Taleo Announces Restatement of Financial Statements to Defer Approximately $3 Million in Revenue

Issues Update on Review of Revenue Recognition Practices

Taleo Corporation today announced that the Company's previously issued financial statements for the years ended December 31, 2006 and 2007, and the interim financial statements for the quarters ended March 31, 2008 and June 30, 2008 will be restated to make corrections to the timing of recognition of approximately $3 million of consulting services revenue previously recognized as delivered under the proportional performance method, and the timing of revenue recognition of approximately $200,000 for set-up fees, an element of the Company's application services revenue.

During the relevant period of restatement, a total of approximately $56 million in consulting revenue was recognized on the basis of proportional performance, and approximately $245 million of application revenue was recognized. Neither of these corrections will result in any change to the cumulative total revenue to be recognized under the Company's contractual arrangements or to cumulative cash flow from operations.

The decision was made by the Audit Committee of the Board of Directors, following consultation with and upon the recommendation of management, on February 20, 2009, after Deloitte & Touche LLP, the Company's independent registered public accounting firm, requested on November 6, 2008 that the Company review certain of its historical revenue recognition practices.

In the course of the Company's review of its revenue recognition practices, the Company has determined that recognition of consulting revenue as a separate unit of accounting in a multi-element arrangement, pursuant to Emerging Issues Task Force No. 00-21, Revenue Arrangements with Multiple Deliverables, was not appropriate in certain of its customer arrangements in which application services and consulting services were sold in the same arrangement. This correction will result in approximately $3 million of consulting revenue previously recognized on the basis of proportional performance, as has been the Company's historical practice, being recognized ratably over the expected attribution period of the associated arrangement.

Also in connection with the Company's review, the Company has determined that as of January 1, 2006, it would have been appropriate to recognize revenue from set-up fees, an element of the Company's application revenue, over an expected attribution period longer than the typical three-year term of the Company's agreements, as had been the Company's practice. This correction will result in approximately $200,000 of application revenue from set-up fees being recognized over an expected attribution period of seven years rather than the contract term (which is typically three years) of the arrangement with which the set-up fees are associated.

In addition, the Company today provided an update on its review of its revenue recognition practices. The Company continues to make progress in bringing its review process to closure, and, in connection with that process, intends to submit a pre-clearance submission to the Office of the Chief Accountant (the OCA) of the Securities and Exchange Commission. The submission requests the OCA to give pre-clearance to the Company's historical application of EITF 00-21 to the timing of revenue recognition of the Company's consulting services. If the OCA does not agree with the Company's historical application of EITF 00-21, the amount of the restatement of consulting revenue for prior periods may increase.

The Company intends to file its restated financial statements, as well as its delinquent quarterly report on Form 10-Q for the quarter ended September 30, 2008, as soon as practicable following its consultation with the Office of the Chief Accountant.