Sun, Oct 03, 2004 - Page 11 News List

PeopleSoft fires feisty CEO in surprise move

REPLACED The software company's shares surged following its announcement that it had dumped Craig Conway, who had fought Oracle's takeover bid tooth and nail


Business software maker PeopleSoft Inc unexpectedly fired CEO Craig Conway, dumping the feisty leader who engineered the company's dogged resistance to Oracle Corp's US$7.7 billion takeover bid during a 16-month saga.

Just a few hours after PeopleSoft disclosed Conway's ouster, the US Justice Department said on Friday that it won't appeal a court decision removing an antitrust hurdle to Oracle's offer.

Taken together, the news convinced many analysts that People-Soft is clearing the decks for an Oracle takeover.

"This thing is over," said analyst David Hilal of Friedman, Billings, Ramsey & Co. "PeopleSoft is going to be sold. The only question is timing and price."

Investors are betting Oracle will sweeten its all-cash offer of US$21 per share. Redwood Shores-based Oracle has offered as much as US$26 per share for Pleasanton-based PeopleSoft.

PeopleSoft's shares surged US$2.89, more than 14 percent, to US$22.74 during Friday's trading on the Nasdaq Stock Market, where Oracle's shares climbed US$0.51, or 4.5 percent, to US$11.79.

Oracle said it was pleased that the antitrust case won't be appealed. The company declined to comment on Conway's firing.

PeopleSoft's board replaced Conway with its chairman and founder David Duffield, who is also the largest shareholder. The board appointed chief financial officer Kevin Parker and Phil Wilmington, the company's top sales executive, as co-presidents.

PeopleSoft's board dumped Conway in a meeting late Thursday night, Skip Battle, a company director, told analysts during a Friday conference call.

"Over time, the board has become increasingly concerned with Craig's leadership," Battle said. "There is no smoking gun. It was a matter of the board losing confidence in Craig and when that happens a decision has to be made."

PeopleSoft announced Conway's firing along with a pleasant surprise -- sales of new software licenses for the just-completed third quarter exceeded US$150 million, much higher than analysts anticipated.

Hilal said it makes no sense to jettison Conway after such a strong quarter unless the board wanted to ease the tensions with Oracle.

Battle insisted Conway's firing had nothing to do with PeopleSoft's attitude toward Oracle's bid.

Hired five years ago to replace Duffield as CEO, Conway had been staunchly fighting to keep PeopleSoft out of Oracle's clutches.

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

Conway formerly worked under Ellison at Oracle, a dynamic that spiced the soap opera that has riveted Silicon Valley.

Ellison has made it clear he couldn't wait to fire Conway in an Oracle takeover.

With Conway's job looking shaky, PeopleSoft's board improved his severance package eight months ago. The deal, which awards Conway two times his salary and vests millions of stock options, could be worth US$50 million to US$60 million if PeopleSoft is sold to Oracle.

Oracle's bid received a major boost three weeks ago when a federal judge rejected an attempt to block the proposed deal for competitive reasons. That prompted many shareholders to begin pressuring PeopleSoft to open talks with Oracle, but Conway had held out hope the Justice Department might appeal -- an option that evaporated on Friday.

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