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.