PeopleSoft Is Playing For Keeps

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 “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.

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