<PAGE>   1

================================================================================

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549


                                    FORM 10-Q


[X]    Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
       Exchange Act of 1934

                for the quarterly period ended March 31, 2000 or

[ ]    Transition Report Pursuant to Section 13 or 15(d) of the Securities
       Exchange Act of 1934

                for the transition period from ______ to ______.

                         Commission File Number: 0-20710


                                PEOPLESOFT, INC.
             (Exact name of registrant as specified in its charter)



                 DELAWARE                             68-0137069
      (State or other jurisdiction of      (I.R.S. Employer Identification No.)
      incorporation or organization)

    4460 HACIENDA DRIVE, PLEASANTON, CA                  94588
      (Address of principal executive                  (Zip Code)
                 officers)

       REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (925) 694-3000


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 [X]    No [ ]


Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date:

              CLASS                    OUTSTANDING AT MAY 5, 2000
              -----                    --------------------------

  Common Stock, par value $.01........         275,981,041

================================================================================


<PAGE>   2
                                TABLE OF CONTENTS


<TABLE>
<CAPTION>
                                                                            PAGE NO.
                                                                            --------
<S>                                                                         <C>
PART I    FINANCIAL INFORMATION

          ITEM 1 -  Financial Statements

          Condensed Consolidated Balance Sheets as of December 31,             2
          1999 and March 31, 2000

          Condensed Consolidated Statements of Operations for the              3
          Three Months Ended March 31, 1999 and March 31, 2000

          Condensed Consolidated Statements of Cash Flows for the              4
          Three Months Ended March 31, 1999 and March 31, 2000

          Notes to Condensed Consolidated Financial Statements                 5

          ITEM 2 -  Management's Discussion and Analysis of
                    Financial Condition and Results of Operations             10

          ITEM 3 -  Financial Risk Management                                 16

PART II   OTHER INFORMATION

          ITEM 1 -  Legal Proceedings                                         28

          ITEM 2 -  Changes in Securities and Use of Proceeds                 28

          ITEM 3 -  Defaults upon Senior Securities                           28

          ITEM 4 -  Submission of Matters to a Vote of Security Holders       28

          ITEM 5 -  Other Information                                         28

          ITEM 6 -  Exhibits and Reports on Form 8 - K                        28

SIGNATURES                                                                    29
</TABLE>


                                       1
<PAGE>   3

                         PART I - FINANCIAL INFORMATION
                          ITEM 1 - FINANCIAL STATEMENTS

                                PEOPLESOFT, INC.
                      CONDENSED CONSOLIDATED BALANCE SHEETS
                                 (In thousands)

<TABLE>
<CAPTION>
====================================================================================================
                                                                  DECEMBER 31, 1999   MARCH 31, 2000
                                                                                        (UNAUDITED)
----------------------------------------------------------------------------------------------------
<S>                                                               <C>                 <C>
ASSETS
Current assets:
     Cash and cash equivalents                                       $   414,019       $   520,775
     Short-term investments                                              290,122           165,473
     Accounts receivable, net                                            331,104           341,376
     Investment in corporate equity securities                           260,664           189,609
     Deferred income taxes                                                    --            22,998
     Other current assets                                                 63,467            73,066
----------------------------------------------------------------------------------------------------
       Total current assets                                            1,359,376         1,313,297
Property and equipment, at cost                                          359,549           358,082
         Less accumulated depreciation and amortization                 (187,056)         (194,075)
                                                                     -------------------------------
                                                                         172,493           164,007
Investments                                                               67,852           149,129
Deferred income taxes                                                     18,774            22,322
Capitalized software, less accumulated amortization                       27,286            24,199
Other assets                                                              42,097            37,445
----------------------------------------------------------------------------------------------------
       Total assets                                                  $ 1,687,878       $ 1,710,399
====================================================================================================

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
     Accounts payable                                                $    27,555       $    46,125
     Accrued liabilities                                                 121,434           126,774
     Accrued compensation and related expenses                           130,245           128,624
     Income taxes payable                                                 19,055            22,221
     Deferred income taxes                                                23,945                --
     Deferred revenues                                                   429,929           432,423
----------------------------------------------------------------------------------------------------
        Total current liabilities                                        752,163           756,167
Long-term debt                                                            69,000            69,000
Other long-term liabilities                                               14,050            11,293
Long-term deferred revenues                                               88,046            91,340
Commitments and contingencies (see notes)
Stockholders' equity:
     Common stock                                                          2,709             2,752
     Additional paid-in capital                                          538,643           580,724
     Accumulated other comprehensive income                              143,298           102,369
     Retained earnings                                                    79,969            96,754
                                                                     -------------------------------
        Total stockholder's equity                                       764,619           782,599
----------------------------------------------------------------------------------------------------
        Total liabilities and stockholder's equity                   $ 1,687,878       $ 1,710,399
====================================================================================================
</TABLE>

     See accompanying notes to condensed consolidated financial statements.


                                       2
<PAGE>   4

                                PEOPLESOFT, INC.
                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                    (In thousands, except per share amounts)
                                   (Unaudited)

<TABLE>
<CAPTION>
=====================================================================================
FOR THE THREE MONTHS ENDED MARCH 31,                        1999              2000
-------------------------------------------------------------------------------------
<S>                                                      <C>               <C>
REVENUES:
   License fees                                          $  98,727         $  90,235
   Services                                                250,830           262,052
   Development and other services                              552            23,132
-------------------------------------------------------------------------------------
      Total revenues                                       350,109           375,419
COSTS AND EXPENSES:
   Cost of license fees                                     12,507            10,433
   Cost of services                                        138,850           143,287
   Cost of development services                                411            21,097
   Sales and marketing                                     103,769            86,530
   Product development                                      66,961            79,899
   General and administrative                               22,307            25,634
   Restructuring charge                                      4,355                --
   Contribution to Momentum Business Applications          176,409                --
-------------------------------------------------------------------------------------
      Total costs and expenses                             525,569           366,880
-------------------------------------------------------------------------------------
Operating (loss) income                                   (175,460)            8,539
Other income, net                                            7,448            17,677
-------------------------------------------------------------------------------------
      (Loss) Income before income taxes                   (168,012)           26,216
Provision for income taxes                                   3,204             9,431
-------------------------------------------------------------------------------------
Net (loss) income                                        $(171,216)        $  16,785
=====================================================================================
Basic (loss) income per share                            $   (0.66)        $    0.06
Shares used in basic per share computation                 258,360           273,661
=====================================================================================
Diluted (loss) income per share                          $   (0.66)        $    0.06
Shares used in diluted per share computation               258,360           291,953
=====================================================================================
</TABLE>

     See accompanying notes to condensed consolidated financial statements.


                                       3
<PAGE>   5
                                PEOPLESOFT, INC.
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (In thousands)
                                   (Unaudited)

<TABLE>
<CAPTION>
==========================================================================================================
    FOR THE THREE MONTHS ENDED MARCH 31,                                         1999              2000
----------------------------------------------------------------------------------------------------------
<S>                                                                           <C>               <C>
OPERATING ACTIVITIES:
Net (loss) income                                                             $(171,216)        $  16,785
Adjustments to reconcile net (loss) income to net cash
 (used in) provided by operating activities:
      Depreciation and amortization                                              17,624            23,150
      Provision for doubtful accounts                                             1,756               247
      Gain on sales of investments and loss on disposition
      of property and equipment, net                                                 --            (8,016)
      Changes in operating assets and liabilities:
         Accounts receivable                                                    (17,040)          (15,439)
         Cash received from sales of accounts receivable                         14,634            13,920
         Accounts payable and accrued liabilities                               (21,263)           13,807
         Accrued compensation and related expenses                                4,149            (1,621)
         Deferred income taxes                                                   (1,502)          (24,537)
         Income taxes payable                                                   (22,541)            3,166
         Deferred revenues                                                       18,253             5,788
         Other assets and liabilities                                            (5,828)           (9,746)
----------------------------------------------------------------------------------------------------------
      Net cash (used in) provided by operating activities                      (182,974)           17,504
INVESTING ACTIVITIES:
Purchase of investments available for sale                                     (123,915)          (84,784)
Proceeds from maturities and sales of investments
  available for sale                                                            108,516           103,587
Proceeds from maturities of investments held to maturity                          3,043            37,836
Purchase of property and equipment                                               (5,165)           (9,703)
Additions to capitalized software                                                  (963)               --
----------------------------------------------------------------------------------------------------------
      Net cash (used in) provided by investing activities                       (18,484)           46,936
FINANCING ACTIVITIES:
Net proceeds from sale of common stock and exercise of stock options             18,064            37,550
Tax benefits from exercise of stock options                                         899             4,274
Distribution of Momentum Business Applications shares                           (78,622)               --
Payments on capital leases                                                          (85)              (42)
----------------------------------------------------------------------------------------------------------
      Net cash (used in) provided by financing activities                       (59,744)           41,782
Effect of foreign exchange rate changes on cash                                  (2,530)              534
----------------------------------------------------------------------------------------------------------
Net (decrease) increase in cash and cash equivalents                           (263,732)          106,756
Cash and cash equivalents at beginning of period                                531,722           414,019
----------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of period                                    $ 267,990         $ 520,775
==========================================================================================================
SUPPLEMENTAL DISCLOSURES:
 Cash paid for interest                                                       $   1,088         $     852
 Cash paid for income taxes, net of refunds                                   $  24,280         $  21,468
==========================================================================================================
</TABLE>

     See accompanying notes to condensed consolidated financial statements


                                       4
<PAGE>   6
                                PEOPLESOFT, INC.
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

1. BASIS OF PRESENTATION

        The information for the three-month periods ended March 31, 1999 and
March 31, 2000, is unaudited, but includes all adjustments (consisting only of
normal, recurring adjustments) that the Company's management believes to be
necessary for the fair presentation of the financial position, results of
operations, and changes in cash flows for the periods presented. The preparation
of financial statements in conformity with generally accepted accounting
principles requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the reported
periods. Despite management's best effort to establish good faith estimates and
assumptions, and to manage the achievement of the same, actual results may
differ. Certain prior-period amounts have been reclassified to conform to the
current period presentation.

