NEW YORK (CNN/Money) - It's decision time for Oracle and Larry Ellison. How badly does he want PeopleSoft?

Oracle's $6.3 billion takeover offer for PeopleSoft is set to expire Monday and it is looking like the company will need to extend the deadline. Although PeopleSoft's board has formally rejected the bid, Oracle can take the deal directly to PeopleSoft shareholders since it is a cash offer.

The database software titan raised its bid for PeopleSoft from $16 a share to $19.50 a share June 18. But in light of PeopleSoft's announcement Wednesday that its second-quarter earnings will be better than expected, it appears that PeopleSoft is now in the driver's seat.

Shares of PeopleSoft (PSFT: down $0.40 to $17.58, Research, Estimates), however, remain about 10 percent below the $19.50 bid. An spokeswoman for Oracle (ORCL: down $0.18 to $12.27, Research, Estimates) had no comment about extending the offer.

In a research note, Friedman Billings Ramsey analyst David Hilal likened PeopleSoft's sales and earnings shocker to the U.S. Olympic hockey team's upset of the former Soviet Union team in 1980 (Do you believe in miracles....YES!) As a result, he raised his 2003 earnings estimate to 50 cents a share, up from a prior target of 44 cents.

Analysts had widely expected PeopleSoft's potential customers would wait and see how the takeover saga played out before deciding to buy software from the company. So estimates for PeopleSoft had plunged in the past few weeks.

Patrick Mason, an analyst with Pacific Growth Equities, wrote in a report that Oracle will need to raise its offer again in light of PeopleSoft's solid quarter. If Oracle does not do so, PeopleSoft will likely complete its friendly $1.75 billion merger with J.D. Edwards (JDEC: down $0.22 to $14.38, Research, Estimates), which would then make a deal for PeopleSoft more expensive.

Oracle downplayed PeopleSoft's results Wednesday, saying that the company was able to post better-than-expected sales due to "gimmicks" such as PeopleSoft's customer protection program, which would entitle businesses to a money-back guarantee if PeopleSoft were to be acquired by another company.

PeopleSoft put this program into place in order to allay some of their customers' fears since Oracle has stated that it would probably stop selling PeopleSoft products after completing an acquisition.

But the program clearly worked for PeopleSoft and despite Oracle's spin on the results, analysts are raising their earnings estimates, which strengthens PeopleSoft's position substantially. According to First Call, analysts now expect earnings of 48 cents a share for 2003, up a penny from the consensus before PeopleSoft's preliminary second-quarter release. The numbers could head higher once PeopleSoft gives more guidance when it reports final results later this month.

Other obstacles remain as well. There have been increasing concerns about how long an antitrust review of an Oracle-PeopleSoft merger would last, both in the United States and in Europe. And Oracle is still hoping to force PeopleSoft to remove its so-called poison pill, a takeover defense that allows a company to issue more shares in order to make an acquisition more expensive.

Oracle has sued PeopleSoft and the two companies were originally supposed to have a hearing in a Delaware court July 16. But the hearing was postponed this week and now the companies will meet July 25 to set a new date.

So with all that to consider, expect Oracle to extend its tender offer deadline on Monday (if not sooner). It's doubtful that Ellison is going to give up just yet.

Analysts quoted in this story do not own shares of Oracle or PeopleSoft and their firms have no investment banking relationship with them.