Oracle says Siebel would be its second choice

If PeopleSoft takeover falls through, Oracle may target Siebel next

If Oracle Corp.'s takeover of PeopleSoft Inc. falls through, the Redwood Shores, California-based software maker may go after its second choice: Siebel Systems Inc.

In its quest for growth, Oracle has Siebel second on its wish list, Oracle Chief Executive Officer (CEO) Larry Ellison said in a videotaped deposition played in federal court in San Francisco on Monday. Ellison's deposition was part of the U.S. government's case to block Oracle's $7.7 billion hostile takeover of PeopleSoft.

Ellison was asked if Oracle would be able to compete in the enterprise software arena through acquisitions other than a merger with PeopleSoft. He replied that Oracle would be competitive regardless of an acquisition, but that acquisitions would help and that a PeopleSoft takeover would allow it to compete most effectively.

"They (PeopleSoft) have got ... a larger and more important customer base than our second choice, which would be Siebel," Ellison said. "I think I publicly said that Tom Siebel came over to my house and tried to sell me Siebel Systems."

Siebel of San Mateo, California, sells CRM (customer relationship management) software. PeopleSoft of Pleasanton, California, sells a range of business applications, including software that allows businesses to manage human resources, finances and supply chain and customer relations. Siebel Systems could not be immediately reached for comment.

At an earlier point in his testimony, which was recorded last month, Ellison also fingered middleware vendor BEA Systems Inc. as a possible target for Oracle and contradicted what he was about to say later. "I think PeopleSoft and BEA are much more attractive ... than Siebel," he said.

Earlier on Monday Oracle President Safra Catz in a deposition played back from videotape testified that Oracle had courted J.D. Edwards & Co. shortly before launching the PeopleSoft bid. Jeff Henley, Oracle's chairman and chief financial officer, in yet another deposition on tape, said Oracle had considered buying Lawson Software Inc.

Oracle wants to acquire other vendors to expand its customer base. In PeopleSoft's case, Oracle expects an acquisition will allow it to sell more of its database and application server software to PeopleSoft customers who may currently run competing products from vendors including Microsoft Corp. and IBM Corp., Ellison testified.

The U.S. Department of Justice (DOJ) says an Oracle-PeopleSoft merger would stifle competition in the market for high-end human resources and financial management applications, resulting in higher prices. Oracle says there are numerous other competitors, and that other vendors such as Microsoft could enter the market at any time.

As part of its case, the DOJ on Monday also called California Institute of Technology professor Preston McAfee, a witness Oracle had tried to get excluded.

McAfee reviewed Oracle's discounting practices and found the vendor's prices is between 13 percent and 26 percent lower when competing against PeopleSoft. McAfee also testified that Oracle's prices would likely rise between 5 percent and 30 percent if PeopleSoft was not competing.

Oracle attorney Dan Wall attacked McAfee's testimony. Under McAfee's merger theory prices will always go up, Wall argued. "I think the testimony was revealed to be a cartoon version of the industry is about," Wall said, speaking to reporters outside the courtroom.

Monday marked the beginning of the third week in court. The DOJ is expected to informally rest its case on Tuesday, but intends to call Microsoft Business Solutions head Douglas Burgum on Wednesday. Oracle in the coming two weeks is scheduled to present its case. Judge Vaughn Walker will decide the case, most likely in August or September.

Copyright © 2004 IDG Communications, Inc.

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