Gates considered bailing out PeopleSoft

A day after Oracle launched its hostile bid for PeopleSoft, Microsoft chairman and chief software architect Bill Gates sent an...

A day after Oracle launched its hostile bid for PeopleSoft, Microsoft chairman and chief software architect Bill Gates sent an e-mail to chief executive officer Steve Ballmer suggesting that Microsoft come to PeopleSoft's rescue.

Microsoft could make a minority investment in PeopleSoft "to bolster its independence", Gates wrote in an e-mail dated 7 June 2003. In return, the business application supplier would have to make "a modest platform commitment".

Oracle is using the Gates e-mail as evidence in its battle against the US Department of Justice's attempt to block its $7.7bn takeover of PeopleSoft.

The DOJ has sued Oracle, arguing the merger would stifle competition in the software market catering to large enterprises, resulting in higher prices.

In the same e-mail, Gates told Ballmer "its [sic] time we bought SAP".

That Microsoft approached SAP last year about a possible takeover was revealed two weeks ago at the beginning of the trial between Oracle and the DOJ. The talks ended several months ago after Microsoft had decided the deal and the post-merger integration would be too risky.

Nevertheless, Oracle argued the move is a sign that Microsoft is a player in the enterprise applications software arena.

Investing in PeopleSoft would be key for Microsoft's SQL Server database business. The company, according to another internal e-mail, was worried that after a takeover by Oracle, it would lose the database business it does with PeopleSoft customers. Oracle would want to sell those users its own database software. 

Gates' suggestion for Microsoft to invest in PeopleSoft is the latest revelation in the trial. The case so far has revealed Microsoft's eying SAP and Oracle's interest in Siebel Systems, BEA Systems and Lawson Software.

Microsoft and SAP play major roles in the trial. During testimony, the DOJ sought to blunt Oracle's point that it should be allowed to acquire PeopleSoft because Microsoft is a competitive threat.

Microsoft's senior vice-president Doug Burgum, head of the company's Business Solutions group, testified that the company has no plans to sell high-function business applications to large and complex enterprises.

There are "gaps" in functionality as well as a lack of a direct sales force and consulting organisation between Microsoft's products and those provided by Oracle, SAP and PeopleSoft, which are suited for large organisations, Burgum said.

The DOJ's case hinges on the definition of the market for high-end human resources and financial management applications, which it argues only Oracle, PeopleSoft and SAP can provide.

Oracle's argument is that there are several other viable suppliers in the segment such as Lawson, American Management Systems and Microsoft.

Joris Evers writes for IDG News Service

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