Oracle chief executive Larry Ellison

Peoplesoft said competition watchdogs were highly likely to block any tie-up between the two firms and added that Oracle's offer was too low.

It also criticised Oracle for making an unsolicited bid, saying the offer seemed "designed to disrupt the company's strong momentum at significant cost to Peoplesoft's customers".

Oracle, the world's largest maker of database software, is hoping to consolidate its position in the market for business software by buying Peoplesoft.

Bad timing

Oracle launched its bid for Peoplesoft last week following Peoplesoft's bid for smaller rival business software maker JD Edwards.

A tie-up between Peoplesoft and JD Edwards would have threatened Oracle's position in the business software market.

JD Edwards has now asked a court to block Oracle's offer, and to force the group to pay it $1.7bn - the value of the Peoplesoft offer which JD Edwards says has been damaged by Oracle's move.

"We believe that this case has no merit whatsoever," said Oracle in a statement.

Shares in PeopleSoft closed down 35 cents at $17.37 on Thursday night but still above Oracle's offer price of $16 - prompting some analysts to suggest it may now have to sweeten its offer.

But Peoplesoft has dismissed Oracle's tender offer as "a pathetic tactic" and said the regulatory issues occurring from a deal with Oracle would be insurmountable.

Competition issues

Oracle, however, maintains that a deal with Peoplesoft would improve its products and is planning investor presentations over the next few weeks.

Andrew Gavil, a law professor at Howard University in Washington, said that if Oracle planned to discontinue Peoplesoft products and migrate customers to its own software, then that would be an "obvious red flag" to competition regulators.

"The ultimate question will be: does it substantially lessen competition," said Mr Gavil.