Price Is Right

This is a partial transcript from "Your World with Neil Cavuto," December 13, 2004, that was edited for clarity.

NEIL CAVUTO, HOST: Finally the billionaire did get his toy. Larry Ellison lands PeopleSoft (search), agreeing on a friendly term to what had been, for the most year, a hostile takeover bid.

Ellison telling me earlier today, the price was right.


LARRY ELLISON, CEO, ORACLE (ORCL): We entered into a negotiation directly with PeopleSoft late last week, and for the first time, we're actually able to see their real numbers.

So, before we'd been making assumptions based on publicly available data. And se were able to do due diligence late last week that we looked specifically at their very large maintenance stream and the profitability of that maintenance stream.

It turns out that that business was larger and more profitable than we had modeled and we had thought. And as we better understood their business, we realized we would be able to pay a little bit more and at the same time deliver a highly accretive value creating deal to the Oracle shareholders.

This is two cents a quarter accretive in '06 and better in '07.

CAVUTO: Let me ask you, are you worried that in the months that this battle ensued that you had a bit of a brain drain to deal with, that some of the best and brightest at the company might have already left?

ELLISON: I don't think so. Keep in mind that this is not the Silicon Valley (search) of the dot-com era. It's not like there are hundreds and thousands of really wonderful jobs available for engineers in Silicon Valley.

So our engineers at Oracle have been staying put, and I think by and large, the PeopleSoft engineers have been staying put. So we think that those assets are intact.

CAVUTO: Let me ask you, had Craig Conway (search) not stepped down or forced out as CEO at PeopleSoft, would this deal have been possible?

ELLISON: I think the deal would have been possible. I think once the PeopleSoft shareholders voted in excess of 60 percent to sell the company, that the poison pill ultimately would have been pulled. That's our guess.

You know, the poison pill isn't designed to forever take away the shareholders' rights to sell the company that they own. The poison pill is designed to give management a little bit more time to negotiate a better deal.

So, while the experts said that they thought that we almost certain Judge Shrine wouldn't pull the pill, our best estimate is he was more likely to pull the pill than not. And we think that's what motivated this board to go ahead and negotiate the deal.

CAVUTO: All right. Now, you're very large in this arena now, second, I guess, only to Germany's SAP. I guess the question is whether the customers will be there to support this field. What do you say?

ELLISON: Well, again, I think there are two very, very important constituencies for this deal.

First, I mentioned the Oracle shareholders. And again, we're delivering a deal that's accretive. Accretive in Q4 of this year for a penny and accretive in subsequent quarters in '06, two cents for a quarter, 8 cents for the year and even better in '07.

The other key constituency are the PeopleSoft customers. And we have to prove to them that we can deliver a higher level of service and a higher quality of product than PeopleSoft ever could have delivered on their own.

And towards that end, we are keeping the PeopleSoft engineering team and support teams separate from the Oracle engineering and support teams.

They're not only going to continue to enhance PeopleSoft 8, the current version, but they're developing an all new version of PeopleSoft 9, which we're going to deliver, because we've got to make those customers comfortable that Oracle is a better supplier than PeopleSoft.

CAVUTO: Are you seeing signs of a resurgence in technology spending, whether for database software or software hardware in general for your industry?

ELLISON: Well, I think what we're seeing is the strong getting stronger and the weak getting weaker. So I think it's really a mixed market. We think the larger companies like Microsoft and Oracle, and IBM, and SAP are doing well had.

In fact, the only two application companies that grew over the last 12 months was Oracle that grew at a rate of five percent and SAP, that grew at a rate of seven percent in the applications business.

Our database business grew much ore strongly than that.

But the big companies are doing well. The smaller companies, I think, are going to go poorly or get purchased.

CAVUTO: What about you? Is this the end of the takeover front? You've still got a lot of cash. You personally could do pretty much whatever you wanted. What's next?

ELLISON: Well, I think we've got to prove what, you know, we promised. We told our shareholders that this thing is going to be accretive to the tune of two cents a quarter in '06. And we have to execute well and deliver on that promise of an accretive value creating deal.

At the same time, we have to prove to those PeopleSoft customers that we can provide a higher level of support than what they're used to. We can deliver product improvements at a higher rate and a quality than what they're used to, that we do, in fact, deliver a high quality PeopleSoft 9 that preserves their investment in PeopleSoft software.

We have to execute well to cement our relationship with those customers and give our shareholders confidence that we know what we're doing when we buy a company. Once we've done that, say, in a year or so, we'll look at other acquisitions.

CAVUTO: Mr. Ellison, I'd be remiss if I didn't mention that this deal in context with Sprint and Nextel, that's a possible roughly $40 billion transaction. Johnson & Johnson and Guidant, that's about a $25 billion transaction. Record number of IPOs on tap.

What do you make of the market environment right now?

ELLISON: Well, you know, during the election you heard about how terrible the economy was. And there certainly were some weak spots in the economy, but we think the economy is pretty good and getting better.

CAVUTO: So, getting better for the type of things the president is planning. This week, as I'm sure you're aware, sir, he's talking about revisiting the tax code, addressing Social Security.

But a lot of corporate honchos have been saying they don't think a lot of this is doable. What do you think?

ELLISON: Well, you know, I don't agree, you know. One of the things that they did at end of last year is have a bill where we're able to bring back some of the money we had offshore and use it for things like acquisitions or dividends that we've been unable to do.

So I think this administration has been doing a number of things -- tax cuts, alteration of tax codes -- which has already helped tremendously. And I think the things that they have -- they have planned have a real possibility of passage.

And if they do pass, in fact, will give the economy yet another boost.

CAVUTO: Do you ever want to run for office?

ELLISON: Well, I'd rather not, actually.

CAVUTO: Why? Is it just the tie thing?

ELLISON: No, I'm not trying not to wear a tie. But I think Governor Schwarzenegger has a job that -- I'm just watching what -- how his life is changing, and let me say I'm not envious.

I'm perfectly happy running Oracle and doing something I know how to do, rather than trying, you know, trying to tackle the state of California or something even larger.


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