Acquisition Taboo in DoJ v. Oracle Case

31, MAY 2004


Oracle (Quote, Chart) will not be able to use some of its previous acquisition experience in court as it argues for a takeover of PeopleSoft (Quote, Chart) next month.

According to court documents, a federal judge granted the U.S. Department of Justice its request to prohibit the Redwood Shores, Calif.-based software giant from talking about or submitting "evidence, testimony, or argument at trial, hearing of any motion relating to Rdb Database."

Oracle purchased the software division from Digital Electronics back in 1994 and has since used the acquisition liberally as an example of how well Oracle honors the accounts of companies it purchases. During town-hall meetings last year to quell the fears of PeopleSoft investors and partners, senior vice president and CIO Bob Pacek recounted that Oracle was so proactive in its integration that DirectTV Group (Quote, Chart) still uses Rdb software for billing.

"With the acquisition of Rdb, a database company purchased from Digital Equipment about 10 years ago, we promised to focus on quality and stability, while enhancing features based on customer demand," Oracle president Chuck Phillips said in an open letter to PeopleSoft investors last month. "At the time, Rdb users had the exact same questions about the takeover you're asking us today. We looked closely at what Rdb customers had to say, working together with their user groups. The bottom line was that we didn't require customers to upgrade to our products. In fact, even today, we still help thousands of Rdb customers running important applications. And we gained some great people from that acquisition as well. The head of our entire technology-development division came from Rdb. So we think the record speaks for itself."

The government said it filed the 43-page brief after Oracle failed to supply it with relevant information about the Rdb acquisition and even doubted the paperwork existed. A Justice Department spokesperson told internetnews.com that the government did not want to have evidence submitted during the case that it was not prepared to deal with.

An Oracle spokesperson declined to comment on the Rdb ruling, but lawyers representing the company filed their own paperwork to prevent any testimony from DaimlerChrysler executive Michael Gorriz. Gorriz is one of 25 likely witnesses that the DoJ planned on calling to testify about the likely impact of proposed transaction.

The DoJ and 10 states are seeking to block Oracle's unsolicited $7.7 billion plan to acquire PeopleSoft. They argue that the merger between two major enterprise software providers would be anti-competitive and limit customers' choices. Oracle is fighting to thwart the DoJ's stance. The trial begins on June 7 and is expected to last six weeks.

Oracle had better hope that the case will wrap up quickly or it will surely drop its bid for PeopleSoft altogether, suggests Jay Desai, CEO and Founder of industry think tank Institute of Global Competitiveness.

"Obviously this deal will not work if the Justice Department can win its case, Desai told internetnews.com. "Even then, I give this acquisition a less than a 5 percent chance of happening. There are too many other obstacles in the way such as the PeopleSoft leadership. Oracle should instead focus on its next stage of building its service-oriented strategy with a combination of innovation and organic growth."

In related news, Former U.S. District Judge Charles Legge is expected to present his report and recommendations on how to proceed with the issue of sensitive documents from third-parties helping with the DoJ's case.

District Court Judge Vaughn R. Walker named Legge as a "special master" of the court to advise companies like Microsoft (Quote, Chart), SAP (Quote, Chart), Siebel Systems, (Quote, Chart) BearingPoint, and niche software vendors such as Lawson Software on how to best prevent their corporate secrets from becoming public record. Past acquisition experience with a database company is barred from Oracle's trial in its bid for PeopleSoft

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