Rumor: Duffield in no mood to give in to Oracle

I was at the APICS International Conference in San Diego today, and I heard an interesting bit of gossip regarding Oracle's hostile bid for PeopleSoft. This source, who is outside of PeopleSoft but has connections inside PeopleSoft, said that David Duffield, founder and newly reappointed CEO of PeopleSoft has been indicating to employees that he is adamantly opposed to Oracle's hostile bid.

If this is true, then all the Wall Street analysts that took Duffield's appointment as a sign that PeopleSoft was about to cave in to Oracle are wrong. It also confirms my interpretation of events last week.

Separately, Oracle co-President Safra Catz said today in court that Oracle might drop its offering price for PeopleSoft by one-third to one-fourth. This follows Oracle CEO Larry Ellison's testimony last week that basically said the same thing.

In my opinion, this is a transparent attempt by Oracle to drive down the current share price of PeopleSoft, making Oracle's offer more attractive. It's right in line with Oracle's attempt to create fear, uncertainty, and doubt (FUD) by launching its hostile bid originally, as indicated in Oracle internal e-mails that the court mistakenly released in unredacted form last week.

Here's a shot I snapped of PeopleSoft's booth at the APICS conference today. A nice booth, in a prime spot next to the main entrance, adjacent to Microsoft's.



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Siebel enters Chapter 2

No, not Chapter 11. Chapter 2 is Siebel's new strategy, as presented by CEO Mike Lawrie at Siebel's user conference this week, to move beyond selling packaged software and hosted services to offering more customized solutions. The strategy is enabled by the trend to component architecture by many vendors, which makes it easier to build composite solutions.

In this regard, Siebel appears to be aligning with the approach of other major vendors, such as SAP and PeopleSoft.

Personally, I feel that composite applications, which appears to be what Siebel is promoting, are particularly well suited for the CRM space. In my experiences, companies are most likely to develop custom software for customer-facing processes than any other area of the company. If Siebel is successful in this strategy, it could propel Siebel back into a leading position among business application vendors. Siebel has had a tough last few years, and I hope they are successful.

For some reason, I'm having trouble finding an official Siebel press release on Chapter 2. But Computerworld has a short summary of the initiative, as well as a follow up article.

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Oracle confidential information released by court

PeopleSoft Craig Conway is testifying today, and most of the press is focusing on his colorful characterization of Oracle CEO Larry Ellison as "Genghis Khan."

But the real news, in my opinion, is some Oracle correspondence that was released by the court in an unredacted form, that is, without some confidential portions omitted. The memos in question can be interpreted as Oracle's attempt to use the takeover bid in an attempt to sow fear, uncertainty, and doubt (FUD) among PeopleSoft prospects, thus hurting PeopleSoft in the marketplace.

According to CNET,

Mark Jarvis, Oracle's chief marketing officer, suggested in an internal June 3, 2003, e-mail that the company "use this news in order to create FUD with prospects and customers alike." FUD is a common term in the computer industry that describes a campaign to spread misinformation or exaggerations.
....
Another excerpt included in the PeopleSoft interrogatory and Oracle's reply was an e-mail message sent by Keven Blake to Oracle President Charles Phillips and others on Sept. 10, 2003. It said that "(we) have successfully spread enough FUD along with our own capabilities to have a good average shot at winning."

Read the whole CNET article for more excerpts.

Checklist for Sarbanes-Oxley compliance

Here's a simple one-page checklist for a self-assessment of Sarbanes-Oxley (SOX) compliance readiness. To download it, you'll need to do a one-time free registration with Baseline.

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Microsoft counters SAP with Axapta price cut

A few months ago, Microsoft and SAP were talking about a merger. This month, they are fighting each other for market share. It appears that SAP, with its SAP Business One and All-in-One program targeted at small and mid-size companies respectively, has had some success in taking deals in Germany away from Microsoft, specifically those involving its higher end Axapta ERP offering. (Unlike in the U.S., Axapta has always had a strong presence in the European market and has been competing with SAP there for years.)

