- The Washington Times - Sunday, February 29, 2004

SAN FRANCISCO - Oracle Corp.’s decision to challenge a government lawsuit blocking its $9.4 billion bid for rival PeopleSoft Inc. raises a question: Has Oracle Chief Executive Officer Larry Ellison turned the takeover quest into a Moby Dick-like obsession that might hurt his company?

Oracle says it’s doing the sensible thing, protecting free-market principles against a misguided antitrust lawsuit filed by the U.S. Justice Department and seven states. “We think we have a strong case,” said Daniel Wall, a San Francisco lawyer hired by the business software maker to fight the government’s lawsuit.

What’s more, Oracle says everyone from shareholders to software customers will be better off if it acquires Pleasanton, Calif.-based PeopleSoft.

But more industry analysts are starting to believe Redwood Shores, Calif.-based Oracle would be better off dropping the bid and setting its sights on other acquisition candidates.

The PeopleSoft offer, introduced nearly nine months ago, has outlived its usefulness, said Forrester Research analyst Erin Kinikin. “The bid served a purpose by disrupting PeopleSoft’s business for many months, but the threat [of a takeover] is just about gone. It’s like the threat level was at orange for a long time and now it’s fading to gray.”

As Oracle has stalked its prey, Mr. Ellison has periodically taunted PeopleSoft CEO Craig Conway, a former subordinate who derisively has compared his former boss to Genghis Khan. Mr. Ellison has cited this Genghis Khan quote as one of his favorite sayings: “It’s not sufficient that I succeed. Everyone must fail.”

The acerbic exchanges between the two executives has made the takeover bid seem personal. “There are some very big egos involved,” said analyst David Hilal of Friedman, Billings, Ramsey & Co.

Mr. Ellison acknowledged that his ego often influences his business decisions in a “60 Minutes II” profile titled “The World’s Most Competitive Man” that aired the night before the Justice Department filed its lawsuit.

“I suppose you can say to anyone who wants to win so badly, who I am winning for?” Mr. Ellison said in the interview. “Am I winning for Oracle shareholders or is this simply a matter of personal vanity? I admit to it, mea culpa. An awful lot of it is personal vanity.”

Oracle declined a request to interview Mr. Ellison on Friday.

Mr. Ellison’s former associates say it would be uncharacteristic for him to put his personal feelings before Oracle’s interests. He has a major incentive to do right by Oracle since he owns 26 percent of the company — a stake worth $18 billion.

“It’s never personal with Larry; it’s always business,” said Marc Benioff, a former Oracle executive who now runs Salesforce.com. “Larry is a master warrior. He may lose the battle, but win the war by destroying PeopleSoft from the inside out.”

PeopleSoft previously has described Oracle’s takeover bid as a major distraction that threatened to disrupt its business.

Now that the Justice Department has intervened, PeopleSoft isn’t paying much attention to Oracle because “the game is over,” spokesman Steve Swasey said. “The lights are out, the stadium is empty and the tarp is being pulled over the field.”

As of Nov. 30, Oracle had spent $33.4 million on its PeopleSoft bid and likely will spend millions more tangling with the Justice Department. Oracle is seeking to accelerate the legal proceedings so the case is wrapped up before the PeopleSoft offer expires June 25, Mr. Wall said.

Pursuing PeopleSoft entails another less obvious cost for Oracle — the missed opportunity to buy other large high-tech companies that might be an even better fit than PeopleSoft, said ThinkEquity Partners analyst Yun Kim.

Oracle executives have said the company likely will pursue other companies if the PeopleSoft deal collapses. Some candidates Oracle might consider include BEA Systems, Mercury Interactive, Tipco and Veritas Software, industry observers say.

Just because the PeopleSoft bid is on the table doesn’t mean Oracle won’t surprise everyone by negotiating another blockbuster deal, Miss Kinikin said.

“There could be a little sleight of hand coming up from Oracle, where all of a sudden the company is buying someone else so people start to forget about PeopleSoft,” she said. “Larry hates to lose, so he needs to find a way to somehow turn this loss into a win.”

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