Oracle May Lower Bid, Ellison Says

Oracle Corp. Chief Executive Larry Ellison said Friday that he might lower his company’s $7.7-billion hostile bid for rival PeopleSoft Inc. even though the current offer of $21 a share is already below the target’s current stock price.

“There have been discussions about changing the price, but there have been more discussions about lowering the price than raising,” Ellison said during testimony in Delaware Chancery Court, where Oracle is seeking to have PeopleSoft’s anti-takeover defenses nullified.

Analysts said Ellison was merely posturing.

“It reminds me of when you go to buy a used car,” said John Torrey of Adams Harkness Inc. in Boston. “The salesman gives you a price. You tell him, ‘No way,’ and head for the door, and he chases you down to give you the real price.”

If so, Ellison’s strategy showed some signs of success. Shares of PeopleSoft fell 58 cents on Nasdaq on Friday to $21.95, a 2.6% decline. Oracle slipped 12 cents to $12.17, also on Nasdaq.

A spokeswoman for software giant Oracle, which is best known for its database products, said the company would not comment on Ellison’s testimony. A spokesman for PeopleSoft, which makes a variety of business software tools, also had no comment.

The unsolicited bid by Redwood City, Calif.-based Oracle to acquire Pleasanton, Calif.-based PeopleSoft started at $16 a share in June 2003. Within two weeks, the offer was boosted to $19.50.

Oracle again raised its bid in February to $26 a share, muting claims from PeopleSoft that Ellison’s chief goal was to disrupt a competitor’s business.

The bid was reduced to $21 three months later to reflect PeopleSoft’s stock price, which had fallen to $17.30.

Now that the PeopleSoft shares have recovered, analyst Nathan Schneiderman of Wedbush Morgan Securities in Los Angeles said, Oracle would probably have to sweeten its offer.

“I think it will have to be north of $24 to make it interesting,” he said.

But he said he doubted Oracle would adjust its bid before the European Union decides as soon as next month whether to fight the deal on antitrust grounds. The company cleared that hurdle in the United States last week, when the Justice Department said it wouldn’t appeal a federal court ruling that a union between Oracle and PeopleSoft wouldn’t violate antitrust laws.

There seemed a chance earlier in the week that PeopleSoft had softened its stance against a merger. Steven Goldby, a PeopleSoft board member, testified at the trial that the company might be open to selling “at the right price” and under the right conditions.

But if Goldby opened the door after 16 contentious months, Ellison’s comments Friday indicated he was not about to step through it, said analyst Tad Piper of Piper Jaffray in Minneapolis.

“If Oracle is serious about pursuing PeopleSoft, this seems like a very odd way to show it,” Piper said. “It’s not a way to get the board to enter into good-faith negotiations.”

In fact, he said, the tactic might be designed to do an end run around PeopleSoft’s board.

“The strategy is to try and talk directly to PeopleSoft shareholders and scare them into selling their shares,” Piper said. “He wants to try and position PeopleSoft as damaged goods.”

Torrey said he doubted that strategy would work.

“Perhaps there are some investors who would feel compelled to act on the $21 price,” he said, “but I can’t imagine there are too many of them.”

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Bloomberg News was used in compiling this report.