Boosted by JDE, PeopleSoft tops Q3 estimates

Finishing its first quarter including business from recently acquired J.D. Edwards & Co., PeopleSoft Inc. reported Thursday record revenue of US$624 million and a narrower-than-expected loss.

PeopleSoft's license fees, maintenance and professional services revenue all increased from last year's third quarter, contributing to its 32 percent revenue gain. PeopleSoft declined to break out J.D. Edwards' contribution to the quarter's revenue, or provide a comparison to last year's quarter, but Conway and Parker said the unit's financial impact on PeopleSoft's results was positive.

"J.D. Edwards has been more than we could have expected," Conway said. "A number of theoretical advantages of combining the company with J.D. Edwards are actually showing quantifiable results. It's one thing to talk about cross-selling and up-selling opportunities; it's another to actually see a number of cross-selling and up-selling opportunities in the first sixty days."

On a pro forma basis excluding costs from the J.D. Edwards acquisition, Pleasanton, California-based PeopleSoft posted per-share earnings of US$0.17, exceeding its own US$0.10 to US$0.11 per-share earnings forecast and the US$0.11 consensus estimate of analysts polled by Thomson First Call. Including acquisition costs, PeopleSoft had a loss of US$7.3 million, or US$0.02 per share, during the quarter, which ended Sept. 30.

PeopleSoft Chief Executive Officer Craig Conway called the quarter a strong one, and said the results reflect the beginning of advantages from combining PeopleSoft and J.D. Edwards. More than 170 customers that had not previous purchased from PeopleSoft signed on with the company during the quarter, making it the company's best quarter for new customer signings since 1998, he said.

"It may be the curse of the Oracle Corp. tender offer that many people find themselves unable to suspend their disbelief in anything positive I say. But I think for those people, the financial results speak for themselves," Conway said during a conference call with analysts following PeopleSoft's financial release.

Oracle's US$7.3 billion offer to PeopleSoft's shareholders for control of the company, initiated in June and now extended at least through the end of the year, remains a concern for customers, Conway said.

"I think it's fair to say that every single transaction we did in Q3 came with a requirement to give an update on the Oracle approach. If it's not the first topic, it's certain in the top three topics every customer would like to get an update on," he said.

But the uncertainty created by Oracle's takeover attempt is not preventing deals, even large ones, from going through, Conway said, pointing to the five-year-high number of new customers signed during the quarter.

Several vendors in the industry -- most notably, SAP AG -- have complained about price warfare decimating margins for enterprise software sales, particularly since the advent of Oracle's brawl with PeopleSoft. Conway and PeopleSoft Chief Financial Officer Kevin Parker said they agree pricing is hotly competitive, but denied that their company is chopping its price tags.

"The funny thing about a price war is that no one ever seems to start it," Parker said. For two years the software market has been "very, very competitive and almost suicidal at times," but PeopleSoft has held the line on its prices, he said.

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