Oracle May Face Tough Integration
Oracle Corp. may face a more complex and costly challenge integrating PeopleSoft Inc. than the company has acknowledged, analysts and industry observers said.
The two companies have sharply contrasting corporate cultures, conflicting technology and different ways of pricing their software. Moreover, Oracle made commitments during the long takeover battle to help win over PeopleSoft customers that will make integration even more difficult.
PeopleSoft agreed to be acquired by Oracle this week for $10.3 billion. When Oracle first disclosed a hostile bid in June 2003, it said it wanted to stop selling PeopleSoft's programs and halt additions to its product lines. Now, Oracle plans to maintain PeopleSoft's separate engineering team and release a new version of PeopleSoft's software within two years.
SOFTWARE SHOWDOWN
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See complete coverage of Oracle's pursuit of PeopleSoft.
This week, Oracle Chief Executive Larry Ellison for the first time broached the possibility that Oracle may maintain the separate product lines long enough to release another PeopleSoft version after that. Oracle has also pledged to continue supporting PeopleSoft's products for at least 10 years, longer even than PeopleSoft itself had been committed to.
"When you add all of these things together, it's going to really compound the complexity of the integration," said Albert Pang, an analyst with IDC in San Mateo, Calif. While Oracle will be able to realize long-term savings, he said, "Over the next three to six months, there are going to be much higher than expected costs associated with the merger."
Oracle executives say they can make the acquisition pay off. "On the cost side, we're convinced we know quite precisely where we are," Mr. Ellison said after the deal was announced. Excluding deal-related costs, the company says the acquisition will add to earnings beginning in the fiscal fourth quarter ending in May.
Harry You, Oracle's chief financial officer, said marketing and general and administrative costs for the combined company won't be much higher than Oracle's standalone costs, and that about $150 million will be cut from the combined research-and-development budget. He said the company would set aside at least $1 billion in restructuring reserves. The company has promised to provide additional financial details at an analysts' conference set for Jan. 26, after the expected close of the deal.
Oracle hasn't provided estimates of how many jobs will be cut from PeopleSoft's work force of nearly 12,000. Oracle now says it will maintain separate engineering teams for PeopleSoft and for the former J.D. Edwards, which was acquired by PeopleSoft last year. Oracle will also add much of PeopleSoft's sales force to its own. Mr. Ellison said merging the two sales teams represented the biggest "integration risk."
But Mr. Pang of IDC says there will be technical and financial challenges as well. For one, the two companies charge differently for their software. PeopleSoft charges corporations a single fee. Oracle prices its software by the number of employees using the program, or the number of computers running it.
Moreover, Mr. Pang says Oracle, PeopleSoft and the former J.D. Edwards used different data structures and business logic in their software. The acquisition will also force Oracle to support business applications, such as finance programs, that rely on databases made by its competitors, including Microsoft Corp. and International Business Machines Corp. Oracle's application programs traditionally work only with its own database.
"It could take years for people to come up with equivalent formulas to get these things to work in the same way," Mr. Pang said. "For the time being, those formulas will have to be handled on a customized basis, which would lead to higher expenses."
Oracle has said PeopleSoft's highly profitable stream of "maintenance" payments is the key to making the deal work. Customers typically pay about 20% of the original cost of the software each year in return for bug fixes, updates and product support. Charles Phillips, Oracle's co-president, said the company expects the number of PeopleSoft customers who cancel such contract to rise, to 10% or more.
PeopleSoft employees and customers are concerned about the changes. One midlevel PeopleSoft executive, who formerly spent five years at Oracle, said employees will have a tough time working for Oracle. "Employees have been brainwashed that working for Mr. Ellison is the worst thing that can happen," said the executive.
At Yellow Roadway Corp. in Overland Park, Kan., Chief Executive Bill Zollars said he is worried Oracle may make it more difficult or expensive for the company to use its PeopleSoft's financial-reporting and human-resources software with IBM's database, as it does now. But Mr. Zollars said that for now, Oracle is likely to be careful not to create "trigger events" that prompt an exodus of PeopleSoft customers. Oracle has said it will support customers' existing database systems.
Gilles Bouchard , executive vice president of global operations at Hewlett-Packard Co., offered Oracle some lessons from H-P's own integration of Compaq Computer Corp. "Whatever decisions they make have to stick. There are always a lot of pressures to reverse decisions," he said. In addition, he advised confronting the cultural differences openly and "not brush this under the carpet."
