To the casual observer, Oracle v. PeopleSoft, the case unfolding in Delaware Chancery Court, is just the latest round in an ugly and long takeover fight between two software giants. Ho-hum.
But sometimes a small detail in such a case can speak volumes about the times we live in. And that is precisely what happened last week, when testimony turned to the issue of corporate lies, the executives who tell them and the companies that help to paper them over.
Oracle, you may recall, made a hostile bid for PeopleSoft 14 months ago and has received scorched-earth opposition since. The judge hearing the case will decide whether PeopleSoft’s directors exercised their fiduciary duty to shareholders in turning down the bid from Oracle.
Our story begins on Oct. 1, the Friday before the trial began, when PeopleSoft abruptly fired Craig A. Conway, its chief executive. In court, a few days later, Steven D. Goldby, chief executive of Symyx Technologies and a PeopleSoft director, testified that one of the reasons Mr. Conway got the boot was that he made a misstatement to analysts at a meeting on Sept. 4, 2003.
The analysts’ meeting was PeopleSoft’s first and, as is typical, was transmitted over the Internet. Mr. Conway’s misstatement came after an analyst asked if the Oracle bid had disrupted PeopleSoft’s business.
The questioner wanted to know if customers were holding off buying PeopleSoft software out of fear that the goods would become obsolete if Oracle eventually won the battle. (Both companies sell so-called enterprise software that helps corporations handle things like finance and manufacturing.)
Playing down the bid’s effects, Mr. Conway said: “I think people have lost interest in it. The last remaining customers whose business decisions were being delayed have actually completed their sales and completed their orders.” In other words, not a disruptive factor, in Mr. Conway’s view.
In reports issued after the meeting, many analysts parroted Mr. Conway’s comments. A bullish report by Banc of America Securities said the Oracle bid seemed to be less and less relevant to PeopleSoft each day. A Wachovia Securities analyst said, “Officials mentioned that the disruption from the Oracle bid had decreased in the last few weeks.” First Albany’s report, raising PeopleSoft to a buy from neutral, said Oracle’s bid “is no longer a disruptive factor.”
NEVER mind that back on Planet Earth, Oracle’s bid was indeed creating problems for PeopleSoft. As Mr. Goldby testified in court last week, PeopleSoft’s board knew immediately that Mr. Conway had erred in his comments. “We were aware that they were not wholly true,” he said.
So what did the company do to correct the misstatement? It filed a corrected version of the meeting transcript with the Securities and Exchange Commission. The correction, however, was part of a document identified as being related to the takeover offer and almost certain to be seen by no one.
In fact, the only clue a curious investor might have that PeopleSoft was correcting anything was this sentence at the top of the transcript, which does not appear until the last half of the document: “Certain statements in this transcript have been corrected to reflect the intended meaning of the speaker.” The filing identified neither the speaker nor the statement that was being corrected.
Gone, however, was Mr. Conway’s statement about PeopleSoft’s customers completing their sales. Instead he is quoted as saying: “Oracle’s tactics have created concern among many users, and that’s a problem for us. Fortunately we’ve been able to overcome much of it and we expect that we will continue to be able to do so.” Words he never said at the meeting, but that the company said he meant to.