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Peregrine Systems, Inc.
12670 High Bluff Drive
San Diego, California 92130
Telephone Number: (858) 481-5000
754,231 Shares
[LOGO]
COMMON STOCK
These shares may be offered and sold from time to time by a certain
stockholder of the Company identified in this prospectus. See "Selling
Stockholder." The selling stockholder acquired 541,675 of the shares on July
16, 1999 and 212,556 of the shares on August 11, 1999 from RL Investment
Limited in a private sale. RL Investment Limited had acquired all of the
shares on April 2, 1999 in connection with Peregrine Systems, Inc.'s ("PSI")
purchase of the entire issued share capital of F.Print UK Limited.
The selling stockholder will receive all of the net proceeds from
the sale of the shares. This stockholder will pay all underwriting discounts
and selling commissions, if any, applicable to the sale of the shares. The
Company will not receive any proceeds from the sale of the shares.
YOU SHOULD CONSIDER CAREFULLY THE RISK FACTORS BEGINNING ON PAGE 4
OF THIS PROSPECTUS BEFORE PURCHASING ANY OF THE COMMON STOCK OFFERED HEREBY.
PSI's common stock is quoted on the Nasdaq National Market under the
symbol "PRGN." On September 8, 1999, the last reported sale price of the
common stock was $37.00 per share.
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THE SECURITIES AND EXCHANGE COMMISSION AND STATE SECURITIES REGULATORS
HAVE NOT APPROVED OR DISAPPROVED THESE SECURITIES, OR DETERMINED IF
THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
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OCTOBER 15, 1999
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TABLE OF CONTENTS
Page
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Available Information...................................................... 2
Information Incorporated by Reference...................................... 2
Forward Looking Information................................................ 3
The Company................................................................ 4
Risk Factors............................................................... 4
Use of Proceeds............................................................ 11
Selling Stockholder........................................................ 11
Plan of Distribution....................................................... 12
Legal Matters.............................................................. 13
Experts.................................................................... 13
You should rely only on the information contained in this
prospectus. We have not authorized anyone to provide you with information
different from that contained in this prospectus. The selling stockholder is
offering to sell, and seeking offers to buy, shares of PSI common stock only
in jurisdictions where offers and sales are permitted. The information
contained in this prospectus is accurate only as of the date of this
prospectus, regardless of the time of delivery of this prospectus or of any
sale of the shares.
In this prospectus, the "Registrant," "Peregrine," "PSI," "we,"
"us," and "our" refer to Peregrine Systems, Inc. and its predecessor.
AVAILABLE INFORMATION
We file annual, quarterly and special reports, proxy statements, and
other information with the SEC. You may read and copy any document we file at
the SEC's public reference rooms in Washington, D.C., New York, New York and
Chicago, Illinois. Please call the SEC at 1-800-SEC-0330 for further
information on the public reference rooms. Our SEC filings are also available
to the public from our web site at http://www.peregrine.com or at the SEC's
web site at http://www.sec.gov.
INFORMATION INCORPORATED BY REFERENCE
The SEC allows us to "incorporate by reference" the information we
file with them, which means that we can disclose important information to you
by referring you to those documents. The information incorporated by
reference is considered to be part of this prospectus, and later information
that we file with the SEC will automatically update and supersede this
information. We incorporate by reference the documents listed below, and any
future filings made with the SEC under Sections 13(a), 13(c), 14 or 15(d) of
the Exchange Act of 1934 (the "Exchange Act"), until the selling stockholder
sells all the shares. This prospectus is part of a Registration Statement we
filed with the SEC (Registration No. 333-86929). The documents we incorporate
by reference are:
1. Our Annual Report on Form 10-K for the fiscal year ended March 31, 1999;
2. Our Quarterly Report on Form 10-Q for the quarter ended June 30, 1999;
3. Our Current Report on Form 8-K dated April 2, 1999 relating to the
acquisition of F.Print UK, Limited;
4. The description of our common stock contained in its Registration
Statement on Form 8-A as filed with the SEC on March 7, 1997.
You may request a copy of these filings, at no cost, by writing or
telephoning us at the following address: General Counsel, Peregrine Systems,
Inc., 12670 High Bluff Drive, San Diego, California 92130; telephone number
(858) 481-5000.
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FORWARD LOOKING INFORMATION
This prospectus, including the information incorporated by reference
herein, contains forward-looking statements within the meaning of Section 27A
of the Securities Act of 1933, as amended (the "Securities Act"), and Section
21E of the Exchange Act. Our actual results could differ materially from
those projected in the forward-looking statements as a result of the risk
factors set forth below. In particular, please review the sections captioned
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" in our annual report on Form 10-K for the fiscal year ended March
31, 1999, and our quarterly report on Form 10-Q for the quarter ended June
30, 1999, which reports are incorporated herein by reference and such section
of any subsequently filed Exchange Act reports. In connection with
forward-looking statements which appear in these disclosures, prospective
purchasers of the shares offered hereby should carefully consider the factors
set forth in this prospectus under "Risk Factors."
