The Microsoft chief software architect and chairman’s lifeline plan for PeopleSoft is the latest revelation to surface in Oracle Corp’s legal battle against the US Department of Justice’s (DOJ) attempt to block its hostile takeover with PeopleSoft Inc.
According to Gates’ email, which was written a day after Oracle first launched its $7.7bn bid for PeopleSoft on June 6, 2003, he suggested to Ballmer that Microsoft might take a small investment stake in business applications software maker PeopleSoft to strengthen its ability to fend off Oracle.
Thinking about this PeopleSoft bid by Oracle made me wonder if we should approach them and suggest a minority investment to bolster their independence, Gates wrote.
In return Gates also said, PeopleSoft could make a modest platform commitment to Redmond, Washington-based Microsoft.
This is really an indirect reference to Microsoft’s SQL Server relational database management system which competes head-to-head with Oracle9i. Microsoft is worried that Oracle’s takeover would remove a large chunk of business since Oracle would naturally want to push its own database to existing PeopleSoft customers brought on board following a takeover.
Gates’ email was submitted as the latest piece of evidence by Oracle at a San Francisco federal court this week.
Gates’ email is also the latest in a series of takeover revelations to come out of the trial’s testimony that continues to pique the interest of industry watchers.
In another email composed by Gates also in June last year he told Ballmer that Microsoft should buy German applications firm SAP AG.
Another thought that came to mind is that its [sic] time we bought SAP, Gates wrote.
Indeed, earlier this month, it was revealed that Microsoft approached SAP about a possible merger. Ultimately nothing came out of the talks which apparently ended several months ago.
Earlier this week, the court was also presented with a list of Oracle’s top nine acquisition list, which included companies such as BEA Systems Inc, Business Objects SA, Sybase Inc, and Documentum Inc among others, alongside PeopleSoft.
The list was presented to Oracle’s board in April 2003.
Microsoft and SAP, though not directly involved in the takeover battle, are clearly having a major influence in the trial’s proceedings.
The DOJ is arguing that any merger would be anti-competitive and lead to higher prices for business application software. Its main argument is that only Oracle, PeopleSoft, and SAP are in a position to monopolize the high-end of the business applications (or ERP) market. Oracle says there are other players to be considered including American Management Systems Inc, Lawson Software Inc, and of course Microsoft.
Redwood Shores, California-based Oracle says that Gates’ email provides a strong indication that Microsoft wants to become a serious player in the enterprise applications software market. Hence, it argues that it should be allowed to buy PeopleSoft because Microsoft presents a real competitive threat.
Oracle may well have a point. Microsoft, which has grown its business on the back of its Windows operating system platform and personal productivity applications suite, has already hinted it is headed in this direction. In December 2000 it acquired Great Plains Software Inc to develop and sell business applications to small-to-medium sized businesses. Earlier, Microsoft also made its first move into the business intelligence (BI) software market following the release of SQL Server 7 in 1998.
Microsoft however says it has no intention of selling software to the complex, high-function business applications market. Microsoft also points to several functionality gaps in its Business Solutions Suite as well as a lack of a direct sales force and consulting organization that Oracle, PeopleSoft, and SAP all have.
