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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 March 31, 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 May 9, 2003, the Registrant had 316,583,870 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 March 31, 2003 and December 31, 2002                             |  | 2 
|                            |  | Condensed Consolidated Statements of Operations for the Three Months Ended
March 31, 2003 and March 31, 2002 |  | 3 
|                            |  | Condensed Consolidated Statements of Cash Flows for the Three Months Ended
March 31, 2003 and March 31, 2002 |  | 4 
|                            |  | Notes to Condensed Consolidated Financial Statements                                                         |  | 5 
|Item 2.                     |  | Managements Discussion and Analysis of Financial Condition and Results of Operations                        |  | 11
|Item 3.                     |  | Quantitative and Qualitative Disclosures About Market Risk                                                   |  | 17
|Item 4.                     |  | Controls and Procedures                                                                                      |  | 19
|PART II
 OTHER INFORMATION
|Item 1.                     |  | Legal Proceedings                                                                                            |  | 27
|Item 2.                     |  | Changes in Securities and Use of Proceeds                                                                    |  | 27
|Item 3.                     |  | Defaults Upon Senior Securities                                                                              |  | 27
|Item 4.                     |  | Submission of Matters to a Vote of Security Holders                                                          |  | 27
|Item 5.                     |  | Other Information                                                                                            |  | 27
|Item 6.                     |  | Exhibits and Reports on Form 8-K                                                                             |  | 27
|SIGNATURES                  |  | 28                                                                                                          
|CERTIFICATIONS              |  | 29                                                                                                          

1



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PART I  FINANCIAL INFORMATION

ITEM 1  CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


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

|                                          |                                           |                                            |         |           |                |  |                   |           |           |  | 
|----------------------------------------- | ----------------------------------------- | ------------------------------------------ | ------- | --------- | -------------- |  | ----------------- | --------- | --------- |  | 
|                                          |                                           |                                            |         |           | March 31, 2003 |  | December 31, 2002
|                                          |                                           |                                            |         |           |                |  |                  
|                                          |                                           |                                            | ASSETS  |           |                |  |                   |           |           |  | 
|Current assets:                           |                                           |                                            |         |           |                |  |                   |          
|                                          | Cash and cash equivalents                 |                                            | $       | 239,031   |                |  | $                 | 319,344   |          
|                                          | Short-term investments                    |                                            |         | 1,693,811 |                |  |                   | 1,588,172 |          
|                                          | Accounts receivable, net                  |                                            |         | 313,450   |                |  |                   | 357,353   |          
|                                          | Deferred tax assets                       |                                            |         | 39,944    |                |  |                   | 40,559    |          
|                                          | Prepaid and other current assets          |                                            |         | 47,615    |                |  |                   | 45,448    |          
|                                          |                                           |                                            |         |           |                |  |                   |          
|                                          |                                           | Total current assets                       |         |           | 2,333,851      |  |                   |           | 2,350,876 | 
|Property and equipment, net               |                                           |                                            | 288,135 |           |                |  | 222,800           |          
|Investments                               |                                           |                                            | 19,732  |           |                |  | 21,946            |          
|Deferred tax assets                       |                                           |                                            | 142,953 |           |                |  | 149,187           |          
|Capitalized software, net                 |                                           |                                            | 39,890  |           |                |  | 44,101            |          
|Goodwill                                  |                                           |                                            | 54,366  |           |                |  | 54,294            |          
|Other assets                              |                                           |                                            | 5,068   |           |                |  | 5,359             |          
|                                          |                                           |                                            |         |           |                |  |                   |          
|                                          |                                           | Total assets                               |         | $         | 2,883,995      |  |                   | $         | 2,848,563 | 
|                                          |                                           |                                            |         |           |                |  |                   |          
|                                          |                                           | LIABILITIES AND STOCKHOLDERS EQUITY       |         |           |                |  |                   |           |           | 
|Current liabilities:                      |                                           |                                            |         |           |                |  |                   |          
|                                          | Accounts payable                          |                                            | $       | 23,728    |                |  | $                 | 23,356    |          
|                                          | Accrued liabilities                       |                                            |         | 95,031    |                |  |                   | 109,331   |          
|                                          | Accrued compensation and related expenses |                                            |         | 133,179   |                |  |                   | 172,566   |          
|                                          | Income taxes payable                      |                                            |         | 31,174    |                |  |                   | 48,095    |          
|                                          | Short-term deferred revenues              |                                            |         | 455,820   |                |  |                   | 422,657   |          
|                                          |                                           |                                            |         |           |                |  |                   |          
|                                          |                                           | Total current liabilities                  |         |           | 738,932        |  |                   |           | 776,005   | 
|Long-term deferred revenues               |                                           |                                            | 88,253  |           |                |  | 95,460            |          
|Other liabilities                         |                                           |                                            | 22,086  |           |                |  | 21,486            |          
|                                          |                                           |                                            |         |           |                |  |                   |          
|                                          |                                           | Total liabilities                          |         |           | 849,271        |  |                   |           | 892,951   | 
|                                          |                                           |                                            |         |           |                |  |                   |          
|Commitments and contingencies (see notes) |                                           |                                            |         |           |                |  |                   |          
|                                          |                                           |                                            |         |           |                |  |                   |          
|Stockholders equity:                     |                                           |                                            |         |           |                |  |                   |          
|                                          | Common stock                              |                                            |         | 3,176     |                |  |                   | 3,150     |          
|                                          | Additional paid-in capital                |                                            |         | 1,416,744 |                |  |                   | 1,382,442 |          
|                                          | Retained earnings                         |                                            |         | 638,282   |                |  |                   | 599,803   |          
|                                          | Treasury stock                            |                                            |         | (35,654   | )              |  |                   | (35,563   | )        
|                                          | Accumulated other comprehensive income    |                                            |         | 12,176    |                |  |                   | 5,780     |          
|                                          |                                           |                                            |         |           |                |  |                   |          
|                                          |                                           | Total stockholders equity                 |         |           | 2,034,724      |  |                   |           | 1,955,612 | 
|                                          |                                           |                                            |         |           |                |  |                   |          
|                                          |                                           | Total liabilities and stockholders equity |         | $         | 2,883,995      |  |                   | $         | 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 March 31,
|                                                    |                                              |                          |         |                             
|                                                    |                                              |                          |         | 2003                         |         | 2002
|                                                    |                                              |                          |         |                              |         |     
|Revenues:                                           |                                              |                          |         |                              |         |      |         |        
|                                                    | License fees                                 |                          | $       | 80,841                       |         |      | $       | 133,290 |        
|                                                   
|                                                    | Maintenance revenue                          |                          |         | 199,921                      |         |      |         | 164,573 |        
|                                                    | Professional services revenue                |                          |         | 179,494                      |         |      |         | 177,874 |        
|                                                    |                                              |                          |         |                              |         |      |         |        
|                                                    |                                              | Services revenue         |         |                              | 379,415 |      |         |         | 342,447 | 
|                                                    | Development and other services               |                          |         |                             |         |      |         | 7,530   |        
|                                                    |                                              |                          |         |                              |         |      |         |        
|                                                    |                                              | Total revenues           |         |                              | 460,256 |      |         |         | 483,267 | 
|Costs and expenses:                                 |                                              |                          |         |                              |         |      |         |        
|                                                    | Cost of license fees                         |                          |         | 8,726                        |         |      |         | 11,437  |        
|                                                    | Cost of services                             |                          |         | 163,469                      |         |      |         | 164,530 |        
|                                                    | Cost of development and other services       |                          |         |                             |         |      |         | 6,755   |        
|                                                    | Sales and marketing expense                  |                          |         | 119,558                      |         |      |         | 124,570 |        
|                                                    | Product development expense                  |                          |         | 83,705                       |         |      |         | 82,333  |        
|                                                    | General and administrative expense           |                          |         | 33,015                       |         |      |         | 30,246  |        
|                                                    | Restructuring, acquisition and other charges |                          |         |                             |         |      |         | 2,800   |        
|                                                    |                                              |                          |         |                              |         |      |         |        
|                                                    |                                              | Total costs and expenses |         |                              | 408,473 |      |         |         | 422,671 | 
|                                                    |                                              |                          |         |                              |         |      |         |        
|Operating income                                    |                                              |                          | 51,783  |                              |         |      | 60,596  |        
|Other income, net                                   |                                              |                          | 6,966   |                              |         |      | 7,239   |        
|                                                    |                                              |                          |         |                              |         |      |         |        
|Income before provision for income taxes            |                                              |                          | 58,749  |                              |         |      | 67,835  |        
|Provision for income taxes                          |                                              |                          | 20,270  |                              |         |      | 23,291  |        
|                                                    |                                              |                          |         |                              |         |      |         |        
|Net income                                          |                                              | $                        | 38,479  |                              |         | $    | 44,544  |        
|                                                    |                                              |                          |         |                              |         |      |         |        
|Basic income per share                              |                                              | $                        | 0.12    |                              |         | $    | 0.14    |        
|Diluted income per share                            |                                              | $                        | 0.12    |                              |         | $    | 0.14    |        
|Shares used in basic income per share computation   |                                              |                          | 314,782 |                              |         |      | 307,990 |        
|Shares used in diluted income per share computation |                                              |                          | 319,831 |                              |         |      | 325,865 |        

