PeopleSoft ( PSFT) finally caved in, confirming analysts' fears about its core license revenue growth. After months of deflecting criticism for refusing to break out revenue from J.D. Edwards, acquired in July 2003, PeopleSoft finally revealed the numbers in a filing with the Securities and Exchange Commission.

Without J.D. Edwards, PeopleSoft's license revenue -- a key measure of software sales -- declined 20.1% in 2003 from 2002, according to the 10-K filing. J.D. Edwards contributed $114.9 million in license fees to PeopleSoft last year, representing 21.3% of the combined company's total license revenue.

The newly disclosed numbers back up charges from some analysts and unwanted suitor Oracle ( ORCL) that Pleasanton, Calif.-based PeopleSoft's core business is stalling.

Prior to last week's disclosure, analysts had criticized PeopleSoft for reporting year-over-year sales increases using results from last year that do not include J.D. Edwards. For instance, PeopleSoft reported a nearly 2% increase in license revenue in 2003, using the combined PeopleSoft-J.D. Edwards numbers in 2003 -- but only PeopleSoft numbers in 2002.

"The fact of the matter is that PeopleSoft on a stand-alone basis is continuing to decline in its license sales," said SG Cowen analyst Drew Brosseau, who had estimated that PeopleSoft license revenue without JDEC suffered an 18% decline last year. "It matters," the analyst said of the 2-percentage-point difference between his estimate and the actual results.

"If you want to get a legitimate view of whether the company is growing or not, you can't just slap on an acquisition and claim it's growth," he added. (SG Cowen hasn't done investment banking with PeopleSoft.)

Of course, it's been in PeopleSoft's interest to shine the best light on its numbers as it fends off Oracle's unwelcome advances. The 10-K disclosure comes as the hostile takeover saga moves to the courtroom, with Oracle fighting the Department of Justice's effort to block the deal and PeopleSoft watching from the sidelines.

Despite the weaker-than-expected 2003 results, PeopleSoft should be able to show growth this year given easier comparisons, Brosseau said.

But those easy comps are a result of PeopleSoft underperforming most of its competitors last year. German behemoth SAP ( SAP) suffered a smaller 6% decline in software licenses in 2003, while Oracle's applications business posted a 3% increase in license revenue.

Because PeopleSoft did not break out JDEC numbers until late last week, analysts have been adding together results for PeopleSoft and J.D. Edwards from a year ago and comparing them to the combined company's results to gauge PeopleSoft's current business. But that method is imperfect because the two companies' quarters ended at different times.

That imprecise approach showed the combined company's license revenue shrunk in the double digits -- though not 20%, said Sanford C. Bernstein analyst Charlie Di Bona, who has an underperform rating on PeopleSoft.

"One of the things we've been saying all along is the growth here they've been posting in their press releases is an artifact of the acquisition," he said. (His firm doesn't do investment banking, but its parent, Alliance Capital, holds PeopleSoft shares.)

In a note downgrading PeopleSoft to a sell rating less than two weeks ago, Merrill Lynch analyst Jason Maynard suggested the same thing. "In our opinion, a primary reason for PeopleSoft's acquisition of J.D. Edwards last June was to make up for the absence of organic growth," he wrote. (His firm hasn't done any banking with PeopleSoft.)

A good company shows growth in both its core business as well as through acquisitions, added JMP Securities analyst Pat Walravens, who has a market perform rating on PeopleSoft. "The problem with these acquisitions is sometimes they can mask a real problem in the core business," he said. (His firm hasn't done banking with PeopleSoft.)

PeopleSoft attributed the decrease in license sales in 2003 to the war in Iraq and the global economic downturn. But industry observers say that doesn't tell the whole story.

Rather, some believe PeopleSoft has sucked all the sales out of the latest version of its enterprise software -- called PeopleSoft 8 -- which helped the company outperform its peers between 2000 and 2002. Maynard estimated that more than 80% of PeopleSoft's 5,400 customers have upgraded to that latest version of its software, curtailing the potential for new-license revenue.

On Monday, shares of PeopleSoft fell 51 cents, or 2.5%, to $19.79, well below Oracle's most recent offer of $26 per share.