updated 2/10/2004 6:38:02 PM ET 2004-02-10T23:38:02

Business software maker PeopleSoft Inc. rejected rival Oracle Corp.’s $26-per-share takeover bid Monday, maintaining a defiant stance likely to keep the bad blood boiling in a battle that started eight months ago.

Pleasanton-based PeopleSoft’s eight directors reached the unanimous decision after concluding Oracle’s latest all-cash bid of $9.4 billion remains inadequate and faces a significant chance of being blocked by antitrust regulators.

It’s the third time PeopleSoft’s board has spurned Oracle since the unsolicited bidding started at $16 per share in early June. The conflict has exposed a prickly relationship between the two companies’ chief executives, Oracle’s Larry Ellison and his former subordinate, PeopleSoft’s Craig Conway, who continued to express his contempt Monday.

“Oracle’s offer does not begin to reflect the company’s real value,” Conway said in an icily worded statement. “Don’t underestimate the significant value PeopleSoft can create once the disruption from Oracle’s hostile activities has ended.”

In a brief response, Redwood Shores-based Oracle called its bid “full and generous” and urged PeopleSoft shareholders to “act in their own best interests” by accepting the bid, despite the board’s recommendation.

PeopleSoft’s cold shoulder dashed hopes that Oracle’s sweetened bid — a 33 percent increase from its previous offer of $19.50 per share — would transform the hostile showdown into a more friendly negotiation.

PeopleSoft’s brusque move caused some industry observers to question whether the company’s management is putting its own interests ahead of shareholders’.

“This is an offer that’s so high that it’s hard to understand the board’s rationale for not entering into a discussion over a fair price,” said Ken Marlin, an investment banker in New York who has been closely following Oracle’s bid.

“It’s clear PeopleSoft management does not want to be acquired, but this shouldn’t be about doing what’s best for them.”

Investment banker Paul Crisci of Broadview International called PeopleSoft’s rejection “stunning. It makes you wonder if this is turning more into a personal grudge where a deal isn’t getting done because the two CEOs have a disdain for each other,” said Crisci, who specializes in software industry acquisition.

Oracle’s bid represents an 8 percent premium above PeopleSoft’s 52-week high of $24.04, reached in early January.

PeopleSoft’s board believes the company will be worth more as investors recognize the financial benefits of the company’s recently completed $2 billion acquisition of J.D. Edwards & Co.

What’s more, Conway says PeopleSoft’s sales have been hurt by the specter of Oracle’s takeover bid. Once the uncertainties caused by the bid dissipate, Conway expects PeopleSoft’s sales and profits to rise, boosting the company’s stock along the way.

Industry analyst Trip Chowdry of FTM Midwest Research disagrees with Conway’s thesis. He believes the Oracle bid has boosted PeopleSoft’s financial results by motivating top executives to make more frequent sales calls to close deals and inspiring supportive customers to accelerate their purchases.

“What we have been seeing at PeopleSoft is a short-term strength that can’t be sustained,” said Chowdry, who predicts the company’s stock will plunge to $13 per share during the next year if the proposed Oracle deal unravels.

Other industry analysts are more bullish. David Hilal of Friedman, Billings, Ramsey & Co. recently set a $28 price target for PeopleSoft’s stock, predicting the company will reap significant benefits from the J.D. Edwards deal.

The U.S. Department of Justice is about to play a key role in the software saga. The department’s staff has assured Oracle it will decide whether to approve or block it’s proposed takeover of PeopleSoft by March 12.

Antitrust regulators have spent the past seven months reviewing how a combination between Oracle and PeopleSoft would affect prices in the $20 billion market for business applications software — the computer coding that automates a wide range of administrative jobs.

An antitrust challenge might doom the bid, although Oracle has indicated it is willing to fight an adverse ruling in court.

If the proposed deal wins antitrust approval, PeopleSoft’s fate may be determined in a March 25 shareholder meeting, where Oracle try to seize control of PeopleSoft’s board by ousting four PeopleSoft incumbents, including Conway.

© 2012 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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