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Updated from 8:22 a.m. EST



board unanimously recommended that shareholders reject



$26-a-share hostile buyout offer, saying it "does not begin to reflect the company's real value."

The primary rationale was valuation, PeopleSoft said Monday morning. Directors believe the shares are currently trading at the low end of a historical valuation range, and said a "normalized" multiple over estimated 2004 per-share earnings of 92 cents to 95 cents a share "far exceeds the offer price." It didn't specify the multiple and blamed the supposedly depressed valuation on "uncertainty created by Oracle's hostile actions."

A research note published last week by SoundView suggested that PeopleSoft's appropriate forward earnings multiple is roughly 30, which would put PeopleSoft's fair value around $27.60 based on 2004 estimates.

For its part, Oracle quickly fired back: "Given PeopleSoft's uncertain future as a stand-alone company and the fact that, for the first quarter, PeopleSoft guided analysts below the consensus estimates, Oracle believes that its offer is full and generous," the company said in a press release.

"Since PeopleSoft's current directors persist in their refusal even to discuss the offer with Oracle, PeopleSoft stockholders can act in their own best interests by tendering their shares and voting to elect the

slate of five independent directors to the PeopleSoft board," the statement added.

Shares of both companies were off in recent trading. PeopleSoft was down 56 cents, or 2.5%, to $22.21; Oracle was down 6 cents, or 0.5%, to $13.36.

Oracle's sweetened bid has proven that it remains serious about acquiring its rival. But the market is far from convinced that Oracle will succeed, as evidenced by the relatively small gains made by PeopleSoft shares in the last week. On Feb. 3, the day before Oracle upped its offer, PeopleSoft closed at $21.89.

The board's recommendation, which included the unanimous assent of a panel of outside directors, reflected opinions from both Citigroup Global Markets and Goldman Sachs that the offer is inadequate, PeopleSoft said.

"Oracle is using the entire process -- tender offer, antitrust and proxy solicitation -- in an attempt to damage our company," PeopleSoft said in a release. "Don't underestimate the significant additional value PeopleSoft can create once the disruption from Oracle's hostile activities has ended."

The company noted in a press release that it has "met or exceeded its earnings guidance in 16 of the last 17 quarters" -- a claim that could raise the hackles of critics who believe the company's earnings were goosed in several previous quarters by refund guarantees to customers who might be worried about PeopleSoft's future.

PeopleSoft also doubts a takeover's viability from a regulatory standpoint. "The board continues to believe that the proposed combination of PeopleSoft and Oracle faces substantial antitrust scrutiny and the significant likelihood that the combination will be prohibited under antitrust law," it said. "In addition, PeopleSoft's board believes that Oracle is attempting to damage PeopleSoft, its business and its shareholder value in an apparent effort to acquire the company at an unreasonably low price."