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UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Form 10-K

Commission File Number: 0-20710

PeopleSoft, Inc.

4460 Hacienda Drive, Pleasanton, California 94588-8618

Registrant’s telephone number, including area code: (925) 225-3000

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered Pursuant to Section 12(g) of the Act:

Common Stock, $0.01 par value

     Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.     Yes þ          No o

      Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.     o

      Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act).     Yes þ          No o

      The aggregate market value of the voting and non-voting common stock held by non-affiliates of the Registrant, based upon the closing sale price of Common Stock on June 28, 2002 as reported on the Nasdaq National Market, was approximately $4.6 billion. Shares of common stock held by each officer and director and by each person who owns 5% or more of the outstanding common stock have been excluded in that such persons may be deemed to be affiliates. This determination of affiliate status is not necessarily a conclusive determination for other purposes.

      On March 25, 2003, the Registrant had 316,334,698 outstanding shares of common stock.

DOCUMENTS INCORPORATED BY REFERENCE

      Portions of the Proxy Statement for Registrant’s 2003 Annual Meeting of Stockholders to be held May 27, 2003 are incorporated by reference in Part III of this Form 10-K Report.

PeopleSoft, the PeopleSoft logo and PeopleTools are registered trademarks of, and Pure Internet Architecture is a trademark of, PeopleSoft, Inc. Certain other company and product names may be trademarks of their respective owners. Copyright © 2003 PeopleSoft, Inc. All rights reserved.

TABLE OF CONTENTS

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PART I

      This Business section and other parts of this Report contain forward-looking statements that are subject to risks and uncertainties. Words such as “anticipate,” “believe,” “estimate,” “forecast,” “intended,” “may,” “plan,” “project,” “predict,” “should” and “will” and similar expressions as they relate to PeopleSoft, Inc. are intended to identify such forward-looking statements. Forward-looking statements contained throughout this Annual Report include, but are not limited to, those identified with a footnote (1) symbol. Our actual results may differ significantly from the results discussed in the forward-looking statements. Factors that might cause such a difference include, but are not limited to, those discussed below and in Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” We undertake no obligation to update the information contained in this Report.

General

      PeopleSoft, Inc. designs, develops, markets and supports a family of enterprise application software products for use throughout large and medium sized organizations worldwide. These organizations include corporations, educational institutions and national, state, provincial and local government agencies. We provide enterprise application software for customer relationship management, human capital management, financial management and supply chain management, along with a range of industry-specific products. Within each of our application suites, we offer embedded analytics and portal applications. In addition, PeopleSoft offers a suite of products for application integration and analytic capability, including portal applications, an integration broker and enterprise warehouse products. Our applications offer a high degree of flexibility, rapid implementation and scalability across multiple databases and operating systems. In addition to enterprise application software, we offer a variety of consulting and training services to our customers focused on implementing, optimizing and upgrading PeopleSoft software.

      Our strategy is to offer comprehensive applications that enable organizations to manage critical business processes and analyze and enhance their relationships with customers, suppliers, employees and partners.

      Incorporated in Delaware in 1987, we shipped our first software product, a human resources management system, in December 1988. In 1992, we introduced the first of a series of financial management software products, and in 1994, we introduced the first of a series of supply chain management products. Since that time, we have introduced several additions to our product lines, as well as industry specific software products for, among others, manufacturing, public sector financial management, public sector human resources management and student administration solutions for the higher education market.

      We began shipping our enterprise applications, built entirely on PeopleSoft Pure Internet Architecture^TM, PeopleSoft 8, in September 2000; the first major suite of enterprise applications that enable organizations to create a real-time enterprise, connecting customers, suppliers, employees and partners. PeopleSoft 8 applications can be accessed anytime and from anywhere with a standard internet browser because they do not require software to be installed on the user’s personal computer. In June 2001, we launched our PeopleSoft 8 Customer Relationship Management solution (“PeopleSoft 8 CRM”), a comprehensive suite built on the Vantive product which was acquired in 1999.

Software Product Architecture

      Our product architecture is designed to provide the system performance required for intensive record keeping and high volume on-line transaction processing. Our applications are designed for ease of use and are compatible with personal productivity applications such as document processing and spreadsheets. Our software products are designed specifically for use with relational database management systems (“RDBMSs”), which offer power and functionality superior to flat files, hierarchical or other non-relational databases that are generally used with legacy software applications. Our software products are also scalable, permitting changes in network size, server platforms and other architectural components, and run on several RDBMSs and hardware platforms. We believe that the intuitive design of our software products reduces end-

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      The PeopleSoft 8 architecture is referred to as PeopleSoft Pure Internet Architecture. PeopleSoft software products rely on an application server to process application logic and the hyper-text markup language (“HTML”) that is used by the web browser to render the user interface. Data management functions are carried out by the database server. Additionally, integration with market leading lightweight directory access protocol (“LDAP”) provides common user definitions and security between our applications and other LDAP-compliant applications (e.g., email). Further integration capabilities are provided through the use of extensible markup language (“XML”) messaging over hyper-text transfer protocol (“HTTP”), as well as open application programming interfaces (“APIs”) accessible with technologies such as Java and COM.

      With the release of PeopleTools® 8.4, PeopleSoft Pure Internet Architecture^TM can also run in a mobile or disconnected mode. Users, such as sales representatives or field service agents, can run certain PeopleSoft applications on laptops or PDA devices while disconnected from the network and synchronize their changes with the server when they re-connect to the network.

      Our products are primarily built on a proprietary set of integrated development and reporting tools known as PeopleTools®. PeopleTools include (i) development tools for use by business process and system analysts to rapidly design and deploy custom modifications; (ii) administration tools for use by systems managers and support staff to improve the efficiency of implementing, operating and upgrading PeopleSoft applications; (iii) reporting and analysis tools for use by application users to easily access, summarize and analyze information; (iv) PeopleSoft Workflow for use by business process and system analysts and application users to automate business processes in a paperless environment; and (v) PeopleSoft enterprise application integration tools for use in communicating between applications built on PeopleTools and applications built with other tools. PeopleTools are used to build and modify data tables, design and customize user interface pages, modify user navigation, define security privileges of individual users and operator access to system objects, define and build workflow based processes, process online transactions and facilitate data importation from other systems into PeopleSoft applications.

      By utilizing relational databases and designing the system from the ground up, we have been able to develop integrated software products with fully normalized data structures. A fully integrated system provides convenient access to shared data and reduces the need for redundant data entry. Through adherence to ANSI Structured Query Language (“SQL”), the industry standard data manipulation language for RDBMSs and other relational database standards, our software products are available in a range of environments. Our software products can be licensed for use with RDBMSs from the following vendors: IBM Corporation, Microsoft Corporation, Oracle Corporation and Sybase, Inc. Not all software products or release versions of our software products are currently available on all of the above platforms, as we review the current status and customer demand for all platforms at the time of any major release of our software. Future or existing RDBMS products may or may not be architecturally compatible with our software product design.

      Our PeopleSoft 8 products are designed to be accessed through the use of a web browser. The web browser interface leverages the user’s existing knowledge and helps to minimize training costs. We use standard internet protocols to integrate with desktop applications and display reports. Desktop integration with other common applications, such as Microsoft Excel, is achieved through the use of standard internet

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      Our application software products incorporate extensive security features designed to protect certain sensitive data. Our security architecture utilizes the capabilities of our own applications, the operating system software, some of the security features contained in the RDBMS platforms on which the applications run, and certain third party security products such as LDAP directory servers.

Application Software Products

      Statement of Possible Future Direction: This document contains statements of possible future direction concerning potential functionality for our software products and technology. Functionality and software products will be available for license and shipment from PeopleSoft only if and when generally commercially available. The statements of possible future direction are for informational purposes only. We undertake no obligation to update this information, and we make no express or implied commitments or representations concerning the timing and content of any future functionality or releases.

      Our software products are generally licensed to end-user customers under non-exclusive, perpetual license agreements. In most cases, we license our software products solely for the customer’s internal operations. License fees for our software products are a function of the particular combination of PeopleSoft software products chosen and the number of employees for Human Capital Management software products, the number of enrolled students for Student Administration Solutions software products and revenues of the licensing entity for Financial Management Solutions, Supply Chain Management and Customer Relationship Management products.

Below is a brief description of certain of our software products commercially available as of December 31, 2002:

      PeopleSoft Customer Relationship Management (“CRM”) is a suite of customer relationship management products that helps companies sell to, support, analyze and service customers through many channels of interaction including the internet, telephone call centers, email or directly through sales and service representatives. PeopleSoft Customer Relationship Management software allows a company to consolidate data from different applications, including legacy and back-office applications, helping companies to obtain a complete view of the customer and more effectively meet the customer’s needs.

      PeopleSoft Financial Management Solutions (“FMS”) helps capture and administer financial data quickly and accurately across the enterprise. PeopleSoft FMS is designed to help companies increase visibility of financial data and business metrics, control expenditures and improve decision making. Our FMS applications support various integrated business processes such as financial reporting, budgeting, employee expense management and asset lifecycles. Consistent with an organization’s practices and policies, PeopleSoft FMS applications can assist in fulfilling both internal and external reporting requirements.

      PeopleSoft Enterprise Service Automation (“ESA”) is designed to enable companies to manage the procurement and utilization of external resources and to assist with internal project management in the areas of resource matching, portfolio management and project cost analysis. By combining all project data into a single repository, users can more readily gain access to critical information. PeopleSoft project management helps identify and capture project costs, from initial estimates through actual results; manage resources associated with each job even in multiple sites, countries and languages; track materials, labor and overhead;

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      PeopleSoft Human Capital Management (“HCM”) helps organizations to more effectively manage, optimize and leverage the workforce to drive a higher level of business performance. Our modular, global solution enables organizations to manage positions and compensation; recruit, hire and train employees; promote, allocate and retire personnel; and comply with local and international regulatory requirements.

      PeopleSoft Supply Chain Management (“SCM”) helps organizations in three main categories: Supplier Relationship Management (“SRM”), Customer Fulfillment Management and Supply Chain Planning. Our suite of SRM applications helps our customers work collaboratively with their suppliers of goods and services to control all categories of spending. PeopleSoft Customer Fulfillment Management enables users to capture, maintain and share product and distribution information across the enterprise. This application set helps users place accurate orders, provide reliable promise dates, create flexible product configurations and submit timely and accurate invoices. PeopleSoft Supply Chain Planning helps customers meet their demand for on-time and accurate delivery of products. This product suite allows users to better analyze available information to forecast demand, schedule production and distribution of finished products and share real-time planning information with suppliers and customers.

      PeopleSoft Enterprise Performance Management (“EPM”) enables companies to better analyze business processes and how they influence results. PeopleSoft EPM features a data warehouse optimized for analytic applications, robust analytic applications specific to different functional areas and industries, and performance workbenches and measurement tools. PeopleSoft EPM applications are an integrated part of all our product lines, including Customer Relationship Management, Human Capital Management, Financial Management Solutions and Supply Chain Management.

      PeopleSoft AppConnect is a product suite of pre-integrated portal, integration and warehouse solutions that reduce the complexities of integrating multi-vendor applications at the people, process and data levels. All three components of this suite operate together to leverage our Pure Internet Architecture to connect an organization’s business operations in real time.

      PeopleSoft Student Administration Solutions offers a suite of integrated applications that automates and improves administrative processes for institutions of higher education. It addresses critical aspects of student administration, from recruitment and admissions to fund-raising and grant writing.

Services

      We believe that a high level of customer service is required to be successful in the enterprise software marketplace. We also believe that the opportunity exists to differentiate ourselves from competitors by delivering superior service that meets the demanding service requirements of this market segment. Our service revenues consist primarily of software maintenance and support fees, consulting fees and customer training fees.

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      PeopleSoft Customer Services provides our customers with around-the-clock mission critical support, web-based self-service problem resolution tools, comprehensive product and technical expertise, and the rights to future software upgrades and enhancements, regulatory and statutory updates and technical fixes.

      At the time a customer licenses our software, the customer is offered to purchase the first year of maintenance, which can be renewed on an annual basis. We offer three tiers of maintenance based upon the customer’s business requirements. They are Standard Customer Support, Premium Customer Support and Platinum Customer Support.

      As long as the customers continue to subscribe to maintenance, they are entitled to receive software product upgrades, tax and regulatory updates, access to account services, web-based self-service and product and technical support. Our policy is to generally continue to support a product for four years after it is made commercially available. The following is a summary of the various services offered to our maintenance customers:

      Global Support Center — Our Global Support Center provides application and around-the-clock technical support via phone, email and the web in eight languages from twelve worldwide offices. The Global Support Center is ISO 9001:2001 certified.

