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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

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FORM 10-K



|                                                                                                          | 
|--------------------------------------------------------------------------------------------------------- | 
|FOR ANNUAL AND TRANSITION REPORTS PURSUANT TO SECTIONS 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

(Mark One)

|                                            |  |                                                                                         
|------------------------------------------- |  | ----------------------------------------------------------------------------------------
|[X]                                         |  | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934    
|                                           
|For the fiscal year ended December 31, 2003
|                                           
|OR                                         
|                                           
|[  ]                                        |  | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
|                                           
|For the transition period from           to

Commission file number: 0-19395

SYBASE, INC.
(Exact name of registrant as Specified in its Charter)

|                                                                |  |                                     
|--------------------------------------------------------------- |  | ------------------------------------
|Delaware                                                        |  | 94-2951005                          
|(State or Other Jurisdiction of

Incorporation or Organization) |  | (I.R.S. Employer
Identification No.)

One Sybase Drive, Dublin, California 94568
(Address of principal executive offices and Zip Code)

Registrants telephone number, including area code: (925) 236-5000

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act:

Common Stock, $.001 par value
Preferred Share Purchase Rights

Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. YES [X]   NO [___]

Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of Registrants knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]

Indicate by check mark whether the Registrant is an accelerated filer (as
defined in Rule 12b-2 of the Act). YES [X]  NO [___]

The aggregate market value of the voting and non-voting common equity held
by non-affiliates computed by reference to the price at which the common equity
was last sold as of the last business day of the Registrants most recently
completed second fiscal quarter was $1.3 billion. As of March 1, 2004, the
Registrant had 97,270,355 shares of Common Stock outstanding.

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TABLE OF CONTENTS



|              |                                                                                                         |                                                 |  |  |  |  |  | 
|------------- | ------------------------------------------------------------------------------------------------------- | ----------------------------------------------- |  |  |  |  |  | 
|PART I       
|              | ITEM 1. BUSINESS                                                                                       
|              | ITEM 2. PROPERTIES                                                                                     
|              | ITEM 3. LEGAL PROCEEDINGS                                                                              
|              | ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS                                            
|PART II      
|              | ITEM 5. MARKET FOR THE REGISTRANTS COMMON STOCK AND RELATED STOCKHOLDER MATTERS                       
|              | ITEM 6. SELECTED FINANCIAL DATA                                                                        
|              | ITEM 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS          
|              | ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                                    
|              | ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA                                                    
|              |                                                                                                         | Consolidated Balance Sheets                    
|              |                                                                                                         | Consolidated Statements of Operations          
|              |                                                                                                         | Consolidated Statements of Stockholders Equity
|              |                                                                                                         | Consolidated Statements of Cash Flows          
|              |                                                                                                         | Notes to Consolidated Financial Statements     
|              | ITEM 9A. CONTROLS AND PROCEDURES                                                                       
|              | ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE           
|PART III     
|              | ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF REGISTRANT                                                
|              | ITEM 11. EXECUTIVE COMPENSATION                                                                        
|              | ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
|              | ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS                                                
|              | ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES                                                        
|PART IV      
|              | ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K                               
|SIGNATURES   
|EXHIBIT INDEX
|EXHIBIT 3.2  
|EXHIBIT 10.12
|EXHIBIT 10.24
|EXHIBIT 10.25
|EXHIBIT 10.27
|EXHIBIT 10.28
|EXHIBIT 10.35
|EXHIBIT 10.36
|EXHIBIT 10.37
|EXHIBIT 10.39
|EXHIBIT 10.40
|EXHIBIT 10.41
|EXHIBIT 10.42
|EXHIBIT 10.43
|EXHIBIT 10.44
|EXHIBIT 21   
|EXHIBIT 23.1 
|EXHIBIT 31.1 
|EXHIBIT 31.2 
|EXHIBIT 32   



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DOCUMENTS INCORPORATED BY REFERENCE

|                |  |                                                                                                                                                                                                                                                             
|--------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Form 10-K Parts |  | Document Incorporated by Reference                                                                                                                                                                                                                          
|                |  |                                                                                                                                                                                                                                                             
|III             |  | Definitive Proxy Statement for the Annual Meeting of
Stockholders to be held May 27, 2004 (to be filed within 120 days of
Registrants fiscal year ended December 31, 2003 pursuant to Section
14(a) of the Securities Exchange Act of 1934 (Exchange Act)

FORWARD-LOOKING STATEMENTS

This annual report contains forward-looking statements that involve risk and
uncertainties that could cause the actual results of Sybase, Inc. and its
consolidated subsidiaries (Sybase, the Company, we or us) to differ
materially from those expressed or implied by such forward-looking statements.
These risks include a continued slow economic recovery in the U.S.; global
political unrest including acts of terrorism and the continued hostilities in
the Middle East; sales productivity; the continued possible disruptive effects
of further organizational changes and changes in Company management; shifts in
our business strategy, or market demand for our products and services; public
perception of Sybase, our technology vision or future prospects; rapid
technological changes; competitive factors; interoperability of our products
with other software products, risks inherent in acquiring other companies, the
ability to integrate acquired companies into our business and culture, and
other risks detailed from time to time in our Securities and Exchange
Commission filings, including those discussed in Managements Discussion and
Analysis of Financial Condition and Results of Operations (MD&A)
 Overview, and MD&A  Future Operating
Results, Part II, Item 7 of this Annual Report on Form 10-K.

Expectations, forecasts, and projections that may be contained in this report
are by nature forward-looking statements, and future results cannot be
guaranteed. The words anticipate, believe, estimate, expect, intend,
will, and similar expressions in this document, as they relate to Sybase and
our management, may identify forward-looking statements. Such statements
reflect the current views of our management with respect to future events and
are subject to risks, uncertainties and assumptions. Forward-looking statements
that were true at the time made may ultimately prove to be incorrect or false,
or may vary materially from those described as anticipated, believed,
estimated, intended or expected. We do not intend to update these
forward-looking statements.

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PART I




ITEM 1. BUSINESS

Sybase enables the Unwired Enterprise through enterprise and mobile software
solutions for information management, development and data integration in
commerce, communications, finance, government and healthcare. Sybase solutions
integrate platforms, databases, and applications, and extend those applications
to mobile workers through mobile and Wi-Fi technologies. Sybase information
management solutions are widely recognized for ultra-reliability, security and
dedication to openness, allowing easy and effective development in heterogenous
environments. Sybase was founded and incorporated in California on November
15, 1984, and was re-incorporated in Delaware on July 1,
1991.

During 2003, our business was organized into three principal operating
divisions, two of which were conducted primarily through two majority owned
subsidiaries. Below is a brief description of the business of each division:

     Infrastructure Platform Group (IPG)is focused principally on enterprise
class database servers for mission-critical transactions, data warehousing and
business analytics, complemented by high-availability replication, data
movement, data integration, and development products. IPG products help
enterprises improve response time, lower cost and reduce the complexity of
managing their information environment. They also increase developer
productivity by providing dramatically easier-to-use tools that cut time and
project complexity while improving collaboration. Beginning in 2003, IPG
combined under a single umbrella the businesses of three former divisions:
Enterprise Solutions Division (ESD), Business Intelligence Division (BID), and
e-Business Division (eBD). eBD focused primarily on certain products of New
Era of Networks, Inc. (NEN), which we acquired in April 2001. During 2003, the
principal products of IPG accounted for approximately 77 percent of our license
revenue.

     iAnywhere Solutions, Inc. (iAS)provides software and services that
enable the delivery of enterprise information anywhere, at anytime. More than
12,000 customers and 1,000 partners worldwide rely on our industry
leading SQL Anywhere® database and mobile enterprise solutions. In addition,
iASs AvantGo® mobile Internet service has more than ten million registered
subscribers. We acquired AvantGo, Inc. in February 2003. The principal
products of iAS accounted for approximately 21 percent of our license revenue
in 2003.

     Financial Fusion, Inc. (FFI)provides banking, payment, and trade
messaging solutions to more than 200 leading financial
institutions. FFI solutions enable banks to provide account access and payment
initiation on behalf of their consumer, small business and corporate clients.
For financial market customers, FFI messaging and integration solutions enable
straight-through processing (STP) of trading transactions. FFI was created to
extend the business of Home Financial Network, Inc. (HFN), which we
acquired in January 2000, and to develop certain products formerly within NEN.
The principal products of FFI accounted for approximately 2 percent of our
license revenue in 2003.

A summary of financial results for these divisions is found in Note Ten to the
Consolidated Financial Statements, Part II, Item 8, incorporated here by
reference.

CUSTOMERS

Our customers are primarily Fortune 1000 companies in North America and their
equivalents in other geographic regions around the globe. Our primary markets
include financial services, commerce, communications, healthcare, and
government agencies. No single customer accounted for more than 10
percent of total
revenues during 2003, 2002 or 2001. Our customers during 2003
included the following:

     A
major content manager vendor that entered into an OEM relationship
with IPG to embed in its application Sybase®
Content Capture, a lightweight content integration engine, and Sybase Mach
Desktop, a lightweight user experience

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server, to give users personalized views of
real-time information quickly and easily, and the ability to efficiently manage
content integration.

     One of the worlds largest charter airlines leveraged SQL Anywhere®
Studio, Manage Anywhere Studioand Pylon Anywheretechnologies as a part of
an innovative mobile employee information system providing more than 2,300
airline employees with access to crew rosters, passenger information, air
traffic control notices, safety notices, updated destination details and duty
free sales information using a Wi-Fi network in the airport crew
rooms. As a result of this mobile deployment, the airline can save $700,000 per
year by automating more than fifty paper-based workflow processes.

     One of the top 100 banks in the U.S. added Financial Fusion® Corporate
Banking Solution to its existing suite of FFI solutions to create a single
technology platform to serve all of its online banking customers. The bank
previously implemented FFIs Consumer Banking Solutionand Small Business
Banking Solutionfor other functions including bill payment and presentment,
alerts, check imaging, and bill payment and transfer warehouse.

Our products are available on hardware platforms manufactured by
Hewlett-Packard, IBM, Sun Microsystems and others. We also make products that
connect these platforms to other hardware platforms with large installed bases.
Our products are also available for a wide range of operating systems
including various UNIX environments, Windows, Windows NT, and Linux. A
description of our principal products follows:

Infrastructure Platform Group (IPG)

Enterprise Solutions Products

Sybase Adaptive Server® Enterprise(ASE) is a high-performance, self-managing,
 web services-enabled information management system
designed to support the demanding requirements of businesses today at an
efficient cost of ownership. ASE offers a unique blend of advanced developer
features and an efficient, robust computing environment for all forms of
mission-critical transaction processing on numerous hardware and software
platforms. Among its many enterprise-class features is advanced support for
XML, highly available computing, extensive dynamic tuning, and advanced
security systems such as row-based access control and SSL-based communications.

Replication Server®allows remote sites to share data from a primary data site,
and to automatically receive updated data from the primary site. Replication
Server uses store-and-forward asynchronous replication that monitors and
copies changes made at the primary data site and automatically forwards those
changes to all replicated sites. Sybase replication technology offers an
innovative practical architecture for building cost-effective,
high-performance, robust distributed systems, and supplies a flexible approach
to information delivery that can rapidly adapt to changing business needs.

Sybase PowerBuilder® is a 4GL rapid application development (RAD) tool that
increases developer productivity through a tight integration of design,
modeling, development and management. Developers can build rich-client
applications for web-services, n-tier and client server and then
quickly deploy their applications
into heterogeneous environment such as Microsoft.Net and J2EE.

Sybase Pocket PowerBuilderis a highly productive 4GL integrated development
environment (IDE) for mobile application development. This product is designed
to simplify and accelerate the creation of mobile and wireless enterprise
applications targeting Windows CE-based environments, so that mobile
applications can be developed with almost codeless ease. Pocket PowerBuilder also
simplifies the creation of database-powered applications through close
integration with SQL Anywhere®, the leading mobile database from iAS.

Sybase RepConnect, Open Server, Open Client and OpenSwitchare among our
core data access and integration products. These products allow users to use a
single language to access varied

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types of data and applications (e.g., real-time data feeds, stored data) from
multiple sources as if they were contained in a single database.

e-Business Products

Sybase Enterprise Portal (EP)is an extensible portal environment capable of
extending an enterprise to trading partners and expanding its reach to mobile
workers. We also offer two embeddable portal technologies, Sybase Content
Captureand Sybase Mach Desktopthrough our OEM channel.

Sybase EAServeris a highly scalable, robust application server for e-portal
and Internet business solutions. It provides best-of-class transaction and
security management and high availability, enabling customers to support highly
trafficked websites.

Sybase Integration Orchestratorallows users to harness mission-critical data from multiple
applications into flexible, automated, re-useable and easily configurable
end-to-end processes.

Sybase PowerDesigner® an
all-one collaborative modeling solution that enables business
analysts, architects, developers and database administrators to
collaboratively design and build applications without worrying about
different skill sets, platforms or languages. PowerDesigner supports
the latest editions of most leading application frameworks, including
EAServer using J2EE and EJB, Apache Tomcat, BEA WebLogic, and IBM
WebSphere.

Sybase HIPAA Accelerator, Sybase EDI Server and Sybase e-Biz Impactare
integration products aimed at the healthcare industry. The HIPAA solution is a
tool designed to help customers manage their compliance and reporting
obligations under the Health Insurance Portability and Accountability Act of
1996. Sybase EDI Server is an integration product for organizations using
electronic data interchange (EDI) to exchange business information with trading
partners. Sybase e-Biz Impact is a proven integration solution for managing
complex information routing, particularly in the healthcare industry.

Business Intelligence Products

Sybase Adaptive Server® IQpresents customers with a wide range of capabilities
for business intelligence and web-enabled data warehousing, allowing data
access, query performance and data loading 10 to 100 times faster than
traditional relational databases. Multiplexing capabilities allow this product
to maintain high performance levels even with dramatic increases in the number
of users and the volume of data. Adaptive Server IQ Multiplex can
compress even terabytes of data without the need for continuous, laborious
tuning and maintenance.

Sybase Industry Warehouse Studios(IWS) are prepackaged solutions that can be
customized for a variety of industries including retail banking, capital markets,
insurance, healthcare and telecommunications to create a strategic, end-to-end
business intelligence infrastructure that encompasses data acquisition, data
modeling, metadata management, data analysis, data storage and analytic
applications. IWS provides the basic framework to enable an organization to
analyze customer behavior and trends and their impact on the business.

iAnywhere Solutions (iAS)

SQL Anywhere® Studiois a market-leading data management and enterprise data
synchronization solution that enables the rapid development and deployment of
database-powered applications for mobile, remote and small to medium sized
business environments.

m-Business Anywhereis a highly scalable platform for delivering
web-based applications and content to mobile devices with no recoding required.
It enables always available computing, providing both secure wireless and
offline access to information, allowing users to access the information they
need, when and where they need it.

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Manage Anywhere Studiois an all-in-one solution that provides central control
of software distribution and updates, system configuration, and device
inventory for desktops, laptops, servers and hand-held devices. It is designed
to reduce costs of software distribution, help desk support, inventory
maintenance and lost productivity.

Pylonis a set of flexible, feature-rich, secure solutions that can extend a
companys existing Lotus Notes and Microsoft Exchange infrastructure to
hand-held devices. Pylon products enable organizations to mobilize corporate
email, calendar, contacts, task lists, expenses and custom Notes applications,
easily  with no programming required.

Mobile Salesis a customizable software package that helps organizations
accelerate the adoption and return on investment of existing customer
relationship management (CRM) solutions, by enabling sales professionals to
access these systems from mobile devices, anywhere, at anytime. Mobile Sales
offers adaptors for Siebel and salesforce.com applications, and Mobile Pharma
addresses the mobile CRM needs of the pharmaceutical industry.

AvantGo® Mobile Internet Service is a free service that delivers rich, personalized mobile websites to
PDAs and smartphones. Today, more than 2,500 major brands, including American
Airlines, CNET, GM, Rolling Stone and The New York Times, leverage AvantGo to
target more than ten million registered
subscribers. AvantGo offers the convenience of anywhere, anytime access,
seamlessly supporting both wireless and sync and go connectivity. To learn
more about AvantGo visit www.avantgo.com.

Financial Fusion, Inc. (FFI)

Financial Fusion® Banking Solutionsenable financial institutions to offer
multiple-delivery channel support to their consumer, small business, and large
corporate clients. Features include account access, banking, cash management
services, imaging, bill payment and presentment, customer care, and wireless
application support. Solutions are supported on an integrated platform driven
by Financial Fusion Server, using advanced Java technology and industry
protocols.

Financial Fusion® Financial Markets Solutionsare designed to meet the
straight-through processing connectivity and integration requirements of the
trading industry. FFI solutions provide processing for transaction intensive
trading organizations such as securities and investment firms, electronic
communications networks and network providers. FFI solutions support a variety
of electronic messaging protocols including FIX, FIXML, FpML, EMX, SWIFT, VMUs,
and certain proprietary protocols.

WORLDWIDE SERVICES

Technical Support.Our Customer Service and Support organization offers
technical support for our entire family of products. We currently maintain
regional support centers in North America, Europe, and Asia Pacific that can
provide 24 x 7 technical services in
all time zones around the world. Our end users and partners have access to
technical information sources and newsgroups on our support website, including
a problem-solving library, a solved cases database, and software
fixes that can be downloaded. Customers generally can choose technical support
programs that best suit their business needs. All of the following support
programs are priced on a per-product basis and include updates and new version
releases that become available during the support period:

     Basic Supportis generally geared toward smaller local enterprises, and
includes 24 x 7 support coverage for up to two customer support contacts.

     Extended
Supportis the minimum support level recommended for our enterprise
database products such as ASE and includes 24 x 7 coverage for up to four customer support
contacts.

     Enterprise Supportoffers personalized high-availability support for
companies with mission-critical projects. Services include designated
enterprise support team, account management and other specialized options.

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In addition to the above support
offerings, we also offer several support services options
geared toward developers for designated workplace level and tools products.
These programs are priced on a flat-fee annual price basis with updates and new
version releases available for purchase separately.

Each of our principal business divisions also offer a variety of support services
to their partners and resellers.

Consulting.The Sybase Professional Services (SPS) organization offers
customers comprehensive consulting, education and integration services designed
to optimize their business solutions using both Sybase and non-Sybase products.
Service offerings include assistance with data and system migration, custom
application design and development, implementation, performance improvement,
knowledge transfer and system administration. SPS also provides extensive SQL
and Sybase product education.

Education. We provide a broad education curriculum allowing customers and
partners to increase their proficiency in our products. Basic and advanced
courses are offered at Sybase education centers throughout North America, South
America, Europe and Asia Pacific (including Australia and New Zealand).
Specially tailored customer classes and self-paced training are also available.
A number of our distributors and authorized training providers also provide
education in our products.

SALES AND DISTRIBUTION

Licensing Model.Consistent with software industry practice, we do not sell or
transfer title to our software products to our customers. Instead, customers
generally purchase non-exclusive, nontransferable perpetual licenses in
exchange for a fee that varies depending on the mix of products and services,
the number and type of users, the number of servers, and the type of operating
system. License fees range from several hundred dollars for single user
desktop products to several million dollars for solutions that can support
hundreds or thousands of users. We also license many of our products for use
in connection with customer applications on the Internet. Our products and
services are offered in a wide variety of configurations depending on each
customers needs and hardware environment.

Distribution Method.All Sybase products and services generally are licensed
through our direct sales organization and our indirect sales channels.
Indirect sales channels include value added resellers (VARs), systems
integrators (SIs), original equipment manufacturers (OEMs) and international
distributors and resellers.

International Business.In 2003, 41 percent of the Companys total revenues
were from operations outside North America, with operations in EMEA (Europe,
Middle East and Africa) accounting for 27 percent, and operations in our
Intercontinental region (Asia Pacific and Latin America) accounting for 14
percent. Most of our international sales are made by our foreign subsidiaries.
However, certain sales are made in international markets from the United
States. We also license our products through distributors and other resellers
throughout the world. A summary of our geographical revenues is set forth in
MD&A  Geographical Revenues, Part II, Item 7, and Note Ten to Consolidated
Financial Statements, Part II, Item 8, incorporated here by reference. For a
discussion of the risks associated with our foreign operations, see MD&A 
Future Operating Results  International Operations, Part II, Item 7,
incorporated here by reference.

INTELLECTUAL PROPERTY RIGHTS

We rely on a combination of trade secret, copyright, patent and trademark laws,
as well as contractual terms, to protect our intellectual property rights. As
of March 1, 2004, we had 75 issued patents (73 U.S. and 2 non-U.S.) that expire
in approximately 20 years from the date they are filed. These patents cover
various aspects of our technology. We believe that our patents and other
intellectual property rights have value, but no single patent is critical to
Sybase as a whole. However, any of our proprietary rights could be challenged,
invalidated or circumvented, or may not provide us with significant competitive
advantage. For a discussion of additional risks associated with our
intellectual property, see MD&A  Future Operating Results  Intellectual
Property, Part II, Item 7, incorporated here by reference.

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RESEARCH AND DEVELOPMENT

Since inception, we have made substantial investments in research and product
development. We believe that timely development of new products and
enhancements to our existing products is essential to maintaining a strong
position in our market. During 2003, we invested $116.9 million, or 15 percent
of our total revenue in research and development. We intend to continue to
invest heavily in these areas. However, future operations could be affected if
we fail to timely enhance existing products or introduce new products to meet
customer demands. For a further discussion of the risks associated with
product development, see MD&A  Future Operating Results  Product
Development, Part II, Item 7, incorporated here by reference.

COMPETITION

The market for our products and services is extremely competitive due to
various factors including a maturing enterprise infrastructure software market,
changes in customer IT spending habits, and the trend toward consolidation of
companies within the software industry. For a discussion of certain risks
associated with competition, see MD&A  Future Operating Results 
Competition, Part II, Item 7, incorporated here by reference.

EMPLOYEES

As of March 1, 2004, Sybase and
its subsidiaries had approximately 3,660 regular
employees. For information regarding our executive officers, see Directors
and Executive Officers of the Registrant, Part III,
Item 10 below, incorporated here by reference.




ITEM 2. PROPERTIES

As of December 31, 2003, our field operations, professional service
organizations and subsidiaries occupied leased facilities in approximately 95
locations throughout North America, Latin America, Europe and the Asia Pacific
region (including Australia and New Zealand), aggregating approximately 1.6
million square feet.

In May 2003, we entered into a 15-year non-cancelable lease pursuant to which a
105,000 square foot building will be constructed to house administrative, R&D
and other facilities of our subsidiaries in Waterloo, Canada. The lease is scheduled to
commence in the third quarter of 2004 and will expire in 2019. We have the
option to renew the lease for one 10-year term at the end of the initial term
generally at then-fair market value, subject to certain conditions. The operations and personnel that will relocate to the new space currently occupy
approximately 60,190 square feet elsewhere in Waterloo. The lease for the
current space has been extended on a month-to-month basis until the move is
completed.

On January 28, 2000, we entered into a 15-year non-cancelable lease of our
corporate headquarters facility in Dublin, California. The property consists
of approximately 406,000 square feet of administrative and product development
facilities. We moved to Dublin from our offices in Emeryville, California
beginning in January 2002. We have the option to renew our Dublin lease for up
to two five-year periods, generally at then-fair market value, subject to
certain conditions.

In September 1999, the Company sold its facility in Concord, Massachusetts and
simultaneously entered into a sale-leaseback agreement on two other buildings
in Concord, which expires in June 2006. Under the terms of the sale-leaseback
agreement, the Company entered into a seven-year operating lease, which was
amended in June 1, 2001 to extend the lease term an additional six years. The
termination date of this lease is October 31, 2012. For a further discussion
of our leases in Dublin, Concord, and Waterloo, see Note Six to Consolidated
Financial Statements, Part II, Item 8, incorporated here by reference.

We continue to lease space at other locations around the world that serve a
variety of functions, including professional services, sales, engineering,
technical support, and general administration. These include approximately
31,935 square feet in Maidenhead, England leased through May 2009 with an
option to renew, and approximately 96,360 square feet in Boulder, Colorado
leased through September 2010. We also maintain engineering centers in
Englewood, Colorado; Paris, France; Waterloo, Canada; and
Singapore.

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ITEM 3. LEGAL PROCEEDINGS

No proceedings required to be disclosed under this item were pending or terminated during
the fourth quarter of 2003. See Note Twelve to Consolidated Financial
Statements, Part II, Item 8, incorporated here by reference.




ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No matters were submitted to a stockholder vote in the quarter ended December
31, 2003.




PART II




ITEM 5. MARKET FOR THE REGISTRANTS COMMON STOCK AND RELATED STOCKHOLDER MATTERS

Sybase, Inc. Common Stock, par value $.001, began trading on the New York Stock
Exchange (NYSE) on May 22, 2001, under the symbol SY. Prior to that, our stock
traded on the NASDAQ National Market System under the symbol
SYBS. Following
is the range of low and high closing prices for our stock as reported on the
NYSE for the quarters indicated.

|                                 |  |      |       |     |  |   |       | 
|-------------------------------- |  | ---- | ----- | --- |  | - | ----- | 
|                                 |  | High |       | Low
|                                 |  |      |       |    
|Fiscal 2002                      |  |      |       |     |  |   |       | 
|Quarter ended March 31, 2002     |  | $    | 19.00 |     |  | $ | 15.81 | 
|Quarter ended June 30, 2002      |  | $    | 17.45 |     |  | $ | 10.40 | 
|Quarter ended September 30, 2002 |  | $    | 15.15 |     |  | $ | 9.35  | 
|Quarter ended December 31, 2002  |  | $    | 13.66 |     |  | $ | 11.05 | 
|Fiscal 2003                      |  |      |       |     |  |   |       | 
|Quarter ended March 31, 2003     |  | $    | 14.97 |     |  | $ | 12.95 | 
|Quarter ended June 30, 2003      |  | $    | 14.67 |     |  | $ | 11.49 | 
|Quarter ended September 30, 2003 |  | $    | 17.59 |     |  | $ | 13.80 | 
|Quarter ended December 31, 2003  |  | $    | 22.10 |     |  | $ | 16.99 | 

We have never paid cash dividends on our capital stock, and we do not
anticipate doing so in the foreseeable future. The closing sale price
of our Common
Stock on the NYSE on March 1, 2004 was $21.75. The number of
stockholders of record on that date was 1,464, according to American Stock
Transfer and Trust, our transfer agent.

The information required by this item regarding our securities authorized for
issuance under equity compensation plans is incorporated by reference to
Security Ownership of Certain Beneficial Owners and Management, Part III,
Item 12, which  incorporates information to be disclosed in our
2004 Proxy Statement.

In April 2001, we acquired all of the issued and outstanding common stock of
New Era of Networks, Inc. (NEN) in exchange for approximately 14,289,957 shares
of our Common Stock. For further discussion of this acquisition, see Note
Eleven to the Consolidated Financial Statements, Part II, Item 8, incorporated
here by reference.

In July 2003, we issued approximately 0.7 million shares of our Common Stock in
a private transaction under an agreement pursuant to which we will be provided
with certain specified marketing services over a period of 42 months. For
further discussion of this transaction, see Note Seven to Consolidated
Financial Statements  Issuance of Company Stock for Certain
Services, Part I, Item 1, incorporated here by reference.

Issuer Purchases of Equity Securities

We did not repurchase any of our Common Stock during the fourth quarter of
2003.

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ITEM 6. SELECTED FINANCIAL DATA

The following selected financial information is not necessarily indicative of
the results of future operations. This data should be read in conjunction the
MD&A, Part II, Item 7, as well as the Consolidated Financial Statements and
related Notes included in Part II, Item 8, of this Report on Form 10-K.

Consolidated Statements of Operations Data

|                                                                         |                                             |      |         |         |  |      |          |         |  |      |         |         |  |   |         |         |   |   |         |         |  
|------------------------------------------------------------------------ | ------------------------------------------- | ---- | ------- | ------- |  | ---- | -------- | ------- |  | ---- | ------- | ------- |  | - | ------- | ------- | - | - | ------- | ------- | -
|(In thousands, except per share data)                                    |                                             | 2003 |         | 2002    |  | 2001 |          | 2000    |  | 1999
|                                                                         |                                             |      |         |         |  |      |          |         |  |     
|Revenues:                                                                |                                             |      |         |         |  |      |          |         |  |      |         |         |  |   |         |         |   |   |         |        
|                                                                         | License fees                                |      | $       | 274,817 |  |      | $        | 325,916 |  |      | $       | 389,038 |  |   | $       | 468,501 |   |   | $       | 421,645 |  
|                                                                         | Services                                    |      |         | 503,245 |  |      |          | 503,945 |  |      |         | 538,885 |  |   |         | 494,662 |   |   |         | 452,526 |  
|                                                                         |                                             |      |         |         |  |      |          |         |  |      |         |         |  |   |         |         |   |   |         |         |  
|Total revenues                                                           |                                             |      | 778,062 |         |  |      | 829,861  |         |  |      | 927,923 |         |  |   | 963,163 |         |   |   | 874,171 |        
|Costs and expenses:                                                      |                                             |      |         |         |  |      |          |         |  |      |         |         |  |   |         |         |   |   |         |        
|                                                                         | Cost of license fees                        |      |         | 60,711  |  |      |          | 51,448  |  |      |         | 45,695  |  |   |         | 45,120  |   |   |         | 46,241  |  
|                                                                         | Cost of services                            |      |         | 162,666 |  |      |          | 190,067 |  |      |         | 240,779 |  |   |         | 248,542 |   |   |         | 219,591 |  
|                                                                         | Sales and marketing                         |      |         | 239,045 |  |      |          | 271,765 |  |      |         | 331,237 |  |   |         | 345,149 |   |   |         | 310,774 |  
|                                                                         | Product development and engineering         |      |         | 116,889 |  |      |          | 117,784 |  |      |         | 125,404 |  |   |         | 126,689 |   |   |         | 136,272 |  
|                                                                         | General and administrative                  |      |         | 82,111  |  |      |          | 84,938  |  |      |         | 76,885  |  |   |         | 67,267  |   |   |         | 68,876  |  
|                                                                         | Amortization of goodwill (1)                |      |         |        |  |      |          |        |  |      |         | 53,859  |  |   |         | 30,155  |   |   |         | 13,234  |  
|                                                                         | Amortization of other purchased
intangibles |      |         | 2,000   |  |      |          | 2,000   |  |      |         | 2,000   |  |   |         | 2,575   |   |   |         | 686     |  
|                                                                         | Goodwill impairment (1)                     |      |         |        |  |      |          | 12,300  |  |      |         |        |  |   |         |        |   |   |         |        |  
|                                                                         | In-process research and development         |      |         |        |  |      |          |        |  |      |         | 18,500  |  |   |         | 8,000   |   |   |         |        |  
|                                                                         | Stock compensation expense                  |      |         | 2,882   |  |      |          | 1,937   |  |      |         | 1,334   |  |   |         |        |   |   |         |        |  
|                                                                         | Cost (reversal) of restructuring            |      |         | 7,429   |  |      |          | 40,446  |  |      |         | 48,751  |  |   |         | (791    | ) |   |         | (8,528  | )
|                                                                         |                                             |      |         |         |  |      |          |         |  |      |         |         |  |   |         |         |   |   |         |        
|Total costs and expenses                                                 |                                             |      | 673,733 |         |  |      | 772,685  |         |  |      | 944,444 |         |  |   | 872,706 |         |   |   | 787,146 |        
|                                                                         |                                             |      |         |         |  |      |          |         |  |      |         |         |  |   |         |         |   |   |         |        
|Operating income (loss)                                                  |                                             |      | 104,329 |         |  |      | 57,176   |         |  |      | (16,521 | )       |  |   | 90,457  |         |   |   | 87,025  |        
|Interest income and expense, net                                         |                                             |      | 13,766  |         |  |      | 14,033   |         |  |      | 17,529  |         |  |   | 17,035  |         |   |   | 13,773  |        
|Minority interest                                                        |                                             |      |        |         |  |      |         |         |  |      | (30     | )       |  |   | 94      |         |   |   |        |        
|                                                                         |                                             |      |         |         |  |      |          |         |  |      |         |         |  |   |         |         |   |   |         |        
|Income before income taxes and
cumulative effect of an accounting
change |                                             |      | 118,095 |         |  |      | 71,209   |         |  |      | 978     |         |  |   | 107,586 |         |   |   | 100,798 |        
|Provision for income taxes                                               |                                             |      | 30,829  |         |  |      | 33,428   |         |  |      | 26,500  |         |  |   | 35,461  |         |   |   | 38,303  |        
|                                                                         |                                             |      |         |         |  |      |          |         |  |      |         |         |  |   |         |         |   |   |         |         |  
|Income (Loss) before cumulative effect
of an accounting change           |                                             |      | 87,266  |         |  |      | 37,781   |         |  |      | (25,522 | )       |  |   | 72,125  |         |   |   | 62,495  |        
|Cumulative effect of an accounting
change to adopt SFAS 142              |                                             |      |        |         |  |      | (132,450 | )       |  |      |        |         |  |   |        |         |   |   |        |        
|                                                                         |                                             |      |         |         |  |      |          |         |  |      |         |         |  |   |         |         |   |   |         |         |  
|Net income (loss)                                                        |                                             | $    | 87,266  |         |  | $    | (94,669  | )       |  | $    | (25,522 | )       |  | $ | 72,125  |         |   | $ | 62,495  |        
|                                                                         |                                             |      |         |         |  |      |          |         |  |      |         |         |  |   |         |         |   |   |         |         |  
|Income (Loss) per share before
cumulative effect of
an accounting change |                                             | $    | 0.92    |         |  | $    | 0.39     |         |  | $    | (0.27   | )       |  | $ | 0.82    |         |   | $ | 0.76    |        
|Cumulative effect of an accounting change                                |                                             |      |        |         |  |      | (1.37    | )       |  |      |        |         |  |   |        |         |   |   |        |        
|                                                                         |                                             |      |         |         |  |      |          |         |  |      |         |         |  |   |         |         |   |   |         |        
|Basic net income (loss) per share                                        |                                             | $    | 0.92    |         |  | $    | (0.98    | )       |  | $    | (0.27   | )       |  | $ | 0.82    |         |   | $ | 0.76    |        
|                                                                         |                                             |      |         |         |  |      |          |         |  |      |         |         |  |   |         |         |   |   |         |         |  
|Shares used in computing basic net
income (loss) per share               |                                             |      | 94,833  |         |  |      | 96,844   |         |  |      | 94,592  |         |  |   | 87,711  |         |   |   | 81,817  |        
|                                                                         |                                             |      |         |         |  |      |          |         |  |      |         |         |  |   |         |         |   |   |         |         |  
|Income (Loss) per share before cumulative
effect of an accounting change |                                             | $    | 0.89    |         |  | $    | 0.38     |         |  | $    | (0.27   | )       |  | $ | 0.78    |         |   | $ | 0.74    |        
|Cumulative effect of an accounting change                                |                                             |      |        |         |  |      | (1.33    | )       |  |      |        |         |  |   |        |         |   |   |        |        
|                                                                         |                                             |      |         |         |  |      |          |         |  |      |         |         |  |   |         |         |   |   |         |         |  
|Diluted net income (loss) per share                                      |                                             | $    | 0.89    |         |  | $    | (0.95    | )       |  | $    | (0.27   | )       |  | $ | 0.78    |         |   | $ | 0.74    |        
|                                                                         |                                             |      |         |         |  |      |          |         |  |      |         |         |  |   |         |         |   |   |         |         |  
|Shares used in computing diluted net
Income (loss) per share             |                                             |      | 97,582  |         |  |      | 99,584   |         |  |      | 94,592  |         |  |   | 92,150  |         |   |   | 84,156  |        
|                                                                         |                                             |      |         |         |  |      |          |         |  |      |         |         |  |   |         |         |   |   |         |         |  



|(1) |  | We implemented Statement of Financial Accounting Standards (SFAS) No. 142
on January 1, 2002, which states that goodwill (including assembled workforce)
can no longer be amortized, but must be tested for impairment on at least an
annual basis. For a further discussion of SFAS 142, see Note One to the
Consolidated Financial Statements  Goodwill and Other Purchased Intangible
Assets, Part II, Item 8, incorporated here by reference.
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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| |  | Consolidated Balance Sheet
Data
(In thousands)
| |  | ----------------------------------------------

|                                            |  |      |           |      |  |      |         |      |  |      |           |  |  |   |         |  |  |   |         | 
|------------------------------------------- |  | ---- | --------- | ---- |  | ---- | ------- | ---- |  | ---- | --------- |  |  | - | ------- |  |  | - | ------- | 
|                                            |  | 2003 |           | 2002 |  | 2001 |         | 2000 |  | 1999
|                                            |  |      |           |      |  |      |         |      |  |     
|Cash, cash equivalents and
cash investments |  | $    | 573,793   |      |  | $    | 387,180 |      |  | $    | 343,160   |  |  | $ | 354,612 |  |  | $ | 352,899 | 
|Working capital                             |  |      | 254,754   |      |  |      | 107,914 |      |  |      | 108,571   |  |  |   | 157,486 |  |  |   | 127,229 | 
|Total assets                                |  |      | 1,151,356 |      |  |      | 992,749 |      |  |      | 1,133,242 |  |  |   | 915,040 |  |  |   | 737,335 | 
|Long-term obligations                       |  |      | 15,129    |      |  |      | 10,641  |      |  |      | 5,887     |  |  |   | 5,795   |  |  |   | 5,799   | 
|Stockholders equity                        |  |      | 741,469   |      |  |      | 580,374 |      |  |      | 716,519   |  |  |   | 490,752 |  |  |   | 336,110 | 




ITEM 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Overview



| |  | Our Business
|- |  | ------------

In 2003, our business was organized into three business segments: IPG, which
principally focuses on enterprise class database servers, integration and
development products; iAS, which provides mobile database and mobile
enterprise solutions; and FFI, which delivers integrated banking, payment
and trade messaging solutions to large financial institutions. During 2003,
approximately 55 percent of our revenues were generated from the U.S. with the
balance generated from our non-U.S. operations. For further discussion of
our business segments and principal products, see Business, Part I, Item
1, incorporated here by reference.



| |  | Our Results
|- |  | -----------

We reported net income of $87.3 million for 2003, compared to net income of
$37.8 million in 2002 (before the cumulative effect of an accounting change),
and a net loss of $ 25.5 million in 2001. Total revenues were $778.1
million for 2003, compared to $829.9 million for 2002, and $927.9 million
for 2001. The decline in total revenues from 2003 to 2002 was primarily due
to lower license, consulting and education revenues. However, these
declines were more than fully offset by a decrease in our overall costs and
expenses, and an increase in our technical support revenues.

In 2003, our revenues from technical support services increased 4.1 percent
compared to 2002 (which increased 7.6 percent compared to 2001).
Furthermore, our 2003 operating margin doubled from 6.8 percent in 2002 to
13.4 percent in 2003 due to our continued management of operating expenses
and the benefits realized from our restructuring activities.

