Shares of

PeopleSoft

(PSFT)

were getting pummeled Wednesday as analysts expressed doubts about the company's explanation for its weak first quarter.

In recent trading, PeopleSoft was above its morning low of $14.78 a share, but had still shed 99 cents, or 6.3%, to $15.05.

Following a warning earlier this month, the company reported Tuesday that first-quarter revenue dropped nearly 5% year-over-year, and licensing revenue met the company's sharply reduced expectations.

The enterprise software company earned 12 cents a share, compared with 14 cents a share a year ago, according to generally accepted accounting principles. Total revenue was $460 million.

License revenue, a key measure of growth, was $81 million, in line with the company's revised estimate, but far below PeopleSoft's earlier guidance of $125 million to $135 million.

"The recovery that began in the fourth quarter was fragile and simply ended with additional economic concerns and geopolitical tensions," Craig A. Conway, PeopleSoft president and CEO, said in a prepared statement. During a call with analysts after the postclose announcement, Conway pointed the finger at everything from lower tax revenues to the war with Iraq and the SARS outbreak.

PeopleSoft, he said, was particularly hard hit by cuts in government outlays forced by reduced tax revenues, because federal and state governments generally make up about 25% of the company's sales.

Not everyone bought his story. "The licensing miss was too big to blame on the weak, weak economy Conway kept citing," said Pacific Growth Equities analyst Patrick Mason, who promptly downgraded the company to underweight. (PGE does not have a banking relationship with PeopleSoft.)

First Albany's Mark Murphy was also skeptical, saying "we continue to believe the license revenue shortfall was mostly a result of PeopleSoft-specific problems, including a fading PeopleSoft 8 product cycleand intense price pressure from

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The picture for the future is mixed. License revenues won't reach the first-quarter target until the fourth quarter, a signal likely to bother analysts. But increased cost controls and continued strong margins will keep the company's overall revenue and earnings targets close to the range expected by Wall Street, the company said.

For Q2, the company projects GAAP earnings of 8 cents to 9 cents a share, and pro forma earnings of 11 cents to 12 cents on total revenue of $450 million to $465 million. Analysts polled by Thomson Financial/First Call expect revenue of $467.8 million and pro forma EPS of 12 cents.

Net income will be lowered about 3 cents a share during the quarter by charges reflecting a cut of about 200 administrative jobs, along with the closing of the company's Santa Clara, Calif., campus and transfer of employees to PeopleSoft's main office in Pleasanton, Calif.

Still, the miss could have been worse. First Albany's Murphy noted that total revenue was higher than the company's preannouncement range of $450 million to $455 million.

"This was primarily due to surprise strength in PeopleSoft's maintenance revenue. First-quarter maintenance revenue was just shy of $200 million, a year-over-year increase of 21%. This maintenance revenue success translated into service margins of 57%, a year-over-year increase of 5%. When combined with a 3% year-over-year reduction in total costs and expenses, the company managed to squeeze out 12 cents a share, only one penny shy of the low end of initial guidance, noted Murphy, whose company does not have a banking relationship with PeopleSoft.

PGE's Mason was troubled by the guidance. He had expected license revenue in the second quarter to increase to about $106 million; instead, the company said to expect license revenue of $85 million to $95 million.

For the full year, the company told investors to expect pro forma EPS of 52 cents to 54 cents, on total revenue of $1.9 billion. Wall Street expects EPS to be a 53-cent profit on sales of $1.9 billion.

PeopleSoft shares had lost a bit more than 10% of their value, falling as low as $14.82, after the company warned of sharply lower licensing revenues in early April. Since then, the stock has recouped most of the losses.

In postclose trading on Tuesday, PeopleSoft was off 34 cents, or 2%, to $15.70.