Among those likely to be looking at the US$10.3 billion merger with some trepidation are hundreds of major corporations and thousands of smaller companies that rely on PeopleSoft's programs to run their businesses.
In addition, PeopleSoft's 12,000 employees are wondering how the deal will affect their jobs. And Oracle competitors are weighing the merger's potential effect on their business.
Some of the most anxious companies are those using software from JD Edwards, which PeopleSoft acquired last year.
Oracle has repeatedly promised to bend over backward to keep PeopleSoft's 12,200 customers happy, but some are already disgruntled.
"The customer has taken the back seat," said Ray Justus, manager of systems development at Kitchell, a construction company in Phoenix, Ariz. "This is all a money deal; it's about Oracle wanting to get bigger to compete with the bigger guys."
Justus is understandably unsettled. He just got used to working with PeopleSoft. Now Kitchell and thousands of other former JD Edwards customers must adjust to yet another set of owners for the company. The fact that Oracle initially preferred to acquire PeopleSoft without JD Edwards, is further cause for concern, Justus said.
"We're just wondering what's going to happen," he said.
A number of big PeopleSoft customers, including DaimlerChrysler, Verizon Communications and Cox Communications, expressed alarm over the PeopleSoft takeover as witnesses in a government antitrust suit over the deal.
Executives in charge of information technology at each of those companies testified at the June trial that the merger was likely to raise software prices and cause costly disruptions. None of them returned calls about Monday's deal.
However, PeopleSoft customers should take into consideration that Oracle executives, including CEO Larry Ellison most recently, have vowed to do right by them, technology analysts said. It would be in the company's interest to honour such promises because of the lucrative software maintenance fees those customers pay.
One Oracle customer offered a sunnier view of the deal. Charles Peters, senior executive vice president of Emerson Electric, said he looks forward to seeing new products from Oracle as a result of the merger.
"I think it's a positive development," Peters said. "Oracle needs the scale to compete on a global level and keep up the development necessary to provide complete information technology solutions to companies like our own."
Keeping existing customers happy -- whether they use software from Oracle, PeopleSoft or JD Edwards -- is job No. 1 for Ellison, said analysts. "The big challenge for Oracle is to keep the PeopleSoft customer base," said Joshua Greenbaum, analyst at Enterprise Applications Consulting. "If those customers start evacuating to higher ground, Oracle's in trouble."
One of the major reasons for Oracle's interest in the merger is the recurring revenue from maintenance fees and upgrades to existing software paid by PeopleSoft customers.
A growing percentage of Oracle's revenue comes from such fees, which are highly lucrative, often producing profit margins of 80 percent to 90 percent. As the growth in new software licence sales slows, Oracle, along with other software makers, will increasingly rely on maintenance fees to fuel quarterly profits.
Rivals weigh in
Oracle fears that some customers may flee to German rival SAP, the largest supplier of business planning software in the world. The company has been a primary beneficiary of the 18-month battle between its two closest competitors, selling itself as the safe and reliable alternative.
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