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)

|                                                                                  |                            |                                                                              |                                           |        |                              |         |            |       |          |         |  
|--------------------------------------------------------------------------------- | -------------------------- | ---------------------------------------------------------------------------- | ----------------------------------------- | ------ | ---------------------------- | ------- | ---------- | ----- | -------- | ------- | -
|                                                                                  |                            |                                                                              |                                           |        | Three Months Ended March 31,
|                                                                                  |                            |                                                                              |                                           |        |                             
|                                                                                  |                            |                                                                              |                                           |        | 2003                         |         | 2002      
|                                                                                  |                            |                                                                              |                                           |        |                              |         |           
|Operating activities:                                                             |                            |                                                                              |                                           |        |                              |         |            |      
|Net income                                                                        |                            | $                                                                            | 38,479                                    |        |                              | $       | 44,544     |      
|Adjustments to reconcile net income to net cash
provided by operating activities: |                            |                                                                              |                                           |        |                              |         |            |      
|                                                                                  |                            | Depreciation and amortization                                                |                                           |        | 26,884                       |         |            |       | 22,231   |        
|                                                                                  |                            | Provision for doubtful accounts                                              |                                           |        | 3,780                        |         |            |       | 2,037    |        
|                                                                                  |                            | Tax benefits from employee stock transactions                                |                                           |        | 1,956                        |         |            |       | 14,515   |        
|                                                                                  |                            | Provision (benefit) for deferred income taxes                                |                                           |        | 6,562                        |         |            |       | (643     | )      
|                                                                                  |                            | Gain on sales of investments and disposition of property and
equipment, net  |                                           |        | (649                         | )       |            |       | (1,373   | )      
|                                                                                  |                            | Non-cash stock compensation                                                  |                                           |        | 2,304                        |         |            |       | 1,569    |        
|                                                                                  |                            | Restructuring, acquisition and other charges                                 |                                           |        |                             |         |            |       | 2,800    |        
|                                                                                  |                            | Changes in operating assets and liabilities, net of effects of acquisitions: |                                           |        |                              |         |            |       |          |        
|                                                                                  |                            |                                                                              | Accounts receivable                       |        |                              | 41,742  |            |       |          | 60,382  |  
|                                                                                  |                            |                                                                              | Accounts payable and accrued liabilities  |        |                              | (11,509 | )          |       |          | 3,885   |  
|                                                                                  |                            |                                                                              | Accrued compensation and related expenses |        |                              | (39,701 | )          |       |          | (33,420 | )
|                                                                                  |                            |                                                                              | Income taxes, net                         |        |                              | (16,698 | )          |       |          | 5,258   |  
|                                                                                  |                            |                                                                              | Deferred revenues                         |        |                              | 21,015  |            |       |          | 17,057  |  
|                                                                                  |                            |                                                                              | Other                                     |        |                              | 584     |            |       |          | 1,976   |  
|                                                                                  |                            |                                                                              |                                           |        |                              |         |            |      
|                                                                                  |                            | Net cash provided by operating activities                                    |                                           |        | 74,749                       |         |            |       | 140,818  |        
|                                                                                 
|Investing activities:                                                             |                            |                                                                              |                                           |        |                              |         |            |      
|Purchase of available-for-sale investments                                        |                            |                                                                              | (3,226,843                                | )      |                              |         | (2,373,033 | )    
|Proceeds from maturities and sales of available-for-sale investments              |                            |                                                                              | 3,123,799                                 |        |                              |         | 2,267,094  |      
|Purchase of property and equipment                                                |                            |                                                                              | (86,695                                   | )      |                              |         | (22,418    | )    
|Acquisitions, net of cash acquired                                                |                            |                                                                              |                                          |        |                              |         | (29,999    | )    
|                                                                                  |                            |                                                                              |                                           |        |                              |         |            |      
|                                                                                  |                            | Net cash used in investing activities                                        |                                           |        | (189,739                     | )       |            |       | (158,356 | )      
|                                                                                 
|Financing activities:                                                             |                            |                                                                              |                                           |        |                              |         |            |      
|Proceeds from employee stock transactions                                         |                            |                                                                              | 30,068                                    |        |                              |         | 63,732     |      
|                                                                                  |                            |                                                                              |                                           |        |                              |         |            |      
|                                                                                  |                            | Net cash provided by financing activities                                    |                                           |        | 30,068                       |         |            |       | 63,732   |        
|Effect of foreign exchange rate changes on cash and cash equivalents              |                            |                                                                              | 4,609                                     |        |                              |         | (1,730     | )    
|                                                                                  |                            |                                                                              |                                           |        |                              |         |            |      
|Net (decrease) increase in cash and cash equivalents                              |                            |                                                                              | (80,313                                   | )      |                              |         | 44,464     |      
|Cash and cash equivalents at beginning of period                                  |                            |                                                                              | 319,344                                   |        |                              |         | 433,700    |      
|                                                                                  |                            |                                                                              |                                           |        |                              |         |            |      
|Cash and cash equivalents at end of period                                        |                            | $                                                                            | 239,031                                   |        |                              | $       | 478,164    |      
|                                                                                  |                            |                                                                              |                                           |        |                              |         |            |      
|Supplemental disclosures:                                                         |                            |                                                                              |                                           |        |                              |         |            |      
|                                                                                  | Cash paid for interest     |                                                                              | $                                         | 58     |                              |         | $          | 1,562 |         
|                                                                                  | Cash paid for income taxes |                                                                              | $                                         | 28,675 |                              |         | $          | 4,473 |         

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 months ended March 31,
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 reported amounts. Actual results
may differ from the Companys estimates.

