Peregrine Stayed Too Long at the Dance

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Peregrine Systems (PRGN - commentary - Cramer's Take) smells like rotted deer on the side of the highway. The maggots are just beginning to appear, the crows are having a field day and you can't walk near it without being bowled over by the stench.

Yet, it was loved, loved, loved last year at this time. How could so many people fall in love with what amounted to a help-desk software company? How could so many people believe in what is now a bloated carcass?

First, it is possible that there were accounting gimmicks. Those are being investigated, of course.

More important, though, the category, "enterprise software, customer retention, customer relationship" was virtually worshiped on Wall Street during the dot-com mania and its wake. Every company that came public during the dot-com period was an immediate candidate for Peregrine or its progeny. Everybody needed help at the help desk.

Now those companies are disappearing daily. (Don't feel bad; they were disappearing hourly at one point.) The companies that need this kind of software can get it, if they want to, from anybody. There was simply nothing special about Peregrine except for the fact that it generated a lot of fees and made a lot of commercials. Everybody likes those!

And why not like Peregrine? The company had generated 16 consecutive quarters of sequential revenue growth at the time that Piper Jaffray slapped the big "strong buy" on the company. "Initiating coverage of the Quiet Software Company Peregrine Systems With a Strong Buy and $44 Price Target," the research read. "Strong Performance and Growth Prospects from this Diverse Software Provider Create Compelling Investment Opportunity." The analyst noted that "brand awareness" was rising -- that's those pesky commercials. "Strong visionary and execution-oriented management team will continue to drive growth," the report continued, making me think that the management was secretly involved in taking acting lessons from the masters.

The analyst, Tim Klein, noted that Peregrine stacked up much better than the competition when it came to growth. Now, here's the clincher. Get a load of this competition: J.D. Edwards, Siebel Systems (SEBL - commentary - Cramer's Take), Sybase (SY - commentary - Cramer's Take), Parametric Technology (PMTC - commentary - Cramer's Take) and PeopleSoft (PSFT - commentary - Cramer's Take). Ah, at one time these six companies were the belles of the ball.

Now, with the exception, maybe, of Siebel, they are the stocks you just wish would go home already.

Enterprise software. How many times did I say to Jeff Berkowitz, "this is the most treacherous minefield of all of the tech groups"?

And Peregrine turned out to be the biggest booby trap of all.

Random musings: Sure seems like everything, I mean everything, is totally upside-down these days. To which I say, it's always been a little upside-down, but there is an extreme tone to what I am seeing since Sept. 11. It's weird every day now in this market. Very hard to get a handle on it day-to-day.

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James J. Cramer is a director and co-founder of TheStreet.com. He contributes daily market commentary for TheStreet.com's sites and serves as an adviser to the company's CEO. Outside contributing columnists for TheStreet.com and RealMoney.com, including Cramer, may, from time to time, write about stocks in which they have a position. In such cases, appropriate disclosure is made. To see his personal portfolio and find out what trades Cramer will make before he makes them, sign up for Action Alerts PLUS by clicking here. While he cannot provide personalized investment advice or recommendations, he invites you to send comments on his column to [e-mail]. Click here to get Cramer's book, "Confessions of a Street Addict."