PeopleSoft sales climb; buyout spurs loss

PeopleSoft completed its purchase of business software maker J.D. Edwards in August. Including the acquisition, PeopleSoft recorded a third-quarter net loss of $7.3 million, or 2 cents per share, compared with net income of $44.6 million, or 14 cents per share, one year ago.

Excluding adjustments from the J.D. Edwards deal, PeopleSoft had earnings of 17 cents per share, handily beating its earlier projections of 11 cents per share.

The company's revenue totaled $624 million, surpassing its previously reported guidance of $575 million, to $590 million, and rising significantly over the $471 million in revenue it reported for the third quarter of 2002. The third-quarter results marked the second consecutive quarter of apparent growth for PeopleSoft in the face of a hostile takeover bid by rival software maker Oracle.

PeopleSoft also exceeded its own estimates for software sales for the third quarter, reporting new license revenue of $160 million, compared with its earlier projection of $135 million to $150 million.

The company said it expects fourth-quarter license sales of $170 million to $185 million. PeopleSoft reported that one third of its third-quarter sales came from new customers, the most it has added in several years. Professional services revenue for the third quarter reached $229 million, with maintenance revenue totaling $235 million.

Earlier this year, PeopleSoft updated its annual earnings forecasts for 2003 and 2004. The software company expects total 2003 revenue of $2.1 billion to $2.2 billion and earnings of 52 cents to 55 cents a share. After three quarters of 2003, PeopleSoft has reported revenue of roughly $1.6 billion. It anticipates 2004 revenue of $2.8 billion to $2.9 billion and earnings of 90 cents to 95 cents a share.

PeopleSoft CEO Craig Conway said he is increasingly confident that Oracle's $7.25 billion takeover bid has failed. Conway denied rumors that PeopleSoft engaged in heavy discounting to boost its sales numbers and said that customers agree that any serious threat of an Oracle takeover has passed.

"All of our customers still ask about Oracle, but for the most part, they agree that the saga is over," Conway said on a conference call.

The executive also downplayed any impact on sales results related to PeopleSoft's customer protection program, a refund plan that the software maker launched to protect against Oracle's original offer.

"No one buys a house because it comes with a good fire-insurance policy," said Conway. "We still have customers that have delayed their orders, but the protection program hasn't been a factor either way."

PeopleSoft executives said the software maker's average deal size increased during the third quarter, rising to roughly to $600,000 per sale from $575,000. Conway believes that demand for business technology products continues to improve, with enterprise software sales growing faster than are other segments of the industry.

He said that PeopleSoft's customer relationship management (CRM), supply chain management and financial software businesses all improved during the third quarter, along with continued growth in its core human resources applications sector.

The company reiterated that it expects to eliminate between 750 and 1,000 jobs as a result of its merger with J.D. Edwards and said it expects to complete the reduction, derived mainly from redundant administrative operations, over the next several quarters.