Commenting on today's announcement, John F. Davis, III, chairman and chief executive officer of Pegasus Solutions said, "The actions we are taking, coupled with our strong position in the hotel industry, will enable significant improvements in our overall business model and will position us well for 2002 and beyond.  This restructuring will complete our reorganization plans, which began in January 2001 when we realigned our two business segments."
     
The Company expects to realize numerous benefits both internally and externally with the movement to a functional organization.  In the Company's current business unit structure, several functions, such as sales, account management and information technology, are duplicated within each business unit.  The reorganization will eliminate many of these resource and task redundancies.  Under the new functional organization, centralized sales, account management and information technology teams will provide services across all of the Company's business units.  The new organization will enable the Company to effectively share resources and will provide more flexibility in allocating these resources to its business units.
     
Within the Company's technology segment, the sales and account management functions will be organized on a geographical basis and will focus on individual customer relationships that span across all product lines.  In addition to the functional realignment, the information technology and customer service processes will be further streamlined by carefully planning the nature and timing of future product releases and by taking advantage of new management reporting processes.  Finally, the Company will be making staffing and operating changes at its call centers that will provide additional capacity to handle more calls and improved flexibility in dealing with changes in call volume.
     
Changes within the hospitality segment include the realignment of Utell's operations from a regional structure into four key functions -- Demand Sales, Membership Development, Marketing and Hotel Services.  Utell is also migrating a variety of financial functions from regional offices around the world to a consolidated Financial Service Center in London.
     
"At the center of the actions we are announcing today are our customers requirements and our clear market position.  Our business unit structure has served us very well in the past, when our product requirements were very separate and distinct.  Through our growth and through the development of our new technologies, the product requirement differences have become blurred, and Pegasus is now in a position to gain significant synergies from our newly announced structure," said Mr. Davis.
     
Pegasus expects to take a one-time pre-tax charge associated with the restructuring of approximately $5 million in the third quarter primarily related to workforce reductions and consolidation of facilities.  In addition, the Company expects to incur other one-time charges of approximately $3 million, which consists primarily of fees paid or to be paid during the third and fourth quarters to independent consultants who assisted with the review.
     
Financial Outlook

Commenting on today's announcement, Susan K. Cole, chief financial officer of Pegasus Solutions, said, "We believe the workforce reductions, when combined with our new streamlined organization and improved internal reporting, will improve efficiencies and lower operating costs enabling us to focus on increasing revenue and company profitability.  We expect this plan to result in full year cost savings in the range of $0.21 to $0.24 per share beginning in 2002."
     
Due to continued concerns over slowing of the economy and the travel industry in particular, the Company is further lowering its revenue guidance for the fourth quarter by $2 million.  Accordingly, Pegasus expects revenues to be in the range of $43 million to $45 million for the fourth quarter.  The Company's previously stated guidance for cash earnings per share for the balance of this year, excluding restructuring and one-time charges, remains unchanged due to cost savings related to the plans announced today and continued focus on reducing variable costs in line with the softening travel market.
     
To provide guidance due to the reorganization, preliminary estimates for 2002 cash earnings per share is expected to be in the range of $0.80 to $0.83.  As previously announced, the Company will provide complete projected financial guidance for 2002 at the time of its third quarter earnings announcement.

Dallas-based Pegasus Solutions, Inc. (http://www.pegs.com) is a leading global provider of hotel reservation technologies.  Its services include central reservations systems; electronic distribution services that connect more than 40,000 hotels to the Internet and to the global distribution systems (GDS); travel agent commission processing and payment services; the consumer Internet site TravelWeb.com (http://www.travelweb.com); the Utell marketing and reservation representation service (http://www.Utell.com); and PegasusCentral(TM), a Web-based enterprise solution with property management applications.  
 
This statement contains references to future events and projected results, including anticipated transactions involving the Company and its service offerings.