PeopleSoft Forecasts Small Quarterly Profit

While Baan Co. was releasing a barrage of more bad news, rival PeopleSoft Inc. - itself no stranger to struggles - last week said it expects to report a small operating profit for the fourth quarter of last year.

Pleasanton, Calif.-based PeopleSoft predicted that its operating profit will come in between $4.8 million and $9.6 million. That estimate includes its own application business and The Vantive Corp., a Santa Clara, Calif., vendor of customer relationship management software that PeopleSoft acquired Dec. 31.

Outside earnings estimates had targeted the low end of that earnings range, according to First Call/Thomson Financial, a financial research firm in New York.

Even so, PeopleSoft remains "marginally profitable" and still hasn't proved that it's on the road to recovery after hitting the wall on software sales early last year, said Bert Hochfeld, an analyst at Josephthal & Co. in New York. Combined fourth-quarter software sales for PeopleSoft/Vantive may be down more than 50%, compared with the last three months of 1998, Hochfeld said.

"I still haven't seen a consistent e-business strategy that will produce revenue growth [for PeopleSoft]," he added.

PeopleSoft confirmed that year-to-year sales continued to decline in the fourth quarter, but it said license sales should increase at least 35% from their third-quarter levels.

The company could end up with a net loss for the quarter because of charges of $50 million to $70 million related to the Vantive acquisition. However, PeopleSoft said those charges will be partially offset by gains of $45 million to $50 million from the sale of some equity investments.

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