##### Table of Contents



UNITED STATES SECURITIES AND
    EXCHANGE COMMISSIONWashington, D.C.
    20549
  Form 10-Q
  (Mark One)þ

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934For the quarterly period ended
    June 30, 2007oro

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934For the transition period
    from          to   Commission File Number:
    333-115328
  PeopleSupport, Inc.
 (Exact name of Registrant as
    specified in its charter)
  Delaware

95-4695021(State or other jurisdiction
    of
    incorporation or organization)

(I.R.S. Employer
    Identification No.)   1100 Glendon Ave., Suite 1250, Los Angeles, California
    90024
 (Address of principal executive
    offices)
  (310) 824-6200
 (Registrants telephone
    number, including area code)
      þ o
  Rule 12b-2
  o þ o
  Rule 12b-2 o þ




---



##### 



PEOPLESUPPORT,
    INC.FORM 10-Q
    FOR THE QUARTER ENDED
    June 30, 2007
  INDEX
  
  PagePART
    I  FINANCIAL INFORMATION


1ITEM 1.


Financial
    Statements


1Consolidated
    Balance Sheets as of June 30, 2007(unaudited) and
    December 31, 2006 (unaudited)


1Consolidated
    Statements of Operations and Other Comprehensive Income for the
    three and six month periods ended June 30, 2007 (unaudited)
    and 2006 (unaudited)


2Consolidated
    Statements of Cash Flows for the six months ended
    June 30, 2007 (unaudited) and 2006
    (unaudited)


3Notes to
    Consolidated Financial Statements (unaudited)


4ITEM 2.


Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations


15ITEM 3.


Quantitative and
    Qualitative Disclosures about Market Risk


24ITEM 4.


Controls and
    Procedures


24PART
    II  OTHER INFORMATION


25ITEM 1.


Legal
    Proceedings


25ITEM 1A.


Risk
    Factors


25ITEM 4.


Submission of
    Matters to a Vote of Security Holders


26ITEM 6.


Exhibits


26Signature


27EXHIBIT 31.1EXHIBIT 31.2EXHIBIT 32.1EXHIBIT 32.2




---



##### Table of Contents



PART I 
    FINANCIAL INFORMATION  ITEM 1.
    Financial
    Statements  PEOPLESUPPORT,
    INC. AND SUBSIDIARIESCONSOLIDATED BALANCE SHEETS
 (Unaudited, in thousands)
  June 30,


December 31,2007


2006ASSETSCurrent assets:Cash and cash equivalents

$
72,282


$
80,880Marketable securities


28,969



39,520Accounts receivable, net of
    allowance for doubtful accounts of $1,458 and $947


20,181



18,127Deferred tax assets


1,888



1,888Prepaid expenses and other current
    assets


6,050



5,745Total current assets


129,370



146,160Property and equipment, net


34,791



22,080Marketable securities


34,133



20,133Deferred tax assets


19,090



18,372Goodwill and other intangible
    assets


8,351



9,181Other long-term assets


2,626



1,665Total assets

$
228,361


$
217,591LIABILITIES AND
    STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable

$
4,875


$
7,389Accrued liabilities


10,819



9,963Deferred revenue


6,132



4,515Other current liabilities


78



106Total current liabilities


21,904



21,973Deferred rent


2,287



1,812Other long-term liabilities


1,335



1,347Total liabilities


25,526



25,132Commitments and contingenciesMinority interest






29Stockholders equity:Common stock; $0.001 par
    value; authorized 87,000 shares; 23,583 and
    23,479 shares issued and outstanding at June 30, 2007
    and December 31, 2006, respectively


24



23Additional paid-in capital


210,858



208,044Accumulated deficit


(8,293
)


(16,062
)Accumulated other comprehensive
    income


246



425Total stockholders equity


202,835



192,430Total liabilities and
    stockholders equity

$
228,361


$
217,591    1




---



##### Table of Contents



PEOPLESUPPORT,
    INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF OPERATIONSAND OTHER COMPREHENSIVE INCOME
 (Unaudited, in thousands, except per share data)
  Three Months Ended


