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Judge in Oracle Trial Wants Key Terms Clarified

June 26, 2004|From Times Staff and Wire Reports

SAN FRANCISCO — The federal judge who will decide an antitrust trial contesting Oracle Corp.'s $7.7-billion bid for PeopleSoft Inc. ordered the lawyers in the case to provide better explanations about several key concepts.

"I'm not sure all the definitions of all the terms that have been used are as clear as they might be," U.S. District Judge Vaughn Walker said Friday.

Walker's list of terms for clarification includes "high-function software" -- a concept crucial to the Justice Department's effort to prove that an Oracle takeover of PeopleSoft would be anti-competitive.

The government's case is built on the premise that a small group of U.S. firms are so large and diversified that they require specially engineered "high-function" software to perform various financial and personnel management jobs.

Oracle, PeopleSoft and Germany-based SAP are the only software makers capable of meeting the demand for these complex products, making it imperative to keep the three apart to avoid a concentration of market power, the government claims.

Antitrust regulators acknowledge that numerous competitors sell less sophisticated versions of business application software, making it important for the government to establish the existence of a distinct high-function market.

Oracle lawyers have argued that the high-function market is an illusion manufactured specifically for this case -- a point that they say was validated by Walker's demand for a more concrete definition.

"It's clear he's grappling with the very question of whether the high-end niche market can be separately defined as a relevant market," said William White, an antitrust attorney who isn't involved in the case. "If you're the government, it should bother you that the judge is still asking questions."

Justice Department attorney Renata Hesse characterized Walker's demand as an attempt at "getting a head start on pulling together the gigantic volume of information in this case."

Also on Friday, Oracle President Safra Catz testified that Oracle didn't offer lower prices when it was competing with PeopleSoft.

"I always assume there's competition" from PeopleSoft, SAP, smaller providers or the software that's already in place, she said.

The biggest factor in deciding how deeply to cut from Oracle's list price is how big the customer is and the potential for future business, and those factors would still apply if Oracle bought PeopleSoft, she said.

Catz also said she didn't view the market the way the Justice Department was defining it. When deciding on what sort of a deal to strike, she said, she never weighs whether it includes the sale of "core human resources" or "core financial" software, the two areas the government is focusing on.

"I'm looking at the deal overall," Catz said.

Catz testified that Oracle planned to cut about 6,000 jobs at PeopleSoft -- saving $1.2 billion annually -- and raise software maintenance fees for PeopleSoft customers if the deal went through.

The cuts described, equal to more than half of PeopleSoft's staff, are a "worst-case scenario," she said during questioning by government attorneys.

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Associated Press and Bloomberg News were used in compiling this report.

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