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00007

11

    
12

  

ANTHONY DONALD KENDER,

13

 having been first duly sworn, was examined and
14

 testified as follows:
15

    
16

   EXAMINATION
17

    
18

 BY MR.ANBEER:
19

   Q. Good morning, Mr. Kender. Could you
20

 please state your full name for the record,
21

 please.
22

   A. Anthony Donald Kender.
Kender 05-11-04

00008

1

   

Q. And your business address.

2

    A. My business address is -- oh, man,
3

 usually it's an airplane. It is -- you know what,
4

I could check my business card for you. I don't

5

 know the address or --
6

   Q. How about your home office.
7

    A. It's in Berwin, Pennsylvania.
8

My home address is 26 Spring Meadow Drive,

9

 Downingtown, Pennsylvania 19335.
10

   Q. Mr. Kender, my name is Kyle Andeer.
11

 I'm an attorney with the Antitrust Division of the
12

 U.S. Department of Justice representing the United
13

 States of America in this matter.
14

   I'm going to be asking you a series
15

of questions today dealing with Oracle's proposed

16

 takeover for PeopleSoft as well as the enterprise
17

 software market in general.
18

   Have you ever been deposed before?
19

   A. I've been deposed once before.
20

   Q. Well, let me just go over some ground
21

rules just at the outset, so if there's any issues

22

or questions, we can address them now.

Kender 05-11-04

00009

1

   

A. Fine.

2

    Q. First, I'm going to ask that all your
3

 answers are verbal. It's very difficult for the
4

 court reporter to pick up nods and "ums" and
5

 "hmms" and that sort of thing. I'm going to also
6

 ask that you -- I am allowed to finish my
7

 questions before you begin to answer. That way we
8

 both understand each other. Is that understood?
9

   A. Yes.
10

   Q. And if you don't understand any of ray
11

 questions, I'll -- please let me know and I'll
12

 attempt to rephrase and make it a little bit more
13

 clear for you.
14

  

A. Fair enough.

15

  

Q. And finally, is there any reason that

16

 you can think of that you couldn't answer my
17

 questions fully and truthfully today?
18

   A. No.
Kender 05-11-04

00029

3

   

Q. How do you go about making a case --

4

 and I guess we'll focus on HR first. How do you
5

 go about making a case to sell HR software at
6

 Oracle?
7

   A. If there is a company who is doing
8

 active evaluation, do you mean?
9

   Q. Sure.
10

   A. Then you go in, you understand their
11

requirements, you understand the business they're

12

in and you take their requirements, you map it to

13

what your product does, you go back and you show

14

 them your product, how it operates, what the
15

 requirements they have.
16

   Q. So one, you need to understand the
17

 business, the unique company's requirements?
18

  

A. Yes.

19

   Q. And two, you need to understand what
20

 industry they're working in.
21

   A. Sometimes.
22

   Q. Why do you say "sometimes"?
Kender 05-11-04

00030

1

   

A. Because HR is a fairly horizontal

2

 product, so it is not as prone to industry
3

 variations as other products. Certain industries
4

 it is. Some it is not. Everybody needs payroll.
5

 Everybody needs general HR recordkeeping. Within
6

 the industry there are some nuances.
7

    Q. So it's not something you can ignore.
8

 You need to understand what industry they're in,
9

 even in HR?
10

   A. It is helpful to do so, yes.
Kender 05-11-04

00056

8

  

Q. Earlier you mentioned that HR -- I

9

 think the term you used is more of a "horizontal"
10

 application. There are differences in industry,
11

 but they're not as great as other industries; is
12

 that -- or other products; is that right?
13

  

