Peregrine Systems Inc – ‘8-K’ for 11/3/00 – EX-99.1

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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-99.1   —   Description of Business

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                                                                    EXHIBIT 99.1

BUSINESS

    Peregrine is a leading global provider of infrastructure resource management
applications, employee self-service solutions and e-commerce technologies and   
services. We offer software products, services and enabling technologies that   
permit large and medium-sized businesses to manage the acquisition, use,        
maintenance and disposition of various infrastructure assets. Our solutions are 
intended to make our customers more competitive in their markets by optimizing  
the procurement and availability of their assets and increasing the productivity
of their employees. We believe our products can result in more efficient        
deployment of capital and other resources and can lower the cost of operating   
and maintaining organizational infrastructure assets. Peregrine markets its     
products through two groups: the infrastructure management group, which consists
of products and services representing our traditional infrastructure management 
business and employee self-service products, and the e-markets group, which     
provides business-to-business software products and creates and manages         
web-based catalog and vertical exchange markets for production supplies and     
commodities.                                                                    

Our infrastructure management group provides software, technologies and 
services to manage the procurement, maintenance, and disposition of             
infrastructure assets throughout their life cycles. We offer management         
solutions for diverse categories of business assets, including technology       
equipment and systems, telecommunications networks, corporate vehicle fleets and
physical plant and facilities. Our products offer complete life cycle management
of infrastructure assets. At the beginning of the cycle, we offer technologies  
and services that enable buyers and sellers of infrastructure assets to purchase
and sell assets electronically over the Internet. Once an asset has been made   
available for automated purchase or lease, we then automate and facilitate the  
management and maintenance of the asset as well as its ultimate disposition. In 
addition, our employee self-service applications offer individual employees     
direct access to the resources, help, information, or infrastructure they       
require.                                                                        

Our e-markets group provides business-to-business software products and 
solutions to facilitate the processes of selling and purchasing direct goods    
used in the manufacture of finished products. Specifically, our e-markets group 
provides e-commerce connectivity and data transformation solutions, creates and 
manages web-based catalogs of supplies and materials, and maintains and hosts   
vertical exchange markets for supply and commodity markets in the automotive,   
energy, industrial component and retail/distribution industries.                

   Our solutions are intended to manage every step of the infrastructure asset
life cycle. By integrating the connectivity, data transformation, catalog       
creation and management and transaction assurance technologies with our         
infrastructure management products, we provide a comprehensive solution to      
manage infrastructure assets and the procurement processes associated with      
acquiring those assets.                                                         

INDUSTRY BACKGROUND                                                             

Businesses across many industries are facing increasing competitive     
pressures to improve their operations by optimizing the management and          
procurement of infrastructure assets. In response, businesses are deploying     
information technology to gain competitive advantages to more efficiently manage
the life cycle of infrastructure assets.                                        

   We believe that the operational effectiveness of an organization ultimately
depends on the efficient acquisition, management, and divestiture of            
infrastructure assets. Threats to infrastructure pose substantial business      
risks. Issues addressed in connection with Year 2000 remediation, European      
currency conversion, computer viruses, major facilities relocations and changes 
in network environments have highlighted for senior business executives and     
information technology managers the extent of infrastructure dependency and its 
associated risks. In addition, in recent years, companies have focused          
substantial resources on creating more efficient and less costly manufacturing, 
production, and other core business processes, and we believe that they are now 
looking internally to achieve similar cost reductions and efficiencies in       
acquiring and maintaining infrastructure assets.                                

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  In response, organizations are generating demand for software applications
that manage the full life cycle of infrastructure assets including acquisition, 
management and divestiture. Companies are seeking enabling technologies and     
applications that:                                                              

- lower the total cost of ownership of infrastructure assets;           

- optimize the allocation of investment in infrastructure;              

- streamline change management processes;                               

- increase the availability and performance of critical infrastructure  
assets; and                                                         

- empower employees with technology to improve productivity.            

