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Filed Pursuant to Rule 424(b)(3)
Registration No. 333-36951
PROSPECTUS
290,645 SHARES
PEOPLESOFT, INC.
COMMON STOCK
($.01 PAR VALUE)
This Prospectus relates to the public offering, which is not being
underwritten, of shares of the common stock ("Common Stock") of PeopleSoft,
Inc., a Delaware corporation (together with its consolidated subsidiaries,
"PeopleSoft" or the "Company") offered from time to time by the Selling
Shareholders named herein (the "Selling Shareholders") for their own benefit. It
is anticipated that the Selling Shareholders will generally offer shares of
Common Stock for sale at prevailing prices in the over-the-counter market on the
date of sale. The Company will receive no part of the proceeds of sales made
hereunder. The Common Stock to which this Prospectus relates was received by the
Selling Shareholders in connection with either (i) the acquisition by the
Company of substantially all of the assets of Salerno Manufacturing Systems,
Inc. or (ii) the acquisition by the Company of all of the outstanding shares of
Campus Solutions, Inc. (the "Acquisitions"). The Common Stock issued to the
Selling Shareholders in the Acquisitions was issued pursuant to an exemption
from the registration requirements of the Securities Act of 1933, as amended
(the "Securities Act"), provided by Section 4(2) thereof. The Company will
receive no part of the proceeds of sales made hereunder. All expenses of
registration incurred in connection with this offering, are being borne by the
Company, but all selling and other expenses incurred by a Selling Shareholder
will be borne by such Selling Shareholder. None of the shares offered pursuant
to this Prospectus have been registered prior to the filing of the Registration
Statement of which this Prospectus is a part.
The Common Stock of the Company is traded in the over-the-counter market
on the Nasdaq National Market. On September 30, 1997, the closing price of the
Company's Common Stock was $59 3/4 (Nasdaq Symbol: PSFT).
SEE "RISK FACTORS" COMMENCING ON PAGE 3 FOR A DISCUSSION OF CERTAIN
FACTORS THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE COMMON STOCK
OFFERED HEREBY.
The Selling Shareholders and any broker executing selling orders on
behalf of the Selling Shareholders may be deemed to be an "underwriter" within
the meaning of the Securities Act. Commissions received by any such broker may
be deemed to be underwriting commissions under the Securities Act.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
The date of this Prospectus is October 1, 1997.
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No person is authorized to give any information or to make any
representations, other than those contained in this Prospectus, in connection
with the offering described herein, and, if given or made, such information or
representations must not be relied upon as having been authorized by the Company
or the Selling Shareholders. This Prospectus does not constitute an offer to
sell, or a solicitation of an offer to buy, nor shall there be any sale of these
securities by any person in any jurisdiction in which it is unlawful for such
person to make such offer, solicitation or sale. Neither the delivery of this
Prospectus nor any sale made hereunder shall under any circumstances create an
implication that the information contained herein is correct as of any time
subsequent to the date hereof.
The Company hereby undertakes to provide without charge to each person
to whom a copy of this Prospectus is delivered, upon written or oral request of
any such person, a copy of any and all of the information that has been or may
be incorporated by reference in this Prospectus, other than exhibits to such
documents. Requests for such copies should be directed to PeopleSoft, Inc., 4440
Rosewood Drive, Pleasanton, CA 94588, Attn: Secretary, (telephone (510)
225-3000).
The Company is subject to the informational reporting requirements of
the Securities Exchange Act of 1934, as amended, and in accordance therewith
files reports, proxy statements and other information with the Securities and
Exchange Commission (the "Commission"). Such reports, proxy statements and other
information can be inspected and copied at the Public Reference Room of the
Commission, 450 Fifth Street, N.W., Washington, D.C. 20549 and at the
Commission's regional offices at 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661-2511; and copies of such material can be obtained from the Public
Reference Section of the Commission, Washington, D.C. 20549, at prescribed
rates. The commission also maintains a world wide web site that contains
reports, proxy and information statements and other information regarding
registrants that file electronically. The address of the site is
http://www.sec.gov.
This Prospectus contains information concerning the Company and sales of
its Common Stock by the Selling Shareholders, but does not contain all the
information set forth in the Registration Statement on Form S-3 which the
Company has filed with the Securities and Exchange Commission under the
Securities Act of 1933, as amended (the "Registration Statement"). The
Registration Statement, including various exhibits, may be inspected at the
Commission's office in Washington, D.C.
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RISK FACTORS
The Company operates in a dynamic and rapidly changing environment that
involves numerous risks and uncertainties. The following section lists some, but
not all, of these risks and uncertainties which may have a material adverse
effect on the Company's business, financial condition or results of operations.
FLUCTUATIONS IN QUARTERLY OPERATING RESULTS
The Company's revenues and operating results can vary substantially from
quarter to quarter. License revenues in any quarter are substantially dependent
on the execution of license agreements ("contracting activity") governing the
use of the Company's software products booked and shipped in that quarter.
