Oracle judge grappling with market definition

NEWS After the first week of testimony, a federal judge overseeing the Justice Department's case to block Oracle's hostile bid for PeopleSoft was still grappling with the key issue of market definition.

In the high-profile case, Judge Vaughn Walker, who is presiding over the US District Court trial in San Francisco, took an active role on Thursday in asking questions of the two witnesses who testified. They included a former executive at J.D. Edwards, which PeopleSoft acquired just as Oracle launched its surprise bid, and a senior vice president at systems integrator BearingPoint.

At issue is whether the business applications software market can be defined by smaller players and large enterprise vendors. Oracle seeks a broad definition that does not differentiate between the two, while the Justice Department wants a narrow definition that would include only Oracle, PeopleSoft and SAP. That would go down to two players if Oracle and PeopleSoft are allowed to merge.

Richard Allen, former chief financial officer for J.D. Edwards, described the mid-tier market as being comprised of companies more interested in integrated software suites, because they require less work for the customer's limited IT staff.

"A mid-market customer also tends to be in one industry, whereas an (enterprise) customer may be involved in multiple industries," Allen said.

During cross-examination, Oracle attorney Tom Rosch suggested J.D. Edwards was capable of moving into the enterprise market but had abandoned those efforts in the 1990s because it believed the arena was already saturated during the Y2K preparations.

Following Allen, the Justice Department called on Perry Keating, senior vice president of global enterprise solutions for system integrator BearingPoint. Keating emphasised that the majority of enterprise customers that his company deals with tend to select PeopleSoft, Oracle or SAP, with Lawson Software a distant fourth.

On Wednesday, the Justice Department used testimony from Verizon, a PeopleSoft customer, and computing giant IBM to bolster its argument that there's not enough significant competition in Oracle's market to allow it to swallow PeopleSoft.

A day earlier, Oracle used PeopleSoft analyses of competitive pressures to argue that two smaller players, Lawson Software and American Management Systems (AMS), were a significant part of the market.

Walker also displayed his impatience during the trial for third-party witnesses who were quick to black out portions of their testimony, or documents, that they deemed "highly confidential."

"I was surprised by the extent of information that was redacted, especially when much of it was generic," Walker said. "When we have such claims of confidentiality, how can I assess the credibility of the witness?"

The judge, who is known for his usual approach to problems that arise during trial, said he would take a much "tougher line" in accepting documents and testimony that has been redacted.

"It seems we have incentives in place to reward confidentiality and don't punish it. What can we do to create an incentive to avoid it?" he asked attorneys for Oracle and the Justice Department. "I will take a much tougher line on accepting any more redacted information from this point forward. You, or a third party, will have to show good cause for any redactions... like a specific showing of commercial harm."