I think the reason for the industry discussion and guidance a few weeks back was an attempt to assuage some fears that were building in the investment community. I think PeopleSoft felt that they were being broadbrushed unfairly with the entire sector, and this was their attempt to say "yeah, license revenue growth will slow a bit, but we're better than the rest of the industry, so don't sell".
PeopleSoft has long enjoyed a large premium, not only due to 1)it's impressive fundamentals, but it's 2) perceived superior management, conservative accounting approach, and nice guy image. I believe that when general market conditions turned south, the latter component of the premium was thrown out the window. Essentially, I think 10 or more points of PeopleSoft's earnings multiple was a "good feelings" bonus. In a bad market or economy, investors aren't willing/able to give a "good feelings" bonus on the multiple.
So, even though PeopleSoft management realized that it's stock should take a hit due to changing economic and industry conditions, they probably weren't aware that they would also lose the theoretical "good feelings" portion of the multiple. In this respect, I think they were probably a bit complacent or naive.
Anyway, it's no longer a problem for them as clearly the market has removed the "good feelings" bonus.
Take it for what it's worth,
Rick. |