The 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, the 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. Certain prior period amounts
have been reclassified to conform to the current period presentation.

2.     Per Share Data

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 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 March 31,
|                         |                                                                                        |   |                             
|                         |                                                                                        |   | 2003                         |         | 2002
|                         |                                                                                        |   |                              |         |     
|Numerator:               |                                                                                        |   |                              |         |      |   |      |        
|                         | Net income                                                                             |   | $                            | 38,479  |      |   | $    | 44,544  | 
|Denominator:             |                                                                                        |   |                              |         |      |   |      |        
|                         | Denominator for basic income per share -                                               |   |                              |         |      |   |      |         | 
|                         | Weighted average shares outstanding                                                    |   |                              | 314,782 |      |   |      | 307,990 | 
|                         | Employee stock options and other                                                       |   |                              | 5,049   |      |   |      | 17,875  | 
|                         |                                                                                        |   |                              |         |      |   |      |        
|                         | Denominator for diluted income per share -                                             |   |                              |         |      |   |      |         | 
|                         | Weighted average shares outstanding, assuming
exercise      of potential common shares |   |                              | 319,831 |      |   |      | 325,865 | 
|                         |                                                                                        |   |                              |         |      |   |      |        
|Basic income per share   |                                                                                        | $ | 0.12                         |         |      | $ | 0.14 |        
|Diluted income per share |                                                                                        | $ | 0.12                         |         |      | $ | 0.14 |        

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):

5



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|                                      |  |                              |      |      |  |  |      | 
|------------------------------------- |  | ---------------------------- | ---- | ---- |  |  | ---- | 
|                                      |  | Three Months Ended March 31,
|                                      |  |                             
|                                      |  | 2003                         |      | 2002
|                                      |  |                              |      |     
|Employee stock options outstanding    |  |                              | 44.5 |      |  |  | 12.3 | 
|Unvested restricted stock             |  |                              | 0.8  |      |  |  |     | 
|Shares issuable from convertible debt |  |                              |     |      |  |  | 1.1  | 
|                                      |  |                              |      |      |  |  |      | 
|Total shares excluded                 |  |                              | 45.3 |      |  |  | 13.4 | 
|                                      |  |                              |      |      |  |  |      | 

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 March 31, 2003 and 2002 were $27.89 and $37.67 per
share.

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 months ended March 31, 2003 and 2002 (in
thousands, except per share amounts).

|                                |             |                                                                                                      |        |                              |         |      |        |      |         |  
|------------------------------- | ----------- | ---------------------------------------------------------------------------------------------------- | ------ | ---------------------------- | ------- | ---- | ------ | ---- | ------- | -
|                                |             |                                                                                                      |        | Three Months Ended March 31,
|                                |             |                                                                                                      |        |                             
|                                |             |                                                                                                      |        | 2003                         |         | 2002
|                                |             |                                                                                                      |        |                              |         |     
|Net income, as reported         |             | $                                                                                                    | 38,479 |                              |         | $    | 44,544 |     
|                                |             | Add: Stock-based employee compensation expense
included in reported net income, net of tax           |        |                              | 2,020   |      |        |      | 1,409   |  
|                                |             | Deduct: Stock-based employee compensation
expense determined under the fair value method,
net of tax |        |                              | (40,902 | )    |        |      | (37,864 | )
|                                |             |                                                                                                      |        |                              |         |      |        |     
|Pro forma net (loss) income     |             | $                                                                                                    | (403   | )                            |         | $    | 8,089  |     
|                                |             |                                                                                                      |        |                              |         |      |        |     
|Basic (loss) income per share   |             |                                                                                                      |        |                              |         |      |        |     
|                                | As reported |                                                                                                      | $      | 0.12                         |         |      | $      | 0.14 |        
|                                | Pro forma   |                                                                                                      | $      | 0.00                         |         |      | $      | 0.03 |        
|Diluted (loss) income per share |             |                                                                                                      |        |                              |         |      |        |     
|                                | As reported |                                                                                                      | $      | 0.12                         |         |      | $      | 0.14 |        
|                                | Pro forma   |                                                                                                      | $      | 0.00                         |         |      | $      | 0.03 |        

4.     Comprehensive Income

Comprehensive income includes unrealized gains or losses and foreign
currency translation gains or losses which are reflected as a component of
stockholders equity. The components of comprehensive income, net of tax, were
as follows (in thousands):

|                                   |                                                       |                                                                       |        |                              |       |      |        |        |       | 
|---------------------------------- | ----------------------------------------------------- | --------------------------------------------------------------------- | ------ | ---------------------------- | ----- | ---- | ------ | ------ | ----- | 
|                                   |                                                       |                                                                       |        | Three Months Ended March 31,
|                                   |                                                       |                                                                       |        |                             
|                                   |                                                       |                                                                       |        | 2003                         |       | 2002
|                                   |                                                       |                                                                       |        |                              |       |     
|Net income                         |                                                       | $                                                                     | 38,479 |                              |       | $    | 44,544 |       
|Other comprehensive income (loss): |                                                       |                                                                       |        |                              |       |      |        |       
|                                   | Net unrealized loss on available-for-sale investments |                                                                       |        | (579                         | )     |      |        | (365   | )    
|                                   | Foreign currency translation adjustments              |                                                                       |        | 5,798                        |       |      |        | (1,781 | )    
|                                   | Interest rate swap transactions:                      |                                                                       |        |                              |       |      |        |        |      
|                                   |                                                       | Net unrealized (loss) gain on cash flow hedges                        |        |                              | (58   | )    |        |        | 128   | 
|                                   |                                                       | Reclassification adjustment for earnings
recognized
during the period |        |                              | 1,235 |      |        |        | 1,272 | 
|                                   |                                                       |                                                                       |        |                              |       |      |        |       
|Comprehensive income               |                                                       | $                                                                     | 44,875 |                              |       | $    | 43,798 |       
|                                   |                                                       |                                                                       |        |                              |       |      |        |       

5.     Derivative Financial Instruments

Derivative financial instruments are utilized by the Company to reduce
foreign currency exchange and interest rate risks. Derivative financial
instruments are restricted to foreign currency hedges and interest rate swaps.
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 in the accompanying condensed
consolidated statements of operations.

During the three months ended March 31, 2003 and 2002, the Company
recorded net foreign currency losses of $0.2 million and $0.5 million. At March
31, 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 March 31, 2003.

