PeopleSoft loss would devastate By George Avalos The Contra Costa Times, Jun. 22, 2003
The loss of thousands of jobs might just be the start of the economic aftershocks for the East Bay if PeopleSoft Inc. is conquered by Oracle Corp.'s hostile takeover bid. >From pizzas to property values, from Stoneridge mall to Main Street, the Tri-Valley economy could be devastated if Oracle succeeds in its quest to buy PeopleSoft and keeps its promise to slash thousands of jobs at the combined company, including many workers at PeopleSoft's Pleasanton headquarters. And the ripples from that event would rock the entire region. Even as PeopleSoft and Oracle girded for an all-out war, business and community leaders pondered the prospect of a Tri-Valley without PeopleSoft. What they glimpsed was bleak. A dramatic down-sizing of PeopleSoft in Pleasanton would shake the pocketbooks of a broad range of small businesses and individuals who live or work in the Pleasanton-Dublin-Livermore-San Ramon area. "I see it as a major impact," said Ken Mercer, Pleasanton's former mayor and a vice president with Valley Care Health System. "If these people leave, those are people who are not going to lunch, not going to the movies, not buying gas, not shopping, not staying in hotels." PeopleSoft has such a large influence on the area in part because its employees are relatively well paid. "These are people with a lot of disposable income," said Weldon Moreland, president of Moreland & Davis, a certified public accounting firm in Livermore. "They live in middle- and high-end homes." That's one reason some executives warn that the temblors from a merger could weaken the most prized possessions of many Tri-Valley folks: their homes. All of this means that the implications of the deal go well outside the cozy boardrooms of the two software companies. It reaches beyond the egos of PeopleSoft leader Craig Conway and his former boss, Oracle chieftain Lawrence Ellison. Ironically, the deal may have much more of an impact on the Tri-Valley economy than it does on the software industry that Ellison seeks to reshape through consolidation. There will always be a group of companies of varying sizes that provide corporations and other institutions with the software to operate their organizations. But for the Tri-Valley, PeopleSoft is unique. For one thing, PeopleSoft is Pleasanton's largest private employer, with 3,500 local jobs. That alone would merit plenty of local attention. But PeopleSoft also has its world headquarters there. PeopleSoft's relocation in 1995 to Pleasanton gave that city a technology cachet it lacked until then. Sure, AT&T had maintained a regional operation in Pleasanton. Pacific Bell and Chevron boasted big complexes in San Ramon. But the PeopleSoft move was a watershed because it brought the Tri-Valley the headquarters of an up-and-coming high-tech player. What's more, PeopleSoft was in the vanguard of young software dynamos that had crafted new ways to help businesses operate more efficiently. Others followed PeopleSoft's trail to the Tri-Valley or emerged as home-grown forces in their own right. Documentum Inc., which was born in Pleasanton, became a public company in 1996. Commerce One Inc., an Internet commerce innovator, moved its head offices to Pleasanton in 2000. That same year, Tut Systems Inc., a telecommunications equipment company, moved to Pleasanton. And in 2002, Sybase Inc. opened its new headquarters complex in Dublin. "PeopleSoft is one of the main anchors, not only for Hacienda Business Park, but also for all of Pleasanton," said Chris Kinzel, president of Pleasanton-based TJKM Transportation Consultants. Kinzel said he fears more than the loss of a solid and successful company such as PeopleSoft if Oracle prevails. "It would be a blow to the area's morale," Kinzel said. "You can't always count that in dollars and cents." Still, plenty of dollars and cents could be on the line, warned Steve McNichols, a partner with McNichols, Randick, O'Dea & Tooliatos, a Pleasanton-based law firm. "There could be a problem for real estate," McNichols said. "Residential real estate could be tremendously affected. That would hurt sellers of property, brokers, it might hurt property values for a time." It's also possible that home prices wouldn't slump badly in the Tri-Valley, said James Ghielmetti, chief executive officer with Signature Properties, a local home builder. After all, the supply of new homes still can't keep up with demand, which can buttress home prices. But he also pointed out that big job losses have dampened home prices in places such as Silicon Valley. "Santa Clara County has one of the weakest housing markets in the Bay Area," Ghielmetti said. "That was a direct result of people losing their jobs." Commercial real estate's outlook also could become murky. The Tri-Valley office market is already wobbly and could really begin to teeter if big chunks of PeopleSoft space are put on the block by a triumphant Oracle. "It would substantially increase vacancy rates in the Tri-Valley," said Michael Copeland, a senior vice president with the Pleasanton office of Colliers International, a commercial realty firm. "It would drive lease rates and property values down." About 22 percent of the commercial office space in the Pleasanton-Dublin-San Ramon market was already vacant at the end of March, realty agents estimated. That was worse than the vacancy rate in December. Add PeopleSoft's offices to the mix, along with other cutbacks, and the Tri-Valley could be looking not all that different from the dreadful commercial property market in Silicon Valley. "It would be a huge problem," said Jeffrey Weil, senior vice president in Colliers' Walnut Creek office. "The market is already underwater and we have had a lot of companies down-size." AT&T, Lucent, Providian, Macromedia and Schwab are among those that have slashed the office space they occupied in the area, Weil said. Even worse, it could take years to re-fill Tri-Valley offices if PeopleSoft exits. Perhaps even more ominous are the indirect blows to the region. "This sort of thing has a ripple effect through the community," said James Mayer, president and CEO of Diablo Valley Bank. "It hurts the small merchants and the business people. It hurts their income and revenue." Restaurant owners are one of those at risk. Claude "Skip" Hinsley, owner of Girasole restaurant in Pleasanton and Bighorn Grill in San Ramon, believes both of his eateries would be harmed by an Oracle-PeopleSoft deal. "PeopleSoft is a strong force in the restaurant market," Hinsley said. "They do banquets. They come in with small- and medium-sized groups for lunch. It would hurt. It would hurt for sure." The demise of PeopleSoft, Hinsley figured, could cost his restaurants $50,000 to $100,000 a year in lost business. He cautioned that this was only a guess. Other restaurant owners say they make healthy sales from frequent pizza deliveries to PeopleSoft. A merger would be yet another negative event amid a two-year economic slump. Restaurants and businesses in the East Bay have had to endure the effects of terrorist attacks, the dot-com implosion, the recession and jitters prior to the battle of Iraq. "I'm wondering, when does this stop?" Hinsley said. "What's next? Boils?" Hotels would also be bumped by the economic ripple. Bruce Britton, general manager with Wyndham Garden Hotel, said his Pleasanton establishment has had an active relationship with PeopleSoft over the years. The software company uses hotels in the area for customers who are in town to train to use PeopleSoft products, or clients who are getting a sales pitch from PeopleSoft. "They would be missed," Britton said. "The entire hotel industry in the area would be hurt." The body blows could bruise more than businesses. Charitable activity could deteriorate, warned restaurateur Hinsley, who is a director with Pleasanton Partnerships in Education Foundation. That group, which assists local schools, would face tough times without PeopleSoft. "The loss of any major contributor would be a big loss in terms of cash, as well as in employees participating in the schools," Hinsley said. Despite all this, local leaders remained confident the Tri-Valley would be able to find life after PeopleSoft, if it comes to that. "The Tri-Valley is very strong, it is very vibrant," bank executive Mayer said. "But if PeopleSoft goes away, that would be somebody throwing a very big stone in the pond."
