Surviving a Corporate Death

For all their dedication and effort, Peregrine isn't out of the woods yet, and the pain isn't over. Its ranks are continuing to thin, and the quality of its business--increased customer base or not--remains in question. In December, Peregrine delayed its SEC filings for the third time. But its foot soldiers march on. This is the story of a war for corporate survival, told from the trenches by those still fighting--and, in some cases, by those who have fallen--in a battle whose ultimate outcome remains unclear. It is also a glimpse of the challenge all too many workers at all too many companies have had to face in the last couple of years, and a window on what it takes to weather such crises.

Shortly after he hung up the phone with Rick Nelson in May 2002, Andy Cahill--now rinkside at his daughter's skating party--began placing calls from his cell phone to his own four top lieutenants. "I never did put skates on, but I was going to go to my daughter's party," he says. In addition to overseeing Peregrine's sales force, Cahill was also the executive vice president in charge of service and customer support, so the task of breaking the news to some 3,000 customers scattered across the globe would fall to his 200-person staff. Cahill instructed his lieutenants to establish a communications war room at headquarters and told them to speak directly to every single Peregrine client or partner inside of just 48 hours. The first task would be to "tell them everything we know about what's going on." The second, to reassure them that Peregrine's troubles wouldn't impede the company's ability to deliver its products. Then Cahill threw in a parting comment: "And just in case any of you are interested, I'm not going anywhere." It was a remark that would later give those who heard it reason to shudder.

That evening, Cahill met Nelson and several other Peregrine executives at headquarters to prepare for what promised to be a rough Monday. Nelson drafted a communique to the employees; Peregrine's marketing department, headed by Nicole Eagan, began working on a telephone script for the salespeople in the war room to use in their calls to customers. It contained what she expected would be the most frequently asked questions about the audit, as well as talking points for answering them. At some point in the evening, Cahill recalls, one executive in the room suggested that, under the circumstances, Nelson consider canceling the Employee Kickoff planned for Tues-day. Cahill could hardly contain himself. "Cancel the Kickoff and you might as well cancel the company!" he shot back. "Let's get in there and explain to our people what has happened. We're gonna run this event, and we're gonna carry on!"

Time to Hit the Silk?

As Peregrine's staffers began trickling in to work the next day, they quickly began to sense that something was amiss. For Robert Munn, a clean-cut 34-year-old Web manager, the tip-off was the eerie emptiness around his third-floor office. "Something was off," he recalls. "It was really quiet and there didn't seem to be anyone around." Munn, who builds and manages Peregrine's Web sites for internal training and customer support, had been uncharacteristically late to the office. Had he forgotten something? Was today the day for the Employee Kickoff?

Minutes later, Munn joined so many other of his colleagues as he read--in stunned silence--an email from Nelson, crafted the previous night, explaining the executive changes and accounting investigation. When his telephone rang, Munn was just as shocked to find a headhunter on the line. Having already heard Peregrine's news, the recruiter was calling to offer Munn a job interview with the information technology department of a local medical-systems company.

With just a year and a half at Peregrine and a young family to support, Munn hardly could have been faulted for hitting the silk. But remarkably, he turned the recruiter down. "You have to wait for more information in a situation like that," he says. "You don't automatically jump ship. You have to trust that the people sitting next to you will do their jobs."

Other employees seemed to react in similar fashion. After reading Nelson's email, veteran salesman Bruce Aboudara turned to a coworker and said, "Hold on tight, this is going to get really wild!" But that is about as emotional as he ever got. Older than many of his colleagues at 52, with graying hair and glasses, Aboudara exudes an easy confidence, and his reaction to the bad news was all business. "Salespeople don't like uncertainty," he says. "Most important that morning was reading quickly down to the bottom of the note to see what the plan was."