Peregrine releases roadmap, plots turnaround

After three years of bulking out through acquisitions, culminating in its US$1 billion purchase of Remedy Corp., IT management software maker Peregrine Systems Inc. shocked its customers last May with the sudden sacking of two top executives and the disclosure of massive accounting irregularities.

Now, the company is regrouping, issuing this week a product roadmap for what it pledges will be its successful turnaround as a smaller, more focused company.

Most of the news coming out of Peregrine since May has been grim. After its accounting disclosure, the company spent the rest of 2002 auditing its books and dealing with the fallout of what turned out to be years of revenue misreporting. Peregrine lost its Nasdaq listing and filed for Chapter 11 bankruptcy protection. Last month, when it finally released its revamped financial statements, Peregrine cut by nearly 40 percent its reported revenue for three fiscal years.

The scandal took out Peregrine's chief executive officer, chief financial officer, chairman, and most of its board. Financial problems prompted layoffs of nearly half the staff of the San Diego-based company. The bankruptcy forced Peregrine to sell off many of its acquisition assets, including Remedy, which BMC Software Inc. picked up in November for US$355 million.

Now, with its PricewaterhouseCoopers-audited financial statements released and mediated negotiations underway with its creditors, Peregrine officials say the company is ready to focus on its 3,500 customers.

The company held this month the first meetings of its newly constituted Customer Advisory Councils in North America and Europe. The goal of the organizations is to ensure that Peregrine's development is in line with customer needs, said Nicole Eagan, senior vice president of global marketing.

Peregrine also announced its product roadmap, which focuses on consolidating its technologies into two flagship software suites, ServiceCenter and AssetCenter.

Peregrine will always sell its products piecemeal to customers who prefer to purchase them that way, but the company will be concentrating on increasing integration between its components and pulling them together into unified packages, Eagan said.

"All of our customers are focused on driving cost out of their IT budgets, and one way they're doing that is through more consolidated software," she said. "For a time, ERP (enterprise resource planning) vendors had point solutions, and so did Peregrine. Now they're offering more integrated solutions that can be deployed modularly. We are moving toward the same sort of functionality structure."

AMR Research Inc. analyst Colleen Niven said Peregrine is on the right track with that approach.

"Nobody is out there buying best-of-breed anymore. They're looking for an integrated suite," said Niven, an AMR vice president and research fellow in Boston.

Peregrine has managed to retain most of its customer base throughout its troubles, according to Niven.

"Customers haven't jumped ship. What they've been doing is waiting and watching and seeing what would happen with the products. Now, since Peregrine is executing as they said they would, there isn't a massive exodus," she said. "Based on our conversations with clients and with (Peregrine), we think they're going to make this turnaround."

One reason customers have stuck by the company is that its technology is relatively unique, said IDC senior research analyst Fred Broussard, in Framingham. (IDC is a unit of International Data Group Inc., parent company of the IDG News Service.)

"The kind of product Peregrine sells is not something that you can get from just anybody," he said. "If you're looking for, say, a large service desk application, there's serious reasons to look at Peregrine, even with the other issues."

Those other issues -- the bankruptcy, the management changes, the accounting scandal -- haven't affected apparel maker L.L. Bean Inc.'s day-to-day dealings with Peregrine.

"Peregrine has been very responsive in letting us know what's going on," said Pam Hines, a programmer with L.L. Bean Inc., in Freeport, Maine.

Some sales and support staff changes have affected the company, which is a longtime user of Peregrine's customer service management software, but nothing more drastic than what the company deals with from other vendors, she said.

With Peregrine's backing, Hines recently started a New England Peregrine user group. At meetings, Peregrine's corporate problems have been discussed more as a curiosity than an active problem for customers, she said.

Customers thinking of signing on with Peregrine shouldn't be scared off by the company's recent problems, but they should up their level of due diligence before purchasing, said IDC's Broussard, who also recommended that current customers take a very active role in managing their account.

"If I were in the IT department, I would have Peregrine tell me what they're going to do, in each individual deal. I'd ask, 'What are your plans to move forward? How will this impact me? Are you moving sales people around? Should I expect to deal with different product managers?'" he said.

Meanwhile, AMR's Niven said her outlook on Peregrine is postive.

"They're really focused right now. They know where their core competencies are, and they're very focused on their existing clients," she said.

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