Third PeopleSoft bid renews support fears

Oracle's decision to increase its offer for rival PeopleSoft is likely to raise customer concerns about their investments in business systems, analysts have warned.

The database giant has hiked up its offer by $2.1bn (£1.1bn) to $9.4bn (£5.1bn). This represents roughly a 20 per cent premium on PeopleSoft's current stock price and may be enough to tempt shareholders.

Significantly, the move comes ahead of elections to PeopleSoft's board of directors. If Oracle gets its way, a new board of directors could favour its bid. And this could result in the withdrawal of poison pill provisions, which include massive customer rebates in the event of PeopleSoft being acquired.

"There's no doubt that the timing of this was done with the board elections in mind," said Nigel Montgomery, European research director at analyst firm AMR Research.

But "this is no done deal", he added. Oracle still needs approval from both European and US regulators.

PeopleSoft's customers face a dilemma given Oracle's dedication to acquiring its rival, said Philip Carnelley, research director at Ovum.

Although Oracle has said it will continue to offer support for PeopleSoft's products, customers would at some stage have to move to different software.

"That is a big task. It's not just a case of copying over tables from one database to another. With big ERP suites there's an enormous amount of process knowledge built in. It's not clear how easy it will be to convert this," said Carnelley.

Larry Ellison, Oracle chief executive, said in a statement: "We believe this acquisition is pro-competitive [and] will benefit the customers of both companies. We stand by our pledge to support PeopleSoft customer base."

Oracle's chairman and chief financial officer, Jeff Henley, added: "This is our final price. We urge PeopleSoft directors to seriously consider our offer and put the interests of their stockholders first."

But it is unlikely that PeopleSoft will accept the offer. The company, which has rejected two previous bids from Oracle, has advised its stockholders to take no action at this time, promising that its board of directors will meet to discuss the offer.

PeopleSoft said in a statement: "The unsolicited and hostile nature of the [previous] offers, combined with Oracle's statements in connection with the original offer, were designed to disrupt the company's strong momentum at significant cost to PeopleSoft's stockholders."