Financial results

Given that it is toiling under the strain of an 17 month-long hostile assault, PeopleSoft has proved itself the exception by producing a startling set of results for its third quarter. Even its unwelcome suitor, Oracle, was impressed enough to raise the price of its offer for the company after having lowered it earlier in the year.

Revenues to the end of September were up 11% year-on-year to $698.8 million and PeopleSoft recorded net income of $23.6 million in comparison to a net loss of $7.3 million a year ago.

Last year's figures were considerably weakened by charges relating to PeopleSoft's purchase of JD Edwards, exaggerating the improvement slightly. However, the company's feat of adding 138 new customers to its base was impressive. New customers accounted for 21% of licence revenue in the quarter, above the new licence percentage when the takeover battle was beginning.

Analysts have struggled to understand how PeopleSoft has managed to perform so well, particularly in the light of Oracle's 36% collapse in licence sales in its last quarter. One suggestion is that PeopleSoft customers have accelerated their purchases in order to qualify for incentives before the takeover issue is resolved.

In its fight for regulatory approval of its acquisition of PeopleSoft, Oracle has been telling the courts that the increasing challenge from Microsoft will continue to ensure a fair level of competition in the business applications sector. To support that argument, Microsoft's Business Solutions segment dutifully put in a respectable 9% growth for its first quarter of fiscal 2005, recording revenues of $160 million, up from $147 million a year ago. Much improvement was down to the "double digit" revenue growth of its customer relationship management (CRM) business and a "strong showing" from its mid-range enterprise resource planning (ERP) package, Axapta.

Microsoft's smallest segment, Mobile and Embedded Devices, is also its fastest growing with revenues up 30% to $69 million. Server software sales increased 19% to $2.2 billion, and strong sales of Office 2003 pushed the Information Worker segment up 14% to $2.6 billion. But its Client business remains Microsoft's cash cow, accounting for $3.0 billion of total revenues and more than half of its $2.9 billion in profits.

One small blemish on Microsoft's results statement was a larger-than-expected drop in forward bookings. Microsoft told analysts that the reason for the fall is that its customers are taking longer to renew software contracts. "They clearly use the renewal period to hold out for discounting," said CFO John Connors. He claimed this deceleration was also due to larger deals, which take longer to negotiate. Analysts noted that the next big upgrade to Microsoft's desktop and server software is still a long way off, making corporate customers more reluctant to renew contracts.

Also bolstering Oracle's case that the business applications sector is replete with competitors, were strong results and a confident outlook from German ERP giant SAP. With third-quarter revenues up 11% (adjusted at constant currency) to E1.8 billion and new licences up 17% to E491 million, SAP continues to dwarf its rivals. It also claims to be taking customers from both Oracle and PeopleSoft, growing its share of the US enterprise applications market from 32% to 38%. European software sales increased 24% and overall profits were up 15% to E291 million.

SAP CEO Henning Kagermann clearly enjoyed his post-results conference call to analysts. SAP, he said, banked 56% of all the applications money generated by the top four vendors (Oracle, PeopleSoft, Microsoft and SAP) in the quarter, up 3% on the same quarter in 2003. The company's increasingly valuable mid-market customer base is also growing fast and CRM software revenues now make up one fifth of overall sales.

"We have now increased our rolling four-quarter market share to 124% of Siebel's software revenues," added Kagermann, suggesting SAP is running away with the CRM crown it recently stole from the Californian sales software vendor.

So where does that leave Siebel? With profits of $19.4 million, the company's third quarter results seemed to please financial analysts. Siebel has been inching away from red ink, recording its second consecutive profitable quarter; losses were $59.3 million a year ago.

But this growth in profit was accompanied by a decline in licence revenue. Though up on the low point of its second quarter, $104.6 million in licences is still down on the $110.0 million reported in the third quarter of 2003 and the $126.8 million recorded in the same period for 2002.

Siebel OnDemand, the company's response to the hosted-CRM offerings of, Salesnet and others, is claimed to be growing in value by around 30% a quarter, though its figures are not broken out from software or services revenues. OnDemand first became available in the first quarter of 2004, when Siebel said it closed 229 deals for the product. Even if the company is targeting larger customers than its upstart rivals, this means it is still likely to have fewer than 400 licences for its fledgling online service (its total customer base is around 4,000).

Perhaps forthcoming vertical specialisations can help accelerate the growth of OnDemand. But next to's 88% leap in revenues in its second quarter, Siebel looks like it has a lot of ground to make up, online and offline.