Contracting activity is difficult to forecast for a variety of reasons
including: (i) a significant portion of the Company's license agreements are
completed within the last few weeks of each quarter; (ii) the duration of the
Company's sales cycle is relatively long and increasingly variable because the
Company has broadened its marketing emphasis to encompass software product
solutions for the customer's overall enterprise, thereby increasing the
financial value of individual transactions and the complexity of the customer
selection, negotiation and approval process; (iii) the size of license
transactions can vary significantly; (iv) system replacement projects and new
system evaluations may be postponed or canceled at any time due to changes in a
customer's project, company management, budgetary constraints or strategic
priorities; (v) customer evaluations and procurement processes vary
significantly from company to company, and a customer's internal approval and
expenditure authorization process can be arduous, even subsequent to actual
vendor selection; (vi) the number, timing and significance of software product
enhancements and new software product announcements by the Company and its
competitors; (vii) as the Year 2000 approaches, many potential customers are
evaluating their legacy systems and must decide whether to repair, outsource, or
replace existing applications which have Year 2000 operability issues. While the
Company believes that such evaluations are favorably impacting demand for its
applications, such demand is subject to change as the Year 2000 draws closer
since lead times required to complete systems implementations preclude system
replacement as a timely solution to the Year 2000 issue. Given the lack of
precedent for an issue of this magnitude, the Company's ability to accurately
forecast the impact of the issue on quarter to quarter revenue achievement is
limited; and (viii) changes in economic, political and market conditions can
adversely impact business opportunities without any notice. In addition, certain
license agreements executed during a quarter may not meet the Company's revenue
recognition criteria. Consequently, a situation could occur in which the Company
meets or exceeds its forecast of aggregate contracting activity, but is not able
to meet its forecast for license revenues.
In addition to factors impacting contracting activity, license revenues are
difficult to forecast because: (i) the timing of new software product
availability to fulfill delivery obligations under both new and existing license
agreements is difficult to predict because of the increasing complexity of the
Company's technology, software product solutions and underlying development and
testing processes; (ii) changes in the Company's sales incentive plans have had
and may continue to have an unpredictable impact on seasonal business patterns;
(iii) enterprise transactions often involve both software products that are then
currently deliverable, as well as software products that are still under
development; to the extent the Company enters into a license agreement for the
provision of both software product categories, the license agreement and
supporting schedules to the license agreement must contain very precise
contractual provisions and terminology consistent with generally accepted
accounting principles to permit revenue recognition under the license agreement;
(iv) enterprise transactions may grant rights to process data across complex,
widely distributed computing environments. Due to a variety of factors
including, but not limited to, differences in relational database product
performance across wide area networks, differences in speed of various
communication links and differences in hardware platform performance, there is a
limited ability to accurately predict product performance in some of these
environments. To the extent the Company enters into a license agreement with an
enterprise customer incorporating such non-standard acceptance criteria which
includes various on-line and batch performance measures within such
environments, revenue recognition could be postponed pending verification of the
performance capabilities within the operating environment; and (v) all of the
above factors, as well as other specific requirements under recently published
proposed generally accepted accounting standards for software revenue
recognition such as increased use of
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contract accounting when certain types of professional services and/or payment
terms are included in license transactions, create circumstances under which the
Company must have very precise contractual language in order to recognize
revenue upon initial product delivery. Although the Company has a standard
license agreement which meets the demanding criteria under generally accepted
accounting principles, the Company must often negotiate and revise certain terms
and conditions in large enterprise transactions. Negotiation of mutually
acceptable language can extend the sales cycle, and in certain situations, the
Company does not always obtain terms and conditions which permit recognition of
revenue at the time of delivery or even under the percentage of completion
method under contract accounting rules.
Services revenues have varied from quarter to quarter due to changes in
levels of consulting activity and seasonality in training revenues which tend to
lag license revenues by approximately one quarter. In order to continue the
growth of service revenues, particularly those related to professional services,
the Company must continue to recruit, hire and train growing numbers of
consultants.
POSSIBLE ADVERSE EFFECTS OF RECENT SECURITIES ISSUANCES
The Company has outstanding warrants to purchase 4,000,000 shares of its
common stock which have exercise prices below the current market price of the
common stock. The exercise of these warrants and resale of the underlying shares
or the sale of the shares issued in the Acquisition could adversely affect the
market price of the Company's common stock. Warrants to purchase 800,000 shares
of common stock at an exercise price of $27.50 per share expire in the fourth
quarter of 1997. At December 31, 1996 the Company had 6,869,747 exercisable
options outstanding to purchase common stock which have exercise prices below
the current market price of the common stock. The exercise and sale of a
significant number of such stock options for the underlying shares could
adversely affect the market price of the Company's common stock. In addition,
the 282,581 shares offered hereby will be salable beginning in late October
1997.
OPERATING LEVERAGE
Consistent with many companies in the software industry, the Company's
business model is characterized by a very high degree of operating leverage.
Employee and facility related expenditures comprise a significant portion of the
Company's operating costs and expenses, and are therefore relatively fixed at
least over the short term. In addition, the Company's expense levels are based,
in significant part, on the Company's expectations as to near term future
revenue levels. If revenue levels fall below expectations, net income is likely
to be disproportionately adversely affected. There can be no assurance that the
Company will be able to increase or even maintain its current level of
profitability on a quarterly or annual basis in the future. Due to the
foregoing, it is likely that in one or more future quarters the Company's
operating results will be below the expectations of public securities market
analysts. In such event, the price of the Company's common stock would likely be
materially adversely affected.
UNEVEN PATTERNS OF QUARTERLY OPERATING RESULTS
The Company does not believe that the percentage increases in revenues
achieved in prior periods should be anticipated in future periods. The operating
results of many software companies reflect seasonal trends, and the Company has
been, and expects to continue to be, affected by such trends in the future.
