Oracle CEO: Stop Worrying

Larry Ellison says his company is on track postmerger and won't neglect its PeopleSoft customers.
Author:
Publish date:

Updated from 6:23 p.m. EST

Less than a month after closing the $10.3 billion takeover of

PeopleSoft

, Larry Ellison, CEO of

Oracle

(ORCL) - Get Report

, confidently declared that his company has completed the organizational integration of the two companies and that he expects to lose far fewer customers than his critics expect.

"In terms of organizational changes, we are done. There is nothing left to do," he told reporters at a Tuesday press conference at Oracle's Redwood Shores, Calif., headquarters. Asked about customer losses caused by uncertainty surrounding

the merger, Ellison said that Oracle's retention rate is about 95% and that he doesn't "know why it would be worse

for the combined companies, as long as we do a good job of supporting customers and don't pull any business shenanigans."

At one point during the company's

ultimately successful antitrust bout with the Department of Justice, an Oracle executive testified that as many as 15% of PeopleSoft's customers could defect after a takeover. Losses that high would significantly reduce the stream of maintenance revenue that pours into the company -- somewhat more than $1 billion a year.

But Ellison said the loss of 15% of the smaller company's customer was "a worst case scenario," and there was no reason to expect losses of that magnitude. "I'm not concerned about hitting our financial targets," he said.

Ellison made his remarks at the conclusion of an unusual meeting called to allay the roughly 1,300 customers and partners who may fear that Oracle would not be a good software provider for PeopleSoft customers.

"Circle 2013 on your calendars," he said "That's how long we'll support you."

One point that might reassure customers was the revelation that some 90% of PeopleSoft's support and engineering employees have received offers to join Oracle, though how many have accepted is not yet known. Interestingly, less than 1,000 of the 5,000 layoffs announced last week were in the San Francisco Bay Area, home to both companies. The rest were in other states and other countries.

Ellison's upbeat presentations didn't get universal approval on Wall Street. Sanford C. Bernstein analyst Charles Di Bona, for example, said the discussion was short on substance. "Customers and partners may be comforted by Oracle's stated plans to maintain a substantial portion of PeopleSoft's operations, but management did little to address the heightened operational risk implied by this plan or the impact this increased commitment will have on Oracle's ability to generate returns from the merger," he wrote in a note to clients. (Di Bona's firm doesn't do investment banking but holds shares of PeopleSoft.)

Prudential's Brent Thill was more positive. He applauded the shakeup within Oracle's application software team and said he believed that the customer meetings, and analyst day on Jan. 26, where detailed financial data is expected to be released, will push up earnings estimates for the company. (Prudential does not have an investment banking relationship with Oracle.)

Oracle also promised customers that new versions of both Oracle's and PeopleSoft's major application programs will be ready in 2006.

By 2007, "Project Fusion" an effort to combine the best features of Oracle, PeopleSoft and J.D. Edwards (now owned by PeopleSoft) will bear fruit with a number of applications. A year later, Oracle hopes to have a true suite of Fusion products on the market. The Fusion products are clearly aimed at German software giant

SAP

(SAP) - Get Report

, the only business software venture larger than the combined Oracle and PeopleSoft.

As he has in the past, Ellison predicted that the further consolidation of the software industry, and said he expects Oracle's next acquisition to be friendly. Although the CEO said the major organizational task of integrating the companies was over, Oracle will wait until customers and Wall Street seem convinced, to wage another M&A battle.