PeopleSoft Turns A Profit

Enterprise software developer brags about new customer wins as others in the sector slump.

E-business and enterprise resource planning software maker PeopleSoft Inc. reported second quarter earnings today that, while positive in comparison to competitors, showed an $11.4 million drop in income over last year.

PeopleSoft posted net income of $36 million for the quarter, or 11 cents per share, versus a profit of $47.4 million, or 16 cents a share, for the same year-ago period. Second quarter revenue fell 11 percent to $482.2 million, from $544 million last year. At the same time, license revenues fell 20 percent to $132 million, versus $166 million a year earlier.

"The overall economic environment is difficult. Technology spending, in particular, is down," said Craig Conway, PeopleSoft president and CEO, during a conference call.

PeopleSoft exceeded analysts expectations for total revenues of $474.5 million and for a 13 cent per share profit, before acquisition-related costs, according to Thomson First Call. PeopleSoft fared exceptionally well in the areas of Customer Relationship Management and Supply Chain Management, according to Conway.

"We are in the best industry for this type of software – enterprise software," said Conway. "CRM, SCM, these are timely topics. Most companies that reported positive earnings do that because of improved internal business operations."

Conway said the company won six CRM deals where rival Siebel Systems Inc.s software was already installed. Yesterday, Siebel said it was cutting 1,100 jobs due to declining revenues and profits.

In about half the CRM and SCM deals PeopleSoft won – there were over 80 customer wins for the quarter – Conway attributed the viability factor. Customers, he said, are worried about the viability of PeopleSoft competitors.

He also said the PeopleSoft software is gaining some maturity.

"Q1 was the quarter in which our sales in CRM broke out of integration plays and the installed base," said Conway. "In Q1 we began to win stand-alone deals – and that was thrilling. That continued in Q2."

Conway likened the competitive landscape – narrowed down exclusively to integrated ERP software providers, he said – as brutal.

"Were in an environment where competitors are getting desperate, where pricing in some cases is suicidal," he said. "Weve had competitors literally, literally, giving software away in exchange for the maintenance revenue. The only benefit is smaller companies are not even considered."

Kevin Parker, CFO at PeopleSoft, in Pleasanton, Calif., forecasted slightly lower software license revenue for the third quarter. Parker said he sees license revenues of $120 million to $130 million and per share earnings of 13 cents a share.