Seasonal patterns of revenue achievement can be caused by a variety of factors,
including sales incentives, customer demand based on available capital budgets
and release of new technologies.
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FUTURE OPERATING RESULTS UNCERTAIN
Segments of the software industry have experienced significant economic
downturns characterized by decreased product demand, price erosion,
technological shifts, work slowdowns and layoffs. The Company's operations may,
in the future, experience substantial fluctuations from period to period as a
consequence of such industry patterns, general economic conditions affecting the
timing of orders from customers, and other factors affecting capital spending.
There can be no assurance that such factors will not have a materially adverse
effect on the Company's business, operating results or financial condition. The
Company's continued success is dependent on its continued ability to introduce,
develop and market new and enhanced versions of its software products, although
there can be no assurance that such ability can be maintained.
INTERNATIONAL OPERATIONS
The Company has utilized, and will continue to utilize substantial resources
and funding to build its international service and support infrastructure.
Operating costs in many countries, including some of those in which the Company
operates, are often higher than in the United States. In order to increase
international sales in 1997 and subsequent periods, the Company must continue to
globalize its software product lines, expand existing, as well as establish
additional foreign operations, hire additional personnel, identify suitable
locations for sales, marketing, customer service and development, and recruit
international distributors and resellers in selected territories. In the event
international expansion and/or product globalization are not successful, it is
likely to have a negative impact on the Company's operating results.
The Company's sales through its foreign operations are generally denominated
in each respective subsidiary's functional currency. Unexpected changes in the
exchange rates for these foreign currencies could result in significant
fluctuations in the foreign currency transaction and translation gains and
losses in future periods. In the future, the Company expects to have an
increased amount of non-U.S. dollar denominated license agreements and intends
to implement hedging programs designed to mitigate the potential adverse impact
of exchange rate fluctuations.
COMPETITION
The market for business application software is intensely competitive. The
Company faces competition from a variety of software vendors including
enterprise application software vendors, manufacturing application software
vendors, enterprise resource optimization application software vendors,
financial management system, HRMS (human resource management systems)
application software vendors and software tools vendors. Although PeopleSoft
believes its success has been due in part to its early emphasis on the
client/server architecture, virtually all of the Company's competitors now offer
software products based on a client/server architecture. Consequently,
competitive differentiators now include more subtle architectural and
technological factors such as web enablement, enterprise product breadth and
individual product features, service reputation, product flexibility, ease of
implementation, international product version availability and support, and
price.
In the enterprise application software market, PeopleSoft faces significant
competition from SAP AG, Oracle Corporation and Baan Company N. V. and to a
lesser degree, Dun & Bradstreet Software (now operating as two separate
divisions of Geac Computer Systems, Inc.), Computer Associates International,
Inc. and other companies such as System Software Associates who previously
focused primarily on the AS/400 marketplace. In this market, the chief
competitive factors include the breadth and completeness of the enterprise
solution offered by each vendor, the extent of product integration across the
enterprise solution and the availability of localized software products and
technical support in key markets outside the United States. Primarily due to
their significant worldwide presence and longer operating and product
development history, both SAP and Oracle have certain competitive advantages
over PeopleSoft in each of these areas. In addition, both SAP and Oracle have
substantially greater financial, technical and
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marketing resources, and a larger installed base than PeopleSoft. Furthermore,
Oracle's RDBMS (relational database management system) is a supported platform
underlying a significant share of PeopleSoft's installed applications.
In the manufacturing software application markets, in which PeopleSoft
recently began competing, PeopleSoft faces competition from several of its
existing competitors including those listed immediately above and others such as
QAD, Ross Systems and J.D. Edwards and a large number of niche competitors
already in the manufacturing market.
In the emerging enterprise resource optimization software solutions market,
in which the Company now competes since its acquisition of Red Pepper Software
during the fourth quarter of 1996, PeopleSoft faces several current and
potential competitors including: (i) companies such as i2 Technologies,
Manugistics and Numetrix Software which have developed or are attempting to
develop advanced planning and scheduling software products which complement or
compete with MRP (material requirements planning) solutions; (ii) other
companies that provide specialized planning and scheduling software for niche
markets, including Chesapeake Systems, Waterloo Manufacturing Software, MAPICS,
Inc. (formerly Marcam Corporation) Marcam Solutions, Inc. and Cap Logistics;
(iii) other business application software vendors that may broaden their product
offerings by internally developing, or by acquiring (such as Baan's recent
acquisitions of Berclain Group, Inc. and Antalys, Inc.) or partnering with
independent developers of advanced planning and scheduling software; (iv)
internal development efforts by corporate information technology departments;
and (v) companies offering standardized or customized products on mainframe
and/or mid-range computer systems.
PeopleSoft also faces competition from providers of HRMS software products
including Cyborg, Lawson, Integral Systems, Inc., InPower and Ceridian, and from
providers of financial management systems software products including Hyperion,
Computron Software, Inc., Lawson Associates and other smaller companies. In
addition, ADP, Inc. and Shared Medical Systems, Inc. have the right to
sublicense selected PeopleSoft products in competition with PeopleSoft's
marketing efforts in selected markets.