Six Months EndedJune 30,


June 30,2007


2006


2007


2006Revenues

$
34,328


$
25,947


$
67,925


$
48,994Cost of revenues (exclusive of
    depreciation and amortization expense shown below)


25,964



16,013



49,495



29,495Selling, general and administrative


5,512



4,706



12,033



9,633Depreciation and amortization


2,334



1,634



4,795



2,919Income from operations


518



3,594



1,602



6,947Interest expense


1



2



2



5Interest income


(1,531
)


(489
)


(3,005
)


(912
)Other (income) expense


(2,115
)


22



(3,238
)


(1
)Income before provision for income
    taxes


4,163



4,059



7,843



7,855Provision for income taxes


256



251



72



1,172Net income


3,907



3,808



7,771



6,683Foreign currency translation
    (gain) loss


(5
)


276



(372
)


18Unrealized loss on securities


636



30



525



64Minimum pension liability
    adjustment


35







26



Comprehensive income

$
3,241


$
3,502


$
7,592


$
6,601Basic earnings per share

$
0.17


$
0.21


$
0.33


$
0.36Diluted earnings per share

$
0.16


$
0.20


$
0.32


$
0.35Basic weighted average shares
    outstanding


23,561



18,511



23,531



18,467Diluted weighted average shares
    outstanding


24,025



19,348



24,197



19,251    2




---



##### Table of Contents



PEOPLESUPPORT,
    INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWS
 (Unaudited, in thousands)
  Six Months Ended June 30,2007


2006OPERATING ACTIVITIESNet income

$
7,771


$
6,683Adjustments to reconcile net
    income to net cash provided by operating activities:Depreciation and amortization


4,795



2,920Provision for doubtful accounts


588



9Stock-based compensation


2,515



1,153Management incentive plan


171



171Deferred income taxes


(612
)


894Tax benefits from employee stock
    option exercises


(37
)


(193
)Changes in operating assets and
    liabilities:Accounts receivable


(2,643
)


(3,868
)Prepaid expenses and other assets


(1,187
)


(261
)Accounts payable and accrued
    liabilities


(1,352
)


4,524Deferred rent


467



156Deferred revenue


1,623



1,108Net cash provided by operating
    activities


12,099



13,296INVESTING ACTIVITIESProceeds from sale/maturities of
    marketable securities


58,951



3,000Purchases of property and equipment


(17,434
)


(7,971
)Purchases of marketable securities


(62,411
)


(11,000
)Acquisitions, net of cash received






(8,968
)Net cash used in investing
    activities


(20,894
)


(24,939
)FINANCING ACTIVITIESPayments of capital lease
    obligation


(29
)


(130
)Tax benefits from employee stock
    option exercises


37



193Proceeds from the exercise of
    stock options


361



567Costs incurred in public offering


(168
)


Net cash provided by financing
    activities


201



630Effect of exchange rate changes on
    cash


(4
)


(18
)Net decrease in cash and cash
    equivalents


(8,598
)


(11,031
)Cash and cash equivalents,
    beginning of period


80,880



27,760Cash and cash equivalents, end of
    period

$
72,282


$
16,729NON-CASH INVESTING AND
    FINANCING ACTIVITIESUnrealized holding (losses) on
    marketable securities

$
(525
)

$
(64
)Construction in progress costs
    incurred but not paid


(27
)


(723
)Non-cash tax benefit from
    disqualifying dispositions


112



48    3




---



##### Table of Contents



PEOPLESUPPORT,
    INC. AND SUBSIDIARIES
    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except per share data) Note 1.
    Description
    of Business  U.S.-based
    Note 2.
    Basis of
    Presentation  Basis
    of Presentation
  Form 10-Q Regulation S-X. Form 10-K.
  Reclassifications
    Use of
    Estimates
    Concentrations
    of Risk
     4




