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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 June 30, 2003

OR

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

4460 Hacienda Drive, Pleasanton, California 94588-8618(Address of principal executive offices, Zip Code)

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



| |                                                                                                                                                                                                                                                                                                                                                                    
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 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 o



| |                                                                                                                             
| | ----------------------------------------------------------------------------------------------------------------------------
| | Indicate by check mark whether Registrant is an accelerated filer
(as defined in Rule 12b-2 of the Exchange Act). Yes x No o
|
| | On August 8, 2003, the Registrant had 364,055,320 shares of common stock
outstanding.                                       



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TABLE OF CONTENTS

|                               |  |                                                                                       |    |                                                                                                                    |    |  |   |  |  | 
|------------------------------ |  | ------------------------------------------------------------------------------------- | -- | ------------------------------------------------------------------------------------------------------------------ | -- |  | - |  |  | 
|PART I  FINANCIAL INFORMATION
|Item 1.                        |  | Condensed Consolidated Financial Statements                                           |    |                                                                                                                    |    | 
|                               |  |                                                                                       |    | Condensed Consolidated Balance Sheets as of June 30, 2003 and December 31, 2002                                    |    |  | 2 | 
|                               |  |                                                                                       |    | Condensed Consolidated Statements of Operations for the Three and Six Months
Ended June 30, 2003 and June 30, 2002 |    |  | 3 | 
|                               |  |                                                                                       |    | Condensed Consolidated Statements of Cash Flows for the Six Months Ended June
30, 2003 and June 30, 2002           |    |  | 4 | 
|                               |  |                                                                                       |    | Notes to Condensed Consolidated Financial Statements                                                               |    |  | 5 | 
|Item 2.                        |  | Managements Discussion and Analysis of Financial Condition and Results of Operations |    |                                                                                                                    | 16 | 
|Item 3.                        |  | Quantitative and Qualitative Disclosures About Market Risk                            |    |                                                                                                                    | 25 | 
|Item 4.                        |  | Controls and Procedures                                                               |    |                                                                                                                    | 27 | 
|PART II  OTHER INFORMATION   
|Item 1.                        |  | Legal Proceedings                                                                     |    |                                                                                                                    | 38 | 
|Item 2.                        |  | Changes in Securities and Use of Proceeds                                             |    |                                                                                                                    | 40 | 
|Item 3.                        |  | Defaults Upon Senior Securities                                                       |    |                                                                                                                    | 40 | 
|Item 4.                        |  | Submission of Matters to a Vote of Security Holders                                   |    |                                                                                                                    | 40 | 
|Item 5.                        |  | Other Information                                                                     |    |                                                                                                                    | 41 | 
|Item 6.                        |  | Exhibits and Reports on Form 8-K                                                      |    |                                                                                                                    | 41 | 
|SIGNATURES                     |  |                                                                                       | 43 |                                                                                                                   

1



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PART I  FINANCIAL INFORMATION
ITEM 1  CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

PEOPLESOFT, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)
(Unaudited)


|                                                       |                                           |                                            |                                      |           |           |               |         |                   |           |  |  | 
|------------------------------------------------------ | ----------------------------------------- | ------------------------------------------ | ------------------------------------ | --------- | --------- | ------------- | ------- | ----------------- | --------- |  |  | 
|                                                       |                                           |                                            |                                      |           |           | June 30, 2003 |         | December 31, 2002
|                                                       |                                           |                                            |                                      |           |           |               |         |                  
|                                                       |                                           |                                            |                                      | ASSETS    |           |               |         |                   |           |  |  | 
|Current assets:                                        |                                           |                                            |                                      |           |           |               |         |                  
|                                                       | Cash and cash equivalents                 |                                            | $                                    | 272,860   |           |               | $       | 319,344           |          
|                                                       | Short-term investments                    |                                            |                                      | 1,666,693 |           |               |         | 1,588,172         |          
|                                                       | Accounts receivable, net                  |                                            |                                      | 312,291   |           |               |         | 357,353           |          
|                                                       | Deferred tax assets                       |                                            |                                      | 38,700    |           |               |         | 40,559            |          
|                                                       | Prepaid expenses and other current assets |                                            |                                      | 54,568    |           |               |         | 45,448            |          
|                                                       |                                           |                                            |                                      |           |           |               |         |                  
|                                                       |                                           | Total current assets                       |                                      |           | 2,345,112 |               |         |                   | 2,350,876 | 
|Property and equipment, net                            |                                           |                                            | 389,974                              |           |           |               | 222,800 |                  
|Investments                                            |                                           |                                            | 37,764                               |           |           |               | 21,946  |                  
|Deferred tax assets                                    |                                           |                                            | 140,839                              |           |           |               | 149,187 |                  
|Capitalized software, net                              |                                           |                                            | 35,679                               |           |           |               | 44,101  |                  
|Goodwill                                               |                                           |                                            | 54,657                               |           |           |               | 54,294  |                  
|Other assets                                           |                                           |                                            | 6,217                                |           |           |               | 5,359   |                  
|                                                       |                                           |                                            |                                      |           |           |               |         |                  
|                                                       |                                           | Total assets                               |                                      | $         | 3,010,242 |               |         | $                 | 2,848,563 | 
|                                                       |                                           |                                            |                                      |           |           |               |         |                  
|                                                       |                                           |                                            | LIABILITIES AND STOCKHOLDERS EQUITY |           |           |               |         |                   |           |  | 
|Current liabilities:                                   |                                           |                                            |                                      |           |           |               |         |                  
|                                                       | Accounts payable                          |                                            | $                                    | 35,429    |           |               | $       | 23,356            |          
|                                                       | Accrued liabilities                       |                                            |                                      | 102,933   |           |               |         | 109,331           |          
|                                                       | Accrued compensation and related expenses |                                            |                                      | 148,878   |           |               |         | 172,566           |          
|                                                       | Income taxes payable                      |                                            |                                      | 23,471    |           |               |         | 48,095            |          
|                                                       | Short-term deferred revenues              |                                            |                                      | 468,501   |           |               |         | 422,657           |          
|                                                       |                                           |                                            |                                      |           |           |               |         |                  
|                                                       |                                           | Total current liabilities                  |                                      |           | 779,212   |               |         |                   | 776,005   | 
|Long-term deferred revenues                            |                                           |                                            | 90,319                               |           |           |               | 95,460  |                  
|Other liabilities                                      |                                           |                                            | 29,617                               |           |           |               | 21,486  |                  
|                                                       |                                           |                                            |                                      |           |           |               |         |                  
|                                                       |                                           | Total liabilities                          |                                      |           | 899,148   |               |         |                   | 892,951   | 
|Commitments and contingencies (see accompanying notes) |                                           |                                            |                                      |           |           |               |         |                  
|Stockholders equity:                                  |                                           |                                            |                                      |           |           |               |         |                  
|                                                       | Common stock                              |                                            |                                      | 3,191     |           |               |         | 3,150             |          
|                                                       | Additional paid-in capital                |                                            |                                      | 1,439,759 |           |               |         | 1,382,442         |          
|                                                       | Retained earnings                         |                                            |                                      | 674,816   |           |               |         | 599,803           |          
|                                                       | Treasury stock                            |                                            |                                      | (36,429   | )         |               |         | (35,563           | )        
|                                                       | Accumulated other comprehensive income    |                                            |                                      | 29,757    |           |               |         | 5,780             |          
|                                                       |                                           |                                            |                                      |           |           |               |         |                  
|                                                       |                                           | Total stockholders equity                 |                                      |           | 2,111,094 |               |         |                   | 1,955,612 | 
|                                                       |                                           |                                            |                                      |           |           |               |         |                  
|                                                       |                                           | Total liabilities and stockholders equity |                                      | $         | 3,010,242 |               |         | $                 | 2,848,563 | 
|                                                       |                                           |                                            |                                      |           |           |               |         |                  

See accompanying notes to unaudited condensed consolidated financial statements.

2



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PEOPLESOFT, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share amounts)
(Unaudited)


|                                                    |                                              |   |                          |         |                    |         |                  |         |      |         |         |         |  |         |         |         |  |         | 
|--------------------------------------------------- | -------------------------------------------- | - | ------------------------ | ------- | ------------------ | ------- | ---------------- | ------- | ---- | ------- | ------- | ------- |  | ------- | ------- | ------- |  | ------- | 
|                                                    |                                              |   |                          |         | Three Months Ended |         | Six Months Ended
|                                                    |                                              |   |                          |         | June 30,           |         | June 30,        
|                                                    |                                              |   |                          |         | 2003               |         | 2002             |         | 2003 |         | 2002   
|                                                    |                                              |   |                          |         |                    |         |                  |         |      |         |        
|Revenues:                                           |                                              |   |                          |         |                    |         |                  |         |      |         |         |         |  |         |         |        
|                                                    | License fees                                 |   | $                        | 111,726 |                    |         | $                | 131,929 |      |         | $       | 192,567 |  |         | $       | 265,219 | 
|                                                    |                                              |   |                          |         |                    |         |                 
|                                                    | Maintenance revenue                          |   |                          | 205,563 |                    |         |                  | 171,327 |      |         |         | 405,484 |  |         |         | 335,900 | 
|                                                    | Professional services revenue                |   |                          | 180,153 |                    |         |                  | 178,956 |      |         |         | 359,647 |  |         |         | 356,830 | 
|                                                    |                                              |   |                          |         |                    |         |                  |         |      |         |         |         |  |         |         |        
|                                                    |                                              |   | Service revenue          |         |                    | 385,716 |                  |         |      | 350,283 |         |         |  | 765,131 |         |         |  | 692,730 | 
|                                                    | Development and other service revenue        |   |                          |        |                    |         |                  |        |      |         |         |        |  |         |         | 7,530   | 
|                                                    |                                              |   |                          |         |                    |         |                  |         |      |         |         |         |  |         |         |        
|                                                    |                                              |   | Total
revenues           |         |                    | 497,442 |                  |         |      | 482,212 |         |         |  | 957,698 |         |         |  | 965,479 | 
|Costs and expenses:                                 |                                              |   |                          |         |                    |         |                  |         |      |         |         |         |  |         |         |        
|                                                    | Cost of license
fees                         |   |                          | 9,563   |                    |         |                  | 10,182  |      |         |         | 18,289  |  |         |         | 21,619  | 
|                                                    | Cost of
services                             |   |                          | 166,698 |                    |         |                  | 171,159 |      |         |         | 330,167 |  |         |         | 335,689 | 
|                                                    | Cost of development and other services       |   |                          |        |                    |         |                  |        |      |         |         |        |  |         |         | 6,755   | 
|                                                    | Sales and marketing
expense                  |   |                          | 131,492 |                    |         |                  | 126,162 |      |         |         | 251,050 |  |         |         | 250,732 | 
|                                                    | Product development expense                  |   |                          | 84,646  |                    |         |                  | 87,547  |      |         |         | 168,351 |  |         |         | 169,880 | 
|                                                    | General and administrative expense           |   |                          | 41,024  |                    |         |                  | 27,396  |      |         |         | 74,039  |  |         |         | 57,642  | 
|                                                    | Restructuring, acquisition and other charges |   |                          | 13,799  |                    |         |                  | 8,679   |      |         |         | 13,799  |  |         |         | 11,479  | 
|                                                    |                                              |   |                          |         |                    |         |                  |         |      |         |         |         |  |         |         |        
|                                                    |                                              |   | Total costs and expenses |         |                    | 447,222 |                  |         |      | 431,125 |         |         |  | 855,695 |         |         |  | 853,796 | 
|                                                    |                                              |   |                          |         |                    |         |                  |         |      |         |         |         |  |         |         |        
|Operating income                                    |                                              |   | 50,220                   |         |                    |         | 51,087           |         |      |         | 102,003 |         |  |         | 111,683 |        
|Other income,
net                                   |                                              |   | 4,712                    |         |                    |         | 8,478            |         |      |         | 11,678  |         |  |         | 15,717  |        
|                                                    |                                              |   |                          |         |                    |         |                  |         |      |         |         |         |  |         |         |        
|Income before provision for income taxes            |                                              |   | 54,932                   |         |                    |         | 59,565           |         |      |         | 113,681 |         |  |         | 127,400 |        
|Provision for income
taxes                          |                                              |   | 18,398                   |         |                    |         | 23,545           |         |      |         | 38,668  |         |  |         | 46,836  |        
|                                                    |                                              |   |                          |         |                    |         |                  |         |      |         |         |         |  |         |         |        
|Net income                                          |                                              | $ | 36,534                   |         |                    | $       | 36,020           |         |      | $       | 75,013  |         |  | $       | 80,564  |        
|                                                    |                                              |   |                          |         |                    |         |                  |         |      |         |         |         |  |         |         |        
|Basic income per
share                              |                                              | $ | 0.12                     |         |                    | $       | 0.12             |         |      | $       | 0.24    |         |  | $       | 0.26    |        
|Shares used in basic income per share computation   |                                              |   | 315,707                  |         |                    |         | 310,617          |         |      |         | 315,302 |         |  |         | 309,276 |        
|Diluted income per
share                            |                                              | $ | 0.11                     |         |                    | $       | 0.11             |         |      | $       | 0.23    |         |  | $       | 0.25    |        
|Shares used in diluted income per share computation |                                              |   | 318,630                  |         |                    |         | 318,535          |         |      |         | 319,299 |         |  |         | 322,590 |        

See accompanying notes to unaudited condensed consolidated financial statements.

3



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PEOPLESOFT, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)
(Unaudited)


|                                                                                  |                            |                                                                             |                                           |        |                           |         |            |        |          |         |  
|--------------------------------------------------------------------------------- | -------------------------- | --------------------------------------------------------------------------- | ----------------------------------------- | ------ | ------------------------- | ------- | ---------- | ------ | -------- | ------- | -
|                                                                                  |                            |                                                                             |                                           |        | Six Months Ended June 30,
|                                                                                  |                            |                                                                             |                                           |        | 2003                      |         | 2002      
|                                                                                  |                            |                                                                             |                                           |        |                           |         |           
|Operating activities:                                                             |                            |                                                                             |                                           |        |                           |         |            |       
|Net income                                                                        |                            | $                                                                           | 75,013                                    |        |                           | $       | 80,564     |       
|Adjustments to reconcile net income to net cash
provided by operating activities: |                            |                                                                             |                                           |        |                           |         |            |       
|                                                                                  |                            | Depreciation and amortization                                               |                                           |        | 56,710                    |         |            |        | 46,335   |        
|                                                                                  |                            | Provision for doubtful accounts                                             |                                           |        | 5,544                     |         |            |        | 6,140    |        
|                                                                                  |                            | Tax benefits from employee stock transactions                               |                                           |        | 3,585                     |         |            |        | 22,496   |        
|                                                                                  |                            | Provision (benefit) for deferred income taxes                               |                                           |        | 7,739                     |         |            |        | (4,268   | )      
|                                                                                  |                            | Gain on sales of investments and disposition of property and
equipment, net |                                           |        | (1,289                    | )       |            |        | (2,881   | )      
|                                                                                  |                            | Non-cash stock compensation                                                 |                                           |        | 4,628                     |         |            |        | 3,752    |        
|                                                                                  |                            | Restructuring, acquisition and other charges                                |                                           |        | 1,722                     |         |            |        | 11,479   |        
|                                                                                  |                            | Changes in operating assets and liabilities:                                |                                           |        |                           |         |            |        |          |        
|                                                                                  |                            |                                                                             | Accounts receivable                       |        |                           | 45,350  |            |        |          | 54,293  |  
|                                                                                  |                            |                                                                             | Accounts payable and accrued liabilities  |        |                           | 10,735  |            |        |          | (10,963 | )
|                                                                                  |                            |                                                                             | Accrued compensation and related expenses |        |                           | (26,157 | )          |        |          | (22,323 | )
|                                                                                  |                            |                                                                             | Income taxes, net                         |        |                           | (23,529 | )          |        |          | 11,176  |  
|                                                                                  |                            |                                                                             | Deferred revenues                         |        |                           | 26,439  |            |        |          | 12,755  |  
|                                                                                  |                            |                                                                             | Other                                     |        |                           | 6,769   |            |        |          | 5,832   |  
|                                                                                  |                            |                                                                             |                                           |        |                           |         |            |       
|                                                                                  |                            | Net cash provided by operating activities                                   |                                           |        | 193,259                   |         |            |        | 214,387  |        
|Investing activities:                                                             |                            |                                                                             |                                           |        |                           |         |            |       
|Purchase of investments                                                           |                            |                                                                             | (6,822,384                                | )      |                           |         | (4,733,065 | )     
|Proceeds from sales and maturities of investments                                 |                            |                                                                             | 6,732,056                                 |        |                           |         | 4,581,692  |       
|Purchase of property and equipment                                                |                            |                                                                             | (213,801                                  | )      |                           |         | (50,859    | )     
|Acquisitions, net of cash acquired                                                |                            |                                                                             |                                          |        |                           |         | (117,758   | )     
|                                                                                  |                            |                                                                             |                                           |        |                           |         |            |       
|                                                                                  |                            | Net cash used in investing activities                                       |                                           |        | (304,129                  | )       |            |        | (319,990 | )      
|Financing activities:                                                             |                            |                                                                             |                                           |        |                           |         |            |       
|Proceeds from employee stock transactions                                         |                            |                                                                             | 49,145                                    |        |                           |         | 78,113     |       
|                                                                                  |                            |                                                                             |                                           |        |                           |         |            |       
|                                                                                  |                            | Net cash provided by financing activities                                   |                                           |        | 49,145                    |         |            |        | 78,113   |        
|Effect of foreign exchange rate changes on cash and cash equivalents              |                            |                                                                             | 15,241                                    |        |                           |         | 12,066     |       
|                                                                                  |                            |                                                                             |                                           |        |                           |         |            |       
|Net decrease in cash and cash equivalents                                         |                            |                                                                             | (46,484                                   | )      |                           |         | (15,424    | )     
|Cash and cash equivalents at beginning of period                                  |                            |                                                                             | 319,344                                   |        |                           |         | 433,700    |       
|                                                                                  |                            |                                                                             |                                           |        |                           |         |            |       
|Cash and cash equivalents at end of period                                        |                            | $                                                                           | 272,860                                   |        |                           | $       | 418,276    |       
|                                                                                  |                            |                                                                             |                                           |        |                           |         |            |       
|Supplemental disclosures:                                                         |                            |                                                                             |                                           |        |                           |         |            |       
|                                                                                  | Cash paid for interest     |                                                                             | $                                         | 74     |                           |         | $          | 2,149  |         
|                                                                                  | Cash paid for income taxes |                                                                             | $                                         | 50,330 |                           |         | $          | 16,548 |         

See accompanying notes to unaudited condensed consolidated financial statements.

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PEOPLESOFT, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

1.   Basis of Presentation

The accompanying financial statements for the three and six months ended
June 30, 2003 and 2002 have been prepared in accordance with accounting
principles generally accepted in the United States of America (U.S. GAAP) and
are consistent in all material respects with those applied in the Companys
Annual Report on Form 10-K for the year ended December 31, 2002. These
financial statements are unaudited and in the opinion of management, include
all necessary adjustments for the fair presentation of the Companys financial
position, results of operations and changes in cash flows. The preparation of
financial statements in conformity with U.S. GAAP requires the Company to make
estimates and assumptions that may affect the amounts reported in the
accompanying financial statements. Despite the Companys best
effort to make these good faith estimates and assumptions, actual
results may differ. Certain prior period amounts have
been reclassified to conform to the current period presentation.

These interim financial statements are prepared in accordance with
Securities and Exchange Commission rules and regulations, which allow certain
information and footnote disclosures, normally included in annual financial
statements, to be condensed or omitted. As a result, these interim financial
statements should be read in conjunction with the Companys Annual Report on
Form 10-K for the year ended December 31, 2002.

2.   Income Per Share

Basic income per share is computed by dividing net income 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 the number of potential dilutive common
shares outstanding during the period. Potential dilutive common shares consist
of shares issuable upon the exercise of stock options, shares issuable
resulting from withholdings associated with the Companys employee stock
purchase plan and restricted stock not yet vested, using the treasury stock
method, and the conversion of convertible subordinated notes, using the
if-converted method.

The following table sets forth the computation of basic and diluted income
per share (in thousands, except per share amounts):

|                         |                                            |   |                                                                                   |        |                    |         |                  |        |      |         |      |        |  |         |      |        |  |         | 
|------------------------ | ------------------------------------------ | - | --------------------------------------------------------------------------------- | ------ | ------------------ | ------- | ---------------- | ------ | ---- | ------- | ---- | ------ |  | ------- | ---- | ------ |  | ------- | 
|                         |                                            |   |                                                                                   |        | Three Months Ended |         | Six Months Ended
|                         |                                            |   |                                                                                   |        | June 30,           |         | June 30,        
|                         |                                            |   |                                                                                   |        | 2003               |         | 2002             |        | 2003 |         | 2002
|                         |                                            |   |                                                                                   |        |                    |         |                  |        |      |         |     
|Numerator:               |                                            |   |                                                                                   |        |                    |         |                  |        |      |         |      |        |  |         |      |       
|                         | Net income                                 |   | $                                                                                 | 36,534 |                    |         | $                | 36,020 |      |         | $    | 75,013 |  |         | $    | 80,564 | 
|Denominator:             |                                            |   |                                                                                   |        |                    |         |                  |        |      |         |      |        |  |         |      |       
|                         | Denominator for basic income per share -   |   |                                                                                   |        |                    |         |                  |        |      |         |      |        |  |         |      |        | 
|                         |                                            |   | Weighted average shares outstanding                                               |        |                    | 315,707 |                  |        |      | 310,617 |      |        |  | 315,302 |      |        |  | 309,276 | 
|                         |                                            |   | Employee stock options and other                                                  |        |                    | 2,923   |                  |        |      | 7,918   |      |        |  | 3,997   |      |        |  | 13,314  | 
|                         |                                            |   |                                                                                   |        |                    |         |                  |        |      |         |      |        |  |         |      |       
|                         | Denominator for diluted income per share - |   |                                                                                   |        |                    |         |                  |        |      |         |      |        |  |         |      |        | 
|                         |                                            |   | Weighted average shares outstanding, assuming
exercise of potential common shares |        |                    | 318,630 |                  |        |      | 318,535 |      |        |  | 319,299 |      |        |  | 322,590 | 
|                         |                                            |   |                                                                                   |        |                    |         |                  |        |      |         |      |        |  |         |      |       
|Basic income per share   |                                            | $ | 0.12                                                                              |        |                    | $       | 0.12             |        |      | $       | 0.24 |        |  | $       | 0.26 |       
|Diluted income per share |                                            | $ | 0.11                                                                              |        |                    | $       | 0.11             |        |      | $       | 0.23 |        |  | $       | 0.25 |       

5



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The following table sets forth the common shares that were excluded from
the diluted income per share computations because the exercise or conversion
prices were greater than the average market price of the common shares during
the period or were otherwise not dilutive (in millions):

|                                      |  |  |  |  |  |                    |      |      |  |  |      |                  |  |      |  |      |  |  |      |  |  |  |      | 
|------------------------------------- |  |  |  |  |  | ------------------ | ---- | ---- |  |  | ---- | ---------------- |  | ---- |  | ---- |  |  | ---- |  |  |  | ---- | 
|                                      |  |  |  |  |  | Three Months Ended |      |      |  |  |      | Six Months Ended
|                                      |  |  |  |  |  | June 30,           |      |      |  |  |      | June 30,        
|                                      |  |  |  |  |  | 2003               |      | 2002 |  |  |      |                  |  | 2003 |  | 2002
|                                      |  |  |  |  |  |                    |      |      |  |  |      |                  |  |      |  |     
|Employee stock options                |  |  |  |  |  |                    | 51.9 |      |  |  | 41.2 |                  |  |      |  |      |  |  | 45.3 |  |  |  | 20.7 | 
|Unvested restricted stock             |  |  |  |  |  |                    | 0.7  |      |  |  | 0.8  |                  |  |      |  |      |  |  | 0.7  |  |  |  |     | 
|Shares issuable from convertible debt |  |  |  |  |  |                    |     |      |  |  | 1.1  |                  |  |      |  |      |  |  |     |  |  |  | 1.1  | 
|                                      |  |  |  |  |  |                    |      |      |  |  |      |                  |  |      |  |      |  |  |      |  |  |  |      | 
|Total shares excluded                 |  |  |  |  |  |                    | 52.6 |      |  |  | 43.1 |                  |  |      |  |      |  |  | 46.0 |  |  |  | 21.8 | 

The weighted average exercise prices of the employee stock options with
exercise prices exceeding the average fair value of the Companys common stock
for the three months ended June 30, 2003 and 2002 were $25.78 and $28.19 per
share, respectively, and for the six months ended June 30, 2003 and 2002 were
$27.72 and $42.06 per share, respectively.

3.   Stock-Based Compensation

The Company accounts for employee stock-based compensation in accordance
with Accounting Principles Board Opinion No. 25, Accounting for Stock Issued
to Employees (APB Opinion No. 25). The following table illustrates the effect
on net income and earnings per share as if the Company had applied the fair
value recognition provisions of Statement of Financial Accounting Standards No.
123, Accounting for Stock-Based Compensation (SFAS 123), to stock-based
employee compensation for the three and six months ended June 30, 2003 and 2002
(in thousands, except per share amounts).

|                                |                                                                                                      |   |                    |         |      |   |        |         |                  |  |      |  |      |   |        |         |   |   |        |         |  
|------------------------------- | ---------------------------------------------------------------------------------------------------- | - | ------------------ | ------- | ---- | - | ------ | ------- | ---------------- |  | ---- |  | ---- | - | ------ | ------- | - | - | ------ | ------- | -
|                                |                                                                                                      |   | Three Months Ended |         |      |   |        |         | Six Months Ended
|                                |                                                                                                      |   | June 30,           |         |      |   |        |         | June 30,        
|                                |                                                                                                      |   | 2003               |         | 2002 |   |        |         |                  |  | 2003 |  | 2002
|                                |                                                                                                      |   |                    |         |      |   |        |         |                  |  |      |  |     
|Net income, as reported         |                                                                                                      | $ | 36,534             |         |      | $ | 36,020 |         |                  |  |      |  |      | $ | 75,013 |         |   | $ | 80,564 |        
|                                | Add: Stock-based employee compensation expense
included in reported net income, net of tax           |   |                    | 2,045   |      |   |        | 1,916   |                  |  |      |  |      |   |        | 4,065   |   |   |        | 3,325   |  
|                                | Deduct: Stock-based employee compensation
expense determined under the fair value
method, net of tax |   |                    | (33,984 | )    |   |        | (49,144 | )                |  |      |  |      |   |        | (74,886 | ) |   |        | (87,008 | )
|                                |                                                                                                      |   |                    |         |      |   |        |         |                  |  |      |  |      |   |        |         |   |   |        |        
|                                | Pro forma net income (loss)                                                                          |   |                    | 4,595   |      |   |        | (11,208 | )                |  |      |  |      |   |        | 4,192   |   |   |        | (3,119  | )
|Basic income (loss) per share   |                                                                                                      |   |                    |         |      |   |        |         |                  |  |      |  |      |   |        |         |   |   |        |        
|                                | As reported                                                                                          |   | $                  | 0.12    |      |   | $      | 0.12    |                  |  |      |  |      |   | $      | 0.24    |   |   | $      | 0.26    |  
|                                | Pro forma                                                                                            |   | $                  | 0.01    |      |   | $      | (0.04   | )                |  |      |  |      |   | $      | 0.01    |   |   | $      | (0.01   | )
|Diluted income (loss) per share |                                                                                                      |   |                    |         |      |   |        |         |                  |  |      |  |      |   |        |         |   |   |        |        
|                                | As reported                                                                                          |   | $                  | 0.11    |      |   | $      | 0.11    |                  |  |      |  |      |   | $      | 0.23    |   |   | $      | 0.25    |  
|                                | Pro forma                                                                                            |   | $                  | 0.01    |      |   | $      | (0.04   | )                |  |      |  |      |   | $      | 0.01    |   |   | $      | (0.01   | )

4.   Comprehensive Income

Comprehensive income primarily includes unrealized gains or losses on
investments, mark-to-market adjustments on interest rate swap transactions, and
foreign currency translation adjustments, which are reflected as a component of
stockholders equity. The components of comprehensive income, net of tax, were
as follows (in thousands):

6



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##### 



|                            |                                          |                                                                                                   |  |  |  |   |        |                    |     |      |        |                  |      |   |  |      |  |      |        |        |       |   |        |        |       |  
|--------------------------- | ---------------------------------------- | ------------------------------------------------------------------------------------------------- |  |  |  | - | ------ | ------------------ | --- | ---- | ------ | ---------------- | ---- | - |  | ---- |  | ---- | ------ | ------ | ----- | - | ------ | ------ | ----- | -
|                            |                                          |                                                                                                   |  |  |  |   |        | Three Months Ended |     |      |        | Six Months Ended
|                            |                                          |                                                                                                   |  |  |  |   |        | June 30,           |     |      |        | June 30,        
|                            |                                          |                                                                                                   |  |  |  |   |        | 2003               |     | 2002 |        |                  |      |   |  | 2003 |  | 2002
|                            |                                          |                                                                                                   |  |  |  |   |        |                    |     |      |        |                  |      |   |  |      |  |     
|Net income                  |                                          |                                                                                                   |  |  |  | $ | 36,534 |                    |     | $    | 36,020 |                  |      |   |  |      |  | $    | 75,013 |        |       | $ | 80,564 |       
|Other comprehensive income: |                                          |                                                                                                   |  |  |  |   |        |                    |     |      |        |                  |      |   |  |      |  |      |        |        |       |   |        |       
|                            | Net unrealized gain (loss) investments   |                                                                                                   |  |  |  |   |        | 1,896              |     |      |        | 63               |      |   |  |      |  |      |        | 1,317  |       |   |        | (302   | )    
|                            | Foreign currency translation adjustments |                                                                                                   |  |  |  |   |        | 13,933             |     |      |        | 16,745           |      |   |  |      |  |      |        | 19,731 |       |   |        | 14,964 |      
|                            | Interest rate swap transactions:         |                                                                                                   |  |  |  |   |        |                    |     |      |        |                  |      |   |  |      |  |      |        |        |       |   |        |        |      
|                            |                                          | Net unrealized loss on cash flow hedges                                                           |  |  |  |   |        |                    |    |      |        |                  | (983 | ) |  |      |  |      |        |        | (58   | ) |        |        | (855  | )
|                            |                                          | Reclassification adjustment for earnings
recognized during the period                             |  |  |  |   |        |                    | 871 |      |        |                  | 818  |   |  |      |  |      |        |        | 2,106 |   |        |        | 2,090 |  
|                            |                                          | Reclassification adjustment for realized
loss on the termination of interest rate
swap agreements |  |  |  |   |        |                    | 881 |      |        |                  |     |   |  |      |  |      |        |        | 881   |   |        |        |      |  
|                            |                                          |                                                                                                   |  |  |  |   |        |                    |     |      |        |                  |      |   |  |      |  |      |        |        |       |   |        |       
|Comprehensive income        |                                          |                                                                                                   |  |  |  | $ | 54,115 |                    |     | $    | 52,663 |                  |      |   |  |      |  | $    | 98,990 |        |       | $ | 96,461 |       

5.   Derivative Financial Instruments

Derivative financial instruments are only utilized by the Company to
reduce foreign currency exchange and interest rate risks. The Company does not
hold any derivative financial instruments for trading or speculative purposes.

Forward Foreign Exchange Contracts

The Company has a foreign exchange hedging program principally designed to
mitigate the potential impact due to changes in foreign currency exchange
rates. Forward exchange contracts are primarily used to hedge foreign currency
exposures and generally have terms of two months or less. The derivatives used
in the foreign exchange hedging program are not designated as cash flow or fair
value hedges under Statement of Financial Accounting Standards No. 133,
Accounting for Derivative Instruments and Hedging Activities (SFAS 133), as
amended. These contracts are recorded on the balance sheet at fair value in
Accrued liabilities. Changes in fair value of the contracts and the amounts
being hedged are included in Other income, net..

During the three months ended June 30, 2003 and 2002, the Company recorded
net foreign currency losses of $1.0 million and net foreign currency gains of
$3.0 million, respectively. During the six months ended June 30, 2003 and
2002, the Company recorded net foreign currency losses of $1.2 million and net
foreign currency gains of $2.5 million, respectively. At June 30, 2003, each
of the foreign exchange contracts matured within 60 days and had a book value
that approximated fair value. Neither the cost nor the fair value of these
forward foreign exchange contracts was material at June 30, 2003.

At June 30, 2003, the Company had the following outstanding forward
foreign exchange contracts to exchange foreign currency for U.S. dollars:

|                    |  |          |              |  | 
|------------------- |  | -------- | ------------ |  | 
|                    |  | Notional
|Foreign Currency    |  | Amount  
|                    |  |         
|Singapore dollars   |  | $        | 8.8 million 
|Canadian dollars    |  |          | 8.5 million 
|New Zealand dollars |  |          | 1.0 million 
|Japanese yen        |  |          | 1.0 million 
|Swiss francs        |  |          | 0.9 million 
|Swedish krona       |  |          | 0.8 million 
|Euros               |  |          | 0.7 million 
|Taiwanese dollars   |  |          | 0.4 million 
|                    |  |          |             
|                    |  | $        | 22.1 million
|                    |  |          |             

7



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##### 



At June 30, 2003, the Company had the following outstanding forward
foreign exchange contracts to exchange U.S. dollars for foreign currency:

|                   |  |          |             | 
|------------------ |  | -------- | ----------- | 
|                   |  | Notional
|Foreign Currency   |  | Amount  
|                   |  |         
|Hong Kong dollars  |  | $        | 0.9 million | 
|South African rand |  |          | 0.6 million | 
|                   |  |          |             | 
|                   |  | $        | 1.5 million | 
|                   |  |          |             | 

At June 30, 2002, the Company had the following outstanding forward
foreign exchange contracts to exchange foreign currency for U.S. dollars:

|                  |  |          |              | 
|----------------- |  | -------- | ------------ | 
|                  |  | Notional
|Foreign Currency  |  | Amount  
|                  |  |         
|Hong Kong dollars |  | $        | 8.7 million  | 
|Singapore dollars |  |          | 5.7 million  | 
|                  |  |          |              | 
|                  |  | $        | 14.4 million | 
|                  |  |          |              | 

At June 30, 2002, the Company had the following outstanding forward
foreign exchange contracts to exchange U.S. dollars for foreign currency:

|                    |  |          |              | 
|------------------- |  | -------- | ------------ | 
|                    |  | Notional
|Foreign Currency    |  | Amount  
|                    |  |         
|Euros               |  | $        | 3.7 million  | 
|South African rand  |  |          | 2.9 million  | 
|British pounds      |  |          | 1.1 million  | 
|Swiss francs        |  |          | 0.9 million  | 
|Japanese yen        |  |          | 0.8 million  | 
|Canadian dollars    |  |          | 0.6 million  | 
|Swedish krona       |  |          | 0.4 million  | 
|New Zealand dollars |  |          | 0.3 million  | 
|                    |  |          |              | 
|                    |  | $        | 10.7 million | 
|                    |  |          |              | 

Interest Rate Swap Transactions

The Company used interest rate swap transactions to manage its exposure to
interest rate changes on its synthetic lease obligations. The swaps had an
aggregate notional principal amount of $175.0 million and matured at various
dates in 2003, consistent with the expiration of the synthetic leases. Under
the swap agreements, the Company received a variable interest rate based on the
three month LIBOR rate and paid a weighted average fixed interest rate of 6.8%.
The swaps were designated under SFAS 133 as hedges against changes in the
amount of future cash flows. In February 2003, the Company exercised its
option under a synthetic lease agreement to purchase certain of its
headquarters facilities located in Pleasanton, California for $70.0 million,
and concurrently, swaps with an aggregate notional principal amount of $70.0
million matured. On June 30, 2003, the Company exercised its option under a
synthetic lease agreement to purchase certain of its headquarters facilities
located in Pleasanton, California for $105.0 million. As a result of this
transaction, the Company terminated its remaining interest rate swap agreements
with an aggregate notional principal amount of $105.0 million resulting in a
pretax charge of $1.4 million to Other income, net. Included in Accumulated
other comprehensive income at March 31, 2003 was a $1.8 million unrealized
loss (after-tax) related to these interest rate swaps. In the second quarter
of 2003, $0.9 million (after-tax) was reclassified from other
comprehensive income into earnings by making
scheduled swap payments and $0.9 million (after-tax) was recognized as a
realized loss that was reclassified from other
comprehensive income into earnings upon the termination of the
remaining interest rate swap agreements.

