SAN FRANCISCO -- Is PeopleSoft (PSFT) becoming "PeopleLost"?
named the Pleasanton, Calif., software company the sixth-best company to work for in 1998 -- burnishing a worker-friendly image that PeopleSoft had labored to build over the years. In January, the first blemish on that image appeared as the company announced layoffs for 6% of its staff.
Now, many workers in PeopleSoft's sales staff are leaving, say two sell-side analysts who have been in contact with the company's current and former staff but who asked not to be identified. One of the analysts says lingering uncertainty about the company's long-term prospects is prompting workers to leave PeopleSoft's cushy nest.
PeopleSoft declined to say whether it's seeing an increase in staff resignations. Two of its biggest rivals confirm they're seeing an increased flow of resumes from PeopleSoft workers. And many of the resumes are from people not affected by the layoffs, they say.
Hamstrung by a slump in the market for enterprise-resource-planning software, PeopleSoft has hit
hard times. After the company's fourth-quarter earnings fell short of estimates, it encouraged analysts to lower their forecasts for 1999. Most alarming, PeopleSoft saw revenue growth slow in its core market for software licenses to 3% last quarter -- suggesting that the service contracts that often grow out of the licenses could eventually see a similar slowdown.
Losing valued workers would only heighten PeopleSoft's crisis. At a sales meeting late last month, the company unveiled changes aimed at keeping its salespeople in its fold. A PeopleSoft spokesman confirmed that the sales meeting took place but declined to give any further details. According to Steve Kohn, an analyst at
, the company announced a reorganization of its sales division into three groups: one for new customers and the others to sell ERP and analytical applications to existing customers. It also announced compensation changes.
"They are raising the base salaries for their sales force but cutting quotas and commissions," says an analyst who asked not to be identified. The lower sales quotas and commissions suggest PeopleSoft doesn't expect strong sales of its products near term, says the analyst, who has a hold rating on the stock. At the same time, PeopleSoft needs to keep its sales force intact until new Internet-related products are ready in late 1999 and early 2000, which accounts for the raises, he says.
But the moves don't appear to be working: More top salespeople are looking to get out. While other Silicon Valley workers are seeing the value of their stock options rise, PeopleSoft's slumping stock has rendered many employee options worthless: Although the company repriced its employee stock options to 17 5/16 late last year, the stock is trading around 16 now. More disappointing earnings could drive the stock even lower.
The turmoil in PeopleSoft's sales staff comes amid high turnover at the executive level. In the past month, CIO Steve Zarate left and Albert Duffield, senior VP in charge of sales, retired. Howard Gwin moved from international operations to take on Duffield's responsibilities. (Zarate says he stepped down to become CIO of e-commerce start-up
.) On Wednesday, PeopleSoft said Aneel Bhusri, who was PeopleSoft's senior VP of product strategy, was named a vice chairman, a more advisory role.
President and CEO David Duffield may be next. PeopleSoft says it's looking to hire a new president to oversee daily operations as Duffield reduces his role in the company. News reports have suggested that he will also relinquish his title as CEO.
The reshuffling is leaving some on the buy side uneasy. "What can really scare me ... is a company that is already struggling with execution and treats the problem like it's a card game," says Charles Haney, analyst at hedge fund
Masters Capital Investments
, which holds no position in PeopleSoft.
"It doesn't matter how many times you shuffle the cards or what order you put the cards in, you're still stuck with the same cards," Haney says. "At some point, it may be time to change the game ... or put your money in your pocket and go home."