S-8, 1998-07-24
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             As filed with the Securities and Exchange Commission
                               on July 24, 1998
                                              Registration No. 333-_____

                            Washington, D.C. 20549

                                   FORM S-8

                         REGISTRATION STATEMENT UNDER
                          THE SECURITIES ACT OF 1933

                        PERITUS SOFTWARE SERVICES, INC.
            (Exact Name of Registrant as Specified in Its Charter)

        (State or Other Jurisdiction of Incorporation or Organization)

                     (I.R.S. Employer Identification No.)

  (Address of Principal Executive Offices)                 (Zip Code)

                           1997 STOCK INCENTIVE PLAN
                           (Full Title of the Plan)

                                ALLEN K. DEARY
                        PERITUS SOFTWARE SERVICES, INC.
                               2 FEDERAL STREET
                     BILLERICA, MASSACHUSETTS  01821-3540
                    (Name and Address of Agent for Service)

                                (978) 670-0800
         (Telephone Number, Including Area Code, of Agent For Service)




<S>               <C>          <C>           <C>            <C>
   REGISTERED                   PRICE PER      OFFERING
                                  SHARE         PRICE 
- --------------------------------------------------------------------------------
Common Stock,      
$.01 par value    2,000,000     $6.125(1)   $12,250,000(1)     $3,613.75

(1)  Estimated solely for the purpose of calculating the registration fee, and
     based upon the average of the high and low sale prices of the Common Stock
     on the Nasdaq National Market on July 22, 1998 in accordance with Rules
     457(c) and 457(h) of the Securities Act of 1933, as amended.

     This Registration Statement on Form S-8 incorporates by reference the
contents of (i) PART I and (ii) Items 3, 4, 5, 6, 7 and 9 of PART II of the
Registration Statement on Form S-8, File No. 333-38659, filed by the Registrant
on October 24, 1997 relating to the Registrant's 1997 Stock Incentive Plan.


Item 8.   Exhibits

          The Exhibit Index immediately preceding the exhibits is incorporated
herein by reference.


     Pursuant to the requirements of the Securities Act of 1933, as amended (the
"Securities Act"), the Registrant certifies that it has reasonable grounds to
believe that it meets all of the requirements for filing on Form S-8 and has
duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the Town of Billerica, Commonwealth
of Massachusetts, on this 22 day of July, 1998.

                                    PERITUS SOFTWARE SERVICES, INC.

                                    By:  /s/ Allen K. Deary
                                         Allen K. Deary
                                         Vice President, Finance and
                                         Chief Financial Officer

                               POWER OF ATTORNEY

     We, the undersigned officers and directors of Peritus Software Services,
Inc., hereby severally constitute Dominic K. Chan, Douglas A. Catalano, Allen K.
Deary and Peter B. Tarr, and each of them singly, our true and lawful attorneys
with full power to them, and each of them singly, to sign for us and in our
names in the capacities indicated below, the Registration Statement on Form S-8
filed herewith and any and all subsequent amendments to said Registration
Statement, and generally to do all such things in our names and behalf in our
capacities as officers and directors to enable Peritus Software Services, Inc.
to comply with all requirements of the Securities and Exchange Commission,
hereby ratifying and confirming our signatures as they may be signed by said
attorneys, or any of them, to said Registration Statement and any and all
amendments thereto.

     Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed below by the following persons in the capacities and
on the date indicated.

           Signature                       Title             Date
           ---------                       -----             ----
/s/ Dominic K. Chan               Chairman of the Board      July 22, 1998 
- --------------------------------  of Directors and Chief              
Dominic K. Chan                   Technology Officer                  
/s/ Douglas A. Catalano           President, Chief           July 22, 1998 
- --------------------------------  Executive Officer and               
Douglas A. Catalano               Director (Principal                 
                                  Executive Officer)                  
/s/ Allen K. Deary                Vice President,            July 22, 1998 
- --------------------------------  Finance,                            
 Allen K. Deary                   Chief Financial Officer             
                                  and Director (Principal             
                                  Financial Officer)                  
/s/ John E. MacPhee               Director of Finance and    July 22, 1998 
- --------------------------------  Treasurer (Principal                
John E. MacPhee                   Accounting Officer)                 
                                  Director                   July __, 1998 
- --------------------------------                                      
Arthur Carr                                                           
/s/ W. Michael Humphreys          Director                   July 22, 1998 
- --------------------------------                                      
W. Michael Humphreys                                                  
                                  Director                   July __, 1998 
- --------------------------------                                      
Axel Leblois                                                          
/s/ Henry F. McCance              Director                   July 22, 1998 
- --------------------------------                                      
Henry F. McCance                                                      
/s/ Roland Pampel                 Director                   July 22, 1998 
- --------------------------------                                      
 Roland Pampel                                                        
/s/ William W. Verity             Director                   July 22, 1998 
- --------------------------------
 William W. Verity

