Microsoft's Gathering Storm

Antitrust law is about as exciting as reading a phone book. Then again, when you have litigants that include CEOs like Larry Ellison of Oracle (Nasdaq: ORCL) and Craig Conway of PeopleSoft (Nasdaq: PSFT), things are bound to get a little crazy.

On the first day of the federal government's antitrust case against Oracle to block the $7.7 billion hostile takeover for PeopleSoft, there were a few bombshells. First of all, the federal government's attorney was a bit shaky in front of Judge Vaughn Walker. As with any smart judge, Walker asked why the government was only focusing on the U.S. market. Isn't mega enterprise resource planning (ERP) software a global business?

Well, the government attorney didn't have a good answer.

But the most explosive piece of news came from Microsoft (Nasdaq: MSFT). It indicated that late last year it had discussions to buy out the German ERP giant, SAP (NYSE: SAP). Ironically, it was also last year that Microsoft indicated to the federal government that it would not enter the ERP market within the next two years.

But whenever Microsoft denies it is entering a market, it must really want to enter it -- if history is any guide. Microsoft has spent billions buying companies like Great Plains and Navision. The company has also elevated key executives to its enterprise division and plans to spend billions on R&D.

Clearly, Microsoft sees lots of money to be made in big-customer ERP. So speculation erupted that Microsoft may buy PeopleSoft. But if this is what Microsoft wanted to do, it would probably have already made a bid or discussed matters with the company.

As usual, Microsoft wants to dominate -- that means buying the biggest player or building the business internally. And it looks like it has chosen the latter.

Want to read more about the ongoing PeopleSoft/Oracle fight? Check out:

• The Case for OracleSoft and Oracle, PeopleSoft Need Owners, by Tim Beyers
• PeopleSoft's Pandemonium, by Mark Mahorney

Fool contributor Tom Taulli is the author of The EDGAR Online Guide to Decoding Financial Statements . He does not own shares in any of the stocks mentioned.