Peerless Systems Announces Fiscal 2008 Fourth Quarter and Full-Year Results

EL SEGUNDO, CA, Apr 10 (MARKET WIRE) --
Peerless Systems (NASDAQ: PRLS)

Selected Highlights:

-- Full-year income before tax benefit increases to $5.2 million
-- Company books $5.0 million tax benefit and realizes full-year net
income of $10.1 million, or $0.56 per diluted share
-- Year-over-year cost of goods sold and operating expenses cut by
combined $6.4 million
-- Year-end cash balance reaches $23.1 million, up 41% from the end of
fiscal 2007

Peerless Systems Corporation (NASDAQ: PRLS), a provider of advanced
imagingand networking technologies and components to the digital document
market, today
reported financial results for its fourth fiscal quarter and full fiscal year
ended January 31, 2008.

Fourth Quarter Results

Fourth quarter revenues were $9.3 million versus $8.7 million in the
fourthquarter a year ago and $7.4 million in the third quarter of fiscal 2008.
Product licensing revenue was $6.4 million compared with $6.1 million in
last year's fourth quarter and $4.9 million in the third quarter of fiscal 2008.
Engineering services and maintenance revenue was $2.9 million versus $2.6
million in the fourth quarter a year ago and $2.5 million in the third fiscal
quarter of 2008. During the fourth quarter, Kyocera Mita Corporation (KMC)
awarded
Peerless $0.25 million in performance incentives associated with its engineering
services agreement.

During the fourth quarter, Peerless recorded two block license agreements
collectively valued at $5.6 million, all of which were recognized as revenue
during the period. Five million dollars in fourth quarter license revenue was
related to the KMC block license signed in the second quarter of fiscal year
2008. The current portion of the company's contract backlog for engineering
services, including KMC, is $2.8 million, of which management believes most
will be recognized during the first quarter of fiscal 2009. KMC and Peerless
have extended the engineering services portion of their master development
agreement for the period just prior to the special shareholder vote on the
proposed KMC Asset Purchase Agreement. The extension calls for a monthly payment
of
$625,000 with no bonus incentive until the outcome of the April 28, 2008,
stockholder meeting is known.

Fourth quarter gross margin was 76.1% compared with 63.1% in the fourth
quarter
last year and 60.1% in the prior quarter. The increase was attributable to a
greater percentage of Peerless technology versus third-party technology within
the company's sales mix. In addition, the company recorded a one-time
reduction of $0.3 million in product licensing expense during the quarter, which
arose from one of Peerless' vendor's review of several years of royalty
transactions.

Research and development expenses were $0.7 million, or 8% of revenue, a
reduction of approximately $0.5 million compared with last year's fourth quarter
R&D expenses, which were $1.2 million, or 14.2% of revenue. R&D expenses in
the 2008 third quarter were $1.3 million, or 17.3% of revenue. Sales and
marketing
expenses were $0.6 million, or 6.7% of revenue, versus $0.7 million, or 8.2% of
revenue, in last year's fourth quarter, and $0.6 million, or 8.4% of revenue,
in the 2008 third quarter.

General and administrative expenses were $2.5 million, or 26.3% of
revenue,compared with $2.1 million, or 24.0% of revenue, in the fourth quarter
lastyear and $1.5 million, or 19.7% of revenue, in the third fiscal quarter.
This
year's fourth quarter G&A expense was impacted by approximately $1.1 million
of combined costs, which included expenses associated with the KMC Asset
Purchase Agreement, professional service fees associated with a R&D tax
credit engagement, and other expenses.

Income before taxes in the fourth quarter was $3.5 million. The company
recorded
a fourth quarter income tax benefit in the amount of $5 million associated with
the expected realization of certain deferred tax assets that were previously
fully reserved. The expected realization of the deferred tax assets was
primarily a result of the signing of the KMC Asset Purchase Agreement in the
fourth quarter. Peerless reported income before taxes of $1.6 million in last
year's fourth quarter and $1.3 million in this fiscal year's third quarter.
Fourth quarter net income was $8.5 million or $0.47 per diluted share, which
includes the $5 million income tax benefit.

Peerless ended the fiscal year with cash and cash equivalents of $23.1
million,
an increase of 41% versus the $16.4 million reported at the end of fiscal
2007, and an increase of 6% when compared with the $21.7 million recorded at the
end of the 2008 third quarter.