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THE COMPANY
We provide enterprise infrastructure management application
software. The objective of our infrastructure management strategy is to
provide organizations control over their infrastructure assets and related
information throughout the asset life cycle. Our applications enable
customers to maximize the availability of assets, minimize investments and
expenses, consolidate enterprise data, and interface to enterprise
applications. We develop, market, and support an integrated suite of
applications that automates the management of complex, enterprise-wide
information and infrastructure assets. Our main product suites, SERVICECENTER
and ASSETCENTER, are designed to address the enterprise service desk and
asset management requirements of large organizations. These product suites
can be deployed across all major hardware platforms and network operating
systems and protocols. Each utilizes advanced client/server and intelligent
agent technologies and a modular architecture. To optimize performance and
minimize costs, the SERVICECENTER and ASSETCENTER product suites are intended
to provide organizations a single view of all elements of their
infrastructure.
RISK FACTORS
YOU SHOULD CAREFULLY CONSIDER THE RISKS DESCRIBED BELOW BEFORE
MAKING AN INVESTMENT DECISION. THE RISKS AND UNCERTAINTIES DESCRIBED BELOW
ARE NOT THE ONLY ONES FACING OUR COMPANY. ADDITIONAL RISKS AND UNCERTAINTIES
NOT PRESENTLY KNOWN TO US OR THAT WE CURRENTLY DEEM IMMATERIAL MAY ALSO
IMPAIR OUR BUSINESS OPERATIONS.
IF ANY OF THE FOLLOWING RISKS ACTUALLY OCCUR, OUR BUSINESS,
FINANCIAL CONDITION, OR RESULTS OF OPERATIONS COULD BE MATERIALLY ADVERSELY
AFFECTED. IN SUCH CASE, THE TRADING PRICE OF OUR COMMON STOCK COULD DECLINE
AND YOU MAY LOSE ALL OR PART OF YOUR INVESTMENT.
THIS PROSPECTUS CONTAINS FORWARD-LOOKING STATEMENTS THAT INVOLVE
RISKS AND UNCERTAINTIES. OUR ACTUAL RESULTS COULD DIFFER MATERIALLY FROM
THOSE ANTICIPATED IN SUCH FORWARD-LOOKING STATEMENTS AS A RESULT OF A VARIETY
OF FACTORS, INCLUDING THOSE SET FORTH IN THE FOLLOWING RISK FACTORS AND
ELSEWHERE IN, OR INCORPORATED BY REFERENCE INTO, THIS PROSPECTUS. IN
EVALUATING AN INVESTMENT IN THE SHARES YOU SHOULD CONSIDER CAREFULLY THE
FOLLOWING RISK FACTORS IN ADDITION TO THE OTHER INFORMATION PRESENTED IN THIS
PROSPECTUS OR INCORPORATED BY REFERENCE INTO THIS PROSPECTUS.
FACTORS THAT MAY AFFECT FUTURE RESULTS
HISTORY OF OPERATING LOSSES. Through June 30, 1999, we have recorded
cumulative net losses of approximately $44.6 million, including approximately
$37.2 million related to the write-off of acquired in-process research and
development in connection with acquisitions. Our applications have changed
substantially since the mid-1990s. In addition, we have acquired or developed
a significant number of applications bringing our total number of
applications to in excess of 20 in the last three years. As a result,
prediction of our future operating results is difficult, if not impossible.
Although we achieved profitability during the years ended March 31, 1998 and
1999 (excluding the impact of the $33.0 million charge related to acquired
in-process research and development in connection with the acquisitions),
there can be no assurance that we will be able to remain profitable on a
quarterly or annual basis. In addition, we do not believe that the growth in
revenues we have experienced in recent years is indicative of future revenue
growth or future operating results.
POTENTIAL FLUCTUATIONS IN QUARTERLY RESULTS; LENGTHY SALES CYCLE;
SEASONALITY. Our quarterly operating results have varied significantly in the
past and may vary significantly in the future depending upon a number of
factors, many of which are beyond our control. These factors include, among
others, our ability to develop, introduce and market new and enhanced
versions of our software on a timely basis; market demand for the Company's
software; the size, timing and contractual terms of significant orders; the
timing and significance of new software product announcements or releases by
Peregrine or our competitors; changes in our pricing policies or out
competitors; changes in our business strategies; budgeting cycles of our
potential customers; changes in the mix of software products and services
sold; reliance on indirect sales forces like systems integrators and
channels; changes in the mix of revenues attributable to domestic and
international sales; the impact of acquisitions of competitors; seasonal
trends; the cancellations of licenses or maintenance agreements; product life
cycles; software defects and other product quality problems; and personnel
changes. We have often recognized a substantial portion of our revenues in
the last month or weeks of a quarter. As a result, license revenues in any
quarter are substantially dependent on orders booked and shipped in the last
month or weeks of that quarter. Due
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to the foregoing factors, quarterly revenues and operating results are not
predictable with any significant degree of accuracy. In particular, the
timing of revenue recognition can be affected by many factors, including the
timing of contract execution and delivery. The timing between initial
customer contact and fulfillment of criteria for revenue recognition can be
lengthy and unpredictable, and revenues in any given quarter can be adversely
affected as a result of such unpredictability. In the event of any downturn
in potential customers' businesses or the economy in general, planned
purchases of our products may be deferred or canceled, which could have a
material adverse effect on our business, operating results and financial
condition.
