PeopleSoft Raises 3Q Earnings And Revenue Views

The business software maker says results exceeded expectations, raising the pressure on Oracle to boost the price of its takeover bid.

InformationWeek Staff, Contributor

October 7, 2003

3 Min Read

SAN FRANCISCO (AP) -- Business software maker PeopleSoft Inc. on Monday said its third-quarter results exceeded management expectations set a month ago, raising the pressure on spurned suitor Oracle Corp. to sweeten its $19.50-per-share takeover bid.

Without providing specific figures, PeopleSoft said its sales of new software licenses, total revenue, and profit from ongoing operations topped the estimates provided to analysts in early September.

At that time, PeopleSoft projected its third-quarter revenue would range from $575 million to $590 million, and yield earnings of 10 cents or 11 cents per share, before absorbing charges primarily related to the company's $1.8 billion acquisition of J.D. Edwards & Co.

Including those charges, Pleasanton-based PeopleSoft will likely record a net loss when it reports its third-quarter results later this month.

PeopleSoft had been expected to earn 11 cents per share, before special charges, on revenue of $587 million, according to the consensus estimates of analysts polled by Thomson First Call.

Investors cheered Monday's news as PeopleSoft's shares climbed 62 cents to close at $20.43 on the Nasdaq Stock Market.

PeopleSoft's stock price, combined with the company's recent sales momentum, virtually assures Oracle will have to raise its $7.5 billion offer if it wins antitrust clearance to pursue the deal, said industry analyst David Hilal of Friedman, Billings, Ramsey & Co.

Hilal, who follows both companies, believes Oracle could afford to pay as much as $23 per share for PeopleSoft.

Oracle's $19.50-per-share offer values PeopleSoft "fully and fairly," Oracle spokeswoman Jennifer Glass said.

The bid has been on hold for the past three months while the Justice Department assesses whether Oracle's takeover plans would hurt customers in the $20 billion market for business application software--products companies use to automate much of their operations.

The department is expected to complete its review before December. Government investigators recently have been collecting sworn declarations from PeopleSoft customers--a move some antitrust attorneys interpreted as a precursor to a court challenge.

Much of the rationale for Oracle's takeover is based on the premise that PeopleSoft isn't strong enough to survive on its own for much longer.

The theory looked stronger when Oracle launched its bid in early June; at that time, PeopleSoft's sales of new product licenses were plunging, prompting disillusioned investors to dump the company's stock.

Since Oracle's bid, PeopleSoft has surprised analysts by stringing together successive quarters that have exceeded expectations. The company's sales have been bolstered by an unusual guarantee pledging to refund up to five times the amount of a transaction if the company's software is discontinued after a takeover.

Oracle executives maintain PeopleSoft's recent gains reflect a temporary improvement driven by the refund promises and a marketing campaign urging customers to buy more software to defuse the bid.

PeopleSoft maintains its strides reflect the company's superior technology--an advantage that the company says will grow as it digests J.D. Edwards.

"When you offer customers better software ... they buy more," PeopleSoft chief executive Craig Conway said.

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