      Customer Care Center — Our Customer Care Center is staffed with a pool of customer service professionals that is available through 800 number access or the web to provide support on specific business issues. These service professionals are focused on resolving customer issues including customer software and service orders, giving guidance on using our self-service support tools, and locating product and technical information. Through our Customer Launch program, PeopleSoft Customer Care provides an on-line guide to important information for new customers.

      Customer Connection — Customer Connection is a secure customer extranet providing our maintenance customers immediate access to a rich technical knowledge base of product and technical solutions, the latest PeopleSoft information and news, training opportunities and online education and consulting and customer service options. It also offers product and technology updates from development experts and on-line networking opportunities with user groups and other PeopleSoft customers. My Customer Connection is a personalized portal within Customer Connection that allows customers to customize their home page using pagelets — small windows of content — that are updated with the products and services they use and access most.

      PeopleSoft Advisor — PeopleSoft Advisor provides expert advice on product, technology and service topics via regularly scheduled webcasts and seminars. Programs are recorded and posted online for customers who were unable to attend or would like to review the program’s content at a later date.

      Plugged-In — PeopleSoft Plugged-In is our series of email newsletters that deliver the latest PeopleSoft product, event and service news directly to our customers.

      User Groups — PeopleSoft customers are invited to take advantage of a network of regional, special and industry user groups worldwide. Additionally, customers receive invitations to PeopleSoft conferences and events, access to discussion groups and the Customer-to-Customer Networking newsletter.

      PeopleSoft Global Services, comprised of PeopleSoft Consulting and PeopleSoft Education, provides worldwide services focused on implementing, optimizing and upgrading PeopleSoft software.

      PeopleSoft Consulting — PeopleSoft Consulting helps customers around the world implement, optimize and upgrade PeopleSoft products to improve business performance. PeopleSoft Consulting works to accelerate timelines and obtain the most functionality from PeopleSoft software. Our implementation services are tailored to specific business needs and provide global infrastructure and expertise. We frequently work closely with third party consulting and systems integration firms such as Accenture, Bearing Point, Inc., Cap Gemini

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      PeopleSoft Education — PeopleSoft Education provides PeopleSoft-related training through role-based courses offered to executives, project managers, end users and third party consultants. Our on-line course offerings give customers the opportunity to increase productivity and competence. We offer project team training classes, end-user training classes, an end-user training kit and course development and delivery services.

      PeopleSoft eCenter is our solution for deploying, hosting and managing PeopleSoft pure internet enterprise applications. Through eCenter we offer an end-to-end scalable and affordable hosting solution. eCenter’s customer base consists of mid-sized and well-known Fortune 1000 companies. We have an agreement with Hewlett-Packard Company (“HP”), which provides eCenter services to our global customers.

Sales and Marketing

      We market and sell our software products in most major world markets through a direct sales organization. The domestic direct sales organization is based in over 25 field sales offices located in major metropolitan areas throughout the United States. International sales activities are conducted out of our offices located near major concentrations of users in Europe, Japan, Asia-Pacific, Latin America and other parts of the world.

      The sales cycle varies substantially from customer to customer; historically requiring three to twelve months to complete. Normally the process includes the generation of a sales lead, or the receipt of a request for proposal from a prospective customer, qualification of the lead, analysis of the customer’s needs, submission of a proposal, one or more presentations to the customer, customer internal sign-off activities and contract negotiation and finalization. In support of our sales efforts, we conduct comprehensive marketing programs, which include telemarketing, direct mail, public relations, advertising, seminars, trade shows and ongoing customer communication programs.

      Our customers and potential customers often rely on third party systems integrators to develop, deploy and manage their enterprise applications. Our marketing strategy includes building and maintaining strong working relationships with businesses we believe play an important role in the success of our software products. These include:

	(i)	RDBMS software vendors (such as Microsoft Corporation, Oracle Corporation, IBM Corporation and Sybase, Inc);

	(ii)	hardware vendors (such as Hewlett-Packard Company, IBM Corporation and Sun Microsystems, Inc.); and

	(iii)	technology consulting firms and systems integrators (such as Accenture, Bearing Point, Inc., Cap Gemini Ernst & Young Group, Deloitte Consulting and IBM Corporation), some of which are active in the selection and implementation of large information systems for the information-intensive organizations that comprise our principal customer base.

      We have conducted several joint marketing and sales programs with these vendors and other technology and software partners, including seminars, direct mail campaigns and trade show appearances. Most of these companies have significantly greater financial and marketing resources than we have and may start, or in some cases, increase marketing business application software in competition with us. They might also discontinue their relationships with, or support of, PeopleSoft software products.(1)

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Competition

      The market for application software continues to be intensely competitive. We compete with a variety of large enterprise application software vendors in markets including customer relationship management, human capital management, financial management and supply chain management. In addition to these competitors, we continue to see niche software vendors in various market segments such as enterprise portals, enterprise service automation and eProcurement.

      Our primary competitors in the enterprise application software market continue to be SAP and Oracle Corporation. Siebel Systems remains our primary competitor in the customer relationship management space.

      We must continue to differentiate ourselves from the rest of the market by capitalizing on our architectural advantage and providing functionally superior products and quality customer service.

Software Product Development

      Our research and development staff consisted of 2,379 and 2,214 employees as of December 31, 2002 and 2001. Our total product development expense was $341.2 million in 2002, $299.0 million in 2001 and $320.5 million in 2000.

      As noted above, we have made substantial investments in research and software product development. We believe that timely development of new software products, enhancements to existing software products and the acquisition of rights to sell or incorporate complementary technologies and products into our software product offerings is essential to maintain our competitive position in the market. The application software market is characterized by rapid technological change, frequent introductions of new products, changes in customer demands and rapidly evolving industry standards. We believe that software product development is most effectively and expeditiously accomplished by small teams comprised of relatively senior people who are focused on certain software product areas. Accordingly, our development organization is comprised of small, focused development groups assigned to each of the software products within our various software product areas. In addition, from time to time, we enter into development agreements with third parties.

      Our current focus in application development is to continue to extend our software offerings by delivering enhanced functionality and to further develop new applications in our integrated application suites: Human Capital Management, Financial Management Solutions, Customer Relationship Management and Supply Chain Management.(1)

Intellectual Property and Proprietary Rights

      We regard certain aspects of our operations, products and documentation as proprietary. We rely on a combination of patent, copyright, trademark and trade secret laws and other measures to protect our proprietary rights. We also rely on contractual restrictions in our agreements with customers, employees and others to protect our intellectual property rights. Furthermore, in certain foreign countries, effective copyright and trade secret protection may be unavailable or the laws of these other jurisdictions may not protect our products and intellectual property rights to the same extent as the laws of the United States. Failure to obtain and/or maintain appropriate patent, copyright or trade secret protection either in the U.S. or in certain foreign countries, for any reason, may have a material adverse effect on our business, operating results and financial condition.

      We currently hold U.S. patents on some of the technologies included in our products and we intend to continue to file patent applications in the future.(1) We believe that, because of the rapid pace of technological change in the computer software industry, factors such as the knowledge, ability and experience of our employees, frequent software product enhancements and the timeliness and quality of support services are key to our success. This success is also dependent, in part, upon our proprietary technology and other intellectual property rights.

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      The source code for PeopleSoft software products is protected both as a trade secret and as a copyrighted work. Many of our customers are beneficiaries of a source code escrow account arrangement which enables the customer to acquire a contingent future limited right to use our source code solely for the customer’s internal use. If our source code is accessed, the likelihood of misappropriation or other misuse of our intellectual property may increase.

      We believe that our products, trademarks or other proprietary rights do not infringe upon the proprietary rights of third parties. However, there can be no assurance that third parties will not assert infringement claims against us in the future with respect to current or future products or that any such assertion will not require us to enter into royalty arrangements or result in costly and time-consuming litigation.

Personnel

      As of December 31, 2002, we employed 8,293 people, including 3,481 in services, 1,564 in sales and marketing, 2,379 in research and development and 869 in administration. There were 6,033 employees located in the United States. None of our employees in the United States are represented by a labor union or are subject to a collective bargaining agreement. Certain of our international employees are covered by the customary employment contracts and agreements of the countries in which they are employed.

      Mr. Craig A. Conway joined PeopleSoft in 1999 as President and Chief Operating Officer and was promoted to Chief Executive Officer later that year. He oversees our business operations including sales, marketing, professional services, customer support, development, finance and administration. From 1996 to 1999, Mr. Conway was President and Chief Executive Officer for OneTouch Systems, a leader in the field of interactive broadcast networks. From 1993 to 1996, Mr. Conway served as President and Chief Executive Officer for TGV Software, Inc., an early developer of IP network protocols and applications for corporate intranets and the internet. Mr. Conway also spent eight years at Oracle Corporation as Executive Vice President in a variety of roles including marketing, sales and operations. Mr. Conway graduated from State University of New York with a degree in Computer Science and Mathematics.

      Mr. Kevin T. Parker joined PeopleSoft in 2000 as Senior Vice President and Chief Financial Officer. In January 2002, Mr. Parker was promoted to Executive Vice President of Finance and Administration, Chief Financial Officer. Prior to joining PeopleSoft, Mr. Parker served as Senior Vice President and Chief Financial Officer from 1999 to 2000 for Aspect Communications Corporation, a customer relationship management software company. From 1996 to 1999, Mr. Parker was Senior Vice President of Finance and Administration at Fujitsu Computer Products of America. Previous posts include Chief Financial Officer, Controller and other financial management positions at Standard Microsystems, O’Neil Data Systems, Toshiba America Information Systems, CalComp and Price Waterhouse. Mr. Parker attended Clarkson University where he received a bachelor’s degree in Accounting.

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      Ms. Nanci Caldwell joined PeopleSoft in 2001 as Senior Vice President and Chief Marketing Officer. In January 2002, Ms. Caldwell was promoted to Executive Vice President and Chief Marketing Officer. Prior to joining PeopleSoft, Ms. Caldwell worked for Hewlett-Packard Company from 1982 to 2001, where she held a number of senior management roles, including: Vice President of Marketing — HP Services, Vice President of North American Sales and Vice President of Worldwide Enterprise Marketing and Global Alliances. Ms. Caldwell earned a degree in Psychology from Canada’s Queen’s University and completed the University of Western Ontario’s Executive Marketing Management program.

      Mr. Guy Dubois joined PeopleSoft in 1999. Prior to being promoted to Executive Vice President, International, in January 2000, Mr. Dubois served as Executive Vice President and General Manager, International of The Vantive Corporation. From 1995 to 1999, Mr. Dubois was Vice President and General Manager of the Europe, Middle East, Africa operations of Sybase Inc. From 1994 to 1995, Mr. Dubois was Vice President of Southern Europe at Sybase. Prior to that, he was Deputy Managing Director of Digital Equipment Corporation France. Mr. Dubois attended Lille University in France where he received a master of sciences and technology degree and an engineer degree.

      Mr. Michael Gregoire joined PeopleSoft in 2000 as Senior Vice President, PeopleSoft Consulting, North America. In January 2003, he was promoted to Executive Vice President, PeopleSoft Global Services, and is in charge of all of PeopleSoft’s professional services and training. Prior to his employment at PeopleSoft, Mr. Gregoire spent 13 years at Electronic Data Systems Corporation, where he held a variety of management positions, most recently Managing Director of Services for the Global Financial Markets Group. Mr. Gregoire has a Bachelor of Science degree in physics and computing from Wilfred Laurier University in Ontario, Canada, and an MBA from California Coast University. He is a graduate of the Thunderbird American School for International Business, International Executive Program. Mr. Gregoire serves on the Board of Directors of the Association of Management Consulting Firms (“AMCF”) in New York City.

      Mr. Ram Gupta joined PeopleSoft in 2000 as Executive Vice President of Products and Technology. Prior to joining PeopleSoft, he was Senior Vice President and General Manager for Healtheon*WebMD Corporation, from 1997 to 2000. Before working at Healtheon*WebMD Corporation, Mr. Gupta was the director of the Multimedia Networking Group at Silicon Graphics, from 1994 to 1997. Before that he worked in various management roles at IBM and Philips. Mr. Gupta received a master’s degree in computer science from the University of Massachusetts.

