Peoplesoft failed to meet analysts? expectations for its fourth fiscal quarter and said it does not expect to see significant growth again until the second half of its new financial year.
For its fourth quarter, which ended 31 December, 1998, the enterprise resource planning (ERP) applications vendor saw revenues increase to $364.2 million from $260.6 million last time.
Profits were flat at $40 million or $0.16 per share compared with $39.5 million or $0.16 per share in the year ago quarter. Earnings came in $0.01 behind the First Call analysts? consensus estimate.
After a $13.9 million charge related to Peoplesoft?s acquisition of Intrepid Systems, however, income fell to only $0.10.
As a result, the firm announced it was laying off 430 staff or six per cent of its total workforce and redeploying 100 others in an attempt to refocus its business on potential growth areas.
Some 90 per cent of the job cuts will come from headquarters in Pleasanton, California, mainly in the area of field operations, which includes administration and sales and marketing support services.
Peoplesoft is also creating a new centralised direct sales organisation to focus on initiatives that it hopes will have high revenue potential for the Millenium. These include its new analytical applications, the Peoplesoft Business Network ebusiness packages and its outsourcing business.
Al Castino, Peoplesoft?s chief financial officer, said: "The key thrust of our new sales organisation is to gain momentum in new sales areas and its also a vehicle to sell into our installed base. Many vendors are in a bit of a fink over the last quarter?s drop in IT spending, but we?re making a strategic investment that is going to play out in 2000 and beyond."
He added: "We expect a 20-25 per cent increase in revenues over the next quarter, which we?re very pleased with in a terribly uncertain year for the industry. The key to look at will be our product introductions. We?re building a pipeline, but there?ll be no revenues from them until the second half of the fiscal year and comparing the second half will be easier than the first."
In the past, the supplier has seen sales growth in the 70 per cent range, and Dave Duffield, Peoplesoft?s chief executive, had forecast annual growth rates of 50-60 per cent for the fiscal year just gone(see VNU Newswire, 5 February, 1998).
But Castino attributed the market slowdown to the usual Year 2000 problems and global economic woes, although he also admitted the firm was facing more intense market competition than it had previously, and was suffering from considerably lower degrees of "visibility and associated confidence levels" than it had in prior years.
It would appear that Peoplesoft is also expecting a difficult first fiscal quarter, however.
The company anticipates taking a $6 million hit for the staff it is axing, and a further one off $175 million charge related to the spin off of its Momentum research and development arm and the distribution of Momentum?s stock to Peoplesoft shareholders (see VNU Newswire, 14 January, 1999).
As a result, it expects profits to be about 15 per cent lower than the comparable year ago quarter?s earnings of $33.8 million or $0.13 per share.
It is also currently in the throes of responding to a letter from the Securities and Exchange Commission (SEC) relating to the charge made for its acquisition of Pman in 1996.
It is likewise clearing the accounts it submitted to the SEC for its purchase of Intrepid made in the fourth quarter of last year. Peoplesoft acknowledged that the review may cause it to restate its 1996, 1997 and 1998 financial statements.
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