PeopleSoft Inc. provided a bit of hope in the carnage of the enterprise software market last week by meeting first quarter revenue and earnings projections and maintaining growth forecasts for the year. The company reported $503 million in revenue, up 34% from a year ago, while license revenue grew 70% to $153 million. The company earned 11 cents per share, up from 4 cents per share a year ago, and it tenaciously stood by earlier estimates of 35% license revenue growth for the year.
The company attributes its good fortune to the traction of the Internet release of its enterprise resource planning suite, called PeopleSoft 8. Nearly half of PeopleSoft's 4,700 customers have upgraded to PeopleSoft 8 since it was released last year, the company says, and it gained 130 new customers during the quarter. PeopleSoft also did well at selling additional components of its software to its customer base. "Pieces of ERP remained a priority, particularly if they were things that leveraged the existing investment in an ERP system," says Rob Kugel, an analyst at FAC Equities. "People who might have only had the Human Resource module bought the Financials module, and vice versa."
The company competes in two software segments--enterprise resource planning and customer-relationship management--that seem to be weathering the economic downturn better than other application categories. As evidence, the largest vendors in each space, SAP and Siebel Systems, respectively, exceeded projections in the first quarter. For ERP vendors such as SAP and PeopleSoft, who last year were derided by rivals for "missing" the Internet, this quarter's earning are something of a vindication. Says Kugel: "There was the element of the tortoise and the hare this quarter, wasn't there?"
PeopleSoft seems to have regained its balance after a couple of unsteady years, but it has lost some ground in the meantime. "They remain a lower-market-share player in a very high-stakes game," Kugel says. "They have, by far, the best architecture of any company today. The question is how well they'll be able to leverage that over the next couple of years, competing against Siebel and SAP, whose market share is a significant multiple of their own."