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PeopleSoft, PEERS SING EARNINGS BLUES

As reported by Margaret Kane and Alorie Gilbert, business software maker PeopleSoft said that it would fall short of expectations for its first quarter, blaming a "cautious economic environment" and joining a string of business software companies with earnings woes.

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 follows 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 string of misses confirmed some analysts' beliefs that it may still be some 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 Solomon 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 apps 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 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 $0.12 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 for 2002 from 57 cents to 50 cents, and for 2003 from 75 cents to 65 cents.

The news should take a toll on software stocks throughout the day. Before the market opened, PeopleSoft had fallen 18 percent on the Island ECN, dropping $6.88 to $37.37. Other software stocks dropped in sympathy, with Oracle off 44 cents to $12.84 and Siebel Systems down $2.80 to $34.20.

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. Analyst 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 re-evaluating its CRM project. As a result, Epiphany will not recognize any of the anticipated revenue from that deal.

Onyx Software, 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, it 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.