IBM Projects Losses From Potential Oracle-PeopleSoft Deal

Oracle submitted the confidential documents as part of an effort to question the credibility of an IBM software consultant called to testify by the Department of Justice, which is seeking to block Oracle's $7.7 billion bid for rival business software maker PeopleSoft.

Nancy Thomas, a top executive for IBM Business Consulting Services, largely supported one of the government's main premises _ that only Oracle, PeopleSoft and Germany-based SAP are equipped to sell complex accounting and personnel software to the nation's largest companies.

Many major companies rely on IBM Business Consulting Services to analyze their software needs and then help install the chosen products in their computer systems.

Oracle challenged Thomas' objectivity Wednesday using documents obtained as the Redwood Shores, Calif.-based company prepared for the monthlong trial.

IBM realized it would face "very substantial losses in revenue" if Oracle buys PeopleSoft because Oracle's accounting and personnel software won't work with IBM's database software, Oracle attorney Greg Lindstrom said during his cross-examination of Thomas. PeopleSoft's competing software, in contrast, is compatible with IBM's database products and other important components that help automate administrative tasks.

Oracle makes the most popular database software, but Armonk, N.Y.-based IBM has been gaining market share in recent years.

IBM Business Consulting Services employs 602 workers devoted to PeopleSoft products compared with 277 workers who handle Oracle's software, according to a breakdown presented Wednesday. IBM has assigned 1,800 workers to SAP, reflecting that company's position as the market leader in business applications software. SAP's software also is compatible with IBM's database products.

Lindstrom pressed Thomas to cite IBM's projected revenue losses from an Oracle takeover, but Thomas said she had only seen the documents in her pretrial deposition and couldn't remember the specifics. The IBM documents also outlined possible strategies to help PeopleSoft fend off Oracle, Lindstrom said.

Because she knew she would be testifying in the trial, Thomas said she was "very cautious" about becoming involved in internal discussions about the possible financial fallout from an Oracle takeover of PeopleSoft. She predicted the combination of the software giants might stir more demand for IBM's consulting services.

The IBM documents have been tagged highly confidential and, like much of the evidence in this case, is being kept under court seal.

Both an IBM attorney and company spokeswoman declined to comment about the documents after Thomas' testimony. IBM's financial stake in helping PeopleSoft avoid an Oracle takeover is expected to come up again toward the end of the trial when Oracle is scheduled to call IBM's top software executive, Steve Mills, to the witness stand.

Oracle attorneys have long maintained that the government's antitrust case has been shaped by information provided by high-tech heavyweights such as IBM and Microsoft Corp. motivated by a desire to help Pleasanton, Calif.-based PeopleSoft avoid a takeover.

Thomas O. Barnett, a deputy assistant attorney general for the Justice Department, said Oracle's perceptions are off base. "We made our own independent judgment" to file the antitrust lawsuit, Barnett said in an interview. "Our judgment is (an Oracle takeover) will harm customers."

Wednesday marked the third day of testimony in the government's two-week effort to prove its case in a nonjury trial that will be decided by U.S. District Vaughn Walker, a former antitrust lawyer.

Justice Department lawyers have spent most of their time eliciting testimony from software customers and software executives depicting PeopleSoft, Oracle and SAP as the dominant players in the battle to sell complex software to major companies.

Oracle has been trying to punch holes in that argument by citing a recent string of software purchases made by large companies and government agencies. In the deals cited by Oracle, the software was sold by other suppliers, including Lawson Software Inc. and American Management Systems Inc.

Oracle also contends Microsoft plans to expand into business applications software, giving customers even more choices. Just before the trial began, Microsoft acknowledged it discussed buying SAP last year before ending the talks because the proposed merger would be too complicated to pull off. Copyright 2004 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.