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PeopleSoft users bristle at Oracle takeover talk

Oracle doesn't seem to have done much to soften some PeopleSoft customers' objections to its takeover attempt.

More than one month after Oracle Corp. launched its hostile takeover bid, PeopleSoft Inc. customers remain resolutely opposed to the deal.

Their feelings seem to have changed little, despite frequent reassurances from Oracle executives that they would extend support for current PeopleSoft products and allow users to migrate to the Oracle E-Business Suite without incurring new licensing fees.

From the start, however, Oracle, has clearly stated its intention to discontinue the PeopleSoft product line.

One customer squarely against the deal is Omaha, Neb.-based Data Transmission Network Corp. (DTN), a data services provider for the agricultural industry. DTN has been a PeopleSoft shop since 1998 and currently runs PeopleSoft Financials 8.1 and PeopleSoft CRM 8.4.

"Our No. 1 fear is not knowing Oracle's product very well and understanding its depth," said Phil Tomek, DTN's chief information officer. "Would we really get the same functionality we get today?"

Complicating matters, DTN runs PeopleSoft with a Microsoft SQL Server database back end. Tomek fears that Oracle would eventually push PeopleSoft customers toward its flagship database and might not be committed to "tuning for the SQL Server side of the house."

Another PeopleSoft customer and SQL Server user, lighting equipment manufacturer Electronic Theatre Controls (ETC) in Middleton, Wis., shares those concerns. Chief information officer Tracy Wundrock calls her company a "Microsoft shop" and is afraid Oracle would try to change that.

"They would steer the customer base to an Oracle database platform," Wundrock said. She added that Oracle databases cost more and that it's more difficult to find affordable, trained staff with the skills to run them. "My biggest fear is it would cost our organization millions of dollars and waste thousands of hours of time," she said.

One PeopleSoft customer, the state of Connecticut, filed a lawsuit citing antitrust objections to the acquisition.

These customers' feelings match those gauged recently as part of exclusive research. Sixty-one percent of those who took an online survey said the acquisition would not be a good for PeopleSoft customers. The survey was launched June 6, the day Oracle made its hostile bid.

Since then Oracle has stepped up its efforts -- and raised its bid to $6.3 billion -- to convince PeopleSoft customers and shareholders that the deal would benefit them. Last month it embarked on a road show to meet with institutional investors.

Even if Oracle can win shareholder approval, it still needs to get the Department of Justice to sign off on the deal. Antitrust investigators have asked Oracle to submit additional information on the deal. That delay forced Oracle to extend its tender offer, which was due to expire Monday. The deadline is now July 18.

Meantime, PeopleSoft's board has rejected Oracle's offer and proceeded with plans to acquire with J.D. Edwards & Co., Denver. That deal could close as early as July 17, according to PeopleSoft's director of corporate public relations, Steve Swasey.

Last week, PeopleSoft's preliminary quarterly earnings report defied doomsday forecasts by beating Wall Street estimates. Buoyed by a customer protection program that promises refunds as high as five times their licensing fees, PeopleSoft signed on 30 new customers in the quarter.

Many analysis firms, most notably Gartner Inc., have cautioned PeopleSoft customers to withhold purchases while the acquisition plays out.

"Be careful and be cautious," are still the words of advice from Chris Selland, founder of Cambridge, Mass.-based CRM consultancy Reservoir Partners. "You don't want to invest six or seven figure sums in technology that may not be there."

Selland thinks Oracle will prevail, but only after PeopleSoft's acquisition of J.D. Edwards is complete.

Both DTN and ETC are currently considering further PeopleSoft purchases and say they aren't scared off -- yet.

"Hopefully, this will be behind [PeopleSoft] by then," said DTN's Tomek, who plans to buy a data warehouse within a few months.

PeopleSoft's customer assurance program expired June 30, and Swasey said the company has no plans to reinstate it.

ETC is now attempting to add protections to its PeopleSoft contract, including a transfer clause requiring any acquirer to abide by the current terms and also put source code in escrow, according to Wundrock.

On the other hand, some Oracle customers are hoping the takeover will take place. Within the past year, Sealing Devices Inc., a Lancaster, N.Y., manufacturer of industrial products, went live with Oracle software for both CRM and ERP.

IT manager Patrick Harris thinks market consolidation ultimately benefits everyone because the existence of fewer software platforms eases integration with partners and suppliers. Yet he admits he'd be singing a different tune had he opted for PeopleSoft applications, which Sealing Devices had considered.

"I would not feel the same way as a PeopleSoft customer," Harris said. "[The acquisition] strengthens Oracle's position in the marketplace. From a very selfish perspective, we made the right decision."


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