Ellison Tells Trial Judge Acquisitions Are Only Way Oracle Can Compete; Says Competition Increasing; CEO's testimony highlights fed antitrust case related to PeopleSoft takeover bid.(INTERNET & TECHNOLOGY)

Byline: J. BONASIA

More than a year after Oracle Chief Executive Larry Ellison launched a fight to buy rival software maker PeopleSoft, he took center stage as a star witness in an antitrust trial in San Francisco, emphasizing his belief that his firm needed the acquisition to compete in a tougher market.

Oracle is appealing a Justice Department finding that an Oracle-PeopleSoft marriage would be anti-competitive for the business software field, even as PeopleSoft on its own continues to resist Oracle's hostile takeover attempt.

Department of Justice attorney Claude Scott and Oracle attorney Dan Wall questioned Ellison in U.S. District Court on Wednesday. Ellison dispensed with his trademark black T-shirt and sports coat in favor of a double-breasted gray suit and red tie for a serious session in the hot seat.

In answering questions posed by Wall, Ellison outlined his reasoning. He cited a highly competitive market that's facing rapid consolidation. He spoke of a growing alliance between rivals SAP and IBM, a brewing threat from Microsoft and a new dynamic of Indian offshore outsourcing competitors. He referred to Hewlett-Packard's purchase of Compaq Computer.

"There was a lot of consolidation going on around us," he said. "We thought the only way we could survive and prosper was through an acquisition strategy we had never done. We had to be a bigger applications company to face the competitive onslaught. Organic growth was slower than it had been, so we had to go to an acquisition strategy."

He said Oracle needed to "increase our investment in R&D and simultaneously lower our prices."