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PeopleSoft details post-acquisition plan for J.D. Edwards

PeopleSoft upped financial estimates, confirmed layoffs loom and made good on promises for three product lines. Oracle chimed in, giving investors more time to tender their shares.

On the heels of acquiring the final shares of J.D. Edwards & Co., PeopleSoft Inc., struck an optimistic tone regarding its purchase of the midmarket applications provider Thursday, ramping up earnings projections at its analyst day.

The Pleasanton, Calif., company also reaffirmed earlier commitments to offer three distinct product lines from the newly combined company and confirmed it would cut jobs.

PeopleSoft CFO Kevin Parker also announced a stock buyback program. The company will spend $350 million by the end of the year to repurchase some of its shares, Parker said. PeopleSoft's shares have risen in recent weeks and on Wednesday exceeded the most recent tender offer from Oracle Corp. of $19.50 per share. The stock price dipped to $19.35 at Thursday's close of the market.

The buyback program has few implications on Redwood Shores, Calif.-based Oracle's takeover bid, however, according to Patrick Mason, a financial analyst with Pacific Growth Equities.

"[PeopleSoft] just thinks the Oracle deal is not going to happen," Mason said. "They think share price is a bargain and that's good if they execute."

Oracle was quick to react to the PeopleSoft briefing, extending its deadline for investors to tender their shares to Oct. 17. Oracle also said it now controls slightly more than 10% of PeopleSoft stock, a figure that has edged up slightly in the last month.

"PeopleSoft's plan means confusion and execution risk for customers and shareholders," Jim Finn, Oracle spokesperson, said in a statement. Oracle is currently waiting for federal antitrust investigators to weigh in on its takeover bid.

On the financial front, Parker predicted total revenue for PeopleSoft this year of $2.145 billion to $2.175 billion. In 2004, the company expects $2.8 billion to $2.9 billion in revenue, with license revenue at roughly $700 million, professional services providing nearly $1 billion and maintenance more than $1 billion.

Together, PeopleSoft and J.D. Edwards create the second largest business applications software firm behind SAP AG.

"That's a very exciting combination," Parker said. "What's more exciting is that we're looking out for the bottom line."

Those projections exceed earlier figures, which Parker attributed to the company's own conservative estimates. He said expectations were adjusted partly due to outside criticism and a strong second quarter.

Additionally, Parker estimated the company will cut roughly 1,000 jobs or about 7% of the combined workforce of about 13,000. The unspecified cuts would hit general administration, marketing and middle management. Current developers, consultants and sales reps are expected to keep their jobs.

There's no word on whether the layoffs would affect PeopleSoft or J.D. Edwards employees.

PeopleSoft made good on an earlier promise to roll out three product lines from the combined company: software directed at shops running IBM's iSeries (formerly called AS/400) will be renamed PeopleSoft World; PeopleSoft Enterprise One software will be based on J.D. Edwards' current midmarket line; and PeopleSoft Enterprise will be the current software for large businesses.

Integration of the two providers' applications has already begun and many combined offerings will be ready in the next 30 to 180 days, according to Ram Gupta, PeopleSoft executive vice president of products and technology.

For example, in the fourth quarter of this year PeopleSoft's supplier relationship management capabilities will be extended to J.D. Edwards applications, and J.D. Edwards real estate functionality will be available in PeopleSoft software. In the first quarter of next year J.D. Edwards asset management capabilities will be moved to PeopleSoft, which will prove a boon to PeopleSoft's customer base in government, telecommunications and utilities, which have lots of assets to manage, Gupta said.

The quick integration, Gupta said, is due in part to PeopleSoft's development of an industry standard portal and J.D. Edwards' architecture being designed to adapt easily to any portal environment. Additionally, PeopleSoft built an open data warehouse designed to accept data from any application, while J.D. Edwards' data is designed to publish to any warehouse.

"We're going to build dramatically superior products by transferring intellectual property from one company to the other," Gupta added. "With [PeopleSoft World, Enterprise and Enterprise One] it makes it hard for me to see how we can lose a deal to SAP and Oracle."

PeopleSoft CEO Craig Conway pledged that this acquisition would go faster and easier than his company's previous acquisitions because of its sheer size. Earlier acquisitions were smaller and suffered from neglect, but J.D. Edwards is "like having an elephant for your dorm mate, you know he's there when you come back from class, you know he's there when you get out of the shower," Conway said.


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