PeopleSoft's board unanimously rejects Oracle's offer

Canadian experts weigh in on the takeover bid and what it could mean to the HR market: "The unknowns are just going to scare the pants off people"

PeopleSoft Inc.’s board of directors has unanimously rejected the unsolicited bid by Oracle Corp. to buy the company.

On Thursday, the board said Oracle’s offer would face lengthy antitrust scrutiny and would probably not receive the required approval. It also said the bid by Oracle, of $16 (all figures U.S.) per share, undervalues the company.

Ian Turnbull, managing partner of Laird & Greer Management Consultants in Toronto, and past-president of the Canadian Council of Human Resource Association (CCHRA) and the International Association for Human Resource Information Management (IHRIM), doubts Oracle's attempted takeover will succeed.

“I don’t think it’s going to go through, at least not at this price,” said Turnbull. There is too much volatility in software company stock prices for a $16 per share offer to be accepted by PeopleSoft’s board of directors. He’s also suspicious of Oracle’s motives in the takeover bid. Oracle may be more interested in complicating PeopleSoft's proposed $1.8-billion merger with J.D. Edwards than actually acquiring its business software rival.

“Oracle is currently number two in the world. PeopleSoft and J.D. Edwards would eclipse them and turn them into a bad third,” he said. “So it makes a certain amount of sense that they would want to screw up this deal.”

And while Turnbull is suspicious of Oracle’s intentions, he speculated that there could be a trend of takeovers and mergers in the industry.

“I think consolidation in general makes a lot of sense,” he said. “I am a little surprised there hasn’t been more consolidation.”

The industry experienced fast-paced growth in the 1990s, but that growth wasn’t sustainable and so some of those software companies will be looking for merger and acquisition opportunities so they can continue to grow.

So what does this mean for HR? Turnbull said mergers of HR software providers will mean less competition and higher prices in the short term. But the changes could also open the door for other vendors to move into the space. There are a lot of products out there that haven’t really been established in the Canadian marketplace and this could be an opportunity to do so.

Not good for business

Al Doran, an HR technology consultant who helps organizations select and implement HR systems and president of Phenix Management International in Toronto, said PeopleSoft’s disappearance from the HR market would not be good news for Canadian businesses.

“Basically what Oracle is doing is wiping (PeopleSoft) out so they are not a competitor,” said Doran.

He said Oracle’s performance in the HR market in the past few years has been disappointing. When Oracle first stepped into HR market, industry experts felt their was a lot of potential but it has not met expectations and has failed to deliver an attractive product for the Canadian HR audience, said Doran.

Oracle’s struggle to move effectively into the HR market raises questions about its ability to merge the PeopleSoft products into its line, he said.

He said he’s fielded a number of calls from clients using PeopleSoft who are concerned about what the takeover might mean for them. Many of them have long-term strategic plans based on implementing a PeopleSoft system over the next few years and now they’ll likely have to rethink that, he said, because they’re worried about having new modules pushed on them or they’re concerned about the support they will receive for their current system.

Oracle’s CEO Larry Ellison has said that, if the deal goes through, the company would not force any PeopleSoft 7 users to update to PeopleSoft 8. PeopleSoft’s support for version 7 was set to run out at the end of this calendar year, but Ellison said Oracle would eliminate that artificial deadline and continue to support version 7.

“That’s forcing customers to upgrade to the next generation of PeopleSoft, PeopleSoft 8, sooner than they might want to,” said Ellison. “So we think choice is a good thing. We’re going to extend that support and let them make an upgrade at a time of their choosing.”

He said customers would still have the option of moving from PeopleSoft 7 to PeopleSoft 8, and stressed they wouldn’t be forced to switch to Oracle software.

“We’re not going to charge additional license fees from moving from PeopleSoft 7 to PeopleSoft 8, nor will we charge an additional license fee if they choose, and I emphasize if they choose, to migrate from PeopleSoft 7 to the Oracle E-Business Suite,” said Ellison. “But that will also be an option and one in a series of upgrade steps to make that easy and graceful.”

But Doran said those considering purchasing a new system will likely stay away from PeopleSoft products.

“The unknowns are just going to scare the pants off people,” said Doran.

PeopleSoft is trying to get the message out that customers should plan to continue to use its products and that buying PeopleSoft software is still the best way to go. PeopleSoft’s CEO, Craig Conway, said the company is moving forward with its planned merger with J.D. Edwards.

Latest stories