CEO Dave Duffield owns about 52.5 million shares - 23 percent of outstanding stock - in the company, according to the Carson Group, which keeps track of large stock holdings.That means the amiable Duffield - who started his career at IBM and co-founded PeopleSoft (PSFT) 11 years ago - lost a cool $450 million overnight.
The precipitous decline of PeopleSoft's stock, which caused the company to lose about $2 billion of its market cap Friday, stems from downgrades by a pair of investment banks concerned over slowing growth at the maker of business automation software.
The more vehement of the ratings cuts came from Morgan Stanley Dean Witter analyst Chuck Phillips, who cut his outlook all the way to "neutral" from "strong buy."
Phillips said he took that step because of concerns that businesses are delaying purchases of PeopleSoft applications as they spend money to fix the pending year 2000 problem. (That glitch, which may cost a total of hundreds of billions of dollars to fix, stems from the fact that many computers recognize only the last two digits of a year and thus could misread 2000 as 1900, meaning that they may break down when the new millennium arrives.)
Additionally, Phillips said larger rival SAP "is going right after" PeopleSoft's core market. The German giant (SAP) has slashed prices for its software, threatening to undercut PeopleSoft, he added.
SAP has about three times the share of PeopleSoft in the so-called enterprise resource planning market, which helps businesses automate basic functions.
Goldman Sachs analyst Rick Sherlund took PeopleSoft off the investment bank's "recommend list," saying sales of the company's software will slow in 1999 to about half of last year's rate.
Last month, PeopleSoft held an unprecedented conference call to discuss its outlook. It reiterated its goal to increase sales by 60 to 6 percent each quarter, while keeping operating margin between 18 and 20 percent.
Investors didn't care too much about that on Friday, sending shares down 9 1/4 to 23 1/4 in the afternoon session. Trading was more than six times heavier than average.
Written By Brenon Daly