Do E-mails Reveal Oracle's True Plans for PeopleSoft?
The best that can be said about sealed e-mails from Oracle Corp. executives that were disclosed last week is that Oracle is a merciless competitor.
A less-kind reading confirms what PeopleSoft, many of its customers, and even some industry analysts have long suggested, however: that Oracle’s bid is actually an attempt to acquire PeopleSoft’s customer base or destroy the company as a viable competitor.
The sealed internal e-mails and memos are part of a lawsuit that PeopleSoft filed in an Alameda County, Calif. court in June. California’s Contra Costa Times newspaper last week obtained a copy of PeopleSoft’s complaint and published selections from the sealed e-mails and memos.
In these excerpts, Oracle executives discuss plans for supporting PeopleSoft’s products and express optimism that their company’s hostile takeover attempt will hurt PeopleSoft’s bottom line and reduce its stock price.
PeopleSoft amended its lawsuit against Oracle last month, alleging that it had uncovered "extensive new facts about Oracle management's ongoing acts of unfair trade practices”—including, the company claimed, the database giant’s strategy to “disrupt PeopleSoft's customer relationships."
Take, for example, Oracle’s claim that it won’t kill off PeopleSoft’s product line. During a virtual town hall meeting in July, Oracle executive vice president Chuck Phillips dismissed reports that his company would no longer market PeopleSoft applications to new customers.
“All we said was in terms of how we take those products to market,” he argued. “[We said] we wouldn’t actively market those products, and that’s just the overhead and expense of doing marketing seminars, doing online seminars, those sorts of things that really cost a lot. As far as anyone who wants to buy the product, existing and new customers, they can certainly buy the product.”
Read in that context, Oracle vice president Safra Catz’s disclosure that “We really won’t be continuing their product line”—a statement that was excerpted from its original context—doesn’t contradict Phillips’ argument.
And what of PeopleSoft’s charge that Oracle is trying to disrupt its relationships with customers? An e-mail from an unidentified Oracle employee involved with the acquisition reads like a prosecutorial smoking gun: “We've certainly wounded [PeopleSoft],” he writes, “Even if we don't end up closing the deal, this is going to take it time to recover."
As if that’s not enough, Oracle vice president of analyst relations Peggy O'Neill quotes executive vice president Phillips as saying: "Time is on our side, because the more time goes on … the more likely people start worrying about what will happen to the future of [PeopleSoft]."
Then there’s this: “The more something hurts [PeopleSoft], the more likely that share price drops and $16 starts to look better,” O’Neill quoted Phillips as saying. Oracle initially shopped a tender offer of about $16 per share to PeopleSoft investors, although the database giant upped its offer to $19.50 per share in July.
Strategy is Consistent
At least one long-time industry watcher who has worked for Oracle in the past argues that the company’s hostile bid for PeopleSoft—while unprecedented—is consistent with its bread-and-butter strategy of growing market share by eliminating competitors.
“Oracle’s philosophy has always been you win by having someone else lose,” he observes, noting that while he was with Oracle, the company would often aggressively compete in accounts that it had no shot of winning simply to delay an impending sale to a competitor. “It’s a finite market share, and if the market is not growing, you take on a competitor and put them out of business. One of the best ways of doing that is to hurt their sales efforts.”
There’s anecdotal evidence that this is happening. In July, Noel Cook, an administrator with healthcare managed services provider Extendicare Inc., told us that before Oracle began its bid, his company had narrowed its choices of packaged application suites down to PeopleSoft and Oracle, with PeopleSoft in the lead. Since then, he says, his company is more inclined to go for an Oracle-based solution—although he says that all bets are now off until the dust settles. “It has probably put our decision on hold until this shakes out … [although] it has made us more likely to choose Oracle,” he confirms.
At least one e-mail excerpt suggests that Oracle has benefited financially from customer confusion in such cases. An e-mail that Oracle sales executive Max Hill sent to CFO Jeff Henley discloses that “the acquisition issue” had helped Oracle to win $2.5 million from PeopleSoft.
An e-mail from O’Neill to an unidentified industry analyst advises that “obvious customer advice such as wait on purchases until this is over should be highlighted.” O’Neill’s advice was apparently taken to heart: “See how influenceable [analysts] are when we give them a little love!” she wrote in another e-mail excerpted in PeopleSoft’s complaint.
Before she came to Oracle, O’Neill was an analyst at Dataquest, which is now owned by Gartner, a research firm.
The e-mails were typically provided without context of any kind. In a statement, Oracle spokesperson Jim Finn attacked PeopleSoft’s suit, describing it as “rife with comments taken out of context as PeopleSoft continues to litigate the issue in the court of public opinion."
Stephen Swoyer is a Nashville, TN-based freelance journalist who writes about technology.