6



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At March 31, 2003, the Company had the following outstanding forward
foreign exchange contracts to exchange foreign currency for U.S. dollars (in
millions):

|                    |  |          |      | 
|------------------- |  | -------- | ---- | 
|                    |  | Notional
|Functional Currency |  | Amount  
|                    |  |         
|Euros               |  | $        | 12.7 | 
|Singapore dollars   |  |          | 8.4  | 
|Canadian dollars    |  |          | 2.3  | 
|Chilean pesos       |  |          | 0.7  | 
|Australian dollars  |  |          | 0.6  | 
|Taiwanese dollars   |  |          | 0.4  | 
|                    |  |          |      | 
|                    |  | $        | 25.1 | 
|                    |  |          |      | 

At March 31, 2003, the Company had the following outstanding forward
foreign exchange contracts to exchange U.S. dollars for foreign currency (in
millions):

|                    |  |          |     | 
|------------------- |  | -------- | --- | 
|                    |  | Notional
|Functional Currency |  | Amount  
|                    |  |         
|British pounds      |  | $        | 1.4 | 
|Japanese yen        |  |          | 0.8 | 
|Swiss francs        |  |          | 0.7 | 
|Swedish krona       |  |          | 0.4 | 
|South African rand  |  |          | 0.4 | 
|                    |  |          |     | 
|                    |  | $        | 3.7 | 
|                    |  |          |     | 

At March 31, 2002, the Company had the following outstanding forward
foreign exchange contracts to exchange foreign currency for U.S. dollars (in
millions):

|                    |  |          |      | 
|------------------- |  | -------- | ---- | 
|                    |  | Notional
|Functional Currency |  | Amount  
|                    |  |         
|Hong Kong dollars   |  | $        | 6.2  | 
|Singapore dollars   |  |          | 5.4  | 
|Australian dollars  |  |          | 0.4  | 
|Chilean pesos       |  |          | 0.3  | 
|Canadian dollars    |  |          | 0.2  | 
|                    |  |          |      | 
|                    |  | $        | 12.5 | 
|                    |  |          |      | 

At March 31, 2002, the Company had the following outstanding forward
foreign exchange contracts to exchange U.S. dollars for foreign currency (in
millions):

|                    |  |          |     | 
|------------------- |  | -------- | --- | 
|                    |  | Notional
|Functional Currency |  | Amount  
|                    |  |         
|Euros               |  | $        | 2.3 | 
|South African rand  |  |          | 2.2 | 
|British pounds      |  |          | 1.0 | 
|Swiss francs        |  |          | 0.7 | 
|                    |  |          |     | 
|                    |  | $        | 6.2 | 
|                    |  |          |     | 

Interest Rate Swap Transactions

The Company utilizes interest rate swap transactions to manage its
exposure to interest rate changes on its remaining synthetic lease obligation.
At March 31, 2003, the swaps had an aggregate notional amount of $105.0
million. The swaps mature in September 2003, consistent with the maturity date
of the related synthetic lease. Under these agreements, the Company receives a
variable rate based on the three month LIBOR set on the last day of the previous quarter
and pays a weighted average fixed rate of 6.63%. These swaps are designated
under SFAS 133 as hedges against changes in the amount of future cash flows.
Included in Accumulated other comprehensive income as of March 31, 2003 is a
$1.8 million unrealized loss (after-tax) related to these interest rate swaps.
The unrealized loss at March 31, 2003 of $1.8 million is estimated to be
reclassified into earnings over the remaining life of the swaps based upon a
6-month forward LIBOR rate.

7



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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

The
following table sets forth the activity in the Companys restructuring reserves as of
March 31, 2003, which are included in Accrued liabilities (in thousands).
Future cash payments related to the restructuring reserves, which consist
solely of lease related obligations, are expected to be made through October
2005.

|                                |               |   |       |      |  
|------------------------------- | ------------- | - | ----- | ---- | -
|Balance as of December 31, 2002 |               | $ | 1,312 |     
|                                | Cash payments |   |       | (197 | )
|                                |               |   |       |     
|Balance as of March 31, 2003    |               | $ | 1,115 |     
|                                |               |   |       |     

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 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 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 the 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 March 31, 2003 (in thousands):

|                             |                                         |   |        |        |  
|---------------------------- | --------------------------------------- | - | ------ | ------ | -
|Balance at December 31, 2002 |                                         | $ | 19,266 |       
|                             | Expense related to new claims           |   |        | 1,300  |  
|                             | Expense related to changes in estimates |   |        | (3,899 | )
|                             | Closed claims                           |   |        | (4,378 | )
|                             |                                         |   |        |       
|Balance at March 31, 2003    |                                         | $ | 12,289 |       
|                             |                                         |   |        |       

8



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8.     Commitments and Contingencies

Synthetic Leases

On February 27, 2002, the Company exercised its option under a synthetic
lease agreement to purchase certain of its headquarter facilities located in
Pleasanton, California for $70.0 million. The Company has a remaining
synthetic lease for certain other headquarter facilities located in Pleasanton,
California that were constructed for $105.0 million. This synthetic lease is
accounted for as an operating lease. The Company makes rental payments to the
lessors equal to the interest computed on the $105.0 million based on LIBOR
plus a margin. The Company has an option to renew this synthetic lease or to
purchase the related facilities for $105.0 million that is exercisable in
September 2003. The Company has a maximum potential loss exposure of $89.3
million on this synthetic lease as it has guaranteed a residual value equal to
85% of the lessors cost of construction of $105.0 million. Based on current
real estate market conditions, the Company does not believe that it is probable
that it will incur a loss related to this guarantee. Under this synthetic
lease, the Company is required to maintain compliance with certain financial
covenants, is prohibited from making certain payments, including cash
dividends, and is subject to various other restrictions. As of March 31, 2003,
the Company was in compliance with all covenants. This synthetic lease
qualifies as a variable interest entity under the provisions of Financial
Accounting Standards Board Interpretation No. 46, Consolidation of Variable
Interest Entities (FIN 46). If the Company does not exercise its $105.0
million option to purchase the facilities under this lease agreement before July 1, 2003,
it will be required to consolidate the financial position and operating results
of this synthetic lease under the provisions of FIN 46.

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 March 31, 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.

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 affect
on the 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.

9.     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 months ended March 31, (in thousands):

9



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|                   |  |                    |         |               |  |       |         |       |  |   |         |  |  |   |         | 
|------------------ |  | ------------------ | ------- | ------------- |  | ----- | ------- | ----- |  | - | ------- |  |  | - | ------- | 
|                   |  | Operating Segments |         |               |  |       |         |       |  |  
|                   |  |                    |         |               |  |       |         |       |  |  
|2003               |  | North America      |         | International |  | Other |         | Total
|                   |  |                    |         |               |  |       |         |      
|Revenues           |  | $                  | 350,655 |               |  | $     | 109,601 |       |  | $ |        |  |  | $ | 460,256 | 
|Cost of revenues   |  |                    | 159,479 |               |  |       | 68,536  |       |  |   |        |  |  |   | 228,015 | 
|                   |  |                    |         |               |  |       |         |       |  |   |         |  |  |   |         | 
|Segment margin     |  | $                  | 191,176 |               |  | $     | 41,065  |       |  | $ |        |  |  | $ | 232,241 | 
|                   |  |                    |         |               |  |       |         |       |  |   |         |  |  |   |         | 
|Operating expenses |  |                    |         |               |  |       |         |       |  |   | 180,458 |  |  |   | 180,458 | 
|                   |  |                    |         |               |  |       |         |       |  |   |         |  |  |   |         | 
|Operating income   |  |                    |         |               |  |       |         |       |  |   |         |  |  | $ | 51,783  | 
|                   |  |                    |         |               |  |       |         |       |  |   |         |  |  |   |         | 

