Peoplesoft is at the centre of a hostile bid

Oracle is currently in court arguing with a Justice Department decision to block its hostile takeover.

Microsoft was also thinking of buying German SAP, the world's number three software firm, to protect its turf.

The ideas emerged in emails between Microsoft executives including Bill Gates, revealed during Oracle's appeal.

The revelation is the latest twist in the Peoplesoft saga, itself a reflection of the depth of rivalry between Oracle and Microsoft - and more particularly their founders, Larry Ellison and Bill Gates.

Another thought that came to mind is that it's time we bought SAP Bill Gates

Oracle has been arguing that the emails demonstrate Microsoft's ambitions in large-scale business software - mean the Justice Department is wrong to worry about constricted competition.

Microsoft, in contrast, has argued it is more interested in small and medium-sized businesses, and thus does not pose the kind of competitive threat on which Oracle's argument relies.

Options

On 7 June 2003, the day after Oracle launched its attempt to buy Peoplesoft for $7.7bn (�4.2bn ), Mr Gates - co-founder of Microsoft and now chief software architect - wrote to chief executive officer Steve Ballmer.

"Thinking about this Peoplesoft bid by Oracle made me wonder if we should approach them and suggest a minority investment," he suggested.

Ellison says Microsoft is a competitor in business software...

The offer could be presented as a way of protecting Peoplesoft's independence.

But Mr Gates also voiced the possibility that it could ensure Peoplesoft focused on making its software work with Microsoft's Windows operating system - what he described as a "modest platform commitment".

It would be vital to make sure that SAP, the leading player in business software, did not feel threatened by any such deal, he warned.

Big deal

With that in mind, an alternative strategy might simply be to buy SAP outright, Mr Gates wrote.

"Another thought that came to mind is that it's time we bought SAP," the email said.

"Given our view of the need to strengthen our platform and our willingness to use value to do it seems interesting."

...And cites Gates's memo as evidence

But the complexity of the deal and the price tag - which Mr Gates speculated would exceed SAP's $38bn valuation - was offputting.

A team established by Microsoft to examine the question put a detailed report together within 10 days, suggesting an approach to SAP.

"Regardless of the outcome (of Oracle's bid), the dynamics in the industry have changed," executive Cindy Bates wrote to Mr Gates and Mr Ballmer.

Shortly afterwards the software giant started talks with SAP, which ultimately ended inconclusively.