Administration December 10, 2004

PeopleSoft Extends Guarantee Amid Takeover Try

October 12, 2004 (PLANSPONSOR.com) - Software maker PeopleSoft Inc., which offers popular HR systems, has decided to extend its money-back guarantee until December 31 or until an ongoing hostile takeover by Oracle Corp. expires.

Reported by

Fred Schneyer

The announcement came as testimony continued in a Delaware courtroom as Oracle attacked the customer program, which it says adds a potential $2 billion liability to the $7.7 billion acquisition it has been pursuing (See Oracle Launches Legal Attack on PeopleSoft’s Takeover Defenses ), the Associated Press reported. Oracle co-president Safra Catz testified Monday that the uncertainty around the potential cost of the program is one of the factors Oracle is pondering in a potential revision of its valuation of PeopleSoft. Oracle’s offer stands at $21 per share.

Catz said that Oracle did not factor the customer program liabilities into calculations of the offer now on the table or earlier bids. “We could not quantify it,” she said.

In June 2003 Oracle launched a hostile tender for PeopleSoft at $16 per share. The per-share price was raised to $19.50, then to $26, before falling to the current $21 per share, over the course of Oracle’s 16-month pursuit of PeopleSoft.

In a US Securities and Exchange Commission filing, PeopleSoft said it decided to prolong the customer assurance program because of its value in calming customers’ takeover concerns and to allow PeopleSoft to turn in a successful third quarter.

Testimony in the court case, “including sworn testimony of Oracle’s executives,” played a role in the PeopleSoft board decision, the SEC filing said.

In defending the customer program, PeopleSoft is attempting to prove that Oracle has capitalized on the takeover attempt to steer customers away from PeopleSoft. It’s a point Oracle disputes.

PeopleSoft’s customer assurance program gives companies that sign new contracts with PeopleSoft the right to ask Oracle to pay them from two times to five times the amount they spent if Oracle cuts off support to the products after acquiring its rival. Considered by some a novel form of a “poison pill” antitakeover measure, the customer program is aimed solely at Oracle, and wouldn’t apply to other potential acquirers.

The PeopleSoft-Oracle dispute is being closely watched because it is believed that many current HR officials now using PeopleSoft systems could abandon them in the event of a takeover and outsource their HR operation.