updated 7/1/2004 8:36:03 AM ET 2004-07-01T12:36:03

Oracle Corp. CEO Larry Ellison defended his company's $7.7 billion bid for rival business software maker PeopleSoft Inc. as a radical but necessary move during testimony Wednesday in an antitrust trial challenging the proposed deal.

"We thought the only way we could survive and prosper was through an acquisition strategy," Ellison told a packed federal courtroom in San Francisco. "Oracle had to consider a strategy we had never considered before. If we wanted to survive and grow, we (decided) we will have to start an acquisition strategy. PeopleSoft was on top of the list."

The jaunty billionaire's long-awaited courtroom appearance, coming near the end of a monthlong trial, injected another dramatic moment into a Silicon Valley soap opera that has riveted the high-tech industry since Oracle launched its hostile takeover attempt more than a year ago.

So many people wanted to see Oracle's leader testify that a long line stretched down a normally empty corridor. When the courtroom reopened after a 75-minute lunch break, all the seats were quickly filled.

During 2 hours and 20 minutes of testimony, Ellison avoided his penchant for outrageous remarks. The gregarious CEO triggered laughter at one point when he began one of his signature spiels about high-tech's future and advised the courtroom reporter to "stop me, if I run on."

Uncharacteristically dressed in a gray suit and tie, Ellison depicted an Oracle takeover of PeopleSoft as a savvy Darwinian step amid cutthroat competition that will force a wide range of tech companies to combine forces so they become more efficient and drive prices lower.

Federal antitrust regulators view the competitive landscape much differently, triggering the legal showdown that brought Ellison to court Wednesday.

The Justice Department is trying to block Oracle's takeover attempt, alleging a PeopleSoft acquisition would drive up prices and stifle innovation for a small group of elite customers.

The government contends Oracle, PeopleSoft and Germany-based SAP are the only software makers capable of making the sophisticated products that automate a variety of financial and personnel management jobs at large U.S. companies.

Under cross examination by Justice Department lawyer Claude Scott, Ellison repeatedly disputed the government's premise, insisting "every day the competition is getting worse. Every day there are competitors pushing our prices down."

Scott repeatedly challenged Ellison's motives for pursuing PeopleSoft, suggesting that the bid was a sinister attempt to create uncertainty about a major competitor. PeopleSoft has made similar allegations in a lawsuit scheduled to go to trial in November.

Ellison insisted Oracle is stalking PeopleSoft simply to gain the size and muscle that it needs to compete against a large field of competitors, most notably Microsoft Corp.

He credited PeopleSoft's own CEO, Craig Conway, with coming up with the merger idea in a mid-2002 phone call between the former colleagues turned rivals. Conway once was one of Ellison's top lieutenants.

Those preliminary talks, which have been previously disclosed, might have resulted in a merger agreement then, Ellison said, if Conway hadn't insisted on being in charge of the combined company. Conway's intransigence on the leadership issue convinced Oracle that it would have to make a hostile bid just a few days after PeopleSoft announced plans to buy rival J.D. Edwards & Co., Ellison testified.

If Oracle is rebuffed in its PeopleSoft quest, Ellison said it will be a major disappointment.

"We would have wasted a tremendous amount of money and energy," Ellison testified. "It would have been a very bad mistake because we should have been pursuing other acquisitions."

Responding to a question, Ellison acknowledged Oracle is currently eyeing "three or four" other publicly held technology companies as takeover targets. Without naming the acquisition candidates specifically, Ellison said the list includes software makers specializing in business applications, business intelligence and technology infrastructure.

Three companies on an Oracle takeover list drawn up in April 2003 fit those descriptions — Siebel Systems Inc., Business Objects and BEA Systems Inc. The takeover list is part of the trial evidence.

While Oracle's attorneys have been sparring with Justice Department lawyers seeking to block the PeopleSoft bid, Ellison has been indulging in two of his favorite pastimes — sailing and fattening his already ample bank account.

The adventurous CEO spent last week in Newport, R.I., where his yacht racing team cruised to victory over the defending America's Cup champion. During the past two weeks, Ellison also pocketed nearly $68 million by selling some of his Oracle stock. Ellison still owns nearly 1.3 billion Oracle shares worth about $15 billion.

Copyright 2004 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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