      Mr. Phil Wilmington joined PeopleSoft in 1992. Before being promoted to his current position as Executive Vice President, Americas, Mr. Wilmington held various positions including President of the Services Division, Vice President of Emerging Markets, General Manager of the Financial Services business unit, and General Manager of the Midwest Region. Prior to joining PeopleSoft, Mr. Wilmington served as Executive Vice President of Field Operations at Trinet, Inc. and as Vice President of Sales and Operations at Tesseract Corporation. Mr. Wilmington received a bachelor’s degree in Marketing and Business Administration from Bradley University.

      Ms. Anne S. Jordan joined PeopleSoft in 1999 as Senior Vice President, General Counsel and Corporate Secretary. Prior to joining PeopleSoft, Ms. Jordan was Vice President, Administration and General Counsel for Sega of America, Inc., from 1994 to 1999. Prior to 1994, she was a partner in Carr & Ferrell and held positions as Vice President and General Counsel for Worlds of Wonder, Inc., Assistant General Counsel for Dole Foods, Inc., and corporate counsel for Beatrice Companies, Inc. and Gould Inc. Ms. Jordan received a bachelor’s degree from Northwestern University and a J.D. from DePaul University.

Financial Information About Segments

      For financial information about reportable segments, see Note 15 “Segment and Geographic Areas,” in Item 8 “Financial Statements and Supplementary Data” and “Revenues by Segment,” under Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

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Available Information

      We make available, free of charge, on our website (www.peoplesoft.com/go/investor) our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports as soon as reasonably practicable after we have electronically filed or furnished such materials to the Securities and Exchange Commission.

Facilities

      We lease approximately 2,300,000 square feet of office space, of which approximately 78% is in the U.S. We occupy or sublease 93% of the 2,300,000 square feet of our leased office space.

      Our headquarters are located in Pleasanton, California and consist of approximately 1,045,000 square feet of office facilities used for development, technical support, sales, marketing, customer service and administration. Additional domestic facilities include offices located in Santa Clara, Davis, Irvine, Livermore, Sunnyvale and Encino, California; Chicago, Illinois; Washington, D.C.; Englewood, Colorado; Cincinnati and Columbus, Ohio; Tulsa, Oklahoma; Seattle, Washington; American Fork, Utah; Milwaukee, Wisconsin; Atlanta, Georgia; Teaneck, New Jersey; Bethesda, Maryland; Dallas and Austin, Texas; Boston, Massachusetts; Detroit, Michigan; Minneapolis, Minnesota; Philadelphia, Pennsylvania; Coral Gables, Florida; Manchester, New Hampshire; St. Louis, Missouri and Phoenix, Arizona, which are primarily used for sales, marketing and customer service activities. Leased facilities of significant size located abroad and used primarily for sales, marketing, customer support and administrative functions include facilities located in Toronto, Vancouver and Montreal, Canada; Reading, England; Madrid, Spain; Milan, Italy; Paris, France; Munich, Germany; Amsterdam, The Netherlands; Zurich, Switzerland; Brussels, Belgium; Hong Kong; Singapore; Sydney and Melbourne, Australia; Tokyo, Japan; Mexico City, Mexico; São Paulo, Brazil and Buenos Aires, Argentina.

      Our facilities are suitable for their respective uses and, in general, are adequate to support our current and anticipated volume of business. We believe that suitable additional space will be available to accommodate expansion of our operations.

      The following information relates to our office facilities in Pleasanton, California:

      In December 1996, we entered into a synthetic lease for a new office facility in Pleasanton, California. This synthetic lease is structured as an operating lease with rental payments commencing upon the completion of the construction, which occurred during the fourth quarter of 1998, and runs for 5 years from that date. The cost for the construction of the facility totaled $70.0 million including interest during the construction period. The rental payments equal the amount of interest which accrues on amounts funded prior to the commencement of the lease payments. The interest rate charged was LIBOR plus 0.625% as measured on the date of each funding rollover. We began accruing interest concurrent with the lessor’s first drawdown of the construction commitment in January 1997. Throughout the construction period, the accrued interest amount, which was approximately $4.5 million as of the end of the construction phase, was added to the construction cost. In 1998, we negotiated an amendment to this lease that extended the term of the lease until February 2003, with an option to renew for an additional three years, subject to certain conditions, or purchase the facility for $70.0 million. If at the end of the lease term we do not purchase the property, we have guaranteed a residual value to the lessor equal to 85% of the lessor’s cost of the facility. As such, the maximum potential loss exposure related to this guarantee is $59.5 million. Under this lease, we are required to maintain compliance with certain financial covenants, are prohibited from making certain payments, including cash dividends and are subject to various other restrictions. As of December 31, 2002, we were in compliance with all covenants. As described in “Subsequent Event,” under Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” on February 27, 2003, the Company exercised its $70.0 million option to purchase the office facility under this lease agreement.

      In September 1998, we purchased two parcels of land in Pleasanton, California for $50.0 million and entered into a five-year synthetic lease agreement for facilities to be constructed on one of the parcels. This synthetic lease was structured as an operating lease with rental payments due upon completion of the

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      In September 1998, we entered into agreements to sell and simultaneously lease back a substantial portion of the space related to the office buildings and corresponding land that we owned in Pleasanton, California. The sales price of approximately $50.0 million resulted in a gain of approximately $24.4 million, which is being amortized over the lease period. The original lease term was 10 years with options to terminate up to 50% of the space after the initial four years of the lease term and the remaining 50% at any time following the fifth year of the lease term. Alternatively, we could have extended the term of the lease in five-year increments up to 20 years. In the third quarter of 2001, we exercised our option to terminate approximately 50% of the leased space, effective September 2002. In the third quarter of 2002, we exercised our second option to terminate all our remaining lease space, effective September 2003, due to our decision to construct a new office building, which is discussed below. Termination fees of $2.8 million have been accrued over the initial term of the lease agreement.

      In May 2002, we began construction of a 180,000 square foot office building on 20 acres of land that we own adjacent to our existing corporate headquarters in Pleasanton, California. We anticipate that the building will cost approximately $45.0 million and will be completed in the third quarter of 2003.(1)

      PeopleSoft is party to various legal disputes and proceedings arising from the ordinary course of general business activities. In the opinion of management, resolution of these matters is not expected to have a material adverse effect on our financial position, results of the operations and cash flows. However, depending on the amount and the timing, an unfavorable resolution of some or all of these matters could materially affect our future results of operations or cash flows in a particular period.

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      No matters were submitted to a vote of security holders during the fourth quarter of 2002.

PART II

	(a)	Our common stock is traded on the Nasdaq National Market (“Nasdaq”) under the symbol PSFT. The following table lists the high and low closing prices for the PeopleSoft Common Stock as reported on the Nasdaq for the last two years.

		We have never paid cash dividends on our common stock. In addition, certain lease agreements for our Pleasanton, California corporate headquarters facilities prohibit the payment of cash dividends without the lessor’s consent.

      (b) As of March 25, 2003, the approximate number of stockholders of record was 2,426.

Other Information

      Certain provisions of our Certificate of Incorporation and Bylaws could delay the removal of incumbent directors and could make a merger, tender offer or proxy contest involving PeopleSoft more difficult, even if such events would be beneficial to the interests of the stockholders. In addition, we have 2,000,000 shares of authorized preferred stock which we may issue in the future without further stockholder approval and upon such terms and conditions, and having such rights, privileges and preferences, as the Board of Directors may determine. The rights of the holders of common stock will be subject to, and may be adversely affected by, the rights of the holders of any preferred stock that may be issued in the future. The issuance of preferred stock, while providing flexibility in connection with possible acquisitions and other corporate purposes, could have the effect of making it more difficult for a third party to acquire, or of discouraging a third party from acquiring, a majority of our outstanding voting stock. In addition, the staggered terms of our Board of Directors could have the effect of delaying or deferring a change in control.

      Under a stockholder rights plan adopted in 1995, each share of our common stock carries the right, under certain circumstances, to purchase equity securities of PeopleSoft or an acquirer. Ten days after a tender offer or acquisition of 20% or more of our common stock, each right may be exercised for $190 to purchase one one-thousandth of one share of our Series A Participating Preferred Stock. Each one one-thousandth of each share of Series A Participating Preferred Stock will generally be afforded economic rights similar to one share of common stock. In addition after such rights are triggered, each right entitles the holder to purchase common stock with a fair value of twice the exercise price or, in certain circumstances, securities of the acquiring company for the exercise price. Each right expires in February 2005, and, during specified periods, we may redeem or exchange each right for $0.01 or one share of common stock, respectively.

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NOTES:

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      This Discussion and Analysis of Financial Condition and Results of Operations contains descriptions of our expectations regarding future trends affecting our business that are subject to risks and uncertainties. Words such as “anticipate,” “believe,” “estimate,” “forecast,” “intended,” “may,” “plan,” “project,” “predict,” “should” and “will” and similar expressions as they relate to PeopleSoft are intended to identify such forward-looking statements. Forward-looking statements contained throughout this Report include, but are not limited to, those identified with a footnote (1) symbol. These forward-looking statements and other forward-looking statements made elsewhere in this document are made in reliance upon safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Future results are subject to risks and uncertainties, which could cause actual results and performance to differ significantly from those contemplated by the forward-looking statements. For a discussion of factors that could affect future results, see “Factors That May Affect Our Future Results or The Market Price of Our Stock.” We undertake no obligation to update the information contained in this Item 7 or elsewhere in this Report.

RESULTS OF OPERATIONS

      The following table indicates the percentage of total revenues and the percentage of period over period growth represented by line items in our consolidated statements of operations:

NM — Not meaningful

      Net income decreased $9.0 million or 5% to $182.6 million in 2002 as compared to $191.6 million in 2001 and increased $45.9 million or 31% to $191.6 million in 2001 as compared to $145.7 million in 2000. Diluted

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      The results of operations for the year ended December 31, 2002, included the following items (after tax): (i) $1.7 million charge for in-process research and development related to the Annuncio Software, Inc. business combination; (ii) $8.7 million charge for in-process research and development related to the acquisition of Momentum Business Applications, Inc.; and (iii) $0.7 million favorable adjustment to reduce existing restructuring reserves to reflect current estimates.

      The results of operations for the year ended December 31, 2001, included the following items (after tax): (i) $4.9 million favorable adjustment to reduce existing restructuring reserves to reflect current estimates; (ii) $1.2 million charge for in-process research and development related to the acquisition of SkillsVillage, Inc. and (iii) $1.9 million charge for in-process research and development related to the acquisition of assets which was otherwise insignificant to us.

      The results of operations for the year ended December 31, 2000, included the following items (after tax): (i) $79.7 million gain from the sale of equity securities; (ii) $28.6 million charge related to product exit charges; and (iii) $2.8 million favorable adjustment to reduce existing restructuring reserves.

Revenues

      Our software products are generally licensed to end-user customers under non-exclusive, perpetual license agreements. Revenue from license fees decreased by 18% to $530.1 million in 2002 from $645.4 million in 2001 and increased by 30% in 2001 from $496.1 million in 2000. The decrease in revenue from license fees in 2002 was primarily due to a global economic downturn during 2002. The increase in revenue from license fees in 2001 resulted primarily from increased licensing activity following the general availability of PeopleSoft 8 applications in 2000. We began shipping our first pure internet application suite, PeopleSoft 8, in September 2000 and began shipping PeopleSoft 8 CRM in June 2001.

      Our services revenue consists of software maintenance fees, consulting fees, customer training fees and other miscellaneous fees. Revenue from services increased by 3% to $1,411.3 million in 2002 from $1,371.0 million in 2001 and increased by 19% in 2001 from $1,154.0 million in 2000. The increase in services revenue in 2002 was primarily attributable to an increase in maintenance revenue of $105.4 million, partially offset by decreases in consulting revenue of $57.0 million and training revenue of $8.1 million. The increase in maintenance revenue is primarily attributable to the growth of our installed base of software applications, arising from sales to both new and existing customers. The decrease in consulting and training revenue is primarily attributable to the global economic downturn. The increase in services revenue in 2001 was primarily attributable to an increase in maintenance revenue of $95.3 million, consulting revenue of $111.0 million and training revenue of $10.7 million. The increase in maintenance revenue was primarily attributable to the growth of our installed base of software applications, arising from sales to both new and existing customers. The increase in consulting and training revenue was primarily attributable to the increased license contracting activity following the general availability of PeopleSoft 8 in 2000. Reductions or slowdowns in our license activity during a given quarter may adversely impact our future services revenue, since these revenues typically follow license activity. Our ability to maintain or increase services revenue in the future depends primarily on our ability to increase our installed customer base, resubscribe existing customers to maintenance agreements, and to maintain or increase our current levels of our professional services business.

