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September 29, 1998

PERITUS OUTLINES RESTRUCTURING PLANS

By CBR Staff Writer

Peritus Software Services Inc, the Billerica, Massachusetts software maintenance and year 2000 company, has announced details of its latest round of restructuring following last week’s warning that third-quarter results will show a net loss on lower- than-expected revenues. The new plan to reduce expenses includes a workforce reduction of 90 employees – nearly one-third of the total – the closing of two facilities in Ohio and one in Illinois and the consolidation of other facilities. The company said the actions will result in a charge of $3.7m that will be taken in the troubled third-quarter, which Peritus had previously said would contain a net loss, before any charges, of between $8.2m and $4.7m. Peritus offered a number of excuses for the shortfall in revenue for the quarter, including delays in client buying decisions for and decreases in Year 2000 licenses and sharply lower-than-expected demand for its renovation factory services. Another factor was slower take-up of the independent verification and validation offering – Renovation Quality Evaluation – despite what the company described as increased interest in the product. The restructuring is the second of the year for Peritus, which in March announced it was cutting its staff by 35 people – an action that led to a second-quarter restructuring charge of $1.4m. The company said the goal of the new plan is to reduce expenses and lessen the impact of Y2K market shifts, while moving its focus away from Y2K and back on the core software management business. Other changes that will be made as part of the restructuring will include a reduction in excess delivery capacity for renovation services; the combination of outsourcing and year 2000 services units into one streamlined group; the realignment of the sales organization into three regions in the northeast, south and west; and a shift of research and development resources to focus on specific initiatives including extending the Software Asset Maintenance (SAM) offerings into new areas. The company insisted that its moves will better align its costs with expected revenues and said despite the poor quarter it remains confident about longer-term prospects, especially the SAM outsourcing services, which Peritus said represent the future of the company. The SAM business include development, code conversion, and system migration and modernization.

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