Week Three of United States of America v. Oracle
The battle continues. June 7, 2004 Oracle faced off against anti-trust officials to contest the Department of Justice's (DOJ) decision to block the $7.7 billion takeover bid for PeopleSoft.
In week three, the government finished testimony and rested its case while Oracle began calling witnesses to the stand. Oracle lawyer Dan Wall called upon several witnesses throughout the week, but announced mid-week that he would eliminate the number of witnesses, including PeopleSoft's CEO Craig Conway.
In an effort to disprove the government's position and demonstrate competition among software providers in the up-market, Oracle called upon: Richard Knowles, the vice president of Operations-North America, for SAP America to testify that the German software giant was a global competitor in the market; Michael Sternklar, of FESCo, an outsourcing division of Fidelity Investments, to testify that outsourcing is a major source of competition within the market and Safra Catz, Oracle's Co-President and board member to testify that revenues from what the Government calls "high-function software" are "chump change."
Under cross-examination, Oracle witnesses made a stronger case for the government. Richard Knowles admitted that SAP had failed to capture significant U.S. business in a number of verticals, verifying that SAP is not a major competitor in the US market. To disprove the theory that up-market vendors face competition from business processing outsourcers (BPOs), Michael Sternklar admitted that FESCo is limited to the scope of work based on company regulations and that most BPOs run on the market leaders: Oracle, PeopleSoft or SAP. Safra Catz admitted that Oracle and PeopleSoft HR and financial management offerings are virtually identical, that Oracle wants PeopleSoft for its customers, and the acquisition would result in the loss of 6,000 PeopleSoft employees.
One of the biggest questions throughout the course of the trial has been the possibility of Microsoft becoming a major player in the up-market. According to a video deposition given by Orlando Ayala, a senior VP at Microsoft, Microsoft cannot be considered a competitor in the up-market. Orlando claims that non-established vendors have no sales opportunities with the largest customers; Microsoft's Axapta product is not capable of meeting the needs of multinational customers; Microsoft has scaled back its marketing messages in order to avoid overselling its product and producing failed implementations; Microsoft's offerings are not suitable for all such customers; and Microsoft has over-emphasized trying to break into the mid-market as an application vendor has been "a humbling experience."
Following the video deposition, the Government officially rested its case. Dan Wall moved for a "directed verdict"-a routine motion arguing that the Government hasn't proven the basic elements of its case. The judge asked a couple of questions and took the motion under submission, to be ruled upon at a later time.
United States of America v. Oracle Comes to a Close
The U.S. anti-trust trial that opened four weeks ago has come to a close. Oracle and the Department of Justice faced off on June 7, 2004 to determine the fate of Oracle's 7.7 billion hostile takeover bid for PeopleSoft.
The Department of Justice filed suit in February claiming that a merger between the two would eliminate competition in the up-market. Oracle claims that there is sufficient competition from SAP, Microsoft and Lawson within the niche.
Final arguments will be heard on July 20, 2004. The sole decision rests in the hands of Judge Vaughn Walker, who is expected to make a ruling on the case no sooner than August.
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