PeopleSoft allows antimerger provision to lapse

Business applications vendor PeopleSoft has quietly allowed to lapse a program that offered potential customers rebates in case the company is acquired by hostile bidder Oracle and its software portfolio is no longer developed.

PeopleSoft spokesman Steve Swasey confirmed that the company's board has, at least temporarily, let expire the customer assurance program, which it established as a way to fend off Oracle's unwanted takeover bid. Oracle has been trying to buy PeopleSoft since last summer in a multibillion-dollar deal, but it now faces a number of objections on antitrust grounds by the European Union and the U.S. Department of Justice.

Swasey said the program, which comes up for renewal each quarter, was allowed to lapse on March 31 at the end of the first quarter. The program had offered refunds of two to five times the value of a customer's contracts should a merger take place and the purchasing company cease to enhance PeopleSoft's software. Oracle at one point denounced the move as an "unsustainable gimmick to close deals".

As of the end of the fourth quarter of 2003, the program had created US$1.5 billion worth of potential liability.

"It was very successful because it (assured) the customers that the environment was sound and the software would be viable over time," said Swasey. "The program is only triggered if PeopleSoft is acquired and the new company does not support and develop the software as PeopleSoft would. If it's never triggered, it's never a liability to anyone."

He declined to divulge just how many customers had opted to join the program but said that "it was not a driver of sales by any means." Rather, customers saw it as a "nice-to-have element for something that was already strongly appealing, like fire insurance for a house."

It's up to PeopleSoft's board to decide whether to extend the offer in the future, said Swasey, who declined to say when it next plans to meet.

He also indicated that the Oracle takeover now seems unlikely. "How many government and official agencies does it take (to block the merger)?" he said. "The regulators have spoken."

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