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The Department of Justice plans to call numerous enterprise software customers to testify that Oracle Corp.’s $7.7 billion hostile tender for rival PeopleSoft Inc. would weaken competition for business software. Executives from Cox Communications Inc., Verizon Communications Inc., Neiman Marcus Group, Pepsi Americas, Apartment Investment and Management Co., Nextel Communications and Metro-North commuter railroad are among those included on the government’s witness list, which was disclosed late Tuesday. These witnesses are expected to testify that only Oracle, PeopleSoft and SAP AG offer enterprise business software that meets their performance criteria. This is intended to support the government’s charge that the merger would leave at most two companies selling sophisticated enterprise software. Oracle plans to call fewer customers than the government, filling its list instead with executives from providers of enterprise software other than Oracle, PeopleSoft and SAP. Included are officials from American Management Systems Inc., Lawson Software Inc., IBM Corp., Seibel Systems Inc. and Microsoft Corp. Oracle also plans to call seven of its own employees, including president Safra Catz and CEO Larry Ellison, and spend up to six hours grilling PeopleSoft president and CEO Craig Conway during the trial, which begins June 7. “Clearly [Oracle] thinks it’s in Microsoft’s interest and SAP’s interest to talk about how competitive the industry is,” said Nate Eimer, a partner at law firm Eimer Stahl Klevorn & Solberg LLP in Chicago. The Justice Department sued in February to block Oracle’s bid for PeopleSoft. Oracle has pledged to fight the decision in court. Last week the company lowered its bid from $9.4 billion to $7.7 billion, saying the reduction reflected a fall in PeopleSoft’s stock price. Industry observers said Oracle could face an uphill climb because the Justice Department’s witness list is heavily stacked with credible witnesses who buy enterprise software. Robert Doyle, a partner at Sheppard, Mullin, Richter & Hampton LLP in Washington, called Oracle’s witness list “extremely limited” that focused mostly on experts and its own employees. “Contrast that to the government’s witness list, which is dominated by customers, the buyers in the marketplaces of these products and services,” he said. “The fact that these companies are coming forth and are willing to testify about how they make buying decisions and who they turn to makes the government’s witness list very credible and very persuasive in a courtroom.” Tom Taulli, a professor of finance at the University of Southern California’s Marshall School of Business, said many of these customers are concerned about a potential Oracle-PeopleSoft combination and that such consolidation “could be harmful in their ability to get good pricing and technology.” Oracle’s witness list also could fall short of the company’s expectations, said Allen Cinzori, a vice president at M&A advisory firm Software Equity Group LLC in San Diego. John Coughlan, president and CEO of Lawson Software, is expected to testify, for example, but Lawson is focused mostly on financial products and doesn’t offer the full suite of software offered by Oracle or PeopleSoft, he said. Meanwhile, IBM, also on Oracle’s witness list, offers some applications but is focused mostly on services. And Microsoft has typically been focused on desktop applications and recently moved into the mid-market with its acquisitions of Great Plains Software Inc. and Navision Software AS, while both Oracle and PeopleSoft play in the enterprise application arena, Cinzori said. “The reality is the big guys are PeopleSoft, SAP and Oracle” for enterprise applications, he said. But Taulli said that Judge Vaughn R. Walker, who is hearing the case, cannot overlook Microsoft as a potential future competitor. “If I were the judge, I would certainly take into consideration that you have a well-capitalized company that’s demonstrated time and time again that they’ve been able to come into new markets and dominate,” he said. “They’ve developed a lot of software that looks like [enterprise resource planning] solutions.” �Copyright 2004, The Deal, LLC. All rights reserved.

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