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Trial Over PeopleSoft Refund Program Set For March/April
Monday December 8, 12:13 pm ET
By Marcelo Prince, Of DOW JONES NEWSWIRES
NEW YORK (Dow Jones)--A potential trial over PeopleSoft Inc. (NasdaqNM:PSFT - News)'s controversial customer-refund program is scheduled for late March and early April, according to the software company.
The Delaware Court of Chancery has decided to "tentatively reserve time" in March and April "for a possible trial or other proceedings" as warranted, PeopleSoft disclosed in documents filed with the Securities and Exchange Commission (News - Websites) on Friday.
A group of PeopleSoft shareholders have sued to have the refund program blocked, saying it's an antitakeover defense. Oracle Corp. (NasdaqNM:ORCL - News) , which is trying to buy PeopleSoft, has joined the suit.
Vice Chancellor Leo Strine denied the shareholders' request for a preliminary injunction last month, saying there was no need to speed up a decision on the matter. Oracle's hostile takeover has been delayed by an extended antitrust review.
PeopleSoft began offering in June to repay customers two to five times their licensing fees if the company was acquired and certain support levels not met. PeopleSoft later revised the terms of the program, adding to the burdens it placed upon an acquirer.
Last month, PeopleSoft pulled back on most of the more problematic provisions after Oracle and the shareholders filed their legal challenges. The refund program, which has been extended until Dec. 31, had tallied more than $800 million in liabilities as of Sept. 30.
Cameron Steele, an analyst at RBC Capital Markets, downgraded his rating on PeopleSoft on Monday to underperform from sector perform, partly because of its refund program. He estimates it will create a liability of at least $1 billion by the end of 2003.
In a research report, Steele said the refund program is a "non-sustainable business practice" that isn't in "shareholders' best interests as it has permanently reduced the enterprise value of the company to any potential acquirer."
Steele doesn't have a position in PeopleSoft shares. RBC hasn't performed investment-banking work for the company.
PeopleSoft shares recently were down 2%, or 42 cents, to $20.95, but remain above Oracle's $19.50-a-share offer. Shares of Oracle, which reports earnings next week, recently traded at $12.71, down 2 cents.
-By Marcelo Prince, Dow Jones Newswires; 201-938-5244; marcelo.prince@dowjones.com |
