Surviving a Corporate Death

For Nicole Eagan, it meant reducing her global marketing staff of 118 people to just 35. Even for someone who cut her management teeth at the notoriously brutal Oracle Corp., this was one of the most difficult things Eagan says she's ever done. "In some ways, I think it was harder for the people we kept. They have survivor's guilt," reasons Eagan. "They are also doing more work now. Five jobs now instead of one."

For the survivors, that certainly meant more stress. But in some cases, it also meant more responsibility and opportunity. Robert Munn, the information-technology manager who builds Peregrine's Web sites, saw his group shrink from 10 people to 2. He and his remaining colleague were tasked with rebuilding Peregrine's entire customer service Web site, and Munn is proud that the pair finished the job in just six months. "Two years ago, it would have been easy to hire a bunch of consultants to rebuild that site," he says. "Do I feel more fulfilled? Oh yeah, very much so."

Nancy Pratt in accounts payable saw her career advance when her group dropped from nine people to four. "I got promoted because my boss left," she says. "I've learned some new skills, so it has been an advantageous experience. I've learned how to deal with adversity. I've learned flexibility."

For the sales teams, the elimination of so many jobs did add pressure, but it was the kind of pressure salespeople live for: Lots of sales territories were suddenly open, and soon reps were jockeying for the best portfolios. At the same time, management was trying to create some stability at the company, so commissions were scaled up. "Chaos breeds opportunity, and opportunity breeds reward," Bruce Aboudara says. Before Peregrine's implosion, his sales group, which focuses on smaller customers, rarely closed deals for more than $500,000. Now, thanks to a closer relationship with Peregrine's business partners, sales groups such as Aboudara's have had the opportunity to do sales of up to $1 million to $2 million.

As the employees grappled with their increased workloads and survivor's guilt, Greenfield struggled to sell enough assets to keep Peregrine out of bankruptcy court. But by the end of August, despite the sale of three operating divisions and the planned elimination of 1,400 jobs, Peregrine was still on the brink of insolvency. On September 22, 2002, the company filed for Chapter 11 bankruptcy protection in a Delaware court. The filing, Greenfield reasoned, would give Peregrine some shelter from its creditors, buying enough time to rebuild the business. "That decision was about protecting the enterprise," Greenfield says.

In the short term, however, the bankruptcy filing made the sales team's task even tougher. For technology buyers, after all, few things are spookier than any hint that a supplier might not be around to service and update a complex system. Greenfield divided his senior staff into three teams and dispatched them around the globe to reassure Peregrine's 2,250 customers (down from 3,000). In town hall-like forums, and countless phone conversations, Greenfield and his staff explained to customers what the filing meant for Peregrine, and for them. "I knew that if we could save the customers, we could save Peregrine," Greenfield says.

One of those customers was Mark Bradley, the senior network engineer at Schaumburg, Illinois-based insurer Zurich Life, which uses Peregrine's software to monitor its IT help desk and some external Web sites. Bradley was in the middle of renegotiating Zurich's maintenance agreement with Peregrine when the accounting crisis erupted, prompting immediate pressure inside his company to rip out Peregrine's code and replace it with a rival's product. Salesmen from Hewlett-Packard and Computer Associates were circling. But Bradley, who is a big fan of Peregrine's software, stalled. A Greenfield town-hall meeting in Chicago persuaded him to stick with the company. "They really laid out their cards," he says. "They showed us what happened, told us why it happened, and explained how they were going to continue to support us."

Peregrine's pitch had the desired effect elsewhere, too. Three trouble-shooting sales teams visited 1,300 customers in 19 cities in just three weeks. By the time they returned to San Diego in mid-October, they had tied up 89 new sales. "When those three teams came back, there was a sense that we'd brought the whole company back," Cahill recalls.

Just over a year after the nightmare began, the bankruptcy court confirmed Peregrine's reorganization plan, and a month later, Peregrine Systems officially emerged from Chapter 11.

The grim reality, though, is that the company's travails are far from over. Besides the ongoing financial mess that still prevents shareholders from getting a true picture of Peregrine's current condition, the personnel casualties continue. On August 18, 2003, the board replaced Greenfield with a new permanent CEO, John Mutch. As recently as October 28, Peregrine juggled its board for the fifth time, announcing that it had named three new directors. Even more alarming was the quiet departure, on the day before Thanksgiving, of Andy Cahill. Peregrine won't comment except to say that Cahill left voluntarily, and Cahill offered no comment, either. But it has to be troubling that someone who played as great a role in pulling Peregrine through the worst of its crisis--the man who wasn't going anywhere--is gone.

Carleen Hawn (chawn@fastcompany.com) is Fast Company's West Coast bureau chief.