Our overall financial position remains strong. During 2003 we generated net
cash from operating activities of $202.1 million, and had $573.8 million in
cash, cash equivalents and cash investments at December 31, 2003  the
highest in our history. We have no long-term debt. Our days sales
outstanding in accounts receivable improved to 60 days for the quarter ended
December 31, 2003 compared to 72 days for the quarter ended December 31,
2002.

Looking ahead, we believe we are well positioned to realize the objectives
of our Unwired Enterprise initiative and to lead the expansion of enterprise
software to the mobile and wireless business environment. We continue to
win praise for our market-leading mobile and wireless solutions, and our
core database products that enable data liquidity. For example, the latest
version of SQL Anywhere Studio was recently honored with a Best of 2003
award by the editors of PC Magazine.

For a discussion of factors that may impact our business, see Future
Operating Results, below.

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| |  | Business Trends
|- |  | ---------------

The market for new sales of enterprise infrastructure software continued to
be challenging in 2003 due to various factors including a maturing
enterprise infrastructure software market, changing patterns in IT spending,
and mixed signs of economic recovery in the U.S.

The majority of our license fees revenues came from sales to our existing
customers in 2003, and fewer of those clients undertook large-scale
infrastructure investments requiring significant investment in our core
enterprise database products and related services (this also contributed to a
decline in our consulting and education revenues). We believe this is
partly due to market saturation in some of our target markets (including
financial services, insurance and telecommunications) where large
enterprises have invested heavily in their core database infrastructures
during the past 15 years.

Despite these trends, 2003 revenues attributable to ASE, our core enterprise
database product, grew 6 percent from 2002 levels. Further, the recent
release of ASE powered by Intels Itanium® 2 processor on Unix and Linux has
been well received both by customers and industry analysts.

In 2003, we observed some notable changes in IT spending patterns.
Specifically, we began to see an overall increase in our transaction volume
for license revenues, but an overall decrease in the average dollar value of
these deals. This pattern supports the view that fiscally cautious customers
are purchasing products and services based more on present need and less on
fulfilling anticipated future needs.

Global market conditions generally improved in 2003 compared to 2002.
However, mixed signs of a strong U.S. economic recovery make it difficult to
project whether the overall market for enterprise infrastructure software
will materially improve.

Moving forward, we will continue to manage our operating expenses as we
aggressively pursue our business initiatives and strategic alliances with
our key partners including HP, Intel, and others.

Critical Accounting Policies and Estimates

We prepare our financial statements in conformity with U.S. generally accepted
accounting principles (GAAP). These accounting principals require us to make
estimates and assumptions that affect the reported amounts of assets and
liabilities, and the disclosure of contingent assets and liabilities at the
date of our financial statements. We are also required to make certain
judgments that affect the reported amounts of revenues and expenses during each
reporting period. We periodically evaluate our estimates including those
relating to revenue recognition, impairment of goodwill and intangible assets,
the allowance for doubtful accounts, capitalized software, restructuring,
income taxes, stock-based compensation and contingencies and litigation. We
base our estimates on historical experience and various other assumptions that
we believe to be reasonable based on specific circumstances. Our management
has reviewed the development, selection, and disclosure of these estimates with
the Audit Committee of our Board of Directors. These estimates and assumptions
form the basis for our judgments about the carrying value of certain assets and
liabilities that are not readily apparent from other sources. Actual results
could differ from these estimates. See also Future Operating Results 
Financial Accounting Related Matters, below.



| |  | Revenue Recognition                                                                                                                                                                                                                                                                                                                                                          
|- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| 
|  |  | Revenue recognition rules for software companies are very complex, and we
follow very specific and detailed guidance in measuring revenue. Certain
judgments, however, affect the application of our revenue policy.                                                                                                                                                         
| 
|  |  | We recognize revenue in accordance with Statement of Position (SOP) 97-2,
Software Revenue Recognition, as amended by SOP 98-4 and SOP 98-9, and in
certain instances in accordance with SOP 81-1, Accounting for Performance
of Construction-Type and Certain Production-Type Contracts.                                                                                
| 
|  |  | We license software under non-cancelable license agreements. License fees
revenues are recognized when a non-cancelable license agreement is in force,
the product has been shipped, the license fee is fixed or determinable, and
collection is reasonably assured. If the fee is not fixed or determinable,
revenue is recognized as payments become due from the customer.

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|  |  | Residual Method Accounting. In software arrangements that include
multiple elements (such as license rights and technical support services),
we allocate the total arrangement fee among each of the elements using the
residual method of accounting. Under this method, revenue allocated to
undelivered elements is based on vendor-specific objective evidence of fair
value of such undelivered elements, and the residual revenue is allocated to
the delivered elements.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| 
|  |  | Percentage of Completion Accounting. Fees from licenses sold together
with consulting services are generally recognized upon shipment of the
licenses, provided (i) the above criteria are met, (ii) payment of the
license fees are not dependent upon the performance of the services, and
(iii) the consulting services are not essential to the functionality of the
licensed software. If the services are essential to the functionality of
the software, or payment of license fees is dependent on performance of
services, both the software license and consulting fees are recognized under
the percentage of completion method of contract accounting. Under this
method, management is required to estimate the number of total hours needed
to complete a particular project, and revenues and profits are recognized
based on the percentage of total contract hours completed. As a result,
recognized revenues and profits are subject to revision as contract phases
are actually completed.
| 
|  |  | Sublicense Revenues. We recognize sublicense fees as reported to us by
our licensees. License fees revenue for certain application development and
data access tools are recognized upon direct shipment to the end user or
direct shipment to the reseller for resale to the end user. If collection
is not reasonably assured in advance, revenue is recognized only when the
fee is actually collected.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| 
|  |  | Service Revenues. Technical support revenues are recognized ratably
over the term of the related agreements, which in most cases is one year.
Revenues from consulting services under time and materials contracts and for
education are recognized as services are performed. Revenues from other
contract services are generally recognized under the percentage of
completion method of contract accounting described above.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| 
| |  | Impairment of Goodwill and Other Intangible Assets                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| 
|  |  | Goodwill and intangible assets have generally resulted from our business
combinations accounted for as purchases. Prior to 2002, these assets were
generally recorded at amortized cost. The carrying values of these
intangible assets were reviewed on a periodic basis, under the accounting
rules then in effect, and our testing indicated no impairment of the assets
carrying value.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| 
|  |  | Beginning in 2002, new accounting rules issued by the Financial Accounting
Standards Board (FASB) provided that goodwill could no longer be amortized,
but had to be tested for impairment at least annually. These rules
further changed the method of evaluating goodwill from a recoverability test
based upon undiscounted cash flows to a fair value approach. The application
of these new rules resulted in a cumulative effect of an accounting change                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  

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| |  | of $132.5 million in the first quarter of 2002 and a goodwill impairment of
$12.3 million in the fourth quarter of 2002.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| 
|  |  | As of December 31, 2003, our goodwill balance totaled $140.9 million. The
review of goodwill for potential impairment is highly subjective and
requires us to make numerous estimates to determine both the fair values and
the carrying values of our reporting units to which goodwill is assigned.
For these purposes, our reporting units equate to our reported segments (see
Note Ten to Consolidated Financial Statements, Part II, Item 1, incorporated
here by reference). If the estimated fair value of a reporting unit is
determined to be less than its carrying value, we are required to perform an
analysis similar to a purchase price allocation for an acquired business in
order to determine the amount of goodwill impairment, if any. This analysis
requires a valuation of certain other intangible assets including in-process
research and development, and developed technology.                                                                          
| 
|  |  | We performed the annual impairment analysis as of December 31, 2003 for each
of our reporting units. This analysis indicated that the estimated fair
value of each reporting unit exceeded its carrying value. Therefore, we
were not required to recognize an impairment loss in 2003.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| 
|  |  | However, changes in our internal business structure, changes in our future
revenue and expense forecasts, and certain other factors that directly
impact the valuation of our reporting units could result in a future
goodwill impairment charge. Since a goodwill impairment charge is based on
the value of a reporting unit at the testing date, reporting units that
previously reported an impairment charge, such as FFI in 2002, are
particularly prone to additional impairment charges if future revenue and
expense forecasts or market conditions worsen after the testing date.                                                                                                                                                                                                                                                                                                                                                                                          
| 
|  |  | We continue to review our other intangible assets (purchased technology,
trade names and customer lists) for indications of impairment whenever
events or changes in circumstances indicate the carrying amount of such an
asset may not be recoverable. For these purposes, recoverability of these
assets is measured by comparing their carrying values to the future
undiscounted cash flows the assets are expected to generate. This
methodology requires us to estimate future cash flows associated with
certain assets or groups of assets. Changes in these estimates could result
in impairment losses associated with other intangible assets. See Note One to Consolidated Financial Statements 
Goodwill and other Purchased Intangible Assets, Part II, Item 8,
incorporated here by reference.                                                                                                                                                                       
| 
| |  | Allowance for Doubtful Accounts                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| 
|  |  | We maintain an allowance for doubtful accounts to reflect the expected
non-collection of accounts receivable based on past collection history and
specific risks identified in our portfolio of receivables. Additional
allowances might be required if deteriorating economic conditions or other
factors affect our customers ability to make timely payments.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| 
| |  | Capitalized Software                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| 
|  |  | We capitalize certain software development costs after a product becomes
technologically feasible and before its general release to customers.
Subjective judgment is required in determining when a product becomes
technologically feasible. Capitalized development costs are then
amortized over the products estimated life beginning upon general release.
Periodically, we compare a products unamortized capitalized cost to the
products net realizable value. To the extent unamortized capitalized cost
exceeds net realizable value based on the products estimated future gross
revenues (and reduced by the estimated future costs of completing and
disposing of the product) the excess is written off. This analysis requires
us to estimate future gross revenues associated with certain products, and
the future costs of completing and disposing of certain products. Changes in these
estimates could result in write-offs of capitalized software costs.
| 
| |  | Restructuring                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| 
|  |  | We have recorded significant accruals in connection with various
restructuring activities. These accruals include estimated net costs to
settle certain lease obligations, based on the analysis of                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   

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|  |  | independent real estate consultants. While we do not anticipate significant
changes to these estimates in the future, the actual costs may differ from
the estimates. For example, if we are able to negotiate more affordable
termination fees, if rental rates increase in the markets where the
properties are located, or if we are able to locate suitable sublease
tenants more quickly than expected, the actual costs could be lower than our
estimates. In that case, we would reduce our restructuring accrual with a
corresponding credit to cost of restructuring. Alternatively, if we are unable to
negotiate affordable termination fees, if rental rates continue to decrease
in the markets where the properties are located, or if it takes us longer
then expected to find suitable sublease tenants, the actual costs could
exceed our estimates. See Note Thirteen to Consolidated Financial
Statements, Part II, Item 8, incorporated here by reference.                                                                                                                                                                                                                                                                                                                                                                                 
|- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| 
| |  | Income Taxes                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| 
|  |  | We use the asset and liability approach to account for income taxes. This
methodology recognizes deferred tax assets and liabilities for the expected
future tax consequences of temporary differences between the carrying
amounts and the tax bases of assets and liabilities. We then record a
valuation allowance to reduce deferred tax assets to an amount that likely
will be realized. We consider future taxable income and ongoing prudent and
feasible tax planning strategies in assessing the need for the valuation
allowance. If we determine during any period that we could realize a larger
net deferred tax asset than the recorded amount, we would adjust the
deferred tax asset to increase income for the period. Conversely, if we
determine that we would be unable to realize a portion of our recorded
deferred tax asset, we would adjust the deferred tax asset to record a
charge to income for the period. Subjective judgment is required in
assessing the future tax consequences of events that have been recognized in
the Companys financial statements or tax returns. Fluctuations in the
actual outcome of these future tax consequences could materially impact our
financial position or results of operations. See Note Eight to
Consolidated Financial Statements, Part II, Item 8, incorporated here
by reference.
| 
| |  | Stock-Based Compensation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| 
|  |  | SFAS 123, Accounting for Stock-Based Compensation, encourages, but does
not require, companies to record compensation cost for stock-based employee
compensation plans at fair value. We have chosen to continue to account for
stock-based employee compensation using the intrinsic value method.
Accordingly, compensation cost for stock options granted to employees is
measured as the excess, if any, of the quoted market price of the Company
stock at the date of the grant over the amount an employee must pay to
acquire the stock. See also Note One to Consolidated Financial
Statements-Stock-Based Compensation,
Part II, Item 1, incorporated here by reference.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| 
| |  | Contingencies and Liabilities                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| 
|  |  | We are involved from time to time in various proceedings, lawsuits and
claims involving our customers, products, intellectual property,
stockholders and employees, among other things. When we reasonably
determine that a liability has been or will be incurred, and can reasonably
estimate the range of potential losses in these matters, we are required to
adequately provide for these loss contingencies. Even if we are not able to
estimate the amount of potential loss in these matters, in the case of a
potential material matter, we are required to disclose that there
is a reasonable possibility that a loss has been incurred. Our financial
position or results of operations could be materially and adversely affected
if we have underestimated the potential liability in any matter.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               

- 15 -



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##### Table of Contents



Results of Operations

Revenues(Dollars in millions)

|               |                              |   |       |    |        |  |      |    |        |   |       |    |   |  |     |    |  |   |       |    |  
|-------------- | ---------------------------- | - | ----- | -- | ------ |  | ---- | -- | ------ | - | ----- | -- | - |  | --- | -- |  | - | ----- | -- | -
|               |                              |   | 2003  |    | Change |  | 2002 |    | Change |   | 2001 
|               |                              |   |       |    |        |  |      |    |        |   |      
|License fees   |                              | $ | 274.8 |    |        |  | (16  | %) |        | $ | 325.9 |    |   |  | (16 | %) |  | $ | 389.0 |   
|               | Percentage of total revenues |   |       | 35 | %      |  |      |    |        |   |       | 39 | % |  |     |    |  |   |       | 42 | %
|Services       |                              | $ | 503.3 |    |        |  | *    |    |        | $ | 504.0 |    |   |  | (6  | %) |  | $ | 538.9 |   
|               | Percentage of total revenues |   |       | 65 | %      |  |      |    |        |   |       | 61 | % |  |     |    |  |   |       | 58 | %
|Total revenues |                              | $ | 778.1 |    |        |  | (6   | %) |        | $ | 829.9 |    |   |  | (11 | %) |  | $ | 927.9 |   



---

|* Not meaningful
|----------------

Total revenues for 2003 decreased 6 percent from total revenues in 2002 (which
had decreased 11 percent from 2001). The decline in 2003 was primarily
attributable to a 16 percent drop in license fees revenues, and a 12 percent
decline in consulting and education revenues (which was partially offset by a 4
percent increase in technical support revenues). The major factors contributing
to the decline in our license fees and services revenues overall are discussed
in Overview, above, and Future Operating Results, below.

In 2003, license fees revenues accounted for approximately 35 percent of our
total revenues. The most significant decline in license fees revenues resulted
from lower than expected sales of certain IPG e-Business products partially due
a major shift in the business of one of our largest North American resellers
that significantly lowered the resellers need to use our technology as part of
its offering.

The 2002 decrease in license fees revenues (which accounted for about 39
percent of our total revenues that year) was primarily attributable to a
decline in license fees revenues from our enterprise database and mobile
database products (partially offset by an increase in license fees revenues of
certain e-Business products). We believe the events of 9/11 triggered a
downturn in the global economy in 2002 that contributed to the cancellation or
delay of many of large-scale IT infrastructure investments.

Despite declining license fees revenues, our 2003 services revenues, which
accounted for approximately 65 percent of total revenues, remained relatively
flat from 2002 levels (which had declined 6 percent from 2001 levels). Our 2003
technical support revenues (which accounted for 77 percent of total services
revenues), were driven primarily by a steady level of support renewals by
existing customers. Meanwhile, revenues from education services (which are
highly dependent on sales of new products), and revenues from consulting
services (which are driven by the implementation of large enterprise systems) declined in 2003 for the
reasons discussed in Overview, above). The decrease in 2002 services
revenues was due to a 31 percent decrease in consulting and education revenues
(partially offset by a 7 percent increase in technical support revenues) as a
result of the economic factors discussed above.

For a description of our technical support, consulting and education services,
see Business  Worldwide Services, Part II, Item 1, incorporated here by
reference.

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##### Table of Contents



Geographical Revenues
(Dollars in millions)

|                                                  |                                       |                              |       |       |    |        |    |      |  |        |       |       |    |   |     |     |    |   |       |       |    |  
|------------------------------------------------- | ------------------------------------- | ---------------------------- | ----- | ----- | -- | ------ | -- | ---- |  | ------ | ----- | ----- | -- | - | --- | --- | -- | - | ----- | ----- | -- | -
|                                                  |                                       |                              |       | 2003  |    | Change |    | 2002 |  | Change |       | 2001 
|                                                  |                                       |                              |       |       |    |        |    |      |  |        |       |      
|North America                                     |                                       | $                            | 455.0 |       |    |        | (8 | %)   |  | $      | 495.4 |       |    |   | (8  | %)  |    | $ | 539.3 |      
|                                                  | Percentage of total revenues          |                              |       | 59    | %  |        |    |      |  |        |       | 60    | %  |   |     |     |    |   |       | 58    | % 
|International:                                    |                                       |                              |       |       |    |        |    |      |  |        |       |       |    |   |     |     |    |   |       |      
|                                                  | EMEA (Europe, Middle East and
Africa) |                              | $     | 212.8 |    |        |    | *    |  |        | $     | 213.6 |    |   |     | (15 | %) |   | $     | 251.6 |   
|                                                  |                                       | Percentage of total revenues |       |       | 27 | %      |    |      |  |        |       |       | 26 | % |     |     |    |   |       |       | 27 | %
|Intercontinental (Asia Pacific
and Latin America) |                                       | $                            | 110.3 |       |    |        | (9 | %)   |  | $      | 120.9 |       |    |   | (12 | %)  |    | $ | 137.0 |      
|                                                  |                                       | Percentage of total revenues |       |       | 14 | %      |    |      |  |        |       |       | 14 | % |     |     |    |   |       |       | 15 | %
|Total International                               |                                       | $                            | 323.1 |       |    |        | (3 | %)   |  | $      | 334.5 |       |    |   | (14 | %)  |    | $ | 388.6 |      
|                                                  | Percentage of total revenues          |                              |       | 41    | %  |        |    |      |  |        |       | 40    | %  |   |     |     |    |   |       | 42    | % 
|Total revenues                                    |                                       | $                            | 778.1 |       |    |        | (6 | %)   |  | $      | 829.9 |       |    |   | (11 | %)  |    | $ | 927.9 |      



---

|* Not meaningful
|----------------

In 2003, the decline in our total revenues was most significant in North
America (United States, Canada and Mexico) due to the decline in e-Business
license revenues. As discussed in Revenues, above, we believe a major shift
in the business of one of our largest North American resellers resulting in
significantly lower sales of our technology contributed to this decline. In
2002, the decline in North America revenues was primarily due to a decline in
enterprise database license fees and consulting and education revenues.

Total international revenues
decreased 3 percent in 2003 from 2002 due to a 7 percent decrease in
license fees revenues and a 25 percent decrease in consulting and education
revenues (offset by an 8 percent decrease in technical support
revenues). The slight decline in EMEA (Europe, Middle East
and Africa) 2003 revenues was attributable to lower revenues from e-Business
products, largely offset by an increase in revenues from our enterprise
database products. The 9 percent decrease in 2003 Intercontinental (Asia
Pacific and Latin America) revenues was due a drop in license fees and services
revenues from our enterprise database products. In 2002, total international
revenues decreased 14 percent from 2001 levels due to declines in license
revenues in both EMEA and the Intercontinental regions. EMEA revenues declined
by 15 percent in 2002 due to a 22 percent decline in license fees revenues,
primarily from our enterprise database products, and a 38 percent decrease in
consulting and education revenues. In 2002, the decline in Intercontinental
revenues was due to a 17 percent decrease in license fees revenues primarily
from our enterprise database products, and a 43 percent decrease in
professional services revenues (partially offset by an 11 percent increase in
technical support revenues).

In EMEA and the Intercontinental region, most revenues and expenses are
denominated in local currencies. The cumulative impact of changes in foreign
currency exchange rates from 2002 to 2003 resulted in a 5 percent increase in
our revenues and a 3 percent increase in our operating expenses. This change
was primarily due to the weakness of the U.S. dollar against certain European
currencies. The effect of foreign currency exchange rate changes on revenues
and expenses was not material in 2002.

Our business and results of operations could be materially
and adversely affected by fluctuations in foreign currency exchange
rates, even though we take into account changes in exchange rates
over time in our pricing strategy. Additionally, changes in foreign currency exchange rates, the strength of local economies,
and the general volatility of worldwide software markets may result in a higher
or lower proportion of international revenues as a percentage of total revenues
in the future. For additional risks associated with currency fluctuation, see
Financial Risk Management  Foreign Exchange Risk, below.

- 17 -



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##### Table of Contents



Cost and Expenses
(Dollars in millions)

|                                            |                                     |   |       |    |        |  |      |    |        |   |       |    |   |  |     |    |  |   |       |    |  
|------------------------------------------- | ----------------------------------- | - | ----- | -- | ------ |  | ---- | -- | ------ | - | ----- | -- | - |  | --- | -- |  | - | ----- | -- | -
|                                            |                                     |   | 2003  |    | Change |  | 2002 |    | Change |   | 2001 
|                                            |                                     |   |       |    |        |  |      |    |        |   |      
|Cost of license fees                        |                                     | $ | 60.7  |    |        |  | 18   | %  |        | $ | 51.4  |    |   |  | 12  | %  |  | $ | 45.7  |   
|                                            | Percentage of license fees revenues |   |       | 22 | %      |  |      |    |        |   |       | 16 | % |  |     |    |  |   |       | 12 | %
|Cost of services                            |                                     | $ | 162.7 |    |        |  | (14  | %) |        | $ | 190.1 |    |   |  | (21 | %) |  | $ | 240.8 |   
|                                            | Percentage of services revenues     |   |       | 32 | %      |  |      |    |        |   |       | 38 | % |  |     |    |  |   |       | 45 | %
|Sales and marketing                         |                                     | $ | 239.0 |    |        |  | (12  | %) |        | $ | 271.8 |    |   |  | (18 | %) |  | $ | 331.2 |   
|                                            | Percentage of total revenues        |   |       | 31 | %      |  |      |    |        |   |       | 33 | % |  |     |    |  |   |       | 36 | %
|Product development and engineering         |                                     | $ | 116.9 |    |        |  | (1   | %) |        | $ | 117.8 |    |   |  | (6  | %) |  | $ | 125.4 |   
|                                            | Percentage of total revenues        |   |       | 15 | %      |  |      |    |        |   |       | 14 | % |  |     |    |  |   |       | 14 | %
|General and administrative                  |                                     | $ | 82.1  |    |        |  | (3   | %) |        | $ | 84.9  |    |   |  | 10  | %  |  | $ | 76.9  |   
|                                            | Percentage of total revenues        |   |       | 11 | %      |  |      |    |        |   |       | 10 | % |  |     |    |  |   |       | 8  | %
|Amortization of goodwill                    |                                     |   |      |    |        |  | *    |    |        |   |      |    |   |  |     |    |  | $ | 53.9  |   
|                                            | Percentage of total revenues        |   |       |   |        |  |      |    |        |   |       |   |   |  |     |    |  |   |       | 6  | %
|Amortization of other purchased intangibles |                                     | $ | 2.0   |    |        |  | 0    | %  |        | $ | 2.0   |    |   |  | 0   | %  |  | $ | 2.0   |   
|                                            | Percentage of total revenues        |   |       | *  |        |  |      |    |        |   |       | *  |   |  |     |    |  |   |       | *  |  
|Goodwill impairment                         |                                     |   |      |    |        |  | *    |    |        | $ | 12.3  |    |   |  | *   |    |  |   |      |   
|                                            | Percentage of total revenues        |   |       |   |        |  |      |    |        |   |       | 1  | % |  |     |    |  |   |       |   |  
|In-process research and development         |                                     |   |      |    |        |  | *    |    |        |   |      |    |   |  | *   |    |  | $ | 18.5  |   
|                                            | Percentage of total revenues        |   |       |   |        |  |      |    |        |   |       |   |   |  |     |    |  |   |       | 2  | %
|Stock compensation expense                  |                                     | $ | 2.9   |    |        |  | 53   | %  |        | $ | 1.9   |    |   |  | 46  | %  |  | $ | 1.3   |   
|                                            | Percentage of total revenues        |   |       | *  |        |  |      |    |        |   |       | *  |   |  |     |    |  |   |       | *  |  
|Cost of restructuring                       |                                     | $ | 7.4   |    |        |  | (82  | %) |        | $ | 40.4  |    |   |  | (17 | %) |  | $ | 48.8  |   
|                                            | Percentage of total revenues        |   |       | 1  | %      |  |      |    |        |   |       | 5  | % |  |     |    |  |   |       | 5  | %



---

|* Not meaningful
|----------------

Cost of license fees

Cost of license fees consists primarily of product costs (media and
documentation), amortization of capitalized software development costs and
purchased technology, and third party royalty costs. The cost of license fees
expense increased 18 percent in 2003 over 2002, and increased
12 percent in 2002 from 2001. The 2003 increase was primarily due to an increase in
amortization of capitalized software development costs. The 2002 increase was
primarily due to an increase in amortization of capitalized software
development costs and the amortization of purchased technology acquired in the
NEN transaction (partially offset by a decrease in third party royalties).

Amortization of capitalized software costs was $31.1 million in 2003, $24.0
million in 2002, and $17.8 million in 2001. In 2003, the increase in
amortization of capitalized software costs was primarily due to certain
enterprise database products that we began amortizing in 2003 and certain
enterprise application products that we began amortizing in 2003 and in the
second half of 2002. In 2002, the increase in amortization of capitalized
software costs was primarily due to certain enterprise application and
enterprise database products that we began to amortize in 2002. Amortization of
purchased technology acquired was $15.3 million in 2003, $14.9 million in 2002
and $12.1 million in 2001. See Note One to the Consolidated Financial
Statements  Capitalized Software, Part II, Item 8, incorporated here by
reference.

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##### Table of Contents



Cost of services

Cost of services consists primarily of our cost to provide technical support,
education and professional services and, to a lesser degree, services-related
product costs (media and documentation). These costs decreased 14 percent in
2003 compared to 2002,primarily due to a reduction in consulting and technical
support personnel as a result of our restructuring activities in the second
half of 2002 and 2003, and a decrease in costs associated with third-party
consultants. Our average headcount reflected in this expense category
decreased approximately 19 percent in 2003 from 2002. The decrease in cost of
services in 2002 over 2001 was primarily due to a reduction in consulting
personnel as a result of our 2002 and 2001 restructuring activities, and a
decrease in costs associated with third party consultants. For further
discussion of the effect of our restructuring activities on our cost of
service, see Note Thirteen to Consolidated Financial Statements, Part I, Item
8, incorporated here by reference.

Sales and marketing

Sales and marketing expense decreased 12 percent in 2003 compared to 2002
(which had decreased 18 percent from 2001), primarily due to a substantial
decrease in spending on marketing programs, a decrease in sales and marketing
personnel as a result of our 2003 and 2002 restructuring activities, and a
reduction in sales commissions (principally due to lower license fees
revenues), and a decrease in certain allocated common costs. We
allocate certain common costs (primarily certain telecommunications, IT
infrastructure, and facilities-related expenses) to
sales and marketing, product development and engineering, and general and
administrative expenses.

The decrease in sales and marketing expense in 2002 compared to 2001 was
primarily due to a reduction in sales commissions (principally due to lower
license fees revenues), a reduction in discretionary spending on marketing
programs and a decrease in sales and marketing personnel as a result of our
2002 and 2001 restructuring activities. For further discussion of the effect
of our restructuring activities, see Note Thirteen to Consolidated Financial
Statements, Part II, Item 8, incorporated here by reference.

Product development and engineering

Product development and engineering expenses (net of capitalized software
development costs  see discussion below) decreased slightly in 2003 from 2002
(which had decreased 6 percent from 2001), primarily due to a decrease in
allocated common cost, partially offset by the addition of product development
and engineering personnel resulting from our acquisition of AvantGo, Inc. in
February 2003.

The decrease in product development and engineering expenses in 2002 over 2001
was primarily due to a reduction in R&D personnel resulting from the further
integration of NEN, and in connection with our 2002 and 2001 restructuring
activities. See Note Thirteen to Consolidated Financial Statements, Part II,
Item 8, incorporated here by reference.

We capitalize product development and engineering costs during the period
between achievement of technological feasibility and general availability of a
product. In 2003, our capitalized software costs of $28.0 million included
costs incurred for the development of Corporate Banking 2.1, EA Server 5.0, Sybase Enterprise Portal 6.0, Integration Orchestrator
4.3, and PowerDesigner 10.0. In 2002, capitalized software costs included
costs incurred for the development of the Adaptive Server Enterprise 15.0,
Business Process Integrator 3.9, Connectivity 15.0,CeBS 1.0 and 1.5,
EA Server 4.1, PowerBuilder 9.0,and PowerDesigner 9.5.
In 2001, capitalized software costs included costs incurred for the development
of Sybase Enterprise Portal 3.0, Adaptive Server Enterprise 12.5 and 14.0,
Adaptive Server IQ 12.4.3, PowerBuilder 8.0, DirectConnect 12.5 and 14.0,
MainframeConnect 12.5 and 14.0, Replication Server 12.5, certain NEN
adapters, and SQL Anywhere 8.0. Capitalized amounts were approximately $32.7
million in 2002 and $35.8 million in 2001.

- 19 -



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##### Table of Contents



We believe that product development and engineering expenditures are essential
to technology and product leadership and expect product development and
engineering expenditures to continue to be significant, both in absolute
dollars and as a percentage of total revenues.

General and administrative

General and administrative expenses decreased slightly in 2003 compared to 2002
(which increased 10 percent from 2001), primarily due to decreases in
allocated common costs and a 5 percent decrease in the average number of
G & A personnel resulting from our 2003
restructuring activities (see Note Thirteen to Consolidated Financial
Statements, Part II, Item 8, incorporated here by reference). The increase in
2002 compared to 2001 was primarily due to the following factors: (i) an
increase in finance personnel resulting from the establishment of various
regional shared services centers that centralized finance functions within
specific geographic regions; (ii) , an increase in executive and corporate
development personnel, and (iii) an increase in allocated common costs
associated, in part, with our move to new corporate headquarters facilities in
Dublin, California in early 2002.

Amortization of goodwill

We adopted Statement of Financial Accounting Standards No. 142, Goodwill and
Other Intangible Assets, (SFAS 142) effective January 1, 2002, which provided
that goodwill and certain other intangible assets could no longer be amortized,
but had to be tested for impairment at least annually. SFAS 142 further changed
the method of evaluating goodwill from a recoverability test based upon
undiscounted cash flows to a fair value approach. See Note One to Consolidated
Financial Statements  Goodwill and Other Purchased Intangible Assets, Part I,
Item 8, incorporated here by reference.

Amortization of other purchased intangibles

Amortization of other purchased intangibles reflects our amortization of the
established customer list of Home Financial Network, Inc. (now FFI), which we
acquired in 2000. The amortization of purchased technology associated with our
acquisition of Home Financial Network, NEN and AvantGo is included in cost of
license fees. See Note One to Consolidated Financial Statements  Goodwill and Other Purchased
Intangibles, Part II, Item 8, incorporated here by reference.

Goodwill impairment

Following our adoption of SFAS 142 in the first quarter of 2002, we conducted
annual impairment testing required by SFAS 142 as of December 31, 2003 and
December 31, 2002. See Note One to Consolidated Financial Statements -
Goodwill and Other Purchased Intangible Assets, Part I, Item 8, incorporated
here by reference. The application of these new rules resulted in a cumulative
effect of an accounting change of $132.5 million in the first quarter of 2002
and a goodwill impairment of $12.3 million in the fourth quarter of 2002. Our
2003 analysis of goodwill impairment did not indicate an impairment loss for
any of the Companys reporting units. See Overview, above, and Future Operating Results  Impairment
of Goodwill and Other Intangible Assets, below, incorporated here by
reference.

In-process research and development

In connection with our acquisition of NEN in the quarter ended June 30, 2001,
we allocated $18.5 million of the $339.3 million purchase price to NENs
in-process research and development. These amounts were written off during the
quarter ended June 30, 2001. A detailed discussion of the process undertaken
to determine the amount of this write-off is set forth in our Annual Report on Form 10-K for the year
ended December 31, 2002,  MD&A  Cost and
Expenses, Part I, Item 7, incorporated here by reference.

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##### Table of Contents



Stock compensation expense

Stock compensation expense reflects non-cash compensation expense associated
with restricted stock purchase rights granted to certain Sybase executives in
the second quarter of 2001 and in the first quarter of 2003 (see Note Seven to
Consolidated Financial Statements  Restricted Stock Grants, Part II, Item 8,
incorporated here by reference), and the amortization of the value assigned to
certain unvested stock options assumed in the acquisition of NEN in 2001.

Cost (reversal) of restructuring

2003 Restructuring Activities

During the first quarter of 2003, Sybases license fees revenues were below our
expectations. Given this lower than expected revenue, we reduced our
projections regarding revenues for the remainder of the year and began to
identify means of reducing our cost structure to produce earnings in line with
revised plan amounts. After this review, and in order to reduce our fixed
quarterly cost structure, we embarked on a restructuring plan (2003 Plan)
aimed at reducing our annual payroll and facilities-related expenses by
approximately $16.0 million. These activities included the planned termination
of approximately 240 employees worldwide and the planned closure or
consolidation of approximately 9 facilities worldwide. It is anticipated that
the total costs, once the restructuring activities prescribed under the 2003
Plan are fully completed, will be $10.8 million. In general, these expenses
will be incurred over a 12-month period although certain expenses may extend
beyond this twelve-month time frame depending upon when the costs associated
with the sublease of certain facilities are incurred. We believe the 2003 Plan
has been successful as the targeted expenses have been reduced to achieve
annualized cost reduction of approximately $18.0 million.

2002 and 2001 Restructuring Activities

We also undertook restructuring activities in 2002 and 2001 as a means of
managing our operating expenses. For further discussion regarding the 2003
Plan and our restructuring activities in 2002 and 2001, see Note Thirteen to
Consolidated Financial Statements, Part II, Item 8, incorporated here by
reference.

|                        |                              |   |       |    |        |  |      |   |        |   |      |   |   |  |   |  |  |   |       |    |   
|----------------------- | ---------------------------- | - | ----- | -- | ------ |  | ---- | - | ------ | - | ---- | - | - |  | - |  |  | - | ----- | -- | --
|Operating income/(loss) |                              |   |       |    |        |  |      |   |        |   |      |   |   |  |   |  |  |   |       |   
|(Dollars in millions)   |                              |   |       |    |        |  |      |   |        |   |      |   |   |  |   |  |  |   |       |   
|                        |                              |   | 2003  |    | Change |  | 2002 |   | Change |   | 2001
|                        |                              |   |       |    |        |  |      |   |        |   |     
|Operating income/(loss) |                              | $ | 104.3 |    |        |  | 82   | % |        | $ | 57.2 |   |   |  | * |  |  | $ | (16.5 | ) 
|                        | Percentage of total revenues |   |       | 13 | %      |  |      |   |        |   |      | 7 | % |  |   |  |  |   |       | (2 | %)



---

|* |  | Not meaningful
|- |  | --------------

Operating income in 2003 was $104.3 million compared to operating income of
$57.2 million in 2002, and an operating loss of $16.5 million in 2001.
Operating income in 2003 included $7.4 million in restructuring charges, and
operating income in 2002 included $40.4 million in restructuring charges. In
2001, our operating loss included restructuring charges of $48.8 million.

Our restructuring efforts were largely intended to reduce our operating
expenses to offset our reduced revenue forecasts. We believe these efforts have been
successful and have allowed us to offset decreases in revenue with
corresponding decreases in our core operating expenses (defined for purposes of this
explanation as cost of license fees, cost of services, sales and
marketing, product development and engineering, and general and administrative).

In 2003, the decrease in our core operating expenses from 2002 was
approximately 8 percent (principally offset by a 6 percent decline in our total
revenues from 2002 to 2003). The improved operating income from 2002 to 2003
was primarily attributable to a $33.0 million decrease in restructuring expense
and the absence of the $12.3 million charge relating to goodwill impairment.

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In 2002, the decrease in our core operating expenses from 2001 was
approximately 13 percent ((principally offset by an 11 percent decrease in our
total revenues from 2001 to 2002). The improved operating income from 2001 to
2002 was primarily attributable to an $8.3 million reduction in restructuring
expense and the absence in 2002 of both the $53.8 million in goodwill amortization (upon the
adoption of SFAS 142) and an $18.5 million charge for the write-off of
in-process research and development.

|                                |                              |   |      |   |        |  |      |    |        |   |      |   |   |  |     |    |  |   |      |   |  
|------------------------------- | ---------------------------- | - | ---- | - | ------ |  | ---- | -- | ------ | - | ---- | - | - |  | --- | -- |  | - | ---- | - | -
|Other income (expense), net     |                              |   |      |   |        |  |      |    |        |   |      |   |   |  |     |    |  |   |      |  
|(Dollars in millions)           |                              |   |      |   |        |  |      |    |        |   |      |   |   |  |     |    |  |   |      |  
|                                |                              |   | 2003 |   | Change |  | 2002 |    | Change |   | 2001
|                                |                              |   |      |   |        |  |      |    |        |   |     
|Interest income                 |                              | $ | 11.2 |   |        |  | (4   | %) |        | $ | 11.7 |   |   |  | (31 | %) |  | $ | 17.0 |  
|                                | Percentage of total revenues |   |      | 1 | %      |  |      |    |        |   |      | 1 | % |  |     |    |  |   |      | 2 | %
|Interest expense and other, net |                              | $ | 2.5  |   |        |  | 4    | %  |        | $ | 2.4  |   |   |  | 300 | %  |  | $ | 0.6  |  
|                                | Percentage of total revenues |   |      | * |        |  |      |    |        |   |      | * |   |  |     |    |  |   |      | * |  
|Minority interest               |                              |   | *    |   |        |  | *    |    |        |   | *    |   |   |  | *   |    |  |   | *    |  
|                                | Percentage of total revenues |   |      | * |        |  |      |    |        |   |      | * |   |  |     |    |  |   |      | * |  



---

|* |  | Not meaningful
|- |  | --------------

In 2003, interest income decreased 4 percent from 2002 (which had decreased 31
percent from 2001). Interest income consists primarily of interest earned on
our investments. The decrease in interest income from 2001 to 2002, and from
2002 to 2003 is largely due to the decline in interest rate yields on our cash
balances invested.