Quoted in an AFX News article, Michael Kleinemeier, head of SAP's German operation said,

"We have increased our total number of clients in this space by 40 to 50 percent," Kleinemeier said. He said that about 500 small businesses now use SAP's Business One software package and 2,000 mid-sized businesses use its All-in-One program. As a result, SAP is out in front of rival Microsoft and its "Microsoft Business Solutions" product.

In response, Microsoft is reportedly cutting the price of Axapta by 12% in order to hold ground against SAP.

It would not surprise me to see Microsoft make similar price cuts in the U.S., if it hasn't done so already. Microsoft can certainly afford to do it, and it would put pressure on all the major players, including SAP, Oracle, and PeopleSoft, at a time when they are trying to hold the line on revenue and earnings numbers.

A price war would be good news for buyers.

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PeopleSoft execs sighted at Oracle HQ?

Reuters is now reporting that the new PeopleSoft executives paid a visit to Oracle headquarters last week, increasing speculation that PeopleSoft may be softening its stance against Oracle.

"Our sources indicate to us that the new PeopleSoft management team visited the Oracle campus last week. This indicates to us that (they are) more willing to engage in a dialogue with Oracle to discuss its options," said Prudential Equity Group analyst Brent Thrill in a note to clients.

Further evidence that PeopleSoft's position may be softening came from Steven Goldby's second day on the stand in Oracle's lawsuit to overturn PeopleSoft's poison pill.

The PeopleSoft Inc. director who has been leading the defense of the software company's antitakeover measures said Tuesday the company's board is willing to talk about a deal with rival Oracle Corp.

On the stand for the second day in a Delaware court trial, PeopleSoft director Steven Goldby said German software company SAP AG was the chief beneficiary of the long-running takeover fight between the two companies.

PeopleSoft's board would be willing to talk about an Oracle acquisition now if the price was right and there was a "high certainty" that a deal could close quickly, Goldby said.

An AP article has more details.

Update: Woops. Brent Thill is now backing off his reporting of a meeting between the new PeopleSoft executives and Oracle.

"There's been no management team meeting with Oracle," said PeopleSoft (PSFT) spokesman Steve Swasey.

He responded to questions following a report from analyst Brent Thill with Prudential Equity Group that stated such a meeting did happen. Thill cited "sources" that informed him PeopleSoft's new management team visited the Oracle (ORCL) campus last week. In a follow-up research note issued Tuesday afternoon, Thill said a PeopleSoft senior executive confirmed that no senior management members met with Oracle.

Looks like it was just a rumor.

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.

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SSA grows, but don't get no respect

I wasn't able to attend the SSA Global client forum in Philadelphia. But John Moore from the ARC Advisory Group has a pretty good report, summarizing strategic direction for SSA in the coming year.

Moore points out that SSA's approach to standardize on IBM Websphere technology across its multiple products is similar to that of PeopleSoft, but SSA was taking this approach prior to PeopleSoft's recent announcement of the same.

With its strategy of buying software products and customers from distressed vendors, SSA doesn't get a lot of respect from consultants. But SSA's strategy has propelled it to the position of number four among enterprise system vendor, behind SAP, PeopleSoft, and Oracle. And, if Oracle gobbles up PeopleSoft, SSA will be number three.

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Lawson fires 100, blames Oracle

Lawson Software is laying off 100 employees in a cost cutting move, following its most recent earnings disappointment.

What I find hilarious is the new excuse that Lawson has come up with for why its sales are lagging: it is blaming Oracle!

Since earlier this year, Lawson has said its business is being hurt by the ongoing efforts of competitor Oracle Corp. to buy another competitor, PeopleSoft, in an unfriendly takeover. The U.S. Department of Justice opposed the Oracle takeover of PeopleSoft on antitrust grounds, but Oracle won the case earlier this month and continued its takeover bid. As a result, some ERP customers have decided to wait out the battle to see which suppliers remain, Lawson said.

As I recall, back in April during Oracle's anti-trust trial, Lawson took out two full page ads in the Wall Street Journal thanking Oracle for positioning Lawson as a top competitor!

But now, somehow, Oracle is to blame for Lawson's problems. I can see how PeopleSoft might make that claim. But Lawson?

Maybe next quarter they can blame the hurricanes in Florida.

Lawson's hometown paper, the Minneapolis Star Tribune, has the details.

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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.

Strange.

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.