   To address these challenges, businesses are increasingly replacing paper or
spreadsheet-based applications with a single integrated solution to optimize the
workflow associated with the process to acquire, deploy, maintain, operate and  
divest infrastructure assets efficiently throughout their life cycle. To further
reduce infrastructure costs, businesses are increasingly seeking web-based      
applications to facilitate the procurement of complex assets. These assets can  
range from computers to manufacturing machinery to transportation equipment that
are mission-critical to core business operations. The Internet provides a       
cost-effective and efficient channel for connecting and transacting with global 
suppliers, distributors and customers. We believe leveraging web-based          
procurement applications accelerates the procurement cycle, lowers the cost to  
acquire, minimizes levels of asset inventory and enables individual employees to
initiate procurement decisions on an as needed basis subject to automated       
approval processes that are less costly and more efficient than manual order and
approval processes.                                                             

DEVELOPMENT OF OUR BUSINESS                                                     

  Until recently, our products focused principally on problem management for
an organization's information technology infrastructure. Historically, our      
principal product suite has been SERVICECENTER, an integrated, enterprise       
service desk software solution that assists information technology departments  
to manage and maintain their internal computer networks and related assets.     

  In addition to our internal development efforts, we have also made several
acquisitions intended to broaden the scope of our product suite beyond network  
help desks. The largest and most significant of these acquisitions are the      
following:                                                                      

    - In September 1997, we acquired ASSETCENTER, our asset management solution,
through the acquisition of Apsylog, S.A., a French corporation.     

- In July 1998, we acquired Innovative Tech Systems, a provider of      
    facilities management software. Innovative's SPAN*FM product line became
our FACILITYCENTER product line.                                    

   - In March 1999, we acquired Prototype, a provider of software products for
managing corporate vehicle and equipment fleets. Prototype's fleet  
management product line became our FLEETANYWHERE product line.      

   - In December 1999, we acquired advanced and light rail management software
    for the passenger and freight rail industries from KKO & Associates. Our
recently released RAILANYWHERE rail management product is based on  
   software developed by KKO applied to the FLEETANYWHERE technology base.

   - In March 2000, through the acquisition of Telco Research, we acquired our
TELECENTER application for managing telecommunications assets.      

- In June 2000, we completed the acquisition of Harbinger Corporation.  
    Harbinger's e-commerce and procurement software solutions have served as
the genesis of our e-markets group.                                 

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   In addition to acquiring technologies and products through acquisitions, we
have also focused substantial internal resources on internal product and        
technology development. Our employee self service procurement product, GET.IT!  
was developed internally and introduced in late 1999 to assist companies to     
automate their internal asset procurement processes and make them more          
efficient.                                                                      

PRODUCTS                                                                        

    We currently offer over 40 infrastructure management and e-commerce software
products. The following discussion summarizes the principal product families of 
our infrastructure management and e-markets groups.                             

INFRASTRUCTURE MANAGEMENT GROUP                                         

SERVICECENTER is a set of applications designed to maintain the         
effectiveness and functionality of an organization's information technology     
infrastructure. Products in this family include applications that report, track 
and assist operators in resolving problems with a business enterprise's         
computing environment. Other SERVICECENTER products help manage an              
organization's computing environment with applications that provide an inventory
of network devices and applications that provide a framework for managing       
changes to a network, including products that track costs associated with       
infrastructure problems and changes, and automate and track an organization's   
equipment and services ordering process. SERVICECENTER includes an              
Internet-hosted version, E-SERVICECENTER, in which we act as system             
administrator and operator for the customer.                                    

ASSETCENTER is a set of applications designed to manage financial       
information relating to an organization's portfolio of information technology   
investments. This family includes applications that provide a comprehensive     
inventory of an organization's equipment, users, suppliers, and contracts, and  
that assist in the financial analysis and decision-making of acquiring          
information technology products. Other ASSETCENTER products help organizations  
monitor leased and rented equipment, and track, control and allocate information
technology related expenses.                                                    

INFRATOOLS is a suite of software tools used in the real-time discovery,
tracking, and integration process of information technology infrastructure.     
Applications in this family automate the discovery and inventory of personal    
computer hardware and software assets, and the discovery, inventory and         
monitoring of intelligent devices on a network, such as routers, hubs, switches,
servers and workstations. In addition, INFRATOOLS includes products that        
remotely manage a number of intelligent devices with a graphical user interface 
either through dedicated networks or the Internet.                              

