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PeopleSoft Forecasts Earnings Dip

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Posted July 7, 2004 By Colin C. Haley     Feedback

Strained from fighting Oracle's hostile takeover bid, the business software maker warns that Q2 results will disappoint.

PeopleSoft warned that it will miss second-quarter financial targets, citing the strain of fighting off Oracle's hostile takeover bid.

"Although we have been able to meet or exceed our financial projections since Oracle launched their hostile tender offer more than a year ago, the extensive publicity of the antitrust trial during the last month of our quarter was impossible to completely overcome," Craig Conway, PeopleSoft president and CEO, said in a statement.

Analysts expected a profit of approximately 21 cents per share on revenue of $691.5 million. The business software maker now expects earnings of 13 cents to 15 cents per share on revenue of $655 million to $664 million. Official second-quarter results are due July 27.

The earnings warning comes shortly after testimony concluded in the Department of Justice's legal case against Oracle. The government sued to block Oracle's bid to take over PeopleSoft's assets and customer contracts, saying the $7.7 billion deal would limit choice and sew uncertainty in the enterprise resource planning (ERP) market.

Conway said the evidence presented at the trial "clearly displayed Oracle's intent to disrupt our business and damage PeopleSoft." He called the impact on the company's business "substantial," especially as the trial grabbed headlines last month.

Lawyers for Oracle and the DoJ will file their Proposed Findings of Fact and Proposed Conclusions of Law tomorrow, and their post-trial briefs on July 12. Closing arguments are scheduled for July 20.

A spokeswoman for Oracle was not immediately available to comment.

In a research note to investors, SG Cowen & Co. said that PeopleSoft's poor preliminary results, as well as other warnings from other software companies, show that business slowed in June. Entrust , JDA Software Group , Micromuse , Sybase and VERITAS are among several applications makers that issued earnings warnings.

"We believe that some of this is a market-share shift that is benefiting Microsoft and SAP , among others," the analysts wrote in a note to investors this morning.

As a result of PeopleSoft's warning, SG Cowen lowered its 2004 and 2005 earnings estimates for the company. In morning trading, the company's stock had slumped about 5 percent on the news.

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