But Oracle still has many hurdles to overcome before a takeover is likely - a possible appeal, an EU Commission investigation and a civil action brought by PeopleSoft.
Background
Oracle's battle began in June last year when it submitted an offer to buy rival firm PeopleSoft. At the time the bid was largely seen as a spoiler to prevent PeopleSoft amicably acquiring another player in the market, JD Edwards.
That acquisition went ahead, but Oracle stuck to its plans to buy PeopleSoft, despite lawsuits filed against it by PeopleSoft, JD Edwards and the State of Connecticut. Antitrust investigations by the Department of Justice and the European Commission were also instigated.
In March 2004 the Department of Justice filed suit, alleging that Oracle, PeopleSoft and one other company, SAP, are the only companies that currently compete to develop and sell the high-function integrated human resource management and financial management services software that meets the needs of these large enterprises.
Consequently, said the Justice Department, the suit was necessary to ensure "vigorous competition".
Oracle fought back, bringing software giant Microsoft into court, hoping to convince San Francisco District Court Judge Vaughn Walker that, despite what the takeover may do to the existing market for enterprise software, Oracle is about to face stiff competition from Bill Gates' company.
The tactic appears to have paid off. To the surprise of some commentators, Judge Walker yesterday ruled in favour of Oracle.
The ruling
The District Court Judge found that the Department of Justice had not proved that the takeover would affect competition in the market, commenting, "Unsubstantiated customer apprehensions do not substitute for hard evidence".
He concluded, according to a report by Silicon.com:
"Because plaintiffs have not shown by a preponderance of the evidence that the merger of Oracle and PeopleSoft is likely substantially to lessen competition in a relevant product and geographic market in violation of [antitrust laws], the court directs the entry of judgement against plaintiffs and in favour of defendant Oracle."
In a statement R Hewitt Pate, Assistant Attorney General in charge of the Justice Department's Antitrust Division, said that the Department was disappointed with the ruling and was considering its options.
Oracle's Chairman, Jeffrey Henley, welcomed the ruling, adding, "This decision puts the onus squarely on the board of PeopleSoft to meet with us and to redeem their poison pill so that the shareholders can accept our offer".
The so-called "poison pill" is an expanded license fee refund scheme for PeopleSoft customers, set up by the PeopleSoft board in order to give customers massive refunds of their license fee, if PeopleSoft is bought within a two year period and if the purchasing company stops selling PeopleSoft products within four years. Effectively the scheme prevents Oracle from taking over the company.
PeopleSoft confirmed that its Board would review the implications of the ruling, but stressed that a $1 billion lawsuit, filed by PeopleSoft against Oracle early on in the takeover battle, was still proceeding.
PeopleSoft is claiming compensation and punitive damages over allegations that Oracle engaged in unfair business practices, including a deliberate campaign to mislead PeopleSoft's customers and disrupt its business. The case is due to be heard in court on 1st November.
The ruling marks the end of one stage of the antitrust dispute. Oracle and PeopleSoft now have to wait to see if the Department of Justice will appeal, and to find out the results of an ongoing EU antitrust investigation.
If Oracle manages to clear both antitrust hurdles, the civil lawsuit and the poison pill, it has then to persuade PeopleSoft's shareholders that the takeover is worth their while. Shareholders have already rejected several offers from Oracle, on the basis that they were too low. Oracle's current bid, for $21 per share, has been extended until 24th September.