Peregrine top two quit after $100m hole uncovered
A huge financial scandal has engulfed Peregrine Systems Inc after its auditors uncovered revenue recognition "irregularities" involving as much as $100m in the last two financial years.
Chairman and CEO Steve Gardner and CFO Matt Glass quit the CRM and asset management software developer yesterday after the irregularities were brought to light by auditors KPMG, who replaced Arthur Andersen at Peregrine in April after the accountants were disgraced by the Enron affair.
San Diego, California-based Peregrine caused a stock market panic last week when it delayed filing its fourth quarter figures, saying KPMG needed more time to finalize the accounts after it took over from Arthur Andersen. Investors' worst fears were realized when the board said yesterday it had authorized its audit committee to investigate the irregularities.
Peregrine said the transactions under investigation were recorded initially as revenue from its indirect channels and "may have been written off in later quarters." It said it had informed the SEC of its inquiry and will keep the regulators informed of progress.
Certainly, during 2001 Peregrine's revenue held rock steady during a period when other software companies were fighting a slide in sales. In the last four quarters Peregrine reported revenue of $175.2m, $175m, $172m and $171m.
Such reliability did no harm to its share price, which was a major boon to an acquisitive company. In March 2001, it paid $168m for B2B relationship management software developer Extricity Inc and then in June it splashed out $1.09bn for CRM vendor Remedy Corp.
Peregrine's share price, which has been as high as $33.5 in the past year, crashed yesterday by 60% to $1. This means a predatory company, which boasted a 10,000-strong customer base will now be prey to bargain hunters, once it has extricated itself from its current financial mess.
At the same time, the Peregrine affair is bound to increase the suspicion that has inevitably attached itself to those companies in the industry whose accounts were audited by Arthur Andersen.
Peregrine directors have appointed Rick Nelson as acting CEO and Fred Gerson as acting CFO.
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