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Hewlett-Packard Acquires Peregrine for $425M

Peregrine Systems, the San Diego-based software company that revealed a massive accounting fraud in 2002 resulting in its bankruptcy and federal criminal indictments of top former executives, said Sept. 19 that it signed a definitive agreement to be acquired by Hewlett-Packard Co. for $26.08 per share for a total cash price of $425 million.

Palo Alto-based HP, the nation’s No. 2 computer maker behind Dell Inc., offered a 37 percent premium for Peregrine based upon the share price of Sept. 16. Both companies’ shares rose on news of the announcement in early trading Sept. 19.

HP said upon completion of the acquisition, expected in the first quarter of 2006, Peregrine will become part of HP’s OpenView business unit.

Peregrine makes software that helps large corporations track and manage assets such as information technology systems.

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HP said with the purchase, it would become a leader in asset management software, a segment that is anticipated to grow to more than $1 billion in 2008.

Since emerging from Chapter 11 bankruptcy protection in August 2003, Peregrine has continued operations, albeit on a much smaller scale than at its peak in 2000, when it had revenues in excess of $500 million.

For its most recent annual report for its fiscal year ended March 31, Peregrine sustained a net loss of $25.4 million on revenues of $191 million.

Leading up to its spectacular failure in 2002, Peregrine was one of the region’s biggest high-tech success stories. The software firm, founded in 1981 and once chaired by San Diego Padres owner John Moores, was reporting revenues in 2000 of more than $500 million, and had a market capitalization of more than $9 billion.

But in a stunning series of revelations beginning in May 2002, Peregrine said it had fraudulently inflated its revenues by $509 million over three fiscal years.

Last year, following a lengthy probe by the Department of Justice and the Securities and Exchange Commission, the government announced criminal and civil indictments of about a dozen former Peregrine executives and associated business partners, including former Chief Executive Officer Steve Gardner.

Moores, who served as the company’s chairman from 1990 to July 2000 and returned when the company first revealed “accounting inaccuracies” in May 2002, has been the subject of several class action shareholder suits but has not been charged in any criminal or civil indictments.

Mike Allen

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