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

To: Chuzzlewit who wrote (4403)	1/28/1999 9:51:00 PM
From: Philip W. Dunton, Jr	Read Replies (1) \| Respond to of 4509

From the street.com Triple Trouble for PeopleSoft By Medora Lee Staff Reporter 1/28/99 9:26 PM ET SAN FRANCISCO -- This is a story about PeopleSoft (PSFT:Nasdaq) and the three bears. The enterprise-software developer delivered three bearish pieces of news to Wall Street after the market closed today. PeopleSoft said fourth-quarter earnings came in below Wall Street's estimates, lowered its guidance for 1999 and said it's responding to a letter from the Securities and Exchange Commission about how it accounted for its in-process research and development charges linked to a 1996 acquisition. That could lead it to restate 1996, 1997 and 1998 earnings. The only semblance of positive news PeopleSoft offered was an announcement that it would lay off 430 workers, or about 6% of its workforce, this quarter. Positive, that is, if you're an investor and not an employee. The Pleasanton, Calif., firm earned 16 cents a diluted share excluding charges in the fourth quarter ended Dec. 31, below First Call's 25-broker consensus estimate of 17 cents. Including charges, PeopleSoft's net income was 10 cents a diluted share. Revenue for the quarter was $364.2 million, up 40% from the same quarter last year. License revenue increased only 3%, while service revenue jumped 83% to account for 61% of total revenue for the quarter. Last year, service revenue accounted for 46% of total revenue in the fourth quarter. Analysts say growth in license revenue is preferable to growth in service revenues because the licenses come from software, the company's core business. All of that could lead to downward earnings revisions among Wall Street analysts. "It wasn't a very good quarter, with license revenue weak" and no predictability to future orders, said one Wall Street analyst whose firm has not underwritten for PeopleSoft. "I don't see any positive reaction coming out of this. According to our models, we'll probably see negative growth in license fee revenue for the next two quarters, year over year." The 430 layoffs will mostly come from administration, sales support and marketing support jobs. PeopleSoft also said it would move 100 employees to other areas and hire more staff to support such areas as e-business, customer support programs and analytic applications development. The company said more than 90% of the layoffs will be in North America. After a rough 1998, in which the company's stock price fell to less than half its high of 52 in April, PeopleSoft warned that 1999 could continue to be tough. PeopleSoft last traded at 22 7/16 today, down 1/4. As a result of uncertainties related to Year 2000 and global economies and escalating competition, PeopleSoft said "the company's degree of visibility and associated confidence level in forecast information is considerably lower than it has been over the past year and prior years." But the company still forecasts first-quarter revenue to grow between 20% and 25% from the first quarter of 1998 and between 20% and 30% during all of 1999. Last quarter, the company had predicted 1999 revenue to grow between 25% and 35%, says SoundView Technology Group analyst Steve Kohn. SoundView has not underwritten for PeopleSoft. In a conference call with investors, PeopleSoft CFO Al Castino says he expects revenue in the second half to grow faster than in the first half as the company introduces new products. Castino also said PeopleSoft's revenue should double in the next three years as the effects of the Year 2000 problem pass and as more new products are sold. But Kohn isn't convinced PeopleSoft can achieve the second-half growth that it expects. The uncertainty related to corporate spending with Year 2000 will still be looming through the year, he says. Regarding the SEC's review of PeopleSoft's accounting related to in-process R&D charges it took when it acquired PMAN, Kohn says he expect this issue won't escalate. PeopleSoft said "the company believes its accounting for PMAN was proper" and "that any adjustment would not be material to the financial statements of 1996, 1997 or 1998." In 1998, total revenue was $1.3 billion, net income was $143.2 million and earnings per share were 55 cents. Results include a one-time writeoff of in-process R&D costs of $13.9 million linked to the acquisition of Intrepid Systems last quarter. PeopleSoft said the SEC's inquiry into the company's in-process R&D charges could change the writedown taken in the fourth quarter for Intrepid. PeopleSoft is currently clearing its acquisition last quarter of Intrepid with the SEC. TOP

To: Chuzzlewit who wrote (4403)	1/28/1999 9:57:00 PM
From: Melissa McAuliffe	Read Replies (1) \| Respond to of 4509

I think that if PSFT were a different kind of company they might have been able to avoid the layoffs through normal attrition. Unfortunately, I don't get the impression that PSFT employees regularly leave the company since they're known to have one of the lowest attrition rates in the industry. I heard that SAP had some layoffs too a short while ago but I also heard that many many people were leaving SAP voluntarily. I actually think that SAP might be doing this layoff thing a few at a time which is a much worse way to do it, IMHO. Granted, you don't have to make any big announcement but it creates tremendous uncertainty for the employees...never knowing if they'll be next. So when you think about it in hindsight layoffs were almost a inevitability...PSFT hired like crazy last year expecting a certain % growth...the growth targets were reduced and couldn't support the headcount any longer....people weren't leaving voluntarily....so they had to do something....this was it.