Oracle says PeopleSoft merger ready to roll by January

It may be one of the software industry's largest acquisitions to date, but Oracle expects to work out its merger plans with PeopleSoft by the end of the year and will "hit the ground running in January," according to Oracle President Charles Phillips.

"This has been a long time in coming and is a very strategic acquisition. We've been thinking about this for the last 18 months and have a pretty solid plan," Phillips said Tuesday in a conference call with reporters. He added that he will be heading out to PeopleSoft's offices in Pleasanton, California, on Wednesday to begin work on some of those merger plans. "This is not something that will drag out."

Oracle announced on Monday it has signed a definitive agreement to acquire PeopleSoft for US$26.50 per share, or approximately US$10.3 billion. The deal is expected to close in early January.

One part of the plan Oracle has already decided upon is that it will finish and then sell PeopleSoft 9, the next version of the PeopleSoft's enterprise software suite. "It is just another release with some enhancements," Phillips said.

Additionally, there will be another version of the product from the former JD Edwards & Co., called JD Edwards 6, Phillips said. PeopleSoft acquired JD Edwards last year for US$1.8 billion.

"We are going to evaluate the reseller network, and we want resellers to continue to sell the upgrades. We'll tell resellers that we would also like them to take a look at Oracle E-Business Suite Special Edition," Phillips said. "Resellers can carry multiple editions, and as for our partners, there will be lots of products for them to sell."

Oracle plans to support the product lines it is acquiring for the next 10 years while making it easier for users to migrate to Oracle products over time, the company's president said.

Phillips acknowledge that some of the 12,000 employees at PeopleSoft are facing layoffs, but he said numbers have not been decided on. "We are interested in keeping those in the developer and support organizations, but a lot less of the administrative positions," he said.

Oracle will also try to quickly evaluate the partnerships and agreements that PeopleSoft brings to the merger. For example, last September, PeopleSoft announced it was deepening its ties with IBM and planned to work with Big Blue to optimize its applications for use with IBM's WebSphere middleware and development tools. It would also sell WebSphere products directly through its own sales force.

"I don't have a lot of detail on the IBM contract and I don't know if it was even signed. It is also unclear what they've committed to WebSphere," Phillips said. But while Oracle would not be interested in adding IBM technology to its stack, Phillips said, it would be very interested in working with IBM on services.

Oracle also is keen on in developing other PeopleSoft relationships, including its partnerships with ISVs (independent software vendors). "PeopleSoft has over 200 ISVs. A lot are valuable to us, while others won't fit as well," Phillips said.

According to Phillips, Oracle has made considerable strides in evaluating the markets to which PeopleSoft caters and will not shy away from cherry-picking what it thinks is the cream of the crop. "PeopleSoft has a very good presence in federal, state and local government projects. And they have some things we don't have," Phillips said. "Their federal payroll application is something we don't have. That will be the exception where their product will be the lead."

Phillips added that PeopleSoft also "has a pretty decent presence" in the financial services space.

Analysts and users have warned that Oracle will need not only to quickly come up with plans for integrating PeopleSoft, but also to clearly articulate those plans if they are to keep customers on their side. According to Bruce Richardson, an analyst at consultancy AMR Research Inc., in Boston, the first 30 days of the deal are critical and the company will have to make it crystal clear where they plan to go with the PeopleSoft and JD Edwards products.

"It will take a while to digest this acquisition. It's like a python swallowing a school bus," Richardson said. "It will be especially hard if they decide to support all three product lines."

Richardson also pointed out that Oracle's competitors, in particular Redmond, Washington-based Microsoft and Walldorf, Germany-based SAP, will be looking to take full advantage of any confusion on the part of current and potential Oracle and PeopleSoft customers.

"In the coming year, SAP has the opportunity to reap the high end and Microsoft can go after the SMBs (small and medium-sized businesses) while Oracle is distracted (with the details of the merger)," Richardson said. "SAP (celebrated) yesterday. And Microsoft is also going to love this. Clearly, if you are a customer looking to do a first-time purchase, you don't want to worry about where Oracle is going to go with it's products. It's a huge distraction."

Despite that distraction, Phillips said that not only is Oracle confident it can smoothly handle its merger with PeopleSoft, the company is still interested in continuing its buying spree. "We have said that we are looking at multiple acquisitions," he said.

When asked if Oracle may now have its eye on buying up Siebel Systems, Phillips didn't deny Oracle has designs on the CRM (customer relationship management) software maker, but he said that any acquisitions Oracle would make in the short term would have to be on a smaller scale.

Scarlet Pruitt, in London, contributed to this report.

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