      Revenue from development and other services decreased by 93% to $7.5 million in 2002 from $102.7 million in 2001 and decreased 16% in 2001 from $122.3 million in 2000. Cost of development and other services decreased by 93% to $6.8 million in 2002 from $93.1 million in 2001 and decreased 16% in 2001 from $111.1 million in 2000. Revenue from development and other services and the related cost of development and other services decreased in 2002, as Momentum Business Applications, Inc. (“Momentum”) exhausted its development funding. The decreases in 2001 are due to a lower amount of active development projects as compared to 2000 as well as reduced funding available for development projects. On April 9, 2002, we closed a transaction to purchase all the outstanding Class A Common Stock of Momentum. Refer to “Business

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      At December 31, 2002, we were organized by geographic areas, in two operating segments: North America, which includes operations in the U.S. and Canada, and International, which includes operations in all other regions. Revenues from external customers were (in thousands):

      Total revenues from the North America segment decreased by 3% to $1,476.5 million in 2002 from $1,522.1 million in 2001 and increased by 21% in 2001 from $1,261.2 million in 2000. As a percentage of total segment revenues, revenues from the North America segment were 76% in 2002, 75% in 2001 and 76% in 2000. The dollar decrease in revenues from 2001 to 2002 from the North America segment is primarily due to the global economic downturn in 2002. The dollar increase in revenues from 2000 to 2001 from the North America segment is primarily attributable to the sales of additional PeopleSoft applications to our existing installed base and revenues related to new customers licensing software and contracting for services.

      Total revenues from the International segment decreased by 6% to $464.9 million in 2002 from $494.2 million in 2001 and increased 27% in 2001 from $389.0 million in 2000. As a percentage of total segment revenues, revenues from the International segment were 24% in 2002, 25% in 2001 and 24% in 2000. The dollar decrease in revenues from 2001 to 2002 from the International segment is primarily due to the global economic downturn in 2002. The dollar increase in revenues from 2000 to 2001 from the International segment resulted primarily from increased sales attributable to increased globalization of our applications and increased focus on our international operations.

      Revenues from the Europe/ Middle-East/ Africa region represented 14% of total revenues in 2002 and 13% of total revenues in 2001 and 2000. No other international region had revenues equal to or greater than 10% of total revenues in 2002, 2001 or 2000. Revenues attributable to the U.S. were $1,378.4 million in 2002, $1,536.0 million in 2001 and $1,314.3 million in 2000. Revenues originated in each individual foreign country were less than 5% of total revenues during 2002, 2001 and 2000, with the exception of Canada in 2002. Canada had revenues which comprised 5% of total revenues in 2002. “Development and other services” revenue is not considered segment revenue and as such is designated as “Other” for segment disclosure purposes.

Costs and Expenses

      Our software products are based on a combination of internally developed and acquired technology, as well as bundled third party products and technology. Cost of license fees consists principally of royalties, license fees for certain third party software products, amortization of capitalized software costs and product warranty costs. Cost of license fees decreased to $45.1 million in 2002 from $61.3 million in 2001 and increased in 2001 from $38.9 million in 2000. The decrease in cost of license fees in 2002 is primarily a result of a $13.7 million decrease in third party royalty expense resulting from decreased license fee revenue on which such royalties are calculated and an $8.7 million decrease in product warranty costs resulting from a decline in the number of warranty claims. These decreases are partially offset by a $9.7 million increase in

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      Cost of services consists primarily of employee costs and the related infrastructure costs incurred in providing consulting services, post-installation support and training. Cost of services decreased to $661.1 million in 2002 from $744.2 million in 2001 and increased in 2001 from $642.2 million in 2000, representing 47%, 54% and 56% of services revenue in those years. The decrease in cost of services in 2002 is primarily due to a $39.4 million decrease in employee compensation and benefit costs related to decreased incentive compensation expense and headcount reductions, a $12.4 million expense decrease related to the reduction in the utilization of outside consultants, and a $10.7 million decrease in service warranty costs resulting from a decline in the number of warranty claims, as well as general expense reductions associated with improved cost management in the consulting organization. The increase in cost of services in 2001 is primarily the result of an increase in the average headcount, as compared to 2000, which was required to support the growth in the installed customer base. If the demand for services from new and existing customers for installation, consulting, maintenance and training services increases over the next several quarters, we anticipate that our cost of services may increase.(1)

      Sales and marketing expense was $514.8 million in 2002, $513.9 million in 2001 and $448.0 million in 2000, representing 26%, 24% and 26% of total revenues in those years. The increase in sales and marketing expense in 2002 is primarily attributable to a $30.2 million increase in salaries due to sales and marketing headcount increases and a $6.4 million increase in travel expense consistent with the increase in headcount, partially offset by a $21.9 million decrease in sales commissions related to decreased license fee revenue and a $14.3 million decrease in marketing programs and advertising. The increase in sales and marketing expense in 2001 is primarily attributable to costs associated with the growth in the sales force and increased marketing campaigns. Sales and marketing expense may increase in future periods as we increase our sales force and marketing and advertising expenses to improve our competitive positioning in the marketplace and to promote brand awareness and global recognition of our products.(1)

      Product development expense consists of costs primarily related to our software developers and the associated infrastructure costs required to fund product development initiatives. Product development expense was $341.2 million in 2002, $299.0 million in 2001 and $320.5 million in 2000, representing 18%, 14% and 18% of total revenues in those years. The increase in product development expense in 2002 is related to the decrease in development costs billed to Momentum as developers were redeployed to work on internal development initiatives. The decrease in product development expense in 2001 is primarily attributable to fewer outside contractors being used for development initiatives as a result of the completion of PeopleSoft 8 in 2000. In 2000, we capitalized product development costs of $4.2 million. We did not capitalize any development costs in 2002 or 2001, other than product development costs acquired through business combinations or purchased from third parties. Our current focus is to continue to extend our software offerings by delivering enhanced functionality and further develop new applications in our integrated application suites: Human Capital Management, Financial Management Solutions, Customer Relationship Management and Supply Chain Management.(1)

      General and administrative expense was $117.1 million in 2002, $155.6 million in 2001 and $108.1 million in 2000, representing 6%, 7% and 6% of total revenues in those years. The decrease in general and administrative expense in 2002 is primarily attributable to a $12.4 million decrease in the amortization of goodwill in connection with the adoption of Statement of Financial Accounting Standards No. 142, “Goodwill and Other Intangible Assets,” (“SFAS 142”) on January 1, 2002, a $10.5 million decrease in non-product related litigation expense, a $9.5 million decrease in telecommunications costs, a $4.7 million decrease in bad debt expense associated with process improvements related to our accounts receivable collections and general expense reductions associated with improved cost management. The increase in general and administrative expense in 2001 is partially due to a 16% increase in average administrative headcount from 2000 and

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Product Exit Charges

      We did not record any product exit charges in 2002 or 2001. During the third quarter of 2000, we recorded product exit charges in the amount of $35.9 million related to the impairment and write-off of the unamortized cost of capitalized software, customer list and goodwill related to two products acquired as part of the Intrepid Systems, Inc. and TriMark Technologies, Inc. business combinations.

Restructuring, Acquisition and Other Charges

      The following table sets forth the components of “Restructuring, acquisition and other charges” (in thousands):

      Restructuring reserves adjustments of $1.1 million, $5.1 million and $3.5 million in 2002, 2001 and 2000 consist of favorable adjustments to existing restructuring reserves to reflect then current estimates. Acquired in-process research and development charges of $11.5 million in 2002 are attributable to a $2.8 million charge related to the Annuncio Software, Inc. business combination and a $8.7 million charge related to the acquisition of Momentum Business Applications, Inc. Acquired in-process research and development charges of $4.9 million in 2001 are attributable to a $3.0 million charge related to an acquisition which was otherwise insignificant to PeopleSoft and a $1.9 million charge related to the acquisition of SkillsVillage, Inc. For additional discussion of the acquired in-process research and development charges see “Business Combinations.” In the future, if we consummate business combinations and technology purchases, we may incur additional in-process research and development charges which may impact our results of operations.(1)

Other Income, Net

      The following table sets forth the components of “Other income, net” (in thousands):

      The decrease in interest income during 2002 was primarily due to a decrease in interest rates. The gain on sale of equity securities in 2000 relates to the sale of investments in publicly traded start-up companies.

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Provision for Income Taxes

      Our income tax provision increased to $100.6 million in 2002 from $98.0 million in 2001 and increased in 2001 from $91.5 million in 2000. The effective tax rate was 35.5% in 2002, 33.8% in 2001 and 38.6% in 2000. Exclusive of in-process research and development, adjustments to restructuring reserves, equity investment gains and product exit charges, the effective tax rate was 34.5% for 2002, 2001 and 2000. The net deferred tax assets at December 31, 2002 were $189.7 million. In accordance with Statement of Financial Accounting Standards No. 109, “Accounting for Income Taxes,” (“SFAS 109”), the valuation of these net deferred tax assets is based upon an estimate of both the timing and amount of future taxable income. Future taxable income may be derived from future operations, subsequent reversals of deferred tax liabilities and other sources.(1)

Business Combinations

      During the two years ended December 31, 2002, we completed the acquisitions of Momentum Business Applications, Inc. (“Momentum”) and SkillsVillage, Inc. (“SkillsVillage”) and acquired technology from Annuncio Software, Inc. (“Annuncio”). These transactions were accounted for using the purchase method of accounting and, accordingly, the results of operations subsequent to the acquisition date are included in the accompanying consolidated statements of operations. Additionally, during the three years ended December 31, 2002, we completed five other acquisitions that were not significant to our financial statements. As part of our strategy we anticipate additional acquisition activity. Future acquisitions may be significant to us on either an individual or an aggregate basis.(1)

      In January 2002, we purchased the intellectual property and certain assets of Annuncio, a privately held company, for $25.0 million in cash. The transaction was treated as an acquisition of a business and was accounted for using the purchase method of accounting. The intellectual property of Annuncio consists of marketing automation software solutions for email and web-based customer interactions.

      We allocated the excess purchase price over the fair value of the net tangible liabilities acquired of $0.7 million to the following intangible assets: $16.6 million to goodwill, $3.2 million to capitalized software, $2.8 million to in-process research and development, $1.5 million to non-compete agreements, $1.0 million to customer relationships and $0.6 million to other intangible assets. The capitalized intangible assets are being amortized on a straight-line basis over estimated useful lives of one to three years.

      Amounts allocated to in-process research and development were expensed as “Restructuring, acquisition and other charges” in the accompanying consolidated statements of operations, because the purchased research and development had no alternative uses, and had not reached technological feasibility. The in-process research and development related to additional functionality for Annuncio’s marketing automation software products. At the date of the acquisition, the Annuncio products under development were approximately 90% complete and were subsequently completed during the first quarter of 2002 at a cost of approximately $0.5 million.

      In performing the purchase price allocation, we considered, among other factors, our future use of the acquired assets and analyses of historical financial performance and estimates of future performance of Annuncio’s products. We estimated that we would recognize revenue on the projects related to the in-process technology from 2002 to 2005. The projected incremental cash flows were discounted to their present value using discount rates of 14% and 25% for developed and in-process technology. These discount rates were determined after consideration of our rate of return on debt capital and equity, the weighted average return on invested capital and the risks associated with achieving anticipated sales related to the technology acquired from Annuncio. Risks include achieving anticipated levels of market acceptance and penetration, successful

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      Our financial projections may ultimately prove to be inaccurate and unanticipated events and circumstances may occur. Therefore, no assurance can be given that the underlying assumptions used to forecast revenues and costs to develop such projects will transpire as projected.

      On January 29, 2002, we exercised an option to purchase all the outstanding Class A Common Stock of Momentum for $90.0 million in cash. The transaction closed in April 2002 and was accounted for using the purchase method of accounting.

      We allocated the excess purchase price over the fair value of the net tangible liabilities acquired of $0.2 million to the following assets and liabilities: $63.1 million to deferred tax assets, $29.5 million to capitalized software, $8.7 million to in-process research and development and $11.1 million to deferred tax liabilities. The capitalized software products are being amortized on a straight-line basis over an estimated useful life of five years.