Concentrations of Credit Risk

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

6.   Restructuring Reserves

During the second quarter of 2003, the Company recorded pretax
restructuring charges of $13.8 million. The $13.8 million of restructuring charges are included in Restructuring, acquisition and other
charges and consisted of $4.6 million for employee severance, $7.5 million for
the fair value of lease obligations associated with the closure of an office
facility and $1.7 million for the impairment of related leasehold
improvements.

8



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##### 



Approximately $12.1 million of the restructuring charge is a cash
charge, which is expected to be funded through operating cash flow.

The following table sets forth the activity in the Companys restructuring
reserves for the quarter ended June 30, 2003, which is included in Accrued
liabilities (in thousands).

|                       |                       |   |          |        |            |  |             |  |       |   |        |   |  |   |       |       |   |   |        |        |  
|---------------------- | --------------------- | - | -------- | ------ | ---------- |  | ----------- |  | ----- | - | ------ | - |  | - | ----- | ----- | - | - | ------ | ------ | -
|                       |                       |   | Employee |        | Asset      |  | Leases      |  |       |   |       
|                       |                       |   | Costs    |        | Impairment |  | Obligations |  | Total
|                       |                       |   |          |        |            |  |             |  |      
|Balance March 31, 2003 |                       | $ |         |        |            |  |             |  | $     |  |        |   |  | $ | 1,115 |       |   | $ | 1,115  |       
|                       | Restructuring charges |   |          | 4,544  |            |  |             |  |       |   | 1,722  |   |  |   |       | 7,533 |   |   |        | 13,799 |  
|                       | Cash payments         |   |          | (1,559 | )          |  |             |  |       |   |       |   |  |   |       | (465  | ) |   |        | (2,024 | )
|                       | Non-cash items        |   |          |       |            |  |             |  |       |   | (1,722 | ) |  |   |       | 28    |   |   |        | (1,694 | )
|                       |                       |   |          |        |            |  |             |  |       |   |        |   |  |   |       |       |   |   |        |        |  
|Balance June 30, 2003  |                       | $ | 2,985    |        |            |  |             |  | $     |  |        |   |  | $ | 8,211 |       |   | $ | 11,196 |       

Future cash payments related to the restructuring reserves, which consist
of future severance payments and office lease payments, are expected to be made
through October 2005.

7.   Products and Service Warranty Reserve

The Company provides for the estimated cost of product and service
warranties based on specific warranty claims, provided that it is
both probable that a potential liability exists and that the amount
can be reasonably estimated. Additional information may become
available in the future which may result in changes to the originally
estimated liability. In addition, if estimated claims are settled for amounts differing from the Companys estimates, or if the
estimated value of warranty claims were to increase or decrease, revisions to
the estimated warranty liability may be required and warranty expense may
change from current levels.

The following table sets forth the activity in the Companys product and
service warranty reserve, which is included in Accrued liabilities, for the
three months ended June 30, 2003 (in thousands):

|                          |                                                      |   |        |        |  
|------------------------- | ---------------------------------------------------- | - | ------ | ------ | -
|                          |                                                      |   | Total 
|                          |                                                      |   |       
|Balance at March 31, 2003 |                                                      | $ | 12,289 |       
|                          | Expense related to new claims                        |   |        | 2,397  |  
|                          | Reduction in expense related to changes in estimates |   |        | (1,530 | )
|                          | Settlement of claims                                 |   |        | (3,621 | )
|                          |                                                      |   |        |       
|Balance June 30, 2003     |                                                      | $ | 9,535  |       

8.   Business Combinations

On June 1, 2003, the Company, Jersey Acquisition Corporation, a wholly
owned subsidiary of the Company (Jersey), and J.D. Edwards and Company
(J.D. Edwards) entered into an Agreement and Plan of
Merger which provided for an offer to purchase all the outstanding
shares of common stock of J.D. Edwards (the exchange
offer). On June 16,
2003, the Company entered into an Amended and Restated Agreement and Plan of
Merger and Reorganization with J.D. Edwards and Jersey. The value of the consideration to be given for approximately 122
million shares of the outstanding J.D. Edwards common stock was approximately
$1.8 billion.

On June 19, 2003, the Company filed with the Securities and Exchange
Commission a Tender Offer Statement on Schedule TO with regard to the exchange
offer and a Registration Statement on Form S-4 to register the shares to be
issued in the exchange offer. Pursuant to the exchange offer, holders of J.D.
Edwards common stock were entitled to make an election to tender their shares
for cash or shares of PeopleSoft stock and such holders were entitled to
receive cash, stock, or a combination of cash and stock, in each case having a
value, on a per share basis of $7.05 plus 0.43 of a share of the Companys
common stock, allocated by prorating cash and shares available in the exchange
offer among the elections made by the holders. The value of the cash and stock
consideration to be paid to tendering J.D. Edwards shareholders was based upon
the closing prices of one share of the Companys

9



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##### 



common stock during the five trading days ending before the second trading
day prior to the expiration of the exchange offer.

On July 14, 2003, the Company and J.D. Edwards announced that, in
connection with the Companys exchange offer to acquire all of the outstanding
shares of J.D. Edwards, the companies received notice of termination of the
required waiting period under the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended.

The Companys offer to acquire all of the outstanding shares of J.D.
Edwards expired at midnight, New York City time on Thursday, July 17, 2003. At
the expiration of the offer and after delivery of guaranteed shares,
104,754,894 shares of J.D. Edwards common stock had been validly tendered for
exchange, all of which were accepted for exchange by PeopleSoft at
approximately 1:45 a.m., New York City time, on Friday, July 18, 2003. As a
result of such acceptance and exchange, PeopleSoft owns
approximately 85% of the J.D. Edwards common stock outstanding as of
August 8,
2003 The Company expects to acquire all of the remaining shares of J.D. Edwards
by completing a merger of a wholly-owned subsidiary of the Company with J.D.
Edwards before the end of August 2003.

9.   Oracles
Unsolicited Tender Offer for PeopleSofts Common Stock and
Customer Protection Program

Unsolicited Tender Offer for
PeopleSofts Common Stock

On June 6, 2003, Oracle Corporation (Oracle) announced that it intended
to commence an unsolicited cash tender offer to purchase all of the outstanding shares of
PeopleSoft for $16.00 per share, or approximately $5.1 billion
in the aggregate (the Oracle Offer). On June 8, 2003, the Companys board of
directors met and discussed Oracles unsolicited offer and formed a Transaction
Committee of independent directors, comprised of Frank J. Fanzilli, Jr., Steven
D. Goldby, A. George Battle and Cyril J. Yansouni. The purpose
of the Transaction Committee is to evaluate and assess the
terms of the Oracle Offer in consultation with the Companys
board of directors financial and legal advisors, and make a recommendation to
its board. On June 9, 2003, Oracle and Pepper Acquisition Corp., a Delaware
corporation and wholly-owned subsidiary of Oracle, filed a Tender Offer
Statement on Schedule TO with the SEC in connection with the Oracle Offer. On
June 11, 2003, the Companys board of directors, including all of the members
of the Transaction Committee, met with management and the boards financial and
legal advisors to further consider and discuss the Oracle Offer. After careful
consideration, including consultation with management and the boards financial
and legal advisors, the Transaction Committee unanimously concluded that the Oracle Offer
dramatically undervalued the Company, would face lengthy antitrust
scrutiny, with a significant likelihood that the necessary approval would not
be granted, the delays and uncertainties created by the Oracle Offer,
coupled with Oracles stated intent to discontinue the Companys products,
represented a substantial threat to stockholder value, and that the unsolicited
and hostile nature of the Oracle Offer, combined with Oracles
public statements, was
designed to disrupt the Companys momentum at significant cost to the
Company and its customers. For these and other reasons (more fully described in
the Companys Solicitation/Recommendation on Schedule 14D-9, as amended, filed
with the SEC in response to the Oracle Offer) the Transaction
Committee determined that the Oracle Offer was not in the best
interests of the stockholders and unanimously recommended to the full board of
directors that the full board, in turn, recommend that the Companys
stockholders reject the Oracle Offer and not tender their shares to Oracle for
purchase. The full board of directors concurred with the committee and, having
determined that the Oracle Offer was not in the best interests of the Companys
stockholders, unanimously recommended that the stockholders reject the Oracle
Offer. The Company publicly announced the boards recommendation on June 12,
2003.

On June 18, 2003, Oracle announced that it had amended its offer to
purchase all of the outstanding stock of PeopleSoft by increasing the purchase
price from $16.00 to $19.50 per share. After careful consideration, including
consultation with management and the boards financial and legal advisors, the
Transaction Committee unanimously concluded that their previously stated reasons
for rejecting the Oracle Offer remained unchanged. As more fully described in the Companys amended
Schedule 14D-9, the Transaction Committee determined that the Oracle Offer was not in the
best interests of the stockholders and unanimously recommended to the full
board that it recommend that the stockholders reject the Oracle Offer and not
tender their shares to Oracle for purchase. The full board of directors
concurred with the Transaction Committee and, having determined that the revised Oracle
Offer was not in the best interests of the Companys stockholders, unanimously
recommended that the stockholders reject the revised Oracle Offer. The Company
publicly announced the boards recommendation on June 20, 2003. On June 30,
2003, the Department of Justice requested additional information from
Oracle and the Company regarding
antitrust matters relating to Oracles proposed acquisition of PeopleSoft,
known as a second request.

10



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##### 



On July 14, 2003, Oracle announced the extension of expiration of the
Oracle Offer from July 18 to August 15, 2003. On July 24, 2003, Oracle amended
its offer to eliminate the condition requiring Oracles consent for any
amendment to the merger agreement between PeopleSoft and J.D. Edwards. As a
result of the Companys issuance of additional shares pursuant to the exchange
offer and acquisition of J.D. Edwards, Oracles cash offer of $19.50 per share
was increased to a total of approximately $7.3 billion. On August 8, 2003,
Oracle announced the extension of expiration of the Oracle Offer from August 15
to September 19, 2003. See Note 10, Commitments and Contingencies for
information about litigation instituted by the Company and others related to
the Oracle tender offer.

Customer Protection Program

In
response to Oracles public statement about its intent to
discontinue the Companys products and to minimize a potential loss of business during the Oracle Offer, in June
2003 the Company implemented a customer protection program. This
program incorporates a
contingent change in control provision to its standard perpetual licensing
arrangement which provides customers purchasing application licenses with
financial protection in the event that an acquirer discontinues the sale,
development or support of PeopleSoft applications within a specified period
after an acquisition. That financial protection is in the form of a payment
generally equal to two to five times the total arrangement fees. The multiple
increases as the arrangement fees increase and generally will be paid provided
the following events occur:



| |  |  | within one year of the contract effective date, the Company is
acquired or merged, and the Company is not the acquirer, and                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | within two years of the contract effective date, the acquiring
company announces a) its intention to discontinue, or discontinues
support services before the end of the normal support term as defined
by the Companys standard policies, or b) announces its intention to
stop licensing PeopleSoft products to new customers, or c) announces
its intention not to provide updates or new releases for supportable
products, which would, if the Company were not acquired or merged into
the acquired company, have been considered updates or new releases
under standard business policies, and
|
| |  |  | the customer requests the payment in writing by December 31, 2005,
and the customer has timely paid for support services in accordance
with the terms of the customers agreement with the Company.                                                                                                                                                                                                                                                                                                                                                                                                   

Customers retain rights to the licensed products whether or not the
customer protection programs payments are implicated. No customer is entitled
to a refund of arrangement fees paid under the customers contract with the
Company, but the customer would be entitled to a payment under the customer
protection program if all of the conditions stated above are met.

The customer protection program has no financial statement impact
on PeopleSoft. A contingent liability would only be recognized in the financial
statements of the Company or its acquirer upon or after the consummation of a
business combination provided all the events listed above occurred. As of June
30, 2003, the maximum potential amount of future payments which may be required
to be made under the customer protection program was approximately $391
million.

The Company intends to continue to offer the customer protection program
for an indefinite period of time.

10.   Commitments
and Contingencies

Customer Indemnification

From time to time, the Company agrees to indemnify its customers against
liability if the Companys products infringe a third partys intellectual
property rights. As of June 30, 2003, the Company had no outstanding claims
and was not subject to any pending litigation alleging that the Companys
products infringe the intellectual property rights of any third parties.

PeopleSoft Shareholder
Actions  Delaware Court of Chancery

On June 6, 2003, Felix Ezeir (Case No. 20349-NC), Teresita Fay (Case No.
20350-NC), Robert Crescente (Case No. 20351-NC), Robert Corwin (Case No.
20352-NC) and Ernest Hack (Case No. 20353-NC), all of whom purport to be
stockholders of the Company, each filed a putative stockholder class action
suit in the Delaware Court of Chancery against the Company and several of its
officers and directors. The suits allege that defendants breached their
fiduciary duties in connection with the Companys response to Oracle
Corporations tender offer purportedly

11



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##### 



announced on June 6, 2003. Plaintiffs in each of the actions seek
injunctive relief and an accounting. On June 10, 2003, an action was filed in
the Delaware Court of Chancery against these same defendants by Steven Padness
(Case No. 20358-NC), making similar allegations and seeking similar relief. On
June 12, 2003, an action was filed in the Delaware Court of Chancery against
these same defendants by Thomas Nemes (Case No. 20365-NC), making similar
allegations and seeking similar relief (the Nemes Action). The Nemes Action
was amended on June 18, 2003, to include allegations and seeking relief similar
to those in the above-referenced actions.

On June 25, 2003, on an application filed in the Nemes Action, the Court
consolidated the actions listed above under a single caption and case number:
In re PeopleSoft, Inc. Shareholder Litigation, Consol. C.A. No. 20365-NC.
Defendants filed their Answer on June 25, 2003.

On July 2, 2003, Richard Hutchings (Case No. 20403-NC) filed a putative
stockholder class action suit in the Delaware Court of Chancery against the
Company and several of its officers and directors. The suit alleges that
defendants breached their fiduciary duties in connection with the Companys
response to Oracles tender offer purportedly announced on June 6, 2003.
Plaintiff seeks injunctive relief, an accounting and damages. On July 22,
2003, the Court ordered that this action be consolidated with the other
putative shareholder actions listed above.

Document discovery has commenced in these consolidated actions and is
coordinated with the discovery in the action filed against the Company by
Oracle Corporation, discussed below.

On June 27, 2003, Milton Pfeiffer (Case No. 20390-NC), who purports to be
a shareholder of J.D. Edwards, filed a putative class action against J.D.
Edwards and several of its officers and directors, alleging that defendants
breached their fiduciary duties in connection with the amendment of the merger
agreement between J.D. Edwards and the Company. Plaintiff seeks injunctive
relief, an accounting and damages. Defendants moved to dismiss or stay the
action on the grounds, inter alia, that Pfeiffer is not a proper plaintiff. In
response, on July 24, 2003, Pfeiffer amended his complaint, adding as a
plaintiff Ward Quarles, who also purports to be a shareholder of J.D. Edwards.
The amended complaint also adds the Company as a defendant and alleges that the
Company aided and abetted J.D. Edwards and the other defendants in their
alleged breaches of fiduciary duty. The amended complaint seeks an accounting
and damages.

The Company believes that the claims and allegations asserted in each of
the foregoing putative class action suits are without merit, and intends to
vigorously defend against these lawsuits.

Oracle v. PeopleSoft  Delaware Court of Chancery

On June 18, 2003, Oracle filed a suit in the Delaware Court of Chancery
(Case No. 20377-NC) against the Company, several of the Companys directors
(the Director Defendants), and J.D. Edwards, alleging that the Director
Defendants breached their fiduciary duties in connection with the Companys
response to Oracles tender offer commenced on June 9 and amended June 18,
2003, and that J.D. Edwards aided and abetted such directors purported breach
of fiduciary duty. Oracle seeks injunctive, declaratory and rescissory relief.
On June 25, 2003, defendants filed their Answer. A hearing on a motion for
preliminary injunction was scheduled for July 16, 2003, but was postponed upon
the request of Oracle. On July 25, 2003, Oracle advised the Court that, in
light of the second request for further information it received from the
antitrust division of the United States Department of Justice regarding its
tender offer, it did not believe it was appropriate to set a hearing date at
this time, and requested that the Court allow the parties to report back to it
in mid-September of 2003. Document discovery has commenced and is coordinated
with that in the consolidated shareholder actions described above.

The Company believes that the claims and allegations asserted in this
action are without merit, and intends vigorously to defend against this
lawsuit.

PeopleSoft Shareholder Actions 
California Superior Court for the County of Alameda

On June 6, 2003, separate actions were filed in the California Superior
Court for the County of Alameda by Doris Staehr (Case No. RG03100291), the West
Virginia Laborers Pension Trust Fund (Case No. RG03100306), Lorrie McBride
(Case No. RG03100300), and Ray Baldi (Case No. RG03100696) (collectively the
Initial Alameda Shareholder Actions), all of whom purport to be stockholders
of the Company, against several of the Companys executive officers and
directors. The suits allege that defendants breached their fiduciary duties in
connection with (i) the Companys response to Oracles tender offer announced
on June 6, 2003, (ii) the Companys agreement to acquire J.D. Edwards &
Company, and (iii) the implementation of the 2003 Directors Stock Plan, which
was

12



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##### 



approved by Company shareholders at the 2003 Annual Meeting. Plaintiffs
seek injunctive, rescissory and declaratory relief. On June 16, 2003, the
Initial Alameda Shareholder Actions were consolidated. On June 11, 2003, two
additional actions were filed by Moshe Panzer (Case No. RG03100876) and Arace
Brothers (Case No. RG03100830) asserting similar claims. By Order dated July
10, 2003, the Panzer and Arace actions were consolidated with the Initial
Alameda Shareholder Actions (collectively the Alameda Shareholder Actions).

By Order dated June 18, 2003, the Alameda County Superior Court granted
the Companys Motion to Stay the Initial Alameda Shareholder Actions pending
resolution of the claims involving the duties of the defendant directors by the
Delaware Court of Chancery. By Order dated July 10, 2003, the Alameda County
Superior Court also stayed the Panzer and Arace Brothers cases pursuant to the
June 18, 2003 Order in the Initial Alameda Shareholder Actions. Accordingly,
all of the Alameda Shareholder Actions are stayed by order of the Court.

The Company believes that the claims and allegations asserted in each of
the foregoing putative class action suits are without merit, and intends to
vigorously defend against these lawsuits.

Other Matters

The Company is party to various legal disputes and proceedings arising during
the ordinary course of business. In the opinion of management, resolution of
these matters is not expected to have a material adverse effect on the

13



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##### 



financial position, results of the operations and cash flows of the Company.
An unfavorable resolution of some or all of these matters could materially
affect the Companys future results of operations or cash flows.

11.   Segment Information

The Companys chief operating decision maker is its President and Chief
Executive Officer (CEO). While the CEO is apprised of a variety of financial
metrics and information, PeopleSoft is principally managed on a geographic
basis in terms of revenue and segment margin performance. The Companys two
geographic business segments are: North America, which includes the United
States and Canada, and International, which includes all other geographic
regions. Operating expenses are managed functionally on a global basis. Assets
are not identified with geographic segments because the CEO does not evaluate
that information to make resource allocation decisions.

Revenues are defined as revenues generated from unaffiliated customers.
Cost of revenues includes the cost of license, cost of services and the direct
selling cost included in sales and marketing expense. Development and other
services revenue is not considered segment revenue. Correspondingly, Cost of
development and other services is excluded from the cost of revenues for
segment purposes. Operating expenses, which are managed functionally on a
global basis, include corporate marketing, product development, general and
administrative expenses as well as restructuring, acquisition and other
charges.

Accounting policies for each of the reportable segments are the same as
those used on a consolidated basis. The following table presents a summary of
operating information for the three and six months ended June 30, 2003 and 2002
(in thousands):

|                   |  |                             |         |               |  |       |         |       |  |   |         |  |  |   |         | 
|------------------ |  | --------------------------- | ------- | ------------- |  | ----- | ------- | ----- |  | - | ------- |  |  | - | ------- | 
|                   |  | Three Months Ended June 30,
|                   |  |                            
|                   |  | Operating Segments          |         |               |  |       |         |       |  |  
|                   |  |                             |         |               |  |       |         |       |  |  
|2003               |  | North America               |         | International |  | Other |         | Total
|                   |  |                             |         |               |  |       |         |      
|Revenues           |  | $                           | 367,458 |               |  | $     | 129,984 |       |  | $ |        |  |  | $ | 497,442 | 
|Cost of revenues   |  |                             | 169,230 |               |  |       | 70,562  |       |  |   |        |  |  |   | 239,792 | 
|                   |  |                             |         |               |  |       |         |       |  |   |         |  |  |   |         | 
|Segment margin     |  | $                           | 198,228 |               |  | $     | 59,422  |       |  | $ |        |  |  | $ | 257,650 | 
|                   |  |                             |         |               |  |       |         |       |  |   |         |  |  |   |         | 
|Operating expenses |  |                             |         |               |  |       |         |       |  |   | 207,430 |  |  |   | 207,430 | 
|                   |  |                             |         |               |  |       |         |       |  |   |         |  |  |   |         | 
|Operating income   |  |                             |         |               |  |       |         |       |  |   |         |  |  | $ | 50,220  | 
|                   |  |                             |         |               |  |       |         |       |  |   |         |  |  |   |         | 

|                   |  |                    |         |               |  |       |         |       |  |   |         |  |  |   |         | 
|------------------ |  | ------------------ | ------- | ------------- |  | ----- | ------- | ----- |  | - | ------- |  |  | - | ------- | 
|                   |  | Operating Segments |         |               |  |       |         |       |  |  
|                   |  |                    |         |               |  |       |         |       |  |  
|2002               |  | North America      |         | International |  | Other |         | Total
|                   |  |                    |         |               |  |       |         |      
|Revenues           |  | $                  | 369,128 |               |  | $     | 113,084 |       |  | $ |        |  |  | $ | 482,212 | 
|Cost of revenues   |  |                    | 173,688 |               |  |       | 69,088  |       |  |   |        |  |  |   | 242,776 | 
|                   |  |                    |         |               |  |       |         |       |  |   |         |  |  |   |         | 
|Segment margin     |  | $                  | 195,440 |               |  | $     | 43,996  |       |  | $ |        |  |  | $ | 239,436 | 
|                   |  |                    |         |               |  |       |         |       |  |   |         |  |  |   |         | 
|Operating expenses |  |                    |         |               |  |       |         |       |  |   | 188,349 |  |  |   | 188,349 | 
|                   |  |                    |         |               |  |       |         |       |  |   |         |  |  |   |         | 
|Operating income   |  |                    |         |               |  |       |         |       |  |   |         |  |  | $ | 51,087  | 
|                   |  |                    |         |               |  |       |         |       |  |   |         |  |  |   |         | 

|                   |  |                           |         |               |  |       |         |       |  |   |         |  |  |   |         | 
|------------------ |  | ------------------------- | ------- | ------------- |  | ----- | ------- | ----- |  | - | ------- |  |  | - | ------- | 
|                   |  | Six Months Ended June 30,
|                   |  |                          
|                   |  | Operating Segments        |         |               |  |       |         |       |  |  
|                   |  |                           |         |               |  |       |         |       |  |  
|2003               |  | North America             |         | International |  | Other |         | Total
|                   |  |                           |         |               |  |       |         |      
|Revenues           |  | $                         | 718,113 |               |  | $     | 239,585 |       |  | $ |        |  |  | $ | 957,698 | 
|Cost of revenues   |  |                           | 328,709 |               |  |       | 139,098 |       |  |   |        |  |  |   | 467,807 | 
|                   |  |                           |         |               |  |       |         |       |  |   |         |  |  |   |         | 
|Segment margin     |  | $                         | 389,404 |               |  | $     | 100,487 |       |  | $ |        |  |  | $ | 489,891 | 
|                   |  |                           |         |               |  |       |         |       |  |   |         |  |  |   |         | 
|Operating expenses |  |                           |         |               |  |       |         |       |  |   | 387,888 |  |  |   | 387,888 | 
|                   |  |                           |         |               |  |       |         |       |  |   |         |  |  |   |         | 
|Operating income   |  |                           |         |               |  |       |         |       |  |   |         |  |  | $ | 102,003 | 
|                   |  |                           |         |               |  |       |         |       |  |   |         |  |  |   |         | 

14



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|                   |  |                    |         |               |  |       |         |       |  |   |         |  |  |   |         | 
|------------------ |  | ------------------ | ------- | ------------- |  | ----- | ------- | ----- |  | - | ------- |  |  | - | ------- | 
|                   |  | Operating Segments |         |               |  |       |         |       |  |  
|                   |  |                    |         |               |  |       |         |       |  |  
|2002               |  | North America      |         | International |  | Other |         | Total
|                   |  |                    |         |               |  |       |         |      
|Revenues           |  | $                  | 732,190 |               |  | $     | 225,759 |       |  | $ | 7,530   |  |  | $ | 965,479 | 
|Cost of revenues   |  |                    | 345,060 |               |  |       | 135,759 |       |  |   | 6,755   |  |  |   | 487,574 | 
|                   |  |                    |         |               |  |       |         |       |  |   |         |  |  |   |         | 
|Segment margin     |  | $                  | 387,130 |               |  | $     | 90,000  |       |  | $ | 775     |  |  | $ | 477,905 | 
|                   |  |                    |         |               |  |       |         |       |  |   |         |  |  |   |         | 
|Operating expenses |  |                    |         |               |  |       |         |       |  |   | 366,222 |  |  |   | 366,222 | 
|                   |  |                    |         |               |  |       |         |       |  |   |         |  |  |   |         | 
|Operating income   |  |                    |         |               |  |       |         |       |  |   |         |  |  | $ | 111,683 | 
|                   |  |                    |         |               |  |       |         |       |  |   |         |  |  |   |         | 

Revenues from the Europe/Middle-East/Africa region represented 15% and 14%
of total revenues, respectively, for the three months ended June 30, 2003 and
2002. Revenues from the Europe/Middle-East/Africa region represented 14% of
total revenues for each of the six month periods ended June 30, 2003 and 2002.
No other international region had revenues equal to or greater than 10% of
total revenues for the three and six months ended June 30, 2003 or 2002.
Revenues originating in each individual foreign country were less than 10% of
total revenues for each of the three and six months ended June 30, 2003 and
2002.

12.   Recently Issued Accounting Standards

In January 2003, the Financial Accounting Standards Board (FASB) issued
Interpretation No. 46, Consolidation of Variable Interest Entities (FIN 46)
that addresses the consolidation of variable interest entities. The
interpretation provides guidance for determining when a primary beneficiary
should consolidate a variable interest entity, or equivalent structure, that
functions to support the activities of the primary beneficiary. The
interpretation is effective after January 31, 2003 for newly created variable
interest entities. For variable interest entities created before February 1,
2003, the interpretation is effective as of the beginning of the first interim
or annual reporting period beginning after June 15, 2003. On June 30, 2003, the
Company exercised its option to purchase certain of its headquarters facilities
located in Pleasanton, California for $105.0 million, prior to the maturity of
the related synthetic lease. Had the Company not terminated this synthetic
lease prior to July 1, 2003, it would have been required to consolidate its
financial position and results of operations under the provisions of FIN 46.
Consequently, given the termination of this synthetic lease, the adoption of
FIN 46 will have no effect on the Companys consolidated financial position,
results of operations or cash flows.

In May 2003, the FASB issued Statement of Financial Accounting Standards
No. 150, Accounting for Certain Financial Instruments with Characteristics of
Both Liabilities and Equity (SFAS 150) that establishes standards for how an
issuer classifies and measures certain financial instruments with
characteristics of both liabilities and equity. SFAS 150 is effective for
financial instruments entered into or modified after May 31, 2003, and
otherwise is effective at the beginning of the first interim period beginning
after June 15, 2003. The adoption of this statement will have no effect on the
Companys consolidated financial position, results of operations or cash flows.

15



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##### 



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 forward-looking statements concerning non-historical facts or
matters that are subject to risks and uncertainties. These forward-looking
statements may be preceded by, followed by or include the words believes,
expects, anticipates, intends, plans, projections, estimates,
may, will, should, could or similar expressions. These forward-looking
statements represent our expectations or beliefs concerning future events, many
of which are outside of our control. Forward-looking statements contained
throughout this Report include, but are not limited to, those identified with a
footnote (1) symbol. Many possible events or factors could affect the actual
financial results and performance of PeopleSoft and of the combined company
after the acquisition of J.D. Edwards. These factors or events could cause
those results or performance to differ significantly from those expressed in
our forward-looking statements.

We
caution that these forward-looking statements are further qualified by important
factors, including those set forth below and elsewhere in this Quarterly
Report that could cause actual results to differ significantly.

These forward-looking statements and other forward-looking statements made
elsewhere in this document are made under the safe harbor provisions of
the Private Securities Litigation Reform Act of 1995. Forward-looking
statements are not guarantees of performance. By their nature, they involve
risks, uncertainties and assumptions. The future results of PeopleSoft may differ significantly from those expressed in these
forward-looking statements. Stockholders are cautioned not to put undue
reliance on any forward-looking statement. Any such statement speaks only as of
the date of this Quarterly Report. We do not assume any obligation to update or
release any revisions to any forward-looking statements, to report any new
information, future event or other circumstances after the date of this
Quarterly Report or to reflect the occurrence of unanticipated events, except
as required by law. For a discussion of factors that could affect future
results, see Factors That May Affect Our Future Results Or The Market Price Of
Our Stock.

RESULTS OF OPERATIONS

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

|                           |                                              |  |                          |                 |    |                             |    |                           |   |        |    |                |   |      |     |               |    |    |    |    |   |     |    |    |   |     |    | 
|-------------------------- | -------------------------------------------- |  | ------------------------ | --------------- | -- | --------------------------- | -- | ------------------------- | - | ------ | -- | -------------- | - | ---- | --- | ------------- | -- | -- | -- | -- | - | --- | -- | -- | - | --- | -- | 
|                           |                                              |  |                          |                 |    | Percentage of               |    |                           |   |        |    |                |   |      |     | Percentage of |    |    |    |    |   |     |    |   
|                           |                                              |  |                          |                 |    | Dollar                      |    | Percentage of             |   | Dollar |    | Percentage of 
|                           |                                              |  |                          |                 |    | Change                      |    | Total Revenues            |   | Change |    | Total Revenues
|                           |                                              |  |                          |                 |    |                             |    |                           |   |        |    |               
|                           |                                              |  |                          |                 |    | Three months ended June 30, |    | Six months ended June 30,
|                           |                                              |  |                          |                 |    | 2003/2002                   |    | 2003                      |   | 2002   |    | 2003/2002      |   | 2003 |     | 2002         
|                           |                                              |  |                          |                 |    |                             |    |                           |   |        |    |                |   |      |     |              
|Revenues:                  |                                              |  |                          |                 |    |                             |    |                           |   |        |    |                |   |      |     |               |    |    |    |    |   |     |    |   
|                           | License fees                                 |  |                          | (15             | )% |                             |    | 22                        | % |        |    | 27             | % |      |     | (27           | )% |    |    | 20 | % |     |    | 27 | %
|                          
|                          
|                          
|                          
|                          
|                          
|                          
|                          
|                          
|                           | Maintenance revenue                          |  |                          | 20              |    |                             |    | 42                        |   |        |    | 36             |   |      |     | 21            |    |    |    | 42 |   |     |    | 35 |  
|                           | Professional services revenue                |  |                          | 1               |    |                             |    | 36                        |   |        |    | 37             |   |      |     | 1             |    |    |    | 38 |   |     |    | 37 |  
|                           |                                              |  |                          |                 |    |                             |    |                           |   |        |    |                |   |      |     |               |    |    |    |    |   |     |    |   
|                           |                                              |  |                          | Service revenue |    |                             | 10 |                           |   |        | 78 |                |   |      | 73  |               |    |    | 11 |    |   |     | 80 |    |   |     | 72 | 
|                           | Development and other service revenue        |  |                          | N/A             |    |                             |    |                          |   |        |    |               |   |      |     | (100          | )  |    |    |   |   |     |    | 1  |  
|                           |                                              |  |                          |                 |    |                             |    |                           |   |        |    |                |   |      |     |               |    |    |    |    |   |     |    |   
|                           |                                              |  | Total revenues           |                 |    | 3                           |    |                           |   | 100    |    |                |   | 100  |     |               |    | (1 | )  |    |   | 100 |    |    |   | 100 |   
|                           |                                              |  |                          |                 |    |                             |    |                           |   |        |    |                |   |      |     |               |    |    |    |    |   |     |    |   
|Costs and expenses:        |                                              |  |                          |                 |    |                             |    |                           |   |        |    |                |   |      |     |               |    |    |    |    |   |     |    |   
|                           | Cost of license fees                         |  |                          | (6              | )  |                             |    | 2                         |   |        |    | 2              |   |      |     | (15           | )  |    |    | 2  |   |     |    | 2  |  
|                           | Cost of services                             |  |                          | (3              | )  |                             |    | 34                        |   |        |    | 35             |   |      |     | (2            | )  |    |    | 34 |   |     |    | 35 |  
|                           | Cost of development and other services       |  |                          | N/A             |    |                             |    |                          |   |        |    |               |   |      |     | (100          | )  |    |    |   |   |     |    |   |  
|                           | Sales and marketing expense                  |  |                          | 4               |    |                             |    | 26                        |   |        |    | 26             |   |      |     |              |    |    |    | 26 |   |     |    | 26 |  
|                           | Product development expense                  |  |                          | (3              | )  |                             |    | 17                        |   |        |    | 18             |   |      |     | (1            | )  |    |    | 18 |   |     |    | 18 |  
|                           | General and administrative expense           |  |                          | 50              |    |                             |    | 8                         |   |        |    | 6              |   |      |     | 28            |    |    |    | 8  |   |     |    | 6  |  
|                           | Restructuring, acquisition and other charges |  |                          | 59              |    |                             |    | 3                         |   |        |    | 2              |   |      |     | 20            |    |    |    | 1  |   |     |    | 1  |  
|                           |                                              |  |                          |                 |    |                             |    |                           |   |        |    |                |   |      |     |               |    |    |    |    |   |     |    |   
|                           |                                              |  | Total costs and expenses |                 |    | 4                           |    |                           |   | 90     |    |                |   | 89   |     |               |    |   |    |    |   | 89  |    |    |   | 88  |   
|                           |                                              |  |                          |                 |    |                             |    |                           |   |        |    |                |   |      |     |               |    |    |    |    |   |     |    |   
|Operating income           |                                              |  | (2                       | )               |    |                             | 10 |                           |   |        | 11 |                |   |      | (9  | )             |    |    | 11 |    |   |     | 12 |   
|Other income, net          |                                              |  | (44                      | )               |    |                             | 1  |                           |   |        | 1  |                |   |      | (26 | )             |    |    | 1  |    |   |     | 1  |   
|Provision for income taxes |                                              |  | (22                      | )               |    |                             | 4  |                           |   |        | 5  |                |   |      | (17 | )             |    |    | 4  |    |   |     | 5  |   
|                           |                                              |  |                          |                 |    |                             |    |                           |   |        |    |                |   |      |     |               |    |    |    |    |   |     |    |   
|Net income                 |                                              |  | 1                        | %               |    |                             | 7  | %                         |   |        | 7  | %              |   |      | (7  | )%            |    |    | 8  | %  |   |     | 8  | % 
|                           |                                              |  |                          |                 |    |                             |    |                           |   |        |    |                |   |      |     |               |    |    |    |    |   |     |    |   
|Diluted income per share   |                                              |  | 0                        | %               |    |                             |    |                           |   |        |    |                |   |      | (8  | )%            |    |    |    |    |   |     |    |   



| |  | N/A  Not Applicable
| |  | --------------------

16



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Net income increased $0.5 million or 1% to $36.5 million for the second
quarter of 2003 from $36.0 million for the second quarter of 2002. Diluted
income per share was $0.11 in the second quarter of 2003, consistent with the
first quarter of 2002.

For the six months ended June 30, 2003, net income decreased $5.6 million
or 7% to $75.0 million from $80.6 million for the six months ended June 30,
2002. For the six months ended June 30, 2003, diluted income per share
decreased to $0.23 from $0.25 for the six months ended June 30, 2002.

Net income for the quarter and six months ended June 30, 2003 included
restructuring charges totaling $8.5 million (after-tax)
resulting from headcount
reductions within various worldwide administrative and support functions and
the closure of an underutilized office facility. Refer to
Restructuring, Acquisition and Other Charges below.

Net income for the six months ended June 30, 2002 includes a first quarter
charge of $1.7 million (after-tax) for in-process research and development
related to the Annuncio Software, Inc. (Annuncio) business combination and a
second quarter in-process research and development charge of $8.7 million (no
tax impact) related to the acquisition of Momentum Business Applications, Inc.
(Momentum).

