Oracle sees plenty of competitors

SAN FRANCISCO--Oracle in court on Tuesday trotted out numerous PeopleSoft documents discussing competitive pressure from Lawson Software and a variety of other makers of business application software.

During the second day of its antitrust trial, Oracle's legal team introduced the documents during a cross examination of PeopleSoft Chief Technology Officer Rick Bergquist. The move was an apparent effort to show that the two companies compete with a broader array of software rivals than the U.S. Justice Department claims.

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Oracle, PeopleSoft and German firm SAP are the leaders in the market for software packages that businesses use to manage payroll, human resources and related functions. The Justice Department contends that if Oracle buys the reluctant PeopleSoft, the market narrows to two. Oracle contends that there's plenty more viable competition beyond the three top firms.

A PeopleSoft attorney objected to the presentation of several of the documents, arguing that they revealed sensitive information, but was overruled by presiding U.S. District Judge Vaughn Walker.

The documents included a July 8, 2003, competitive sales analysis from PeopleSoft indicating that the company competed against Lawson Software almost as many times as it did against SAP for customer contracts it considered large, complex accounts.

When questioned about the analysis, Bergquist acknowledged the document appeared to have been sent to his e-mail account but refused to comment on it. He said he did not recognize the document and didn't know anything about it.

Another document Oracle exhibited was an e-mail sent to PeopleSoft's education and government sales team from an employee, Scott Rollins. The e-mail contained PeopleSoft's "competitive analysis" of American Management Systems (AMS), a software and consulting firm that recently won a deal to provide the Justice Department with an accounting package.

"Their niche is the government sector, where they are considered a very formidable competitor and serious threat," the analysis read.

Antitrust attorneys at the Justice Department have built their case that a combined Oracle-PeopleSoft would unfairly reduce competition by excluding Lawson, AMS and other smaller suppliers, plus companies not quite in the market, such as Microsoft, in its definition of the market.

Microsoft + SAP = evidence?
A Justice Department attorney sought to bolster the agency's argument by downplaying the Microsoft factor. On Monday, SAP and Microsoft disclosed that they had entered preliminary merger talks last year, apparently anticipating that the news would surface during the trial.

"It doesn't affect our view of the case or the fact that the bid is anticompetitive," Thomas Barnett, a deputy assistant attorney in the agency's antitrust division, told reporters outside the courtroom on Tuesday.

Oracle attorneys highlighted the Microsoft-SAP talks in their opening remarks on Monday to support their contention that Microsoft intends to enter the market. The Justice Department says Microsoft caters to a different market segment and doesn't count as a competitor. Besides, Microsoft and SAP have abandoned their discussions.

The fact that Microsoft considered buying SAP, the third largest software company in the world, demonstrates Microsoft's relatively weak position in the market and the high barriers to entry it faces, Barnett said.

Oracle attorney Dan Wall said he was "befuddled" by taped testimony the Justice Department presented from Oracle sales executive Keith Block.

Block covered general information about the way Oracle handles discounts and customer product evaluations. The questioning never touched on specific competitors nor how Oracle interacts with them in the marketplace.

"It's early but I don't see any compelling evidence so far that this deal is anticompetitive," Wall said.

Barnett said he thought the trial was going "very well." He and PeopleSoft spokesman Steve Swasey said many of the documents Oracle produced were presented out of context, downplaying their significance.

The Justice Department's first customer witness, on the trial's opening day, described his concerns that the proposed acquisition would leave insufficient competition in the market. Scott Hatfield, senior vice president and chief information officer for Cox Communications in Atlanta, said Cox figured its recent decision to update its financial software would have cost between $1 million and $2 million more if PeopleSoft and Oracle hadn't been rivals for Cox's business.

The Justice Department charges that a PeopleSoft buyout would do exactly what Cox feared--raise prices because there'd be only two viable competitors for such large accounts. An Oracle attorney vowed to discredit the agency's case by demonstrating that the field of competition is much wider than the government claims and that the proposed acquisition would preserve competition.

Oracle launched its $7.7 billion bid for PeopleSoft over a year ago. The antitrust trial is one of many obstacles Oracle has faced in the takeover quest. PeopleSoft has rejected several Oracle bids, claiming that the deal would be anticompetitive, and is suing Oracle for, it says, designing the bid solely to damage PeopleSoft's business.

Oracle is countersuing PeopleSoft in an attempt to overturn a takeover defense plan called a poison pill that could stop the merger if the antitrust trial doesn't. The pill would be the release of a new wave of stock, which would drive up Oracle's acquisition costs.

During the next two weeks, the Justice Department is scheduled to call many big PeopleSoft customers and economists to the witness stand. Oracle then will make its case, with the trial expected to conclude in early July. The nonjury trial is expected to last about four weeks, with the government presenting its case first. Oracle is expected to follow about July 2.