A Question of Loyalty, And Practicality

In reporting better-than-expected preliminary results for its second quarter, ended June 30, PeopleSoft president and CEO Craig Conway touted the "undeniable vote of confidence" new and existing customers had in the company, despite the turmoil over its future.

There's that, but the goal of being prepared no matter what also factors into some buyers' decisions. Take London Drugs Ltd., which signed a contract with PeopleSoft last month -- after Oracle announced its takeover plans -- for new modules and consulting services worth several million dollars. The reason? "By buying more software at this point, we can ignore Oracle for some time if they succeed,'' says Wynne Powell, president of London Drugs, a Canadian pharmacy retailer that also sells high-end cameras, computers, cosmetics, and more. The latest and greatest version of PeopleSoft's applications should serve the company well for the next few years.

Not that Powell is downplaying the loyalty element. "I think it's important that major customers stand by PeopleSoft in this time of need, and we demonstrated that with this purchase,'' Powell says. The company accelerated plans to purchase the software, which it had originally intended to do in two years.

London Drugs apparently isn't alone in standing by its software provider. PeopleSoft on Wednesday said its preliminary earnings results for the second quarter exceed its earlier expectations. License revenue for the quarter is expected to be between $105 million and $115 million, and total revenue is expected to range from $490 million to $500 million.

To assure customers that they're making the right decision, PeopleSoft also initiated a guarantee program for its customers. If PeopleSoft is acquired and the acquiring company ends support of PeopleSoft products, customers after a certain period of time will receive anywhere from two to five times the purchase price of their software, to be paid for by the acquiring company. If the program were to take effect because of an acquisition, it is not expected to exceed $354 million in payments.

London Drugs has been using PeopleSoft's ERP software for about three years, and Powell says it chose PeopleSoft because it best fit the company's needs. ''It has proven to be a very robust product, and our implementations have been on-budget and on-time, and in some cases we've finished them ahead of time.''

Powell says the company considered other vendors, including Oracle, when it first purchased ERP software, but ''Oracle in our view is not right for our needs.'' If Oracle did want to do business with London Drugs, the vendor would have to improve its products, he says, as well as support Microsoft SQL Server, which is the company's database platform. Not many see that as likely.

Powell says he has some advice for Oracle: ''Don't do this deal, it is wrong for the industry, wrong for the customer. And second, if you do do this, don't force us, the customers, to go to the Oracle database,'' Powell says.