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Technology Stocks : PSFT - Fiscal 1998 - Discussion for the next year -- Ignore unavailable to you. Want to Upgrade?

To: Tom Smith who wrote (2458)	10/3/1998 11:03:00 PM
From: Tom Smith	Respond to of 4509

Conference Call Excerpt #1 Chuck Phillips, Morgan Stanley The question I have is on the pricing issue, which is of some concern to investors at the moment, and the increasing discounting in recent quarters, particularly out of SAP, is what people are fearful of. Can you comment on that? Has it materially changed over the last six months or is it in keeping with what you were expecting and had already planned on? And the second issue is I didn't hear you making any margin comments, unless I missed it. Can you talk about the related impact on margins going forward? Ron Codd, CFO Yeah Chuck, this is Ron. You know we have raised in a couple of different discussion forums the notion that we have seen some aggressive pricing and terms and conditions out of SAP in some competitive situations. What we have also, though, clearly said is that we do not believe that that is having an adverse impact either on our win rate or our average selling prices. I think that it's interesting that they are engaging in that, but the fact is that this is not a price-based competitive market. There are several other factors -- Dave mentioned several of them -- a long term relationship, a vendor you can trust, service capabilities, the functionality of the product. There's a whole variety of things that customers first and foremost evaluate before they worry about price. It's a very difficult notion to assume that all things being equal, so that it comes down to price as a tie breaker. On occasion no doubt that happens, but we don't see any material impact on our business from SAP's pricing activities. Chuck Phillips OK, and last question. Do you expect the deferred license component within deferred revenue to resume a more normal pattern based on everything you've seen so far? Ron Codd Yeah, as I mentioned earlier in the conference call, the overall total deferred license fee revenue number did go up this last quarter and in fact it went up at a greater percentage than the rate in the same period of last year. I think what you're seeing is just an arbitrary result of numbers that just happened to work the way they did mathematically to net off more from our reported number than we might normally have netted off. I would argue that, frankly, total gross license fee revenues have maintained a very normal pattern of growth. Chuck Phillips Thank you and thanks for the update.

To: Tom Smith who wrote (2458)	10/3/1998 11:07:00 PM
From: Tom Smith	Read Replies (1) \| Respond to of 4509

Conference Call Excerpt #2 Rick Sherland, Goldman Sachs A couple of questions. First, Ron, on license revenue growth, I'm wondering if you're, at this point in the quarter, able to comment at all on, maybe looking for 60% or so overall revenue growth for the quarter, or any comment on the split between licenses and services. Ron Codd Rick, as you know, in the past we've gotten into a practice of not getting into providing line-item specific guidance in the revenue area, and we continue to prefer to stay away from that. As I've mentioned in the past, it's everything we can do to manage the total number of different expectation points we do set and I think that we're very forthcoming with providing guidance to the investor community, much more so, frankly, than most companies are. But when it gets into having to deal with a lot of detailed expectations, that's more than I care to get involved in trying to manage. And I am very concerned that any expectations we set, we have the ability, capability, and focus on meeting. What we've said about license revenue growth is that we expect we will be able to continue to grow at or above the rate of the general ERP market growth rate. And then, we would continue to reiterate that guidance. Rick Sherland OK, and how is business coming in this quarter in terms of the skewing of the business, and what are the implications for DSO's? Ron Codd The report from the field is that we're in a business-as-usual situation for the quarter. Nothing unusual to report. And so that's where we're at there. Rick Sherland Ok, and back to an earlier question about the mid-market. I didn't hear any metrics on how you're doing there. Can you offer something in terms of percentage of business, or number of employees that are focused and dedicated to this area? Ron Codd Yeah, it continues to be a relatively small portion of our overall business. I think that we have maybe somewhere around 100 or so people involved in the middle market business activity at this point. We haven't broken out, nor do we intend to break out, any specific revenue items or disclosures. But I will say that they've been growing at a very healthy clip with a roughly doubling of the unit sales that they've been doing each quarter over the last several quarters. Rick Sherland OK, and lastly, regarding general headcount issues, are you still adding people at the rate that you have been? There seem to be some bears on the street that, you know, sometimes you hear some crazy stories that you're cutting back on expenses, maybe even laying some people off. Can you refute that? Ron Codd Sure, I can refute that very clearly. We are, other than exercising normal fiscal responsibility, which I would hope everybody out there is interested in us doing, we're managing our business as usual. This quarter we will add approximately 700 or so people, we believe, to our workforce, which is a substantial increment and quite in line with the increments in the last couple of quarters. Any other perspectives on our fiscal situation are (chuckling) probably greatly exaggerated. Rick Sherland OK. Thank you.

