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PeopleSoft to buy rival J.D. Edwards for $1.7 billion

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Jun 02, 20034 mins
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PeopleSoft Monday announced it will acquire J.D. Edwards in a stock deal valued at about $1.7 billion. The acquisition will create the second largest business applications maker, with about $2.8 billion revenue, 13,000 employees and 11,000 customers, the vendors said.

PeopleSoft announced Monday it will acquire J.D. Edwards in a stock deal valued at $1.7 billion. The acquisition will create the second-largest business applications maker, behind only SAP, with estimated $2.8 billion revenue, 13,000 employees and 11,000 customers.

Both companies offer ERP and CRM software, but they attract different customers. PeopleSoft traditionally has focused on large enterprises in service industries, while J.D. Edwards’ strengths lie with mid-market companies in manufacturing, distribution and asset-intensive industries.

The deal – which calls for J.D. Edwards to become a wholly owned subsidiary of PeopleSoft – will benefit both companies, says Jim Shepherd, senior vice president at AMR Research.

“PeopleSoft needed a way to get into manufacturing. They were really only competing effectively in half the market – the non-manufacturing half,” Shepherd says. “This makes them immediately credible as a manufacturing software vendor.” Likewise, J.D. Edwards needed a presence in non-manufacturing sectors, which PeopleSoft provides, he says.

In addition, the two companies are culturally compatible, Shepherd says. Both are very hands-on and have customer-friendly philosophies, he says.

Observers agree the deal is about increasing size. PeopleSoft and J.D. Edwards gain “a critical mass to compete against Oracle and SAP that they just didn’t have before,” Shepherd says. “It makes them bigger, it gives them more development resources, more brand visibility, more people on the ground. All of that is a help for both companies.”

“The consolidation of the two, from a customer base perspective, makes them a stronger force collectively in the e-business application market,” agrees Kelly Spang Ferguson, principal analyst at research firm Current Analysis.

But Ferguson says that PeopleSoft stands to benefit more from the deal than J.D. Edwards does.

“From the supply chain perspective and from the mid-market manufacturing perspective, this is clearly a win for PeopleSoft,” Ferguson says. She’s skeptical that the deal benefits J.D. Edwards, “other than the fact that pooling resources gives them better financial positioning,” Ferguson says.

J.D. Edwards, like every other business applications vendor, has been struggling to grow revenue in a tough economy, but not to the point that it needed to give up its independence, Ferguson says. “J.D. Edwards is one of the last independent e-business software companies out there. Now they’re giving in to market trends and will become part of PeopleSoft.”

Shepherd says the deal will not have much of an impact on customers since J.D. Edwards’ products will likely remain independent and PeopleSoft won’t try to force any product migrations. “We think that they will maintain two separate product lines: a manufacturing product line and a services product line,” he says.

He downplays any product redundancy issues. This is not the kind of acquisition where the companies will try to merge two product lines, “so functional overlap really is not an issue,” Shepherd says. “They’re not going to want to endanger the customer base by trying to force them to do something.”

Ferguson isn’t so sure. Keeping J.D. Edwards as a wholly owned subsidiary may make sense in the short term, she says. “But if PeopleSoft, in fact, wants J.D. Edwards for the manufacturing installed base and the manufacturing technology, I’m not sure it makes sense to have them as two operations,” she says. “The redundancy in the product lines – in terms of ERP and CRM – is concerning.”

The vendors said in a conference call announcing the news that no changes in product support are expected.