Oracle Clears the Conway Hurdle

With PeopleSoft CEO Craig Conway canned, experts say Oracle has a much-improved chance at sitting down at the table for an acquisition.

With PeopleSoft CEO Craig Conway canned, Oracle has cleared one of its biggest hurdles to acquiring his former employer, some experts believe.

Conway was ousted Friday morning from his post as PeopleSoft Inc.s CEO, following 15 arduous and not particularly successful months of attempting to fight off Oracle Corp.s hostile takeover attempt, to retain customers and to keep PeopleSofts stock from tumbling.

PeopleSofts founder and chairman, Dave Duffield, was moved into the CEO position that he ceded to Conway 10 years ago—a retrenching that could be a last-ditch effort to fend off the hostile takeover.

/zimages/4/28571.gifRead more here about the PeopleSoft boards decision to fire Conway, citing "a loss of confidence."

But some experts said that having the admittedly beloved Duffield back in the saddle is irrelevant to the success or failure of Oracles acquisition, in comparison with the importance of getting Conway out of the way.

"We think it significantly increases the probability that Oracle will be successful," said Ken Marlin, a managing partner at Marlin & Associates, a New York mergers and acquisitions law firm focused on media and technology. "Its less important who took over. The most important thing is Conway is not there."

Indeed, Conway was, in some ways, a single-man dam that kept Oracle from washing over PeopleSoft. Over the past 15 months, Conway has done everything in his power to keep PeopleSofts board of directors from sitting down to negotiate a deal with Oracle.

"Craig Conway convinced his board of directors of two things: one, that Oracle was the evil empire, and, more importantly from a board perspective, he convinced them the price being offered by Oracle was inadequate," Marlin said.

Oracles initial offering price was $19.50 per share. It bounced around over the course of the past 15 months, rising to a high of $26 per share. As PeopleSofts stock steadily crumbled, Oracle in May chopped its offering price down to $21 per share.

In cold, hard cash, that meant that Conways deep antipathy toward his former boss, Oracle CEO Larry Ellison, cost PeopleSoft shareholders some $2 billion.

"His rationale … was to let the current managers and team run the company, that he would get growth that would drive the stock price higher than what Oracle was offering," Marlin said. "The problem is that that is not happening. In the process, he cost shareholders $2 billion, because Oracle has lowered its offering price."

/zimages/4/28571.gifTo read about a $1 billion, multiyear partnership recently formed between PeopleSoft and IBM, click here.

Paul Friedman, an antitrust expert and partner in the Washington law firm of Dechert LLP, agreed that Conways dismissal is closely intertwined with PeopleSofts poor market position. "Where it really comes into play is, how effective was Conway in protecting and improving PeopleSofts market position in the face of the uncertainty that was created by the tender offer and the litigation?" Friedman said.

"I think the point is right—that the board has to be concerned about how well did management lead the company so that sales would meet projections, profits would meet projections, customers would be retained and shareholder value would be where it needs to be. Theyre all interconnected, but I think the fallout has more to do with failure to deliver effectively in the marketplace."

Next Page: A renewed focus on customers needs?