PeopleSoft shares fell as much as 32 percent after two influential Wall Street analysts downgraded their earnings forecasts on a diminished outlook.
"Based on recent data we've seen in contracts we've obtained, pricing in PeopleSoft's key markets (human resources and public sector) is under attack," wrote Chuck Philips, analyst at Morgan Stanley Dean Witter, in his report. "[Rival] SAP has targeted those segments and wants to get in the game."
Prices are being discounted by 60 to 80 percent in some cases, Philips wrote.
In addition, Goldman, Sachs downgraded the company's stock rating to "market performer" and removed it from its "recommended list" of stocks. Additional details of the move weren't immediately available.
Stock in PeopleSoft, long seen as immune to the forces ailing prices of other companies in the computer industry, closed down $8.18 to $24.31 on trading of 37.3 million shares. Earlier, the stock traded as low as $22.25, the lowest price since May 1997.
PeopleSoft (PSFT) makes computer programs that help big companies manage their operations, like ordering supplies, managing payroll, and other human-resources functions.
Philips said competition from rival SAP, turmoil in Asian and Russian markets, and the Y2K problem's impact on corporate spending will hamper PeopleSoft's growth in coming months. He wrote the company could "make up some of the difference" with consulting and training services and said "the bottom-line impact might be small." Nevertheless, he reduced his earnings estimates by a penny to 64 cents a share for 1998 and by 4 cents to 89 cents a share for 1999.
He also reduced estimates for software-license revenue growth to 42 percent from 46 percent for the third and fourth quarters, and down to 38 percent for 1999.
Morgan Stanley dropped PeopleSoft's stock rating from "strong buy" to "neutral."
Shares of other enterprise-software companies followed PeopleSoft. Baan (BAANF) fell $2.06 to close at $22.18, Siebel Systems (SEBL) closed down at $2.37 to $24.12, and SAP lost $2.12 to $33.75.