In addition, as the year 2000 approaches, enterprises may consider
outsourcing options including data center outsourcing and service bureaus as
viable alternatives to purchasing the Company's products which may result in
increased competition from outsource services including Computer Sciences
Corporation (CSC), Electronic Data System Corporation (EDS), IBM, ADP, Ceridian,
and other smaller companies.
Intense competition could potentially lead to increased price competition in
the market, forcing the Company to reduce prices which may result in reduced
gross margins and loss of market share by the Company which could materially
adversely affect the Company's business, operating results and financial
condition. Therefore, there can be no assurance that the Company will continue
to compete successfully with its existing competitors or will be able to compete
successfully with new competitors.
RELIANCE ON PROPRIETARY SOFTWARE DEVELOPMENT TOOLS
The Company's software products include a suite of proprietary software
development tools known as "PeopleTools", which are fundamental to the effective
use of the Company's software products. While no industry standard exists for
software development tools, several companies are focused specifically on
providing software development tools and are attempting to establish their
software development tools as accepted industry standards. In the event that a
software product other than the Company's PeopleTools software product becomes
the clearly established and widely accepted industry standard, the Company may
need to abandon or modify PeopleTools in favor of such an established standard,
may be forced to redesign its software products to operate with such third
party's software development tools, or may be faced with the potential sales
obstacle of marketing a proprietary software product against other vendors'
software products incorporating a standardized software development toolset.
Accordingly, in any of these cases, the Company's results of operations could be
materially adversely affected.
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RELIANCE ON THIRD PARTIES FOR SALES, MARKETING AND SOFTWARE PRODUCT
IMPLEMENTATIONS
A key aspect of the sales and marketing strategy for the Company is to build
and maintain strong working relationships with businesses the Company believes
play an important role in the successful marketing of its software products. The
Company's customers and potential customers often rely on third party system
integrators to develop, deploy and manage client/server applications. These
include: (i) RDBMS software vendors; (ii) hardware vendors which offer both
hardware platforms and, in the case of IBM, proprietary RDBMS products on which
the Company's software products run; (iii) technology consulting firms and
systems integrators, some of which are active in the selection and
implementation of large information systems for the information-intensive
organizations that comprise the Company's principal customer base; and (iv)
benefits consulting firms that are active in the implementation of HRMS. The
Company believes that its marketing and sales efforts are enhanced by the
worldwide presence of these companies. However, there can be no assurance that
these companies, most of which have significantly greater financial and
marketing resources than PeopleSoft, will not start, or in some cases increase,
the marketing of business application software in competition with PeopleSoft,
or will not otherwise discontinue their relationships with or in support of
PeopleSoft. If the Company or its partners are unable to recruit and adequately
train a sufficient number of consulting personnel to support the implementation
of the Company's software products, demand for these software products could
subsequently be materially adversely affected. In addition, PeopleSoft's
software application architecture, including PeopleTools, may facilitate reduced
implementation efforts for customers compared to the competitive alternatives.
Consequently, PeopleSoft's software products may be a less desirable
recommendation alternative for integrators who provide both selection advice and
generate consulting fees from customers by providing implementation services.
Due to the foregoing factors, it is reasonably possible that in a future quarter
or quarters the Company's operating results could fall short of the published
expectations of certain public market financial analysts.
COMPLEXITY OF SOFTWARE PRODUCTS AND PRODUCT DEVELOPMENT
PeopleSoft's software products can be licensed for use with the following
RDBMS's and run on the following operating systems: IBM's DB2 ( MVS/ESA or
OS/390 using connectivity products from Centura or IBM and separately, AIX,
OS/390 version 5 and OS/400), Informix INFORMIX-OnLine Dynamic Server (AIX,
Dynix, Solaris, MP RAS, Digital Unix, Unisys Unix, DG/UX, DC/Osx, IRIX, SCO Open
Server, Reliant Unix, NT, and HP-UX), Microsoft SQL Server NT version 6.5,
Oracle (NT and over 10 versions of Unix), and Sybase's System 11 (Digital Unix,
HP-UX, AIX and Solaris). In addition, the Company has introduced client support
for Apple's Macintosh family of computers using Sun Microsystem's Java platform
running on the Macintosh client in PeopleTools. No assurance can be given
concerning the successful development of PeopleSoft software products on
additional platforms, the specific timing of the releases of any future software
products, the performance characteristics of PeopleSoft applications on
additional platforms or their acceptance in the marketplace. In addition, there
may be future or existing RDBMS platforms which achieve popularity within the
business application marketplace and which PeopleSoft may desire to offer its
applications thereon. Such future or existing RDBMS products may or may not be
architecturally compatible with PeopleSoft's software product design. No
assurance can be given concerning the successful porting to new platforms, the
specific timing of completion of any such ports or their acceptance in the
marketplace.
Beginning with Release 6, the Company integrated certain features of BEA's
Tuxedo product into its applications. The Company currently intends over its
next several releases to integrate additional Tuxedo features. Such enhancements
may be critical to the competitiveness of the Company's products in the future.
Integration of these and other products is complex and no assurance can be made
that these efforts will be successful or result in significant product
enhancements.
Software programs as complex as those offered by the Company are likely to
contain a number of undetected errors or "bugs" when they are first introduced
or as new releases are thereafter released. Despite testing
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by the Company and by third-parties, errors or system performance issues may
arise with the possible result of reduced acceptance of the Company's software
products in the marketplace. Due to the increasing number of possible
combinations of vendor hardware platforms, operating systems and updated
versions, PeopleSoft application software products and updated versions, and
RDBMS platforms and updated versions, the effort and expense of developing,
testing and maintaining these software product lines in an increasing number of
combinations will increase, and the ability to develop consistent product
performance characteristics across all of these combinations could place a
significant strain on the Company's development resources and product release
schedules.
