Oracle and DOJ head for merger trial

Oracle and the US Department of Justice are heading to court to battle over Oracle's hostile takeover bid for PeopleSoft, a deal...

Oracle and the US Department of Justice are heading to court to battle over Oracle's hostile takeover bid for PeopleSoft, a deal the government said would choke competition in the enterprise applications market and lead push up prices.

The trial is expected to last about a month, and government sources said they expected a verdict fairly quickly. If either side appeals, however, the trial could drag out until next year.

Judge Vaughn Walker has been resolving last-minute conflicts over access to documents, the eligibility of expert witnesses and other pre-trial matters. He told PeopleSoft that its president and chief executive, Craig Conway, must be available to give testimony in court on 29 June, over protests that he will miss part of an important customer conference.

The DOJ has argued that the merger would leave only two companies - SAP and the combined Oracle/PeopleSoft - to sell a type of "high function" human resources and financial management software that large organisations need to run their businesses.

The reduced competition could lead to price hikes of 5% to 28%, the DOJ argued.

Legal experts said the case hinges in large part on the DOJ's ability to convince Judge Walker that the market it describes exists.

Oracle has dismissed the DOJ's definition as a fiction dreamed up to make the impact of the merger seem far greater than it would actually be.

Big customers can turn to numerous suppliers for their human resources and financial applications, it argued, such as Lawson Software and American Management Systems. The DOJ has also ignored multivendor "best-of-breed" solutions and the option to outsource back-office functions, Oracle said.

Joshua Greenbaum, principal analyst at Enterprise Applications Consulting, said the DOJ is showing its "extraordinary ignorance" by arguing that only three applications suppliers can meet the needs of large buyers. The DOJ itself picked AMS recently for a $24m deal to update its accounting software, he noted.

However, Gartner analyst Lee Geishecker was less sure. Corporations in certain "asset intensive" industries, such as utilities and construction, could be considered dependent on the top three suppliers, she said.

"Depending on the context, the DOJ may be right. There are very many ways to slice the industry," Geishecker said.

James Niccolai writes for IDG News Service

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