00008
14	BY MR. SCOTT:
15	Q. All right, sir, as I stated earlier, this will
16	be the deposition of the Lawrence Ellison pursuant to
17	Civil Investigative Demand No. 022793.
18	Do you have that in front of you, sir? It's
19	Exhibit 1 to your deposition.
20	A. Yes, I do.
21	Q. Have you had a chance to read through that?
22	A. In a cursory way, yes.

00009
1	Q. All right. So I'll just -- for the record, I
2	will point out to you on the back of it there is some
3	language, too, that's pertinent, which is the authority
4	and -- one of the authorities by which this is being done
5	and some of the laws that govern the taking of the
6	deposition.
7	You might just want to read through that, as
8	well, just to be sure you've got all the language. At
9	least you've had a chance to look at it, as you've said,
10	on a cursory basis.
11	Just let me know when you're finished.
12	A. I've finished.
13	Q. All right, sir. Now, this will be your
14	deposition pursuant to that CID.

00011
3	Q. You understand you are testifying under oath?
4	A. I do
5	Q. And pursuant to the statutes that's printed on
6	the back of the CID, Exhibit 1, to your deposition, in
7	addition to making truthful -- well, as part of
8	testifying under oath, do you understand that if I ask
9	you a question and you have any information pertaining to
10	that question and you say you do not know or do not
11	remember having any information, that would be a
12	violation of the oath?
13	A. Right.
14	Q. All right, sir, now, what's your current
15	position with Oracle?
16	A. I'm the CEO, chief executive officer.
17	Q. And your duties and responsibilities in that
18	position, what are they?
19	A. I'm a senior executive, senior management
20	executive in the company. All the other managers report
21	to me.
22	Q. Who are currently your direct reports?

00012
1	A. Jeff Henley's our chief financial officer; Safra
2	Catz is president in charge of operations; Chuck Phillips
3	is president in charge of our field; Chuck Rozwat is the
4	head of development of our technology products, that's
5	data base products; Ron Wohl is the head of development
6	of our application products; Mike Rocha is responsible
7	for support services.
8	Q. I've seen some references in some of the
9	documents that have been produced to Oracle in the
10	context of this investigation, references to the
11	executive committee.
12	Do you know what that is?
13	A. Yes, I do.
14	Q. Who -- well, first of all, what is the executive
15	committee and, secondly, who is currently on it?
16	A. It's a group of senior managers and that
17	includes all of the people I just mentioned, plus our
18	four heads of field sales on different geographic areas,
19	Sergio Giacoletto in EMEA, Europe, Middle East, Africa;
20	Luis Meizler in Latin America; Dereck Williams in Asia
21	Pacific; and Keith Block in North America.
22	Q. All right, sir, what is the purpose of the

00013
1	executive committee?
2	A. To review the status -- review what's going on
3	in the company and to make plans for our future
4	strategies and our -- and to execute on those plans.
5	Q. All right, sir, now, I've seen in the press
6	recently there's been some change within the company
7	regarding your position; is that right?
8	A. Yes.
9	Q. Could you describe for me what that change has
10	consisted of?
11	A. I used to be chairman of the board of Oracle of
12	the -- about half the time during Oracle's existence,
13	I've been chairman, about half the time I've not been
14	chairman. And Jeff Henley just took over chairman. I
15	believe the board believes a separation of chairman and
16	chief executive is good for our corporate goverments. It
17	also gave us the opportunity to retain Mr. Henley for a
18	longer period of time than we otherwise might have if he
19	just remained as chief financial officer.
20	Q. As a result of this change, you--I take it,
21	you're still on the board?
22	A. Yes, I am.

00014
1	Q. Have your duties and responsibilities, as they
2	relate to Oracle, changed with you having stepped down as
3	the chairman of Oracle's board of directors?
4	A. My management duties haven't changed at all.
5	Q. Did you give up any duties and responsibilities
6	as a result of the change?
7	A. I give up duties as chairman of the board.
8	Q. Which would consist of what, as opposed to what
9	you would just do as a member of the board
10	A. Running the board meetings.

00034
2	Q. All right, sir, are you familiar with, I guess,
3	for want of a better term, an e-mail account within
4	Oracle called "HQ Apps"?
5	A. It's an approval account?
6	Q. Yes.
7	A. Am I familiar? I know it exists.
8	Q. By "approval account," what I meant in the last
9	question was an account where requests for approval of
10	non-standard contract terms or discounts above a certain
11	level are sent for review by people above, for example,
12	an application software, Mr. Block.
13	A. I think there are a lot of different HQ Apps
14	accountants [sic], including approval for purchase
15	requests, just buying a computer. It's basically our
16	approval system that includes all sorts of things that
17	require approval, including any exception to policy,
18	including discounts.
19	Q. So, for example, just to be sure we're clear on
20	where we are on this, if someone in Mr. Block's
21	organization sent up a request for approval of a discount
22	in a transaction dealing with application software that