RELIANCE ON CLIENT INTERFACES
At the present time, the Company supports client (workstation) platforms
predominantly utilizing Microsoft's Windows family of software products,
including Windows 3.1 (PeopleSoft releases prior to Release 6 only), Windows NT
and Windows 95. If Microsoft were to fundamentally change the architecture of
its software product such that users of PeopleSoft's software applications
experienced significant performance degradation or were rendered incompatible
with future versions of Microsoft's Windows Operating System, the Company's
results of operations could be materially adversely affected. If a new user
interface were to gain broad acceptance in the marketplace, there can be no
assurance that PeopleSoft's architecture would be compatible with such an
interface.
The use of a Web browser (running on either a PC or network computer) to
access client/server systems is rapidly emerging as an alternative client to the
traditional desktop access through Microsoft Windows based personal computers.
The Company has enabled access to its applications through this new emerging
client utilizing a Web Client built on Sun Microsystems' Java environment and
BEA Systems Inc.'s BEA Jolt middleware. Such client access via the Internet will
be subject to numerous risks inherent in utilizing the Internet including:
security, availability and reliability. No assurance can be given concerning the
Company's successful support for new client platforms, the specific timing of
their availability or their acceptance in the marketplace.
RELIANCE ON JOINT BUSINESS ARRANGEMENTS
PeopleSoft has, and may in the future, enter into various development or
joint business arrangements for the purpose of developing new products or
extensions to existing products. Under these development arrangements,
PeopleSoft is generally the exclusive remarketer of the developed software
products and pays a royalty to the funding entities based on license fees
received from end user licenses of these software products. Under joint business
arrangements, PeopleSoft may distribute or jointly sell with its business
partner an integrated product offering. While the intent of such arrangements is
to develop business applications which are integrated with PeopleSoft's software
products, there can be no assurance that such software products will in fact be
integrated or that an integrated enterprise solution will be accepted by the
market. In addition, should such arrangements require additional investments
from third parties or business partners to complete development or enhance the
software product, there can be no assurance that investments will be available
on terms acceptable to the business partner or the existing or other potential
third party funding source(s). Should PeopleSoft acquire title to the software
products or technology from the third party entity, such an acquisition might be
accounted for using the purchase method which is likely to result in either or
both of the following accounting treatments: (i) a charge to earnings for
in-process research and development which would be recorded in the Statement of
Income in the period such acquisition was completed; (ii) or the creation of
significant intangible assets by virtue of an allocation of a substantial
portion of the purchase price to the acquired technology or other intangible
assets. Such intangible assets would be amortized in future periods as a cost of
operations. Should either of these scenarios occur, the results of operations of
one or more future periods could be materially adversely impacted.
APPLICATION SECURITY ARCHITECTURE
The Company's application software products incorporate extensive security
features designed to protect certain sensitive data managed by these
applications from unauthorized retrieval or modification. The Company has
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developed a security architecture utilizing the capabilities of its own
applications, the client operating system software, some of the security
features contained in the RDBMS platforms on which the applications run, as well
as certain third party security products. To date, the Company is not aware of
any violations of its application security architecture within its installed
base. Although these security features are subject to constant review and
enhancement, no assurances can be given concerning the successful implementation
of these security features and their effectiveness within a particular
customer's operating environment. Should a breach of security or a suspected
breach of security occur, the accompanying publicity or any subsequent claims
against the Company could have an adverse impact on the demand for the Company's
software products and/or cause a decline in the market price of the Company's
stock and/or adversely impact the Company's financial results due to lost or
delayed closing of software licensing opportunities.
INTELLECTUAL PROPERTY AND PROPRIETARY RIGHTS
The Company regards certain features of its internal operations, software
and documentation as proprietary, and relies on a combination of contract,
patent, copyright, trademark, trade secret laws and other measures to protect
their proprietary information. The Company received its first patent in June
1995 and its second patent in August 1995. In July 1995, the Company received
title to a third patent as part of a teaming and development agreement. Also,
the Company has four additional patent applications pending. There can be no
assurance that any issued patents will result from such applications or that, if
issued, such patents will provide any meaningful competitive advantage as
existing copyright laws afford only limited protection. The Company believes
that, because of the rapid pace of technological change in the computer software
industry, trade secret and copyright protection are less significant than
factors such as the knowledge, ability and experience of the Company's
employees, frequent product enhancements and the timeliness and quality of
support services. There can be no assurance that these protections will be
adequate or that PeopleSoft's competitors will not independently develop
technologies that are substantially equivalent or superior to the Company's
technology. Many customers of PeopleSoft are beneficiaries of a source code
escrow arrangement to enable the customer to acquire a future limited right to
use the Company's source code solely for their internal provision of maintenance
services. This possible access to the Company's source code may increase the
likelihood of misappropriation or other misuse of the Company's intellectual
property. In addition, the laws of certain countries in which the Company's
software products are or may be licensed do not protect the Company's software
products and intellectual property rights to the same extent as the laws of the
United States.
