PeopleSoft 'Guaranteed' Its Quarter

Updated from 10:09 a.m. EDT

Software maker PeopleSoft (PSFT) silenced critics Wednesday by saying its second quarter came through better than expected, despite the nasty merger dispute with Oracle (ORCL).

Shortly before the market opened, the company announced that it would beat guidance, with GAAP earnings per share of 10 cents to 11 cents on revenue that would range between $490 million and $500 million. Previous guidance had been for earnings of 8 cents to 9 cents a share. The company also said software license revenue would range between $105 million and $115 million, compared to its previous guidance of $85 million to $95 million.

Those results are considerable improvements over Wall Street estimates, which have been widely reduced since Oracle's bid for the company early this month. In fact, 18 of the 32 analysts who follow the company had lowered their estimates in the last few weeks and many had expected the company to preannounce on the negative side.

PeopleSoft CEO Craig Conway called the news "an undeniable vote of confidence by both existing customers and new customers (who) continued to select PeopleSoft for their enterprise software applications. Our biggest regret is what might have been this quarter, if we did not face the uncertainty of the Oracle hostile takeover attempt."

In a conference call Wednesday morning, Conway and CFO Kevin Parker attributed the turnaround to a number of factors, including a customer and industry backlash against Oracle, but the most significant appeared to be the success of PeopleSoft's "money-back guarantee", essentially an offer to refund license fees to new customers if Oracle takes over the company. Parker said that more than half of the quarter's license revenue was derived from customers covered by the offer. Ironically, the offer expired Monday, but the company may renew it, Parker said.