00035
1	was above a specified amount, it would have to come to HQ
2	Apps for approval?
3	A. I don't know that for a fact, but it has to go
4	to Safra Catz for approval and HQ -- and I believe it
5	likely to goes through HQ Apps.
6	Q. Do you ever approve or been involved in
7	approvals of non-standard contract terms or larger than
8	discounts that are --
9	A. Sure.
10	Q. Let me back up a minute.
11	Do you know what level Mr. Block is authorized
12	to grant discounts to?
13	A. I can get very close.
14	Q. All right. So why don't - what is your
15	understanding of it?
16	A. I think he's at 70 percent right now.
17	Q. I think that's consistent with what he told us
18	at his deposition so.
19	Do you get involved in reviewing and approving
20	requests for discounts that go over that?
21	A. Occasionally.
22	Q. Are there particular types of transactions or

00036
1	circumstances that would lead you to get involved as
2	opposed to Ms. Catz?
3	A. If it's a particularly large transaction, an
4	interesting transaction, we're taking a different
5	structure, we're accepting more liability than what we
6	otherwise might, all of those might cause her to let me
7	know what she's approving. But typically she doesn't ask
8	for my approval, she just informs me that she thinks it's
9	a good idea or she'll want to get some comfort level that
10	I'm aware of what we're doing and I don't disagree.
11	Q. When you say a larger transaction may cause her
12	to come to you, do you have a specific number or range in
13	mind that would cause her to do that?
14	A. $10,000,000.
15	Q. $10,000,000 in license fee or something else?
16	A. $10,000,000 in license fees. But anything --
17	but it might be a smaller deal, if it's a different
18	structure. But in terms of a discount in excess of
19	$10,000,000, she might come to me, she might not come to
20	me on a $10,000,000 deal. I don't think there's a firm
21	rule of when she chooses to let me know. It's what the
22	deal is.

00037
1	Q. Now, in the context of the approval for
2	discounts in the area of application software, are there
3	any guidelines that have been given to Ms. Catz regarding
4	what you think would or would not be acceptable in the
5	way of granting additional discounts?
6	A. I think it's situational so --
7	Q. So there aren't any guidelines she's been given?
8	A. Well, there are -- to Ms. Catz?
9	Q. To Ms. Catz.
10	A. No.
11	Q. Is there any level of discount that you would
12	not approve in the area of application software?
13	A. I think, again, it's situational so -- but if
14	you ignore situations, could I imagine where we'd give a
15	hundred percent discount, the answer is yes. Can I
16	imagine where we'd give no discount, the answer's yes.
17	So I think that's the full range.
18	Q. That would seem to cover it.
19	Are there circumstances where you've given up to
20	a hundred percent discount on license fees?
21	A. More.
22	Q. "More" meaning what?

00038
1	A. "More" meaning a hundred percent discount in
2	license fees and some additional, some free consulting.

00040
13	Q. Now, do your requests for discounts for approval
14	generally have to include information regarding the
15	justification for wanting to give an additional discount?
16	A. Again, I don't look at these documents so -- but
17	it certainly stands to reason that if you want to give a
18	large discount, you explain why.
19	Q. I mean, you certainly wouldn't want the salesmen
20	giving them if there wasn't a business reason for the
21	basis of it?
22	A. Well, we wouldn't approve it.

00041
1	Q. Now, in the context of the ones that you do get
2	involved in and whatnot, do you generally try to
3	understand what the competitive circumstances are that
4	justify the specific request?
5	A. Yes.
6	Q. And do the competitive circumstances that you
7	would find persuasive from the standpoint of granting a
8	request for discount above 70 percent, for example, in
9	the area of application software, would that include
10	information regarding what -- who the competition was and
11	the pricing they were offering?
12	A. Yes, sometimes. Again, it's a bit situational.
13	Q. Certainly one piece of information that you
14	would find relevant is who you're competing with in a
15	particular account and whether they're pricing in a way
16	that is higher than your folks can without your approval?
17	A. It's more complicated than that, but, yes.
18	Q. Does the issue of -- well, strike that.
19	You said it was more complicated than that. In
20	what way?
21	A. We'll determine whether the competitor is
22	actually a threat to us. So sometimes a competitor

00042
1	coming in with a very low price is a real competition,
2	sometimes a competitor coming with a real low price
3	doesn't have a competitive product, doesn't -- the
4	customer is largely committed to the Oracle data base and
5	they don't want to make a change.
6	There's a cost associated with changing from one
7	system to another, which might outweigh whatever, you
8	know, IBM might be offering a free data base, which they
9	do quite frequently, but there's a high cost in changing
10	what the customer's doing. So we might not have to meet
11	that price of zero that IBM is offering to that customer
12	to change.
13	So the dynamics are -- it's not like buying
14	lumber where, as long as lumber's good quality, the
15	cheaper you can buy, you buy the cheapest lumber. The
16	dynamics of the situation include lots and lots of other
17	things.
18	Q. Well, from the standpoint of determining whether
19	a particular -- strike that. Let me back up and be sure
20	the question's clear.
21	In the context of reviewing accounts or requests
22	in accounts for a special dispensation, either a higher

00043
1	discount or some other business term, you said that you
2	try to determine whether or not the offer that's being
3	reported from your competitor is really a threat or not.
4	A. Is a genuine competitive threat, that's correct.
5	Q. Other than the situations where you've talked
6	about a moment ago and the IBM situation in the data base
7	context where transitioning over would have some
8	implementation and transfer costs that have to be
9	factored into this, what other type of factors do you
10	look at to determine if a particular offer from a
11	competitor is a real threat?
12	A. Well, is the vendor there already an encumbant
13	at that customer, do they have products -- in other
14	words, are there a number of those vendor's products
15	already in place at that customer.
16	So let's say we're competing with SAP and we're
17	trying to replace SAP financials. SAP's an encumbant,
18	then that works against us. So we have to be much more
19	aggressive in our discounting than SAP would if we're
20	trying to actually replace SAP. Or one division is
21	running SAP financials and we're trying to replace, you
22	know, install our financials in another division. SAP is

