Microsoft both is and isn't a threat.

Short-term, merging Peoplesoft and Oracle gives a lot of customers no competition, leaving better lock-in, and better prices for Oracle. No question about it, businesses will pay through the nose.

There is also no question that Microsoft will be a low-end competitor in the near term.

However history suggests that low-end competitors eat their way up the food chain. Oracle raising its prices would improve Microsoft's profit opportunity, and increase the speed with which this migration could happen. And long-term, the business segment that Oracle is in will get wiped out as it finds itself adding feature sets that put it upstream of any significant client-base. If Microsoft is not the party that takes advantage of this, then someone else will. But Microsoft is positioning itself to be in a good position to do this.

Cheers,
Ben