The license of our software generally requires us to engage in a
sales cycle that typically takes approximately six to nine months to
complete. The length of the sales cycle may vary depending on a number of
factors over which we may have little or no control, including the size of
the transaction and the level of competition which we encounter in our
selling activities. During the sales cycle, we typically provide a
significant level of education to prospective customers regarding the use and
benefits of our products. Any delay in the sales cycle of a large license or
a number of smaller licenses could have a material adverse effect on our
business, operating results and financial condition.
Our business has experienced and is expected to continue to
experience seasonality. Our revenues and operating results in our December
quarter typically benefit from purchase decisions made by the large
concentration of customers with calendar year-end budgeting requirements,
while revenues and operating results in the March quarter typically benefit
from the efforts of our sales force to meet fiscal year-end sales quotas. In
addition, we are currently attempting to expand our presence in international
markets, including Europe, the Pacific Rim, and Latin America. International
revenues comprise a significant percentage of our total revenues, and we may
experience additional variability in demand associated with seasonal buying
patterns in such foreign markets.
RISKS ASSOCIATED WITH PEREGRINE ACQUISITIONS. Since September 1997,
we have completed five acquisitions. In the future Peregrine may make
acquisitions of, or large investments in, other businesses that offer
products, services, and technologies that further our goal of providing
integrated infrastructure management software solutions to businesses. Past
acquisitions and any future acquisitions or investments that Peregrine may
complete present risks commonly encountered with these types of transactions.
The following are examples of such risks:
- difficulty in combining the technology, operations, or work force of
the acquired business
- disruption of on-going businesses
- difficulty in realizing the potential financial and strategic
position of Peregrine through the successful integration of the
acquired business
- difficulty in maintaining uniform standards, controls, procedures,
and policies - possible impairment of relationships with employees
and clients as a result of any integration of new businesses and
management personnel
- difficulty in adding significant numbers of new employees, including
training, evaluation, and coordination of effort of all employees
towards our corporate mission
- diversion of management attention
- difficulty in obtaining preferred acquisition accounting treatment
for these types of transactions; likelihood that future acquisitions
will require purchase accounting resulting in increased intangible
assets and goodwill, substantial amortization of such assets and
goodwill, and a negative impact on reported earnings
- potential dilutive effect on earnings
The risks described above, either individually or in the aggregate,
could materially adversely affect our business, operating results, and
financial condition. Future acquisitions, if any, could provide for
consideration to be paid in cash, shares of Peregrine common stock, or a
combination of cash and Peregrine common stock. However, we may not be able
to complete any such additional acquisitions in the future.
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DEPENDENCE ON MARKET ACCEPTANCE OF INFRASTRUCTURE MANAGEMENT
SOFTWARE SOLUTIONS. Until recently, our product strategy has focused on
integrating a broad array of IT management applications with other
traditional internal help desk applications to create an Enterprise Service
Desk capable of managing multiple aspects of an enterprise's IT structure. In
recent years, we have broadened our product line beyond traditional IT
infrastructure management to offer a more comprehensive product suite capable
of managing a business enterprise's IT infrastructure, physical plant and
facilities, communications infrastructure, distribution systems, and fleets.
In recent years, the market for enterprise software solutions has
been characterized by rapid technological change, frequent new product
announcements and introductions, and evolving industry standards. In response
to advances in technology, customer requirements have become increasingly
complex, resulting in industry consolidation of product lines offering
similar or related functionality. In particular, we believe that a market for
integrated enterprise-wide infrastructure management solutions, including
applications for IT management, asset management, building and facilities
management, communications resource management, distribution systems
management, and fleet management, is evolving from existing requirements for
specific IT management solutions. However, the existence of such a market is
unproven. If such a market does not fully develop, this would have a
materially adverse effect on our business, results of operations, or
financial condition. Regardless of the development of a market for integrated
Infrastructure Management solutions, factors adversely affecting the pricing
of, demand for, or market acceptance of one or more of our Infrastructure
Management applications, could have a material adverse effect on our
business, results of operations, and financial condition.