        The Company merged with The Vantive Corporation ("Vantive") on December
31, 1999. This merger was accounted for using the pooling of interest method of
accounting and therefore the condensed consolidated financial statements reflect
the combined financial position, operating results and cash flows of PeopleSoft
and Vantive as if they had been combined for all periods presented.

        The results of operations of Momentum Business Applications, Inc.
("Momentum Business Applications") were consolidated with the results of
operations of the Company through March 15, 1999. The Condensed Consolidated
Statement of Operations for the three-month period ended March 31, 1999 includes
Momentum Business Application's results through that date.

        The accompanying interim condensed consolidated financial statements
should be read in conjunction with the financial statements and related notes
included in the Company's Annual Report to Stockholders on Form 10-K for the
year ended December 31, 1999. Certain information and footnote disclosures
normally included in annual financial statements prepared in accordance with
generally accepted accounting principles have been condensed or omitted pursuant
to the Securities and Exchange Commission rules and regulations. Interim results
of operations for the three-month period ended March 31, 2000 are not
necessarily indicative of operating results or performance levels that can be
expected for the full fiscal year.

2. PER SHARE DATA

        Basic income (loss) per share is computed by dividing net income (loss)
by the weighted average number of common shares outstanding during the period.
Diluted income per share is computed by dividing net income by the sum of
weighted average number of common shares outstanding and dilutive common
equivalent shares outstanding during the period. Common equivalent shares
consist of the shares issuable upon the exercise of stock options, warrants and
convertible subordinated notes (using the treasury stock method).


                                       5
<PAGE>   7
        The following table sets forth the computation of basic and diluted
income (loss) per share.

<TABLE>
<CAPTION>
        ==========================================================================================
        THREE MONTHS ENDED MARCH 31,                                      1999              2000
        (In thousands, except per share amounts)
        ------------------------------------------------------------------------------------------
<S>                                                                    <C>               <C>
        Numerator:
              Net (loss) income                                        $(171,216)        $  16,785
        Denominator:
             Denominator for basic (loss) income per share -
                  weighted average shares outstanding                    258,360           273,661

              Employee stock options                                          --            18,274
              Warrants                                                        --                18
                                                                       ---------------------------
             Denominator for diluted (loss) income per share -
                  adjusted weighted average shares outstanding
                  assuming exercise of common equivalent shares          258,360           291,953

        ==========================================================================================
        Basic (loss) income per share                                  $   (0.66)        $    0.06
        ==========================================================================================
        Diluted (loss) income per share                                $   (0.66)        $    0.06
        ==========================================================================================
</TABLE>

        Options to purchase 216,000 shares of common stock were outstanding
during the three months ended March 31, 2000, but were not included in the
computation of diluted EPS because the options' exercise price was greater than
the average market price of the common shares.

3. COMPREHENSIVE LOSS

        The components of comprehensive loss, net of tax, were as follows:

<TABLE>
<CAPTION>
        ======================================================================
        THREE MONTHS ENDED MARCH 31,                   1999              2000
        (In thousands)
        ----------------------------------------------------------------------
<S>                                               <C>               <C>
        Net (loss) income                         $(171,216)        $  16,785
        Other comprehensive loss:
          Net change in unrealized gain on
            investments available for sale               --           (41,463)
          Foreign currency translation               (2,525)              534
        ----------------------------------------------------------------------
         Comprehensive loss                       $(173,741)        $ (24,144)
        ======================================================================
</TABLE>

4. INVESTMENTS IN CORPORATE EQUITY SECURITIES

        The Company has classified its investments in certain Internet start-up
companies as investments available for sale, included in "Investments in
corporate equity securities." Realized gains on the sale of these investments
for the quarter ended March 31, 2000 were $9.5 million. The aggregate fair value
of investments in corporate equity securities held at March 31, 2000, was $189.6
million. Gross unrealized gains were $173.5 million as of March 31, 2000, and
are included, net of deferred income taxes of $66.8 million, as a component of
"Accumulated other comprehensive income." All of the unrealized holding gains
relate to an investment in equity securities of a company that completed its
public offering in the third quarter of 1999. These equity securities are
subject to lock up provisions, which expire in August 2000. As of the filing
date of this Form, the gross unrealized gains had decreased to approximately
$104.0 million.

5. FINANCIAL INSTRUMENTS

        The Company is not a party to any interest rate risk management
transactions and does not hold any derivative financial instruments for trading
purposes. The Company has written policies that place all foreign currency
forward transactions under the direction of corporate treasury and restrict all
derivative transactions to those intended for hedging purposes.


                                       6
<PAGE>   8

Forward Foreign Exchange Contracts

        The Company has a foreign exchange hedging program designed to mitigate
the potential for future adverse impact on intercompany balances due to changes
in foreign currency exchange rates. The program uses forward foreign currency
exchange contracts as the vehicle for hedging these intercompany balances. The
Company uses two multinational banks for substantially all of these contracts.
In general, these contracts have terms of three months or less. Gains and losses
on the settled contracts are included in "Other income, net" and are recognized
in the current period, consistent with the period in which the gain or loss of
the underlying transaction is recognized. During the quarters ended March 31,
1999 and March 31, 2000 the Company recorded net losses from these settled
contracts and underlying foreign currency exposures of approximately $0.4
million and $1.1 million. At March 31, 2000, the Company had outstanding forward
exchange contracts totaling $40.8 million, to exchange Euros ($35.0 million),
Singapore dollars ($6.5 million), South African rands ($0.5 million), Swiss
francs ($2.4 million), New Zealand dollars ($1.0 million), Hong Kong dollars
($1.3 million) and British Pounds ($0.2 million) for U.S. dollars, and to
exchange U.S. dollars for Australian dollars ($1.5 million), Canadian dollars
($3.4 million) and Mexican pesos ($1.2 million). Each of these contracts had
maturity dates through May 2000 and a book value that approximates fair value.
The cost and the fair value of these foreign currency exchange contracts was not
material at March 31, 2000.

        The foreign exchange hedging program is managed in accordance with a
corporate policy approved by the Company's Board of Directors. In addition to
hedging existing transactional exposures, the Company's foreign exchange
management policy allows for the hedging of anticipated transactions, and
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 estimatable, and significant in amount.
No such hedges have occurred through March 31, 2000.

Concentrations of Credit Risk

        The Company does not have a concentration of credit or operating risk in
any one industry or any one geographic region within or outside of the United
States.

6. TRANSFER OF FINANCIAL ASSETS

        The Company transfers accounts receivable under certain software license
agreements with customers to financial institutions. The Company records such
transfers as sales of the related accounts receivable when it is considered to
have surrendered control of such receivables under the provisions of Statement
of Financial Accounting Standards No. 125, "Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities" ("SFAS 125").
As of March 31, 2000, the Company had servicing obligations related to
approximately $13.9 million of accounts receivable that had been sold under
these arrangements. In the event that these receivables are not fully repaid to
the financial institution, the Company could be obligated to pay up to ten
percent of the amount of the accounts receivable.

7. RESTRUCTURING AND EXIT CHARGES

        In the first quarter of 1999, the Company adopted a restructuring plan
and incurred a pretax restructuring charge of $4.4 million. PeopleSoft
eliminated approximately 430 redundant and unnecessary positions, primarily in
the U.S., in the administration, sales support, and marketing support areas. All
severance costs associated with this restructuring were paid in 1999 and were
funded through operating cash flow.

        In the fourth quarter of 1999, the Company incurred a pretax exit charge
of $34.1 million resulting from the merger of PeopleSoft and Vantive. The exit
charge included employee severance, write-off of duplicative equipment and other
fixed assets, costs associated with the elimination of excess facilities, and
costs to terminate contracts with third parties that provide redundant or
conflicting services. Approximately 44 redundant positions in the U.S.,
primarily in the management and administration areas, were eliminated. At March
31, 2000, a total of 39 employees had separated from the Company.


                                       7
<PAGE>   9
        The following table sets forth the components the Company's
restructuring reserves as of March 31, 2000, which are included in "Accrued
liabilities."

<TABLE>
<CAPTION>
       =====================================================================================================
       (In thousands)                   EMPLOYEE       ASSET
                                         COSTS      WRITE-DOWNS       LEASES          OTHER         TOTAL
       -----------------------------------------------------------------------------------------------------
<S>                                    <C>          <C>              <C>            <C>            <C>
        Balance December 31, 1999      $  4,168       $  1,536       $  5,870       $ 11,535       $ 23,109

           Cash payments                 (1,125)            --           (278)          (653)        (2,056)
           Non-cash items                                 (840)            --             --           (840)
       -----------------------------------------------------------------------------------------------------
        Balance March 31, 2000         $  3,043       $    696       $  5,592       $ 10,882       $ 20,213
       =====================================================================================================
</TABLE>

8. COMMITMENTS AND CONTINGENCIES

        Beginning on January 29, 1999, a series of class action lawsuits were
filed in the United States District Court for the Northern District of
California against the Company and certain of its officers and directors,
alleging violations of Section 10(b) of the Securities Exchange Act of 1934. The
actions were consolidated in June 1999 under the name of the lead case Suttovia
v. Duffield, et al., C 99-0472. Following appointment of lead plaintiffs under
the provisions of the Private Securities Litigation Reform Act, a consolidated
amended complaint was filed on December 6, 1999. The Consolidated Complaint
names the Company and David Duffield, Albert Duffield, Ronald Codd, Kenneth
Morris, Margaret Taylor, Aneel Bhusri, James Bozzini and George Still as
defendants.

        The Consolidated Complaint purports to bring claims on behalf of all
purchasers of PeopleSoft common stock during the period April 22 1997 to January
28, 1999, the date when the Company first announced results for the 1998 fiscal
year, and disclosed that certain of the Company's accounting practices were
being reviewed by the Securities and Exchange Commission. The Consolidated
Complaint alleges that PeopleSoft misrepresented, inter alia, the degree of
market acceptance of its products, the technical capabilities of its products,
the success of certain acquisitions it had made, and the anticipated financial
performance of the Company in fiscal 1999. The Consolidated Complaint abandons
all of the allegations in the original complaints concerning alleged accounting
improprieties, including claims of accounting fraud related to the Company's
write-downs for "in process research and development" in connection with various
acquisitions, and claims of accounting fraud related to the Company's spin-off
of Momentum Business Applications, Inc. (Momentum had been a named defendant in
the original actions, but was eliminated as a defendant when the Consolidated
Complaint was filed).

