Oracle-PeopleSoft deal examined in Europe

Oracle Corp.’s intended takeover of rival corporate software maker PeopleSoft Inc. was scrutinized by customers, competitors and PeopleSoft itself at a closed-door hearing in Brussels on Thursday, people close to the meeting said.

In a preliminary assessment, the European Commission appears set to prohibit the deal because it believes the merged entity will dominate the market for large corporate computer software systems, such as customer relationship management and financial management software used by multinational companies.

Two such companies intervened at the hearing Thursday, according to one person present at the meeting. The St. Louis-based manufacturing conglomerate Emerson Electric Co. broadly welcomed the takeover, but the deal raised concerns for the Dutch banking and insurance group ING Groep NV, according to this person. Both companies use a wide range of so-called enterprise software.

Another person close to the merger review said Germany’s SAP AG, the biggest player in the market in Europe, intervened. It agreed with many of Oracle’s arguments in defense of the takeover, in particular its insistence that the Commission is defining the market too narrowly by only focusing on the top end of the market for corporate software.

Both Oracle and SAP argue that by doing so the Commission exaggerates their market share. Suppliers of smaller systems for smaller clients should also be considered as competitors in the same market, the two companies said at the second and final day of the Oracle hearing, the people close to the meeting said.

Microsoft Corp.’s wholly owned Danish subsidiary, Navision, acquired in 2002, and Baan, a unit of Chicago-based SSA Global Technologies Inc., compete in the market for enterprise software for small companies. Microsoft was not represented at the hearing, according to both people.

Baan was present and intervened offering support for some of Oracle’s arguments, said the person who was present. Baan was not immediately available to comment.

Other companies, such as Siebel Systems Inc., build specialized software for companies, such as customer relationship management tools, but none apart from Oracle, PeopleSoft and SAP make all-around programs for multinationals, according to a person close to PeopleSoft.

“The market supplying large multinational clients is completely separate from the market for smaller firms, or for specialist products,” this person said. PeopleSoft opposes the deal. “The demand is separate, as is the supply,” he added.

Amelia Torres, competition spokesperson at the European Commission, declined to comment on the Oracle case.

The Commission has until May 11 to make a final ruling. Before doing so, it will consult national competition regulators.

Its decision will come less than a month before the U.S. Department of Justice’s attempt to block the deal is scheduled to be heard in a California court.