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Chief Says Oracle Still on Prowl for Takeover Targets

From Associated Press

Oracle Corp. Chairman and Chief Executive Larry Ellison told shareholders Monday that the business software maker remained on the prowl for other takeover prey as it continued to stalk rival PeopleSoft Inc.

Responding to a question at Oracle’s annual shareholders meeting, Ellison acknowledged mulling over a bid for struggling computer maker Sun Microsystems Inc. before concluding it would be a bad idea to expand into the hardware business.

“I don’t think we will acquire Sun or any other hardware company,” Ellison said.

However, he emphasized that Oracle’s appetite for acquisitions wouldn’t be satisfied even if it managed to devour PeopleSoft in a proposed deal currently valued at $7.5 billion.

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“As the industry matures and we grow larger and larger, we will have to grow through a combination of developing new products and buying other companies,” Ellison said. He didn’t identify any potential candidates.

Pleasanton, Calif.-based PeopleSoft already has rejected Oracle’s $19.50-per-share offer, which has been put on hold while the Department of Justice completes an antitrust review of the proposed combination.

Oracle expects the government inquiry to be wrapped up in November or December, Chief Financial Officer Jeff Henley told shareholders.

With PeopleSoft’s stock recently trading above Oracle’s bid, analysts believe the offer will have to be raised.

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As of last week, only 6% of PeopleSoft’s shares had been tendered to Oracle.

PeopleSoft’s shares gained 17 cents to close at $20.72 on Monday on the Nasdaq Stock Market. Oracle shares lost 5 cents to close at $12.28, also on Nasdaq.

Oracle, based in Redwood Shores, Calif., will abandon the bid if PeopleSoft becomes too expensive, Henley stressed.

“We need to make sure it’s done at the right price so it’s a good thing for our business and shareholders,” he said.

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Takeover talk was just one of several topics covered during Oracle’s two-hour annual meeting, held at its headquarters.

Oracle is discussing alternatives to stock options as political pressure mounts for an accounting change that would force companies to expense the popular employee awards, said Michael Boskin, who heads the company’s compensation committee.

Boskin, a Stanford University economics professor, didn’t provide specifics, other than to say that other “equity vehicles” are under consideration.

Microsoft Corp. made waves earlier this year when it announced that it would start giving its employees regular company stock instead of options, which grant the recipient the right to buy shares at a set price.

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Oracle had 482 million employee stock options outstanding as of Aug. 31. Had Oracle expensed stock options in its last fiscal year ended in May, the company estimated, it would have earned $1.98 billion instead of its reported profit of $2.31 billion.

On the political front, Ellison applauded the decision to replace California Gov. Gray Davis with Arnold Schwarzenegger.

“ ‘Commando’ is one of my favorite movies,” Ellison said. “I think [Schwarzenegger] is a very smart guy and his [proposed] policies are a substantial improvement over the former governor.”

Oracle became entwined in a political tempest last year after an audit concluded that a $95-million software contract sold to the Davis administration would cost the state $41 million more than if it had stuck with its old software.

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California signed the contract five days before Oracle submitted a $25,000 campaign contribution to Davis.

Oracle eventually canceled the software contract and Davis returned the company’s campaign contribution.


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