|                   |  |                    |         |               |  |       |         |       |  |   |         |  |  |   |         | 
|------------------ |  | ------------------ | ------- | ------------- |  | ----- | ------- | ----- |  | - | ------- |  |  | - | ------- | 
|                   |  | Operating Segments |         |               |  |       |         |       |  |  
|                   |  |                    |         |               |  |       |         |       |  |  
|2002               |  | North America      |         | International |  | Other |         | Total
|                   |  |                    |         |               |  |       |         |      
|Revenues           |  | $                  | 363,062 |               |  | $     | 112,675 |       |  | $ | 7,530   |  |  | $ | 483,267 | 
|Cost of revenues   |  |                    | 171,373 |               |  |       | 66,672  |       |  |   | 6,755   |  |  |   | 244,800 | 
|                   |  |                    |         |               |  |       |         |       |  |   |         |  |  |   |         | 
|Segment margin     |  | $                  | 191,689 |               |  | $     | 46,003  |       |  | $ | 775     |  |  | $ | 238,467 | 
|                   |  |                    |         |               |  |       |         |       |  |   |         |  |  |   |         | 
|Operating expenses |  |                    |         |               |  |       |         |       |  |   | 177,871 |  |  |   | 177,871 | 
|                   |  |                    |         |               |  |       |         |       |  |   |         |  |  |   |         | 
|Operating income   |  |                    |         |               |  |       |         |       |  |   |         |  |  | $ | 60,596  | 
|                   |  |                    |         |               |  |       |         |       |  |   |         |  |  |   |         | 

Revenues from the Europe/Middle-East/Africa region represented 14% of
total revenues for the quarters ended March 31, 2003 and 2002. No other
international region had revenues equal to or greater than 10% of total
revenues for the three months ended March 31, 2003 or 2002. Revenues
originating in each individual foreign country were less than 10% of total
revenues for each of the three months ended March 31, 2003 and 2002.

10.     Recently Issued Accounting Standards

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

11.     Subsequent Event

On April 22, 2003, the Company announced it will reduce headcount within
various worldwide administrative and support functions resulting in a charge of
approximately $4 million. Additionally, the Company expects to consolidate
certain California office facilities resulting in the closure of an
underutilized facility. The anticipated charge associated with the facility
consolidation and closure is approximately $8 million. The Company expects to
take these headcount and facility related charges in the second quarter of
2003.

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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 descriptions of our expectations regarding future trends
affecting our business that are subject to risks and uncertainties. Words such
as anticipate, believe, estimate, forecast, intended, may, plan,
project, predict, should and will and similar expressions as they
relate to PeopleSoft are intended to identify such forward-looking statements.
Forward-looking statements contained throughout this Report include, but are
not limited to, those identified with a footnote (1) symbol. These
forward-looking statements and other forward-looking statements made elsewhere
in this document are made in reliance upon safe harbor provisions of the
Private Securities Litigation Reform Act of 1995. Future results are subject
to risks and uncertainties, which could cause actual results and performance to
differ significantly from those contemplated by the forward-looking statements.
For a discussion of factors that could affect future results, see Factors
That May Affect Our Future Results or The Market Price of Our Stock. We
undertake no obligation to update the information contained in this Item 2 or
elsewhere in this Report.

RESULTS OF OPERATIONS

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

|                    |                                              |                          |                |      |                              |    |                              |    |      |     |  |    |    |     | 
|------------------- | -------------------------------------------- | ------------------------ | -------------- | ---- | ---------------------------- | -- | ---------------------------- | -- | ---- | --- |  | -- | -- | --- | 
|                    |                                              |                          |                |      | Percentage of                |    |                              |    |      |     |  |    |   
|                    |                                              |                          |                |      | Dollar Change                |    |                              |    |      |     |  |    |   
|                    |                                              |                          |                |      | Period Over Period           |    | Percentage of Total Revenues
|                    |                                              |                          |                |      |                              |    |                             
|                    |                                              |                          |                |      | Three Months Ended March 31,
|                    |                                              |                          |                |      | 2003/2002                    |    | 2003                         |    | 2002
|                    |                                              |                          |                |      |                              |    |                              |    |     
|Revenues:           |                                              |                          |                |      |                              |    |                              |    |      |     |  |   
|                    | License fees                                 |                          |                | (39  | )%                           |    |                              | 18 | %    |     |  | 27 | % 
|                   
|                    | Maintenance revenue                          |                          |                | 21   |                              |    |                              | 43 |      |     |  | 34 |   
|                    | Professional services revenue                |                          |                | 1    |                              |    |                              | 39 |      |     |  | 37 |   
|                    |                                              |                          |                |      |                              |    |                              |    |      |     |  |   
|                    |                                              |                          | Services       |      |                              | 11 |                              |    |      | 82  |  |    |    | 71  | 
|                    | Development and other services               |                          |                | (100 | )                            |    |                              |   |      |     |  | 2  |   
|                    |                                              |                          |                |      |                              |    |                              |    |      |     |  |   
|                    |                                              |                          | Total revenues |      |                              | (5 | )                            |    |      | 100 |  |    |    | 100 | 
|Costs and expenses: |                                              |                          |                |      |                              |    |                              |    |      |     |  |   
|                    | Cost of license fees                         |                          |                | (24  | )                            |    |                              | 2  |      |     |  | 2  |   
|                    | Cost of services                             |                          |                | (1   | )                            |    |                              | 36 |      |     |  | 34 |   
|                    | Cost of development and other services       |                          |                | (100 | )                            |    |                              |   |      |     |  | 1  |   
|                    | Sales and marketing expense                  |                          |                | (4   | )                            |    |                              | 26 |      |     |  | 26 |   
|                    | Product development expense                  |                          |                | 2    |                              |    |                              | 18 |      |     |  | 17 |   
|                    | General and administrative expense           |                          |                | 9    |                              |    |                              | 7  |      |     |  | 6  |   
|                    | Restructuring, acquisition and other charges |                          |                | (100 | )                            |    |                              |   |      |     |  | 1  |   
|                    |                                              |                          |                |      |                              |    |                              |    |      |     |  |   
|                    |                                              | Total costs and expenses |                |      | (3                           | )  |                              |    | 89   |     |  |    | 87 |    
|                    | Operating income                             |                          |                | (15  | )                            |    |                              | 11 |      |     |  | 13 |   
|                    | Other income, net                            |                          |                | (4   | )                            |    |                              | 1  |      |     |  | 1  |   
|                    | Provision for income taxes                   |                          |                | (13  | )                            |    |                              | 4  |      |     |  | 5  |   
|                    |                                              |                          |                |      |                              |    |                              |    |      |     |  |   
|                    | Net income                                   |                          |                | (14  | )                            |    |                              | 8  | %    |     |  | 9  | % 
|                    |                                              |                          |                |      |                              |    |                              |    |      |     |  |   
|                    | Diluted income per share                     |                          |                | (14  | )%                           |    |                              |    |      |     |  |    |   

Net income decreased $6.0 million or 14% to $38.5 million for the first
quarter of 2003 compared to $44.5 million for the first quarter of 2002.
Diluted income per share decreased to $0.12 for the first quarter of 2003
compared to $0.14 for the first quarter of 2002.