    FACILITYCENTER is a set of applications designed to manage assets related to
physical plant and facilities. FACILITYCENTER includes space planning,          
facilities management, work order management, stacking, maintenance management, 
facilities help desk, cable plant management, computer aided design integrator, 
and data collection. E-FACILITYCENTER, an Internet-hosted version, offers the   
application set to real estate and facility managers on a hosted basis.         

  FLEETANYWHERE is a comprehensive, Internet-enabled, fully integrated fleet
management system. This product family tracks all functions related to the      
maintenance of equipment fleets, including processing repair and work orders,   
tracking operating expenses, and tracking and billing for equipment usage.      
E.FLEET, an Internet-hosted version, offers the FLEETANYWHERE application set to
fleet managers on a hosted basis.                                               

    GET.IT! is our employee self-service procurement product that is designed to
improve employee productivity and reduce operating expenses. Applications in    
this family include products that enable employees at anytime and anyplace to   
acquire information, resources, help or infrastructure to get their job done.   
Specifically, GET.RESOURCES! enables employees to obtain assistance with their  
infrastructure,                                                                 

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GET.ANSWERS! allows employees to ask questions of their company knowledge bases,
and GET.ROOMS! enables employees to reserve corporate facilities for office or  
conference functions.                                                           

The TELECENTER product family helps an organization to manage its       
telecommunications assets. Applications in this family monitor and collect      
information produced by network switching equipment, and provide customers with 
the information to control costs and usage of their voice communications        
network, monitor network operating status and maintain network integrity.       

E-MARKETS GROUP                                                         

  POWER.IT! is a suite of e-business software for integrating the e-commerce
and back-office applications of buyers and suppliers. The suite enables         
real-time data exchange in numerous formats, such as XML, xCBL, ebXML, cXML,    
RosettaNet, Biztalk, X12, and EDIFACT.                                          

TRUSTED LINK is our e-commerce data transformation software. It allows  
businesses to exchange e-commerce documents in standard data formats. The       
software provides capabilities for data communications via popular value-added  
networks as well as the Internet. The software also provides capabilities for   
integrating e-commerce data directly with internal business applications that   
either generate or need to receive e-commerce-related transactions.             

PRODUCT INTEGRATION                                                             

   We have completed several acquisitions of businesses and technologies since
late 1997. As a result, our research and development personnel have focused     
substantial effort on integrating the acquired products and technologies into a 
single product suite with a common data repository. In October 2000, we         
announced that we had integrated the connectivity, marketplace, and catalog     
technology acquired through the acquisition of Harbinger into the complete life 
cycle of our infrastructure resource management products. At the same time, we  
announced that we had also integrated some of the technology we obtained through
the purchase of Loran, which was completed in August 2000. Prior to the         
acquisition, we resold Loran's products under our INFRATOOLS product line. We   
are continuing to expend resources to improve the integration of SERVICECENTER, 
ASSETCENTER, and FACILITYCENTER. Integration of products of this number and     
complexity is costly and time consuming, results in the diversion of resources  
from the development of new or enhanced products and technologies, and exposes  
us to a number of risks which are described in greater detail in Exhibit 99.2   
attached herewith.                                                              

PRODUCT DEVELOPEMENT; PRODUCT AUTHORSHIP MODEL                                  

   We believe that attracting and retaining talented software developers is an
important component of our product development activities. To this end, we have 
instituted a product authorship incentive program that rewards our developers   
with commissions based on the market success of the applications designed,      
written, marketed and supported by them. Our product authorship program is      
designed to encourage our developers to evaluate the effectiveness of a product 
in the actual user environment.                                                 

We believe that the ability to deliver new and enhanced products to     
customers is a key success factor. We have historically developed our products  
through a consultative process with existing and potential customers. We expect 
that continued dialogue with existing and potential customers may result in     
enhancements to existing products and the development of new products. We have  
in the past devoted and expect to continue to devote a significant amount of    
resources to developing new and enhanced products. We currently have a number of
product development initiatives underway. We cannot predict, however, whether   
any enhanced products, new products, or product suites will be embraced by      
existing or new customers. The failure of any of these products to achieve      
market acceptance would have a material adverse effect on our business, results 
of operations and financial condition.                                          

