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Peregrine Systems Inc – ‘8-K’ for 11/3/00 – EX-99.2

On: Friday, 11/3/00, at 5:19pm ET · For: 11/3/00 · Accession #: 912057-0-47212 · File #: 0-22209

  As Of                Filer                Filing    For·On·As Docs:Size              Issuer               Agent

11/03/00  Peregrine Systems Inc             8-K:5      11/03/00    4:95K                                    Merrill Corp/FA

Current Report — Form 8-K
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: 8-K         Current Report                                         4     12K 
 2: EX-99.1     Description of Business                               11     52K 
 3: EX-99.2     Factors That May Effect Future Results                12     58K 
 4: EX-99.3     Recent Developments                                    1      9K

EX-99.2 — Factors That May Effect Future Results

EX-99.2 1st Page of 12 TOC ↑Top Previous Next ↓Bottom Just 1st
 
                                                                    EXHIBIT 99.2

FACTORS THAT MAY AFFECT OUR FUTURE RESULTS

    OUR FILINGS WITH THE SECURITIES AND EXCHANGE COMMISSION UNDER THE SECURITIES
EXCHANGE ACT OF 1934 CONTAIN FORWARD LOOKING STATEMENTS AND OTHER PROSPECTIVE   
INFORMATION RELATING TO FUTURE EVENTS. THESE FORWARD-LOOKING STATEMENTS AND     
OTHER INFORMATION ARE SUBJECT TO CERTAIN RISKS AND UNCERTAINTIES THAT COULD     
CAUSE OUR ACTUAL RESULTS TO DIFFER MATERIALLY FROM HISTORICAL RESULTS OR        
ANTICIPATED RESULTS, INCLUDING THE FOLLOWING:                                   

WE HAVE A HISTORY OF LOSSES AND CANNOT ASSURE THAT WE WILL BE PROFITABLE IN THE 
FUTURE ON AN OPERATING BASIS OR OTHERWISE.                                      

We have incurred substantial losses in recent years, and predicting our 
future operating results is difficult. If we continue to incur losses, if our   
revenues decline or grow at a slower rate, or if our expenses increase without  
commensurate increases in revenues, our operating results will suffer and the   
price of our common stock may fall. Through June 30, 2000, we had recorded      
cumulative net losses of approximately $160.0 million, including approximately  
$220.6 million related to the write-off of acquired in-process research and     
development and the amortization of goodwill and other intangible assets in     
connection with a series of acquisitions completed since late 1997. We have     
incurred, and expect to continue to incur, substantial expenses associated with 
the amortization of intangible assets. In addition, we do not believe recent    
revenue growth rates are sustainable in the future or indicative of future      
growth rates. If our revenue growth rates slow or our revenues decline, our     
operating results could be seriously impaired because many of our expenses are  
fixed and cannot be easily or quickly changed.                                  

OUR RECENT ACQUISITION OF HARBINGER CORPORATION MAY REDUCE OUR REVENUE GROWTH   
RATES AND MAKE PREDICTION OF OUR FUTURE REVENUES AND OPERATING RESULTS MORE     
DIFFICULT AS WE INTEGRATE OUR BUSINESSES AND ATTEMPT TO FOCUS THE STRATEGIC     
MODEL OF THE COMBINED COMPANY.                                                  

Harbinger's revenues prior to the acquisition were growing at a         
substantially slower rate than our revenues, due in large part to declining     
revenues for Harbinger's legacy electronic commerce software business. If our   
efforts to refocus Harbinger's business and integrate it with that of Peregrine 
are not successful, our future revenue growth rates could be substantially less 
than our historic growth rates, and our future revenues and operating results   
could be impaired. We have already determined to de-emphasize and discontinue   
certain businesses of Harbinger that we do not believe are strategic to the     
combined company. In September 2000, we completed the sale of one of Harbinger's
product lines and may determine to sell or discontinue other Harbinger products 
or businesses in the future. We expect this recent divestiture and any future   
discontinuations or divestitures to result in revenue reductions that may not be
offset by revenues from other sources.                                          

In October 2000, we announced that we were implementing a strategic     
segmentation of our business into an infrastructure management group and        
e-markets group. Our infrastructure management group will focus principally on  
the sale of our historic infrastructure management product line together with   
procurement solutions and technologies acquired from Harbinger that were        
complementary with or otherwise relevant to managing internal infrastructure    
assets. Our e-markets group will focus on the acquisition of supplies and       
materials used in the manufacture and production of finished goods. The         
e-markets group will be comprised substantially of Harbinger's legacy e-commerce
software and data transformation businesses as well as web-based supply catalogs
and vertical exchange markets for supply and commodity markets in the           
automotive, energy, industrial component and retail industries. We expect the   
continuing strategic and operational integration of Harbinger into Peregrine    
will make prediction of our future revenues and operating results particularly  
difficult because our results of operations in future periods will reflect a    
substantially different business than the historical businesses of either       
Peregrine or Harbinger. We may not be able to accurately predict how the        
combined businesses, or the individual businesses represented by our            
infrastructure management and                                                   

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e-markets groups, will evolve. In particular, our future revenues and operating 
results may be adversely affected for a number of reasons resulting from the    
acquisition and subsequent integration processes, including the following:      

- Revenues for Harbinger's e-commerce software products may continue to 
decline.                                                            

 - Harbinger's web-based supply catalog and vertical supply businesses are
     still in their early stages, and a sustainable market may not develop for
these services as offered by our e-markets group.                   

    - The businesses associated with our infrastructure management and e-markets
  groups may be sufficiently distinct that customers perceive no benefit
      from our combined product offerings, in which case we will not realize the
anticipated financial and product synergies of the acquisition.     

- We may experience substantial unanticipated integration costs.        

OUR REVENUES VARY SIGNIFICANTLY FROM QUARTER-TO-QUARTER FOR NUMEROUS REASONS    
BEYOND OUR CONTROL. QUARTER-TO-QUARTER VARIATIONS COULD RESULT IN A SUBSTANTIAL 
DECREASE IN OUR STOCK PRICE IF OUR REVENUES OR OPERATING RESULTS ARE LESS THAN  
MARKET ANALYSTS ANTICIPATE.                                                     

   Our revenues or operating results in a given quarter could be substantially
less than anticipated by market analysts, which could result in a substantial   
decline in our stock price. In addition, quarter-to-quarter variations could    
create uncertainty about the direction or progress of our business, which could 
also result in a decline in the price of our common stock. Our revenues and     
operating results will vary from quarter to quarter for many reasons beyond our 
control. As a result, our quarterly revenues and operating results are not      
predictable with any significant degree of accuracy. Reasons for variability of 
our revenues and operating results include the following:                       

- SIZE, TIMING, AND CONTRACTUAL TERMS OF ORDERS. Our revenues in a given
   quarter could be adversely affected if we are unable to complete one or
more large license agreements, if the completion of a large license 
  agreement is delayed, or if the contract terms were to prevent us from
  recognizing revenue during that quarter. In addition, when negotiating
 large software licenses, many customers time their negotiations until
quarter-end in an effort to improve their ability to negotiate more 
    favorable pricing terms. As a result, we recognize a substantial portion
of our revenues in the last month or weeks of a quarter, and license
    revenues in a given quarter depend substantially on orders booked during
      the last month or weeks of a quarter. Our revenue growth in recent periods
has been attributable in part to an increase in the number of large 
license transactions we completed in a given period. We expect our  
reliance on these large transactions to continue for the foreseeable
   future. If we are unable to complete a large license transaction by the
    end of a particular quarter, our revenues and operating results could be
     materially below the expectations of market analysts, and our stock price
could fall.                                                         

 - FLUCTUATIONS IN REVENUE SOURCES. If our sales through indirect channels
 were to decrease in a given quarter, our total revenues and operating
results could be harmed. Sales through indirect channels, including 
    distributors, third party resellers, and system integrators, represent a
significant percentage of our total sales. We expect this trend to  
   continue in the future. As a result, we could experience a shortfall in
    our revenues, or a substantial decline in our rate of revenue growth, if
     sales through indirect channels were to decrease or were to increase at a
 slower rate than recently experienced. We have less ability to manage
sales through indirect channels, relative to direct sales, and less 
      visibility about our channel partners' success in selling our products. As
    a result, we could experience unforeseen variability in our revenues and
operating results for a number of reasons, including the following: 
     inability of our channel partners to sell our products; a decision by our
     channel partners to favor competing products; or inability of our channel
  partners to manage the timing of their purchases from us against their
   sales to end-users, resulting in inventories of unsold licenses held by
channel partners.                                                   

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   - CUSTOMER BUDGETING CYCLES. Our quarter-to-quarter revenues will depend on
     customer budgeting cycles. If customers change their budgeting cycles, or
    reduce their capital spending on technology, our revenues could decline.

- PRODUCT AND PRICING ANNOUNCEMENTS. Announcements of new products or   
      releases by us or our competitors could cause customers to delay purchases
pending the introduction of the new product or release. In addition,
    announcements by us or our competitors concerning pricing policies could
have an adverse effect on our revenues in a given quarter.          

   - CHANGES IN PRODUCT MIX. Changes in our product mix could adversely affect
   our operating results because some products provide higher margins than
    others. For example, margins on software licenses tend to be higher than
margins on maintenance and services.                                

- CANCELLATION OF LICENSES, SUBSCRIPTION OR MAINTENANCE                 
AGREEMENTS. Cancellations of licenses, subscription or maintenance  
  contracts could reduce our revenues and harm our operating results. In
particular, our maintenance contracts with customers terminate on an
  annual basis. Substantial cancellations of maintenance or subscription
agreements, or a substantial failure to renew these contracts, would
reduce our revenues and harm our operating results.                 

THE LONG SALES CYCLE FOR OUR PRODUCTS MAY CAUSE SUBSTANTIAL FLUCTUATIONS IN OUR 
REVENUES AND OPERATING RESULTS.                                                 

  Delays in customer orders could result in revenues substantially below the
expectations of market analysts. Our customers' planning and purchase decisions 
involve a significant commitment of resources and a lengthy evaluation and      
product qualification process. As a result, we may incur substantial sales and  
marketing expenses during a particular period in an effort to obtain orders. If 
we are unsuccessful in generating offsetting revenues during that period, our   
revenues and earnings could be substantially reduced, or we could experience a  
large loss. The sales cycle for our products typically takes six to nine months 
to complete, and we may experience delays that further extend this period. The  
length of the sales cycle may be extended beyond six or nine months due to      
factors over which we have little or no control, including the size of the      
transaction and the level of competition we encounter. The average size of our  
transactions has increased in recent periods, and this could have the effect of 
further extending our sales cycle. During the sales cycle, we typically provide 
a significant level of education to prospective customers regarding the use and 
benefits of our products. Any delay in the sales cycle of a large license or a  
number of smaller licenses could have an adverse effect on our operating results
and financial condition.                                                        

SEASONAL TRENDS IN SALES OF OUR SOFTWARE PRODUCTS MAY RESULT IN PERIODIC        
REDUCTIONS IN OUR REVENUES AND IMPAIRMENT OF OUR OPERATING RESULTS.             

  Seasonality in our business could result in our revenues in a given period
being less than market estimates. Seasonality could also result in              
quarter-to-quarter decreases in our revenues. In either of these events,        
seasonality could have an adverse impact on our results of operations.          
Historically, our revenues and operating results in our December quarter have   
tended to benefit, relative to our June and September quarters, from purchase   
decisions made by the large concentration of our customers with calendar        
year-end budgeting requirements. Our June and September quarters tend to be our 
weakest. Revenues and operating results in the March quarter have tended to     
benefit from the efforts of our sales force to meet fiscal year-end sales       
quotas. These historical patterns may change over time, however, particularly as
our operations become larger and the sources of our revenue change or become    
more diverse. For example, our international operations have expanded           
significantly in recent years, particularly in Europe. We also have an          
international presence in the Pacific Rim and Latin America. We may experience  
variability in demand associated with seasonal buying patterns in these foreign 
markets. As an example, our September quarter is typically weaker in part due to
the European summer holiday season.                                             

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OUR BUSINESS AND OPERATING RESULTS WILL BE HARMED IF WE CANNOT COMPETE          
EFFECTIVELY AGAINST OTHER COMPANIES IN OUR MARKETS.                             

 The market for our products is intensely competitive and diverse, and the
technologies for our products can change rapidly. New products are introduced   
frequently and existing products are continually enhanced. We face competition  
from a number of sources in the markets for our infrastructure resource         
management, procurement and e-business connectivity solutions.                  

- In the markets for our infrastructure resource management and employee
  self-service software solutions, we face competition from providers of
internal help desk software applications for managing information   
technology service desks, such as Remedy Corporation and Computer   
Associates, that compete with our enterprise service desk software; 
      providers of asset management software, including Remedy, MainControl, and
      Janus Technologies; providers of facilities management software, including
   Archibus, Facilities Information Systems, and Assetworks (a division of
CSI-Maximus); providers of transportation management software that  
      competes with our fleet management and rail management software, including
 Control Software (a division of CSI-Maximus) and Project Software and
     Development Inc.; information technology and systems management companies
    such as Tivoli Systems (a division of IBM), Computer Associates, Network
   Associates, Hewlett-Packard, and Microsoft; numerous start-up and other
entrepreneurial companies offering products that compete with the   
 functionality offered by one or more of our infrastructure management
  products; and the internal information technology departments of those
companies with infrastructure management needs.                     

- In the markets for employee self-service, including procurement and   
 e-service solutions, we have experienced competition from established
      competitors in the business-to-business Internet commerce solution market,
  such as Ariba and CommerceOne, and established providers of enterprise
   resource planning software that are entering the market for procurement
and e-procurement solutions, including Oracle and SAP.              

- In the markets served by our e-commerce enablement technology, we have
experienced competition from Sterling Commerce, a division of SBC   
    Communications, and General Electric eXchange solutions, each a provider
of electronic commerce software; Aspect Development, a provider of  
     internet business software solutions; Requisite Technology, a provider of
  catalog management solutions; and webMethods, a provider of e-commerce
enablement software.                                                

 If we cannot compete effectively in our markets by offering products that
are comparable in functionality, ease of use and price to those of our          
competitors, our revenues will decrease, and our operating results will be      
adversely affected. Many of our current and potential competitors have          
substantially greater financial, technical, marketing and other resources than  
we have. As a result, they may be able to devote greater resources than we can  
to the development, promotion and sale of their products and may be able to     
respond more quickly to new or emerging technologies and changes in customer    
needs.                                                                          

Additional competition from new entrepreneurial companies or established
companies entering our markets could have an adverse effect on our business,    
revenues and operating results. In addition, alliances among companies that are 
not currently direct competitors could create new competitors with substantial  
market presence. Because few barriers to entry exist in the software industry,  
we anticipate additional competition from new and established companies as well 
as business alliances. We expect that the software industry will continue to    
consolidate. In particular, we expect that large software companies will        
continue to acquire or establish alliances with our smaller competitors, thereby
increasing the resources available to these competitors. These new competitors  
or alliances could rapidly acquire significant market share at our expense.     

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OUR FUTURE OPERATING RESULTS MAY BE ADVERSELY AFFECTED IF THE SOFTWARE          
APPLICATION MARKET CONTINUES TO EVOLVE TOWARD A SUBSCRIPTION-BASED MODEL, WHICH 
MAY PROVE LESS PROFITABLE FOR US.                                               

We expect our revenue growth rates and operating results to be adversely
affected as customers require us to offer our products under a                  
subscription-based application service provider model. Historically, we have    
sold our infrastructure management solutions on a perpetual license basis in    
exchange for an up-front license fee. Customers are increasingly attempting to  
reduce their up-front capital expenditures and are purchasing software          
applications under a hosted subscription service model. Under the hosted model, 
the customer subscribes to use an application from the software provider. The   
application is generally hosted on a server managed by the service provider or a
third-party hosting service. We expect that a substantial portion of future     
revenues generated by our e-markets group will be realized under a subscription 
model. We also expect that an increasing portion of our infrastructure          
management group revenues may be represented by subscriptions.                  

 Under the subscription revenue model, we generally will recognize revenue
and receive payment ratably over the term of the customer's subscription. As a  
result, our rates of revenue growth under a subscription model may be less than 
our historical rates under a license model. In addition, the price of our       
services will be fixed at the time of entering into the subscription agreement. 
If we are unable to adequately predict the costs associated with maintaining and
servicing a customer's subscription, then the periodic expenses associated with 
a subscription may exceed the revenues we recognize for the subscription in the 
same period, which may adversely affect our operating results.                  

In addition, if we are not successful in implementing the subscription  
revenue model, or if market analysts or investors do not believe that the model 
is attractive relative to our traditional license model, our business and our   
stock price could decline dramatically.                                         

IF WE, OR THIRD PARTIES ON WHICH WE WILL RELY, ARE UNABLE TO ADEQUATELY DELIVER 
OUR INTERNET-BASED APPLICATIONS, OUR OPERATING RESULTS MAY BE ADVERSELY         
AFFECTED.                                                                       

  We currently use our own servers to deliver our Internet-based products to
customers. We intend, however, to engage one or more third parties to provide a 
full complement of services that will enable us to outsource the delivery of    
these Internet-based products to our customers. For example, our third-party    
service providers will manage the application servers, maintain communications  
equipment, manage the network data centers where our software and data will be  
stored, and provide client support. If we are unable to adequately deliver our  
Internet-based applications, we may lose customers or be unable to attract new  
customers, which would adversely affect our revenues.                           

In addition, the third-party service providers that we engage may not   
deliver adequate support or service to our clients, which may harm our          
reputation and our business. Because these third-party service providers handle 
the installation of the computer and communications equipment and software      
needed for the day-to-day operations of our Internet-based applications, we will
be dependent on them to manage, maintain and provide adequate security for      
customer applications. If our customers experience any delays in response time  
or performance problems while using our Internet applications hosted by a       
third-party or us, our customers may perceive such delays as defects with our   
products and may stop using our applications, which will adversely impact our   
revenues.                                                                       

We have limited experience outsourcing these services and may have      
difficulties managing this process. We will be required to monitor our          
third-party service providers to ensure that they perform these services        
adequately. In addition, if we do not maintain good relations with these        
third-party service providers, or if they go out of business, they may be unable
to perform critical support functions for us. If we were unable to find         
replacement third-party service providers, we would be required to perform these
functions ourselves. We may not be successful in obtaining or performing these  
services on a timely or cost-effective basis.                                   

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IF WE DO NOT RESPOND ADEQUATELY TO OUR INDUSTRY'S EVOLVING TECHNOLOGY STANDARDS,
OR DO NOT CONTINUALLY DEVELOP PRODUCTS THAT MEET THE COMPLEX AND EVOLVING NEEDS 
OF OUR CUSTOMERS, SALES OF OUR PRODUCTS MAY DECREASE.                           

  As a result of rapid technological change in our industry, our competitive
position in existing markets, or in markets we may enter in the future, can be  
eroded rapidly by product advances and technological changes. We may be unable  
to improve the performance and features of our products as necessary to respond 
to these developments. In addition, the life cycles of our products are         
difficult to estimate. Our growth and future financial performance depend in    
part on our ability to improve existing products and develop and introduce new  
products that keep pace with technological advances, meet changing customer     
needs, and respond to competitive products. Our product development efforts will
continue to require substantial investments. In addition, competitive or        
technological developments may require us to make substantial, unanticipated    
investments in new products and technologies, and we may not have sufficient    
resources to make these investments. If we were required to expend substantial  
resources to respond to specific technological or product changes, our operating
results would be adversely affected.                                            

IF WE CANNOT ATTRACT AND RETAIN QUALIFIED SALES PERSONNEL, SOFTWARE DEVELOPERS  
AND CUSTOMER SERVICE PERSONNEL, WE WILL NOT BE ABLE TO SELL AND SUPPORT OUR     
PRODUCTS.                                                                       

Competition for qualified employees is intense, particularly in the     
technology industry, and we have in the past experienced difficulty recruiting  
qualified employees. If we are not successful in attracting and retaining       
qualified sales personnel, software developers and customer service personnel,  
our revenue growth rates could decrease, or our revenues could decline, and our 
operating results could be materially harmed. Our products and services require 
a sophisticated selling effort targeted at several key people within a          
prospective customer's organization. This process requires the efforts of       
experienced sales personnel as well as specialized consulting professionals. In 
addition, the complexity of our products, and issues associated with installing 
and maintaining them, require highly-trained customer service and support       
personnel. We intend to hire a significant number of these personnel in the     
future and train them in the use of our products. We believe our success will   
depend in large part on our ability to attract and retain these key employees.  

OUR BUSINESS WOULD BE HARMED IF WE LOST THE SERVICES OF ONE OR MORE MEMBERS OF  
OUR SENIOR MANAGEMENT TEAM.                                                     

The loss of the services of one or more of our executive officers or key
employees, or the decision of one or more of these individuals to join a        
competitor, could adversely affect our business and harm our operating results  
and financial condition. Our success depends to a significant extent on the     
continued service of our senior management and other key sales, consulting,     
technical and marketing personnel. None of our senior management is bound by an 
employment or non-competition agreement. We do not maintain key man life        
insurance on any of our employees.                                              

IF WE FAIL TO MANAGE EXPANSION EFFECTIVELY, THIS WILL PLACE A SIGNIFICANT STRAIN
ON OUR MANAGEMENT AND OPERATIONAL RESOURCES.                                    

  Our recent growth rates have placed a significant strain on our management
and operational resources. We have expanded the size and geographic scope of our
operations rapidly in recent years, both internally and through acquisitions,   
and intend to continue to expand in order to pursue market opportunities that   
our management believes are attractive. Our customer relationships could be     
strained if we are unable to devote sufficient resources to them as a result of 
our growth, which could have an adverse effect on our future revenues and       
operating results.                                                              

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SYSTEM MANAGEMENT COMPANIES MAY ACQUIRE INFRASTRUCTURE MANAGEMENT AND/OR HELP   
DESK SOFTWARE COMPANIES AND CLOSE THEIR SYSTEMS TO OUR PRODUCTS, HARMING OUR    
ABILITY TO SELL OUR PRODUCTS.                                                   

 If large system management providers close their systems to our products,
our revenues and operating results would be seriously harmed. Our ability to    
sell our products depends in large part on their compatibility with and support 
by providers of system management products, including Tivoli, Computer          
Associates, and Hewlett-Packard. Both Tivoli and Hewlett-Packard have acquired  
providers of help desk software products. These large, established providers of 
system management products and services may decide to close their systems to    
competing vendors like us. They may also decide to bundle the products that     
compete with our products with other products for enterprise licenses for       
promotional purposes or as part of a long-term pricing strategy. If that were to
happen, our ability to sell our products could be adversely affected. Increased 
competition may result from acquisitions of help desk and other infrastructure  
management software vendors by system management companies. Increased           
competition could result in price reductions, reductions in our gross margins,  
or reductions in our market share. Any of these events would adversely affect   
our business and operating results.                                             

WE MAY BE UNABLE TO EXPAND OUR BUSINESS AND INCREASE OUR REVENUES IF WE ARE     
UNABLE TO EXPAND OUR DISTRIBUTION CHANNELS.                                     

If we are unable to expand our distribution channels effectively, our   
business, revenues and operating results could be harmed. In particular, we will
need to expand our direct sales force and establish relationships with          
additional system integrators, resellers and other third party channel partners 
who market and sell our products. If we cannot establish these relationships, or
if our channel partners are unable to market our products effectively or provide
cost-effective customer support and service, our revenues and operating results 
will be harmed. Even where we are successful in establishing a new third-party  
relationship, our agreement with the third party may not be exclusive. As a     
result, our partner may carry competing product lines.                          

IF WE ARE UNABLE TO EXPAND OUR BUSINESS INTERNATIONALLY, OUR BUSINESS, REVENUES 
AND OPERATING RESULTS COULD BE HARMED.                                          

In order to grow our business, increase our revenues, and improve our   
operating results, we believe we must continue to expand internationally. If we 
expend substantial resources pursuing an international strategy and are not     
successful, our revenues will be less than our management or market analysts    
anticipate, and our operating results will suffer. International revenues       
represented approximately 36.0% of our business in each of fiscal 1998 and 1999 
and approximately 41.0% of our business in fiscal 2000. We have several         
international sales offices in Europe as well as offices in Japan, Singapore and
Australia. International expansion will require significant management attention
and financial resources, and we may not be successful expanding our             
international operations. We have limited experience in developing local        
language versions of our products or in marketing our products to international 
customers. We may not be able to successfully translate, market, sell, and      
deliver our products internationally.                                           

CONDUCTING BUSINESS INTERNATIONALLY POSES RISKS THAT COULD AFFECT OUR FINANCIAL 
RESULTS.                                                                        

Even if we are successful in expanding our operations internationally,  
conducting business outside North America poses many risks that could adversely 
affect our operating results. In particular, we may experience gains and losses 
resulting from fluctuations in currency exchange rates, for which hedging       
activities may not adequately protect us. Moreover, exchange rate risks can have
an adverse effect on our ability to sell our products in foreign markets. Where 
we sell our products in U.S. dollars, our sales could be adversely affected by  
declines in foreign currencies relative to the dollar, thereby making our       
products more expensive in local currencies. Where we sell our products in local
currencies, we could be competitively unable to change our prices to reflect    
exchange rate changes. In recent periods, for example, our revenues in Europe   
have been adversely affected by the decline in the value of the Euro and its    
component currencies relative to the U.S. dollar.                               