As a result of rapid technology change in our industry, our
position in existing markets or other markets that we may enter can be eroded
rapidly by product advances. The life cycles of our products are difficult to
estimate. Our growth and future financial performance depends in part upon
our ability to improve existing products, develop and introduce new products
that keep pace with technological advances, meet changing customer needs, and
respond to competitive products. Our product development efforts will
continue to require substantial investments. We may not have sufficient
resources to make the necessary investments.
DEPENDENCE ON KEY PERSONNEL. Our success will depend to a
significant extent on the continued service of our senior management and
certain other key employees, including selected sales, consulting, technical
and marketing personnel. Few of our employees, including senior management,
are bound by an employment or noncompetition agreement. In addition, we do
not generally maintain key man life insurance on any employee. The loss of
the services of one or more of our executive officers or key employees or the
decision of one or more of such officers or employees to join a competitor or
otherwise compete directly or indirectly with us could have a material
adverse effect on our business, operating results and financial condition.
ABILITY TO RECRUIT PERSONNEL.
EXECUTIVE OFFICERS AND KEY PERSONNEL. Our future success will likely
depend in large part on our ability to attract and retain additional highly
skilled technical, sales, management, and marketing personnel. Competition
for such personnel in the computer software industry is intense, and in the
past we have experienced difficulty in recruiting qualified personnel. New
employees generally require substantial training in the use of our products.
We may not succeed in attracting and retaining such personnel. If we do not,
our business, operating results, and financial condition could be materially
adversely affected.
FOREIGN EMPLOYEES. To achieve our business objectives we must be
able to recruit and employ skilled technical professionals from other
countries. Any future shortage of qualified technical personnel who are
either United States citizens or otherwise eligible to work in the United
States could increase our reliance on foreign professionals. Many technology
companies have already begun to experience shortages of such personnel. Any
failure to attract and retain qualified personnel as necessary, including as
a result of limitations imposed by federal immigration laws and the
availability of visas issued thereunder, could materially adversely affect
our business and operating results. Foreign computer professionals such as
those employed by us typically become eligible for employment in the United
States by obtaining a nonimmigrant visa. The number of nonimmigrant visas is
limited by federal immigration law. Currently, Congress is considering
approving an increase in the number of visas available. We cannot predict
whether such legislation will ultimately become law. We also cannot predict
what effect any future changes in the federal immigration laws will have on
our business, operating results, or financial condition.
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COMPETITION. The market for our products is highly competitive and
diverse. The technology for Infrastructure Management 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.
EXISTING COMPETITION. We have faced competition from a number of
sources, including:
- providers of internal help desk software applications such as Remedy
Corporation and Software Artistry, Inc. (now a division of Tivoli
Systems, Inc.)
- customer interaction software companies such as Clarify, Inc. and The
Vantive Corporation, whose products include internal help desk
applications
- information technology and systems management companies such as IBM,
Computer Associates International, Inc., Network Associates, Inc.,
and Hewlett-Packard Company
- providers of asset management and facilities management software
- the internal information technology departments of those companies
with infrastructure management needs
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.
Our ability to sell our products depends in part on their
compatibility with and support by providers of system management products,
including Tivoli, Computer Associates, and Hewlett-Packard. Both Tivoli and
Hewlett-Packard have recently acquired providers of help desk software
products. These providers of system management products may decide to close
their systems to competing vendors like Peregrine. They may also decide to
bundle their infrastructure management and/or help-desk software products
with other products for enterprise licenses for promotional purposes or as
part of a long-term pricing strategy. If that were to happen, our ability to
sell our products could be adversely affected. Increased competition may
result from acquisitions of help desk and other infrastructure management
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.
GENERAL COMPETITION. Some of our current and many of our potential
competitors have much greater financial, technical, marketing, and other
resources than Peregrine. As a result, they may be able to respond more
quickly 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 than we can. We may not be able to compete
successfully against current and future competitors. In addition, competitive
pressures faced by Peregrine may materially adversely affect our business,
operating results, and financial condition.
MANAGEMENT OF GROWTH. We have grown significantly in recent periods,
with total revenues increasing from $35.0 million in fiscal 1997 to $61.9
million in fiscal 1998, and to $138.1 million in fiscal 1999.
If we achieve our growth plans, including the integration of
technology acquired in acquisitions, such growth may burden our operating and
financial systems. This burden will require large amounts of senior
management attention and will require the use of other Peregrine resources.
Our ability to compete effectively and to manage future growth (and our
future operating results) will depend in part on our ability to implement and
expand operational, customer support, and financial control systems and to
expand, train, and manage our employees. In particular, in connection with
the acquisitions, we will be required to integrate additional personnel and
to augment or replace existing financial and management systems. Such
integration could disrupt our operations and could adversely affect our
financial results. We may not be able to augment or improve existing systems
and controls or implement new systems and controls in response to future
growth, if any. Any failure to do so could materially adversely affect our
business, operating results, and financial condition.
