March 1, 2004 7:30 PM PST

Oracle to call on Microsoft in antitrust battle

In an ironic twist, Oracle revealed on Monday that it is seeking information from archenemy Microsoft to buttress its defense against an antitrust lawsuit filed by the U.S. Department of Justice.

Oracle will request that Microsoft furnish insight into its plans to expand its share of the business applications software market, Oracle spokeswoman Jennifer Glass confirmed.


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Oracle vs. PeopleSoft

The Justice Department filed a lawsuit against Oracle last week to block the company's $9.4 billion hostile acquisition bid for PeopleSoft. Oracle intends to challenge the suit, which contends that a buyout would leave large companies with only two software suppliers, Oracle and Germany-based SAP, to choose from and that prices would rise as a result.

The irony of the situation is that Oracle Chief Executive Larry Ellison was among the most outspoken critics of Microsoft during the Redmond, Wash., company's own antitrust trial, which was led by the same agency now blocking Oracle's expansion plans. At the time, Ellison advocated the breakup of Microsoft into separate companies, and he remains fond of referring to Microsoft as a "convicted monopolist" in speeches.

A Microsoft representative declined to comment on the matter or to say whether the company has received any requests from Oracle, its lawyers or the Department of Justice.

How willing Microsoft will be to cooperate with one if its worst critics and toughest competitors remains an open question. Oracle may be compelled to subpoena Microsoft for the information it seeks, according to a report in Bloomberg that quotes Oracle attorney Daniel Wall of Latham & Watkins.

Meanwhile, Oracle is seeking a June trial date from the San Francisco federal court that's handling the case and expects the trial to take two weeks to a month to resolve, Wall told CNET News.com. U.S. District Court Judge Vaughn Walker has been assigned to hear the case, he added. Both Oracle and PeopleSoft are based in the San Francisco Bay Area.

"You can't dismiss Microsoft because it's fishing the market where the fishing is good," Wall said, referring to Microsoft's focus on supplying applications to midsize businesses. The Justice Department largely excluded the midsize business segment of the market in its analysis of Oracle's bid. Instead, it based it ruling on the competitive dynamics in the market for applications for the very largest corporations in the world.

Although Microsoft now mostly targets businesses with less than $1 billion in annual revenue, the general wisdom is that the company will eventually target larger global firms and compete with SAP, PeopleSoft and Oracle. But the Justice Department discounted Microsoft as a competitor to the three leading business systems suppliers.

"It makes no sense that (Microsoft) is going to ignore larger enterprises given their overall strategy," Wall said.

Microsoft has ambitious plans to grow its applications business over the next five years or so. Microsoft has spent more than $2 billion on acquisitions in the past few years, which gives it an almost $600 million foothold in the business applications market. The company expects to grow the unit to $10 billion in yearly revenue by 2010. That's quite a goal--SAP, the gorilla in that market, reported $7.8 billion in sales last year. By comparison, Oracle booked just $2.5 billion in business applications revenue--about 20 percent of its total revenue--in its 2003 fiscal year.

In a speech Monday, Oracle Co-President Charles Phillips also argued that Microsoft poses a growing competitive threat in the business applications market and that a PeopleSoft acquisition would help it compete against the industry behemoth.

 

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