Ellison: 'Radical' industry shift drove bid - News - Business

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This story was printed from ZDNet Australia.
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Ellison: 'Radical' industry shift drove bid

By Alorie Gilbert, CNET News.com
July 01, 2004
URL: http://www.zdnet.com.au/news/business/soa/Ellison-Radical-industry-shift-drove-bid/0,139023166,139152088,00.htm

Increasing competitive pressure from SAP and the entry of Microsoft into the business applications market spurred Oracle to launch its hostile bid for PeopleSoft last year, Oracle CEO Larry Ellison testified on Wednesday in the US.

"We wanted to be a survivor and a consolidator, and we felt the only way to survive and prosper was through acquisition," Ellison said in U.S. District Court, where it is fighting the Justice Department's insistence that an Oracle-PeopleSoft merger should be prevented on antitrust grounds.

Ellison said he first considered a merger with PeopleSoft two years ago after PeopleSoft chief executive Craig Conway called him and suggested PeopleSoft and Oracle's applications business combine.

The companies abandoned the talks after several meetings when the two CEOs disagreed about which of them would run the combined company, Ellison said. Conway would only agree to a merger if he were left in charge, the Oracle chief testified. Ellison insisted that Oracle run the merged firms under his leadership.

Oracle decided to launch an unsolicited bid for the company nearly a year later because Conway had resisted Oracle's plan and moved to buy rival JD Edwards. "We had no choice but to bypass management and make an offer directly to shareholders," Ellison said.

The effort has been resisted by PeopleSoft and drew the ire of antitrust regulators, who have been arguing before Judge Vaughn Walker that if Oracle swallows PeopleSoft, only it and German rival SAP will be significant players in the market. Oracle insists that there are plenty of other options for business software packages from smaller companies.

Ellison cast the hostile bid as a survival strategy rather than a predatory effort to squash a competitor. Oracle was particularly worried about the mounting power of German rival SAP. Other developments that threatened Oracle's position were the rise of outsourcing service providers and new upstarts such as Salesforce.com, all offering alternatives to Oracle's products.

"The competitive dynamics were changing rapidly," Ellison said. "There was going to be tremendous price pressure on our applications business."

Ellison was expected to finish his testimony later Wednesday in the US. The presentation of Oracle's case, and the entire four-week trial, were slated to wrap up this week.