        The Company believes that the claims asserted in the Consolidated
Complaint are without merit, and the Company intends to vigorously defend the
action. On February 10, 2000, the defendants filed motions to dismiss the
Consolidated Complaint without leave to amend. The motions were heard on May 4,
2000. The Court has not yet issued its ruling on the matter. There can be no
assurance that if the motion is unsuccessful, and if there is an unfavorable
resolution of the litigation, there would not be a material adverse impact on
the Company's future financial position or results of operations or cash flows.
However, the Company has in place significant amounts of insurance that would be
available in the event of an adverse result.

        The Company 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 affect on the financial position, results of the operations and cash
flows of the Company. However, depending on the amount and the timing, an
unfavorable resolution of some or all of these matters could materially affect
the Company's future results of operations or cash flows in a particular period.


                                       8
<PAGE>   10

9. SEGMENT INFORMATION

        Based on the criteria of Statement of Financial Accounting Standards No.
131, "Disclosures about Segments of an Enterprise and Related Information,"
("SFAS 131"), which establishes standards for the way in which public companies
disclose certain information about operating segments in the Company's financial
reports, the Company identified its chief executive officer ("CEO") as the chief
operating decision maker. During the three-month period ended March 31, 2000,
the Company's CEO evaluated revenue performance based on two segments: North
America, which includes the U.S. and Canada, and International, which includes
all other geographic regions. Employee headcount and operating costs are managed
by functional areas, rather than by revenue segments, and are only reviewed by
the CEO on a company-wide basis. In addition, the Company does not account for
or report to the CEO its assets or capital expenditures by any other segment.
Thus, the Company is not required to disclose any additional information
pursuant to SFAS 131. The accounting policies for each of the reportable
segments shown below are the same as those described in the summary of
significant accounting policies.

        The following table presents a summary of operating information and
certain quarter-end balance sheet information by operating segment for the
quarters ended March 31, 1999 and March 31, 2000:

<TABLE>
<CAPTION>
        ========================================================================
        THREE MONTHS ENDED MARCH 31,                  1999              2000
        (In thousands)
        ------------------------------------------------------------------------
<S>                                               <C>               <C>
        Revenues from unaffiliated customers
          North America                           $   296,300       $   299,490
          International                                53,809            75,929
        ------------------------------------------------------------------------
          Consolidated                            $   350,109       $   375,419
        ========================================================================
        Operating (loss) income
          North America                           $  (181,041)      $    (1,703)
          International                                 5,581            10,242
        ------------------------------------------------------------------------
          Consolidated                            $  (175,460)      $     8,539
        ========================================================================
        Identifiable assets
          North America                           $ 1,216,376       $ 1,527,285
          International                               150,958           183,114
        ------------------------------------------------------------------------
          Consolidated                            $ 1,367,334       $ 1,710,399
        ========================================================================
</TABLE>

        Revenues from Europe represented 9% and 12% of total revenues during
the quarters ended March 31, 1999 and March 31, 2000. International revenues
from all other geographic regions represented less than ten percent of total
revenues.

10. REVENUE RECOGNITION

        PeopleSoft adopted Statement of Position ("SOP") 98-9, "Modifications of
SOP 97-2, Software Revenue Recognition, With Respect to Certain Transactions",
on January 1, 2000 and has changed certain business policies to meet the
requirements of this SOP.

        In December 1999, the Securities and Exchange Commission ("SEC") issued
Staff Accounting Bulletin No. 101, "Revenue Recognition in Financial Statements"
("SAB 101") and amended it in March 2000 with respect to the effective dates.
PeopleSoft is required to adopt the provisions of SAB 101 in its second fiscal
quarter of 2000. The Company is currently reviewing the provisions of SAB 101
and has not fully assessed the impact of its adoption. While SAB 101 does not
supercede the software industry specific revenue recognition guidance, with
which the Company believes it is in compliance, SAB 101 may change current
interpretations of software revenue recognition requirements; which would
result in PeopleSoft, recording a cumulative effect of a change in accounting
principles in the second quarter of 2000, retroactive to January 1, 2000.



                                       9
<PAGE>   11

                ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS

        This Discussion and Analysis of Financial Condition and Results of
Operations contains descriptions of the Company's expectations regarding future
trends affecting its business. 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 Future Results and Market Price of
Stock." Forward-looking statements contained throughout this Report include but
are not limited to those identified with a footnote (1) symbol. The Company
undertakes no obligation to update the information contained in this Item 2.

        As more fully described in the "Merger" section of the Management's
Discussion and Analysis of financial condition and Results of Operations
included in the 1999 Annual Report on Form 10-K, PeopleSoft, Inc. ("PeopleSoft")
merged with The Vantive Corporation ("Vantive") on December 31, 1999. The
condensed consolidated financial statements for the three month period ended
March 31, 1999 included in this report on Form 10-Q have been prepared following
the pooling of interest method of accounting and therefore reflect the combined
operating results and cash flows of PeopleSoft and Vantive as if they had been
combined for the prior-year periods presented. Certain prior period amounts have
been reclassified to conform to the current period presentation. The
management's discussion and analysis of financial condition and results of
operations that follows is also based on the assumption that PeopleSoft and
Vantive were combined for the three-month period ended March 31, 1999.


                              RESULTS OF OPERATIONS

        The following table sets forth, the percentage of dollar change quarter
over quarter and the percentage of total revenues represented by certain line
items in the Company's condensed consolidated statements of operations, for the
three-month periods ended March 31, 1999 and March 31, 2000.

<TABLE>
<CAPTION>
===============================================================================
                                                 PERCENTAGE
                                                  OF DOLLAR
                                                   CHANGE        PERCENTAGE OF
                                                QUARTER OVER     TOTAL REVENUES
                                                  QUARTER
                                                ------------     --------------
                                                  2000/1999       1999    2000
-------------------------------------------------------------------------------
<S>                                             <C>              <C>      <C>
Revenues:
  License fees.....................................    (9)%        28%     24%
  Services.........................................     4          72      70
  Development and other services...................     *           *       6
-------------------------------------------------------------------------------
          Total revenues                                7         100     100
===============================================================================
Costs and expenses:
  Cost of license fees.............................   (17)%        4%       3%
  Cost of services.................................     3         40       38
  Cost of development services.....................     *          *        6
  Sales and marketing..............................   (17)        30       23
  Product development..............................    19         19       21
  General and administrative.......................    15          6        7
  Restructuring charge.............................   n/a          1      n/a
  Contribution to Momentum Business                   n/a         50      n/a
Applications.......................................
-------------------------------------------------------------------------------
          Total costs and expenses                    (30)       150       98
===============================================================================
Operating (loss) income                                 *        (50)%      2%
-------------------------------------------------------------------------------
Other income, net                                       *          2        5
-------------------------------------------------------------------------------
Provision for income taxes                              *          1        3
===============================================================================
</TABLE>
   *Not meaningful


                                       10
<PAGE>   12
REVENUES

        Revenues from licensing fees decreased by 9% from $98.7 million in the
first quarter of 1999 to $90.2 million in the first quarter of 2000, primarily
the result of a continued slowdown in demand for the Company's Enterprise
Resource Planning ("ERP") back office products, partially offset by an increase
in revenues from license fees of the Company's supply chain management and
business analytic products. At March 31, 1999 and March 31, 2000, the Company
had deferred license revenue in the amount of $66.1 million and $76.5 million.
The deferred revenue balances do not include items which are both deferred and
unbilled. The Company's practice is to net such deferred items against the
related receivable balances. As of March 31, 1999 and March 31, 2000, $49.0
million and $44.5 million in unbilled receivables was netted against deferred
license revenue.

        Revenues from services increased by 4% from $250.8 million in the first
quarter of 1999 to $262.1 million in the first quarter of 2000. The growth in
services revenue during the first quarter of 2000 when compared to the first
quarter of 1999 resulted primarily from an increase in maintenance revenue in
the amount of $18.9 million, partially offset by a decrease in training revenue
of $8.8 million. On a sequential basis, training revenues increased by
approximately $1.0 million. Revenues from consulting services were essentially
flat quarter over quarter and down sequentially by approximately $6.0 million
 . We cannot give you assurance that revenues from consulting services will not
continue to decrease. Revenue from services as a percentage of total revenues
was 72% and 70% for the quarters ended March 31, 1999 and March 31, 2000. The
decrease in service revenue as a percentage of total revenues during the first
quarter of 2000 reflects primarily the change in revenue mix during the quarter,
which includes revenue from development services. Excluding revenues from
development services, revenues from services would have been 74% of total
revenues. The slow services revenue growth in the first quarter of 2000,
primarily reflects the decrease in license activity that the Company has
experienced during the last year. If PeopleSoft is not successful in expanding
its consulting and training services, total revenues for the Company could be
adversely impacted in the future(1).

        The Company recognized revenue from development services in the amount
of $0.6 million during the first quarter of 1999 compared to $23.1 million
during the first quarter of 2000. Per the terms of the development agreement
with Momentum Business Applications, the Company performed development services
on behalf of Momentum Business Applications. Momentum Business Applications pays
the Company one hundred and ten percent (110%) of the Company's fully burdened
costs relating to the research and development provided by the Company. The
three-month period ended March 31,1999 was the first quarter of Momentum
Business Applications existence and since then, many more projects have been
approved by Momentum Business Applications. In addition to development services,
during the first quarter of 2000, Momentum Business Applications paid
third-party royalty costs in the amount of $1.8 million for technology that will
be incorporated into products developed by Momentum Business Applications. The
Company also charged Momentum Business Applications a quarterly administrative
fee of $0.1 million. Cost of development services increased from $0.4 million
during the first quarter of 1999 to $21.1 million during the first quarter of
2000.

        Total revenues increased by 7% from $ 350.1 million in the first quarter
of 1999 to $375.4 million in the first quarter of 2000. The increase in total
revenues is primarily attributable to the $22.6 million increase in development
services revenue and the $11.2 million increase in revenue from services,
partially offset by a decrease of $8.5 million in license fees revenue.