                                 EXHIBIT INDEX

Number                          Description
- --------  -------------------------------------------------------

4/(1)/    Specimen Certificate for shares of Common Stock, $.01
          par value per share, of the Registrant

5         Opinion of Hale and Dorr LLP

10        1997 Stock Incentive Plan, as amended

23.1      Consent of Hale and Dorr LLP (included in Exhibit 5)

23.2      Consent of Pricewaterhouse Coopers LLP

23.3      Consent of Ernst & Young LLP

24        Power of Attorney (included on the signature page of
          this Registration Statement)

- -------------------

    /1/    Incorporated herein by reference to the Registrant's Registration
           Statement on Form S-1 (Commission File No. 333-27087).


                                                                       EXHIBIT 5
                               HALE AND DORR LLP
                              Counsellors at Law

                 60 State Street, Boston, Massachusetts 02109
                       617-526-6000  *  FAX 617-526-5000

                                 July 23, 1998

Peritus Software Services, Inc.
2 Federal Street
Billerica, Massachusetts 01821-3540

     Re:  1997 Stock Incentive Plan

Ladies and Gentlemen:

     We have assisted in the preparation of a Registration Statement on Form S-8
(the "Registration Statement") to be filed with the Securities and Exchange
Commission (the "Commission") relating to 2,000,000 shares of common stock, $.01
par value per share (the "Shares"), of Peritus Software Services, Inc., a
Massachusetts corporation (the "Company"), issuable under the Company's 1997
Stock Incentive Plan, as amended (the "Plan").

     We have examined the Restated Articles of Organization of the Company and
the Amended and Restated By-Laws of the Company, and originals, or copies
certified to our satisfaction, of all pertinent records of the meetings of the
directors and stockholders of the Company, the Registration Statement and such
other documents relating to the Company as we have deemed material for the
purposes of this opinion.

     In examination of the foregoing documents, we have assumed the genuineness
of all signatures and the authenticity of all documents submitted to us as
originals, the conformity to original documents of all documents submitted to us
as certified, photostatic or facsimile copies, the authenticity of the originals
of such latter documents and the legal competence of all signatories to such

     We assume that the appropriate action will be taken, prior to the offer and
sale of the shares in accordance with the Plan, to register and qualify the
shares for sale under all applicable state securities or "blue sky" laws.
Peritus Software Services, Inc.
July 23, 1998 
Page 2

     We express no opinion herein as to the laws of any state or jurisdiction
other than the state laws of the Commonwealth of Massachusetts and the federal
laws of the United States of America.

     Based upon and subject to the foregoing, we are of the opinion that the
Company has duly authorized for issuance the Shares covered by the Registration
Statement to be issued under the Plan, as described in the Registration
Statement, and such Shares, when issued in accordance with the terms of the
Plan, will be legally issued, fully paid and nonassessable.

     It is understood that this opinion is to be used only in connection with
the offer and sale of the Shares while the Registration Statement is in effect.

     Please note that we are opining only as to the matters expressly set forth
herein, and no opinion should be inferred as to any other matters.

     We hereby consent to the filing of this opinion with the Commission as an
exhibit to the Registration Statement in accordance with the requirements of
Item 601(b)(5) of Regulation S-K under the Securities Act of 1933, as amended
(the "Securities Act").  In giving such consent, we do not hereby admit that we
are in the category of persons whose consent is required under Section 7 of the
Securities Act or the rules and regulations of the Commission.

                                    Very truly yours,

                                    /s/ Hale and Dorr LLP

                                    HALE AND DORR LLP

                                                                      EXHIBIT 10

                        PERITUS SOFTWARE SERVICES, INC.

