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October 12, 1999

PeopleSoft Fills in Front-End With $433m Vantive Buy

By CBR Staff Writer

By William Fellows

PeopleSoft Inc CEO Craig Conway has taken the company into the world of the front office by paying $433m in stock for customer relationship management company and long-time partner Vantive Corp. Conway says PeopleSoft vacillated over its CRM strategy for far too long; first it backed off from a relationship with CRM leader Siebel Systems and then it investigated deals with other CRM houses Pivotal and Clarify. The delay exacerbated PeopleSoft’s problems in the ERP market as it fell further behind number two ERP company Oracle which has built its own CRM offering and which PeopleSoft at one time it promised to overhaul. It will be at least a year before ERP leader SAP gets its own CRM product to market which should give PeopleSoft an opportunity to claw back some ground. PeopleSoft and Vantive are third and fourth in their respective markets according to AMR Research.

The slump in ERP spending last spring mainly due to investment in Y2K fixes hurt PeopleSoft badly and its share price had fallen to around $16 from $55 last year. Vantive has also experienced a fall off in revenue growth. At the same time as the acquisition was announced both PeopleSoft and Vantive said this quarter’s results would be below expectations. PeopleSoft said it expects third-quarter earnings to barely break even at two cents per share on revenue of $290m to $310m, while Vantive will be some $0.16 behind expectations. At $14.23 a share, PeopleSoft’s paying a 60% premium for Vantive over last Friday’s closing price but far less than the $40 at which Vantive was trading last year.

PeopleSoft’s challenge is two-fold: to integrate Vantive fully into its product lines; and to develop a coherent web and internet strategy. Recently the company backtracked on its much- hyped e-commerce initiative, the PeopleSoft Buiness Network. Part of the reason for PeopleSoft’s late entry into the market is that the majority of its customers, as much as 80%, are in government and the public sector where the demand for customer interaction programs is less than in more commercial environments.

Meantime, analysts at Meta Group say its time to move on from the operational and collaborative CRM issues which have monopolized mindshare, to the equally valuable analytical story, which it believes has been relatively ignored. The battle for operational seats (Siebel, Clarify, Vantive, Oracle) and web personalization (BroadVision, Vignette, ART) will shift due to analytics in six to twelve months, driven by the success of Broadbase and Epiphany IPOs. In other words it’s all very well collecting customer and other front-office data but then what does a company do with it? Analytical solutions should address the complete problem, from multisourced data extraction, transformation, loading and management to supporting business processes with role-based user interfaces, says Meta, the idea being that customer relationships are maximized and information used in highly targeted marketing campaigns.

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