PeopleSoft Sees Big Gains Coming From J.D. Edwards Merger

The vendor raised its estimates from licensing revenue, and CEO Craig Conway says the improved performance will stem from the merger.
PeopleSoft Inc. executives say the enterprise software vendor is set to realize big gains in both its product line and financial performance as a result of its $1.7 billion merger with J.D. Edwards & Co.

The company on Thursday raised its estimates for fourth-quarter and full-year licensing revenue due to what PeopleSoft CEO Craig Conway, speaking at an analysts meeting in New York, called the "clear, present, and immediate benefit" of the merger.

PeopleSoft raised its estimate for fourth-quarter licensing revenue from $120 million to $135 million to $160 million to $175 million. For all of 2004, it raised its estimated licensing revenue from slightly more than $400 million to $485 million to $515 million. PeopleSoft officials say they now expect total 2004 revenue to fall between $2.15 billion and $2.18 billion and pro-forma, per-share earnings for the year of 52 cents to 55 cents. The company also announced that it has filed to repurchase up to $350 million of its common stock. Ram Gupta, executive VP for products and technology, says much of the growth will be due to the merging of PeopleSoft and J.D. Edwards products--a move that Gupta said will broaden the appeal of both product sets and create significant cross-selling opportunities. For instance, Gupta said, by the fourth quarter, J.D. Edwards' real-estate management tools will be available to PeopleSoft customers. The latter, as a group, own more than 5 billion square feet of real estate, said Gupta. "Talk about an opportunity," he added.

Conversely, Gupta said J.D. Edwards users will soon have access to PeopleSoft's supplier-relationship-management tools. Gupta said J.D. Edwards customers spend more than $50 billion annually on procurement. "This is bad news for point solution vendors like Ariba," Gupta said.

PeopleSoft will have completed its product-integration plans by the first quarter of 2004, he said, and PeopleSoft is using its own integration tools, including Integration Broker, to hasten the process.

To accommodate the new product mix, PeopleSoft is revamping its marketing strategy. Software aimed at IBM AS/400 users will be sold under the new PeopleSoft World brand. Products aimed at mid-size users will fall under the PeopleSoft Enterprise One brand, while the PeopleSoft Enterprise brand will be aimed at large companies.

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