Sun ranks high on list of targets

Oracle-PeopleSoft deal may only be the tip of the iceberg

Oakland Tribune Online – June 7, 2003

By Francine Brevetti, BUSINESS WRITER

Merger and acquisition activity will only increase in the wake of Oracle’s bid to acquire PeopleSoft, specialists said.

M&A brokers and investment bankers are predicting a host of board meetings across corporate America this weekend. Company directors will be trying “to decide whether their strategy of going it alone makes sense. As a result of increased discussion, there will be increased activity,” said Ron Lissak, managing partner of Catapult Advisors in San Francisco.

Investment bankers and M&A specialists were reluctant to speculate on the record which software company would be the next on the auction block. But the senior vice president of global software for research firm IDC, Tony Picardi, proffered his guesses on the next likely take-over targets.

While it’s been rumored that IBM might have designs on Sun Microsystems, attractive because Sun is the only stand-alone company left with its own operating system, it’s not clear that IBM could pull it off successfully.

“But you could see (Sun) getting split up between Hewlett-Packard and IBM,” Picardi suggested, with the hardware side going to HP.

He saw possibilities for Sun selling off its software side alone and that would arouse “a big play” for Java “that would be snapped up by IBM or BEA,” he said.

However, an investment banker said anonymously that while Sun is very vulnerable in some ways, its brass have already gone on record saying there’s no chance of a friendly deal.

“A hostile deal for Sun would be a very hard transaction and mean an erosion of shareholder value,” he stated.

Picardi’s sense of future possibilities included SAP acquiring the likes of Siebel, CRM or Ariba, all enterprise software companies.

“Ariba is the last one left standing” and untouched as yet by SAP, Oracle, PeopleSoft or Microsoft, Picardi observed.

But an M&A broker countered that SAP has “never made any acquisitions. They just don’t do it. Historically they’ve made money the old-fashioned way by figuring out what their customers want and making that. Which is what Oracle does. Which is why Oracle’s bid for PeopleSoft is out of character,” the broker said. “I wouldn’t be surprised Oracle is just blocking the JD Edwards merger.”

One company that may find itself sidelines is J.D. Edwards & Co., the business-software maker that agreed this week to be bought by rival PeopleSoft Inc., may be left in the lurch after Oracle Corp. offer.

PeopleSoft Monday agreed to pay $1.7 billion in a friendly deal with Denver-based J.D. Edwards.

J.D. Edwards’s union with PeopleSoft is now in jeopardy after Oracle said it would review the J.D. Edwards purchase. An independent J.D. Edwards would fall further behind market leader SAP AG and Oracle, and face increased competition in corporate orders for programs, analysts said.

“They’re probably just going to have to hang tight and see what happens,” Needham & Co. analyst Richard Davis said, referring to J.D. Edwards. “I don’t think Oracle even cares if J.D. Edwards gets bought by PeopleSoft. It’s not a threat to Oracle.”

Bloomberg News contributed to this report.