Database software giant Oracle Corp. got a double dose of rejection yesterday.
First, PeopleSoft Inc.'s board of directors scorned Oracle's $5.1 billion hostile offer to buy the company. Hours later, J.D. Edwards & Co. sued Oracle for allegedly trying to foil its own $1.7 billion acquisition by PeopleSoft.
At a minimum, the counter-moves suggest that if Oracle chief executive Larry Ellison is to salvage his audacious plan to buy rival PeopleSoft, a maker of business applications software, he will have to raise the offer price well above the current $16 per share, analysts said.
"A good faith gesture would be to raise the bid," said Jamie Friedman, software analyst with Fulcrum Global Partners, a research firm in New York. "If you think there's going to be a recovery in [technology] spending, then PeopleSoft is worth more than what Oracle is offering."
For his part, Ellison vowed to take his case directly to the people who will ultimately decide PeopleSoft's fate: its biggest investors.
"The shareholders own the company. They have the right to decide," Ellison said in a conference call after PeopleSoft's board recommended that shareholders reject the deal. "We don't believe that PeopleSoft's management has done a good job for shareholders."
The rapid escalation in the three-way battle overshadowed Oracle's strong fourth-quarter financial results, which were reported after the market closed. The Redwood City, Calif., company said its net income in the three months that ended May 31 climbed 31 percent to $858 million, or 16 cents a share, aided by currency fluctuations and smaller investment losses. Revenue in the quarter rose slightly to $2.8 billion. For the full 2003 fiscal year, net income jumped 4 percent to $2.3 billion, or 43 cents a share, on slightly weaker revenue of nearly $9.5 billion.
Oracle moved up the release of those results from next week, giving it an earlier chance to compare its better-than-expected performance with recent reports from PeopleSoft.
As they released the quarterly figures, Oracle executives also announced plans for meetings and Web broadcasts with PeopleSoft investors.
And they faulted PeopleSoft's board, which noted probable antitrust issues and Oracle's stated intention to stop selling PeopleSoft's products in its decision to come out against the offer. "The unsolicited and hostile nature of the offer, combined with Oracle's statements, is designed to disrupt the company's strong momentum at significant cost to PeopleSoft's customers," PeopleSoft said.
PeopleSoft chief executive Craig Conway, a former Oracle executive, also wrote to customers, urging them not to put off buying the company's products because of the uncertainty surrounding the company's future.
Conway said, too, that PeopleSoft's planned merger wouldn't cause antitrust problems because J.D. Edwards sells most of its software to mid-sized companies.
Oracle's proposed takeover would eliminate PeopleSoft from the mix. Only Oracle and German company SAP would be left to sell business applications software to big companies - something Conway believes regulators wouldn't tolerate.
But Ellison said Conway wasn't worried about antitrust issues a year ago when the PeopleSoft CEO sought a combination of the two companies' business applications line.
Denver-based J.D. Edwards filed suit against Oracle in Colorado and California state courts, alleging improper interference with its contracts. In addition to seeking $1.7 billion in damages, J.D. Edwards asked the courts to stop Oracle from proceeding with its tender offer.
"Oracle's purpose ... is to prevent the competition it would face if the J.D. Edwards/People- Soft contract is consummated, while its chosen method for achieving its objective is an illusory offer to acquire PeopleSoft," the Colorado suit says.
Oracle said the suit was meritless. "Clearly PeopleSoft and J.D. Edwards prefer to fight in the courts [rather] than let shareholders decide," said Oracle spokesman Jim Finn.
Oracle's shares gained 6 cents to close at $13.33 in regular Nasdaq trading, but rose to $13.50 in extended trading after its earnings release. PeopleSoft's shares fell 25 cents to $17.37.
Joseph Menn and Alex Pham are reporters for the Los Angeles Times, a Tribune Publishing newspaper. The Associated press also contributed to this article.