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By Iain Ferguson, 5 August 2003 06:24

NEWS IBM has ruled out the riding to the rescue of embattled applications software company PeopleSoft as it fights a hostile $7.3bn acquisition bid by Oracle. Steve Mills, senior VP and group executive of IBM's software group, speaking at the company's research headquarters in Westchester, New York said: "We're not in the applications business and we don't plan to be in the applications business. The amount of revenue IBM gets by partnering and not competing with the applications companies far exceeds the revenue we would get if we competed with them." Mills' comments come as tension between PeopleSoft - fresh from its acquisition of another rival, JD Edwards - and Oracle over the hostile acquisition bid ratchets up to new levels. PeopleSoft chief executive, Craig Conway, told a US newspaper this week that "this game is dead," a position hotly disputed by his Oracle rival, Larry Ellison. Mills did concede that, having made the strategic decision not to tackle the applications market, IBM would have to live with the ramifications of any transaction that took place. But he said "with every action goes a reaction in the marketplace that you can take advantage of," with consolidation likely to provide incentive to other software companies to partner with Big Blue. He said the Oracle takeover will probably not go ahead: "I personally believe it is doubtful that Oracle will complete the transaction." Mills also took the opportunity to blast Oracle - a key competitor of IBM's in the database arena - over its database strategies. "Their prices are high, their support is poor. They don't make customers' happy." He added that Oracle had a skewed view of its database products, saying that while Ellison's company viewed them as great, they were "nothing special". Mills also moved to downplay IBM's role in shifting software development positions from the US to lower-cost countries such as India, arguing that key drivers for laboratory location and growth included the ability to build capabilities and build products in collaboration with domestic companies. He said: "This is not about moving skilled jobs elsewhere." Iain Ferguson writes for ZDNet Australia