      Amounts allocated to in-process research and development were expensed as “Restructuring, acquisition and other charges” in the accompanying consolidated statements of operations because the purchased research and development had no alternative uses and had not reached technological feasibility. Fourteen in-process research and development projects were identified. Five projects related to Human Capital Management application suites and accounted for 63% of the amount allocated to in-process research and development. A portal application project accounted for 23% of the amount allocated to in-process research and development. Various other projects accounted for the remaining 14% allocated to in-process research and development. At December 31, 2002, the Momentum products in process were expected to be completed by the first half of 2003. The remaining efforts primarily include completion of coding and system and platform testing.(1)

      In performing the purchase price allocation, we considered, among other factors, future use of the acquired assets, analyses of historical financial performance and estimates of future performance of Momentum’s products, and an analysis of future royalty payments payable to Momentum by us. An estimation of the future royalty payments that we would not be required to pay was the basis for the valuation analysis. We estimated that we would avoid royalty payments on the projects related to the in-process technology from 2002 to 2006. The after-tax royalty savings was discounted to its present value using discount rates of 12% and 20% for developed and in-process technology. These discount rates were determined after consideration of our rate of return on debt capital and equity, the weighted average return on invested capital and the risks associated with achieving anticipated sales related to the technology acquired from Momentum. Risks included achieving anticipated levels of market acceptance and penetration, successful completion of various research and development efforts, market growth rates and risks related to the impact of potential changes in future target markets.

      Our financial projections may ultimately prove to be inaccurate and unanticipated events and circumstances may occur. Therefore, no assurance can be given that the underlying assumptions used to forecast revenues and costs to develop such projects will transpire as projected.

      On May 31, 2001, we acquired the assets and assumed liabilities of SkillsVillage, in a business combination accounted for under the purchase method of accounting. The assets acquired included technology to automate the procurement and management of contract services. The aggregate purchase price of $31.5 million included the issuance of 398,029 shares of our common stock with a fair value of $16.1 million, the issuance of options to SkillsVillage employees to purchase common stock with a fair value of $2.2 million,

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      We allocated the excess purchase price over the fair value of the net tangible assets acquired of $2.3 million to the following intangible assets: $21.7 million to goodwill, $4.8 million to completed products and technology, $1.9 million to in-process research and development and $0.8 million to assembled workforce. The capitalized completed products and technology are being amortized based on an estimated useful life of four years.

      Amounts allocated to in-process research and development were expensed as “Restructuring, acquisition and other charges” in the accompanying consolidated statements of operations because the purchased research and development had no alternative uses and had not reached technological feasibility. The in-process research and development relates to additional functionality for SkillsVillage’s software. At the date of the acquisition, the SkillsVillage product under development was approximately 82% complete and was subsequently completed during the third quarter of 2001 at a cost of approximately $1.3 million.

      In performing the purchase price allocation, we considered, among other factors, future use of the acquired assets and analyses of historical financial performance and estimates of future performance of SkillsVillage’s products. The projected incremental cash flows were discounted back to their present value using discount rates of 18% and 23% for developed and in-process technology, respectively. These discount rates were determined after consideration of our rate of return on debt capital and equity, the weighted average return on invested capital and the risks associated with achieving anticipated sales related to the technology acquired from SkillsVillage. Risks included achieving anticipated levels of market acceptance and penetration, market growth rates and risks related to the impact of potential changes in future target markets.

      Our financial projections may ultimately prove to be inaccurate and unanticipated events and circumstances may occur. Therefore, no assurance can be given that the underlying assumptions used to forecast revenues and costs to develop such projects will transpire as projected.

Critical Accounting Policies and Estimates

      The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) requires us to utilize accounting policies and make estimates and assumptions that affect our reported results. Our significant accounting policies are described in Note 1 in our “Notes to Consolidated Financial Statements.” We believe policies and estimates related to revenue recognition, capitalized software, allowance for doubtful accounts, product and service warranty reserve and deferred tax asset valuation allowance represent our critical accounting policies and estimates. Future results may differ from our estimates under different assumptions or conditions.

      We derive revenues from the following sources: software license revenue and services revenue, which primarily consists of maintenance, consulting and training. We recognize revenue in accordance with the Securities and Exchange Commissions Staff Accounting Bulletin No. 101, “Revenue Recognition in Financial Statements,” the American Institute of Certified Public Accountants’ Statement of Position (“SOP”) 97-2, “Software Revenue Recognition,” as amended by SOP 98-9, “Modification of SOP 97-2, Software Revenue Recognition, with Respect to Certain Transactions,” and other authoritative accounting literature.

      License Fee Revenue. For software license agreements that do not require significant modification or customization of the software, we recognize revenue when persuasive evidence of an agreement exists, delivery of the product has occurred, the license fee is fixed or determinable and collection is probable. Our consulting services generally do not involve significant modification or customization of the licensed software. We use the residual method to recognize revenue when a license agreement includes one or more elements to be delivered

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      If the license fee due from the customer is not fixed or determinable, revenue is recognized as payment becomes due, assuming all other revenue recognition criteria have been met. We consider arrangements with extended payment terms not to be fixed or determinable. Revenue arrangements with resellers are recognized when we receive persuasive evidence that the reseller has sold the products to an end user customer.

      If provided in a license agreement, acceptance provisions generally grant customers a right of refund or replacement only if the licensed software does not perform in accordance with its published specifications. We believe the likelihood of non-acceptance in these situations is remote and generally recognize revenue when all other criteria of revenue recognition are met. If such a determination cannot be made, revenue is recognized upon the earlier of receipt of written acceptance or when the acceptance period has lapsed.

      Services Revenue. Maintenance revenue is recognized ratably over the term of the maintenance agreement, typically one year. Consulting and training revenues are usually charged on a time and materials basis and are recognized as the services are performed. Revenue from certain fixed price contracts is recognized on a percentage of completion basis, which involves the use of estimates. If we do not have a sufficient basis to measure the progress towards completion, revenue is recognized when the project is completed or when we receive final acceptance from the customer.

      We account for the development cost of software intended for sale in accordance with Statement of Financial Accounting Standards No. 86, “Accounting for Costs of Computer Software to be Sold, Leased, or Otherwise Marketed,” (“SFAS 86”). SFAS 86 requires product development costs to be charged to expense as incurred until technological feasibility is attained. Technological feasibility is attained when our software has completed system testing and has been determined viable for its intended use. The time between the attainment of technological feasibility and completion of software development has been short with immaterial amounts of development costs incurred during this period. Accordingly, we did not capitalize any development costs in 2002 or 2001, other than product development costs acquired through business combinations or purchased from third parties. We capitalize software acquired through technology purchases and business combinations if the related software under development has reached technological feasibility or if there are alternative future uses for the software.

      We evaluate the recoverability of capitalized software based on estimated future gross revenues reduced by the estimated cost of completing the products and of performing maintenance and customer support. If our gross revenues were to be significantly less than our estimates, the net realizable value of our capitalized software intended for sale would be impaired.

      We maintain an allowance for doubtful accounts at an amount we estimate to be sufficient to provide adequate protection against losses resulting from collecting less than full payment on our receivables. We record an allowance for receivables based on a percentage of revenues. Additionally, individual overdue accounts are reviewed, and an additional allowance is recorded when determined necessary to state receivables at realizable value. In judging the adequacy of the allowance for doubtful accounts, we consider multiple factors including historical bad debt experience, the general economic environment, and the aging of our receivables. A considerable amount of judgment is required when we assess the realization of receivables, including assessing the probability of collection and the current creditworthiness of each customer. If the financial condition of our customers were to deteriorate, resulting in an impairment of their ability to make payments, an additional provision for doubtful accounts may be required.

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      We provide for the estimated cost of product and service warranties based on specific warranty claims received, provided that it is probable that a liability exists, and provided the cost to repair or otherwise satisfy the claim can be reasonably estimated. The amount of the reserve recorded is equal to the costs to repair or otherwise satisfy the claim. If existing claims are settled for amounts which differ from our estimates, or if the estimated monetary value of the future warranty claims were to increase or decrease, revisions to the estimated warranty liability would be required and the warranty expense would change from current levels.

      We account for income taxes in accordance with SFAS 109. We assess the likelihood that our net deferred tax assets will be recovered from future taxable income and to the extent we believe that recovery is not likely, we establish a valuation allowance. We consider future taxable income and ongoing prudent and feasible tax planning strategies in assessing the amount of the valuation allowance. However, adjustments could be required in the future if we determine that the amount to be realized is greater or less than the amount we have recorded. Our valuation allowance relates to established allowances on net operating losses incurred in foreign jurisdictions and other foreign tax benefits as well as on operating loss carryforwards in state jurisdictions of acquired companies.

Newly Adopted and Recently Issued Accounting Standards

      On January 1, 2002, we adopted Statement of Financial Accounting Standards No. 142, “Goodwill and Other Intangible Assets,” (“SFAS 142”). SFAS 142 requires that goodwill no longer be amortized and that goodwill be tested annually for impairment or more frequently if events and circumstances warrant. The application of the provisions of SFAS 142 resulted in a reduction of goodwill amortization expense of $12.4 million for the year ended December 31, 2002. During 2002, we completed our transitional goodwill impairment test (comparing the fair value of each of our reporting units as of January 1, 2002 to the carrying value, which includes goodwill) and determined that the carrying amount of goodwill was not impaired. At December 31, 2002, we had goodwill of $54.3 million.

      On January 1, 2002, we adopted Statement of Financial Accounting Standards No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets,” (“SFAS 144”). SFAS 144 supercedes SFAS No. 121, “Accounting for the Impairment of Long-Lived Assets and Long-Lived Assets to be Disposed of,” and elements of APB 30, “Reporting the Results of Operations — Reporting the Effects on Disposal of a Segment of a Business and Extraordinary, Unusual or Infrequently Occurring Events and Transactions.” SFAS 144 establishes a single-accounting model for long-lived assets to be disposed of while maintaining many of the provisions relating to impairment testing and valuation. The adoption of this statement did not have an impact on our consolidated financial position, results of operations or cash flows.

      On January 1, 2002, we adopted Financial Accounting Standards Board Emerging Issues Task Force No. 01-14, “Income Statement Characterization of Reimbursements Received for ‘Out-of-Pocket’ Expenses Incurred,” (“EITF 01-14”). EITF 01-14 requires companies to characterize reimbursements received for out-of-pocket expenses incurred as revenue and to reclassify prior period financial statements to conform to the current year presentation for comparative purposes. Our “Services” revenue now includes reimbursable out-of-pocket expenses and “Cost of services” includes the costs associated with reimbursable out-of-pocket expenses. Prior to the adoption of EITF 01-14, our historical financial statements included these expenses as net amounts in “Cost of services.” The adoption of EITF 01-14 did not have a significant impact on our services gross margin percentage and had no effect on net income. Reimbursable out-of-pocket expenses reclassified as services revenue were $45.8 million and $35.9 million for the years ended December 31, 2001 and 2000.

      In April 2002, Statement of Financial Accounting Standards No. 145, “Rescission of FASB Statements No. 4, 44 and 64, Amendment of FASB Statement No. 13, and Technical Corrections,” was issued. This statement provides guidance on the classification of gains and losses from the extinguishment of debt and on

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      In June 2002, Statement of Financial Accounting Standards No. 146, “Accounting for Costs Associated with Exit or Disposal Activities,” (“SFAS 146”) was issued. This statement provides guidance on the recognition and measurement of liabilities associated with disposal activities and is effective for us for restructurings initiated after December 31, 2002. Under SFAS 146, companies will record the fair value of exit or disposal costs when they are incurred rather than at the date of a commitment to an exit or disposal plan. The adoption of SFAS 146 may result in us recognizing the cost of future restructuring activities, if any, over a period of time rather than in one reporting period.

      In November 2002, the Financial Accounting Standards Board issued Interpretation No. 45, “Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Guarantees of Indebtedness of Others” (“FIN 45”). FIN 45 requires us to recognize, at the inception of a guarantee, a liability for the fair value of the obligation undertaken in the issuance of the guarantee. FIN 45 is effective for guarantees issued or modified after December 31, 2002. The disclosure requirements effective for the year ending December 31, 2002, expand the disclosures required by a guarantor about its obligations under a guarantee. The adoption of the accounting requirements of this statement did not impact our financial position, results of operations, or cash flows. The adoption of the disclosure requirements of this statement resulted in additional disclosures related to our product and service warranty reserve, customer indemnifications and synthetic lease guarantees.

