Conway's dismissal was due to a "loss of confidence" in the CEO's ability to lead PeopleSoft, the company said.

The board of directors also promoted CFO Kevin Parker, and executive vice-president, Phil Wilmington, to co-presidents, and Aneel Bhusri, a former PeopleSoft executive now working as a venture capitalist, to vice-chairman of the board.

"It is great to be back," Duffield said on a conference call following the announcement.

He served as PeopleSoft's CEO from its incorporation in 1987 through 1999, when he turned the reins over to Conway. Duffield said his re-appointment to the CEO spot is permanent.

PeopleSoft also said Friday that its licence revenue in the quarter ended Thursday topped $150m - a pleasant surprise to many financial analysts, who feared worse after PeopleSoft said last week that its licence revenue for the quarter topped that of Oracle.

Oracle reported $69m in application revenue in its most recent quarter; while PeopleSoft would not comment further on its revenue, analysts generally took its statement to mean it had only edged past Oracle's disappointing results.

The CEO dismissal at the end of a respectable quarter puzzled some analysts.

"I think it was a huge surprise," says American Technology Research analyst, Donovan Gow. "$150m in licence revenue is strong - I think pretty much everyone, myself included, thought that the quarter would be a complete disaster. On the one hand, the company is saying that it has lost faith in the CEO; on the other hand, it is saying that it is gaining traction with new and existing customers. Obviously, it is not giving him credit for that."

Speaking on behalf of PeopleSoft's board, director George "Skip" Battle declined to go into specifics about the reasons for the lost faith in Conway.

The decision was made and approved Thursday night by the board's five independent directors, with Duffield and Bhusri abstaining from the vote, he says.

PeopleSoft's eight-person board had consisted of Duffield, Conway and six outside directors, including Bhusri.

"The very simple and plain truth is that over time the board has become increasingly concerned with Craig's leadership, and, essentially, had lost confidence," Battle adds. "There is no smoking gun, there is no accounting irregularity. He was not terminated under the for-cause provision in his contract."

Battle denied that PeopleSoft's ongoing battle with Oracle, which is continuing a hostile takeover campaign it launched in June 2003, had anything to do with Conway's firing.

PeopleSoft's board has consistently rejected Oracle's offer, now valued at $7,7bn.

Conway, a former Oracle executive, strongly opposed the deal, and was seen as having a personal stake in ensuring that it did not occur.

But Battle said PeopleSoft's transaction committee, comprised entirely of independent directors, unanimously agreed to reject each of Oracle's bids, and was never at odds with Conway about the Oracle deal.

Financial analyst, Charles Di Bona, says that he sees deeper problems at the company than the confusion created by Oracle.

"I think a large part of the loss of confidence really is more around the JD Edwards situation than Oracle," he said, referring to PeopleSoft's work integrating the smaller business applications vendor it purchased one year ago.

"$150m is still down 9% year-over-year. There is not as much good there as (Wall) Street thinks. This is not a growing company, this is an ailing company. I think that is getting lost in the noise, because people thought it was not just ailing, but on life support."

Duffield says his priorities at PeopleSoft will be to return the company to the core values upon which it was founded.

"We need a little more in the way of vision and strategy, and I think I am very good at that stuff," he adds.

Forrester Research analyst Paul Hamerman sees the move as a good one for customers. Under Conway, PeopleSoft moved aggressively on raising maintenance prices and lost some of its reputation as a customer-focused vendor, he said.

"I think there has been an erosion in customer confidence," Hamerman says. "There have been issues about the maintenance pricing and the service levels customers are receiving. In the days when Dave Duffield ran the company, it bonded with its customers, and really paid a lot of attention to customer satisfaction. It has decided to step back in and restore some of the original values of the company."

Hamerman also expects to see a more developed technology vision from Duffield, something he feels Conway lacked.

PeopleSoft's primary product development strategy for the past year has been what the company calls the "total ownership experience", a push to reduce its software's administrative costs and burdens.

Whether Duffield's return will change PeopleSoft's stance regarding Oracle is an open question, analysts said. An Oracle representative said the company had no immediate comment on the news.

"Conway was generally regarded as a big impediment to the deal going through," says Gow. "I do not necessarily think (Duffield) will be any more likely to accept the bid, but it is very hard to read at this point. The knee-jerk reaction is that the stock price will go up as people expect that the deal is more likely."

Indeed, PeopleSoft's shares rose by 15% in Friday trading on the Nasdaq exchange, to $22,83. Oracle's all-cash offer currently stands at $21 per share.

Hamerman adds that, as PeopleSoft's founder, Duffield is likely to want to see the company remain independent.

"I do not think he wants to give up the company, especially to Oracle," he says.

Yankee Group analyst, Mike Dominy, challenges that view, though, saying he thinks that this marks the end of the road for PeopleSoft's resistance.

With the US Department of Justice announcing Friday that it will not appeal a court decision overruling its anti-trust objections to a PeopleSoft-Oracle merger, the European Commission expected to approve the deal, and PeopleSoft struggling to grow its sales, Oracle's offer becomes ever harder to walk away from, Dominy adds.

"I absolutely believe the developments with Oracle are a factor (in Conway's departure)," he says.
Oracle now needs to develop and very clearly communicate a plan for both short- and long-term support of PeopleSoft's customers; disrupting product development and alienating the customers it spent billions to buy would be a waste of Oracle's investment, he concludes.

(Laura Rohde in London contributed to this report.)