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CAPITAL COMMITMENT. In June 1999, we entered into a series of leases
providing approximately 540,000 square feet of office space, including an
option for approximately 118,000 square feet of space. Even excluding the
exercise of the option, the leases require minimum lease payments of
approximately $124 million over the terms of the leases, approximately twelve
years. This office space (including the option) is intended for a five
building campus setting in San Diego, California. Construction has commenced
on the first building and the final building is scheduled for delivery in
2003. The capital commitments, construction oversight, and moving of
personnel and facilities involved in a transaction of this type and magnitude
present numerous risks involving estimation of future events, including
growth of our business, and execution of the transaction. Examples of the
risks involved include: failure to properly estimate the growth of our
business in the future; inability to sublease excess office space that may
result; disruption of operations; and inability to match substantially-fixed
lease payments with fluctuating revenues.
EXPANSION OF DISTRIBUTION CHANNELS. We sell our products through our
direct sales force and a limited number of distributors and we provide
maintenance and support services through our technical and customer support
staff. We plan to continue to invest large amounts of resources to our direct
sales force, particularly in North America where we have recently opened
several new sales offices. In addition, we are developing additional sales
and marketing channels through system integrators and original equipment
manufacturers and other channel partners. We may not be able to attract
channel partners that will be able to market our products effectively or that
will be qualified to provide timely and cost-effective customer support and
service. If we establish distribution through such indirect channels, our
agreements with channel partners may not be exclusive. As a result, such
channel partners may also carry competing product lines. If we do not
establish and maintain such distribution relationships, this could materially
adversely affect our business, operating results, and financial condition.
INTERNATIONAL OPERATIONS. International sales represented
approximately 36% of our total revenue both in fiscal 1998 and fiscal 1999.
We currently have international sales offices in Utrecht, Brussels,
Stockholm, Copenhagen, Frankfurt, London, Paris, Singapore, Tokyo, Milan,
Rome and Sydney. Our continued growth and profitability will require
continued expansion of our international operations, particularly in Europe,
Latin America, and the Pacific Rim. Accordingly, we intend to expand our
current international operations and enter additional international markets.
Such expansion will require significant management attention and financial
resources. Our international operations are subject to a variety of risks
associated with conducting business internationally, including the following:
- fluctuations in currency exchange rates
- longer payment cycles
- difficulties in staffing and managing international operations
- problems in collecting accounts receivable
- seasonal reductions in business activity during the summer months in
Europe and certain other parts of the world
- increases in tariffs, duties, price controls, or other restrictions
on foreign currencies trade barriers imposed by foreign countries
These factors could materially adversely affect our business,
operating results, and financial condition. We have only limited experience
in developing local-language versions of our products and marketing and
distributing its products internationally. We may not be able to successfully
translate, market, sell and deliver our products internationally. If we are
unable to expand our international operations successfully and in a timely
manner, our business, operating results, and financial condition could be
adversely affected.
Recent instability in the Asian-Pacific economies and financial
markets could adversely affect our business, operating results, and financial
condition in future quarters as well.
CURRENCY FLUCTUATION. A large portion of our business is conducted
in foreign currencies. Fluctuations in the value of foreign currencies
relative to the U.S. dollar have caused and will continue to cause currency
transaction gains and losses. We cannot predict the effect of exchange rate
fluctuations upon future operating results. We may experience currency losses
in the future. We currently maintain a foreign exchange hedging program,
consisting principally of purchases of one month forward-rate currency
contracts. However, our hedging activities may not adequately protect us
against the risks associated with foreign currency fluctuations.
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ISSUES RELATED TO THE EUROPEAN MONETARY CONVERSION. On January 1, 1999,
certain member states of the European Economic Community (the "EEC") fixed their
respective currencies to a new currency, the euro. On that date, the euro became
a functional legal currency within these countries. During the three years
beginning on January 1, 1999, business in these EEC member states will be
conducted in both the existing national currency, such as the French franc or
deutsche mark, and the euro. Companies operating in or conducting business in
EEC member states will need to ensure that their financial and other software
systems are capable of processing transactions and properly handling the
existing currencies, as well as the euro. Our AssetCenter product was originally
developed for the European market and is capable of managing currency data
measured in euros. We are still assessing the impact that the euro will have on
our internal systems and our other products. We will take corrective actions
based on the results of such assessment. We have not yet determined the costs
related to this problem. Issues related to the introduction of the euro may
materially adversely affect our business, operating results, and financial
condition.
