PeopleSoft’s Q3 income jumps 113%

PALO ALTO, California: PeopleSoft Inc. on Thursday posted a 113 per cent jump

in third-quarter income from recurring operations, beating Wall Street's lowered

forecasts, as sales of its flagship PeopleSoft 8 software line gained momentum

despite cutbacks in corporate tech spending.

The stock of PeopleSoft -- a vendor of software that automates such corporate

functions as accounting, human resources and selling -- climbed to $26.05 in

extended trade on Instinet, after rising $1.11 to $24.30 in the regular Nasdaq

session.

PeopleSoft president and chief executive Craig Conway told Reuters in a

conference call that the company's better-than-expected results were due to

in-house cost controls and strong sales of its Internet-based PeopleSoft 8

products to new and existing customers. Looking to the fourth quarter, the

company sees per-share earnings that are in line with Wall Street's consensus

estimate of 16 cents.

That target would put PeopleSoft's 2001 earnings at 56 cents a share, within

the range of its original forecast for earnings of 55 cents to 60 cents. "I

continue to be very optimistic about the future ... Our visibility is improving

every day," said Conway during the conference call. "I'm very

optimistic about 2002, although I may be the only one in the industry that

is," Conway added in a later conversation.

Although reporting higher total revenue and software license revenue in the

latest third quarter from a year ago, figures for both declined from the

previous quarter. The company said it sees slightly lower sequential growth in

software license revenue -- a key measure of software sales and future

performance -- in the current fourth quarter, with growth in the 10 per cent

range. The company did not give 2002 guidance, but said it would provide it in

January.

Recurring income jumps

"It was a pretty remarkable quarter ... One bright spot in a lot of

darkness that I've seen in the last week or so," said SunTrust Robinson

Humphrey analyst Bill Chappell, who noted that PeopleSoft reported a

"substantial" pickup in profitability during the quarter.

The Pleasanton, California-based company, said total revenue grew 15 per cent

year-over-year to $509.4 million, but declined from $533 million recorded in the

second quarter. Income from recurring operations leapt to $50 million, or 15

cents a share, from $23 million, or 8 cents, a year ago to beat Wall Street's

consensus per-share earnings estimates by 3 cents.

Net income was $50.3 million, down from $68.7 million in the year-ago

quarter, when PeopleSoft booked a large one-time gain from the sale of equity

securities and a one-time charge to exit certain product lines. "On almost

every metric they were better than could be expected in light of Sept. 11,"

said Chappell.

To that end, Conway said last month's deadly air attacks on the Pentagon and

World Trade Center caused sales to the financial services arena to evaporate and

contracts worth about $20 million to fall through.

Same company, new story

Two years ago, PeopleSoft was rewriting its code to run on the Web and

posting lackluster revenues as sales at rival software companies SAP AG, Oracle

Corp. and Siebel Systems Inc. were booming on Y2K buying and the Internet

frenzy. These days, however, PeopleSoft is shining brighter than its

competitors.

In the latest quarter ended Sept. 30, PeopleSoft's license revenues rose to

$151.8 million from $131.5 million last year, but fell from $166 million in the

second quarter. During the same period, Siebel Systems' license revenue fell to

$193.5 million from $308.8 million and SAP pulled in license revenues that were

7 per cent lower at 447 million euros -- about US$404.3 million.

Database giant Oracle -- which reported results from its quarter ended Aug.

31 in the wake of last month's hijacking attacks -- posted license revenue of

$731.4 million, 9 per cent lower than a year ago. "In this environment,

it's tough," said US Bancorp Piper Jaffray analyst Jon Ekoniak.

"PeopleSoft is like the Timex of the software industry -- they took a

licking and they kept on ticking," he said, referring to old television

commercials in which Timex watches kept running despite various physical abuses.

During the past year, PeopleSoft's stock price has dropped about 43 per cent,

less than Oracle's 61 per cent drop and Siebel's 85 per cent decline.