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JDE, PeopleSoft plot thickens with commitment to merge

At the J.D. Edwards user conference, the CEOs of J.D. Edwards and PeopleSoft said they intend to merge despite Oracle's challenge and offered a product road map for the deal.

DENVER - It sounds straight out of a fairy tale. After an eight-month courtship, a nobleman gets a princess to accept his hand in marriage. Then, days after announcing their engagement, a powerful duke publicly proclaims his desire to steal away the princess by tempting her parents with riches. But the lovers stand their ground and forge ahead with wedding preparations.

That's essentially the plot line that the chief executives of J.D. Edwards & Co. and PeopleSoft Inc. described yesterday. In the face of Oracle Corp.'s attempt to take over PeopleSoft, both reiterated their commitment to making J.D. Edwards a wholly owned subsidiary of PeopleSoft.

Oracle's $5.1 billion bid for PeopleSoft last week threw the J.D. Edwards deal -- announced just four days earlier -- up in the air. Oracle has said it would review whether to go ahead with the J.D. Edwards acquisition if it successfully acquires PeopleSoft. Observers, however, seriously doubt that the Redwood City, Calif.-based database giant would want J.D. Edwards.

During a taped address to attendees of the Quest Global conference, J.D. Edwards' annual user event, PeopleSoft CEO Craig Conway said the merger simply makes sense. "Some would say we were twins separated at birth," he said, noting that the companies share a similar customer philosophy.

J.D. Edwards chairman and CEO Bob Dutkowsky also made a case for joining forces with PeopleSoft, arguing that it was in the best of interest of customers. The deal would create three distinct PeopleSoft product lines, catering to enterprise customers, the midmarket, and users running IBM Corp.'s iSeries platform, he said.

Dutkoswky added that current users of J.D. Edwards software would have nothing to fear. "It would be your choice to migrate, your choice to accelerate deployments," he said in a keynote address.

Some Quest attendees, however, are concerned about how service and support would be affected.

David Frady, manager and executive vice president for treasury management at New Orleans-based Hibernia Bank, uses J.D. Edwards' financial services CRM package. Frady is extremely pleased with the implementation, but he fears support could be affected during the integration of the companies. "These kind of things can happen with mergers," he said.

In the long term, Frady thinks he could benefit from PeopleSoft's financial services strength. "J.D. Edwards is not very strong in the financial services space, but PeopleSoft is," he said.

Frady actually has first-hand experience with J.D. Edwards' integration. He initially purchased software from YOUcentric Inc., the CRM provider J.D. Edwards acquired in 2001. "I bought it because it was the right technology for us. I figured somebody would buy the architecture and support it [if anything happened to YOUcentric] because it was so good," he said.

With YOUcentric, J.D. Edwards was able to do some preliminary integration and have a product available only 30 days after closing the sale, said David Siebert, group vice president for J.D. Edwards' WorldSoftware. He admits that integration with PeopleSoft would be more complex.

It's still too early to say specifically how PeopleSoft would integrate J.D. Edwards' CRM offerings into its product portfolio, Siebert said, noting that he is flying out to PeopleSoft's headquarters next week for product talks.

The two companies' product lines don't overlap much, Siebert said. PeopleSoft's CRM offerings tend to be more robust, standalone products built for the enterprise, and they are largely installed in industries like financial services and telecommunications. J.D. Edwards' tools have a strong midmarket manufacturing bent, with strength in supplier relationship management functionality.

If they can successfully combat the Oracle threat, PeopleSoft and J.D. Edwards hope to close their deal within 90 to 120 days. Dutkowsky was tight-lipped about specific contingency plans. J.D. Edwards has $400 million in cash that it could spend on acquisitions of its own or on developing new technologies of its own. Another merger is not out of the question, but Dutkowsky declined to speculate on possible partners.

If combined, PeopleSoft and J.D. Edwards have said they hope to realize $80 million in savings, mostly by reducing infrastructure and redundancies. For example, both companies have offices in Switzerland that are located only blocks from one another. Layoffs would be a last resort, Dutkowsky said.

Under the agreement, Conway would remain as CEO, but upper-level executives at J.D. Edwards would work with PeopleSoft for periods ranging from six months to two years. Dutkowsky has agreed to stay on for six months to help with the integration of the companies. "We'll have to wait and see if I will find a meaningful role in the company after that," he said.

Dutkowsky first learned that Oracle could put a kink in his merger plans while having breakfast with his son at a Boston restaurant. "At first, I really did think it was a joke," Dutkowsky said. "PeopleSoft stock was trading for $18 a share and Oracle was offering $16. It didn't make any sense, but then again it is Oracle. I'll let you draw your own conclusions."


At JDE show, customers ponder merger mayhem

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