PeopleSoft Inc.'s board yesterday abruptly fired chief executive Craig A. Conway, saying it had lost confidence in the man who had aggressively led the software firm's opposition to a hostile takeover bid by Oracle Corp.
The firing followed a recent federal court ruling that stymied a move by the Justice Department to block the deal on antitrust grounds. Yesterday, the Justice Department said it was dropping its opposition to the $7.7 billion bid and would not appeal the court's decision.
PeopleSoft stock rallied on the news, finishing the day up $2.98, or 15 percent, at $22.83 a share, as investors speculated that a deal might be in the offing. Oracle, led by Lawrence J. Ellison, made its initial offer for PeopleSoft in early summer 2003 and has reiterated its interest in buying the company despite attacks from Conway, legal opposition from PeopleSoft and the Justice Department, and an ongoing antitrust review by the European Union.
PeopleSoft said Conway was not dismissed for cause and therefore is entitled to collect severance pay and other compensation worth $10 million to $20 million, according to people familiar with his employment agreement who spoke on the condition of anonymity.
Conway did not respond to a request for comment.
Conway's dismissal came despite a strong performance by PeopleSoft in the third quarter. The company, which sells software to manage human relations and payroll functions, reported yesterday that license revenue for the quarter ended Sept. 30 is on track to exceed $150 million, a healthy figure that beat analyst expectations.
PeopleSoft named its chairman and founder, David A. Duffield, to replace Conway as chief executive. The company also appointed senior executives Kevin Parker and W. Phillip Wilmington as co-presidents of the firm and named Aneel Bhusri, a member of PeopleSoft's board, as vice chairman of the board. Duffield said he looked forward to refocusing the company -- which under Conway has been heavily driven by marketing and sales -- on developing cutting-edge technology and providing excellent customer service.
"When the board asked me to return, I was glad to say, 'yes'
" Duffield told Wall Street analysts in a conference call. "PeopleSoft is an amazing company, and my top priority is to build on the core values upon which it was founded.
In an interview, A. George "Skip" Battle, a member of PeopleSoft's board, said the board has had about 80 meetings since the takeover fight with Oracle began and, in the process, gained greater insight into Conway's management skills and style than it otherwise would have attained. That resulted, he said, in a gradual loss of confidence in Conway's leadership of a company that historically has been run in a collegial fashion.
"This has nothing to do with a difference in strategic approach with regard to Oracle. There are no accounting irregularities. This is just a matter, over time, of losing confidence in the way Craig wanted to manage the company," Battle said.
Battle said the company still considers Oracle's pending $21-a-share takeover bid to be too low and plans to proceed with litigation in California, where it is seeking $1 billion plus punitive damages from Oracle due to alleged unfair business practices linked to the takeover bid. Oracle has sued PeopleSoft in Delaware, claiming that its takeover defenses are improper.
"What we are trying to do is increase and preserve shareholder value," Battle said.