The Company does not believe that its software products, third party
software products the Company offers under sublicense agreements, Company
trademarks or other Company proprietary rights infringe the property rights of
any third parties. However, there can be no assurance that third parties will
not assert infringement claims against the Company in the future with respect to
current or future software products or that any such assertion may not require
the Company to enter into royalty arrangements or result in costly litigation.
YEAR 2000 COMPLIANCE
The Company's internal business information systems are primarily comprised of
the same commercial application software products generally offered for license
by the Company to end user customers. These applications have been tested for
Year 2000 compliance and are certified by the Information Technology Association
of America (ITAA) as Year 2000 compliant, therefore the Company does not expect
any Year 2000 compliance issues to arise related to its primary internal
business information systems. However, the Company utilizes other third party
vendor network equipment, telecommunication products, and other third party
software products which may or may not be Year 2000 compliant. Although the
Company is currently taking steps to address the impact, if any, of the Year
2000 issue surrounding such third party products, failure of any critical
technology components to operate properly in the Year 2000 may have an adverse
impact on business operations or require the Company to incur unanticipated
expenses to remedy any problems.
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PRODUCT LIABILITY
The Company's license agreements with their customers contain provisions
designed to limit their exposure to potential product liability claims. It is
possible, however, that the limitation of liability provisions contained in such
license agreements may not be valid as a result of federal, state and local laws
or ordinances or unfavorable judicial decisions. Although the Company has not
experienced any product liability claims to date, the license and support of its
software for use in mission critical applications creates the risk of a claim
being pursued against the Company. Damage or injunctive relief resulting under
such a successful claim could cause a materially adverse impact on the Company's
business, operating results and financial condition. In addition, as PeopleSoft
begins to compete in the manufacturing software application market, the critical
nature of such software products may increase PeopleSoft's exposure to product
liability claims against the Company.
GROWTH IN OPERATIONS
The Company has experienced an extended period of significant revenue
growth, growth in the Company's customer base, expansion of its software product
lines and supported platforms both through internal development and mergers and
acquisitions, a significant increase in the number of its employees, and
expansion in the geographic scope of its operations. This growth has resulted in
new and increased responsibilities for management personnel, and has placed, and
is expected to continue to place a significant strain upon the Company's
management, operating, and financial controls and resources. To accommodate
recent growth, compete effectively, and manage potential future growth, the
Company must continue to implement and improve its operational and financial
systems, procedures and controls. In addition, the Company must continue to
expand, train, retain and manage its employee base. There can be no assurance
that the Company will be able to manage this expansion effectively, or that the
Company's personnel, procedures, systems and controls will be adequate to
support the Company's future operations.
KEY PERSONNEL
PeopleSoft believes that its continued success will depend in large part
upon its ability to attract, train and retain highly-skilled technical,
managerial and marketing personnel. The Company continues to hire a significant
number of additional sales, services and technical personnel. Competition for
the hiring of such personnel in the software industry is intense, and the
Company from time to time experiences difficulty in locating candidates with
appropriate qualifications or within various desired geographic locations.
Growth in contracting activity will be impacted by the Company's ability to
attract, train, retain and manage productive sales and sales support personnel.
The loss of services of one or more of the Company's key employees could
have a materially adverse effect on the Company's business, operating results
and financial condition. The Company has historically experienced a very low
attrition rate amongst all of its employees, especially those in critical
positions. The Company has several retention programs in place to retain such
key personnel including granting of stock with vesting periods averaging 5
years. A number of key employees have vested stock options which have a
relatively low price when compared to the Company's current stock price. These
potential gains provide these employees the economic freedom to explore personal
objectives both within and outside the Company which my result in the loss of
one or more key employees during the coming years.
It is widely held that the technology industry is at or beyond a condition
of full employment. There can be no assurance that the Company will be
successful in attracting, training and retaining the personnel it requires to
develop, market, sell and support new or existing software.
REORGANIZATION OF THE COMPANY'S SALES FORCE
Effective April 1, 1997, the Company undertook a reorganization of its North
American sales operations around industry based territories and major account
assignments from a geographic based business unit organization
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<PAGE> 11
structure. As part of this reorganization, a substantial number of accounts,
prospects and opportunities previously assigned to one sales representative were
reassigned to another sales representative. This reassignment has caused delays
in account assignments and the associated management of the sales cycle, which
may have resulted in lost sales opportunities or otherwise lengthened the sales
cycle. In addition, each of the industry territories will require validation
from one or more key customer reference accounts. Such accounts are a critical
factor for sales success since sales prospects frequently require validation
prior to entering into a license agreement. However, limited referencable
accounts exist in certain target industries at this time. There can be no
assurance that the Company will develop a sufficient number of referencable
customer accounts across all industry segments without significant adverse
impact on near term sales results or that this sales operations reorganization
will sustain or improve long term sales results.
In addition, the Company recently formed a separate division to provide
business software products and services that address the specific needs of
medium-sized organizations. While the Company fully expects this division to be
a successful component of the overall business, the middle market for software
applications is extremely competitive, more price sensitive and generally
includes a higher component of bundled implementation services when compared to
the Fortune 1000 enterprise application market the Company has traditionally
targeted. There can be no assurance that the Company will be successful in
penetrating this market or that operations in this marketplace will be
profitable or that license fee revenues will not be negatively impacted due to
revenue recognition rules under generally accepted accounting principles.
