Monday, November 01, 2004

Oracle's True Motivation in the PSFT Takeover Attempt

Here's the story behind Oracle's "surprising" new offer of $24 a share for PeopleSoft*.

First, Judge Leo Shrine forced this to happen. He strongly suggested that Oracle put its' best and final offer on the table, so that PeopleSoft could stop pussyfooting around. Oracle sued PeopleSoft to force the company to drop its' poison pill.

Some of the analysts I talked to say that Oracle proved that PeopleSoft's board has no intention of accepting any Oracle offer. That'd be a clear violation of their fiduciary duty to shareholders -- shareholders who've GOTTA be pissed that PeopleSoft rejected a $26-a-share offer.

With this new offer on the table, and a November 19 deadline, it's put up or shut-up time for PeopleSoft.

The one issue that analysts were buzzing after an early morning conference call today was Oracle's new assessment of the cost of getting this deal done. Little noticed by the media, but well noted by analysts such as UBS' Heather Bellini and Pacific Crest's Brendan Barnicle, Oracle admitted that this takeover will cost more than initially estimated.

Oracle now says a PeopleSoft deal won't be GAAP accretive until the second year, reflecting a higher closing cost.

And perhaps a higher likelihood of this hostile takeover actually going through.

* Disclosure, I own one share of PSFT (I paid $21.57 back in February), which I bought so PeopleSoft couldn't refuse me entry to shareholder meetings, etc.


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