00044
1	an encumbant. You're not replacing them, but they are an
2	encumbant vendor, so we might have to be more aggressive
3	in our pricing.
4	Q. Earlier also -- again, I'm not trying to
5	misstate you so if I get this wrong, just tell me -- you
6	indicated also you wanted to know if the competitor would
7	have a -- well, let's say in the application software
8	area for the moment because that seems to be more
9	pertinent to what we're doing here. You would want to
10	know whether the particular vendor who is making the
11	offer had a product that had the correct functional
12	requirements for the client; is that right?
13	A. Well, there are three products out there.
14	There's a lot of free ware out there, so there are free
15	products that we can't meet the price. So you could say,
16	well, if you can use this free product, it would have to
17	always be free because the customers would say, "I'll use
18	this free product instead of Oracle." So, therefore, our
19	price goes to zero all the time.
20	So we have to decide whether that free product
21	really is a contender and has the capability to take our
22	place, either to displace us or to win this deal because

00045
1	there's a lot of free ware out there.
2	Q. Would that same analysis take place in the
3	context if somebody you're competing with is not free
4	ware? For example, if someone came in, would you want to
5	look at their product and determine how close they could
6	get to the clients' needs and determine how big a threat
7	they are?
8	A. Of course.
9	Q. Why would you want to know that?
10	A. To see -- because, as we -- as we compete on
11	price -- we have to compete on price and capability. So
12	it depends on the credibility of the vendor, the ability
13	to provide service, the functionality of the product,
14	whether there's encumbancy or not. The existing
15	relationship we have with the customer, did the customer
16	think -- we've done a great job. Does the customer think
17	we've done a terrible job, and we have some making up to
18	do.
19	So there are lots and lots of factors before
20	they decide to make -- purchase enterprise software
21	because it's a long-term relationship.
22	These systems are highly durable and they --

00046
1	they're around for a decade. So they're not just buying
2	a product, they're buying into a company who's going to
3	constantly improve their product, provide related
4	services, provide related products. So they have a
5	certain amount of experience with us, which could have
6	been positive or negative.
7	I'm not trying to make it more complicated than
8	it really is, it really is that complicated.
9	Q. I understand. I understand.
10	Is what you're saying then, in analyzing whether
11	or not to give another discount, you're going to look at
12	the four corners of a particular transaction to determine
13	if short-term, whoever you're competitor is, has a
14	product that meets -- is as good for the client
15	functioning as yours and long term whether they have the
16	wherewithal, the budget, the presence in the market, to
17	give the customer the long-term relationship that they're
18	looking for because if they can't, you don't have to
19	price as aggressively?
20	A. Those aren't the only factors, but, yes. I
21	mean, they can be a small company with a fabulous new
22	product, like a Salesforce.com, or they could be a big

00047
1	company who can guarantee continuous investment, like a
2	Microsoft.
3	So these are two very different -- here are two
4	radically different potential competitors we could face
5	in the same deal. Here comes Microsoft with not that
6	good a product, a customer might say, "But my God,
7	Microsoft is going to make it better five years from now.
8	This is a long-term decision. I should go with Microsoft
9	because look at how much money they're investing, so I
10	should start with Microsoft now because that's the right
11	place to be."
12	Other people might say, "Well, look at
13	Salesforce.com. Their price is incredibly low. They've
14	been very innovative in what they've delivered. I should
15	go with Salesforce.com even though they're a small
16	company."
17	So it's a -- you know, there are different ways
18	companies compete in this market, some instances
19	innovation, some instances relationship.
20	IBM is the king of relationships. I've had a
21	30-year relationship with IBM. I play golf with the
22	sales guy every weekend, they're a company I can trust.

00048
1	I should -- they're the ones giving me guidance, so I
2	should buy that way.
3	So there are lots and lots of different things
4	that influence people to make buying decisions and we
5	have to, through some complex calculus, evaluate all
6	these things and decide how to price our product.
8	But in the circumstances that you are talking
9	about, I take it one initial threshold -- clearly, there
10	may be other factors in this -- is whether or not the
11	competitor that you're being told into an account, that
12	you're being asked to give a higher discount against, has
13	a product that can actually meet the customer's needs?
14	A. That's one factor.
15	Can it -- that's usually looked at over a
16	five-year period, at least a five- or ten-year period.
17	Q. To see --
18	A. Can this competitor -- for example, SAP says,
19	okay, here's the new version of our banking product. SAP
20	has just come out with a couple banking products. These
21	are brand new versions, but we're SAP and we'll
22	continuously make it better. It's very different if

00049
1	company "X" that no one ever heard of came out with a
2	brand new banking product.
3	Q. I understand.
4	A. You can rely --I know SAP is going to be around
5	and that they're an existing -- I buy products from SAP.
6	They're going to be around. Yes, it's a new product but
7	it's SAP, I know them, and they're going to make it
8	continously better.

