PeopleSoft confirms job cuts and roadmap

PeopleSoft has confirmed its intention to lay off up to 1,000 workers while keeping the JD Edwards product line intact.
PeopleSoft executives, speaking to securities analysts in New York this week, said the company will maintain the mainframe and client-server versions of JD Edwards' software and its own set of applications as three distinct product lines. Under the plan, JD Edwards' products will be renamed PeopleSoft World and PeopleSoft Enterprise One, respectively.
PeopleSoft CEO Craig Conway implicitly sought to contrast this approach to Oracle's stated plan to acquire PeopleSoft and discontinue selling PeopleSoft's products. The company has so far fended off Oracle's hostile bid, which the database giant launched the same week PeopleSoft agreed to purchase JD Edwards. All three companies compete in the market for business-management applications.

Conway said: "This was never intended as a consolidation play. It was never intended to drive down the size of the product line…or to coerce or enable a revenue stream by consolidation. It's always been about growth."

Though that news should give JD Edwards customers reason to breathe a sigh of relief, employees have less cause to celebrate. As part of its goal to eliminate $167m to $207m in duplicate costs, PeopleSoft executives said they will cut 750 to 1,000 jobs as they fold in JD Edwards. The layoffs will eliminate approximately 6 per cent to 8 per cent of the combined headcount of about 13,000.

PeopleSoft, which originally forecast a combined annual cost savings of $150m to $200m as a result of the $1.8bn acquisition, didn't detail whether the cuts would be concentrated on the JD Edwards staff or on PeopleSoft's. But PeopleSoft CFO Kevin Parker said cuts will be aimed at redundant administrative, marketing and middle-management positions, leaving development, sales and consulting staff untouched.

In addition to cost reductions, PeopleSoft highlighted its opportunities to grow the combined sales of the companies by selling PeopleSoft products to JD Edwards customers and vice-versa. To that end, PeopleSoft intends to build technical bridges between the two companies' products to make them compatible. PeopleSoft said it expects to complete that work over the next six months, a quick timeframe for such an undertaking. The acquisition will also help PeopleSoft introduce new products, which it plans to do over the next 18 months, according to Ram Gupta, PeopleSoft's executive vice president of products and technology.
PeopleSoft management also announced a plan to buy back $350m worth of stock, about 18 million outstanding shares, by the end of the year. That represents more than 5 per cent of the 316.6 million shares currently outstanding. By taking some shares off the market, PeopleSoft may be seeking to further buffer itself from a hostile Oracle buyout.

But explicit mentions of Oracle, which had originally sought to derail the JD Edwards deal, were few. "I don't think the Oracle bid is a current issue," Conway said in response to a question about Oracle's offer.

Yet Oracle, which has raised the profiles of all three companies with its surprise bid, has not yet given up. Its $7.25bn bid is under regulatory review and is not set to expire until 19 September. PeopleSoft management updated its earnings forecast for this year and next year as well. The software company expects total 2003 revenue of $2.145bn to $2.175bn. It anticipates 2004 revenue of $2.8bn to $2.9bn.
Alorie Gilbert writes for CNET News.com