CONTROL BY EXISTING STOCKHOLDERS. Based on shares outstanding as of May
31, 1999, Peregrine's officers, directors, and entities directly related to such
individuals together beneficially own approximately 28.6% of the outstanding
shares of Peregrine common stock. In particular, John J. Moores, Chairman of
Peregrine's board of directors, owns approximately 22.3% of the outstanding
shares. As a result, Peregrine's officers and directors will be able to control
most matters requiring stockholder approval, including the election of directors
and the approval of mergers, consolidations, and sales of all or substantially
all of the assets of Peregrine. Such concentrated share ownership may prevent or
discourage potential bids to acquire Peregrine unless the terms of acquisition
are approved by such officers and directors.
PRODUCT DEVELOPMENT DELAYS. We have experienced product development
delays in the past and may experience delays in the future. Difficulties in
product development could delay or prevent the successful introduction or
marketing of new or improved products. Any such new or improved products may not
achieve market acceptance. Our current or future products may not conform to
industry requirements. If we are unable, for technological or other reasons, to
develop and introduce new and improved products in a timely manner, our
business, operating results, and financial condition could be adversely
affected.
Because our software products are complex, these products may contain
errors that could be detected at any point in a product's life cycle. In the
past we have discovered software errors in certain of our products and have
experienced delays in shipment of our products during the period required to
correct these errors. Despite testing by Peregrine and by current and potential
customers, errors in our products may be found in the future. Detection of such
errors may result in, among other things, loss of, or delay in, market
acceptance and sales of our products, diversion of development resources, injury
to our reputation, or increased service and warranty costs. If any of these
results were to occur, our business, operating results, and financial condition
could be materially adversely affected.
DEPENDENCE ON PROPRIETARY TECHNOLOGY. Our success will be heavily
dependent upon 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. Such laws provide only
limited protection. Despite precautions that we 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. Such means of protecting our
proprietary rights may not be adequate. Additionally, our competitors may
independently develop similar or superior technology. Policing unauthorized use
of software is difficult and, while we do not expect software piracy to be a
persistent problem, some foreign laws do not protect our proprietary rights to
the same extent as United States laws. Litigation may be necessary in the future
to enforce our intellectual property rights, to protect our trade secrets or to
determine the validity and scope of the proprietary rights of others. Litigation
could result in substantial costs and diversion of resources to Peregrine and
could materially adversely affect our business, operating results, and financial
condition.
RISKS OF INFRINGEMENT. While we are not aware that any of our software
product offerings infringes the proprietary rights of third parties, third
parties may claim infringement with respect to our current or future products.
We expect that software product developers will increasingly be subject to
infringement claims as the number of products and competitors in the software
industry segment grows and the functionality of products in different industry
segments overlaps. Any such claims, with or without merit, could be time
consuming, result in
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costly litigation, cause product shipment delays, or require us to enter into
royalty or licensing agreements. Royalty or license agreements may not be
available on acceptable terms or at all. As a result, infringement claims
could have a material adverse affect on our business, operating results, and
financial condition.
PRODUCT LIABILITY. Our license agreements with our customers typically
contain provisions designed to limit exposure to potential product liability
claims. Such limitation of liability provisions may, however, not be effective
under the laws of certain jurisdictions. Although we have not experienced any
product liability claims to date, the sale and support of our products entails
the risk of such claims. We may be subject to such claims in the future. A
product liability claim could materially adversely affect our business,
operating results, and financial condition.
UNDESIGNATED PREFERRED STOCK. Peregrine's board of directors has the
authority to issue up to 5,000,000 shares of preferred stock in one or more
series. The board of directors can fix the price, rights, preferences,
privileges, and restrictions of such preferred stock without any further vote or
action by Peregrine's stockholders. The issuance of preferred stock allows
Peregrine to have flexibility in connection with possible acquisitions and other
corporate purposes. However, the issuance of shares of preferred stock may delay
or prevent a change in control transaction without further action by the
Peregrine stockholders. As a result, the market price of the Peregrine common
stock and the voting and other rights of the holders of Peregrine common stock
may be adversely affected. The issuance of preferred stock may result in the
loss of voting control to others. Peregrine has no current plans to issue any
shares of preferred stock.
CHARTER PROVISIONS. Certain provisions of Peregrine's charter documents
eliminate the right of stockholders to act by written consent without a meeting
and specify certain procedures for nominating directors and submitting proposals
for consideration at stockholder meetings. Such provisions are intended to
increase the likelihood of continuity and stability in the composition of the
Peregrine board of directors and in the policies set by the board. These
provisions also discourage certain types of transactions which may involve an
actual or threatened change of control transaction. These provisions are
designed to reduce the vulnerability of Peregrine to an unsolicited acquisition
proposal. As a result, these provisions could discourage potential acquisition
proposals and could delay or prevent a change in control transaction. These
provisions are also intended to discourage certain tactics that may be used in
proxy fights. However, they could have the effect of discouraging others from
making tender offers for Peregrine's shares. As a result, these provisions may
prevent the market price of Peregrine common stock from reflecting the effects
of actual or rumored takeover attempts. These provisions may also prevent
changes in the management of Peregrine.
