2004-10-04: PeopleSoft CEO Conway Ousted ~ Oracle v. Peoplesoft

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2004-10-04: PeopleSoft CEO Conway Ousted

In a surprise move, business software maker PeopleSoft Inc. fired CEO Craig Conway Friday, divorcing itself from the feisty leader who engineered the company's dogged resistance to a $7.7 billion takeover bid by rival Oracle Corp.

PeopleSoft's board replaced Conway with its chairman and founder David Duffield, who also is the Pleasanton-based company's largest shareholder.

The board appointed Kevin Parker, PeopleSoft's chief financial officer, and Phil Wilmington, the company's top sales executive, as co-presidents.

In a statement, PeopleSoft's board attributed the shake up to "a loss of confidence in Mr. Conway's ability to continue to lead the company."

Conway, hired five years ago to replace Duffield as CEO, has been staunchly fighting to keep PeopleSoft out of Oracle's clutches for nearly 16 months.

Almost as soon as Oracle launched its hostile takeover attempt, Conway defiantly dug in his heels, describing the bid as "atrociously bad behavior" and while lambasting Oracle CEO Larry Ellison as a sociopath.

Conway formerly worked under Ellison at Redwood Shores-based Oracle, a dynamic that spiced a soap opera that has riveted Silicon Valley.

Friday's move comes a week after PeopleSoft held a customer conference where Conway reiterated the company's resolve to resist Oracle's bid, which received a major boost last month when a federal judge rejected an attempt to block the proposed deal for competitive reasons.

The court decision prompted many shareholders to begin pressuring PeopleSoft to open talks with Oracle.

It's unclear how Conway's ouster might affect PeopleSoft's stance toward Oracle's bid. Ellison has repeatedly asked to meet with PeopleSoft to negotiate the terms of a bid that currently stands at $21 per share, but the board has refused throughout the battle.

In Friday's statement, the company noted that all five members on the board committee that has unanimously rejected Oracle's offer remain in place.

Investors seemed to believe the deal is now more likely to be consummated now that Conway is out of the way. PeopleSoft's shares surged during Friday's early trading on the Nasdaq Stock Market. Oracle shares were up, too.

PeopleSoft also delivered a pleasant surprise Friday by disclosing its sales of new software licenses for the just-completed third quarter exceeded $150 million. Many industry analysts had expected PeopleSoft's software sales to fall below $100 million in the quarter, largely because customers are so uncertain about the company's fate.

With Conway gone and the company coming off a surprisingly strong quarter, "many shareholders seem to believe PeopleSoft's board will now have the leverage to get a higher price," said American Technology Research analyst Donovan Gow.

But Gow still suspects Duffield, who founded PeopleSoft in 1987, might have reservations about selling to Oracle, his company's fiercest foe.

"PeopleSoft is Dave Duffield's baby," Gow said. "He may just as adamant as Conway" about fending off Oracle.

In a statement Friday, Duffield said he intends to focus on "a relentless commitment to our customers, and a renewed drive to keep PeopleSoft a great place to work for all employees."

Oracle has indicated it will fire more than half of PeopleSoft's 11,500 employees if it buys the company.


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