---



##### Table of Contents



PEOPLESUPPORT,
    INC. AND SUBSIDIARIES
    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (In thousands, except per share data)
      For theThree MonthsEnded


As of and for theJune 30,


Six Months Ended June 30,% of Revenue


% of Revenue


$ of A/R, Net2007


2006


2007


2006


2007


2006Customer A


25
%


19
%


21
%


20
%

$
6,048


$
2,960Customer B


15
%


16
%


15
%


17
%


3,515



1,763Customer C


14
%


13
%


15
%


13
%


2,372



1,363Customer D


9
%


9
%


9
%


10
%


1,934



597Customer E


7
%


6
%


6
%


5
%


2,019



142Customer F


5
%


5
%


5
%


5
%


528



27       Revenue
    Recognition
    Cost
    of Revenues
    Impairment
    of Long-lived Assets
   5




---



##### Table of Contents



PEOPLESUPPORT,
    INC. AND SUBSIDIARIES
    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (In thousands, except per share data)
  Goodwill,
    Intangible Assets, Long-lived Assets and
    Investments
  Goodwill and Other Intangible Assets
  and/or
  Stock-based
    Compensation Expense
  Share-Based Payment
  Note 3.
    Cash,
    Cash Equivalents and Marketable Securities      Short-Term


Long-TermAmortized


Unrealized


Market


Cash & Cash


Marketable


MarketableCost


Losses


Value


Equivalents


Securities


SecuritiesCash and cash equivalents

$
72,282


$



$
72,282


$
72,282


$



$
Government bonds


28,992



(25
)


28,967







22,989



5,978Corporate bonds


10,938



(279
)


10,659







5,980



4,679Mortgage backed securities


19,511



(230
)


19,281











19,281Preferred stock


4,325



(130
)


4,195











4,195Total

$
136,048


$
(664
)

$
135,384


$
72,282


$
28,969


$
34,133  6




---



##### Table of Contents



PEOPLESUPPORT,
    INC. AND SUBSIDIARIES
    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (In thousands, except per share data)
    MortgageCorporate


Government


Backed


PreferredMaturities

Bonds


Bonds


Securities


Stock


Total1 year

$
5,980


$
22,989


$



$



$
28,9691 to 5 years


2,469



5,736



666



3,116



11,9875 to 10 years


2,210



242







1,079



3,53110+ years










18,615







18,615Total

$
10,659


$
28,967


$
19,281


$
4,195


$
63,102     Short-Term


Long-TermAmortized


Unrealized


Market


Cash & Cash


Marketable


MarketableCost


Losses


Value


Equivalents


Securities


SecuritiesCash and cash equivalents

$
80,880


$



$
80,880


$
80,880


$



$
Government bonds


33,992



(77
)


33,915







24,942



8,973Corporate bonds


16,184



(9
)


16,175







14,578



1,597Mortgage backed securities


9,615



(52
)


9,563











9,563Total

$
140,671


$
(138
)

$
140,533


$
80,880


$
39,520


$
20,133     MortgageCorporate


Government


BackedMaturities

Bonds


Bonds


Securities


Total1 year

$
14,578


$
24,942


$



$
39,5201 to 5 years


1,597



8,729







10,3265 to 10 years






244



715



95910+ years










8,848



8,848Total

$
16,175


$
33,915


$
9,563


$
59,653   Note 4.
    Statement
    of Stockholders Equity and Accumulated Comprehensive
    Income    UnrealizedForeign


Loss on


MinimumCurrency


Marketable


PensionTranslation


Securities


Liability


TotalBalance, December 31, 2006

$
1,119


$
(138
)

$
(556
)

$
425Quarterly change


368



110



9



487Balance, March 31, 2007


1,487



(28
)


(547
)


912Quarterly change


5



(636
)


(35
)


(666
)Balance, June 30, 2007

$
1,492


$
(664
)

$
(582
)

$
246    7




---



##### Table of Contents



PEOPLESUPPORT,
    INC. AND SUBSIDIARIES
    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (In thousands, except per share data)
    Form 10-K
  Note 5.
    Computation
    of Earnings Per Share      Three Months


