The Justice Department went first on Tuesday afternoon, and U.S. District Court Judge Vaughn Walker quickly hit attorney Claude Scott with a barrage of questions about the government's market analysis. Walker asked why he should view the market in question as a United States market only, as the agency contends, rather than a global market.
"How can this be anything but a global market?" Walker asked, noting that the software code that PeopleSoft and Oracle sell in the United States is the same code they sell in Europe.
He also called into question the Justice Department's market analysis, which defines the relevant arena as "high-function" human resource management and financial management software. "Is this a definition that has ever been used outside this litigation?" Walker asked Scott.
The Justice Department filed suit against Oracle in February, charging that its hostile buyout bid for PeopleSoft would give the merged company too much market power. Oracle argues that Germany's SAP and a flotilla of other competitors would keep it in check.
Walker spent just over an hour questioning Scott and then called Oracle's lead attorney, Dan Wall, to state his case.
"This is the first merger case that the goverment has tried to challenge in which the mergered firm would not have dominant market share," Wall noted in his summation.
Walker dealt to Wall the same intense questioning that Scott had received. Walker appeared sympathetic to business software customers such as Daimler Chrysler and Nextel Communications, which had decried the prospect of a PeopleSoft buyout in testimony last month.
"I agree that the government (market) definition is awkward and unwieldy," Walker said. "But we heard from customer witness after customer witness; these people all say that what SAP, PeopleSoft and Oracle sell is different from the other vendors."
Wall said he disagreed with those customers and insisted that government economic analysis of the market is flawed. Oracle has argued that corporate software buyers have a broader selection of choices, including Lawson Software, American Management Systems, business systems outsourcing firms, and, increasingly, Microsoft.
The high-profile trial started in June, with a month of testimony from numerous economists, software executives and business software customers. The verdict in the nonjury trial rests solely with Walker, who is expected to rule by September.
Oracle and PeopleSoft each make computer programs designed to automate common business tasks, such as processing orders, tracking inventory and updating personnel records. SAP is the largest seller of such software. PeopleSoft and Oracle hold the No. 2 and No. 3 spots, respectively.
Oracle launched its surprise bid for PeopleSoft more than 13 months ago and has faced an uphill battle ever since. PeopleSoft's board has rejected multiple offers and erected numerous obstacles for its unwanted suitor, including an antitakeover provision that would flood the market with new shares if another company acquired a large enough stake in the company--making a takeover prohibitively expensive.
Few thought Oracle would prevail in the antitrust case because such victories are rare. Yet after the testimony phase of the trial ended on July 1, PeopleSoft's shares have climbed on speculation that the trial had gone Oracle's way. The rise in share price comes despite PeopleSoft's recent warning that second-quarter earnings would fall below target.
No matter the outcome, the legal drama will probably continue. Analysts say the losing side is likely to appeal the decision. The European Commission, Europe's antitrust agency, is also reviewing the deal. PeopleSoft and Oracle are each suing each other as well, with PeopleSoft charging that Oracle launched the hostile bid merely to damage a competitor. Oracle's suit seeks to overturn PeopleSoft's "poison pill" antitakeover measure.
