PeopleSoft clears earnings hurdles

PeopleSoft Thursday released its full financial report on its just-ended quarter, confirming the better-than-anticipated revenue and income results it preliminarily announced earlier in the month.

PeopleSoft Thursday released its full financial report on its just-ended quarter, confirming the better-than-anticipated revenue and income results it preliminarily announced earlier in the month.

PeopleSoft posted revenue of $497.4 million in its second quarter, ended June 30, up 3% from last year’s $482.2 million second-quarter total. License revenue was down 15%, however, to $111.7 million, while professional services revenue also dipped slightly. A rise in maintenance revenue, from $171.3 million last year to $205.6 million in 2003’s second quarter, offset the declines.

PeopleSoft CEO Craig Conway called the quarter a strong one and said the financial results reflect PeopleSoft’s across-the-board healthy operations in all of its product lines and geographies.

PeopleSoft’s net income for the quarter was $36.5 million, up fractionally from the $36 million total for the year-ago quarter. Excluding $14 million in restructuring charges relating to job cuts and the closure of PeopleSoft’s Santa Clara office, PeopleSoft posted earnings of 14 cents per share, in line with the range it forecast in its preliminary announcement.

PeopleSoft met the financial targets it set for the quarter before Oracle launched its $6.3 billion unsolicited takeover bid, a feat that helps it in its bid to rebuff its hostile suitor.

Defending against Oracle has cost PeopleSoft $14 million so far, and will cost an additional $10 million to $12 million in the ongoing quarter, Chief Financial Officer Kevin Parker said during a conference call with analysts following PeopleSoft’s earnings results release.

While Oracle has accused PeopleSoft of hitting its quarterly targets by cashing in favors from business partners and through other “one-time gimmicks,” Conway insisted that the company has not drained its pipeline or called in favors. PeopleSoft added more than 100 new customers during the quarter, making it one of its best in two years, he said, citing a higher conversion rate of turning prospects into customers as the key to the quarter’s strength.

Conway and Park dismissed questions about the effects of PeopleSoft’s “customer assurance program,” a contractual clause offered to some customers during the quarter that promised large payments in the event PeopleSoft is taken over by a company that disrupts its product support. The executives said they will consider offering the program again if customer requests warrant, but they maintained that it did not influence customers’ purchasing decisions during the quarter.

“It’s like buying fire insurance for your house. There’s certainly a good reason to buy fire insurance for your house, but it’s not the reason you buy the house,” Parker said.

At midnight Thursday, the company’s tender offer to acquire shares of J.D. Edwards expires, after which PeopleSoft intends to close its $1.8 billion acquisition of its fellow enterprise applications developer. Conway said Oracle’s bid for PeopleSoft has reinforced his belief that marrying PeopleSoft and J.D. Edwards is a powerful combination. He also claimed that Oracle’s takeover attempt will ultimately aid PeopleSoft, because of the self-inflicted damage being done to the reputation of one of its most formidable rivals.

“The Oracle brand name has become synonymous with the most negative of terms,” Conway said. “This is every great American movie ever made. It’s the big landowner trying to force the small landowner off his land. The audience roots, as it always does, for the underdog.”