On Dec.13, 2004, Oracle announced that it is buying PeopleSoft.
After a sometimes fractious 18-month courtship, this saga
will probably go down in technology and M&A legend.
At a price of $26.50 per share, almost a 10 percent premium
over the current PeopleSoft price per share, the $10.3 billion
deal is historic in that it is clearly a better offer than
five previous offers made by Oracle in the past year and
a half. And it is significantly richer than the $16.00 per
share/$5 billion takeover offer for the German-based PeopleSoft
originally made by California-based Oracle.
UtiliPoint® observes that plainly, from an economic
perspective, the deal has finally been consummated because
the tender and acquisition announced today is much more
in line with PeopleSoft's continuing assertion that its
price per share valuation was really worth more than $30.00
per share. PeopleSoft also saw itself as one of the best
growth engines in the technology market despite deteriorating
finances, as the company had been outperforming the NASDAQ
index for more than 18 months.
Because PeopleSoft shareholders are seeing significant
benefit, the new offer became a deal very quickly; the boards
of both companies have approved the offer and accepted the
terms of the merger slated for completion in late January
of 2005.
As the deal is clearly advantageous to shareholders of
both organizations, analyst guidance on near term earnings
for both companies is projected to rise.
Impact on the Energy Industry
The merger of two of the biggest names in software
platforms and technology is significant news across the
business universe. In many industries and industry segments,
the coupling of these two industry players will have a considerable
impact. The dynamics of technology acquisition by energy
companies and utilities will be especially altered.
Foremost, UtiliPoint® anticipates that the corporate
combination will reinvigorate a number of forestalled deals
at North American utilities. While SPL WorldGroup and PeopleSoft
had successful track records selling CIS solutions to the
municipal utilities market, PeopleSoft's business development
in this market segment has been waylaid by utility executive
concerns about company commitment and stability. UtiliPoint
anticipates that many of these concerns will not only be
assuaged by the merger, but the value proposition of the
combined entity may provide more capability and value.
Considered from a broader utility and energy technology
market perspective, UtiliPoint® anticipates that the
PeopleSoft Enterprise Revenue Management platform that includes
CIS for Utilities will be an intriguing and potentially
more powerful back-office solution, considering the integration
and Web services technology capabilities offered by Oracle.
With the merger, the footprint of Oracle and PeopleSoft
in the utilities and energy industry is likely to get even
larger. Both organizations have estimable development capability
and the industry's renewed focus on asset management, asset
optimization, field management and workforce management
plays well into the established strengths of the two organizations.
What remains to be seen in honeymoon phase is how the two
software giants combine their technological and organizational
strength and merge what each brings to the utilities and
energy technology marketplace as a combined value proposition.
Though the timeframe was longer than UtiliPoint® had
anticipated, the combination of Oracle and PeopleSoft is
proof in the pudding that there is too much capacity for
too few technology deals in the energy and utility space
and in business generally. UtiliPoint® has forecast
that mergers and acquisitions in utility and energy technology
that have taken root in 2004 will bear fruit in the coming
several years. UtiliPoint® has already witnessed the
combination of business process outsourcing and professional
services with Alliance Data Systems' purchase of Capstone
Consulting—a purchase that enables Alliance Data to
expand its capabilities for utility clients beyond billing
and customer care to professional services such as implementation,
integration and hosting operations expertise.
UtiliPoint® has previously written about our anticipation
of consolidation of smaller CIS, billing and back-office
technology vendors and anticipates that this trend will
accelerate and continue for the foreseeable future.
What is next beyond M&A? UtiliPoint® doesn't have
a crystal ball, but our attention is focused among other
things squarely on asset management, field service management,
and again on customer relationship management. One question
we will be asking very shortly is what does all this mean
for market players SAP, Oracle and Siebel Systems; emerging
business process outsourcers like Vertex-UK and Delinea;
and companies with customer care solutions in the enterprise
market such as SPL WorldGroup, AMX International and Harris.
Stay tuned….
