Craig Conway, the chief executive officer of financial software giant PeopleSoft, is facing a shareholder lawsuit over the company's decision to insert a 'poisoned pill' into customer contracts in order to relieve their fears over a hostile Oracle bid.
Dissident shareholders filed the motion at Delaware Court of Chancery last week to seek an injunction that would stop PeopleSoft from offering any more of the money-back guarantees to customers.
The potential liabilities from the guarantees currently amount to more than $800m (£480m), which the shareholders claim will effectively prevent an offer from Oracle, or any other potential suitor, from being accepted.
This, however, was shrugged off by Steve Swasey, PeopleSoft’s director of corporate public relations. ‘If you are talking about a $7.3bn acquisition, what’s $800m?’ he said.
Swasey said the clause was introduced to protect and appease customers who were ‘concerned and alarmed’ over the threatening comments coming out of Oracle this summer.
‘We believe this is a very smart programme and is to the benefit of our customers, which ultimately is of benefit to the company and its shareholders,’ he said. ‘Everything that we do is to maximise the investments of our shareholders. We have said all along that we have a better plan than Oracle.’
Accountancy Age reported on what PeopleSoft refers to as its ‘customer protection programme’ in July. At the time, Brian Skiba, global analyst with Deutsche Bank Securities, questioned whether the fact that the company recognised revenue without taking into account any potential liability from the clauses met US GAAP standards.
This was dismissed by PeopleSoft, which said: ‘We follow the regulation by the letter – everything that is disclosed is overseen by our auditor.’
The programme means that any customer with the clause in their contract would be guaranteed a refund of between two and five times the value of their original contract should the company be sold, and the software was not grown and supported as PeopleSoft itself would have done.
Swasey went on to say that the company believes the lawsuit to be ‘without merit’ and that it would ‘defend it vigorously’.