Interest expense and other, net, primarily includes: net gains and losses
resulting from foreign currency transactions and the related hedging
activities; the cost of hedging foreign currency exposures; bank fees; and gains
from the disposition of certain real estate and investments. Other income
(expense), net for 2003 included a gain of approximately $3.2 million from cash
collected on a note receivable previously reserved in connection with our sale
of certain NEN Swiss subsidiaries. Other income (expense), net for 2002 included a gain of approximately
$2.5 million that we realized on the initial sale of these Swiss subsidiaries.

|                           |  |      |      |        |  |      |    |        |  |      |      |  |  |  |    |   |  |   |      | 
|-------------------------- |  | ---- | ---- | ------ |  | ---- | -- | ------ |  | ---- | ---- |  |  |  | -- | - |  | - | ---- | 
|Provision for income taxes |  |      |      |        |  |      |    |        |  |      |      |  |  |  |    |   |  |   |      | 
|(Dollars in millions)      |  |      |      |        |  |      |    |        |  |      |      |  |  |  |    |   |  |   |      | 
|                           |  | 2003 |      | Change |  | 2002 |    | Change |  | 2001
|                           |  |      |      |        |  |      |    |        |  |     
|Provision for income taxes |  | $    | 30.8 |        |  |      | (8 | %)     |  | $    | 33.4 |  |  |  | 26 | % |  | $ | 26.5 | 

In 2003, a provision for income taxes was recorded at a rate of approximately
26 percent on operating income. Our effective tax rate differs from the
statutory federal rate of 35 percent primarily due to three factors: the
utilization of certain foreign tax credit carryover not previously recognized;
the release of certain deferred tax liabilities which were made unnecessary
when restructured certain earnings of a foreign subsidiary to allow
for their repatriation free from withholding taxes which had been
provided for with the deferred tax liability; and, the release of certain tax
accruals upon the completion of various tax audits. Without the release of
the deferred tax liability and the tax accruals, our effective tax rate for the
year would have been approximately 32 percent.

In 2002, a provision for income taxes was recorded at a rate of approximately
47 percent on operating income before the cumulative effect of an accounting
change. Our 2002 effective tax rate exceeded the
statutory federal rate of 35 percent primarily due to non-deductible charges
associated with the impairment loss on certain goodwill, and the impact of
state taxes.

In 2001, income taxes of $26.5 million were recorded on pre-tax income of $1.0
million resulting largely from taxes on our international earnings. In 2001, we had significant pre-tax earnings in
foreign jurisdictions and a significant pre-tax loss in the U.S. The 2001
U.S. pre-tax book loss

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primarily resulted from the non-deductible amortization
or write-off of intangibles acquired in various acquisitions and our 2001
restructuring activity. The significant amount of non-tax deductible expenses (primarily the amortization or write off of intangibles acquired
in the NEN acquisition) made our effective tax rate meaningless in 2001. See
Note Eight to Consolidated Financial Statements, Part II, Item 8, incorporated
here by reference.

|                                                            |  |      |   |        |  |      |   |        |  |      |       |  |  |  |   |  |  |  |   | 
|----------------------------------------------------------- |  | ---- | - | ------ |  | ---- | - | ------ |  | ---- | ----- |  |  |  | - |  |  |  | - | 
|Cumulative effect of an accounting change to adopt SFAS 142 |  |      |   |        |  |     
|(Dollars in millions)                                       |  |      |   |        |  |     
|                                                            |  | 2003 |   | Change |  | 2002 |   | Change |  | 2001
|                                                            |  |      |   |        |  |      |   |        |  |     
|Cumulative effect of an
accounting change to adopt
SFAS 142 |  |      |  |        |  |      | * |        |  | $    | 132.5 |  |  |  | * |  |  |  |  | 



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|* |  | Not meaningful
|- |  | --------------

For a discussion of the cumulative effect of an accounting change to adopt SFAS
142, see Note One to Consolidated Financial Statements  Goodwill and Other
Purchased Intangibles, Part II, Item 8, incorporated here by reference.

|                                 |                                                              |   |      |      |        |  |      |    |        |   |       |       |    |  |     |     |   |   |       |       |   
|-------------------------------- | ------------------------------------------------------------ | - | ---- | ---- | ------ |  | ---- | -- | ------ | - | ----- | ----- | -- |  | --- | --- | - | - | ----- | ----- | --
|Net income (loss) per share      |                                                              |   |      |      |        |  |      |    |        |   |       |       |    |  |     |     |   |   |       |      
|(Dollars and shares in millions) |                                                              |   |      |      |        |  |      |    |        |   |       |       |    |  |     |     |   |   |       |      
|                                 |                                                              |   | 2003 |      | Change |  | 2002 |    | Change |   | 2001 
|                                 |                                                              |   |      |      |        |  |      |    |        |   |      
|Net income (loss)                |                                                              | $ | 87.3 |      |        |  | *    |    |        | $ | (94.7 | )     |    |  | 271 | %   |   | $ | (25.5 | )    
|                                 | Percentage of total revenues                                 |   |      | 11   | %      |  |      |    |        |   |       | (11   | %) |  |     |     |   |   |       | (3    | %)
|Basic:                           |                                                              |   |      |      |        |  |      |    |        |   |       |       |    |  |     |     |   |   |       |      
|                                 | Net income (loss) per share                                  |   | $    | 0.92 |        |  |      | *  |        |   | $     | (0.98 | )  |  |     | 263 | % |   | $     | (0.27 | ) 
|                                 | Shares used in computing
basic net income (loss) per
share   |   |      | 94.8 |        |  |      | (2 | %)     |   |       | 96.8  |    |  |     | 2   | % |   |       | 94.6  |   
|Diluted:                         |                                                              |   |      |      |        |  |      |    |        |   |       |       |    |  |     |     |   |   |       |      
|                                 | Net income (loss) per share                                  |   | $    | 0.89 |        |  |      | *  |        |   | $     | (0.95 | )  |  |     | 252 | % |   | $     | (0.27 | ) 
|                                 | Shares used in computing
diluted net income (loss)
per share |   |      | 97.6 |        |  |      | (2 | %)     |   |       | 99.6  |    |  |     | 5   | % |   |       | 94.6  |   



---

|* |  | Not meaningful
|- |  | --------------

In 2003, the increase in our net income was primarily related to the absence
of
any goodwill impairment loss as compared to the $132.5 million impairment loss
recognized in 2002 as a cumulative effect of an accounting change (see Note One to Consolidated Financial Statements - Goodwill and Other
Purchased Intangibles, Part II, Item 8, incorporated here by reference), and the
factors discussed in Operating Income, above. The same impairment loss
conversely contributed to the increase in our net loss from 2001 to 2002.

In 2003, the decrease in shares used for computing basic and diluted net income
per share was primarily from shares we repurchased under our Stock Repurchase
Program (described in Liquidity and Capital Resources, below). The decrease
was partially offset by the exercise of employee stock options and the issuance
of approximately 0.7 million shares of our Common Stock during the third
quarter of 2003 to an unrelated third party in connection with an agreement for
marketing services (see Note Seven to Consolidated Financial Statements 
Issuance of Company Stock for Certain Services, Part II, Item 8, incorporated
here by reference). In 2002, the share increases in all cases were attributable
to the ongoing exercise of employee stock options and the effect of our shares
issued in 2001 in connection with our acquisition of NEN (partially offset by
our share repurchases).

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|                                                     |  |      |       |        |  |      |     |        |  |      |       |   |  |  |     |    |  |   |       |  
|---------------------------------------------------- |  | ---- | ----- | ------ |  | ---- | --- | ------ |  | ---- | ----- | - |  |  | --- | -- |  | - | ----- | -
|Liquidity and capital resources                      |  |      |       |        |  |      |     |        |  |      |       |   |  |  |     |    |  |   |       |  
|(Dollars in millions)                                |  |      |       |        |  |      |     |        |  |      |       |   |  |  |     |    |  |   |       |  
|                                                     |  | 2003 |       | Change |  | 2002 |     | Change |  | 2001
|                                                     |  |      |       |        |  |      |     |        |  |     
|Working capital                                      |  | $    | 254.8 |        |  |      | 136 | %      |  | $    | 107.9 |   |  |  | (1  | %) |  | $ | 108.6 |  
|Cash, cash equivalents and cash
Investments          |  | $    | 573.8 |        |  |      | 48  | %      |  | $    | 387.2 |   |  |  | 13  | %  |  | $ | 343.2 |  
|Net cash provided by operating activities            |  | $    | 202.1 |        |  |      | 23  | %      |  | $    | 164.3 |   |  |  | 76  | %  |  | $ | 93.1  |  
|Net cash used for investing activities               |  | $    | 178.7 |        |  |      | 62  | %      |  | $    | 110.1 |   |  |  | 381 | %  |  | $ | 22.9  |  
|Net cash provided by (used for)
financing activities |  | $    | 25.0  |        |  |      | *   |        |  | $    | (66.2 | ) |  |  | (12 | %) |  | $ | (75.4 | )



---

|* |  | Not meaningful
|- |  | --------------

Net cash provided by operating activities increased 23 percent between 2002 and
2003. primarily due to a $40.7 million increase in net income before
consideration of depreciation, amortization and an impairment loss. The
increase also resulted from increased cash of $24.5 million associated with our
improved collections within EMEA (offset somewhat by a reduction of accrued liabilities principally relating to
certain restructuring related facilities obligations).

The increase from 2001 to 2002 in this category resulted primarily from lower
operating expenses incurred in 2002 due to our 2002 and 2001
restructuring activities; the timing of payments made against other accrued
restructuring related liabilities; and an increase in deferred revenues. Net
cash used for investing activities increased 62 percent between 2002 and 2003
primarily due to net purchases of cash investments of $102.9 million in 2003
compared to $34.0 million in 2002. For further discussion of our investment
portfolio, see Interest Rate Risk, below. The increase from 2001 to 2002 in
this category was primarily due to $34.0 million of cash investment net
purchases in 2002 compared to net dispositions of cash investments of $29.5
million in 2001. In addition, we gained net cash from business combinations (primarily NEN) of
approximately $27.2 million during 2001 compared to $2.0 million of net cash
used for acquisitions in 2002.

Beginning in 1998, our Board of Directors authorized the repurchase of our
outstanding Common Stock from time to time, subject to price and other
conditions (Stock Repurchase Program). Through December 31, 2003, aggregate
amounts authorized under the Stock Repurchase Program totaled $400.0 million.
During 2003, we repurchased 2.3 million shares at a cost of $30.9 million. In
2002, we repurchased 6.7 million shares at a cost of $89.8 million, and in 2001
we repurchased 6.4 million shares at a cost of $106.9 million. Approximately
$19.2 million remained in the Stock Repurchase Program at December 31, 2003.  For
additional information regarding the Stock Repurchase Program, see Note Fifteen
to Consolidated Financial Statements, Part II, Item 8.

Substantially all our financing activities from 2001 through 2003 related to
purchases under the Stock Repurchase Program and the utilization of treasury
stock issued upon exercise of stock options under certain of our employee stock
plans. Net cash provided by financing activities was $25.0 million in 2003
compared to net cash used of $66.2 million during 2002. The decrease was
primarily due to the fact that we repurchased fewer shares under the Stock
Repurchase Program in 2003 compared to 2002. The average price of the shares
repurchased under the Stock Repurchase Program during 2003 was $13.24, compared
to $13.42 in 2002. Net cash used for financing activities decreased 12 percent
between 2001 and 2002 primarily because less cash was used in the Stock
Repurchase Program in 2002 compared to 2001. While more shares were repurchased
in 2002 than in 2001, the average price of the shares repurchased under the
Stock Repurchase Program during 2001 was $16.77.

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We had no significant commitments for capital expenditures at December 31,
2003. We expect to fund expenditures for future capital requirements,
liquidity and strategic operating programs from a combination of available cash
balances and internally generated funds. We currently have no outside debt.

We engage in global business operations and are therefore exposed to foreign
currency fluctuations that can affect the overall value of the assets
(including cash) and liabilities reflected on our balance sheet. For a further
discussion of the effect of foreign currency fluctuations on our financial
condition, see Financial Risk Management  Foreign Exchange Risk, below

Contractual Obligations

Our contractual obligations at December 31, 2003, are summarized as follows:

|                                                                  |  |                        |       |             |  |             |      |             |  |            |      |  |  |   |      |  |  |   |       | 
|----------------------------------------------------------------- |  | ---------------------- | ----- | ----------- |  | ----------- | ---- | ----------- |  | ---------- | ---- |  |  | - | ---- |  |  | - | ----- | 
|(Dollars in Millions)                                             |  |                        |       |             |  |             |      |             |  |            |      |  |  |   |      |  |  |   |       | 
|Contractual Obligations                                           |  | Payments Due by Period
|                                                                  |  |                       
|                                                                  |  |                        |       |             |  | 2004        |      | 2005-2006   |  | 2007-2008  |      |  |  |  
|                                                                  |  | Total                  |       | Commitments |  | Commitments |      | Commitments |  | After 2008
|                                                                  |  |                        |       |             |  |             |      |             |  |           
|Operating leases                                                  |  | $                      | 387.3 |             |  | $           | 47.9 |             |  | $          | 78.3 |  |  | $ | 68.9 |  |  | $ | 192.2 | 
|Third party royalties
/Software license &
maintenance
commitments |  |                        | 12.6  |             |  |             | 9.8  |             |  |            | 2.8  |  |  |   |      |  |  |   |      | 
|Other Guarantees                                                  |  |                        | 16.0  |             |  |             | 4.0  |             |  |            | 8.0  |  |  |   | 4.0  |  |  |   |       | 
|                                                                  |  |                        |       |             |  |             |      |             |  |            |      |  |  |   |      |  |  |   |       | 
|Total commitments                                                 |  | $                      | 415.9 |             |  | $           | 61.7 |             |  | $          | 89.1 |  |  | $ | 72.9 |  |  | $ | 192.2 | 
|                                                                  |  |                        |       |             |  |             |      |             |  |            |      |  |  |   |      |  |  |   |       | 

In 2002, we entered into a six-year arrangement with an unrelated third party
software company requiring that company to develop and port certain of its
products to run on the Sybase database platform. The parties agreed to jointly
market and sell the ported products, and also agreed on prescribed annual
minimum revenue targets during the term of the agreement. Under the terms of
the agreement, and provided the other party performs its obligations,
we could be obligated to pay up to $4.0 million per year to
cover any revenue shortfall against the minimum revenue targets for
years 2003 through 2007.

New Accounting Pronouncements

In January 2003, the FASB issued Interpretation No. 46, Consolidation of
Variable Interest Entities, an Interpretation of Accounting Research Bulletin
(ARB) No. 51 (Interpretation 46). Interpretation 46, which establishes
accounting guidance for determining whether certain variable interest entities
(VIEs) are required to be consolidated by their investors, sponsors or
transferors. These rules are currently effective for any variable interest in
VIEs created after January 31, 2003 (of which we have none) and will be
effective for variable interests in VIEs created before January 31, 2003 in our
quarter ending March 31, 2004. We do not expect the adoption of the effective
provisions of Interpretation 46 to have any impact on our consolidated
financial position or statement of operations. See Note One to Consolidated
Financial Statements  Other Recent Accounting Pronouncements, Part I, Item 8,
incorporated here by reference.

Financial Risk Management

Foreign Exchange Risk

We experience foreign exchange translation exposure on our net assets
denominated in currencies other than the U.S. dollar. The related foreign
currency translation gains and losses from translating these amounts into U.S.
dollars for subsidiaries that conduct their business in non-U.S. currencies are
reflected in Accumulated other comprehensive income/(loss) under
Stockholders equity on the balance sheet. As of December 31, 2003, we had
identifiable net assets totaling $143.2 million associated with our EMEA
operations and $60.6 million associated with our Intercontinental operations.

As a global concern, we face exposure to adverse movements in foreign currency
exchange rates. These exposures may change over time as business practices
evolve and could have a material adverse impact on our financial position and
results of operations. Historically, our primary exposures have related to
non-U.S. dollar-denominated sales and expenses in EMEA, Asia Pacific, and Latin
America. In order to reduce the effect of foreign currency fluctuations, we
utilize foreign currency forward exchange contracts (forward contracts) to
hedge certain foreign currency transaction exposures. Specifically, we
enter into forward contracts with a maturity of approximately 30 days
to hedge against the foreign exchange exposure created by certain balances that
are denominated in a currency other than the principal reporting

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currency of
the entity recording the transaction. The gains and losses on the forward
contracts are meant to mitigate the gains and losses on these outstanding
foreign currency transactions. We do not enter into forward contracts for
trading purposes. All foreign currency transactions and all outstanding
forward contracts are marked to market at the end of the period with unrealized
gains and losses included in interest expense and other, net. The unrealized
gain (loss) on our outstanding forward contracts as of December 31, 2003 was
immaterial to our consolidated financial statements. The tables below provide information
about our forward contracts as of December 31, 2003 and 2002.

(Amounts in thousands except exchange rates)

|                                                      |                   |              |        |               |  |  |  |        | 
|----------------------------------------------------- | ----------------- | ------------ | ------ | ------------- |  |  |  | ------ | 
|                                                      |                   | US $Notional |        | Average      
|Forward Contracts - As of December 31, 2003           |                   | amount       |        | Contract rate
|                                                      |                   |              |        |              
|Contracts for the sale of US Dollars and purchase of: |                   |              |        |               |  |  |  |       
|                                                      | Canadian Dollars  |              | $      | 7,157         |  |  |  | 0.7695 | 
|                                                      | Euro              |              | $      | 17,732        |  |  |  | 1.2576 | 
|                                                      | Singapore Dollars |              | $      | 5,235         |  |  |  | 0.5882 | 
|Contracts for the purchase of US Dollars and sale of: |                   |              |        |               |  |  |  |       
|                                                      | Swiss Franc       |              | $      | 1,613         |  |  |  | 1.2403 | 
|Contracts for the purchase of Euros and sale of:      |                   |              |        |               |  |  |  |       
|                                                      | Swedish Krona     |              | $      | 1,262         |  |  |  | 9.0769 | 
|                                                      | Swiss Franc       |              | $      | 1,452         |  |  |  | 1.5598 | 
|                                                      | UK Pound          |              | $      | 9,065         |  |  |  | 0.7080 | 
|                                                      | Norwegian Krone   |              | $      | 1,603         |  |  |  | 8.4020 | 
|                                                      |                   |              |        |               |  |  |  |       
|Total                                                 |                   | $            | 45,119 |               |  |  |  |       

|                                                      |                   |              |        |               |  |  |  |        | 
|----------------------------------------------------- | ----------------- | ------------ | ------ | ------------- |  |  |  | ------ | 
|(Amounts in thousands except exchange rates)          |                   |              |        |               |  | 
|                                                      |                   | US $Notional |        | Average      
|Forward Contracts  As of December 31, 2002           |                   | amount       |        | Contract rate
|                                                      |                   |              |        |              
|Contracts for the sale of US Dollars and purchase of: |                   |              |        |               |  |  |  |       
|                                                      | Canadian Dollars  |              | $      | 8,150         |  |  |  | 0.6318 | 
|                                                      | Euro              |              |        | 8,920         |  |  |  | 1.0494 | 
|                                                      | Singapore Dollars |              |        | 2,766         |  |  |  | 0.5762 | 
|Contracts for purchase of US Dollars and sale of:     |                   |              |        |               |  |  |  |       
|                                                      | Swiss Franc       |              |        | 1,667         |  |  |  | 1.3801 | 
|                                                      | Brazilian Real    |              |        | 2,849         |  |  |  | 0.2793 | 
|Contracts for purchase of Euros and sale of:          |                   |              |        |               |  |  |  |       
|                                                      | Swedish Krona     |              |        | 1,394         |  |  |  | 9.1177 | 
|                                                      | Swiss Franc       |              |        | 1,741         |  |  |  | 1.4483 | 
|                                                      | UK Pound          |              |        | 12,349        |  |  |  | 0.6550 | 
|                                                      | Norwegian Krone   |              |        | 4,489         |  |  |  | 7.3487 | 
|                                                      |                   |              |        |               |  |  |  |       
|Total                                                 |                   | $            | 44,325 |               |  |  |  |       

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Interest Rate Risk

Our exposure to market risk for changes in interest rates relates to our
investment portfolio, which consists of taxable, short-term money market
instruments and debt securities with maturities between 90 days and three
years. We do not use derivative financial instruments in our investment
portfolio. We place our investments with high quality credit issuers and, by
policy, limit the amount of credit exposure with any one issuer.

We mitigate default risk by investing
in only safe, high investment
grade securities and by monitoring the credit rating of investment issuers.
The portfolio includes only marketable securities with active secondary or
resale markets to ensure portfolio liquidity. We have no cash flow exposure
due to rate changes for our investment portfolio, since all investments are
made in securities with fixed interest rates.

Future Operating Results

Our future operating results may vary substantially from period to period due
to a variety of significant risks, some of which are discussed below and
elsewhere in this Report on Form 10-K. We strongly urge current and prospective
investors to carefully consider the cautionary statements and risks contained
in this Report including those regarding forward-looking statements described
on Page 2.

Revenue Related Factors

In 2003, the decline in our license, consulting and education services revenues
was offset by a variety of factors including an increase in technical support
services revenues, our vigilant control over operating expenses, and the
benefits realized from our restructuring activities (see Overview, above).

Although our technical support revenues have increased steadily over the past
several years, we have begun to encounter increased pricing pressure from
customers during technical support renewal negotiations. If this trend
continues, or if customers cancel or delay renewal of their technical support
contracts, our ability to maintain and grow this source of revenue could be
adversely affected.

Our restructuring activities
over the past several years and our management of operating expenses allowed us to double our operating margins from
2002 to 2003. However, we do not believe we can further reduce our current
cost structure in any material respects without fundamentally changing elements
of our current business. While we are confident in our ability to control our
operating expenses going forward, our future operating margin expansion will
need to be generated from increased top line revenues.

Despite the challenges created by such factors, we intend to continue
controlling costs and pursuing our business strategies, including our recently
announced Unwired Enterprise initiative which focuses on leveraging our lead in
the expansion of enterprise level software to mobile and wireless solutions.
We also intend to continue creating and maintaining successful strategic and
global alliances with key partners (including Intel, Sun Microsystems, Apple
Computer, Hewlett-Packard and SAP), to provide customers with optimal solutions
based on our leading-edge technology and our partners capabilities in specific
markets. If we are unable to achieve these goals, or if we are unable to
overcome the challenges discussed elsewhere in this report, our ability to grow
top line revenues will be significantly impaired. This, in turn, could
adversely impact our results of operations, even if we continue to generate a
profit and to maintain positive cash flows.

Increasingly complex revenue
recognition rules for software companies directly affect
our ability to measure revenue for any given accounting period. Such rules are
subject to constant review and revision by various bodies tasked with
establishing accounting standards. Therefore, modifications or new
interpretations of existing accounting guidance governing revenue recognition
in the software industry could have a material effect on our business.

In addition to the above factors, the timing and amount of our revenues are
subject to a number of factors that make it difficult to accurately estimate
revenues and operating results on a quarterly or annual basis. In our
experience, license fees revenues tend to decline between the fourth quarter of
one year and the first quarter of the next year. This has contributed to lower
total revenues and earnings in the first quarter compared to the prior fourth
quarter. We currently anticipate that this seasonal pattern will continue.

Since we operate with little or no backlog, quarterly revenues depend largely
on orders booked and shipped in that quarter. Historically, we have recorded
approximately 50 to 70 percent of our quarterly revenues in the last month of each quarter, particularly during the final two
weeks. During 2003, we experienced an overall increase in the volume of
transactions for license revenues, but an overall decrease in the average
dollar value of these deals. Therefore, although many of our customers are
larger enterprises, an apparent trend toward more conservative IT spending has
resulted in fewer of these large customers making substantial investments in
our products and services in any given quarter. Therefore, our inability to
record or recognize one or more orders of $1.0 million or greater in the
aggregate at the very end of a quarter could materially and adversely impact
our results of operations. Our operating expenses are based on projected
annual and

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quarterly revenue levels, and are generally incurred ratably
throughout each quarter. Since our operating expenses are relatively fixed in
the short term, failure to realize projected revenues for a specified period
could impact operating results, causing an operating loss for that period.

In North America where approximately 59 percent of our total revenues were generated
in 2003, we currently ship most of our products from our Dublin, California
facility near the site of our corporate headquarters. Because we tend to
record a high percentage of revenues during the last two weeks of each quarter,
disruption of operations at that facility (e.g., due to natural calamity or systems
failure) could directly harm our ability to record revenues for
such quarter. This could, in turn, have an adverse impact on operating
results.

Impairment of Goodwill and Other Purchased Intangibles

In 2002 we determined under SFAS 142 that the carrying value of FFIs goodwill
exceeded its implied value by $12.3 million. Consequently, we were required to
recognize the impairment loss in the fourth quarter of 2002, which affected our
reported earnings. If we are required to recognize additional impairment
losses in the future, our results of operations could be materially and
adversely affected. See Critical Accounting Policies and Estimates 
Impairment of Goodwill and Intangible
Assets, above, and Note One to Consolidated Financial Statements  Goodwill
and Other Intangible Assets, Part II, Item 8, incorporated here by
reference.

Changing Legal and Accounting Environment

During the past several years, various accounting guidance has been issued with
respect to revenue recognition rules in the software industry. However, much
of this guidance addresses software revenue recognition primarily from a
conceptual level, and is silent as to specific implementation requirements. As
a consequence, accounting firms and their clients have been required to make
assumptions, in certain circumstances, regarding application of the rules to
transactions not addressed by the existing rules. We believe our current
business arrangements and contract terms have been properly reported under the
current rules. However, if final interpretations of these rules necessitate a
change in our current revenue recognition practices, our results of operations,
financial condition and business could be materially and adversely affected.
For further discussion, see Critical Accounting Policies and Estimates,
above.

In addition to the above, the U.S. Congress enacted the Sarbanes-Oxley Act of
2002 (SOA) in July 2002, largely in response to a rash of financial scandals
involving public companies such as Enron and WorldCom. The SOA provides for
sweeping and unprecedented corporate reforms, focusing on public company
financial reporting, corporate ethics, and oversight of the accounting
profession, among other areas, and establishing harsher civil and criminal
penalties for violation of U.S. securities laws. Certain provisions of the SOA
became effective immediately, and others required the SEC and the national
securities exchanges to enact rules and regulations to carry out the purposes
of the act. Many of these new SEC-mandated rules and procedures (including
rules requiring personal certification of a companys SEC reports by the
companys chief executive officer and senior financial officers, accelerated
filing of certain SEC reports, and changes in the role and functions of a
companys audit committee), became effective during the latter half of 2002 and
during 2003. Many additional rules and regulations, including those enacted by
the New York Stock Exchange where our Common Stock is traded are effective
starting in 2004. We believe our corporate practices and standards meet or
exceed the current rules and regulations currently in effect. However, new or
additional rules that influence significant adjustments to our business
practices and procedures could result in increased administrative costs,
lengthened sales cycles and other changes that could adversely affect our
results of operations.

In the last half of 2003, the Financial Accounting Standards Board (FASB) made
several significant decisions regarding its ongoing project on accounting for
stock-based compensation. We currently account for stock-based employee
compensation using the intrinsic value method prescribed in Accounting
Principles Board (APB) Opinion No. 25, Accounting for Stock Issued to
Employees, and Related Interpretations. However, it is expected that FASB
will issue new rules sometime in the third

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quarter of 2004 requiring companies
to expense employee stock options and other equity-based compensation at fair
value beginning in January 2005. These rulings likely will affect the
accounting for our current employee stock option and stock purchase plans, and
could have an adverse effect on our accounting for compensation expenses if we
are unable to modify our plans in an appropriate or timely manner.

Stock Price Volatility

Our ability to exceed, or our failure to achieve, expected operating results
for any period could significantly impact our stock price. Inevitably, some
investors will experience gains while others will experience losses depending
on the timing of their investment. The market for our stock and for technology
stocks in general has been highly volatile, and the trading price of our Common
Stock has fluctuated widely in recent years.

During 2002 and early 2003, U.S. stock prices in general experienced a
significant downturn, due in part to the collapse of dot.com stocks,
continued war and political unrest in the Middle East and a struggling economic
recovery in the U.S. Although our stock price stabilized and experienced a
rebound in the latter half of 2003 compared to 2002 levels, our stock price may
fluctuate in the future in response to a variety of factors including the
progress of the U.S. economic recovery, our financial results, press and
industry analyst reports, market acceptance of our products and pricing
policies, activities of competitors, acquisitions of other businesses and
technologies by Sybase and other events. In addition, the stock market has
from time to time experienced extreme price and volume fluctuations that have
categorically affected the market price for high technology companies, but
which often have been unrelated to the operating performance of these
companies.

Competition and Industry Consolidation

The IT industry and the market for our core database infrastructure products
and services is becoming more competitive due to a variety of factors including
a maturing enterprise infrastructure software market, changes in customer IT
spending habits, and a slow economic recovery in the U.S. (see
Overview, above). There is also a growing trend toward consolidations in the software industry
(e.g., PeopleSoft, Inc.s 2003 acquisition of J.D. Edwards, and IBMs 2001
acquisition of the Informix database business). Continued consolidation within
the software industry could result in the larger software companies (including
IBM Corporation, Microsoft Corporation and Oracle Corporation) increasing their
market share through the acquisition of smaller companies that, for example,
dominate certain lucrative market niches or that have loyal installed customer
bases. This could pose a significant competitive disadvantage to Sybase.
Many of these companies may have greater financial, technical, sales and
marketing resources, and a larger installed customer base than Sybase. In
addition, our competitors advertising and marketing efforts could overshadow
our own and/or adversely influence customer perception of our products and
services, and harm our business and prospects as a result. To remain
competitive, we must be able to develop and promote new products and
businesses, enhance existing products and retain competitive pricing policies,
all in a timely manner. Our failure to compete successfully with new or
existing competitors in any of these areas, or other areas, could have a
material adverse impact on our ability to generate new revenues.

Product Development

Increased widespread use of the Internet and fast-growing market demand for
mobile and wireless solutions may significantly alter how we do business in the
future. This could affect our ability to timely meet the demand for new or
enhanced products and services at competitive prices, which could significantly
impact our ability to generate future revenues.

Our acquisition of AvantGo in 2003 allows us to significantly enhance our iAS
mobile, wireless and embedded solutions. We believe our focus on these
solutions and services and our other strategies will enhance revenues and
profitability. However, if the market does not continue to develop as
anticipated, or if our solutions and services do not successfully compete in
the relevant markets, we may not realize expected revenues and profitability.

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Our future results may also be affected if our products cannot interoperate and
perform well with software products of other companies. Certain leading
applications currently are not interoperable with our products, and others may
never be. In addition, many of our principal products are designed for use
with products offered by competitors. In the future, vendors of non-Sybase
products may become less willing to provide us with access to their products,
technical information, and marketing and sales support, which could harm our
business and prospects.

Changes in Sales Model

Our sales model has evolved significantly during the past few years to keep
pace with new and developing markets and changing business environments. If we
have misjudged demand for our products and services in our target markets, or
if we are unable to coordinate our sales efforts in a focused and efficient
way, this could materially and adversely affect our business and prospects.

In January 2003, we reorganized our sales focus with the creation of the
Infrastructure Platform Group (IPG), which focused on increasing market
presence and revenue through solution partners (e.g., ISVs, VARs and OEMs) and
delivery partners (e.g., SIs, distributors and resellers). In the process of
this reorganization, we brought three of our former divisions (ESD, eBD and
BID) under a single umbrella, and reduced the number of our business divisions
from five to three. In May 2000, we announced the launch of iAS, which was
formed to continue the business of our former, the MEC division in mobile and
embedded e-Business products and services. In January 2000, we acquired HFN
(now FFI) to increase our focus on the financial services market. eBD was
created in the second quarter of 2001 when we acquired NEN, and consisted of
certain operations of NEN along with certain products previously in the ESD
segment and certain products previously in the former Internet Applications
Division (IAD). In January 1999, we realigned our direct sales force, product
teams and professional services capabilities into four divisions. This
reorganization was intended to enhance overall revenues and profitability by
providing increased focus on each of four key markets: Enterprise Solutions,
Mobile and Embedded Computing, Internet Applications and Business Intelligence.
Other organizational changes in our sales or divisional model, including
certain changes that were instituted in February 2004, could have a direct
affect on our results of operations depending on how quickly and effectively
our employees and management are able to adapt to and maximize the advantages
these changes are intended to create.

International Operations

We continue to derive a substantial portion of our revenues from our
international operations, and we plan to continue expanding our business in
international markets in the future. In 2003, revenues outside North America
represented 41 percent of our total revenues. Because of this, global
political unrest, acts of terrorism and continued unrest and war in the Middle
East could have a material impact on our international revenues and
operations.

As a global concern, we also face exposure to adverse movements in foreign
currency exchange rates. For a discussion of risks associated with currency
fluctuation, see Financial Risk Management  Foreign Exchange Risk above,
incorporated here by reference.

Our revenues outside North America could also fluctuate due to the relative
immaturity of some markets, rapid growth in other markets, and organizational
changes we have made to accommodate these conditions. For example, during 2003
we transferred ownership of AvantGo to iAS, de-registered our subsidiary in the
Lao Peoples Democratic Republic, and completed the dissolution of a former
German subsidiary of NEN. The prior year, we centralized finance functions
within specific geographic regions (rather than maintaining them on a
country-by-country basis), closed a subsidiary in the Czech Republic, and
dissolved NEN as well as several of its majority-owned and wholly owned
subsidiaries. In February 2001, we acquired our distributor in Denmark and in
September 2000, we acquired certain assets and assumed certain liabilities of
our distributor in Mexico.

Other factors that could significantly impact aspects of our international
operations include:

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| |  |  | Changes in political, regulatory, or economic conditions
| | - |  | --------------------------------------------------------
|
| |  |  | Changes or limitations in trade protection laws         
|
| |  |  | Changes in tax treaties or laws favorable to Sybase     
|
| |  |  | Natural disasters                                       

Intellectual Property

Our inability to obtain adequate copyright, patent or trade secret protection
for our products in certain countries may have a material adverse impact on
future operating results. In addition, as the number of software products and
associated patents increase, it is possible that software developers will
become subject to more frequent infringement claims.

We have in the past, and currently continue to receive claims by third parties
asserting that our products violate their patents or other proprietary rights.
It is possible that such claims will be asserted in the future. In addition,
to the extent we acquire other technologies, whether directly from third
parties or through acquisitions of other companies, we face the possibility
that such intellectual property will be found to infringe or violate the
proprietary rights of others. For example, a trademark infringement and
dilution case filed in 1999 against NEN, which we acquired in April
2001, resulted in
a multi-million dollar judgment against NEN and an injunction against NENs use
of the trade name NEON. The action was settled in September 2001 for a lesser
amount as well as certain other concessions. Regardless of whether these
claims have merit, they can be time consuming and expensive to defend or
settle, and can harm the Companys business and reputation. We do not believe
our products infringe any third party patents or proprietary rights, but there
is no guarantee that we can avoid claims or findings of infringement in the
future.

Changes in Management; Human Resources

In recent years, we have added to our executive management team. For example,
in January 2003, Thomas Volk joined the Company as Executive Vice President,
Infrastructure Platform Group, and was recently named Executive Vice President,
Worldwide Field Organization to replace Michael Bealmear who resigned the
position in February 2004. At the same time, Steven M. Capelli was named
Senior Vice President, Worldwide Partner Group, and Billy Ho, formerly Senior
Vice President and General Manager of eBD, became Senior Vice President and
General Manager, OEM Partner Sales. In June 2003, Pamela J. George resigned as
Senior Vice President of Corporate Marketing, and was replaced by Marty Beard,
who was named Senior Vice President, Corporate Development and Corporate
Marketing. In July 2003, Eric L. Miles resigned as Senior Vice President,
Business Intelligence Division. Richard Moore, who was named President of FFI
in August 2002, joined the Company in July 2001 as Senior Vice President and
General Manager of the v-Business Group. In October 2001, Billy Ho replaced
George F. (Rick) Adam, former CEO of NEN, as Senior Vice President and General
Manager of eBD. Further changes involving executives and managers resulting
from acquisitions, mergers and other events could increase the current rate of
employee turnover, particularly in consulting, engineering and sales. In
February 2004, Jack E. Sum, a former partner of PricewaterhouseCoopers, became
a Company director. Further changes in our Board membership could affect the
Companys current strategic plans or business vision.

Additionally, our inability to hire and retain qualified technical, managerial,
sales and other employees could affect our product development and sales
efforts, other aspects of our operations, and our financial results.
Competition for highly skilled personnel in the software industry is typically
intense. Our financial and stock price performance relative to the companies
with whom we compete for employees, and the high cost of living in the San
Francisco Bay Area, where our headquarters is located, could also impact the
degree of future employee turnover.

Acquisitions and Strategic Relationships

We regularly explore possible acquisitions and other strategic ventures to
expand and enhance our business. We have recently acquired or invested in a
number of companies and formed certain strategic relationships, and will likely
continue to do so in the future. For example, in February 2003 we completed
our acquisition of

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AvantGo, Inc., a leading provider of mobile enterprise
software, which was merged into iAS at the end of 2003. In April 2002, we
acquired all of the issued and outstanding stock of OnePage, Inc., a leading
provider of technology and applications for building the information components
- portlets - of corporate, consumer and wireless portals. During 2001, we
acquired NEN, a developer of enterprise application integration software, as
well as our distributor in Denmark. During 2000, we acquired certain assets
of our distributor in Mexico, and the stock of Home Financial Network, Inc.
(now FFI).

We may not achieve the desired benefits of our acquisitions and investments.
For example, we may be unable to successfully assimilate an acquired companys
management team, business infrastructure, company culture, or other important
factors. Also, dedication of additional resources to handle these integration
tasks could temporarily divert attention from other important business. Such
acquisitions could also result in costs, liabilities, or additional expenses
that could harm our results of operations and financial condition. With
respect to our investments in other companies, we may not realize a return on
our investments, or the value of our investments may decline if the businesses
in which we invest are not successful.




ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The information required by this item is incorporated by reference to MD&A 
Financial Risk Management, Part II, Item 7, incorporated here by reference.




ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

TABLE OF CONTENTS

|                                                                                                     |  |      |    | 
|---------------------------------------------------------------------------------------------------- |  | ---- | -- | 
|                                                                                                     |  | Page
|Report of Independent Auditors                                                                       |  |      | 33 | 
|Consolidated Balance Sheets as of December 31, 2003 and 2002                                         |  |      | 34 | 
|Consolidated Statements of Operations for the Years Ended December
31, 2003, 2002 and 2001           |  |      | 35 | 
|Consolidated Statements of Stockholders Equity for the Years Ended
December 31, 2003, 2002 and 2001 |  |      | 36 | 
|Consolidated Statements of Cash Flows for the Years Ended December
31, 2003, 2002 and 2001           |  |      | 37 | 
|Notes to Consolidated Financial Statements                                                           |  |      | 38 | 

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Report of Independent Auditors

The Board of Directors and Stockholders
Sybase, Inc.

We have audited the accompanying consolidated balance sheets of Sybase, Inc.,
as of December 31, 2003 and 2002 and the related consolidated statements of
operations, stockholders equity and cash flows for each of the three years in
the period ended December 31, 2003. Our audits also included the financial
statement schedule for the year ended December 31, 2003 listed in the index at
Item 15 (a). These financial statements and schedule are the responsibility of
the Companys management. Our responsibility is to express an opinion on these
financial statements and schedule based on our audits.

We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
Sybase, Inc. at December 31, 2003 and 2002, and the consolidated results of its
operations and its cash flows for each of the three years in the period ended
December 31, 2003, in conformity with accounting principles generally accepted
in the United States. Also in our opinion, the related financial statement
schedule, when considered in relation to the basic financial statements taken
as a whole, presents fairly, in all material respects, the information set
forth therein.

As discussed in Note One and Note Four to the consolidated financial
statements, in 2002 Sybase, Inc. changed its method of accounting for goodwill
and other purchased intangible assets.

/s/ ERNST & YOUNG LLP

Palo Alto, California
January 27, 2004, except for Note Fifteen
as to which the date is February 5, 2004

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Consolidated Balance Sheets

|                                                                                       |                                                                                                                                                                                                 |                           |                                                              |                                            |         |         |           |          |         |         |         | 
|-------------------------------------------------------------------------------------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------- | ------------------------------------------------------------ | ------------------------------------------ | ------- | ------- | --------- | -------- | ------- | ------- | ------- | 
|(Dollars in thousands, except share and per share data)                                |                                                                                                                                                                                                 | December 31,             
|                                                                                       |                                                                                                                                                                                                 |                           |                                                              |                                            |         | 2003    |           | 2002    
|                                                                                       |                                                                                                                                                                                                 |                           |                                                              |                                            |         |         |           |         
|Assets                                                                                 |                                                                                                                                                                                                 |                           |                                                              |                                            |         |         |           |         
|Current assets:                                                                        |                                                                                                                                                                                                 |                           |                                                              |                                            |         |         |           |         
|                                                                                       | Cash and cash equivalents                                                                                                                                                                       |                           | $                                                            | 315,404                                    |         |         | $         | 231,267  |        
|                                                                                       | Short-term cash investments                                                                                                                                                                     |                           |                                                              | 155,093                                    |         |         |           | 63,740   |        
|                                                                                       |                                                                                                                                                                                                 |                           |                                                              |                                            |         |         |           |         
|                                                                                       |                                                                                                                                                                                                 |                           | Total cash, cash equivalents and short-term cash investments |                                            |         | 470,497 |           |          |         | 295,007 |        
|                                                                                       | Restricted cash                                                                                                                                                                                 |                           |                                                              | 4,747                                      |         |         |           | 5,653    |        
|                                                                                       | Accounts receivable, less allowance for doubtful accounts of $13,645
(2002 - $10,307)                                                                                                           |                           |                                                              | 140,332                                    |         |         |           | 169,193  |        
|                                                                                       | Deferred income taxes                                                                                                                                                                           |                           |                                                              | 12,739                                     |         |         |           | 20,097   |        
|                                                                                       | Prepaid expenses and other current assets                                                                                                                                                       |                           |                                                              | 16,167                                     |         |         |           | 14,669   |        
|                                                                                       |                                                                                                                                                                                                 |                           |                                                              |                                            |         |         |           |         
|                                                                                       |                                                                                                                                                                                                 |                           | Total current assets                                         |                                            |         | 644,482 |           |          |         | 504,619 |        
|Long-term cash investments                                                             |                                                                                                                                                                                                 |                           | 103,296                                                      |                                            |         |         | 92,173    |         
|Restricted long-term cash investments                                                  |                                                                                                                                                                                                 |                           | 3,400                                                        |                                            |         |         |          |         
|Property, equipment and improvements, net                                              |                                                                                                                                                                                                 |                           | 67,462                                                       |                                            |         |         | 70,402    |         
|Deferred income taxes                                                                  |                                                                                                                                                                                                 |                           | 58,506                                                       |                                            |         |         | 46,295    |         
|Capitalized software, net                                                              |                                                                                                                                                                                                 |                           | 58,947                                                       |                                            |         |         | 62,266    |         
|Goodwill                                                                               |                                                                                                                                                                                                 |                           | 140,875                                                      |                                            |         |         | 136,826   |         
|Other purchased intangibles, less accumulated amortization
of $63,485 (2002  $46,227) |                                                                                                                                                                                                 |                           | 38,715                                                       |                                            |         |         | 50,473    |         
|Other assets                                                                           |                                                                                                                                                                                                 |                           | 35,673                                                       |                                            |         |         | 29,695    |         
|                                                                                       |                                                                                                                                                                                                 |                           |                                                              |                                            |         |         |           |         
|                                                                                       |                                                                                                                                                                                                 |                           |                                                              | Total assets                               |         | $       | 1,151,356 |          |         | $       | 992,749 | 
|                                                                                       |                                                                                                                                                                                                 |                           |                                                              |                                            |         |         |           |         
|Liabilities and stockholders equity                                                   |                                                                                                                                                                                                 |                           |                                                              |                                            |         |         |           |         
|Current liabilities:                                                                   |                                                                                                                                                                                                 |                           |                                                              |                                            |         |         |           |         
|                                                                                       | Accounts payable                                                                                                                                                                                |                           | $                                                            | 15,425                                     |         |         | $         | 13,085   |        
|                                                                                       | Accrued compensation and related expenses                                                                                                                                                       |                           |                                                              | 39,134                                     |         |         |           | 36,671   |        
|                                                                                       | Accrued income taxes                                                                                                                                                                            |                           |                                                              | 33,677                                     |         |         |           | 34,023   |        
|                                                                                       | Other accrued liabilities                                                                                                                                                                       |                           |                                                              | 94,611                                     |         |         |           | 112,468  |        
|                                                                                       | Deferred revenue                                                                                                                                                                                |                           |                                                              | 206,881                                    |         |         |           | 200,458  |        
|                                                                                       |                                                                                                                                                                                                 |                           |                                                              |                                            |         |         |           |         
|                                                                                       |                                                                                                                                                                                                 | Total current liabilities |                                                              |                                            | 389,728 |         |           |          | 396,705 |        
|                                                                                       |                                                                                                                                                                                                 |                           |                                                              |                                            |         |         |           |         
|Other liabilities                                                                      |                                                                                                                                                                                                 |                           | 15,129                                                       |                                            |         |         | 10,641    |         
|Minority interest                                                                      |                                                                                                                                                                                                 |                           | 5,030                                                        |                                            |         |         | 5,029     |         
|Commitments and contingent liabilities
Stockholders equity:                           |                                                                                                                                                                                                 |                           |                                                              |                                            |         |         |           |         
|                                                                                       | Preferred stock, $0.001 par value, 8,000,000 shares authorized; none
issued or outstanding                                                                                                      |                           |                                                              |                                           |         |         |           |         |        
|                                                                                       | Common stock, $0.001 par value; 200,000,000 shares authorized;
105,337,362 shares issued and 98,525,464 shares outstanding (2002 
105,337,362 shares issued and 94,660,056 shares outstanding) |                           |                                                              | 105                                        |         |         |           | 105      |        
|                                                                                       | Additional paid-in capital                                                                                                                                                                      |                           |                                                              | 933,657                                    |         |         |           | 929,064  |        
|                                                                                       | Accumulated deficit                                                                                                                                                                             |                           |                                                              | (126,385                                   | )       |         |           | (189,936 | )      
|                                                                                       | Accumulated other comprehensive income/(loss)                                                                                                                                                   |                           |                                                              | 26,849                                     |         |         |           | (8,673   | )      
|                                                                                       | Cost of 6,811,898 shares of treasury stock (2002  10,677,306 shares)                                                                                                                           |                           |                                                              | (87,672                                    | )       |         |           | (146,816 | )      
|                                                                                       | Unearned stock compensation                                                                                                                                                                     |                           |                                                              | (5,085                                     | )       |         |           | (3,370   | )      
|                                                                                       |                                                                                                                                                                                                 |                           |                                                              |                                            |         |         |           |         
|                                                                                       |                                                                                                                                                                                                 |                           | Total stockholders equity                                   |                                            |         | 741,469 |           |          |         | 580,374 |        
|                                                                                       |                                                                                                                                                                                                 |                           |                                                              |                                            |         |         |           |         
|                                                                                       |                                                                                                                                                                                                 |                           |                                                              | Total liabilities and stockholders equity |         | $       | 1,151,356 |          |         | $       | 992,749 | 
|                                                                                       |                                                                                                                                                                                                 |                           |                                                              |                                            |         |         |           |         

See accompanying notes.

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Consolidated Statements of Operations

|                                                                         |                                             |                                  |         |         |         |      |          |         |         |   |         |         |         |  
|------------------------------------------------------------------------ | ------------------------------------------- | -------------------------------- | ------- | ------- | ------- | ---- | -------- | ------- | ------- | - | ------- | ------- | ------- | -
|(In thousands, except per share data)                                    |                                             | For the years ended December 31,
|                                                                         |                                             |                                  |         | 2003    |         | 2002 |          | 2001   
|                                                                         |                                             |                                  |         |         |         |      |          |        
|Revenues:                                                                |                                             |                                  |         |         |         |      |          |         |         |   |         |        
|                                                                         | License fees                                |                                  | $       | 274,817 |         |      | $        | 325,916 |         |   | $       | 389,038 |        
|                                                                         | Services                                    |                                  |         | 503,245 |         |      |          | 503,945 |         |   |         | 538,885 |        
|                                                                         |                                             |                                  |         |         |         |      |          |         |         |   |         |        
|                                                                         |                                             | Total revenues                   |         |         | 778,062 |      |          |         | 829,861 |   |         |         | 927,923 |  
|Costs and expenses:                                                      |                                             |                                  |         |         |         |      |          |         |         |   |         |        
|                                                                         | Cost of license fees                        |                                  |         | 60,711  |         |      |          | 51,448  |         |   |         | 45,695  |        
|                                                                         | Cost of services                            |                                  |         | 162,666 |         |      |          | 190,067 |         |   |         | 240,779 |        
|                                                                         | Sales and marketing                         |                                  |         | 239,045 |         |      |          | 271,765 |         |   |         | 331,237 |        
|                                                                         | Product development and engineering         |                                  |         | 116,889 |         |      |          | 117,784 |         |   |         | 125,404 |        
|                                                                         | General and administrative                  |                                  |         | 82,111  |         |      |          | 84,938  |         |   |         | 76,885  |        
|                                                                         | Amortization of goodwill                    |                                  |         |        |         |      |          |        |         |   |         | 53,859  |        
|                                                                         | Amortization of other purchased intangibles |                                  |         | 2,000   |         |      |          | 2,000   |         |   |         | 2,000   |        
|                                                                         | Goodwill impairment                         |                                  |         |        |         |      |          | 12,300  |         |   |         |        |        
|                                                                         | In-process research and development         |                                  |         |        |         |      |          |        |         |   |         | 18,500  |        
|                                                                         | Stock compensation expense                  |                                  |         | 2,882   |         |      |          | 1,937   |         |   |         | 1,334   |        
|                                                                         | Cost of restructuring                       |                                  |         | 7,429   |         |      |          | 40,446  |         |   |         | 48,751  |        
|                                                                         |                                             |                                  |         |         |         |      |          |         |         |   |         |        
|                                                                         |                                             | Total costs and expenses         |         |         | 673,733 |      |          |         | 772,685 |   |         |         | 944,444 |  
|                                                                         |                                             |                                  |         |         |         |      |          |         |         |   |         |        
|Operating income (loss)                                                  |                                             |                                  | 104,329 |         |         |      | 57,176   |         |         |   | (16,521 | )      
|Interest income                                                          |                                             |                                  | 11,229  |         |         |      | 11,674   |         |         |   | 16,952  |        
|Interest expense and other income, net                                   |                                             |                                  | 2,537   |         |         |      | 2,359    |         |         |   | 577     |        
|Minority interest                                                        |                                             |                                  |        |         |         |      |         |         |         |   | (30     | )      
|                                                                         |                                             |                                  |         |         |         |      |          |         |         |   |         |        
|Income before income taxes and cumulative
effect of an accounting change |                                             |                                  | 118,095 |         |         |      | 71,209   |         |         |   | 978     |        
|Provision for income taxes                                               |                                             |                                  | 30,829  |         |         |      | 33,428   |         |         |   | 26,500  |        
|                                                                         |                                             |                                  |         |         |         |      |          |         |         |   |         |        
|Income (loss) before cumulative effect of an
accounting change           |                                             |                                  | 87,266  |         |         |      | 37,781   |         |         |   | (25,522 | )      
|Cumulative effect of an accounting change to
adopt SFAS 142              |                                             |                                  |        |         |         |      | (132,450 | )       |         |   |        |        
|                                                                         |                                             |                                  |         |         |         |      |          |         |         |   |         |        
|                                                                         |                                             | Net income (loss)                |         | $       | 87,266  |      |          | $       | (94,669 | ) |         | $       | (25,522 | )
|                                                                         |                                             |                                  |         |         |         |      |          |         |         |   |         |        
|Income (loss) per share before cumulative effect
of an accounting change |                                             | $                                | 0.92    |         |         | $    | 0.39     |         |         | $ | (0.27   | )      
|Cumulative effect of an accounting change                                |                                             |                                  |        |         |         |      | (1.37    | )       |         |   |        |        
|                                                                         |                                             |                                  |         |         |         |      |          |         |         |   |         |        
|Basic net income (loss) per share                                        |                                             | $                                | 0.92    |         |         | $    | (0.98    | )       |         | $ | (0.27   | )      
|                                                                         |                                             |                                  |         |         |         |      |          |         |         |   |         |        
|Shares used in computing basic net income (loss)
per share               |                                             |                                  | 94,833  |         |         |      | 96,844   |         |         |   | 94,592  |        
|                                                                         |                                             |                                  |         |         |         |      |          |         |         |   |         |        
|Income (loss) per share before cumulative effect
of an accounting change |                                             | $                                | 0.89    |         |         | $    | 0.38     |         |         | $ | (0.27   | )      
|Cumulative effect of an accounting change                                |                                             |                                  |        |         |         |      | (1.33    | )       |         |   |        |        
|                                                                         |                                             |                                  |         |         |         |      |          |         |         |   |         |        
|Diluted net income (loss) per share                                      |                                             | $                                | 0.89    |         |         | $    | (0.95    | )       |         | $ | (0.27   | )      
|                                                                         |                                             |                                  |         |         |         |      |          |         |         |   |         |        
|Shares used in computing diluted net income
(loss) per share             |                                             |                                  | 97,582  |         |         |      | 99,584   |         |         |   | 94,592  |        
|                                                                         |                                             |                                  |         |         |         |      |          |         |         |   |         |        

See accompanying notes.

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Consolidated Statements of Stockholders Equity



|                                                                                                   |  |                                     |        |            |  |         |     |             |  |   |         |   |  |   |          |  
|-------------------------------------------------------------------------------------------------- |  | ----------------------------------- | ------ | ---------- |  | ------- | --- | ----------- |  | - | ------- | - |  | - | -------- | -
|                                                                                                   |  | Three years ended December 31, 2003
|                                                                                                   |  | Common stock                        |        | Additional |  |         |     |            
|                                                                                                   |  | Outstanding                         |        | Par        |  | paid-in |     | Accumulated
|(Dollars and shares in thousands)                                                                  |  | Shares                              |        | Value      |  | capital |     | Deficit    
|                                                                                                   |  |                                     |        |            |  |         |     |            
|Balances at January 1, 2001                                                                        |  |                                     | 87,656 |            |  | $       | 91  |             |  | $ | 582,972 |   |  | $ | (6,940   | )
|Common stock issued in connection with
business combinations                                       |  |                                     | 14,567 |            |  |         | 14  |             |  |   | 336,124 |   |  |   |         |  
|Common stock issued and treasury
Stock reissued under stock option
And stock purchase plans        |  |                                     | 2,494  |            |  |         |    |             |  |   | 3       |   |  |   | (27,143  | )
|Treasury stock reissued under
Restricted stock option plan                                         |  |                                     | 384    |            |  |         |     |             |  |   | 5,571   |   |  |   | (9,118   | )
|Acquisition of treasury stock                                                                      |  |                                     | (6,376 | )          |  |         |    |             |  |   |        |   |  |   |         |  
|Amortization of unearned
Stock compensation                                                        |  |                                     |        |            |  |         |    |             |  |   |        |   |  |   |         |  
|Tax benefit of exercise of stock options                                                           |  |                                     |       |            |  |         |    |             |  |   | 1,039   |   |  |   |         |  
|                                                                                                   |  |                                     |        |            |  |         |     |             |  |   |         |   |  |   |          |  
|Subtotal                                                                                           |  |                                     | 98,725 |            |  |         | 105 |             |  |   | 925,709 |   |  |   | (43,201  | )
|Net loss                                                                                           |  |                                     |       |            |  |         |    |             |  |   |        |   |  |   | (25,522  | )
|Foreign currency translation adjustments                                                           |  |                                     |       |            |  |         |    |             |  |   |        |   |  |   |         |  
|Unrealized gains/(losses) on
Marketable securities                                                 |  |                                     |       |            |  |         |    |             |  |   |        |   |  |   |         |  
|Comprehensive loss                                                                                 |  |                                     |        |            |  |         |     |             |  |   |         |   |  |   |          |  
|                                                                                                   |  |                                     |        |            |  |         |     |             |  |   |         |   |  |   |          |  
|Balances at December 31, 2001                                                                      |  |                                     | 98,725 |            |  |         | 105 |             |  |   | 925,709 |   |  |   | (68,723  | )
|                                                                                                   |  |                                     |        |            |  |         |     |             |  |   |         |   |  |   |          |  
|Common stock issued and treasury
Stock reissued under stock option,
Stock purchase plans and other |  |                                     | 2,633  |            |  |         |    |             |  |   |        |   |  |   | (26,690  | )
|Treasury stock repurchased due to
Forfeiture in restricted stock
Option plan                       |  |                                     | (6     | )          |  |         |     |             |  |   | (95     | ) |  |   | 146      |  
|Acquisition of treasury stock                                                                      |  |                                     | (6,692 | )          |  |         |    |             |  |   |        |   |  |   |         |  
|Amortization of unearned stock
Compensation                                                        |  |                                     |        |            |  |         |    |             |  |   |        |   |  |   |         |  
|Tax benefit of exercise of stock options                                                           |  |                                     |       |            |  |         |    |             |  |   | 3,450   |   |  |   |         |  
|                                                                                                   |  |                                     |        |            |  |         |     |             |  |   |         |   |  |   |          |  
|Subtotal                                                                                           |  |                                     | 94,660 |            |  |         | 105 |             |  |   | 929,064 |   |  |   | (95,267  | )
|Net loss                                                                                           |  |                                     |       |            |  |         |    |             |  |   |        |   |  |   | (94,669  | )
|Foreign currency translation adjustments                                                           |  |                                     |       |            |  |         |    |             |  |   |        |   |  |   |         |  
|Unrealized gains/(losses) on
Marketable securities                                                 |  |                                     |       |            |  |         |    |             |  |   |        |   |  |   |         |  
|Comprehensive loss                                                                                 |  |                                     |        |            |  |         |     |             |  |   |         |   |  |   |          |  
|                                                                                                   |  |                                     |        |            |  |         |     |             |  |   |         |   |  |   |          |  
|Balances at December 31, 2002                                                                      |  |                                     | 94,660 |            |  |         | 105 |             |  |   | 929,064 |   |  |   | (189,936 | )
|                                                                                                   |  |                                     |        |            |  |         |     |             |  |   |         |   |  |   |          |  
|Common stock issued and treasury
Stock reissued under stock option,
stock purchase plans and other |  |                                     | 5,148  |            |  |         |    |             |  |   | (3      | ) |  |   | (20,054  | )
|Treasury stock reissued under
Restricted stock option plan                                         |  |                                     | 353    |            |  |         |     |             |  |   | 5,012   |   |  |   | (5,915   | )
|Treasury stock reissued for certain
Services                                                       |  |                                     | 721    |            |  |         |     |             |  |   |        |   |  |   | 1,720    |  
|Treasury stock repurchased due to
Forfeiture in restricted stock
Option plan                       |  |                                     | (24    | )          |  |         |     |             |  |   | (416    | ) |  |   | 534      |  
|Acquisition of treasury stock                                                                      |  |                                     | (2,333 | )          |  |         |    |             |  |   |        |   |  |   |         |  
|Amortization of unearned stock
Compensation                                                        |  |                                     |        |            |  |         |    |             |  |   |        |   |  |   |         |  
|                                                                                                   |  |                                     |        |            |  |         |     |             |  |   |         |   |  |   |          |  
|Subtotal                                                                                           |  |                                     | 98,525 |            |  |         | 105 |             |  |   | 933,657 |   |  |   | (213,651 | )
|Net income                                                                                         |  |                                     |       |            |  |         |    |             |  |   |        |   |  |   | 87,266   |  
|Foreign currency translation adjustments                                                           |  |                                     |       |            |  |         |    |             |  |   |        |   |  |   |         |  
|Unrealized gains/(losses) on
Marketable securities                                                 |  |                                     |       |            |  |         |    |             |  |   |        |   |  |   |         |  
|Comprehensive loss                                                                                 |  |                                     |        |            |  |         |     |             |  |   |         |   |  |   |          |  
|                                                                                                   |  |                                     |        |            |  |         |     |             |  |   |         |   |  |   |          |  
|Balances at December 31, 2003                                                                      |  |                                     | 98,525 |            |  | $       | 105 |             |  | $ | 933,657 |   |  | $ | (126,385 | )
|                                                                                                   |  |                                     |        |            |  |         |     |             |  |   |         |   |  |   |          |  

|See accompanying notes.
|-----------------------

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##### Table of Contents






|                                                               |                                                                                 |                                                   |                                                    |                                           |          |        |          |         |          |         |         |          |          |         |         |  
|-------------------------------------------------------------- | ------------------------------------------------------------------------------- | ------------------------------------------------- | -------------------------------------------------- | ----------------------------------------- | -------- | ------ | -------- | ------- | -------- | ------- | ------- | -------- | -------- | ------- | ------- | -
|Consolidated Statements of Cash Flows                          |                                                                                 |                                                   |                                                    |                                           |          |        |          |         |          |         |         |         
|                                                               |                                                                                 |                                                   |                                                    |                                           |          |        |          |         |          |         |         |         
|(Dollars in thousands)                                         |                                                                                 | For the years ended December 31,                 
|                                                               |                                                                                 |                                                   |                                                    |                                           |          | 2003   |          | 2002    |          | 2001   
|                                                               |                                                                                 |                                                   |                                                    |                                           |          |        |          |         |          |        
|Cash and cash equivalents, beginning of year                   |                                                                                 | $                                                 | 231,267                                            |                                           |          | $      | 222,793  |         |          | $       | 235,588 |         
|Cash flows from operating activities:                          |                                                                                 |                                                   |                                                    |                                           |          |        |          |         |          |         |         |         
|                                                               |                                                                                 | Net income (loss)                                 |                                                    |                                           | 87,266   |        |          |         | (94,669  | )       |         |          | (25,522  | )      
|                                                               | Adjustments to reconcile net income (loss) to net cash                          |                                                   |                                                    |                                           |          |        |          |         |          |         |         |          |         
|                                                               |                                                                                 |                                                   | provided by operating activities:                  |                                           |          |        |          |         |          |         |         |          |          |         |        
|                                                               |                                                                                 |                                                   | Depreciation and amortization                      |                                           |          | 84,885 |          |         |          | 81,342  |         |          |          | 136,482 |        
|                                                               |                                                                                 |                                                   | Write-off of in-process research and development   |                                           |          |        |          |         |          |         |         |          |          | 18,500  |        
|                                                               |                                                                                 |                                                   | Write-off of assets in restructuring               |                                           |          | 258    |          |         |          | 992     |         |          |          | 3,188   |        
|                                                               |                                                                                 |                                                   | Minority interest in income (loss) of subsidiaries |                                           |          |        |          |         |          |         |         |          |          | 30      |        
|                                                               |                                                                                 |                                                   | Gain on disposal of assets                         |                                           |          | (435   | )        |         |          | (3,004  | )       |          |          | (962    | )      
|                                                               |                                                                                 |                                                   | Goodwill impairment                                |                                           |          |        |          |         |          | 144,750 |         |          |          |         |        
|                                                               |                                                                                 |                                                   | Deferred income taxes                              |                                           |          | 729    |          |         |          | (4,771  | )       |          |          | (1,563  | )      
|                                                               |                                                                                 |                                                   | Tax benefit from exercise of stock options         |                                           |          |        |          |         |          | 3,451   |         |          |          | 1,039   |        
|                                                               |                                                                                 |                                                   | Amortization of deferred stock-based compensation  |                                           |          | 2,882  |          |         |          | 1,937   |         |          |          | 1,334   |        
|                                                               |                                                                                 |                                                   | Changes in assets and liabilities:                 |                                           |          |        |          |         |          |         |         |          |          |         |        
|                                                               |                                                                                 |                                                   |                                                    | Accounts receivable                       |          |        | 40,738   |         |          |         | 16,234  |          |          |         | 58,184  |  
|                                                               |                                                                                 |                                                   |                                                    | Other current assets                      |          |        | 1,646    |         |          |         | 6,648   |          |          |         | 4,163   |  
|                                                               |                                                                                 |                                                   |                                                    | Accounts payable                          |          |        | (4,591   | )       |          |         | 32      |          |          |         | (8,687  | )
|                                                               |                                                                                 |                                                   |                                                    | Accrued compensation and related expenses |          |        | 1,495    |         |          |         | (7,472  | )        |          |         | (19,794 | )
|                                                               |                                                                                 |                                                   |                                                    | Accrued income taxes                      |          |        | 6,598    |         |          |         | 4,555   |          |          |         | (1,422  | )
|                                                               |                                                                                 |                                                   |                                                    | Other accrued liabilities                 |          |        | (29,598  | )       |          |         | 1,359   |          |          |         | (44,127 | )
|                                                               |                                                                                 |                                                   |                                                    | Deferred revenues                         |          |        | 5,622    |         |          |         | 7,940   |          |          |         | (28,054 | )
|                                                               |                                                                                 |                                                   |                                                    | Other liabilities                         |          |        | 4,650    |         |          |         | 4,953   |          |          |         | 305     |  
|                                                               |                                                                                 |                                                   |                                                    |                                           |          |        |          |         |          |         |         |         
|Net cash provided by operating activities                      |                                                                                 |                                                   | 202,145                                            |                                           |          |        | 164,277  |         |          |         | 93,094  |         
|Cash flows from investing activities:                          |                                                                                 |                                                   |                                                    |                                           |          |        |          |         |          |         |         |         
|                                                               |                                                                                 | (Increase) Decrease in restricted cash            |                                                    |                                           | 906      |        |          |         | (2,227   | )       |         |          | (3,426   | )      
|                                                               |                                                                                 | Purchases of available-for-sale cash investments  |                                                    |                                           | (325,725 | )      |          |         | (234,754 | )       |         |          | (119,745 | )      
|                                                               |                                                                                 | Maturities of available-for-sale cash investments |                                                    |                                           | 153,805  |        |          |         | 43,857   |         |         |          | 82,497   |        
|                                                               |                                                                                 | Sales of available-for-sale cash investments      |                                                    |                                           | 69,064   |        |          |         | 156,916  |         |         |          | 66,768   |        
|                                                               |                                                                                 | Business combinations, net of cash acquired       |                                                    |                                           | (13,900  | )      |          |         | (2,106   | )       |         |          | 27,166   |        
|                                                               |                                                                                 | Purchases of property, equipment and improvements |                                                    |                                           | (35,325  | )      |          |         | (40,476  | )       |         |          | (38,985  | )      
|                                                               |                                                                                 | Proceeds from sale of fixed assets                |                                                    |                                           | 159      |        |          |         | 1,068    |         |         |          | 568      |        
|                                                               |                                                                                 | Capitalized software development costs            |                                                    |                                           | (27,964  | )      |          |         | (32,729  | )       |         |          | (35,783  | )      
|                                                               |                                                                                 | (Increase) decrease in other assets               |                                                    |                                           | 288      |        |          |         | 327      |         |         |          | (1,971   | )      
|                                                               |                                                                                 |                                                   |                                                    |                                           |          |        |          |         |          |         |         |         
|Net cash used for investing activities                         |                                                                                 |                                                   | (178,692                                           | )                                         |          |        | (110,124 | )       |          |         | (22,911 | )       
|Cash flows from financing activities:                          |                                                                                 |                                                   |                                                    |                                           |          |        |          |         |          |         |         |         
|                                                               | Minority Interest                                                               |                                                   |                                                    | 1                                         |          |        |          |        |          |         |         | 3,133    |         
|                                                               | Net proceeds from the issuance of common stock and
Reissuance of treasury stock |                                                   |                                                    | 55,914                                    |          |        |          | 23,641  |          |         |         | 28,401   |         
|                                                               | Purchases of treasury stock                                                     |                                                   |                                                    | (30,883                                   | )        |        |          | (89,826 | )        |         |         | (106,930 | )       
|                                                               |                                                                                 |                                                   |                                                    |                                           |          |        |          |         |          |         |         |         
|Net cash provided by (used for) financing activities           |                                                                                 |                                                   | 25,032                                             |                                           |          |        | (66,185  | )       |          |         | (75,396 | )       
|Effect of exchange rate changes on cash                        |                                                                                 |                                                   | 35,652                                             |                                           |          |        | 20,506   |         |          |         | (7,582  | )       
|                                                               |                                                                                 |                                                   |                                                    |                                           |          |        |          |         |          |         |         |         
|Net increase (decrease) in cash and cash equivalents           |                                                                                 |                                                   | 84,137                                             |                                           |          |        | 8,474    |         |          |         | (12,795 | )       
|Cash and cash equivalents, end of year                         |                                                                                 |                                                   | 315,404                                            |                                           |          |        | 231,267  |         |          |         | 222,793 |         
|                                                               |                                                                                 |                                                   |                                                    |                                           |          |        |          |         |          |         |         |         
|Cash investments, end of year                                  |                                                                                 |                                                   | 258,389                                            |                                           |          |        | 155,913  |         |          |         | 120,367 |         
|Total cash, cash equivalents and cash investments, end of year |                                                                                 | $                                                 | 573,793                                            |                                           |          | $      | 387,180  |         |          | $       | 343,160 |         
|                                                               |                                                                                 |                                                   |                                                    |                                           |          |        |          |         |          |         |         |         
|Supplemental disclosures:                                      |                                                                                 |                                                   |                                                    |                                           |          |        |          |         |          |         |         |         
|                                                               | Interest paid                                                                   |                                                   | $                                                  | 62                                        |          |        | $        | 198     |          |         | $       | 276      |         
|                                                               | Income taxes paid                                                               |                                                   | $                                                  | 26,685                                    |          |        | $        | 31,693  |          |         | $       | 22,702   |         



|See accompanying notes.
|-----------------------

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##### Table of Contents






Notes to Consolidated Financial Statements

Note One: Summary of Significant Accounting Policies

The Company

Sybase, Inc. (Sybase or the Company) enables the Unwired Enterprise for
customers and partners by delivering enterprise and mobile software solutions
for information management, development and integration. Sybase solutions
integrate platforms, databases, and applications, and extend those applications
to mobile workers through mobile and Wi-Fi technologies.

In 2003, the Companys business was organized into three business segments:
Infrastructure Platform Group (IPG), which principally focused on enterprise
class database servers, integration and development products; iAnywhere
Solutions, Inc. (iAS) which provides mobile database mobile enterprise
solutions; and Financial Fusion, Inc. (FFI) which delivers integrated banking,
payment and trade messaging solutions to large financial
institutions.Principles of Consolidation

The consolidated financial statements include the accounts of Sybase and its
majority owned subsidiaries. All significant intercompany transactions and
balances have been eliminated in consolidation.

Use of Estimates

The preparation of financial statements in conformity with U.S. generally
accepted accounting principles (GAAP) requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and the
disclosure of contingent assets and liabilities at the date of the financial
statements. Management is also required to make certain judgments that affect
the reported amounts of revenues and expenses during the reporting period.
Sybase periodically evaluates its estimates including those relating to revenue
recognition, the allowance for doubtful accounts, capitalized software,
investments, intangible assets, income taxes, restructuring,
stock-based compensation, litigation and
other contingencies. The Company bases its estimates on historical experience
and various other assumptions that are believed to be reasonable based on the
specific circumstances. The Companys management has discussed these estimates
with the Audit Committee of Sybases Board of Directors. These estimates and
assumptions form the basis for making judgments about the carrying value of
certain assets and liabilities that are not readily apparent from other
sources. Actual results could differ from these estimates.

Accounts Receivable and Allowance for Doubtful Accounts

Accounts receivable consist primarily of amounts due to the Company from its
normal business activities. The Company maintains an allowance for doubtful
accounts to reflect the expected non-collection of accounts receivable based on
past collection history and specific risks identified in the
portfolio. Additional allowances might be required if deteriorating
economic conditions or other factors affect Sybase customers
ability to make timely payments.

Capitalized Software

The Company capitalizes software development costs in accordance with SFAS No.
86, Accounting for Costs of Computer Software to be Sold, Leased or Otherwise
Marketed, (SFAS 86), under which certain software development costs incurred
subsequent to the establishment of technological feasibility may be capitalized
and amortized over the estimated lives of the related products. The Company
determines technological feasibility to be established upon the internal
release of a working model or a detailed program design as specified by SFAS
86. Upon the general release of the product to customers, development costs for
that product are amortized over periods not exceeding three years, based on the
estimated economic life of the product. Capitalized software costs amounted to
$214.7 million and
$186.7 million, at December 31, 2003 and 2002, respectively, and related
accumulated amortization was $155.8

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million, and $124.5 million, respectively.
Software amortization charges included in cost of license fees were $31.1
million, $24.0 million and $17.8 million for 2003, 2002 and 2001, respectively.

SFAS 86 also requires that the unamortized capitalized costs of a computer
software product be compared to the net realizable value of such product at
each reporting date. To the extent the unamortized capitalized cost exceeds
the net realizable value of a software product based upon its estimated future
gross revenues reduced by estimated future costs of completing and disposing of
the product, the excess is written off. If the estimated future gross revenue
associated with certain of the Companys software products were to be reduced,
write-offs of capitalized software costs might be required.

Property, Equipment and Improvements

Property, equipment and improvements are stated at cost less accumulated
depreciation. Major renewals and improvements are capitalized, and minor
replacements, maintenance and repairs are charged to current operations.
Depreciation and amortization are computed using the straight-line method over
the estimated useful lives of the assets, while leasehold improvements are
amortized over the shorter of the estimated useful life of the asset or the
associated lease term.

Costs related to internally developed software and software purchased for
internal use, which are required to be capitalized pursuant to Statement of
Position (SOP) No. 98-1, Accounting for Costs of Computer Software Developed
or Obtained for Internal Use,  are included in property, plant and equipment.
Such amounts are amortized over a three-year period from the time they are
placed in service.

Goodwill and Other Purchased Intangible Assets

The Company adopted SFAS No. 142, Goodwill and Other Intangible Assets, 
(SFAS 142) on January 1, 2002. Under SFAS 142 goodwill and intangible assets
deemed to have indefinite lives are not amortized but are subject to annual
impairment tests. With the adoption of SFAS 142, the Company ceased
amortization of goodwill as of January 1, 2002. Prior to this point, goodwill
was amortized using the straight-line method over its estimated useful life.

In accordance with SFAS 142, the Company performed the first of the required
two-step impairment tests of goodwill and indefinite-lived intangible assets as
of January 1, 2002. In performing the first step of this analysis, the Company
first assigned its assets and liabilities, including existing goodwill and
other intangible assets, to its identified reporting units to determine their
carrying value. For this purpose, the Companys reporting units equate to its
business segments discussed in Note Ten below. Based on the analysis of an
independent third party appraiser, the Company then estimated the fair value of
each reporting unit utilizing various valuation techniques including discounted
cash flow and comparative market analysis. Step one of this analysis was then
completed by comparing the carrying value of each reporting unit to its fair
value. This comparison indicated a possible goodwill impairment within the FFI
and the then-existing eBD reporting units and necessitated step two of the
analysis.

In step two of the analysis the Company allocated the fair value of FFI and eBD
to their respective assets and then compared the implied value of their
goodwill to such goodwills carrying value. Based on the completed analysis,
the Company recognized an impairment loss of $132.5 million in the first
quarter of 2002. This loss was recognized as a cumulative effect of an
accounting change. The impairment loss had no income tax effect.

As required by SFAS 142, intangible assets that did not meet the criteria for
recognition apart from goodwill were reclassified. The Company transferred
$7.9 million of net assembled workforce to goodwill as of January 1, 2002.
This amount was partially offset by the reclassification of $3.2 million of an
associated deferred tax liability.

The Company conducted the annual impairment testing required by SFAS 142 as of
December 31, 2003 and December 31, 2002. The 2003 analysis did not indicate an
impairment for any of the Companys reporting units. Therefore, no impairment
loss was recognized for 2003.

Based on the 2002 analysis, Sybase recognized an impairment loss of $12.3
million on the goodwill associated with the FFI division. The 2002 impairment
loss primarily resulted from a reduction in the Companys estimates of future
cash flows to be generated by the FFI reporting unit. After consideration of
the impairment loss, the carrying value of the goodwill associated with the FFI
division was $29.3 million.

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In future years, a reduction of the Companys estimated future
economic benefits to be generated by certain reporting units could result in a
further impairment loss associated with various intangible assets.

Other purchased intangible assets, which have generally resulted from business
combinations accounted for as purchases (see Note Eleven below), are recorded
at amortized cost. Amortization is computed using the straight-line method
over periods of 3 to 10 years.

Impairment of Long-Lived Assets

On January 1, 2002, the Company adopted the provisions of SFAS No. 144,
Accounting for the Impairment or Disposal of Long-Lived Assets, (SFAS 144)
which generally requires impairment losses to be recorded on long-lived assets
(excluding goodwill) used in operations, such as property, equipment and
improvements, and intangible assets, when indicators of impairment are present
and the undiscounted cash flows estimated to be generated by those assets are
less than the carrying amount of the assets. The provisions of this statement
did not have a significant impact on the Companys financial condition or
operating results.

Revenue Recognition

The Company recognizes revenue in accordance with Statement of Position (SOP)
97-2, Software Revenue Recognition, as amended by SOP 98-4 and SOP 98-9, and
in certain instances in accordance with SOP 81-1, Accounting for Performance
of Construction-Type and Certain Production-Type Contracts.

