Oracle CEO says time is on his side
Larry Ellison predicts at an investment banking conference that PeopleSoft will post lackluster results in upcoming quarters, a weakness that could help Oracle's hostile acquisition.
At an investment banking conference in Aspen, Colo., Ellison refuted the idea that delays caused by an extended antitrust review and continued resistance from PeopleSoft management would hurt Oracle's buyout plan.
"It's not clear to me that time is on PeopleSoft's side," Ellison said.
He conceded, however, that PeopleSoft's pending acquisition of J.D. Edwards, which the U.S. Department of Justice cleared to move forward on Tuesday, could complicate matters.
"The acquisition of J.D. Edwards will somewhat obscure (PeopleSoft's) numbers," Ellison said. "So there is going to be all this bizarre accounting that will confuse investors.
"Perhaps they can manufacture a couple of good quarters," he added. "But their real business has actually been deteriorating for some time."
PeopleSoft countered that it just reported better-than-expected second-quarter results, which "speaks for itself" in terms of the company's financial health, spokesman Steve Swasey said. PeopleSoft plans to update its financial outlook at an analysts' meeting on Thursday.
Oracle's unexpected $6.3 billion bid for PeopleSoft, launched last month, is under review by the Justice Department. But unlike its review of PeopleSoft's buyout of J.D. Edwards, the regulatory body has asked Oracle for additional information as part of a more extensive inquiry that could take months.
Oracle faces another hurdle: It must persuade a court to repeal PeopleSoft's "poison pill," a shareholder protection plan that makes an acquisition more expensive. If Oracle is unsuccessful, the company intends to push to elect a management board favorable to Oracle next June, when some PeopleSoft board seats open up.
"That's as far as they can drag it out," Ellison said Tuesday. "Dragging it out only works if your business is improving. I don't think it (PeopleSoft's business) will improve."
Some analysts, however, say Oracle has been outmaneuvered by PeopleSoft.
"With the feds having issued a second request for information, and the time delay that was created along with the added complication of PeopleSoft merging with J.D. Edwards, it's unlikely that Oracle will succeed in its acquisition bid," said Rob Christopher, an antitrust attorney at Coudert Brothers in Palo Alto, Calif.
In his remarks, Ellison added that customers who buy PeopleSoft business applications "will have bet on the wrong horse" if Oracle's bid is successful. But he reiterated earlier promises that Oracle would continue to support PeopleSoft products for a decade if the acquisition were to happen.
The Oracle chief did not comment on how PeopleSoft's purchase of J.D. Edwards, which appears imminent now that regulators have given the deal a green light, affects his bid for PeopleSoft. He also did not speculate about what Oracle would do with J.D. Edwards if it swallowed both companies.
PeopleSoft is expected to complete its $1.7 billion purchase of J.D. Edwards on Thursday, the day its tender offer period expires. Oracle extended its tender offer period for PeopleSoft shareholders for the second time on Monday. It's now set to expire Aug. 15.