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Magazine Issue Date:
10/01/2003
PeopleSoft Is Playing For Keeps
Jon Swartz
"It's time
for the next game"
Larry Ellison couldn't beat Craig
Conway on the basketball court when the two worked-and sparred-at Oracle more
than a decade ago.
Today, they've taken the game and moved it to a new
playground-only this time, rival billion-dollar software companies, millions of
shareholders and prodigious egos are at stake. PeopleSoft is combating a hostile
bid from Oracle in Silicon Valley's nastiest fight since dissident shareholder
Walter Hewlett took on Hewlett-Packard last year.
"This basketball game is over," an unflinching Conway says in a 75-minute
interview at PeopleSoft's tree-lined campus in Pleasanton, California. "An offer
was made and we rejected it. It's time for the next game."
That game is PeopleSoft's merger with rival J.D. Edwards, which closed in
August, creating a $3 billion business-software company. "Oracle can do what it
pleases, but our merger has our laser-like focus," says Conway, who visited J.D.
Edwards' headquarters in Denver prior to the acquisition.
Conway, 48, has never backed down from a fight-especially when it involves
his former boss, billionaire software magnate Ellison. Since Conway lost a power
struggle at Oracle a decade ago, he has pined to take on Ellison, software
industry experts say.
Many are betting the tireless grinder, Conway, will outlast the swashbuckling
Ellison and Oracle. "I've never seen Craig lose when the competition is fair,"
says Mike Seashols , the former head of sales and marketing at Oracle, who hired
Conway in 1985.
The high-profile battle has made a media star of the no-nonsense Conway, who
has overcome humble beginnings in the Midwest to turn around PeopleSoft. With
Oracle breathing down its neck with a $7.5 billion offer, the reluctant Conway
is trading barbs with Ellison. "The last six weeks seem like two years," he
says, sighing.
To wit:
On Oracle: "This is an ends-justifies-the-means company. Internally, it is a
full-contact sport, and the first bloody hand up gets the prize."
On Oracle's takeover bid: "(Larry) initially said he would kill (PeopleSoft),
then he turned around and said I was using fear and scare tactics. It's
situational ethics."
On Larry's management style: "It's a divine monarchy, and he's the pope.
Larry is best at generating controversy and distractions."
If that is true, then Ellison has been at his provoking best since Oracle
announced its hostile bid June 6.
In his missive late this past summer, Ellison poked fun at Conway's
observation that Oracle's takeover bid is "like me asking if I could buy your
dog so I can go out back and shoot it." Ellison, barely suppressing a smirk,
gave a name to a dog Conway owns, and a nickname to Conway. "If Craigy and Bear
were standing next to each other and I had one bullet, trust me, it wouldn't be
for the dog," Ellison said to laughter.
A perturbed Conway, in a phone interview a few weeks earlier, gives his
long-delayed response. "Someone rushed into my office and said I wouldn't
believe it," he says. "I had only one overriding reaction: I hope my (two
grade-school) children don't read this."
For the record, Conway assures animal lovers that the family lab, Abby, is
safe. But the cavalier nature of Ellison's digs sometimes gets to Conway.
"There's this tolerance to let him say one thing, change his opinion the next
day and then not hold him accountable," the normally stoic Conway says, arms
gesturing. "If Sandy Weill or Jack Welch did that, it would be front-page news."
Oracle claims Conway is resorting to name calling because he has no plans for
J.D. Edwards. Conway says he has a plan, but doesn't care to share it with a
rival.
Contrasting combatants
Though they share similar backgrounds-both overcame
humble beginnings in the Midwest to head billion-dollar companies-Conway and
Ellison have little in common and have talked just twice in the past decade.
Last year, Conway called Ellison and for 20 minutes discussed the possibility of
PeopleSoft buying Oracle's software applications. But talks faltered.
The thrice-divorced Ellison still controls Oracle, the company
he founded in 1977, but carves out time to compete in the America's Cup yacht
race and fly a decommissioned Russian fighter jet.
"Larry gets bored easily," Seashols says. "He likes to zig and zag, and
surround himself with process guys like (CFO Jeff) Henley."
By contrast, Conway, who's been married to the same woman for 22 years, is a
meticulous, hands-on manager who every year reviews the work of some 3,000
PeopleSoft managers and signs off every purchase order over $100,000. Conway has
been known to change press conference venues and trade-show booths at the last
minute because they didn't meet his exacting standards.
"He's very demanding and insists that his people perform at the highest
level," says Steve Goldby, a PeopleSoft board member who has known Conway for 15
years.
"It was no surprise he wanted to run a big company. He's a success-driven
guy," adds David Kashtan, who recruited Conway to run TGV Software shortly after
Conway left Oracle. Conway took TGV public and sold it to Cisco Systems for $115
million in 1996. He also turned around OneTouch Software, an interactive
broadcast network in Silicon Valley.
It was Conway's voracious drive for power, Oracle insiders say, that prompted
then-Oracle President Ray Lane-who was certain marketing executive Conway wanted
his job-to fire him in 1993. Conway said the decision was mutual, and he wanted
to be a CEO. Lane had no comment.