Six MonthsEnded


EndedJune 30,


June 30,2007


2006


2007


2006Options


885



59



531



84Restricted Stock Units


119







33



Warrants






3







3     Three Months Ended June 30,2007


2006Income


Shares


Per Share


Income


Shares


Per Share(Numerator)


(Denominator)


Amount


(Numerator)


(Denominator)


AmountBasic earnings per share:Income to common stockholders

$
3,907



23,561


$
0.17


$
3,808



18,511


$
0.21Effect of dilutive securities:Options






425











741Restricted stock units






39











96Income available to common
    stockholders

$
3,907



24,025


$
0.16


$
3,808



19,348


$
0.20  8




---



##### Table of Contents



PEOPLESUPPORT,
    INC. AND SUBSIDIARIES
    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (In thousands, except per share data)
    Six Months Ended June 30,2007


2006Income


Shares


Per Share


Income


Shares


Per Share(Numerator)


(Denominator)


Amount


(Numerator)


(Denominator)


AmountBasic earnings per share:Income to common stockholders

$
7,771



23,531


$
0.33


$
6,683



18,467


$
0.36Effect of dilutive securities:Options






616











698Restricted stock units






50











86Income available to common
    stockholders

$
7,771



24,197


$
0.32


$
6,683



19,251


$
0.35   Note 6.
    Equity-Based
    Compensation    Six Months Ended June 30,2007


2006Net proceeds from stock options
    exercised

$
361


$
567Tax benefits related to stock
    options exercised


37



193Intrinsic value of stock options
    exercised


908



1,638     Stock OptionsWeighted


WeightedNumber of


Average


Remaining


AggregateOptions


Exercise


Contractual


IntrinsicOutstanding


Price


Term


ValueBalance at March 31, 2007


1,946


$
10.38



8.1


$
6,619Granted


86



12.37Forfeited


(104
)


14.40Expired


(6
)


4.02Exercised


(52
)


4.30Balance at June 30, 2007


1,870


$
10.44



8.0


$
5,705       9




---



##### Table of Contents



PEOPLESUPPORT,
    INC. AND SUBSIDIARIES
    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (In thousands, except per share data)
  Restricted Stock UnitsWt. Avg.


WeightedRestricted


Value of


Remaining


AggregateStock Units


Awards


Contractual


IntrinsicOutstanding


at Grant


Term


ValueBalance at March 31, 2007


196


$
15.45



1.5


$
2,279Granted


8



12.09Canceled


(5
)


12.53Released


(3
)


12.41Balance at June 30, 2007


196


$
15.43



1.3


$
2,225       Six MonthsThree Months Ended


EndedJune 30,


June 30,2007


2006


2007


2006Cost of revenues

$
460


$
147


$
862


$
257Selling, general &
    administrative


898



517



1,652



896$
1,358


$
664


$
2,514


$
1,153   Note 7.
    Pension
    Plan    Three Months


Six MonthsEnded


EndedJune 30,


June 30,2007


2007Service cost

$
211


$
408Interest cost


25



48Expected return on plan assets






Unrecognized net actuarial loss


7



14Net periodic benefit cost

$
243


$
470     Note 8.
    Forward
    Foreign Currency Contracts  Accounting for Derivative Instruments and Hedging
    Activities
 10




---



##### Table of Contents



PEOPLESUPPORT,
    INC. AND SUBSIDIARIES
    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (In thousands, except per share data)
      Note 9.
    Income
    Taxes      Accounting
    for Uncertainty in Income Taxes
  Accounting for Uncertainty in Income Taxes  an
    Interpretation of FASB Statement No. 109 Accounting for Income
    Taxes
    and/or
 11




---



##### Table of Contents



PEOPLESUPPORT,
    INC. AND SUBSIDIARIES
    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (In thousands, except per share data)
  Note 10.
    Segment
    and Geographic Information  U.S.-based
  Three Months Ended June 30,


Six Months Ended June 30,2007


2006


2007


2006Revenues:U.S.