Revenues

Our software products are generally licensed to end-user customers under
non-exclusive, perpetual license agreements. Revenue from license fees
decreased by 15% to $111.7 million in the second quarter of 2003 from $131.9
million in the second quarter of 2002. Revenue from license fees decreased by
27% to $192.6 million during the six months ended June 30, 2003 from $265.2
million during the six months ended June 30, 2002. The decrease in license
revenue, which was distributed across most geographies, reflects the
continued slowdown in
capital spending resulting from the ongoing global economic downturn.

Our services revenue consists of software maintenance revenue and
professional services revenue (consulting fees, customer training fees and
miscellaneous fees). Maintenance revenue was $205.6 million during the second
quarter of 2003 compared to $171.3 million during the second quarter of 2002.
The $34.2 million increase in maintenance revenue is primarily a result of the
continuing addition of new customers to our installed base combined with a high renewal
rate by existing customers. Professional services revenue was $180.2 million
during the second quarter of 2003 compared to $179.0 million during the second
quarter of 2002. The $1.2 million increase in professional services revenue
reflects continued demand for consulting and training services associated with
license activity from recent quarters. For the six months ended June 30, 2003,
maintenance revenue increased by 21% to $405.5 million from $335.9 million for
the six months ended June 30, 2002. The increase in maintenance revenue is
primarily a result of the continuing addition of new customers to our installed base
combined with a high renewal rate by existing customers. For the six months
ended June 30, 2003, professional services revenue increased by 1% to $359.6
million from $356.8 million for the six months ended
June 30, 2002. The increase in professional services revenue
reflects continued demand for consulting and training services associated with
license activity from recent quarters.

Development and other services revenue recognized in 2002 consisted of
revenue generated pursuant to a development agreement with Momentum. On
April 9, 2002, we completed a transaction to purchase Momentum. Subsequent to
this acquisition, no development and other services revenue was recognized.
Revenue from development and other services was zero for the six months ended
June 30, 2003 as compared to $7.5 million for the same period in 2002. Cost of
development and other services was zero for the six months ended June 30, 2003
from $6.8 million during the six months ended June 30, 2002. Refer to
Business Combinations in our Annual Report on Form 10-K for the year ended
December 31, 2002 for further discussion about Momentum and the acquisition of
Momentum. We do not expect to have any further Development and other
services revenue or related costs.(1)

Costs and Expenses

Our software products are based on a combination of internally developed
and acquired technology, as well as bundled third party technology and
products. Cost of license fees consists principally of royalties, license fees
for certain third party software products, amortization of capitalized software
costs and product warranty costs. Cost of
license fees decreased to $9.6 million in the second quarter of 2003 from
$10.2 million in the second quarter of 2002 representing 9% and 8% of license
revenue in each of those quarters. The decrease in the cost of license fees for
the



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three months ended June 30, 2003
is primarily a result of a decrease in license revenue combined with
a change in the
associated product mix. During the six months ended June 30, 2003 and 2002,
cost of license fees decreased to $18.3 million from $21.6 million,
representing 9% and 8% of license revenue in each of those six month periods.
The decrease in the cost of license fees for the six months ended June 30, 2003
is primarily a result of a decrease in license revenue combined with
a change in the associated product mix. Cost of license fees as a
percentage of license revenue may increase as a result of the acquisition of
J.D. Edwards and Company (J.D. Edwards).(1)

Cost of services consists primarily of employee costs and the related
infrastructure costs incurred in providing consulting services,
post-installation support and training. Cost of services decreased to $166.7
million in the second quarter of 2003 from $171.2 million in the second quarter
of 2002, representing 43% and 49% of services revenues in each of those
quarters. The decrease in cost of services for the second quarter of 2003 is
primarily due to a $3.2 million decrease in travel related expenses, a $2.3
million decrease in meeting expenses, a $1.2 million decrease in employee
related costs, and a $2.8 million decrease in fixed fee contract expense due to
the timing of projects, partially offset by an increase of $6.0 million for outside
consulting expense and a redeployment of consulting personnel working
on internal projects. For the
six months ended June 30, 2003 cost of services decreased to $330.2 million
from $335.7 million during the six months ended June 30, 2002, representing 43%
and 48% of service revenues in each of those six month periods. The decrease in
cost of services for the six months ended June 30, 2003 is primarily due to a
$3.8 million decrease in services warranty expense, a $3.6 million decrease in fixed
fee contract expense due to project timing, a $2.8 million decrease in meetings
expenses, a $2.1 million decrease in leased computers due to buy-out of
computer leases in the first quarter 2003, and a $1.8 million decrease in
travel related expenses due to company cost control partially offset by a $5.3
million increase in expenses relating the redeployment of consulting
personnel working on internal projects and a $2.7 million increase in employee related expenses. If the demand for services from new and
existing customers for installation, consulting, maintenance and training
services increases over the next several quarters, our cost of services may
increase.(1)

Sales and marketing expenses increased to $131.5 million in the second
quarter of 2003 from $126.2 million in the second quarter of 2002, representing
26% of total revenues in each of those quarters. The increase in sales and
marketing expenses is primarily due to a $4.3 million increase in marketing
expenses including, $2.3 million in marketing expenses arising
from our response to the Oracle Offer, and
a $4.0 million increase in sales commissions, partially offset by a $2.2
million decrease in external consulting expense and a $1.6 million decrease in
salaries expense. Sales and marketing expenses increased to $251.1 million for
the six months ended June 30, 2003 from $250.7 million for the six months ended
June 30, 2002, representing 26% of total revenues in each of the six month
periods. The increase in sales and marketing expenses is primarily due to a
$5.4 million increase in marketing expense, of which $2.3 million relates to
expenses incurred in the second quarter in response to the Oracle Offer,
partially offset by a $2.5 million decrease in sales commissions and a $2.2
million decrease in external consulting expense. Sales and marketing expenses
may increase in future periods as we increase our sales force and marketing and
advertising expenses to improve our competitive positioning in the marketplace
and to promote brand awareness and global recognition of our products.(1)
Sales and marketing expenses in the third quarter will include
marketing expenses
incurred in response to the Oracle Offer.(1)

Product development expenses consist of costs primarily related to our
software developers and the associated infrastructure costs required to fund
product development initiatives. Product development expenses decreased to
$84.6 million in the second quarter of 2003 from $87.5 million in the second
quarter of 2002, representing 17% and 18% of total revenues in each of those
quarters. The decrease in product development expenses is primarily
attributable to a $4.6 million decrease in employee incentive
compensation due to a decline in
license revenues, partially offset by a $2.0 million increase in salaries due
to increased headcount in 2003. Product development expenses decreased to
$168.4 million during the six months ended June 30, 2003 from $169.9 million
for the six months ended June 30, 2002, representing 18% of total revenues in
each of the six month periods. The decrease in product development expenses is
primarily attributable to a $9.6 million decrease in employee
incentive compensation due to a
decline in license revenues, partially offset by a $5.9 million increase in
development activities as developers were redeployed from working on Momentum
projects in the prior year and a $4.0 million increase in salaries due to
increased headcount in 2003. Our focus is to continue to extend our software
offerings by delivering enhanced functionality and to



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further develop new applications in our integrated application suites:
Human Capital Management, Financial Management Solutions, Customer Relationship
Management and Supply Chain Management.(1)

General and administrative expenses increased to $41.0 million during the
second quarter of 2003 from $27.4 million during the second quarter of 2002,
representing 8% and 6% of total revenues in each of those quarters. The
increase is primarily attributable to investment banking, legal and other
expenses of $11.5 million incurred in the second quarter of 2003 related to our
response to the Oracle Offer. General and administrative expenses increased to
$74.0 million from $57.6 million for the six months ended June 30, 2003,
representing 8% and 6% of total revenues in each of those periods. The
increase for the six month period is primarily attributable to expenses of
$11.5 million incurred in the second quarter of 2003 related to our response to
the Oracle Offer, an increase in directors and officers insurance premiums of
$1.5 million and increases in employee expenses
relating to the redeployment of internal personnel and other costs of
$2.3 million. General and administrative expenses in the third quarter will include
expenses incurred in response to the Oracle Offer.(1)

Restructuring, Acquisition and Other Charges

During the second quarter of 2003, we recorded pretax restructuring
charges of $13.8 million. The $13.8 million of restructuring charges are included in Restructuring, acquisition and other charges and
consisted of $4.6 million for employee severance, $7.5 million for the fair
value of lease obligations associated with the closure of an office facility and $1.7 million for the impairment of related leasehold
improvements. Approximately
$12.1 million of the restructuring charge is a cash charge, which is expected
to be funded through operating cash flow. We expect to be able to recover the
$13.8 million severance and facility-related restructuring
charges through cost savings over the
next 8 months. During the six months ended June 30, 2002, we incurred a first
quarter charge of $2.8 million related to the write-off of in-process research
and development costs associated with our acquisition of Annuncio and a second
quarter charge of $8.7 million related to the write-off of in-process research
and development costs related to the acquisition of Momentum. In the future,
if we complete business combinations and technology purchases, including the
completion of our acquisition of J.D. Edwards, we may incur additional
in-process research and development charges which may impact our results of
operations.(1)

Other Income, Net

Other income, net, which primarily includes interest income, decreased to
$4.7 million in the second quarter of 2003 from $8.5 million in the second
quarter of 2002, and decreased to $11.7 million in the six months ended June
30, 2003 from $15.7 million during the six months ended June 30, 2002. The
decrease is primarily a result of a decrease in net foreign currency
transaction gains of $4.0 million and 3.0 million for the three and six month
periods ended June 30, 2003, a $1.4 million realized loss on the buyout of our
remaining interest rate swaps incurred in the second quarter of 2003 and a
decrease in interest income in both periods due to lower interest rates.

Provision for Income Taxes

Our income tax provision decreased to $18.4 million in the second quarter
of 2003 from $23.5 million in the second quarter of 2002 and decreased to $38.7
million in the six months ended June 30, 2003 from $46.8 million for the same
period in 2002. Our effective tax rate was 34.0% and 36.8% for the six months
ended June 30, 2003 and 2002, respectively. Exclusive of restructuring charges
in the second quarter of 2003 and in-process research and development charges
in the first and second quarters of 2002, the effective tax rate for the six
months ended June 30, 2003 and 2002 was 34.5%. The net deferred tax assets at
June 30, 2003 were $179.5 million. In accordance with Statement of Financial
Accounting Standards No. 109, Accounting for Income Taxes (SFAS 109), the
valuation of these net deferred tax assets is based upon an estimate of both
the timing and amount of future taxable income. Future taxable income may be
derived from future operations, subsequent reversals of deferred tax
liabilities and other sources.(1)



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Business Combinations

On June 1, 2003, PeopleSoft, Jersey Acquisition Corporation, a wholly
owned subsidiary of the Company (Jersey), and J.D. Edwards entered into an
Agreement and Plan of Merger, which provided for an offer to purchase
all the outstanding shares of common stock of J.D. Edwards (the
exchange offer). On June 16, 2003, we entered into an Amended and
Restated Agreement and Plan of Merger and Reorganization with J.D. Edwards and
Jersey. The value of the consideration to be given
for approximately 122 million shares of the outstanding J.D. Edwards common
stock was approximately $1.8 billion.

On June 19, 2003, we filed with the Securities and Exchange Commission a
Tender Offer Statement on Schedule TO with regard to the exchange offer and a
Registration Statement on Form S-4 to register the shares to be issued in
connection with the exchange offer. Pursuant to the exchange offer, holders of
J.D. Edwards common stock were entitled to make an election to tender their
shares for cash or shares of PeopleSoft stock and such holders were entitled to
receive cash, stock, or a combination of cash and stock, in each case having a
value, on a per share basis of $7.05 plus 0.43 of a share of PeopleSoft common
stock, allocated by prorating cash and shares available in the tender offer
among the elections made by the holders. The value of the cash and stock
consideration to be paid to tendering J.D. Edwards shareholders was based upon
the closing prices of one share of PeopleSofts common stock during the five
trading days ending before the second trading day prior to the expiration of
the exchange offer. The exchange offer expired on July 17, 2003.

On July 14, 2003, PeopleSoft and J.D. Edwards announced that, in
connection with our exchange offer to acquire all of the outstanding shares of
J.D. Edwards, the companies received notice of termination of the required
waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended.

Our offer to acquire all of the outstanding shares of J.D. Edwards expired
at midnight, New York City time on Thursday, July 17, 2003. At the expiration
of the offer and after delivery of guaranteed shares, 104,754,894 shares of
J.D. Edwards common stock had been validly tendered for exchange, all of which
were accepted for exchange by PeopleSoft at approximately 1:45 a.m., New York
City time, on Friday, July 18, 2003. As a result of such acceptance and
exchange, PeopleSoft owns approximately 85% of the J.D. Edwards
common stock outstanding as of August 8, 2003. We expect to acquire all of the
remaining shares of J.D. Edwards by completing a merger of a wholly-owned
subsidiary of PeopleSoft with J.D. Edwards before the end of August 2003.

Oracles Unsolicited Tender Offer for PeopleSofts Common Stock

On
June 6, 2003, Oracle Corporation announced that it intended to
commence an unsolicited cash tender offer to purchase all of the outstanding shares of PeopleSoft for
$16.00 per share, or approximately $5.1 billion in the aggregate (the Oracle
Offer). On June 8, 2003, the Companys board of
directors met and discussed Oracles
unsolicited offer and formed a Transaction Committee of independent
directors, comprised of Frank J. Fanzilli, Jr., Steven D. Goldby, A. George
Battle and Cyril J. Yansouni. The purpose of the Transaction
Committee is to evaluate and assess the terms of the Oracle
Offer, once announced, in consultation with the Companys board of directors
financial and legal advisors, and make a recommendation to its board. On June 9,
2003, Oracle and Pepper Acquisition Corp., a Delaware corporation and
wholly-owned subsidiary of Oracle, filed a Tender Offer Statement on Schedule
TO with the SEC in connection with the Oracle Offer. On June 11, 2003, the
Companys board of directors, including all of the members of the Transaction
Committee, met with management and the boards financial and legal advisors to
further consider and discuss the Oracle Offer. After careful consideration,
including consultation with management and the boards financial and legal
advisors, the Transaction Committee unanimously concluded that the Oracle Offer
dramatically undervalued the Company, would face lengthy antitrust
scrutiny, with a significant likelihood that the necessary approval would not
be granted, the delays and uncertainties created by the Oracle Offer,
coupled with Oracles stated intent to discontinue the Companys market-leading
products, represented a substantial threat to stockholder value, and that the
unsolicited and hostile nature of the Oracle Offer, combined with Oracles
public statements, was designed to disrupt the Companys momentum at
significant cost to the Company and its customers. For these and other reasons
(more fully described in the Companys Solicitation/Recommendation on Schedule
14D-9, as amended, filed with the SEC in response to the Oracle Offer, referred
to as the Schedule 14D-9), the Transaction Committee determined that the Oracle Offer was
not in the best interests of the stockholders and unanimously recommended to
the full board of directors that the full board, in turn, recommend that the
Companys stockholders reject the Oracle Offer and not tender their shares to
Oracle for purchase. The full board of directors concurred with the committee
and, having determined that the Oracle Offer was not in the best interests of
the Companys stockholders, unanimously

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recommended that the stockholders reject the Oracle Offer. The Company
publicly announced the boards recommendation on June 12, 2003.

On June 18, 2003, Oracle announced that it had amended its offer to
purchase all of the outstanding stock of PeopleSoft by increasing the purchase
price from $16.00 to $19.50 per share. After careful consideration, including
consultation with management and the boards financial and legal advisors, the
Transaction Committee unanimously concluded that their previously stated reasons
for rejecting the Oracle Offer remained unchanged. As more fully described in the Companys amended
Schedule 14D-9, the Transaction Committee determined that the Oracle Offer was not in the
best interests of the stockholders and unanimously recommended to the full
board that it recommend that the stockholders reject the Oracle Offer and not
tender their shares to Oracle for purchase. The full board of directors
concurred with the Transaction Committee and, having determined that the revised Oracle
Offer was not in the best interests of the Companys stockholders, unanimously
recommended that the stockholders reject the revised Oracle Offer. The Company
publicly announced the boards recommendation on June 20, 2003. On June 30,
2003, the Department of Justice requested additional information from
Oracle and the Company regarding
antitrust matters relating to Oracles proposed acquisition of PeopleSoft,
known as a second request.

On July 14, 2003, Oracle announced the extension of expiration of the
Oracle Offer from July 18 to August 15, 2003. On July 24, 2003, Oracle amended
its offer to eliminate the condition requiring Oracles consent for any
amendment to the merger agreement between PeopleSoft and J.D. Edwards. As a
result of PeopleSofts issuance of additional shares pursuant to the exchange
offer and acquisition of J.D. Edwards, Oracles cash offer of $19.50 per share
was increased to a total of approximately $7.3 billion. On August 8, 2003,
Oracle announced the extension of expiration of the Oracle Offer from August 15
to September 19, 2003. See Item 1. Legal
Proceedings under Part II - Other
Information for information about litigation instituted by the Company and
others related to the Oracle Offer.

Critical Accounting Policies and Estimates

The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America (U.S. GAAP)
requires us to utilize accounting policies and make estimates and assumptions
that affect our reported results. We believe our accounting policies and estimates related to
revenue recognition, capitalized software, allowance for doubtful accounts,
product and service warranty reserve and deferred tax asset valuation
allowances represent our critical accounting policies and estimates.
Despite the Companys best effort to make good faith estimates
and assumptions, actual results may differ.

Revenue Recognition

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

License Fee Revenue.For software license agreements that do not require
significant modifications or customization of the software, we recognize
software license revenue when persuasive evidence of an agreement exists,
delivery of the product has occurred, the license fee is fixed or determinable
and collection is probable. Our software license agreements generally include
multiple products and services, or elements. Consulting services, if included
as an element of software license agreements, generally do not involve
significant modification or customization of the licensed software. We use the
residual method to recognize revenue when a license agreement includes one or
more elements to be delivered at a future date and vendor specific evidence of
the fair value of all undelivered elements exists. The fair value of the
undelivered elements is determined based on the historical evidence of
stand-alone sales of these elements to third parties. Under the residual
method, the fair value of the undelivered elements is deferred and the
remaining portion of the arrangement fee is recognized as revenue. If evidence
of the fair value of one or more undelivered elements does not exist, the
revenue is deferred and recognized when delivery of those elements occurs or
when fair value can be established. If the license fee due from the customer is
not fixed or determinable, revenue is recognized as payment becomes due,
assuming all other revenue recognition criteria have been met. We consider
arrangements with extended payment terms not to be fixed or determinable.
Revenue associated with reseller arrangements is recognized when we receive
persuasive evidence that the reseller has sold the products to an end user
customer. Acceptance provisions included in a software license agreement
generally grant customers a right of refund or replacement only if the licensed
software does not perform

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in accordance with its published specifications. Based on our history, the
likelihood of non-acceptance in these situations is remote, and we recognize
revenue when all other criteria of revenue recognition are met. If the
likelihood of non-acceptance is determined to be other than remote, revenue is
recognized upon the earlier of receipt of written acceptance or when the
acceptance period has lapsed.

