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
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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)...
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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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