The Company licenses software under non-cancelable license agreements. License
fees revenues are recognized when a non-cancelable license agreement is in
force, the product has been shipped, the license fee is fixed or determinable,
and collectibility is reasonably assured. If the fee is not fixed or
determinable, revenue is recognized as payments become due from the customer.
In software arrangements that include rights to multiple software products
and/or services, the Company allocates the total arrangement fee among each of
the deliverables using the residual method, under which revenue is allocated to
undelivered elements based on vendor-specific objective evidence of fair value
of such undelivered elements and the residual amounts of revenue are allocated
to delivered elements.

Fees from licenses sold together with consulting services are generally
recognized upon shipment provided that the above criteria are met, payment of
the license fees are not dependent upon the performance of the services, and
the consulting services are not essential to the functionality of the licensed
software. If the services are essential to the functionality of the software,
or payment of the license fees are dependent upon the performance of the
services, both the software license and consulting fees are recognized under
the percentage of completion method of contract accounting using labor hours
to measure the completion percentage. In order to apply the percentage of
completion of method, management is required to estimate the number of hours
needed to complete a particular project. As a result, recognized revenues and
profits are subject to revisions as the contract progresses to completion.

Sublicense fees are recognized as reported to the Company by its licensees.
License fees revenue for certain application development and data access tools
is recognized upon direct shipment to the end user or direct shipment to the
reseller for the end user. If collectibility is not reasonably assured,
revenue is recognized when the fee is collected.

Technical support revenues are recognized ratably over the term of the related
agreements, which in most cases is one year. Revenues from consulting services
under time and materials contracts and for education are recognized as services
are performed. Revenues from other contract services are generally recognized
under the percentage-of-completion method described above.

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Business Combinations

The Company has accounted for all its recent acquisitions using the purchase
method of accounting. In the case of its material acquisitions, the Company
based its purchase price allocation and useful life estimates on an analysis
performed by an independent third party. See Note Eleven for specific details.

Foreign Currencies

The Company translates the accounts of its foreign subsidiaries using the local
foreign currency as the functional currency. For foreign subsidiaries in
countries with highly inflationary economies, the accounts are translated as if
the U.S. dollar was the functional currency. The assets and liabilities of
foreign subsidiaries are translated into U.S. dollars using year-end exchange
rates, and gains and losses from this translation process are credited or
charged to the accumulated other comprehensive loss account included in
stockholders equity. Foreign currency transaction gains and losses, which
historically have not been material, are included in interest expense and
other, net in the consolidated statements of operations.

In order to reduce the effect of foreign currency fluctuations on its results
of operations, the Company hedges its exposure on certain transactional
balances that are denominated in foreign currencies through the use of
short-term foreign currency forward exchange contracts. For the most part,
these exposures consist of inter-company balances between Sybase entities
resulting from software license royalties and certain management, research, and
administrative services. These exposures are denominated in Canadian, European
and Asia Pacific currencies, primarily the Canadian dollar, the UK pound
and the Euro. These forward exchange contracts are recorded at fair value
and the resulting gains or losses, as well as the associated premiums or
discounts, are recorded in interest expense and other, net in the consolidated
statements of operations and are offset by corresponding gains and losses on hedged balances. All foreign exchange contracts
have a life of approximately 30 days and are marked to market at the end each
reporting period with unrealized gains and losses included in other income.

Income Taxes

The asset and liability approach is used to account for income taxes by
recognizing deferred tax assets and liabilities for the expected future tax
consequences of temporary differences between the carrying amounts and the tax
base of assets and liabilities. The Company records a valuation allowance to
reduce deferred tax assets to the amount that is more likely than not to be
realized. The Company has considered future taxable income and ongoing prudent
and feasible tax planning strategies in assessing the need for the valuation
allowance. Additional information regarding the Companys deferred tax
asset and associated valuation allowance is provided in Note Eight below.

Contingent change of control provisions

During the fourth quarter of 2003, FFI entered into a software license and
support agreement with an end user customer containing certain change of
control provisions that will be triggered if either party undergoes a full or
partial change of control within five years from the contract date. For
example, if an unrelated third party acquires all of the stock or assets of FFI
so that Sybase can no longer include any portion of, or any material interest
in, the results of FFI (or the acquiring entity) in its consolidated financial
statements or its results of operations, the acquiring party will be required
to pay the end user customer $10.0 million. Alternatively, if FFI undergoes a
partial change of control resulting in Sybase or its affiliates holding less
than 50 percent of the voting control of FFI or the acquiring entity, then the
acquiring company (or Sybase) will be required to pay up to $1.5 million to the
end user customer. Although the $10.0 million remains fixed, the $1.5 million
declines to $0.5 million after two years and expires completely at the end of
year five. As a result, $1.5 million in license fees have been deferred and
such amounts will be recognized as revenue as the payment obligation decreases
over the 5-year period.

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obligations to FFI if there is a full or partial change of control of
the end user customer within the next five years.

Stock-Based Compensation

SFAS 123, Accounting for Stock-Based Compensation, encourages, but does not
require, companies to record compensation cost for stock based employee
compensation plans at fair value. The Company has chosen to continue to account
for stock based employee compensation using the intrinsic value method
prescribed in Accounting Principles Board (APB) Opinion No. 25, Accounting for
Stock Issued to Employees, and Related Interpretations. Accordingly,
compensation cost for stock options granted to employees is measured as the
excess, if any, of the quoted market price of the Company stock at the date of
the grant over the amount an employee must pay to acquire the stock.

In December 2002, the FASB issued SFAS No. 148, Accounting for Stock-Based
Compensation  Transition and Disclosure (SFAS 148) effective for fiscal years
ending after December 15, 2002. SFAS 148 amends SFAS 123, to provide
alternative methods of transition to the voluntary fair value method of
accounting for stock-based employee compensation. SFAS 148 also amends the
disclosure provisions of SFAS 123 to require that disclosure of the pro forma
effect of using the fair value method of accounting for stock-based employee
compensation be displayed in tabular format within a Companys summary of
significant accounting policies. Had compensation cost been charged to expense
for grants to employees under the Companys fixed stock option plans (including
the FFI and iAS Plans) and its employee stock purchase plan based on the fair
value at the grant dates for awards under those plans, consistent with the
method encouraged by SFAS No. 123, the Companys net income/(loss) and net
income/(loss) per share would have been adjusted to the pro forma amounts
indicated below:

|                                                                                                              |             |      |         |      |  |      |          |       |   |   |         |       |  
|------------------------------------------------------------------------------------------------------------- | ----------- | ---- | ------- | ---- |  | ---- | -------- | ----- | - | - | ------- | ----- | -
|(Dollars in thousands, except per share data)                                                                 |             | 2003 |         | 2002 |  | 2001
|                                                                                                              |             |      |         |      |  |     
|As reported net income/(loss)  stock-based employee
compensation determined using the intrinsic value method |             | $    | 87,266  |      |  | $    | (94,669  | )     |   | $ | (25,522 | )    
|Add: Stock-based employee compensation cost, net of tax,
included in net income as reported                   |             |      | 2,882   |      |  |      | 1,937    |       |   |   | 1,334   |      
|Less: Pro-forma stock-based employee compensation cost,
net of tax, determined under the fair value method    |             |      | (30,389 | )    |  |      | (35,626  | )     |   |   | (38,358 | )    
|                                                                                                              |             |      |         |      |  |      |          |       |   |   |         |      
|Pro-forma
net income/(loss)  stock-based employee
compensation determined under the fair value method        |             | $    | 59,759  |      |  | $    | (128,358 | )     |   | $ | (62,546 | )    
|Basic net income/(loss) per share                                                                             |             |      |         |      |  |      |          |       |   |   |         |      
|                                                                                                              | As reported |      | $       | 0.92 |  |      | $        | (0.98 | ) |   | $       | (0.27 | )
|                                                                                                              | Pro forma   |      |         | 0.63 |  |      |          | (1.33 | ) |   |         | (0.66 | )
|Diluted net income/(loss) per share                                                                           |             |      |         |      |  |      |          |       |   |   |         |      
|                                                                                                              | As reported |      | $       | 0.89 |  |      | $        | (0.95 | ) |   | $       | (0.27 | )
|                                                                                                              | Pro forma   |      |         | 0.61 |  |      |          | (1.28 | ) |   |         | (0.66 | )

The fair value employee compensation cost was determined using the
Black-Scholes option pricing model. Additional information regarding the
valuation of the stock options is provided in Note Seven below.

Net Income (Loss) Per Share

Shares used in computing basic and diluted net income (loss) per share are
based on the weighted average shares outstanding in each period, excluding
treasury stock. Basic net income (loss) per share excludes any dilutive
effects of stock options. Diluted net income (loss) per share includes the
dilutive effect of the assumed exercise of stock options, warrants and
restricted stock using the treasury stock method. However, the effect of
outstanding stock options has been excluded from the calculation of
diluted net loss per share in 2001, as their inclusion would be anti-dilutive.
Accordingly, the calculation of diluted net loss per share does not include the
common stock equivalent effect (using the treasury stock

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method) of 2,787,807
shares of Common Stock that were granted under outstanding stock options at
December 31, 2001.

The following shows the computation of basic and diluted net income (loss) per
share at December 31:

|                                                             |  |      |        |      |  |      |         |   |  |   |         |     
|------------------------------------------------------------ |  | ---- | ------ | ---- |  | ---- | ------- | - |  | - | ------- | ----
|(In thousands, except per share data)                        |  | 2003 |        | 2002 |  | 2001
|                                                             |  |      |        |      |  |     
|Net income (loss)                                            |  | $    | 87,266 |      |  | $    | (94,669 | ) |  | $ | (25,522 | )   
|Shares used in computing basic net income
(loss) per share   |  |      | 94,833 |      |  |      | 96,844  |   |  |   | 94,592  |     
|Effect
of dilutive securities - stock options                |  |      | 2,749  |      |  |      | 2,740   |   |  |   | (a      | )   
|Shares used in computing diluted net income
(loss) per share |  |      | 97,582 |      |  |      | 99,584  |   |  |   | 94,592  |     
|Basic net income (loss) per share                            |  | $    | 0.92   |      |  | $    | (0.98   | ) |  | $ | (0.27   | )   
|Diluted net income (loss) per share                          |  | $    | 0.89   |      |  | $    | (0.95   | ) |  | $ | (0.27   | )(a)

(a)  The effect of outstanding stock options is excluded from the calculation of
diluted net loss per share, as their inclusion would be anti-dilutive.

Comprehensive Income (Loss)

Comprehensive income (loss) includes net earnings (loss) and other changes to
stockholders equity not reflected in net income (loss). The Companys
components of other comprehensive income (loss) consist of foreign currency
translation adjustments and unrealized gain/loss on available-for-sale
securities.

Advertising

The Companys advertising
expenses for the years ended December 31, 2003, 2002 and 2001
were approximately $10.9 million, $16.0 million and $20.8 million, respectively.

Other Recent Accounting Pronouncements

In January 2003, the FASB issued Interpretation No. 46, Consolidation of
Variable Interest Entities, an Interpretation of Accounting Research Bulletin
(ARB) No. 51 (Interpretation 46). Interpretation 46, which establishes
accounting guidance for determining whether certain variable interest entities
(VIEs) are required to be consolidated by their investors, sponsors or
transferors. In general, variable interests are contractual, ownership, or
other interests in an entity that expose their holders to the risks and rewards
of the VIE. Variable interests include equity investments, loans, leases,
derivatives, guarantees and other instruments whose values change with changes
in the VIEs assets. The new rules determine control, and the resulting need
for consolidation, based on which holder bears the majority of the potential
variability in losses and gains of the VIE being evaluated. These rules are
currently effective for any variable interest in VIEs created after January 31,
2003 and will be effective for variable interests in VIEs created before
January 31, 2003 in the Companys quarter ending December 31, 2003. The
adoption of the effective provisions of Interpretation 46 did not have any
impact on the Companys consolidated financial position or statement of
operations.

Note Two: Financial Instruments

Cash, Cash Equivalents and Cash Investments

Cash and cash equivalents consist of highly liquid investments that are
comprised principally of taxable, short-term money market instruments with
original maturities of three months or less at the time of purchase and demand
deposits with financial institutions. These instruments carry insignificant
interest

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rate risk because of the short-term maturities. Cash equivalents are
stated at amounts that approximate fair value based on quoted market prices.
Cash investments consist principally of commercial paper, corporate bonds, U.S.
Government bonds and taxable municipal bonds with maturities between 90 days
and up to three years and are stated at amounts that approximate fair value,
based on quoted market prices. No individual investment security equaled or
exceeded two percent of total assets.

In accordance with SFAS No. 115, Accounting for Certain Investments in Debt
and Equity Securities, (SFAS 115) management determines the appropriate
classification of debt and equity securities at the time of purchase and
re-evaluates such designation as of each balance sheet date. At December 31,
2003, the Company has classified all of its debt and equity securities as
available-for-sale pursuant to SFAS 115. Such securities are recorded at fair
value and unrealized holding gains and losses, net of the related tax effect,
if any, are not reflected in earnings but are reported as a separate component
of other comprehensive income (loss) until realized. Unrealized gains and
losses at December 31, 2003 were not significant. Realized gains and losses
are determined on the specific identification method and are reflected in
income.

At December 31, cash equivalents and amortized cost of investments in
marketable securities and their approximate fair values are as follows:

(Dollars in thousands)
    
    Amortized
    
    Unrealized
    
    Unrealized
    
    Fair MarketCost
    
    Gains
    
    (Losses)
    
    ValueDecember 31, 2003:Cash and cash equivalents
    
    $
    315,404
    
    
    $
    
    
    
    $
    
    
    
    $
    315,404Short-term corporate notes and bonds
(maturities of one year or less)
    
    
    140,185
    
    
    
    149
    
    
    
    (8
    )
    
    
    140,326Short-term government obligations
(maturities of one year or less)
    
    
    14,667
    
    
    
    100
    
    
    
    
    
    
    
    14,767Long-term corporate notes and bonds
(maturities over one year)
    
    
    69,520
    
    
    
    452
    
    
    
    (37
    )
    
    
    69,935Long-term government obligations
(maturities over one year)
    
    
    33,274
    
    
    
    87
    
    
    
    
    
    
    
    33,361$
    573,050
    
    
    $
    788
    
    
    $
    (45
    )
    
    $
    573,793December 31, 2002:Cash and cash equivalents
    
    $
    231,267
    
    
    $
    
    
    
    $
    
    
    
    $
    231,267Short-term corporate notes and bonds
(maturities of one year or less)
    
    
    56,933
    
    
    
    139
    
    
    
    (3
    )
    
    
    57,069Short-term government obligations
(maturities of one year or less)
    
    
    6,569
    
    
    
    102
    
    
    
    
    
    
    
    6,671Long-term corporate notes and bonds
(maturities over one year)
    
    
    52,948
    
    
    
    1,022
    
    
    
    (2
    )
    
    
    53,968Long-term government obligations
(maturities over one year)
    
    
    37,901
    
    
    
    304
    
    
    
    
    
    
    
    38,205$
    385,618
    
    
    $
    1,567
    
    
    $
    (5
    )
    
    $
    387,180


Restricted Cash

At December 31, 2003, the Company had $ 8.1 million in restricted cash set
aside for a guarantee against certain payroll and leases in the United Kingdom
and in California.

Foreign Currency Forward Exchange Contracts

At December 31, 2003, the Company had outstanding forward contracts, all having
maturities of approximately 30 days, to exchange various foreign currencies for
U.S. dollars in the amounts of $1.6 million, and to exchange U.S. dollars and
Euros into various foreign currencies in the amounts of $30.1 million and $13.4
million, respectively. At December 31, 2002, the Company had outstanding
forward exchange contracts, all having maturities of approximately 30 days, to
exchange various foreign currencies for U.S. dollars in the amounts of $4.5
million and to exchange U.S. dollars and Euros into various foreign currencies
in the amounts of $19.8 million and $20.0 million, respectively. Neither the
cost nor the fair value of these foreign currency forward contracts was
material at December 31, 2003 or 2002. All foreign currency forward contracts
are marked-to-market at the end of each reporting period with unrealized gains
and losses included in other income. One of two major U.S. multinational banks
is counter party to all of these contracts during both 2003 and 2002.

Note Three: Property, Equipment and Improvements

|                                         |  |      |          |      |  |       |          |   |  |                                 |  | 
|---------------------------------------- |  | ---- | -------- | ---- |  | ----- | -------- | - |  | ------------------------------- |  | 
|                                         |  |      |          |      |  |       |          |   |  | Estimated useful               
|(Dollars in thousands)                   |  | 2003 |          | 2002 |  | lives
|                                         |  |      |          |      |  |      
|Computer equipment and software          |  | $    | 310,719  |      |  | $     | 289,876  |   |  | 3 years                        
|Furniture and fixtures                   |  |      | 82,315   |      |  |       | 86,400   |   |  | 5 years                        
|Leasehold improvements                   |  |      | 55,402   |      |  |       | 51,470   |   |  | Shorter of 5 yearsor lease term
|                                         |  |      |          |      |  |       |          |   |  |                                 |  | 
|                                         |  |      | 448,436  |      |  |       | 427,746  |   |  |                                 |  | 
|Less accumulated depreciation            |  |      | (380,974 | )    |  |       | (357,344 | ) |  |                                 |  | 
|                                         |  |      |          |      |  |       |          |   |  |                                 |  | 
|Net property, equipment and improvements |  | $    | 67,462   |      |  | $     | 70,402   |   |  |                                 |  | 
|                                         |  |      |          |      |  |       |          |   |  |                                 |  | 

Depreciation expense amounted to $34.9 million, $37.9 million and $39.8 million
in 2003, 2002 and 2001, respectively.

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Note Four: Goodwill and Other Purchased Intangibles

The following table reflects the changes in the carrying amount of goodwill
(including assembled workforce) by reporting unit.

|                                                 |  |     |         |     |  |     |         |       |  |   |        |   |  |              |          |  
|------------------------------------------------ |  | --- | ------- | --- |  | --- | ------- | ----- |  | - | ------ | - |  | ------------ | -------- | -
|                                                 |  |     |         |     |  |     |         |       |  |   |        |   |  | Consolidated
|(In thousands)                                   |  | IPG |         | FFI |  | IAS |         | Total
|                                                 |  |     |         |     |  |     |         |      
|Balance at January 1, 2002                       |  | $   | 218,659 |     |  | $   | 85,865  |       |  | $ |       |   |  | $            | 304,524  |  
|Reduction in liabilities in purchase
Accounting  |  |     | (1,299  | )   |  |     |        |       |  |   |       |   |  |              | (1,299   | )
|Reduction for utilization of
acquired tax assets |  |     | (19,307 | )   |  |     | (5,319  | )     |  |   |       |   |  |              | (24,626  | )
|Additions                                        |  |     | 2,017   |     |  |     |         |       |  |   | 89     |   |  |              | 2,106    |  
|Foreign currency translation
Adjustments         |  |     | 871     |     |  |     |        |       |  |   |        |   |  |              | 871      |  
|Impairment loss                                  |  |     |        |     |  |     | (12,300 | )     |  |   |       |   |  |              | (12,300  | )
|Accounting change                                |  |     | (93,485 | )   |  |     | (38,965 | )     |  |   |        |   |  |              | (132,450 | )
|                                                 |  |     |         |     |  |     |         |       |  |   |        |   |  |              |          |  
|Balance at December 31, 2002                     |  |     | 107,456 |     |  |     | 29,281  |       |  |   | 89     |   |  |              | 136,826  |  
|                                                 |  |     |         |     |  |     |         |       |  |   |        |   |  |              |          |  
|Goodwill recorded on AvantGo acquisition         |  |     |        |     |  |     |        |       |  |   | 16,606 |   |  |              | 16,606   |  
|Reduction for utilization of
acquired tax assets |  |     | (4,914  | )   |  |     |         |       |  |   | (8,361 | ) |  |              | (13,275  | )
|Foreign currency translation
Adjustments         |  |     | 718     |     |  |     |        |       |  |   |        |   |  |              | 718      |  
|                                                 |  |     |         |     |  |     |         |       |  |   |        |   |  |              |          |  
|Balance at December 31,
2003                     |  | $   | 103,260 |     |  | $   | 29,281  |       |  | $ | 8,334  |   |  | $            | 140,875  |  
|                                                 |  |     |         |     |  |     |         |       |  |   |        |   |  |              |          |  

The following table reflects intangible assets subject to amortization as of
December 31, 2003 and December 31, 2002:

|                     |  |          |         |              |  |              |         |          |  |              |        |              |  |   |        |  |  |   |         |   |  |   |        | 
|-------------------- |  | -------- | ------- | ------------ |  | ------------ | ------- | -------- |  | ------------ | ------ | ------------ |  | - | ------ |  |  | - | ------- | - |  | - | ------ | 
|                     |  | Gross    |         |              |  |              |         |          |  |              |        | Gross        |  |   |        |  |  |   |         |  
|                     |  | Carrying |         | Accumulated  |  | Net Carrying |         | Carrying |  | Accumulated  |        | Net Carrying
|                     |  | Amount   |         | Amortization |  | Amount       |         | Amount   |  | Amortization |        | Amount      
|(In thousands)       |  | 12/31/03 |         | 12/31/03     |  | 12/31/03     |         | 12/31/02 |  | 12/31/02     |        | 12/31/02    
|                     |  |          |         |              |  |              |         |          |  |              |        |             
|Purchased technology |  | $        | 79,100  |              |  | $            | (55,596 | )        |  | $            | 23,504 |              |  | $ | 76,700 |  |  | $ | (40,338 | ) |  | $ | 36,362 | 
|AvantGo trade names  |  |          | 3,100   |              |  |              |        |          |  |              | 3,100  |              |  |   |       |  |  |   |        |   |  |   |       | 
|Customer lists       |  |          | 20,000  |              |  |              | (7,889  | )        |  |              | 12,111 |              |  |   | 20,000 |  |  |   | (5,889  | ) |  |   | 14,111 | 
|                     |  |          |         |              |  |              |         |          |  |              |        |              |  |   |        |  |  |   |         |   |  |   |        | 
|Totals               |  | $        | 102,200 |              |  | $            | (63,485 | )        |  | $            | 38,715 |              |  | $ | 96,700 |  |  | $ | (46,227 | ) |  | $ | 50,473 | 
|                     |  |          |         |              |  |              |         |          |  |              |        |              |  |   |        |  |  |   |         |   |  |   |        | 

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Purchased technology is generally amortized over a period of 4 to 7 years;
covenant not to compete is generally amortized over a period of 7 years;
customer lists are generally amortized over a period of 10 years.

Estimated amortization expense for other purchased intangibles in each of the
next five years ending December 31, is as follows (dollars in thousands):

|     |  |   |        | 
|---- |  | - | ------ | 
|2004 |  | $ | 17,325 | 
|2005 |  |   | 8,746  | 
|2006 |  |   | 2,567  | 
|2007 |  |   | 2,400  | 
|2008 |  |   | 2,400  | 

The following financial information reflects consolidated results adjusted as
though the accounting for goodwill and other intangible assets was consistent
in all comparable periods presented:

|                                                                                          |  |                                  |        |      |  |      |        |  |  |   |         |  
|----------------------------------------------------------------------------------------- |  | -------------------------------- | ------ | ---- |  | ---- | ------ |  |  | - | ------- | -
|                                                                                          |  | For the years ended December 31,
|(Dollars in thousands, except per share data)                                             |  | 2003                             |        | 2002 |  | 2001
|                                                                                          |  |                                  |        |      |  |     
|Reported income (loss) before
cumulative effect of an accounting change                   |  | $                                | 87,266 |      |  | $    | 37,781 |  |  | $ | (25,522 | )
|Add back goodwill (including assembled
workforce) amortization, net of tax                |  |                                  |       |      |  |      |       |  |  |   | 53,859  |  
|                                                                                          |  |                                  |        |      |  |      |        |  |  |   |         |  
|Adjusted income before cumulative effect
of an accounting change                          |  | $                                | 87,266 |      |  | $    | 37,781 |  |  | $ | 28,337  |  
|                                                                                          |  |                                  |        |      |  |      |        |  |  |   |         |  
|Adjusted basic net income (loss) per share:                                               |  |                                  |        |      |  |      |        |  |  |   |         |  
|Reported basic income (loss) per share before
cumulative effect of an accounting change   |  | $                                | 0.92   |      |  | $    | 0.39   |  |  | $ | (0.27   | )
|Add back goodwill (including assembled
workforce) amortization, net of tax                |  |                                  |       |      |  |      |       |  |  |   | 0.57    |  
|                                                                                          |  |                                  |        |      |  |      |        |  |  |   |         |  
|Adjusted basic income per share before
cumulative effect of an accounting change          |  | $                                | 0.92   |      |  | $    | 0.39   |  |  | $ | 0.30    |  
|Adjusted diluted net income (loss) per share:                                             |  |                                  |        |      |  |      |        |  |  |   |         |  
|Reported diluted income (loss) per share before
cumulative effect of an accounting change |  | $                                | 0.89   |      |  | $    | 0.38   |  |  | $ | (0.26   | )
|Add back goodwill amortization, net of tax                                                |  |                                  |       |      |  |      |       |  |  |   | 0.55    |  
|                                                                                          |  |                                  |        |      |  |      |        |  |  |   |         |  
|Adjusted diluted income per share before
cumulative effect of an accounting change        |  | $                                | 0.89   |      |  | $    | 0.38   |  |  | $ | 0.29    |  
|                                                                                          |  |                                  |        |      |  |      |        |  |  |   |         |  

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Note Five: Other Assets

Other assets consist of the following (in thousands):

|         |  |      |        |      |  |   |        | 
|-------- |  | ---- | ------ | ---- |  | - | ------ | 
|         |  | 2003 |        | 2002
|         |  |      |        |     
|Deposits |  | $    | 23,663 |      |  | $ | 23,167 | 
|Other    |  |      | 12,010 |      |  |   | 6,528  | 
|         |  |      |        |      |  |   |        | 
|         |  | $    | 35,673 |      |  | $ | 29,695 | 
|         |  |      |        |      |  |   |        | 

Deposits include an $18.0 million security deposit on a 15-year non-cancelable
lease for the Companys Dublin, California facility (see Note Six).

Note Six: Lease Obligations and Other Liabilities and Commitments

The Company leases, or has committed to lease, certain office facilities and
certain furniture and equipment under operating leases expiring through 2017,
which generally require Sybase to pay operating costs, including property
taxes, insurance and maintenance. These facility leases generally contain
renewal options and provisions adjusting the lease payments based upon changes
in the consumer price index, increases in real estate taxes and operating
expenses or in fixed increments. Rent expense is reflected on a straight-line
basis over the term of the lease. Capital lease obligations incurred for
equipment acquisitions have not been material.

Future minimum lease payments under noncancellable operating leases having
initial terms in excess of one year as of December 31, 2003 (including those provided for in the Companys restructuring accrual) are as follows
(dollars in thousands):

|                              |  |   |         | 
|----------------------------- |  | - | ------- | 
|2004                          |  | $ | 47,881  | 
|2005                          |  |   | 40,303  | 
|2006                          |  |   | 38,033  | 
|2007                          |  |   | 35,898  | 
|2008                          |  |   | 32,982  | 
|Thereafter                    |  |   | 192,212 | 
|                              |  |   |         | 
|Total minimum lease payments* |  | $ | 387,309 | 
|                              |  |   |         | 

*  Minimum payments have not been reduced by minimum sublease rentals of $16.6
million due in the future under non-cancelable subleases.

The following schedule shows the composition of total rental expense for all
operating leases:

|                       |  |                          |        |      |  |      |        |  |  |   |        | 
|---------------------- |  | ------------------------ | ------ | ---- |  | ---- | ------ |  |  | - | ------ | 
|                       |  | Year ending December 31,
|                       |  |                         
|                       |  | 2003                     |        | 2002 |  | 2001
|                       |  |                          |        |      |  |     
|Minimum rentals        |  | $                        | 51,064 |      |  | $    | 50,369 |  |  | $ | 39,382 | 
|Less: sublease rentals |  |                          | 3,570  |      |  |      | 5,708  |  |  |   | 3,789  | 
|                       |  |                          |        |      |  |      |        |  |  |   |        | 
|                       |  | $                        | 47,494 |      |  | $    | 44,661 |  |  | $ | 35,593 | 
|                       |  |                          |        |      |  |      |        |  |  |   |        | 

At December 31, 2003, the Company had outstanding letters of credit in the
amount of $9.5 million.

In 2002, the Company entered into a six-year arrangement with an unrelated third party
software company requiring that company to develop and port certain of its
products to run on the Sybase database platform. The parties agreed to jointly
market and sell the ported products, and also agreed on prescribed annual
minimum revenue targets during the term of the agreement. Under the terms of
the agreement, and provided the other party performs its obligations, Sybase could be obligated to pay up to $4.0 million per year to
cover any revenue shortfall against the minimum revenue targets for years 2003 and
2007.

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Note Seven: Stockholders Equity

Pursuant to a Preferred Stock Rights Agreement between the Company and American
Stock Transfer and Trust Company, as rights agent, the Companys Board of
Directors declared a dividend of one right (a Right) to purchase one
one-thousandth share of the Companys Series A Participating Preferred Stock
for each outstanding share of the Companys Common Stock outstanding on August
15, 2002. Each Right entitles the registered holder to purchase one
one-thousandth of a share of Series A Participating Preferred Stock at an
exercise price of $90, subject to certain adjustments, upon the acquisition of,
or announcement of the intent to acquire, 15 percent of the Companys Common
Stock by a person or group of affiliated or associated persons. The Rights
plan is intended to maximize the value of the Company in the event of an
unsolicited attempt to take over the Company in a manner or on terms not
approved by Sybases Board of Directors.

Restricted Stock Grants

During the year ended December 31, 2003, the Company issued rights to purchase
an aggregate of 358,000 shares of its Common Stock as restricted stock under
the 1996 Stock Plan to certain senior executives at a price of $0.10 per share.
Rights totaling 353,500 shares were timely exercised, and the restricted
shares were issued. During the year ended December 31, 2001, the Company
issued rights to purchase an aggregate of 383,667 shares of its Common Stock as
restricted stock under the 1996 Stock Plan to certain senior executives at a
price of $0.10 per share. The restricted shares are subject to repurchase by
the Company over a period of three or four years from the date of grant (Repurchase
Period), depending on the terms of the particular grant.

The Company has amortized the
difference between the fair market value of the
underlying shares on the date the restricted stock purchase rights were
granted, and the exercise price of such shares, pro rata over the term of the
applicable Repurchase Period. The Companys right to repurchase is triggered
in the event a restricted shareholders recipients employment is terminated
any time before the relevant Repurchase Period has expired. At December 31,
2003, 347,500 restricted shares issued in 2003, and 359,500 restricted shares
issued in 2001, were still outstanding and subject to repurchase during the
Repurchase Period.

Issuance of Company Stock for
Certain Services

During the quarter ended September 30, 2003, the Company issued approximately
0.7 million shares of its common stock to an unrelated party in connection with
an agreement under which the Company will be provided with certain specified
marketing services over a period of 42 months. The Company recorded a
pre-paid asset of approximately $10.4 million upon the issuance of these shares
based on the fair value of such shares on the date of grant. The expense
associated with the marketing services provided to the Company under this
agreement will be recognized as they are received.

Stock Option Plans

Pursuant to the terms of the Companys 1988 Stock Plan (1988 Stock Plan), an
aggregate of 17,930,480 shares of Common Stock have been issued or reserved for
issuance at December 31, 2003 upon the exercise of options granted to qualified
employees and consultants of the Company. The Board of Directors, directly or
through committees, administers the Plan and establishes the terms of option
grants. The exercise price per share of all incentive stock options granted
under the 1988 Stock Plan must be at least equal to the fair market value of the shares at the date of
the grant. The exercise price of all non-statutory options granted under the
1988 Stock Plan must be at least 85% of the fair market value of the Common
Stock on the date granted. Only employees are eligible to receive
non-statutory option grants. Options granted prior to January 1, 1997 expire
ten years from the grant date, or one month after termination of employment, or
six months after death or permanent disability of the optionee. Options
granted subsequent to January 1, 1997 expire ten years from the grant date, or
three months after termination of employment, or two years after death, or one
year after permanent disability of the optionee. Options in all of these cases
are exercisable to the extent vested. Vesting generally occurs at the rate of
12.5 percent after 6 months and the balance in equal installments over the
following 42 months. The 1988 Stock Plan expired in June 1998, in accordance
with its terms. As of that time, no further options were granted under the
1988 Stock Plan, but optionees are able to exercise their vested options before
those options expire. All unexercised options are cancelled upon expiration.
As of December 31, 2003, there were 1,928,440 unexercised options outstanding
under the 1988 Stock Plan.

Pursuant to the Companys 1996 Stock Plan (1996 Stock Plan), at December 31,
2003, an aggregate of 16,727,000 shares of Common Stock have been issued or
reserved for issuance upon the exercise of

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options granted to qualified
employees and consultants of the Company. The Board of Directors, directly or
through committees, administers the Plan and establishes the terms of option
grants. The exercise price per share of all incentive stock options granted
under the Plan must be at least equal to the fair market value of the shares at
the date of the grant. The exercise price of all non-statutory stock options
granted under the 1996 Stock Plan must be at least 85% of the fair market value
of the Common Stock on the date granted. Options generally expire ten years
from the grant date, or three months after termination of employment, or two
years after death, or one year after permanent disability. Options are
exercisable to the extent vested. Vesting generally occurs at the rate of 12.5
percent after 6 months and the balance in equal installments over the following
42 months.

Pursuant to the 1999 Nonstatutory Stock Plan (1999 Stock Plan), at December 31,
2003, an aggregate of 7,000,000 shares of Common Stock have been issued or
reserved for issuance upon the exercise of options granted to qualified
employees and consultants of the Company. Employees (i) who are officers of the
Company within the meaning of Section 16 of the Exchange Act, or (ii) who hold
the title of vice president or above, are not eligible to receive options under
the 1999 Stock Plan. The Board of Directors, directly or through committees,
administers the Plan and establishes the terms of option grants. The exercise
price of all stock options granted under the 1999 Stock Plan must be at least
85% of the fair market value of the Common Stock on the date granted. Options
expire on terms set forth in the grant notice (generally with 10 years from the
grant date), or three months after termination of employment, or two years
after death, or one year after permanent disability. Options are exercisable
to the extent vested. Vesting occurs at various rates and over various time
periods.

Pursuant to the 2003 Stock Plan (2003 Stock Plan) at December 31, 2003, an
aggregate of 2,500,000 shares of Common Stock have been reserved for issuance
upon the exercise of options granted to qualified employees and consultants of
the Company. As of that date, no stock options had been issued under the 2003
Plan. The Board of Directors, directly or through committees, administers the
Plan and establishes the terms of option grants. The exercise price of all
stock options granted under the 2003 Stock Plan must be at least 85% of the
fair market value of the Common Stock on the date granted. Options expire on
terms set forth in the grant notice (generally with 10 years from the grant
date), or three months after termination of employment, or two years after
death, or one year after permanent disability. Options are exercisable to the
extent vested. Vesting occurs at various rates and over various time periods.

An aggregate of 700,000 shares of Common Stock have been issued or reserved for
issuance under the 1992 Director Option Plan, as amended (the 1992 Director
Plan), as of December 31, 2003. All options under the 1992 Director Plan are
non-statutory, and may be granted only to non-employee directors. The exercise
price of all options granted under the 1992 Director Plan must be the fair
market value of the shares at the date of grant. Options expire ten years from
the date of grant and vest ratably over four years from the grant date. The
1992 Director Plan expired in February 2002, and no further options are
available for grant under the 1992 Director Plan, but optionees are able to
exercise their vested options before those options expire.

An aggregate of 300,000 shares of Common Stock has been issued or reserved for
issuance under the 2001 Director Option Plan (the 2001 Director Plan) as of
December 31, 2003.  All options under the 2001 Director Plan are non-statutory.
All grants of options under the 2001 Director Plan are automatic and
non-discretionary and may be granted only to non-employee directors. The
exercise price of all options granted under the 2001 Director Plan must be the
fair market value of the shares at the date of grant. Options expire ten years
from the date of grant and vest ratably over four years from the grant date.

Price data and activity for the Companys option plans, including options
assumed by the Company in mergers with other companies (adjusted for the merger
exchange ratio) are summarized as follows:

|                             |  |                     |            |                |  |                  |       | 
|---------------------------- |  | ------------------- | ---------- | -------------- |  | ---------------- | ----- | 
|                             |  |                     |            |                |  | Weighted average
|                             |  | Outstanding options |            | exercise price
|                             |  | number of shares    |            | per share     
|                             |  |                     |            |               
|Balance at December 31, 2000 |  |                     | 15,387,165 |                |  | $                | 14.16 | 
|Granted                      |  |                     | 11,268,170 |                |  |                  | 16.40 | 
|Exercised                    |  |                     | (1,782,592 | )              |  |                  | 9.32  | 
|Forfeited                    |  |                     | (3,112,298 | )              |  |                  | 23.82 | 
|                             |  |                     |            |                |  |                  |       | 
|Balance at December 31, 2001 |  |                     | 21,760,445 |                |  | $                | 14.32 | 
|Granted                      |  |                     | 2,950,161  |                |  |                  | 11.26 | 
|Exercised                    |  |                     | (1,604,503 | )              |  |                  | 9.01  | 
|Forfeited                    |  |                     | (1,779,379 | )              |  |                  | 17.09 | 
|                             |  |                     |            |                |  |                  |       | 
|Balance at December 31, 2002 |  |                     | 21,326,724 |                |  | $                | 14.09 | 
|Granted                      |  |                     | 3,021,750  |                |  |                  | 12.94 | 
|Exercised                    |  |                     | (4,402,181 | )              |  |                  | 10.69 | 
|Forfeited                    |  |                     | (1,925,615 | )              |  |                  | 17.16 | 
|                             |  |                     |            |                |  |                  |       | 
|Balance at December 31, 2003 |  |                     | 18,020,678 |                |  | $                | 14.40 | 
|                             |  |                     |            |                |  |                  |       | 

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The total number of shares granted in 2001 includes 2,764,136 options assumed
by the Company due to its acquisition of NEN. At December 31, 2003, options to
purchase 11,440,790 shares were exercisable at prices ranging from $0.10 to
$148.27. Shares available for grant totaled 3,012,093 at December 31, 2003.
The above totals include the restricted shares issued under the 1996 Stock
Plan.

The income tax benefits that accrue to the Company from exercises of
nonqualified stock options and disqualifying dispositions of incentive stock
options are recorded as additional paid-in capital.