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Our research and development expenditures in fiscal 2000, 1999, and 1998
were $28.5 million, $13.9 million, and $8.4 million, representing 11%, 10%, and 
14% of total revenues in the respective periods. In addition, our research and  
development expenditures for the three-month period ended June 30, 2000 were    
$11.3 million.                                                                  

The market for our products is subject to rapid technological change,   
changing customer needs, frequent new product introductions and evolving        
industry standards that may render existing products and services obsolete. As a
result, our position in existing markets or other markets that we may enter     
could be eroded rapidly by product advances. The life cycles of our products are
difficult to estimate. Our growth and future financial performance will depend  
in part on our ability to enhance existing applications, develop and introduce  
new applications that keep pace with technological advances, meet changing      
customer requirements and respond to competitive products. Our product          
development efforts are expected to continue to require substantial investment  
by us. There can be no assurance that we will have sufficient resources to make 
the necessary investment. We have in the past experienced development delays,   
and there can be no assurance that we will not experience development delays in 
the future. There can be no assurance that we will not experience difficulties  
that could delay or prevent the successful development, introduction, or        
marketing of new or enhanced products. In addition, there can be no assurance   
that any new or enhanced products will achieve market acceptance, or that our   
current or future products will conform to industry requirements. Our inability,
for technological or other reasons, to develop and introduce new and enhanced   
products in a timely manner could have a material adverse effect on our         
business, results of operations, and financial condition.                       

TECHNOLOGY                                                                      

Our products rely on a number of standard, commercially available       
technologies for relational database storage and retrieval and client/server    
communications. They are designed to support a range of implementations of      
infrastructure management applications and enterprise service desks within      
medium sized to large organizations. We have developed other technologies       
designed to provide a comprehensive environment to build, deploy, and customize 
a range of applications.                                                        

N-TIERED ARCHITECTURE.  N-tiered architecture applications permit the   
separation of multiple clients, multiple application servers, and multiple      
database servers in a single cohesive application implementation. Our database, 
business rules, and presentation technologies create an N-tiered client/ server 
architecture intended to provide scalability and flexibility. The tiers are     
logically separated, allowing changes to the database design or the graphical   
interface to be made without requiring changes to the business rules or other   
related tiers.                                                                  

   EASY CUSTOMIZATION/EXTENSION.  In order to make our software fit customers'
needs, our products provide a number of tools that enable customers to customize
and extend SERVICECENTER, ASSETCENTER, FACILITYCENTER and FLEETANYWHERE. The    
design of the database, the contents and appearance of the user interface, and  
the business rules can be modified using the standard tools that we provide with
the system.                                                                     

RAPID APPLICATION DEVELOPMENT ENVIRONMENT.  We have created a           
"fill-in-the-blanks" development environment for building and deploying         
applications. All SERVICECENTER applications are implemented using our rapid    
application development environment. If a customer requires more extensive      
modification, the system can be customized by changing the applications that we 
provide or by implementing new applications using the rapid application         
development environment. In fiscal 1999, we introduced an advanced graphical    
workflow engine in ASSETCENTER, along with technology for simplified tailoring  
of the application. Our new product developments have been standardized upon a  
Java and Enterprise Java Beans development environment using XML and HTTP for   
inter-application event and data connectivity.                                  

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DISTRIBUTED SERVICES.  We have distributed a database technology that   
provides replication services and the capability to move work from one          
SERVICECENTER system to another. These services are database vendor independent 
and contain knowledge of the application schema.                                

   ADAPTERS.  We provide adapters to industry standard application programming
interfaces, such as SMTP e-mail, and leading vendors products. These adapters   
expand the reach of our products by allowing them to interact with other        
products currently in the customer's environment. We also have created adapters 
that permit the system to communicate using e-mail, beepers, facsimile and Lotus
Notes. The adapters also provide communication with third party network         
management tools such as Hewlett-Packard's OpenView, Computer Associates        
Unicenter, Tivoli's TME, Cabletron's Spectrum, Sun's SunNet Manager and others. 
In addition, we have created an open application programming interface          
permitting software developed by third parties, end-users or our professional   
services group to be integrated into the system.                                

INTELLIGENT AGENTS.  We provide intelligent agents that gather and feed 
information to SERVICECENTER. The agents provide automated inventory gathering  
and problem determination data for use in problem resolution and management of  
an information technology environment. The agents permit help desk personnel to 
open, update, and close trouble tickets based on criteria provided by the       
customers.                                                                      

GLOBAL USER ACCESS.  The technology underlying our GET.IT! employee     
self-service applications also provides the foundation for a common user        
approach to all our applications, some applications of other software vendors   
and customer-written applications. GET.IT! technology provides a dynamic user   
interface which enables users to access GET.IT!'S data and applications through 
a cell phone, on a Palm OS or Windows CE device.                                

UNIVERSAL CONNECTIVITY.  Our technology also provides open communication
among our products and between our products and applications and integration    
tools from other software technology companies, which provides a unified user   
interface for an organization's infrastructure management applications.         

SALES AND MARKETING                                                             

We sell our software and services in North America and internationally  
primarily through a direct sales force. In October 2000, we implemented a       
strategic segmentation of our business into two groups, our infrastructure      
management group and our e-markets group, each with a dedicated sales and       
marketing team to pursue business opportunities in their respective markets. A  
large number of our sales force is based at our San Diego headquarters, but we  
also have North American sales personnel located in, or in close proximity to,  
most major cities in the United States, Canada and Mexico. Our international    
sales force is located in the metropolitan areas of Amsterdam, Frankfurt,       
London, Milan, Copenhagen, Munich, Paris, Singapore and Sydney. Our sales model 
combines telephone and Internet communications for product demonstrations with  
travel to customer locations to pursue a consultative sales process. In addition
to our direct sales strategy, we continue to pursue indirect distribution       
channels. In the Pacific Rim and Latin America, we have established a network of
channel partners. In North America, we have established a network of regional   
and national systems integrators and channel partners. When sold through direct 
channels, the sales cycle for our products typically ranges from six to nine    
months, depending on a number of factors, including the size of the transaction 
and the level of competition we encounter in our sales activities.              

In recent periods, we have devoted significant resources to building our
marketing organization and infrastructure. We have significantly expanded       
product marketing, marketing communications, alliance marketing, telemarketing  
and sales training. The primary focus of our marketing department is to generate
qualified leads for the worldwide direct sales force and to create market       
awareness programs for Peregrine and our products. As part of our strategy, we  
have invested significantly in the                                              

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Internet, developing a new corporate web site during fiscal 2000 and executing  
an array of web-based marketing programs. In addition, during fiscal 2000, we   
established an executive briefing center in order to focus our sales efforts at 
senior levels within our prospective customer's organizations.                  

 We have significantly increased the size of our sales force over the last
year and expect to continue hiring sales personnel, both domestically and       
internationally, over the next twelve months. Competition for qualified sales   
personnel is intense in the software industry. We also expect to increase the   
number of our regional, national, system integrator and channel partners, both  
domestically and internationally. Any failure to expand our direct sales force  
or other distribution channels could have a material adverse effect on our      
business, results of operations, and financial condition.                       

We believe that our continued growth and profitability will require     
expansion of our international operations, particularly in Europe, Latin        
America, and the Pacific Rim. We intend to expand international operations and  
to enter additional international markets, either directly or through           
international distribution or similar arrangements, which will require          
significant management attention and financial resources. Competition for       
suitable distribution partners is intense in many markets outside North America.
There can be no assurance that we will be successful in attracting and retaining
qualified international distributors or that we will be successful in           
implementing direct sales programs in selected international markets. If we are 
unable to obtain qualified international distribution partners or are otherwise 
unable to successfully penetrate important international markets, our business, 
results of operations, and financial condition would be materially and adversely
affected.                                                                       

PROFESSIONAL SERVICES AND CUSTOMER SUPPORT                                      

  Our professional services group provides technical consulting and training
to assist customers and business partners in implementing our products.         

