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PeopleSoft takeover faces first hurdle

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Oracle will be in court later today to defend itself against claims by the Department of Justice that its proposed acquisition of PeopleSoft would damage competition. The DoJ filed an anti-trust suit in San Francisco on the basis that the merger "lessens competition in an important market."

The DoJ wants to block the deal which it sees as a serious threat to the enterprise software market. The Department fears that the merger will effectively leave only two serious players in the market: Oracle and SAP. They could work together against the interests of users.

Oracle is expected to defend itself by talking up its vulnerability to competition from Microsoft and IBM and from smaller rivals like Lawson Software. It will seek to convince the judge that MS and IBM offer a challenge to Oracle's position in the enterprise software market. Neither company is targetting such customers at the moment but Oracle is expected to claim they will in future. Its other strategy would be to persuade the court that the DoJ has defined the market too narrowly.

Many observers are predicting a government win in court. The case will look at what impact the deal would have in the next two years making it harder for Oracle to introduce evidence of future competition.

The case is expected to last about a month.

The European Commission is conducting a separate, but broadly similar, investigation into the deal. ®

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