PeopleSoft's Courtroom Confession

You'd think that after the disaster Jean-Marie Messier created at Vivendi (NYSE: V  ) by overhyping the prospects of an aging French water utility, no executive would ever again resort to lying about his company's prospects.

Yeah, you'd think, but we don't live in fantasyland. So I guess you can color me unsurprised that the reason Craig Conway was fired as CEO of business software maker PeopleSoft (Nasdaq: PSFT  ) was because... wait for it... he was less than honest in describing PeopleSoft's sales prospects. Oops.

The dirty laundry was aired yesterday at the opening of the trial in Oracle's (Nasdaq: ORCL  ) suit to remove anti-takeover provisions that would allow it to move forward with a $7.7 billion hostile acquisition of PeopleSoft. Director Steven Goldby took the stand and described how Conway misled analysts in September 2003 when he said that Oracle's bid was having no impact on sales. Goldby also said that the board took action shortly afterward, amending his comments in a transcript filed with the Securities and Exchange Commission.

But Conway didn't get into hot water until recently, when in a deposition relating to the trial he gave his reasons for stretching the truth. A report at Forbes.com quotes Conway saying in the deposition that he was "promoting, promoting, promoting." And that he decided to brush off the impact Oracle's bid was having on sales because he was "hoping for a self-fulfilling prophecy."

Are you kidding me? News flash, folks: Denial isn't a strategy and is best reserved for the dark sitcoms making the rounds on HBO. It's as if Conway was planning a guest spot on Curb Your Enthusiasm rather than running a $2 billion a year software firm. No wonder the board fired him.

Of course, amid the comedy is an important lesson for investors: Run away from any firm that gets so caught up in promoting itself that it takes its eye off business fundamentals. That's probably what happened with PeopleSoft under Conway. New CEO Dave Duffield is unlikely to let that happen again, but it's probably too late for it to matter.

Indeed, in follow-up testimony this morning Goldby admitted that PeopleSoft's board would be willing to talk about a deal if the price were right and the acquisition could be closed quickly. Does anyone doubt the database king will agree to those terms? I don't.

It's time to get ready for OracleSoft.

Need to get current on the Oracle-PeopleSoft love-hate affair? Try these Foolish tidbits:

  • When Conway was sacked last week, I argued that OracleSoft was inevitable.

  • But a white knight like IBM (NYSE: IBM  ) could step in and rescue PeopleSoft. Microsoft (Nasdaq: MSFT  ) , however, has already said it wants no part of a deal.

  • Oracle has been on the up, but its recent results make a PeopleSoft acquisition more inviting.

  • Fortunately, a federal judge decided that Oracle could go ahead with its bid.

Don't like companies that treat hype like a product? We don't either. In fact, Tom Gardner seeks out the quiet and reserved for subscribers ofMotley Fool Hidden Gems, and his picks are walloping the market. A free 30-day trial is yours for the asking.

Fool contributor Tim Beyers owns shares of Oracle. You can view his Fool profile here.


Read/Post Comments (0) | Recommend This Article (0)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 502254, ~/Articles/ArticleHandler.aspx, 8/27/2014 7:11:06 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement