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PeopleSoft Inc., outpacing many competitors in sales and earnings growth, reported Thursday a 40% increase in income in the fourth quarter and record sales in software licenses. The business-software maker said revenue for the quarter ended Dec. 31 rose to $528.2 million from $497.8 million during the same period a year ago. Software licenses, a key indicator of performance and future growth, rose to a record $174.1 million from $164.5 million a year ago. Income from recurring operations increased to $58 million, or 18 cents a share, from $41 million, or 13 cents a share, a year ago.
For the year, PeopleSoft's revenue was $2.07 billion, a 19% increase from $1.74 billion reported for 2000. Software license revenue rose 30% to $645.4 million from $496.1 million a year ago. Income from recurring operations was $190 million, or 59 cents a share, a 107% jump from the $92 million, or 30 cents a share, reported in 2000.
Despite the solid financial performance for 2001, the company acknowledged 2002 would be a tough year, with corporate spending expected to remain slow in the first half of the year, with a "mild recovery" in the second half. "I don't see companies today so confident of an economic recovery that they become more aggressive in their actual spending," chief executive Craig Conway told financial analysts during a teleconference. The company predicted a 15% increase in software license revenue this year and a 10% increase in service revenue. Operating margins were expected to increase to 15% from 12%, and earnings per share were expected to increase for the year to between 70 cents and 75 cents.
Conway also said the company would acquire Momentum Business Applications, a research house set up by PeopleSoft to help produce PeopleSoft 8, the blockbuster software driving company revenue. Concerns have been raised that the affiliate, set up in 1998 and spun off to shareholders, was established to offload development costs and boost revenue and net income. Conway said the company planned to end the controversy by acquiring Momentum for $90 million cash. The deal would be completed by the end of the first quarter.
PeopleSoft, which started in the late 1980s with a successful package of personnel-management software, hit the skids in the late 1990s before re-emerging with PeopleSoft 8 as a serious competitor to companies like SAP AG and Siebel Systems Inc. Siebel, the No. 1 seller of software to manage selling and customer-service activities, Wednesday reported a 17% drop in fourth-quarter profits. The company expected software revenue to increase by 15% this year. In preliminary results released Wednesday, SAP reported net profit was down 6% in 2001, while revenue increased 17%.