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PeopleSoft Rejects Oracle's Latest Offer

Staff Writer
Published: 2004-11-21

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The PeopleSoft Board concluded that PeopleSoft is worth much more than the $24 per share price offered by Oracle. They reiterated that they will not sell the company for less than it is worth.

George "Skip" Battle, Chairman of the Transaction Committee of independent directors, said, "Based on the numerous conversations we have had with our largest stockholders over the past ten days, the Board believesthat a majority of our stockholders agree that Oracle's $24 offer is inadequate and does not reflect PeopleSoft's real value."

Battle continues, "This majority is comprised of stockholders who did not tender their shares, as well as stockholders who tendered but told us that they believe PeopleSoft is worth more than $24 per share. We are confident that in the time leading to our 2005 Annual Meeting we will continue to demonstrate PeopleSoft's superior value to our stockholders."

In making its recommendation, the Board considered, among other things:

Substantial sequential growth forecast for fourth quarter 2004:

PeopleSoft continues to demonstrate strong sales execution and entered the fourth quarter with a robust pipeline. The Company anticipates substantial sequential growth in license revenue and pro forma and GAAP earnings per share. Specifically, PeopleSoft anticipates that license revenue will be in the range of $175 million to $185 million with total revenue between $700 million and $715 million. Operating margin for the quarter is expected to be in the range of 16% to 18% (pro forma) and 11% to 13% (GAAP). The Company expects to report pro forma and GAAP earnings per share between $0.20 and $0.22 and between $0.14 and $0.16, respectively. For the full year 2004, the Company expects total license revenue between $600 million and $610 million with record total revenue of approximately $2.7 billion.

Strong momentum reflected in guidance for 2005:

The Company expects strong momentum in 2005 due primarily to continued growth in license revenue; a growing maintenance revenue stream; focusing on operating efficiency and lowering costs; and the full year benefit of the cost and revenue synergies from the J.D. Edwards acquisition. For 2005, the Company expects license revenue of $640 million to $655 million, an increase of 5% to 10% and total revenue of $2.8 billion to $2.9 billion, representing 4% to 8% growth. The Company also anticipates pro forma operating margins for the year in excess of 20% and GAAP operating margins in excess of 16%. 2005 pro forma earnings per share are expected to be between $1.05 and $1.10 and GAAP earnings per share are expected to be in the range of $0.82 to $0.87. Guidance for 2005 does not include any potential benefit from the elimination of the Oracle overhang.

Alameda lawsuit against Oracle seeking damages in excess of $1 billion goes to trial in January:

PeopleSoft claims compensatory damages of more than $1 billion plus punitive damages in the Company's lawsuit against Oracle, which is scheduled to go to trial before a jury in Oakland, California, on January 10, 2005. PeopleSoft's complaint alleges that Oracle has engaged in unfair business practices, including a deliberate campaign to mislead PeopleSoft's customers and disrupt its business.

The rejection means a likely proxy fight next year, in which the PeopleSoft and Oracle would fight over control of PeopleSoft's board. That could be avoided if a Delaware court rules that PeopleSoft's "poison pill" defense can be removed, a ruling soon. Oracle won big Friday, when it heard from a majority of PeopleSoft shareholders that were committed to an Oracle purchase. This prompted the Board to take a re-look and again reject the offer.

"This vote was an astounding result for Oracle," commented Greg Taxin, chief executive officer of Glass, Lewis & Co, a San Francisco proxy advisory firm. "I don't think Vice Chancellor (Leo) Strine is going to be in a mood to allow PeopleSoft's board more time. I think whatever discretion or tolerance the judge might have afforded this board is probably wearing thin at this point."

"We believe it is time to bring this matter to a close, for the good of PeopleSoft's shareholders, customers, and employees," said Oracle's Chairman Jeff Henley. "We are prepared to complete and pay for the acquisition of all of the outstanding shares of PeopleSoft upon satisfaction of the remaining conditions, which are all in the control of the PeopleSoft Board."

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