Peoplesoft
Buys J. D. Edwards
Just
as we sat down to write this newsletter, several folks called our
attention to this morning’s news: more convergence in the software
industry as PeopleSoft announced its purchase of J. D. Edwards for
$1.7 billion.
You
should not be surprised. The
giant software market bargain sale has been going on for more than a
year and it’s not over yet. We
expect lots more.
This
one is exactly the sort of merger that makes perfect sense:
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It
creates a very large company, second only to SAP in the
enterprise application market.
(Oracle is divided between infrastructure and
applications and Microsoft is not only divided between
operating systems, infrastructure, and applications – it’s
mainly not in the enterprise market, yet.)
Critical mass is becoming important for success as
customers decide they would like to deal with a smaller number
of larger, strategic IT partners.
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PeopleSoft
and J. D. Edwards specialize in different application areas.
PeopleSoft is the king of HR and J. D. Edward is
especially well known for manufacturing software.
This lack of overlap makes it easier to put the two
companies together and makes their incremental value greater.
There are very few products, if any, that will need to
be rationalized or discreetly disposed of to make this company
a well integrated single firm.
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PeopleSoft
sells mainly to large firms.
J. D. Edwards specialty is the mid-market. This means that each will be able to use the other’s
expertise to get to customers and markets that were formerly
less available to it. This
should be particularly important to PeopleSoft, which like SAP
and other enterprise firms which target the Fortune 1000 have
wanted to target somewhat smaller organizations, where the
available rate of growth is still in double digits.
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The
deal is scheduled to close later this year.
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