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   Additional risks we face in conducting business internationally include the
following:                                                                      

- longer payment cycles;                                                

- difficulties in staffing and managing international operations;       

- problems in collecting accounts receivable; and                       

- the adverse effects of tariffs, duties, price controls or other       
restrictions that impair trade.                                     

WE MAY EXPERIENCE INTEGRATION OR OTHER PROBLEMS WITH NEW ACQUISITIONS, WHICH    
COULD HAVE AN ADVERSE EFFECT ON OUR BUSINESS OR RESULTS OF OPERATIONS. NEW      
ACQUISITIONS COULD DILUTE THE INTERESTS OF EXISTING STOCKHOLDERS, AND THE       
ANNOUNCEMENT OF NEW ACQUISITIONS COULD RESULT IN A DECLINE IN THE PRICE OF OUR  
COMMON STOCK.                                                                   

In addition to the acquisition of Harbinger, we have made a number of   
acquisitions of businesses and technologies over the last three years. We are   
frequently in formal or informal discussions with potential acquisition         
candidates. Accordingly, we may in the future make acquisitions of, or large    
investments in, businesses that offer products, services and technologies that  
we believe would complement our products or services. We may also make          
acquisitions of or investments in businesses that we believe could expand our   
distribution channels. Even though we announce an acquisition, however, we may  
not be able to complete it. Any future acquisition or substantial investment    
would present numerous risks. The following are examples of these risks:        

 - difficulty in combining the technology, operations or work force of the
acquired business;                                                  

- disruption of our on-going business;                                  

  - difficulty in realizing the potential financial or strategic benefits of
the transaction;                                                    

- difficulty in maintaining uniform standards, controls, procedures and 
policies;                                                           

- possible impairment of relationships with employees and customers as a
 result of any integration of new businesses and management personnel;

   - impairment of assets related to resulting goodwill, and reductions in our
future operating results from amortization of goodwill and other    
intangible assets.                                                  

We expect that future acquisitions could provide for consideration to be
paid in cash, shares of our common stock, or a combination of cash and our      
common stock. If the consideration for the transaction were paid in common      
stock, this would further dilute our existing stockholders. Any amortization of 
goodwill or other assets resulting from the acquisition could materially impair 
our operating results and financial condition. If an acquisition were to take   
place, the risks described above could materially and adversely affect our      
business and operating results.                                                 

HARBINGER AND SOME OF ITS FORMER OFFICERS AND DIRECTORS ARE DEFENDANTS IN       
SHAREHOLDER LITIGATION FOR WHICH HARBINGER IS NOT INSURED. THE OUTCOME OF THIS  
LITIGATION, IF DETERMINED ADVERSELY TO HARBINGER, COULD HAVE A MATERIAL ADVERSE 
EFFECT ON OUR FINANCIAL CONDITION.                                              

  In September 1999, a complaint was filed against Harbinger and some of its
current and former officers and directors in the United States District Court   
for the Northern District of Georgia. The complaint alleges causes of action for
misrepresentation and violations of federal securities laws. An amended         
complaint was filed in March 2000, alleging additional causes of action,        
including allegations relating to accounting improprieties. The complaints      
relate to actions by Harbinger during the period from February 1998 to          
October 1998. Harbinger did not maintain directors' and officers' liability     
insurance during this period. As a result, we are not insured with respect to   
any potential liability of Harbinger or any officer or director of Harbinger.   
Harbinger was, however, obligated under agreements with each of its officers and
directors to indemnify them for the costs incurred in connection with           

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defending themselves against this litigation and is obligated to indemnify them 
to the maximum extent permitted under applicable law if they are held liable. In
connection with the acquisition, we agreed to honor these contractual           
arrangements.                                                                   

 In October 2000, we entered into an agreement in principle to settle this
class action lawsuit. If the settlement is finalized and approved by the court, 
we will be required to make an aggregate cash payment of $2.25 million to a     
class of former shareholders of Harbinger in exchange for dismissal of all      
claims against Harbinger. Although the parties to the litigation have agreed in 
principle to this settlement, final settlement is subject to further            
documentation, various contingencies, and approval by the court. The court may  
not approve the settlement. If the court does not approve the settlement, the   
plaintiffs in the lawsuit may proceed with their claims, without prejudice. If  
the litigation were to continue to proceed, we could be required to spend       
substantial sums in an effort to litigate this matter. Continued litigation     
would be likely to result in a diversion of management's time and attention away
from business operations. If the litigation were decided adversely to Harbinger,
or we agree in the future to settle this litigation for a substantial sum as a  
result of failure to obtain court approval of the pending settlement, our       
financial condition and results of operations could be materially and adversely 
affected.                                                                       

IF IMMIGRATION LAWS LIMIT OUR ABILITY TO RECRUIT AND EMPLOY SKILLED TECHNICAL   
PROFESSIONALS FROM OTHER COUNTRIES, OUR BUSINESS AND OPERATING RESULTS COULD BE 
HARMED.                                                                         

Limitations under United States immigration laws could prevent us from  
recruiting skilled technical personnel from foreign countries, which could harm 
our business if we do not have sufficient personnel to develop new products and 
respond to technological changes. This inability to hire technical personnel    
could lead to future decreases in our revenues, or decreases in our revenue     
growth rates, either of which would adversely affect our operating results.     
Because of severe shortages for qualified technical personnel in the United     
States, many companies, including Peregrine, have recruited engineers and other 
technical personnel from foreign countries. Foreign computer professionals such 
as those we have employed typically become eligible for employment in the United
States by obtaining a nonimmigrant visa. The number of nonimmigrant visas is    
limited annually by federal immigration laws. In recent years, despite increases
in the number of available visas, the annual allocation has been exhausted well 
before year-end.                                                                

WE HAVE MADE SUBSTANTIAL CAPITAL COMMITMENTS THAT COULD HAVE AN ADVERSE EFFECT  
ON OUR OPERATING RESULTS AND FINANCIAL CONDITION IF OUR BUSINESS DOES NOT GROW. 

