January 14, 2005 2:32 PM PST

Oracle to cut 5,000 jobs in PeopleSoft merger

Oracle dropped the ax Friday, announcing plans to lay off 5,000 workers in its effort to squeeze costs out of its $10.3 billion software merger with PeopleSoft.

"Notifications at PeopleSoft and Oracle began today, and a majority will be completed over the next 10 days," Oracle said in a statement.

PeopleSoft, which employs more than 11,000 workers around the world, is expected to absorb the brunt of the cuts. Oracle is expected to notify many PeopleSoft workers of their terminations over the weekend, via Express Mail to their homes--a practice human resources experts frown on.

The number of workers leaving PeopleSoft could climb even higher as people leave of their own volition.

As anticipated, the layoff news comes just one week after Oracle's fast-track completion of the deal, last Friday. PeopleSoft fought the deal for more than 18 months in a bitter battle marked by two court struggles and public vows by Oracle CEO Larry Ellison to shut down PeopleSoft and discontinue its products.

Oracle came to take a more diplomatic stance after the early heat of the battle: It promised to provide technical support for PeopleSoft's programs for the next decade and to finish work on new versions of software now under development. On Friday, Oracle said it would make good on that undertaking by retaining more than 90 percent of the company's product development and product support staff.

"By retaining the vast majority of PeopleSoft technical staff, Oracle will have the resources to deliver on the development and support commitments we have made to PeopleSoft customers over the last 18 months," Ellison said in a statement.

The number of job cuts is higher than predicted by some analysts, who pegged initial layoffs to fall between 3,000 and 4,000. Yet they are less than Oracle's own first estimate that it would dismiss as many as 6,000 workers--a figure it discussed at an antitrust trial last June.

But once Oracle makes good on its product development promises, more heads may roll, Drew Brosseau, an analyst with SG Cowen, said.

"Everyone had been expecting a large head-count reduction," Brosseau said. "In some sense, however, they are keeping more PeopleSoft employees than they would have if they had not committed to completing and delivering some of the PeopleSoft products."

The number of workers leaving PeopleSoft could climb even higher as people leave of their own volition, another analyst noted. "The next two weeks is going to be challenging," AMR Research analyst Bruce Richardson said. "There are lots of recruiters from (German rival) SAP and smaller companies hovering about to lure away the best people."

Oracle is expected to elaborate on the layoffs and the structure of the newly merged company on Tuesday during a press conference and customer event at its headquarters in Redwood Shores, Calif. The company may also then address some unanswered questions, such as how many Oracle employees it is firing.

 

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