PeopleSoft meets its Q2 guidance

Shaking off the grimmest predictions about the effect Oracle Corp.’s hostile takeover bid could have on PeopleSoft Inc.’s sales, PeopleSoft said Wednesday it has met its previously announced financial expectations for the quarter that ended Monday.

Software license revenue will be US$105 million to US$115 million, with total revenue in the US$490 million to US$500 million range, PeopleSoft said. In last year’s second quarter, the company generated license revenue of US$131.9 million and total revenue of US$482.2 million.

Earnings per share from recurring operations will be US$0.13 to US$0.14. Including nonrecurring charges from job cuts and the closure of PeopleSoft’s Santa Clara, Calif. office, earnings per share will be US$0.10 to US$0.11, the company said.

PeopleSoft Chief Executive Officer Craig Conway hailed the company’s performance as a triumph “against all odds and odds makers.” Since Oracle’s June 6 surprise announcement of a US$5.1 billion offer to acquire PeopleSoft, the two enterprise applications vendors have been locked in an acrimonious battle. Oracle later increased its bid to US$6.3 billion, and hopes to entice PeopleSoft shareholders to take advantage of a tender offer set to expire next week.

With Oracle’s takeover attempt timed to the crucial end of PeopleSoft’s fiscal quarter, when many sales take place, industry analysts warned that the company could fall short of its financial goals if customers decided to delay purchases until after the drama settles down. Several firms, including Gartner Inc. and Forrester Research Inc., recommended soon after Oracle’s bid that customers delay buying decisions, though Gartner noted that doing so would lend strength to Oracle’s bid.

“Gartner’s recent research indicates that Oracle’s bid has complicated PeopleSoft’s ability to close deals with some customers in 2Q03 (second quarter of 2003),” the firm said in a June 30 research note. “Ironically, enterprises that choose to delay signing a PeopleSoft deal or negotiating with PeopleSoft for extremely favourable terms contribute to a financially weaker PeopleSoft and therefore may unintentionally aid Oracle’s takeover attempt.”

While PeopleSoft did lose some sales and suffer business disruptions during the quarter because of the Oracle bid, it also benefited from the anger some customers felt over Oracle’s offer, Conway said Wednesday during a conference call with analysts.

“Many customers were determined not to allow the hostile takeover attempt to harm PeopleSoft. They wanted to help,” Conway said. “Our biggest regret is what might have been this quarter had we not faced the uncertainty.”

For the first time in “more quarters than any of us would like to remember,” PeopleSoft improved its conversion rate on turning prospects in its pipeline into customers, he said. Conway attributed some of the turnaround to a backlash against Oracle, but also said he sees the software market improving.

“I think this is the first glimmer of what will be a return to a freer spending environment for technology,” he said.

PeopleSoft is scheduled to release its full second-quarter results later this month.

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