A. That's correct.

14

   Q. With financial -- would the same be
15

 true for financial management software?
16

   A. Yes.
17

   Q. To the same extent as HR or a lesser
18

 extent than HR?
19

   A. Hard to say. It's similar. The
20

 example I just gave of process manufacturing is a
21

 good example. Process manufacturing is very
22

 specific to four or five industries who will
Kender 05-11-04

00057

1

actually manufacture items that require a process,

2

 like toothpaste.
3

    Everybody needs -- everybody company
4

 has people that need to be paid. Every company
5

 has a general ledger for their financials - to
6

 track their financials, so therefore, those
7

 products are considered more horizontal.
8

   Q. Are there differences -- I mean, I
9

 understand at a broad level, a general ledger
10

 everybody's got to keep track of their accounts.
11

  

A. Um-hmm.

12

   Q. Are there differences, though, from
13

 industry to industry or even company to company?
14

   A. Yes.
15

  

Q. What are some of those differences?

16

   A. Well, for example, in government the
17

 accounting principles that are used are different
18

 than in commercial.
19

   In banking and insurance, the
20

 accounting -- financial accounting requirements
21

 may exist that don't exist in a manufacturer. So
22

 although everybody needs a general ledger, you
Kender 05-11-04

00058

1

start to build out industry functionality specific

2

 to those industries.
3

    Sometimes it is less of actually
4

 functionality requirements and more of a comfort
5

 level. So if you're a bank -- and I can tell you
6

 that I had a lot of banks -- you feel better.
7

 Maybe you'll buy it from me because of that even
8

 if the functional differences really are minimal.
9

   Q. Could you explain -- I mean, comfort
10

 level is -- it's sound like customers are
11

 interested in knowing whether there are other
12

 people using, say, Oracle software; is that right?
13

  

A. Sometimes. Um-hmm.

14

  

Q. Do you have -- why is that important?

15

Why is there -- do you have an understanding of

16

why that's important to a customer?

17

  

A. It varies. Sometimes it's important

18

 because people want to know others like them have
19

 bought the software and they feel that might lower
20

 risk in their mind. It isn't always the case, but
21

 it may be perceived that way.
22

   Q. Is this what I've also heard referred
Kender 05-11-04

00059

1

to as references and the importance of references,

2

 this kind of comfort-level idea?
3

    A. Well, the importance -- it is an
4

 aspect of it. You can have references that use
5

 your software that aren't in that industry that
6

 are perfectly fine. You can have references that
7

 are in the industry. So it touches on it.
17

   How is the term -- what is -- what
18

 is -- I mean, what is a reference? In your
19

 industry what is a reference?
20

   A. It's a wide range. A reference might
21

 simply be a name of a company who uses our
22

 software that you are looking to buy.
Kender 05-11-04

00060

1

   

It may also be a company that you

2

 would like to call and ask questions to. It also
3

 could be a company that you would like to visit
4

 and see how they use it.
5

   Q. So it sounds like there's three
6

 different types of references. One is simply a
7

 name reference. Two is someone you can
8

 actually -- a potential client can call and talk
9

 about the software; is that right?
10

  

A. Yes.

11

   Q. And third is a reference that you can
12

visit and actually see how the software is being

13

used; is that right?

14

   A. I wouldn't say there's only three
15

 kinds, but those are three kinds.
16

  

Q. Okay. How does Oracle go about

17

 developing references?
18

   A. It is a lot of ways. There is the
19

 local salesperson in San Francisco knows who a few
20

 of his local references are. Because sometimes I
21

 want to know -- forget about my industry, do you
22

 have anybody here that is a customer?
Kender 05-11-04

00061

1

   

The industries business unit or the

2

 applications business unit may determine a list of
3

 customers for specific products or specific
4

 industries. There are references that get very
5

 finite on a point solution. So there is a supply
6

 chain reference, but there might be someone that
7

 just uses warehouse management.
8

   There might be a human resources
9

 reference for someone who just uses recruitment
10

 software. So there's layers of it, levels of it.
11

 And that's very standard across the entire
12

 software industry.
13

   Q. Are references -- developing
14

 references important to Oracle?
15

   A. Yes.
Kender 05-11-04

00076

14

  

Do you have an understanding of what

15

 it means, Leveraging the Power of Integration?
16

 What is - is that a strategy? What does that
17

 mean?
18

   A. Well, it means that when you have
19

 various -- when you sell a suite, various products
20

 are built to integrate together so that when it's
21

 delivered they work together, versus a company
22

 buying point solutions or best-of-breed vendors
Kender 05-11-04

00077

1

where they have to make them talk to each other.