                           1997 STOCK INCENTIVE PLAN

1.   Purpose

     The purpose of this 1997 Stock Incentive Plan (the "Plan") of Peritus
Software Services, Inc. , a Massachusetts corporation (the "Company"), is to
advance the interests of the Company's shareholders by enhancing the Company's
ability to attract, retain and motivate persons who make (or are expected to
make) important contributions to the Company by providing such persons with
equity ownership opportunities and performance-based incentives and thereby
better aligning the interests of such persons with those of the Company's
shareholders.  Except where the context otherwise requires, the term "Company"
shall include any present or future subsidiary corporations of Peritus Software
Services, Inc.  as defined in Section 424(f) of the Internal Revenue Code of
1986, as amended, and any regulations promulgated thereunder (the "Code").

2.   Eligibility

     All of the Company's employees, officers, directors, consultants and
advisors are eligible to be granted options, restricted stock, or other stock-
based awards (each, an "Award") under the Plan.  Any person who has been granted
an Award under the Plan shall be deemed a "Participant".

3.   Administration, Delegation

     a.   Administration by Board of Directors.  The Plan will be administered
by the Board of Directors of the Company (the "Board").  The Board shall have
authority to grant Awards and to adopt, amend and repeal such administrative
rules, guidelines and practices relating to the Plan as it shall deem advisable.
The Board may correct any defect, supply any omission or reconcile any
inconsistency in the Plan or any Award in the manner and to the extent it shall
deem expedient to carry the Plan into effect and it shall be the sole and final
judge of such expediency.  No member of the Board shall be liable for any action
or determination relating to the Plan.  All decisions by the Board shall be made
in the Board's sole discretion and shall be final and binding on all persons
having or claiming any interest in the Plan or in any Award. No director or
person acting pursuant to the authority delegated by the Board shall be liable
for any action or determination under the Plan made in good faith.

     b.   Delegation to Officers.  To the extent permitted by applicable law,
the Board may delegate to one or more officers of the Company the power to make
Awards and exercise such other powers under the Plan as the Board may determine,
provided that the Board shall fix the maximum number of shares subject to Awards
and the maximum number of shares for any one Participant to be made by such
executive officers.

     c.   Appointment of Committees.  To the extent permitted by applicable law,
the Board may delegate any or all of its powers under the Plan to one or more
committees or subcommittees of the Board (a "Committee").  If and when the Class
A common stock, no par value per share, of the Company (the "Common Stock") is
registered under the Securities Exchange Act of 1934 (the "Exchange Act"), the
Board shall appoint one such Committee of not less than two members, each member
of which shall be an "outside director" within the meaning of Section 162(m) of
the Code and a "non-employee director" as defined in Rule 16b-3 promulgated
under the Exchange Act."  All references in the Plan to the "Board" shall mean a
Committee or the Board or the officer referred to in Section 3(b) to the extent
that the Board's powers or authority under the Plan have been delegated to such
Committee or executive officer.

4.   Stock Available for Awards

     a.   Number of Shares.  Subject to adjustment under Section 4(c), Awards
may be made under the Plan for up to 1,950,000 shares of Common Stock.  If any
Award expires or is terminated, surrendered or canceled without having been
fully exercised or is forfeited in whole or in part or results in any Common
Stock not being issued, the unused Common Stock covered by such Award shall
again be available for the grant of Awards under the Plan, subject, however, in
the case of Incentive Stock Options (as hereinafter defined), to any limitation
required under the Code.  Shares issued under the Plan may consist in whole or
in part of authorized but unissued shares or treasury shares.

     b.   Per-Participant Limit.  Subject to adjustment under Section 4(c), for
Awards granted after the Common Stock is registered under the Exchange Act, the
maximum number of shares with respect to which an Award may be granted to any
participant under the Plan shall be 1,000,000 per calendar year.  The per-
Participant limit described in this Section 4(b) shall be construed and applied
consistently with Section 162(m) of the Code.

     c.   Adjustment to Common Stock.  In the event of any stock split, stock
dividend, recapitalization, reorganization, merger, consolidation, combination,
exchange of shares, liquidation, spin-off or other similar change in
capitalization or event, or any distribution to holders of Common Stock other
than a normal cash dividend, (i) the number and class of securities available
under this Plan, (ii) the number and class of security and exercise price per
share subject to each outstanding Option, (iii) the repurchase price per
security subject to each outstanding Restricted Stock Award, and (iv) the terms
of each other outstanding stock-based Award shall be appropriately adjusted by
the Company (or substituted Awards may be made, if 
applicable) to the extent the Board shall determine, in good faith, that such an
adjustment (or substitution) is necessary and appropriate. If this Section 4(c)
applies and Section 8(e)(1) also applies to any event, Section 8(e)(1) shall be
applicable to such event, and this Section 4(c) shall not be applicable.

