Will PeopleSoft find a white knight?

Just as PeopleSoft was settling down to deal with the fine points of buying JD Edwards, it was ambushed by Oracle's Larry Ellison.

Instead of being one of the consolidators, PeopleSoft found itself put into play and over the weekend the rumour mill was working on overdrive. IBM, SAP, Microsoft: which would step in?

Patrick Snell, an analyst with Robert W. Baird & Co., wrote in a research not that he believes there could be a bidding war involving all three companies for PeopleSoft.

Indeed, IBM, which had more than $5.5 billion in cash and equivalents at the end of its March quarter, already has a long-standing joint-marketing deal with J.D. Edwards, which earlier this week announced it will be acquired by PeopleSoft.

But the odds of a third party emerging from the shadows remain remote, some analysts say.

"I can't see IBM getting involved in this," said Bruce Richardson, an analyst at AMR Research. "They have never been successful in the applications market. But they may not want to lose revenue from J.D. Edwards. Still, I can't imagine them doing that."

W.R. Hambrecht analyst Richard Petersen agreed, saying he thinks IBM has little interest getting into the applications software business and that it's unlikely that another suitor will jump into the fray.

"The only other possible bidder is SAP, and SAP benefits more from standing on the sidelines and watching the carnage than it does by acquiring PeopleSoft," Petersen said. "In any event, SAP does not have a history of making large acquisitions."

Richardson initially viewed the Oracle bid as a ploy to derail the pending PeopleSoft-J.D. Edwards deal. He now believes Oracle's bid is genuine, especially given the caliber of the company's advisers.

The company recently hired Chuck Phillips, a former Morgan Stanley software analyst, as an executive reporting to and advising Oracle CEO Larry Ellison.

"I can't think that Chuck Phillips would advise Ellison to do this if it wasn't for real," Richardson said. "He wouldn't (mess) with Wall Street."

PeopleSoft, like a number of other companies, has a policy in place to make it more difficult for hostile suitors to take over. Often referred to as a "poison pill," the provision calls for more shares to be unleashed--thereby making it more expensive for an unwanted suitor to acquire the company.

PeopleSoft has not yet officially turned down Oracle's offer, though Craig Conway, CEO of the software maker, dismissed the takeover bid as "atrociously bad behavior from a company with a history of atrociously bad behavior." Of course, that may be the opening shot in a campaign to convince Oracle to sweeten its offer.

It could also be a prelude to an official rejection. Hostile takeovers in businesses like the software industry are rare, because the prize assets--employees--can walk out the door if they don't like the new management.

That conventional wisdom could be get put to the test, however, considering that Ellison has made it clear that Oracle has no intention of keeping PeopleSoft alive as a separate brand, should the deal go through.

Charles Cooper writes for news.com