SAN FRANCISCO – PeopleSoft Inc. (search) on Tuesday said it would not meet current Wall Street estimates for the full year because Oracle Corp.'s hostile takeover bid is crimping demand for its business software and had caused quarterly profits to fall from a year ago.
Shares of PeopleSoft, which had warned three weeks ago of lower-than-expected results, fell in after-hours trade.
PeopleSoft has said repeatedly that Oracle's (search) takeover effort has hurt demand for its products because customers fear PeopleSoft products might not be adequately supported and updated by the combined companies.
Kevin Parker, PeopleSoft's chief financial officer, said in a conference call with analysts that earlier PeopleSoft estimates for 2004 "cannot be achieved" due to the uncertainty caused by the Oracle takeover proposal.
Pleasanton, California-based PeopleSoft reported a second quarter net profit of $11 million, or 3 cents per share, compared with a net profit of $37 million, or 11 cents per share, a year earlier.
Revenue was $647.3 million up from $497.4 million.
Parker declined to provide an outlook for the third quarter and fourth quarter, but said PeopleSoft would provide updates for those quarters after a federal judge rules on whether the takeover can move forward.
A decision is likely by the end of September following a month-long trial in San Francisco (search) that ended last week.
The company said it had spent about $70 million fighting Oracle's takeover since Oracle launched its $7.7 billion bid in June 2003.
PeopleSoft reported second quarter license revenue, a barometer of future growth, of $130 million, up from about $112 million a year earlier.
Elephant in the Room
Craig Conway, PeopleSoft chief executive, told analysts in the conference call that the Oracle takeover battle was an "elephant in the room" whenever PeopleSoft sales people visited clients and said several deals had been either lost or delayed due to the uncertainty caused by the trial outcome.
Charlie Di Bona, an analyst at Sanford Bernstein, said PeopleSoft's results were not surprising given PeopleSoft's warning on July 7.
But he said the company still had to answer questions about the progress it was making with integrating JD Edwards, a software company it bought in 2003. "The issue for us has been over the integration of JD Edwards," DiBona said.
PeopleSoft said it was ahead of schedule in achieving cost-savings from the merger and said it believed it would achieve cost-savings this year of between $167 million and $207 million from the JD Edwards purchase.
Conway said in an interview that PeopleSoft would also release combined JD Edwards and PeopleSoft products during the fourth quarter.
Conway also said he had not spoken with Microsoft executives about a friendly merger. During the Oracle antitrust trial, internal Microsoft e-mails revealed Microsoft had considered buying a stake in PeopleSoft.
Analysts had expected PeopleSoft to report revenue of $668.8 million and earnings per share, excluding items such as the legal costs stemming from the Oracle takeover bid, of about 15 cents. On that basis, PeopleSoft reported a profit of $51 million, or 14 cents a share.
PeopleSoft's results stood in contrast to its biggest competitors, Oracle and SAP AG of Germany.
Last week, SAP said its U.S. market share rose to 37 percent from 34 percent during the second quarter, gaining ground amid Oracle's takeover effort of PeopleSoft.
Earlier this month, Oracle reaffirmed its current first-quarter earnings outlook of 9 cents per share on total revenue growth of 6 percent to 9 percent from a year ago, led by demand for Oracle's flagship database software. Shares of PeopleSoft fell in after-hours trade. about 12 cents in after hours trade to $17.20 from after closing at $17.32, up 21 cents in regular trade on the Nasdaq. The stock has fallen some 25 percent year to date.
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