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PeopleSoft Inc. chief executive Craig Conway on Tuesday likened Oracle Corp.’s $7.7 billion hostile pursuit of his company to a nightmare. Addressing PeopleSoft’s annual users conference in San Francisco, Conway said his company had performed strongly during the past year despite Oracle’s campaign to buy the business software maker. “Let me just ask you a question: Have you ever had a bad dream that just wouldn’t seem to end?” Conway asked the overflow crowd. “We have. Ours has been going on for 15 months.” Across town at Banc of America Securities LLC’s annual investment forum, Oracle Chairman Jeff Henley suggested the company is unconcerned that the effort to corral PeopleSoft is taking so long. Oracle CEO Larry Ellison “owns 20 percent of the company — he has never thrown his money around lightly,” Henley said. “We are not on an ego trip. We have had no second thoughts.” Henley also criticized PeopleSoft’s use of a poison pill as an effort to block Oracle’s hostile tender. “Usually, you use a pill to buy some time, but not 15 months of time,” Henley said. Oracle will try to void PeopleSoft’s poison pill in the Delaware Court of Chancery in a trial set to start Oct. 4. The rivals also are facing off in Superior Court in Alameda County, Calif., with PeopleSoft accusing Oracle of unfair trade practices, among other allegations. PeopleSoft seeks compensatory damages of $1 billion plus punitive damages in that trial, which is scheduled to begin Jan. 10. But the most important legal issue in the Oracle-PeopleSoft saga was resolved Sept. 9, when U.S. District Judge Vaughn Walker ruled that Oracle may acquire PeopleSoft over antitrust objections by the Department of Justice. As he said in a letter to customers immediately after Walker issued his decision, Conway noted that Oracle’s acquisition of PeopleSoft faces numerous hurdles, include an antitrust ruling on the takeover by the European Commission. Walker’s order “does not mean that PeopleSoft will be acquired by Oracle,” Conway said to a round of applause. In his 40-minute keynote speech, Conway spent little time discussing Oracle’s unsolicited bid, which the Redwood Shores, Calif.-based company launched in June 2003. Instead, the presentation highlighted PeopleSoft’s recent accomplishments. Conway said PeopleSoft has improved what he termed the “total ownership experience,” a company program to make it easier to use and upgrade its products. It takes 25 percent less time to implement PeopleSoft applications than a year ago and significantly fewer steps to upgrade software, the executive said. “Overall, PeopleSoft has now improved the ownership experience by almost 40 percent and anticipates reaching the goal of 60 percent by early 2005,” he said. Conway also pointed to the integration of J.D. Edwards & Co., which PeopleSoft acquired for $1.7 billion in June 2003, as a success. Among other things, the deal made PeopleSoft a leader in selling business applications, such as human resources and financial reporting software, to the manufacturing industry, he said. After integrating the acquisition, PeopleSoft has made 300 enhancements to its manufacturing software suite and plans 250 more by December, Conway said. “This was not a consolidation play,” he said. “It was an additive play.” But while Conway was upbeat in his assessment of PeopleSoft, analysts said the company faces serious challenges. “The environment is very, very bad for one of PeopleSoft’s major products — applications — and it has nothing to do with Oracle,” said Bert Hochfeld, founder and managing director of Hochfeld Independent Research Group. Among enterprise software experts, another hot topic of conversation is whether Oracle will raise its $21 per share bid for PeopleSoft. Trip Chowdhry, an analyst with FTN Midwest Research Securities Corp., predicted Oracle will maintain its current offer, noting that the company’s financial prospects are uncertain amid falling demand for business applications. Although Oracle recorded net income growth of 16 percent in the first quarter, applications sales, which make up roughly 20 percent of the company’s revenue, plummeted 36 percent for the period compared with the year-ago quarter. Chowdhry also said PeopleSoft’s roughly 15,000 corporate customers will play a critical role in determining its fate. “What finally happened is the bully mentality of Oracle has made PeopleSoft stronger, the management cohesive and the customers extremely loyal,” he said. Another hurdle for Oracle is PeopleSoft’s recent move to sweeten the company’s severance packages for its thousands of employees, offering a minimum of 12 weeks of pay for most workers and possibly doubling compensation for executives. This could significantly increase the cost of an acquisition for Oracle, which said in court testimony this summer that it plans to dismiss 6,000 PeopleSoft workers if its bid succeeds. Oracle said in a statement Tuesday that PeopleSoft’s revised severance plan is not certain to raise the price tag. By contrast, “This necessarily lowers the value of PeopleSoft and is just the latest in a long string of measures that takes value away from the PeopleSoft shareholders,” Oracle spokesman Jim Finn said. For now, each company’s management is digging in for what will likely be a long and costly endgame. Wrapping up his speech, Conway reiterated that PeopleSoft is not about to lie down and let Oracle acquire it. “PeopleSoft has had a year that has tested our resolve, a year that has stretched our resources and challenged our values,” Conway said. “But we didn’t blink, and we are not going to blink.” Cheryl Meyer and Brenon Daly contributed to this story.

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