Oracle to Fight DOJ Decision on PeopleSoft Merger

Oracle's Board of Directors has met and decided to "vigorously challenge the Justice Department's lawsuit to block Oracle's merger with PeopleSoft," the statement continued. "The Department's claim that there are only three vendors that meet the needs of large enterprises does not fit with the reality of the highly competitive, dynamic and rapidly changing market."

Since the litigation will likely extend beyond PeopleSoft shareholders' meeting on March 25, Oracle also announced the withdrawal of the slate of directors it nominated for PeopleSoft's board. Oracle will now not solicit proxies for use at the meeting. However, Oracle has extended its previously announced tender offer for all PeopleSoft stock to 12:00 a.m. EST on June 25.

Larry Vs. Uncle Sam

In a presentation to investors filed with the Securities and Exchange Commission this week, Oracle said it believes "it has a very strong case and will ultimately prevail. Efficiencies created by the merger far outweigh any purported anticompetitive harm."

But after several months of review, Justice Department regulators disagreed. The DOJ concluded that Oracle, PeopleSoft and German behemoth SAP(SAP Quote) are the only companies that currently compete to develop and sell the high-function integrated human resource management and financial management services software for large enterprises.

"This lawsuit seeks to ensure that there will continue to be vigorous competition in this important industry," Pate said.

Antitrust experts and financial analysts had predicted that Oracle would be blocked if Justice Department regulators use a narrow definition of the application software market. A wider definition, by contrast, would have included competitors such as Microsoft (MSFT Quote) that are slowly expanding into the enterprise space, as well as more specialized players such as Siebel Systems (SEBL Quote) and i2 Technologies (ITWO Quote) that concentrate on specific areas such as customer-relationship management and supply-chain software.

Oracle will be going against the grain in fighting the DOJ. "It is not common for somebody to make the government take them to court in a merger case," said Paul Friedman, who co-chairs the antitrust group of the Washington, D.C., law firm Dechert LLP. There are cases where the government has lost in court, Friedman added, though he could not cite a specific example.