Connecticut joins Oracle fracas

State leaders said in a statement that Oracle's proposed takeover would violate state and federal antitrust laws, "directly damage the state and its economy and raise prices for businesses, governments and consumers by significantly reducing competition in the markets PeopleSoft serves."

State Attorney General Richard Blumenthal said Connecticut is taking the lead in fighting the merger, but that he expects others to join the effort.

"We are assembling a powerful coalition of states and other consumers that will suffer the same unacceptable costs if this unlawful, anticompetitive takeover is permitted," Blumenthal said in the statement. "The costs are huge and intolerable--in money, time, human capital and system reliability--now and going forward, for our consumers and economy. The takeover would cripple competition--threatening higher prices and lower quality--and cause terrible waste in the human and financial investments already made.?

Blumenthal said in an interview that he would also seek the intervention of federal antitrust regulators. "We would welcome the federal government to get involved, and hope they will make a stand in favor of competition," he said.

Oracle rattled the software industry earlier this month when it made an unsolicited $5.1 billion takeover bid for PeopleSoft just days after PeopleSoft itself had announced plans to acquire J.D. Edwards for $1.7 billion. PeopleSoft and Oracle compete in the market for broad-based business applications, an area where Oracle has had little success leveraging its commanding lead in database software.

Oracle CEO Larry Ellison has said the buyout would make Oracle more profitable and competitive. But PeopleSoft executives have said Oracle's "predatory" offer is intended mainly to spread doubt in the software market and hurt PeopleSoft's business.

PeopleSoft's board of directors formally rejected the offer last week, but Oracle raised the stakes Wednesday, boosting its bid to $19.50 per share for a total value of $6.3 billion.

The hostile takeover attempt has inspired several lawsuits by and against Oracle, PeopleSoft and J.D. Edwards, but Connecticut is the first outside party to join the fray.

The state?s comptroller, Nancy Wyman, said in the statement that if Oracle takes over PeopleSoft and discontinues its products--as Ellison has vowed to do--the state would have to spend $100 million to convert key computing systems built on PeopleSoft products.

?Allowing this takeover to go forward would cost Connecticut taxpayers tens of millions of dollars at a time when we can least afford it,? Wyman said. ?It would also mean an incredible loss of work and employee training that has been invested in this important project. I am hopeful that the attorney general?s action can prevent what would be a terrible waste of time and money.?

Oracle spokeswoman Jennifer Glass said the state's understanding of the takeover bid is incorrect. "The state of Connecticut has been intentionally misled by PeopleSoft management regarding the impact of our proposed acquisition," she said. "The projects they cite would have lower costs and an enhanced likelihood of success after Oracle's acquisition. We welcome the opportunity to meet with the state to explain the benefits of our deal to them."

Blumenthal said Oracle's previous statements on its plans for PeopleSoft products are a better indication of the company's intent. "Their assurances are vague and worthless," he said.

This isn't the first time that Oracle has been in the cross hairs of a state government. California became embroiled in a controversy last year, when it was revealed that government officials had agreed to a no-bid contract in which the state would apparently buy more Oracle licenses than it needed.