Momentum Business Applications, Inc. Announces First Quarter Financial Results
Business Wire - August 26, 1999 23:44
PLEASANTON, Calif.--(BUSINESS WIRE)--Aug. 27, 1999--Momentum Business Applications, Inc. (Nasdaq:MMTM), today announced a net loss of $2.177 million or $0.46 per share for the first quarter of Fiscal 2000 which ended July 31, 1999.
Interest and investment income earned on invested funds were $2.992 million for the quarter.
Aggregate product development expenses under the Development and License Agreement (the "Agreement") with PeopleSoft, Inc. were $5.0 million for the quarter ended July 31, 1999 compared to $2.60 million for the preceding quarter ended April 30, 1999.
While the development expenditures nearly doubled due to increased project staffing and a full quarter of development activity, such expenditures were lower than originally anticipated for two reasons: 1) The ramp up of certain committed development projects has been slower than planned due to staffing challenges associated primarily with a very tight labor market, and 2) As discussed more fully below, fewer projects have been committed to date than originally expected. Nonetheless, for the foreseeable future, Momentum expects that its development expenditures will continue to exceed interest income, resulting in ongoing net operating losses.
During the period from inception through April 30, 1999, Momentum and PeopleSoft executed several amendments to the Agreement under which the two companies would jointly develop eight different software product suites with an expected aggregate development cost of nearly $140 million. Although virtually all of these projects have been initiated and are presently active, no new development project commitments were entered into between the two companies during the quarter ended July 31, 1999.
PeopleSoft has recently been engaged in a comprehensive review of its business and product strategy, and has suspended the initiation of any new development projects with Momentum during this period. PeopleSoft's management has indicated that they expect to have this review completed shortly, and Momentum expects to re-engage with PeopleSoft in further development project evaluation and selection thereafter.
Special Note
To the extent any statements made in this release pertain to information that is not historical, these statements are necessarily forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. The reader is cautioned not to rely on these forward-looking statements. Momentum expressly disclaims any intent or obligation to update these forward-looking statements. These forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those anticipated. Such risks and uncertainties include, but are not limited to the following:
-- Momentum may not successfully select or develop products. The
development projects referenced herein are characterized by many
inherent risks, including but not limited to 1) it may be
difficult to staff such projects with qualified development
personnel who have sufficient domain expertise, 2) existing
PeopleSoft technology may not be suitable as a foundation for the
application software functionality, 3) development efforts in
general are complex, and such complexities create a risk that the
products may not be technologically feasible, and 4) constantly
changing and evolving customer demands for products and product
functionality may cause products to meet with limited market
acceptance. Consequently, such development efforts may not be
successful or result in a product that is accepted by the market.
-- Demand for Momentum's products may be highly sensitive to time to
market and/or first mover advantages. Any material delays in the
development project schedule may adversely affect demand for the
product, even if the development project is otherwise
successfully completed. Furthermore, competitors of PeopleSoft,
and even PeopleSoft, may offer products that compete directly
with Momentum's products. Weakness in demand for a product will
translate into limited royalty income to Momentum, associated
limited product payment buy out proceeds, if any, and may
ultimately reduce PeopleSoft's interest in exercising its
purchase option.
-- Momentum and PeopleSoft are parties to various agreements which
limit Momentum's ability to take certain actions, establish
alternate channels of distribution for its products, and use
funds for other than designated product development and
administrative activities. Consequently, Momentum has few degrees
of freedom with which to generate revenues or otherwise
commercialize developed technology or products should PeopleSoft
elect not to utilize some or all of the developed products.
-- Momentum or PeopleSoft may cancel a development project at
anytime and for any reason or no reason at all. Accordingly, it
is possible that Momentum could incur significant expenditures
toward the development of a particular product, only to have the
project cancelled in the later stages of the schedule. There is
no recourse to PeopleSoft in the event of this occurrence.
-- If Momentum were not successful with a number of development
projects, PeopleSoft would be unlikely to exercise its option to
purchase the stock of Momentum. Even if Momentum is successful in
developing certain products, PeopleSoft may not exercise its
option to purchase the Common Stock of Momentum. For example,
PeopleSoft has the right to buy out the ownership of selected
products under its product royalty buy out rights. Consequently,
it could purchase the rights to certain products, thereby
obviating any need to exercise the purchase option on the
Company's Common Stock.
Other risks which are detailed in the Company's filings with the Securities and Exchange Commission, including, but not limited to, the December 31, 1998 Second Amendment to the Information Statement (Form 10), the 1999 third quarter Report to Shareholders (Form 10-Q) filed March 15, 1999, and the 1999 Annual Report to Shareholders (Form 10-K) filed July 29, 1999.
About Momentum
Momentum Business Applications, Inc. was created by PeopleSoft, Inc. in 1998 to select, develop and commercialize software products in the following three areas: 1) Analytic applications, 2) Industry specific applications, and 3) E-Business applications.
PeopleSoft initially contributed $250 million in capital to Momentum, and under the development and licensing agreement between Momentum and PeopleSoft, these funds (as well as any interest earned thereon) are specifically restricted to certain product development and administrative activities.
Upon the completion of a development project, PeopleSoft has an option to license and exclusively distribute the resulting application products through its worldwide sales and marketing group. In addition, PeopleSoft has an option to purchase all of the Momentum Class A Common Stock at a price set according to a predetermined formula. Momentum's offices are located in Pleasanton, Calif.
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