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Technology Stocks : PSFT - Fiscal 1998 - Discussion for the next year
PSFT 0.00010000.0%Oct 29 5:00 PM EST
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To: Just_Observing who wrote (1712)7/30/1998 9:08:00 PM
From: JJ  Read Replies (1) of 4509
 
To All: Excerpts from Lehman Bros report:

* PeopleSoft topped SAP AG in growth again. Revenue was $320 million,(74%) with EPS of $0.15. International revenue climbed 100%; services up 97%; Europe will likely be a key driver for growth in 2H.

* Average contract sale was $1.2 million, steady with 1Q. Contracting activity held steady at 50%, the same as 1Q. Gross margins on services continue to climb, with 2Q at 43% versus 39% in 1Q. An increase in the service mix DOESN'T mean lower margins.

* License growth rate of 53% down from 64% in prior two quarters will likely remain an area of concern. This rate is higher than peers, and company's competitiveness remains unchanged. Company achieved 72% of its revenue from new customers versus 50% from SAP AG.

* Company strengthened balance sheet with gross DSO's down to 96 days (from 109 in 1Q) and net DSO of 86 days (down from 98 days). Overall deferred revenues were $396 million (+67% Y/Y, +7.6% sequentially), with deferred licenses revenues down $2 million.

* We reiterate our 1-Buy rating and recommend the stock to investors playing the huge secular opportunity in enterprise applications. Near-term issues related to mix and license growth should create pressure. We expect skepticism about growth prospects to wane by year-end and the stock to see a lift.

Additionally, had 6-12 mo. price target of $70.

Regards,
--JJ
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