Takeover bid by Oracle is bad news for Microsoft

By Dina Bass
Bloomberg News Service

Oracle Corp.'s $6.3 billion hostile bid for PeopleSoft Inc. may force Microsoft Corp. to sell business- management software to bigger customers to keep Oracle and SAP AG from dominating the market, an analyst said.

Microsoft sells applications such as payroll and accounting programs to clients with less than $800 million in annual sales, while Oracle and SAP focus on larger companies.

Goldman, Sachs & Co. analyst Rick Sherlund says that's going to change. SAP and Oracle are the two biggest makers of business-applications software, and they may convince customers not to use other Microsoft programs, including the .Net Internet and networking software that Microsoft is depending on for sales growth.

"If the enterprise applications market is dominated by Oracle and SAP and both are hostile to .Net, then this consolidation is bad for Microsoft," Sherlund wrote to clients. Sherlund rates Microsoft shares "outperform."

Shares of Redmond, Wash.-based Microsoft rose 97 cents to $27.42 today in late afternoon Nasdaq trading.