Oracle in Court Over PeopleSoft Bid

Oracle Corp. (ORCL) goes to trial Monday on its legal bid to dismantle the dwindling takeover defenses of PeopleSoft Inc. (PSFT), the rival it has been attempting to acquire for 15 months.

On Friday, the U.S. Department of Justice (search) said it would drop its antitrust challenge to the combination of the two software makers.

European regulators said Monday they are continuing to collect data on the proposed $7.7 billion deal.

If European antitrust authorities follow the U.S. lead, PeopleSoft, a maker of business software, will be left with only two corporate takeover defenses, both of which are on the line in the Delaware Chancery Court lawsuit that goes to trial Monday.

Oracle, a maker of database-management software based in Redwood City, Calif., has asked for a ruling invalidating PeopleSoft's standard poison-pill, or anti-takeover rights measure, and its special money-back-guarantee customer program, which Oracle says could add a $2 billion liability to the acquisition.

Craig Conway, the chief executive PeopleSoft ousted last week, is expected to testify Wednesday.

Conway was called as a witness by both sides before he was fired by a board of directors that cited ebbing confidence in him, but denied the decision was linked to his opposition to the deal. He was replaced by chairman and founder David Duffield.

A former lieutenant of Oracle Chief Executive Larry Ellison (search), Conway has been openly critical of Ellison and the acquisition effort, which PeopleSoft has blamed for its slumping sales.

PeopleSoft, based in Pleasanton, Calif., says in court papers that Conway did not drive the decision to put barricades in place to block the Oracle buy.

Resistance to the deal was the product of decisions by independent directors, and thus entitled to a presumption of validity under Delaware law, PeopleSoft argues.

It's a point Oracle has said it will dispute.

"I'm ready to go on him," Oracle attorney Michael Carroll said at a pre-trial meeting in Delaware last week, days before Conway was fired.

Ellison is also expected to take the stand in an effort to convince the court his company's takeover effort does not pose a threat to PeopleSoft or its customers that would justify the poison pill and customer program.

The customer program requires Oracle to meet high standards in continuing to support PeopleSoft products if it buys the company, or face claims from distraught customers entitled to ask for as much as five times what they spent on PeopleSoft software.

PeopleSoft says the customer program was necessary to calm fears among software buyers that a victorious Oracle would shut off support to PeopleSoft products and force its own wares on them.

The two men who replaced Conway in the president's slot, Chief Financial Officer Kevin Parker and sales chief Phillip Wilmington, are also slated to testify.

In pretrial discussions, Parker was identified as the architect of the customer program, the first versions of which rolled out in June 2003, only three days after Oracle launched a tender offer.

Wilmington will be PeopleSoft's principal witness on customer fears about an Oracle takeover, company attorney Donald Wolfe said in pretrial discussions.