MENLO PARK, Calif. (CNN/Money) -
All is well in software land. At least if you stick to the headlines.
PeopleSoft (PSFT: Research, Estimates), the company many investors hadn't ever heard of before Oracle (ORCL: Research, Estimates) tried to buy it, announced Monday it will have better-than-expected earnings in the just ended third quarter.
That was particularly good news for its stock, which jumped 3 percent Monday to $20.43, and even better news for terrified employees worried about their fates should Oracle succeed in its hostile takeover attempt.
Oracle has offered to buy PeopleSoft -- which makes software applications that help companies run their sales forces, human resources departments and the like -- for $19.50 a share.
That offer is being reviewed by anti-trust regulators and isn't likely to be acted on until next year.
| Recently by Adam Lashinsky
|
|
|
|
|
In any event, investors are signaling that they don't take Oracle's offer seriously. Who'd sell their $20 shares to Oracle for $19.50, after all?
But dig just a little deeper, and you'll see that the PeopleSoft situation isn't quite so hunky-dory.
Patrick Walravens, the JMP Securities eagle-eye analyst who accurately predicted that Siebel Systems (SEBL: Research, Estimates) would revive its online sales effort, points out that PeopleSoft actually cleared a bar it had lowered only a month ago.
In a note to clients, Walravens reminds them that at the beginning of September PeopleSoft lowered its expected third-quarter earnings from the then-consensus of 13 cents per share to about 10 or 11 cents.
Monday's "good" news from PeopleSoft brought the expectations back up to about 13 cents.
More worrisome, according to Walravens, is what happens in 2004, when PeopleSoft must deliver on integrating its recently purchased J.D. Edwards.
"We believe the real challenge for PeopleSoft is not achieving the 2003 EPS estimates, but rather achieving the 2004 estimates," writes Walravens, who doesn't own PeopleSoft shares and whose firm hasn't done investment banking for them.
So what to say about the Oracle deal? Well, if PeopleSoft delivers, forget about an Oracle bid -- unless Oracle ups the ante considerably.
If PeopleSoft trips and its price drops, a distinct possibility given the challenges in front of it, all of a sudden a $19.50 offer from Oracle might look a whole lot better.
ThatSmarts
The hottest sector, by far, in Silicon Valley is Internet search. That's why Yahoo! (YHOO: Research, Estimates) is buying Overture (OVER: Research, Estimates), why Overture bought AltaVista, and why Google is the most anticipated IPO in the world.
But heat burns as well as propels. Shares of San Francisco-based search-technology firm LookSmart (LOOK: Research, Estimates) were halved Tuesday, a day after the company announced that Microsoft (MSFT: Research, Estimates) will stop being a customer.
Sadly for investors who owned shares of LookSmart Monday night, it was no secret that Microsoft might drop LookSmart, which has disclosed the potential doomsday scenario in its securities filings.
Don't call someone else either.
The other day I printed my two-pronged personal strategy for never getting telemarketing calls.
Basically, I unlist my number and regularly fib when asked for it by merchants. I make up a number to avoid having an argument about how I don't want to give it to them.
But a reader, John M., took me to task for this practice. "Great idea," he scoffs. "All you've done is push the problem off on to someone else who now has to be disturbed even if they have an unlisted number. I've got a better idea, why not tell a whole bunch of people to do this. You're worse than the telemarketers in the first place."
I confess I hadn't thought until now about how my deflection strategy could affect others. From now on, when asked for my phone number, I'm just saying, "Sorry, I don't give it out." Thanks John.
Adam Lashinsky is a senior writer for Fortune magazine. Send e-mail to Adam at lashinskysbottomline@yahoo.com.
Sign up to receive The Bottom Line by e-mail.
|
