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Larry Ellison is in court to challenge the Department of Justice which wants to stop him taking over PeopleSoft. His defence in part relies on claims that Microsoft and IBM are likely future competitors in the enterprise software market.

This claim got a big boost from Microsoft which yesterday said it had been in serious talks to acquire SAP. Talks ended in the spring "due to the complexity of the potential transaction and subsequent integration." SAP has a market value of about $52bn. Both sides said talks were unlikely to restart.

The news bolsters Ellison's claim that Oracle and PeopleSoft will face increased competition in future. The Department of Justice began its court case against Oracle yesterday, alleging that its takeover of PeopleSoft would damage competition in the market.

The proposed merger emerged from talks to jointly develop Web services. Late last year Microsoft raised the idea of a merger. Talks ended in spring although they did lead to a Web services partnership announced in May.

Henning Kagermann, chief executive at SAP, said: "SAP, like all publicly-held corporations, routinely evaluates potential opportunities to strengthen its leading position in the enterprise software market, and the disclosure made today should be interpreted this way."

The deal would have turned the enterprise market on its head and marked a major change in strategy from Microsoft. Although it has bought Great Plains, Navision and Axapta in recent years it was not seen as a serious challenger in the enterprise market. Microsoft said it was revealing the talks because they were likely to emerge in court.

Lawyers for PeopleSoft said the revelation showed that there were just three serious players in the market and that Microsoft would have to buy one in order to compete effectively.

To see the whole SAP statement click here ®

Related stories

US gov and Oracle in court
Oracle slashes PeopleSoft offer
SAP snuggles up to IBM and MS

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