The secret life of companies exposed

The court battles between PeopleSoft and Oracle are bringing to light reams of internal documents and discussions usually kept...

The court battles between PeopleSoft and Oracle are bringing to light reams of internal documents and discussions usually kept hidden from public view.

Highlights from last week's Delaware's hearings include:

  • Oracle is leaving itself room to raise its bid for PeopleSoft, which currently stands at $21 (£11.78) per share. Oracle director Joseph Grundfest said in court on Wednesday that no one should assume Oracle's current offer is its final one.
  • The surprise firing last Friday of PeopleSoft chief executive Craig Conway was sparked in part by a mutiny. Chief financial officer Kevin Parker, Americas field operations head Phil Wilmington and chief marketing officer Nanci Caldwell no longer wanted to work with Conway, and PeopleSoft could not afford to lose the three executives, director Steven Goldby testified.
  • Although board members first raised the idea of firing Conway earlier in the year, the decision to go ahead and do so came abruptly last week, with Conway given little warning. Goldby and another director, George "Skip" Battle, met Conway several weeks ago to discuss their qualms about a deposition Conway gave for the Delaware case, in which Conway acknowledged lying to analysts when he told them that them Oracle's takeover campaign was not affecting PeopleSoft's sales. Conway was not told at that meeting that he might be fired.
  • Conway overstated PeopleSoft's case several times in the months after Oracle launched its tender offer. "In a lot of ways, I was doing the same thing policemen do at the scene of the crime," Conway said in a deposition. "I was telling people, 'The show is over.'  Absolutely not true. The company was under ongoing attack."
  • At one point, PeopleSoft's directors changed quotes in a transcript of Conway's remarks before filing the transcript with the US Securities and Exchange Commission. In response to a question from analysts, Conway said, "The last remaining customers whose business decisions were being delayed have actually completed their sales and completed their orders." That statement was incorrect, and PeopleSoft removed it from the transcript it filed, adding a note that some statements in the transcript had been changed "to reflect the intended meaning of the speaker". The transcript alteration drew some sharp words from the judge. "This is some sort of Orwellian thing?" he asked. "It strikes me as passing strange. Like Gerald Ford - I'm sure wishes he could revise what he said about Poland in 1976."
  • PeopleSoft's "customer assurance plan" (CAP), a contractual addition that offers customers sizable payments if PeopleSoft is bought by a company that disrupts its development and support, has been controversial from its start. But one of the provision's most inflammatory clauses ended up included by accident. "Anne Jordan, who was then the general counsel of the company, simply cut and pasted a definition out of what I think was an employee agreement," Goldby testified, when asked to explain how a clause listing a change in the compensation of PeopleSoft's board - not just a change of company ownership - came to be included as a trigger for the CAP. "PeopleSoft certainly has no shortage of legal talent on the payroll, and one would expect a much better job of drafting something that important than actually took place," he said. The clause was soon dropped from the CAP.
  • PeopleSoft's management initially saw Oracle's offer as potentially a hoax  - "brings new meaning to the word 'diabolical'," Conway wrote in an e-mail soon after Oracle commenced its offer. "We thought it was not a good faith offer," Conway said at the trial. "We didn't think it was even a bad faith offer. We thought it was a destructive offer." Despite Goldby's comments about his willingness to negotiate with Oracle if they come to the table with a reasonable offer, the tenor of his testimony overall expressed hostility to Oracle and doubt about its motives. "[PeopleSoft] was and continues to be in a fight for its life," he said at one point. At another, he praised PeopleSoft's performance "despite the strongest headwind that any software company has ever faced".
  • PeopleSoft's deal to acquire JD Edwards almost fell apart as PeopleSoft began 2003 by missing sales expectations in its first quarter. Conway responded to criticism from JD Edwards by pointing out that it, too, was going to miss its first-quarter revenue projections. "When we issued the pre-announcement [of the licence sales shortfall] and I spoke to [JD Edwards chief executive] Bob Dutkowsky, I was probably, if not undoubtedly, trying to hold the deal together," Conway said. PeopleSoft announced its plan to buy JD Edwards in June 2003, prompting Oracle to initiate its takeover campaign.

Judge Strine has broken up the tedium of a trial focused on the minutiae of contracts and board minutes with a few barbs aimed at PeopleSoft's and Oracle's lawyers.

As the court considered bank documents identifying Oracle and PeopleSoft with the codenames "Orange" and "Pear," the judge applauded the "health-conscious" naming by the bankers.

"We didn't have, like, Voracious Shark and Plump Bait Fish or anything like that?" he asked. "Orange and Pear. Sensitivity training at Goldman Sachs paying off."

Stacy Cowley writes for IDG News Service

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