2

    Q. And does -- what -- how does Oracle
3

 position itself. Is it a suite provider or is it
4

 a best of -- so-called best-of-breed provider?
5

   A. How it positions itself or what it
6

 is?
7

   Q. What it is?
8

   A. It's both.
9

   Q. Could you explain? How is it both?
10

   A. It's both because Oracle provides a
11

suite of applications that are integrated

12

together. But if it needs to compete in -- with a

13

company who is typically buying a one-point

14

solution or best-of-breed vendor, it can take one

15

of its modules and compete there as well.

Kender 05-11-04

00078

8

  

Q. Total cost of ownership, what does

9

 that mean? Could you define that for me?
10

   A. Well, there are various definitions.
11

 Basically, what it means is it costs less to own
12

 and operate this software versus that software or
13

 set of software packages.
14

   Q. And how is that determined? How do
15

 you come up with a total cost of ownership?
16

   A. Again, it is determined various ways,
17

 and I'm no means an expert in total cost of
18

 ownership, but it is things like the price of the
19

 software itself, the ongoing maintenance of that
20

 software, the cost to implement it, the ongoing
21

 cost to support interfaces between that software
22

 and other software packages.
Kender 05-11-04

00079

1

  

So if you buy software from any suite

2

 vendor, theoretically you don't have to maintain
3

 those interfaces between various products because
4

 they come delivered, and therefore your internal
5

 IT staff costs should be less.
6

   Q. So you said the one way of messaging
7

 this integration -- or one of fee points of the
8

 integration message is this lower cost of -- lower
9

 total cost of ownership.
10

  

A. Yes.

11

   Q. How does integration lower the total
12

 cost of ownership?
13

   A. As I just said, you don't have to
14

 have interfaces written that you support yourself
15

between various models, if the integration is

16

 already there, you don't have to incur the expense
17

 of maintaining those interfaces. When a release
18

 changes, now you've got to go back and integrate
19

 those products again.
20

   Q. Are there any other -- in terms of
21

 total cost of ownership, is there any other
22

 advantages in terms of a suite offering versus the
Kender 05-11-04

00080

1

alternatives?

2

   A. Well, the -- all of the different
3

 software packages are designed to work together,
4

 so theoretically the interface of information
5

 should be smoother.
6

   The end user, people using the
7

 software, learn to use one type of software versus
8

 various of them. Your IT organization only needs
9

 to understand one technical environment, not
10

 multiple technical environments, which would lead
11

typically to lower people -- less people at lower

12

 cost.
13

   Q. The interfaces that you mentioned,
14

what are -- could you explain that term for me?

15

 What are the interfaces between products?
16

   A. Well, here you're getting a little
17

 bit out of my area of expertise, so I can tell you
18

 at a high level
19

  

Q. Okay.

20

  

A. As you'd want to get lower, I

21

wouldn't be able to. But if you have a company X

22

general ledger and company Y's HR payroll system,

Kender 05-11-04

00081
1

you need to get transactions from HR and payroll

2

 to update the general ledger.
3

   If they are two different companies,
4

 there has to be an interface to send the
5

 information back and forth. When company X or Y
6

 comes out with a new release of software, now that
7

 interface may not be the same. So now you've got
8

 to go back in there, make the changes, fix it,
9

 maintain it, learn it, go to training on it. All
10

 of that takes time and money and cost
11

   If you had a financial system and an
12

 HR and payroll system from -- all from company X,
13

 whenever mere is a version change that interface
14

 is automatically changed. There is nothing for
15

 you to do. The information will still pass
16

without you spending any time at all in fixing it,

17

 maintaining it, changing it.
18

   Q. So the cost with these interfaces,
19

 one is just simply maintaining the interface and
20

 billing it itself.
21

  

