Oracle finally buys PeopleSoft

Oracle today announced that it is finally to acquire PeopleSoft for $10.3 billion, or $26.50 per share – $2.50 per share above what has been Oracle’s ‘final’ offer for well over a year – ending 18 months of saga, legal wrangling and speculation. The revelation apparently follows a phone call from the PeopleSoft board, via lawyers, naming its price late last week. The revised figure was approved by both boards, acknowledging PeopleSoft’s sustained financial performance, and should close by early January 2005. At that point, Oracle becomes the clear Number Two in the enterprise applications game behind SAP – and arguably a much more powerful contender than Oracle and PeopleSoft apart. “Today we announced both a great quarter and the agreement to acquire PeopleSoft,” said a jubilant Oracle CEO Larry Ellison. “This merger gives Oracle even more scale and momentum.” Indeed, this is a double story: Oracle’s latest results show a turnaround in its applications business. Total revenue was up 10% at $2.76bn, with net income up 32%, but its recently lacklustre applications side has rocketed up with 57% growth in new licence revenues in its latest quarter closed November 30. “This merger is going to make that applications business bigger and stronger,” insisted Ellison. And it’s clear that Oracle management is well aware that’s not going to happen by good numbers alone. “We intend to enhance PeopleSoft 8 and develop a PeopleSoft 9, and enhance JD Edwards 5 and develop a JD Edwards 6,” said Ellison, interestingly reviving the dropped separate names. “We intend to immediately extend and improve support for existing JD Edwards and PeopleSoft customers world-wide.” Whatever way you look at it, those are warm words for users from a company reputed by some to be intent on dropping its former adversaries’ ERP systems and forcing users to migrate to Oracle E-Business Suite11i. It’s also worth noting that the company insists its not about to sell what was the JD Edwards business, in spite of most observers views that there’s little synergy at the technology level with systems rooted in IBM iSeries, as opposed to the favoured Unix or Linux. Quite how that will pan out for existing PeopleSoft offices and employees is not yet clear – but it’s hard to escape the conclusion that there will be considerable rationalisation over the coming weeks. Making sense of such a large acquisition is, however, going to take time. All of which should, if taken at face value, allow users finally to relax a little on the support front, and get on with the business as usual. Easier said than done and there will be doubters and different views; but plainly, whatever platform you’re on, it now makes sense to continue maintenance and pursue your path of business-led improvement after re-assessing your individual exposure. And given the warm words, users can expect contact and reassurance very soon from the new system owners, anxious to prove their position – and, frankly, to capitalise on what is now a very large world-wide and industry-wide customer base. Assuming Oracle honours its promises on the PeopleSoft and JD Edwards support, there’s no reason to resist those overtures. And if in due course, moving to the Oracle application suite makes most sense, then again, so be it. Quite what will happen to the recently announced, and much paraded, strategic alliance between PeopleSoft and IBM, hasn’t yet received comment. Although on the face of it no longer tenable, the synergy, certainly with the former JD Edwards systems’ basis in iSeries (AS/400) at least, makes it unlikely that the entire baby will be thrown out with the bathwater. It’s also the case that in the IT sector, as in many others, even arch rivals also have ongoing alliances where it suits them both. Expect a few months of considerable change as these respective substantial organisations face inevitable change. But also expect a rather more caring Oracle than some have suggested: no-one spends that kind of money only to cut off its routes to a cherished market. Meanwhile, Oracle is amending its current tender offer for all outstanding shares of PeopleSoft to expire at midnight, New York City time, on December 28, 2004. As of the close of business on Friday, December 10, 2004, approximately 120,600,093 shares had been tendered.