PeopleSoft and Oracle jockey for position in ERP market

18 June 2003
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19 June 2003 | Robin Parker

A battle for position has broken out among major players in the enterprise resource planning (ERP) software market.

It follows PeopleSoft's announcement that it plans to buy JD Edwards.

Peoplesoft's $1.7 billion proposal was announced earlier this month, backed by JD Edwards' senior board. The deal could be cleared by the autumn.

The move would reduce the current "big four" ERP vendors - SAP, Oracle, PeopleSoft and JD Edwards - to three, positioning PeopleSoft as second only to SAP. JD Edwards would have a 25 per cent share of the combined company.

Between them, SAP and the bolstered PeopleSoft would have 71 per cent of the ERP market, which covers everything businesses need to manage processes from human resources to design, planning and purchasing.

But Oracle swiftly launched a hostile $5.1 billion takeover bid for PeopleSoft.

Larry Ellison, Oracle chairman and chief executive, said he would cease development of PeopleSoft's software, instead incorporating advanced features of its products into future upgrades to the Oracle E-Business Suite.

Ellison said Oracle would not consider whether JD Edwards was worth acquiring until the PeopleSoft bid was successful.

Craig Conway, president and chief executive of PeopleSoft, branded the cash offer a "transparent" attempt to disrupt his company's plans.

He added: "It is atrociously bad behaviour from a company with a history of atrociously bad behaviour."

JD Edwards also branded Oracle's offer anti-competitive and said it was likely to be investigated by either the US Department of Justice or at the European Union level.

PeopleSoft's offer is based on the idea that JD Edwards was a complementary fit. With 16 common prospective clients, it sees cross-selling opportunities.

PeopleSoft wants access to more manufacturing customers, and to expand its presence among mid-sized organisations, particularly in Europe. The companies have combined annual revenues of around $2.8 billion and 11,000 customers in more than 150 countries.

The two vendors also want to improve their financial standing. JD Edwards recently posted its first loss in six consecutive quarters, while PeopleSoft's stock value has more than halved in the past year.

Undeterred by the events, JD Edwards last week made its biggest product announcement in two years.

It has added more than 400 new products and enhancements to its JD Edwards 5 suite, including new supply chain management and supplier relationship management software.

In a statement, AMR Research's lead analysts said Oracle's bid was a "typically provocative" tactic designed to do little more than hurt PeopleSoft competitively in the short term.

But even if PeopleSoft changed its mind on the bid, Oracle will still face hostility, the analysts said.

"Oracle will have a lot of work to do to persuade PeopleSoft users to stick around after the dust settles, particularly after showing them so much disdain during the bid," it says.

SMjun2003

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