Peregrine to cut workforce by half

19 June 2002 Peregrine Systems, the troubled asset management software company, will cut almost half of its North American work force over the next few weeks, sparking concerns that the cuts will may eventually affect its European business.

Peregrine has been in the headlines since the start of 2002 due to a controversy over its accounting practices and mismanagement of its acquisitions during the past two years.

In May 2002, the software company replaced its accounting firm Arthur Andersen with KPMG, and admitted that it would have to examine $100 million (€108m) in “questionable” revenue from the last two years.

Most of those questionable deals were related to the consulting arm Arthur Andersen, but by the end of the month Peregrine had also dismissed KPMG after learning that $35 million (€37.7m) of the questionable $100 million (€108m) came in historic sales to its new auditor’s consulting arm. Four key executives, including Peregrine’s CEO and chief financial officer, resigned as a result of the debacle.

The accounting farce sent Peregrine’s stock tumbling, but the company was already buckling under the weight of mounting problems. CEO Steve Gardner had long been criticised for the 2000 acquisition of electronic data interchange (EDI) specialist Harbinger and the 2001 purchase of business-to-business (B2B) integration tools specialist Extricity. Both acquisitions mystified analysts.

Last week, Peregrine revealed that it would sell these units to a private equity company Golden Gate Capital in a cut-price deal. At the same time the company secured a $50 million (€52.7m) loan.

But Peregrine is not yet in the clear according to an analyst quoted by the Wall Street Journal. “It’s too early to tell if this is enough or not,” says Brad Reback, an analyst with CIBC World Markets. “At the end of the day, I don’t think it will go bankrupt, but Peregrine said in the release that these cuts are only in North America and that they are looking at additional consolidation in Europe.”

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Ben Rossi

Ben was Vitesse Media's editorial director, leading content creation and editorial strategy across all Vitesse products, including its market-leading B2B and consumer magazines, websites, research and...

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