The board of PeopleSoft yesterday bowed to its investors and to one of the most aggressive executives in Silicon Valley by agreeing to sell the company to Oracle...
SAN FRANCISCO The board of PeopleSoft yesterday bowed to its investors and to one of the most aggressive executives in Silicon Valley by agreeing to sell the company to Oracle for $10.3 billion.
The deal caps a bitter, often personal 18-month fight that captivated Wall Street and Silicon Valley, even though few casual computer users know much about either company’s products.
The agreement was reached over the weekend, during the first direct negotiations between Oracle and PeopleSoft. The talks convened after PeopleSoft asked Oracle to raise its previous “best and final offer” by $2.50 a share, to $26.50 a 10.6 percent premium over PeopleSoft’s Friday closing price of $23.95.
PeopleSoft’s concession heads off a court fight over its anti-takeover provisions. In November, 60 percent of PeopleSoft investors agreed to sell to Oracle for $24 a share, but the board threatened to block a sale by flooding the market with additional shares.
After the purchase closes next month, database maker Oracle will become one of the largest producers of the software that powers back-office functions for large corporations, allowing it to compete against market leader SAP.
But the business aspects of the deal were overshadowed during PeopleSoft’s struggle by the sniping between former PeopleSoft CEO Craig Conway and Oracle founder Larry Ellison, a flamboyant executive not used to losing.
In a letter to PeopleSoft employees yesterday, company founder Dave Duffield struck a more diplomatic tone, but his disappointment was clear.
“I offer my sincere apologies for not figuring out a different conclusion,” wrote Duffield, who started the company in 1987 and returned as CEO after Conway was sacked.
Employees said Duffield’s sentiments reflected the mood at Pleasanton, Calif.-based PeopleSoft.
“A lot of people are upset, but it’s a unifier,” one worker said. “There’s a unity in defeat.”
In launching his June 2003 bid, Ellison shrugged off the software industry’s aversion to hostile takeovers. He kept fighting even after the federal government sued to block it.
The 60-year-old billionaire shifted part of his rationale for the deal over time but still hammered away with high-priced legal and Wall Street talent.
By belittling PeopleSoft’s prospects while raising his offer, he left many shareholders and eventually the PeopleSoft board seeing no other way out.
“It’s an all-is-fair-in-love-and-war approach to acquisitions,” said analyst Tad Piper of Piper Jaffray. “The aggressive rhetoric is very much a part of the style.”
For Ellison, winning PeopleSoft was a matter not just of ego but of long-term survival.
Oracle, based in Redwood Shores, Calif., gets most of its revenue by selling database programs that house large amounts of information. It and IBM are close rivals in that field, and they face pressure from Microsoft and others at the market’s lower end.
To broaden its portfolio, Oracle has tried with mixed results to sell more business programs that run on top of databases and manage payroll, billing and other corporate functions.
Ellison wanted to add PeopleSoft’s much larger set of business programs to compete better with Germany’s SAP.
With the addition of PeopleSoft, Ellison said in a conference call with analysts, Oracle will double its customer base to become the top seller of business programs in North America and in such sectors as retail banking.
“It’s going to give us real strength in specific industries,” Ellison said, and Oracle will be able to invest more in research and development.
In testimony as Oracle defeated a Justice Department suit to block the merger on antitrust grounds, Ellison predicted the demise of an independent PeopleSoft and other firms that solve only one business problem or another.
He said that over time, many large customers would become dependent on multiple products from Microsoft or those cobbled together by IBM, and that Oracle needed to expand to survive.
“He’s right; the enterprise software sector is maturing,” said stock analyst David Hilal of Friedman, Billings, Ramsey. “Whenever anything matures, there’s always a consolidation.”