PeopleSoft clients wary of Oracle

Almost two-thirds of PeopleSoft Inc. customers said they will cancel their software-support contracts if Oracle Corp. buys PeopleSoft and stops enhancing the programs, according to a survey by AMR Research Inc.

AMR found 63 percent of PeopleSoft clients will leave Oracle immediately or as soon as it stops adding to the products if they can get support elsewhere, according to a November survey of 150 PeopleSoft customers by the Boston-based researcher.

Oracle chief executive Larry Ellison faces a "significant sales job" convincing PeopleSoft customers to buy his software if Oracle's $8.8 billion hostile takeover succeeds, AMR analyst Bill Swanton said. Redwood City, Calif.-based Oracle says it will support PeopleSoft's products for 10 years.

PeopleSoft employs 2,000 people in Colorado after its acquisition of J.D. Edwards, a Denver software company, in 2003.

"PeopleSoft has probably the most loyal customer base of any enterprise software company - it's almost like a cult following," said UBS Securities Inc.'s Heather Bellini in New York. "Oracle is going to have to do a lot of smoothing over in order to make those customers feel they will be taken care of in the same fashion."

Ellison wants PeopleSoft's nearly 13,000 clients to help revive sales of applications such as payroll and human-resources programs and lessen Oracle's dependence on database software, which accounts for 80 percent of its revenue.

The deal would give him PeopleSoft's lucrative maintenance revenue, among the highest in the software industry, Bellini said. PeopleSoft clients will pay more than $1.27 billion in maintenance and support fees this year, up from $1 billion in 2003, she said.

"The concern is that they believe Oracle will give them tax updates for 10 years, but they don't believe they will expand the functionality," AMR's Swanton said.

PeopleSoft shares rose to an 11-month high of $23.99 Thursday after analysts including Wells Fargo Securities' Eric Upin raised 2005 sales estimates for the company.