PeopleSoft's Poison Pill Puts the Lawyers in Charge

By raising his offer to $19.50 a share from $16 and offering to give PeopleSoft customers more support than he originally promised, Ellison has proven that he really wants to buy the company, not just disrupt PeopleSoft's business.

PeopleSoft CEO Craig Conway, meanwhile, is doing more than relying on his internal defenses. He has sped up the friendly, $1.75 billion J.D. Edwards(JDEC Quote) acquisition, which if completed in time will make PeopleSoft much more expensive, and less desirable.

On Friday, PeopleSoft's board played yet another card, saying that it was willing to talk to a so-called white knight, that is, a company willing to buy or merge on a friendly basis. But it's a weak ploy. Simply put, it's hard to imagine anyone else buying PeopleSoft.

IBM(IBM Quote) certainly could afford to, but the company has repeatedly said that it's not interested in competing with its enterprise application partners. Hewlett-Packard(HPQ Quote) has barely digested Compaq, and SAP(SAP Quote), the giant German application vendor, said no last week. "We have a strategy within SAP that we don't buy market share," CEO Henning Kagermann told reporters covering the company's annual customer convention.

Cash-rich Microsoft(MSFT Quote) could also pay the freight, but would probably be buying another antitrust case if it picked up PeopleSoft, even though Microsoft might be tempted to replace its current weak CRM offerings with PeopleSoft's much stronger applications. Bottom line: an unlikely outcome.

And then there are those who think all three players in the merger dance would do better to tend to their knitting rather than waste time, money and executive attention spans on M&A games. "The funny thing about all of this is that it is a battle over a snowball in hell. The enterprise applications [sector] is saturated and there appears to be a lot more shelfware than we thought," said Rob Tholemeier, software analyst for research boutique Ramberg, Whalen.

Nevertheless, Tholemeier said PeopleSoft shareholders should consider the deal. "I don't see PeopleSoft shareholders better off if the deal collapses -- although Conway would be." Without the offer, PeopleSoft could be headed back to $14 a share, he said.

Maybe so. But right now it looks like lawyers will have more to say than shareholders.