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PeopleSoft profits plummet

Executives acknowledge the effect Oracle's takeover bid has had on PeopleSoft's business.

PeopleSoft Inc. earnings plummeted 70% in the past quarter, a drop executives blamed squarely on Oracle Corp.'s takeover attempt and publicity surrounding the antitrust trial.

"The impact on our business of delayed or lost sales had been significant," Craig Conway, the CEO of the Pleasanton, Calif.-based PeopleSoft, said in a call with financial analysts. "The extensive media coverage of the U.S. vs. Oracle trial in the last quarter was too much to overcome. It was the elephant in the room of every deal in the quarter."

A week ago, Oracle and Department of Justice attorneys delivered closing arguments in the antitrust case that will determine whether Redwood Shores, Calif.-based Oracle can go ahead with its hostile takeover of PeopleSoft. The feds claim the acquisition would thwart competition in the business software market. A U.S. District Court judge is expected to rule on the matter no later than September.

PeopleSoft's second quarter earnings per share were $0.03 versus $0.17 for the second quarter last year. Net profit for the second quarter dropped from $37 million in 2003 to $11 million in 2004.

[The antitrust trial] was the elephant in the room of every deal in the quarter.
Craig Conway, PeopleSoft CEO,

Since Oracle launched its takeover bid in June 2003, PeopleSoft has said the attempted acquisitions has impacted its bottom line.

Germany's SAP AG has reaped the rewards of customer uncertainty about PeopleSoft, Conway said. Last week it announced a 15% jump in revenue in its quarterly results.

"Anyone giving SAP credit for anything more than showing up is giving them too much credit," Conway said. "SAP is the unintended beneficiary of Oracle's offer. That's clear in their numbers."

SAP posted second quarter license sales of $171.7 million, up 63%.

Conway added that PeopleSoft's discount forms, published as a part of the trial, had armed potential customers with the knowledge of price breaks offered to similar-sized organizations. Customers were then in a position to demand higher discounts than PeopleSoft would otherwise have offered.

An economic slow down and the distraction of Sarbanes-Oxley compliance also led to a lack of investment in business applications, Conway said.

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