00053
7	Q. You have in front of you what's been marked
8	Exhibit 6 to your deposition, which is a Form 8-K, dated
9	June 6, 2003, filed with the Securities and Exchange
10	Commission on behalf of Oracle Corporation.
11	Is that what you have in front of you?
12	A. Yes.
13	Q. All right, sir, if you would flip over within
14	the document to the fourth page. And if you want to look
15	through the document before that to look at something
16	specific to familiarize yourself with it, that's fine.
17	A. All right.
18	Q. So we're on page 4 of Exhibit 6 to your
19	deposition. It is a page that is actually numbered at
20	the top page 4 of 25, and we have about halfway down the
21	page an "Oracle to launch cash tender offer for
22	PeopleSoft for $16.00 per share. Oracle fourth quarter

00054
1	preliminary earnings of 14 to 15 cents per share," which
2	appears to be a press release or news release issued by
3	Oracle.
4	Do you see that?
5	A. Yes.
6	Q. Are you familiar with that press release?
7	Again, take as much time as you need to read through it.
8	A. I've never seen it before but -- well, I don't
9	recall seeing it but, yeah, I'm certainly familiar with
10	the event and with the information it contains.
11	Q. Now, the press release itself, if you look at
12	the second paragraph, purports to quote you.
13	Do you see that?
14	A. Yes.
15	Q. Are you familiar with the language that's
16	contained there that's attributed to you?
17	A. Absolutely.
18	Q. Now, it -- first of all, let's skip down, if you
19	would, to the sentence that begins, "Although we will not
20	be actively selling PeopleSoft products to new customers,
21	we will provide enhanced support for all PeopleSoft
22	products."

00055
1	Do you see that?
2	A. Yes.
3	Q. The statement there, what did you mean by "We
4	will not be actively selling PeopleSoft products to new
5	customers"?
6	A. We were trying to explain a couple things -- we
7	would not have -- our sales force would not be selling
8	both the Oracle E-business suite and the PeopleSoft
9	products at the same time to new customers. We would be,
10	in fact, selling the Oracle E-business suite to new
11	customers.
12	Q. And when you say the Oracle E-business suite,
13	what is that product?
14	A. We would be selling the Oracle suite of
15	application products to new customers. So if there was a
16	customer who was not a PeopleSoft customer and not an
17	Oracle customer, in other words, they were -- they didn't
18	have products from PeopleSoft, they didn't have products
19	from Oracle. That's what I mean by "a new customer,"
20	someone who has neither Oracle applications nor
21	PeopleSoft applications.
22	In that case, our sales force would try to

00056
1	persuade that new customer to buy Oracle application
2	products, not PeopleSoft application products.
3	Q. In the context that you've talked about, a
4	customer who hasn't bought from either, as of the time
5	your salesman approached them, would they only offer them
6	the Oracle products for application software?
7	A. What do you mean by "offer"? They would try to
8	persuade -- what the sales force function is is to try to
9	persuade the customer to buy our products, in this case
10	buy the Oracle E-business suite products.
11	If the customers say, "Will you sell me the
12	PeopleSoft products?" of course, the answer is yes, of
13	course, we will sell them. We'll sell the PeopleSoft
14	products to whoever wants to buy them. But our marketing
15	campaigns and our sales organization, in terms of
16	persuasion, we would put our effort in to trying to
17	persuade people to buy the Oracle products.
18	Q. So we're --
19	A. I'm sorry to interrupt. My lawyers probably
20	don't like when I do that.
21	To avoid confusion --
22	Q. I don't mind.

00057
1	A. I know you don't.
2	But to avoid confusion, I want to be very clear
3	that our sales force is trained in selling our products,
4	that's the products they'll continue to sell. We won't
5	have a separate sales force selling PeopleSoft products,
6	we won't have our sales force trying to persuade people
7	to buy the PeopleSoft products. It does not mean that
8	existing PeopleSoft customers as opposed to new customers
9	we wouldn't sell to, we wouldn't be trying to sell to.
10	So that's why the issue is really new customers.
11	Q. Let me follow up on this to be sure I understand
12	what you said.
13	Now, we're talking in a world where the merger
14	would have been approved --
15	A. Yeah.
16	Q. -- and you acquire PeopleSoft. In those
17	circumstances it is your plans to have your sales force
18	actively marketing and selling the E-business suite of
19	Oracle?
20	A. Correct.
21	Q. Now, if your salesmen go into an account,
22	someone's who is not Oracle, has not been PeopleSoft in

00058
1	the past, is the plan to have them even mention the
2	PeopleSoft product or not?
3	A. Even mentioned? No. I mean, everyone will
4	know. I think most people would know we have both
5	products, they'd be on the price list. But, no, they
6	wouldn't even be trained to sell the PeopleSoft products.
7	Q. So by "trained to sell the PeopleSoft products,"
8	what type of training would normally be encompassed in
9	selling, for example, your product?
10	A. Understanding the features and the functions and
11	the details of our products, know to some degree what our
12	products do.
13	Q. And there are no plans to have a separate sales
14	organization or force that would be dealing with
15	PeopleSoft products and selling them post merger?
16	A. No, that's not correct. That's not correct.
17	We would be selling, actively selling the
18	PeopleSoft products to existing PeopleSoft customers. So
19	absolutely sell existing customers. But, again, given a
20	blank sheet of paper, customer doesn't use Oracle
21	applications or PeopleSoft applications, the applications
22	that we would be selling and we would be marketing --