EXPANSION OF FACILITIES
Recently, commercial building vacancy rates have significantly dropped in
many of the major metropolitan markets where the Company has significant
operations. As a consequence, the Company expects to experience increasing
difficulty in obtaining additional space within which to expand its operations.
In addition, the increased demand for office space has caused commercial rental
rates to increase substantially. Failure to either obtain space, or obtain it on
reasonably attractive commercial terms, may inhibit the Company's ability to
grow, or otherwise adversely effect the Company's operations and financial
results.
VOLATILITY OF STOCK PRICE
As is frequently the case with stock of high technology companies, the
market price of the Company's stock has been and may continue to be quite
volatile. Factors such as quarterly fluctuations in results of operations,
announcements of technological innovations by the Company or its competitors or
the introduction of new products by the Company or its competitors, and
macroeconomic conditions in the computer hardware and software industries
generally, may have a significant impact on the market price of the stock of
PeopleSoft. If revenues or earnings in any quarter fail to meet the expectations
(published or otherwise) of the investment community, there could be an
immediate impact on the Company's stock price. In addition, as described in the
"Possible Adverse Effects of Recent Securities Issuances" section above, the
Company has issued shares, stock options and warrants which, if sold directly or
exercised and sold on the open market in large concentrations, could cause the
Company's stock price to decline in the short term. Additionally, recent tax
legislation lowered tax rates on capital gains. This could potentially result in
increased sales of all U.S. equity securities including the Company's Common
Stock. Such sales, if material, could negatively impact the stock price. The
Company makes no assurance as to when and if such a short term stock price
decline may recover. Furthermore, the stock market has from time to time
experienced extreme price and volume fluctuations which have particularly
affected the market price for many high technology companies and which, on
occasion, have been unrelated to the operating performance of those companies.
These broad market fluctuations may materially adversely affect the market price
of the stock of PeopleSoft.
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INVESTMENTS AND LIQUIDITY
The Company's short-term and long-term investments consist primarily of high
quality municipal bonds, U.S. government securities, corporate debt securities
and tax-advantaged money market instruments. Despite favorable credit ratings on
these investments there can be no assurance the issuing agencies will not
default on their obligations which may result in losses of principal and accrued
interest by PeopleSoft. While operating activities may provide cash in certain
periods, to the extent the Company experiences growth in the future, operating
and investing activities may use cash and, consequently, such growth may require
the Company to obtain additional sources of financing. In addition, material
acquisitions of complementary businesses, products, technologies and capital
expenditures may require additional sources of financing. There can be no
assurance that the Company would be able to obtain additional sources of
financing or additional financing at terms favorable to the Company.
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<PAGE> 13
PEOPLESOFT, INC.
THE COMPANY
PeopleSoft, Inc. was incorporated in Delaware in August 1987. The Company's
principal executive offices are located at 4440 Rosewood Drive, Pleasanton, CA
94588 and its telephone number at that address is (510) 225-3000. The Common
Stock of the Company is traded on the Nasdaq National Marked under the symbol
PSFT.
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<PAGE> 14
SELLING SHAREHOLDERS
The following table shows (i) the name of the Selling Shareholders, (ii) the
number of shares of Common Stock beneficially owned prior to the offering, (iii)
the number of shares of Common Stock to be sold by them pursuant to this
Prospectus and (iv) the number of shares beneficially owned after the offering:
<TABLE>
<CAPTION>
Shares Shares
Beneficially Shares to be Beneficially Owned
Owned Sold in the After the
Name Prior to Offering Offering Offering(1)
---- ----------------- -------- -----------
<S> <C> <C> <C>
Ronald Bird 35,000 35,000 --
Geoffrey Collier 36,200 35,000 1,200
Elizabeth Dietz 35,600 35,000 600
Diran Edinjikiian 38,200 35,000 3,200
David Ehrlich 35,200 35,000 200
James M. Peters, III 35,000 35,000 --
Aldo G. Salerno 32,079(2) 32,079 --
Gerald M. Salerno 32,066(3) 32,066 --
Aldo G. and Beatrice Salerno, as Joint 5,500(4) 5,500 --
Tenants
Gerald M. and Beatrice Salerno, as Joint 5,500(4) 5,500 --
Tenants
Gordon S. Whitehead 5,500(4) 5,500 --
</TABLE>
(1) Each of the Selling Shareholders owns less than 1% of the outstanding
shares of Common Stock of the Company.
(2) Includes 3,208 shares subject to an escrow agreement with the Company.
(3) Includes 3,206 shares subject to an escrow agreement with the Company.
(4) Includes 550 shares subject to an escrow agreement with the Company.
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<PAGE> 15
PLAN OF DISTRIBUTION
The Company has been advised by the Selling Shareholders that they intend to
sell all or a portion of the shares offered hereby from time to time in the
over-the-counter market and that sales will be made at prices prevailing at the
times of such sales. The Selling Shareholders may also make private sales
directly or through a broker or brokers, who may act as agent or as principal.
In connection with any sales, the Selling Shareholders and any brokers
participating in such sales may be deemed to be underwriters within the meaning
of the Securities Act. The Company will receive no part of the proceeds of sales
made hereunder.