        At March 31, 2000, the Company is 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.
During the first quarter of 2000, revenues from the North America segment
increased by 1% from $296.3 million or 85% of total revenues in the first
quarter of 1999 to $299.5 million or 80% or total revenues. The increase was
attributable to a significant increase in revenues from development services
offset by a decrease in license revenues. Revenues from the International
segment increased by 41% from $53.8 million or 15% of total revenues in the
first quarter of 1999 to $75.9 million or 20% of total revenues in the first
quarter of 2000. Within the International segment, revenues from Europe
represented 9% and 12% of total revenues during the first quarter of 1999 and
the first quarter of 2000,


                                       11
<PAGE>   13

where the Company experienced strong growth in revenues from services and
license fees compared to the prior-year quarter.

COSTS AND EXPENSES

        Cost of license fees consists principally of royalties, technology
access fees for certain third-party software products and amortization of
capitalized software costs. Cost of license fees decreased from $12.5 million in
the first quarter of 1999 to $10.4 million in the first quarter of 2000,
representing 4% and 3% of total revenues. Cost of license fees represented 13%
of license fee revenues in the first quarter of 1999 and 12% of license fee
revenues in the first quarter of 2000. The decrease in absolute dollars in cost
of license fees in the first quarter of 2000 resulted primarily from a decrease
in royalties of $1.5 million resulting primarily from the decrease in license
revenue activity during the quarter. Cost of license fees during the first
quarter of 2000 includes $0.9 million in capitalized software amortization
expense related to the software acquired from TriMark and Distinction in May and
August of 1999. The Company's products are based on a combination of internally
developed technology and application products, as well as bundled third-party
products and technology. Cost of license fees as a percentage of license fee
revenues may fluctuate from period to period due principally to the mix of sales
of royalty-bearing software products in each period and seasonal fluctuations in
revenues contrasted with certain fixed expenses such as the amortization of
capitalized software. Royalties associated with certain software products
currently under development by joint business arrangements and charges
associated with software products and technologies acquired from various
third-party vendors may cause the cost of license fees as a percentage of
license fee revenues to increase in future periods.

        Cost of services consists primarily of employee-related costs and other
expenses incurred to provide consulting and installation services, customer care
center administrative support, account management field support, training, and
product support. These costs increased from $138.9 million in the first quarter
of 1999 to $143.3 million in the first quarter of 2000, representing 40% and 38%
of total revenues and 55% of service revenues in both quarters. The dollar
increase in cost of services is consistent with the increase in services
revenue. The Company anticipates cost of services will increase in dollar
amount, and may increase as a percentage of service revenues and total revenues
in future periods(1).

        Sales and marketing expenses decreased from $103.8 million in the first
quarter of 1999 to $86.5 million in the first quarter of 2000, representing 30%
and 23% of total revenues in each of those quarters. Sales and marketing
headcount decreased from 1,448 during the first quarter of 1999 to 1,118 during
the first quarter of 2000, partially the result of the first quarter of 1999
restructuring. The decrease of approximately $17.0 million in sales and
marketing expenses during the first quarter of 2000 was due in part to a
decrease in consulting services related to sales support. Sales and marketing
expenses may increase in dollar amount and as a percentage of total revenues in
future periods as the Company increases its marketing and advertising costs(1).
In addition, the Company may choose to invest in sales resources for new product
areas(1).

        Software product development expenditures consist of costs related to
the Company's staff of software developers and outside consultants, and the
associated infrastructure costs required to support software product development
initiatives. Software product development expenses increased from $67.0 million
in the first quarter of 1999 to $79.9 million in the first quarter of 2000,
representing 19% and 21% of total revenues in each of those quarters. The
Company's research and development staff consisted of 1,636 and 1,867 employees
during the first quarter of 1999 and the first quarter of 2000. The Company's
current focus in application development is to complete its next major release,
PeopleSoft 8, which is expected to be the first pure HTML internet client
offering from the Company, and includes internet technologies, such as XML,
publish-subscribe and business interlink(1).

--------------------------------
 (1) Forward-Looking Statement


                                       12
<PAGE>   14

        In addition to this major technology shift, the Company expects to
deliver enhanced functionality in its core products and a number of new
applications, mostly focused on eCommerce and internet collaboration(1). The
Company expects that the dollar amount invested in software product development
expenses will continue to increase during 2000 as the Company continues to
invest in expanded functionality across all of its software product offerings,
including global product requirements and industry specific requirements(1).
There can be no assurance that such development efforts will result in products,
features or functionality or that software products, features or functionality
that are developed will be accepted by the market.

        General and administrative expenses increased from $22.3 million in the
first quarter of 1999 to $25.6 million in the first quarter of 2000,
representing 6% and 7% of total revenues. The dollar increase is primarily due
to an increase in amortization of goodwill and value of workforce of $2.2
million, resulting from the TriMark and Distinction acquisitions in May and
August 1999.

RESTRUCTURING AND EXIT CHARGES

        During the first quarter of 1999, the Company adopted a restructuring
plan and incurred a pretax restructuring charge of $4.4 million. PeopleSoft
eliminated approximately 430 redundant and unnecessary positions, primarily in
the U.S. in the administration, sales support, and marketing support areas. All
severance costs associated with this restructuring were paid in 1999 and were
funded through operating cash flow.

        In the fourth quarter of 1999, the Company incurred a pretax exit charge
of $34.1 million resulting from the merger of PeopleSoft and Vantive. The exit
charge included employee severance, write-off of duplicative equipment and other
fixed assets, costs associated with the elimination of excess facilities, and
costs to terminate contracts with third parties that provide redundant or
conflicting services. Approximately 44 redundant positions in the U.S.,
primarily in the management and administration areas, were eliminated. At March
31, 2000, a total of 39 employees had separated from the Company. Five
additional employees are expected to leave during the second quarter of 2000.

        The following table sets forth the components of the Company's
restructuring reserves as of March 31, 2000, which are included in "Accrued
liabilities" in the accompanying condensed consolidated balance sheets.

<TABLE>
<CAPTION>
       =====================================================================================
       (in millions)                   EMPLOYEE    ASSET     LEASES      OTHER       TOTAL
                                        COSTS   WRITE-DOWNS
       -------------------------------------------------------------------------------------
<S>                                    <C>      <C>          <C>        <C>         <C>
        Balance December 31, 1999      $  4.2     $  1.5     $  5.9     $  11.5     $  23.1
           Cash payments ........        (1.2)        --       (0.3)       (0.6)       (2.1)
           Non-cash items .......          --       (0.8)        --          --        (0.8)
       -------------------------------------------------------------------------------------
        Balance March 31, 2000         $  3.0     $  0.7     $  5.6     $  10.9     $  20.2
       =====================================================================================
</TABLE>

CONTRIBUTION TO MOMENTUM BUSINESS APPLICATIONS

        During 1998, PeopleSoft formed Momentum Business Applications, Inc.
("Momentum Business Applications"), a research and development company designed
to develop eBusiness, analytic applications and industry-specific software
products. All of the outstanding shares of Momentum Business Applications Class
A Common Stock were transferred to a custodian on December 31, 1998 and
distributed as a dividend to holders of PeopleSoft Common Stock during January
1999. Prior to the distribution, PeopleSoft contributed $250.0 million to
Momentum Business Applications. PeopleSoft consolidated Momentum Business
Applications into its financial statements for the fourth quarter of 1998.
However, during the first quarter of 1999, Momentum Business Applications no
longer met the requirements for consolidation. As a result, the Company incurred
a charge of $176.4 million, which represents the $250.0 million contribution
less a $78.6 million dividend recorded as of December 31, 1998, investment
banker fees of $2.9 million, other expenses related to the formation of Momentum
Business Applications, and expenses incurred by Momentum Business Applications
while consolidated with the Company.

------------------------------
(1) Forward-Looking Statement


                                       13
<PAGE>   15

OTHER INCOME, NET

        "Other income, net," which includes interest income, interest expense
and other, increased from $7.4 million in the first quarter of 1999 to $17.7
million in the first quarter of 2000. The increase was primarily the result of
realized gains on the sale of corporate equity securities in the amount of $9.5
million. See also "Investments in Corporate Equity Securities and Unrealized
Gains."

PROVISION FOR INCOME TAXES

        The Company's income tax provision increased from $3.2 million in the
three-month period ended March 31, 1999 to $9.4 million for the same quarter in
2000. Excluding the impact of the charges related to Momentum Business
Applications and the restructuring costs, the effective tax rate was 38.4%
during the first quarter of 1999. For the first quarter of 2000, excluding the
impact of the gain on marketable equity securities, the effective tax rate was
34.5%. The 2000 rate is lower than the 1999 rate mainly due to the statutory
extension of the research and development credit. The net deferred tax assets at
March 31, 2000 were $45.3 million. The valuation of these net deferred tax
assets is based on historical tax positions and expectations about future
taxable income.

NET INCOME (LOSS) PER SHARE

        Diluted net income (loss) per share increased from a net loss of $(0.66)
per share in the first quarter of 1999 to net income of $0.06 per share in the
first quarter of 2000. Weighted average shares outstanding, used in the
calculation of diluted net income (loss) per share were 258.4 million for the
first quarter of 1999 compared to 292.0 million for the first quarter of 2000.
Net loss for the first quarter of 1999 included pretax charges of $176.4 million
for the contribution to Momentum Business Applications and $4.4 million for
restructuring costs. Excluding the impact of the charges related to Momentum
Business Applications and the restructuring costs, diluted income per share
would have been $0.03 for the first quarter of 1999. Net income for the first
quarter of 2000 included a pretax gain on the sale of corporate equity
securities in the amount of $9.5 million. Excluding the impact of the gain on
corporate equity securities, diluted net income per share would have been $0.04
for the first quarter of 2000. Shares outstanding during 2000 might be impacted
by the following factors: (i) any fluctuations in the Company's stock price,
which could cause changes in the number of common stock equivalents included in
the earnings per share computation; (ii) the issuance of common stock associated
with stock option exercises and the employee stock purchase plan; (iii) the
issuance of common stock to effect business combinations, should the Company
enter into such transactions; and (iv) potential conversion of subordinated
notes into common stock of the Company.