Net income for the three months ended March 31, 2002 includes a first
quarter charge of $1.7 million (after-tax) for in-process research and
development related to the Annuncio Software, Inc. business
combination. Refer to Business Combinations in our Annual
Report on Form 10-K for the year ended December 31, 2002 for
further discussion.

Revenues

Our software products are generally licensed to end-user customers under
non-exclusive, perpetual license agreements. Revenue from license fees
decreased by 39% to $80.8 million in the first quarter of 2003 from $133.3
million in the first quarter of 2002. The decrease in license revenue, which
was distributed across most geographies and regions, reflects a slowdown in
capital spending resulting from the continued global economic downturn
compounded by escalated geopolitical tensions and the war in Iraq.

11



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Our services revenue consists of software maintenance fees and
professional services revenue (consulting fees, customer training fees and
miscellaneous fees). The $35.3 million increase in maintenance
revenue during the first quarter of 2003 compared to the first
quarter of 2002 is primarily a result of the addition of new customers to our installed
base. The $1.6 million increase in professional services during
the first quarter of 2003 compared to the first quarter of 2002 reflects continued demand for
consulting and training services associated with license activity from current
and prior quarters.

Development and other services revenue consisted of revenue generated
pursuant to a development agreement with Momentum Business Applications, Inc.
(Momentum). Under this agreement, we performed certain development services on
behalf of 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 decreased
to zero for the three months ended March 31, 2003 as compared to $7.5 million
for the same period in 2002. Cost of development and other services decreased
to zero during the three months ended March 31, 2003 from $6.8 million during
the three months ended March 31, 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 $8.7
million in the first quarter of 2003 from $11.4 million in the first quarter of
2002. The decrease in the cost of license fees for the three months ended March
31, 2003 is primarily a result of a $3.0 million decrease in royalties to third
parties resulting from decreased license fee revenue and a $1.6 million
decrease in product warranty expense resulting from reductions in the product
warranty reserve based on changes in estimates and a decline in the number of
new warranty claims. These decreases are partially offset by a $2.0 million
increase in amortization, in the first quarter of 2003, related to software
obtained through acquisitions.

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 $163.5
million in the first quarter of 2003 from $164.5 million in the first quarter
of 2002, representing 43% and 48% of service revenues in each of those
quarters. The decrease in cost of services for the first quarter of 2003 is
primarily due to a $3.9 million decrease in service warranty expense resulting
from reductions in the service warranty reserve based on changes in estimates
and a decline in the number of new warranty claims. Additionally, cost of
services decreased due to a $1.3 million decrease related to a reduction in
outside consultants, partially offset by a $2.2 million increase in project
related travel expenses and a $2.9 million increase in employee
compensation and benefit costs. If the demand for services from new and
existing customers for installation, consulting, maintenance and training
services increases over the next several quarters, we anticipate that our cost
of services may increase.(1)

Sales and marketing expenses decreased to $119.6 million in the first
quarter of 2003 from $124.6 million in the first quarter of 2002, representing
26% of total revenues in each of those quarters. The reduction in sales and
marketing expenses is primarily due to a $6.5 million decrease in bonus and
commission expense associated with lower revenues and a $1.5 million decrease
related to a reduction in outside consultants, partially offset by a $1.3
million increase in travel and related expenses, a $1.1 million increase in
marketing programs and advertising and a $0.9 million increase in salaries, due
to headcount increases in international offices. 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)

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 increased to



---

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

12



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$83.7 million in the first quarter of 2003 from $82.3 million in the first
quarter of 2002, representing 18% and 17%
of total revenues in each of those quarters. The increase in product
development expenses is primarily attributable to a $5.9 million increase
associated with the decrease in development costs billed to Momentum as
developers were redeployed to work on internal development initiatives and a
$2.0 million increase in salary expense due to increased headcount. Partially
offsetting the increases in product development expenses were a $5.1 million
decrease in employee bonuses attributable to lower revenues in 2003 and general
expense reductions of $1.4 million associated with improved cost management.
Our focus is to continue to extend our software offerings by delivering
enhanced functionality and to further develop new applications in our
integrated application suites: Human Capital Management, Financial Management
Solutions, Customer Relationship Management and Supply Chain
Management.(1)

General and administrative expenses increased to $33.0 million during the
first quarter of 2003 from $30.2 million during the first quarter of 2002,
representing 7% and 6% of total revenues. The increase in 2003 is attributable
to a $2.0 million increase in depreciation and facility expenses, a $1.7
million increase in salaries and other compensation and a $0.9 million increase
in insurance expense, partially offset by a $1.4 million decrease in employee
bonuses attributable to lower revenues and a decrease of $0.7 million in
non-product related litigation expense.

Restructuring, Acquisition and Other Charges

During the three months ended March 31, 2002, we incurred a $2.8 million
in-process research and development charge associated with our acquisition of
Annuncio Software, Inc. We did not record any restructuring, acquisition or
other charges in the first quarter of 2003. In the future, if we consummate
business combinations and technology purchases, we may incur additional
in-process research and development charges which may impact our results of
operations.(1)

Other Income, Net

Other income, net, which primarily includes interest income and interest
expense, decreased to $7.0 million in the first quarter of 2003 from $7.2
million in the first quarter of 2002. The change is primarily a result of a
decrease in interest income due to lower interest rates.

Provision for Income Taxes

Our income tax provision decreased to $20.3 million in the first quarter
of 2003 from $23.3 million in the first quarter of 2002. Our effective tax
rate was 34.5% and 34.3% for the three months ended March 31, 2003 and 2002.
Exclusive of in-process research and development charges, the effective tax
rate for the three months ended March 31, 2002 was 34.5%. The net deferred tax
assets at March 31, 2003 were $182.9 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)

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 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. Future
results may differ from our estimates under different assumptions or
conditions.



---

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

13



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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 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.

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 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
three month periods ended March 31, 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

14



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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 SFAS 109. We assess the
likelihood that our net deferred tax assets will be recovered from future
taxable income and to the extent we believe that recovery is not likely, we
establish a valuation allowance 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.

Subsequent Event

On April 22, 2003, we announced that we will reduce headcount within
various worldwide administrative and support functions resulting in a change of
approximately $4 million. Additionally, we expect to consolidate certain
California office facilities resulting in the closure of an underutilized
facility. The anticipated charge associated with the facility consolidation
and closure is approximately $8 million. We expect to take these headcount and
facility related charges in the second quarter of 2003.(1)



---

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

15



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LIQUIDITY AND CAPITAL RESOURCES

At March 31, 2003, we had $239.0 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 March 31, 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 $105.0 million for the intended
purchase of certain office facilities under our remaining synthetic lease
arrangement and other purchases of property and
equipment.(1)

Cash provided by operating activities was $74.7 million during the three
months ended March 31, 2003 compared to $140.8 million during the same period
in 2002. This fluctuation is primarily due to a decrease associated
with the fluctuation in
the income tax and accounts receivable balances, a decrease in tax
benefits from employee stock transactions and lower net income in the
first quarter of 2003 compared to the same period in 2002.

