Just as Oracle Corp. took Wall Street by surprise with its hostile takeover bid nearly one month ago, PeopleSoft Inc. landed a stunning counterpunch Wednesday, forecasting an unexpectedly strong financial performance and undermining Oracle's ambition to dominate the business software market.

PeopleSoft defied Wall Street oddsmakers, saying it expects to top its own and analysts' estimates for the second quarter as customers continued to buy its software despite uncertainty about the company's future sown by Oracle's hostile bid.

Reaction from investment analysts -- highly paid to predict the twists in what has become the hottest takeover drama in recent memory -- ranged from surprise to disbelief.

"All I can say is, 'Wow,'" said Lehman Brothers analyst Neil Herman.

PeopleSoft's financial performance significantly bolstered its campaign to remain a stand-alone company, analysts say. "We are now convinced that Oracle's bid for PeopleSoft is unlikely to succeed," said Prudential Securities analyst Brent Thill.

Investors seemed to agree. PeopleSoft shares only rose slightly to $17.98, far below the $19.50 a share Oracle has offered.

In a conference call with analysts and investors, PeopleSoft Chief Executive Officer Craig Conway credited the better-than-expected financial results to "an outpouring of customer goodwill" and an anti-Oracle backlash.

Oracle launched its hostile bid in the last month of the quarter, when most software companies close the bulk of their deals. Conway said PeopleSoft would "seek redress" from Oracle for the loss of business from customers who delayed or canceled purchases.

Oracle fired back, accusing PeopleSoft of taking favors from business partners and coming up with "one-time gimmicks" such as a controversial money-back guarantee promotion to pump up sales. "We believe that five straight quarters of declining results are a better indication of the underlying condition of PeopleSoft's business," Oracle spokesman Jim Finn said in a statement.

Analysts are divided over whether PeopleSoft pulled off a one-time upset or made a persuasive case for the long-term viability of its business. Some warn that PeopleSoft may have sacrificed sales from future quarters. It also may have gotten a big sales boost from longtime customers and partners like Hewlett-Packard, who wanted to send a message to Oracle about its aggressive tactics.

This is the second significant setback Oracle has suffered in its hard-charging pursuit of PeopleSoft in just 24 hours. On Tuesday, Oracle agreed to postpone a Delaware legal hearing where it planned to ask the court to block PeopleSoft's $1.75 billion merger with smaller software rival J.D. Edwards.

Excluding some costs related to previously announced cutbacks, PeopleSoft's profit for the second quarter will range from 13 cents to 14 cents a share, the company said, beating the consensus of 10 cents from analysts polled by Thomson First Call. In April, PeopleSoft estimated it would generate 11 cents to 12 cents a share. PeopleSoft anticipates second-quarter overall sales of $490 million to $500 million, beating the analyst consensus of $443 million. The company will announce final results later this month.

"This will make it that much harder for Oracle to convince PeopleSoft shareholders that they should tender their shares," said Friedman, Billings, Ramsey & Co. Inc. analyst David Hilal. "Part of Oracle's argument was that PeopleSoft is in this tailspin and shareholders should be thanking Oracle for coming to their rescue. That story doesn't play out in the face of these numbers."

Software sales, a key barometer of a company's health, will range from $105 million to $115 million, substantially higher than analysts expected. And rebutting charges that the company took out all the stops to close deals, PeopleSoft chief financial officer Kevin Parker said the company did not heavily discount its software or lengthen payment terms to get sales.

But more than half of those software-sales contracts have a money-back guarantee clause that would pay out two to five times the value of any software purchased if PeopleSoft is acquired and its products discontinued. The refund program, which could result in hundreds of millions of dollars in liabilities for Oracle, is another powerful defense in PeopleSoft's antitakeover arsenal, analysts said.

Momentum seems to be on PeopleSoft's side. Oracle probably cannot stop PeopleSoft from merging with J.D. Edwards in the next few weeks, analysts say, giving rise to speculation that PeopleSoft may have outmaneuvered Oracle.

Some analysts speculate that PeopleSoft's strong financial performance will just fuel Oracle's desire to clinch the deal. But, even if Oracle convinced shareholders to offer more for both companies, a bid to combine all three would raise "substantial, if not insurmountable" red flags with U.S. and European antitrust regulators, Thill said.

And even an Oracle-PeopleSoft merger faces legal and regulatory hurdles that could derail Oracle's plan to challenge German software giant SAP AG in the multibillion-dollar market for business software by buying PeopleSoft.

The U.S. Department of Justice has requested more information in an antitrust probe of that proposed merger.