PeopleSoft's Profit Up, But Software Sales Down

Despite declining software sales, PeopleSoft Inc.'s first-quarter profit was up 39% over the same period last year, according to the company. Earnings were $11 million, or 4 cents a share, compared with $7.9 million, or 3 cents a share, in the first quarter of 1999.

Revenue for the quarter, ending March 31, was $375.4 million, compared with $350.1 million a year ago. Net income in the first quarter was $11 million, compared with $7.9 million in the first quarter of 1999.

PeopleSoft (stock: PSFT) CEO Craig Conway says software license revenue for the quarter was $90.2 million, down from $98.7 million a year ago. But strong showings in the company's service, maintenance, and development-services divisions boosted revenue, he says.

Those two factors cannot continue to run against each other, says Dave Caruso, an analyst for AMR Research. He says declining license sales eventually will curb revenue growth in the maintenance, development, and service divisions. "The name of the game is new license income," Caruso says. "In a time when so many of their competitors are faltering, it's up to them to grab hold of the opportunity and make something of it."