5.   Stock Options

     a.   General.  The Board may grant options to purchase Common Stock (each,
an "Option") and determine the number of shares of Common Stock to be covered by
each Option, the exercise price of each Option and the conditions and
limitations applicable to the exercise of each Option, including conditions
relating to applicable federal or state securities laws, as it considers
necessary or advisable.  An Option which is not intended to be an Incentive
Stock Option (as hereinafter defined) shall be designated a "Nonstatutory Stock

     b.   Incentive Stock Options.  An Option that the Board intends to be an
"incentive stock option" as defined in Section 422 of the Code (an "Incentive
Stock Option") shall only be granted to employees of the Company and shall be
subject to and shall be construed consistently with the requirements of Section
422 of the Code. The Company shall have no liability to a Participant, or any
other party, if an Option (or any part thereof) which is intended to be an
Incentive Stock Option is not an Incentive Stock Option.

     c.   Exercise Price.  The Board shall establish the exercise price at the
time each Option is granted and specify it in the applicable option agreement.

     d.   Duration of Options.  Each Option shall be exercisable at such times
and subject to such terms and conditions as the Board may specify in the
applicable option agreement.

     e.   Exercise of Option.  Options may be exercised only by delivery to the
Company of a written notice of exercise signed by the proper person together
with payment in full as specified in Section 5(f) for the number of shares for
which the Option is exercised.

     f.   Payment Upon Exercise.  Common Stock purchased upon the exercise of an
Option granted under the Plan shall be paid for as follows:

          i.   in cash or by check, payable to the order of the Company;

          ii.  except as the Board may otherwise provide in an Option, delivery
of an irrevocable and unconditional undertaking by a credit worthy broker to
deliver promptly to the Company sufficient funds to pay the exercise price, or
delivery by the Participant to the Company of a copy of irrevocable and
unconditional instructions to a credit worthy broker to deliver promptly to the
Company cash or a check sufficient to pay the exercise price;
          iii    (i) by delivery of shares of Common Stock owned by the
Participant valued at their fair market value as determined by the Board in good
faith ("Fair Market Value"), which Common Stock was owned by the Participant at
least six months prior to such delivery, (ii) by delivery of a promissory note
of the Participant to the Company on terms determined by the Board, or (iii) by
payment of such other lawful consideration as the Board may determine; or

          iv.  any combination of the above permitted forms of payment.

6.   Restricted Stock

     a.   Grants.  The Board may grant Awards entitling recipients to acquire
shares of Common Stock, subject to the right of the Company to repurchase all or
part of such shares at their issue price or other stated or formula price (or to
require forfeiture of such shares if issued at no cost) from the recipient in
the event that conditions specified by the Board in the applicable Award are not
satisfied prior to the end of the applicable restriction period or periods
established by the Board for such Award (each, "Restricted Stock Award").

     b.   Terms and Conditions.  The Board shall determine the terms and
conditions of any such Restricted Stock Award, including the conditions for
repurchase (or forfeiture) and the issue price, if any.  Any stock certificates
issued in respect of a Restricted Stock Award shall be registered in the name of
the Participant and, unless otherwise determined by the Board, deposited by the
Participant, together with a stock power endorsed in blank, with the Company (or
its designee).  At the expiration of the applicable restriction periods, the
Company (or such designee) shall deliver the certificates no longer subject to
such restrictions to the Participant or if the Participant has died, to the
beneficiary designated, in a manner determined by the Board, by a Participant to
receive amounts due or exercise rights of the Participant in the event of the
Participant's death (the "Designated Beneficiary").  In the absence of an
effective designation by a Participant, Designated Beneficiary shall mean the
Participant's estate.

7.   Other Stock-Based Awards

     The Board shall have the right to grant other Awards based upon the Common
Stock having such terms and conditions as the Board may determine, including the
grant of shares based upon certain conditions, the grant of securities
convertible into Common Stock and the grant of stock appreciation rights.

