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PeopleSoft has filed suit against Oracle, saying legal action is the only way to protect its business against a "sham" takeover bid.

The lawsuit filed in Alameda County Superior Court calls for an injunction against Oracle in pursuing its $5.1 billion offer for PeopleSoft. This move contradicts earlier reports from Oracle that PeopleSoft would not pursue a court battle. Such a change of heart is to be expected in what is a very fluid situation between the two companies and PeopleSoft's own acquisition target J.D. Edwards.

"PeopleSoft (Friday) announced that it has sued Oracle to put an end to what it characterizes as a sham tender offer aimed at destroying PeopleSoft's business," the company said in a statement. "According to the suit, Oracle's true intent in making the tender offer was to undercut PeopleSoft's business operations by disparaging PeopleSoft's products, services, and future prospects, undermine PeopleSoft's viability by creating uncertainty and doubt in the minds of PeopleSoft's customers and prospective customers, and interfere with PeopleSoft's plan to merge with J. D. Edwards and Company."

PeopleSoft claims that Oracle has understated the costs customers will face should an acquisition take place between the companies. Oracle is planning to migrate PeopleSoft customers over to its own software products. PeopleSoft's lawsuit follows similar litigation started earlier this week by J.D. Edwards against Oracle.

These legal rumblings add to an active public relations war between the three software makers. The scuffle has caught the eye of other industry executives, providing a source of amusement.

"With respect to Larry (Ellison), isn't he a kick," said Scott McNealy, CEO at Sun Microsystems, today at the JavaOne conference. "My view is have fun Larry, good luck, have at it."

The purchase of PeopleSoft by Oracle could provide a boost to Sun's business, McNealy said, citing his company's close relationship with Oracle.

"If (Elllison) were to go out and buy J.D. Edwards, PeopleSoft, SAP and Microsoft that would be good for us," McNealy said. "The bigger Larry's portfolio gets the happier I am. Right now we have to compete for PeopleSoft's love with IBM. Competing against IBM for Oracle's love on PeopleSoft apps will be a lot easier."

Oracle's tactics against PeopleSoft have had a powerful effect. There's no doubt the Eillison mob will prepare a new bomb to hit by next week and keep the pressure on. The company already fired one round late Friday, issuing a firm statement.

"PeopleSoft seems to have revived its on-again, off-again litigation strategy," said Oracle spokesperson Jim Finn, in the statement. "This matter must be decided by PeopleSoft shareholders and not by frivolous litigation."

PeopleSoft is doing what it can to counter Oracle's moves, but at this point sees the legal action as the only way its "business can be protected." ®

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