      In December 2002, Statement of Financial Accounting Standards No. 148, “Accounting for Stock-Based Compensation-Transition and Disclosure,” (“SFAS 148”) was issued. SFAS 148 amends Statement of Financial Accounting Standards No. 123, “Accounting for Stock-Based Compensation,” (“SFAS 123”) to provide alternative methods of transition for a voluntary change to the fair value method of accounting for stock-based employee compensation. In addition, SFAS 148 amends the disclosure requirements of SFAS 123 to require prominent disclosures in both annual and interim financial statements about the method of accounting for stock-based employee compensation and the effect of the method used on the reported results. The disclosure provisions of SFAS 148 are effective for financial statements for fiscal years ending after December 15, 2002 and interim periods beginning after December 15, 2002. The adoption of this statement did not impact our financial position, results of operations, or cash flows.

      In January 2003, the Financial Accounting Standards Board issued Interpretation No. 46, “Consolidation of Variable Interest Entities” (“FIN 46”) that addresses the consolidation of variable interest entities. The interpretation provides guidance for determining when a primary beneficiary should consolidate a variable interest entity, or equivalent structure, that functions to support the activities of the primary beneficiary. The interpretation is effective after January 31, 2003 for newly created variable interest entities. For variable interest entities created before February 1, 2003, the interpretation is effective as of the beginning of the first interim or annual reporting period beginning after June 15, 2003. This interpretation is applicable to our synthetic lease, entered into in September 1998, under which certain office facilities were constructed in Pleasanton, California at a cost of $105.0 million. We may be required to consolidate the financial position and operating results related to this synthetic lease if we do not exercise our purchase option before July 1, 2003.

Subsequent Event

      We have two synthetic lease arrangements related to certain office facilities in Pleasanton, California, which were constructed for $70.0 million and $105.0 million, as described in further detail in Item 2 “Properties.” We have options to purchase the office facilities under these synthetic lease arrangements. On February 27, 2003, we exercised our $70.0 million option to purchase the office facilities under the synthetic lease agreement entered into in December 1996.

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LIQUIDITY AND CAPITAL RESOURCES

      At December 31, 2002, we had $319.3 million in cash and cash equivalents and $1.6 billion in short-term investments, consisting principally of investments in interest-bearing demand deposit accounts with various financial institutions, tax-advantaged money market funds and highly liquid debt securities of corporations and municipalities. Our working capital was $1.6 billion at December 31, 2002. We believe that the combination of cash and cash equivalents and short-term investment balances and the potential cash flow from operations will be sufficient, at least through the next twelve months, to satisfy our cash requirements, including $175.0 million for the contemplated purchases of certain office facilities under our synthetic lease arrangements and the expected purchases of property and equipment.(1)

      Cash provided by operating activities was $389.1 million during 2002, $467.0 million during 2001 and $121.9 million during 2000. The decrease in cash from operating activities during 2002 is primarily due to a decrease in the tax benefit from employee stock transactions, a decrease in the cash from accounts receivable and a decrease in cash from accounts payable, accrued liabilities and accrued compensation, partially offset by an increase in cash provided from refunded income taxes. The increase in cash from operating activities during 2001 is primarily due to an increase in net income, decrease in accounts receivable, increase in depreciation and amortization, decrease in the gain on sale of investments and increase in the tax benefits from exercise of stock options, partially offset by the decrease in deferred revenues and cash received from sale of accounts receivable.

      Cash used in investing activities was $584.2 million during 2002, $909.1 million during 2001 and $53.6 million during 2000. Our principal use of cash in investing activities during 2002 resulted from net purchases of investments, principally of a short-term duration, of $370.0 million, purchases of property and equipment of $93.3 million and acquisitions of $120.9 million, net of cash acquired. Our principal use of cash in investing activities during 2001 resulted from net purchases of investments, principally of a short-term duration, of $790.7 million, purchases of property and equipment of $92.0 million and acquisitions of $26.4 million, net of cash acquired. Our principal use of cash in investing activities during 2000 resulted from purchases of property and equipment of $102.3 million, which were partially offset by net proceeds from maturities and sales of investments of $52.7 million.

      Cash provided by financing activities was $58.7 million during 2002 and $238.6 million during 2001 and $169.9 million during 2000. The principal source of cash provided by financing activities during 2002 was proceeds from the exercise of common stock options by employees and issuance of stock under the employee stock purchase program totaling $115.7 million, which was partially offset by cash used for the retirement of debt of $57.0 million. The principal source of cash provided by financing activities during 2001 was proceeds from the exercise of common stock options by employees and issuance of stock under the employee stock purchase program totaling $269.2 million, which was partially offset by $20.0 million in purchases of treasury stock under the $100.0 million share repurchase plan authorized by the Board of Directors in 2000 and $10.5 million repurchase of convertible subordinate debt, net. The principal source of cash provided by financing activities during 2000 was proceeds from the exercise of common stock options by employees and issuance of stock under the employee stock purchase program totaling $185.8 million, which was partially offset by $15.0 million in purchases of treasury stock.

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Contractual Obligations

      The following summarizes our contractual obligations at December 31, 2002 and the effect these contractual obligations are expected to have on our liquidity and cash flows in future periods (in millions).

Commercial Commitments

      We lease certain office facilities in Pleasanton, California under synthetic lease arrangements, which are accounted for as operating leases. The combined cost for the construction of the facilities was $175.0 million and we pay interest to the lessors based on LIBOR plus a margin. We have options to renew the leases or purchase the related facilities that are exercisable in February 2003 for $70.0 million and in September 2003 for the remaining $105.0 million. If at the end of the lease terms, we do not purchase the properties, we have guaranteed residual values equal to 85% of the lessor’s cost of construction. As such, the maximum potential loss exposure related to these guarantees is $148.8 million. Based on current real estate market conditions, we do not believe that it is probable that we will incur a loss related to these guarantees. Under these leases, we are required to maintain compliance with certain financial covenants, are prohibited from making certain payments, including cash dividends and are subject to various other restrictions. As of December 31, 2002, we were in compliance with all covenants. As described in “Subsequent Event,” under Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” on February 27, 2003, we elected to exercise our option to purchase office facilities for $70.0 million under the synthetic lease arrangement entered into in December 1996.(1)

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FACTORS THAT MAY AFFECT OUR FUTURE RESULTS

      Management’s Discussion and Analysis of Financial Condition and Results of Operations and other sections of this Annual Report on Form 10-K contain descriptions of our expectations regarding future trends affecting our business that are subject to risks and uncertainties. Words such as “anticipate,” “believe,” “estimate,” “forecast,” “intended,” “may,” “plan,” “project,” “predict,” “should” and “will” and similar expressions as they relate to PeopleSoft are intended to identify such forward-looking statements. Forward-looking statements contained throughout this Annual Report include, but are not limited to, those identified with a footnote (1) symbol. We may also make other forward-looking statements from time to time, both written and oral. Forward-looking statements apply as of the date they are made and we undertake no obligation to update the information to reflect changes that occur after that date. The actual results may differ materially from those projected in any such forward-looking statements due to a number of factors, including those set forth below and elsewhere in this Report.

      We operate in a dynamic and rapidly changing environment that involves numerous risks and uncertainties. The following section describes some, but not all, of these risks and uncertainties that we believe may adversely affect our business, financial condition or results of operations. This section should be read in conjunction with the audited Consolidated Financial Statements and Notes thereto, and Management’s Discussion and Analysis of Financial Condition and Results of Operations contained elsewhere in this Report.

Continued regional and/or global economic, political and market conditions may cause a decrease in demand for our software and related services which may negatively affect our revenue and operating results.

      Our revenue and profitability depend on the overall demand for our software and related services. Regional and/or global changes in the economy and financial markets and political instability in geographic areas have resulted in companies reducing spending for technology projects generally and the delay or reconsideration of potential purchases of our products and related services. The prospect of a prolonged war may further impact the purchasing decisions of current or potential customers. Future declines in demand for our products and/or services could adversely affect our revenues and operating results.

Our quarterly revenues are difficult to predict and may fluctuate substantially, which may adversely affect our net income.

      Our revenues and results of operations can be difficult to predict and may fluctuate substantially from quarter to quarter. Our expense levels, operating costs and hiring plans are based on projections of future revenues. If our actual revenues fall below expectations, our net income may be adversely affected. Factors that may affect the predictability of actual revenues include the following:

	•	our sales cycle can vary as a result of the complexity of a customer’s overall business needs and may extend over one or more quarters;
	•	the complexity and size of license transactions can result in protracted negotiations;
	•	a significant number of our license agreements are typically completed within the last few weeks of the quarter and purchasing decisions may be delayed to future quarters;
	•	the effect of economic downturns and political conditions may result in decreased product demand, price erosion, and other factors that may substantially reduce license and services revenue;
	•	customers may unexpectedly postpone or cancel anticipated system replacement or new system implementation due to changes in strategic priorities, project objectives, budgetary constraints, internal purchasing processes or company management;
	•	changes in our competitors’ and our own pricing policies and discount plans may affect customer purchasing patterns and decisions; and

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	•	the number, timing and significance of our competitors’ and our own software product enhancements and new software product announcements may affect purchasing decisions.

Our future revenue is dependent in part upon our installed customer base continuing to license additional products, renew maintenance and purchase additional services.

      Our installed customer base has traditionally generated additional new license and service revenues. Maintenance is generally renewable annually at a customer’s option, and there are no mandatory payment obligations or obligations to license additional software. In addition, customers may not necessarily license additional products or contract for additional services or maintenance. If our customers fail to renew their maintenance or license additional products or contract for additional services, our revenues could decrease and our operating results could be adversely affected.

We may be required to defer recognition of license revenue for a significant period of time after entering into an agreement, which could negatively impact our results of operations.

      We may have to delay recognizing license related revenue for a significant period of time for a variety of types of transactions, including:

	•	transactions that include both currently deliverable software products and software products that are under development or contain other currently undeliverable elements;
	•	transactions where the customer demands services that include significant modifications, customizations or complex interfaces that could delay product delivery or acceptance;
	•	transactions that involve non-standard acceptance criteria or identified product-related performance issues; and
	•	transactions that include contingency-based payment terms or fees.

      These factors and other specific accounting requirements for software revenue recognition, require that we have very precise terms in our license agreements to allow us to recognize revenue when we initially deliver software or perform services. Although we have a standard form of license agreement that meets the criteria for current revenue recognition on delivered elements, we negotiate and revise these terms and conditions in some transactions. Sometimes we may license our software or provide service with terms and conditions that do not permit revenue recognition at the time of delivery or even as work on the project is completed.

If accounting interpretations relating to revenue recognition change, our reported revenues could decline or we could be forced to make changes in our business practices.

      Over the past several years, the American Institute of Certified Public Accountants has issued Statement of Position (“SOP”) 97-2, “Software Revenue Recognition,” and SOP 98-9, “Modification of SOP 97-2, Software Revenue Recognition, With Respect to Certain Transactions.” In addition, in December 1999, the Securities and Exchange Commission staff issued Staff Accounting Bulletin No. 101, “Revenue Recognition in Financial Statements,” (“SAB 101”) which explains how the SEC staff believes existing revenue recognition rules should be applied to or interpreted for transactions not specifically addressed by existing rules. These standards address software revenue recognition matters primarily from a conceptual level and do not include specific implementation guidance. We believe that our revenue has been recognized in compliance with SOP 97-2, SOP 98-9 and SAB 101.

      However, the accounting profession and regulatory agencies continue to discuss various provisions of these pronouncements with the objective of providing additional guidance on their application. These discussions and the issuance of new interpretations, once finalized, could lead to unanticipated reductions in recognized revenue. They could also drive significant adjustments to our business practices which could result in increased administrative costs, lengthened sales cycles and other changes which could adversely affect our reported revenues and results of operations.

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Increases in services revenue as a percentage of total revenues could decrease overall margins and adversely affect our operating results.

      We realize lower margins on services revenue than on license revenues. In addition, we may contract with certain third parties to supplement the services we provide to customers, which generally yields lower gross margins than our service business. As a result, if services revenue increases as a percentage of total revenue or if we increase our use of third parties to provide such services, our gross margins will be lower and our operating results may be adversely affected.

Acquisitions may present risks, and we may be unable to achieve the financial and strategic goals intended at the time of any acquisition.

      As a component of our strategy, we acquire or invest in companies, products or technologies, and may enter into joint ventures and strategic alliances with other companies. The risks we commonly encounter in such transactions include:

	•	we may have difficulty assimilating the operations and personnel of the acquired company;
	•	we may have difficulty effectively integrating the acquired technologies or products with our current products and technologies;
	•	our ongoing business may be disrupted by transition and integration issues;
	•	we may not be able to retain key technical and managerial personnel from the acquired business;
	•	we may be unable to achieve the financial and strategic goals for the acquired and combined businesses;
	•	we may have difficulty in maintaining controls, procedures and policies during the transition and integration;
	•	our relationships with partner companies or third party providers of technology or products could be adversely affected;
	•	our relationships with employees and customers could be impaired;
	•	our due diligence process may fail to identify significant issues with product quality, product architecture, legal and financial contingencies, and product development, among other things; and
	•	we may be required to sustain significant exit charges if products acquired in business combinations are unsuccessful.

Our margins may be reduced if we need to lower prices or offer other favorable terms on our products and services to meet competitive pressures in our industry.

      We compete with a variety of software vendors in all of our major product lines, including vendors of enterprise application software, manufacturing software applications, CRM applications, human capital management software and financial management solutions software. In addition, we compete with numerous small firms that offer products with new or advanced features. Some of our competitors may have advantages over us due to their significant worldwide presence, longer operating and product development history, and substantially greater technical and marketing resources, or exclusive intellectual property rights. At least one competitor has a larger installed base than we do.

      If competitors offer more favorable pricing, payment terms, contractual implementation terms, or product or service warranties, or offer product functionality which we do not currently provide, we may need to lower prices or offer other favorable terms in order to compete successfully. Any such changes would be likely to reduce margins and may adversely affect operating results.

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If we fail to compete effectively and introduce new or improved products and service offerings, our results of operations and the financial condition of the business will suffer.

      The market for our software products is intensely competitive and is characterized by rapid technological change, evolving industry standards, changes in customer requirements and frequent new product introductions and enhancements. The competitive environment demands that we constantly improve our existing products and create new products. Our future success may depend in part upon our ability to:

	•	improve our existing products and develop new ones to keep pace with technological developments, including developments related to the internet;
	•	successfully integrate third party products;
	•	enter new markets;
	•	satisfy increasingly sophisticated customer requirements; and
	•	maintain market acceptance.

      If we are unable to meet these challenges, our results of operations and our financial condition will be adversely affected.

Market acceptance of new platforms and operating environments may require us to undergo the expense of developing and maintaining compatible product lines.

      Although our software products can be licensed for use with a variety of popular industry standard relational database management system platforms, there may be future or existing platforms that achieve popularity in the marketplace which may not be architecturally compatible with our software product design. Moreover, future or existing user interfaces that achieve popularity within the business application marketplace may or may not be architecturally compatible with our current software product design. Developing and maintaining consistent software product performance characteristics across all of these combinations could place a significant strain on our resources and software product release schedules which could adversely affect revenue and results of operations. To maintain software performance across accepted platforms and operating environments, or to achieve market acceptance of those that we support, or to adapt to popular new ones, our expenses may increase and our sales and revenues may be adversely affected.

As our international business grows, we will become increasingly subject to currency risks and other costs and contingencies that could adversely affect our results.

      We continue to invest in the expansion of our international operations. The global reach of our business could cause us to be subject to unexpected, uncontrollable and rapidly changing economic and political conditions that could adversely affect our results of operations. The following factors, among others, present risks that could have an adverse impact on our business:

	•	conducting business in currencies other than United States dollars subjects us to currency controls and fluctuations in currency exchange rates;
	•	inability to hedge the currency risk in some transactions because of uncertainty or the inability to reasonably estimate our foreign exchange exposure;
	•	increased cost and development time required to adapt our products to local markets;
	•	lack of experience in a particular geographic market;
	•	legal, regulatory, social, political, labor or economic uncertainties in a specific country or region, including loss or modification of exemptions for taxes and tariffs, increased withholding or other taxes on payments by subsidiaries, import and export license requirements, trade tariffs or restrictions, war, terrorism and civil unrest; and
	•	higher operating costs due to local laws or regulation.

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Our future success depends on our ability to continue to retain and attract qualified employees.

      We believe that our future success depends upon our ability to continue to train, retain, effectively manage and attract highly skilled technical, managerial, sales and marketing personnel. If our efforts in these areas are not successful, our costs may increase, development and sales efforts may be hindered and our customer service may be degraded. Although we invest significant resources in recruiting and retaining employees, there is intense competition for personnel in the software industry. From time to time, we experience difficulties in locating enough highly qualified candidates in desired geographic locations, or with required industry-specific expertise.

The loss of key personnel could have an adverse effect on our operations and stock price.

      We believe that there are certain key employees within the organization, primarily in the senior management team, who are necessary for us to meet our objectives. Due to the competitive employment nature of the software industry, there is a risk that we will not be able to retain these key employees. The loss of one or more key employees could adversely affect our continued operations. In addition, uncertainty created by turnover of key employees could result in reduced confidence in our financial performance which could cause fluctuations in our stock price and result in further turnover of our employees.

We may be required to undertake a costly redesign of our products if third party software development tools become an industry standard.

      Our software products include a suite of proprietary software development tools, known as PeopleTools®, which are fundamental to their effective use. While no industry standard exists for software development tools, several companies have focused on providing software development tools and each of them is attempting to establish its own as the accepted industry standard. If a software product were to emerge as a clearly established and widely accepted industry standard, we may not be able to adapt PeopleTools appropriately or rapidly enough to satisfy market demand. In addition, we could be forced to abandon or modify PeopleTools or to redesign our software products to accommodate the new industry standard. This would be expensive and time consuming and may adversely affect results of operations and the financial condition of the business. Our failure to drive or adapt to new and changing industry standards or third party interfaces could adversely affect sales of our products and services.

A decline in customers’ ability or willingness to migrate software applications to an internet architecture could adversely affect continued market acceptance and sales of PeopleSoft 8 and future internet-based products.

      With PeopleSoft 8, use of a web browser as the user interface replaces the traditional desktop access through networked Microsoft Windows®-based personal computers. Dependable access to software applications via the internet or an intranet involves numerous risks, including security, availability and reliability. There is a risk that some customers will not be willing or able to implement internet-based applications. If they do not, our revenues may be reduced and results of operations may be adversely affected.

Increased scope and complexity of our software may result in more difficult detection and correction of errors, delays in the introduction of new products and more costly performance and warranty claims.

      Our software programs, like all software programs generally, may contain a number of undetected errors despite internal and third party testing. Increased complexity of the software and more sophisticated expectations of customers may result in higher costs to correct such errors and delay the introduction of new products or enhancements in the marketplace.

      Product software errors could subject us to litigation and liability based on performance and/or warranty claims. Although our agreements contain provisions designed to limit our exposure to potential liability claims, these provisions could be invalidated by unfavorable judicial decisions or by federal, state, local or foreign laws or regulations. If a claim against us were to be successful, we might be required to incur significant expense

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If we lose access to critical third party software or technology, our costs could increase and the introduction of new products and product enhancements could be delayed.

      We license software and technology from third parties, including some competitors, and incorporate it into our own software products, some of which is critical to the operation of our software. If any of the third party software vendors were to change product offerings, increase prices or terminate our licenses, we might need to seek alternative vendors and incur additional internal or external development costs to ensure continued performance of our products. Such alternatives may not be available on attractive terms, or may not be as widely accepted or as effective as the software provided by our existing vendors. If the cost of licensing or maintaining these third party software products or other technology significantly increases, our gross margin levels could significantly decrease. In addition, interruption in functionality of our products could adversely affect future sales of licenses and services.

Disruption of our relationships with third party systems integrators could adversely affect revenues and results of operations.

      We build and maintain strong working relationships with businesses that we believe play an important role in the successful marketing and deployment of our software application products. Our current and potential customers often rely on third party system integrators to develop, deploy and manage applications. We believe that our relationships with these companies enhance our marketing and sales efforts. However, if these system integrators are unable to recruit and adequately train a sufficient number of consulting personnel to support the successful implementation of our software products, we may lose customers. Moreover, our relationships with these companies are not exclusive, and they are free to start, or in some cases increase, the marketing of competitive business application software, or to otherwise discontinue their relationships with us. In addition, integrators who generate consulting fees from customers by providing implementation services may be less likely to recommend our software if our products are more difficult or costly to install than competitors’ similar product offerings. Disruption of our relationships with these companies could adversely affect revenues and results of operations.

Our intellectual property and proprietary rights may offer only limited protection.

      We consider certain aspects of our internal operations, and our software and documentation to be proprietary, and we primarily rely on a combination of patent, copyright, trademark and trade secret laws and other measures to protect our proprietary rights. Patent applications or issued patents, as well as trademark, copyright, and trade secret rights, may not provide significant protection or competitive advantage. We also rely on contractual restrictions in our agreements with customers, employees and others to protect our intellectual property rights. There can be no assurance that these agreements will not be breached, that we have adequate remedies for any breach, or that our patents, copyrights, trademarks or trade secrets will not otherwise become known. Moreover, the laws of some countries do not protect proprietary intellectual property rights as effectively as do the laws of the United States. Protecting and defending our intellectual property rights could be costly regardless of venue.

      Through an escrow arrangement, we have granted some of our customers a contingent future right to use our source code solely for internal maintenance services. If our source code is accessed through an escrow, the likelihood of misappropriation or other misuse of our intellectual property may increase.

Third parties may claim that our products infringe their intellectual property rights, which could result in material costs.

      Third parties may assert infringement claims against us more aggressively in the future, especially in light of recent developments in patent law expanding the scope of patents on software and business methods. These assertions, regardless of their validity, could result in costly and time-consuming litigation, including damage

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We may be unable to achieve the benefits we anticipate from joint software development or marketing arrangements with our business partners.

      We enter into various development or joint business arrangements to develop new software products or extensions to our existing software products. We may distribute ourselves or jointly sell with our business partners an integrated software product and pay a royalty to the business partner based on end-user license fees under these joint business arrangements. While we intend to develop business applications that are integrated with our software products, these software products may in fact not be integrated or brought to market, or the market may reject the integrated enterprise solution. As a result, we may not achieve the revenues that we anticipated at the time we entered into the joint business arrangement.

Potential terrorist activity may interfere with our ability to conduct business.

      Potential terrorist attacks on United States interests present a threat to communication systems, information technology and security, damage to buildings and their contents and injury to or death of key employees. We continue to take steps to increase security and add protections against terrorist threats. This may require adjustment or change of business practices, which could involve significant capital expenditure and result in loss of focus and distraction of management, development and sales employees. Moreover, an actual or perceived increase in risk of travel due to the prospect of terrorist activity may reduce our ability to demonstrate products and meet with prospective customers, which may adversely affect our ability to close sales and meet projected forecasts. In addition, our data center near our corporate headquarters in Pleasanton, California could be vulnerable to catastrophic events such as a major earthquake, fire, flood or attack. Significant structural damage to the data center could cause a disruption of our information systems and loss of financial data and certain customer data, which could adversely impact results of operations and business financial conditions.

Our stock price may remain volatile.

      The trading price of our common stock has in the past and may in the future be subject to wide fluctuations in response to factors such as the following:

	•	revenue or results of operations in any quarter failing to meet the expectations, published or otherwise, of the investment community;
	•	announcements of technological innovations by us or our competitors;
	•	introduction of new products or significant customer wins or losses by us or our competitors;
	•	developments with respect to our intellectual property rights or those of our competitors;
	•	changes in recommendations or financial estimates by securities analysts;
	•	rumors or dissemination of false and/or misleading information, particularly through internet chat rooms, instant messaging and other means of rapid dissemination;
	•	changes in management;
	•	conditions and trends in the software industry;
	•	announcement of acquisitions or other significant transactions by us or our competitors;
	•	adoption of new accounting standards affecting the software industry; and
	•	general market conditions.

      In addition, fluctuations in the price of our common stock may expose us to the risk of securities class action or shareholder derivative lawsuits. Defending against such lawsuits could result in substantial costs and

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If requirements relating to accounting treatment for employee stock options are changed, we may be forced to change our business practices.

      We currently account for the issuance of stock options under APB Opinion No. 25, “Accounting for Stock Issued to Employees.” A shareholder proposal will be presented for consideration at the 2003 Annual Meeting of Stockholders, urging the Board of Directors to adopt a policy that we treat the value of stock options granted to employees as a compensation expense. If this proposal passes or if other proposals currently under consideration by accounting standards organizations and governmental authorities are adopted, we may be required to change our practice. As a result, we could decide to reduce the number of stock options granted to employees or to grant options to fewer employees. This could affect our ability to retain existing employees and attract qualified candidates, and increase the cash compensation we would have to pay to them. In addition, such a change could have a negative effect on our earnings.