Though Conway objects to Oracle's tactics, he admires the "single-minded
focus" that has made it one of the world's largest software companies. "There's
a little bit of the company in me," Conway says. "I'm an ultra-competitive
player."
Often, that surfaced in brutal basketball games between Team Ellison and Team
Conway, which usually won. "There was plenty of trash talking and physical
altercations. Losing was very frustrating to Larry," says Seashols, who is now
CEO of database maker GoldenGate.com. "The good thing for Craig, though, is now
he doesn't have to play by Larry's rules. Regulators, customers and shareholders
will determine the outcome."
When challenged, Conway usually perseveres. He is credited with reversing the
fortunes of PeopleSoft, whose revenue and profit were declining. "He was the
right guy to bring a higher level of energy without disrupting our culture,"
David A. Duffield, PeopleSoft's avuncular co-founder who remains chairman, said
in a phone interview. "He's fully matured from street fighter to a well-honed
businessman."
The Hawaiian shift-clad Duffield, who signed his e-mails to employees with
the initials "D.A.D." and treated quarterly meetings like a late-night talk
show, instilled a laid-back-and sometimes pricey-culture to PeopleSoft. One
company perk, free bagels, cost $2 million a year.
Enter the practical Conway, who for several years lived with his parents and
older brother in a trailer park in Fort Wayne, Ind. After taking charge as CEO
in 1999, Conway quickly whipped PeopleSoft into shape. He bet the company's
future on the Internet and new markets, insisted customers pay their bills,
fired top executives and banned free bagels and pets.
The results were immediate. By 2001, PeopleSoft's revenue improved 45 percent
to $2.07 billion, and it was profitable. "Craig brought an aggressive,
professional mentality to the company," says analyst Barry Wilderman, of META
Group.
A typical 14-hour work day begins at 4:30 a.m., when Conway works out in a
gym at his Woodside, Calif., home. Things got so hectic during the early days of
the Oracle bid that he spent several nights at a rundown hotel near PeopleSoft's
campus. It was only at the pleading of staff, that Conway checked into a nicer
hotel.
That doesn't mean Conway, a stickler for suits and ties, can't loosen up. In
2000, he appeared before 15,000 customers and business partners in white jacket
and bell-bottoms and struck a disco pose a la John Travolta in "Saturday Night
Fever." At a company event in the summer of 1999 he volunteered for the dunking
tank-in his suit.
Several of PeopleSoft's quirky traditions also endure, including the "Raving
Dave's" house band and anti-Ellison T-shirts. The latest: "Larry, KISS OUR
APPS!" Outdoor basketball and volleyball games are common.
But everything isn't fun and games at PeopleSoft. Besides fending off a
hostile takeover, it is coping with a tech spending drought. Year-over-year
revenue drooped 8 percent to $1.95 billion in 2002, and 5 percent in the first
three months of 2003, forcing it to shed 200 jobs. However, PeopleSoft rebounded
with a 3 percent hike in the quarter ended June 30.
"There are challenges, but we just need to focus on what we do well," Conway
says. "This company will change the (business) software industry forever. We're
not concerned with Oracle."
Sidebar: Supply Chain
Snapshot
Peoplesoft's Global Reach
By Patrick Burnson
WT: How large is your
global operation and distribution network?
PS: PeopleSoft is a software
developer and marketer based in the U.S. with 11,000 customers in 150 countries.
Australia is simply huge for us. As you might expect, we are doing business in
all of the World Trade "Top 30 Countries for Trade & Expansion," such as
Germany, Japan, the Netherlands, Singapore....
WT: Where are your distribution centers (both internationally and
domestic); and what are the advantages/disadvantages relative to your company's
SCM strategy?
PS: We have service centers in the U.S., Canada and other locations
worldwide.
WT: Who are your company's transportation suppliers?
PS: We use a variety of intermediaries, including FedEx, DHL, and the
U.S. Postal Service. Each handles key elements of shipping and Customs
compliance.
WT: IT & Software Solution Providers. Who are they and what functions
do you use their product for (ERP, WMS, CRM, etc.)?
PS: PeopleSoft has alliance relationships with various companies
ranging from Sun Microsystems, to HP, IBM, and Microsoft.
WT: Trade Services. Does your company use consultants, trade
attorneys, or other experts to help in the design and implementation of your SCM
strategy?
PS: Yes, we rely on Citigroup Global Markets, Goldman Sachs, and
Gibson Dunn & Crutcher for this information.
WT: Financial Settlement. How is payment to vendors and others
settled, and does your company utilize any electronic banking or settlement
solutions for this function?
PS: PeopleSoft uses PeopleSoft 8 Pure Internet Financial Management
System.
WT: Where was the CEO educated?
PS: State University of New York at Brockport.
WT: What MBA programs or schools does he value for recruiting?
PS: We have an on-campus grant for universities nationwide, and we
recruit from all the leading colleges including Stanford, MIT, and Harvard.
Jon Swartz is a
senior technology editor with USA TODAY. |
