PeopleSoft details layoff, product plans

PeopleSoft detailed to analysts its plans to digest the recently acquired J.D. Edwards, confirming its intention to lay off up to 1,000 workers while keeping the Edwards product line intact.

PeopleSoft executives, speaking to a hall of securities analysts in New York on Thursday, said the company will maintain the mainframe and client-server versions of J.D. Edwards' software and its own set of applications as three distinct product lines. Under the plan, J.D. Edwards' products will be renamed PeopleSoft World and PeopleSoft Enterprise One, respectively.

PeopleSoft Chief Executive 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 J.D. Edwards. All three companies compete in the market for business-management applications.

"This was never intended as a consolidation play," Conway said. "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 J.D. Edwards customers reason to breathe a sigh of relief, employees have less cause to celebrate. As part of its goal to eliminate $167 million to $207 million in duplicate costs, PeopleSoft executives said they'll cut 750 to 1,000 jobs as they fold in J.D. Edwards. The layoffs would eliminate approximately 6 percent to 8 percent of the combined headcount of about 13,000.

PeopleSoft, which originally forecast a combined annual cost savings of $150 million to $200 million as a result of the $1.8 billion acquisition, didn't detail whether the cuts would be concentrated on the J.D. Edwards staff or on PeopleSoft's. But PeopleSoft Chief Financial Officer Kevin Parker said cuts would 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 J.D. 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.

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PeopleSoft management also announced a plan to buy back $350 million worth of stock, about 18 million outstanding shares, by the end of the year. That represents more than 5 percent 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 J.D. 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 $7.25 billion bid is under regulatory review and is not set to expire until Sept. 19.

PeopleSoft management updated its earnings forecast for this year and next year as well. The software company expects total 2003 revenue of $2.145 billion to $2.175 billion and earnings of 52 cents to 55 cents a share. It anticipates 2004 revenue of $2.8 billion to $2.9 billion and earnings of 90 cents to 95 cents a share.