Fiscal 2008 full-year results

For the full fiscal year, Peerless reported income before taxes of $5.2
million on total revenue of $28.4 million. In fiscal 2007, income before taxes
was $3.3 million on revenue of $33.4 million. Fiscal 2008 net income was $10.1
million, or $0.56 per diluted share, which includes the $5 million income
tax benefit.

Gross margin increased from 57.9% in fiscal 2007 to 65.2% in fiscal 2008.
The
primary reason for the increase was the more favorable mix of Peerless
technology
to third-party technology in the company's sales mix, as well as the benefit
of a product licensing adjustment arising from one of Peerless' vendor's review
of
several years of royalty transactions. Operating expenses declined 14%, or $2.3
million year over year. This reduction was achieved despite $1.4 million in
expenses associated with the signing of the KMC Asset Purchase Agreement,
the decision to enter the rapidly growing digital content management market, a
proxy contest earlier in the year and an outside study commissioned on the
company's R&D tax credit position.

Management Commentary

Rick Roll, president and CEO, said, "We established aggressive profit
objectives
for fiscal 2008, and despite the dramatic changes taking place in our
traditional end markets, we achieved our bottom-line performance goals. We also
made
significant progress in advancing the strategic initiatives we rolled out in
March
of last year. Key strategic milestones during fiscal 2008 included a $6.4
million,
year-over-year reduction in our combined cost of goods sold and operating
expenses, our signing of a definitive agreement with Kyocera Mita
Corporation calling for the sale and perpetual licensing back of our
intellectual property, and our decision to enter the rapidly growing digital
content management sector. Subsequent to the end of our fiscal year, we took
an important step toward this latter objective when we announced our plans to
purchase substantially all of the assets of Prism Software. We believe this
acquisition will serve as a springboard toward our broader strategy of
addressing the market for solution-software and digital content management
applications."

Roll said that Peerless recently retained the services of Roth Capital
Partners,
a leading regional investment bank, which has been selected to assist the
company in identifying and evaluating additional acquisition candidates in the
digital content management sector.

"While growth in our traditional digital imaging markets has slowed
considerably
in recent years, several related industry segments are expanding rapidly,"
Roll said. "We have spent much of the past year analyzing these segments and
have formulated a strategy designed to redirect Peerless' core competencies
and position the company as a strong participant within these high-growth
markets."

The company's initial efforts have been focused on document solutions
applications
and all-in-one (AIO) imaging devices -- both of which exist within the broader
$8 billion digital content management industry. A leading independent
research firm estimates that document solutions -- the segment in which Prism
competes -- is growing domestically at a compound annul rate of 27%. The AIO
sector is estimated to be growing globally at a compound annual rate of
26%, and Peerless' new wholly owned subsidiary, Cue Imaging Corporation, is
pursuing opportunities in that space.

"We believe these and other initiatives we are pursuing will provide
Peerless
with new opportunities for sustained, long-term growth and enhanced
shareholder value," Roll said. "We are encouraged by the broad base of
additional prospects that exist within the digital content management sector,
and
will be working closely with our investment bankers to identify other compelling
acquisition candidates. We are confident that the strategy we are pursuing is
the best course for addressing our overarching objective of building value
for Peerless shareholders."

To help facilitate its growth strategy, the company also recently named
Andrew
Lombard as vice president of corporate development. "Andy joins Peerless with
extensive experience as a senior executive with both private and public
companies," Roll said. "His management background and entrepreneurial drive
will be extremely valuable as we expand our presence in the digital content
management arena. Andy also serves as president of Cue Imaging Corporation,
which will be advancing our AIO imaging device program." Lombard, 44, was
previously chairman and CEO of Protege Sports, a digital media and sports
Internet company he co-founded in 2005. He also was founder, chairman and CEO
of airBand Communications, a wireless communications service provider; and
served
in executive management positions with Adaptive Broadband Corporation (NASDAQ:
ADAP), a wireless broadband equipment company. Lombard also held several
positions
withMotorola, including director of strategy and new business at Motorola
Network
Ventures.

