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Conway Gets His Chance To Defend PeopleSoft

Former PeopleSoft CEO Craig Conway has become central to Oracle's argument in favor of taking over PeopleSoft .

During the company's ongoing civil suit in Delaware, the ousted executive defended himself against Oracle's lawyers who questioned Conway about his part in PeopleSoft's Customer Assurance Program (CAP).

On the stand Wednesday, Conway justified his negative campaign against Oracle, saying that his interests were to keep morale high among customers and employees, according to observers in the courtroom.

Conway said he responded to the initial hostile takeover bid in June 2003 with a campaign that "vilified" Oracle and put them in a bad light, when asked by Oracle attorney Michael Carroll.

"I have referred to Oracle as a sociopathic company," he said, adding that he was "very surprised" that his former boss would try to acquire his company at the same time that PeopleSoft had announced intentions to purchase J.D. Edwards.

"I believed that what we were doing was addressing what we thought was a threat," Conway said.

Oracle's legal beef, however, is that PeopleSoft's board did not get a chance to review the CAP plan and that Conway kept tight control over the board's advisement attorneys and bankers. According to court documents, there were more than $2 billion in CAP contracts as of June 30, 2004.

Symyx Technologies CEO Steven Goldby, who sits on the board of directors at PeopleSoft, apparently strengthened the argument Tuesday when he told the court he was open to discussing a deal with Oracle, but that it would have to be for more than the current tender offer of $21 per share or $7.7 billion.

Representatives with both Oracle and PeopleSoft denied that the two companies were currently in discussions to adjust the merger price.

Oracle's suit claims the customer refund guarantee and subsequent "poison pill" are unlawful because Conway misled investors about it and allegedly sheltered his own board into believing that there would be nothing Oracle could do to acquire PeopleSoft.

This was Conway's first appearance since PeopleSoft's board of directors fired him last week, replacing him with Founder and Chairman Dave Duffield.

As previously reported, Ellison and Conway had four separate interactions that may have led to a merger between Oracle and PeopleSoft. During the government's antitrust suit to block the hostile bid, which was dismissed last month, Ellison recounted that he and Conway differed on which one of them would run the operations of PeopleSoft as a division within Oracle.

Public opinion of an Oracle-PeopleSoft merger may also be shifting. Philip Fersht, Yankee Group Director and market analyst, told internetnews.com that PeopleSoft customers he's talked with are becoming less concerned about the takeover.

"On the whole, enterprises do not see Oracle as damaging the PeopleSoft product, and are more likely to invest in and develop its functionality further," Fersht said. "A customer assurance program will further strengthen reassurances that the PeopleSoft apps will continue to be supported effectively. The bigger issue is how Oracle will deal with IBM underpinning the apps with WebSphere, but that's the name of the game these days -- working with competitive middleware solutions to deliver optimum functionality in a service-oriented fashion. Also, enterprises don't tend to change their middleware for the sake of it."

Before he was let go, Conway inked a five-year distribution deal that embeds IBM's WebSphere software in all PeopleSoft products.

Yankee's Fersht said customers don't really have to worry too much about the impact until 2005, but that they should prepare for a closer integration between IBM's middleware and PeopleSoft applications.

That shouldn't be too much of an issue, given that IBM's products are based on Java and Web services standards -- two things Oracle has also aligned its products behind. And even without Oracle standing in the middle, existing PeopleSoft customers should still be able to plug in middleware products from other infrastructure software providers, such as TIBCO and BEA.

Even if it manages to remove PeopleSoft's CAP and poison pill during the civil suit trial, Oracle still may have its takeover plans stringently scrutinized by European regulators.

EC antitrust chief Mario Monti said Wednesday that a review of the competition concerns was on hold for now because it is still awaiting information from Oracle.

"We expect that Oracle will very shortly provide the information still pending and that, therefore, the commission will be able to restart the clock in coming days," Monti said at a press conference in Washington. "This should make it possible for the commission to take a final decision on this case before the end of October."