The following table summarizes information about the Companys fixed stock
options outstanding at December 31, 2003:

|                   |  |                     |            |                     |  |             |      |           |  |       |       |  |  |           |            |  |  |   |       | 
|------------------ |  | ------------------- | ---------- | ------------------- |  | ----------- | ---- | --------- |  | ----- | ----- |  |  | --------- | ---------- |  |  | - | ----- | 
|                   |  | Options outstanding |            | Options exercisable
|                   |  |                     |            |                    
|                   |  |                     |            |                     |  | Weighted-   |      |           |  |       |       |  |  |           |            |  |  |  
|                   |  |                     |            |                     |  | Average     |      | Weighted- |  |       |       |  |  | Weighted-
|                   |  |                     |            |                     |  | Remaining   |      | Average   |  |       |       |  |  | Average  
|Ranges of          |  |                     |            |                     |  | Contractual |      | Exercise  |  |       |       |  |  | Exercise 
|Exercisable prices |  | Shares              |            | Life                |  | Price       |      | Shares    |  | Price
|                   |  |                     |            |                     |  |             |      |           |  |      
|$0.10 to $9.93     |  |                     | 3,886,388  |                     |  |             | 6.64 |           |  | $     | 7.08  |  |  |           | 2,148,327  |  |  | $ | 8.12  | 
|$10.10 to $10.81   |  |                     | 3,893,882  |                     |  |             | 6.92 |           |  | $     | 10.36 |  |  |           | 3,051,989  |  |  | $ | 10.43 | 
|$11.05 to $15.18   |  |                     | 3,301,249  |                     |  |             | 8.70 |           |  | $     | 14.14 |  |  |           | 700,339    |  |  | $ | 13.86 | 
|$15.25 to $19.75   |  |                     | 3,235,836  |                     |  |             | 6.63 |           |  | $     | 17.45 |  |  |           | 2,479,425  |  |  | $ | 17.60 | 
|$20.12 to $25.06   |  |                     | 3,391,416  |                     |  |             | 6.61 |           |  | $     | 23.18 |  |  |           | 2,782,909  |  |  | $ | 23.16 | 
|$26.63 to $148.27  |  |                     | 311,907    |                     |  |             | 4.68 |           |  | $     | 31.63 |  |  |           | 277,801    |  |  | $ | 31.30 | 
|                   |  |                     |            |                     |  |             |      |           |  |       |       |  |  |           |            |  |  |   |       | 
|$0.10 to $148.27   |  |                     | 18,020,678 |                     |  |             | 7.04 |           |  | $     | 14.40 |  |  |           | 11,440,790 |  |  | $ | 15.36 | 
|                   |  |                     |            |                     |  |             |      |           |  |       |       |  |  |           |            |  |  |   |       | 

FFI Stock Option Plans

In February of 2000, the Company established the 2000 FFI Stock Option Plan
(2000 FFI Plan). At December 31, 2003, an aggregate of 7,088,870 shares of
Common Stock have been reserved for issuance upon the exercise of options
granted to qualified employees and consultants of FFI, a majority owned
subsidiary of the Company, and certain employees of Sybase, Inc. FFIs Board of
Directors, directly or through committees, administers the 2000 FFI Plan and establishes
the terms of option grants. The exercise price per share of all incentive stock
options granted under the 2000 FFI Plan must be at least equal to the fair
market value of the shares at the date of the grant. The exercise price of all
non-statutory stock options granted under the 2000 FFI Plan must be at least
85% of the fair market value of the common stock on the date granted. As FFI is
not a public company, the fair market value of the shares issued under the plan
has been determined by FFIs Board of Directors and supported by a valuation
prepared by an independent valuation expert. All options issued under the 2000
FFI Plan were granted at the estimated fair market value of the option at the
date of grant. Options expire over ten years from the grant date, three months
after termination of employment, two years after death or one year after
permanent disability. Options are exercisable to the extent vested. Vesting
generally occurs at the rate of 12.5 percent after 6 months and the balance in
equal installments over the following 42 months. In March 2001, the 2000 FFI
Plan was terminated and no further options were granted under the Plan.
Optionees holding unexpired options are able to exercise such options before
those options expire. At that time, any unexercised options expire and are
cancelled. As of December 31, 2003, there were 3,462,740 unexercised options
outstanding under the 2000 Plan.

In March 2001, FFI established the 2001 FFI Stock Option Plan (2001 FFI Plan).
At December 31, 2003, an aggregate of 6,175,360 shares of FFIs common stock
have been reserved for issuance upon the exercise of options granted to
qualified employees and consultants of FFI, and certain employees of Sybase,
Inc. FFIs Board of Directors, directly or through committees, administers the
2001 FFI Plan and establishes the terms of option grants. The exercise price
per share of all incentive stock options granted

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under the 2001 FFI Plan must
be at least equal to the fair market value of the shares at the date of the
grant. The exercise price of all non-statutory stock options granted under the
2001 FFI Plan must be at least 85% of the fair market value of the common stock
on the date granted. As FFI is not a public company, the fair market value of
the shares issued under the plan has been determined by FFIs Board of
Directors and supported by a valuation prepared by an independent valuation
expert. All options issued during 2003 were granted at the estimated fair
market value of the option at the date of grant. Options expire ten years from
the grant date, or three months after termination of employment, or two years
after death, or one year after permanent disability. Options are exercisable to
the extent vested. Vesting occurs at the rate of at least 20 percent per year
over 5 years from the date options are granted.

Price data and activity for the FFI Plan are summarized as follows:

|                             |  |                     |            |                |  |                  |      | 
|---------------------------- |  | ------------------- | ---------- | -------------- |  | ---------------- | ---- | 
|                             |  |                     |            |                |  | Weighted average
|                             |  | Outstanding options |            | Exercise price
|                             |  | number of shares    |            | per share     
|                             |  |                     |            |               
|Balance at December 31, 2000 |  |                     | 11,709,774 |                |  | $                | 5.00 | 
|Granted                      |  |                     | 1,600,484  |                |  | $                | 5.00 | 
|Forfeited                    |  |                     | (4,985,775 | )              |  |                  | 5.00 | 
|                             |  |                     |            |                |  |                  |      | 
|Balance at December 31, 2001 |  |                     | 8,324,483  |                |  | $                | 5.00 | 
|Granted                      |  |                     | 841,900    |                |  | $                | 5.00 | 
|Forfeited                    |  |                     | (3,387,344 | )              |  |                  | 5.00 | 
|                             |  |                     |            |                |  |                  |      | 
|Balance at December 31, 2002 |  |                     | 5,779,039  |                |  | $                | 5.00 | 
|Granted                      |  |                     | 3,581,000  |                |  | $                | 0.83 | 
|Forfeited                    |  |                     | (627,983   | )              |  |                  | 4.67 | 
|                             |  |                     |            |                |  |                  |      | 
|Balance at December 31, 2003 |  |                     | 8,732,056  |                |  | $                | 3.32 | 
|                             |  |                     |            |                |  |                  |      | 

The following table summarizes information about the FFI fixed stock options
outstanding at December 31, 2003:

|                   |  |                     |           |                     |  |             |      |           |  |       |      |  |  |           |           |  |  |   |      | 
|------------------ |  | ------------------- | --------- | ------------------- |  | ----------- | ---- | --------- |  | ----- | ---- |  |  | --------- | --------- |  |  | - | ---- | 
|                   |  | Options outstanding |           | Options exercisable
|                   |  |                     |           |                    
|                   |  |                     |           |                     |  | Weighted-   |      |           |  |       |      |  |  |           |           |  |  |  
|                   |  |                     |           |                     |  | Average     |      | Weighted- |  |       |      |  |  | Weighted-
|                   |  |                     |           |                     |  | Remaining   |      | Average   |  |       |      |  |  | Average  
|Ranges of          |  |                     |           |                     |  | Contractual |      | Exercise  |  |       |      |  |  | Exercise 
|Exercisable prices |  | Shares              |           | Life                |  | Price       |      | Shares    |  | Price
|                   |  |                     |           |                     |  |             |      |           |  |      
|$0.75              |  |                     | 1,371,000 |                     |  |             | 9.08 |           |  | $     | 0.75 |  |  |           | 309,986   |  |  | $ | 0.75 | 
|$0.78              |  |                     | 2,098,500 |                     |  |             | 9.62 |           |  | $     | 0.78 |  |  |           | 237,691   |  |  | $ | 0.78 | 
|$5.00              |  |                     | 5,262,556 |                     |  |             | 6.85 |           |  | $     | 5.00 |  |  |           | 4,119,852 |  |  | $ | 5.00 | 
|                   |  |                     |           |                     |  |             |      |           |  |       |      |  |  |           |           |  |  |   |      | 
|$0.75 to $5.00     |  |                     | 8,732,056 |                     |  |             | 7.86 |           |  | $     | 3.32 |  |  |           | 4,667,529 |  |  | $ | 4.50 | 
|                   |  |                     |           |                     |  |             |      |           |  |       |      |  |  |           |           |  |  |   |      | 

iAS Stock Option Plan

In March 2001, iAS established the 2001 iAS Stock Option Plan (iAS Plan) and
reserved for issuance an aggregate of 11,250,000 shares of iAS common stock
upon the exercise of options granted to qualified employees and consultants of
iAnywhere Solutions, Inc., a majority owned subsidiary of the Company, and
certain employees of Sybase, Inc. iASs Board of Directors, directly or through
committees, administers the iAS Plan and establishes the terms of option
grants. The exercise price of all stock options granted under the iAS Plan
must be at least 85% of the fair market value of the common stock on the date
granted. Because iAS is not a public company, the fair market value of the
shares issued under the plan has been determined by iASs Board of Directors
and supported by a valuation prepared by the Company. All options issued
during 2003 were granted at the estimated fair market value of the option at
the date of grant. Options expire ten years from the grant date, or three
months after termination of

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employment, or two years after death, or one year
after permanent disability. Options are exercisable to the extent vested.
Vesting occurs at the rate of at least 20 percent per year over 5 years from
the date options are granted.

Price data and activity for the iAS Plan are summarized as follows:

|                             |  |                     |            |                |  |                  |      | 
|---------------------------- |  | ------------------- | ---------- | -------------- |  | ---------------- | ---- | 
|                             |  |                     |            |                |  | Weighted average
|                             |  | Outstanding options |            | exercise price
|                             |  | number of shares    |            | per share     
|                             |  |                     |            |               
|Granted                      |  |                     | 8,397,875  |                |  | $                | 2.51 | 
|Forfeited                    |  |                     | (89,000    | )              |  |                  | 2.51 | 
|                             |  |                     |            |                |  |                  |      | 
|Balance at December 31, 2001 |  |                     | 8,308,875  |                |  | $                | 2.51 | 
|Granted                      |  |                     | 1,432,149  |                |  | $                | 2.51 | 
|Forfeited                    |  |                     | (214,866   | )              |  |                  | 2.51 | 
|                             |  |                     |            |                |  |                  |      | 
|Balance at December 31, 2002 |  |                     | 9,526,158  |                |  | $                | 2.51 | 
|Granted                      |  |                     | 1,306,000  |                |  | $                | 2.51 | 
|Forfeited                    |  |                     | (201,572   | )              |  |                  | 2.51 | 
|                             |  |                     |            |                |  |                  |      | 
|Balance at December 31, 2003 |  |                     | 10,630,586 |                |  | $                | 2.51 | 
|                             |  |                     |            |                |  |                  |      | 

At December 31, 2003 there were 5,425,771 shares exercisable under the iAS Plan
all at an exercise price of $2.51 per share. The weighted average remaining
contractual life of the options outstanding at December 31, 2003 was 7.9 years.

Employee Stock Purchase Plans

The Companys 1991 Employee Stock Purchase Plan and 1991 Foreign Subsidiary
Employee Stock Purchase Plan, as amended (collectively the ESPP), allow
eligible employees to purchase our Common Stock through payroll deductions. The
ESPP consists of 6-month exercise periods. The shares can be purchased at the
lower of 85% of the fair market value of the Common Stock at the first day of
each 6-month exercise period or at the last day of each 6-month exercise
period. Purchases are limited to 10 percent of an employees eligible
compensation, subject to an annual maximum, as defined in the
ESPP.

As of December 31, 2003, an aggregate of 11,800,000 shares of Common Stock had
been reserved under the ESPP, of which 900,230 shares remained available for
issuance. Employees purchased 740,312 shares in 2003, 807,295 shares in 2002,
and 710,312 shares in 2001.

Pro Forma Disclosures of the Effect of Stock Based Compensation Plans

The Company applies the intrinsic value based method set forth by APB 25 and
related Interpretations in accounting for grants to employees under its
stock-based compensation plans, described above. Under this method,
compensation expense is recognized only when options are granted with a
discounted exercise price. Any resulting compensation expense is then
generally recognized over the vesting period of the option. Compensation cost
for the estimated fair value of grants to non-employee consultants of
stock-based compensation has not been material.

The fair value of each option grant is estimated on the date of the grant using
the Black-Scholes option-pricing model with the following weighted-average
assumptions:

|                         |  |                    |       |                |  |      |       |      |  |      |       |      |  |  |       |   |  |  |       |   |  |  |       |  
|------------------------ |  | ------------------ | ----- | -------------- |  | ---- | ----- | ---- |  | ---- | ----- | ---- |  |  | ----- | - |  |  | ----- | - |  |  | ----- | -
|                         |  | Stock option plans |       | Purchase plans
|                         |  | 2003               |       | 2002           |  | 2001 |       | 2003 |  | 2002 |       | 2001
|                         |  |                    |       |                |  |      |       |      |  |      |       |     
|Expected volatility      |  |                    | 64.54 | %              |  |      | 67.65 | %    |  |      | 72.08 | %    |  |  | 64.41 | % |  |  | 67.65 | % |  |  | 72.08 | %
|Risk-free interest rates |  |                    | 2.56  | %              |  |      | 3.46  | %    |  |      | 4.32  | %    |  |  | 1.29  | % |  |  | 1.82  | % |  |  | 3.41  | %
|Expected lives (years)   |  |                    | 4.25  |                |  |      | 4.25  |      |  |      | 4.25  |      |  |  | .50   |   |  |  | .50   |   |  |  | .50   |  
|Expected dividend yield  |  |                    |      |                |  |      |      |      |  |      |      |      |  |  |      |   |  |  |      |   |  |  |      |  

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The weighted average grant date fair value of options (excluding FFI and iAS
options) granted in 2003, 2002 and 2001 was $8.40, $6.18, and $7.38 per share,
respectively. The weighted average grant date fair value of the FFI options
granted in 2003, 2002 and 2001 was $0.43, $2.75, and $2.92 per share,
respectively. The weighted-average grant-date fair value of the iAS options
granted in 2003, 2002 and 2001 was $1.31, $1.38, and $1.46 per share,
respectively.

Note Eight: Income Taxes

The Company accounts for income taxes under the liability method. Under this
method, deferred tax assets and liabilities are determined based on differences
between financial reporting and income tax bases of assets and liabilities and
are measured using the enacted tax rates and laws that will be in effect when
the differences are expected to reverse.

The following is a geographical breakdown of consolidated income (loss) before
the cumulative effect of an accounting change, and income taxes (including
intercompany royalties and expenses) by income tax jurisdiction (dollars in
thousands):

|              |  |      |         |      |  |      |        |   |  |   |         |  
|------------- |  | ---- | ------- | ---- |  | ---- | ------ | - |  | - | ------- | -
|              |  | 2003 |         | 2002 |  | 2001
|              |  |      |         |      |  |     
|United States |  | $    | 11,778  |      |  | $    | (8,958 | ) |  | $ | (81,180 | )
|Foreign       |  |      | 106,317 |      |  |      | 80,167 |   |  |   | 82,158  |  
|              |  |      |         |      |  |      |        |   |  |   |         |  
|Total         |  | $    | 118,095 |      |  | $    | 71,209 |   |  | $ | 978     |  
|              |  |      |         |      |  |      |        |   |  |   |         |  

The provisions (credits) for income taxes consist of the following (dollars in
thousands):

|        |          |   |        |        |      |   |        |         |   |   |        |        |  
|------- | -------- | - | ------ | ------ | ---- | - | ------ | ------- | - | - | ------ | ------ | -
|        |          |   | 2003   |        | 2002 |   | 2001  
|        |          |   |        |        |      |   |       
|Federal |          |   |        |        |      |   |        |         |   |   |        |       
|        | Current  |   | $      | 6,760  |      |   | $      | 29,464  |   |   | $      | 1,166  |  
|        | Deferred |   |        | (3,964 | )    |   |        | (20,237 | ) |   |        | (613   | )
|        |          |   |        |        |      |   |        |         |   |   |        |        |  
|        |          |   | 2,796  |        |      |   | 9,227  |         |   |   | 553    |       
|State   |          |   |        |        |      |   |        |         |   |   |        |       
|        | Current  |   |        | 212    |      |   |        | 1,406   |   |   |        | 987    |  
|        | Deferred |   |        | 2,401  |      |   |        | 740     |   |   |        | (728   | )
|        |          |   |        |        |      |   |        |         |   |   |        |        |  
|        |          |   | 2,613  |        |      |   | 2,146  |         |   |   | 259    |       
|Foreign |          |   |        |        |      |   |        |         |   |   |        |       
|        | Current  |   |        | 25,645 |      |   |        | 23,748  |   |   |        | 25,921 |  
|        | Deferred |   |        | (225   | )    |   |        | (1,693  | ) |   |        | (233   | )
|        |          |   |        |        |      |   |        |         |   |   |        |        |  
|        |          |   | 25,420 |        |      |   | 22,055 |         |   |   | 25,688 |       
|        |          |   |        |        |      |   |        |         |   |   |        |        |  
|Total   |          | $ | 30,829 |        |      | $ | 33,428 |         |   | $ | 26,500 |       
|        |          |   |        |        |      |   |        |         |   |   |        |        |  

The provision for income taxes differs from the amount computed by applying the
statutory federal income tax rate to income before income taxes. The sources
and tax effects of the differences are as follows (dollars in thousands):

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|                                                                           |  |      |        |      |  |      |        |   |  |   |        |  
|-------------------------------------------------------------------------- |  | ---- | ------ | ---- |  | ---- | ------ | - |  | - | ------ | -
|                                                                           |  | 2003 |        | 2002 |  | 2001
|                                                                           |  |      |        |      |  |     
|Tax (credit) at U.S. statutory rate                                        |  | $    | 41,333 |      |  | $    | 24,923 |   |  | $ | 344    |  
|State tax, net of federal benefit                                          |  |      | 2,613  |      |  |      | 2,146  |   |  |   | 259    |  
|Effect of foreign operations                                               |  |      | (2,862 | )    |  |      | (505   | ) |  |   | (295   | )
|Amortization/impairment of intangible assets                               |  |      | 928    |      |  |      | 5,339  |   |  |   | 25,025 |  
|Research and development tax credits                                       |  |      | (500   | )    |  |      | (500   | ) |  |   | (500   | )
|Utilization of foreign tax credit carryforwards                            |  |      | (6,592 | )    |  |      | (1,153 | ) |  |   |       |  
|Release of deferred tax liability associated with certain
foreign earnings |  |      | (3,990 | )    |  |      |        |   |  |   |        |  
|Release of tax accruals following the completion of
certain audits         |  |      | (2,500 | )    |  |      |        |   |  |   |        |  
|Other                                                                      |  |      | 2,399  |      |  |      | 3,178  |   |  |   | 1,667  |  
|                                                                           |  |      |        |      |  |      |        |   |  |   |        |  
|Total                                                                      |  | $    | 30,829 |      |  | $    | 33,428 |   |  | $ | 26,500 |  
|                                                                           |  |      |        |      |  |      |        |   |  |   |        |  

Deferred income taxes result principally from temporary differences between
years in the recognition of certain revenue and expense items for financial and
tax reporting purposes. Significant components of the Companys net deferred
tax assets were as follows at December 31 (dollars in thousands):

|                                                            |                                |   |         |        |      |   |         |        | 
|----------------------------------------------------------- | ------------------------------ | - | ------- | ------ | ---- | - | ------- | ------ | 
|                                                            |                                |   | 2003    |        | 2002
|                                                            |                                |   |         |        |     
|Depreciation                                                |                                | $ | 7,793   |        |      | $ | 7,566   |       
|Deferred revenue                                            |                                |   | 5,974   |        |      |   | 2,604   |       
|Accrued expenses                                            |                                |   | 21,560  |        |      |   | 25,957  |       
|Allowance for doubtful accounts                             |                                |   | 1,819   |        |      |   | 251     |       
|Capitalized R&D expenses                                    |                                |   | 31,761  |        |      |   | 24,711  |       
|Purchased software                                          |                                |   | 625     |        |      |   | 1,211   |       
|Net operating loss carryovers and tax credits
Carryforwards |                                |   | 70,447  |        |      |   | 68,187  |       
|Intangible assets                                           |                                |   | 5,182   |        |      |   | 7,789   |       
|Capital loss carryforward                                   |                                |   | 14,204  |        |      |   | 3,647   |       
|Other assets                                                |                                |   | 817     |        |      |   | 4,458   |       
|                                                            |                                |   |         |        |      |   |         |       
|Gross deferred tax asset                                    |                                |   | 160,182 |        |      |   | 146,381 |       
|Unremitted foreign earnings                                 |                                |   | (8,468  | )      |      |   | (19,489 | )     
|Acquired Intangibles                                        |                                |   | (7,109  | )      |      |   | (11,152 | )     
|Other liabilities                                           |                                |   | (1,659  | )      |      |   | (861    | )     
|                                                            |                                |   |         |        |      |   |         |       
|Gross deferred tax liability                                |                                |   | (17,236 | )      |      |   | (31,502 | )     
|Total before valuation allowance                            |                                |   | 142,946 |        |      |   | 114,879 |       
|Valuation allowance                                         |                                |   | (71,701 | )      |      |   | (48,488 | )     
|                                                            |                                |   |         |        |      |   |         |       
|Net deferred tax assets                                     |                                | $ | 71,245  |        |      | $ | 66,391  |       
|Recorded as:                                                |                                |   |         |        |      |   |         |       
|                                                            | Current deferred tax assets    |   | $       | 12,739 |      |   | $       | 20,097 | 
|                                                            | Noncurrent deferred tax assets |   |         | 58,506 |      |   |         | 46,295 | 
|                                                            |                                |   |         |        |      |   |         |       
|                                                            |                                | $ | 71,245  |        |      | $ | 66,392  |       
|                                                            |                                |   |         |        |      |   |         |       

The valuation allowance increased by $23.2 million in 2003. This valuation
allowance primarily relates to the deferred tax assets for acquired net
operating losses, capital loss carryforwards, tax assets associated with stock
option activity, and foreign tax credits. The movement was primarily related
to the following items:

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|                                                                                           |  |   |      |  
|------------------------------------------------------------------------------------------ |  | - | ---- | -
|(Dollars in millions)                                                                      |  |   |      |  
|Deferred tax asset acquired during the year on AvantGo net operating losses
not recognized |  | $ | 10.2 |  
|Adjustment to capital loss generated from sale of certain subsidiaries and
investments     |  |   | 10.5 |  
|Tax benefit associated with stock option activity                                          |  |   | 12.1 |  
|Utilization of NEN and AvantGo net operating losses credited to goodwill                   |  |   | (4.1 | )
|Utilization of certain tax credits                                                         |  |   | (5.5 | )
|                                                                                           |  |   |      |  
|                                                                                           |  | $ | 23.2 |  
|                                                                                           |  |   |      |  

Approximately $51.4 million of the valuation allowance relates to deferred tax
assets associated with net operating losses, research and development tax
credits and capital losses acquired in, or attributable to, the NEN and AvantGo
acquisitions. If the associated deferred tax assets are realized, the benefit
from their realization will reduce goodwill carried on the Companys books
associated with these acquisitions rather than future income tax expense. The
valuation allowance also includes approximately $12.1 million associated with
stock option activity for which any recognized tax benefits will be credited
directly to shareholders equity.

As of December 31, 2003, the Company had research and development tax credits
of $16.5 million, which expire in years from 2005 through 2023, foreign tax
credits of $3.0 million expiring in 2004, and an asset of $38.2 million
associated with certain net operating losses which expire in the years from
2006 through 2023.Realization of the Companys net deferred tax assets is
dependent on its ability to generate approximately $215.8 million of future
taxable income, largely in the U.S. Sybase believes that sufficient income
will be earned in the future to realize these assets. The amount of the
deferred tax assets considered realizable is subject to adjustment in future
periods if estimates of future taxable income are reduced. Any such
adjustments to the deferred tax assets would be charged to income in the period
such adjustment was made. No provision has been made for income taxes and
foreign withholding taxes on approximately $76 million of undistributed
earnings from non-US operations as of December 31, 2003 because the Company
currently plans to permanently reinvest all such earnings. If the Company did
not plan on permanently reinvesting these earnings, the additional deferred tax
liability would be approximately $16.9 million. When excess cash accumulates
in the Companys non-US subsidiaries, the subsidiarys earnings are remitted if
it is advantageous for business, tax and foreign exchange reasons.

The Internal Revenue Service (IRS) has examined the Companys income tax
returns for all years through 2000. During the year, the IRS audit of the
Companys tax returns for the years 1998 through 2000 was completed. As a
result the Company released tax accruals of approximately $2.5 million. The
Company believes that it has provided adequate accruals for all open tax years.

Note Nine: Retirement Plan

The Company maintains a defined contribution retirement plan pursuant to
Section 401(k) of the Internal Revenue Code (the 401(k) Plan) that allows
eligible employees to contribute up to a certain percentage of their annual
compensation to the Plan, subject to the annual IRS limit. Starting in 2002,
401(k) Plan participants who (i) attained the age of 50 during the calendar
year and (ii) had made the maximum plan or IRS pre-tax contribution were able
to make an additional catch-up contribution up to a maximum of $1,000. In
2003, 2002 and 2001, the Company matched employee contribution at a rate of
$0.50 for each dollar up to the first $3,000 of salary contributed by the
employee, with a maximum employer match of $1,500 for the year fully vested.
The Plan also allows the Company to make discretionary contributions. There
were no such discretionary contributions made in 2003, 2002 or 2001.

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Note Ten: Segment and Geographical Information

During 2003, the Company was organized into three separate business segments
each of which focused on one of three key market segments  Infrastructure
Platform Group (IPG), iAnywhere Solutions, Inc. (iAS) and Financial Fusion,
Inc. (FFI).

During 2003, the Company was organized into three separate business segments
each of which focused on one of three key market segments: IPG, which
principally focuses on enterprise class database servers, integration and
development products; iAS, which provides mobile database and mobile enterprise
solutions; and FFI, which delivers integrated banking, payment and trade
messaging solutions to large financial institutions.

The Company created IPG as of January 1, 2003.
This segment includes the former operations of the Companys Enterprise
Solutions Division (ESD), e-Business Division (eBD), and Business Intelligence
Division (BID), which were disclosed as separate reportable segments prior to
January 1, 2003. IPG was formed to focus on integrating and providing synergies
between the Companys application infrastructure products and solutions with an
emphasis on delivering technologically advanced, open and modular technology
and solutions.

The Company discloses iAS, FFI, IPG as reportable segments in accordance with
Statement of Financial Accounting Standards No. 131, Disclosures about
Segments of an Enterprise and Related Information. As ESD, eBD and BID have
been combined into IPG and are no longer reported as separate segments, the
Company has restated all earlier periods reported to reflect the segment
changes made in the first quarter of 2003.

Sybases chief operating decision maker, is the President and Chief Executive
Officer (CEO). While the CEO is apprised of a variety of financial metrics and
information, the Sybase business is principally managed on a segment basis,
with the CEO evaluating performance based upon segment operating profit or loss
that includes an allocation of common expenses, but excludes certain
unallocated expenses. Segment revenue includes transactions between the
segments. These revenues are transferred to the applicable segments less
amounts retained, which are intended to reflect the costs incurred by the
transferring segment. Certain common costs and expenses are allocated based on
measurable drivers of expense. Unallocated expenses represent corporate
expenditures or cost savings that are not specifically allocated to the
segments including reversals of restructuring expenses associated with
restructuring activities undertaken prior to 2003. The CEO does not view
segment results below operating profit (loss) before unallocated costs, and
therefore unallocated expenses, interest income, interest expense and other,
net, the provision for income taxes, and the cumulative effect of an accounting
change are not broken out by segment. Sybase does not account for, or report
to the CEO, assets or capital expenditures by segment. In accordance with SFAS
146 the Company has allocated the costs associated with 2003 restructuring
activities to each reportable segment. Prior to 2003, the Company did not track
its restructuring activities by segment and it is impracticable to now do so
with respect to these prior activities. Accordingly, restructuring related
expenses and reversals associated with restructuring activities undertaken
before 2003 are not included in segment level operating results but instead
included in the total for unallocated cost savings.

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A summary of the segment financial information reported to the CEO for the year
ended December 31, 2003 is presented below (in thousands):

|                                                                                                                          |              |                                    |                       |         |         |         |        |             |        |        |        |        |       |        |         |   |         |         |         |         |              |         | 
|------------------------------------------------------------------------------------------------------------------------- | ------------ | ---------------------------------- | --------------------- | ------- | ------- | ------- | ------ | ----------- | ------ | ------ | ------ | ------ | ----- | ------ | ------- | - | ------- | ------- | ------- | ------- | ------------ | ------- | 
|                                                                                                                          |              |                                    |                       |         |         |         |        |             |        |        |        |        |       |        |         |   |         |         |         |         | Consolidated
|(In thousands)                                                                                                            |              | IPG                                |                       | iAS     |         | FFI     |        | Elimination |        | Total 
|                                                                                                                          |              |                                    |                       |         |         |         |        |             |        |       
|Revenues:                                                                                                                 |              |                                    |                       |         |         |         |        |             |        |        |        |        |       |        |         |   |         |         |         |        
|                                                                                                                          | License fees |                                    |                       |         |         |         |        |             |        |        |        |        |       |        |         |   |         |         |         |         |             
|                                                                                                                          |              | Enterprise                         |                       | $       | 155,182 |         |        | $           | 763    |        |        | $      |      |        |         |   |        |         |         | $       | 155,945      |        
|                                                                                                                          |              | E-Business                         |                       |         | 39,144  |         |        |             |       |        |        |        |      |        |         |   |        |         |         |         | 39,144       |        
|                                                                                                                          |              | Mobile and Embedded                |                       |         | 26,049  |         |        |             | 33,807 |        |        |        |      |        |         |   |        |         |         |         | 59,856       |        
|                                                                                                                          |              | E-Finance                          |                       |         | 1,527   |         |        |             |       |        |        |        | 2,622 |        |         |   |        |         |         |         | 4,149        |        
|                                                                                                                          |              | Datawarehouse                      |                       |         | 15,723  |         |        |             |       |        |        |        |      |        |         |   |        |         |         |         | 15,723       |        
|                                                                                                                          |              |                                    |                       |         |         |         |        |             |        |        |        |        |       |        |         |   |         |         |         |         |             
|                                                                                                                          |              |                                    | Subtotal license fees |         |         | 237,625 |        |             |        | 34,570 |        |        |       | 2,622  |         |   |         |        |         |         |              | 274,817 | 
|                                                                                                                          |              | Intersegment license fees revenues |                       |         | 86      |         |        |             | 21,778 |        |        |        | 1,271 |        |         |   | (23,135 | )       |         |         |             |        
|                                                                                                                          |              |                                    |                       |         |         |         |        |             |        |        |        |        |       |        |         |   |         |         |         |         |             
|                                                                                                                          |              |                                    | Total license fees    |         |         | 237,711 |        |             |        | 56,348 |        |        |       | 3,893  |         |   |         | (23,135 | )       |         |              | 274,817 | 
|                                                                                                                          | Services     |                                    |                       | 481,004 |         |         |        | 10,212      |        |        |        | 12,029 |       |        |         |  |         |         |         | 503,245 |             
|                                                                                                                          |              | Intersegment service revenues      |                       |         | 11      |         |        |             | 25,691 |        |        |        | 4,711 |        |         |   | (30,413 | )       |         |         |             |        
|                                                                                                                          |              |                                    |                       |         |         |         |        |             |        |        |        |        |       |        |         |   |         |         |         |         |             
|                                                                                                                          |              |                                    | Total services        |         |         | 481,015 |        |             |        | 35,903 |        |        |       | 16,740 |         |   |         | (30,413 | )       |         |              | 503,245 | 
|                                                                                                                          |              |                                    |                       |         |         |         |        |             |        |        |        |        |       |        |         |   |         |         |         |         |             
|Total revenues                                                                                                            |              |                                    | 718,726               |         |         |         | 92,251 |             |        |        | 20,633 |        |       |        | (53,548 | ) |         |         | 778,062 |        
|Total allocated costs and expenses before cost
of restructure and amortization of customer
lists and purchased technology |              |                                    | 616,447               |         |         |         | 72,362 |             |        |        | 24,892 |        |       |        | (53,548 | ) |         |         | 660,153 |        
|                                                                                                                          |              |                                    |                       |         |         |         |        |             |        |        |        |        |       |        |         |   |         |         |         |         |             
|Operating income (loss) before cost of
restructure and amortization of customer lists
and purchased technology            |              |                                    | 102,279               |         |         |         | 19,889 |             |        |        | (4,259 | )      |       |        |        |   |         |         | 117,909 |        
|Amortization of other purchased intangibles                                                                               |              |                                    |                      |         |         |         |       |             |        |        | 2,000  |        |       |        |        |   |         |         | 2,000   |        
|Amortization of purchased technology                                                                                      |              |                                    | 11,679                |         |         |         | 333    |             |        |        | 3,245  |        |       |        |        |   |         |         | 15,257  |        
|                                                                                                                          |              |                                    |                       |         |         |         |        |             |        |        |        |        |       |        |         |   |         |         |         |         |             
|Operating income (loss) before unallocated costs
and cost of restructure                                                  |              |                                    | 90,600                |         |         |         | 19,556 |             |        |        | (9,504 | )      |       |        |        |   |         |         | 100,652 |        
|Cost
of restructure  2003 Activity                                                                                       |              |                                    | 9,199                 |         |         |         | 341    |             |        |        | 13     |        |       |        |        |   |         |         | 9,553   |        
|                                                                                                                          |              |                                    |                       |         |         |         |        |             |        |        |        |        |       |        |         |   |         |         |         |         |             
|Operating income (loss) before unallocated costs                                                                          |              |                                    | 81,401                |         |         |         | 19,215 |             |        |        | (9,517 | )      |       |        |        |   |         |         | 91,099  |        
|Unallocated cost savings                                                                                                  |              |                                    |                       |         |         |         |        |             |        |        |        |        |       |        |         |   |         |         | (13,230 | )      
|                                                                                                                          |              |                                    |                       |         |         |         |        |             |        |        |        |        |       |        |         |   |         |         |         |        
|Operating income                                                                                                          |              |                                    |                       |         |         |         |        |             |        |        |        |        |       |        |         |   |         |         | 104,329 |        
|Interest income, interest expense and other, net                                                                          |              |                                    |                       |         |         |         |        |             |        |        |        |        |       |        |         |   |         |         | 13,766  |        
|                                                                                                                          |              |                                    |                       |         |         |         |        |             |        |        |        |        |       |        |         |   |         |         |         |        
|Income before income taxes                                                                                                |              |                                    |                       |         |         |         |        |             |        |        |        |        |       |        |         |   |         | $       | 118,095 |        

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A summary of the segment financial information reported to the CEO for the year
ended December 31, 2002 is presented below:

|                                                                                                                          |              |                                    |                       |         |         |         |        |             |        |        |         |        |       |        |         |   |         |         |         |         |              |         | 
|------------------------------------------------------------------------------------------------------------------------- | ------------ | ---------------------------------- | --------------------- | ------- | ------- | ------- | ------ | ----------- | ------ | ------ | ------- | ------ | ----- | ------ | ------- | - | ------- | ------- | ------- | ------- | ------------ | ------- | 
|                                                                                                                          |              |                                    |                       |         |         |         |        |             |        |        |         |        |       |        |         |   |         |         |         |         | Consolidated
|(In thousands)                                                                                                            |              | IPG                                |                       | iAS     |         | FFI     |        | Elimination |        | Total 
|                                                                                                                          |              |                                    |                       |         |         |         |        |             |        |       
|Revenues:                                                                                                                 |              |                                    |                       |         |         |         |        |             |        |        |         |        |       |        |         |   |         |         |         |        
|                                                                                                                          | License fees |                                    |                       |         |         |         |        |             |        |        |         |        |       |        |         |   |         |         |         |         |             
|                                                                                                                          |              | Enterprise                         |                       | $       | 164,622 |         |        | $           | (14    | )      |         | $      |      |        |         |   |        |         |         | $       | 164,608      |        
|                                                                                                                          |              | E-Business                         |                       |         | 74,056  |         |        |             | 4      |        |         |        | 98    |        |         |   |        |         |         |         | 74,158       |        
|                                                                                                                          |              | Mobile and Embedded                |                       |         | 32,281  |         |        |             | 30,375 |        |         |        |      |        |         |   |        |         |         |         | 62,656       |        
|                                                                                                                          |              | E-Finance                          |                       |         | 2,680   |         |        |             |       |        |         |        | 5,134 |        |         |   |        |         |         |         | 7,814        |        
|                                                                                                                          |              | Datawarehouse                      |                       |         | 16,680  |         |        |             |       |        |         |        |      |        |         |   |        |         |         |         | 16,680       |        
|                                                                                                                          |              |                                    |                       |         |         |         |        |             |        |        |         |        |       |        |         |   |         |         |         |         |             
|                                                                                                                          |              |                                    | Subtotal license fees |         |         | 290,319 |        |             |        | 30,365 |         |        |       | 5,232  |         |   |         |        |         |         |              | 325,916 | 
|                                                                                                                          |              | Intersegment license fees revenues |                       |         | 168     |         |        |             | 26,884 |        |         |        | 2,239 |        |         |   | (29,291 | )       |         |         |             |        
|                                                                                                                          |              |                                    |                       |         |         |         |        |             |        |        |         |        |       |        |         |   |         |         |         |         |             
|                                                                                                                          |              |                                    | Total license fees    |         |         | 290,487 |        |             |        | 57,249 |         |        |       | 7,471  |         |   |         | (29,291 | )       |         |              | 325,916 | 
|                                                                                                                          | Services     |                                    |                       | 485,396 |         |         |        | 2,844       |        |        |         | 15,705 |       |        |         |  |         |         |         | 503,945 |             
|                                                                                                                          |              | Intersegment service revenues      |                       |         | 88      |         |        |             | 18,971 |        |         |        | 3,551 |        |         |   | (22,610 | )       |         |         |             |        
|                                                                                                                          |              |                                    |                       |         |         |         |        |             |        |        |         |        |       |        |         |   |         |         |         |         |             
|                                                                                                                          |              |                                    | Total services        |         |         | 485,484 |        |             |        | 21,815 |         |        |       | 19,256 |         |   |         | (22,610 | )       |         |              | 503,945 | 
|                                                                                                                          |              |                                    |                       |         |         |         |        |             |        |        |         |        |       |        |         |   |         |         |         |         |             
|Total revenues                                                                                                            |              |                                    | 775,971               |         |         |         | 79,064 |             |        |        | 26,727  |        |       |        | (51,901 | ) |         |         | 829,861 |        
|Total allocated costs and expenses before
amortization of customer lists and purchased
technology and goodwill impairment |              |                                    | 677,560               |         |         |         | 56,952 |             |        |        | 28,010  |        |       |        | (51,901 | ) |         |         | 710,621 |        
|                                                                                                                          |              |                                    |                       |         |         |         |        |             |        |        |         |        |       |        |         |   |         |         |         |         |             
|Operating income (loss) before amortization of
customer lists and purchased technology and
goodwill impairment            |              |                                    | 98,411                |         |         |         | 22,112 |             |        |        | (1,283  | )      |       |        |        |   |         |         | 119,240 |        
|Amortization of other purchased intangibles                                                                               |              |                                    |                      |         |         |         |       |             |        |        | 2,000   |        |       |        |        |   |         |         | 2,000   |        
|Amortization of purchased technology                                                                                      |              |                                    | 11,679                |         |         |         |       |             |        |        | 3,245   |        |       |        |        |   |         |         | 14,924  |        
|Goodwill impairment                                                                                                       |              |                                    |                      |         |         |         |       |             |        |        | 12,300  |        |       |        |        |   |         |         | 12,300  |        
|                                                                                                                          |              |                                    |                       |         |         |         |        |             |        |        |         |        |       |        |         |   |         |         |         |         |             
|Operating income (loss) before unallocated costs                                                                          |              |                                    | 86,732                |         |         |         | 22,112 |             |        |        | (18,828 | )      |       |        |        |   |         |         | 90,016  |        
|Unallocated cost                                                                                                          |              |                                    |                       |         |         |         |        |             |        |        |         |        |       |        |         |   |         |         | 32,840  |        
|                                                                                                                          |              |                                    |                       |         |         |         |        |             |        |        |         |        |       |        |         |   |         |         |         |        
|Operating income                                                                                                          |              |                                    |                       |         |         |         |        |             |        |        |         |        |       |        |         |   |         |         | 57,176  |        
|Interest income, interest expense and other, net                                                                          |              |                                    |                       |         |         |         |        |             |        |        |         |        |       |        |         |   |         |         | 14,033  |        
|                                                                                                                          |              |                                    |                       |         |         |         |        |             |        |        |         |        |       |        |         |   |         |         |         |        
|Income before income taxes and cumulative
effect of an accounting change                                                  |              |                                    |                       |         |         |         |        |             |        |        |         |        |       |        |         |   |         | $       | 71,209  |        

