Posted on: Saturday, January 15, 2005
Oracle to cut 5,000 jobs in merger's wake
By Michael Liedtke
Associated Press
SAN FRANCISCO — Oracle Corp. will lay off 5,000 workers in the financial fallout from the business software maker's recently completed $10.3 billion takeover of rival PeopleSoft Inc.
The job cuts outlined yesterday represent a 9 percent reduction from the roughly 55,000 employees on the two companies' combined payrolls.
The purge is less severe than Oracle has envisioned when it first set its sights on PeopleSoft 19 months ago. At that time, Oracle planned to jettison at least 6,000 PeopleSoft employees, according to court testimony during the tense legal battle leading up to the takeover.
Piper Jaffray & Co. analyst Tad Piper believes Oracle still intends to reach its original target of 6,000 layoffs, but expects the company to make the remaining job cuts very gradually.
Oracle began delivering the layoff notices yesterday, but some of the affected workers might not learn of their fate for up to 10 more days. The company said it will retain 90 percent of the engineers that develop and support products, but didn't provide other details about what types of jobs are being cut.
Industry analysts expect that the layoffs will be concentrated among PeopleSoft's 11,225 employees — a bias displayed by most corporate buyers when cutting jobs after a takeover.
Many of PeopleSoft's employees have been bracing for their final day on the job since Redwood Shores-based Oracle signed the papers last month to buy one of its biggest rivals in the business applications software market.
The sense of foreboding created a somber atmosphere at PeopleSoft's Pleasanton headquarters as employees gathered in small groups to say their final goodbyes.
Hours before Oracle's announcement yesterday, employees turned a PeopleSoft sign into a makeshift shrine of flowers, candles and company memorabilia. An inflatable doll dressed in black wore a button that read "Oracle" with a slash through it.
Other PeopleSoft employees, flashing the defiance that characterized the company's staunch resistance to the takeover bid, said they would rather be fired than work for Oracle and its ruthless chief executive, Larry Ellison.
"The new company is going to be totally different," said Anil Aggarwal, PeopleSoft's director of database markets. "PeopleSoft had an easygoing, relaxed atmosphere. Oracle has an edgy, aggressive atmosphere that's not conducive to innovative production."
The layoffs are a cornerstone of Oracle's blueprint to trim its annual expenses dramatically as it strives to deliver on a promise to boost its profit by $400 million in the fiscal year ending in May 2006.
Oracle also is counting on the takeover to generate more software sales and a steady stream of revenue from existing PeopleSoft customers who pay for product upgrades and maintenance.
The takeover addled scores of loyal PeopleSoft customers, prompting Oracle to promise to keep its rival's product line intact for much longer than it originally intended.
Oracle's shares gained 15 cents yesterday to close at $13.63 on the Nasdaq stock market. The stock has traded in a 52-week range of $9.78 to $15.51.