INVESTMENTS IN CORPORATE EQUITY SECURITIES AND UNREALIZED GAINS

        The Company has classified its investments in several Internet start-up
companies as investments available for sale, included in "Investments in
corporate equity securities" in the accompanying condensed consolidated balance
sheets. Realized gains on the sale of these investments for the quarter ended
March 31, 2000 were $9.5 million. The aggregate fair value of corporate equity
securities held at March 31, 2000, was $189.6 million. Gross unrealized gains
were $173.5 million as of March 31, 2000, and are included, net of deferred
income taxes of $66.8 million, as a component of "Accumulated other
comprehensive income" in the accompanying condensed consolidated balance sheets.
The unrealized holding gains relate to an investment in equity securities in a
company that completed its public offering in the third quarter of 1999. These
securities are subject to lock-up provisions, which expire in August 2000. The
Company intends to sell these investments when the lock-up provisions expire(1).
However, the stock market is highly volatile and as a result we cannot give you
assurance that the net unrealized holding gains will be realized. As of the
filing date of this Form, the gross unrealized gains had decreased to
approximately $104 million.

------------------------------
(1) Forward-Looking Statement


                                       14
<PAGE>   16

NEWLY ISSUED ACCOUNTING STANDARDS

        In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin No. 101, "Revenue Recognition in Financial Statements" ("SAB
101") and amended it in March 2000 with respect to the effective date.
PeopleSoft is required to adopt the provisions of SAB 101 in its second fiscal
quarter of 2000. The Company is currently reviewing the provisions of the
statement and has not fully assessed the impact of its adoption. While SAB 101
does not supercede the software industry specific revenue recognition guidance,
with which the Company believes it is in compliance, SAB 101 may change current
interpretations of software revenue recognition requirements, which would result
in PeopleSoft recording a cumulative effect of a change in accounting principles
in the second quarter of 2000, retroactive to January 1, 2000.


                         LIQUIDITY AND CAPITAL RESOURCES

        At March 31, 2000, the Company had $557.1 million in working capital,
including $520.8 million in cash and cash equivalents and $165.5 million 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 and equity securities
of corporations, municipalities and the U.S. Government. The Company believes
that the combination of cash and cash equivalents and short-term investment
balances, issuance of stock under the employee purchase plan and stock option
exercises, proceeds from sale of strategic equity security investments, and
potential cash flow from operations will be sufficient to satisfy its operating
cash requirements and expected purchases of property and equipment at least
through the next twelve months.(1)

        The following table summarizes the Company's cash flows from operating,
investing, and financing activities.

<TABLE>
<CAPTION>
        ================================================================================
        THREE MONTHS ENDED MARCH 31,                              1999            2000
        (in millions)
        --------------------------------------------------------------------------------
<S>                                                             <C>             <C>
        Net cash (used in) provided by:
          Operating activities .........................        $(183.0)        $  17.5
          Investing activities .........................          (18.5)           46.9
          Financing activities .........................          (59.7)           41.8
          Effect of exchange rate changes on
          cash and cash equivalents ....................           (2.5)            0.6
        --------------------------------------------------------------------------------
        (Decrease) increase in cash and cash equivalents        $(263.7)        $ 106.8
        ================================================================================
</TABLE>

        Net cash used in operating activities during the three-month period
ended March 31, 1999 was $183.0 million compared to net cash provided by
operating activities during the three-month period ended March 31, 2000 in the
amount of $17.5 million. Cash used by operating activities in the three-month
period ended March 31, 1999 included the $176.4 million contribution to Momentum
Business Applications.

        Net cash used for investing activities during the three-month period
ended March 31, 1999 was $18.5 million compared to net cash provided by
investing activities during the three-month period ended March 31, 2000 in the
amount of $46.9 million. The Company's principal use of cash for investing
activities in the three-month period ended March 31, 1999 included net purchase
of investments in the amount of $12.4 million and purchases of property and
equipment in the amount of $5.2 million. The Company's principal source of cash
from investing activities during the three-month period ended March 31, 2000 was
net proceeds from maturities and sales of investments of $56.6 million, which
were partially offset by purchases of property and equipment in the amount of
$9.7 million.

        Net cash used in financing activities during the three-month period
ended March 31, 1999 was $59.7 million compared to net cash provided by
financing activities during the three-month period ended March

------------------------------
(1) Forward-Looking Statement


                                       15
<PAGE>   17

31, 2000 in the amount of $41.8 million. Proceeds from the exercise of common
stock options by employees and issuance of stock under the employee stock
purchase program were $18.1 million and $37.6 million during the three months
ended March 31, 1999 and March 31, 2000. During the three-month period ended
March 31, 1999, proceeds from exercise of common stock options and issuances
under the stock purchase plan were offset by the Company's distribution of $78.6
million in Momentum Business Applications shares to PeopleSoft shareholders.


                       ITEM 3. FINANCIAL RISK MANAGEMENT

FOREIGN EXCHANGE RISK

        During the three months ended March 31, 1999 and March 31, 2000, the
Company's revenue originating outside the United States was 20% and 24% of total
revenues, including revenues generated in Europe of 9% and 12% of total revenues
during the same periods. Revenues from all other geographic regions were less
than 10% of total revenues. International sales are made mostly from the
Company's foreign sales subsidiaries in the local countries and are typically
denominated in the local currency of each country. These subsidiaries incur most
of their expenses in the local currency as well.

        The Company's international business is subject to risks typical of an
international business, including, but not limited to: differing economic
conditions, changes in political climate, differing tax structures, other
regulations and restrictions, and foreign exchange rate volatility. Accordingly,
the Company could experience a material adverse effect on its business and
results of operations.

        The Company's exposure to foreign exchange rate fluctuations arises in
part from intercompany accounts in which the cost of software, including certain
development costs, incurred in the United States is charged to the Company's
foreign sales subsidiaries. These intercompany accounts are typically
denominated in the functional currency of the foreign subsidiary in order to
centralize foreign exchange risk with the parent company in the United States.
The Company is also exposed to foreign exchange rate fluctuations as the
financial results of foreign subsidiaries are translated into U.S. dollars in
consolidation. As exchange rates vary, these results, when translated, may vary
from expectations and adversely impact overall expected profitability.

        The Company uses a foreign exchange hedging program designed to mitigate
the potential for future adverse impact on intercompany balances due to changes
in foreign currency exchange rates. The program uses foreign currency exchange
contracts as the vehicle for hedging these intercompany balances. The Company
uses two multinational banks for substantially all of these contracts. In
general, these contracts have terms of three months or less. Gains and losses on
the settled contracts are included in "Other income, net" and are recognized in
the current period, consistent with the period in which the gain or loss of the
underlying transaction is recognized. During the three-month periods ended March
31, 1999 and March 31, 2000 the Company recorded net losses from these settled
contracts and underlying foreign currency exposures of approximately $0.4
million and $1.1 million. At March 31, 2000, the Company had outstanding forward
exchange contracts totaling $40.8 million, to exchange Euros ($35.0 million),
Singapore dollars ($6.5 million), South African rands ($0.5 million), Swiss
francs ($2.4 million), New Zealand dollars ($1.0 million), Hong Kong dollars
($1.3 million) and British Pounds ($0.2 million) for U.S. dollars, and to
exchange U.S. dollars for Australian dollars ($1.5 million), Canadian dollars
($3.4 million) and Mexican pesos ($1.2 million). These contracts had maturity
dates through May 2000 and a book value that approximates fair value. The cost
and the fair value of these foreign currency exchange contracts was not material
at March 31, 2000.

        The foreign exchange hedging program is managed in accordance with a
corporate policy approved by the Company's Board of Directors. In addition to
hedging existing transactional exposures, the Company's foreign exchange
management policy allows for the hedging of anticipated transactions, and
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 estimatable, and significant in amount.
No such hedges have been undertaken through March 31, 2000.


                                       16
<PAGE>   18
INTEREST RATES

        The Company invests its cash in a variety of financial instruments,
consisting principally of investments in interest-bearing demand deposit
accounts with financial institutions, tax-advantaged money market funds and
highly liquid debt and equity securities of corporations, municipalities and the
U.S. Government. These investments are denominated in U.S. Dollars. Cash
balances in foreign currencies overseas are operating balances and are only
invested in short-term time deposits of the local operating bank.

        The Company accounts for its cash equivalents and investments under
Statement of Financial Accounting Standards No. 115, "Accounting for Certain
Investments in Debt and Equity Securities" ("SFAS 115"). The Company classifies
debt and preferred equity securities based on management's intention on the date
of purchase and reevaluates such designation 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
and equity securities are classified as available for sale and carried at fair
value with net unrealized gains and losses included in Accumulated other
comprehensive income, net of tax.

        Investments in both fixed rate and floating rate interest earning
instruments carries 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 may produce less income than expected if interest
rates fall. Due in part to these factors, the Company's future investment income
may fall short of expectations due to changes in interest rates or the Company
may suffer losses in principal if forced to sell securities which have seen a
decline in market value due to changes in interest rates.

        The Company's investments are made in accordance with an investment
policy approved by the Board of Directors. At March 31, 2000, the average
maturity of the Company's investment securities was approximately five months.
All investment securities had maturities of less than two years. The following
table presents certain information about the financial instruments held by the
Company at March 31, 2000 that are sensitive to changes in interest rates. These
instruments are not leveraged and are held for purposes other than trading. The
Company believes its investment securities, comprised of highly liquid debt
securities of corporations, municipalities, and the U.S. Government, are similar
enough to aggregate. Because of the Company's effective tax rate, the Company
finds it advantageous to invest largely in tax-advantaged securities. The
average interest rates below reflect a weighted average rate for both taxable
investments and tax-exempt investments. Below is a tabular presentation of the
maturity profile of the Company's investment securities held at March 31, 2000:

<TABLE>
<CAPTION>
================================================================================
AS OF MARCH 31, 2000                   EXPECTED MATURITY
                                    ----------------------
(in millions)                       ONE YEAR     MORE THAN   PRINCIPAL    FAIR
                                    OR LESS      ONE YEAR     AMOUNT      VALUE
--------------------------------------------------------------------------------
<S>                                 <C>          <C>         <C>          <C>
Available-for-sale securities.....    $318.7      $149.1      $467.8     $467.5
Weighted average interest rate....      4.42%       4.06%
Held-to-maturity..................    $  8.7           -        $8.7     $  8.7
Weighted average interest rate....      4.42%
================================================================================
</TABLE>


        The Company has classified its investments in several Internet start-up
companies as investments available for sale, included in "Investments in
corporate equity securities" in the accompanying condensed consolidated balance
sheets. Realized gains on the sale of these investments for the quarter ended
March 31, 2000 were $9.5 million. The aggregate fair value of investments in
corporate equity securities held at March 31, 2000, was $189.6 million. Gross
unrealized gains were $173.5 million as of March 31, 2000 and are included, net
of deferred income taxes of $66.8 million, as a component of "Accumulated other
comprehensive income" in the accompanying condensed consolidated balance sheet.
The unrealized holding gains relate to an investment in equity securities of a
company that completed its public offering in the third quarter of 1999. These
securities are subject to lock up provisions, which expire in August 2000. The
Company intends to sell these investments


                                       17
<PAGE>   19
when the lock up provisions expire(1). However, the stock market is highly
volatile; and as a result we cannot give you assurance that the unrealized
holding gains as of March 31, 2000 will be realized. As of the filing date of
this Form, the gross unrealized gains had decreased to approximately $104.0
million.

