When will Momentum ( MMTM) start living up to its name for PeopleSoft ( PSFT)? Since PeopleSoft ( PSFT) announced Jan. 24 that it would buy back Momentum Business Applications, a company it spun off in 1998, the software maker's shares have continued on a downward slide. Wary of accounting issues in the era of Enron and confused by how the acquisition will affect PeopleSoft, many investors are simply staying away.
The Momentum spinoff has raised eyebrows in the past about whether PeopleSoft was using it as a shelter from high software-development costs. Now that PeopleSoft is ending the relationship, investors are wondering what the impact will be on PeopleSoft's bottom line. "I think they've got to resolve the question of handling Momentum costs, and clearly in the Enronitis environment we're in now, anything that smacks of or hints at off balance sheet is something you want to be out of," said analyst Ian Morton of J.P. Morgan H&Q. He rates PeopleSoft long-term buy and his firm has no banking relationship with PeopleSoft. PeopleSoft shares rose 0.2% Tuesday to close at $30.32. But that's still down 21% percent from Jan. 24's close of $38.43 and down nearly 25% from Dec. 31. By contrast, Oracle ( ORCL) has seen its shares rise 14.5% and Siebel ( SEBL) shares have gone up 20.4% since the beginning of the year.