PeopleSoft benefits from CRM boom

Enterprise application vendor PeopleSoft announced higher than expected earnings for its second financial quarter, beating analyst estimates.

The company posted profit of $15.9m, ahead of estimates by $2.6m, on revenue sharply up from the same period last year. The comparative quarter for 1999 showed a loss of $542,000.

PeopleSoft had prepared the ground for better than expected results at its launch of PeopleSoft 8 in New York last week when Craig Conway, the company's chief executive, hinted that analysts "might be happy" with the figures.

Licence revenue, a key indicator of a software vendor's underlying ability to make profit, was up by 37 per cent on the same period last year to $109.8m. While Conway would not be drawn on discussing sales strength going forward, he said: "Bookings for revenue are substantially up on this time last year." Total revenue for the second quarter was $420.2m, up from $360.7m a year earlier.

Conway said PeopleSoft's immediate tasks are to "execute on PeopleSoft 8, the 59 new products we launched last week, and capitalise on the acceleration" of customer relationship management (CRM).

According to Steve Hill, PeopleSoft's chief financial officer, CRM now represents the majority of new licence sales.

Conway noted that the company spent the past year concentrating on product development, allocating more than 27 per cent of revenue to this area. In the coming months he anticipates a winding down of the development effort, and a significant increase in sales and marketing for the new applications. Evidence of this was shown in the income statement, in which the company showed a 23 per cent increased in sales and marketing spend over the first quarter.

The current view among analysts is that PeopleSoft has turned a corner after last year when it experienced its worst ever downturn. "We can easily say that PeopleSoft is back on track with its internet-based application suite," said AMR Research in a report.

However, the researcher went on to warn that PeopleSoft needs to demonstrate that it is itself an ebusiness if it is to compete effectively in that fast-growing market. AMR also said that more integration work needs to be done with the acquired Vantive CRM products, and development on PeopleSoft's supply chain offerings needs to accelerate.

Nevertheless, PeopleSoft remains confident. The company continues to attract significant new customers, according to Hill. In the latest quarter, more than "100 new customers, representing 35 per cent of revenue" were added to the vendor's list of 4400 customers worldwide, he added.