October 1, 2004 6:17 AM PDT
PeopleSoft fires CEO Conway
PeopleSoft's board of directors said Friday that it took the surprise move because of a "loss of confidence in Mr. Conway's ability to continue to lead the company."
The maker of business software has been engaged in a bitter struggle to fight off a $7.7 billion hostile takeover by rival Oracle.
PeopleSoft, which last month hosted its annual customer convention, has been trying to hang on to its customers despite the merger effort. Some licensees have expressed reluctance to continue buying and upgrading their products until the fight is over.
At the customer event, Conway gave an upbeat presentation and voiced optimism that PeopleSoft would endure, despite the travails of the takeover effort. But he also acknowledged that the 15-month battle against Oracle had taken a toll.
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Just two weeks before that gathering, Oracle had won a key court decision in the federal government's effort to block the merger on antitrust grounds.
On Friday, the U.S. Department of Justice said it would not appeal that decision, eliminating a major obstacle to Oracle's takeover bid. The Justice Department had argued that a takeover would let Oracle illegally raise prices and would hurt industry innovation.
PeopleSoft responded to that action with a statement aimed to dispel the notion that Conway's abrupt departure may have been based on the Justice Department's decision not to appeal.
"Earlier today, prior to learning of the DOJ's decision, PeopleSoft's board announced the appointment of Dave Duffield, PeopleSoft's founder and chairman, as the company's chief executive," the company said.
And to counter speculation that the timing of Conway's dismissal stemmed from his opposition to the merger, a PeopleSoft board member said Friday that the CEO was never at odds with the views of the board's transaction committee.
"There was no smoking gun, no accounting irregularities, no (fights) with the transaction committee," PeopleSoft board member Skip Battle said during a conference call with analysts.
The company also said Friday that license revenue for the third quarter is expected to exceed $150 million.
A remaining barrier to the deal is PeopleSoft's poison pill, an anti-takeover measure. A trial over that matter is scheduled to start Monday in the Delaware Chancery Court.
Regulators in the European Union are also investigating Oracle's merger offer, with a decision expected sometime in October.
Justice Dept.--no appeal
Antitrust regulators decide
to call it a day
Oracle is proposing $21 a share for PeopleSoft, with the offer now set to expire Oct. 8, after a number of extensions. The company declined to comment on Conway's abrupt departure.
On Friday, PeopleSoft's shares started the day with a jump of $1.33, or 6 percent, to $21.18. Oracle was up 33 cents, or 3 percent, to $11.61.
Oracle has said PeopleSoft stakeholders have so far sold it about 23.8 million shares. Meanwhile, PeopleSoft has strengthened its ties with IBM, in what some see as a bid to bring a "white knight" to its side.
Changing of the guard
In PeopleSoft's executive shift, Duffield, who founded the company in 1987, will continue to serve as chairman of the company. Kevin Parker and Phil Wilmington have been named as co-presidents, and Aneel Bhusri as vice chairman of the board. All of the changes are effective immediately.
Duffield said he is looking forward to returning to the helm of PeopleSoft.
"It's great to be back," Duffield said during the conference call. "It's an exciting day for me, personally. I look forward to coming back to work with a strong management team."
The new stint as CEO is not an interim role, Duffield said. "I'm here for the long term. I'm energized, and I can't imagine a better team to work with."
Duffield resigned as CEO in 1999, handing the post to Conway, after leading the company he founded for 12 years. PeopleSoft was struggling financially at the time Duffield resigned. Conway had arrived four months earlier as president and chief operating officer.
Duffield said he will focus on customer satisfaction and "invigorating the employee community."
A number of high-level executives have resigned since Oracle announced its hostile takeover bid.
Duffield will receive an annual salary of $1 and receive no additional stock this year, Battle said during the conference call.
Before Conway began his tenure at PeopleSoft, he spent eight years at Oracle in a variety of executive roles, including marketing, sales and operations. He also served as chief executive at TGV Software, a developer of applications for corporate intranets and the Internet that Cisco acquired in 1997.
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"Craig has advised the company he is considering whether he will resign from the board," said Steve Swasey, a PeopleSoft spokesman.
During the battle to fend off Oracle's hostile takeover bid, all the decisions to reject the offer were made through recommendations from the board's transaction committee. That committee consists only of independent directors.
Although PeopleSoft recently bumped up the severance packages for executives and employees, should they be terminated as a result of a change in control of the company, it is not yet clear how Conway's severance package would be treated, since no deal has yet taken place.
"Craig's termination was not 'for cause,' but I don't know if the change in control provision of his contract would kick in," Swasey said.
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