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PeopleSoft extends refund plan, again

Through the end of the year, PeopleSoft will calm new customer fears about a possible Oracle takeover with a rebate guarantee.

PeopleSoft Inc. said today it is extending its customer assurance program through the end of the year.

The program promises to refund customers two to five times their software licensing fees should the Pleasanton, Calif., company be acquired and its product lines discontinued. The plan has widely been regarded as a "poison pill" to fend off rival Oracle Corp.'s $7.3 billion hostile takeover bid. Currently, the program has added an estimated $800 million to the cost of the takeover, PeopleSoft has said.

According to Steve Swasey, PeopleSoft's director of corporate communications, this is the third time the program has been extended since it was first offered in June, just after Oracle launched its hostile takeover bid. Each deadline for the program has coincided with the close of one of the company's fiscal quarters. The current offer runs through Dec. 31.

"The program allows customers to continue buying PeopleSoft products despite ongoing uncertainty," Swasey said. "There's still so much uncertainty about the whole thing. We believe it's behind us, but customers need certainty, and we're providing that."

Last week, Redwood Shores, Calif.-based Oracle filed suit to block the program. A court hearing has been scheduled for today.

PeopleSoft also faces a legal challenge from a group of stockholders who have sued to stop the assurance program.

On Monday, PeopleSoft announced that a change in majority control to its corporate board would not automatically trigger the refund. Rebates will only kick in if board changes are the result of an acquisition. Swasey characterized that change in the plan as correcting an "administrative error" and said the language did not affect any customer contracts.

Oracle may be forced to reduce its offer, which stands at $19.50 per PeopleSoft share, if the court challenge fails. But that may be "putting the cart before the horse," according to Jamie Friedman, a financial analyst with Fulcrum Global Partners LLC in New York. The deal requires approval by the Department of Justice, which is still investigating it.

Friedman said that, regardless of what happens, the competitive deck currently isn't stacked in Oracle's favor.

"If the judge doesn't block the [customer-assurance] liability, none of that alters the fact that Oracle is still in the uncomfortable position of being the third application vendor," Friedman said. "I'm not sure they want to be in that situation. Ultimately, everything plays into [market leader] SAP's court."

PeopleSoft has not said how many customers have taken advantage of the rebate program, but the company signed up 100 new customers in the second quarter and 177 new customers in the third quarter, Swasey said.


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