July 11, 2003 11:44 AM PDT

No 'white knight' seen for PeopleSoft

"White knights" are for fairy tales, according to a new research report that concludes no other software makers are likely to make a play for Oracle acquisition target PeopleSoft.

Oracle's hostile takeover bid for PeopleSoft has prompted speculation that another major software maker could step in with an offer more palatable to PeopleSoft shareholders and executives, who are in the midst of their own acquisition bid for J.D. Edwards.

But a new report by research firm Gartner finds such a "white knight" scenario unlikely, as the risks posed by an Oracle takeover aren't sufficient to motivate business software competitors such as Microsoft and IBM.

"After examining the opportunities for these other vendors, we believe PeopleSoft and J.D. Edwards prospects and users should consider a white-knight scenario as a low probability when considering their options," Betsy Burton, vice president and research director for Gartner, said in a statement.

The Gartner report sees IBM as the company with the most to lose from an Oracle takeover, but says Big Blue is unlikely to react in time to prevent such a move.

"Although IBM is the most-plausible candidate for a white knight, it has not reached the point of being compelled to change its strategy," according to the report. "This could be to IBM's detriment, because, by the time it has no other options, its position will be substantially weaker than if it acted in advance of inevitability.

"If significant consolidation occurs within this market--as illustrated by a successful bid by Oracle for PeopleSoft and Microsoft successfully integrating its technology and application capabilities--we believe IBM could be forced, through a series of major acquisitions, to enter the business application market during the next five years."

Microsoft's focus on small and medium-sized business applications means there's little overlap with PeopleSoft's market, the report continues, and German software giant SAP is doing fine without PeopleSoft products.

"SAP is the major beneficiary of Oracle's bid, whether it succeeds or not," the report stated. "It will do whatever it can to attract PeopleSoft, JDE (J.D. Edwards) and even Oracle customers looking for a 'safe haven' amid the current uncertainty. It has no interest in PeopleSoft's technology or products and can likely achieve a better return by competing for its customers, rather than buying them."

Oracle shocked the technology world last month with a $5.1 billion bid--later increased to $6.3 billion --to take over PeopleSoft. The deal has created widespread anxiety among PeopleSoft customers, attracted scrutiny from state and federal regulators and inspired a volley of hostile rhetoric. Despite optimistic statements from Oracle CEO Larry Ellison, the outcome of the deal remains uncertain.

 

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