Any broker-dealer participating in such transactions as agent may receive
commissions from a Selling Shareholder (and, if they act as agent for the
purchaser of such shares, from such purchaser). Usual and customary brokerage
fees will be paid by the Selling Shareholder. Broker-dealers may agree with a
Selling Shareholder to sell a specified number of shares at a stipulated price
per share, and, to the extent such a broker-dealer is unable to do so acting as
agent for such Selling Shareholder, to purchase as principal any unsold shares
at the price required to fulfill the broker-dealer commitment to the Selling
Shareholder. Broker-dealers who acquire shares as principal may thereafter
resell such shares from time to time in transactions (which may involve crosses
and block transactions and which may involve sales to and through other
broker-dealers, including transactions of the nature described above) in the
over-the-counter market, in negotiated transactions or otherwise at market
prices prevailing at the time of sale or at negotiated prices, and in connection
with such resales may pay to or receive from the purchasers of such shares
commissions computed as described above.
The Company has advised the Selling Shareholders that anti-manipulation
rules of Regulation M under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), may apply to their sales in the market, has furnished each
Selling Shareholder with a copy of these Rules and has informed them of the need
for delivery of copies of this Prospectus. The Selling Shareholder may indemnify
any broker-dealer that participates in transactions involving the sale of the
shares against certain liabilities, including liabilities arising under the
Securities Act. Any commissions paid or any discounts or concessions allowed to
any such broker-dealers, and any profits received on the resale of such shares,
may be deemed to be underwriting discounts and commissions under the Securities
Act if any such broker-dealers purchase shares as principal.
Upon notification by a Selling Shareholder to the Company that any material
arrangement has been entered into with a broker-dealer for the sale of shares
through a cross or block trade, a supplemental prospectus will be filed under
Rule 424(c) under the Securities Act setting forth the name of the participating
broker-dealer(s), the number of shares involved, the price at which such shares
were sold by the Selling Shareholder, the commissions paid or discounts or
concessions allowed by the Selling Shareholder to such broker-dealer(s), and
where applicable, that such broker-dealer(s) did not conduct any investigation
to verify the information set out in this Prospectus.
Any securities covered by this Prospectus which qualify for sale pursuant to
Rule 144 under the Securities Act may be sold under that Rule rather than
pursuant to this Prospectus.
There can be no assurance that the Selling Shareholders will sell any or all
of the shares of Common Stock offered by them hereunder.
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<PAGE> 16
INFORMATION INCORPORATED BY REFERENCE
The following documents filed with the Commission by the Company (File No.
68-0137069) pursuant to the Exchange Act are hereby incorporated by reference in
this Prospectus:
(1) The Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1996, filed pursuant to Section 13 of the Exchange Act
(including those portions of the Company's Annual Report to Shareholders
and definitive proxy statement for the Annual Meeting of Shareholders
held on May 21, 1996).
(2) The Company's Quarterly Report on Form 10-Q for the fiscal quarters
ended March 31, 1997 and June 30, 1997 filed pursuant to Section 13 of
the Exchange Act.
(3) The description of the Company's Common Stock to be offered hereby
contained in the Company's Registration Statement on Form 8-A dated
October 7, 1992, filed pursuant to Section 12(g) of the Exchange Act
including any amendment or report filed for the purpose of updating such
description.
(4) The description of the Company's Preferred Share Rights Agreement
contained in its Registration Statement on Form 8-A filed with the
Commission on February 16, 1995 including any amendment or report filed
for the purpose of updating such description.
All documents filed by the Company pursuant to Sections 13(a), 13(c), 14 and
15(d) of the Exchange Act, after the date of this Prospectus and prior to the
filing of a post-effective amendment which indicates that all securities offered
have been sold or which deregisters all securities then remaining unsold, shall
be deemed to be incorporated by reference in this Prospectus and to be part
hereof from the date of filing such documents.
INDEMNIFICATION OF DIRECTORS AND OFFICERS
LIMITATION OF LIABILITY AND INDEMNIFICATION MATTERS
As permitted by the Delaware General Corporation Law, the Company has
included in its Certificate of Incorporation a provision to eliminate the
personal liability of its directors for monetary damages for breach or alleged
breach of their fiduciary duties as directors, subject to certain exceptions. In
addition, the Bylaws of the Company provide that the Company is required to
indemnify its officers and directors under certain circumstances, including
those circumstances in which indemnification would otherwise be discretionary,
and the Company is required to advance expenses to its officers and directors as
incurred in connection with proceedings against them for which they may be
indemnified. The Company has entered into indemnification agreements with its
officers and directors containing provisions that are in some respects broader
than the specific indemnification provisions contained in the Delaware General
Corporation Law. The indemnification agreements may require the Company, among
other things, to indemnify such officers and directors against certain
liabilities that may arise by reason of their status or service as directors or
officers (other than liabilities arising from willful misconduct of a culpable
nature), to advance expenses incurred as a result of any proceeding against them
as to which they could be indemnified, and to obtain directors' and officers'
insurance if available on reasonable terms. The Company believes that its
charter provisions and indemnification agreements are necessary to attract and
retain qualified persons as directors and officers.
The Company understands that the staff of the Securities and Exchange
Commission is of the opinion that statutory, charter and contractual provisions
as are described above have no effect on claims arising under the federal
securities laws.
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<PAGE> 17
LEGAL MATTERS
Counsel for the Company, Wilson Sonsini Goodrich & Rosati, Professional
Corporation, 650 Page Mill Road, Palo Alto, California 94304-1050, has rendered
an opinion to the effect that the Common Stock offered hereby is duly and
validly issued, fully paid and non-assessable.
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