To: Tom Smith who wrote (2458)	10/3/1998 11:15:00 PM
From: Tom Smith	Read Replies (6) \| Respond to of 4509

Conference Call Excerpt #3 Comments from Aneel Bushri and Dave Duffield -- Aneel Bushri Quickly turning to PeopleSoft's position in the market, PeopleSoft's focus on customer success, delivering a robust, flexible and easy-to-implement software application solution, and fostering a unique culture has, according to IDC, positioned the company as the number two provider of enterprise solutions. Just to give you some background on our competitive stance versus other players in the marketplace, PeopleSoft today is at 8.5% marketshare of the client/server space. SAP is 24.9, Oracle is 8.4, putting PeopleSoft in the number two position for 1997. In 1996 we were number three, in 1995 we were number seven. So as you've seen, over the last three years we've taken significant market share away from our competitors. ------------------ Bushri Another interesting trend is to note the market share of the leader in the category, SAP. Over the last three years SAP's share of the client/sever market has gone from 30% in 95, to 26 in 96, to 25 in 97, clearly indicating that this is a very competitive marketplace that is not going to be dominated by one vendor in particular. ------------------ Bushri We also continue to compete very effectively against our key competitors. I'll highlight some competitive wins against SAP. Those were: American Express, Cushman Wakefield, Federal Express, Kitchener (sp?) Manufacturing, and Society General, just to name a few. ------------------ Dave Duffield Just a personal perspective here and that is, PeopleSoft 7.5 is huge. And I just want to reiterate how large this product offering is. There are over 2000 person years in development and testing in PeopleSoft 7.5. 100% of that product is geared, or let's say that development effort, is geared to the global customer -- 50% geared to the European customer. PeopleSoft, according to the analysts, has the best solution for the Euro. And as you can see in the press, enthusiasm for the Euro is catching on more and more every day. I will say we're clearly ahead of all the competition other than SAP in global functionality, and we're even closing the gap with them. But we still have beaten SAP, and some significant wins other than the ones Aneel just mentioned are Credit-Suiss group over in Switzerland, a German-speaking part of Switzerland I might add. And I just talked with the CFO about a week ago and when he polled all of the people who made the choice, and by the way this is for our financial application, the choice was unanimous for PeopleSoft. Toyota-Japan has licensed our PeopleSoft financial products and will go live in April of next year. Aneel mentioned Packard Bell-NEC in Europe -- live with our supply chain products. Corning is in great shape. You may know that was a difficult customer, difficult for both of us. Today they're a magnificent customer in production with all our applications and rolling out the whole suite of applications, including manufacturing to two more sites as we speak. Compaq has licensed our PeopleSoft human resource system to displace their in-production SAP human resource system. Walmart will go live in a very few days with a 750,000 person payroll, the largest payroll that I think any company has ever run. Our key customers are doing well, like Ford, Carfor (?) over in France, 3Com, Boise-Cascade, all are in production with one or more of our financial or purchasing/procurement applications. New customers for our manufacturing suite include Borden Foods and Eagle Family Foods. And they we expect to do extremely well with all our products. But why have we won prior to release of 7.5? And it gets back to our customer focus. I think you all know we are viewed as having the most loyal, satisfied customer base in the business. We are a far better partner than most every other enterprise software provider. And my favorite story, just to point this up, is again about Ford Motor Company that selected our financial applications for implementation in 35 countries around the world. The easy choice would have been SAP, and this was approximately a year and a half ago. But they chose PeopleSoft, not necessarily for features and functions, although in many countries we were right on a par there, but because of two reasons. One, they liked us as people, meaning that we're easy to do business with, and most importantly they trusted us. And they felt that they were selecting a software partner not a software product. And partnerships are there for 20-plus years. So if you're going to pick a vendor to do business with for the next 20 years, the really important things are: do you like to do business with them? are they easy to work with? and are they trustworthy? More and more customers are picking PeopleSoft for our culture, for our commitment to our customers, and the real interest we have in their satisfaction. Now our win rate over SAP has actually improved, as Aneel has pointed out with the statistics from IDC, and with Release 7.5 we expect that to improve even further. Release 8, which is now on the drawing boards, and other initiatives that Aneel has referred to will further extend our lead over Oracle, Baan, others, and will have totally leveled the functionality, global functionality, playing field with SAP with Release 8. And you couple that with our phenomenal culture and customer commitment, we should take further market share from SAP and others.

To: Tom Smith who wrote (2458)	10/4/1998 12:23:00 AM
From: aps	Respond to of 4509

Tom, i will go through the analysis in detail later, but your effort in getting to the bottom of the problem is commendable. Great job!!! Thanks!!! aps

To: Tom Smith who wrote (2458)	10/4/1998 7:31:00 AM
From: Raptor	Read Replies (1) \| Respond to of 4509

Tom Thanks much for the CC posts. I listened to the CC originally but did not tape it. I recall all of the questions and answers/comments you posted as I re-read them. Another thing your transcipts do not reveal is the tone of people's voices. In listening to the CC at the time, the PS people came across as they usually do - genuine and straight-forward. I have seen all of them at one or more times and seen some of them interact and speak to clients. As for the analysts, no one on the CC seemed to be on the attack or attempting to expose anything or 'grill' anyone. The overall tone of the CC seemed normal and reassuring and there didn't seem to be any real contrarian views or doubting Thomases. Little indication they were to be knocked for a loop by these two guys just a short time later. I guess we'll find out more Oct 20 - unless PS feels compelled to speak out again in their own defence.