00059
1	advertising, for example, we wouldn't be advertising the
2	PeopleSoft products.
3	Q. All right. Let me rephrase my previous question
4	because I think we just went past each other a little
5	bit. It's my fault and because I wasn't precise enough.
6	From the standpoint of actually having a sales
7	force that will be dedicated to selling to new customers,
8	PeopleSoft products, that will not exist?
9	A. That's correct.
10	Q. Post merger, you said you would sell additional
11	PeopleSoft modules or -- to existing PeopleSoft
12	customers; correct?
13	A. Absolutely.
14	Q. Who within Oracle would be responsible for
15	handling those sales and transactions?
16	A. Again, it would be our existing sales force, so
17	we wouldn't split into two sales forces. We might have
18	some specialists in telesales on PeopleSoft. We would
19	have specialists on PeopleSoft, but we would not have two
20	sales forces. We would have an application sales force
21	that would be able to sell the PeopleSoft products to
22	existing customers.

00060
1	Q. When you say you would have specialists in
2	telesales pertaining to PeopleSoft? What does that mean?
3	A. Oh, they they might know -- we're putting in the
4	latest tax tables for payroll, and making sure that our
5	PeopleSoft payroll customers got the latest updates.
6	It's not something we're likely to charge for, but
7	probably, you know, likely give that away for free.
8	But making sure that we remain in contact with PeopleSoft
9	customers and provide high quality support to PeopleSoft
10	customers.
11	So there would be PeopleSoft specialists
12	probably in telesales and clearly PeopleSoft specialists
13	in our support organization.
14	Q. Do you have a telesales group now?
15	A. Yes, we do.
16	Q. You're talking having certain people within that
17	designated as being PeopleSoft specialists?
18	A. Yes.
19	Q. Has any thought been given to how many you would
20	need to do that type of thing?
21	A. I don't think we have an exact number of how
22	many specialists we would need.

00061
1	Q. Approximation?
2	A. I don't know.
3	Q. Who within the company has been responsible for
4	making integration plans regarding how you would
5	integrate PeopleSoft business into Oracle?
6	A. At a very high level, I've been involved in the
7	integration plan.
8	Q. Who else?
9	A. Every one of my direct -- virtually every one of
10	my direct reports.
11	Q. Has there been a written integration plan
12	prepared pertaining to post merger?
13	A. Not that I know of.
14	Q. Can you describe for me to the extent to which
15	integration planning has already occurred?
16	A. We've certainly -- for example, one of the big
17	ones was deciding not to have two sales forces, how to
18	structure the sales force. What position to take
19	vis-a-vis new customers is extremely important, how we
20	would merge the PeopleSoft products and the Oracle
21	products in a new release; how -- our policy with
22	customers as to how long we would support the PeopleSoft

00062
1	products; how we'd structure the engineering teams; how
2	we'd structure the support teams, you know, what the
3	financial implications of the merger are.
4	All of those things have been outlined.

00069
11	Q. All right, sir, again, looking at page 4 of
12	Exhibit 6, it states, "Furthermore, we will be
13	incorporating the advanced features from the PeopleSoft
14	products into future versions of the Oracle E-business
15	suite."
16	Do you see that?
17	A. Yes.
18	Q. Now, the Oracle E-business suite, again, is your
19	application enterprise software product?
20	A. Yes.
21	Q. What types of functions or modules are contained
22	within that product?

00070
1	A. Oh, just about everything: sales, service,
2	marketing, you know, accounting, finance, personnel,
3	payroll, supply chain automation, warehousing, logistics.
4	Q. Now, do -- do you have a software package or
5	suite that would be characterized as financial
6	management?
7	A. Yes.
8	Q. And do you have a software application suite
9	that could be characterized as having human resources
10	functionality?
11	A. Yes.
12	Q. Is the E-business suite a combination of those
13	two?
14	A. The E-business suite is the sum of most, but not
15	all, of our application products. We have clinical trial
16	products and adverse event reporting products for the
17	pharmaceutical industry, but they're not part of the
18	E-business suite. But E-business is -- most of our
19	applications are collected as the E-business suite that
20	works on top of a single data base.
21	Q. From the standpoint of the customer, if they buy
22	the E-business suite, they license and pay for whatever

00071
1	modules they particularly want out of that; is that
2	right?
3	A. Well, they have a choice. They can either just
4	buy general E-business Suite Users and use any of the
5	modules. So they can buy a thousand users to the
6	E-business suite and twenty can use marketing or they can
7	specifically and explicitly license the financial
8	component or the H.R. component or the manufacturing
9	component.
10	Q. Does it makes a difference price wise which they
11	do?
12	A. It's a little more expensive to have the
13	flexibility. If you know you're going to use financials
14	and only use financials, it's cheaper to just license
15	financials than to license the whole E-business suite.
16	Q. Couple of follow-up questions from earlier.
17	You indicated that you thought there might have
18	been some circumstances where you folks had sold
19	applications software at a zero licensing fee; correct?
20	A. Let me be a little bit more precise on that,
21	which is, yes, a given transaction with a customer. So
22	perhaps -- hypothetical -- where this might happen, we

