PeopleSoft Expects to Post Strong Profit
PeopleSoft Inc. executives on Wednesday said preliminary quarterly profit beat Wall Street expectations, touting the results as a sign that the company is flourishing despite uncertainty created by Oracle Corp.’s $6.3-billion hostile takeover bid.
Analysts said PeopleSoft’s better-than-expected second-quarter earnings might force Oracle to either raise its tender offer from the current $19.50 a share or abandon the bid.
“If Oracle is serious, they should come back to the table with a higher bid,” said David Hilal, analyst with investment firm Friedman Billings & Ramsey Co. “They need to get it to $21 or $22 a share to get interest from PeopleSoft shareholders at this point.”
Pleasanton, Calif.-based PeopleSoft said it earned 10 cents to 11 cents a share on sales of $490 million to $500 million for the quarter ended June 30. A year earlier, per-share earnings were 11 cents. Without one-time charges related to closing a Santa Clara, Calif., office, earnings were 13 cents to 14 cents a share. Charges included as much as $15 million that PeopleSoft spent to defend itself against Redwood City, Calif.-based Oracle’s hostile bid.
Analysts surveyed by Thomson First Call expected earnings, excluding items, of 10 cents a share and sales of $443 million.
PeopleSoft shares gained 19 cents to $17.98 on Nasdaq.
Many analysts had expected the company to post weak results as nervous customers put off orders. “It was absolutely a surprise,” Hilal said. “The company delivered a very strong quarter in very strenuous circumstances.”
PeopleSoft Chief Executive Craig Conway said his company was both helped and hindered by Oracle’s unwanted advances. Some customers sped up their orders, he said.
“Many customers were determined not to allow Oracle’s hostile takeover attempt to harm PeopleSoft,” Conway said in a conference call with analysts. “They wanted to help.”
But PeopleSoft also lost customers, and Conway hinted he may sue Oracle for damages.
“It was not entirely a Cinderella ending this quarter,” Conway said. “Many customers did delay their purchases. Even worse, some customers that had already selected PeopleSoft now say they will select a competitor due to the uncertainty posed to our company. We will seek redress for all of those losses from Oracle.”
PeopleSoft Chief Financial Officer Kevin Parker also said the company signed agreements with customers that would obligate any acquirer of PeopleSoft to issue refunds of as much as two to five times the amount customers paid for their software.
Oracle discounted the significance of PeopleSoft’s results.
“PeopleSoft’s claims to have beaten analyst expectations are hardly surprising, since by their own admission over half of their new license revenue resulted not from ordinary course sustainable business but from one-time gimmicks such as two to five times money-back guarantees, favors from business partners, and other tactics from a company desperate to put up numbers for a single quarter,” said Oracle spokesman Jim Finn.
PeopleSoft’s Parker emphasized during the conference call that the company did not discount products or offer special payment plans to win clients.
