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7/22/2004
02:34 PM
Ted Kemp
Ted Kemp
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The SAP Question

Should Oracle and PeopleSoft be viewed in the context of a global market, or a domestic one?

The fun is over in San Francisco, with attorneys for the U.S. Justice Department and Oracle having wrapped up their arguments in the trial that will determine whether Oracle should be allowed to gobble up PeopleSoft. And it may be that the court's decision, due the next couple months, will turn on a question that didn't get a lot of press during the trial itself: Should Oracle and PeopleSoft be viewed in the context of a global market, or a domestic one?

The perceived strength of Germany's power software player, SAP, is likely to factor more powerfully in Judge Vaughn Walker's thinking than a lot of people watching this trial have acknowledged. Walker indicated, in questions posed to attorneys from both sides following closing arguments, that he doesn't buy Oracle's argument that Microsoft provides adequate competition with Oracle in the enterprise applications market. Walker did indicate, however, that he gave credence (as well he should have) to the parade of customer witnesses who said that enterprise applications are a three-company market now dominated by Oracle, PeopleSoft and SAP.

So, assuming the reporters in the courtroom got the right read on Walker, the question might become, Does competition from SAP count? It seems to me that if you perceive domestic software buyers' options as being mainly the domestic manufacturers, the answer is no. But if you perceive their options as being manufacturers that come from anywhere on earth, the answer is yes.

It doesn't help the government's case against Oracle that SAP this morning reported U.S. software sales that jumped 70 percent, excluding the impact of currency exchange rates. Will SAP's growing strength in the United States impact the court's thinking on whether we can get by with only one major domestic enterprise applications maker? Any answer is pure speculation. But I'm betting that question will be the central influence on Judge Walker's mind as he spends time in chambers for the next two months, deciding the next and possibly final turn in the Oracle-PeopleSoft saga.

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