updated 7/2/2004 7:39:06 AM ET 2004-07-02T11:39:06

Rattled by Oracle Corp.'s hostile takeover bid for PeopleSoft Inc., IBM Corp. considered making defensive investments in other software makers and lobbying the government to discourage other mergers, according to company documents released in court.

IBM's assessment of Oracle's $7.7 billion bid for PeopleSoft is part of the evidence that has piled up in a month-long antitrust deal challenging the proposed combination of business software makers. The IBM documents had been kept under seal until Thursday, which marked the last day of testimony in the nonjury trial.

The trial won't officially end until July 20 when Oracle's lawyers and government lawyers seeking to block the PeopleSoft bid return to court to present their final arguments to U.S. District Judge Vaughn Walker.

The final bit of testimony seemed anticlimactic because it came the day after Oracle's rakish CEO Larry Ellison drew a capacity courtroom crowd to hear his much-anticipated defense of the PeopleSoft bid.

The IBM documents, drawn up a week after Oracle launched its June 2003 bid for PeopleSoft, provide more insights about the competitive aftershocks that Ellison caused with his surprise move.

Although sensitive financial data were redacted, the newly released IBM documents contained dialogue that illustrates the technology giant's worries about Oracle buying PeopleSoft.

"We are exposed to potential consolidation of the (software) space, especially to acquisitions by hostile players," the analysis said.

As a protective measures, the IBM documents discussed three options: acquiring "blocking stakes" in unnamed software makers; "lobbying ... against (industry) consolidation" with customers and government regulators; and taking "tighter direct/exclusive control" of software makers, citing France-based Dassault Systemes as a possible target.

The papers also suggested remaining neutral on Oracle's bid, "thus avoiding fighting other parties' wars and setting of precedents."

Publicly, IBM hasn't taken a stance on the deal, although one of the company's top consulting executives testified as a government witness. The executive, Nancy Thomas, largely supported the government's central premise _ that a merger between Oracle and PeopleSoft diminish competition in the business applications market, threatening to raise the prices for complex financial and human resources management software designed for large U.S. companies.

IBM spokesman Tim Breuer declined to comment on the documents released Thursday.

Oracle's pursuit of PeopleSoft also unnerved high-tech heavyweight Microsoft Corp., according to evidence submitted earlier in the trial. The bid prompted Microsoft to explore a takeover of Germany-based SAP and a possible investment in PeopleSoft to thwart Oracle.

It's unclear from the documents released Thursday whether IBM also considered an investment in PeopleSoft.

But June 16, 2003 e-mail to PeopleSoft CEO Craig Conway indicated that the company discussed a financial alliance with Microsoft and IBM to fend off Oracle.

The e-mail from Skip Battle, a member of PeopleSoft's board, responded to Conway's suggestion that the company consider investments from Microsoft and IBM "with the right to rebuff an offer."

"My take is that this is not a very good idea at this stage," Battle wrote. "One hundred million dollars isn't very much to give anyone that kind of influence over corporate direction, and we probably couldn't arrange a more appropriate investment (say 10 to 20 percent of the company) in a short enough timeframe to be helpful."

For its part, Oracle seemed to be hoping the PeopleSoft bid would vex Microsoft and IBM.

"They will be concerned which of course is an emotion we like to invoke in each of them," Oracle wrote in a confidential report analyzing the fallout from the PeopleSoft bid.

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

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