updated 10/18/2004 6:57:50 AM ET 2004-10-18T10:57:50

PeopleSoft Inc. said Tuesday it is extending a money-back guarantee program that it says is designed to protect customers in event of a takeover by Oracle Corp.

The announcement came as testimony continues in a Delaware court weighing Oracle’s legal attack on the customer program, which it says adds a potential $2 billion liability to the $7.7 billion acquisition it has been pursuing.

Oracle co-president Safra Catz testified Monday that the uncertainty around the potential cost of the customer program is one of the factors Oracle is weighing in a potential revision of the value it places on PeopleSoft.

Oracle’s offer stands at $21 per share.

In June 2003 Oracle launched a hostile tender for PeopleSoft at $16 per share.

The per-share price was raised to $19.50, then to $26, before falling to the current $21 per share, over the course of Oracle’s 16-month pursuit of PeopleSoft.

Catz said Tuesday that Oracle did not factor the customer program liabilities into calculations of the offer now on the table or earlier bids.

“We could not quantify it,” she said.

PeopleSoft’s board voted Monday to extend the customer program until Dec. 31 or until Oracle’s tender offer expires.

In a filing with the Securities and Exchange Commission, PeopleSoft said it decided to prolong the customer assurance program due to its value in calming customer concerns about the takeover threat, and allowing PeopleSoft to turn in a successful third quarter.

Testimony in the court case, “including sworn testimony of Oracle’s executives,” played a role in the PeopleSoft board decision, the SEC filing said.

In defending the customer program, PeopleSoft is attempting to prove that Oracle has capitalized on the takeover attempt to steer customers away from PeopleSoft.

It’s a point Oracle disputes.

Tuesday, PeopleSoft attorney Matthew Fischer questioned Catz about a series of internal Oracle documents that he says reveal a plan to exploit the takeover in order to take away PeopleSoft’s customers, hurting its earnings and driving its stock price down.

Catz said she did not know who wrote some of the documents, and said they were in places incorrect and did not reflect the views of top Oracle management.

“Oh, the FUD opportunities,” said one document, using an acronym that signifies “fear, uncertainty and doubt” among PeopleSoft customers due to the threat of an Oracle takeover.

The document goes on to script a conversation with a PeopleSoft customer in which the customer is told that it is being offered less protection under the money-back guarantee program than other customers.

“Wow, you must not be very important to them,” the suggested Oracle sales script says.

PeopleSoft’s customer assurance program gives companies that sign new contracts with PeopleSoft the right to ask Oracle to pay them from two times to five times the amount they spent if Oracle cuts off support to the products after acquiring its rival.

Considered by some a novel form of a “poison pill” antitakeover measure, the customer program is aimed solely at Oracle, and wouldn’t apply to other potential acquirers.

Catz testified Oracle does not believe it will trigger the customer program in the wake of an acquisition, but does not have enough details to be certain.

In public statements, Oracle has said it will continue support for PeopleSoft products beyond the period required under the customer program, including enhancements and new developments.

But a sales strategy document produced in trial Tuesday set out a strategy with one customer in which it was to be told “moving forward with PeopleSoft would be a dead-end decision because products will be supported, but minimally at best.”

Shares of PeopleSoft, based in Pleasanton, Calif., traded Tuesday afternoon at $21.50, down 33 cents, or 1.5 percent, on the Nasdaq Stock Market.

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