When Oracle (NASDAQ:ORCL) CEO Larry Ellison was under oath during the PeopleSoft antitrust trial, he mentioned that micro-cap enterprise resource planning (ERP) vendor Lawson Software (NASDAQ:LWSN) was on his acquisition short list. Since then, the company's stock has been on a slow slide down.

Is it time to buy this $5.30-a-share stock, fully realizing that Lawson isn't the only company under Ellison's microscope?

Last night, the company reported fourth-quarter and fiscal-year (ending in May) results. While the press release trumpets that fourth-quarter GAAP earnings per share doubled over last year's comparable quarter, the real increase in net income was 71.7%. And that was before numerous one-time events.

The earnings news is a smoke screen for falling sales, particularly as it pertains to the fourth-quarter numbers. Year-over-year revenue fell 7.8% and comparable fourth-quarter sales fell an even sharper 12.9%. Yikes! Fifteen months ago, in the wake of the Ellison antitrust trial comments, Lawson was warning investors that customers were holding back on purchases. Well, guess what? Sales still are not going in the right direction.

Leading the plunge down were licensing sales (new software sales). They dropped an attention-getting 37.5% on an annualized basis and 36% on a quarterly basis! Saving the day were services -- which include the highly prized software maintenance fees. Services rose 2.3% on an annualized basis and fell a modest 4.3% on a quarterly basis.

Falling sales should be detracting from Lawson's appeal as an acquisition target. But muddying that picture is the company's recent all-stock $425 million merger with Sweden's Intentia International AB. Lawson is now No. 4 in the rapidly consolidating ERP application area.

So what does this all mean?

The Intentia merger makes sense because the companies have minimal ERP vertical market and geographic overlap. Intentia is already converting its software to standards like Java -- which is the new Lawson strategic direction. Intentia can help Lawson make this very difficult and necessary technical transition.

The new Lawson -- which has always catered to the small to medium-sized enterprise -- is now larger in the ERP market than Microsoft (NASDAQ:MSFT). Don't underestimate how important size is in a boardroom presentation when you are competing with giants like Oracle, Microsoft, and, at times, SAP (NYSE:SAP).

There is one big negative for the combined companies. They need to integrate their software, and that will take more than a year and lots of money. Merger and integration costs may mean results are not as sterling as expected in upcoming quarters.

I like the combined company. It shares technology partners IBM (NYSE:IBM) and Sun Microsystems (NASDAQ:SUNW). I would have hammered Lawson's use of the archaic RPG and COBOL software languages, which are more expensive and time-consuming to establish and maintain, but Intentia provides an accelerated path to state-of-the-art technology.

Lawson is now an international company with a broad product portfolio that will allow it to compete more effectively. Analysts expect the company to earn $0.20 a share during the current fiscal year. That forward price-to-earnings multiple of 26 is hardly cheap, especially for a company expected to grow earnings 11% a year over the coming five years.

It is too early to buy Lawson now, but the company bears watching. If the merger accelerates the technology transformation and sales start to build, the stock's slow decline could turn into a multi-bagger performance to the upside -- assuming Ellison doesn't intervene before then.

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Fool contributor W.D. Crotty does not own shares in any of the companies mentioned, but as an information-technology consultant, W.D. knows the vendors mentioned here. Click here to see The Motley Fool's disclosure policy.