Originally created 06/30/03

PeopleSoft sprints to close sales in fight for survival



SAN FRANCISCO -- With its survival at stake, business software maker PeopleSoft Inc. is racing to close sales this week so it can wield customer loyalty as a club against its unwelcome suitor, Oracle Corp.

It's a daunting challenge.

PeopleSoft must persuade squeamish customers to buy expensive, complex software even though the company's fate remains uncertain, with Oracle pressing a hostile $6.3 billion takeover bid.

The faceoff is making PeopleSoft's current and prospective customers antsy because they fear the takeover battle will create chaos in their technology departments.

The software applications made by PeopleSoft, Oracle and other rivals have become indispensable tools for businesses, schools and government agencies around the world. Customers use the software to manage finances, personnel, customers and suppliers.

The software typically costs millions of dollars and requires months of technical training, so customers are reluctant to deal with a company that may not be around much longer.

To prod sales before the quarter ends this Monday, PeopleSoft is offering full refunds if the company is acquired, according to customers contacted by The Associated Press.

While declining to provide specifics about the incentives, PeopleSoft spokesman Steve Swasey said the company is "making a prudent response to Oracle's attempt to disrupt our business."

PeopleSoft CEO Craig Conway and the head of a customer advisory board also have written to customers urging them to buy new software licenses before July.

Oracle's bid "assumed a dramatic slowdown in customer purchases. Don't let it happen," Conway urged in a recent customer letter reprinted in newspaper ads.

The urgent sales push underscores the high stakes facing Pleasanton-based PeopleSoft and its 8,000 employees - most of whom may lose their jobs under an Oracle regime.

If the jitters raised by the takeover prompt customers to postpone purchases, PeopleSoft's second-quarter results may miss the stock market's target.

PeopleSoft is now expected to earn 10 cents per share on revenue of $448 million, based on the consensus estimates among analysts surveyed by Thomson First Call. Anticipating trouble, some analysts have lowered their estimates, bringing down the previous consensus of 11 cents per share before Oracle launched its June 6 bid.

If the results fall shy of the latest estimates, it could force PeopleSoft to issue an early July warning, threatening to drive down the company's stock price and make Oracle's all-cash bid of $19.50 per share look more attractive to stockholders.

"It would become another arrow in Oracle's quiver," said analyst David Hilal of Friedman, Billings, Ramsey & Co.

PeopleSoft shares fell 11 cents to close at $18.03 on the Nasdaq Stock Market. Oracle shares gained 14 cents to close at $12.52.

Alternatively, if PeopleSoft can deliver on the financial expectations, it would help support its stock and reassure shareholders about the company's plan to buy another rival software maker, J.D. Edwards & Co., for $1.75 billion.

That's why PeopleSoft is pushing harder than ever to close deals in the quarter's final days - typically the time when most software sales are made.

In a show of support, a wide range of PeopleSoft's 5,100 customers have issue statements backing the company's effort to fend off Redwood Shores-based Oracle, the world's second largest software maker behind Microsoft.

But closing actual sales won't be easy, said Bruce Temkin, principal analyst for Forrester Research, because PeopleSoft's strongest customer support is coming from places that have already bought most of the software they need.

Prospective customers are being advised by technology consultants, such as the Gartner Group, to avoid making expensive commitments until there's a resolution to the Oracle-PeopleSoft showdown.

What's more, many customers are watching their pennies in a tough economy.

"Our budget is under so much pressure that I don't think we will be buying much software for the next two years," said Mike Ten Eyck, manager of administrative systems for Texas Christian University, a PeopleSoft customer.

Germany-based SAP, the market leader business applications software, also has been running ads promoting its products as a "safe harbor" in an unsettled market - increasing the pressure on PeopleSoft.

At least 25 U.S. companies have requested sales consultations since SAP started the campaign, said SAP spokeswoman Laurie Doyle Kelly.

"It's understandable why some new customers would think this isn't a good time to be buying PeopleSoft software," said Peg Nicholson, president of the PeopleSoft International Customer Advisory Board. "That's why this really is a brilliant plan on Oracle's part. They knew this could really throw a monkey wrench into PeopleSoft's sales."

On The Net:

http://www.peoplesoft.com

http://www.oracle.com

http://www.jdedwards.com