Oracle's PeopleSoft bid said 'bad behavior'

By Alex Pham
Los Angeles Times

Bringing the drama — and the mud-slinging — back to California's Silicon Valley, Oracle Corp. chief executive Larry Ellison on Friday lobbed an unsolicited bid for his database company to buy rival PeopleSoft Inc. for $5.1 billion in cash and pledged to discontinue its products.

PeopleSoft chief executive Craig Conway, who earlier last week made a friendly offer to buy software maker J.D. Edwards & Co. for $1.9 billion in stock, fired back by likening the flamboyant Ellison to the brutal Mongolian warrior Genghis Khan.

"Obviously it's a transparent attempt to disrupt the acquisition of J.D. Edwards by PeopleSoft," said Conway, who characterized the offer as "atrociously bad behavior from a company with a history of atrociously bad behavior."

Even some analysts doubt the sincerity of Oracle's bid.

"This is a huge departure in Oracle's typical strategy," said Art Russell, senior technology analyst at Edwards Jones in St. Louis. "Everything they've purchased so far has been tiny. It makes you wonder what they're thinking."

Oracle's offer of $16 a share represents a mere 6 percent premium over PeopleSoft's closing price of $15.11 on Thursday. News of the offer pushed PeopleSoft's stock up $2.71 to $17.82 — suggesting that investors expect Oracle to sweeten its bid — while Oracle's fell 27 cents to $13.09 in Nasdaq trading Friday. Oracle said it will file a formal bid for PeopleSoft tomorrow.

Redwood City-based Oracle and Pleasanton-based PeopleSoft compete in the cutthroat $20 billion global market for software used by large businesses to manage their accounting, customer databases, supply chains and other office tasks.

Analysts said the surprise offer could signal a renewed interest in deal-making in the technology sector, which has been battered over the past two years by a feeble economy, cutbacks in corporate spending and weak stock market valuations. Once-splashy tech companies responded to the downturn by keeping their heads down and tightening their belts.

Now that the sector is showing some signs of recovery, some companies are resuming their wheeler-dealer ways.

"The deal-making certainly has picked up," said David Yockelson, director of technology research at Meta Group Inc. in Stamford, Conn. "It's a pretty stark contrast to a year ago when technology spending was frozen or down and most companies were concerned with just getting through the year."