'Poison pill' overshadows PeopleSoft results

The 'customer protection programme' clause stated that should PeopleSoft be acquired, and the acquiring company discontinues its products, customers would be awarded compensation of between two and five times the value of the initial contract.

But experts have expressed doubt whether PeopleSoft should be allowed to recognise all of the revenue under US GAAP law, and not take into account the potential liability of the clause. '(PeopleSoft) recognised all the revenue, but it is questionable whether that is correct by US GAAP standards,' said Brian Skiba, global analyst with Deutsche Bank Securities.

Steve Swasey, spokesman for PeopleSoft in matters connected to the Oracle takeover, said there was no conflict with US GAAP. 'The revenue is recognised as revenue,' he said. 'There is no balance sheet exposure with the customer protection programme with PeopleSoft, because if it remains an independent company there is no issue.'

The potential liability arising from the poisoned pill is $354m (£217m).

'It was a prudent response to Oracle's distractions during our second quarter,' said Swasey. 'There was a lot of threatening language, and a number of customers had concerns.' But he was unsure whether the validity of such a clause had been confirmed by its auditors, KPMG. 'Bankers and attorneys helped us to develop this. If we had it reviewed by our auditors I can't say.'