This column was originally published on June 19, before PeopleSoft rejected Oracle's second takeover offer.
NEW YORK (CNN/Money) -- Now that Oracle has boosted its hostile bid for PeopleSoft by 22 percent to $6.3 billion, should PeopleSoft CEO Craig Conway have just given in to Oracle head honcho Larry Ellison?
Ellison, who is doing a pretty good impersonation of the nefarious Borg from Star Trek, ("PeopleSoft, prepare to be assimilated!") is making it tougher for Conway to resist. After all, Oracle's new offer is 29 percent higher than what PeopleSoft was trading at on June 5, the day before Oracle announced its first bid.
But PeopleSoft formally rejected this offer on Friday and Conway is proceeding with his own empire-making aspirations. On Thursday, PeopleSoft formally launched its $1.75 billion tender offer for J.D. Edwards. Those two companies agreed to a friendly merger on June 2 and sweetened the deal on Monday.
 |
|
| PeopleSoft CEO Craig Conway explains why the J.D. Edwards merger makes sense. |
Speaking at the CeBIT America trade show in New York Thursday, Conway reiterated that a deal for J.D. Edwards makes sense for PeopleSoft because it would help the software maker win more mid-sized customers in construction, manufacturing and other industrial sectors.
PeopleSoft and J.D. Edwards sell similar software products that help manage customers, suppliers and human resource functions but PeopleSoft has targeted service industries, such as banks and government agencies, as customers.
Conway did not mention Oracle's new and improved offer. His only not-so-veiled reference to Oracle was when he said that the J.D. Edwards deal "definitely caught the interest of our competitors." That remark drew a round of giggles from the audience. Conway was not available for questions after his presentation.
Not so wild about Larry
PeopleSoft formally rejected Oracle's first offer last week and said Wednesday that its board would meet soon to discuss the new offer.
Still, you have to wonder if Conway is letting personal feelings interfere, possibly to the detriment of PeopleSoft shareholders. I don't think you can downplay the fact that Conway used to work for Ellison. He was an Oracle marketing executive from 1985 to 1993. So a chance to upstage his former boss must really appeal to Conway.
In fact, Conway once said that one of the things he learned from Ellison was to focus on who's ahead of you, not who's behind you. (Conway actually said that to me nearly two years ago, when I was writing for a different, and now defunct, publication.)
And voila, PeopleSoft's deal for J.D. Edwards would leapfrog it ahead of Oracle in the applications software race, making it the second-largest company behind SAP.
Conway probably figures that selling to Oracle now would be akin to taking a 9-0 lead into the bottom of the sixth inning and then deciding to forfeit. True, the game's not over, but you have to like your chances. With that in mind, I'm guessing Conway would probably rather sell out to anybody (IBM, SAP, even Microsoft) than let Larry put him out of a job.
No deal at any price?
But isn't Conway's fiduciary responsibility to PeopleSoft's owners?
"As a PeopleSoft shareholder, I thought that $16 was a fair price, so $19.50 is more presents under the Christmas tree," said Barry Randall, manager of the First American Technology fund, referring to the per-share prices for Oracle's initial and sweetened bid.
Randall figures that even though a combined PeopleSoft-J.D. Edwards would be bigger than Oracle in the application world, Oracle would still be a more formidable competitor because of its massive database software business and stronger balance sheet.
Dreyfus Premier Technology Growth fund manager Mark Herskovitz, who owns shares of both PeopleSoft (PSFT: Research, Estimates) and Oracle (ORCL: Research, Estimates) in the fund, said he understands why PeopleSoft has been adamantly opposed to doing a deal. Oracle has said that it intends to stop selling PeopleSoft products and would only keep top software developers.
| Recently in Tech Investor
|
|
|
|
|
Still, he added, that doesn't excuse PeopleSoft from sitting down and talking to Oracle, especially since the bid has been increased. "Any management has got to consider a bona fide offer. You can't just say, 'We don't like Oracle or Ellison so we're not going to sell to him'," said Herskovitz, who also owns shares of PeopleSoft in the Dreyfus Premier NexTech fund.
But another fund manager said he doesn't believe Oracle's tough talk about shutting down PeopleSoft.
"Oracle's efforts in the application business have been consistently disappointing," said Zach Shafran, manager of the Waddell & Reed Advisors Science & Technology fund, which owns PeopleSoft and Oracle. "Does PeopleSoft have some capabilities that can meaningfully enhance Oracle's applications? I think the answer is Yes."
For this reason, Shafran said PeopleSoft's board has been "irresponsible" to dismiss Oracle's offer. But he thinks Oracle will need to raise the bid again to convince a majority of PeopleSoft shareholders to sign off on a deal.
Based on Conway's responses so far, though, it seems fair to ask if any price will be high enough to convince him to swallow his pride. From that perspective, PeopleSoft shareholders may have reason to be worried.
Sign up to receive the Tech Investor column by e-mail.
Plus, see more tech commentary and get the latest tech news.
|