ANTITAKEOVER EFFECTS OF DELAWARE LAW. Peregrine is subject to the
antitakeover provisions of the Delaware General Corporation Law, which regulates
corporate acquisitions. The Delaware law prevents certain Delaware corporations,
including Peregrine, from engaging, under certain circumstances, in a "business
combination" with any "interested stockholder" for three years following the
date that such stockholder became an interested stockholder. For purposes of
Delaware law, a "business combination" includes, among other things, a merger or
consolidation involving Peregrine and the interested stockholder and the sale of
more than 10% of Peregrine's assets. In general, Delaware law defines an
"interested stockholder" as any entity or person beneficially owning 15% or more
of the outstanding voting stock of a company and any entity or person affiliated
with or controlling or controlled by such entity or person. Under Delaware law,
a Delaware corporation may "opt out" of the antitakeover provisions. Peregrine
has not "opted out" of the antitakeover provisions of Delaware Law.
VOLATILITY OF TRADING PRICES. We completed the initial public offering
of Peregrine common stock in April 1997. Prior to April 1997 no public market
existed for Peregrine common stock. In the past, the market price of our common
stock has varied greatly and the volume of our common stock traded has
fluctuated greatly as well. We expect such fluctuation to continue. The
fluctuation result due to a number of factors including:
- any shortfall in revenues or net income from revenues or net income
expected by securities analysts
- announcements of new products by Peregrine or our competitors
- quarterly fluctuations in our financial results or the results of
other software companies, including those of our direct competitors
- changes in analysts' estimates of our financial performance, the
financial performance of our competitors, or the financial
performance of software companies in general
- general conditions in the software industry - changes in prices for
our products or the products of our competitors
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- changes in our revenue growth rates or the growth rates of our
competitors
- sales of large blocks of the Peregrine common stock conditions in the
financial markets in general
In addition, the stock market may from time to time experience extreme
price and volume fluctuations. Many technology companies in particular have
experienced such fluctuations. Often such fluctuations have been unrelated to
the operating performance of the specific companies. The market prices of our
common stock may experience significant fluctuations in the future.
RAPID TECHNOLOGICAL CHANGE AND PRODUCT DEVELOPMENT RISKS. The markets
for our products are 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
our existing markets or other markets that it 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 upon 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 investments. There can be no assurance that we
will have sufficient resources to make the necessary investments. We have in the
past experienced development delays, and there can be no assurance that we will
not experience such 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 such 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
business, results of operations, and financial condition.
Software products as complex as those we offer may contain errors that
may be detected at any point in a product's life cycle. We have in the past
discovered software errors in certain of our products and have experienced
delays in shipment of products during the period required to correct these
errors. There can be no assurance that, despite testing by us and by current and
potential customers, errors will not be found, resulting in loss of, or delay
in, market acceptance and sales, diversion of development resources, injury to
our reputation, or increased service and warranty costs, any of which could have
a material adverse effect on our business, results of operations, and financial
condition.
USE OF PROCEEDS
The Company will not receive any proceeds from the sale of the shares
by the selling stockholder.
SELLING STOCKHOLDER
The following table sets forth certain information regarding the
beneficial ownership of the Company's common stock by the selling stockholder.
All information contained in the table below is based on beneficial ownership as
of June 30, 1999.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP BENEFICIAL OWNERSHIP
PRIOR TO OFFERING (2) NUMBER OF AFTER OFFERING
--------------------- SHARES --------------------
SELLING STOCKHOLDER (1) NUMBER PERCENT OFFERED NUMBER PERCENT
- ----------------------- --------- ---------- ------- --------- ---------
<S> <C> <C> <C> <C> <C>
PaineWebber International (UK) Ltd. 754,231 1.52% 754,231 0 0%
1 Finsbury Avenue
London, England
EC2M2PA
</TABLE>
- ------------------------
(1) The selling stockholder acquired 541,675 of the shares on July 16, 1999
and 212,556 of the shares on August 11, 1999 from RL Investment Limited
in a private sale. RL Investment Limited had acquired all of the shares
on April 2, 1999 in connection with Peregrine Systems, Inc.'s ("PSI")
purchase of the entire issued share capital of F.Print UK Limited (the
"F.Print Purchase"). All of the shares offered hereby are being sold by
the selling stockholder. Pursuant to the terms of the Registration
Rights Agreement, dated as of April 2, 1999, which was entered into in
connection with the F.Print Purchase (the "Registration Rights
Agreement"), the Company undertook to use its best efforts to effect
the registration of the shares issued to RL Investment Limited and
transferred to the selling stockholder.
(2) Applicable percentage ownership is based on 49,666,638 shares of common
stock outstanding as of June 30, 1999, which reflects the issuance of a
total of 754,231 shares in connection with the F.Print Purchase.
