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Oracle drops PeopleSoft CEO as witness

Oracle won't call Craig Conway to testify, but Lawson Software's CEO takes the stand.

SAN FRANCISCO--In a surprise move, Oracle announced on Monday that it would forgo calling PeopleSoft Chief Executive Craig Conway to the witness stand in the ongoing federal antitrust trial here.

That decision came as the Justice Department and Oracle entered the fourth and final week of their high-profile case. Federal regulators are seeking to block the software maker?s hostile bid for PeopleSoft, arguing that a merger of the two companies would stifle competition in the market for large-scale business applications. Oracle had earlier anticipated calling Conway as a witness for a grueling six hours, compared with the hour typical of other witnesses.

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"We found it wasn't needed to call him, because of the testimony from other PeopleSoft executives, Rick Bergquist and Phillip Wilmington, and various internal documents," Oracle attorney Dan Wall said.

PeopleSoft said it regretted the lost opportunity. "It's unfortunate Craig wasn't given a chance to take the stand. He would have talked about how this merger would damage our customers and how it's damaged our business," said Steve Swasey, a company spokesman.

The Justice Department said its case is not affected by whether Conway takes the stand. "It doesn't matter to us. We called the folks we felt we needed to call," said Renata Hesse, chief attorney of the Justice Department's networks and technology division.

Oracle kicked off testimony Monday by questioning John "Jay" Coughlan, chief executive of Lawson Software. Coughlan noted how his company focuses its efforts on business software applications for several select industries, such as retail, health care and the public-education sector. He said Lawson has successfully competed against PeopleSoft and Oracle in those markets, winning six large deals worth more than $1 million each.

But Coughlan added that Lawson also sells its human resources and payroll applications software to industries outside those three sectors and plans to eventually grow into other sectors, such as financial services.

That supported Oracle's contention that there are other competitors in the business applications market beyond the big three of SAP, Oracle and PeopleSoft, even when it comes to landing multimillion-dollar deals at large companies. However, the Justice Department questioned Lawson?s ability to serve the breadth of industries that the three primary competitors can, as well as Lawson's capacity to quickly expand beyond its core markets.

The Justice Department also produced some internal Lawson documents, in which sales representatives submit a written review on the win or loss of a customer. In recapping an October discussion with Mastercard International, the Lawson sales representative wrote that "Mastercard has some outstanding issues with Lawson" revolving around its current payroll/HR products. For instance, using the Lawson payroll application caused the CEO's paycheck to be calculated incorrectly. "These problems are exacerbated by the lack of responsiveness the customer is receiving from Lawson," the document adds.

Oracle also called to the stand Jerry Hausman, an economics professor at the Massachusetts Institute of Technology. He pointed to a number of companies that have relied on outsourcing to handle parts of their business, such as Goldman Sachs.

"The DOJ argues that customers will not have enough choices if the PeopleSoft merger goes through and they say prices will rise. But Oracle can't charge higher prices because the "vulnerable" customer can turn to outsourcing companies," Hausman said.

During Hausman's testimony regarding how pricing would not be adversely effected if PeopleSoft no longer existed, Judge Vaughn Walker questioned Hausman on why the data he referenced showed the largest customer discounts came from the three largest vendors: SAP, Oracle and PeopleSoft.

"How is this your conclusion? Isn't more competitors better?" Walker asked.

But Hausman responded that even with one competitor, it would be possible for customers to "get the best deal." He noted that buyers have the power to turn to outsourcing, or SAP, and that very often customers ultimately end up having only two competitors involved in the final bidding process.