Friday, October 01, 2004

Huh? PeopleSoft fires Craig Conway

I'm seeing this just now on CNBC. PeopleSoft's board has just fired CEO Craig Conway, effective immediately, citing "loss of confidence in Mr. Conway's ability to continue to lead the Company."

The CNBC commentators are as baffled as I am about this. They are speculating about "personality problems." I don't think so. As the CNBC commentators finally conclude, the move makes no sense. The press release indicates that the decision received the unanimous vote of the independent directors, so there must be something else going on here.

The press release leads with the news that Dave Duffield, PeopleSoft's founder, is now back as CEO. Kevin Parker (CFO) and Phil Wilmington (EVP Americas) are being promoted as co-presidents. Aneel Bhusri has been appointed Vice Chairman, focusing on product and technology strategy

You can read the press release on the PeopleSoft web site. Hopefully there will be more light shed on this development in the coming hours and days.

Update: less than an hour into trading, and PeopleSoft shares are up over 8% to $21.44, which is actually above Oracle's tender offer. The market apparently thinks that Conway's departure increases the chance of Oracle's takeover being successful. PeopleSoft is hosting a conference call shortly, so hopefully there will be more clarification.

Update: S&P analysts feel that Conway's departure does increase the likelihood of a deal, and that Oracle will need to raise its tender offer to at least $23. But in a PeopleSoft conference call just now, new CEO David Duffield said, "There has been no position that the transaction committee has taken with Oracle that was at odds with where Craig was." He says that the departure of Conway has nothing to do with the Oracle bid. On the other hand, he didn't say why they "lost confidence" in him.


Update: Here are some more analyst reactions, as noted by CBS Marketwatch.

From Stephen Trotta at Technology Business Research:
What this tells me is that the board is in favor of throwing in the towel and, clearly, Conway was not ready to do so. This certainly clears the path for PeopleSoft to be acquired. ... One of the greatest obstacles in this battle has been Conway's ego and the emotional stake he has vested in attempting to out smart Larry Ellison. The removal of Conway eliminates the emotional factor from the process and clears the way for the founder of PeopleSoft, David Duffield, to come back and have the final say.
Art Hogan, of Jefferies & Co says, "The obvious interpretation is that this makes the deal more doable."

Patrick Snell, of Robert Baird, thinks that firing Conway was "a move to restore credibility in the eyes of the investment community and customers/prospects, which may have suffered in part due to Conway's very public [and] personal attacks on Oracle's [CEO] Larry Ellison."

Update: separate but related news just in: the DoJ now says that it will not appeal the court's ruling to let Oracle proceed with its hostile bid for PeopleSoft.

Update, Oct. 2. The New York Times (free registration required) has gathered some additional insight into what might be going on:
Executives close to PeopleSoft said that while Mr. Conway's aggressive approach to the Oracle offer was a consideration in his removal, frustration with his handling of strategic business issues was also part of his undoing. Most notably, PeopleSoft's acquisition of J. D. Edwards in 2003, a project that Mr. Conway led, is largely considered a failure. The company has also been slow to give customers a clear plan for the future, the executives said.
Tad W. Piper, an analyst with Piper Jaffray, said the ouster of Mr. Conway could smooth the way for an acquisition by Oracle, but noted it was not the only reason for the board's decision. Problems with the company's product strategy were apparent at PeopleSoft's annual customer conference last week, he said, which might account for the timing of the board's announcement.

Other analysts said that the appointment of Mr. Duffield, the company's founder, as chief executive might indicate that the board, though unhappy with Mr. Conway, remained opposed to an Oracle takeover.
Mr. Duffield told analysts on Friday that he planned to "put together a technology vision that's been absent for a period of time."
Although the NY Times insights are helpful, I am still perplexed by several things. First, the contention that the JDE acquisition has been a failure is surely a debatable point. Second, I was at PeopleSoft Connect press conference last week and did not hear any great skepticism voiced by these same analysts about PeopleSoft's product strategy. Finally, Duffield's comment about putting together a technology vision is really baffling--especially after PeopleSoft just signed a $1B agreement with IBM that addresses this very issue. What exactly would Duffield do in addition to, or differently from, what PeopleSoft just stated as a technology direction? Does Duffield disagree with the IBM alliance? If anything, Duffield's comment would make me more concerned about PeopleSoft's direction, not less concerned.

Update, Oct. 2. John Moore of the ARC Advisory Group has the same reaction as I expressed in the preceding paragraph.
There is another interesting twist to this story and that is the appointment of former PeopleSoft employee, Aneel Bhusri, as Vice Chairman to lead the company's product and technology direction. In the conference call Duffield stated that he thought the technology vision at PeopleSoft was "lacking as of late," which brings into question what part of that vision was suspect. At Connect, the company announced a major partnership with IBM and touted the success of their Total Ownership Experience (TOE) initiative, which is getting significant traction among the customer base. Thus it is hard to determine where the company may be faltering - could it be the slow progress in integrating JD Edwards?
Update, Oct 4. There's better information now emerging. See my post on Oct. 4, Why PeopleSoft fired CEO Conway.

If you've got thoughts on PeopleSoft's latest moves, please click on the Read/post comments link below and post your viewpoint.

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