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Monday, October 04, 2004

Why PeopleSoft fired CEO Conway

Today was the start of a lawsuit by Oracle to overturn PeopleSoft's poison pill anti-takeover defense, and already there are some insights into the firing of PeopleSoft CEO Craig Conway.

According to a CNET article, PeopleSoft board member Steven Goldby testified today that Conway "was fired in large part because of his reckless exaggeration to Wall Street analysts when informing them last year [September 2003] that Oracle's offer to buy the company was no longer a disruptive influence." At the time, the board was so uncomfortable with Conway's representation that they amended an SEC filing that included a transcript of Conway's remarks.

I remember how Conway was talking around this time, because I wrote a blog post based on Conway's attitude, entitled "All over except for the shouting."

It also appears that the board just discovered two weeks ago that Conway had made quite a concession to Oracle's lawyers during a deposition for this trial.
Oracle's lawyers played a five-minute videotape of the deposition, in which Conway acknowledged being less than honest during the conversation with analysts in September 2003. At the end of the video, after repeated questioning, Conway admitted that his remarks "weren't true."
So this would explain why PeopleSoft only moved last week to fire Conway, a year after his "less than honest" remarks to analysts. Knowing that Conway's admission of his untruthfulness would come out in court this week probably forced PeopleSoft's hand.

This does help explain things. If this picture is accurate, then there's no relevance to PeopleSoft founder and new CEO David Duffield's comment last week about a technology vision being lacking.

Also, in the trial today, Goldby seemed to indicate that PeopleSoft's board had been simply waiting for the right time to fire Conway:
Goldby said that last week was not the first time that the board had considered firing Conway, saying "it really goes back further than that." But the board waited to terminate Conway until it had good news to deliver as well, he said.
I find that excuse pretty weak, since there have been other points since September 2003 when PeopleSoft had better-than-expected quarterly results and could have taken action against Conway.

CNET has more.

I would also add that if my interpretation is correct, then the consensus of Wall Street analysts is wrong. Market analysts have been reading too much into the firing of Conway, thinking that PeopleSoft fired Conway because they wanted to deal with Oracle and Conway was an obstacle. I think that Goldby's testimony today indicates that PeopleSoft's board wants to fight and that because Conway's deposition was not helpful in that fight, they fired him.

Update, Oct. 4. There was more interesting testimony from Goldby today, as reported by the Wall Street Journal:
Mr. Goldby, the PeopleSoft director, said the board had become increasingly concerned about Mr. Conway's "micromanagement," which made him unable to work well with the rest of PeopleSoft's senior executives. Three key executives were "terribly, terribly unhappy and likely to quit," he said.
Back in March, I wrote a short post entitled, "Why are executives leaving PeopleSoft?," but didn't see that it might be a sign of dissatisfaction with Conway.

There's more to come. Craig Conway is being called as a witness on Wednesday. CFO Kevin Parker and EVP Phil Wilmington, who replaced Conway as president, are also expected to testify. Expect more interesting stuff to come out then. A Forbes article has more details.

John Palatto, writing for eWeek, thinks that Conway overstated the significance of the PeopleSoft/IBM alliance, and that also contributed to the board's dissatisfaction with Conway. But I don't buy it.

Quoted in Computerworld, Charles Di Bona, an analyst at Sanford C. Bernstein & Co. thinks that problems with the JDE acquisition are also a factor:
Charles Di Bona ... said he sees continued problems at PeopleSoft – ones that go deeper than the confusion created by Oracle's bid. He noted that the $150 million in software revenue is 9% lower than last year's third-quarter sales figure.

"I think a large part of the loss of confidence [in Conway] really is more around the J.D. Edwards situation than Oracle," Di Bona said, referring to PeopleSoft's problematic integration of former rival J.D. Edwards & Co., which it acquired last year. "This is not a growing company; this is an ailing company."
Might be a bit overstated. But on the other hand Di Bona follows PeopleSoft pretty closely.

Update, Oct. 6. It appears that the three executives that threatened to quit were sales EVP Phil Wilmington, CFO Kevin Parker, and chief marketing office, Nancy Caldwell. This is according to Steve Goldby's testimony in the Oracle lawsuit yesterday. With Conway now gone, Wilmington and Parker are now co-presidents.

Related posts
Huh? PeopleSoft fires Craig Conway
Why are executives leaving PeopleSoft?

by Frank Scavo, 10/04/2004 09:44:00 AM | permalink | e-mail this!

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