Our basic consulting services include analyzing user requirements and   
providing the customer with a starter system that will quickly demonstrate      
significant benefits of our products. More advanced consulting services include 
providing turn-key implementations using our Advanced Implementation            
Methodology, which begins with a structured analysis to map the customer's      
business rules onto our service desk tools, continues with the technical design 
and construction, and finishes with system roll out. Implementation assistance  
frequently involves a modest level of process reengineering and the development 
of interfaces between our products and legacy systems and other tools or        
systems.                                                                        

 We offer training courses in the implementation and administration of our
products. On a periodic basis, we offer product training at our facilities in   
San Diego, Orlando, Washington D.C., London, Paris, Frankfurt, Amsterdam and    
Tokyo for customers and business partners. Customer-site training is also       
available.                                                                      

We maintain a staff of customer support and customer care personnel, who
provide technical support and periodic software updates to our customers and    
partners. We offer complete technical support services 24 hours a day, five days
per week, with critical care services offered 24 hours a day, seven days a week 
via toll free lines through our local offices in Europe and San Diego. In       
addition to telephone support, we provide support via facsimile, e-mail and a   
web server.                                                                     

COMPETITION                                                                     

The markets for our products are highly competitive and diverse. The    
technology for e-commerce enablement, infrastructure management and employee    
self-service software products can change rapidly. New products are frequently  
introduced and existing products are continually enhanced. Competitors vary in  
size and in the scope and breadth of the products and services offered. In the  
last few years, we have experienced substantial competition from new competitors
of all types and sizes, and we do not foresee a change in the rate of increasing
competition.                                                                    

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SOURCES OF EXISTING COMPETITION                                         

We face competition from a number of sources in the markets for our     
e-commerce enablement, infrastructure resource management and employee          
self-service software solutions.                                                

- In the markets for our infrastructure resource management products, we
face competition from: providers of internal help desk software     
  applications, 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, 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-procurement solutions, we face competition from: established competitors
  in the business-to-business internet commerce solution market, such as
Ariba and CommerceOne; established providers of enterprise resource 
planning software that are entering the market for procurement and  
    e-procurement solutions, including Oracle and SAP; and numerous start-up
     and other entrepreneurial companies offering products that provide one or
      more aspects of employee self-service such as self-help service offerings,
or web-based knowledge management systems.                          

- In the markets served by our e-commerce enablement technology, we face
 competition from: providers of customer relationship portals, such as
     Aspect Communications; providers of catalog management solutions, such as
     Requisite Technology; providers of e-commerce enablement software such as
  webMethods; and providers of legacy e-commerce technology and services
    such as SBC (Sterling Commerce) and General Electric eXchange Solutions.

SOURCES OF FUTURE COMPETITION                                           

   Because competitors can easily penetrate the software market, we anticipate
additional competition from other established and new companies as the market   
for enterprise infrastructure management applications develops. In addition,    
current and potential competitors have established or may in the future         
establish cooperative relationships among themselves or with third parties.     
Large software companies may acquire or establish alliances with our smaller    
competitors. We expect that the software industry will continue to consolidate. 
It is possible that new competitors or alliances among competitors may emerge   
and rapidly acquire significant market share.                                   

  Increased competition may result from acquisitions of other infrastructure
management or e-procurement software vendors by system management companies. The
results of increased competition including price reductions of our products,    
reduced gross margins, and reduction of market share, could materially adversely
affect our business, operating results, and financial condition. In several of  
our market segments, we believe there is a distinct trend by competitors toward 
securing market share at the expense of profitability. This could have an impact
on the mode and success of our ongoing business in these segments.              

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GENERAL COMPETITIVE FACTORS IN OUR INDUSTRY                             

   Some of our current and many of our potential competitors have much greater
financial, technical, marketing, and other resources. As a result, they may be  
able to respond more quickly than we can to new or emerging technologies and    
changes in customer needs. They may also be able to devote greater resources to 
the development, promotion, and sale of their products. We may not be able to   
compete successfully against current and future competitors. In addition,       
competitive pressures that we face may materially and adversely affect our      
business, operating results, and financial condition.                           

   We believe that the principal competitive factors affecting markets include
product features such as adaptability, scalability, ability to integrate with   
third party products, functionality, ease of use, product reputation, quality,  
performance, price, customer service and support, effectiveness of sales and    
marketing efforts and company reputation. Although we believe that we currently 
compete favorably with respect to these factors, there can be no assurance that 
we will maintain our competitive position against current and potential         
competitors, especially those with greater financial, marketing, service,       
support, technical, and other resources than us. In addition, we believe that   
our future financial performance will depend in large part on our success in    
continuing to expand our product line of infrastructure management and          
e-procurement solutions and to create organizational awareness of the benefits  
when purchasing these integrated solutions from a single vendor.                

