Reading the Tea Leaves at PeopleSoft

Investors appear to be taking the curious timing of PeopleSoft’s firing of CEO Craig Conway as a sign that the company is ready to sit down and talk with Oracle — and that Oracle may have to raise its bid for the company.

Shares of Oracle soared 15% Friday to $22.83 — above Oracle’s $21 a share offer for PeopleSoft, and a sign that Wall Street’s immediate reaction to the news is that it makes an Oracle-PeopleSoft deal more likely. That or analysts just have a heck of a lot of confidence in PeopleSoft founder and chairman Dave Duffield, who was named CEO.

PeopleSoft’s board cited “a loss of confidence in Mr. Conway’s ability to continue to lead the company,” which has posted disappointing results recently, blaming them on adverse publicity from Oracle’s takeover attempt and antitrust battle with the Justice Department. But the company said in the same announcement that third-quarter license revenues will come in better than expected, so at least for now, business appears to be on the rebound.

The announcement came on the same day that the Justice Department dropped its opposition to Oracle’s takeover attempt, and a trial begins Monday in Oracle’s lawsuit to overturn PeopleSoft’s defense measures erected to fend off the takeover. Conway was adamantly opposed to the takeover, so the timing of his firing had analysts wondering why the company would choose now to give up its main line of defense, concluding that some movement in the 15-month-old battle may be at hand.

Stocks soared Friday in a move largely attributed to inflows on the first day of a new quarter, as economic reports were mixed. Chip stocks surged after J.P. Morgan upgraded the sector.

The Nasdaq soared 45 to 1942, the S&P 500 rose 16 to 1131, and the Dow surged 112 to 10,192. Volume declined to 1.59 billion shares on the NYSE, but rose to 1.83 billion on the Nasdaq. Advancers led 24-8 on the NYSE, and 21-9 on the Nasdaq. Upside volume was 86% on the NYSE, and 84% on the Nasdaq. New highs-new lows were 345-16 on the NYSE, and 143-32 on the Nasdaq.

Research In Motion fell 3% after beating estimates but issuing mixed guidance, and Redback plunged 34% on a warning.

Lawson rose 3% after meeting estimates.

Nokia gained 5% on a Goldman Sachs upgrade, and Red Hat , Blue Coat and Citrix also surged on upgrades.

Interwave plunged 41% on news that Alvarion is abandoning plans to acquire the company.

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