A. Yes.

22

  

Q. And two is updating the interface

Kender 05-11-04

00082

1

when, I believe you said, new releases or new

2

 versions come on the market; is that right?
3

   

A. That is correct.

4

   Q. Is there a difference in terminology
5

 between releases and versions?
6

   A. Not really. They're typically used
7

 interchangeably.
Kender 05-11-04

00087

10

  

Q. Okay. Do you recognize Exhibit 107?

11

   A. Yes.
12

   Q. And what is this document?
13

   A. I believe it's a presentation done by
14

Russell Pike who was part of the development --

15

specifically the financials development

16

organization.

17

  

Q. And who is Russ Pike?

18

   A. Russ Pike is part of the financials
19

 development team, and he had various jobs in
20

 rolling out new products, communicating to the
21

 field things that he did, usually not in
22

 conjunction with my organization and almost
Kender 05-11-04

00088

1

sometimes counter to it.

2

    Q. So he wasn't a part of any of your
3

 organizations?
4

   A. No.
5

   Q. And when you say "counter to it,"
6

 what do you mean?
7

    A. Well, he would decide to go out and
8

 present training on a product or a competitor
9

 without coordinating that with marketing or with
10

the ABU, and sometimes that would confuse the

11

field because they would be hearing from different

12

 organizations and people not always the same
13

 message.
14

   Q. And this document is titled Attack
15

 PeopleSoft. And it looks like -- you know,
16

Mr. Pike's name is on this document. And also

17

 says -- it looks like it was created in November
18

 2002. Does that square with your recollection?
19

   A. I don't remember exactly. Probably.
20

 Probably so.
21

   Q. Do you agree with the contents of
22

 this presentation?
Kender 05-11-04

00089

2

  

THE WITNESS: I don't know. I'd have

3

 to look. I mean, there is a lot there. I don't
4

 necessarily agree with everything that's in there.
12

   Q. I know it's a long -- well, then,
13

 let's look specifically at page 45395.
14

   A. 45395.
15

   MR.ROSCH: Thank you. That's
16

 better.
17

   THE WITNESS; Okay.
18

 BY MR. ANDEER:
19

   Q. And before I ask any questions on
20

 this specific slide, do you recall giving Mr. Pike
21

 any feedback on this presentation after it was
22

 given?
Kender 05-11-04

00090

1

  

A. Yeah. I told him I didn't agree with

2

 that slide.
3

   Q. What about this slide don't you agree
4

 with?
5

   A. Well, I felt that he wasn't qualified
6

 to say that HRMS was a minus versus a plus to
7

 PeopleSoft because he's a financials guy and that
8

 he would probably be giving the field sales team
9

 the wrong impression of the Oracle HR solution.
10

Something like -- something to that -- if I

11

remember correctly.

12

   Q. And this slide is titled Selling
13

 Against PeopleSoft and there is a table with a
14

 series of pluses and minuses; is that right?
15

  

A. Yes.

16

  

Q. What's your understanding of what

17

this slide is supposed to depict?

18

   A. Well, what - in his opinion -- I'm
19

 not sure where he got his information from --
20

 where Oracle would have an advantage over
21

 PeopleSoft from a sales and functional standpoint
22

 I -- I assume, I don't really know what he -- I
Kender 05-11-04

00091

1

don't know exactly what he was trying to get

2

 across.
3

    Q. And on this slide the first row --
4

 rather the second row is HRMS, which is -- is that
5

 human resources Management?
6

  

A. Yes.

7

  

Q. And it has a minus sign in the Oracle

8

column and a plus sign in the PeopleSoft column,

9

and that's an area where you disagreed with

10

 Mr. Pike; is that right?
11

   A. He has the minus sign in the Oracle
12

 column with the word "close."
13

   Q. Thanks for the correction.
14

   What is it about that you disagreed
15

with Mr. Pike? I mean, what was the source of

16

 your disagreement?
17

   A. Well, as I said, I don't think he had
18

 the knowledge of HR to say one way or the other.
19

 And even if it were true, I'm not so sure that
20

 presenting it that way to the sales force is the
21

 right way to go about training them.
22

   Q. At the time did you believe this to
Kender 05-11-04

00092

1

be true?