INTELLECTUAL PROPERTY                                                           

Our success depends heavily on our ability to maintain and protect our  
proprietary technology. We rely primarily on a combination of copyright and     
trademark laws, trade secrets, confidentiality procedures and contractual       
provisions to protect our proprietary rights, which offer only limited          
protection. We attempt to protect our intellectual property rights by limiting  
access to the distribution of our software, documentation and other proprietary 
information. In addition, we enter into confidentiality agreements with our     
employees and certain customers, vendors, and strategic partners. These steps   
may fail to prevent the misappropriation of our intellectual property,          
particularly in foreign countries where the laws may not protect our proprietary
rights as fully as in the United States. Other parties may independently develop
competing technology. Attempts may be made to copy aspects of our products or to
obtain and use information that we regard as proprietary. Despite precautions we
may 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. In particular, we may provide our licensees with access to our  
data model and other proprietary information underlying our licensed            
applications.                                                                   

   We employ a variety of intellectual property in the development and sale of
our products. We believe that the loss of all or a substantial portion of our   
intellectual property rights would have a material adverse effect on our results
of operations. Our intellectual property protection measures might not be       
sufficient to prevent misappropriation of our technology. From time to time, we 
may desire or be required to renew or obtain licenses from others in order to   
further develop and effectively market commercially viable products effectively.
Any necessary licenses might not be available on reasonable terms, if at all,   
and the associated license fees could increase our expenses and impair our      
results of operations.                                                          

Litigation concerning intellectual property is common among technology  
companies. In the future, third parties may claim that we infringe their        
products or technologies. These claims and any resulting lawsuit, if successful,
could subject us to significant liability for damages and invalidate our        
proprietary rights. These lawsuits, regardless of their success, would likely be
time-consuming and expensive to                                                 

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resolve and would divert management time and attention. Any potential           
intellectual property litigation 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 right a 
      license to sell or use the relevant technology, which may not be available
on acceptable terms, if at all; or                                  

- redesign those products or services that incorporate the disputed     
technology.                                                         

    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 our competitors. These      
claims could result in costly litigation and the diversion of our technical and 
management personnel's time and attention. As a result, our operating results   
could suffer, and our financial condition could be harmed.                      

EMPLOYEES                                                                       

   As of September 30, 2000, we employed 2,583 persons, including 880 in sales
and marketing, 319 in customer support, 451 in professional services, 431 in    
research and development and 502 in finance and administration. Of our          
employees, 696 are located outside North America, principally in Europe. None of
our employees is represented by a labor union (other than by statutory unions or
workers' committees required by law in some European countries). We have not    
experienced any work stoppages and consider our relations with our employees to 
be good.                                                                        

PROPERTIES                                                                      

Our principal administrative, sales, marketing, support, research and   
development and training functions are located at our headquarters facility in  
San Diego, California. In June 1999, we entered into a series of leases covering
up to approximately 540,000 square feet of office space, including an option on 
approximately 118,000 square feet of office space, for our headquarters in San  
Diego, California. Excluding the exercise of the option, the leases require     
minimum lease payments of approximately $124 million over their term, which is  
approximately twelve years. This office space (including the option) relates to 
a five building campus in San Diego, California. We recently relocated our San  
Diego operations to three of these buildings and intend for the present time to 
sublease the remaining two buildings.                                           

  We also lease office space for sales, marketing, and professional services
staff in most major metropolitan areas of the United States and Canada. In      
connection with our recent acquisition of Harbinger Corporation, we assumed     
leases for approximately 99,560 square feet of office space in Atlanta, Georgia,
which lease expires in 2008. In Europe, we lease space in the metropolitan areas
of Amsterdam, Copenhagen, Dublin, Frankfurt, London, Milan and Paris. In the    
Pacific Rim, we lease space in Singapore, Sydney and Tokyo.                     

LEGAL PROCEEDINGS                                                               

  In connection with our acquisition of Harbinger, we assumed the defense of
an outstanding shareholder class action lawsuit against Harbinger and several of
its former officers and directors. In September 1999, a complaint was filed     
against Harbinger and some of its 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.                               

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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 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.                                                                       

11

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		10					10-Q
		6/30/00		5					10-Q,  SC 13G/A
									List all Filings