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PeopleSoft Says It Had A Better-Than-Expected Quarter

Preliminary results show that PeopleSoft has confidence of many customers, CEO Conway says—though not all.
Many observers expected that Oracle's attempt to take over PeopleSoft Inc. would hurt that vendor's sales. But PeopleSoft on Wednesday painted a rosy picture of its financials, saying its preliminary earnings results for the second quarter, ended June 30, 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. Earnings per share from recurring operations is expected to be 13 to 14 cents, compared with PeopleSoft's original guidance of 11 to 12 cents per share. Earnings per share, including previously announced nonrecurring items, is expected to be 10 to 11 cents, compared with an original guidance of 8 to 9 cents per share.

The preliminary results say a lot about PeopleSoft and Oracle's hostile bid, PeopleSoft president and CEO Craig Conway says. He calls the results "an undeniable vote of confidence" in his company, from both existing customers who've decided to stick with PeopleSoft and new clients. More than 30% of license revenue in the quarter came from new customers, PeopleSoft CFO Kevin Parker says.

But Conway did say many customers have delayed software purchases, and some that had already selected PeopleSoft are now saying they'll go with a competitor because of the uncertainties surrounding the future of PeopleSoft applications. "Our biggest regret is what might have been—what might have been this quarter had we not faced the hostile takeover bid from Oracle," he says.

Conway says PeopleSoft will seek redress for these losses from Oracle.

Mike Dominy, senior analyst with the Yankee Group, says the results are good news for PeopleSoft, but cautions that the figures are preliminary. "It seems awfully quick to be able to report accurate information, since the quarter just closed," Dominy says. "But giving them the benefit of the doubt, it's great news."

A good quarter won't necessarily derail Oracle's efforts, he adds. But, "if it were bad, that could add fuel to the fire."

PeopleSoft's results are based on preliminary information; final results and additional information regarding PeopleSoft's second-quarter results will be released later this month.

In related news, Oracle and PeopleSoft said today that the two companies have mutually agreed to postpone the hearing originally scheduled for July 16 relating to Oracle's suit against PeopleSoft, its board of directors, and J.D. Edwards & Co., alleging they breached their fiduciary duties by conspiring to derail Oracle's attempt to buy PeopleSoft. The suit is in response to PeopleSoft's revision of the terms of its proposed offer to buy J.D. Edwards, which eliminates the need for a shareholder vote.

"This is simply a postponement of the hearing date, which made sense to all parties given the second request Oracle received from the Department of Justice yesterday and the longer timetable it implies," an Oracle spokesman said in a written statement. "Oracle continues to maintain that PeopleSoft and its board have breached their fiduciary duties to PeopleSoft's shareholders, and Oracle will continue to seek redemption of the PeopleSoft 'poison pill.' "