Cash used in investing activities was $189.7 million during the three
months ended March 31, 2003 compared to $158.4 million in 2002. The increase
in the first quarter of 2003 is primarily attributable to the exercise of a
$70.0 million option to purchase office facilities under a synthetic lease
agreement partially offset by cash used in business combinations of $30.0
million in the comparable 2002 period.

Cash provided by financing activities was $30.1 million during the three
months ended March 31, 2003 compared to $63.7 million during the three months
ended March 31, 2002. The source of cash provided by financing activities
during the three months ended March 31, 2003 and 2002 was related to proceeds
from the exercise of common stock options by employees and issuance of stock
under the employee stock purchase program.

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 could be paid for with available cash, equity, debt or a
combination of these sources.(1)

Commercial Commitments

Synthetic Leases

On February 27, 2002, we exercised our option under a synthetic lease agreement
to purchase certain of our headquarter facilities located in Pleasanton,
California for $70.0 million. We have a remaining synthetic lease for certain
other headquarter facilities located in Pleasanton, California that were
constructed for $105.0 million. This synthetic lease is accounted for as an
operating lease. We make rental payments to the lessors equal to the interest
computed on the $105.0 million based on LIBOR plus a margin. We have an option
to renew this synthetic lease or to purchase the related facilities for $105.0
million that is exercisable in September 2003. We have a maximum potential loss
exposure of $89.3 million on this synthetic lease as we have guaranteed a
residual value equal to 85% of the lessors cost of construction of $105.0
million. Based on current real estate market conditions, we do not believe
that it is probable that we will incur a loss related to this guarantee.(1) Under
this synthetic lease, we are required to maintain compliance with certain
financial covenants, are prohibited from making certain payments, including
cash dividends and are subject to various other restrictions. As of March 31,
2003, we were in compliance with all covenants. This synthetic lease qualifies
as a variable interest entity under the provisions of Financial Accounting
Standards Board Interpretation No. 46, Consolidation of Variable Interest
Entities (FIN 46). If we do not exercise our $105.0 million option to
purchase the facilities under this lease agreement before July 1, 2003, we will be
required to consolidate the financial position and operating results of this
synthetic lease under the provisions of FIN 46.



---

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

16



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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 in the accompanying condensed consolidated statements of
operations and are recognized in the current period, consistent with the period
in which the gain or loss of the underlying transaction is recognized.

At March 31, 2003, we had the following outstanding forward foreign
exchange contracts to exchange foreign currency for U.S. dollars:

|                    |  |                 |  |               |  |                   |  | 
|------------------- |  | --------------- |  | ------------- |  | ----------------- |  | 
|                    |  |                 |  |               |  | Notional Weighted
|                    |  |                 |  |               |  | Average Exchange 
|Functional Currency |  | Notional Amount |  | Rate per US $
|                    |  |                 |  |              
|Euros               |  | $12.7 million   |  |               |  | 0.931             | 
|Singapore dollars   |  | 8.4 million     |  |               |  | 1.770             | 
|Canadian dollars    |  | 2.3 million     |  |               |  | 1.469             | 
|Chilean pesos       |  | 0.7 million     |  |               |  | 731.200           | 
|Australian dollars  |  | 0.6 million     |  |               |  | 1.670             | 
|Taiwanese dollars   |  | 0.4 million     |  |               |  | 34.800            | 
|                    |  |                 |  |               |  |                  
|                    |  | $25.1 million   |  |               |  |                  
|                    |  |                 |  |               |  |                  

At March 31, 2003, we had the following outstanding forward foreign
exchange contracts to exchange U.S. dollars for foreign currency:

|                    |  |                 |  |               |  |                   |  | 
|------------------- |  | --------------- |  | ------------- |  | ----------------- |  | 
|                    |  |                 |  |               |  | Notional Weighted
|                    |  |                 |  |               |  | Average Exchange 
|Functional Currency |  | Notional Amount |  | Rate per US $
|                    |  |                 |  |              
|British pounds      |  | $1.4 million    |  |               |  | 0.635             | 
|Japanese yen        |  | 0.8 million     |  |               |  | 119.99            | 
|Swiss francs        |  | 0.7 million     |  |               |  | 1.382             | 
|Swedish krona       |  | 0.4 million     |  |               |  | 8.654             | 
|South African rand  |  | 0.4 million     |  |               |  | 7.960             | 
|                    |  |                 |  |               |  |                  
|                    |  | $3.7 million    |  |               |  |                   | 
|                    |  |                 |  |               |  |                  

17



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At March 31, 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 March 31, 2003.
During the three months ended March 31, 2003, we recorded net foreign currency
losses of $0.2 million.

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 March 31, 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 March 31, 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 March 31, 2003, we invested heavily in tax-exempt
investments which reduced our weighted average interest rate.

Below is a presentation of the maturity profile of our investment
securities held at March 31, 2003 and the weighted average interest rates. The
rates reflect weighted average rates for both taxable and tax-exempt
investments (in millions, except interest rates):

|                               |  |                   |         |             |  |           |      |            |  |   |         |  |  |   |         | 
|------------------------------ |  | ----------------- | ------- | ----------- |  | --------- | ---- | ---------- |  | - | ------- |  |  | - | ------- | 
|                               |  | Expected Maturity |         |             |  |           |      |            |  |  
|                               |  |                   |         | Total       |  |           |      |           
|                               |  | 1 Year or         |         | More than 1 |  | Principal |      | Total     
|                               |  | less              |         | year        |  | Amount    |      | Fair Value
|                               |  |                   |         |             |  |           |      |           
|Available-for-sale investments |  | $                 | 1,693.9 |             |  | $         | 19.7 |            |  | $ | 1,713.6 |  |  | $ | 1,713.5 | 
|Weighted average interest rate |  |                   | 1.3     | %           |  |           | 1.6  | %          |  |   |         |  |  |   |         | 

Interest Rate Swap Transactions

We utilize interest rate swap transactions to manage our exposure to
interest rate changes on our remaining synthetic lease obligation. At March 31, 2003,
the swaps had an aggregate notional amount of $105.0 million. The swaps mature
in September 2003, consistent with the maturity date of the synthetic lease.
Under these agreements, we receive a variable rate based on the three month
LIBOR set on the last day of the previous quarter and pay a weighted average
fixed rate of 6.63%. These swaps are designated under SFAS 133 as hedges
against changes in amount of future cash flows. Included in Accumulated other
comprehensive income as of March 31, 2003 is a $1.8 million unrealized loss
(after-tax) related to these interest rate swaps. The unrealized loss at March
31, 2003 of $1.8 million is estimated to be reclassified into earnings over the
remaining life of the swaps based upon a 6-month forward LIBOR rate.