Beneficial ownership
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is determined in accordance with the rules of the SEC and generally
includes voting or investment power with respect to securities,
subject to community property laws, where applicable. Shares of
common stock subject to options that are presently exercisable or
exercisable within 60 days of June 30, 1999 are deemed to be
beneficially owned by the person holding such options for the
purpose of computing the percentage of ownership of such person but
are not treated as outstanding for the purpose of computing the
percentage of any other person. To the extent that any shares are
issued upon exercise of options, warrants or other rights to acquire
the Company's capital stock that are presently outstanding or
granted in the future or reserved for future issuance under the
Company's stock plans, there will be further dilution to new public
investors.
PLAN OF DISTRIBUTION
The shares covered by this prospectus may be offered and sold from
time to time by the selling stockholder. Such sales may be made on the NASDAQ
National Market, in the over-the-counter market or otherwise, at prices and
under terms then prevailing or at prices related to the then current market
price, or in negotiated transactions. The shares may be sold by means of one
or more of the following: (a) a block trade in which the broker-dealer so
engaged will attempt to sell the shares as agent, but may position and resell
a portion of the block as principal to facilitate the transaction; (b)
purchases by a broker-dealer as principal and resale by such broker-dealer
for its account pursuant to this prospectus; (c) an over-the-counter
distribution in accordance with the rules of the NASDAQ National Market; (d)
ordinary brokerage transactions in which the broker solicits purchasers; and
(e) privately negotiated transactions. In effecting sales, broker-dealers
engaged by the selling stockholder may arrange for other broker-dealers to
participate in the resales.
In connection with distributions of the shares or otherwise, the
selling stockholder may enter into hedging transactions with broker-dealers. In
connection with such transactions, broker-dealers may engage in short sales of
the shares registered hereunder in the course of hedging the positions they
assume with the selling stockholder. The selling stockholder may also sell the
shares short and redeliver the shares to close out such short positions. The
selling stockholder may also enter into option or other transactions with
broker-dealers which require the delivery to the broker-dealer of the shares
registered hereunder, which the broker-dealer may resell or otherwise transfer
pursuant to this prospectus. The selling stockholder may also loan or pledge the
shares registered hereunder to a broker-dealer and the broker-dealer may sell
the shares so loaned or upon a default the broker-dealer may effect sales of the
pledged shares pursuant to this prospectus.
Broker-dealers or agents may receive compensation in the form of
commissions, discounts or concessions from the selling stockholder in amounts to
be negotiated in connection with the sale. Such broker-dealers and any other
participating broker-dealers may be deemed to be "underwriters" within the
meaning of the Securities Act, in connection with such sales and any such
commission, discount or concession may be deemed to be underwriting discounts or
commissions under the Securities Act.
The Company has advised the selling stockholder that the
anti-manipulation rules under the Exchange Act may apply to sales of shares in
the market and to the activities of the selling stockholder and their
affiliates. In addition, the Company will make copies of this prospectus
available to the selling stockholder and has informed them of the need for
delivery of copies of this prospectus to purchasers at or prior to the time of
any sale of the shares offered hereby.
All costs, expenses and fees in connection with the registration of the
shares will be borne one-half by the selling stockholder and one-half by the
Company. Commissions and discounts, if any, attributable to the sales of the
shares will be borne by the selling stockholder. The selling stockholder may
agree to indemnify any broker-dealer or agent that participates in transactions
involving sales of the shares against certain liabilities, including liabilities
arising under the Securities Act. The Company will not receive any proceeds from
the sale of the shares.
The Company may suspend the use of this prospectus for a discrete
period of time, not exceeding thirty (30) days, if, in the reasonable
judgment of the Company, such sales would require public disclosure by the
Company of material nonpublic information that is not included in the
Registration Statement. The Company may not exercise this delay right more
than
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once. The Company is obligated in the event of such suspension to use its
best efforts to ensure that the use of the prospectus may be resumed as soon
as practicable.
The Company has agreed with the selling stockholder to keep the
registration statement of which this prospectus constitutes a part effective for
up to forty-five (45) calendar days following the effective date of this
Prospectus. Trading of any unsold shares after the expiration of forty-five (45)
days following the effective date of this prospectus will be subject to
compliance with all applicable securities laws, including Rule 144.
There can be no assurance that the selling stockholder will sell any or
all of the shares of common stock offered by it hereunder.
LEGAL MATTERS
The validity of the shares of common stock offered hereby has been
passed upon for the Company by Wilson Sonsini Goodrich & Rosati, Professional
Corporation, Palo Alto, California.
EXPERTS
The consolidated financial statements of the Company as of March 31,
1999 and 1998 and for the three years in the period ended March 31, 1999,
incorporated by reference in this prospectus and the Registration Statement
have been audited by Arthur Andersen LLP, independent public accountants, as
indicated in their report with respect thereto and are incorporated by
reference herein in reliance upon the authority of said firm as experts in
giving said report.
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