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PeopleSoft earnings ignite stock

Shares in the business applications maker soar after the company surprises Wall Street with its first-quarter results.

    PeopleSoft (PSFT) shares soared 22 percent today after the software maker surprised Wall Street with its first-quarter results.

    Shares soared to close at 42-5/8, up 7-5/8 over yesterday.

    PeopleSoft posted $17.8 million in net income, or 14 cents a share, on $153.7 million in revenues for its first quarter ended March 31.

    The business applications maker beat Wall Street's estimate by 2 cents a share to post first-quarter revenues nearly double those of a year ago, when it posted $82.3 million in revenues.

    Net income grew nearly nine-fold from the first quarter of 1996, when PeopleSoft posted $9.5 million in net income, or 8 cents a share, according to a report filed with the Securities and Exchange Commission and released after market's close today.

    Financial Analysts had expected the company to post a gain of 12 cents a share for the period, according to a FirstCall consensus estimate.

    Despite the solid results, PeopleSoft appears to be losing some momentum. The company has nearly doubled its revenues and workforce for each of the last five years. Yet, it said today it expects 1997 revenues to grow by a still strong but less robust 70 percent over the 1996 level.

    Such results may not be good enough for investors. Even before the company reported the quarterly results, PeopleSoft had an eventful day today. The company committed to releasing the next edition of its PeopleSoft 7 business applications in September, some six months ahead of schedule. Instead of reassuring stockholders, PeopleSoft shares rollercoastered on Wall Street, dipping nearly 10 percent before closing up 1-1/8 at $35.

    One factor contributing to Wall Street's jitters may have been stellar quarterly results from arch rival SAP. The German business software powerhouse this morning announced record revenues of $615 million for its fiscal first quarter ended March 31, nearly doubling sales over the same period one year ago.

    PeopleSoft is riding the same wave of corporate market demand for business applications, according Ronald Codd, PeopleSoft's chief financial officer. The Pleasanton, California-based company hired some 450 new employees between January 1 and March 31, bringing the company's total workforce to more than 2,900 people, Codd said.

    "This is a very large market, and there is room for more than one successful company," Codd said, alluding to SAP's gains today.

    PeopleSoft said revenues from software license fees, which contribute slightly more than half of its total revenue stream, increased 91 percent during the quarter, while revenues from services grew by 81 percent.

    The company's bid to open up new foreign markets also yielded growth. Revenues from international operations grew 86 percent, contributing $26.4 million to the company's coffers for the quarter, compared to $14.2 million a year ago. International operations accounted for 17 percent of PeopleSoft's total revenues, holding about the same portion of revenues as it did this time last year.

    However, the company cautioned that its second quarter revenues will slow down dramatically from the first-quarter level. It estimated today that revenues will increase only 14 percent in the current quarter, reflecting a traditional second-quarter slowdown in sales.