E-Business: PeopleSoft, Inc. Forms New R&D Corporation to Develop E-business Solutions, Analytic Applications and Industry-specific Software Products - Momentum Business Applications Inc - Company Business and Marketing

Edge: Work-Group Computing Report, Nov 23, 1998

PeopleSoft, Inc. has formed Momentum Business Applications, Inc.(Momentum), a research and development company designed to accelerate PeopleSoft's initiatives in critical areas including e-business, analytic applications and industry-specific software products.

"Momentum Business Applications will provide direct benefits to PeopleSoft shareholders and to our customers," said Dave Duffield, PeopleSoft president and CEO. "Momentum will allow PeopleSoft to more aggressively pursue strategic R&D opportunities while providing our shareholders additional alternatives for investment in the future of PeopleSoft. With this announcement, PeopleSoft is sending an unambiguous message to our customers, partners and competitors that we are absolutely determined to deliver comprehensive and innovative enterprise solutions to meet the needs of customers today and in the future."

In conjunction with the formation of the new company, PeopleSoft is filing a registration statement with the Securities and Exchange Commission on behalf of Momentum relating to a proposed special distribution of Momentum Class A Common Stock to the holders of Common Stock of PeopleSoft, Inc. The distribution is expected to occur around the end of this year.

Prior to the distribution, PeopleSoft will contribute $300 million to Momentum. Holders of PeopleSoft Common Stock will then receive one share of Momentum Class A Common Stock for each 50 shares of PeopleSoft Common Stock held as of a record date to be specified.

Based on approximately 233,000,000 shares of PeopleSoft Common Stock outstanding as of October 31, 1998, approximately 4,660,000 shares of Momentum Class A Common Stock are expected to be issued to holders of PeopleSoft Common Stock in the distribution. Holders of PeopleSoft Common Stock will not be required to pay any cash or other consideration for the Momentum Class A Common Stock received P. in the distribution. The distribution will be taxable as a dividend to each PeopleSoft, Inc. shareholder in the amount of the fair market value of Momentum Shares distributed to such holder.

Momentum will enter into development agreements in which PeopleSoft and possibly other third parties will undertake research and development activities on behalf of Momentum. PeopleSoft will have the option to license any products and technology developed by or at the direction of Momentum, and will also retain an option to purchase all of the Momentum shares at a price set according to a predetermined formula.

"Shareholders have been interested in how we intend to use the sizable cash reserves the Company has accumulated over the past couple of years," said Ron Codd, PeopleSoft senior vice president and CFO. "We evaluated a stock repurchase program, but determined that P. such a program would most likely have a very limited impact on shareholder value. We believe this structure has the potential to create much more substantial and sustainable future value for our shareholders." Business Outlook Supplement

In its third quarter earnings release, the Company provided business outlook information on its forecasted total revenue growth for 1999, but did not provide operating model guidance for the same period. PeopleSoft now expects to spend between 14% and 17% of total revenues on product development during 1999, a level consistent with the Company's past levels of spending on product development. This expenditure is entirely separate from activities conducted by Momentum. PeopleSoft expects to provide full operating margin guidance for 1999 when it releases the results of operations for the quarter ending December 31, 1998.

PeopleSoft is a global supplier of enterprise application software for business and government. PeopleSoft solutions for manufacturing, supply chain, financial, project and human resource management are used by more than 2,700 customers worldwide. Headquartered in Pleasanton, California, PeopleSoft employs 6,500 people and had 1997 revenues of $815 million.