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PeopleSoft says anti-trust trial hurt its Q2

Jul 07, 20043 mins
Mergers and AcquisitionsOracleWi-Fi

PeopleSoft Wednesday released its preliminary second-quarter 2004 results, warning that it has been substantially impacted by Oracle’s hostile bid for the company and publicity it has received in recent court skirmishes.

PeopleSoft Wednesday released its preliminary second-quarter 2004 results, warning that it has been substantially impacted by Oracle’s hostile bid for the company and publicity it has received in recent court skirmishes.

The Pleasanton, Calif., company said that it expects to report revenue of between $655 million and $665 million for the quarter ended June 30, including license revenue of between $129 million and $133 million.

Earnings per share are expected to come in at $0.03 to $0.05 on a Generally Accepted Accounting Principles (GAAP) basis, with pro-forma earnings, including write-downs for restructuring and costs related to the Oracle bid, of 13 cents to 15 cents a share.

Those figures are sharply below PeopleSoft’s earlier guidance and analysts’ expectations. The mean estimate of analysts polled by Thomson First Call forecast pro-forma, per-share earnings of 21 cents, on revenue of $689 million.

The company’s final second-quarter results are due out July 27.

Extensive publicity from the U.S. government’s antitrust trial to block Oracle’s hostile bid has adversely impacted PeopleSoft’s business over the last month, PeopleSoft President and COO Craig Conway said in a statement.

PeopleSoft believes that evidence submitted in the trial displayed Oracle’s interest in disrupting its business and damaging the company, Conway added in the statement.

But one financial analyst called PeopleSoft’s excuse a smokescreen. “There are clearly other factors,” said Charles Di Bona, who tracks PeopleSoft for Sanford C. Bernstein & Co. LLC, in New York. “We’ve been concerned that this is about fundamentals.”

Di Bona thinks PeopleSoft was too aggressive in its promises of growth and cost savings from its J.D. Edwards acquisition last year. The only way Oracle’s bid could be affecting PeopleSoft at this point, according to Di Bona, is by prompting potential customers to make purchases earlier than they otherwise would have, boosting past quarters at the expense of draining PeopleSoft’s pipeline for future deals. PeopleSoft backers wanting to show support for the company may have completed deals sooner than they would have, around the time Oracle’s bid began, to help strengthen the company.

“It’s sort of unknowable, but I think that’s a legitimate concern, that they’ve been pulling this revenue forward,” he said.

The U.S. government’s case, which is due to wrap up later this month when closing arguments are delivered, has placed PeopleSoft, Oracle and their competitors in the headlines recently, revealing the normally secret worlds of the enterprise software giants.

Oracle made its initial bid for PeopleSoft over a year ago, but this quarter is the first since the bid in which PeopleSoft has issued an earnings warning. Last quarter, it came up slightly short, meeting its own guidance but falling just below analysts’ revenue and income expectations.

In the first few quarters after Oracle’s bid, Conway dismissed talk of any negative fallout, pointing to PeopleSoft’s strong sales and support from its customers. Last quarter, though, he began reversing that stance, blaming Oracle’s lingering campaign for lost sales. Some customers are delaying purchases or buying from PeopleSoft’s rivals out of concern about how Oracle may affect PeopleSoft’s future, he said.

“Some of those deals can’t wait. They close for our competitors,” Conway said in April, during a discussion with analysts of PeopleSoft’s first-quarter results.

Scarlet Pruitt contributed to this report from London.