PeopleSoft issued a warning on Wednesday that earnings for the second quarter, which ended last week, would fall short of its goal by about a third. It primarily blamed issues surrounding rival Oracle's hostile bid to acquire the company.
"They seem to be pointing only to Oracle, but I think it's also related to some internal execution problems," said Patrick Mason, an analyst at Pacific Growth Equities.
PeopleSoft said it now expects earnings per share of US$0.13 to 15 cents, excluding certain items. Previously it had forecast earnings of 20 cents to 22 cents per share. Analysts on average had expected earnings of 21 cents per share, according to Reuters estimates.
Including items such as 2 cents per share in Oracle-related costs, amortisation and restructuring charges, PeopleSoft predicts net income of 5 cents per share, lower than its April forecast of 10 cents to 12 cents per share. Analysts on average had expected 12 cents per share on that basis, but promptly lowered their earnings and revenue guidance. In a July 7 note, J.P. Morgan Chase analyst Adam Holt slashed his second-quarter revenue forecast from $674 million to $660 million. Fiscal year 2004 drops from $2.8 billion to $2.7 billion.
The company blamed the ongoing Oracle anti-trust trial, which began in June, for the miss. If victorious, Oracle will almost certainly continue its $7.7 billion hostile bid for PeopleSoft. Testimony concluded last week, but a court verdict remains weeks away.
However, securities analysts say the company's problems aren't so simple. Though the trial was certainly a detriment, PeopleSoft is also troubled by the logistics of last year's merger with rival JD Edwards, they said. And the company is grappling with a wobbly recovery in the corporate software market that is affecting many suppliers.
"We did expect something like this to happen," said Charles Di Bona, a Bernstein & Co. analyst. "(Wall Street's) expectations were running too high, and we were concerned (PeopleSoft) wouldn't be able to generate the type of efficiencies they wanted from the JD Edwards merger."
Problems at home
Specifically, analysts said, PeopleSoft overestimated the sales synergies of its JD Edwards buyout. The JD Edwards customer base didn't produce as many sales opportunities as PeopleSoft had expected, Mason said. The reorganisation of its sales team to incorporate JD Edwards' staff has been bumpy, and that may have affected the company's financial performance as well, he added.
2%
4%
