PeopleSoft earnings drop

The CEO blames costs associated with Oracle's hostile takeover bid.

As its stock price hovers well below the latest acquisition offer from Oracle Corp., PeopleSoft Inc. announced

Thursday that its quarterly earnings were down due in part to the costs associated with the hostile takeover attempt.

PeopleSoft revenue rose, however, buoyed by its buyout last year of J.D. Edwards & Co. Total revenue for the first quarter came in at $634 million. Earnings were $0.07 per share, compared to $0.12 per share in the first quarter of 2003. A great deal of the $131 million in license revenues -- about 30% -- came from sales to existing customers, said PeopleSoft CFO Kevin Parker.

The subject of Oracle cropped up throughout the Pleasanton, Calif.-based company's afternoon earnings call, as CEO Craig Conway explained that costs associated with fending off the takeover impacted the bottom line. Earnings per share for the quarter would have been $0.09 if not for Oracle-associated costs, Conway said.

"Since Oracle announced its hostile takeover, PeopleSoft has incurred more than $55 million in costs," Conway said. "We could have done much better without this burden."

Oracle Corp., Redwood Shores, Calif., launched a hostile takeover attempt last summer. Its offer now stands at $9.4 billion or $26 per share. PeopleSoft stock closed Thursday at $18.89.

Conway said PeopleSoft had reached a point where it could "no longer delay important activities while we anticipate these costs." The company met its quarterly guidance, though fell short of analyst estimates. Conway cited disruptions from a shareholder meeting, a decision from the Department of Justice to fight the Oracle takeover in court and a statement of objection from the European Union.

The cost of PeopleSoft's customer assurance program, a guarantee to new customers that they would receive three to five times their license costs back should PeopleSoft be acquired and its product line discontinued, now stands at $2 billion, according to the company.

In other competitive news, Conway said that PeopleSoft is going up against SAP AG on most deals, and he believes Oracle is losing market share. Additionally, the integration of J.D. Edwards and Co., acquired last summer, is nearly complete, Conway said.

PeopleSoft offered guidance for its second quarter. It expects license revenue of $150 million to $170 million, total revenue of $675 million to $695 million and earnings per share of $0.20 to $0.22.

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