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Oracle Corp. and the Justice Department summed up their respective points of a pivotal trial challenging the software maker’s $7.7 billion takeover bid for rival PeopleSoft Inc. The closing arguments Tuesday offered the opponents a final chance to present their contradictory views to U.S. District Judge Vaughn Walker, who is expected to issue his decision within two months. The ruling could extend or end Oracle’s relentless pursuit of Pleasanton, Calif.-based PeopleSoft — a saga that began in June 2003 with a hostile bid that stunned the software industry. Walker frequently interrupted Tuesday’s closing arguments to press Justice Department attorney Claude Scott and Oracle attorney Daniel Wall to offer more support for the positions that the two sides staked out during a month of testimony that concluded July 1. “He gave each side a good workout,” Wall said afterward. The Justice Department contends Oracle should be barred from buying PeopleSoft because the combination would undermine competition in a market sliver that accounts for about $500 million in annual sales of business application software, the complex systems that automate a range of financial and personnel management jobs for the nation’s largest companies. The government’s case is built on the premise that only Redwood Shores, Calif.-based Oracle, PeopleSoft and Germany-based SAP have the resources to provide such applications. Analysts have estimated the overall business applications software market at anywhere from $20 billion to $40 billion. Oracle argues the government’s market definition is too fuzzy, too narrow and largely irrelevant, given the rapidly shifting dynamics of the high-tech industry. Walker’s line of questioning Tuesday indicated he is still struggling with the government’s market definition — a critical issue in the case. The judge described the definition as “unwieldy and awkward” and at one point asked Scott, “Is this a definition that has ever been used outside this litigation?” Scott conceded this market segment might seem imprecise at times, but insisted it covered a distinct group of large U.S. businesses and government agencies whose needs differ from smaller organizations. “Whether there is a technical, formal definition, the market acts in a way consistent with there being two products and two sets of customers,” Scott said. Walker also seemed troubled by the government’s effort to narrow the market definition to large U.S. companies because Oracle, PeopleSoft and SAP all sell essentially the same software products in Europe, too. “How can this be anything but a global market?” the judge wondered. Even if the market definition is expanded to include Europe, a combination between Oracle and PeopleSoft would still break antitrust laws, Scott said. While raising reservations about the government’s market definition, Walker also questioned Oracle’s motives for buying PeopleSoft, perhaps its fiercest rival in the business applications software market. “What possible justification could there be for Oracle to spend $7.7 billion (on a PeopleSoft takeover) … except to obtain market power?” Walker asked Wall. Despite his confusion about the market definition, the judge said he was impressed by the “compelling” trial testimony from numerous software customers expressing serious reservations about an Oracle takeover of PeopleSoft. “We heard customer witness after customer witness, each of whom has forgot more about (business applications) software than I will ever know, and these people all say what Oracle, PeopleSoft and SAP sell is different from other vendors,” Walker said. Even if these customers are correct, Wall told Walker that the market would remain highly competitive if Oracle buys PeopleSoft because SAP would remain by far the largest competitor. Wall said SAP sells about $5 billion worth of business applications software annually, about 60 percent more than the combined sales of Oracle and PeopleSoft. But the government says Oracle would become the market leader in financial and personnel management software if it devours PeopleSoft. Citing evidence presented in the trial, Scott said the combined company would have a 48 percent share of the U.S. market for financial management software and 68 percent of the U.S. market for personnel management software. Copyright 2004 Associated Press. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed.

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