After acquiring J.D. Edwards on July 18 for US$1.7 billion, PeopleSoft Inc. this month unveiled a strategy that bolsters the companies’ existing product lines, but involves laying off between 750 to 1,000 employees.
Implemented to get rid of duplication in middle management, marketing and administration, the layoffs will save PeopleSoft about US$10 to US$15 million in 2004 said Kevin Parker, executive vice-president and CFO during a Webcast on Thursday. He said the headcount in R&D, sales and consulting would not be diminished as a result of the layoffs.
PeopleSoft acquired about 5,000 employees from J.D. Edwards and after the reduction in staff the company’s final headcount will be about 12,000, Parker said.
In addition, enhancing the company’s offerings is also part of PeopleSoft’s strategy.
“Our product strategy is about expansion, not consolidation,” explained Craig Conway, president and CEO of PeopleSoft in Pleasanton, Calif.
“The best way to do that is not to try to consolidate different product lines that are already well-suited to their respective industries, but rather to use those product lines and improve them so they’ll be more competitive for their respective markets,” he said.
In the next 30 to 180 days, PeopleSoft said it plans to integrate some J.D. Edwards products with its own offerings and vice versa, said Ram Gupta, executive vice-president, products and technology, based in Pleasanton, Calif.
For example, in Q4 2003 PeopleSoft plans to integrate its Supplier Relationship Management (SRM) tools into J.D. Edwards’ offerings, Gupta said. In Q1 2004 PeopleSoft will integrate J.D. Edwards’ Asset Management programs into its products.
Some of the product integration has been completed.
“For example, the latest release of J.D. Edwards 5.0 has the look-and-feel of a PeopleSoft application,” Gupta said.
Of the three new product groups now being introduced, the first will provide software specifically for IBM Corp.’s iSeries AS400 line and will be called PeopleSoft World.
The second, dubbed PeopleSoft One, includes products targeted to the midsized enterprise market, and the third, entitled PeopleSoft Enterprise, is composed of software geared for the large enterprise market.
Warren Shiau, software analyst at IDC Canada Ltd, in Toronto said that customers will benefit from the merger between the two companies because there is little overlap between the industries the companies serve, and the size enterprise the companies target.
Where PeopleSoft has a strong following in the large enterprise market, J.D. Edwards targets mid-sized companies. Also, PeopleSoft’s clients generally come from service-based verticals such as health care, education and government, while J.D. Edwards serves asset intensive sectors such as manufacturing, distribution and real estate.
PeopleSoft also initiated a US$350 million stock repurchase plan that is expected to be completed by Dec. 31 of this year.
“It’s important to note that even after the stock buyback PeopleSoft…will still be a cash-flow positive business. We expect our cash at Dec. 31 to be a US$1 billion or greater, so we’re not impinging on our liquidity and our ability to manage this business successfully. But it is important and a good use of our cash at this time to buy back some shares,” Parker said.
PeopleSoft is facing a hostile takeover bid from rival Oracle Corp., which made a US$5.1 billion bid for the company in June, only days after PeopleSoft announced its intent to acquire J.D. Edwards. [see ” PeopleSoft announces plan to acquire J.D. Edwards“]
After the company’s board of directors unanimously voted against recommending the offer to shareholders, Oracle boosted its offer to US$6.3 billion, or US$19.50 per share. [see ” PeopleSoft board rejects Oracle bid“]
But with PeopleSoft’s stock buy back off, shareholders would make more money selling their stocks to PeopleSoft instead of Oracle, Shiau said.
“Right now it wouldn’t make sense if you were a shareholder to sell your shares to Oracle,” he said.
Oracle recently issued a release affirming its intent to acquire PeopleSoft and has extended its offer for the common stock of PeopleSoft to midnight EDT on Oct. 17. [see ” Oracle extends PeopleSoft deadline as take-up stalls“]
PeopleSoft has not backed down from its position that a takeover by Oracle, based in Redwood Shores, Calif., would not be in the best interests of the company, its customers and its shareholders. Both PeopleSoft and J.D. Edwards have sued Oracle in attempts to block the company’s takeover bid. [see ” J.D. Edwards sues Oracle over PeopleSoft bid” and ” PeopleSoft sues Oracle“]
Oracle has since launched a lawsuit against PeopleSoft’s board of directors claiming it is failing to act in the best interest of its shareholders. [see ” Oracle increases offer, sues PeopleSoft“]
On June 6, Conway in a statement called the offer “atrociously bad behaviour from a company with a history of atrociously bad behaviour,” and said it was an obvious attempt to disrupt the acquisition of J.D. Edwards.
PeopleSoft is based in Pleasanton, Calif. For more information visit www.peoplesoft.com.
