April 2, 2002 6:50 AM PST
PeopleSoft, peers sing earnings blues
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PeopleSoft tops estimatesJanuary 24, 2002
PeopleSoft now expects earnings from operations to be 14 cents per share, 3 cents higher than the year-ago first quarter, but a penny short of the 15 cents per share analysts have been expecting. In January, PeopleSoft said it expected to earn between 14 cents and 15 cents per share on license revenue of about $160 million.
License revenue for the quarter that ended Sunday is now expected to be in the range of $130 million to $135 million. PeopleSoft CEO Craig Conway said that sales of consulting and maintenance services were "on plan." The company will formally announce results for the quarter on April 25.
PeopleSoft's warning comes after a string of warnings from companies that make customer relationship management (CRM) software, including Epiphany and Onyx Software. CRM applications help automate a company's sales, marketing and call-center tasks. BroadVision, which makes e-commerce software, also warned.
The news took a toll on software stocks. In early trading, PeopleSoft fell $10.12, or 27 percent, to $27.25; and rival Siebel Systems slumped $2.77, or 8 percent, to $31.43. Epiphany fell $1.11, or 15 percent, to $5.95 and Onyx lost 9 cents to $3.71. BroadVision was off 24 cents, or 14 percent, to $1.48.
The string of misses confirmed some analysts' beliefs that it could still take time before software application vendors recover from the economic downturn. In the first quarter of the year, some companies were able to stave off trouble because they had built up a backlog of business, wrote Salomon Smith Barney analyst Heather Bellini. But without that buildup, the current period "will be the toughest quarter of the year" for software companies, she said.
"As one of the most well-positioned vendors in the (applications) space, (PeopleSoft's first-quarter) license miss helps confirm our belief that we have yet to see any signs of a broad scale recovery in applications software," wrote CS First Boston analyst Brent Thill. He dropped his rating on PeopleSoft from "buy" to "hold."
Goldman Sachs analyst Rick Sherlund, meanwhile, lowered earnings estimates for Siebel Systems on Tuesday based on broad indicators. "A recovery in the tech sector is lagging well behind the overall U.S. economy. Estimates in this sector are likely to come down as a result," he said.
"We have expected Siebel to make its first-quarter estimates of $250 million in license revenues and earnings of 12 cents per share, and we have not changed these estimates," he wrote in a research note. "Europe and Asia were likely slower than the U.S. and business in general was probably tougher than expected in the quarter."
Sherlund dropped earnings-per-share estimates from 57 cents to 50 cents for 2002, and from 75 cents to 65 cents for 2003.
Epiphany said it now expects first-quarter revenue of $22 million and a net loss, excluding certain charges, of 20 cents per share or less. Analysts polled by First Call have estimated revenue of $28.3 million and loss per share of 14 cents.
Epiphany said it missed estimates because one customer, with whom it had signed its largest deal ever last quarter, is reevaluating its CRM project. As a result, Epiphany will not recognize any of the anticipated revenue from that deal.
Onyx, also a CRM software maker, expects first-quarter revenue of $14 million, compared with First Call estimates of $17 million. The company said in a press release that the disappointing results are "temporary in nature."
BroadVision, meanwhile, not only warned of disappointing sales, but also restated earnings for the third and fourth quarters. The company, which sells software for building customer portals and other online self-service applications, said it expects first-quarter revenue in the range of $29 million to $32 million.
Analysts polled by First Call had been expecting revenue of $35.6 million. The company blamed uncertainties in information technology spending for the shortfall.
After restating third-quarter earnings, the company's revenue decreased $3.5 million, from $51.2 million to $47.7 million, and its loss per share increased from $1.54 to $1.55. Revised fourth-quarter revenue increased to $48.2 million from the $48 million originally reported, and loss per share decreased from 20 cents to 19 cents.