PeopleSoft shows its chief executive the door

PeopleSoft‘s board of directors said Friday that they have fired president and CEO Craig Conway, leading some analysts to speculate that Oracle may enjoy a smoother ride in its takeover bid.

Conway, who had occupied the

position since 1999, has been replaced by PeopleSoft’s founder and chairman Dave Duffield. The only reason PeopleSoft would provide for the ouster of Conway is that the board had lost confidence in his leadership.

“”There’s no smoking gun, there are no accounting irregularities . . . it’s a matter of the board losing confidence in Craig,”” said board member Skip Battle during a Friday morning conference call. “”And when that happens, one has to make a decision.””

The recommendation to terminate Conway was made by PeopleSoft’s transaction committee — the five-person group at PeopleSoft responsible for handling the situation with Oracle’s takeover bid. The board of directors was then put to a vote and Conway’s removal was unanimous, said Battle.

“”I’m here for the long term,”” said Duffield, dismissing questions that the position was just for the interim. “”I’m totally energized. I can’t imagine a better team of people to work with in light of the great performance the company has put forth.””

Duffield, who founded PeopleSoft in 1987, wouldn’t comment on the reasoning behind the decision to remove Conway. He did say, “”We need a little more in the way of vision and strategy and I think I’m pretty good at that stuff.””

PeopleSoft also said Friday that it has appointed Kevin Parker and Phil Wilmington as co-presidents and Aneel Bhusri as vice-chairman of the board. Parker, also the company’s CFO, announced that PeopleSoft’s licensing revenues are expected to exceed $150 million for the quarter which ended Sept. 30.

The fact that PeopleSoft opted to terminate Conway after a quarter that should beat all analyst expectations “”just seems to be inconsistent with their actions,”” said Jonathan Rudy, software analyst with Standard and Poor’s equity research in New York City.

It’s likely, he said, Conway’s defiant posture with Oracle played a role.

“”The whole situation had become a personal, acrimonious battle between Craig Conway and Larry Ellison. It was very unlikely that the deal would go forward with Conway still at PeopleSoft. While this doesn’t guarantee anything, I think it certainly opens the door for discussions,”” said Rudy.

Conway, once an Oracle employee, has made his feelings on the Oracle bid clear on several occasions. “”It was tough to see how the board could really uphold their fiduciary responsibility with their CEO talking like that,”” said Rudy.

At PeopleSoft’s user conference held in San Francisco last month, Conway told an audience: “”Have you ever had a bad dream that just won’t seem to end?””

Mike Dominy, analyst with Boston-based Yankee Group said, “”All signs are pointing towards making a deal between Oracle and PeopleSoft happen. . . . It would be extremely challenging at best to make a deal happen between the two companies with Craig Conway leading PeopleSoft.””

Paul Hammerman, analyst with Cambridge, Mass.-based Forrester Research, said that Conway may have ruffled feathers not just over the Oracle situation. Among the problems, he said, were rising maintenance prices, customer service issues and a “”proliferation of add-on products that many customers felt should have been delivered under the upgrade path.

“”I think (Conway) accomplished a lot of good things and put in place good operational discipline and restored the company’s profitability, but in the end, customers felt alienated,”” he said, adding that Dave Duffield may continue to mount a defence against the Oracle bid.

Oracle’s most recent bid of US$21 a share for PeopleSoft is set to expire on Oct. 8.


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