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A summary of the segment financial information reported to the CEO for the year
ended December 31, 2001 is presented below (in thousands):

|                                                                                                                                                                                               |              |                                    |                       |         |        |         |        |             |        |        |         |        |       |        |         |   |         |         |         |         |              |         | 
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------ | ---------------------------------- | --------------------- | ------- | ------ | ------- | ------ | ----------- | ------ | ------ | ------- | ------ | ----- | ------ | ------- | - | ------- | ------- | ------- | ------- | ------------ | ------- | 
|                                                                                                                                                                                               |              |                                    |                       |         |        |         |        |             |        |        |         |        |       |        |         |   |         |         |         |         | Consolidated
|(In thousands)                                                                                                                                                                                 |              | IPG                                |                       | iAS     |        | FFI     |        | Elimination |        | Total 
|                                                                                                                                                                                               |              |                                    |                       |         |        |         |        |             |        |       
|Revenues:                                                                                                                                                                                      |              |                                    |                       |         |        |         |        |             |        |        |         |        |       |        |         |   |         |         |         |        
|                                                                                                                                                                                               | License fees |                                    | $                     | 222,660 |        |         | $      | 441         |        |        | $       |       |       |        |         |  |         |         | $       | 223,101 |             
|                                                                                                                                                                                               |              | Enterprise                         |                       |         |        |         |        |             |        |        |         |        |       |        |         |   |         |         |         |         |              |        
|                                                                                                                                                                                               |              | E-Business                         |                       |         | 54,093 |         |        |             | 2      |        |         |        |      |        |         |   |        |         |         |         | 54,095       |        
|                                                                                                                                                                                               |              | Mobile and Embedded                |                       |         | 39,285 |         |        |             | 41,072 |        |         |        |      |        |         |   |        |         |         |         | 80,357       |        
|                                                                                                                                                                                               |              | E-Finance                          |                       |         | 5,397  |         |        |             |       |        |         |        | 6,241 |        |         |   |        |         |         |         | 11,638       |        
|                                                                                                                                                                                               |              | Datawarehouse                      |                       |         | 19,847 |         |        |             |       |        |         |        |      |        |         |   |        |         |         |         | 19,847       |        
|                                                                                                                                                                                               |              |                                    |                       |         |        |         |        |             |        |        |         |        |       |        |         |   |         |         |         |         |             
|                                                                                                                                                                                               |              |                                    | Subtotal license fees |         |        | 341,282 |        |             |        | 41,515 |         |        |       | 6,241  |         |   |         |        |         |         |              | 389,038 | 
|                                                                                                                                                                                               |              | Intersegment license fees revenues |                       |         | 86     |         |        |             | 32,807 |        |         |        | 4,396 |        |         |   | (37,289 | )       |         |         |             |        
|                                                                                                                                                                                               |              |                                    |                       |         |        |         |        |             |        |        |         |        |       |        |         |   |         |         |         |         |             
|                                                                                                                                                                                               |              |                                    | Total license fees    |         |        | 341,368 |        |             |        | 74,322 |         |        |       | 10,637 |         |   |         | (37,289 | )       |         |              | 389,038 | 
|                                                                                                                                                                                               | Services     |                                    |                       | 521,362 |        |         |        | 2,154       |        |        |         | 15,369 |       |        |         |  |         |         |         | 538,885 |             
|                                                                                                                                                                                               |              | Intersegment service revenues      |                       |         | 40     |         |        |             | 12,946 |        |         |        | 2,099 |        |         |   | (15,085 | )       |         |         |             |        
|                                                                                                                                                                                               |              |                                    |                       |         |        |         |        |             |        |        |         |        |       |        |         |   |         |         |         |         |             
|                                                                                                                                                                                               |              |                                    | Total services        |         |        | 521,402 |        |             |        | 15,100 |         |        |       | 17,468 |         |   |         | (15,085 | )       |         |              | 538,885 | 
|                                                                                                                                                                                               |              |                                    |                       |         |        |         |        |             |        |        |         |        |       |        |         |   |         |         |         |         |             
|Total revenues                                                                                                                                                                                 |              |                                    | 862,770               |         |        |         | 89,422 |             |        |        | 28,105  |        |       |        | (52,374 | ) |         |         | 927,923 |        
|Total allocated costs and expenses before
amortization of goodwill and other purchased
intangibles, amortization of purchased
technology, and write-off of in-process research
and development |              |                                    | 763,464               |         |        |         | 61,891 |             |        |        | 49,574  |        |       |        | (52,374 | ) |         |         | 822,555 |        
|                                                                                                                                                                                               |              |                                    |                       |         |        |         |        |             |        |        |         |        |       |        |         |   |         |         |         |         |             
|Operating income (loss) before amortization of
goodwill and other purchased intangibles,
amortization of purchased technology, and
write-off of in-process research and development            |              |                                    | 99,306                |         |        |         | 27,531 |             |        |        | (21,469 | )      |       |        |        |   |         |         | 105,368 |        
|Amortization of goodwill and other purchased
intangibles                                                                                                                                       |              |                                    | 36,831                |         |        |         | 41     |             |        |        | 18,987  |        |       |        |        |   |         |         | 55,859  |        
|Amortization of purchased technology                                                                                                                                                           |              |                                    | 9,103                 |         |        |         |       |             |        |        | 3,000   |        |       |        |        |   |         |         | 12,103  |        
|Write-off of in-process research and development                                                                                                                                               |              |                                    | 18,500                |         |        |         |       |             |        |        |        |        |       |        |        |   |         |         | 18,500  |        
|                                                                                                                                                                                               |              |                                    |                       |         |        |         |        |             |        |        |         |        |       |        |         |   |         |         |         |         |             
|Operating income (loss) before unallocated costs                                                                                                                                               |              |                                    | 34,872                |         |        |         | 27,490 |             |        |        | (43,456 | )      |       |        |        |   |         |         | 18,906  |        
|Unallocated cost                                                                                                                                                                               |              |                                    |                       |         |        |         |        |             |        |        |         |        |       |        |         |   |         |         | 35,427  |        
|                                                                                                                                                                                               |              |                                    |                       |         |        |         |        |             |        |        |         |        |       |        |         |   |         |         |         |        
|Operating loss                                                                                                                                                                                 |              |                                    |                       |         |        |         |        |             |        |        |         |        |       |        |         |   |         |         | (16,521 | )      
|Interest income, interest expense and other, net                                                                                                                                               |              |                                    |                       |         |        |         |        |             |        |        |         |        |       |        |         |   |         |         | 17,529  |        
|Minority interest                                                                                                                                                                              |              |                                    |                       |         |        |         |        |             |        |        |         |        |       |        |         |   |         |         | (30     | )      
|                                                                                                                                                                                               |              |                                    |                       |         |        |         |        |             |        |        |         |        |       |        |         |   |         |         |         |        
|Income before income taxes                                                                                                                                                                     |              |                                    |                       |         |        |         |        |             |        |        |         |        |       |        |         |   |         | $       | 978     |        



|(1) |  | Certain previously reported amounts have been reclassified to conform to
current period presentation format.
|--- |  | ------------------------------------------------------------------------------------------------------------

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The Company operates in one industry segment (the development and marketing of
computer software and related services) and markets its products and services
internationally through both foreign subsidiaries and distributors located in
the United States, Canada, Europe, Asia, Australia, New Zealand, and Latin
America. Other includes operations in Asia, Australia, Canada, New Zealand and
Latin America. The following table presents a summary of operating information
and certain year-end balance sheet information by geographic region (in
thousands):

|                        |                         |               |       |         |         |         |      |         |         |         |   |         |         |         | 
|----------------------- | ----------------------- | ------------- | ----- | ------- | ------- | ------- | ---- | ------- | ------- | ------- | - | ------- | ------- | ------- | 
|                        |                         |               |       |         | 2003    |         | 2002 |         | 2001   
|                        |                         |               |       |         |         |         |      |         |        
|Revenues:               |                         |               |       |         |         |         |      |         |         |         |   |        
|                        | Unaffiliated customers: |               |       |         |         |         |      |         |         |         |   |         |        
|                        |                         | United States |       | $       | 425,834 |         |      | $       | 465,601 |         |   | $       | 504,632 |        
|                        |                         | Europe        |       |         | 212,774 |         |      |         | 213,543 |         |   |         | 251,570 |        
|                        |                         | Other         |       |         | 139,454 |         |      |         | 150,717 |         |   |         | 171,721 |        
|                        |                         |               |       |         |         |         |      |         |         |         |   |         |         |        
|                        |                         |               | Total |         | $       | 778,062 |      |         | $       | 829,861 |   |         | $       | 927,923 | 
|                        |                         |               |       |         |         |         |      |         |         |         |   |         |         |        
|Long-lived assets, net: |                         |               |       |         |         |         |      |         |         |         |   |        
|                        | United States           |               | $     | 483,014 |         |         | $    | 461,300 |         |         | $ | 590,040 |        
|                        | Europe                  |               |       | 12,483  |         |         |      | 14,633  |         |         |   | 16,356  |        
|                        | Other                   |               |       | 11,377  |         |         |      | 12,197  |         |         |   | 12,467  |        
|                        |                         |               |       |         |         |         |      |         |         |         |   |         |         |        
|                        |                         | Total         |       | $       | 506,874 |         |      | $       | 488,130 |         |   | $       | 618,863 |        
|                        |                         |               |       |         |         |         |      |         |         |         |   |         |         |        

Note Eleven: Business Combinations

On December 20, 2002, Sybase agreed to acquire all the outstanding capital
stock of AvantGo, Inc. (AvantGo) a publicly traded provider of mobile
enterprise software, for approximately $40.5 million in cash including $1.4
million in merger-related transaction expenses. On February 25, 2003, the
AvantGo shareholders approved the transaction. As a result of the acquisition,
Sybase expects to strengthen its position in the mobile middleware market and
provide a more complete m-Business platform to its customers. The results of
AvantGo are included in the Companys iAS reporting segment from February 25,
2003 onward. The excess of the purchase price over the fair value of the net
assets acquired was approximately $13.8 million.

Based on an independent valuation prepared using estimates and assumptions
provided by the Company, the total purchase price of approximately $40.5
million was allocated as follows:

|                                      |  |               |       |  
|------------------------------------- |  | ------------- | ----- | -
|                                      |  | (In millions)
|                                      |  |              
|Cash and cash equivalents             |  | $             | 26.5  |  
|Accounts receivable, net              |  |               | 1.9   |  
|Current deferred tax asset            |  |               | 4.6   |  
|Other current assets                  |  |               | 0.1   |  
|Restricted long-term cash investments |  |               | 3.4   |  
|Property, equipment and improvements  |  |               | 3.9   |  
|Deferred tax asset                    |  |               | 2.8   |  
|Developed technology                  |  |               | 2.4   |  
|Trade name                            |  |               | 3.1   |  
|Goodwill                              |  |               | 8.3   |  
|Other assets                          |  |               | 0.6   |  
|Accounts payable                      |  |               | (0.7  | )
|Other current liabilities             |  |               | (1.0  | )
|Deferred revenue                      |  |               | (0.8  | )
|Accrued restructuring                 |  |               | (14.1 | )
|Other long-term liabilities           |  |               | (0.5  | )
|                                      |  |               |       |  
|                                      |  | $             | 40.5  |  

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In connection with the acquisition of AvantGo, the Company assumed certain
liabilities associated with AvantGos 2001 and 2002 restructuring programs.
These accrued restructure liabilities primarily related to excess space at
AvantGos Hayward, California and Chicago, Illinois facilities. The following
table summarizes the restructuring liabilities acquired and post-acquisition
activity related to AvantGos restructuring actions:

|                                    |  |             |     |         |  |          |     |             |  |         |     | 
|----------------------------------- |  | ----------- | --- | ------- |  | -------- | --- | ----------- |  | ------- | --- | 
|                                    |  |             |     |         |  |          |     |             |  | Accrued
|                                    |  | Accrued     |     |         |  |          |     | liabilities
|                                    |  | Liabilities |     | Amounts |  | at      
|(Dollars in millions)               |  | Assumed     |     | Paid    |  | 12/31/03
|                                    |  |             |     |         |  |         
|Lease cancellations and commitments |  |             | 4.3 |         |  |          | 1.0 |             |  |         | 3.3 | 
|                                    |  |             |     |         |  |          |     |             |  |         |     | 
|                                    |  | $           | 4.3 |         |  | $        | 1.0 |             |  | $       | 3.3 | 
|                                    |  |             |     |         |  |          |     |             |  |         |     | 

The following unaudited pro forma financial information presents the combined
results of operations of Sybase and AvantGo as if the acquisition of AvantGo
had occurred as of the beginning of 2003 and 2002, respectively. The pro forma
financial information gives effect to certain adjustments, including the
amortization of developed technology and the elimination of AvantGos
amortization of stock-based compensation. The pro forma financial information
does not necessarily reflect the results of operations that would have occurred
had the two companies constituted a single entity during such periods.

|                                                                  |  |          |         |          |  |   |          |  
|----------------------------------------------------------------- |  | -------- | ------- | -------- |  | - | -------- | -
|                                                                  |  | Twelve   |         | Twelve  
|                                                                  |  | Months   |         | Months  
|                                                                  |  | Ended    |         | Ended   
|(In thousands, except per share data)                             |  | 12/31/03 |         | 12/31/02
|                                                                  |  |          |         |         
|Revenue                                                           |  | $        | 780,078 |          |  | $ | 849,735  |  
|Income before the cumulative effect of an accounting change       |  |          | 73,461  |          |  |   | 19,045   |  
|Net income (loss)                                                 |  | $        | 73,461  |          |  | $ | (113,405 | )
|Income per share before cumulative effect of an accounting
change |  | $        | 0.77    |          |  | $ | 0.20     |  
|Cumulative effect of an accounting change                         |  |          |        |          |  |   | (1.37    | )
|                                                                  |  |          |         |          |  |   |          |  
|Basic net income (loss) per share                                 |  | $        | 0.77    |          |  | $ | (1.17    | )
|                                                                  |  |          |         |          |  |   |          |  
|Income per share before cumulative effect of an accounting
change |  | $        | 0.75    |          |  | $ | 0.19     |  
|Cumulative effect of an accounting change                         |  |          |        |          |  |   | (1.33    | )
|                                                                  |  |          |         |          |  |   |          |  
|Diluted net income (loss) per share                               |  | $        | 0.75    |          |  | $ | (1.14    | )
|                                                                  |  |          |         |          |  |   |          |  

On February 20, 2001, the Company agreed to acquire New Era of Networks, Inc.
(NEN), a publicly-traded e-Business application integration company, in a
stock-for-stock transaction valued at $339.3 million, and accounted for as a
purchase.

The following unaudited pro forma financial information presents the combined
results of operations of Sybase as if the acquisition of NEN had occurred as of
the beginning of 2001. The pro forma financial information gives effect to
certain adjustments, including amortization of goodwill and other intangible
assets, but excluding the non-recurring charge for the write-off of $18.5
million in in-process research and

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development acquired in the NEN acquisition. The pro forma financial
information does not necessarily reflect the results of operations that would
have occurred had these companies constituted a single entity during such
periods.

|                                      |  |          |          |     
|------------------------------------- |  | -------- | -------- | ----
|                                      |  | Twelve  
|                                      |  | Months  
|                                      |  | Ended   
|(In thousands, except per share data) |  | 12/31/01
|                                      |  |         
|Revenue                               |  | $        | 972,348  |     
|Net loss                              |  |          | (113,029 | )   
|Basic loss per share                  |  |          | ( 1.14   | )   
|Diluted net loss per share (a)        |  |          | (1.14    | )(a)

(a)  The effect of outstanding stock options is excluded from the calculation of
diluted net loss per share, as their inclusion would be anti-dilutive.

On February 1, 2001, the Company acquired Sybase A/S, a privately held
distributor of Sybase products in Denmark, for approximately $3.5 million in
cash. The acquisition was accounted for using the purchase method of
accounting, and a significant portion of the purchase price was allocated to
intangible assets. The results of operations of the Denmark entity have not
been material in relation to those of our company as a whole and are included
in the consolidated results of operations for periods subsequent to the
acquisition date.

Note Twelve: Litigation

Sybase is a party to various legal disputes and proceedings arising in the
ordinary course of business. In the opinion of management, resolution of those
matters is not expected to have a material adverse effect on our consolidated
financial position or results of operations. However, depending on the amount
and timing of such resolution, an unfavorable resolution of some or all of
these matters could materially affect our future results of operations or cash
flows in a particular period. The Company believes it has adequately accrued
for these matters at December 31, 2003.

Note Thirteen: Restructuring Costs

2003 Restructuring Activities

During the first quarter of 2003, Sybases license fees revenues were well
below the Companys expectations. Given this lower than expected revenue the
Company reduced its projections regarding revenues for the remainder of the
year and began to identify means of reducing its cost structure to produce
earnings in line with its revised plan amounts. After this review, and in order
to reduce its fixed quarterly cost structure, the Company embarked on a
Restructuring Plan (2003 Plan) aimed at reducing its annual payroll and
facilities related expenses by approximately $16.0 million. These activities
included the planned termination of approximately 240 employees worldwide and
the planned closure or consolidation of approximately 9 facilities worldwide.
It is anticipated that the total costs, once the restructuring activities
prescribed under the 2003 Plan are fully completed, will be $10.8 million. In
general, these expenses will be incurred over a 12-month period although
certain expenses may extend beyond this twelve-month time frame depending upon
when the costs associated with the sublease of certain facilities are incurred.
In accordance with SFAS No. 146, the Company has recorded approximately $9.6
million to restructuring charges during 2003 as follows:

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|                                    |  |          |  |     |     |         |     |       |     |   |     |              |     |   |     | 
|----------------------------------- |  | -------- |  | --- | --- | ------- | --- | ----- | --- | - | --- | ------------ | --- | - | --- | 
|                                    |  |          |  |     |     | Segment |     |       |     |  
|                                    |  |          |  |     |     |         |     |       |     |  
|                                    |  | Cash/    |  |     |     |         |     |       |     |   |     | Consolidated
|(Dollars in millions)               |  | Non-Cash |  | IPG |     | iAS     |     | Total
|                                    |  |          |  |     |     |         |     |      
|Employee termination costs          |  | Cash     |  | $   | 7.2 |         |     | $     | 0.3 |   |     | $            | 7.5 |  
|                                    |  | Cash/    |  |     |     |         |     |       |     |   |     |              |     |  
|Lease cancellations and commitments |  | Non-cash |  |     | 2.1 |         |     |       |    |   |     |              | 2.1 |  
|                                    |  |          |  |     |     |         |     |       |     |   |     |              |     |   |     | 
|                                    |  |          |  |     |     | $       | 9.3 |       |     | $ | 0.3 |              |     | $ | 9.6 | 
|                                    |  |          |  |     |     |         |     |       |     |   |     |              |     |   |     | 

Termination payments to employees and other related costs

During 2003, the Company recorded restructuring charges of $7.5 million for
severance payments, termination benefits and related expenses incurred in
connection with the termination of approximately 240 Sybase employees. The
employees terminated crossed largely all employee levels, business functions,
operating units and geographic regions.

Severance payments and termination benefits were accrued and charged to
restructuring costs in the period that the amounts were determined and
communicated to the affected employees, provided the employee was not to render
services to the Company beyond a minimum retention period. In such a case, the
severance amounts were expensed over the retention period.

As part of the 2003 Plan, the Company expects to incur restructuring charges in
addition to the amounts disclosed above of approximately $0.7 million for
severance payments, termination benefits and related expenses associated with:
(i) certain legal contingencies in connection with certain individuals outside
the US who have not yet agreed to their severance package and as such will be
subject to legal proceedings; and (ii) certain benefits potentially due to
certain individuals terminated that have not been incurred. The balance of the
restructuring charge will be included in future results of operations in the
quarter such expenses are actually incurred.

Lease cancellations and commitments

As part of the termination of employees referred to above, and in connection
with further streamlining the Companys infrastructure to align its expenses
with decreased growth projections, the Company identified a variety of Sybase
facilities for closure or consolidation.

During 2003, Sybase recorded restructuring charges of $2.1 million for
facilities vacated by the Company, including properties located in
Pennsylvania, Denmark, France, Germany, Netherlands, Sweden, Norway, and
Thailand.

The offices included above were primarily used for the sale of Sybase software
products, and the provision of professional services and customer support.
These restructuring charges reflect the fair value of remaining contractual
obligations under the facility leases and certain costs associated with the
expected sublease of the facilities, net of anticipated sublease income from
the date of vacancy to the end of the lease term. The amounts recorded were
based upon the analysis of an independent real estate consultant.

As part of the 2003 Plan, the Company expects to incur additional lease
cancellations and other related expenses of approximately $0.5 million in
future periods. These additional restructuring related expenses will be
included in future results of operations in the quarter in which such expenses
are actually incurred.

The following table summarizes the activity related to the 2003 Plan.

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|                                                          |  |         |     |             |  |          |     |             |  |         |     | 
|--------------------------------------------------------- |  | ------- | --- | ----------- |  | -------- | --- | ----------- |  | ------- | --- | 
|                                                          |  |         |     |             |  |          |     |             |  | Accrued
|                                                          |  |         |     |             |  | Amounts  |     | liabilities
|                                                          |  | Total   |     | Paid or     |  | at      
|(Dollars in millions)                                     |  | Charges |     | written off |  | 12/31/03
|                                                          |  |         |     |             |  |         
|Termination payments to employees
and other related costs |  | $       | 7.5 |             |  | $        | 6.9 |             |  | $       | 0.6 | 
|Lease cancellations and commitments                       |  |         | 2.1 |             |  |          | 1.4 |             |  |         | 0.7 | 
|                                                          |  |         |     |             |  |          |     |             |  |         |     | 
|                                                          |  | $       | 9.6 |             |  | $        | 8.3 |             |  | $       | 1.3 | 
|                                                          |  |         |     |             |  |          |     |             |  |         |     | 

The remaining restructuring accrual primarily relates to certain lease costs
the Company is contractually required to pay on certain closed facilities, net
of estimated associated sublease amounts, and certain remaining termination
benefits payable to employees terminated as part of the 2003 Plan.
Substantially all remaining severance payments are expected to be made during
2004. Sybases payments toward the accruals relating to lease cancellations
and commitments are dependent upon market conditions and the Companys ability
to negotiate acceptable lease buy-outs or to locate suitable subtenants. These
payments will be made over the remaining lease terms, ending at various dates
through January 2008, or over a shorter period as the Company may negotiate
with its lessors.

2002 Restructuring Activities

The Company embarked on certain restructuring actions during the third and
fourth quarters of 2002 (2002 Plan) aimed at reducing its annual payroll and
facilities-related expenses by approximately $24.0 million. The Company
recorded restructuring charges of $36.5 million to reflect these activities.
These activities included the termination of approximately 400 employees
worldwide, the closure or consolidation of approximately 18 facilities
worldwide, and the liquidation of approximately 9 foreign subsidiaries.

The following table summarized the activity associated with the balance of the
accrued restructuring charges related to the 2002 Plan through December 31,
2003:

|                                                          |  |             |      |         |  |          |      |          |  |   |     |             |  |   |      | 
|--------------------------------------------------------- |  | ----------- | ---- | ------- |  | -------- | ---- | -------- |  | - | --- | ----------- |  | - | ---- | 
|                                                          |  | Accrued     |      |         |  |          |      |          |  |   |     | Accrued    
|                                                          |  | liabilities |      |         |  |          |      |          |  |   |     | liabilities
|                                                          |  | at          |      | Amounts |  | Amounts  |      | at      
|(Dollars in millions)                                     |  | 12/31/02    |      | paid    |  | reversed |      | 12/31/03
|                                                          |  |             |      |         |  |          |      |         
|Termination payments to employees
and other related costs |  | $           | 2.7  |         |  | $        | 2.4  |          |  | $ | 0.3 |             |  | $ | 0.0  | 
|Lease cancellations and commitments                       |  |             | 23.3 |         |  |          | 8.2  |          |  |   | 0.8 |             |  |   | 14.3 | 
|Other                                                     |  |             | 0.2  |         |  |          |      |          |  |   |    |             |  |   | 0.2  | 
|                                                          |  |             |      |         |  |          |      |          |  |   |     |             |  |   |      | 
|                                                          |  | $           | 26.2 |         |  | $        | 10.6 |          |  | $ | 1.1 |             |  | $ | 14.5 | 
|                                                          |  |             |      |         |  |          |      |          |  |   |     |             |  |   |      | 

The remaining restructuring accrual primarily relates to certain lease costs
the Company is contractually required to pay on certain closed facilities, net
of estimated associated sublease amounts. Sybases payments toward the accruals
relating to lease cancellations and commitments are dependent upon market
conditions and the Companys ability to negotiate acceptable lease buy-outs or
to locate suitable

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subtenants. These payments will be made over the remaining lease terms, ending
at various dates through May 2010, or over a shorter period as the Company may
negotiate with its lessors.

During 2003 an excess of $1.1million was reversed by a corresponding credit to
restructuring expense. The reversal to the severance accrual primarily related
to excess amounts associated with foreign employees who were paid amounts less
than originally provided, after the applicable administrative hearings required
under local law. The reversal to the lease cancellations and commitments
accrual primarily related to the conclusion of lease negotiations associated
with properties located in California and Texas.

2001 Restructuring Activities

In connection with the Companys acquisition of NEN and after announcement that
first quarter and 2001 revenues would be below expectations, it began to
implement a restructuring plan designed to eliminate certain personnel, assets
and facilities, and align its cost structure with anticipated revenues (2001
Plan). The Company recorded a restructuring charge of $48.8 million during
2001 to reflect these activities. The 2001 Plan called for the termination of
approximately 880 employees worldwide, as well as the consolidation or closure
of approximately 30 facilities worldwide and the write-off of certain assets
abandoned as a result of the office closures. Additionally, based on
deterioration of real estate market conditions, the Companys inability to
sublease certain properties previously included in the 2001 Plan resulted in
additional restructuring accruals of $5.4 million in 2002 that were established
for properties located in Colorado, Michigan and the United Kingdom and $0.8
million in 2003 for properties located in California and Virginia. Due to the
length of some of the lease terms and the uncertainty of the real estate
market, we expect to make periodic adjustments to the accrual balance to
reflect changes in our estimates, and to reflect actual events as they occur.

The following table summarized the activity associated with the balance of the
accrued restructuring charges associated with the 2001 Plan through December
31, 2003:

|                                                          |  |             |      |         |  |         |     |          |  |          |     |  |  |   |     |             |  |   |      | 
|--------------------------------------------------------- |  | ----------- | ---- | ------- |  | ------- | --- | -------- |  | -------- | --- |  |  | - | --- | ----------- |  | - | ---- | 
|                                                          |  | Accrued     |      |         |  |         |     |          |  |          |     |  |  |   |     | Accrued    
|                                                          |  | liabilities |      |         |  |         |     |          |  |          |     |  |  |   |     | liabilities
|                                                          |  | at          |      | Amounts |  | Amounts |     | Amounts  |  | at      
|(Dollars in millions)                                     |  | 12/31/02    |      | paid    |  | accrued |     | reversed |  | 12/31/03
|                                                          |  |             |      |         |  |         |     |          |  |         
|Termination payments to employees
and other related costs |  | $           | 0.8  |         |  | $       | 0.4 |          |  |          |     |  |  | $ | 0.4 |             |  | $ | 0.0  | 
|Lease cancellations and
commitments                       |  |             | 19.5 |         |  |         | 6.0 |          |  | $        | 0.8 |  |  |   | 1.5 |             |  |   | 12.8 | 
|                                                          |  |             |      |         |  |         |     |          |  |          |     |  |  |   |     |             |  |   |      | 
|                                                          |  | $           | 20.3 |         |  | $       | 6.4 |          |  | $        | 0.8 |  |  | $ | 1.9 |             |  | $ | 12.8 | 
|                                                          |  |             |      |         |  |         |     |          |  |          |     |  |  |   |     |             |  |   |      | 

The remaining restructuring accrual primarily relates to certain lease payments
the Company is contractually required to make on certain closed facilities, net
of estimated associated sublease amounts. The payments of these accruals are
dependent upon market conditions and the Companys ability to negotiate
acceptable lease buy-outs or locate suitable subtenants. These payments will
be paid over the remaining lease terms, ending at various dates through May
2011, or over a shorter period as the Company may negotiate with its lessors.

During 2003 an excess of $1.9 million was reversed by a corresponding credit to
restructuring expense. The credit to lease cancellations and commitments
accrual primarily related to excess reserves remaining at the conclusion of
leases associated with properties located in California, Colorado, Florida,
Utah, Canada and the U.K. The Company also recorded a reversal of $0.4 million
from the severance accrual primarily related to certain foreign employees who
were paid amounts less than originally provided, after the applicable
administrative hearings required under local law.

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Note Fourteen: Guarantees

In November 2002, the FASB issued FIN 45, Guarantors Accounting and Disclosure
Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of
Others. FIN 45 requires that the Company recognize the fair value for guarantee
and indemnification arrangements issued or modified by the Company after
December 31, 2002, if these arrangements are within the scope of the
Interpretation. In addition, the Company must continue to monitor the
conditions that are subject to the guarantees and indemnifications, as required
under previously existing generally accepted accounting principles, in order to
identify if a loss has occurred. If the Company determines it is probable that
a loss has occurred then any such estimable loss would be recognized under
those guarantees and indemnifications. Under its standard software license
agreement (SWLA), the Company agrees to indemnify, defend and hold harmless its
licensees from and against certain losses, damages and costs arising from
claims alleging the licensees use of Company software infringes the
intellectual property rights of a third party. Historically, the Company has
not been required to pay material amounts in connection with claims asserted
under these provisions and, accordingly, the Company has not recorded a
liability relating to such provisions. Under the SWLA, the Company also
represents and warrants to licensees that its software products operate
substantially in accordance with published specifications. Under its standard
consulting and development agreement, the Company warrants that the services it
performs will be undertaken by qualified personnel in a professional manner
conforming to generally accepted industry standards and practices.
Historically, only minimal costs have been incurred relating to the
satisfaction of product warranty claims and, as such, no accruals for warranty
claims have been made. Other guarantees include promises to indemnify, defend
and hold harmless each of the Companys executive officers, non-employee
directors and certain key employees from and against losses, damages and costs
incurred by each such individual in administrative, legal or investigative
proceedings arising from alleged wrongdoing by the individual while acting in
good faith within the scope of his or her job duties on behalf of the Company.
Historically minimal costs have been incurred relating to such indemnifications
and, as such, no accruals for these guarantees have been made. The Company
implemented the provisions of FIN 45 as of January 1, 2003. The implementation
of FIN 45 did not have a material impact on Sybases financial position,
results of operations or cash flows.

Note Fifteen: Subsequent Events

On February 5, 2004, the Companys Board of Directors authorized the addition
of $200 million to the Companys stock repurchase program. This program
authorized Sybase to repurchase its outstanding Common Stock in open market and
other transactions from time to time, subject to price and other conditions.
As of December 31, 2003, approximately $19 million remained of the $400 million
previously authorized by the Board of Directors under this program.