Peerless stockholders are scheduled to vote on the Kyocera Mita asset sale
on
April 28, 2008, and the acquisition of substantially all of the assets of Prism
Software is expected to close within the next 60 days. Roll said that until
these two transactions are finalized, it will be difficult for management to
provide guidance on Peerless' anticipated financial performance for fiscal 2009.
"Once we have closed these two transactions we intend to complete our
revenue and earnings forecasts and will share our expectations with
stockholders during a future earnings presentation," Roll said. "As we have
previously stated, the Kyocera Mita asset sale is a key component of our
overall strategy for enhancing shareholder value. We strongly encourage our
stockholders to vote their shares as soon as possible in favor of the
transaction. We are very encouraged by our recent accomplishments and look
forward to reporting on our ongoing progress throughout the coming fiscal year."

Peerless Systems Conference Call

Management will hold a conference call to discuss fiscal fourth quarter
results
today at 5:00 p.m. Eastern (2:00 p.m. Pacific). Investors are invited to
listen to the call live via the Internet at www.peerless.com, or by dialing
into the teleconference at 888-713-4199 (617-213-4861 for international
callers) and entering the passcode 79712991. Participants should access the
website at
least 15 minutes early to register and download any necessary audio software.
A replay of the webcast will be available for 30 days and a telephonic
replay will be available through April 12, 2008, by calling 888-286-8010
(617-801-6888 for international callers) and entering the passcode 33887334.

About Peerless Systems Corporation

Founded in 1982, Peerless Systems Corporation is a provider of imaging and
networking technologies and components to the digital document markets, which
include manufacturers of color, monochrome and multifunction office products and
digital appliances. In order to process digital text and graphics, digital
document products rely on a core set of imaging software and supporting
electronics, collectively known as an imaging controller. Peerless' broad line
of
scalable software and silicon offerings enables its customers to shorten
their time-to-market and reduce costs by offering unique solutions for multiple
products. Peerless' customer base includes companies such as Canon, IBM, Konica
Minolta, Kyocera-Mita, Lenovo, OkiData, Ricoh, RISO, Seiko Epson and Xerox.
Peerless also maintains strategic partnerships with Adobe and Novell. For more
information, visit Peerless' web site at www.peerless.com.

Safe Harbor Statement Under The U.S. Private Securities Litigation Reform
Act Of
1995

Statements made by us in this press release that are not historical facts
constitute "forward-looking statements" within the meaning of Section 27A of
the Securities Act of 1933 and Section 21E of the Securities Exchange Act of
1934.
These forward-looking statements are necessarily estimates reflecting the best
judgment of our senior management based on our current estimates, expectations,
forecasts and projections and include comments that express our current opinions
about trends and factors that may impact future operating results. Statements
that use words such as we "believe," "anticipate," "estimate," "intend,"
"could,"
"plan," "expect," "project," "predict," "forecast," "outlook," "potential,"
"continue," "may," "future," "can," "enhance," and "should," or the negative of
these, as well as similar expressions, can be used to identify
forward-looking statements. These statements are not guarantees of future
performance, rely on a number of assumptions concerning future events, many of
which are outside of our control, and involve known and unknown risks and
uncertainties that could cause our actual results, performance or achievements,
or industry results, to differ materially from any future results, performance
or
achievements,expressed or implied by such forward-looking statements. Such risks
and
uncertainties include, among other things, stockholder approval of the
saleof substantially all of our intellectual property to Kyocera Mita
Corporation,
changing competitive and market conditions, our reliance on certain OEM
customers for significant portions of our revenues, the sufficiency of our
capital resources, any adverse change in our relationship with Adobe Systems
Incorporated and/or Novell, Inc, increased competition both from in-house OEM
products and low cost offshore competitors, the impact of Microsoft's Vista(TM)
operating system, reduced demand for our existing monochrome technologies or
other products, the rapid changes taking place in the emerging color print
devices markets, our ability to realize contract backlog, our ability to
identify new customers or place our technology in a broader base of products,
our
ability to leverage core competencies and find product segments that blend
well with our core business, our ability to successfully enter new software
application
sectors, our ability to maintain our profit objectives and create compelling
margins, the tenure of the competitive advantage of our old and new
technologies, our reliance on block licensing, our ability to develop and
market our advanced devices and software, the validity and protection of our
intellectual property rights, risks associated with international business
activities, our reliance on key personnel and our board of directors and our
ability to execute our business plan and strategic partnering transactions.

The above risks, and others, are described in further detail in our
reportsfiled with the Securities and Exchange Commission, including, but not
limited
to, those described under "Item 1A. Risk Factors" in our most recent Annual
Report on Form 10-K for the fiscal year ended January 31, 2007, filed on
April 13, 2007, and those described under "Item 1A. Risk Factors" in the most
recent Quarterly Report on Form 10-Q for the quarter ended October 31, 2007,
filed December 12, 2007.

