Connecticut Sues Oracle Over Bid for PeopleSoft

Connecticut has leapt into the PeopleSoft/Oracle fray, as the state’s top officials have filed an antitrust lawsuit against Oracle, alleging that its acquisition of PeopleSoft would interfere with the state’s current computer system conversion plan.

In the suit, filed Wednesday in U.S. District Court in Hartford, Governor John G. Rowland, Attorney General Richard Blumenthal, and state Comptroller Nancy Wyman claimed Oracle’s takeover of PeopleSoft could raise software prices and force PeopleSoft customers to replace their software with other vendors’ products.

PeopleSoft and Oracle compete in the market for business applications for financial management, human resources, customer relations and student administration software. Redwood Shores, Calif.’s Oracle moved to acquire Pleasanton, Calif.’s PeopleSoft June 6 for $5.1 billion, and after a series of verbal and legal spats, upped its offer to $6.3 billion today.

The officials said they want to block the takeover bid because they believe Oracle will discontinue the PeopleSoft line of products, replacing them with its own products, which they said would create a problem for PeopleSoft customers.

Specifically, Wyman said a takeover would create an “enormous and expensive upheaval” of the state’s conversion of its computer system, known as Core-CT, which is slated to begin next month. The conversion, worth $100 million, is based on software purchased from PeopleSoft under a five-year contract signed last year. Wyman said a takeover of PeopleSoft would cost the state much of what has already been spent on the project, and would force it to complete the task with a different vendor’s software.

“Allowing this takeover to go forward would cost Connecticut taxpayers tens of millions of dollars at a time when we can least afford it,” Wyman said. “It would also mean an incredible loss of work and employee training that has been invested in this important project. I am hopeful that the Attorney General’s action can prevent what would be a terrible waste of time and money.”

However, Oracle Executive Vice President Chuck Phillips said in a conference call Wednesday that Oracle would do what it could to support products used by current PeopleSoft customers. Oracle CEO and Chairman Larry Ellison reiterated his company’s promises in a letter to Rowland and Blumenthal.

“Oracle will continue to support PeopleSoft products, you will be able to purchase additional PeopleSoft licenses, and we will protect the significant technology investments that all customers have made,” Ellison said. “It has never been our intention to force any customers to migrate to Oracle Applications. In fact, we have consistently said that we would extend PeopleSoft’s current support deadlines, providing service through our much larger global support organization.”

PeopleSoft currently provides software for state offices and other organizations and corporations throughout Connecticut, including St. Francis Hospital, Connecticut College, Trinity College, Wesleyan University, Travelers, GE Capital, Advo, Hartford Life, Time Warner, and Daimler Chrysler.

“Those customers are the reason why we are doing this,” Oracle spokeswoman Jennifer Glass said. “Our primary objective is to keep them happy.”

After Oracle’s conference earlier in the day to announce its sweetened offer for PeopleSoft, Forrester Research analyst said he sensed a softening in Oracle’s stance toward the PeopleSoft products. The company is now offering add-on modules to migrate existing PeopleSoft customers to comparable Oracle applications at no extra charge.

“This shows that Oracle is trying to be more friendly to the PeopleSoft customer base,” Hamerman said.

Still, Oracle’s maneuvers have raised the ire of Attorney General Blumenthal, who has been a strong vocal opponent of antitrust issues affecting Connecticut. Blumenthal and his office regularly filed suit against Microsoft in the past over antitrust violations.

“We are assembling a powerful coalition of states and other consumers that will suffer the same unacceptable costs if this unlawful, anti-competitive takeover is permitted,” said Blumenthal in a public statement. “The costs are huge and intolerable – in money, time, human capital and system reliability – now and going forward, for our consumers and economy. The takeover would cripple competition, threatening higher prices and lower quality, and cause terrible waste in the human and financial investments already made. Oracle is threatening to force its products on consumers by illegally seizing a key rival and thus amassing market dominance.”

The shakeup in the enterprise applications space has its roots more than two weeks ago, when PeopleSoft announced a definitive merger with J.D. Edwards. PeopleSoft responded by offering to buy PeopleSoft and the merger hopefuls followed by filing suits versus Oracle. PeopleSoft bolstered its offer for J.D. Edwards Monday and Oracle fired back with its own suit Wednesday, which accompanied its sweetened offer.