In
response to Oracles public statement about its intent to discontinue
the Companys products and to minimize a potential loss of business during the Oracle Offer, in June
2003 PeopleSoft implemented a program. This program incorporates a contingent change in
control provision to our standard perpetual licensing arrangement which
provides customers purchasing application licenses with financial protection in
the event that an acquirer discontinues the sale, development or support of
PeopleSoft applications within a specified period after an acquisition. That
financial protection is in the form of a payment generally equal to two to five
times the total arrangement fees. The multiple increases as the arrangement
fees increase and generally will be paid provided the following events occur:



| |  |  | within one year of the contract effective date, PeopleSoft is
acquired or merged, and PeopleSoft is not the acquirer; and                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | within two years of the contract effective date, the acquiring
company: (i) announces its intention to discontinue, or discontinues,
support services before the end of the normal support term as defined
by PeopleSoft standard policies, or (ii) announces its intention to
stop licensing PeopleSoft products to new customers, or (iii) announces
its intention not to provide updates or new releases for supportable
products, which would, if PeopleSoft were not acquired or merged with
the acquired company, have been considered updates or new releases
under PeopleSoft standard business policies; and
|
| |  |  | the customer requests the payment in writing by December 31, 2005
and has timely paid for support services in accordance with the terms
of the customers agreement with PeopleSoft.                                                                                                                                                                                                                                                                                                                                                                                                                                 

Customers retain rights to the licensed products whether or not the
customer protection program payments are implicated. No customer is entitled to
a refund of arrangement fees paid under the customers contract with
PeopleSoft, but the customer would be entitled to a payment under the customer
protection program if all of the conditions stated above are met.

The customer protection program was designed to protect a customers total
investment in PeopleSoft products. We believe that the customer protection
provision has encouraged customers to go forward with business arrangements
despite uncertainty about the future of PeopleSoft applications in the
marketplace that the Oracle Offer and Oracles public statements have created.
(1) These assurances provided to customers facilitated
completing sales transactions, which preserves the value of PeopleSofts
business for our stockholders.

The customer protection program has no financial statement impact
on PeopleSoft. A contingent liability would only be recognized in the financial
statements of PeopleSoft or its acquirer upon or after the consummation of the
business combination provided all the events listed above occurred. As of June
30, 2003, the maximum potential amount of future payments which may be required
to be made under the program is approximately $391 million.

Maintenance Revenue.Maintenance revenue is recognized ratably over the
term of the maintenance agreement, typically one year.

Professional Services Revenue.Professional services revenue primarily
consists of consulting and customer training revenues, which are usually
charged on a time and materials basis and are recognized as the services are
performed. Revenue from certain fixed price contracts is recognized on a
percentage of completion basis, which involves the use of estimates. If we do
not have a sufficient basis to measure the progress towards completion, revenue
is recognized when the project is completed or when we receive final acceptance
from the customer.

Capitalized Software

We account for the development cost of software intended for sale in
accordance with Statement of Financial Accounting Standards No. 86, Accounting
for Costs of Computer Software to be Sold, Leased, or Otherwise Marketed (SFAS
86). SFAS 86 requires product development costs to be charged to expense as
incurred until



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technological feasibility is attained. Technological feasibility is
attained when our software has completed internal testing and has been
determined viable for its intended use. The time between the attainment of
technological feasibility and completion of software development has been short
with immaterial amounts of development costs incurred during this period.
Accordingly, we did not capitalize any development costs in the six month
periods ended June 30, 2003 and 2002. We capitalize software acquired through
technology purchases and business combinations if the related software under
development has reached technological feasibility or if there are alternative
future uses for the software. We evaluate the recoverability of capitalized
software based on estimated future gross revenues reduced by the estimated cost
of completing the products and of performing maintenance and customer support.
If our gross revenues were to be significantly less than our estimates, the net
realizable value of our capitalized software intended for sale would be
impaired.

Allowance for Doubtful Accounts

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

Product and Service Warranty Reserve

We provide for the estimated cost of product and service warranties based
on specific warranty claims, provided that it is probable that a liability
exists, and provided the amount can be reasonably estimated. Warranty expense
is equal to the costs to repair or otherwise satisfy the claim. As settlement
negotiations proceed, additional information becomes available which may result
in changes in the estimated liability. If claims are settled for amounts
differing from our estimates, or if the estimated value of warranty claims were
to increase or decrease, revisions to the estimated warranty liability may be
required and the warranty expense may change from current levels.

Deferred Tax Asset Valuation Allowance

We account for income taxes in accordance with Statement of Financial
Accounting Standards No. 109, Accounting for Income Taxes. We assess the
likelihood that our net deferred tax assets will be recovered from future
taxable income and to the extent we believe that recovery is not likely, we
establish a valuation allowance against those deferred tax assets. We consider
future taxable income and ongoing prudent and feasible tax planning strategies
in assessing the amount of the valuation allowance. However, adjustments could
be required in the future if we determine that the amount to be realized is
greater or less than the amount we have recorded. We have established
valuation allowances for net operating losses incurred in foreign jurisdictions
and other foreign tax benefits as well as on operating loss carryforwards in
state jurisdictions of acquired companies.

Liquidity and Capital Resources

At June 30, 2003, we had $272.9 million in cash and cash equivalents and
$1.7 billion in short-term investments, consisting principally of investments
in interest-bearing demand deposit accounts with various financial
institutions, tax-advantaged money market funds and highly liquid debt
securities of corporations and municipalities. At June 30, 2003, working
capital was $1.6 billion. We believe that the combination of cash and cash
equivalents, short-term investment balances and potential cash flow from
operations will be sufficient, at least through the next twelve months, to
satisfy our cash requirements, including payments of approximately $873 million
related to the cash portion of the total consideration to be distributed to
J.D. Edwards shareholders upon the merger of PeopleSoft and J.D. Edwards, of
which approximately $739 million was paid upon completion of the exchange offer
in July 2003, and the remainder is expected to be paid upon completion of the
merger with J.D. Edwards during the third quarter.(1)

Cash provided by operating activities decreased $21.1 million to $193.3
million during the six months ended June 30, 2003 from $214.4 million during
the same period in 2002. The decrease was primarily due to a decrease



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associated with fluctuations in the income tax and accounts receivable
balances, a decrease in tax benefits from employee stock transactions, and
lower net income in the six months ended June 30, 2003 compared to the same
period in 2002.

Cash used in investing activities decreased $15.9 million to $304.1
million during the six months ended June 30, 2003 from $320.0 million during
the same period in 2002. The $15.9 million decrease was primarily attributable
to $61.0 million lower net purchases of investments and $117.8 million was
related to 2002 business combinations, partially offset by $162.9 million in
greater purchases of property and equipment, of which $175.0 million relates to
exercising options under synthetic lease agreements in 2003 to purchase certain
of our headquarter facilities in Pleasanton, California.

Cash provided by financing activities decreased $29.0 million to $49.1
million during the six months ended June 30, 2003 from $78.1 million during the
six months ended June 30, 2002. The decrease in was primarily due to $28.0
million less in proceeds received from the exercise of common stock options by
employees.

As part of our business strategy, we consider acquiring companies or
products from time to time to enhance our product and service lines. These
acquisitions may be paid for with available cash, equity, debt or a combination
of these sources.(1)

Commercial Commitments

On February 27, 2003, we exercised our option under a synthetic lease
agreement to purchase certain of our headquarter facilities located in
Pleasanton, California for $70.0 million and on June 30, 2003, we exercised our
option under a synthetic lease agreement to purchase certain of our headquarter
facilities located in Pleasanton, California for $105.0 million, prior to the
agreements maturity date in September 2003. We have no remaining synthetic
leases.



---

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

24



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##### 



ITEM 3  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Foreign Exchange Risk

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

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

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

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

At June 30, 2003, we had the following outstanding forward foreign
exchange contracts to exchange foreign currency for U.S. dollars:

|                    |  |                 |              |               |  |         |                   |  | 
|------------------- |  | --------------- | ------------ | ------------- |  | ------- | ----------------- |  | 
|                    |  |                 |              |               |  |         | Notional Weighted
|                    |  |                 |              |               |  |         | Average Exchange 
|Foreign Currency    |  | Notional Amount |              | Rate per US $
|                    |  |                 |              |              
|Singapore dollars   |  | $               | 8.8 million  |               |  | 1.75670 |                  
|Canadian dollars    |  |                 | 8.5 million  |               |  | 1.35510 |                  
|New Zealand dollars |  |                 | 1.0 million  |               |  | 1.72000 |                  
|Japanese yen        |  |                 | 1.0 million  |               |  | 119.530 |                  
|Swiss francs        |  |                 | 0.9 million  |               |  | 1.34860 |                  
|Swedish krona       |  |                 | 0.8 million  |               |  | 8.03500 |                  
|Euros               |  |                 | 0.7 million  |               |  | 0.87040 |                  
|Taiwanese dollars   |  |                 | 0.4 million  |               |  | 34.5620 |                  
|                    |  |                 |              |               |  |         |                  
|                    |  | $               | 22.1 million |               |  |         |                  
|                    |  |                 |              |               |  |         |                  

At June 30, 2003, we had the following outstanding forward foreign
exchange contracts to exchange U.S. dollars for foreign currency:

|                   |  |                 |             |               |  |         |                   |  | 
|------------------ |  | --------------- | ----------- | ------------- |  | ------- | ----------------- |  | 
|                   |  |                 |             |               |  |         | Notional Weighted
|                   |  |                 |             |               |  |         | Average Exchange 
|Foreign Currency   |  | Notional Amount |             | Rate per US $
|                   |  |                 |             |              
|Hong Kong dollars  |  | $               | 0.9 million |               |  | 7.79800 |                  
|South African rand |  |                 | 0.6 million |               |  | 7.60000 |                  
|                   |  |                 |             |               |  |         |                  
|                   |  | $               | 1.5 million |               |  |         |                  
|                   |  |                 |             |               |  |         |                  

At June 30, 2003, each of these contracts matured within 60 days and had a
book value that approximated fair value. Neither the cost nor the fair value
of these forward foreign exchange contracts was material at June 30, 2003.
During the six months ended June 30, 2003, we recorded net foreign currency
losses of $1.2 million.

25



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##### 



Interest Rate Risk

Investments In Debt Securities

We invest in a variety of securities, consisting principally of
investments in interest-bearing demand deposit accounts with financial
institutions, tax-exempt money market funds and highly liquid debt securities
of corporations and municipalities. Cash balances in foreign currencies
overseas represent operating balances that are typically invested in short term
time deposits in local operating banks.

We classify debt securities based on maturity dates on the date of
purchase and reevaluate the classification as of each balance sheet date. As
of June 30, 2003 and December 31, 2002, all our investments were classified as
available-for-sale, which are carried at fair value. Fair value is determined
based on quoted market prices, with net unrealized gains and losses included in
Accumulated other comprehensive income net of tax, in the accompanying
condensed consolidated balance sheets.

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

At June 30, 2003, the average maturity of our investment securities was
less than three months and all investment securities had maturities of less
than eighteen months. At June 30, 2003, we invested heavily in tax-exempt
investments, which reduced our weighted average interest rate.

Below is a schedule that shows the maturity profile of our investment
securities held at June 30, 2003 and the related weighted average interest
rates. The weighted average rates include both taxable and tax-exempt
investments (in millions, except weighted average interest rates):

|                               |  |                   |         |             |  |           |      |            |  |       |         |  |  |   |         | 
|------------------------------ |  | ----------------- | ------- | ----------- |  | --------- | ---- | ---------- |  | ----- | ------- |  |  | - | ------- | 
|                               |  | Expected Maturity |         |             |  |           |      |            |  |      
|                               |  |                   |         |             |  |           |      |            |  |      
|                               |  |                   |         |             |  |           |      |            |  | Total |         |  |  |  
|                               |  | 1 Year or         |         | More than 1 |  | Principal |      | Total     
|                               |  | less              |         | year        |  | Amount    |      | Fair Value
|                               |  |                   |         |             |  |           |      |           
|Available-for-sale investments |  | $                 | 1,664.1 |             |  | $         | 37.7 |            |  | $     | 1,701.8 |  |  | $ | 1,704.5 | 
|Weighted average interest rate |  |                   | 1.20    | %           |  |           | 1.19 | %          |  |       |         |  |  |   |         | 

Interest Rate Swap Transactions

The Company used interest rate swap transactions to manage its exposure to
interest rate changes on its synthetic lease obligations. The swaps had an
aggregate notional principal amount of $175.0 million and matured at various
dates in 2003, consistent with the expiration of the synthetic leases. Under
the swap agreements, the Company received a variable interest rate based on the
three month LIBOR rate and paid a weighted average fixed interest rate of 6.8%.
The swaps were designated under SFAS 133 as hedges against changes in the
amount of future cash flows. In February 2003, the Company exercised its
option under a synthetic lease agreement to purchase certain of its
headquarters facilities located in Pleasanton, California for $70.0 million,
and concurrently
swaps with an aggregate notional principal amount of $70.0 million
matured. On June 30, 2003 the Company exercised its option under a synthetic
lease agreement to purchase certain of its headquarters facilities located in
Pleasanton, California for $105.0 million. As a result of this transaction,
the Company terminated its remaining interest rate swap agreements with an
aggregate notional principal amount of $105.0 million resulting in a pretax
charge of $1.4 million to Other income, net. Included in Accumulated other
comprehensive income at March 31, 2003 was a $1.8 million unrealized loss
(after-tax) related to these interest rate swaps. In the second quarter of
2003, $0.9 million (after-tax) was reclassified into earnings by making
scheduled swap payments and $0.9 million (after-tax) was recognized as a
realized loss that was reclassified into earnings upon the termination of the
remaining interest rate swap agreements.

26



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##### 



ITEM 4  CONTROLS AND PROCEDURES

As of the end of the second quarter ended June 30, 2003, the Company
carried out an evaluation, under the supervision and with the participation
of members of our management, including the Companys Chief Executive Officer along with
the Companys Chief Financial Officer, of the effectiveness of the design and
operation of the Companys disclosure controls and procedures pursuant to
Rule 13a-15(b) of the Securities Exchange Act of 1934. Based upon that
evaluation, the Companys Chief Executive Officer and the Companys Chief
Financial Officer have concluded that the Companys disclosure controls and
procedures are effective in alerting them in a timely manner to material
information relating to the Company (including its consolidated subsidiaries)
required to be included in the Companys periodic SEC filings.

During the most recent fiscal quarter, there has not occurred any change
in the Companys internal control over financial reporting that has
materially affected, or is reasonably likely to materially affect, the
Companys internal control over financial reporting.

27



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##### 



FACTORS THAT MAY AFFECT OUR FUTURE RESULTS OR THE MARKET PRICE
OF OUR STOCK

We operate in a dynamic and rapidly changing environment that involves
numerous risks and uncertainties. The following section describes some, but not
all, of these risks and uncertainties that may adversely affect our business,
financial condition or results of operations. This section should be read in
conjunction with the unaudited Condensed Consolidated Financial Statements and
the accompanying Notes thereto and Managements Discussion and Analysis of
Financial Condition and Results of Operations included in this Quarterly Report
on Form 10-Q and the audited Consolidated Financial Statements and Notes
thereto, and Managements Discussion and Analysis of Financial Condition and
Results of Operations contained in our 2002 Annual Report on Form 10-K.

Oracle Corporations tender offer to purchase all of our outstanding common
stock is disruptive to our business and threatens to adversely affect the Companys operations and
results.

Oracle Corporation has commenced a cash tender offer, referred to as the
Oracle Offer, to purchase all of our outstanding common stock. The Oracle Offer
involves certain conditions and is accompanied by actions that may delay or
prevent the completion of our merger. Furthermore, we believe that the Oracle
Offer raises significant antitrust concerns that could result in a lengthy
regulatory review process and protracted litigation. On June 30, 2003, the
Department of Justice requested additional information regarding antitrust
matters relating to Oracles proposed acquisition of PeopleSoft, known as a
second request. The delay and uncertainty associated with
the second request could have a material adverse
effect on PeopleSofts and J.D. Edwards financial condition and operating
results.

Oracles initially stated intentions that were interpreted to reflect the
intent to discontinue the development, sale and support of PeopleSoft products
if the Oracle Offer is successful have adversely impacted and may continue to
adversely impact both our and J.D. Edwards ability to attract new customers
and have caused and could continue to cause potential or current customers to
defer purchases or to cancel existing orders. Oracles recent statements that
it would continue to sell and support PeopleSoft products for some time has
resulted in additional confusion for our customers. Moreover, as a result of
the Oracle Offer, certain of our and J.D. Edwards suppliers, distributors, and
other business partners may seek to change or terminate their relationships
with either company. These actions may adversely affect PeopleSofts and J.D.
Edwards respective financial conditions and results of operations.

Additionally,
as a consequence of the uncertainty surrounding their roles and the
companies futures, our key employees and those of J.D. Edwards may seek other
employment opportunities. Moreover, the companies ability to attract and
retain new key management, sales, marketing and technical personnel could be
harmed. If key employees leave as a result of the Oracle Offer, or the
companies are unable to attract or retain qualified personnel, there could be a
material adverse effect on the business and the results of operations for
PeopleSoft and J.D. Edwards.

Responding to the Oracle Offer and Oracles other efforts to stop the
completion of the acquisition of J.D. Edwards has been and may continue to be a
major distraction for management of both PeopleSoft and J.D. Edwards and
require both companies to incur significant costs. Management distraction
created by the Oracle Offer may also adversely impact our ability to
successfully plan the integration of the combined company. This distraction
could adversely affect our and J.D. Edwards business and results of operations
and could negatively affect the results of the combined company.

We may not successfully integrate
our and J.D. Edwards business operations. In addition, we may not achieve the anticipated benefits of the merger, which
could adversely affect the price of our common stock.

We entered into the merger agreement with J.D. Edwards with the
expectation that the acquisition would result in benefits to the combined
company. However, these expected benefits may not be fully realized. The
integration of PeopleSofts and J.D. Edwards operations may be difficult, time
consuming and costly, particularly in light of the technical and complex nature
of each companys products. The combined company must successfully integrate,
among other things, certain product and service offerings, product development,
sales and marketing, administrative and customer service functions, and
management information systems. In addition, we must retain the management, key
employees, customers, distributors, vendors and other business partners of both
companies. It is possible that these integration efforts will not be completed
as efficiently as planned or will distract management from the operations of
the combined companys business.

