PeopleSoft 2Q in line with forecasts

PeopleSoft Inc. (Nasdaq: PSFT) saw a second quarter as weak as analysts expected.

In second quarter results released after market close Tuesday, the enterprise software vendor reported net income of $3 million, or a penny a share, on target with the figure predicted by First Call's survey of 23 analysts. That represents a 92.3 percent profit decline year-over-year.

Second quarter sales dropped 2.6 percent year-over-year, to $312.2 million from $320.5 million. Services generated $248.7 million, a 45 percent gain year-over-year, and 80 percent of total revenue. Overseas revenue increased 64 percent to $76 million, or 24 percent of overall sales. License fees for PeopleSoft's software -- used in the back office operations of large corporations -- plunged 61 percent to $57.9 million, from $148.5 million.

The entire ERP industry has reeled this year from a combination of spending reductions on large technology projects in the face of Y2K computer worries, and possibly market saturation. "Clearly the Company continues to be impacted by the slowdown in purchases of large scale enterprise applications," said Craig Conway, president and chief operating officer of PeopleSoft. "At the same time, we are encouraged by PeopleSoft's introduction of applications for eBusiness, including five new products."

Analysts aren't expecting PeopleSoft to return to its days of heady growth anytime soon. As recently as last year, PeopleSoft saw earnings of 61 cents a share -- a 38.6 percent annual increase -- but analyst consensus predicts a profit of just 12 cents a share this year, and 31 cents next year.

Shares of PeopleSoft fell 1 to 14 1/2 in Tuesday's trading prior to the quarterly report. Of 24 analysts polled by Zack's Investment Research, 19 maintain the equivalent of "hold" ratings on PeopleSoft, three rate the stock a "moderate buy", one recommends it as a "strong buy", and one has a "strong sell" rating.>