8.   General Provisions Applicable to Awards

     a.   Transferability of Awards.  Except as the Board may otherwise
determine or provide in an Award, Awards shall not be sold, assigned,
transferred, pledged or otherwise encumbered by the person to whom they are
granted, either voluntarily or by operation of law, except by will or the laws
of descent and distribution, and, during 
the life of the Participant, shall be exercisable only by the Participant.
References to a Participant, to the extent relevant in the context, shall
include references to authorized transferees.

     b.   Documentation.  Each Award under the Plan shall be evidenced by a
written instrument in such form as the Board shall determine.  Each Award may
contain terms and conditions in addition to, and not inconsistent with, those
set forth in the Plan.

     c.   Board Discretion.  Except as otherwise provided by the Plan, each type
of Award may be made alone in addition or in relation to any other type of
Award.  The terms of each type of Award need not be identical, and the Board
need not treat Participants uniformly.

     d.   Termination of Status.  The Board shall determine the effect on an
Award of the disability, death, retirement, authorized leave of absence or other
change in the employment or other status of a Participant and the extent to
which, and the period during which, the Participant, the Participant's legal
representative, conservator, guardian or Designated Beneficiary may exercise
rights under the Award.

     e.   Acquisition Events

          i.   Consequences of Acquisition Events.   Except to the extent
otherwise provided in the instrument evidencing the Award or in any other
agreement between the Participant and the Company, upon the occurrence of an
Acquisition Event or with respect to Options or any other similar Awards only,
upon the execution by the Company of any agreement with respect to an
Acquisition Event, (i) the Board shall cause all Options then outstanding to
become immediately exercisable in full as of a specified date (the "Acceleration
Date") prior to the Acquisition Event and shall provide written notice to the
Participants informing them that all such options have become exercisable in
full and will terminate immediately prior to the consummation of such
Acquisition Event, except to the extent exercised by the Participants between
the Acceleration Date and the consummation of such Acquisition Event; (ii) all
Restricted Stock Awards then outstanding shall become immediately free of all
restrictions; (iii) all other stock-based Awards all become immediately
exercisable, realizable or vested in full, or shall be immediately free of all
restrictions or conditions, as the case may be.

     An "Acquisition Event" shall mean:  (a) any merger or consolidation which
results in the voting securities of the Company outstanding immediately prior
thereto continuing to represent (either by remaining outstanding or by being
converted into voting securities of the surviving or acquiring entity) less than
60% of the combined voting power of the voting securities of the Company or such
surviving or acquiring entity outstanding immediately after such merger or
consolidation; (b) any sale of all or substantially all of the assets of the
Company; (c) the complete liquidation of the Company; or (d) the acquisition of
"beneficial ownership" (as defined in Rule 13d-3 
under the Exchange Act) of securities of the Company representing 50% or more of
the combined voting power of the Company's then outstanding securities (other
than through a merger or consolidation or an acquisition of securities directly
from the Company) by any "person", as such term is used in Sections 13(d) and
14(d) of the Exchange Act other than the Company, any trustee or other fiduciary
holding securities under an employee benefit plan of the Company or any
corporation owned directly or indirectly by the shareholders of the Company in
substantially the same proportion as their ownership of stock of the Company.

          ii.  Assumption of Options Upon Certain Events.  The Board may grant
Awards under the Plan in substitution for stock and stock-based awards held by
employees of another corporation who become employees of the Company as a result
of a merger or consolidation of the employing corporation with the Company or
the acquisition by the Company of property or stock of the employing
corporation.  The substitute Awards shall be granted on such terms and
conditions as the Board considers appropriate in the circumstances.

     (f) Withholding.  Each Participant shall pay to the Company, or make
provision satisfactory to the Board for payment of, any taxes required by law to
be withheld in connection with Awards to such Participant no later than the date
of the event creating the tax liability.  The Board may allow Participants to
satisfy such tax obligations in whole or in part in shares of Common Stock,
including shares retained from the Award creating the tax obligation, valued at
their Fair Market Value.  The Company may, to the extent permitted by law,
deduct any such tax obligations from any payment of any kind otherwise due to a

     (g) Amendment of Award.  The Board may amend, modify or terminate any
outstanding Award, including but not limited to, substituting therefor another
Award of the same or a different type, changing the date of exercise or
realization, and converting an Incentive Stock Option to a Nonstatutory Stock
Option, provided that the Participant's consent to such action shall be required
unless the Board determines that the action, taking into account any related
action, would not materially and adversely affect the Participant.