Key supplier financial results – October 2004
Company   Main activity   Period   Period end   Revenue ($m)   Rev change   Net inc ($m)   Prev net Inc ($M)  
Accenture Ltd Consultancy and IT services 4Q04 31-Aug 3,806.5 10% 183.0 120.5
Adobe Systems Inc Document s/w 3Q04 03-Sep 403.7 27% 104.5 64.5
Advanced Micro Devices Inc Microprocessors 3Q04 26-Sep 1,239.5 30% 43.8 -31.2
Altiris Inc IT management s/w 3Q04 30-Sep 40.7 61% 3.4 3.8
Borland Software Corp Application development s/w 3Q04 30-Sep 77.6 10% -0.2 -12.2
Check Point Software Tech Ltd Firewall &VPN s/w 3Q04 30-Sep 129.3 22% 66.8 58.4
Citrix Systems Inc Server applns s/w 3Q04 30-Sep 187.6 30% 38.4 31.0
Cognos Inc Business intelligence s/w 2Q05 31-Aug 185.2 17% 27.6 18.2
Computer Associates Intl Inc Systems &applns s/w 2Q05 30-Sep 855.0 6% -96.0 -90.0
Compuware Corp Prog tools, sys mgmt &services 2Q05 30-Sep 295.5 -2% 7.4 -8.5
EMC Corp Storage systems 3Q04 30-Sep 2,028.9 34% 218.0 159.1
Epicor Software Corp Accounting s/w 3Q04 30-Sep 62.2 54% 6.3 1.8
FileNet Corp Content management s/w 3Q04 30-Sep 96.5 8% 6.4 2.5
Foundry Networks Inc Networking products 3Q04 30-Sep 102.5 1% 14.9 20.8
Hummingbird Ltd Data analysis/content mgmt s/w 4Q04 30-Sep 59.3 11% 3.7 -1.4
Hyperion Solutions Corp Analytic applns &OLAP s/w 1Q05 30-Sep 159.5 29% 11.6 9.7
IBM Corp Systems &IT services 3Q04 30-Sep 23,429.0 9% 1,800.0 1,785.0
Informatica Corp Data mgmt/integration s/w 3Q04 30-Sep 52.4 4% -8.6 -0.3
Infosys Technologies Ltd S/w development services 2Q05 30-Sep 379.0 51% 97.0 65.0
Intel Corp Semiconductors 3Q04 25-Sep 8,471.0 8% 1,906.0 1,657.0
Interwoven Inc Content mgmt s/w 3Q04 30-Sep 40.3 54% -2.6 -18.8
Juniper Networks Inc Networking systems 3Q04 30-Sep 375.0 118% 48.8 7.2
Lawson Software Inc Business applications s/w 1Q05 31-Aug 82.7 -6% -0.4 3.2
Lucent Technologies Inc Networking equipment 4Q04 30-Sep 2,402.0 19% 348.0 99.0
Macromedia Inc Interactive s/w dev tools 2Q05 30-Sep 107.9 20% 15.5 9.8
Manugistics Group Inc Supply chain mgmt s/w 2Q05 31-Aug 51.3 -14% -17.1 -8.0
Mercury Interactive Corp Appln perf mgmt s/w 3Q04 30-Sep 165.4 31% 19.0 -6.7
Microsoft Corp PC applns/systems s/w 1Q05 30-Sep 9,189.0 12% 2,901.0 2,614.0
PeopleSoft Inc Business applns s/w 3Q04 30-Sep 698.8 12% 23.6 -7.3
Polycom Inc Voice &video conferencing s/w 3Q04 30-Sep 140.8 28% 11.0 10.0
Quantum Corp Storage systems 2Q05 26-Sep 180.0 -8% -6.1 -38.1
Red Hat Inc Linux software 2Q05 31-Aug 46.3 36% 11.8 3.6
RSA Security Inc Security s/w 3Q04 30-Sep 76.7 19% 8.7 3.6 Inc CRM products 2Q05 31-Jul 40.6 88% 1.2 0.1
SAP AG* Business appln s/w 3Q04 30-Sep 2,131.2 8% 349.2 302.4
SeeBeyond Technology Corp Appln/process integration s/w 3Q04 30-Sep 41.7 29% 1.3 -4.8
Siebel Systems Inc Customer relationship s/w 3Q04 30-Sep 317.1 -1% 19.4 -59.3
Stellent Inc Content management s/w 2Q05 30-Sep 28.0 51% 0.8 -2.5
Storage Technology Corp Storage systems 3Q04 24-Sep 526.5 1% 42.8 31.0
Sun Microsystems Inc Workstations, servers, web s/w 1Q05 26-Sep 2,628.0 4% -174.0 -286.0
SunGard Data Systems Inc Computer services 3Q04 30-Sep 899.3 21% 153.5 92.4
Sybase Inc Database &appln dev s/w 3Q04 30-Sep 198.7 3% 17.8 22
Symantec Corp Enterprise security s/w 2Q05 30-Sep 618.3 44% 135.6 83.4
Tibco Software Inc Appln integration s/w 3Q04 29-Aug 105.9 60% 8.6 2.7
Unisys Corp Systems &services 3Q04 30-Sep 1,445.7 0% 25.2 56.2
Unit 4 Agresso NV* Business applications s/w 1H04 30-Jun 139.2 43% n/a n/a
Verisign Inc Internet security s/w 3Q04 30-Sep 325.3 21% 40.4 -31.3
Vignette Corp Web customer s/w 3Q04 30-Sep 42.6 12% -10.0 -1.9
WebEx Communications Inc Web conferencing svcs 3Q04 30-Sep 64.0 31% 11.8 11.2
WebMethods Inc Application integration s/w 2Q05 30-Sep 51.2 13% -3.3 -4.5
* figures converted to $US at exchange rates averaged over the reporting period

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Ben Rossi

Ben was Vitesse Media's editorial director, leading content creation and editorial strategy across all Vitesse products, including its market-leading B2B and consumer magazines, websites, research and...

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