PeopleSoft Expecting Flat First-Quarter Revenue

ERP software vendor PeopleSoft Inc. today warned of dramatically slowing revenue and profits. The company reported that it expects revenue for the first quarter of 1999 in the range of $275 million to $305 million. That represents almost no growth compared to the $277.7 million in revenue the vendor reported for the year-earlier period.

Analysts were caught off-guard by the news; they had anticipated revenue growth of 20% to 25% for the quarter. "We continue to believe the ERP market is undergoing a fundamental transformation deeper than Y2K that involves the emergence of a new class of applications and new business models," said investment firm Credit Suisse First Boston. "Visibility remains low and risk remains high in this transition."

PeopleSoft maintains that the slowdown is a reflection of broader market forces--not the company itself. "We see no evidence of any decline in our win rate," said Howard Gwin, senior VP of worldwide operations. "Customers are taking longer to close license agreements, but our win rate against competitors continues unchanged."

Harry Tse, an analyst with the Yankee Group, counters that even though the entire ERP market is going through hard times, PeopleSoft is suffering more than most. He says PeopleSoft's bread-and-butter is its human resources systems, and that unlike financial or manufacturing applications, customers typically wait a decade before they replace or upgrade these systems. "They also don't have a best-in-class integrated product suite," Tse says. "As a result, PeopleSoft has had a tough time selling additional applications to its HR customers."