Judge quizzes Oracle and DOJ over takeover bid

The judge overseeing the U.S. government's case to block Oracle Corp.'s hostile bid for PeopleSoft Inc. quizzed both sides during...

The judge overseeing the US government's case to block Oracle's hostile bid for PeopleSoft has quizzed both sides during closing arguments in the case, emphasising market definition and customer testimony.

US Department of Justice (DOJ) lawyer Claude Scott in his closing arguments repeated the government's argument that the acquisition of PeopleSoft would stifle competition in the market defined by the DOJ as high-end human resources and financial management applications for large and complex enterprises, resulting in higher prices and lower spending on product development.

Oracle lawyer Dan Wall countered that Oracle needs to acquire PeopleSoft to achieve scale in a cut-throat market with many players, including giant SAP and, increasingly, Microsoft. Oracle said it competes for customers with smaller players such as Lawson Software and American Management Systems.

Both sides took full advantage of their last chance to sway US District Court Judge Vaughn Walker, who is expected to decide the matter within two months.

Walker expressed his doubts about the market definition, but appeared sympathetic to users such as DaimlerChrysler and Nextel Communications which criticised the merger in testimony during the four-week trial.

"I agree that the government's [market] definition is awkward and unwieldy," Walker said during Oracle's closing arguments. "But how do I deal with the compelling testimony of customers who took the stand?"

Walker also appeared to value testimony from Kenneth Elzinga, an economist and antitrust expert from the University of Virginia, who reviewed hundreds of Oracle sales memos and found that competition with PeopleSoft provided a major incentive for Oracle to drop prices. Elzinga testified for the DOJ.

Wall responded by saying Elzinga's research is flawed and that the DOJ needs to prove that Oracle's takeover of PeopleSoft would have a significant effect on the business applications market as a whole, not just a small piece wrongly defined by the DOJ.

PeopleSoft president and chief executive officer Craig Conway was present during the closing arguments.

"The case has been, from the beginning, about harm to customers and the industry. I think the DOJ presented that well," he said. "We're anxious for a speedy decision."

The ruling could end Oracle's pursuit of PeopleSoft, but insiders expect the losing side to appeal. Oracle also faces additional challenges, including convincing PeopleSoft shareholders to vote in favor of the merger, something only a small percentage has done so far.

The company has also had to sue PeopleSoft in a Delaware court to overturn a "poison pill" measure protecting against a hostile takeover.

Additionally, the European Commission is investigating the merger. Regulators in Europe have expressed similar concerns about the deal to their US counterparts.

Oracle launched its hostile bid, currently valued at $7.7bn (£4.2bn), for PeopleSoft in June last year, days after PeopleSoft announced its plan to acquire JD Edwards. The DOJ in February sued to block Oracle's merger plan.

Joris Evers writes for IDG News Service

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