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Wait-and-see time for PeopleSoft users

What will Oracle's ramped-up offer mean for PeopleSoft customers? Some share their purchasing plans in the wake of this latest takeover twist.

Following Oracle Corp.'s decision Wednesday to raise its takeover offer, PeopleSoft Inc. advised shareholders to take no immediate action. That's advice that at least one PeopleSoft customer is following.

Pyxis Corp., a San Deigo-based medical information systems company, went live with PeopleSoft CRM in November 2002. Other departments within Pyxis, which had been holding off on their PeopleSoft investments to see how the CRM application performed, are now waiting to see the outcome of the takeover bid. The company had been preparing to go forward with a PeopleSoft application for customer administration when Oracle launched its bid.


"When [Oracle CEO] Larry Ellison initially began his quest to beat up on PeopleSoft, that put a dark cloud over that contract," said Vahid Taj, a senior business analyst with Pyxis. "We're waiting for executives to get that comfort level."

For the last several months, PeopleSoft executives reassured customers that the takeover threat was over. After all, stock in the Pleasanton, Calif., company had been trading significantly higher than Oracle's offer. That changed yesterday when Oracle hiked its cash offer to $26 per share, nearly a 19% premium.

Still, some customers are undaunted.

Insurance technology firm AMS Services Inc., Windsor, Conn., runs PeopleSoft's 8.4 software and is considering an upgrade to 8.9. The potential of Oracle purchasing the vendor and discontinuing PeopleSoft products remains a real concern, but AMS is not waiting on the outcome of the deal.

"At this point, we've committed to making PeopleSoft our underlying platform," said Jim Calabrese, AMS' chief financial officer. "We've been in implementation for at least a year. So, at this point, we need to keep moving. There are a few things we've identified adding, and we're committed to those."

Additionally, AMS purchased its PeopleSoft applications before the company's customer assurance plan was in place. The plan promises to give customers a sum of three to five times their license fees if PeopleSoft is acquired and its product line discontinued.

Oracle has pledged ongoing support for PeopleSoft products and restated that commitment in its release announcing the increased takeover bid.

Wednesday's announcement represented the second time the Redwood Shores, Calif.-based firm has upped its offer for PeopleSoft stock. The initial bid last June was $16 per share, and Oracle increased its offer to $19.50 two weeks later. At the close of the NASDAQ on Wednesday, PeopleSoft's shares were trading at $22.70 -- significantly lower than the current Oracle offer of $26.

When the takeover attempt was first announced, customers closely followed developments. Yet some say the acquisition attempt has featured so many twists -- including antitrust investigations and a proxy battle -- that they've tuned out, to a degree.

"Initially, when [the takeover] came out, it was big news, broadcasted heavily in normal news media. But [it] sort of went away," Taj said. "What this whole thing does is it makes folks who are potential purchasers stop and wait."


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