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Oracle's dream ally: Microsoft

By Dina Bass
Bloomberg News

	Larry Ellison
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Oracle Chief Executive Larry Ellison, who has derided Microsoft as a "convicted monopolist," is seeking to enlist his rival — willingly or not — to bolster his hostile bid for PeopleSoft.

The company plans to request information from Microsoft to challenge the federal government's stance that the $9.4 billion offer for PeopleSoft would violate antitrust laws, a lawyer for Oracle said.

Ellison and Oracle are trying to undermine the Justice Department's conclusion that only Germany's SAP would remain a significant rival in the market for complex accounting software if the takeover took place.

Depositions from Microsoft may show it is planning to enter the market, a lawyer for Oracle said.

"Certainly Microsoft is top of mind," said Daniel Wall of San Francisco-based Latham & Watkins, which is working for Oracle. "We're going to have to see what we get cooperatively and what we have to get through subpoena."

Oracle, based in Redwood City, Calif., will try to convince U.S. District Judge Vaughn Walker that competition from Microsoft and others wasn't properly considered by the Justice Department when it sued to block the PeopleSoft takeover.

Oracle said it will argue that a combined Oracle-PeopleSoft would compete with more companies than SAP, including Lawson Software and SSA Global Technologies. Oracle is the third-largest software maker and also No. 3 in business programs such as payroll and accounting.

In seeking evidence from Microsoft, Ellison is turning to a company he has spent a decade lambasting as monopolistic.

The rivalry between Oracle and Microsoft has been acrimonious. Ellison once hired a detective agency to go through Microsoft's trash during the antitrust case against the Redmond company.
 
Relations are "incredibly hostile" between the companies, said analyst Rob Enderle at Enderle Group in San Jose, Calif. "It just goes to show you that when you think incredible things can't happen in this industry, they do."

That Ellison is seeking testimony from Microsoft to prove his antitrust case is ironic, Enderle said. Ellison has publicly referred to Microsoft as a "convicted monopolist" since late 1999, when a federal judge ruled the company used its grip on personal-computer software to thwart rivals.

Ellison, 59, is preparing a case after the Justice Department and seven states last week sued in federal court in San Francisco to block the bid. Oracle said it will "vigorously challenge" the suit, escalating its nine-month battle for control of Pleasanton, Calif.-based PeopleSoft.

PeopleSoft has rejected Oracle's three offers, the most recent at $26 a share.

In opposing the takeover, the government looked at the market for accounting, payroll and human-resources software for large corporations. It decided only Oracle, PeopleSoft and SAP could meet the biggest customers' needs and said a combination of two would harm competition.

Microsoft spokeswoman Janelle Poole declined to comment on whether the company will help Oracle. Microsoft's applications business is focused on small and medium-size companies and on divisions of larger companies, she said.

Microsoft has said it plans to invest $10 billion over five years to build applications and other software for smaller companies.

Orlando Ayala, a Microsoft senior vice president, said the company will compete for clients or subsidiaries with as many as 10,000 employees. He refused to rule out selling business-application software to the biggest companies in a few years.

"This will be a head-on collision with Oracle, you bet," he said in July. "They are moving down to smaller customers, and we are moving up."

R. Hewitt Pate, federal chief antitrust enforcer, said the Justice Department considered and rejected Oracle's argument that Microsoft's plans would counteract any loss of competition from a PeopleSoft buyout.

"We certainly looked at that issue with respect to Microsoft, with respect to other companies," Pate said last week. "It's our conclusion that entry cannot be relied upon to replace the competition that would be harmed by this transaction."

The department relied on comments from customers, Pate said, some of whom said they were concerned prices would rise and service would deteriorate from the merger.

Copyright © 2004 The Seattle Times Company