The challenges involved in this integration include the following:

28



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##### 





| |  | managing software development activities to define a combined product roadmap, ensure timely release of innovative products
to market, coordinating software development operations
in an efficient manner to ensure timely development of product
roadmaps, and release of future products to market;
|- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| 
| |  | demonstrating to our existing and potential customers that the business combination will not result in adverse changes in
customer service standards or business focus;                                                                                                                               
| 
| |  | retaining key alliances on attractive terms with partners and suppliers;                                                                                                                                                                                                                              
| 
| |  | coordinating and integrating sales and marketing efforts to effectively communicate the capabilities of the combined
company, cross selling related products to each others
customers, and managing the combined sales forces;                                                                       
| 
| |  | assimilating key employees and managing an increased number of employees over large geographic
distances;                                                                                                                                                                                             
| 
| |  | creating and effectively implementing uniform standards, controls, procedures, policies and information systems; and                                                                                                                                                                                  
| 
| |  | retaining or recruiting key personnel.                                                                                                                                                                                                                                                                

The execution of these post-merger events will involve considerable risks
and may not be successful. These risks include:



| |  | the failure to realize the
anticipated synergies from our combination with J.D. Edwards;                                                                                   
|- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| 
| |  | the potential disruption of the combined companys ongoing business and distraction of its management;                                                                     
| 
| |  | potential delays related to
integration of the operations, technology and other components of the
two companies;                                                           
| 
| |  | the impairment of relationships with suppliers, customers and business partners as a result of any integration
of new management personnel;                                
| 
| |  | the inability to successfully manage the substantially larger and geographically diverse organization;                                                                     
| 
| |  | greater than anticipated costs and expenses related to restructuring, including employee severance or relocation costs and
costs related to vacating leased facilities; and
| 
| |  | potential unknown liabilities
associated with J.D. Edwards, the merger and the combined operations
of the two companies.                                                   

The combined company may not successfully integrate the operations of PeopleSoft and J.D. Edwards in a timely manner, or at all, and
the combined company may not realize the anticipated benefits of the merger to
the extent, or in the timeframe, anticipated, which could significantly harm
our business and have a material adverse effect on the combined company.

Whether or not the merger with J.D. Edwards is completed, the announcement and
completion of the business combination may cause disruptions, including
potential loss of customers, suppliers and other business partners, in the
business of J.D. Edwards or PeopleSoft, which could have material adverse
effects on each companys or the combined companys business and operations.

Whether or not the merger is completed, PeopleSofts and J.D. Edwards
customers, suppliers, distributors, licensors and other business partners, in
response to the announcement of the offer and the merger, may adversely change
or terminate their relationships with either company or the combined company,
which could have a material adverse effect on the business of the company
concerned. Certain of PeopleSofts or J.D. Edwards current or potential
customers may cancel or defer orders for each
companys products. In addition, customers of both companies may expect
preferential pricing as a result of the offer and the merger or the
announcement of the offer and the merger. The announcement of the offer and the
merger may also adversely affect the companies ability to attract new
customers.

Some of the contracts with suppliers, distributors, system integrators,
customers, licensors, facility owners and other business partners require
PeopleSoft or J.D. Edwards to obtain consent from these other parties in
connection with the offer and the merger. If their consent cannot be obtained
on favorable terms, the combined company may incur higher costs related to
replacing suppliers, may suffer a loss of potential future revenue and may lose
rights to facilities or intellectual property that are material to the business
of the combined company.

29



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Our stock price may remain volatile.

The trading price of our common stock has fluctuated significantly in the
past. Changes in our business, operations or prospects, market assessments of the benefits of the merger and of the likelihood
that the merger will be completed, regulatory considerations, general market
and economic conditions, or other factors may affect the price of our common
stock. Many of these factors are beyond our control. The future trading price
of our common stock is likely to be volatile and could be subject to wide price
fluctuations in response to such factors, including:



| |  | the impact of the pending
unsolicited Oracle Offer or any other proposed acquisition of us;                                                                                                                                                                                                                                           
|- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| 
| |  | actual or anticipated fluctuations in revenues or operating results, including revenue or results of operations in any
quarter failing to meet the expectations, published or otherwise, of the investment community;                                                                                                                 
| 
| |  | announcements of technological innovations by us or our competitors;                                                                                                                                                                                                                                                                  
| 
| |  | introduction and success of new products or significant customer wins or losses by us or our competitors;                                                                                                                                                                                                                             
| 
| |  | developments with respect to our intellectual property rights, including patents, or those of our
competitors;                                                                                                                                                                                                                        
| 
| |  | changes in recommendations or financial estimates by securities analysts;                                                                                                                                                                                                                                                             
| 
| |  | fluctuations in demand for and sales of our products, which will depend on, among other things, the
uncertainty regarding success of the merger and operations of the combined company, our customer protection program, the
acceptance of our products in the marketplace and the general level of spending in the software industry;
| 
| |  | rumors or dissemination of false and/or misleading information, particularly through internet chat rooms, instant messaging
and other means;                                                                                                                                                                                          
| 
| |  | changes in management;                                                                                                                                                                                                                                                                                                                
| 
| |  | proposed and completed acquisitions or other significant transactions by us or our competitors;                                                                                                                                                                                                                                       
| 
| |  | introduction and success of new
products or significant customer wins or losses by us or our competitors;                                                                                                                                                                                                                             
| 
| |  | the mix of products and services
sold by us;                                                                                                                                                                                                                                                                                          
| 
| |  | the timing of significant orders by us;                                                                                                                                                                                                                                                                                               
| 
| |  | conditions and trends in the software industry, or consolidation within the technology industry that may impact our
customers, partners, suppliers or competitors;                                                                                                                                                                    
| 
| |  | adoption of new accounting standards affecting the software industry;                                                                                                                                                                                                                                                                 
| 
| |  | acts of war or terrorism; and                                                                                                                                                                                                                                                                                                         
| 
| |  | general market conditions.                                                                                                                                                                                                                                                                                                            

Charges to earnings resulting from the acquisition of J.D. Edwards including
the application of the purchase method of accounting, and restructuring and
integration costs may materially adversely affect the market value of our
common stock.

In accordance with accounting principles generally accepted in the United
States of America (U.S. GAAP), the combined company will account for the
acquisition using the purchase method of accounting. Accordingly, the combined company will
allocate the total estimated purchase price to J.D. Edwards net tangible
assets, amortizable intangible assets, and in-process research and development
based on their fair values as of the date of completion of the merger,and
record the excess of the purchase price over those fair values as goodwill. The
combined companys financial results, including earnings per share, could be
adversely affected by a number of financial adjustments required by U.S. GAAP
including the following:



| |  | The portion of the purchase price allocated to in-process research and
development will be expensed by the combined company in the quarter in
which the merger is completed.
|- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------

30



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| |  | The combined company will incur additional amortization expense over
the estimated useful lives of certain of the intangible assets
acquired in connection with the merger during such estimated useful
lives.                                                                                                                 
|- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| 
| |  | To the extent the value of goodwill becomes impaired, the combined
company may be required to incur material charges relating to the
impairment of those assets.                                                                                                                                                               
| 
| |  | The portion of the existing deferred revenues on J.D. Edwards balance
sheet at the closing of the merger which predominately represents
maintenance revenue will be adjusted, based on estimated cost to
deliver plus an appropriate gross margin and the portion of deferred
maintenance revenue will be recorded as goodwill.

We expect to incur costs associated with combining the operations of the
two companies, including transaction fees and other costs related to the offer
and the merger. These costs may be substantial and may include those related to
the severance and stock option acceleration provisions of J.D. Edwards
management change in control plan, which will result in certain retention
payments after the merger and on the first anniversary of the merger and which
could be triggered by certain actions taken by us after the merger. We also
face potential costs related to employee redeployment or relocation, employee
retention which could include salary increases or bonuses, reorganization or
closure of facilities, relocation and disposition of excess equipment,
termination of contracts with third parties that provide redundant or
conflicting services and other integration costs. We expect to account for these
costs either as purchase related adjustments or as expenses which
will decrease our net income for the periods in which those
adjustments are made.

These
costs may negatively impact earnings, which could have a
material adverse effect on the price of our common stock.

Litigation related to the merger and the Oracle Offer may result in significant
monetary damages or may otherwise negatively impact the business and operation
of PeopleSoft and J.D. Edwards.

On June 6, 2003, Oracle announced that it intended to commence a cash
tender offer to purchase all of the outstanding shares of PeopleSoft. At least
fifteen stockholder lawsuits have been filed against PeopleSoft and certain of
our directors and officers alleging breaches of fiduciary duties by PeopleSoft
and such persons in connection with the Oracle Offer in Delaware and California
state courts. The California stockholder lawsuits have been stayed and a motion
for preliminary injunction has been filed in one of the Delaware stockholder
suits. A purported class action stockholder lawsuit has also been filed against
J.D. Edwards directors and officers in Delaware state court alleging breaches
of fiduciary duty by such persons and seeking, among other remedies, to enjoin
the transactions contemplated by the merger. On June 18, 2003, Oracle filed a
lawsuit against PeopleSoft, the members of our board and J.D. Edwards in the
Delaware Chancery Court. The lawsuit alleges breaches of fiduciary duties
against us and our board and sought to enjoin our tender offer and merger and
to enjoin us from implementing a recently announced customer protection
program. In addition, other potential lawsuits arising out of the Oracle Offer
or the merger could seek to enjoin consummation of the merger or, in the
alternative, to rescind the merger, as well as monetary damages. Fluctuation in
the price of PeopleSoft or J.D. Edwards common stock may also expose each
company to the risk of securities class-action lawsuits. Any conclusion of such
litigation in a manner adverse to PeopleSoft or J.D. Edwards could have a
material adverse effect on each companys businesses, financial condition and
results of operations. In addition, the cost of defending this litigation, even
if resolved favorably, will be substantial. Such litigation could also
substantially divert the attention of management and resources in general.
Furthermore, uncertainties resulting from the initiation and continuation of
any litigation could harm the ability of PeopleSoft and J.D. Edwards to compete
in the marketplace. For a more detailed description of the litigation related
to the merger and the Oracle Offer, see the discussions under
Item 1. Note 10
Commitments and Contingencies and Part II - Item 1. Legal Proceedings.

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

Our revenue and profitability depend on the overall demand for our
software, professional services and maintenance. Regional and global changes
in the economy, governmental budget deficits and political instability in
geographic areas have resulted in companies, government agencies and
educational institutions, reducing their spending for technology projects
generally and delaying or reconsidering potential purchases of our products and
related services. The uncertainty posed by the long-term effects of the war in
the Middle East and other geopolitical issues may impact the purchasing decisions of current or potential
customers. Future declines in demand for our products and/or services could
adversely affect our revenues and operating results.

31



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##### 



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

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



| |  | the impact of the pending Oracle Offer or any other proposed acquisition of us;                                                                                                                                                                  
|- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| 
| |  | our sales cycle can vary as a result of the complexity of a customers overall business needs and may extend over one or
more quarters;                                                                                                          
| 
| |  | the complexity and size of license transactions can result in protracted negotiations;                                                                                                                                                           
| 
| |  | a significant number of our license agreements are typically completed within the last few weeks of the quarter and
purchasing decisions may be delayed to future quarters;                                                                      
| 
| |  | the effect of economic downturns and unstable political conditions may result in decreased product demand, price erosion,
and other factors that may substantially reduce license and services revenue;                                          
| 
| |  | customers may unexpectedly postpone or cancel anticipated system replacement or new system implementation due to changes in
strategic priorities, project objectives, budgetary constraints, internal purchasing processes or company management;
| 
| |  | changes in our competitors and our own pricing policies and discount plans may affect customer purchasing patterns and
decisions;                                                                                                               
| 
| |  | the number, timing and significance of our competitors and our own software product enhancements and new software product
announcements may affect purchasing decisions; and                                                                    
| 
| |  | changes in customers seasonal purchasing patterns may result in imprecise quarterly revenue projections.                                                                                                                                        

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

Our installed customer base has traditionally generated additional new
license, professional service and maintenance revenues. In future periods,
customers may not necessarily license additional products or contract for
additional services or maintenance. Maintenance is generally renewable annually
at a customers option, and there are no mandatory payment obligations or
obligations to license additional software. If our customers decide not to
renew their maintenance agreements or license additional products or contract
for additional services, or if they reduce the scope of the maintenance
agreements, our revenues could decrease and our operating results could be
adversely affected.

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

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



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

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

32



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

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

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

Increases in services revenue as a percentage of total revenues may decrease
overall margins.

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

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

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



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

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

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

33



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If competitors offer more favorable pricing, payment or other contractual
terms, warranties, or functionality which we do not currently provide, we may
need to lower prices or offer other favorable terms in order to successfully
compete.

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

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



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

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

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

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

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

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



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

34



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

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

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

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

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

We currently account for the issuance of stock options under APB Opinion
No. 25, Accounting for Stock Issued to Employees. Certain proposals related
to treating the grant of an employee stock option as an expense are currently
under consideration by accounting standards organizations and governmental
authorities. If such proposals are adopted, the Companys earnings could be
negatively impacted. As a result, we may decide to reduce the number of stock
options granted to employees or to grant options to fewer employees. This
could affect our ability to retain existing employees and attract qualified
candidates, and increase the cash compensation we would have to pay to them.

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

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

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

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

Product software errors could subject us to litigation and liability based
on performance and/or warranty claims. Although our agreements contain
provisions designed to limit our exposure to potential liability claims, these
provisions could be invalidated by unfavorable judicial decisions or by
federal, state, local or foreign laws or regulations. If a claim against us
were to be successful, we might be required to incur significant expense and
pay substantial damages. Even if we were to prevail, the accompanying
publicity could adversely impact the demand for our products.

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

We license software and technology from third parties, including some
competitors, and incorporate it into our own software products, some of which
is critical to the operation of our software. If any of the third party
software vendors were to change product offerings, increase prices or terminate
our licenses, we might need to seek

35



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##### 



alternative vendors and incur additional internal or external development
costs to ensure continued performance of our products. Such alternatives may
not be available on attractive terms, or may not be as widely accepted or as
effective as the software provided by our existing vendors. If the cost of
licensing or maintaining these third party software products or other
technology significantly increases, our gross margin levels could significantly
decrease. In addition, interruption in functionality of our products could
adversely affect future sales of licenses and services.

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

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

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

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

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

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

Third parties may assert infringement claims against us more aggressively
in the future, especially in light of recent developments in patent law
expanding the scope of patents on software and business methods. These
assertions, regardless of their validity, could result in costly and
time-consuming litigation, including damage awards, or could require costly
redesign of products or present the need to enter into royalty arrangements
which would decrease margins and could adversely affect the results of
operations. Any such litigation or redesign of products could also negatively
impact customer confidence in our products and result in reduced licensing
revenue.

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

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

36



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

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

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

Certain provisions of our Certificate of Incorporation and Bylaws could
delay the removal of incumbent directors and could make a merger, tender offer
or proxy contest involving us more difficult, even if such events would be
beneficial to the interests of the stockholders. These provisions include
adoption of a Preferred Shares Rights Agreement, commonly known as a poison
pill and giving our board the ability to issue preferred stock and determine
the rights and designations of the preferred stock at any time without
stockholder approval. The rights of the holders of our common stock will be
subject to, and may be adversely affected by, the rights of the holders of any
preferred stock that may be issued in the future. The issuance of preferred
stock, while providing flexibility in connection with possible acquisitions and
other corporate purposes, could have the effect of making it more difficult for
a third party to acquire, or of discouraging a third party from acquiring, a
majority of our outstanding voting stock. In addition, the staggered terms of
our Board of Directors could have the effect of delaying or deferring a change
in control. One of the conditions of the Oracle Offer is the removal or
amendment of our Rights Agreement and we are currently involved in litigation
with Oracle and purported stockholders of the Company in which the plaintiffs
seek to redeem the Rights issuable under the Rights Plan or to render the
Rights Plan inapplicable to the proposed acquisition of PeopleSoft by Oracle.
To date, our board of directors has not agreed to such removal or amendment.
In addition, certain provisions of the Delaware General Corporation Law (DGCL),
including Section 203 of the DGCL, may have the effect of delaying or
preventing changes in the control or management of PeopleSoft. In its current
litigation, Oracle also seeks to enjoin our board from taking any action to
enforce Section 203 of the DGCL. We can give no assurances as to the ultimate
outcome of such litigation.

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

37



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PART II  OTHER INFORMATION

Item 1. Legal Proceedings



| |                                                            
| | -----------------------------------------------------------
| | PeopleSoft Shareholder Actions  Delaware Court of Chancery



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | On June 6, 2003, Felix Ezeir (Case No. 20349-NC), Teresita Fay
(Case No. 20350-NC), Robert Crescente (Case No. 20351-NC), Robert Corwin
(Case No. 20352-NC) and Ernest Hack (Case No. 20353-NC), all of whom
purport to be stockholders of the Company, each filed a putative
stockholder class action suit in the Delaware Court of Chancery against
the Company and several of its officers and directors. The suits allege
that defendants breached their fiduciary duties in connection with the
Companys response to the tender offer purportedly announced by Oracle
Corporation on June 6, 2003. Plaintiffs in each of the actions seek
injunctive relief and an accounting. On June 10, 2003, an action was
filed in the Delaware Court of Chancery against these same defendants by
Steven Padness (Case No. 20358-NC), making similar allegations and
seeking similar relief. On June 12, 2003, an action was filed in the
Delaware Court of Chancery against these same defendants by Thomas Nemes
(Case No. 20365-NC), making similar allegations and seeking similar
relief (the Nemes Action). The Nemes Action was amended on June 18,
2003, to include allegations and seeking relief similar to those in the
above-referenced actions.



| |                                                                                                                                                                                                                                                                                 
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | On June 25, 2003, on an application filed in the Nemes Action, the
Court consolidated the actions listed above under a single caption and
case number: In re PeopleSoft, Inc. Shareholder Litigation, Consol.
C.A. No. 20365-NC. Defendants filed their Answer on June 25, 2003.



| |                                                                                                                                                                                     
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Document
discovery has commenced in these consolidated actions and
is coordinated with the discovery in the action filed against the
Company by Oracle Corporation, discussed below.



