Advanced Accounting Consolidation Example Essay

Oracle is the second largest software development company in the world, behind German-based SAP. Oracle develops database and applications software for use in sales, procurement, supply chain manufacturing, and human resources (Ricciuti and Kane, 2003). With 42,000 employees and revenues of $2. 6 billion in 2003, Oracle is a thriving company that still has much growth potential (Ricciuti and Kane, 2003). The company is headed by Larry Ellison, both the Chairman and CEO. Ellison, a college dropout, co-founded Oracle in June 1977 and has since become known as the “other software billionaire” (“Larry Ellison,” 2000).

Ellison is a straightforward, extremely aggressive businessman whose drive has made Oracle what it is today. The Victim PeopleSoft is the third largest competitor in the software development market, but there is quite a large gap in both size and sales in comparison with Oracle (Ricciuti and Kane, 2003). Peoplesoft’s product lineup includes software for customer relationship management, human resources, financial management, and supply chain management (Ricciuti and Kane, 2003). At the top of the totem pole for PeopleSoft are CEO Craig Conway and Chairman David Duffield.

The pair takes a much different approach than Ellison. Their company is more customer oriented, and lacks the aggressive personalities found at Oracle (Ricciuti and Kane, 2003). The Bystander J. D. Edwards was in fourth place in the race for market share in 2003, but was substantially smaller in size than both Oracle and PeopleSoft (Ricciuti and Kane, 2003). The focus of the company is long-term business partnerships and they offer a variety of services, including collaborative enterprise software, consulting, education, and support services (“PeopleSoft completes,” 2003). The Big Picture The Motive

On June 2, 2003, PeopleSoft announced its plan to acquire J. D. Edwards, a combination that would lead to annual revenue of $2. 8 billion and replace Oracle as the second-largest enterprise application software vendor. Ellison appeared challenged by the merger of two of Oracle’s competitors. Only four days later, Oracle announced a tender offer of $5. 1 billion, a mere 6 percent premium, in cash for PeopleSoft. (“Oracle’s bid”, 2004) The Teeter Totter Effect: For Every Action There is a Reaction Oracle’s insulting offer set off a chain of events stretching well over a year, which has still not been resolved.

PeopleSoft rejected Oracle’s offer on June 12, 2003 and filed a lawsuit the next day to block the takeover bid. In response, Oracle increased its offer to $6. 3 billion and began marketing the idea to PeopleSoft customers (“Oracle’s bid,” 2004). Once again, Oracle’s offer was refused and PeopleSoft launched two important defense mechanisms. The first was its Customer Protection Program, designed to cost Oracle hundreds of millions of dollars by having new customers sign a contract entitling them to up to five times the cost of the software licenses in the event of a takeover (“Oracle’s bid,” 2004).

The second was a “poison pill” approach, in which stock rights are offered to existing shareholders to purchase additional shares at a price below fair value, exercisable when a bid is made to purchase a stated number of shares (Fischer, Taylor, & Cheng, 2002). Oracle continued to pursue PeopleSoft, extending the offer numerous times and finally raising its offer to $9. 4 billion in February 2004. PeopleSoft continued to resist, completing the acquisition of J. D. Edwards in July 2003 and continually urging shareholders not to tender their shares to Oracle.

The main reason for the numerous extensions was the intervention of the U. S. Department of Justice and the European Commission. Many people felt that the takeover would eliminate competition and violate many antitrust issues. (“Oracle’s bid,” 2004) The situation also sparked several lawsuits. J. D. Edwards sued Oracle, Oracle sued J. D. Edwards and PeopleSoft, PeopleSoft sued Oracle, the Connecticut Attorney General sued Oracle, and several states joined the U. S. Department of Justice in a suit against Oracle in February 2004. Prior to a final decision, Oracle lowered its offer to only $7. billion. On September 9, 2004 a federal judge ruled that a takeover by Oracle would not violate any antitrust rules, and on October 26 the European Commission gave its approval. (Panker, 2004) What does the future hold? Oracle made its “final” offer of $9. 2 billion on November 1, 2004, up $4. 1 billion from the initial offering seventeen months earlier. The only obstacle that Oracle faces now is PeopleSoft’s board of directors. Oracle has set a deadline of November 19 and has made it clear that if the shares are tendered but the “poison pill” provision is not lifted that they will take legal action. Beal, 2004) For PeopleSoft customers, an acquisition could be far from a smooth transition. Oracle claims it would support PeopleSoft’s products for at least ten years. However, almost 40 percent of PeopleSoft customers are using non-Oracle databases, making many wonder which software infrastructure Oracle would support. A takeover may also trigger many customers to turn to other enterprise software providers, such as SAP. (Ferguson, 2004) Conclusion Oracle has fought a long, hard battle and PeopleSoft is finally within its grasp.

This takeover could be the next big step for Oracle, placing it in a position to challenge SAP and possibly become the largest enterprise software provider in the world. Being a bully may not make friends, but it can definitely make money. References Beal, Barney. (2004). Oracle ups ‘final’ offer. Retrieved November

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