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\u2019 strengths lie with mid-market companies in manufacturing, distribution and asset-intensive industries.The deal \u2013 which calls for J.D. Edwards to become a wholly owned subsidiary of PeopleSoft \u2013 will benefit both companies, says Jim Shepherd, senior vice president at AMR Research.\u201cPeopleSoft needed a way to get into manufacturing. They were really only competing effectively in half the market \u2013 the non-manufacturing half,\u201d Shepherd says. \u201cThis makes them immediately credible as a manufacturing software vendor.\u201d 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 \u201ca critical mass to compete against Oracle and SAP that they just didn\u2019t have before,\u201d Shepherd says. \u201cIt 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.\u201d\u201cThe consolidation of the two, from a customer base perspective, makes them a stronger force collectively in the e-business application market,\u201d 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.\u201cFrom the supply chain perspective and from the mid-market manufacturing perspective, this is clearly a win for PeopleSoft,\u201d Ferguson says. She\u2019s skeptical that the deal benefits J.D. Edwards, \u201cother than the fact that pooling resources gives them better financial positioning,\u201d 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. \u201cJ.D. Edwards is one of the last independent e-business software companies out there. Now they\u2019re giving in to market trends and will become part of PeopleSoft.\u201dShepherd says the deal will not have much of an impact on customers since J.D. Edwards\u2019 products will likely remain independent and PeopleSoft won\u2019t try to force any product migrations. \u201cWe think that they will maintain two separate product lines: a manufacturing product line and a services product line,\u201d 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, \u201cso functional overlap really is not an issue,\u201d Shepherd says. \u201cThey\u2019re not going to want to endanger the customer base by trying to force them to do something.\u201dFerguson isn\u2019t so sure. Keeping J.D. Edwards as a wholly owned subsidiary may make sense in the short term, she says. \u201cBut if PeopleSoft, in fact, wants J.D. Edwards for the manufacturing installed base and the manufacturing technology, I\u2019m not sure it makes sense to have them as two operations,\u201d she says. \u201cThe redundancy in the product lines \u2013 in terms of ERP and CRM \u2013 is concerning.\u201dThe vendors said in a conference call announcing the news that no changes in product support are expected.