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | On July 2, 2003, Richard Hutchings (Case No. 20403-NC) filed a putative
stockholder class action suit in the Delaware Court of Chancery against
the Company and several of its officers and directors. The suit alleges
that defendants breached their fiduciary duties in connection with the
Companys response to Oracles tender offer purportedly announced on
June 6, 2003. Plaintiff seeks injunctive relief, an accounting and
damages. On July 22, 2003, the Court ordered that this action be
consolidated with the other putative shareholder actions listed above.
On June 27, 2003, Milton Pfeiffer (Case No. 20390-NC), who purports to
be a shareholder of J.D. Edwards, filed a putative class action against
J.D. Edwards and several of its officers and directors, alleging that
defendants breached their fiduciary duties in connection with the
amendment of the merger agreement between J.D. Edwards and the Company.
Plaintiff seeks injunctive relief, an accounting and damages.
Defendants moved to dismiss or stay the action on the grounds, inter
alia, that Pfeiffer is not a proper plaintiff. In response, on July 24,
2003, Pfeiffer amended his complaint, adding as a plaintiff Ward
Quarles, who also purports to be a shareholder of J.D. Edwards. The
amended complaint also adds the Company as a defendant and alleges that
the Company aided and abetted J.D. Edwards and the other defendants in
their alleged breaches of fiduciary duty. The amended complaint seeks
an accounting and damages.



| |                                                                                                                                                                                               
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | The Company believes that the claims and allegations asserted in
each of the foregoing putative class action suits are without merit, and
intends to vigorously defend against these lawsuits.



| |                                                  
| | -------------------------------------------------
| | Oracle v. PeopleSoft  Delaware Court of Chancery



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | On June 18, 2003, Oracle filed a suit in the Delaware Court of
Chancery (Case No. 20377-NC) against the Company, several of the
Companys directors (the Director Defendants), and J.D. Edwards,
alleging that the Director Defendants breached their fiduciary duties in
connection with the Companys response to Oracles tender offer
commenced on June 9 and amended June 18, 2003, and that J.D. Edwards
aided and abetted such directors purported breach of fiduciary duty.
Oracle seeks injunctive, declaratory and rescissory relief. On June 25,
2003, defendants filed their Answer. A hearing on a motion for
preliminary injunction was scheduled for July 16, 2003, but was
postponed upon the request of Oracle. On July 25, 2003, Oracle advised
the Court that, in light of the second request for further information
it received from the antitrust division of the United States Department
of Justice regarding its tender offer, it did not believe it appropriate
to set a hearing date at this time, and requested that the Court

38



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| |                                                                                                                                                                                        
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | allow the parties to report back to it in mid-September of 2003.
Document discovery has commenced and is coordinated with that in the
consolidated shareholder actions described above.



| |                                                                                                                                                       
| | ------------------------------------------------------------------------------------------------------------------------------------------------------
| | The Company believes that the claims and allegations asserted in
this action are without merit, and intends vigorously to defend against
this lawsuit.



| |                                                                                     
| | ------------------------------------------------------------------------------------
| | PeopleSoft Shareholder Actions  California Superior Court for the County of Alameda



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | On June 6, 2003, separate actions were filed in the California
Superior Court for the County of Alameda by Doris Staehr (Case No.
RG03100291), the West Virginia Laborers Pension Trust Fund (Case No.
RG03100306), Lorrie McBride (Case No. RG03100300), and Ray Baldi (Case
No. RG03100696) (collectively the Initial Alameda Shareholder
Actions), all of whom purport to be stockholders of the Company,
against several of the Companys executive officers and directors. The
suits allege that defendants breached their fiduciary duties in
connection with (i) the Companys response to Oracles tender offer
announced on June 6, 2003, (ii) the Companys agreement to acquire J.D.
Edwards & Company, and (iii) the implementation of the 2003 Directors
Stock Plan, which was approved by Company shareholders at the 2003
Annual Meeting. Plaintiffs seek injunctive, rescissory and declaratory
relief. On June 16, 2003, the Initial Alameda Shareholder Actions were
consolidated. On June 11, 2003, two additional actions were filed by
Moshe Panzer (Case No. RG03100876) and Arace Brothers (Case No.
RG03100830) asserting similar claims. By Order dated July 10, 2003, the
Panzer and Arace actions were consolidated with the Initial Alameda
Shareholder Actions (collectively the Alameda Shareholder Actions).



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | By Order dated June 18, 2003, the Alameda County Superior Court
granted the Companys Motion to Stay the Initial Alameda Shareholder
Actions pending resolution of the claims involving the duties of the
defendant directors by the Delaware Court of Chancery. By Order dated
July 10, 2003, the Alameda County Superior Court also stayed the Panzer
and Arace Brothers cases pursuant to the June 18, 2003 Order in the
Initial Alameda Shareholder Actions. Accordingly, all of the Alameda
Shareholder Actions are stayed by order of the Court.



| |                                                                                                                                                                                               
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | The Company believes that the claims and allegations asserted in
each of the foregoing putative class action suits are without merit, and
intends to vigorously defend against these lawsuits.



| |                                                                              
| | -----------------------------------------------------------------------------
| | J.D. Edwards v. Oracle  California
Superior Court in the County of San Mateo



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | On June 12, 2003, J.D. Edwards filed a suit in California Superior
Court in the County of San Mateo against Oracle Corporation and two of
its executives (Case No. CIV 431969) alleging violations of
Californias Business and Professions Code Section 17200 et seq.,
intentional interference with prospective economic advantage and
negligent interference with prospective economic advantage. The suit
seeks compensatory damages and a preliminary and permanent injunction
enjoining defendants from proceeding with Oracles proposed tender
offer, taking or attempting to take any other steps to acquire control
of the Company or J.D. Edwards, and otherwise interfering with the
completion of the proposed merger acquisition of J.D. Edwards by the
Company. Pursuant to the agreement of the parties and stipulated
scheduling orders, discovery is being coordinated with discovery in the
Delaware actions described above. On August 12, 2003, PeopleSoft
announced that it intended to consolidate the J.D. Edwards
actions with PeopleSofts suit against Oracle filed in Alameda
County and that it intended to dismiss Case No. CIV 431969.



| |                                              
| | ---------------------------------------------
| | J.D. Edwards v. Oracle  Colorado State
Court



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | On June 12, 2003, J.D. Edwards filed a suit in Colorado State Court
against Oracle Corporation and its wholly-owned subsidiary, Pepper
Acquisition Corp. (Case No. 03CV4270), alleging claims for tortious
interference with contract and prospective business relations. The suit
seeks, among other things, compensatory damages of $1.8 billion and an
unspecified amount of punitive damages. Oracle has moved to dismiss
this complaint, and a response from J.D. Edwards is due on
August 18,
2003. Pursuant to the agreement of the parties and stipulated
scheduling orders, discovery is being coordinated with discovery in the
Delaware actions described above. On August 12, 2003, PeopleSoft
announced that it intended to consolidate the J.D. Edwards
actions with PeopleSofts suit against Oracle filed in Alameda
County and that it intended to dismiss Case No. 03CV4270.

39



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| |                                                                           
| | --------------------------------------------------------------------------
| | PeopleSoft v. Oracle  California Superior Court for the County of Alameda



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | On June 13, 2003, the Company filed a suit in the California
Superior Court for the County of Alameda against Oracle Corporation and
Pepper Acquisition Corp. (Case No. RG03101434). The Company alleges
that, in connection with Oracles proposed tender offer, the defendants
have engaged in: (i) unfair trade practices in violation of
Californias Business and Professions Code; (ii) acts of unlawful
interference with the Companys contracts with its customers; (iii) acts
of unlawful interference with the Companys relationships with its
prospective customers; and (iv) acts of unlawful disparagement of the
Companys products and services. The Company seeks an injunction
precluding defendants unfair trade practices and other unlawful
actions, and prohibiting the defendants from proceeding further with the
tender offer. The Company also requests restitution and damages. On
August 12, 2003, the Company filed an amended complaint,
portions of which have been filed with the court under seal, alleging
extensive new facts about Oracle managements ongoing acts of
unfair trade practices, including its efforts to disrupt
PeopleSofts customer relationships. The complaint also alleges
new information concerning Oracles deliberate campaign to
mislead PeopleSoft customers about Oracles plans to support
PeopleSoft products. In addition, the complaint incorporates claims
of interference with customers of J.D. Edwards. The Company has
announced that it intends to consolidate the two companies
claims against Oracle and Pepper Acquisition Corp. into a single
lawsuit and, therefore, will voluntarily dismiss J.D. Edwards
previously filed lawsuits in Colorado and San Mateo County,
California. The complaint continues to seek injunctive relief,
restitution and damages, including damage caused to J.D. Edwards.
Under a stipulated court order in the Delaware case, the parties are
conducting discovery related to this action in the Delaware case so
as to allow for overall coordinated discovery. PeopleSoft has
recently served additional discovery related to the claims in this
case. PeopleSoft has advised the court in Delaware that if Oracle
opposes the scope or timing of the discovery. PeopleSoft will seek
to have the court order revised to allow discovery in this case to
proceed separately under the supervision of the Alameda County
Superior Court.



| |              
| | -------------
| | Other Matters



| |                                                                                                                                                                                                                                                                                                                                                                                                                      
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | We are party to various legal disputes and proceedings arising
during the ordinary course of business. In the opinion of management,
resolution of these matters is not expected to have a material adverse
effect on our financial position, results of operations and cash flows.
An unfavorable resolution of some or all of these matters could
materially affect our future results of operations or cash flows.

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



| | (a) |  | The Company held its Annual Meeting of Stockholders on May
27, 2003.                                                                                                                                                                                                                                                                
| | --- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | (b) |  | David A. Duffield, Aneel Bhusri, and Steven D. Goldby were
each elected as Class I directors for a term of two years. A.
George Skip Battle, Craig A. Conway, Frank J Fanzilli Jr. and
Cyril J. Yansouni were each elected at the prior years annual
meeting for a term of two years and continue to serve as Class II
directors.
|
| | (c) |  | The Companys stockholders voted on the following matters:                                                                                                                                                                                                                                                                          
|

| | (i) |  | Election of three directors. All directors
nominated by management were elected.
| | --- |  | --------------------------------------------------------------------------------

|                  |  |                 |             |           |  |  |            | 
|----------------- |  | --------------- | ----------- | --------- |  |  | ---------- | 
|                  |  | Number of Votes |             | Authority
|Name of Nominee   |  | For             |             | Withheld 
|                  |  |                 |             |          
|David A. Duffield |  |                 | 274,852,119 |           |  |  | 4,487,429  | 
|Aneel Bhusri      |  |                 | 274,717,748 |           |  |  | 4,621,800  | 
|Steven D. Goldby  |  |                 | 264,576,667 |           |  |  | 14,762,881 | 



| | (ii) |  | Approval of the adoption of the PeopleSoft,
Inc. 2003 Directors Stock Plan, an equity incentive plan for
non-employee members of the Board of Directors authorizing
the issuance of up to 2,000,000 shares of common stock.
| | ---- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

40



---



##### 



|                |  |                 |             |           |  |  |           | 
|--------------- |  | --------------- | ----------- | --------- |  |  | --------- | 
|Number of Votes |  | Number of Votes |             | Authority
|For             |  | Against         |             | Withheld 
|                |  |                 |             |          
|154,678,740     |  |                 | 123,005,356 |           |  |  | 1,655,452 | 



| | (iii) |  | Ratification of the appointment of KPMG LLP as
independent auditors of the Company for the year ending
December 31, 2003.
| | ----- |  | -------------------------------------------------------------------------------------------------------------------------

|                |  |                 |           |           |  |  |           | 
|--------------- |  | --------------- | --------- | --------- |  |  | --------- | 
|Number of Votes |  | Number of Votes |           | Authority
|For             |  | Against         |           | Withheld 
|                |  |                 |           |          
|269,867,144     |  |                 | 7,938,730 |           |  |  | 1,533,674 | 



| | (iv) |  | Approval of a proposal urging the board of
directors to adopt a policy that the cost of employee stock
options be recognized in PeopleSofts income statement.
| | ---- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------

|                |  |                 |             |           |  |       |           |  |  |  |            | 
|--------------- |  | --------------- | ----------- | --------- |  | ----- | --------- |  |  |  | ---------- | 
|Number of Votes |  | Number of Votes |             | Authority |  | Non- 
|For             |  | Against         |             | Withheld  |  | Votes
|                |  |                 |             |           |  |      
|110,237,740     |  |                 | 120,372,483 |           |  |       | 5,473,968 |  |  |  | 43,255,357 | 

Item 5. Other Information



| | None.
| | -----

Item 6. Exhibits and Reports on
Form 8 - K



| | (a) | Exhibits
| | --- | --------

|     |  |                                                                                                                                                                                                                                                                                                                                                                                           
|---- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|2.1  |  | Amended and Restated Agreement and Plan of Merger
and Reorganization, dated as of June 16, 2003, by and among
PeopleSoft, Inc., J.D. Edwards & Company and Jersey
Acquisition Corporation (incorporated by reference to Exhibit
2.1 filed with PeopleSoft, Inc.s Registration Statement on
Form S-4 (No. 333-106269) filed with the Securities and
Exchange Commission on June 19, 2003).
|     |  |                                                                                                                                                                                                                                                                                                                                                                                           
|3.1  |  | Amended and Restated Bylaws of PeopleSoft, Inc. dated July 18, 2003.                                                                                                                                                                                                                                                                                                                      
|     |  |                                                                                                                                                                                                                                                                                                                                                                                           
|10.1 |  | Executive Severance Policy - Executive Vice
Presidents effective as of January 1, 2003.                                                                                                                                                                                                                                                                                                   
|     |  |                                                                                                                                                                                                                                                                                                                                                                                           
|10.2 |  | Executive Severance Policy - Senior Vice
Presidents effective as of January 1, 2003.                                                                                                                                                                                                                                                                                                      
|     |  |                                                                                                                                                                                                                                                                                                                                                                                           
|31.1 |  | Certification by the Chief Executive Officer
Pursuant to Rule 13a-14(a)/15d-14(a) under the Securities
Exchange Act of 1934 as adopted pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.                                                                                                                                                                                         
|     |  |                                                                                                                                                                                                                                                                                                                                                                                           
|31.2 |  | Certification by the Chief Financial Officer
Pursuant to Rule 13a-14(a)/15d-14(a) under the Securities
Exchange Act of 1934 as adopted pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.                                                                                                                                                                                         

41



---



##### 



|     |  |                                                                                                                                                                                       
|---- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|32.1 |  | Certification by the Chief Executive Officer and
the Chief Financial Officer Pursuant to 18 U.S.C. Section
1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002.



| | (b) |  | Reports on Form 8-K
| | --- |  | -------------------

|      |  |                                                                                                                                                                                                                                                                                                                                                                                                                          
|----- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(i)   |  | The Company filed a current report on Form 8-K on
April 4, 2003 and reported that it had issued a press release
announcing preliminary first quarter earnings results.                                                                                                                                                                                                                                                   
|      |  |                                                                                                                                                                                                                                                                                                                                                                                                                          
|(ii)  |  | The Company filed a current report on Form 8-K on
April 23, 2003 and reported that it had issued a press release
announcing its first quarter earnings results.                                                                                                                                                                                                                                                          
|      |  |                                                                                                                                                                                                                                                                                                                                                                                                                          
|(iii) |  | The Company filed a current report on Form 8-K on
June 2, 2003 and reported that it had issued a press release
announcing that it had entered into an Agreement and Plan of
Merger (the Merger Agreement), dated as of June 1, 2003, with
J.D. Edwards & Company, a Delaware corporation, and Jersey
Acquisition Corporation, a Delaware corporation and a
wholly-owned subsidiary of PeopleSoft.                      
|      |  |                                                                                                                                                                                                                                                                                                                                                                                                                          
|(iv)  |  | The Company filed a current report on Form 8-K on
June 12, 2003 and reported that it had issued a press release
announcing that it had filed notification with the U.S.
Department of Justice and the Federal Trade Commission of its
intention to acquire J.D. Edwards & Company (NASDAQ: JDEC), in
compliance with the Premerger Notification requirements of the
Hart-Scott-Rodino Antitrust Improvements Act of 1976.

42



---



##### 



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.

Date: August 13, 2003

| |  |                  |  |                                                                                                                                           
| |  | ---------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------
| |  | PEOPLESOFT, INC.
| |  |                  |  |                                                                                                                                           
| |  | By:              |  | /s/ KEVIN T. PARKER                                                                                                                       
| |  |                  |  |                                                                                                                                           
| |  |                  |  | Kevin T. Parker
Executive Vice President,
Finance and Administration, Chief Financial Officer
(Principal Financial and Accounting Officer)

43



---



##### 



INDEX TO EXHIBITS

|               |  |                                                                                                                                                                                                                                                                                                                                                                                           
|-------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit Number |  | Description                                                                                                                                                                                                                                                                                                                                                                               
|               |  |                                                                                                                                                                                                                                                                                                                                                                                           
|2.1            |  | Amended and Restated Agreement and Plan of Merger and Reorganization,
dated as of June 16, 2003, by and among PeopleSoft, Inc., J.D.
Edwards & Company and Jersey Acquisition Corporation (incorporated by reference to
Exhibit 2.1 filed with PeopleSoft, Inc.s Registration Statement on Form
S-4 (No. 333-106269) filed with the Securities and Exchange Commission on
June 19, 2003).
|               |  |                                                                                                                                                                                                                                                                                                                                                                                           
|3.1            |  | Amended and Restated Bylaws of PeopleSoft, Inc. dated July 18, 2003.                                                                                                                                                                                                                                                                                                                      
|               |  |                                                                                                                                                                                                                                                                                                                                                                                           
|10.1           |  | Executive Severance Policy - Executive Vice Presidents effective as of
January 1, 2003.                                                                                                                                                                                                                                                                                                   
|               |  |                                                                                                                                                                                                                                                                                                                                                                                           
|10.2           |  | Executive Severance Policy - Senior Vice Presidents effective as of
January 1, 2003.                                                                                                                                                                                                                                                                                                      
|               |  |                                                                                                                                                                                                                                                                                                                                                                                           
|31.1           |  | Certification by the Chief Executive Officer Pursuant to Rule
13a-14(a)/15d-14(a) under the Securities Exchange Act of 1934 as adopted
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                         
|               |  |                                                                                                                                                                                                                                                                                                                                                                                           
|31.2           |  | Certification by the Chief Financial Officer Pursuant to Rule
13a-14(a)/15d-14(a) under the Securities Exchange Act of 1934 as adopted
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                         
|              
|32.1           |  | Certification by the Chief Executive Officer and the Chief Financial
Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section
906 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                    

44