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PeopleSoft: 'We're Not For Sale'

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Posted October 21, 2004 By Michael Singer     Feedback

Founder Dave Duffield's memo to employees is designed to rally the troops as well as the stock, analysts suggest.

If Oracle is buying, PeopleSoft's Dave Duffield isn't selling — at least not at these prices.

The founder and new CEO of the Pleasanton, Calif.-based software maker issued a memo to employees this week dispelling any rumors that he returned to broker a deal with Oracle CEO Larry Ellison in one of the more memorable hostile takeover bids in recent history.

"I didn't come back here to sell to Oracle," Duffield said in a memo obtained. "Rather, I'm here to beat Oracle in the marketplace, increase our revenues, re-energize our employees, and deliver greater long-term value to our shareholders."

Duffield continued that the key to preventing a sale to Oracle from happening is to show some good sales numbers of its own as the company ramps up its year-end accounts. The task, Duffield said, can be done with improved products, new offerings, and "outrageous" customer service. Duffield also pointed to a soon-to-be announced, five-year vision he believes will keep the company separate from Oracle.

"I want you to know that I myself have been energized through meeting thousands of our employees in Pleasanton and Denver. You've told me you're also ready for the challenge," Duffield said.

The memo seems to be having the desired effect. Sources knowledgeable about the company said the letter, "has been good for morale, particularly at headquarters and with those people who aren't too far around the bend."

"Duffield is a straight shooter, and he is not going to try to dupe his employees," Paul Hamerman, analyst and vice president of enterprise applications with Forrester Research, told "He wants to retain employees as the company goes through a tough time, and he will do this by being open and honest, rather than trying to give them a marketing pitch."

However, Hamerman also points out that the board of directors will consider a "reasonable and good faith tender offer," and will be under pressure from the shareholders to do so.

"Especially if the stock price falls well below $20. This could take several more months to play out," Hamerman said.

PeopleSoft's stock price hovered just above $20 in mid-day trading and prior to its third-quarter earnings report Thursday.

Rhetoric aside, some analysts suggest that PeopleSoft has already signaled a willingness to revisit the entire question of acquisition, which Oracle perceives, rightly or wrongly, as an opportunity to play hardball on price.

Earlier this month, PeopleSoft Board member Steven Goldby told a Delaware Chancery Court that the board was always open to discussing a deal with Oracle at the "right price," but it would have to be for more than the offer of $21 per share ($7.7 billion) that Oracle stood on for several weeks. Oracle's current tender offer expires this Friday at midnight.

"Interestingly, Oracle has its own dilemma here," suggested Coudert Brothers attorney Robert Christopher. "The longer this drags out now, the less valuable to Oracle PeopleSoft's customer base and other assets become. While Oracle may delight in either undermining or eliminating PeopleSoft as a competitor, it would be better to acquire that business intact than to see it scattered to the winds. SAP becomes the only winner in that scenario."

Duffield's comments come just two weeks after he and the board fired Craig Conway. The 48-year-old executive had been an outspoken critic of the hostile takeover and his former boss, Ellison. In a recent deposition, Conway even admitted to being publicly combative as a front to protect employees and shareholders.

The gamble may have been his undoing, according to analysts like Melanie Hollands, president of Koala Capital, a hedge fund that focuses on technology stocks.

"Some believe Conway should not have rejected the offer on the day it was launched and before the PeopleSoft board of directors had time to consider it," Hollands told "It's interesting, as the company also indicated what the revenues would be; it had to because otherwise everyone would have assumed Craig was getting the axe because of a revenue shortfall."

PeopleSoft was dealt another blow this month as Ram Gupta, head of software development, left the company. A company spokesperson did not comment on the departure and declined to say whether the man who helped PeopleSoft broker the IBM licensing deal had resigned or was fired.

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