PeopleSoft lifts estimates again
Published: 06 Oct 2003 16:30 BST
Enterprise-software maker PeopleSoft has once again raised its estimates for third-quarter earnings, signalling the fading influence of Oracle's bid to buy the company.
PeopleSoft said on Monday that based on preliminary results, it now expects to exceed earlier estimates. Last month, the company raised third-quarter projections to $135m (£81m) to $150m in licence revenue, $575m to $590m in total revenue, and earnings per share to 10 cents to 11 cents.
The projected third-quarter gains would represent the second straight period of improved financial results for PeopleSoft since rival Oracle announced its $7.25bn unsolicited bid to buy out the company. For the second quarter, which ended 30 June, PeopleSoft posted revenue of $497.4m and earnings of 11 cents per share. The company's licence revenue dipped to $111.7m in the second quarter, a drop that the company attributed to market uncertainty regarding the proposed Oracle takeover.
PeopleSoft executives said the better-than-expected third-quarter performance reflects customers' positive feelings about its recently finalised acquisition of software maker J.D. Edwards -- the move that prompted Oracle to launch its hostile acquisition efforts.
"When you offer customers better software, a choice of databases and you build on their existing product investments, they buy more," PeopleSoft President and chief executive Craig Conway said in a statement.
Earlier this year, PeopleSoft updated its annual earnings forecasts for 2003 and 2004. The software company expects total 2003 revenue of $2.1bn to $2.2bn and earnings of 52 cents to 55 cents a share. It anticipates revenue next year of $2.8bn to $2.9bn and earnings of 90 cents to 95 cents a share.
Industry watchers don't expect PeopleSoft's third-quarter results to beat the previously reported estimates by a large margin, but said that the continued performance is a sign that the company has survived Oracle's bid and is moving forward.
"I don't believe (PeopleSoft) will crush their numbers like they did last quarter," said Tom Ernst, analyst with San Francisco-based investment bank Thomas Weisel Partners. "However, this quarter's performance looks to be based more on natural business, as opposed to last quarter when it was more about helping the company beat Oracle."
Ernst said PeopleSoft has successfully transitioned its marketing message to one of looking forward and reinvesting in the company's technology, rather than one centred on dodging Oracle's manoeuvre. The analyst said that customers are also responding positively to the PeopleSoft-J.D. Edwards merger.
David Hilal, an analyst with investment bank Friedman Billings Ramsey, agreed that an Oracle takeover of PeopleSoft looks "less likely with every passing day." He said the company's business has been bolstered by perceptions that the proposed deal will not proceed.
"Customers were worried three months ago, but they're not so worried now," said Hilal. "Even more impressive is that the third quarter is historically very tough in the enterprise-software business."
Hilal said that Oracle would need to raise its standing $19.50-per-share offer for PeopleSoft in order to have any chance of pulling off the hostile takeover. Oracle officials have said in the past that they would not increase the value of their bid. The analyst also said that there is growing sentiment on Wall Street that the deal might not clear the federal government's antitrust approvals process.
PeopleSoft will announce its third-quarter results in mid-October.
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