In the software universe, a warm fuzzy place filled with flextime and endless rows of foosball tables, acquisitions are generally lovey-dovey affairs, gentle bondings that produce synergies and shareholder value and rivers of free fudge for all concerned. And then there’s Oracle’s acquisition of PeopleSoft, a hostile takeover so hostile, so rancorous, it may yet be broadcast on “WWF Raw.” When Oracle management first announced its unsolicited tender offer for its bitter rival in June 2003, the comments coming out of PeopleSoft’s Pleasanton, Calif., headquarters were anything but pleasant. The financial and human-resources software specialist had just announced that it would acquire ERP vendor J.D. Edwards for $1.8 billion, a deal that suddenly propelled PeopleSoft into the upper crust of the enterprise software strata (along with Microsoft, SAP, and Oracle).
But the irascible Craig Conway had little time to relish PeopleSoft’s new status. Within months, the PeopleSoft CEO found himself facing down Larry Ellison, his old boss at Oracle. Over the next year and a half, Conway desperately tried to fend off Ellison, tossing up every possible barrier, including poison pills, lawsuits, and antitrust investigations. He went public with the fight, too, disparaging Ellison in print and paying for full-page newspaper ads that highlighted deep customer concerns about the takeover bid. In one of those spreads, Glenn Marfell, HRMS manager at Fujitsu America, defiantly claimed that his company “would never move to an inferior Oracle product.” In the same ad, Bob Brobst, CIO at Alcon Labs, stated: “Having to convert to Oracle would cost us millions and millions of dollars without any benefit.”
Brobst is going to find out. Oracle’s $10.3 billion bid for PeopleSoft was completed in January, leaving Conway out of work and his former customers out on a limb. Interestingly, management at Fujitsu America says it is no longer making public statements about the Oracle acquisition. And Alcon has done something of an about-face, noting, “We are hopeful the merger will be beneficial to clients in the long run.”
Others are not so sanguine. Jack Kane, senior vice president and CFO of IDX Systems Corp., a midsize health-care software and services company, presided over an implementation of a PeopleSoft management suite—a rollout that was well under way when Oracle announced its bid for PeopleSoft. As for Oracle’s support of PeopleSoft products, Kane has no doubt that Oracle will continue to support the products. He just wonders what that support entails.
Compounding user worries: in January, management at Redwood Shores, Calif.-based Oracle announced the company would lay off workers to pare costs from the acquisition. And despite assurances that Oracle thinks highly of PeopleSoft’s products—the company did end up paying a 65 percent premium over its initial bid—some industry watchers aren’t convinced. “When Ellison says, ‘We love PeopleSoft,’ he means he loves them as customers, not as PeopleSoft,” says Tony Rizzo, director of mergers-and-acquisitions research at technology research firm The 451 Group. “You can pretty much bet the Oracle game plan over the next 24 months will be to begin a hard-core effort to migrate those folks to Oracle.”