PeopleSoft directors fired their chief executive and president, Craig Conway, late last week.
He was replaced by the company's founder and chairman, Dave Duffield, who served as chief executive from PeopleSoft's incorporation in 1987 through 1999, when he turned the reins over to Conway.
Duffield said his reappointment is permanent.
Conway's dismissal resulted from a "loss of confidence" in his ability to lead the company, PeopleSoft said.
Chief financial officer Kevin Parker and executive vice-president Phil Wilmington were promoted to co-presidents and Aneel Bhusri, a former PeopleSoft executive now working as a venture capitalist, became vice-chairman of the board.
PeopleSoft said that its licence revenue in the quarter ended 30 September topped $150m (£83.7m).
Many financial analysts had expected lower figures after PeopleSoft said that its licence revenue for the quarter had topped Oracle's: Oracle reported $69m in application revenue in its most recent quarter, and while PeopleSoft would not comment further on its revenue, analysts took this to mean it had only edged past Oracle's disappointing results.
Conway's dismissal at the end of what turned out to be a respectable quarter puzzled some analysts. "It was a huge surprise," said American Technology Research analyst Donovan Gow.
"$150m in licence revenue is strong - pretty much everyone thought that the quarter would be a complete disaster. On the one hand, they're saying we've lost faith in the CEO; on the other they're saying they're gaining traction with new and existing customers. Obviously, they're not giving him credit for that."
Speaking on behalf of PeopleSoft's board, director George Battle declined to explain the loss of faith in Conway. The decision was made and approved Thursday night by the board's five independent directors, with Duffield and Bhusri abstaining from the vote, he said.
"The simple and plain truth is that, over time, the board has become increasingly concerned with Craig's leadership and essentially had lost confidence," Battle said. "There's no smoking gun, there's no accounting irregularity. He was not terminated under the for-cause provision in his contract."
Battle denied that PeopleSoft's battle with Oracle, which is continuing a hostile takeover campaign it launched in June 2003, had anything to do with Conway's departure.
PeopleSoft's board has consistently rejected Oracle's offer, now valued at $7.7bn. Conway, a former Oracle executive, strongly opposed the deal and was seen as having a personal stake in ensuring it did not occur.
Battle said PeopleSoft's transaction committee, comprised entirely of independent directors, unanimously agreed to reject each of Oracle's bids and was never at odds with Conway about the Oracle deal.
Financial analyst Charles Di Bona, of Sanford C Bernstein, said he sees deeper problems at the company than the confusion created by Oracle.
"A large part of the loss of confidence really is more around the JD Edwards situation than Oracle," he said, referring to PeopleSoft's efforts to integrate the smaller business applications supplier it bought a year ago.
"$150m is still down 9% year-over-year. There's not as much good there as [Wall] Street thinks. This is not a growing company, this is an ailing company. I think that's getting lost in the noise because people thought it was not just ailing but on life support."
Duffield said his priorities at PeopleSoft will be returning the company to the core values upon which it was founded. "We need a little more in the way of vision and strategy, and I think I'm very good at that stuff," he said.
Forrester Research analyst Paul Hamerman sees the move as a good one for customers. Under Conway, PeopleSoft moved aggressively on raising maintenance prices and lost some of its reputation as a customer-focused supplier, he said.
"There's been an erosion in customer confidence," Hamerman said. "There have been issues about the maintenance pricing and the service levels customers are receiving.
"In the days when Dave Duffield ran the company, they bonded with their customers and really paid a lot of attention to customer satisfaction. They've decided to step back in and restore some of the original values of the company."
Hamerman also expects to see a more developed technology vision from Duffield, something he feels Conway lacked. PeopleSoft's primary product development strategy for the past year has been what the company calls the "total ownership experience" - a push to reduce its software's administrative costs and burdens.
Whether Duffield's return will change PeopleSoft's stance regarding Oracle is an open question. "Conway was generally regarded as a big impediment to the deal going through," said Gow.
"I don't necessarily think [Duffield] will be any more likely to accept the bid, but it's hard to read at this point. The knee-jerk reaction is that the stock price will go up as people expect the deal is more likely."
Indeed, PeopleSoft's shares rose 15% on the day, to $22.83. Oracle's all-cash offer currently stands at $21 per share.
Hamerman said that as PeopleSoft's founder, Duffield is likely to want to see the company remain independent. "I don't think he wants to give up the company, especially to Oracle," he said.
However, Yankee Group analyst Mike Dominy thinks this marks the end of the road for PeopleSoft's resistance.
The US Department of Justice announced on Friday that it would not appeal a court decision over-ruling its objections to a PeopleSoft-Oracle merger, the EC is expected to approve the deal, and PeopleSoft is struggling to increase its sales, so Oracle's offer becomes ever harder to walk away from, Dominy said.
"I absolutely believe the developments with Oracle are a factor [in Conway's departure]," he said. Oracle now needs to develop and clearly communicate a plan for both short- and long-term support of PeopleSoft's customers; disrupting product development and alienating the customers it spent billions to buy would be a waste of Oracle's investment, he said.
Stacy Cowley writes for IDG News Service