$
26,401


$
25,947


$
54,870


$
48,994Philippines


7,927







13,055



Total

$
34,328


$
25,947


$
67,925


$
48,994     As of June 30,2007


2006Long-Lived Assets,
    Net:U.S.:Property and equipment

$
5,828


$
2,748Goodwill


7,629



8,285Intangibles


648



792Philippines:Property and equipment


27,413



12,700Intangibles


74



Costa Rica:Property and equipment


1,550



473Total

$
43,142


$
24,998   Six Month PeriodEnded June 30,2007


2006Depreciation and
    Amortization:U.S.:Property and equipment

$
1,025


$
670Intangibles


72



68Philippines:Property and equipment


3,411



2,164Intangibles






Costa Rica:Property and equipment


287



17Total

$
4,795


$
2,919  12




---



##### Table of Contents



PEOPLESUPPORT,
    INC. AND SUBSIDIARIES
    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (In thousands, except per share data)
  Note 11.
    Commitments
    and Contingencies  Leases
    OperatingYears Ending December 31,

Leases2007

$
3,0932008


6,1032009


4,6522010


4,9162011


4,313Thereafter


11,756Total

$
34,833     Note 12.
    Property
    Company    Note 13.
    Line of
    Credit    Note 14.
    Description
    of Leasing Arrangement    Note 15.
    New
    Accounting Pronouncements  Fair Value Measurements
 13




---



##### Table of Contents



PEOPLESUPPORT,
    INC. AND SUBSIDIARIES
    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (In thousands, except per share data)
    The Fair Value Option for
    Financial Assets and Financial Liabilities  Including
    an Amendment of FASB Statement No. 115
  Note 16.
    Subsequent
    Events   14




---



##### Table of Contents



PEOPLESUPPORT,
    INC. AND  SUBSIDIARIES
    FORM 10-Q FOR THE QUARTER
    ENDED JUNE 30, 2007
  CAUTIONARY
    NOTE REGARDING FORWARD-LOOKING STATEMENTS
  This report on
    Form 10-Q
    contains forward-looking statements within the meaning of the
    federal securities laws that involve material risks and
    uncertainties, including, without limitation, statements about
    our expectations regarding our revenues, our clients, our
    expenses, our anticipated cash needs, our estimates regarding
    our capital requirements and our needs for additional financing.
    We generally identify forward-looking statements by using such
    terms as may, will, could,
    should, potential, continue,
    expect, intend, plan,
    estimate, anticipate,
    believe or similar phrases or the negatives of such
    terms. We base these statements on our beliefs as well as
    assumptions we made using information currently available to us.
    These forward-looking statements are subject to risks,
    uncertainties and assumptions, including those identified below
    in Managements Discussion and Analysis of Financial
    Condition and Results of Operations  Risk
    Factors, as well as other matters not yet known to us or
    not currently considered material by us. Should one or more of
    these risks or uncertainties materialize, or should underlying
    assumptions prove incorrect, actual results may vary materially
    from those anticipated, estimated or projected. These risks,
    uncertainties and assumptions include, but are not limited to,
    our dependence on a limited number of clients, negative public
    reaction to offshore outsourcing and the effect of recently
    proposed legislation, competitive conditions in the markets we
    serve, our ability to manage our growth, the risks associated
    with our operations in the Philippines and Costa Rica, and other
    risks discussed in Managements Discussion and
    Analysis of Financial Condition and Results of
    Operations  Risk Factors in this report and in
    our latest report on
    Form 10-K
    filed with the Securities and Exchange Commission
    (SEC). These forward-looking statements represent
    our estimates and assumptions only as of the date of this report
    and, unless required by law, we do not undertake any obligation
    to update or revise these forward-looking statements. You
    should, however, review the factors and risks we describe in
    other reports and registration statements that we file from time
    to time with the SEC.
  ITEM 2.
    Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations    Overview
     15




