Justice Files Against Oracle

Oracle CEO Larry Ellison faced the biggest stumbling block yet to a hostile takeover bid for PeopleSoft Inc. last week. The U.S. Department of Justice, along with seven states, will file a civil antitrust lawsuit to block the acquisition. The Justice Department says the merger would eliminate competition in human-resource and financial-management software, resulting in higher prices and less innovation.

Oracle's board of directors, which recently made a final offer of $9.4 billion for PeopleSoft, met and, within a few hours of the Justice Department's announcement, promised a vigorous challenge to the lawsuit. An Oracle spokesman called it "inconsistent with the overwhelming evidence of intense competition in the markets we serve." Mike Dominy, senior analyst with the Yankee Group, was surprised Oracle wasn't ready last week with an alternative proposal, such as divesting the J.D. Edwards business if it acquires PeopleSoft.