PeopleSoft Fires CEO Conway

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UPDATED: Citing a loss of confidence, PeopleSoft’s board of directors said it fired President
and CEO Craig Conway in a unanimous vote that could have significant
ramifications for the fate of the enterprise software company.

The surprise announcement said PeopleSoft Founder and Chairman Dave
Duffield will immediately take his
place, just as PeopleSoft is in the midst of fending off a hard-fought power
struggle with rival Oracle , which launched a hostile bid to acquire the company in June 2003.

The board also made CFO Kevin Parker and Phil Wilmington co-presidents, with
board member Aneel Bhusri becoming vice chairman of the board.

Parker will retain his CFO role and will be responsible for internal
operations. Wilmington will run worldwide field operations, according to a
statement. Bhusri will lead the Pleasanton, Calif., company’s product and
technology strategy.

In related news, Parker said license revenues for the third quarter are
expected to exceed $150 million, which was better than expected.

On a conference call, PeopleSoft officials were asked about the timing of
Conway’s dismissal, given the strong quarter. PeopleSoft’s transaction committee
made the decision last night, according to board member A. George “Skip”
Battle.

“The very simple and plain reason is that over time the board has become
increasingly concerned with Craig’s leadership and essentially has lost
confidence,” said Battle on the call. “There’s no smoking gun. There are no
accounting irregularities. He is not terminated under the for-cause provisions
in his contract. It’s a matter of the board losing confidence in Craig, and
when that happens one has to make a decision.”

Battle briefly commented on Oracle’s latest tender offer,
noting that all decisions with respect to Oracle’s tender offer have been
made on the unanimous recommendation of the board’s transaction committee.

Battle and the new PeopleSoft officials refused to comment further on the
tender offer.

PeopleSoft and Redwood Shores, Calif.’s Oracle are locked in legal battle
for possession of the company, which quickly became the No. 2 enterprise
applications concern behind German leader SAP.

Oracle last Friday renewed
its tender offer for the 11th time, bidding $21 per share for PeopleSoft.
Under Conway, the company has rejected any offer out of hand.

The latest $7.7 billion offer was the third since Oracle reduced its
takeover price from $26-per-share ($9.4 billion) for PeopleSoft and the
first since a federal judge rejected a Department of Justice (DOJ) claim
that the proposed merger would violate U.S. antitrust laws.

In September, U.S. District Court Judge Vaughn R. Walker ruled that the DOJ
had failed to build a convincing case that the takeover would harm
competition in the market for certain enterprise software applications. In a
month-long trial, the DOJ repeatedly claimed the deal would create a
monopoly in the enterprise resource planning (ERP) market, limiting choices
to just SAP and Oracle.

In his ruling, Walker said the government failed to prove that outsourcing
solutions, best of breed solutions and so-called mid-market vendors should
be excluded from the relevant product market. Furthermore, he said the DoJ
failed to establish that the area of effective competition is limited to the
United States.

The DOJ has until early November to appeal.

PeopleSoft has its own legal complaint against Oracle scheduled for jury
trial Jan. 10. PeopleSoft alleges that Oracle has engaged in unfair business
practices, including a campaign to mislead PeopleSoft’s customers and
disrupt its business. The company wants more than $1 billion in compensation
plus punitive damages.

The European Union is also waiting to weigh in on the acquisition, with a
decision possibly coming by the end of October.