Big PeopleSoft Layoffs Likely

So. Its a done deal: After more than a year and a half of courtroom battles, boardroom machinations, and name calling, Oracle Corp. (Nasdaq: ORCL) will finally close its $10.3 billion acquisition of PeopleSoft Inc. (Nasdaq: PSFT) today (see Oracle to Close PeopleSoft Deal and The Price Is Right for PeopleSoft).

Last night Oracle confirmed that 97 percent of PeopleSoft shareholders had tendered their shares. The Redwood Shores, Calif.-based firm needed at least 90 percent of its rival’s shareholders to tender their stock to close the deal quickly. In what was already a seriously prolonged merger, Oracle stretched its offering period by another two days earlier this week (see Oracle Extends Offering Period).

But now the tough task of actually integrating the two companies begins. It has been suggested that Oracle may lay off as many as 6,000 of PeopleSoft’s employees, a massive chunk of the company’s overall workforce. According to PeopleSoft’s most recent annual report, the company has over 12,000 employees around the world. Oracle is aiming to notify PeopleSoft staff of their future employment status by January 14.

Gordon Haff, senior analyst at Illuminata Inc., warns that large-scale M&A deals are seldom easy. “It’s always difficult merging two companies, so, by definition, it’s going to be hard to pull off,” he says.

So, which parts of PeopleSoft are most likely to be cut? “In general, with M&A the most obvious areas of overlap are in operations -- finance and admin, that type of thing,” Haff adds.Sheryl Kingstone, program manager at analyst firm The Yankee Group warns that Oracle needs to keep PeopleSoft’s intellectual capital. “In my opinion they need to leverage PeopleSoft’s products and technology people,” she says. "They are going to need them for understanding PeopleSoft applications and future development and integration work."

PeopleSoft is regarded as something of a leader in the enterprise resource planning space, and Oracle’s own customers are keen to get their hands on some of the firm’s technology. Specifically, this includes the products that PeopleSoft acquired when it bought J.D Edwards in 2003. PeopleSoft’s payroll applications are also appealing to Oracle users (see Oracle Users Eye PeopleSoft ).

Oracle now faces the tough task of maintaining morale among PeopleSoft employees while at the same time ensuring that those products continue to be developed and integrated into its own product line.

Despite the January 14 target for notifying PeopleSoft staff, Haff says that the true nature of the combined company will only become clear after a number of months. “There was a large contingent that looked on this acquisition as Oracle looking to eliminate a competitor rather than Oracle broadening its product capabilities.

”We will get some illumination on the true motives behind this acquisition as it plays out over the next 12 months or so."Oracle, which will officially launch the new combined company on January 18, was unavailable for comment.

Shares in Oracle rose slightly in early trading this morning, rising 5 cents (0.38 percent) to $13.28. PeopleSoft shares were up 2 cents (0.08 percent) to $26.50.

— James Rogers, Site Editor, Next-Gen Data Center Forum