Peregrine to Fire 1,400 Employees
Peregrine Systems Inc. will fire nearly half its work force as the maker of business software struggles to recover from two years of losses and a federal investigation into its accounting.
The 1,400 job cuts, expected over the next few weeks, are among the first actions of Chief Executive Gary Greenfield, who took over the company this month.
The layoffs will affect its San Diego headquarters, as well as facilities in Indianapolis; Huntsville, Ala.; and Orlando, Fla.
Peregrine shares, which Tuesday rose 4 cents to close at $1.20 on Nasdaq, have been in a nose dive since the company said it may have overstated as much as $100 million in revenue over the last three years. Its continuing troubles have led to several shareholder lawsuits alleging that the company misled investors about its financial health.
Greenfield said that Peregrine will have enough cash to deal with the suits, and that the layoffs will give the company enough breathing room to survive.
“These actions will have minimal impact on our customers and the level of services and support we offer,” he said.
Analysts scoffed at such sentiments.
“That’s ridiculous. It’s totally not true,” said Mike Trigg of Morningstar Inc. “Peregrine will continue to exist, but it’s going to exist in a totally different form.”
What remains is expected to be a slimmed-down version of the once-aggressive e-commerce business, which started out by making software that tracks a company’s technical infrastructure. By 1998, the company had begun to branch out and went on a buying spree, picking up 12 companies over four years and spending billions of dollars in the process.
The company now wants to either spin off or sell many of these businesses. Its core focus would remain its tracking software, which customers use to manage technology resources and other assets, and its call-center business, which it bought last year in a stock deal, then valued at $1 billion, according to analysts.
In April, the company fired Arthur Andersen as its auditor and hired KPMG.
Soon after, KPMG found inflated revenue problems, and Peregrine said it would erase nearly $100 million in sales from the last three years--particularly revenue from software deals made through partners, consultants and retailers if a product was returned.
Such indirect sales account for about 40% of Peregrine’s revenue, according to company officials.
Peregrine eventually fired KPMG, saying that $35 million in revenue that had to be restated was drawn from sales through KPMG’s former consulting unit. Peregrine said keeping KPMG, which had spun off its consulting arm in 2001, would clash with U.S. auditor independence rules.
KPMG, which insisted it didn’t know about the sales until after it was hired, sent a letter to the Securities and Exchange Commission alleging that Peregrine possibly had committed fraud. In late May, the SEC launched a formal probe into the company’s accounting practices.
In the midst of this, Steve Gardner stepped down as board chairman and chief executive, and Matt Gless resigned as chief financial officer and executive vice president of finance.
Greenfield, formerly president and CEO of the e-business development company Merant, replaced Gardner as chief executive. John Moores, owner of the San Diego Padres, took over as chairman.
The company also was linked to an accounting scandal involving e-mail provider Critical Path Inc.
The SEC found that San Francisco-based Critical Path committed fraud to reach revenue targets. One of the ways it did so, according to court documents, was through a “software swap” with Peregrine, where the president of Critical Path once worked.
