Oracle Would Gut Sales, Marketing at PeopleSoft

Oracle Corp. executives said Thursday that they expect to save money from the database giant’s proposed $6.3-billion hostile takeover of PeopleSoft Inc. by gutting its sales and marketing budget.

PeopleSoft spent $515 million last year on such efforts, more than 25% of the Pleasanton, Calif.-based company’s 2002 sales.

In a town conference call aimed at reassuring users of PeopleSoft’s business-applications software, Oracle Executive Vice President Chuck Phillips told customers his company would not spend money trying to win new clients for PeopleSoft products. Instead, Redwood City, Calif.-based Oracle would focus on the more lucrative task of servicing PeopleSoft’s 5,100 existing customers, including some of the world’s largest corporations.

PeopleSoft took in $1.4 billion from maintenance, consulting and training fees last year, compared with $530 million in new software license fees. The software manages payroll, benefits and other human resources tasks.

Customers on the conference call peppered Phillips with questions about Oracle’s plans for maintaining PeopleSoft’s products, service and contracts. Phillips reiterated his company’s promise to “enhance and update” PeopleSoft products for at least 10 years. He also said Oracle would maintain PeopleSoft as a separate unit rather than try to integrate the software into similar Oracle programs.

But Phillips stopped short of committing to developing a brand-new version of the software, dubbed version 9. PeopleSoft’s current software suite was released three years ago.

PeopleSoft, meanwhile, expects to close its $1.7-billion friendly acquisition of J.D. Edwards & Co. today. On Thursday, PeopleSoft posted net income of $36.5 million, or 11 cents a share, on sales of $497 million for the second quarter ended June 30. In the same period a year earlier, it earned $36 million, or 11 cents, on revenue of $482 million.

PeopleSoft shares fell to $17.82 in after-hours trading after rising 1 cent to $17.90 on Nasdaq. Oracle shares fell 32 cents to $12.09 on Nasdaq.