Oracle Executive Tells About Pricing Deals
An Oracle Corp. sales executive testified Tuesday that the software maker sometimes offers deep discounts to potential customers, depending on the amount of competition for the deal.
Executive Vice President Keith Block said he offered to take as much as 70% off the list price for software that big businesses use to manage payroll and other tasks because of intense competition with rival software firms, tight customer budgets and other factors.
Block’s comments came in a videotaped deposition shown on the second day of a federal trial in the Justice Department’s antitrust lawsuit against Oracle, the database company that is trying to buy PeopleSoft Inc. in a $7.7-billion hostile tender offer. The government is trying to block the deal on the grounds that it will reduce the number of players selling sophisticated business software to big companies from three to two.
Government trial attorney Claude Scott described Block as one of the Justice Department’s most important witnesses, even though Block works for Oracle.
Redwood City, Calif.-based Oracle doesn’t discuss prices with prospective customers until it determines that it can meet the customers’ needs, Block said. That testimony supports the government’s contention that there are only a few companies that can supply the programs that have enough functions and flexibility to satisfy the biggest customers, said Deputy Assistant Atty. Gen. Thomas Barnett.
Block also said Oracle was planning to target moderate-sized businesses by introducing a stripped-down version of its back-office programs. Barnett said that strategy conflicted with Oracle’s argument that there was no real distinction between the market for selling to the biggest businesses and those that are smaller.
Most of the day’s proceedings were taken up by the testimony of PeopleSoft’s chief technology officer, who said the only consistently tough competition for software sales to big customers comes from Oracle and SAP of Germany. “It’s who we see,” Richard Bergquist testified.
On cross-examination, however, Oracle’s attorneys introduced PeopleSoft documents identifying other companies as competitors, including Lawson Software Inc., which was named a “serious threat” in fighting for government business.
Under questioning from Oracle lawyers, Bergquist also conceded that there was no hard-and-fast definition for the sort of customer that SAP, Oracle and Pleasanton, Calif.-based PeopleSoft typically compete for. Oracle contends that the government is defining such customers too narrowly in its attempt to block the deal.
“Different participants define it differently,” Bergquist said. “I don’t have any firm dividing lines.”
Oracle attorney Daniel Wall has argued that in addition to Lawson and American Management Systems, the market will soon face more serious competition from Microsoft Corp.
On the stand, Bergquist said he expected Microsoft, the world’s largest software company, to introduce programs aimed at large companies in 2006 or later.