Current and prospective stockholders are urged not to place undue reliance
on
forward-looking statements, which speak only as of the date hereof. We are
under no obligation, and expressly disclaim any obligation, to update or alter
any forward-looking statements, whether as a result of new information,
future events or otherwise. All forward-looking statements contained herein are
qualified in their entirety by the foregoing cautionary statements.

PEERLESS SYSTEMS CORPORATION
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share amounts)

-----------------------------------
Three Months Ended
January 31,
-----------------------------------
2008 2007
---------------- -----------------

Revenues:
Product licensing $ 6,387 68.5% $ 6,134 70.5%
Engineering services and
maintenance 2,939 31.5% 2,569 29.5%
Hardware and other sales - 0.0% 1 0.0%
------- --------
Total revenues 9,326 100.0% 8,704 100.0%
------- --------

Cost of revenues:
Product licensing 575 6.2% 756 8.7%
Engineering services and
maintenance 1,658 17.8% 2,210 25.4%
Hardware and other sales - 0.0% 243 2.8%
------- --------
Total cost of revenues 2,233 23.9% 3,209 36.9%
------- --------
Gross margin 7,093 76.1% 5,495 63.1%
------- --------

Operating expenses:
Research and development 746 8.0% 1,233 14.2%
Sales and marketing 629 6.7% 712 8.2%
General and administrative 2,454 26.3% 2,090 24.0%
------- --------
Total operating expenses 3,829 41.1% 4,035 46.4%
------- --------

Income from operations 3,264 35.0% 1,460 16.8%
Other income 238 2.6% 143 1.6%
------- --------

Income before income taxes 3,502 37.6% 1,603 18.4%
Provision (benefit) for income taxes (4,982) (53.4)% 15 1.0%
------- --------

Net income $ 8,484 91.0% $ 1,588 18.2%
======= ========

Basic earnings per share $ 0.49 $ 0.09
======= ========
Diluted earnings per share $ 0.47 $ 0.09
======= ========

Weighted average common shares
outstanding - basic 17,458 17,152
======= ========
Weighted average common shares
outstanding - diluted 18,181 18,464
======= ========

PEERLESS SYSTEMS CORPORATION
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share amounts)

---------------------------------------
Twelve Months Ended
January 31,
---------------------------------------
2008 2007
------------------ -------------------
Revenues:
Product licensing $ 17,809 62.6% $ 21,758 65.2%
Engineering services and
maintenance 10,632 37.4% 11,232 33.6%
Hardware and other sales 2 0.0% 393 1.2%
-------- ---------
Total revenues 28,443 100.0% 33,383 100.0%
-------- ---------

Cost of revenues:
Product licensing 3,339 11.7% 4,612 13.8%
Engineering services and
maintenance 6,554 23.0% 8,768 26.3%
Hardware and other sales - 0.0% 670 2.0%
-------- ---------
Total cost of revenues 9,893 34.8% 14,050 42.1%
-------- ---------
Gross margin 18,550 65.2% 19,333 57.9%
-------- ---------

Operating expenses:
Research and development 4,394 15.5% 6,706 20.1%
Sales and marketing 2,539 8.9% 3,040 9.1%
General and administrative 7,272 25.6% 6,746 20.2%
-------- ---------
Total operating expenses 14,205 49.9% 16,492 49.4%
-------- ---------

Income from operations 4,345 15.3% 2,841 8.5%
Other income 833 2.9% 468 1.4%
-------- ---------

Income before income taxes 5,178 18.2% 3,309 9.9%
Provision (benefit) for income
taxes (4,969) (17.5)% 23 0.1%
-------- ---------

Net income $ 10,147 35.7% $ 3,286 9.8%
======== =========

Basic earnings per share $ 0.59 $ 0.19
======== =========
Diluted earnings per share $ 0.56 $ 0.17
======== =========

Weighted average common shares
outstanding - basic 17,321 17,100
======== =========
Weighted average common shares
outstanding - diluted 18,154 18,912
======== =========

Contacts:
Peerless Systems Corporation:
John Rigali
Chief Financial Officer
(310) 297-3146

Investor Contact:
Geoff High
Pfeiffer High Investor Relations, Inc.
(303) 393-7044

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