---



##### Table of Contents



PEOPLESUPPORT,
    INC. AND SUBSIDIARIES
    FORM 10-Q FOR THE QUARTER
    ENDED JUNE 30, 2007
  Sources
    of Revenues
    
    time-delineated or production-based fees, including hourly or
    per minute charges and charges per interaction or transaction,
    and training fees, all of which are separately negotiated on an
    individual client basis; and
    implementation fees, including revenue associated with the
    installation and integration of new clients into our
    telecommunications, information technology and client reporting
    structures.  U.S.-based
    Key
    Expense Categories
  Cost of revenues.
  U.S.-based
    Selling, general and administrative. U.S.-based
 16




---



##### Table of Contents



PEOPLESUPPORT,
    INC. AND SUBSIDIARIES
    FORM 10-Q FOR THE QUARTER
    ENDED JUNE 30, 2007
    Depreciation and amortization.
  Critical
    Accounting Policies and Estimates
    Revenues
    and Deferred Revenue Recognition
  Revenue Recognition in Financial
    Statements Revenue Recognition
      Accounting
    for Stock-based Awards
   17




---



##### Table of Contents



PEOPLESUPPORT,
    INC. AND SUBSIDIARIES
    FORM 10-Q FOR THE QUARTER
    ENDED JUNE 30, 2007
    Accounting
    for Income Taxes
      Accounting for Uncertainty in Income Taxes  an
    Interpretation of FASB Statement No. 109 Accounting for Income Taxes
  Long-lived
    Asset Impairment
    Recent
    Accounting Pronouncements
  Fair Value Measurements
  The Fair Value Option for
    Financial Assets and Financial Liabilities  Including
    an Amendment of FASB Statement No. 115
 18




---



##### Table of Contents



PEOPLESUPPORT,
    INC. AND SUBSIDIARIES
    FORM 10-Q FOR THE QUARTER
    ENDED JUNE 30, 2007
    Results
    of Operations
    Three

SixMonths Ended

Months EndedJune 30,

June 30,2007

2006

2007

2006Revenue


100
%


100
%


100
%


100
%Cost of revenue (exclusive of
    depreciation and amortization expense shown below)


76



62



73



60Selling, general, and
    administrative


16



18



18



20Depreciation and amortization


7



6



7



6Income from operations


2



14



2



14Interest income


(4
)


(2
)


(4
)


(2
)Other income


(6
)






(5
)


Income before provision for income
    taxes


12



16



12



16Provision for income taxes


1



1







2Net income


11
%


15
%


11
%


14
%   Three
    Months Ended June 30, 2007 compared with Three Months Ended
    June 30, 2006
  Revenues
    Cost
    of Revenues
   19




---



##### Table of Contents



PEOPLESUPPORT,
    INC. AND SUBSIDIARIES
    FORM 10-Q FOR THE QUARTER
    ENDED JUNE 30, 2007
      Selling,
    General and Administrative
    Depreciation
    and Amortization
    Interest
    Income
    Other
    Income
    Benefit
    for Income Taxes
   20




---



##### Table of Contents



PEOPLESUPPORT,
    INC. AND SUBSIDIARIES
    FORM 10-Q FOR THE QUARTER
    ENDED JUNE 30, 2007
    Six
    Months Ended June 30, 2007 compared with Six Months Ended
    June 30, 2006
  Revenues
    Cost
    of Revenues
      Selling,
    General and Administrative
    Depreciation
    and Amortization
   21




---



##### Table of Contents



PEOPLESUPPORT,
    INC. AND SUBSIDIARIES
    FORM 10-Q FOR THE QUARTER
    ENDED JUNE 30, 2007
    Interest
    Income
    Other
    Income
    Benefit
    for Income Taxes
    Liquidity
    and Capital Resources
    Operating
    Activities
   22




---



##### Table of Contents



PEOPLESUPPORT,
    INC. AND SUBSIDIARIES
    FORM 10-Q FOR THE QUARTER
    ENDED JUNE 30, 2007
  Investing
    Activities
      Financing
    Activities
      Off-Balance
    Sheet Arrangements
  Line
    of Credit
    Forward
    Contracts
     23




