Posted on: Saturday, October 2, 2004
CEO's firing linked to takeover bid
By Michael Liedtke
Associated Press
PLEASANTON, Calif. — 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 $7.7 billion takeover bid during a 16-month melodrama.
Just a few hours after PeopleSoft disclosed Conway's ouster yesterday, the U.S. Justice Department said that it won't appeal a court decision removing an antitrust hurdle to Oracle's offer.
Taken together, the news convinced many analysts that PeopleSoft 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 $21 per share. Redwood Shores-based Oracle has offered as much as $26 per share for Pleasanton-based PeopleSoft.
PeopleSoft's shares surged $2.98, or 15 percent, to close at $22.83 on the Nasdaq Stock Market, and were the largest percent gainer in the Standard & Poor's 500 index. Oracle's shares climbed 62 cents, or 5.5 percent, to close at $11.90.
But Oracle has been dropping hints in recent weeks that it might not be willing to raise the ante because of possible liabilities created by the defensive actions taken by Conway and PeopleSoft's board.
Oracle chairman Jeff Henley reiterated the company's belief that the actions of PeopleSoft's board "have seriously damaged, and continue to damage, shareholder value." Henley didn't mention Conway's firing, but said Oracle is pleased the antitrust case won't be appealed.
PeopleSoft's board replaced Conway with its chairman and founder David Duffield, who also is the largest shareholder. The board appointed chief financial officer Kevin Parker and Phil Wilmington, the company's top sales executive, as co-presidents.
The board dumped Conway in a meeting late Thursday, according to Skip Battle, a PeopleSoft director who heads the committee that made the decision.
"Over time, the board has become increasingly concerned with Craig's leadership," Battle told analysts during a Friday conference call. "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."
Pressed by analysts, Battle declined to elaborate.
The shakeup comes before Oracle intends to attack the integrity of Conway and PeopleSoft's board in a trial scheduled to start Monday in Delaware. In its pretrial brief, Oracle said the company will submit evidence depicting PeopleSoft's board as an irresponsible clique dominated by the irascible Conway.
Oracle indicated that it still plans to call Conway to the witness stand as part of its effort to invalidate PeopleSoft's antitakeover defenses. The measures include an unusual sales program that has guaranteed $2 billion in customer refunds if PeopleSoft is acquired and the new owner diminishes product support.
PeopleSoft announced Conway's firing along with a pleasant surprise — sales of new software licenses for the just-completed third quarter exceeded $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.
