NEW YORK (CNN/Money) - Oracle Corp. made a surprise $5.1 billion bid for PeopleSoft Inc. Friday, an offer that could derail PeopleSoft's recently announced a $1.7 billion deal to buy another software provider, J.D. Edwards & Co.

Oracle (ORCL: down $0.34 to $13.02, Research, Estimates) said it is offering $16 a share cash for PeopleSoft. That represents slightly less than a 6 percent premium over PeopleSoft's Thursday closing price of $15.11 a share, down 9 cents on the day.

Oracle CEO Larry Ellison talks about his $5.1 billion bid for PeopleSoft and what lies ahead for his company. Play video (Real or Windows Media)

Shares of PeopleSoft (PSFT: Research, Estimates) shot up 20.9 percent to $18.26 in late afternoon trading while Oracle edged down to $13.29. But shares of J.D. Edwards gained 2.6 percent to $13.12.

PeopleSoft CEO Craig Conway called the offer "atrociously bad behavior from a company with a history of atrociously bad behavior."

In a statement issued by PeopleSoft, he continued: "Obviously it is a transparent attempt to disrupt the acquisition of J.D. Edwards by PeopleSoft announced earlier this week."

PeopleSoft did not reject the offer, however. It simply advised shareholders to not take immediate action, saying it would formally review the offer and make a decision soon.

Oracle CEO Larry Ellison told investors in a conference call that Conway had proposed a combination of PeopleSoft's and Oracle's application businesses a year ago, but that the two sides couldn't agree on a deal. He said PeopleSoft's proposed deal to buy J.D. Edwards was risky for PeopleSoft shareholders.

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"They're trying to enter a lot of new markets that they're not in," he said. "Ours is an acquisition of consolidation, which is far less risky."

And Ellison would not be drawn into any discussion of whether Oracle would be willing to raise its offer for PeopleSoft, saying he believes the offer is a good one for PeopleSoft shareholders despite the very modest premium.

"It [the offer] is really based on the performance of PeopleSoft in the market," Ellison said. "We think our alternative of $16 a share is a much safer road." He said the deal could be closed as soon as next month if it is accepted by PeopleSoft's board and shareholders.

In a written statement, Oracle Chief Financial Officer Jeff Henley said that the deal would increase Oracle's earnings per share in the first quarter that the companies were combined.

Oracle also said it expects to report earnings per share of 14 or 15 cents in its fiscal fourth quarter, which ended last month. That is at or slightly above the 14 cents a share consensus forecast of analysts surveyed by earnings tracker First Call. The company also earned 14 cents a share a year earlier.

Oracle said that it if completes the deal for PeopleSoft, it would reexamine whether to go ahead with the proposed $1.7 billion stock purchase of J.D. Edwards (JDEC: Research, Estimates).

"As far as J.D. Edwards, we're certainly interested," Ellison said on the conference call. "We've been looking at that closely as well. It's simply a matter of terms of the deal and price of the deal. We're keeping our options open there."

Oracle, one of the world's largest software providers, specializes in business applications including data warehousing, customer relationship management, and supply chain management. PeopleSoft also specializes in business applications such as accounting, customer relationship management, human resources, and supply chain management, while J.D. Edwards' applications deal with many of the same tasks.

Ellison said he hoped to discuss the bid with PeopleSoft's board.

The bid is not to be subject to due diligence or financing, according to Oracle. Credit Suisse First Boston has provided bridge financing and is advising Oracle on the bid. Oracle reported $4.1 billion in cash at the end of its third quarter.