PeopleSoft reckons JD Edwards takeover will boost income, but analysts fear short term impact of takeover turmoil

PeopleSoft reckons that its acquisition of JD Edwards could boost 2004 operating income by as much as 59 per cent, according to a rew filing with the Securities and Exchange Commission. But analysts are warning that the uncertainty surrounding Oracle’s hostile bid for PeopleSoft will drag down second quarter results.

PeopleSoft said it expects 2004 operating earnings to range from 84 cents a share to 92 cents a share if it merges with JD Edwards. PeopleSoft issued the projection to help convince investors its deal with JD Edwards is preferable to a hostile takeover offer by Oracle Corp. for PeopleSoft. PeopleSoft also expects to save $180 million to $200 million in annual costs by merging with JD Edwards, up from initial savings estimates of $80 million.

But analysts are concerned about the financial impact on PeopleSoft of the current market turmoil. JMP Securities analyst Patrick Walravens told clients that he does not think PeopleSoft will be able to achieve its forecast savings.

"Our sense is that this higher level of savings is quite unlikely given PeopleSoft's plans to continue selling JD Edwards' product lines," he said, arguing that if PeopleSoft were able to cut costs by $200 million in 2004, the company's operating earnings would increase by 29 cents a share, or 50 per cent.

Meanwhile Tad Piper of US Bancorop Piper Jaffray predicts second quarter profits will miss the 12 cents mark and be 11 cents on sales that will be around $453.5 million instead of the expected $461.4 million. "Near-term uncertainty will cause some freezing in decisions in the market," he wrote to clients.

In London last week PeopleSoft CEO Craig Conway pleaded with customers to keep on spending in the current quarter as the company needed their support more than ever before. He has also said his sales force remains committed to making the quarter. "We've got business to do," he said.

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