It's finally over. Business-software maker PeopleSoft (PSFT) agreed to be acquired by rival Oracle for $10.3 billion Monday, ending 18 months of lawsuits, corporate end runs and name calling.

PeopleSoft's board, which repeatedly rebuffed the advances of Oracle and vowed to fight into next year, relented after Oracle sweetened its proposal 10%, to $26.50 a share in cash, over the weekend.

The agreement caps a rancorous Silicon Valley feud marked by churlish exchanges between the companies'outspoken executives. Former PeopleSoft CEO Craig Conway compared Larry Ellison, Oracle's billionaire CEO, to Genghis Khan. Ellison joked about shooting Conway.

But Ellison, in an interview Monday, said the contentious takeover bid was more about giving Oracle a competitive edge in the high-tech market than besting Conway, a former protégé. "Sure, there is a little bit of redemption, but this merger makes us that much stronger," Ellison said. "It makes Oracle a stronger competitor against SAP, Microsoft and IBM. It's not, 'Gee, we won a hostile takeover.' "

Acquiring PeopleSoft might be the easy part, software analysts say. Oracle faces a tall task melding two large organizations while competing with the likes of giant SAP of Germany and IBM.

PeopleSoft's posturing softened after a board member contacted Oracle last week and floated a new price, Ellison said. Oracle initially balked at $26.50 a share, but agreed after it was allowed to pore over PeopleSoft's finances for the first time, Ellison said.

The truce was reached shortly before the rivals were to clash in a Delaware trial focusing on PeopleSoft's anti-takeover defense. That trial and another lawsuit filed by PeopleSoft in California will be dropped as part of the sale.

"This has been a long, emotional struggle," George Battle, a PeopleSoft director who oversaw the negotiations, said in a statement.

Shares of both companies rose in trading Monday. Oracle shares rose 10%, to $14.65. PeopleSoft shares gained 10%, to $26.42.

An industry-altering deal

The merger, the biggest in Silicon Valley since Hewlett-Packard and Compaq Computer joined in 2002, would establish a new order in the software industry.

Oracle is already the No. 1 maker of computer databases - powerful programs that store huge amounts of information. The PeopleSoft acquisition also will make it a major player in applications, or programs that run on top of a database to handle business tasks.

With PeopleSoft, Oracle will likely be the No. 1 maker of software that human resource departments use to track employee pay, vacation time and other benefits, says researcher IDC. It will be the No. 2 maker of business accounting and finance software, IDC says.

Add it up, and Oracle will be the second-largest maker of big business software worldwide, behind Germany's SAP. Oracle inherits $3 billion in annual revenue and nearly 13,000 customers from PeopleSoft.

What's more, the contentious coupling could pave the way for more deals in the "massively consolidating" business-software market, says software analyst Phil Fersht, of Yankee Group.

The tech boom of the late 1990s created dozens of business-software makers selling specialized programs. Many of those programs were top of the line, but customers spent huge amounts of time and money getting them to work with other programs they owned, says analyst Evan Quinn, of researcher IDC. The industry has matured since, and businesses increasingly buy broad software packages from a single company so that when things go wrong, customers have "one throat to choke," says software analyst Dave Yockelson, of researcher Meta Group.

The shift gives an advantage to big players and has driven several recent deals, including PeopleSoft's $1.8 billion acquisition of J.D. Edwards, IBM's $2 billion purchase of Rational Software, and Veritas Software's $580 million acquisition of Precise Software Solutions, says deal-tracking firm FactSet Mergerstat.

"If you're a midtier software maker, how are you going to compete?" Fersht says.

Still, Oracle's acquisition of PeopleSoft stands out for its size and scope. It's also significant because it cleared several major antitrust hurdles.

"Oracle was able to argue in both the U.S. and the European courts that this (merger) is (part of) a natural evolution," says tech analyst Tim Bajarin. "That basically throws down the gauntlet to other competitors."

Giant Oracle rivals such as IBM, SAP, Microsoft and Siebel Systems might be forced to acquire more companies to compete, says software analyst Paul Hamerman at Forrester Research.

"I would not be surprised to see a move from Microsoft in the next six months," Fersht adds.

A few independent software makers are expected to survive. "There's still room if you have a much better mousetrap," Yockelson says.

It's less clear whether any more big players will gobble up each other. "At the high end, who's left to acquire whom?" Fersht says.

Yockelson says Oracle might be eyeballing more deals to round out its portfolio. But don't expect Ellison to whip out his checkbook and take action soon. Oracle won't consider large acquisitions for a year, until PeopleSoft is integrated, Ellison said.

"For now, we have to deliver to shareholders in (fiscal year) 2006," Ellison said. "We need to demonstrate and prove to PeopleSoft customers that we can deliver on financials and technical quality of service."

Beating the odds

Oracle overcame several hurdles to acquire PeopleSoft. Among them: initial opposition from the U.S. Department of Justice (news - web sites), which deemed the proposed deal anti-competitive; and the recalcitrant Conway, who opposed the deal at any price.

That changed when Conway was ousted in October, and 61% of PeopleSoft's shareholders agreed in November to accept $24 a share.

"Once the shareholders voted, it put them in an awkward position," Ellison said of PeopleSoft's board. "Conventional wisdom on this deal was wrong since Day 1. No one thought we could overcome Justice's opposition."

Now comes the hard part.

Although mergers and acquisitions are common in technology, big deals are notoriously difficult to make work well. Most tech mergers are about acquiring intellectual property, a tech firms' most valuable asset. In those deals, "brain drain" often poses a problem.

For example, Hewlett-Packard has struggled to retain top workers from Compaq Computer, which it acquired in 2002. Some analysts say the deal has not created any value for H-P's shareholders.

Because "there are a lot of bad feelings," from the hostile takeover attempt, "Oracle's going to have a hard time retaining PeopleSoft employees they want to retain," says Forrester's Hamerman.

A big deal can also distract companies, and distraction can be lethal in the fast-moving technology industry. "The only ones with confidence in this merger are the top people at Oracle, whose confidence might have slid over to ...arrogance," says Rosabeth Moss Kanter, a Harvard Business School professor.

While Oracle and PeopleSoft feuded, SAP made inroads in the market. "SAP seems to be the main winner," says J.P. Auffret, a business professor at George Mason University. "There have been and will be quite a few 'losers,' possibly PeopleSoft customers and certainly PeopleSoft employees and management."

Undaunted, Oracle has set an ambitious timetable. By early January, it plans to close the deal, dissolve PeopleSoft's board, select its management team and decide the fate of many of PeopleSoft's 12,000 employees. At one point, Oracle drew up plans to fire more than 6,000 workers, but the company recently has indicated the purge will not be as dramatic.

At the same time, Oracle needs to maintain a steady stream of revenue by maintaining and upgrading software for PeopleSoft's nearly 13,000 customers. Some have expressed concern about the deal, threatening to defect to SAP or to another company specializing in software support.

Oracle hopes to allay fears by continuing to develop new PeopleSoft products within a division of the merged company. "We have every intention of making this easy for PeopleSoft customers," Ellison said.

If only the good vibes extended to PeopleSoft's executives, who are likely to be eviscerated by the merger. When asked what PeopleSoft CEO Dave Duffield - the company's largest individual shareholder, who opposed the deal - thought of Monday's agreement, Ellison was blunt, as he has been throughout the takeover. "I've never met or spoken to him," Ellison said.

PeopleSoft's comments were limited to Battle's statement.