甲骨文整合仁科可能面临严峻挑战
分析师和业内观察人士认为，甲骨文(Oracle Corp.)整合仁科(PeopleSoft Inc.)业务将面临的难题和成本都会超过甲骨文自己承认的程度。
甲骨文和仁科在企业文化、技术优势和产品定价方式等方面都有著显著差异。此外，甲骨文在竞购仁科的持久战中许下的种种承诺还会进一步加剧整合的难度。
仁科本周同意按103亿美元的价格被甲骨文收购。2003年6月，甲骨文首次宣布敌意收购计划时表示，将停止销售仁科开发的程序，并中止添加仁科系列产品。现在，甲骨文的计划是，单独保留仁科的开发团队，并在两年内推出一套仁科软件的新版本。
本周，甲骨文首席执行长拉里?埃利森(Larry Ellison)首次提出，甲骨文可能会把仁科独立的系列产品保留足够时间，以便推出新版仁科产品。甲骨文还承诺至少在10年内继续支持仁科产品，比仁科自己承诺的还要长。
IDC驻加州圣马特奥的分析师阿尔伯特?庞(Albert Pang)说，如果把这些因素都加到一起，整合的复杂性可就大大增加了。虽然甲骨文能够实现长期的成本节约目标，但未来3-6个月的合并成本会大大提高。
甲骨文管理人士则表示，他们能够通过这项收购交易获利。埃利森在宣布达成收购交易后表示，“在成本方面，我们很清楚自己的情况。”扣除与交易有关的成本，甲骨文表示，收购会从截至明年5月份第四财政季度开始增加公司收益。
甲骨文首席财务长Harry You表示，合并后公司的营销成本、日常运营开支和行政费用不会比甲骨文合并前的水平高出多少，而且合并后公司的研发预算还会减少大约1.5亿美元。他说公司至少拨出至少10亿美元作为重组准备金。甲骨文承诺，在明年1月26日，也就是交易预定完成日期之后召开分析师会议，披露更多财务详情。
仁科现有员工12,000人，甲骨文没有公布计划裁员人数。目前公司表示会保留仁科的工程师队伍，以及仁科去年收购的J.D. Edwards原来的员工队伍。仁科销售部门的大部分员工会被并入甲骨文的销售部门。埃利森还表示，合并双方的销售队伍是最大的“业务整合分风险”。
但是，IDC的庞说，除了合并销售队伍之外，摆在甲骨文面前的还有技术和财务难题。首先，两家公司软件产品的定价方式截然不同。仁科对企业客户采用单一定价标准，而甲骨文根据公司内部使用该软件的员工人数，或者安装该软件的电脑数量来定价。
此外，他还说，甲骨文、仁科和以前的J.D. Edwards，各自软件产品的数据结构和业务逻辑都不同。收购之后，甲骨文就不得不支持那些以竞争对手数据库为基础的财务程序等应用程序了，包括微软(Microsoft Corp.)和国际商业机器公司(International Business Machines Corp.)的应用程序在内。而以往，甲骨文的应用程序都是在自己开发的数据库基础上工作的。
庞说，找到一个办法，让这些程序按照同一项标准工作，可能需要长达数年的时间。眼下，这些产品都要根据不同的客户进行个性化配置，这样就会增加费用。
甲骨文曾表示，仁科利润丰厚的“维修”收入是促使它决定收购的主要因素。通常，客户每年支付软件产品最初成本的20%，由仁科员工负责修补漏洞、进行版本升级并提供产品支持服务。甲骨文联席总裁查尔斯?菲利普斯(Charles Phillips)说，公司预计取消这类服务合约的仁科客户数量会有所增加，估计增幅在10%或更高。
仁科的员工和客户对这些改变也很关切。曾在甲骨文工作过5年，现在是仁科中层经理的一位员工表示，在甲骨文工作很艰苦。他说，员工普遍认为，为埃利森工作是最可怕的事。
Yellow Roadway Corp.首席执行长Bill Zollars说，他担心继续使用仁科财务汇报软件和人力资源管理软件会变得更困难，或者更昂贵。这些软件都是以IBM数据库为基础而开发的。但他也表示，眼下甲骨文不太可能这么做，以免促使仁科客户大规模流逝。甲骨文曾表示，将继续支持使用现有数据库系统的客户。
惠普(Hewlett-Packard Co.)全球业务执行副总裁Gilles Bouchard从惠普整合康柏电脑(Compaq Computer Corp.)的经验出发，向甲骨文提供了几条建议：不管作出什么决策，都要执行到底。改变决策的压力总是会有的。此外，要公开处理企业文化方面的冲突，不要遮遮掩掩。