        In August 1997, the Company issued an aggregate of $69.0 million in
principal amount of convertible subordinated notes, due August 2002, to certain
investors. These notes bear interest at a rate of 4.75% per annum and are
convertible into the Company's common stock at the investor's option at any time
at a conversion price equal to $50.82 per share. Based on the traded yield to
maturity, the approximate fair market value of the convertible subordinated
notes was $59.3 million and $54.6 million as of December 31, 1999 and March 31,
2000.


        FACTORS THAT MAY AFFECT FUTURE RESULTS AND MARKET PRICE OF STOCK

        The Company has identified certain forward-looking statements in the
Management's Discussion and Analysis of Financial Condition and Results of
Operations and elsewhere in this Form 10-Q with a footnote (1) symbol. The
Company may also make oral forward-looking statements from time to time. 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 Form 10-Q.

        The Company operates in a dynamic and rapidly changing environment that
involves numerous risks and uncertainties. The following section lists some, but
not all, of these risks and uncertainties that may have a material adverse
effect on the Company's business, financial condition or results of operations.
This section should be read in conjunction with the unaudited Condensed
Consolidated Financial Statements and Notes included in this report on Form 10-Q
and Management's Discussion and Analysis of Financial Condition and Results of
Operations for the year ended December 31, 1999 contained in the Company's 1999
Annual Report to Stockholders on Form 10-K.

PEOPLESOFT'S CONTINUED SUCCESS DEPENDS UPON ITS ABILITY TO RETAIN AND ATTRACT A
SUFFICIENT NUMBER OF QUALIFIED EMPLOYEES.

        PeopleSoft believes that its future success will depend in large part
upon its ability to attract, train and retain highly skilled technical,
managerial, sales and marketing personnel. Although PeopleSoft invests
significant resources in recruiting and retaining employees, competition for
personnel in the software industry is intense, and, at times, PeopleSoft has had
difficulty locating highly qualified candidates within desired geographic
locations, or with certain industry-specific domain expertise. If PeopleSoft's
competitors increase their use of non-compete agreements, the pool of available
sales and technical personnel may further narrow in certain areas, even if the
non-compete agreements are ultimately unenforceable. PeopleSoft may grant large
numbers of options or other stock-based awards to attract and retain personnel,
which could be highly dilutive to PeopleSoft stockholders. The failure to
attract, train, retain and effectively manage employees could increase
PeopleSoft's costs, hurt PeopleSoft's development and sales efforts and cause a
degradation of PeopleSoft's customer service.

        During the last two years, PeopleSoft has experienced turnover of
several senior executives. PeopleSoft has hired or promoted qualified candidates
to fill these positions. However, since the employees are new to the positions,
it is possible that the newly hired or promoted employees will not easily
transition into these leadership roles or be able to successfully lead
PeopleSoft in its efforts to grow the company. In addition, uncertainty created
by turnover of key employees could cause fluctuations in PeopleSoft's stock
price and further turnover of PeopleSoft employees.

------------------------------
(1) Forward-Looking Statement


                                       18
<PAGE>   20

PEOPLESOFT COULD EXPERIENCE FLUCTUATIONS IN QUARTERLY OPERATING RESULTS WHICH
COULD ADVERSELY IMPACT ITS STOCK PRICE.

        PeopleSoft's revenues and results of operations are difficult to predict
and may fluctuate substantially from quarter to quarter. License revenues in any
quarter depend substantially upon PeopleSoft's total contracting activity and
its ability to recognize revenues in that quarter in accordance with its revenue
recognition policies.

        PeopleSoft's contracting activity is difficult to forecast for a variety
of reasons, including the following:

    o   a significant portion of PeopleSoft's license agreements are completed
        within the last few weeks of each quarter;

    o   PeopleSoft's sales cycle is relatively long and increasingly variable
        since PeopleSoft has broadened its marketing emphasis to include
        software product solutions for a customer's overall business;

    o   the size of license transactions can vary significantly;

    o   the possibility of economic downturns that are characterized by
        decreased product demand, price erosion, technological shifts, work
        slowdowns and layoffs may substantially reduce contracting activity;

    o   customers may unexpectedly postpone or cancel system replacement or new
        system evaluations due to changes in their strategic priorities, project
        objectives, budgetary constraints or company management;

    o   customer evaluations and purchasing processes vary significantly from
        company to company, and a customer's internal approval and expenditure
        authorization process can be difficult and time consuming, even after
        selection of a vendor;

    o   changes in PeopleSoft's sales incentive plans have had and may continue
        to have an unpredictable impact on business patterns; and

    o   the number, timing and significance of software product enhancements and
        new software product announcements by PeopleSoft and its competitors may
        affect purchase decisions.

        Several factors may require PeopleSoft to defer recognition of license
revenue for a significant period of time after entering into a license
agreement, including:

    o   whether the license agreement relates partially or entirely to then
        unavailable software products;

    o   whether enterprise transactions include both currently deliverable
        software products and software products that are under development or
        other undeliverable elements;

    o   whether the customer demands services that include significant
        modifications, customizations or complex interfaces that could delay
        product delivery or acceptance;

    o   whether the transaction involves acceptance criteria that may preclude
        revenue recognition or if there are identified product-related issues,
        such as known defects; and

    o   whether the transaction involves payment terms or fees that depend upon
        contingencies.

        Because of the factors listed above and other specific requirements
under GAAP for software revenue recognition, PeopleSoft must have very precise
terms in its license agreements in order to recognize revenue when it initially
delivers software or performs services. Although PeopleSoft has a standard form
of license agreement that meets the criteria under GAAP for current revenue
recognition on delivered


                                       19
<PAGE>   21
elements, it negotiates and revises these terms and conditions in some
transactions. Negotiation of mutually acceptable terms and conditions can extend
the sales cycle, and sometimes PeopleSoft does not obtain terms and conditions
that permit revenue recognition at the time of delivery or even as work on the
project is completed.

        Variances or slowdowns in PeopleSoft's prior quarter contracting
activity may impact its consulting, training and maintenance service revenues
since these revenues typically follow license fee revenues. PeopleSoft's ability
to maintain or increase service revenue primarily depends on its ability to
increase the number of its licensing agreements. In particular, the significant
decrease in license revenues in 1999 versus the prior year may have a
significant impact on service revenues and earnings in fiscal 2000.

        In addition, PeopleSoft's expense levels, operating costs and hiring
plans are based on projections of future revenues and are relatively fixed. If
PeopleSoft's actual revenues fall below expectations, its net income is likely
to be disproportionately adversely affected.

RECENT ACCOUNTING PRONOUNCEMENTS COULD ADVERSELY IMPACT PEOPLESOFT'S
PROFITABILITY BY DELAYING SOME REVENUE RECOGNITION INTO FUTURE PERIODS.

        Over the past several years, the American Institute of Certified Public
Accountants issued Statement of Position, or SOP 97-2, "Software Revenue
Recognition," SOP 98-4, "Deferral of the Effective Date of a Provision of SOP
97-2, Software Revenue Recognition," and SOP 98-9, "Modification of SOP 97-2,
Software Revenue Recognition, With Respect to Certain Transactions." These
standards address software revenue recognition matters primarily from a
conceptual level and do not include specific implementation guidance. PeopleSoft
believes that it is currently in compliance with SOPs 97-2 and 98-4 and 98-9.
PeopleSoft adopted SOP 98-9 on January 1, 2000 and has changed certain business
policies to meet the requirements of this SOP.

        The American Institute of Certified Public Accountants has only issued
some implementation guidelines for these standards and the accounting profession
is still discussing a wide range of potential interpretations. These
implementation guidelines, once finalized, could lead to unanticipated changes
in PeopleSoft's current revenue accounting practices that could cause PeopleSoft
to recognize lower profits. As a result, PeopleSoft may change its business
practices significantly in order to continue to recognize a substantial portion
of its license revenues when it delivers its software products. These changes
may reduce demand, extend sales cycles, increase administrative costs and
otherwise adversely affect PeopleSoft.

        In December 1999, the Securities and Exchange Commission ("SEC") issued
Staff Accounting Bulletin No. 101, "Revenue Recognition in Financial Statements"
("SAB 101") and amended it in March 2000 with respect to the effective dates.
PeopleSoft is required to adopt the provisions of SAB 101 in its second fiscal
quarter of 2000. The Company is currently reviewing the provisions of SAB 101
and has not fully assessed the impact of its adoption. While SAB 101 does not
supercede the software industry specific revenue recognition guidance, with
which the Company believes it is in compliance, SAB 101 may change current
interpretations of software revenue recognition requirements; which would
result in PeopleSoft, recording a cumulative effect of a change in accounting
principles in the second quarter of 2000, retroactive to January 1, 2000.

PEOPLESOFT HAS RECENTLY EXPANDED ITS TECHNOLOGY INTO SEVERAL NEW BUSINESS AREAS
AND CANNOT BE CERTAIN THAT ITS EXPANSION WILL BE SUCCESSFUL.

        PeopleSoft's future success depends on the Internet being accepted and
widely used for commerce. PeopleSoft has recently expanded its technology into a
number of new business areas to foster long-term growth, including electronic
commerce, on-line business services and other products and services that can be


                                       20
<PAGE>   22
offered over the Internet. These areas are relatively new to PeopleSoft's
product development, sales and marketing personnel and PeopleSoft cannot be
assured that the markets for these products will develop or that it will be able
to compete effectively or will generate significant revenues in these new areas
making PeopleSoft's success in this area is difficult to predict.

