Peregrine Systems

» see peregrine.com as it lived, on the wayback machine

~ the last words ~

The number that ended Peregrine Systems is $509 million. That is how much of the $1.34 billion in revenue it had reported across eleven consecutive quarters, from April 1999 to the last day of 2001, had to come back out of the books. At least $259 million of it was reversed because the underlying transactions had no substance at all. The SEC called it massive financial fraud when it sued in 2003. Peregrine did not dispute that description so much as settle part of it.

Before that it was an ordinary success story. Five people in Irvine, California started it in 1981, selling the Peregrine Network Management System on IBM Series One hardware. The company moved to San Diego and sent its IPO prospectus to the SEC on 9 April 1997. What it sold was infrastructure for the inside of a company: asset management and service desks, the software that tracks which laptop belongs to whom. In 2000 it paid around $2 billion in stock for Harbinger Corporation and in 2001 it bought Remedy Corporation, and by then the revenue being reported was partly a construction.

The accounting problems went public in May 2002. Four months later, on 22 September, Peregrine filed for Chapter 11. The Remedy assets went to BMC Software for $355 million in cash on 20 November 2002, which is how the payroll kept being met, and in August 2003 the reorganization plan took effect. Information Age noted at the time that no publicly held enterprise software company had come out the other side of Chapter 11 before.

I have never touched a Peregrine product under that name. Almost nobody outside a corporate IT department did, since enterprise asset management is not a thing you buy for a spare room. What I have done, like every engineer I know, is file tickets in systems descended directly from these two: HP absorbed ServiceCenter and sold it for years afterward, and BMC Remedy became the queue that much of the industry's internal support still sits in. The ancestry of your helpdesk ticket runs back to a company whose executives went to prison.

~ the record ~

~ eleven quarters ~

The mechanics were not exotic. Software was booked as sold to resellers who had not sold it to anyone and were under no firm obligation to pay. Receivables were then factored to banks, with the parts of the arrangement that would have made a lender nervous left out of the paperwork. Arthur Andersen signed the audits, and in 2002 Peregrine sued its own auditor for $1 billion over the statements Peregrine itself had filed.

John Moores, who had founded BMC Software and owned the San Diego Padres, chaired the board across most of that decade and sold more than $800 million of stock during the period being restated. An appeals court found there was not enough evidence that he knew what was happening in the accounts.

~ the sentences ~

A federal grand jury indicted eleven people in 2004, including eight former Peregrine executives and an outside auditor. Stephen Gardner, the chief executive, was sentenced in 2008 to ninety seven months and had a fatal heart attack in federal custody in July 2013. Matthew Gless, the finance chief, pleaded guilty and got sixty three months. The sentences ran down the organization chart from there to probation and community service. Charges against two of the defendants were dismissed.

~ what HP bought ~

The reorganized company traded on for two more years before agreeing on 19 September 2005 to sell itself to Hewlett-Packard at $26.08 a share, about $425 million for the equity. HP wanted the IT service management line to put under OpenView, where its own Service Desk product had not won the market. The deal closed in December, faster than either side had predicted, and Peregrine Systems filed its Form 15 on 19 December 2005 to terminate the registration of its stock. HP announced the completion on the same date.

The products kept moving after the name stopped. OpenView was folded into HP Software, which was spun out into the Micro Focus merger in 2017. Micro Focus went to OpenText in 2023. Three owners later, something that began as a network tool on a Series One is still licensed to enterprises, under a brand none of the people in this story ever worked for.

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