Oracle: Peoplesoft will submit, New Zealand development centre plans dead

By ADAM GIFFORD

SAN FRANCISCO - Business software giant Oracle believes applications company Peoplesoft is in such a weak financial position it will eventually bow to a hostile takeover.

Oracle launched its bid for its fellow Californian in May, just days after Peoplesoft announced plans to become the second largest vendor of packaged business applications through a friendly merger with Denver-based JD Edwards.

Peoplesoft shareholders have been slow to offer their shares, and the deal is effectively stalled until it is leared by competition regulators at the United States Department of Justice and the European Commission.

Oracle executive vice president Chuck Phillips told journalists at Oracleworld in San Francisco on Wednesday he expected a positive response from regulators by October or November.

"I remain optimistic we have a good case. It is good for customers to have strong competition to (German rival) SAP, and soon for Microsoft. There is no lack of competition," Phillips said.

Peoplesoft shares have been trading above the US$19.50 Oracle is offering, but recently slipped back below $19.

Phillips said Peoplesoft's numbers will be inflated near term, in part because it will have a five month quarter to synchronise its reporting cycle with JD Edwards, but it will be hard to maintain revenue.

"Peoplesoft has been struggling. Its revenues are declining quarter to quarter. Its customers have been coming to us and SAP, said Phillips, who was a Wall Street analyst before joining Oracle earlier this year.

He said Peoplesoft customers had told Oracle they were keen for the takeover to proceed, but refused to name any.

Oracle has promised to maintain Peoplesoft products for existing customers, but will no longer sell them.

"We will not wrap this huge sales and marketing expense around it. That is what loses money," Phillips said.

"In the last quarter, sales and marketing expenses cost Peoplesoft more than it got in licences."

Phillips' comments should be seen in context of the merger, with many deals such as that with New Zealand company Sky City being put off because of uncertainty and other sales only closed after deep discounts or promises the customer would be paid back the licence fees and more if the Oracle takeover went through.

Phillips said the takeover would benefit Peoplesoft's 5500 customers because all development spending would go in enhancing existing products, rather than building code for new business opportunities.

Phillips said the acquisition would give Oracle access to US$800,000 a year in maintenance revenue. "We would love that."

It would also be able to sell other technology, like its database and middleware software, to Peoplesoft customers, as well as move them on to new business applications.

Shortly after the press conference, the giant Moscone Convention Centre was closed by a bomb threat, forcing more than 10,000 attendees into the San Francisco streets.

Meanwhile, a suggestion by Oracle had Larry Ellison last year that he would like to build a development centre in New Zealand seems to have fizzled out with his America's Cup bid.

Phillips told the New Zealand Herald the idea had not developed any further.

Oracle last year opened development centres in Beijing and Shanghai, China, where Oracle has major customers and hopes to earn a lot of its future revenue from.