December 13, 2004 7:56 AM PST

Ellison gets holiday gift after all

Larry Ellison can't find anybody to sell him an NFL football team in time for the holidays, but at least he got PeopleSoft.

Oracle's drawn-out battle to buy PeopleSoft came to a sooner-than-expected finale Monday morning, while most of Silicon Valley was still sleeping. The billionaire CEO was nonchalant about his $10 billion purchase, wrapping the news into a second-quarter earnings report. "Today we announced both a great quarter and the agreement to acquire PeopleSoft," he stated.

But closing this deal wasn't exactly smooth sailing for the America's Cup runner-up. Oracle's hostile bid--rare in the technology world and initially dismissed as "audacious" by PeopleSoft--was a corporate soap opera and neither side's conduct was exactly sportsmanlike. Throughout the bitter battle, Ellison did not mince words.

Back in July 2003, only a month after the hostile bid was announced, the outspoken CEO joked to Wall Street analysts that if he had a gun with only one bullet he'd choose to shoot then-PeopleSoft CEO Craig Conway over Conway's black lab, Abbey. "I think at one point Craig thought I was going to shoot his dog...If Craig and the dog were standing next to each other, trust me--I have one bullet--it wouldn't be for the dog," he said at the time.

Conway said he wasn't amused, but he countered by outfitting Abbey with a bulletproof vest at a customer conference. Conway's skit drew laughter--but by October of this year Conway wasn't laughing. He lost his job in a boardroom coup--another chapter in the unpredictable saga.

Ellison didn't stop with the dog remarks. He also heightened fears among PeopleSoft customers with comments that suggested a short life for PeopleSoft products if the buyout occurred. "Although we will not be actively selling PeopleSoft products to new customers, we will provide enhanced support for all PeopleSoft products," he said in June 2003, when the buyout was announced. "Furthermore we will be incorporating the advanced features from the PeopleSoft products into future versions of the advanced Oracle eSuite products."

Ellison also did little to soothe PeopleSoft's rank-and-file, when in June of 2003, he called the proposed merger "an acquisition of consolidation."

"These overlaps and consolidations allow us on the one hand, to save money; on the other hand, make a lot of improvements," Ellison said at the time. That left PeopleSoft's workers, who had created a more collegial corporate culture than Oracle's competitive atmosphere, worrying about big job cuts.

As the proposal dragged on and it became clear that Oracle's tough talk wasn't winning it enough friends, Ellison toned down his rhetoric. In addition, Chuck Phillips, a soft-spoken executive whom Ellison recruited from Wall Street, became a higher-profile spokesman for the deal.

But Phillips got tripped up, too. In its lawsuit against Oracle to block the deal, the U.S. Justice Department tried to hoist Oracle by its own petard--using the words of co-president Phillips.

The lawsuit cited an analyst report by Phillips, when he worked at Morgan Stanley, that argued the business software market was "dominated by an oligopoly comprised of SAP, Oracle and PeopleSoft."

But Oracle's management, including Phillips, had been arguing just the opposite--that the business was "highly competitive, dynamic and rapidly changing"--to win support for their buyout.

Oracle also was accused of using scare tactics in emails to win support for the deal. In October of this year, e-mails surfaced that suggested Oracle use the acquisition plan to "create FUD with customers and prospects alike." In the computer business FUD--or "fear, uncertainty and doubt"--is a common term used to describe a campaign that spreads misinformation or exaggeration.

In the end, however, Ellison, who was rebuffed in his bid to buy the San Francisco 49ers football franchise, got his way: acquiring PeopleSoft for $26.50 per share and heading off a bitter proxy fight next spring.

And it's not as though PeopleSoft shareholders were left empty-handed: Oracle's final offer was considerably more than the initial offer of $5 billion, or $16 per share, made in June 2003.

 

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