PEOPLESOFT'S RECENT AND FUTURE ACQUISITIONS MAY NOT BE SUCCESSFUL.

        PeopleSoft may acquire or invest in complementary companies, products
and technologies, and enter into joint ventures and strategic alliances with
other companies. Risks commonly encountered in such transactions include:

    o   the difficulty of assimilating the operations and personnel of the
        combined companies;

    o   the risk that PeopleSoft may not be able to integrate the acquired
        technologies or products with its current products and technologies;

    o   the potential disruption of PeopleSoft's ongoing business;

    o   the inability to retain key technical and managerial personnel;

    o   the inability of management to maximize the financial and strategic
        position of PeopleSoft through the successful integration of acquired
        businesses;

    o   adverse impact on PeopleSoft's annual effective tax rate;

    o   dilution of existing equity holders caused by capital stock issuances to
        the stockholders of acquired companies or to retain employees of the
        acquired companies;

    o   difficulty in maintaining controls, procedures and policies;

    o   potential adverse impact on PeopleSoft's relationships with partner
        companies or third-party providers of technology or products;

    o   the impairment of relationships with employees and customers; and

    o   issues with product quality, product architecture, legal contingencies,
        product development issues, or other significant issues that may not be
        detected through PeopleSoft's due diligence process.

        In addition, combinations with other companies may not qualify for
pooling of interests accounting, which would require PeopleSoft to use the
purchase method of accounting. The purchase method of accounting for business
combinations may require large write-offs of any in process research and
development costs related to companies being acquired, as well as ongoing
amortization costs for goodwill and other intangible assets valued in the
combinations with companies. Such write-offs and ongoing amortization charges
may have a significant negative impact on operating margins and net income in
the quarter of the combination and for several subsequent years. PeopleSoft may
not be successful in overcoming these risks or any other problems encountered in
connection with such transactions.

PEOPLESOFT DEPENDS ON THIRD-PARTY TECHNOLOGY THAT COULD RESULT IN INCREASED
COSTS OR DELAYS IN THE PRODUCTION AND IMPROVEMENT OF PEOPLESOFT'S PRODUCTS.

        PeopleSoft licenses numerous critical third-party software products that
it incorporates into its own software products. If any of the third-party
software vendors were to change their product offerings or terminate
PeopleSoft's licenses, PeopleSoft might need to incur additional development
costs to ensure continued performance of its products. In addition, if the cost
of licensing any of these third-party software products significantly increases,
PeopleSoft's gross margin levels could significantly decrease.



                                       21

<PAGE>   23
        PeopleSoft relies on existing partnerships with certain other software
vendors who are also competitors. If these vendors change their business
practices in the future, PeopleSoft may be compelled to find alternative vendors
with complementary software, which may not be available on attractive terms, or
may not be as widely accepted or as effective as the software provided by
PeopleSoft's existing vendors.

THE RELATIONSHIP WITH MOMENTUM BUSINESS APPLICATIONS MAY NEGATIVELY IMPACT
PEOPLESOFT BECAUSE PEOPLESOFT GAVE UP SOME CONTROL OVER RESEARCH AND
DEVELOPMENT.

        PeopleSoft faces a number of risks as of a result of its relationship
with Momentum Business Applications and the distribution of the Momentum
Business Applications Class A Common Stock to PeopleSoft stockholders. These
include:

    o   PeopleSoft has less control over important research and development
        projects. PeopleSoft and Momentum must agree on project selection,
        budgets, timetables and specifications for each project, and Momentum
        has oversight responsibilities for the actual product development;

    o   PeopleSoft could face restrictions on the amount and timing of its
        utilization of, or could lose, the tax benefits associated with the
        research and development expenditures on the projects pursued by
        Momentum; and

    o   if PeopleSoft chooses to acquire Momentum, it will likely be required to
        record significant accounting charges relating to acquisition of
        in-process research and development and amortization of goodwill, which
        would decrease earnings.

THERE IS INTENSE COMPETITION IN THE INDUSTRY, WHICH REQUIRES THAT PEOPLESOFT
CONSTANTLY CREATE NEW PRODUCTS, IMPROVE ITS EXISTING PRODUCTS AND SELL ITS
PRODUCTS AT COMPETITIVE PRICES.

        PeopleSoft competes with a variety of software vendors, including
Internet application vendors in the enterprise application software market
segment, vendors in the manufacturing software application market segment,
vendors in the emerging enterprise resource optimization software solutions
market segment, providers of human resource management system software products,
providers of financial management systems software products, and numerous small
firms that offer products with new or advanced features. As a result, the market
for business application software has been and continues to be intensely
competitive. Some competitors have become more aggressive with their payment
terms and/or issuance of contractual implementation terms or guarantees.
PeopleSoft may be unable to continue to compete successfully with new and
existing competitors without lowering prices or offering other favorable terms.

        In addition, PeopleSoft believes it must differentiate itself through
different or more subtle architectural and technological factors.

        Some of PeopleSoft's competitors may have an advantage over PeopleSoft
due to their significant worldwide presence, longer operating and product
development history, and substantially greater financial, technical and
marketing resources than PeopleSoft. At least one competitor has a larger
installed base. In addition, Oracle Corporation is a competitor whose relational
database management system underlies a significant portion of PeopleSoft's
installed applications.

        Furthermore, potential customers may consider outsourcing options,
including data center outsourcing and service bureaus, as viable alternatives to
licensing PeopleSoft's software products. PeopleSoft began an outsourcing
partner program in 1999 and began hosting its own service bureau in early 2000,
both of which the Company believes address the needs of the marketplace;
however, these programs may not be successful.


                                       22
<PAGE>   24
PEOPLESOFT MAY CHANGE PRICING PRACTICES WHICH COULD IMPACT OPERATING MARGINS OR
CUSTOMER ORDERING PATTERNS.

        In the future, PeopleSoft may choose to make changes to its pricing
practices. For example, PeopleSoft may offer additional discounts to customers,
reduce transactions that involve a perpetual use license to its software
products, or change maintenance pricing. Such changes could reduce margins or
inhibit PeopleSoft's ability to sell its products.

SERVICES REVENUES CARRY LOWER GROSS MARGINS THAN LICENSE REVENUES AND AN OVERALL
INCREASE IN SERVICES REVENUE AS A PERCENTAGE OF TOTAL REVENUES COULD HAVE AN
ADVERSE IMPACT ON PEOPLESOFT'S BUSINESS.

        Because service revenues have lower gross margins than license revenues,
a continued increase in the percentage of total revenue represented by service
revenues could have a detrimental impact on our overall gross margins and could
adversely affect operating results. In addition, PeopleSoft sub-contracts
certain consulting services to third parties which generally carry lower gross
margins than PeopleSoft's service business overall. As a result, PeopleSoft's
gross margins can be negatively impacted based on the percentage of service
revenues as a percentage of total revenue and the mix between services which are
provided by PeopleSoft employees versus services provided by third party
consultants.

IF AN INDUSTRY STANDARD DEVELOPMENT TOOL IS ESTABLISHED, CONFORMANCE TO THE
STANDARD COULD REQUIRE A COSTLY REDESIGN OF EXISTING SOFTWARE PRODUCTS.

        PeopleSoft's software products include a suite of proprietary software
development tools, known as PeopleTools, which are fundamental to the effective
use of PeopleSoft's software products. 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 software
development tools as the accepted industry standard. If a software product other
than PeopleTools becomes the clearly established and widely accepted industry
standard, PeopleSoft may not be able to respond appropriately or rapidly to the
emergence of an industry standard or might be compelled to abandon or modify
PeopleTools in favor of such an established standard; be forced to redesign its
software products to operate with such third party's software development tools;
or face the potential sales obstacle of marketing a proprietary software product
against other vendors' software products that incorporate a standardized
software development toolset.

PEOPLESOFT'S SIGNIFICANT INTERNATIONAL OPERATIONS AND SALES SUBJECT IT TO RISKS
ASSOCIATED WITH RAPID AND UNEXPECTED GROWTH OUTSIDE OF THE UNITED STATES.

        PeopleSoft continues to invest in an effort to enhance its international
operations. The global reach of PeopleSoft's business could cause it to be
subject to unexpected, uncontrollable and rapidly changing events and
circumstances in addition to those experienced in United States locations.
Changes in the following factors, among others, could have an adverse impact on
PeopleSoft's business and earnings:

    o   conducting business in currencies other than United States dollars
        subjects PeopleSoft to factors such as currency controls and
        fluctuations in currency exchange rates;

    o   PeopleSoft may be unable to hedge some transactions because of
        uncertainty or the inability to reasonably estimate its foreign exchange
        exposure;

    o   PeopleSoft may hedge some anticipated transactions and transaction
        exposures, but could experience losses if exchange rates move in the
        opposite direction;

    o   differing foreign technical standards;

    o   increased cost and development time required to localize PeopleSoft
        products;

    o   lack of experience in a particular geographic market;


                                       23
<PAGE>   25

    o   regulatory, social, political, labor or economic conditions in a
        specific country or region;

    o   laws, policies and other regulatory requirements affecting trade and
        investment including loss or modification of exemptions for taxes and
        tariffs, and import and export license requirements;

    o   exposure to different legal standards; and

    o   operating costs in many countries are higher than in the United States.

THE EURO CREATES UNCERTAINTY FOR PEOPLESOFT'S PRODUCT DEVELOPMENT AND AS A
RESULT COULD IMPACT SALES.

        PeopleSoft's latest software release contains European Monetary Union,
or EMU, functionality that allows for dual currency reporting and information
management. However, since the Euro will not be the sole legally required
currency in any of the member nations until 2002, it is possible that all issues
related to conversion to EMU have not surfaced yet, and may not have been
adequately addressed. In addition, PeopleSoft's products may be used with
third-party products that may or may not be EMU compliant. Although PeopleSoft
continues to take steps to address the impact, if any, of EMU compliance for
such third-party products, failure of any critical technology components to
operate properly under EMU may adversely affect sales or require PeopleSoft to
incur unanticipated expenses to remedy any problems.

