June 9, 2004 5:07 PM PDT

DOJ: Big three rule corporate market

SAN FRANCISCO--The Department of Justice advanced its case Wednesday that an Oracle buyout of PeopleSoft would leave just two software vendors in a critical area of business applications.

Testifying on day three of the trial, Laurette Bradley, executive vice president of information technology at PeopleSoft customer Verizon Communications, said the loss of customer choice resulting from an Oracle-PeopleSoft combination would result in "a much less vibrant market."


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That supported the Justice Department's argument that the proposed merger of two of the top three makers of business software packages would result in a duopoly comprising Oracle and Germany's SAP, leading to higher prices and less innovation.

Oracle insists the market is populated by more than three significant suppliers and that competition would remain healthy if it were to buy PeopleSoft. Bradley testified that Verizon's analysis disagreed.

"The three contenders we believe are in the market are Oracle, PeopleSoft and SAP," Bradley said. "Those three companies have superior technology that is kept up to current levels."

Under cross-examination, Bradley agreed that Verizon could play Oracle against SAP in future contract negotiations if PeopleSoft were merged with Oracle. But she fretted at the prospect since Verizon already has decided to install PeopleSoft across the company. "We would lose either way," she said.

An IBM executive testifying on behalf of the Justice Department reiterated that Oracle, SAP and PeopleSoft are often the only choices for many large, sophisticated companies in the market for applications software. Nancy Thomas, a leader in IBM's business consulting services group, said Lawson Software and Microsoft are not in the same league. Oracle has argued those companies are or could become major players.

Under questioning from Oracle, Thomas acknowledged that IBM has taken a public position against Oracle's buyout of PeopleSoft.

Reminding Thomas that Oracle and IBM compete in the database software market, Oracle attorney Greg Lindstrom suggested that IBM fears losing database sales to Oracle if it acquires PeopleSoft and that fear biased her testimony.

On Tuesday, Oracle used numerous PeopleSoft documents to make its case for a wider playing field. It produced PeopleSoft papers discussing competitive pressure from Lawson Software, American Management Systems (AMS) and other smaller makers of business application software.

Antitrust attorneys at the Justice Department have built their case that a combined Oracle-PeopleSoft would unfairly reduce competition by excluding Lawson, AMS and other smaller suppliers, plus companies not quite in the market, such as Microsoft, in its definition of the market.

Oracle opened its $7.7 billion bid for PeopleSoft over a year ago. The antitrust trial is the latest obstacle to that goal. PeopleSoft has rejected several escalating bids, and European antitrust regulators are waiting in the wings to weigh in on the acquisition, should Oracle prevail in U.S. courts.

Over the next two weeks, the Justice Department is scheduled to call many big PeopleSoft customers and economists to the witness stand. Oracle then will make its case, with the trial expected to conclude in early July. The nonjury trial is expected to last about four weeks, with the government presenting its case first. Oracle is expected to present its case starting June 18.

 

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