00072
1	sold the customer some software. There was a consulting
2	project to put it in. The customer was not happy for
3	some reason with our consulting service. There's a
4	subsequent transaction to expand and we gave them the
5	additional software plus a million dollars of consulting
6	to help -- to improve the customer satisfaction.
7	Q. And there -- go ahead.
8	A. What I'm saying is, that's a more likely
9	scenario of a zero price, plus free consulting, what I
10	characterize as a less-than-zero transaction, that there
11	were other transactions with that same customer that
12	preceded that.
13	Q. I understand.
14	Have you also, though, in the context, for
15	example, of your offer to purchase PeopleSoft, told
16	customers that you will swap out software on a free
17	license basis, Oracle modules, equivalent Oracle modules,
18	for whatever PeopleSoft modules they have?
19	A. Right, so we said if you have PeopleSoft H.R.,
20	and you want -- and you want to -- and you want to
21	migrate to Oracle H.R., you can do so at no software fee
22	so -- and you can do that at a time of your choosing.

00073
1	You can do that now, you can do that five years from now.
2	Whenever you want to, you can make that migration.
3	Q. In a context like that, how do you price the
4	maintenance?
5	A. The maintenance would be whatever they were
6	currently paying for PeopleSoft. PeopleSoft has just
7	raised their maintenance fees for the J. D. Edwards
8	customers and so -- again, I'm volunteering information
9	which your question didn't ask but -- you know, I'm not
10	saying we would never raise maintenance fees.
11	We haven't raised maintenance fees recently, but
12	it would certainly start -- I want to be precise. It
13	would certainly start that your maintenance fees would be
14	whatever you're paying PeopleSoft. I'm not saying we
15	would never, ever raise that maintenance fee.
16	Q. When you say "what they're paying PeopleSoft,"
17	you mean the exact dollar amount?
18	A. Yeah.
19	Q. For example, if I'm a customer of PeopleSoft and
20	I swap off with you module for module --
21	A. Let's say -- let's say you bought the PeopleSoft
22	software for $500,000 and you're paying $100,000-a-year

00074
1	maintenance fee and you want to swap to Oracle, you
2	continue to pay the $100,000 maintenance fee but you
3	don't have to buy the Oracle software, you can just move
4	across.
5	Q. And has a decision been made for how long those
6	prices for maintenance will remain in effect?
7	A. Indefinitely. I don't think we've said ten
8	years, but I think the answer would be indefinitely.
9	Q. Now, you said -- you've indicated that, as a
10	general matter, within Oracle, you have not raised
11	maintenance fees in sometime; correct?
12	A. We haven't --
16	MR. SCOTT: Q. You can answer the question.
17	A. I believe -- you know, I believe we haven't
18	made -- increased -- I've got to be very precise here.
19	Some customers got increases, the majority of
20	customers didn't, I believe that's correct, in terms of
21	maintenance fees.
22	Q. You lost me somewhere.

00075
1	A. I lost you because I'm not precisely sure how to
2	answer the question.
3	Q. Let me ask the question --
4	A. I don't want to make the assertion we have not
5	raised any customers' maintenance fees anywhere in the
6	world for the last couple of years.
7	Q. Let me ask the question.
8	For application software, enterprise software
9	that you folks sell, have you raised the maintenance fees
10	within the last three years?
11	A. For certain customers?
12	Q. I'll take that.
13	A. I don't know the answer.

00077
18	For the people who are not J. D. Edwards
19	customers, have you made any decision as to how long
20	PeopleSoft customers that transfer over to Oracle
21	products post merger would receive the same maintenance
22	fees they were paying PeopleSoft as opposed to J. D.

00078
1	Edwards?
2	A. I believe we would treat the PeopleSoft
3	customers exactly like we treat existing Oracle customers
4	in terms of price increases or no price increases in our
5	maintenance fees.
6	Q. You've made no public pronouncements on that one
7	way or the other?
8	A. No.
9	Q. All right. Now, your -- going back to the
10	exhibit, Exhibit 6 to your deposition, it states here,
11	although -- "Furthermore," I'm sorry, in the paragraph 2
12	on page 4, "Furthermore, we will be incorporating the
13	advanced features from the PeopleSoft products into
14	future versions of the Oracle E-business suite."
15	Now, what features are you talking about there?
16	A. Well, I suppose the most conspicuous one is in
17	H.R. They have a pension system and in their human
18	resources system that we don't have and we would put the
19	pension system into the Oracle version of H.R. and, in
20	fact, we would look very thoroughly at all of the
21	features that PeopleSoft had and, as much as possible, if
22	they had features we didn't have, we would try to include

00079
1	those features in the next version of Oracle because
2	over -- what we like to offer Oracle customers and
3	PeopleSoft customers is an improved product.
4	So this is what I refer to as an emerged
5	product. So we take the PeopleSoft features and use the
6	PeopleSoft engineers to put those features into the next
7	version of Oracle H.R.
8	Q. Is this -- strike that.
9	Structurally or functionally how do you do that,
10	put those features in? Are you able to transfer code
11	over or what?
12	A. No, you cannot transfer code over. You have to
13	have the engineer -- but you can transfer knowledge, so
14	you can use the PeopleSoft engineering team and part of
15	the value of this acquisition is the engineering team.
16	You use the engineering team that built those features
17	for PeopleSoft to build those features into the next
18	version of Oracle H.R.
19	Q. Are any of these advanced features using the
20	terminology -- strike that.
21	Yeah, using the terminology in your -- on
22	your -- in the statement here in Exhibit 6, "advanced

