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Monday November 19 1:15 AM ET
Strong Orders to Keep Peoplesoft on
Target
By Jennifer Tan
SINGAPORE (Reuters) - California-based e-business software maker
PeopleSoft Inc said a robust order pipeline has put it on target to meet
earnings guidance for the fourth quarter and 2001 despite the global
economic slowdown.
``As we enter into the fourth quarter, what we've seen is one of the strongest pipelines in the
company's history,'' Martin Mackay, PeopleSoft's vice president for international operations, told
Reuters in an interview.
``Our current guidance remains in force.''
The company, which makes the software to automate such business functions as human resources,
finance and customer service, said it expects October-December earnings per share to be in line with
Wall Street's consensus target of 16 U.S. cents.
If it does hit this target, PeopleSoft's 2001 earnings will be 56 cents a share, within the range of its
original forecast for earnings of 55 cents to 60 cents.
In October, the software maker reported third quarter income from recurring operations of $50
million or 15 cents a share, a jump from $23 million or eight cents a year ago, to beat Wall Street's
consensus earnings per share estimates by three cents.
Total revenues grew 15 percent year-on-year to $509.4 million, but was down from $553 million in
the second quarter.
OUTSHINING RIVALS
``We are the only enterprise application software vendor to have maintained guidance through the
year, in contrast to our competitors who have reduced guidance and reduced guidance on more than
one occasion,'' Mackay said.
In the September quarter, PeopleSoft's software license revenues rose to $151.8 million from $131.5
million last year, but fell from $166 million in the second quarter.
During the same period, rival Siebel Systems Inc's (Nasdaq:SEBL - news) license revenue fell to
$193.5 million from $308.8 million last year, while database giant Oracle Corp (Nasdaq:ORCL -
news) -- which reported results for its quarter ended August 31 -- posted license revenues of $731.4
million, nine percent lower than a year ago.
``It looks as though PeopleSoft could be the only enterprise software company that makes it through
calendar 2001 without lowering guidance,'' Lehman Brothers analyst Neil Herman said in a recent
note to clients.
Mackay said although companies have been reviewing their technology spending after the September
11 attacks, the greater returns on investment offered by the flagship PeopleSoft 8 software line have
sustained demand.
``The value proposition of PeopleSoft 8's pure Internet architecture -- in terms of increased
productivity and reduced cost -- has been extremely compelling,'' he added.
Deutsche Banc Alex Brown analyst Tim Dolan pointed out that lower total cost of ownership and
quick time to market are key in the current tech spending environment.
``PeopleSoft is the only ERP (enterprise resource planning) vendor that can take advantage of the
Internet architecture story and we believe it is a major reason PeopleSoft is continuing to do well in
the face of a tough buying environment,'' he added.
PeopleSoft's customers include express shipper Federal Express (NYSE:FDX - news), discount
broker Charles Schwab (NYSE:SCH - news), carrier Cathay Pacific (0293.HK), Bank of China and
Southeast Asia's largest bank, Development Bank of Singapore (DBSM.SI).
FOCUS ON INTERNATIONAL SALES
Mackay said PeopleSoft expects to grow its international revenues by focusing on China and India.
``Two and a half years ago, we derived 17 percent of our total revenues from international operations,
and today, it is 40 percent -- this provides a hedge against over-exposure to one single market which
is the U.S.,'' he added.
The company intends to grow the international share of the business to 45 percent by 2002, and to
between 50 percent and 55 percent in the medium to longer term, he said.
``Our fastest-growing international region is Asia Pacific.''
As at the nine months ended September 30, Asia Pacific revenues have expanded 41 percent
year-on-year, with Europe, Middle East and Africa rising 20 percent to 25 percent, and Latin
America remaining flat, Mackay noted.
With China opening up its economy -- a process that would be accelerated by its recent entry into the
World Trade Organization (news - web sites) (WTO), huge opportunities would surface.
``In the second quarter of 2002, we will deliver our product in simplified Chinese, and will leverage
that product with business partners to target China's financial services sector and the state-owned
enterprises,'' he added.
PeopleSoft shares closed at $32.36 in New York on Friday.