    We have made substantial capital commitments as a result of recent growth in
our business that could seriously harm our financial condition if our business  
does not grow and we do not have adequate resources to satisfy our obligations. 
In June 1999, we entered into a series of leases providing us with approximately
540,000 square feet of office space and an option to lease 118,000 square feet  
for our headquarters in San Diego, California. Even excluding the exercise of   
the option, the leases require a minimum aggregate lease payment of             
approximately $124.0 million over the twelve year term of the leases. The office
space (including the option) relates to a five building campus. We have         
relocated our San Diego operations to three of these buildings and intend for   
the present time to sublease the remaining two buildings. The capital           
commitments, construction oversight, and movement of personnel and facilities   
involved in a transaction of this type and magnitude present numerous risks,    
including:                                                                      

- failure to properly estimate the future growth of our business;       

- inability to sublease excess office space if we overestimate future   
growth;                                                             

- disruption of operations; and                                         

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  - inability to match fixed lease payments with fluctuating revenues, which
could impair our earnings or result in losses.                      

PRODUCT DEVELOPMENT DELAYS COULD HARM OUR COMPETITIVE POSITION AND REDUCE OUR   
REVENUES.                                                                       

    If we experience significant product development delays, our position in the
market would be harmed, and our revenues could be substantially reduced, which  
would adversely affect our operating results. We have experienced product       
development delays in the past and may experience delays in the future. In      
particular, we may experience product development delays associated with the    
integration of recently acquired products and technologies. Delays may occur for
many reasons, including an inability to hire sufficient number of developers,   
discovery of bugs and errors, or a failure of our current or future products to 
conform to industry requirements.                                               

ERRORS OR OTHER SOFTWARE BUGS IN OUR PRODUCTS COULD RESULT IN SIGNIFICANT       
EXPENDITURES TO REMEDY OR CORRECT THE ERRORS OR BUGS AND COULD RESULT IN PRODUCT
LIABILITY CLAIMS.                                                               

  If we were required to expend significant amounts to correct software bugs
or errors, our revenues could be harmed as a result of an inability to deliver  
the product, and our operating results could be impaired as we incur additional 
costs without offsetting revenues. Errors can be detected at any point in a     
product's life cycle. We have experienced errors in the past that resulted in   
delays in product shipment and increased costs. Discovery of errors could result
in any of the following:                                                        

- loss of or delay in revenues and loss of customers or market share;   

- failure to achieve market acceptance;                                 

- diversion of development resources and increased development expenses;

- increased service and warranty costs;                                 

- legal actions by our customers; and                                   

- increased insurance costs.                                            

    If we were held liable for damages incurred as a result of our products, our
operating results could be significantly impaired. Our license agreements with  
our customers typically contain provisions designed to limit exposure to        
potential product liability claims. These limitations may not be effective under
the laws of some jurisdictions, however. Although we have not experienced any   
product liability claims to date, the sale and support of our products entails  
the risks of these claims.                                                      

WE COULD BE COMPETITIVELY DISADVANTAGED IF WE ARE UNABLE TO PROTECT OUR         
INTELLECTUAL PROPERTY.                                                          

  If we fail to adequately protect our proprietary rights, competitors could
offer similar products relying on technologies we developed, potentially harming
our competitive position and decreasing our revenues. We attempt to protect our 
intellectual property rights by limiting access to the distribution of our      
software, documentation, and other proprietary information and by relying on a  
combination of patent, copyright, trademark, and trade secret laws. In addition,
we enter into confidentiality agreements with our employees and certain         
customers, vendors, and strategic partners. In some circumstances, however, we  
may, if required by a business relationship, provide our licensees with access  
to our data model and other proprietary information underlying our licensed     
applications.                                                                   

   Despite precautions that we take, it may be possible for unauthorized third
parties to copy aspects of our current or future products or to obtain and use  
information that we regard as proprietary. Policing unauthorized use of software
is difficult, and some foreign laws do not protect proprietary rights to the    
same extent as United States laws. Litigation may be necessary in the future to 
enforce                                                                         

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our intellectual property rights, to protect our trade secrets, or to determine 
the validity and scope of the proprietary rights of others, any of which could  
adversely affect our revenues and operating results.                            

IF WE BECOME INVOLVED IN AN INTELLECTUAL PROPERTY DISPUTE, WE MAY INCUR         
SIGNIFICANT EXPENSES OR MAY BE REQUIRED TO CEASE SELLING OUR PRODUCTS, WHICH    
WOULD SUBSTANTIALLY IMPAIR OUR REVENUES AND OPERATING RESULTS.                  

