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1/14/2005
05:21 PM
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Oracle Laying Off 5,000

Oracle is reducing its combined workforce to 50,000 but vows to retain most PeopleSoft product-development and support staff.

Oracle is laying off 5,000 employees in the wake of its $10.3 billion acquisition of application vendor PeopleSoft Inc., the company said Friday. The move will reduce the combined workforce of the two companies to about 50,000.

Although the bulk of the layoffs are expected to come from PeopleSoft's ranks of 12,000 employees, Oracle said layoff notifications began Friday at PeopleSoft and Oracle, with most layoffs expected to be completed within 10 days.

Many layoff notices were expected to be delivered by DHL express on Saturday. Oracle is also taking the step of formally offering new jobs to some--but not all--of the remaining PeopleSoft employees through the same DHL delivery mechanism.

In a statement, Oracle said it expected to retain more than 90% of PeopleSoft's product-development and product-support staff. The development team will finish PeopleSoft version 8.9 and develop another generation of PeopleSoft applications, version 9.0, Oracle said.

While Oracle disclosed no details about which employees were being laid off, employees in sales and administrative positions at PeopleSoft were expected to bear the brunt of the cuts.

"It seems a little harsh" to make the notifications by express delivery, says Seth Ravin, president of TomorrowNow Inc., an independent service provider for PeopleSoft applications. On the other hand, Oracle is getting the painful action over with decisively. "We've talked to a lot of anxious people. Many have no idea whether they are staying or going," says Ravin, a former PeopleSoft executive. He says his firm has hired five PeopleSoft support staffers in the last three weeks and plans to hire more.

Additional layoffs may occur at a later date, says Paul Hamerman, an analyst at Forrester Research. Oracle said during its antitrust battle with the U.S. Department of Justice during its takeover effort last year that it would lay off as many as 6,000 employees, he notes.

"If there's a surprise in here, it's that Oracle plans to retain so much of the development team," Hamerman says.

Oracle renewed its pledge to offer reliable support for PeopleSoft applications, but Hamerman noted the layoffs and other cost-cutting measures are necessary for Oracle to keep another promise to shareholders that the merger will be accretive, that is, it will increase Oracle's per-share earnings.

On Tuesday, Oracle will provide more details about its applications organization, including its product plans, in a Web broadcast.

Oracle acquired PeopleSoft earlier this month after an 18-month hostile-takeover battle in which it gradually increased its purchase price to $26.50 per share.

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