PeopleSoft announced Q2 financial results yesterday, and numbers don't even meet the lowered expectations that the company set just three weeks ago. The firm is still profitable, at 3 cents per share (down from 11, same quarter last year). But most significantly, Q2 software license revenue was only $130M, far short of the $150-170M that PeopleSoft forecast in April. Although the $130M in new license sales is up from $112M last year, last year's numbers did not include J.D. Edwards. Therefore, license sales now from the combined company are up only $18M from the PeopleSoft-only numbers a year earlier.
PeopleSoft is blaming the poor showing on prospect uncertainty around the Oracle anti-trust lawsuit. During an analyst conference call, CEO Craig Conway said that the Oracle takeover bid was the "elephant in the room" whenever PeopleSoft visited sales prospects. He also said that several deals had been either lost or delayed due to the uncertainty around Oracle's takeover bid.
No doubt, buyers are finding it easy to push off a decision until the judge rules whether Oracle can continue its quest to acquire PeopleSoft. I might add that over the past 12 months PeopleSoft has been desperate to keep up its financial performance and has been providing lots of incentives to pull revenue in to current periods. That would have left fewer deals in the pipeline, which could be contributing to the weakness of Q2 results. It's a vicious cycle: your revenue is short, so you provide incentives to pull in deals from future periods, leaving future periods weak, which means you need to cut more deals. At some point, you run out of deals and you take a hit.
No matter how you slice it, it's not going to be easy for PeopleSoft. As I indicated last week, some observers think that it's quite possible that the judge could rule in favor of Oracle
. If so, it will be difficult for large institutional shareholders to say no to Oracle's tender offer, in the face of PeopleSoft's financial performance. When software buyers look at this scenario, it's easy to for them to say, let's just wait a few months to see how this thing is going to turn out.
Reuters has a summary of PeopleSoft's results