Another Wrench in Oracle's Merger Machine

In fact, one explanation for the day's counterintuitive stock moves (PeopleSoft was down much of the day before recovering to a small gain) was that some traders figured that a strong quarter makes PeopleSoft too difficult to acquire, so they got out, said Patrick Mason of Pacific Growth Equities. Mason's firm has no banking relationship with PeopleSoft.

Other analysts, many of whom admitted to being caught off-guard off by the day's events, had other explanations. Richard Williams, of Summit Analytic Partners, said he detected a lot of skepticism among traders, particularly arbitragers, as soon as the announcement crossed the wires: "The market was concerned that the quarter was (as Oracle said) built on gimmicks and they sold."

At one point, the stock was off 35 cents, or 2%, but recovered late in the session to close up 19 cents, or 1.1%, to $17.98. "At that point they decided that it didn't matter whether it was a gimmick or not -- it has to be factored in," said Williams, whose firm does not have an investment banking business.

Trip Chowdhry of Midwest Research, who has been bullish on the merger, said one quarter of good news won't change what he views as the underlying reason PeopleSoft shareholders will sell to Oracle: "PeopleSoft's viability after about one year is questionable. The company needs a growth driver," he said.

Despite all of Wednesday's happy talk, there are shareholders who are leaning toward a sale. Giri Cherukuri, head trader at OakBrook Investments looked at the 10% premium between PeopleSoft's price late in the day and Oracle's $19.50 a share bid and told TheStreet that he was leaning toward tendering his shares.

Ellison was probably glad to get the news. Wednesday's announcement capped a bad week on the M&A front. The Department of Justice decided to ask his company for more information about the PeopleSoft acquisition, a move that could add as much as six months to the process, and a court hearing on Oracle's suit against PeopleSoft and J.D. Edwards (JDEC Quote) has been postponed.