     (h) Conditions on Delivery of Stock.  The Company will not be obligated to
deliver any shares of Common Stock pursuant to the Plan or to remove
restrictions from shares previously delivered under the Plan until (i) all
conditions of the Award have been met or removed to the satisfaction of the
Company, (ii) in the opinion of the Company's counsel, all other legal matters
in connection with the issuance and delivery of such shares have been satisfied,
including any applicable securities laws and any applicable stock exchange or
stock market rules and regulations, and (iii) the Participant has executed and
delivered to the Company such representations or agreements as the Company may
consider appropriate to satisfy the requirements of any applicable laws, rules
or regulations.
     (i) Acceleration.  The Board may at any time provide that any Options shall
become immediately exercisable in full or in part, that any Restricted Stock
Awards shall be free of all restrictions or that any other stock-based Awards
may become exercisable in full or in part or free of some or all restrictions or
conditions, or otherwise realizable in full or in part, as the case may be.

9.   Miscellaneous

     a.   No Right To Employment or Other Status.  No person shall have any
claim or right to be granted an Award, and the grant of an Award shall not be
construed as giving a Participant the right to continued employment or any other
relationship with the Company.  The Company expressly reserves the right at any
time to dismiss or otherwise terminate its relationship with a Participant free
from any liability or claim under the Plan, except as expressly provided in the
applicable Award.

     b.   No Rights As Stockholder.  Subject to the provisions of the applicable
Award, no Participant or Designated Beneficiary shall have any rights as a
stockholder with respect to any shares of Common Stock to be distributed with
respect to an Award until becoming the record holder of such shares.

     c.   Effective Date and Term of Plan.  The Plan shall become effective on
the date on which it is adopted by the Board.  No Awards shall be granted under
the Plan after the completion of ten years from the earlier of (i) the date on
which the Plan was adopted by the Board or (ii) the date the Plan was approved
by the Company's shareholders, but Awards previously granted may extend beyond
that date.

     d.   Amendment of Plan.  The Board may amend, suspend or terminate the Plan
or any portion thereof at any time, provided that no amendment shall be made
without stockholder approval if such approval is necessary to comply with any
applicable tax or regulatory requirements.  Amendments requiring stockholder
approval shall become effective when adopted by the Board, but no Award granted
to a Participant designated as subject to Section 162(m) by the Board shall
become exercisable, realizable or vested (to the extent that such amendment to
the Plan was required to grant such Award to a particular Participant) unless
and until such amendment shall have been approved by the Company's shareholders.

     e.   Governing Law.  The provisions of the Plan and all Awards made
hereunder shall be governed by and interpreted in accordance with the laws of
the Commonwealth of Massachusetts, without regard to any applicable conflicts of

                              Adopted by the Board of Directors on
                              May 5, 1997

                              Approved by the Stockholders on
                              May 28, 1997
                            AMENDMENT NO. 1 TO THE

                        PERITUS SOFTWARE SERVICES, INC.

                           1997 STOCK INCENTIVE PLAN

     Subsection 4(a) of the Peritus Software Services, Inc. 1997 Stock Incentive
Plan (the "Plan"), is hereby amended, subject to stockholder approval, to
increase from 1,950,000 to 3,950,000 the number of shares of Common Stock, $.01
par value per share, authorized for issuance under the Plan (subject to
adjustment under Subsection 4(c) of the Plan).

                                    Adopted by the Board of Directors on
                                    February 11, 1998

                                    Approved by the Stockholders on
                                    June 10, 1998

                                                                    EXHIBIT 23.2


We hereby consent to the incorporation by reference in this Registration
Statement on Form S-8 of our report dated January 27, 1998, which appears on
page 39 of Peritus Software Services, Inc. Annual Report on Form 10-K for the
year ended December 31, 1997.

/s/ Pricewaterhouse Coopers LLP
Pricewaterhouse Coopers LLP

Boston, Massachusetts
July 23, 1998

                                                                    Exhibit 23.3


We consent to the incorporation by reference in this Registration Statement on
Form S-8 pertaining to the 1997 Stock Incentive Plan of Peritus Software
Services, Inc. of our report dated October 29, 1997, with respect to the
financial statements of Millennium Dynamics, Inc. as of December 31, 1995 and
1996 and September 30, 1997 and for each of the two years ended December 31,
1996 and for the nine months ended September 30, 1997, included in the Peritus
Software Services, Inc. Current Report on Form 8-K/A, filed with the Securities
and Exchange Commission on February 17, 1998.

                                    /s/ Ernst & Young LLP
                                    Ernst & Young LLP

Cincinnati, Ohio
July 22, 1998

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