ERP software vendor PeopleSoft Inc’s financial troubles have spilled over into the first quarter of 1999. The Pleasanton, California-based company said Wednesday that it expects to report total revenue in the range of $275m to $305m, which will show anywhere from zero to 10% growth on a year-over-year basis. That level is far below what the company had predicted in January when it reported its year-end numbers and projected full-year revenue growth for 1999 of 20% to 30%. Also at that time, Peoplesoft said it would cut about 6% of its staff in an effort to bring costs in line with current revenue models. In last year’s first quarter revenue was $277.7m, an 80% jump from the corresponding quarter the previous year.
The company declined to provide any specific guidance for the bottom line, but it seems clear that the consensus estimate of analysts surveyed by First Call – for a profit of $0.07 per share – won’t be attainable. PeopleSoft shares dipped on the bad news, shedding $0.9375 to close at $14.625, eclipsing the stock’s previous 52-week low of $15.125, set one week ago. Last year at this time, the shares were trading at more than $57.
Operating profit margins, excluding one-time charges, are expected to be significantly lower than what the company had been looking for, which is being blamed squarely on the revenue shortfall. The company warned in January that it would post a charge of $175m related to the formation of Momentum Business Applications Inc, the R&D shell company it created for spin-off last November (CI No 3,540). PeopleSoft now says that, rather than have to make similar announcements in the future, it will simply discontinue its practice of publishing forecasts with respect to upcoming quarters or years.
The company insists, however, that its problems are not unique and simply represent the current environment in the enterprise application software industry as a whole, with a general slowdown in customer software license sales. The company says it sees no evidence of any decline in its competitive health, explaining, customers are taking longer to close license agreements, but our win rate against competitors continues unchanged.
At any rate, analysts have tempered their opinions of the company’s prospects. Morgan Stanley Dean Witter analyst Chuck Phillips has cut his 1999 estimate to $0.12 per share from a previous $0.55 and is looking for flat yearly revenue of $1.3bn. For 2000, Phillips is now looking for $0.17, way down from his initial estimate of $0.65 cents, on revenue of $1.56bn. Last year, by contrast, PeopleSoft reported earnings of $0.61, excluding one-time charges.
