PeopleSoft sees growth slowing
Tues. 10/20/98==========PSFT Earnings============
PLEASANTON, Calif. (CBS.MW) -- Acknowledging what many investors had been speculating for weeks, PeopleSoft said Tuesday it expects its growth rate to tail off.
Ron Codd, PeopleSoft's (PSFT) chief financial officer, said in an interview that sales in 1999 are expected to increase 25 to 30 percent. That's about half the rate at which the company will expand this year and down dramatically from its 90 percent growth rate over the previous five years.
Speculation about a slowdown -- sparked by declining corporate profits and lower software spending -- have cut PeopleSoft shares in half over the past three months. On Tuesday, PeopleSoft shares dropped 1/16 to 25 9/16.
Meeting the Street Codd's comments came as PeopleSoft reported third-quarter earnings in line with analysts' expectations. The Pleasanton, Calif.-based company said it earned 17 cents per share on sales of $351.3 million, up from 11 cents per share on sales of $217.1 million in the same quarter last year.
Sales of PeopleSoft's core software, which helps businesses automate many basic functions, increased 30 percent in the third quarter -- about half the growth rate recorded in recent years.
Analysts say the slowdown stems from the fact that businesses are delaying purchases of PeopleSoft applications as they spend money
to fix the pending year 2000 problem.
Add to that the fact that the International Monetary Fund projects the global economy will expand just 2 percent this year -- the poorest showing in seven years.
Operating in uncertain conditions
"There's a lot of uncertainty right now. We don't know what to make of the [year 2000] problem or global slowdown," Codd said. "We're not too sure of the impact."
Rivals -- most notably Netherlands-based Baan Co. (BAANF), which pre-announced weak earnings this quarter -- have cited those problems as their rates have slowed. (See more on Baan.)
"Maybe they know something we don't, but we just don't have the data to say one way or the other" if those factors are also hurting PeopleSoft, Codd said.
Earlier this month, both Morgan Stanley Dean Witter and Goldman Sachs downgraded PeopleSoft. Morgan analyst Chuck Phillips explained that he'd cut his outlook -- all the way to "neutral" from "strong buy" -- because of worries about increased competition coupled with decreased spending.
Worrisome silence
And, just last week, PeopleSoft spooked investors by pulling out of an investment conference, leading many to speculate the company was trying to avoid talking about bad news. (The timing of the pullout also sparked concern, as it came one day after rival Baan warned.)
Codd reiterated that PeopleSoft pulled out of the conference -- and
its "highly charged atmosphere" -- because it was limited in what it
could have said due to the "quiet period" ahead of today's earning
release.
All of the concerns arose after PeopleSoft held an unprecedented conference call to discuss its outlook. During the call, the company reiterated its goal of increasing sales by 60 to 65 percent for 1998 while keeping operating margin between 18 and 20 percent.
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PeopleSoft's net rises but profit growth slows
PLEASANTON, Calif., Oct 20 (Reuters) - PeopleSoft Inc. on Tuesday reported third-quarter earnings that matched analyst forecasts, though profit growth slowed at the No. 2 maker of application software.
The company, whose products help companies manage human resources, payroll and other functions, said net income rose 54 percent to $44.2 million, or 17 cents a diluted share, from $28.7 million, or 11
cents, in the same period a year earlier. Revenue rose 62 percent to $351.3 million from $217.1 million.
The results were in line with expectations of 17 cents a share, according to First Call Corp., which tracks analyst forecasts.
Revenue and profit growth in the software business have been slowing as companies spend more on getting their computers ready for
the year 2000 and less on buying products from PeopleSoft and others. The company warned in July that profits for the next several
quarters would be hurt by a slowdown in mainframe software sales.
On Tuesday, Pleasanton, Calif.-based PeopleSoft said it saw revenue in 1998 rising about 60 percent from the $815.7 million it
generated in 1997. That compares with 81 percent growth the year earlier. It forecast 1999 revenue to be about 25 percent to 30 percent
above what it will record this year.
PeopleSoft, No. 2 in applications software sales behind SAP AG, also said it expected its operating margin to be at the lower end of its 18
percent to 20 percent target.
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