PeopleSoft earnings plunge 70pc in fourth quarter

30 Jan 2004

Business software maker PeopleSoft, which is locked in a bitter buyout battle with Oracle, saw its fourth quarter profits plunge 70pc. This is largely because of costs associated with its recent acquisition of JD Edwards, a deal that management says is exceeding expectations and helping to thwart a hostile takeover bid by rival Oracle Corp.

PeopleSoft earned US$17.4m, or 5 cents per share, during the final three months of 2003. The results contrasted with net income of US$57.4m, or 18 cents per share, a year earlier.

Revenue for the quarter totalled US$685m, a 34pc improvement from US$512m a year earlier. New product licenses totalled US$185m in the quarter, a 29pc increase from US$143m last year. However, the company has warned that the US$1.8bn acquisition of JD Edwards last year produced a series of accounting charges that has decreased this quarter’s profit.

The company also delivered another possible disappointment last night by projecting first-quarter revenue of US$625m to US$635m, slightly below analysts’ estimates of US$646m.

PeopleSoft is under more pressure than usual to keep shareholders happy because of Oracle’s hostile bid of US$19.50 per share. Shareholders have had little incentive to tender their shares to Oracle because PeopleSoft’s stock has remained above the takeover bid for months. Oracle has continued to press ahead, even as it awaits a pivotal antitrust decision on the proposed combination. Oracle recently nominated five alternative directors in an attempt to seize control of PeopleSoft’s board in May. The US Justice Department is expected to decide whether to block Oracle’s proposed takeover during the first quarter.

Earlier this month, PeopleSoft announced that it is seeking a California court’s permission to interview a number of key Oracle executives, motivated by allegations that Oracle misled the public and PeopleSoft customers on the level of support and ease of migrating to the Oracle platform. The list includes the company’s executive vice president of global support services and its senior vice president of applications development.

PeopleSoft also alleges that Oracle is maintaining a “highly uncertain” tender offer, keeping its bid substantially below its current share price and therefore delaying the resolution of disputes surrounding its offer for JD Edwards. This uncertainty, it claims, is creating fear and doubt among PeopleSoft’s current and future companies.

By John Kennedy