2

   A. I don't remember. I don't remember.
3

 You're saying this was in 2002. Boy, I absolutely
4

 don't remember.
5

   Q. Do you believe it was true at any
6

 time during your tenure at Oracle?
7

   A. Yes.
8

   Q. And when would that time be?
9

   A. My earlier tenure at Oracle.
10

   Q. When do you feel that it was no
11

 longer true?
12

   A. It's hard for me to say. You know,
13

 most-- in recent years Oracle functionality has
14

 become as good or better in certain areas than
15

 PeopleSoft's.
16

  

Q. in the last two years, would you say?

17

   A. It's difficult for me to appoint an
18

 actual time to it.
19

   Q. Why is it difficult?
20

   A. Well, it's kind of an ongoing
21

process, if you will. So more likely in the last

22

two years than in my first two years at Oracle,

Kender 05-11-04

00093

1

that's for sure.

2

   Q. Did you play any role in closing the
3

 gap since you joined Oracle?
4

   A. Closing which gap?
5

   Q. Well, you'd mentioned there was --
6

you might have agreed with this when you first

7

joined Oracle in the sense that maybe there

8

were -- maybe Oracle didn't have everything

9

PeopleSoft may have had. Is that right?

10

   A. Well, it's hard to say what he is
11

 referring to here. He says selling against
12

 PeopleSoft. So I don't know if he's referring to
13

 functionality or how easy it is to sell or -- it's
14

 very -- it's an ambiguous slide.
15

  

Now, he had certain words he used to

16

 present this slide back in 2002. I don't remember
17

 exactly what it was he said at the time and right
18

 now today. So it's hard for me to answer your
19

 question unless I know more specifically what it
20

 might be referring to.
21

   Q. Would you agree with this
22

 characterization today?
Kender 05-11-04

00094

1

   A. Well, again, I don't know what -- in
2

 what area.
3

   Q. Okay.
4

   A. Would it be in functionality and
5

 selling?
6

   Q. Let's just say functionality. Would
7

 you agree with this -- if this was referring to
8

 functionality, would you agree with this slide
9

 today?
10

   A. No.
11

   Q. Would you -- how would you change it?
12

 What's the difference between today and perhaps
13

 when the time -- at the time of this presentation?
14

   A. Specifically about HRMS?
15

   Q. HR functionality.
16

  

A. I would say Oracle's HRMS is either

17

even or better than PeopleSoft's, generally

18

 speaking. It gets more specific if you break the
19

 modules down.
Kender 05-11-04

00095
4

  

Q. How often -- before I leave this

5

 slide, the second or third row, depending on your
6

 perspective, is Financials, and again there is a
7

 plus sign in Oracle and a plus sign in PeopleSoft.
8

 In terms of functionality, do you agree with that?
11

   THE WITNESS: I don't know.
14

   Q. Do you have any knowledge of Oracle's
15

 financial products?
16

   A. Very little. As far as functionality
17

 and how it works, very little. I don't have a lot
18

 of knowledge about the HR product because I'm not
19

 a demonstration product specialist. I have a high
20

 level of knowledge of the HR product. I have very
21

 little knowledge of the financials product.
22

   Q. What knowledge do you have of
Kender 05-11-04

00096
1

Oracle's financials package on any level?

