PeopleSoft's latest tactic - reassure the customer

PeopleSoft is offering customers money-back guarantees to prevent them from fleeing to rivals in fear of a hostile takeover by Oracle.

The software maker is adding a price-protection clause to customer contracts to keep sales from stalling as a result of a hostile takeover bid launched last week by the database giant, according to sources.

Oracle CEO Larry Ellison has said that, if a buyout occurs, he will discontinue PeopleSoft's product line. In response, PeopleSoft last week began offering customers a refund of a portion of their purchase price, should Oracle's takeover attempt succeed, according to several PeopleSoft customers.

A PeopleSoft official would not discuss details of contracts but confirmed the company launched a programme in response to Oracle's bid. "We aren't discussing specific customer contracts. That's between the company and our customers," said Steve Swasey, director of corporate public relations at PeopleSoft.

"We have a customer programme that is in the best interest of stockholders and customers and is a prudent response to Oracle's attempt to disrupt our business. We have initiated this programme to protect our customers' investments and PeopleSoft's market position," Swasey said.

The move is part of the software maker's efforts to reassure customers of its stability and to prevent the Oracle bid from driving sales to competitors, such as market leader SAP. "It's in the best interest of all parties that they do that," said one CIO, a PeopleSoft customer who requested anonymity.

Laurie Orlov, an analyst at Forrester Research, said PeopleSoft "needs to look good to shareholders, and they need to keep new business coming in".

Oracle earlier this month made an unsolicited $5.1bn takeover bid for PeopleSoft just days after PeopleSoft itself had announced plans to acquire JD Edwards for $1.7bn. PeopleSoft and Oracle compete in the market for broad-based business applications, an area in which Oracle has had little success, despite its commanding lead in database software.

Oracle's Ellison has said the buyout would make Oracle more profitable and competitive. But PeopleSoft executives have said Oracle's $16-a-share offer - below PeopleSoft's current trading price - is intended mainly to spread doubt in the software market and hurt PeopleSoft's business.

PeopleSoft's board of directors formally rejected the offer last week. Its executives have said they will go through with the JD Edwards bid, sweetening the deal with an infusion of cash.

On Monday, PeopleSoft CEO Craig Conway sent a letter to all customers that characterised Oracle's bid as a "predatory" manoeuvre. Conway sought customers' support in fighting the takeover bid by continuing ahead with purchasing plans.

"The calculated approach to disrupt our business assumed a dramatic slowdown in customer purchases. Don't let it happen," Conway wrote. "Show your support for PeopleSoft by moving ahead with your planned purchases of PeopleSoft products this month. Show your support and let us move forward together - this month, this year and for years to come."

Mike Ricciuti writes for CNET News.com.