July 1, 2005 10:32 AM PDT

Oracle cuts merger-cost estimates

Oracle on Friday lowered its estimated restructuring costs related to its acquisition of PeopleSoft.

In a filing with the U.S. Securities and Exchange Commission, Oracle said that it now expects to spend approximately $546 million on restructuring necessitated by the PeopleSoft deal, a sizable reduction from its previously reported projection of $611 million in restructuring expenses. Oracle said it expects to spend an additional $32 million on restructuring related to its other recent acquisitions, which include retail software maker Retek.

The Redwood Shores, Calif.-based firm said that it has completed a "substantial majority" of its PeopleSoft merger-related efforts, including the integration of the two companies' information systems and other business operations. Oracle reported that it expects to complete the remainder of its merger activities around the $11.1 billion PeopleSoft buyout sometime within the next six months.

As part of the filing, the company said that it would continue to look for strategic acquisitions that complement its market opportunities. On Wednesday, Chief Executive Larry Ellison said during the company's fourth-quarter earnings call that Oracle would consider only those acquisitions that contribute to the software maker's long-term strategy and profit-growth target of 20 percent per year for the next five years.

Oracle also listed a number of remaining financial risks related to its integration of PeopleSoft, including the possibility of facing higher-than-expected costs in supporting the applications maker's products. Other reported risks include lagging PeopleSoft license renewals, and the potential departure of significant numbers of the former PeopleSoft's employees, Oracle said. Companies are required to list such risks as part of the SEC filing process.

Oracle reported that the Customer Assurance Program launched by PeopleSoft during its hotly contested corporate takeover of the company could expose it to future lawsuits from some customers. The assurance program offered refunds to PeopleSoft customers if Oracle failed to meet certain product-support obligations once the acquisition was completed. However, Oracle said it does not believe it is likely that the company will face such litigation.

As part of its fourth-quarter earnings report, which exceeded the expectations of Wall Street analysts, Oracle said that it has completed its efforts to merge PeopleSoft's software sales teams with its own operations. Boosted by sales of PeopleSoft applications, Oracle reported $3.12 billion in fourth-quarter software revenue, a 24 percent increase compared with the same period last year.

The company's fourth-quarter enterprise applications license revenue jumped by 52 percent to $350 million as its sales teams began marketing PeopleSoft software directly alongside Oracle's existing products.

 

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