The US Department of Justice’s (DoJ) decision to block Oracle’s hostile takeover bid for PeopleSoft was probably one of the worst kept secrets in Silicon Valley. And while Oracle’s challenge to the decision was equally predictable, the entrance of new players to the debate, at this late stage, was not.
The DoJ blocked the acquisition on antitrust grounds. It said that leaving the high-end enterprise resource planning (ERP) market in the hands of only two vendors – Oracle and SAP – would be anticompetitive, leading to inflated prices for customers of both companies and less innovation in the market as a whole.
Oracle’s appeal against the DoJ ruling rests on the claim that Microsoft is set to join the fray, and that the software giant’s entry into the ERP high-end will therefore nullify the DoJ’s concerns (see article, Insatiable desire?). However, Microsoft has submitted a sworn statement to the contrary.
There is little love lost between the two companies – or their founders Bill Gates and Larry Ellison. For years, Ellison has campaigned for tough antitrust regulation to rein in Microsoft. Now, Microsoft has turned the tables by suggesting that it has no plans to enter the market for at least two years, diluting Oracle’s argument.
But Microsoft’s intervention was counterbalanced by SAP’s unexpected support for the deal. SAP executives have written a letter to the DoJ suggesting that Microsoft should not be discounted from antitrust considerations.
It is easy to detect the self-interest on both sides. For SAP, an Oracle acquisition of PeopleSoft will help remove a competitor, while demonstrating to potential customers SAP’s relative stability. Microsoft’s intervention is more surprising and its motives are less clear. Certainly, the more fragmented the market, the easier it will be for Microsoft to eventually enter and dominate it.
The software market leader is already working on a suite, codenamed ‘Project Green’, that will form the basis of its next generation enterprise applications suite. But it is unclear whether this will simply unify Microsoft’s four current products in the ERP market, which are aimed solely at the small and medium-sized business (SMB) sector, or whether it is planning something more ambitious.
When Oracle eventually has its day in court on 21 June, the saga will have dragged on for more than a year and both SAP and Microsoft will no doubt be celebrating the disruption it is causing to their competitors, even if Oracle finally gets its way.
