Why Bill Gates is smiling today

Following a months-long investigation, the U.S. Justice Department on Thursday said

		Special coverage Oracle vs. PeopleSoft

that it would seek to block Oracle's hostile bid to acquire PeopleSoft, arguing that it would result in higher prices for technology, fewer choices and less innovation.

Setting aside the question of whether Uncle Sam has a case or not, Gates surely must be savoring the moment as Larry Ellison, one of the handmaidens to the Justice Department's antitrust lawsuit against Microsoft, is finally getting payback.

Ellison was one of the most outspoken figures in Silicon Valley egging on government trustbusters to go after Microsoft. The government finally sued Microsoft in May 1998. What's less widely recalled is that the intellectual background for the lawsuit was supplied by a white paper prepared by local attorney Gary Reback at the behest of anonymous complainants. Although nobody has ever stepped forward and taken credit for producing the document, its aims quite neatly fit in with the interests of Oracle and other Silicon Valley rivals of Microsoft.

Why has Ellison pursued Microsoft like Ahab chasing the white whale?

When the Justice Department indeed won a preliminary antitrust verdict against the software maker, Ellison's stump speeches included repeated calls to break Microsoft into so-called Baby Bills. Why has Ellison pursued Microsoft like Ahab chasing the white whale? Boiling all this down to a clash of personalities between famously competitive billionaire founders makes for good dish but misses the larger context.

For Oracle, the specter of Microsoft "locking in" users by creating tie-ins between desktop and server operating systems and back-office applications, such as Microsoft's SQL Server database, is the nightmare scenario. Redmond also has ambitions to expand its operations in the business applications market. Ellison has seen too many software companies get steamrollered by Microsoft not to watch with a mix of dread and respect.

Although he's never gone around saying this in public, Ellison clearly would like to wield that same kind of power. Simply put, the more developers writing applications that query Oracle databases, the stronger the company's control over the database market.

Here's the other part of the story. Oracle always builds its applications to run exclusively on its own databases. Acquiring PeopleSoft would expand Oracle's share of the business applications market. The deal would also set Oracle up to grab a bigger piece of the database market if all PeopleSoft customers were then required to choose its database.

Ellison clearly would like to wield that same kind of power.

Oracle executives swear up and down that won't happen. But it's clear that the folks in Washington, D.C., don't believe them. I don't either. Over the years, the standard operating procedure at Oracle has been to suck everything into supporting its database.

I suppose Oracle execs are flummoxed by the government's decision to block Ellison's ambitions. They may have a point. If SAP bought PeopleSoft or Oracle, there would be a very good antitrust case to argue. But a merger combining the second and third biggest business applications makers--who then still trail the frontrunner by a wide margin--hardly constitutes the second coming of Ming the Merciless.

That's now all academic. Ellison today finds himself butting heads with an entity even more powerful than Microsoft. Nobody ever accused the federal government and its famous hydra-headed bureaucracy of moving too quickly. The irony is that Ellison may have helped awaken this sleeping giant from its slumber.