PeopleSupport Reports Accounting Adjustments for Third Quarter 2004

LOS ANGELES – PeopleSupport, Inc. (Nasdaq: PSPT), an offshore business process outsourcing (BPO) provider that offers customer management and accounts receivable management services for U.S.-based clients from its facilities in the Philippines, today reported that it is restating its financial statements for the quarter ended September 30, 2004 to exclude a charge related to payment obligations of $4.8 million under its management incentive plan in connection with the company’s initial public offering and to make other adjustments related to obligations under the plan. The charge will instead be reflected in the fourth quarter of 2004 and reported when the company reports its 2004 year-end results. As a result of the adjustments, restated net income calculated in accordance with GAAP for the third quarter of 2004 was $1.9 million, or $0.14 per diluted share, as compared with a previously reported net loss of $2.7 million, or $(1.28) per diluted share. The accounting adjustments have no impact on the pro forma financial results reported for the third quarter of 2004, which already excluded the incentive payments. The adjustments will not affect 2004 revenues, net income (loss) or cash flows because the charge will be shifted from the third to the fourth quarter.

As a result of its IPO, the company became obligated to make $4.8 million in payments under its management incentive plan to senior management and other employees. The IPO priced on September 30, 2004 and closed on October 6, 2004, with the payments being made shortly thereafter. In preparing the company’s financial statements for the quarter ended September 30, 2004, the $4.8 million paid under the incentive plan was recorded on September 30 because by September 30 the registration statement for the offering had been declared effective by the SEC, the offering had priced and the management payments were highly probable. The decision to record the charge in the third quarter was made after consultation with, and the concurrence of, the company’s independent accountants. Subsequently, upon further analysis, the company concluded that the event triggering the payment obligations was the closing of, and the receipt of funds from, the offering, and the charge should have been recorded at that time.

The company will amend its quarterly report on form 10-Q for the third quarter of 2004 to reflect the changes. The decision to restate the company’s financial statements was made on January 6, 2005 by the Audit Committee of the company’s Board of Directors in consultation with management and with the concurrence of the company’s independent accountants, BDO Seidman, LLP.

Forward Looking Statement – Certain statements in this press release, including without limitation, those related to anticipated earnings for the year ending on December 31, 2004, forecasts of future earnings and earnings per share, anticipated revenue for the year ending December 31, 2004, expectations regarding expenses, industry and company trends, and market opportunities are forward looking. The company generally identifies 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. The company bases these statements on management’s beliefs as well as assumptions using information currently available. Risks and uncertainties exist that may cause results to differ materially from those set forth in these forward-looking statements. Factors that could cause the anticipated results to differ from those described in the forward-looking statements include: the company’s dependence on a limited number of clients; negative public reaction to offshore outsourcing and the effect of recently proposed legislation; unanticipated technological changes and requirements, including changes that reduce the demand for the company’s services; competitive conditions in the markets the company serves; the company’s ability to manage growth; the risks associated with operations in the Philippines; changes in government regulations; and other risks identified from time-to-time in the company’s SEC filings. These forward-looking statements represent estimates and assumptions only as of the date they are made. The company undertakes no obligation to update or revise these forward-looking statements to reflect circumstances or events that occur after the date the forward-looking statements were made. You should, however, review the factors and risks described in reports and registration statements that the company files from time to time with the SEC.