Emails show PeopleSoft feared Microsoft competition

Oracle attorneys displayed internal PeopleSoft documents during testimony this week showing the company was indeed concerned about growing competition in business applications from Microsoft and Lawson Software.

The evidence presented in San Francisco federal court contradicted the Justice Department's view that PeopleSoft competes primarily against SAP and Oracle.

Oracle is attempting a hostile takeover of PeopleSoft, a chief rival in the market for software packages that businesses use to manage payroll, human resources and related functions. The Justice Department is trying to block that move, contending that it would leave Oracle and German rival SAP as the only significant companies in the market - dominating without enough competition. Oracle is arguing that other viable contenders abound.

After Microsoft announced in late 2000 it was buying Great Plains Software, PeopleSoft executive Renee Lorton sent out an email: "Breaking News. Microsoft buys Great Plains. Yikes!" In the missive, addressed to Ram Gupta, she wrote that PeopleSoft "should be shaking in our boots," characterising Microsoft's move as "a gun at our and Oracle's back".

She also wrote that she didn't buy claims that Microsoft wanted to stay in the mid-market but would move up into the enterprise space, where SAP, PeopleSoft and Oracle sell to large customers. "If [Microsoft Chairman Bill] Gates doesn't want to own the space, he doesn't bother," her email said.

Under cross-examination from Oracle, Phillip Wilmington, PeopleSoft's executive VP of North American sales, dismissed the email, saying Lorton was alarmist because she was seeking a higher budget for her department. She is VP and general manager of PeopleSoft's Financial Management department.

The four-hour Wilmington grilling appeared to be a carefully orchestrated effort on Oracle's part to portray PeopleSoft as a struggling company, vulnerable to attacks from a variety of competitors. Oracle's main justification for a merger with PeopleSoft is that both companies are losing ground to other rivals, including SAP, and that a merger can give them the scale to remain in the game.

The cross-examination provided a peek at the mentality of software industry executives, in the numerous private PeopleSoft email exchanges and internal memos presented by Oracle.

One of the documents outlines a PeopleSoft campaign to "crush SAP" that was circulated among PeopleSoft's top management last year, Wilmington acknowledged.

In it, PeopleSoft identifies SAP - not Oracle - as its "primary competitor" in the market for high-end human resource and financial management software. It warns that SAP has caught up or surpassed PeopleSoft in human resources applications, a traditional stronghold for PeopleSoft.

Oracle will present its case after the Justice Department finishes. The non-jury trial is expected to last about four weeks.

Alorie Gilbert writes for CNET News.com