00080
1	features," are any of those features that you would be
2	unable to duplicate and include in your Oracle products
3	absent this merger?
4	A. Unable is an interesting question. I can
5	make -- the reason we have not put the pension system
6	into our H.R. system is there's a very small market for
7	the pension system and it's not obvious that it's
8	economically justifiable to put that feature in, given
9	the size of that market. So we are technically able to
10	put it in, but the business case is marginal.
11	Q. All right. Let me understand what you're
12	saying.
13	In the context of the pension features that
14	you're talking about from PeopleSoft, Oracle is
15	functionally capable of developing that type of
16	functionality?
17	A. Yes.
18	Q. But from a business standpoint, you've made a
19	decision as of now not to do that?
20	A. Correct.
21	Q. And that is because of, you said, in business
22	cases --

00081
1	A. It's a very small market.
2	Q. So are you -- is what you're saying is the
3	investment in actually doing the engineering to develop
4	the pension system wouldn't be worth -- may not be worth
5	the volume of sales it would generate?
6	A. It's right on the -- yes, it's not clear that it
7	is.
8	Q. Now, would it be -- I'm not expecting exact
9	figures here --
10	A. Sure.
11	Q. -- but from a degree, how much cheaper would it
12	be to take it from and develop it from the PeopleSoft
13	product and reinstall it versus developing it on your
14	own?
15	A. It wouldn't be just cheaper, we'd have more
16	customers. Then as you have more customers, you have
17	more customers to amortize the development over. In the
18	sense that PeopleSoft makes us a bigger applications
19	company, we're then able to invest more money in
20	developing features.
21	Q. Other than the pension feature that we've been
22	discussing, are there other advanced features that you'd

00082
1	expect to include in the Oracle E-business suite post
2	merger?
3	A. That's the one large one. There are, you know,
4	little features here and there that we'd want to include
5	for purposes of upper compatibility.
6	We would like a PeopleSoft customer sometime in
7	the next, I'll just say five years, in the next five
8	years, running PeopleSoft 8 to move to the merged
9	product. We'd like to make that move as graceful as
10	possible. In other words, we don't want them to give up
11	any feature they had in PeopleSoft 8 and not have that in
12	Oracle Version 12.
13	So it should look like moving from -- so the
14	PeopleSoft customers and PeopleSoft 8 should look like
15	moving from PeopleSoft 8 to PeopleSoft 9. In fact, our
16	goal is to make it easier to go from PeopleSoft 8 to
17	Oracle 12 than going from PeopleSoft 7 to PeopleSoft 8,
18	so they can't give up features, so it's very important.
19	And that's one of the things we mean by that, to
20	take all of those features we don't have, even some of
21	the minor features, include those in the next version of
22	our H.R. product that should make it very grace to

00083
1	upgrade so you don't have to give up any features.
2	It's an easy upgrade and you not only get all
3	the features you had with PeopleSoft, you get all the --
4	you get a union of the -- of all of the Oracle advanced
5	features and all the PeopleSoft advanced features. You
6	get a more sophisticated, more advanced product.
7	Q. From the standpoint of the features that you
8	just described that would be transferred from
9	PeopleSoft's product into Oracle to make a transition
10	over to Oracle more palatable to PeopleSoft users, what
11	type of things are we talking about?
17	A. It's a matter of-- again, the big case, if you
18	had pension capability, you would not want to upgrade to
19	the Oracle product and lose the pension capability.
20	If you had a particular feature in PeopleSoft, I
21	can't think of any, they are -- you know, they have a
22	very sophisticated H.R. product.

00084
1	We think we're ahead of them in virtually every
2	other area, but if there was -- if we discover certain
3	specific features that we don't have, we don't want to
4	take those away from PeopleSoft customers because we want
5	them, again, to upgrade.
6	MR. SCOTT: Q. Has any work been done at this
7	point to identify features that you would want to
8	transfer from the PeopleSoft product to the Oracle
9	product to make it more a smooth or graceful transition
10	for people who are wanting to switch over?
11	A. I know of no such document.
12	Q. Whether there's a document or not, has anybody
13	been looking at that type of thing?
14	A. We always do competitive analysis so there's
15	been constant competitive analysis between us and
16	PeopleSoft, but we really don't have access to their
17	software. So until we look at their software in detail,
18	except at gross levels, where I can say -- the pension
19	system we just simply don't have, except in areas like
20	that, I really can't.
21	Q. I understand.
22	When you said that you do constant competitive

00085
1	analysis, presumably versus PeopleSoft, what do you mean
2	by that?
3	A. We have a specialist in H.R., his name is Tony
4	Kender, and we compete with them in the H.R. area. And
5	we know what they say about their products, why they
6	say -- they say you should buy PeopleSoft for these
7	reasons, and we talk to customers when they make
8	decisions and -- talked about it before. One of the
9	purposes of the competitive analysis and the win/loss
10	reports is to figure out why we lost. Was it a product
11	deficiency? Is there something we can do to improve our
12	products?
13	So we're constantly trying to figure out what
14	new features we should put into the product to be
15	competitive with a variety of companies or to gain
16	competitive advantages, what features they don't have,
17	which we should be talking about when we're selling our
18	products versus them.
19	Q. Mr. Kender, is he dedicated to doing this type
20	of work related to PeopleSoft only, this competitive
21	analysis, or does he have other vendors that he looks at?
22	A. He used to work at PeopleSoft so he, excuse me,