PEOPLESOFT'S CONTINUED GROWTH DEPENDS UPON ITS ABILITY TO BUILD AND MAINTAIN
RELATIONSHIPS WITH THIRD PARTIES.

        A key aspect of PeopleSoft's sales and marketing strategy is to build
and maintain strong working relationships with businesses that PeopleSoft
believes play an important role in the successful marketing of its software
products. PeopleSoft's current and potential customers often rely on third-party
system integrators to develop, deploy and manage client/server applications.
PeopleSoft believes that its marketing and sales efforts are enhanced by the
worldwide presence of these companies. However, these companies, most of which
have significantly greater financial and marketing resources than PeopleSoft,
may start, or in some cases increase, the marketing of business application
software in competition with PeopleSoft, or may otherwise discontinue their
relationships with or support of PeopleSoft. If PeopleSoft's partners are unable
to recruit and adequately train a sufficient number of consulting personnel to
support the implementation of PeopleSoft's software products, PeopleSoft may
lose customers. In addition, integrators who generate consulting fees from
customers by providing implementation services may be less likely to recommend
PeopleSoft's software application architecture, including PeopleTools, if these
products are more difficult to install and maintain than competitors' similar
product offerings.

        Also, PeopleSoft has in the past, and may in the future, enter into
various development or joint business arrangements to develop new software
products or extensions to its existing software products. Under these joint
business arrangements, PeopleSoft may distribute itself or jointly sell with its
business partners an integrated software product and pay a royalty to the
business partner based on end-user license fees. While PeopleSoft intends to
develop business applications that are integrated with its software products,
these software products may in fact not be integrated or brought to market or
the market may not accept the integrated enterprise solution. As a result,
PeopleSoft may not achieve the revenues that it anticipated at the time it
entered into the joint business arrangement.

PEOPLESOFT'S SOFTWARE PRODUCTS AND PRODUCT DEVELOPMENT ARE COMPLEX, WHICH MAKES
IT INCREASINGLY DIFFICULT TO INNOVATE, EXTEND ITS PRODUCT OFFERINGS, AND TO
AVOID COSTS RELATED TO CORRECTION OF PROGRAM ERRORS.

        The market for PeopleSoft's software products is characterized by rapid
technological change, evolving industry standards, changes in customer
requirements and frequent new product introductions and enhancements.
PeopleSoft's future success will depend in part upon its ability to:

    o   continue to enhance and expand its core applications;


                                       24
<PAGE>   26

    o   continue to provide enterprise solutions;

    o   continue to successfully integrate third-party products;

    o   enter new markets; and

    o   develop and introduce new products that keep pace with technological
        developments, including developments related to the Internet, satisfy
        increasingly sophisticated customer requirements and achieve market
        acceptance. PeopleSoft may not be able to enhance existing products or
        develop and introduce new products in a timely manner.

        PeopleSoft's software products can be licensed for use with a variety of
popular industry standard relational database management systems. There may be
future or existing relational database management system platforms that achieve
popularity within the business application marketplace and on which PeopleSoft
may desire to offer its applications. These future or existing relational
database management system products may or may not be architecturally compatible
with PeopleSoft's software product design. PeopleSoft may not be able to develop
software products on additional platforms with the specifications and within the
time frame necessary for market success.

        Despite testing by PeopleSoft and by third parties, PeopleSoft's
software programs, like all software programs generally, may contain a number of
undetected errors when they are first introduced or as new releases are
subsequently released. This may result in increased costs to correct such errors
and reduced acceptance of PeopleSoft's software products in the marketplace. The
effort and expense of developing, testing and maintaining software product lines
will increase with the increasing number of possible combinations of:

    o   vendor hardware platforms;

    o   operating systems and updated versions;

    o   PeopleSoft application software products and updated versions; and

    o   relational database management system platforms and updated versions.

Developing consistent software product performance characteristics across all of
these combinations could place a significant strain on PeopleSoft's development
resources and software product release schedules.

PEOPLESOFT RELIES ON CLIENT INTERFACES WHICH COULD NEGATIVELY IMPACT PEOPLESOFT
IF CURRENT OR FUTURE CLIENT INTERFACES ARE NOT COMPATIBLE WITH PEOPLESOFT'S
CURRENT SOFTWARE PRODUCT DESIGN.

        Currently, PeopleSoft supports client platforms using browsers certified
to run its Java-based Web client, or Microsoft's Windows family of software
products, including Windows 3.1 (for PeopleSoft releases prior to Release 6
only), Windows NT, Windows 95, Windows 98 and Windows 2000. If Microsoft
fundamentally changes the architecture of its software products so that users of
PeopleSoft's software applications experience significant performance
degradation or PeopleSoft's software applications become incompatible with
future versions of Microsoft's Windows operating system, it could cause
PeopleSoft to expend significant resources to reconfigure its products. The use
of a Web browser as a primary user interface is emerging as an alternative to
the traditional desktop access through networked Microsoft Windows-based
personal computers. This client access via the Internet or an intranet involves
numerous risks inherent in using the Internet, including security, availability
and reliability. PeopleSoft may wish to offer its applications on future or
existing client platforms that achieve popularity within the business
application marketplace. These future or existing client platforms may or may
not be architecturally compatible with PeopleSoft's current software product
design. PeopleSoft may not be able to support new client interfaces and achieve
market acceptance of new client interfaces that it does support.


                                       25
<PAGE>   27

PEOPLESOFT HAS LIMITED PROTECTION OF INTELLECTUAL PROPERTY AND PROPRIETARY
RIGHTS AND MAY POTENTIALLY INFRINGE THIRD-PARTY INTELLECTUAL PROPERTY RIGHTS.

        PeopleSoft considers certain aspects of its internal operations,
software and documentation to be proprietary, and relies on a combination of
contract, patent, copyright, trademark and trade secret laws and other measures
to protect this information. Outstanding applications may not result in issued
patents and, even if issued, the patents may not provide any meaningful
competitive advantage. Existing copyright laws afford only limited protection.
PeopleSoft believes that the rapid pace of technological change in the computer
software industry has made trade secret and copyright protection less
significant than factors such as:

    o   knowledge, ability and experience of PeopleSoft's employees;

    o   frequent software product enhancements; and

    o   timeliness and quality of support services.

        PeopleSoft's competitors may independently develop technologies that are
substantially equivalent or superior to PeopleSoft's technology. Through an
escrow arrangement, PeopleSoft has granted many of its customers a contingent
future right to use PeopleSoft's source code solely for internal maintenance
services. This possible access to PeopleSoft's source code may increase the
likelihood of misappropriation or other misuse of PeopleSoft's intellectual
property. Finally, the laws of some countries in which PeopleSoft's software
products are or may be licensed do not protect PeopleSoft's software products
and intellectual property rights to the same extent as the laws of the United
States. Defending PeopleSoft's rights could be costly.

        Third parties may assert infringement claims against PeopleSoft. These
assertions could distract management, require PeopleSoft to enter into royalty
arrangements, and could result in costly and time consuming litigation,
including damage awards.

PEOPLESOFT MAY EXPERIENCE LIABILITY CLAIMS ARISING OUT OF THE LICENSING OF ITS
SOFTWARE AND PROVISION OF SERVICES.

        PeopleSoft's agreements contain provisions designed to limit its
exposure to potential liability claims. However, these provisions could be
invalidated by unfavorable judicial decisions or by federal, state, local or
foreign laws or ordinances. For example, PeopleSoft might not be able to avoid
or limit liability for disputes relating to product performance or the provision
of services. If a claim against PeopleSoft were successful, PeopleSoft might be
required to incur significant expense and pay substantial damages. Even if
PeopleSoft was to prevail, the accompanying publicity could adversely impact the
demand for PeopleSoft's software.

PEOPLESOFT'S STOCK PRICE IS VOLATILE AND THERE IS A RISK OF LITIGATION.

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

    o   revenue or results of operations in any quarter failing to meet the
        expectations, published or otherwise, of the investment community;

    o   announcements of technological innovations by PeopleSoft or its
        competitors;

    o   new products or the acquisition of significant customers by PeopleSoft
        or its competitors;

    o   developments with respect to patents, copyrights or other proprietary
        rights of PeopleSoft or its competitors;


                                       26
<PAGE>   28

    o   changes in recommendations or financial estimates by securities
        analysts;

    o   changes in management;

    o   conditions and trends in the software industry generally;

    o   the announcement of acquisitions or other significant transactions by
        PeopleSoft or its competitors;

    o   adoption of new accounting standards affecting the software industry;
        and

    o   general market conditions and other factors.

        Fluctuations in the price of PeopleSoft's common stock may expose
PeopleSoft to the risk of securities class action lawsuits. As a result of the
significant declines in the price of its common stock during the second half of
fiscal 1998 and the first half of fiscal 1999, several such lawsuits were filed
against PeopleSoft. Although PeopleSoft believes that these lawsuits are without
merit, defending against them could result in substantial costs and divert
management's attention and resources. In addition, any settlement or adverse
determination of these lawsuits could subject PeopleSoft to significant
liabilities. PeopleSoft cannot be assured that there will not be additional
lawsuits in the future.


                                       27
<PAGE>   29

                           PART II - OTHER INFORMATION

   Item 1. Legal Proceedings


         None

   Item 2. Changes in Securities and Use of Proceeds

         None

   Item 3. Defaults Upon Senior Securities

         None

   Item 4. Submission of Matters to a Vote of Security Holders

         None

   Item 5. Other Information

         None

   Item 6. Exhibits and Reports on Form 8 - K

        (a) Exhibits

               27.1 Financial Data Schedule

        (b) Reports on Form 8 - K

        The Company filed a Current Report on Form 8-K on January 4, 2000 and
        reported on the merger of PeopleSoft with The Vantive Corporation on
        December 31, 1999.


                                       28
<PAGE>   30

                                   SIGNATURES

        Pursuant to the requirements 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.

        Dated: May 15, 2000


                                 PEOPLESOFT, INC.



                                 By:  /s/ STEPHEN F. HILL
                                    --------------------------------------------
                                    Stephen F. Hill
                                    Sr. Vice President and Chief Financial
                                    Officer (Principal Financial and Accounting
                                    Officer)





                                       29

<PAGE>   31

                               Index to Exhibits

       27.1 Financial Data Schedule