PeopleSoft revises assurance clause in customer contracts

PeopleSoft has rewritten its "customer assurance programme" (CAP) in the final week of a Delaware court trial relating to...

PeopleSoft has rewritten its "customer assurance programme" (CAP) in the final week of a Delaware court trial relating to Oracle's hostile takeover bid for the company.

During extended negotiations Oracle executives criticised PeopleSoft's business in an apparent attempt to drive down PeopleSoft's selling price, while PeopleSoft's CAP could significantly increase Oracle's acquisition costs.

The trial concluded on 15 October, and the two companies will now wait for a decision from Judge Leo Strine.

Oracle has asked the court to invalidate PeopleSoft's "poison pill" anti-takeover defence and its CAP, an initiative PeopleSoft added to customer contracts that promises sizable payouts if PeopleSoft is acquired by a company that disrupts development and support plans.
Strine indicated that he would like to see the CAP amended but was not inclined to void it on already signed contracts. Strine called customers relying on earlier versions of the CAP "innocent purchasers" whose contracts cannot now be altered.

In response to questions raised during the trial, PeopleSoft revised the CAP to clarify some of the language around events that would trigger payments being made to customers, according to PeopleSoft spokesman Steve Swasey.

PeopleSoft's CAP began as an ad-hoc response to customer concerns about Oracle's takeover plans and has been through numerous incarnations as PeopleSoft worked to refine the programme's promises.

As of 30 June, the CAP carried a potential liability of $2bn (£1.1bn). Payments would be triggered if an acquirer bought PeopleSoft and soon thereafter reduced support, licensing, updates or new releases to PeopleSoft's products in specific ways spelled out in the programme's provisions.

Meanwhile, Oracle executives used their time on the stand last week to cast doubt on PeopleSoft's value and prospects.

Oracle CEO Larry Ellison and co-president Safra Catz both highlighted PeopleSoft's weaknesses and said Oracle could lower its current $7.7bn offer because of what Oracle sees as PeopleSoft's eroding business. The jockeying for position by both companies led Strine to observe that the trial was as much a business deal as a legal action.

If the two companies don't come to an agreement, they're scheduled to head to court again in January, when trial will begin on a lawsuit PeopleSoft filed. The company is seeking $1bn in compensation and damages for what it claims are Oracle's unfair business practices and illegal competitive actions.

Stacy Cowley writes for IDG News Service

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