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Oracle Lays Out Its Game Plan

By Jim Kerstetter and Sarah Lacy You have to give Oracle CEO Lawrence J. Ellison credit. When most pundits thought his plan to buy rival software maker PeopleSoft was just a bluff, Ellison persevered. When the Justice Dept. tried to stop the deal on antitrust grounds, he bested the trustbusters in court. And when it came to putting down the cash, he did exactly that, shelling out $10.3 billion to buy out PeopleSoft's shareholders.

Now comes the hard part: Making these two very different companies work together. On Jan. 18, Ellison and other top Oracle (ORCL) executives spent the better part of a day at their company's Silicon Valley headquarters explaining how they plan to support and eventually merge three different product lines -- Oracle's own business software, PeopleSoft's flagship software, and the software PeopleSoft picked up in last year's acquisition of another business software maker, J.D. Edwards & Co.

Oracle will outline the deal's financial implications during a conference with financial analysts on Jan. 26 in New York City. But the Jan. 18 meeting was all about products and how Ellison plans to keep PeopleSoft's customers and his own customers happy as he merges the two companies.

"TRUST ME." The ever-feisty Ellison says he's not about to abandon PeopleSoft's customers. When pink slips started going out to PeopleSoft and Oracle employees Friday, Jan. 14, -- about 5,000 people, or about 9% of the combined company are expected to lose their jobs -- few of them went to engineers. Ellison says 90% of PeopleSoft's engineering and development staff will be retained so Oracle can continue to upgrade both the PeopleSoft and J.D. Edwards product lines as well as Oracle's own software. "We intend to enhance those products for years to come," says Ellison.

The Oracle CEO acknowledged that many people are worried he's trying to make two very different corporate cultures work together -- his own, known for it's pit-bull aggressiveness, and PeopleSoft's, best known for having a soft touch with customers. It's a nice story for the press, Ellison says, but it's not entirely true. "Trust me, PeopleSoft was a very, very aggressive company, or they wouldn't have lasted in the [corporate software] business as long as they did," he says.

Ellison added that PeopleSoft's former chief executive, Craig Conway, who was ousted in the final months of the 18-month takeover fight, was hardly a pushover. Ellison should know, because Conway used to work for him. "The guy running PeopleSoft for most of this process was one of Oracle's most aggressive executives ever," says Ellison.

"PROJECT FUSION." He reiterated Oracle's plans to support PeopleSoft's products until 2013 and said his company will make no effort to nudge PeopleSoft customers toward other Oracle products, such as its database and so-called middleware software that helps big companies use their business systems over the Internet. Many PeopleSoft customers run their business software with other programs made by companies like IBM (IBM) and BEA Systems (BEAS). "Unless IBM should go out of business between now and then, that's just something we can't control," Ellison deadpanned.

In the meantime, Oracle engineers are starting work on something dubbed "Project Fusion," which will merge all three companies' product lines. Customers, of course, don't have to buy it. But Ellison believes it will offer strong technological incentive because it will be built entirely on computer programming standards such as Java and hypertext markup language (HTML). That would make the new software easier to manage and easier to connect to other, standards-based programs.

To hear Ellison talk, all is going according to plan. And maybe it is. But no one has ever successfully merged two such big and established software companies. It will be years before anyone knows for sure whether Oracle's boss has pulled off what would be his greatest trick yet. Kerstetter is BusinessWeek Online's Technology editor and Lacy is a reporter in the Silicon Valley bureau

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