It may become increasingly expensive to obtain and maintain liability insurance at current levels.

      We contract for insurance to cover a variety of potential risks and liabilities. In the current market, insurance coverage is becoming more restrictive, and when insurance coverage is offered, the deductible for which we are responsible is larger. In light of these circumstances, it may become more difficult to maintain insurance coverage at historical levels, or if such coverage is available, the cost to obtain or maintain it may increase substantially. This may result in our being forced to bear the burden of an increased portion of risks for which we have traditionally been covered by insurance, which could negatively impact our results of operations.

We have adopted anti-takeover defenses that could make it difficult for another company to acquire control of PeopleSoft or limit the price investors might be willing to pay for our stock.

      Certain provisions of our Certificate of Incorporation and Bylaws could delay the removal of incumbent directors and could make a merger, tender offer or proxy contest involving us more difficult, even if such events would be beneficial to the interests of the stockholders. These provisions include adoption of a Preferred Shares Rights Agreement, commonly known as a “poison pill” and giving our board the ability to issue preferred stock and determine the rights and designations of the preferred stock at any time without stockholder approval. The rights of the holders of our common stock will be subject to, and may be adversely affected by, the rights of the holders of any preferred stock that may be issued in the future. The issuance of preferred stock, while providing flexibility in connection with possible acquisitions and other corporate purposes, could have the effect of making it more difficult for a third party to acquire, or of discouraging a third party from acquiring, a majority of our outstanding voting stock. In addition, the staggered terms of our Board of Directors could have the effect of delaying or deferring a change in control.

      The above factors and certain provisions of the Delaware General Corporation Law may have the effect of deterring hostile takeovers or otherwise delaying or preventing changes in the control or management of PeopleSoft, including transactions in which our stockholders might otherwise receive a premium over the fair market value of PeopleSoft’s common stock.

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Foreign Exchange Risk

      International sales are made mostly from our foreign subsidiaries in their respective countries and are typically denominated in the local currency of each country. Our foreign subsidiaries incur most of their expenses in local currency as well.

      Our international business is subject to risks, including, but not limited to: unique economic conditions, changes in political climate, differing tax structures, other regulations and restrictions, and foreign exchange rate volatility. Accordingly, our future results could be materially adversely impacted by changes in these or other factors.

      Our exposure to foreign exchange rate fluctuations arises in part from intercompany transactions in which certain costs incurred in the United States are charged to our foreign subsidiaries. Intercompany transactions are typically denominated in the functional currency of the foreign subsidiaries in order to centralize foreign exchange risk in the parent company in the United States. We are also exposed to foreign exchange rate fluctuations as the financial results of our foreign subsidiaries are translated into U.S. dollars during consolidation. As exchange rates vary, these results, when translated, may vary from expectations and may adversely impact overall expected profitability.

      We have a foreign exchange hedging program principally designed to mitigate the future potential impact due to changes in foreign currency exchange rates. Forward exchange contracts are primarily used to hedge foreign currency exposures of the parent company as well as the U.S. dollar denominated exposures of our foreign subsidiaries. We operate in certain countries in Latin America and Asia Pacific where there are limited forward currency exchange markets, and thus we also have unhedged exposures in these countries. In general, our forward foreign exchange contracts have terms of two months or less, which approximate the expected settlement date of the underlying exposure. Gains and losses on the settled contracts are included in “Other income, net” in the accompanying consolidated statements of operations and are recognized in the current period, consistent with the period in which the gain or loss of the underlying transaction is recognized. The foreign currency hedging program is managed in accordance with a corporate policy approved by our Board of Directors.

      In addition to hedging existing transaction exposures, our foreign exchange management policy allows for the hedging of exposure resulting from the translation of foreign subsidiary financial results into U.S. dollars. Such hedges can only be undertaken to the extent that the exposures are highly certain, reasonably estimable and significant in amount. No such hedges have occurred through December 31, 2002.

      At December 31, 2002, we had the following outstanding forward foreign exchange contracts to exchange foreign currency for U.S. dollars:

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      We had the following outstanding forward foreign exchange contracts to exchange U.S. dollars for foreign currency:

      At December 31, 2002, each of these contracts matured within 60 days and had a cost that approximated fair value. Neither the cost nor the fair value of these forward foreign exchange contracts was material at December 31, 2002. We recorded net gains from settled contracts and underlying foreign currency exposures of $0.9 million in 2002 and net losses of $3.0 million in 2001 and $0.6 million in 2000.

Interest Rate Risk

      We invest our cash in a variety of financial instruments, consisting principally of investments in interest-bearing demand deposit accounts with financial institutions, tax-exempt money market funds and highly liquid debt securities of corporations and municipalities. Our investments are made in accordance with an investment policy approved by our Board of Directors. Cash balances in foreign currencies overseas represent operating balances that are typically invested in short term time deposits in local operating banks.

      We classify debt securities based on maturity dates on the date of purchase and reevaluate the classification as of each balance sheet date. Debt securities which management has the intent and ability to hold to maturity are classified as held-to-maturity and reported at amortized cost. All other debt securities are classified as available-for-sale and carried at fair value, which is determined based on quoted market prices, with net unrealized gains and losses included in “Accumulated other comprehensive income (loss),” net of tax, in the accompanying consolidated balance sheets. As of December 31, 2002 and 2001, all our investments were classified as available-for-sale.

      Investments in both fixed rate and floating rate interest earning instruments carry a degree of interest rate risk. Fixed rate securities may have their fair market value adversely impacted due to a rise in interest rates, while floating rate securities, that typically have a shorter duration, may produce less income than expected if interest rates fall. Due in part to these factors, our investment income may decrease in the future due to changes in interest rates.(1)

      At December 31, 2002, the average maturity of our investment securities was less than three months and all investment securities had maturities of less than eighteen months. The following table presents certain information about our financial instruments at December 31, 2002 that are sensitive to changes in interest rates. Due to our tax rate, it is presently advantageous for us to invest largely in tax-exempt securities. The average interest rates shown below reflect a weighted average rate for both taxable and tax-exempt

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      Below is a presentation of the maturity profile of our investments in debt securities at December 31, 2002 (in millions, except interest rates):

      We have entered into interest rate swap transactions to manage our exposure to interest rate changes on our synthetic lease obligations. The swaps involve the exchange of fixed interest rate payments for variable interest rate payments without exchanging the notional principal amount. At December 31, 2002 and 2001, the swaps had an aggregate notional amount of $175.0 million; and fair values of $170.2 million and $165.2 million. The swaps mature at various dates in 2003, consistent with the maturity dates of the synthetic leases. Under these agreements, we receive a variable rate based on the three month LIBOR set on the last day of the previous quarter and pay a weighted average fixed rate of 6.80%. These swaps are designated under Statement of Financial Accounting Standards No. 133, “Accounting for Derivative Instruments and Hedging Activities” (“SFAS 133”), as amended, as hedges against changes in amount of future cash flows. “Accumulated other comprehensive income (loss)” as of December 31, 2002 and 2001 included unrealized losses (after-tax) of $2.9 million and $6.0 million related to these interest rate swaps. The unrealized losses at December 31, 2002 of $2.9 million are estimated to be reclassified into earnings over the remaining life of the swaps based upon a 6 month forward LIBOR rate.

      The information required by this Item 8 is included in Item 15, Part IV.

      On June 5, 2002, we terminated our relationship with Arthur Andersen LLP (“Andersen”) as our independent public accountants and engaged the services of KPMG LLP (“KPMG”), effective as of June 5, 2002, as our independent public accountants for the fiscal year ending December 31, 2002. Our Board of Directors, upon the recommendation of the Audit Committee, authorized the termination of Andersen and the engagement of KPMG.

      Andersen’s audit reports on our consolidated financial statements for the fiscal years ended December 31, 2001 and 2000, did not contain an adverse opinion or disclaimer of opinion, nor were the reports qualified or modified as to uncertainty, audit scope or accounting principles.

      During the fiscal years ended December 31, 2001 and 2000, and the subsequent period through June 5, 2002, there were no disagreements with Andersen on any matter of accounting principle or practice, financial statement disclosure, or auditing scope or procedure, which disagreements, if not resolved to Andersen’s satisfaction, would have caused Andersen to make reference to the subject matter of the disagreement in connection with its reports for such years. In addition, no reportable events, as defined in Item 304(a)(1)(v) of Regulation S-K, occurred during the fiscal years ended December 31, 2001 and 2000, and the subsequent period through June 5, 2002. We provided Andersen with a copy of the foregoing disclosure. Andersen’s letter dated June 5, 2002, stating its agreement with such statements, was filed as Exhibit 16.1 to our Form 8-K filed June 6, 2002 with the Securities Exchange Commission and is incorporated herein by reference.

      During the fiscal years ended December 31, 2001 and 2000, and the subsequent period through June 5, 2002, we did not consult with KPMG with respect to: (i) the application of accounting principles to a specified transaction, either completed or proposed; (ii) the type of audit opinion that might be rendered on our consolidated financial statements; or (iii) any matter or event described in Item 304(a)(2)(i) or (ii) of Regulation S-K.

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PART III

      Certain information required by Part III is omitted from this Report on Form 10-K because the Registrant will file a definitive Proxy Statement pursuant to Regulation 14A (the “Proxy Statement”) not later than 120 days after the end of the fiscal year covered by this Report on Form 10-K, and certain information included therein is incorporated herein by reference.

      The information concerning the “Executive Officers of the Registrant” required by this Item 10 is included in Part I hereof under the heading “Personnel.” The information concerning our directors required by this Item 10 is incorporated by reference to our Proxy Statement under the heading “Election of Directors.” Information concerning the compliance of our officers, directors and 10% shareholders with Section 16(a) of the Securities Exchange Act of 1934 is incorporated by reference to the information contained in our Proxy Statement under the heading “Compliance with Section 16 of the Exchange Act.”

      The information required by this item is incorporated by reference to our Proxy Statement under the heading “Executive Compensation.”

      The information required by this Item is incorporated by reference to our Proxy Statement under the heading “Security Ownership of Certain Beneficial Owners and Management.”

      The information required by this item is incorporated by reference to our Proxy Statement under the heading “Certain Business Relationships and Transactions with Management.”

      Within 90 days prior to the date of filing this Annual Report on Form 10-K (the “Evaluation Date”), the Company carried out an evaluation, under the supervision and with the participation of our management, including the Company’s Chief Executive Officer along with the Company’s Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures pursuant to Rule 13a-14 of the Securities Exchange Act of 1934. Based upon that evaluation, the Company’s Chief Executive Officer and the Company’s Chief Financial Officer have concluded that the Company’s disclosure controls and procedures are effective in alerting them in a timely manner to material information relating to the Company (including its consolidated subsidiaries) required to be included in the Company’s periodic SEC filings.

      There were no significant changes in our internal controls or in other factors that could significantly affect our internal controls subsequent to the Evaluation Date.

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PART IV

      (a) Consolidated Financial Statements, Consolidated Financial Statement Schedule and Exhibits

	1.	Consolidated Financial Statements. The consolidated financial statements as listed in the accompanying “Index to Consolidated Financial Information” are filed as part of this annual report.
	2.	Consolidated Financial Statement Schedule. The consolidated financial statement schedule as listed in the accompanying “Index to Consolidated Financial Information” is filed as part of this annual report.

		All other schedules not listed in the accompanying index have been omitted as they are either not required or not applicable, or the required information is included in the consolidated financial statements or the notes thereto.

	3.	Exhibits. The exhibits listed in the accompanying “Index to Exhibits” are filed or incorporated by reference as part of this annual report.

	(b)	Reports on Form 8-K

           No reports on Form 8-K were filed during the fourth quarter of 2002.

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INDEX TO CONSOLIDATED FINANCIAL INFORMATION

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INDEX TO EXHIBITS

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43

44

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(1)	This exhibit is a compensatory contract, plan or other arrangement in which one or more directors and/or executive officers are eligible to participate.

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SIGNATURES

      Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized on March 27, 2003.

	PEOPLESOFT, INC.

	By:	/s/ KEVIN T. PARKER

	Kevin T. Parker
	Executive Vice President,
	Finance and Administration,
	Chief Financial Officer
	(Principal Financial and Accounting Officer)

      Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the following persons on behalf of the Registrant and in the capacities indicated on March 27, 2003.