00086
1	he used to work at SAP, so he handles SAP. But he was
2	responsible for our H.R. team, so he had the
3	responsibility for H.R.
4	Q. From a competitive analysis standpoint or --
5	A. H.R. sales swat team. They were the experts
6	that got involved in selling H.R.
7	Q. So -- and in selling, being the special -- when
8	you said "swat team," what is that?
9	A. They would be flown into a crisis situation
10	where there was a decision being made on an H.R. purchase
11	and they would, you know, they would travel the world to
12	to try to persuade customers to buy Oracle.
13	Q. His work in that regard, is it directed just at
14	PeopleSoft or PeopleSoft and SAP or PeopleSoft, SAP and
15	others?
16	A. Anyone making an H.R. decision. And he'd have
17	to deal with people who are looking at outsourcing with
18	Fidelity.
19	H.R. is interesting. There are software
20	suppliers and there are service suppliers who directly
21	compete, so they might be considering buying Oracle or
22	just outsourcing all their H.R. to Fidelity.

00088
10	Q. The question is, when you're looking at a
11	discount situation, does the fact of what type of product
12	is involved in a particular competitive transaction
13	matter to you?
14	A. Yes.
15	Q. In what way?
16	A. If we have a brand new product -- example right
17	now, we have a brand new product called Collaboration
18	Suite. We have almost no references. It's a brand new
19	product. It's very aggressively priced, yet we still
20	give huge discounts, trying to get references.
21	So, again, I'm going back to situational.
22	Here's a product -- we're trying to get large

00089
1	customers -- especially for a large customer, trying to
2	get large, credible references and, again, it's not
3	uncommon to even give the product away and even give
4	services away early on in the life cycle of the product,
5	to get a strong reference from an early adopter of that
6	technology.
7	Q. Would it matter to you in the context of a sale
8	involving application software, whether it was your H.R.
9	product or your financial services product or an ERP
10	combination of the two, from the standpoint of deciding
11	whether or not to approve a discount or other special
12	contract terms?
13	A. I don't think so. Back to -- it's back to
14	situational. I think you have to -- it's such a
15	complicated, complex dynamic. If it's --
16	Q. Let me give you an example.
17	A. We have strong competitors in virtually every
18	area.
19	Q. For example, if you were -- an account comes up
20	for approval of a higher discount over 70 percent and you
21	understood it was PeopleSoft you were competing with for
22	their H.R. product. Are you more likely to give a higher

00090
1	discount there than if it was SAP, for example?
2	A. No.
3	Q. You you indicated that you thought that
4	PeopleSoft had a very sophisticated H.R. product; right?
5	A. Yeah.
6	Q. And so does the sophistication of that product
7	in any particular account have any effect on whether or
8	not you give a higher discount?
9	A. The product is one factor causing the customer
10	to buy. Sometimes PeopleSoft can be a formidable
11	competitor because their product. SAP can be a
12	formidable competitor because their product is pretty
13	good. I don't think it's as good as PeopleSoft's,
14	actually, in H.R.
15	But SAP is a much stronger vendor and SAP has
16	the ability to invest at a much higher level than
17	PeopleSoft. So a lot of people will say SAP is the
18	encumbant supplier in an awful lot of places.
19	So, again, I'm back to this -- here's a
20	situation -- I'll take Oracle out of it. You're looking
21	at SAP as a possible supplier, you're looking at
22	PeopleSoft as a possible supplier, you're looking at

00091
1	Microsoft as a possible supplier. They all have
2	different characteristics. If you're an existing --
3	depending upon the kind of customer you are, you can make
4	decisions for any of those companies.
5	SAP has more encumbancy. They have more
6	customers than anybody in applications, so they're more
7	likely to have the encumbancy advantage. That can work
8	for or against you. You like the SAP product, you buy
9	more. Maybe PeopleSoft has a better product, but I think
10	SAP will pass them in five years.
11	Again, these are those long-term, highly durable
12	products that are constantly improved. And the vendor is
13	often more important than the product.
14	Q. When do you expect to have in place the
15	Oracle -- the Oracle business product that would include
16	the features of PeopleSoft that would make it a more
17	graceful transition for PeopleSoft customers?
18	A. Should the acquisition go through --
19	Q. Yes?
20	A. -- how long approximately would it take us?
21	Q. Yes, sir.
22	A. Couple years.

00092
1	Q. In discussions earlier you said something about
2	you were hoping -- again, I'm not trying to -- I'm trying
3	to lay some foundation here in asking questions. If I've
4	got this wrong, feel free to tell me.
5	You indicated something along the line of you
6	were hoping that there would be a transition of
7	PeopleSoft customers to your product over a five-year
8	period?
9	A. We think --
10	Q. Or did I get it wrong?
11	A. Ideally, we said we would support the PeopleSoft
12	products for at least 10 years.
13	Q. Gotcha.
14	A. We would hope that, if we do our job well,
15	that -- our job includes two things, one is doing a very
16	good job of supporting the PeopleSoft customers as they
17	continue to use PeopleSoft product and continue to