PeopleSoft to Acquire J.D. Edwards

$1.7 billion stock deal combines PSFT's large enterprise, services strength with JDEC's mid-market, manufacturing muscle

Pleasanton, CA — June 2, 2003 — Software company PeopleSoft today said that it would buy rival J.D. Edwards & Company in a $1.7 billion stock swap that will create one of the world's largest enterprise applications software companies.

The newly joined companies will have some 13,000 employees and annual revenues of about $2.8 billion. The combined company will compete with the likes of German SAP, which had $8.7 billion in 2002 revenues, and Redwood Shores, Calif.-based Oracle, which recorded $9.7 billion in fiscal 2002 revenues.

Under the terms of the agreement, J.D. Edwards stockholders will receive 0.860 PeopleSoft common shares for each outstanding J.D. Edwards common share. Denver-based J.D. Edwards will become a wholly owned subsidiary of PeopleSoft, and J.D. Edwards stockholders will own approximately 25 percent of the outstanding capital stock of the combined company.

With this acquisition, PeopleSoft says it will expand its presence in more than 20 industries, including a range of services, manufacturing, distribution and asset-intensive industries.

In a statement, Bob Dutkowsky, J.D. Edwards chairman, president and CEO, said that the deal would unite PeopleSoft's strength in the large enterprise space and services industries with J.D. Edwards' strength in the mid-market and manufacturing. "We will be able to serve the entire enterprise software market in a way that no other vendor can," Dutkowsky said.

"Both mid-sized and large enterprise customers will have access to the broadest suite of integrated enterprise software applications," said PeopleSoft President and CEO Craig Conway, in the company's statement.

Michael Dominy, an analyst with technology consultancy Yankee Group, said that the acquisition of customers in the manufacturing and distribution verticals, as well as the mid-market horizontal, definitely will be a boon for PeopleSoft, as will the ability to offer solutions such as supplier relationship management and customer relationship management to it clients. "Selling additional applications (like SRM and CRM) into the customer base is the way [enterprise resource planning (ERP)] vendors [such as PeopleSoft] will survive," Dominy said.

Jim Shepherd and Randy Weston, analysts with AMR Research, said that the combination of the two companies should give PeopleSoft renewed strength in Europe, Asia-Pacific and other overseas markets. "Neither company had enough people on the ground to be effective in many of these global offices; now they will have twice as many people and gain a lot of credibility in the regions," the analysts wrote in a research note today. "The combination should give PeopleSoft a particular boost in Europe, where it has had a problem convincing Europeans it was anything but an [human resources] company. Not having a viable manufacturing product in Europe hurt it a lot, but J.D. Edwards has a pretty strong European presence, giving PeopleSoft the credibility it needed."

The challenges that PeopleSoft will face as it assimilates its rival, according to Dominy, will include the platform migration strategy for J.D. Edwards customers, since so many of these clients are still running on the IBM AS/400 platform. In addition, the analyst cited "retaining the right talent from J.D. Edwards" as an additional challenge for PeopleSoft.

Shepherd and Weston suggested that the two companies' cultures should be a good fit. "They have very similar hands-on, customer-friendly and employee-friendly philosophies, making for an easy transition," the analysts wrote.

Both companies' boards of directors were reported to have unanimously approved the deal, which is anticipated to close in the late third or early fourth calendar quarter.
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