assurance that the standards on which we choose to develop new products will allow us to compete effectively for business opportunities in emerging areas.

 

Following the PeopleSoft acquisition, we announced Project Fusion, a next generation platform planned to combine the best features, flows and usability traits of the Oracle and PeopleSoft applications. If we do not develop and release Project Fusion products within the anticipated time frames or if there is a delay in market acceptance of the combined product line, our applications business may be adversely affected.

There are specific risks remaining from the acquisition and integration of PeopleSoft.   We completed the acquisition of PeopleSoft in January 2005 and have substantially integrated PeopleSoft’s business operations into our global business operations as of June 2005. Despite this progress, we are still in the process of completing the integration and continue to face several integration-related risks, including:

 

 	•	 	we may have higher than anticipated costs in continuing support and development of acquired PeopleSoft products;

 	•	 	we may not realize the anticipated increase in our revenues if a larger than predicted number of PeopleSoft customers decline to renew software license updates and product support;

	•	 	we may disrupt PeopleSoft’s indirect sales channel network as a result of aligning our business practices;

	•	 	our operations could be disrupted if we fail to adequately retain and motivate the combined employee base;

	•	 	until we combine the PeopleSoft and Oracle applications we will have multiple and overlapping product lines that may be offered, priced and supported differently, which could cause customer confusion and delays;

	•	 	we may lose anticipated tax benefits or have additional legal or tax exposures if we have prematurely or improperly combined local entities;

	•	 	goodwill may become impaired and we may incur material charges relating to that impairment; and

	•	 	there may be other unknown liabilities associated with PeopleSoft’s acquisition and integration of J.D. Edwards and our acquisition and integration of PeopleSoft.

 

PeopleSoft’s Customer Assurance Program may expose us to substantial liabilities if triggered.   In June 2003, in response to our tender offer, PeopleSoft implemented what it referred to as the “customer assurance program” or “CAP”. The CAP incorporated a provision in PeopleSoft’s standard licensing arrangement that purports to contractually burden Oracle, as a result of its acquisition of PeopleSoft, with a contingent obligation to make payments to PeopleSoft customers should Oracle fail to take certain business actions for a fixed period of time subsequent to the acquisition. The payment obligation is fixed at an amount generally between two and five times the license and first year support fees paid to PeopleSoft in the applicable license transaction. This purported obligation was not reflected as a liability on PeopleSoft’s balance sheet as PeopleSoft concluded that it could be triggered only following the consummation of an acquisition. PeopleSoft used six different standard versions of the CAP over the