PeopleSofts Game Plan

By Larry Dignan  |  Posted 2003-06-06 Print this article Print

PeopleSofts game plan
Assuming PeopleSoft thwarts the Oracle bid, the companys J.D. Edwards deal—0.860 PeopleSoft share for each J.D. Edwards share—would combine the No. 2 and No. 4 enterprise software companies. The goal: fend off SAP AG and squeeze out Oracle. PeopleSoft didnt have an immediate comment on Oracles bid Friday, but CEO Craig Conway noted on a conference call this week that the J.D. Edwards merger "could not be more compelling."
On paper, the deal—which is expected to close in the third or fourth quarter—works. PeopleSoft hasnt had much success targeting the midmarket, and J.D. Edwards makes it an instant player, say analysts. The company has also had a tough time being viewed as more than a human resources and financial-application player despite offering customer-relationship management and other software modules. The purchase of J.D. Edwards gives it a better foothold in the enterprise resource planning market and opens the door to manufacturing customers.
J.D. Edwards, which posted a net loss of $393,000 for the quarter ended April 30, is being squeezed on its home turf by SAP, Microsoft and a host of other targeting mid-tier companies. As a result, license revenue for the April quarter fell to $43.5 million from $54 million a year ago. By merging with PeopleSoft, J.D. Edwards squelches any worries about the companys future and may give it more clout and distribution among large enterprises. Combined, the two companies have little customer overlap and can target industries ranging from technology and financial (PeopleSoft) to industrial manufacturing, consumer goods and real estate (J.D. Edwards). On the technology front, software from J.D. Edwards and PeopleSoft are likely to remain separate. J.D. Edwards software will continue to operate manufacturing plants, and PeopleSoft applications will focus on corporate functions such as human resources and financials. Meanwhile, the architectures underlying the two companies main products are dramatically different. Many of J.D. Edwards 6,752 customers run on IBMs AS/400 platform and have no intention of changing. PeopleSofts 5,133 customers are used to running their software via a Web browser. When asked whether PeopleSoft would try to migrate J.D. Edwards customers to a Web-based platform, Conway couldnt provide an answer because the two companies were "just getting started on dialogue." Nevertheless, there will be issues for customers of peripheral products. In CRM software, J.D. Edwards acquired Youcentric in 2001 and PeopleSoft bought Vantive in 2000. In supply-chain software, J.D. Edwards added capability by buying Numetrix in 1999. PeopleSoft acquired Red Pepper in 1996. Oracle brings the same software to the table. "They will have to slowly rationalize these and pick the clear leaders," said AMR Research analyst Colleen Niven, referring to the PeopleSoft and J.D. Edwards combination. "Itll be interesting to see how it is cross-pollinated."

Business Editor
Larry formerly served as the East Coast news editor and Finance Editor at CNET Prior to that, he was editor of Ziff Davis Inter@ctive Investor, which was, according to Barron's, a Top-10 financial site in the late 1990s. Larry has covered the technology and financial services industry since 1995, publishing articles in, Inter@ctive Week, The New York Times, and Financial Planning magazine. He's a graduate of the Columbia School of Journalism.

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