Saturday, November 20, 2004

Flash: PeopleSoft shareholders tender majority of shares to Oracle

Midnight tonight (Eastern time) was Oracle's deadline for shareholders to tender their shares, or else it would walk away from its proposed takeover of PeopleSoft. Oracle has just announced that over 60% of shareholders have accepted its bid.

No, I wasn't staying up late awaiting the results. But I did think to check the news wire, just now.

Oracle's success does not mean that the battle is over, however. Oracle still needs to overcome PeopleSoft's poison pill defense. An Oracle lawsuit to do so is awaiting decision by a Delaware court, expected this coming week, but most experts do not expect Oracle to prevail. That means that Oracle will need to wage a proxy battle next spring to win control of PeopleSoft's board.

Of course, at any point, PeopleSoft's board could decide to give in to Oracle. But that's unlikely, based on the board's rejection of Oracle to date. On the other hand, shareholders that have tendered their shares are still free to withdraw their shares. So, this thing still isn't over, by any means.

Although the outcome is not certain, Oracle is closer to its goal tonight than it was a few hours ago. has a summary of the results of Oracle's tender offer tonight.

Update, 1:00 p.m. The Wall Street Journal, in its online edition (subscription required), has some interesting analysis of the impact of an Oracle takeover on PeopleSoft customers, specifically customers of the JDE product lines:

[E]ven if Oracle completes the acquisition, making it pay off may not be easy. Oracle has said it will continue enhancing PeopleSoft's core software, developing an update it calls PeopleSoft 9. But it has been less specific about the EnterpriseOne and World products PeopleSoft acquired through its merger with J.D. Edwards.

In a survey conducted last week, AMR Research found many PeopleSoft customers have reservations about a merger. AMR Vice President Bill Swanton said 150 customers were contacted, the majority of which used J.D. Edwards products.

Sixty-three percent said they would stop paying maintenance fees to Oracle either immediately or if Oracle stops enhancing their products, provided they could find maintenance from a third party. Forty-seven percent said they expected Oracle to add no new features to their software, suggesting an unease with the merger.

"The danger is [Oracle's] maintenance revenue is much less than they are assuming, or the expenses of maintaining the products to ensure renewals are much greater than they are assuming," says Mr. Swanton.
Last week, I speculated that if Oracle is successful in acquiring PeopleSoft, it might be tempted to sell off the JDE product lines. I've not heard anyone else mention this possibility, but if it is true that a significant number of JDE customers are planning to cut off maintenance, that would give a real incentive to Oracle to sell off those products immediately. Who do I think would be interested in buying the JDE products? See my post last week.

Related posts
Possible outcomes of Oracle's takeover bid for PeopleSoft

1 comment:

Seun Osewa said...

Bad news on the short term, for both companies.