2

   A. Really, the highest level, that --
3

 it's one of our stronger applications. It's been
4

 out longer, and we have quite a few customers,
5

demonstrates well. We get selected quite often

6

 when we sell it. That's pretty much it.
7

   Q. Did you have responsibility for
8

 overseeing the financial sales consultants or
9

 financial sales solution -- or solution
10

 specialists?
11

   A. They didn't exist. No, didn't have
12

 any.
13

   Q. Do they have any -- do they exist
14

 today?
15

  

A. No. There are financials sales

16

 consultants --
17

   Q. Okay.
18

   A. -- in the field, not in my group.
19

There are no financials solution specialists

20

simply because we didn't feel the sales force

21

needed support in that area. They were already

22

 very strong there.
Kender 05-11-04

00097
1

  

Q. Looking at this sort of presentation

2

 more broadly, how often are vendor-specific
3

 presentations given at Oracle?
4

   A. I'd say quite often and on various
5

 levels. I mean, there's probably one given weekly
6

 on some vendor.
7

   Q. Does your organization have
8

 responsibility for preparing these sorts of
9

 presentations?
10

  

A. Not exclusively.

11

  

Q. But they have prepared these sorts of

12

 presentations in the past?
13

   A. We have done some in the past, yes.
14

 Anyone can do one. You know, if you were running
15

 a small sales team of five or six salespeople
16

right here in San Francisco and you have a weekly

17

 sales meeting, which these guys typically do, one
18

 of your salespeople may be seeing a vendor quite
19

 often, you might sit down and say here's what I
20

 know about this competitor. I've come up against
21

 him X number of times. I've gathered this
22

 information from their Website. I'm sure it
Kender 05-11-04

00098
1

happens all the time, because you have to help

2

 salespeople learn how to sell against competitors.
3

   Q. Why do you need to educate
4

 salespeople to sell against competitors? Why is
5

 that important?
6

   A. Because that's who they're competing
7

 with and they need to know how to position their
8

 solution versus what a competitor -- or how a
9

 competitor is positioning their solution so that
10

 they can compete and win.
11

   Q. What types of things do you feel it's
12

 important to communicate in these sorts of
13

 vendor-specific presentations? What are the
14

 messages that you would hope to see in some -- a
15

 presentation such as this?
16

   A. Well, I can't take any credit for a
17

presentation such as this. This was completely

18

 out of my purview. Didn't know what was
19

 happening, not something my organization came up
20

 with from a content standpoint.
21

   Q. But you did say that your
22

 organization has created similar presentations?
Kender 05-11-04

00099
1

  

A. I can answer your question. I just

2

 can't answer it as a presentation such as this
3

 because we didn't do this.
4

   Q. Okay.
5

   A. But in a competitive presentation
6

 that my group might give, the things I think would
7

 be important, is that what you're asking?
8

   Q. Yes.
9

   A. I would think it would be important
10

 to understand where you have an advantage and
11

 where your competitor has an advantage such that
12

 you know how to position your solution against
13

 those advantages and disadvantages.
14

   Q. How does your organization educate
15

itself as to where its relative advantage is?

16

   A. Oh. Well, the biggest way we do that
17

 is after they're involved in a sale cycle, win or
18

 lose, basically debrief with the organization what
19

 did they learn.
20

   Well, I learned that Microsoft is
21

 positioning against us this way, and I learned
22

 that ADP is positioning against us that way and
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1

they put their pricing together, and I heard that

2

 Lawson is using their suite integration this way,
3

 and I learned that PeopleSoft does that, and you
4

 kind of gather that information and then you try
5

 to package it and disseminate it so that you keep
6

 people up to date with what they are seeing and
7

 what we are seeing in the marketplace. And that
8

 has been the way it's been in every company I've
9

 worked for and I'm sure way before I joined the
10

 work force.
11

   Q. So one is the sale cycle debriefs,
12

 which after the sale's been completed, either win
13

 or loss, you go back to the members of the team
14

 and talk to them about what happened?
15

   A. By and large the biggest way right
16

there.

17

   Q. In that process how did they know
18

 how -- whoever the vendor is that they're
19

 competing with, how do they know what they're
20

 doing? I mean, how do they know the sorts of
21

 issues you brought up, the positioning, the
22

 messaging?
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A. The -- most of the time it's the

2

 customer saying, well, wait a minute, you know, or
3

 the person who leads the evaluation, the systems
4

 integrator, like maybe Accenture or KPMG or
5

 something like that.
6

   You know, you're saying this and