---



##### Table of Contents



PEOPLESUPPORT,
    INC. AND SUBSIDIARIES
    FORM 10-Q FOR THE QUARTER
    ENDED JUNE 30, 2007
    Contractual
    Obligations
    ITEM 3.
    Quantitative
    and Qualitative Disclosures About Market Risk  Foreign
    Currency Exchange Risk
      Interest
    Rate Sensitivity
    Inflation
    Rate Sensitivity
    ITEM 4.
    Controls
    and Procedures  Evaluation of disclosure controls and
    procedures. Rule 13a-15(e) Rules 13a-15(e) 15d-15(e)
 24




---



##### Table of Contents



PEOPLESUPPORT,
    INC. AND SUBSIDIARIES
    FORM 10-Q FOR THE QUARTER
    ENDED JUNE 30, 2007
    Changes in internal control over financial
    reporting. Rule 13a-15(f) Form 10-Q
 PART II 
    OTHER INFORMATION  ITEM 1.
    Legal
    Proceedings    ITEM 1A.
    Risk
    Factors  Form 10-Q Form 10-Q. Form 10-K Form 10-Q 10-K 10-K.
  Our
    revenues are highly dependent on three major clients that
    collectively accounted for 54% of our revenues for the quarter
    ended June 30, 2007, and any loss of business from our
    major clients would reduce our revenues and seriously harm
    us.
    Substantial
    future sales of our common stock in the public market could
    cause our stock price to fall.
   25




---



##### Table of Contents



PEOPLESUPPORT,
    INC. AND SUBSIDIARIES
    FORM 10-Q FOR THE QUARTER
    ENDED JUNE 30, 2007
  ITEM 4.
    Submission
    of Matters to a Vote of Security Holders    Number of SharesVoted For


Voted Against


Withheld1. To elect the
    Class III directors to hold office until 2010 and until
    their respective successors are elected and qualified(1)Larry C. Bradford


20,914,885







394,123Michael Edell


20,679,223







629,785Lance Rosenzweig


20,880,774







428,2342. To ratify selection of
    independent registered public accounting firm(2)


21,277,577



20,365



11,066     (1)
    
    Directors are elected by a plurality vote, which means that the
    nominee or nominees receiving the most affirmative votes will be
    elected.(2)
    
    The affirmative vote of the majority of the votes cast was
    required for the approval of the selection of the independent
    registered public accounting firm.  Item 6.
    Exhibits  ExhibitNumber31
.1

Rule 13a-14(a)
    Certification of Chief Executive Officer of the Company in
    accordance with Section 302 of the Sarbanes-Oxley Act of
    200231
.2

Rule 13a-14(a)
    Certification of Chief Financial Officer of the Company in
    accordance with Section 302 of the Sarbanes-Oxley Act of
    200232
.1*

Section 1350 Certification of
    Chief Executive Officer of the Company in accordance with
    Section 906 of the Sarbanes-Oxley Act of 200232
.2*

Section 1350 Certification of
    Chief Financial Officer of the Company in accordance with
    Section 906 of the Sarbanes-Oxley Act of 2002     *
    
    The material contained in this exhibit is not deemed
    filed with the SEC and is not to be incorporated by
    reference into any filing of the Registrant under the Securities
    Act of 1933 or the Securities Exchange Act of 1934, whether made
    before or after the date hereof and irrespective of any general
    incorporation language contained in such filing, except to the
    extent that the Registrant specifically incorporates it by
    reference. 26




---



##### Table of Contents



PEOPLESUPPORT,
    INC. AND SUBSIDIARIES
    FORM 10-Q FOR THE QUARTER
    ENDED JUNE 30, 2007
 SIGNATURE    PeopleSupport, Inc.
  By:
    /s/  Caroline
    Rook   Chief Financial Officer
 (Principal Financial and Accounting Officer)
 27