18



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ITEM 4  CONTROLS AND PROCEDURES

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

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

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

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

We operate in a dynamic and rapidly changing environment that involves
numerous risks and uncertainties. The following section describes some, but not
all, of these risks and uncertainties that we believe may adversely affect our
business, financial condition or results of operations. This section should be
read in conjunction with the unaudited Condensed Consolidated Financial
Statements and 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 for the years ended December 31, 2002, 2001 and 2000
contained in our 2002 Annual Report on Form 10-K.

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 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.

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

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



| |  | our sales cycle can vary as a result of the complexity of a customers overall business needs and may extend over one or
more quarters;                                                                
|- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| 
| |  | the complexity and size of license transactions can result in protracted negotiations;                                                                                                                 
| 
| |  | a significant number of our license agreements are typically completed within the last few weeks of the quarter and
purchasing decisions may be delayed to future quarters;                            
| 
| |  | the effect of economic downturns and unstable political conditions may result in decreased product demand, price erosion,
and other factors that may substantially reduce license and services revenue;

20



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| |  | 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.

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.

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

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Increases in services revenue as a percentage of total revenues
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.

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, 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.

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                                                                                                              

22



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##### 





| |  | 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.                                                                                                                                                                                             

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.

23



---



##### 



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

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

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

24



---



##### 



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.

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

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

25



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##### 



Our stock price may remain volatile.

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



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

In addition, fluctuations in the price of our common stock may expose us
to the risk of securities class action or shareholder derivative lawsuits.
Defending against such lawsuits could result in substantial costs and divert
managements attention and resources. Furthermore, any settlement or adverse
determination in such a lawsuit could subject us to significant liabilities.

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

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

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

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

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

26



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##### 



PART II  OTHER INFORMATION

Item 1. Legal Proceedings



| |                                                                                                                                                                                                                                                                                                                                                                                                                      
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 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
affect 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



| |     
| | ----
| | None

Item 5. Other Information



| |     
| | ----
| | None

Item 6. Exhibits and Reports on
Form 8 - K



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

|     |  |                                                                                                                                                                                      
|---- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|99.1 |  | 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



| |                                                                                
| | -------------------------------------------------------------------------------
| | No reports on Form 8-K were filed during the three months ended March
31, 2003.

27



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##### 



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: May 14, 2003

PEOPLESOFT, INC.


By:
    
    /s/ KEVIN T. PARKERKevin T. ParkerExecutive Vice President,Finance and Administration, Chief Financial Officer(Principal Financial and Accounting Officer)


28



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##### 



CERTIFICATIONS

I, Craig A. Conway, certify that:

1.   I have reviewed this quarterly report on Form 10-Q of
PeopleSoft, Inc.;

2.   Based on my knowledge, this quarterly report does not
contain any untrue statement of a material fact or omit to state a
material fact necessary to make the statements made, in light of the
circumstances under which such statements were made, not misleading
with respect to the period covered by this quarterly report;

3.   Based on my knowledge, the financial statements, and other
financial information included in this quarterly report, fairly
present in all material respects the financial condition, results of
operations and cash flows of the registrant as of, and for, the
periods presented in this quarterly report;

4.   The registrants other certifying officer and I are
responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for
the registrant and we have:



| |                                                                                                                                                                                                                                                                                                     
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a)   designed such disclosure controls and procedures to
ensure that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us by
others within those entities, particularly during the period in
which this quarterly report is being prepared;
|
| | b)   evaluated the effectiveness of the registrants
disclosure controls and procedures as of a date within 90 days
prior to the filing date of this quarterly report (the
Evaluation Date); and                                                                                                  
|
| | c)   presented in this quarterly report our conclusions
about the effectiveness of the disclosure controls and procedures
based on our evaluation as of the Evaluation Date;                                                                                                                        

5.   The registrants other certifying officer and I have
disclosed, based on our most recent evaluation, to the registrants
auditors and the audit committee of registrants board of directors
(or persons performing the equivalent function):



| |                                                                                                                                                                                                                                                                                                    
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a)   all significant deficiencies in the design or
operation of internal controls which could adversely affect the
registrants ability to record, process, summarize and report
financial data and have identified for the registrants auditors
any material weaknesses in internal controls; and



| |                                                                                                                                                            
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------
| | b)   any fraud, whether or not material, that involves
management or other employees who have a significant role in the
registrants internal controls; and

6.   The registrants other certifying officer and I have
indicated in this quarterly report whether there were significant
changes in internal controls or in other factors that could
significantly affect internal controls subsequent to the date of our
most recent evaluation, including any corrective actions with regard
to significant deficiencies and material weaknesses.

|      |  |              |  |                                      
|----- |  | ------------ |  | -------------------------------------
|Date: |  | May 14, 2003 |  | /s/ CRAIG A. CONWAY                  
|      |  |              |  |                                      
|      |  |              |  | Craig A. Conway                      
|      |  |              |  | President and Chief Executive Officer
|      |  |              |  | PeopleSoft, Inc.                     

29



---



##### 



I, Kevin T. Parker, certify that:

1.   I have reviewed this quarterly report on Form 10-Q of
PeopleSoft, Inc.;

2.   Based on my knowledge, this quarterly report does not
contain any untrue statement of a material fact or omit to state a
material fact necessary to make the statements made, in light of the
circumstances under which such statements were made, not misleading
with respect to the period covered by this quarterly report;

3.   Based on my knowledge, the financial statements, and other
financial information included in this quarterly report, fairly
present in all material respects the financial condition, results of
operations and cash flows of the registrant as of, and for, the
periods presented in this quarterly report;

4.   The registrants other certifying officer and I are
responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for
the registrant and we have:

a)   designed such disclosure controls and procedures to ensure
that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly
report is being prepared;

b)   evaluated the effectiveness of the registrants disclosure
controls and procedures as of a date within 90 days prior to the
filing date of this quarterly report (the Evaluation Date); and

c)   presented in this quarterly report our conclusions about
the effectiveness of the disclosure controls and procedures based on
our evaluation as of the Evaluation Date;

5.   The registrants other certifying officer and I have
disclosed, based on our most recent evaluation, to the registrants
auditors and the audit committee of registrants board of directors
(or persons performing the equivalent function):

a)   all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrants
ability to record, process, summarize and report financial data and
have identified for the registrants auditors any material weaknesses
in internal controls; and

b)   any fraud, whether or not material, that involves
management or other employees who have a significant role in the
registrants internal controls; and

6.   The registrants other certifying officer and I have
indicated in this quarterly report whether there were significant
changes in internal controls or in other factors that could
significantly affect internal controls subsequent to the date of our
most recent evaluation, including any corrective actions with regard
to significant deficiencies and material weaknesses.

|      |  |              |  |                            
|----- |  | ------------ |  | ---------------------------
|Date: |  | May 14, 2003 |  | /s/ KEVIN T. PARKER        
|      |  |              |  |                            
|      |  |              |  | Kevin T. Parker            
|      |  |              |  | Executive Vice President,  
|      |  |              |  | Finance and Administration,
|      |  |              |  | Chief Financial Officer    
|      |  |              |  | PeopleSoft, Inc.           

30



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##### 



INDEX TO EXHIBITS

|               |  |                                                                                                                                                                                      
|-------------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit Number |  | Description                                                                                                                                                                          
|               |  |                                                                                                                                                                                      
|99.1           |  | 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