   In recent years, there has been significant litigation in the United States
involving intellectual property rights, including rights of companies in the    
software industry. Intellectual property claims against us, and any resulting   
lawsuit, may result in our incurring significant expenses and could subject us  
to significant liability for damages and invalidate what we currently believe   
are our proprietary rights. These lawsuits, regardless of their success, would  
likely be time-consuming and expensive to resolve and could divert management's 
time and attention. Any potential intellectual property litigation against us   
could also force us to do one or more of the following:                         

- cease selling, incorporating or using products or services that       
incorporate the infringed intellectual property;                    

    - obtain from the holder of the infringed intellectual property a license to
      sell or use the relevant technology, which license may not be available on
acceptable terms, if at all; or                                     

- redesign those products or services that incorporate the disputed     
   technology, which could result in substantial unanticipated development
expenses.                                                           

If we are subject to a successful claim of infringement and we fail to  
develop noninfringing technology or license the infringed technology on         
acceptable terms and on a timely basis, our revenues could decline or our       
expenses could increase.                                                        

    We may in the future initiate claims or litigation against third parties for
infringement of our proprietary rights or to determine the scope and validity of
our proprietary rights or the proprietary rights of competitors. These claims   
could also result in significant expense and the diversion of technical and     
management personnel's attention.                                               

CONTROL BY OUR OFFICERS AND DIRECTORS MAY LIMIT OUR STOCKHOLDERS' ABILITY TO    
INFLUENCE MATTERS REQUIRING STOCKHOLDER APPROVAL AND COULD DELAY OR PREVENT A   
CHANGE IN CONTROL, WHICH COULD PREVENT OUR STOCKHOLDERS FROM REALIZING A PREMIUM
IN THE MARKET PRICE OF THEIR COMMON STOCK.                                      

The concentration of ownership of our common stock by our officers and  
directors could delay or prevent a change in control or discourage a potential  
acquirer from attempting to obtain control of Peregrine. This could cause the   
market price of our common stock to fall or prevent our stockholders from       
realizing a premium in the market price in the event of an acquisition. As of   
September 30, 2000, our officers and directors owned approximately 12.0 million 
shares of our common stock (including shares issuable upon exercise of options  
exercisable within 60 days of September 30, 2000), representing approximately   
8.6% of our total shares outstanding.                                           

WE COULD EXPERIENCE LOSSES AS A RESULT OF OUR STRATEGIC INVESTMENTS.            

    If our strategic investments in other companies are not successful, we could
incur losses. We have made and expect to continue to make minority investments  
in companies with businesses or technologies that we consider to be             
complementary with our business or technologies. These investments have         
generally been made by issuing shares of our common stock or, to a lesser       
extent, by paying cash. Many of these investments are in companies whose        
operations are not yet sufficient to establish them as profitable concerns.     
Adverse changes in market conditions or poor operating results of underlying    
investments could result in our incurring losses or our being unable to recover 
the carrying value of our investments.                                          

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PROVISIONS IN OUR CHARTER DOCUMENTS AND DELAWARE LAW MAY DISCOURAGE POTENTIAL   
ACQUISITION BIDS FOR PEREGRINE AND MAY PREVENT CHANGES IN OUR MANAGEMENT THAT   
STOCKHOLDERS OTHERWISE WOULD APPROVE.                                           

    Some provisions of our charter documents eliminate the right of stockholders
to act by written consent without a meeting and impose specific procedures for  
nominating directors and submitting proposals for consideration at a stockholder
meeting. These provisions are intended to increase the likelihood of continuity 
and stability in the composition of our board of directors and the policies     
established by the board of directors. These provisions also discourage some    
types of transactions, which may involve an actual or threatened change of      
control. These provisions are designed to reduce Peregrine's vulnerability to an
unsolicited acquisition proposal. As a result, these provisions could discourage
potential acquisition proposals and could delay or prevent a change of control  
transaction. These provisions are also intended to discourage common tactics    
that may be used in proxy fights. As a result, they could have the effect of    
discouraging third parties from making tender offers for our shares. These      
provisions may prevent the market price of our common stock from reflecting the 
effects of actual or rumored take-over attempts. These provisions may also      
prevent changes in our management.                                              

   Our board of directors has the authority to issue up to 5,000,000 shares of
preferred stock in one or more series. The board of directors can fix the price,
rights, preference, privileges, and restrictions of this preferred stock without
any further vote or action by our stockholders. The issuance of preferred stock 
allows us to have flexibility in connection with possible acquisitions and for  
other corporate purposes. The issuance of preferred stock, however, may delay or
prevent a change in control transaction. As a result, the market price of our   
common stock and other rights of holders of our common stock may be adversely   
affected, including the loss of voting control to others.                       

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Dates Referenced Herein and Documents Incorporated by Reference

		Referenced-On Page
This ‘8-K’ Filing	Date	First	Last	Other Filings

Filed on / For Period End:	11/3/00			8-K
	9/30/00	11		10-Q
	6/30/00	1		10-Q, SC 13G/A
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Peregrine Systems Inc – ‘8-K’ for 11/3/00 – EX-99.2

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Current Report — Form 8-KFiling Table of Contents

EX-99.2 — Factors That May Effect Future Results

Dates Referenced Herein and Documents Incorporated by Reference

Current Report — Form 8-K
Filing Table of Contents