Peerless reported fourth quarter net income of $0.6 million, or $0.04 per share, compared with net income of $0.5 million, or $0.03 per share, in last year’s fourth quarter and a net loss of $2.5 million, or $0.16 per share, in the previous fiscal quarter.

At January 31, 2004, days sales outstanding (DSO) for receivables and unbilled were 72 compared with 39 at the end of the third quarter and 23 at January 31, 2003. The higher than normal DSO was due to a delay in collecting a $2.5 million block license receivable, which ultimately was collected after the close of the fourth quarter. Had the receivable been collected during the fourth period, DSO would have been 43.

Peerless completed fiscal 2004 with total assets of $19.3 million, including cash and investments of $9.4 million, or $0.60 per share. Management had previously forecast that year-end cash and investments would exceed $11 million. The shortfall was due to the delay in collecting the $2.5 million licensing receivable noted above. Peerless ended the year with stockholders’ equity of $11.8 million, or $0.75 per share.

Howard Nellor, president and chief executive officer, said, “While progress in some areas has been slow to come, we achieved a series of important objectives during the fourth quarter and the weeks subsequent to the close of our fiscal year. As anticipated, we shipped the first evaluation units of our new Everest controller to two large potential customers, and we are very pleased to report that we are now in contract discussions with one of these companies for several models of our Everest controller.

“While there can be no assurance our current discussions will result in an executed contract, we are encouraged by the tone and progress of our discussions. In addition, we currently are in pre-proposal discussions with another leading manufacturer related to the potential development of several controllers required for forthcoming office workgroup products.”

Nellor said that the Company’s market research is revealing growing demand for convenience solutions for color copiers and other multi-function peripherals (MFPs). “Manufacturers of office workgroup products are actively transitioning into the color market. This presents a host of challenges for both the OEM and end user. The inherent complexity of color products makes them challenging to develop, and to monitor and maintain once installed. One of our fundamental objectives in developing our Sierra technology suite was product simplicity and convenience. As more OEMs test our technologies and products, we believe there will be even more opportunities for their inclusion in a broader range of future product lines.”

Additional Highlights

•		The Company announced a long-term extension to its agreement with Adobe Systems Inc. for the worldwide licensing of Adobe® PostScript® technologies.
•		Legend (Beijing) Limited, a wholly owned subsidiary of the largest information-technology enterprise in China, said it would utilize Peerless controllers and technologies for an upcoming color printer. Under the agreement, Peerless will provide turnkey development of an office color tandem laser printer. Although this specific agreement will provide the Company with only limited revenues, it enables the Company to build a relationship with a potentially significant client.
•		Peerless recently demonstrated the Everest controller to several leading industry analysts at the On Demand Conference and Exposition in New York City. The conference is the largest industry

event for digital printing automated production, marketing and communications, and IT professionals.

Peerless’ fourth quarter revenue was approximately 4% below previous guidance. However, the Company also had forecast a net loss for the period and achieved profitability as a result of better-than-expected gross margins and lower-than-expected development costs.

Fiscal Year 2004 Results

For the 12 months ended January 31, 2004, total revenue was $25.3 million versus $31.8 million in fiscal 2003. The decline in sales was due primarily to lower product licensing and engineering services revenue, which was partially offset by an increase in revenue from the Company’s application specific integrated circuits.

Gross margins for the 12-month period ended January 31, 2004 were 59.1% compared with 62.0% for fiscal 2003. Net loss was $4.9 million, or $0.31 per share, versus net income of $0.1 million, or $0.01 per share, for fiscal 2003.

Guidance

The Company is currently expecting first quarter revenue of approximately $6.0 million. This forecast is contingent on the completion of a $2 million product licensing agreement, which is scheduled for completion near the end of the quarter but could slip into the second fiscal period. As a result of the expected final testing and launch of the Everest controller, together with the reduction in licensing revenues in the first quarter, the loss for the quarter is expected to be in the $3.0 million to $3.5 million range.

The Company expects to end the first quarter with cash and investments of approximately $7.5 million. Although the Company expects to begin distribution of the Everest product early in the second quarter, it is anticipated that cash and investments will decrease to approximately $3.0 million by the end of this year’s third quarter. Although the Company expects the cash position to increase thereafter with the expected sales growth associated with the Sierra technology, which includes the Everest controller product, there can be no assurances that the Company will experience the anticipated increase in the Sierra technology sales in the 4^th quarter or at all. The Company expects to reduce operating expenses in the second quarter as a result of completion of the majority of the Sierra development effort. However, if the remaining development costs are higher than expected or the anticipated level of Sierra sales are lower than anticipated and the Company is unable to further reduce its operating expenses, the Company may need to take significant measures to preserve and maintain continued business operations. In such event, the company may need to further reduce costs and may have to access the capital markets to raise additional funding. There is no assurance that the Company would be successful in raising capital at attractive terms or at all, and should the Company be successful in raising capital, the financing may be dilutive to current shareholders.

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 800-218-0204 (01-303-262-2130 for international callers). Participants should go to the web site at least 15 minutes early to register and download any necessary audio software. A replay of the webcast will be available for 30 days. An audio replay will be available through March 24, 2004, by calling 800-405-2236 (01-303-590-3000 for international callers) and entering the passcode 572580.

About Peerless Systems Corporation

Founded in 1982, Peerless Systems Corporation is a provider of imaging and networking controllers 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, Legend, OkiData, Ricoh, Seiko Epson and Xerox. Peerless also maintains strategic partnerships with Adobe, IBM Microelectronics, and Novell. For more information, visit the Company’s web site at www.peerless.com.

SAFE HARBOR STATEMENT UNDER THE U.S. PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995.

This Release contains forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. The use of such words including “could slip,” “expected increase,” “expects to,” “forthcoming,” “is expected,” “may use,” “will decrease,” “will rapidly expand,” “will result,” as well as words of similar effect in connection with or related to any discussion of or reference to future operations, opportunities or financial performance set apart forward-looking statements. In particular, statements regarding the Company’s outlook for future business, financial performance and growth, profitability, product availability and potential applications and successes and the impact on future performance of organizational and operational changes all constitute forward-looking statements.

These forward-looking statements are just predictions and best estimations consistent with the information available to the Company at this time. Thus they involve known and unknown risks and uncertainties such that actual results could differ materially from those projected in the forward-looking statements made in this Release. Risks and uncertainties include those set forth in Peerless’ public filings with the Securities and Exchange Commission, including but not limited to the Company’s most recent Annual Report on Form 10-K dated January 31, 2003 in the Section called Risks and Uncertainties at pages 27 through 37, inclusive, filed with the Securities and Exchange Commission (SEC) on May 1, 2003, and the Company’s most recent Quarterly Report on Form 10-Q dated October 31, 2003 in the Section called Risks and Uncertainties at pages 16 through 23, inclusive, filed with the SEC on December 15, 2003.

Current and prospective stockholders are urged not to place undue reliance on forward-looking statements, which speak only as of the date hereof. The Company is under no obligation, and expressly disclaims 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.

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