PeopleSoft Misses Lowered Revenue Mark

Expressing disappointment with its second-quarter results, in which revenue fell to $647 million, the company says it hopes to "return to the market on an even playing field" after the trial over Oracle's takeover bid ends.

Pointing to Oracle as the elephant in the room during sales calls—and in virtually every transaction the company had this past quarter—PeopleSoft Inc. expressed disappointment with its second-quarter results, as well as its hopes for the future.

The Pleasanton, Calif.-based company recorded second-quarter license revenues of $130 million and total revenue of $647 million. PeopleSoft earlier this month had lowered its expectations for the quarters revenues to between $655 million and $665 million.

Net income for the second quarter ended June 30, based on GAAP (Generally Accepted Accounting Principles), was $11 million, compared with $37 million for the same quarter last year. Earnings were 3 cents per share, compared with 11 cents per share for the same quarter in 2003.

"Some analysts wonder if theres more at work here than just the trial," Craig Conway, PeopleSofts president and CEO, said during Tuesday nights earnings call.

"The economic recovery is still slow, theres an election, the price of oil, a war, and Sarbanes-Oxley is consuming enormous energy. All are factors, but those factors were not the elephant in the room for PeopleSoft; it was the trial."

PeopleSoft has been fending off a $7.7 billion hostile takeover bid from Oracle Corp. for more than a year. The U.S. Department of Justice sought a federal injunction to block the deal, and a decision from the U.S. District Court in the Northern District of California is expected sometime in September for the trial that ended earlier this month.

"A decision in the trial is the elephant in the room for PeopleSoft right now," said Conway, in Pleasanton, Calif. "With that decision, we can return to the market on an even playing field, and thats what we are looking at doing."

/zimages/1/28571.gifPeopleSoft lowered its earnings expectations earlier this month, citing bad press surrounding Oracles takeover attempt. Click here to read more.

Conway said that in the meantime, top business applications software maker SAP AG is clearly the benefactor of customers fear and uncertainty promulgated by the Oracle takeover bid. Earlier this month, Walldorf, Germany-based SAP reported stellar second-quarter earnings, including a 63 percent increase in its U.S. software license sales.

In contrast, PeopleSoft reported a 5 percent growth in U.S. sales.

Kevin Parker, PeopleSofts chief financial officer, said that on the upside, PeopleSoft saw a 20 percent increase over the year-ago quarter in license revenue from the manufacturing, distribution and health care sectors. At the same time, new customer license revenue, compared with overall revenue, tallied in at 26 percent—consistent with last quarter.

Conway said the company is on track with its integration of J.D. Edwards & Co., which it acquired last fall. That acquisition announcement spurred the initial tender offer from Redwood Shores, Calif.-based Oracle.

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