JD Edwards begins battle to save merger

Eighteen months ago, not long after he was recruited to turn around the fortunes of the application software provider, he was having dinner with the company’s founder and his predecessor Ed McVaney.

‘Ed shook his knife at me and said: “Don’t you go selling my company”,’ Dutkowsky told Accountancy Age’s sister title Computing in an exclusive interview at the supplier’s Quest user conference in Denver last week.

The warning was eventually ignored – after much consideration – as JD Edwards announced its plans to merge with rival PeopleSoft in a $1.7bn (£1bn) deal.

The news of Oracle’s $5bn (£2.9bn) hostile takeover bid for PeopleSoft, which hit the headlines last week came as a complete surprise. ‘I thought it was a joke,’ he said. There is still a long way to go before the outcome is clear and JD Edwards’ future is finally resolved. Last week, PeopleSoft formally rejected the unwanted takeover, and JD Edwards started legal action against Oracle and its chief executive Larry Ellison. This week PeopleSoft followed suit.

The suit claims that Oracle ‘tortuously interfered’ with the proposed merger with PeopleSoft, and that Ellison has engaged in ‘wrongful conduct and unfair business practices’. ‘We will not sit by idly while Oracle pursues this arrogant, unlawful and destructive course of action,’ said Dutkowsky.

His frustration at Oracle’s aggressive move is understandable. ‘The board recruited me to take JD Edwards to the next level, that was my charter. We tightened up execution, got the company profitable again, got the engines running again.

‘But to take it to the next level, we realised we had to aggressively get bigger, faster. That would be harder for us to do organically, so that led us to some strategic planning. And that led to PeopleSoft.’

The outcome of the battle for PeopleSoft’s future could be a turning point for the much-anticipated consolidation of the IT sector. Hostile takeovers are rare in the industry but Oracle’s move raises an important question: are shareholders more important than customers?

Oracle’s move will appeal to its shareholders, but an online poll by analyst Meta Group suggests that two-thirds of respondents believe a successful Oracle takeover would be unfavourable for PeopleSoft users.

‘Despite what Oracle may say, migrating from PeopleSoft to Oracle would require about 80% of the work and effort of a wholly new installation,’ said a Meta report. Ellison disagrees, calling the merger with JD Edwards a ‘risky undertaking’ for PeopleSoft shareholders.

Either way, Dutkowsky feels JD Edwards is in a winning position. ‘Let’s pretend Oracle/PeopleSoft does happen. It still creates an upside for JD Edwards, because those disenfranchised PeopleSoft customers are not going to flock to Oracle like lemmings.’

Despite this he is adamant the deal will succeed. ‘The merger with PeopleSoft is in the best interest of our customers, it’s been well thought out, well planned, well executed. The biggest validation that it makes sense is that Oracle is trying to stop it,’ he said.