Oracle's Acquisition of Peoplesoft

            
 
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Case Details:

Case Code : BSTR154
Case Length : 19
Pages Period : 2000-2005
Organization : ORACLE
Pub Date : 2005
Teaching Note :Not Available
Countries : United States
Industry : Software

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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.



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EXCERPTS Contd...

The Defense Strategies

After EC's approval, the hurdles that still remained for Oracle were PeopleSoft's poison pill and the company's Customer Assurance Plan. PeopleSoft had instituted its poison pill defense in 1995. The defense allowed the company's existing shareholders to purchase the company's stock at half price in an event of a hostile takeover bid in which the acquirer had acquired 20 percent of the company's stock. The Customer Assurance Plan (CAP) was adopted in June 2003 after Oracle had made its first takeover bid. The provisions under CAP guaranteed pay back to PeopleSoft's customers between two and five times the software licensing fees if the company was taken over within two years or if the product support declined within four years...

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The Deal

Once the deal was finalized, industry experts started reviewing it to evaluate whether Oracle had taken the right decision. They pointed out that PeopleSoft's software licensing revenues had fallen by 18% in 2003 from the previous year's figure. Moreover, for a revenue of every $100 through software sales, PeopleSoft spent $136 in sales and marketing (Refer to Exhibit VI for financial statements of PeopleSoft)...

The Road Ahead

According to AMR Research, the estimated financial revenues in the fiscal 2004 for the merged entity's applications business would be $5.5 billion, commanding a 12% market share of the worldwide enterprise applications market.

Analysts pointed to several integration challenges for Oracle's management, given the scale of the merger (Refer to Exhibit VII for the expected risks of acquiring PeopleSoft). The fact that PeopleSoft was not able to successfully integrate JD Edwards added to the complexity of this acquisition...

Exhibits

Exhibit I: Oracle - Consolidated Statements of Operations
Exhibit II: Oracle - Product Profile
Exhibit III: Peoplesoft - Product Profile
Exhibit IV: Oracle & Peoplesoft - Stock Price Chart
Exhibit V: Mergers and Acquisitions Regulations in the US
Exhibit VI: Peoplesoft - Consolidated Statements of Operations
Exhibit VII: Risks in Acquiring Peoplesoft
Exhibit VII: Timelines for Product and Customer Support

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