PeopleSoft Profit Falls 70% on Weak Demand

PeopleSoft Inc. said Tuesday that its second-quarter profit plunged 70% amid weak customer demand that the business software maker blamed on distractions caused by rival Oracle Corp.’s $7.7-billion takeover bid.

The Pleasanton, Calif.-based company had net income of $11 million, or 3 cents a share, for the three months ended June 30. That contrasts with about $37 million, or 11 cents a share, at the same time last year.

Second-quarter revenue totaled $647 million, a 30% increase from $497 million a year earlier. The sales improvement largely reflected gains achieved through PeopleSoft’s $2-billion acquisition of J.D. Edwards & Co., a deal that closed last summer.

If not for charges to account for that acquisition and costs incurred in resisting the Oracle bid, PeopleSoft said it would have earned 14 cents a share. That matched the average estimate of industry analysts, who shaved their expectations from 21 cents a share earlier this month after the company disclosed it had missed its financial targets for the quarter.

PeopleSoft released the results after the stock market closed Tuesday. The company’s shares gained 21 cents to $17.32 on Nasdaq, then slipped 12 cents in extended trading.

PeopleSoft attributed the disappointing quarter to Oracle’s relentless pursuit of the company. An antitrust trial challenging Oracle’s $21-per-share bid attracted extensive media coverage during most of June, coinciding with the period when PeopleSoft closed most of its sales.

All the attention focused on Oracle’s bid dried up sales as more customers became uncertain about the company’s chances of staving off its unwelcome suitor, PeopleSoft Chief Executive Craig Conway said.

The trial, brought on by the Justice Department, “represented the elephant in the room with every customer” during June, Conway told analysts during a Tuesday conference call.

Some industry analysts believe PeopleSoft is being hurt by factors besides the Oracle trial, citing the possibility that the J.D. Edwards deal isn’t panning out as management envisioned.

Conway dismissed that suggestion Tuesday. He assured analysts that the merger was progressing even better than management had anticipated and predicted that sales would pick up if a federal judge sided with antitrust regulators and blocked Oracle’s bid.

U.S. District Judge Vaughn Walker is expected to rule by early September just as PeopleSoft enters the most crucial stage of its third quarter.

“The sooner the judge can issue his ruling, the sooner PeopleSoft’s business can return to normal,” Conway said.