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Quarterly Financial Information (Unaudited)

|                                        |                                             |          |         |         |   |              |         |             |  |       |         |         |  |   |         |         |   |   |         |         | 
|--------------------------------------- | ------------------------------------------- | -------- | ------- | ------- | - | ------------ | ------- | ----------- |  | ----- | ------- | ------- |  | - | ------- | ------- | - | - | ------- | ------- | 
|Three months ended (in thousands,       |                                             | March 31 |         | June 30 |   | September 30 |         | December 31 |  | Total
|except per share and stock price data)  |                                             | 2003     |         | 2003    |   | 2003         |         | 2003        |  | 2003 
|                                        |                                             |          |         |         |   |              |         |             |  |      
|Revenues:                               |                                             |          |         |         |   |              |         |             |  |       |         |         |  |   |         |         |   |   |         |        
|                                        | License fees                                |          | $       | 60,875  |   |              | $       | 63,897      |  |       | $       | 68,481  |  |   | $       | 81,564  |   |   | $       | 274,817 | 
|                                        | Services                                    |          |         | 120,672 |   |              |         | 128,135     |  |       |         | 125,349 |  |   |         | 129,089 |   |   |         | 503,245 | 
|                                        |                                             |          |         |         |   |              |         |             |  |       |         |         |  |   |         |         |   |   |         |        
|Total revenues:                         |                                             |          | 181,547 |         |   |              | 192,032 |             |  |       | 193,830 |         |  |   | 210,653 |         |   |   | 778,062 |        
|Costs and expenses:                     |                                             |          |         |         |   |              |         |             |  |       |         |         |  |   |         |         |   |   |         |        
|                                        | Cost of license fees                        |          |         | 13,928  |   |              |         | 14,589      |  |       |         | 15,537  |  |   |         | 16,657  |   |   |         | 60,711  | 
|                                        | Cost of services                            |          |         | 39,232  |   |              |         | 40,643      |  |       |         | 40,652  |  |   |         | 42,139  |   |   |         | 162,666 | 
|                                        | Sales and marketing                         |          |         | 58,496  |   |              |         | 59,666      |  |       |         | 59,270  |  |   |         | 61,613  |   |   |         | 239,045 | 
|                                        | Product development and engineering         |          |         | 29,918  |   |              |         | 29,348      |  |       |         | 29,045  |  |   |         | 28,578  |   |   |         | 116,889 | 
|                                        | General and administrative                  |          |         | 22,100  |   |              |         | 20,471      |  |       |         | 20,280  |  |   |         | 19,260  |   |   |         | 82,111  | 
|                                        | Amortization of other purchased
Intangibles |          |         | 500     |   |              |         | 500         |  |       |         | 500     |  |   |         | 500     |   |   |         | 2,000   | 
|                                        | Stock compensation expense                  |          |         | 661     |   |              |         | 727         |  |       |         | 695     |  |   |         | 799     |   |   |         | 2,882   | 
|                                        | Cost (reversal) of restructure              |          |         | (209    | ) |              |         | 7,957       |  |       |         | 1,270   |  |   |         | (1,589  | ) |   |         | 7,429   | 
|                                        |                                             |          |         |         |   |              |         |             |  |       |         |         |  |   |         |         |   |   |         |         | 
|Total costs and expenses                |                                             |          | 164,626 |         |   |              | 173,901 |             |  |       | 167,249 |         |  |   | 167,957 |         |   |   | 673,733 |        
|                                        |                                             |          |         |         |   |              |         |             |  |       |         |         |  |   |         |         |   |   |         |         | 
|Operating income                        |                                             |          | 16,921  |         |   |              | 18,131  |             |  |       | 26,581  |         |  |   | 42,696  |         |   |   | 104,329 |        
|Interest
income, expense and other, net |                                             |          | 2,443   |         |   |              | 3,524   |             |  |       | 6,270   |         |  |   | 1,529   |         |   |   | 13,766  |        
|                                        |                                             |          |         |         |   |              |         |             |  |       |         |         |  |   |         |         |   |   |         |        
|Income before income taxes              |                                             |          | 19,364  |         |   |              | 21,655  |             |  |       | 32,851  |         |  |   | 44,225  |         |   |   | 118,095 |        
|Provision for income taxes              |                                             |          | 6,390   |         |   |              | 7,096   |             |  |       | 10,841  |         |  |   | 6,502   |         |   |   | 30,829  |        
|                                        |                                             |          |         |         |   |              |         |             |  |       |         |         |  |   |         |         |   |   |         |        
|Net income                              |                                             | $        | 12,974  |         |   | $            | 14,559  |             |  | $     | 22,010  |         |  | $ | 37,723  |         |   | $ | 87,266  |        
|                                        |                                             |          |         |         |   |              |         |             |  |       |         |         |  |   |         |         |   |   |         |         | 
|Basic net income per share              |                                             | $        | 0.14    |         |   | $            | 0.16    |             |  | $     | 0.23    |         |  | $ | 0.39    |         |   | $ | 0.92    |        
|Diluted net income per share            |                                             | $        | 0.13    |         |   | $            | 0.15    |             |  | $     | 0.23    |         |  | $ | 0.38    |         |   | $ | 0.89    |        

|                                                                                |                                             |          |          |         |   |              |         |             |   |       |         |         |  |   |         |         |  |   |          |         | 
|------------------------------------------------------------------------------- | ------------------------------------------- | -------- | -------- | ------- | - | ------------ | ------- | ----------- | - | ----- | ------- | ------- |  | - | ------- | ------- |  | - | -------- | ------- | 
|Three months ended (in thousands,                                               |                                             | March 31 |          | June 30 |   | September 30 |         | December 31 |   | Total
|except per share and stock price data)                                          |                                             | 2002     |          | 2002    |   | 2002         |         | 2002        |   | 2002 
|                                                                                |                                             |          |          |         |   |              |         |             |   |      
|Revenues:                                                                       |                                             |          |          |         |   |              |         |             |   |       |         |         |  |   |         |         |  |   |          |        
|                                                                                | License fees                                |          | $        | 83,848  |   |              | $       | 77,449      |   |       | $       | 78,754  |  |   | $       | 85,865  |  |   | $        | 325,916 | 
|                                                                                | Services                                    |          |          | 127,188 |   |              |         | 127,814     |   |       |         | 124,255 |  |   |         | 124,688 |  |   |          | 503,945 | 
|                                                                                |                                             |          |          |         |   |              |         |             |   |       |         |         |  |   |         |         |  |   |          |        
|Total revenues:                                                                 |                                             |          | 211,036  |         |   |              | 205,263 |             |   |       | 203,009 |         |  |   | 210,553 |         |  |   | 829,861  |        
|Costs and expenses:                                                             |                                             |          |          |         |   |              |         |             |   |       |         |         |  |   |         |         |  |   |          |        
|                                                                                | Cost of license fees                        |          |          | 11,464  |   |              |         | 13,225      |   |       |         | 12,766  |  |   |         | 13,993  |  |   |          | 51,448  | 
|                                                                                | Cost of services                            |          |          | 52,085  |   |              |         | 48,344      |   |       |         | 46,524  |  |   |         | 43,114  |  |   |          | 190,067 | 
|                                                                                | Sales and marketing                         |          |          | 70,888  |   |              |         | 66,962      |   |       |         | 65,865  |  |   |         | 68,050  |  |   |          | 271,765 | 
|                                                                                | Product development and engineering         |          |          | 30,939  |   |              |         | 28,530      |   |       |         | 28,046  |  |   |         | 30,269  |  |   |          | 117,784 | 
|                                                                                | General and administrative                  |          |          | 22,262  |   |              |         | 20,428      |   |       |         | 20,819  |  |   |         | 21,429  |  |   |          | 84,938  | 
|                                                                                | Amortization of other purchased
Intangibles |          |          | 500     |   |              |         | 500         |   |       |         | 500     |  |   |         | 500     |  |   |          | 2,000   | 
|                                                                                | Goodwill impairment                         |          |          |        |   |              |         |            |   |       |         |        |  |   |         | 12,300  |  |   |          | 12,300  | 
|                                                                                | Stock compensation expense                  |          |          | 497     |   |              |         | 497         |   |       |         | 497     |  |   |         | 446     |  |   |          | 1,937   | 
|                                                                                | Cost (reversal) of restructure              |          |          | (115    | ) |              |         | (795        | ) |       |         | 6,334   |  |   |         | 35,022  |  |   |          | 40,446  | 
|                                                                                |                                             |          |          |         |   |              |         |             |   |       |         |         |  |   |         |         |  |   |          |         | 
|Total costs and expenses                                                        |                                             |          | 188,520  |         |   |              | 177,691 |             |   |       | 181,351 |         |  |   | 225,123 |         |  |   | 772,685  |        
|                                                                                |                                             |          |          |         |   |              |         |             |   |       |         |         |  |   |         |         |  |   |          |        
|Operating income (loss)                                                         |                                             |          | 22,516   |         |   |              | 27,572  |             |   |       | 21,658  |         |  |   | (14,570 | )       |  |   | 57,176   |        
|Interest
income, expense and other, net                                         |                                             |          | 2,962    |         |   |              | 5,478   |             |   |       | 3,250   |         |  |   | 2,343   |         |  |   | 14,033   |        
|                                                                                |                                             |          |          |         |   |              |         |             |   |       |         |         |  |   |         |         |  |   |          |        
|Income (Loss) before income taxes and
cumulative effect of an accounting change |                                             |          | 25,478   |         |   |              | 33,050  |             |   |       | 24,908  |         |  |   | (12,227 | )       |  |   | 71,209   |        
|Provision for income taxes                                                      |                                             |          | 9,427    |         |   |              | 12,889  |             |   |       | 13,561  |         |  |   | (2,449  | )       |  |   | 33,428   |        
|                                                                                |                                             |          |          |         |   |              |         |             |   |       |         |         |  |   |         |         |  |   |          |        
|Income (Loss) before cumulative effect of an
accounting change                  |                                             |          | 16,051   |         |   |              | 20,161  |             |   |       | 11,347  |         |  |   | (9,778  | )       |  |   | 37,781   |        
|Cumulative effect of an accounting change
to adopt SFAS 142                     |                                             |          | (132,450 | )       |   |              |        |             |   |       |        |         |  |   |        |         |  |   | (132,450 | )      
|                                                                                |                                             |          |          |         |   |              |         |             |   |       |         |         |  |   |         |         |  |   |          |         | 
|Net income (loss)                                                               |                                             | $        | (116,399 | )       |   | $            | 20,161  |             |   | $     | 11,347  |         |  | $ | (9,778  | )       |  | $ | (94,669  | )      
|                                                                                |                                             |          |          |         |   |              |         |             |   |       |         |         |  |   |         |         |  |   |          |         | 
|Basic net income (loss) per share                                               |                                             | $        | (1.18    | )       |   | $            | 0.21    |             |   | $     | 0.12    |         |  | $ | (0.10   | )       |  | $ | (0.98    | )      
|Diluted net income (loss) per share                                             |                                             | $        | (1.14    | )       |   | $            | 0.20    |             |   | $     | 0.12    |         |  | $ | (0.10   | )       |  | $ | (0.95    | )      

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ITEM 9A. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Within 90 days prior to the filing of this Report on Form 10-K (Evaluation
Date), we conducted an evaluation of the effectiveness of the design and
operation of our disclosure controls and procedures under the supervision and
with the participation of our management including our CEO and CFO, pursuant to
Exchange Act Rule 13a-14(c) and 15d-14(c). Based on this evaluation, our
management, including our CEO and CFO, concluded that our disclosure controls
and procedures were effective in timely alerting them to all material
information required to be included in our periodic SEC filings.

In addition to the foregoing, there have been no significant changes in our
internal controls or in other factors that could significantly affect our
disclosure controls and procedures subsequent to the Evaluation Date.
Therefore, no corrective actions have been necessitated or taken.




ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE

Not applicable.




PART III




ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF REGISTRANT

Current Executive Officers

The current executive officers of the Company are as follows:

|                                                                         |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|------------------------------------------------------------------------ |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|John S. Chen
Chairman, Chief Executive Officer and
President
Age 48      |  | Mr. Chen has served in his
present capacity since November
1998. From February through
November 1998, he served as
co-Chief Executive Officer. Mr.
Chen joined Sybase in August 1997
as Chief Operating Officer and
served in that capacity until
February 1998. From March 1995
to July 1997, Mr. Chen was
President of the Open Enterprise
Computing Division of Siemens
Nixdorf, a computer and
electronics company, and Chief
Executive Officer and Chairman of
Siemens Pyramid, a subsidiary of
Siemens Nixdorf. He is also a
current director of The Walt
Disney Company, a media and
entertainment company.
|                                                                         |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|Thomas Volk
Executive Vice President
Worldwide Field Organization
Age 46 |  | Mr. Volk has served in his
present capacity since February
2004. Prior to that, he served
as Executive Vice President,
Infrastructure Platform Group
beginning in January 2003. For
more than 18 years prior to that, Mr. Volk
worked for Hewlett-Packard
Company, a computer and
electronics company, and most
recently served as Vice President
and General Manager of HPs
manufacturing industry business
unit. Mr. Volk also held a
number of worldwide sales and
business management positions
during his tenure at HP.                                                                                     

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|                                                                                             |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|-------------------------------------------------------------------------------------------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Steven M. Capelli
Senior Vice President & General
Manager, Worldwide Partner Group
Age 46    |  | Mr. Capelli has served in his
present capacity since February
2004. Immediately prior to that,
he served as Senior Vice
President and General Manager,
Worldwide Field Organization
beginning in January 2003.
Before that, Mr. Capelli served
Senior Vice President and General
Manager, North American
Operations from March 1998
through July 2002. Before joining
Sybase in December 1997, Mr.
Capelli worked for
Siemens-Pyramid, a subsidiary of
Siemens Nixdorf, a computer and
electronics company, from August
1992 to December 1997. During
that time, he held several
positions including Chief
Financial Officer, Vice President
of Inter Continental Sales and
Director of Field Operations.
|                                                                                             |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|Marty Beard
Senior Vice President
Corporate Development and Marketing
Age 40                 |  | Mr. Beard has served in his
present capacity since February
2003. From August 2000 through
January 2003, Mr. Beard was Vice
President, Corporate Development.
Before joining Sybase, Mr. Beard
was Vice President of Oracle
Online, a division of Oracle
Corporation, a database software
company, from June 1999 through
July 2000. Prior to that he
served as Senior Director,
Mid-Market Business Solutions for
Oracle beginning in July 1997.
From June 1993 through June 1997,
Mr. Beard was Staff Director,
Corporate Strategy and
Development for Pacific Telesis
Group, a telecommunications
company.                                                                                            
|                                                                                             |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|Daniel R. Carl
Vice President and
General Counsel
Age 51                                     |  | Mr. Carl has served in his
present capacity since April
1999. Immediately prior to that,
he served as Director of European
Legal Affairs beginning in
January 1997. Mr. Carl has been
a Vice President of Sybase since
May 1996, and served as Associate
General Counsel from 1992 to
April 1999.                                                                                                                                                                                                                                                                                                                                                                                                        
|                                                                                             |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|Martin J. Healy
Vice President and Corporate
ControllerAge 41                                |  | Mr. Healy has served in his
present capacity since January
1999. Between January 1997 and
January 1999, he served as Vice
President, Intercontinental
Operations. Mr. Healy was
Director of Finance, Asia
(excluding Japan) from January
1994 to December 1997, and prior
to that held various positions
within the Companys finance
organization. Before joining
Sybase in 1989, Mr. Healy was
Financial Reporting Manager at
WordStar International, and an
auditor with Arthur Andersen.                                                                                                                                                                                                             
|                                                                                             |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|Richard J. Moore
President
Financial Fusion, Inc.
Age 51                                     |  | Mr. Moore has served in his
present capacity since July 2001.
Before joining Sybase, he served
as co-CEO of Cygent, Inc., a San
Francisco based
telecommunications company, from
November 2000 to March 2001, and
was Cygents Senior Vice
President of Worldwide Sales from
December 1999 to October 2001.
From December 1998 to December
1999, Mr. Moore served as
Executive Vice President of
Worldwide Sales for DataCore
Software Corp., a storage area
networking company.                                                                                                                                                                                                                         
|                                                                                             |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|Raj Nathan
Senior Vice President & General Manager
Product Technology
Operations GroupAge 50 |  | Dr. Nathan has served in his
present capacity since February
2004. Immediately prior to that,
he served as Senior Vice
President and General Manager,
Enterprise Solutions Division
beginning in December 2000.
Joining Sybase in November 1997,
he served as Senior Vice
President, Corporate Program
Office and later as Senior Vice
President and General Manager of
the Internet Applications
Division until December 2000.
From May through November 1997,
he served as President and Chief
Executive Officer of Siemens
Pyramid, a subsidiary of Siemens
Nixdorf, a computer and
electronics company, and held a
number of executive positions
with Siemens Pyramid prior to
that.                 

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|                                                                              |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|----------------------------------------------------------------------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Terry Stepien
President
iAnywhere Solutions, Inc.
Age 45                      |  | Mr. Stepien has served in his present capacity since May 2000.
Prior to that he had served as Senior Vice President and General
Manager of Sybases Mobile and Embedded Computing Division (MEC) since
March 1999. From September 1998 to March 1999, he was Vice
President and General Manager of MEC. From September 1996
to September 1998, he served as Vice President, Marketing
for Database Products. Mr. Stepien was Vice President, Marketing for
Workplace Database Products from February 1995 to September 1996.
|                                                                              |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|Pieter Van der Vorst
Senior Vice President and
Chief Financial Officer
Age 49 |  | Mr. Van der Vorst has served in his current position since March 2002. Prior to
that, he held the title of Vice President and Chief Financial Officer starting in
January 1999. Between November 1997 and January 1999, he served as Corporate
Controller, and prior to that, he served as Vice President, Tax and Corporate
Accounting beginning in April 1997. Mr. Van der Vorst has held various other
positions since joining Sybase in 1991.                                                                           
|                                                                              |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|Nita C. White-Ivy
Vice President Worldwide Human
Resources
Age 57             |  | Ms. White-Ivy has served in her
present capacity since March
1998. Prior to that, she was a
human resources consultant to
Sybase beginning in January 1998.
Before joining Sybase, she was
with Siemens Pyramid, a computer
and electronics company, serving
as Vice President of Worldwide
Human Resources from February
1994 to October 1997.                                                                                                                                                                             

Identification of Directors

Our directors are identified under the section entitled Election of Directors
in our definitive Proxy Statement for the Annual Meeting of Stockholders to be
held May 27, 2004 (Proxy Statement), to be filed with the SEC within 120 days
after our fiscal year ended December 31, 2003.

Compliance with Section 16(a) of the Exchange Act

The information required under Item 405 of Regulation S-K is incorporated here
by reference to Section 16(a) Beneficial Ownership Reporting Compliance in
the Proxy Statement.

Audit Committee Financial Expert

Our Board of Directors has determined that Audit Committee members Robert P.
Wayman and Jack E. Sum are both audit committee financial experts as defined in
Item 401(h) of Regulation S-K, and are independent within the meaning of Item
7(d)(3)(iv) of Schedule 14A of the Exchange Act.

Standing Audit Committee

The information required under Item 401(i) of Regulation S-K and Item 7(d)(1)
of Schedule 14A of the Exchange Act pertaining to the standing Audit Committee
of the Board of Directors is incorporated by reference to Election of
Directors in the Proxy Statement.

Corporate Governance Guidelines

We have adopted Corporate Governance Guidelines that are available on our
website at
www.sybase.com
under Investor Relations. Stockholders may request a free copy of the
guidelines by contacting Investor Relations at the same address set forth under
Code of Ethics, below.

Code of Ethics

Our code of ethics, entitled Statement of Values and Business Ethics,
applies to all of our employees, directors and officers (including the chief
executive officer, chief financial officer and principal accounting officer),
and is available by clicking on the Code of Ethics link at the bottom of any
page at our website at

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www.sybase.com. Stockholders may request a free copy of
the Statement of Values and Business Ethics from:

Sybase, Inc.
Attention: Investor Relations
One Sybase Drive
Dublin, CA 94568




ITEM 11. EXECUTIVE COMPENSATION

The information required by this item is incorporated by reference to
Executive Compensation in the Proxy Statement.




ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The information required by this item is incorporated by reference to Stock
Ownership of Management and Beneficial Owners in the Proxy Statement.

Information required under Item 201(d) of Regulation S-K regarding our equity
compensation plans (both stockholder and non-stockholder approved plans) is
incorporated by reference to Executive Compensation  Equity Compensation Plan
Information in the Proxy Statement.




ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The information required by this item is incorporated by reference to
Employment Agreements and Certain Transactions in the Proxy Statement.




ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES

The information required by this item is incorporated by reference to
Ratification of Appointment of Independent Auditors in the Proxy Statement.




PART IV




ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

(a) The following documents are filed as part of this Report on Form 10-K:

1.     Financial Statements. See financial statements listed in the table of
contents at the beginning of Part II, Item 8, incorporated here by reference.

2.     Financial Statement Schedules. The following financial statement
schedules of Sybase, Inc. for the years ended December 31, 2003, 2002, and 2001
are filed as part of this Report on Form 10-K and should be read in conjunction
with the Consolidated Financial Statements in Part II, Item 8, and related
Notes.

3.     Exhibits. Item 15(c) below is incorporated here by reference. All
management contracts and compensatory plans filed as exhibits (or incorporated
by reference into this Report) pursuant to Item 601 of Regulation S-K are as
follows:

|            |  |                                                                      
|----------- |  | ---------------------------------------------------------------------
|Exhibit No. |  | Description                                                          
|            |  |                                                                      
|10.1 (1)    |  | New Era of Networks, Inc. Amended and
Restated 1995 Stock Option Plan

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|            |  |                                                                                                                                                                                                                                                                                                 
|----------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |  | Description                                                                                                                                                                                                                                                                                     
|            |  |                                                                                                                                                                                                                                                                                                 
|10.2 (1)    |  | New Era of Networks, Inc. Amended and
Restated 1997 Director Option Plan                                                                                                                                                                                                                        
|            |  |                                                                                                                                                                                                                                                                                                 
|10.3 (1)    |  | New Era of Networks, Inc. 1998 Nonstatutory Stock Option Plan                                                                                                                                                                                                                                   
|            |  |                                                                                                                                                                                                                                                                                                 
|10.4 (1)    |  | Century Analysis Inc. 1996 Equity Incentive Plan                                                                                                                                                                                                                                                
|            |  |                                                                                                                                                                                                                                                                                                 
|10.5 (1)    |  | Convoy Corporation 1997 Stock Option Plan                                                                                                                                                                                                                                                       
|            |  |                                                                                                                                                                                                                                                                                                 
|10.6 (1)    |  | Microscript, Inc. 1997 Stock Option Plan                                                                                                                                                                                                                                                        
|            |  |                                                                                                                                                                                                                                                                                                 
|10.7        |  | 1988 Stock Option Plan and Forms of Incentive
Stock Option Agreements and Nonstatutory Stock Option
Agreements, as amended (incorporated by reference to exhibits
filed in response to Item 16(a), Exhibits, of the Companys
Annual Report on Form 10-K for the year ended December 31,
1997)
|            |  |                                                                                                                                                                                                                                                                                                 
|10.8        |  | 1991 Employee Stock Purchase Plan and 1991
Foreign Subsidiary Employee Stock Purchase Plan, as amended
(incorporated by reference to the Registrants Registration
Statement on Form S-8 filed July 20, 1999                                                                                    
|            |  |                                                                                                                                                                                                                                                                                                 
|10.9        |  | Sybase, Inc. 401(k) Plan (incorporated by
reference to exhibits filed in response to Item 6(a),
Exhibits, of the Companys Quarterly Report on Form 10-Q
for the quarter ended March 31, 2001), as amended by
Amendment No. 1 to the Sybase, Inc. 401(k) Plan dated
December 20, 2002.        
|            |  |                                                                                                                                                                                                                                                                                                 
|10.10 (6)   |  | 1992 Director Stock Option Plan, as amended                                                                                                                                                                                                                                                     
|            |  |                                                                                                                                                                                                                                                                                                 
|10.11 (1)   |  | 2001 Director Stock Option Plan                                                                                                                                                                                                                                                                 
|            |  |                                                                                                                                                                                                                                                                                                 
|10.12       |  | Executive Deferred Compensation Plan, as amended February 5, 2003                                                                                                                                                                                                                               
|            |  |                                                                                                                                                                                                                                                                                                 
|10.13 (1)   |  | Sybase, Inc. 1996 Stock Plan, as amended                                                                                                                                                                                                                                                        
|            |  |                                                                                                                                                                                                                                                                                                 
|10.14 (7)   |  | Form of Indemnification Agreement                                                                                                                                                                                                                                                               
|            |  |                                                                                                                                                                                                                                                                                                 
|10.15 (6)   |  | Form of Amended and Restated Change of
Control Agreement (standard version)                                                                                                                                                                                                                     
|            |  |                                                                                                                                                                                                                                                                                                 
|10.16 (6)   |  | Form of Amended and Restated Change of
Control Agreement (enhanced version)                                                                                                                                                                                                                     
|            |  |                                                                                                                                                                                                                                                                                                 
|10.17 (6)   |  | Offer Letter to Richard J. Moore dated June
8, 2001                                                                                                                                                                                                                                             
|            |  |                                                                                                                                                                                                                                                                                                 
|10.18 (6)   |  | Amended and Restated Employment Agreement
between Sybase, Inc. and John S. Chen dated as of June 11,
2001                                                                                                                                                                                       
|            |  |                                                                                                                                                                                                                                                                                                 
|10.19(8)    |  | Addendum to John Chen Amended and Restated Employment
Agreement dated August 20, 2002                                                                                                                                                                                                           
|            |  |                                                                                                                                                                                                                                                                                                 
|10.20       |  | 1999 Nonstatutory Stock Plan, and form of Stock
Option Agreement (incorporated by reference to the
Registrants Registration Statement on Form S-8 (file no.
333-85637) filed August 20, 1999)                                                                                                  

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|            |  |                                                                                                                                                                                                                   
|----------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |  | Description                                                                                                                                                                                                       
|            |  |                                                                                                                                                                                                                   
|10.21       |  | Home Financial Network, Inc. 1995 Stock Plan,
and form of Stock Option Agreement (incorporated by reference
to the Registrants Registration Statement on Form S-8 (file
no. 333-95079) filed on January 20, 2000)
|            |  |                                                                                                                                                                                                                   
|10.29 (5)   |  | Financial Fusion, Inc. 2000 Stock Option Plan                                                                                                                                                                     
|            |  |                                                                                                                                                                                                                   
|10.30 (6)   |  | Financial Fusion, Inc. 2001 Stock Option Plan                                                                                                                                                                     
|            |  |                                                                                                                                                                                                                   
|10.31 (6)   |  | iAnywhere Solutions, Inc. Stock Option Plan                                                                                                                                                                       
|            |  |                                                                                                                                                                                                                   
|10.32 (6)   |  | Form of Notice of Grant and Restricted Stock Purchase Agreement                                                                                                                                                   
|            |  |                                                                                                                                                                                                                   
|10.33 (8)   |  | Offer Letter to Michael Bealmear dated May 1, 2002                                                                                                                                                                
|            |  |                                                                                                                                                                                                                   
|10.34 (8)   |  | Offer letter to Thomas Volk dated September 5, 2002                                                                                                                                                               
|            |  |                                                                                                                                                                                                                   
|10.35       |  | Retention Letter of Steven M. Capelli dated January 2, 2001                                                                                                                                                       
|            |  |                                                                                                                                                                                                                   
|10.36       |  | Executive Financial Planning and Services
Program for Section 16 Officers, effective as of February 5,
2003                                                                                                       
|            |  |                                                                                                                                                                                                                   
|10.37       |  | Summary Plan Description for Sabbatical Leave
Plan of Sybase, Inc. (Amended and Restated as of May 1, 2003)                                                                                                       
|            |  |                                                                                                                                                                                                                   
|10.38       |  | Sybase, Inc. 2003 Stock Plan (incorporated by
reference to Exhibit 4.1 to the Registrants Registration on
Form S-8 filed on July 25, 2003)                                                                       
|            |  |                                                                                                                                                                                                                   
|10.39       |  | Letter dated February 7, 2003 to John Chen regarding 2003 compensation                                                                                                                                            
|            |  |                                                                                                                                                                                                                   
|10.40       |  | Letter dated
February 10, 2003 to Pieter Van der Vorst regarding 2003 compensation                                                                                                                                
|            |  |                                                                                                                                                                                                                   
|10.41       |  | Letter dated
February 10, 2003 to Marty Beard regarding 2003 compensation                                                                                                                                         
|            |  |                                                                                                                                                                                                                   
|10.42       |  | Letter dated
February 10, 2003 to Raj Nathan regarding 2003 compensation
including 1/1/03 and 7/1/03 variable compensation plans                                                                                  
|            |  |                                                                                                                                                                                                                   
|10.43       |  | Letter dated
February 10, 2003 to Thomas Volk regarding 2003 compensation including 1/1/03 and 7/1/03 variable compensation plans                                                                                 
|            |  |                                                                                                                                                                                                                   
|10.44       |  | Letter dated
February 10, 2003 to Michael Bealmear regarding 2003 compensation including 1/1/03 and 7/1/03 variable compensation plans                                                                            

(1)  Incorporated by reference to the Companys Registration Statement on Form
S-8 filed June 19, 2001.

(2)  Incorporated by reference to the Companys Registration Statement on Form
S-8 filed on February 10, 1995 (file no. 33-89334).

(3)  [This footnote has been intentionally left blank.]

(4)  [This footnote has been intentionally left blank.]

(5)  Incorporated by reference to exhibits filed in response to Item 14(a),
Exhibits, of the Companys Annual Report on Form 10-K for the year ended
December 31, 2000.

(6)  Incorporated by reference to exhibits filed in response to Item 14(a)
Exhibits, of the Companys Annual Report on Form 10-K for the year ended
December 31, 2001.

(7)  Incorporated by reference to exhibits filed in response to Item 16(a),
Exhibits, of the Companys Annual Report on Form 10-K for the year ended
December 31, 1998 (file no. 000-19395).

(8)  Incorporated by reference to exhibits filed in response to Item 14(a)
Exhibits, of the Companys Annual Report on Form 10-K for the year ended
December 31, 2002.

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(b)  Reports on Form 8-K.

No reports on Form 8-K were filed during the quarter ended December 31,
2003

(c)  Exhibits. The exhibits required by Item 601 of Regulation S-K are listed
in the Exhibit Index to this Report on Form 10-K, and are incorporated here by
reference.

|               |  |          
|-------------- |  | ---------
|(d) Schedules. |  | Form 10-K

|                                     |  | Page
|------------------------------------ |  | ----
|                                     |  |     
|II Valuation and Qualifying Accounts |  |     

Schedules not listed above have been omitted because they are either (i) not
applicable or are not required, or (ii) the information is included in the
Consolidated Financial Statements and related Notes, Part II, Item 8.

SCHEDULE II  VALUATION AND QUALIFYING ACCOUNTS

SYBASE, INC.

(Dollars in thousands)

|                              |                               |                                 |  |            |        |              |  |               |   |        |  |   |        |            |  |   |        |  |  |   |        | 
|----------------------------- | ----------------------------- | ------------------------------- |  | ---------- | ------ | ------------ |  | ------------- | - | ------ |  | - | ------ | ---------- |  | - | ------ |  |  | - | ------ | 
|COL. A                        |                               | COL. B                          |  | COL. C     |        | COL. D       |  | COL. E       
|                              |                               |                                 |  |            |        |              |  | Additions     |   |        |  |   |        |            |  |  
|                              |                               |                                 |  |            |        |              |  |               |   |        |  |   |        |            |  |  
|                              |                               |                                 |  |            |        |              |  | Charged       |   |        |  |   |        |            |  |   |        |  |  |  
|                              |                               |                                 |  | Balance at |        | to Costs     |  | Charged       |   |        |  |   |        | Balance at
|                              |                               |                                 |  | Beginning  |        | and          |  | to Other      |   |        |  |   |        | End of    
|Description                   |                               | of Period                       |  | Expenses   |        | Accounts (A) |  | Deletions (B) |   | Period
|                              |                               |                                 |  |            |        |              |  |               |   |       
|Year ended December 31, 2003: |                               |                                 |  |            |        |              |  |               |   |        |  |   |        |            |  |   |        |  |  |  
|                              | Deducted from asset accounts: |                                 |  |            |        |              |  |               |   |        |  |   |        |            |  |   |        |  |  |   |       
|                              |                               | Allowance for doubtful accounts |  | $          | 10,307 |              |  | $             | 5 |        |  | $ | 26,416 |            |  | $ | 23,083 |  |  | $ | 13,645 | 
|Year ended December 31, 2002: |                               |                                 |  |            |        |              |  |               |   |        |  |   |        |            |  |   |        |  |  |  
|                              | Deducted from asset accounts: |                                 |  |            |        |              |  |               |   |        |  |   |        |            |  |   |        |  |  |   |       
|                              |                               | Allowance for doubtful accounts |  | $          | 19,706 |              |  |               |  |        |  | $ | 6,230  |            |  | $ | 15,629 |  |  | $ | 10,307 | 
|Year ended December 31, 2001: |                               |                                 |  |            |        |              |  |               |   |        |  |   |        |            |  |   |        |  |  |  
|                              | Deducted from asset accounts: |                                 |  |            |        |              |  |               |   |        |  |   |        |            |  |   |        |  |  |   |       
|                              |                               | Allowance for doubtful accounts |  | $          | 22,313 |              |  |               |  |        |  | $ | 18,731 |            |  | $ | 21,338 |  |  | $ | 19,706 | 

A Sales returns and credit memos allowances

B Uncollectible accounts written off and recoveries

The required information regarding the valuation allowance for deferred tax assets is included in Note Eight to the Consolidated Financial Statements.

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Exchange Act,
the Registrant has duly caused this Report on Form 10-K to be signed on its
behalf of the undersigned, thereunto duly authorized.

|               |  |  |  |                                                              |  |                 
|-------------- |  |  |  | ------------------------------------------------------------ |  | ----------------
|               |  |  |  | SYBASE, INC.                                                
|               |  |  |  |                                                              |  |                 
|               |  |  |  | By:                                                          |  | /S/ JOHN S. CHEN
|               |  |  |  |                                                              |  |                 
|March 14, 2004 |  |  |  | John S. Chen                                                
|               |  |  |  | Chairman of the Board, Chief
Executive Officer and President

POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints John S. Chen, Pieter Van der Vorst and
Teresa D. Chuh, jointly and severally, his or her attorneys-in-fact, each with
the power of substitution, for him or her in any and all capacities, to sign
any amendment to this Report on Form 10-K and to file the same, with exhibits
thereto and other documents in connection therewith, with the Securities and
Exchange Commission, hereby ratifying and confirming all that each of said
attorneys-in-fact, or his substitute or substitutes, may do or cause to be done
by virtue hereof. Pursuant to the requirements of the Securities Exchange Act
of 1934, this Report on Form 10-K has been signed by the following persons in
the capacities and on the dates indicated:

|                                                       |  |                                                                                                      |  |               
|------------------------------------------------------ |  | ---------------------------------------------------------------------------------------------------- |  | --------------
|Signature                                              |  | Title                                                                                                |  | Date          
|                                                       |  |                                                                                                      |  |               
|/S/ JOHN S. CHEN

(John S. Chen)                       |  | Chairman of the Board, Chief
Executive Officer (Principal Executive
Officer), President and Director |  | March 14, 2004
|                                                       |  |                                                                                                      |  |               
|/S/ PIETER A. VAN DER VORST

(Pieter A. Van der Vorst) |  | Senior Vice President and
Chief Financial Officer (Principal
Financial Officer)                      |  | March 14, 2004
|                                                       |  |                                                                                                      |  |               
|/S/ MARTIN J. HEALY

(Martin J. Healy)                 |  | Vice President and Corporate
Controller (Principal Accounting
Officer)                               |  | March 14, 2004
|                                                       |  |                                                                                                      |  |               
|/S/ RICHARD C. ALBERDING

(Richard C. Alberding)       |  | Director                                                                                             |  | March 14, 2004
|                                                       |  |                                                                                                      |  |               
|/S/ CECILIA CLAUDIO

(Cecilia Claudio)                 |  | Director                                                                                             |  | March 14, 2004
|                                                       |  |                                                                                                      |  |               
|/S/ L. WILLIAM KRAUSE

(L. William Krause)             |  | Director                                                                                             |  | March 14, 2004
|                                                       |  |                                                                                                      |  |               
|/S/ ALAN B. SALISBURY

(Alan B. Salisbury)             |  | Director                                                                                             |  | March 14, 2004
|                                                       |  |                                                                                                      |  |               
|/S/ JACK E. SUM

(Jack E. Sum)                         |  | Director                                                                                             |  | March 14, 2004
|                                                       |  |                                                                                                      |  |               
|/S/ ROBERT P. WAYMAN

(Robert P. Wayman)               |  | Director                                                                                             |  | March 14, 2004
|                                                       |  |                                                                                                      |  |               
|/S/ LINDA K. YATES

(Linda K. Yates)                   |  | Director                                                                                             |  | March 14, 2004

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EXHIBIT INDEX

|            |  |                                                                                                                                                                                                                                                                                                 
|----------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |  | Description                                                                                                                                                                                                                                                                                     
|            |  |                                                                                                                                                                                                                                                                                                 
|2.1         |  | Agreement and Plan of Reorganization dated as of
November 29, 1999, among Sybase, On-Line Financial Services,
Inc., and Home Financial Network, Inc. (incorporated by
reference to Exhibit 2.1 to the Registrants Registration
Statement on Form S-3 filed on January 31, 2000)                
|            |  |                                                                                                                                                                                                                                                                                                 
|2.2         |  | Agreement and Plan of Merger dated as of
February 20, 2001, among Sybase, New Era of Networks, Inc.,
and Neel Acquisition Corp. (incorporated by reference to
Exhibit 2(a) to the Registrants Registration Statement on
Form S-4 filed March 15, 2001)                                         
|            |  |                                                                                                                                                                                                                                                                                                 
|2.3         |  | Agreement and Plan of Merger dated as of
December 19, 2002, by and among Sybase, Inc., Seurat
Acquisition Corporation and AvantGo, Inc. (incorporated by
reference to Exhibit 1 to the Companys Schedule 13D filed
with the Securities and Exchange Commission on December 30,
2002)           
|            |  |                                                                                                                                                                                                                                                                                                 
|3.1 (9)     |  | Restated Certificate of Incorporation of
Registrant, as amended                                                                                                                                                                                                                                 
|            |  |                                                                                                                                                                                                                                                                                                 
|3.2         |  | Bylaws of Registrant, amended and restated as of February 4, 2004                                                                                                                                                                                                                               
|            |  |                                                                                                                                                                                                                                                                                                 
|4.1         |  | Preferred Share Rights Agreement dated as of
July 31, 2002 between Registrant and American Stock Transfer
and Trust Co. (incorporated by reference to Exhibit 4.1 to
the Companys Report on Form 8-K filed on August 5, 2002)                                                                  
|            |  |                                                                                                                                                                                                                                                                                                 
|10.1 (6)    |  | New Era of Networks, Inc. Amended and
Restated 1995 Stock Option Plan                                                                                                                                                                                                                           
|            |  |                                                                                                                                                                                                                                                                                                 
|10.2 (6)    |  | New Era of Networks, Inc. Amended and
Restated 1997 Director Option Plan                                                                                                                                                                                                                        
|            |  |                                                                                                                                                                                                                                                                                                 
|10.3 (6)    |  | New Era of Networks, Inc. 1998 Nonstatutory Stock Option Plan                                                                                                                                                                                                                                   
|            |  |                                                                                                                                                                                                                                                                                                 
|10.4 (6)    |  | Century Analysis Inc. 1996 Equity Incentive Plan                                                                                                                                                                                                                                                
|            |  |                                                                                                                                                                                                                                                                                                 
|10.5 (6)    |  | Convoy Corporation 1997 Stock Option Plan                                                                                                                                                                                                                                                       
|            |  |                                                                                                                                                                                                                                                                                                 
|10.6 (6)    |  | Microscript, Inc. 1997 Stock Option Plan                                                                                                                                                                                                                                                        
|            |  |                                                                                                                                                                                                                                                                                                 
|10.7 (3)    |  | 1988 Stock Option Plan and Forms of
Incentive Stock Option Agreements and Nonstatutory Stock
Option Agreements, as amended (incorporated by reference to
exhibits filed in response to Item 16(a), Exhibits, of the
Companys Annual Report on Form 10-K for the year ended
December 31, 1997)
|            |  |                                                                                                                                                                                                                                                                                                 
|10.8        |  | 1991 Employee Stock Purchase Plan and 1991
Foreign Subsidiary Employee Stock Purchase Plan, as amended
(incorporated by reference to the Registrants Registration
Statement on Form S-8 (file no. 333-83271) filed July 20,
1999                                                               

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|            |  |                                                                                                                                                                                                                                                                                                     
|----------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |  | Description                                                                                                                                                                                                                                                                                         
|            |  |                                                                                                                                                                                                                                                                                                     
|10.9        |  | Sybase, Inc. 401(k) Plan, as amended
(incorporated by reference to exhibits filed in response to
Item 6(a), Exhibits, of the Companys Quarterly Report on
Form 10-Q for the quarter ended March 31, 2001), as amended
by Amendment No. 1 to the Sybase, Inc. 401(k) Plan dated
December 20, 2002.
|            |  |                                                                                                                                                                                                                                                                                                     
|10.10 (10)  |  | Sybase, Inc. 1992 Director Stock Option Plan, as amended                                                                                                                                                                                                                                            
|            |  |                                                                                                                                                                                                                                                                                                     
|10.11 (6)   |  | Sybase, Inc. 2001 Director Stock Option Plan                                                                                                                                                                                                                                                        
|            |  |                                                                                                                                                                                                                                                                                                     
|10.12       |  | Executive Deferred Compensation Plan, as amended December 5, 2003                                                                                                                                                                                                                                   
|            |  |                                                                                                                                                                                                                                                                                                     
|10.13 (6)   |  | Sybase, Inc. 1996 Stock Plan, as amended                                                                                                                                                                                                                                                            
|            |  |                                                                                                                                                                                                                                                                                                     
|10.14 (8)   |  | Form of Indemnification Agreement                                                                                                                                                                                                                                                                   
|            |  |                                                                                                                                                                                                                                                                                                     
|10.15 (10)  |  | Form of Amended and Restated Change of
Control Agreement (standard version)                                                                                                                                                                                                                         
|            |  |                                                                                                                                                                                                                                                                                                     
|10.16 (10)  |  | Form of Amended and Restated Change of
Control Agreement (enhanced version)                                                                                                                                                                                                                         
|            |  |                                                                                                                                                                                                                                                                                                     
|10.17(10)   |  | Offer Letter to Richard J. Moore dated June 8, 2001                                                                                                                                                                                                                                                 
|            |  |                                                                                                                                                                                                                                                                                                     
|10.18 (10)  |  | Amended and Restated Employment Agreement
between Sybase, Inc. and John S. Chen dated as of June 11,
2001                                                                                                                                                                                           
|            |  |                                                                                                                                                                                                                                                                                                     
|10.19 (11)  |  | Addendum to John Chen Amended and Restated
Employment Agreement dated August 20, 2002                                                                                                                                                                                                               
|            |  |                                                                                                                                                                                                                                                                                                     
|10.20       |  | Sybase, Inc. 1999 Nonstatutory Stock Plan, and
form of Stock Option Agreement (incorporated by reference to
the Registrants Registration Statement on Form S-8 filed
August 20, 1999)                                                                                                              
|            |  |                                                                                                                                                                                                                                                                                                     
|10.21       |  | Home Financial Network, Inc. 1995 Stock Plan,
and form of Stock Option Agreement (incorporated by reference
to the Registrants Registration Statement on Form S-8 filed
on January 20, 2000)                                                                                                       
|            |  |                                                                                                                                                                                                                                                                                                     
|10.22 (5)   |  | Corporate Headquarters Lease, dated January
28, 2000, between Sybase, Inc. and WDS-Dublin, LLC, as amended
on November 29, 2000, and December 13, 2001.                                                                                                                                             
|            |  |                                                                                                                                                                                                                                                                                                     
|10.23 (5)   |  | Trust Agreement dated May 1, 2000 between
Fidelity Management Trust Company and Sybase, Inc. for
administration of 401(k) Plan                                                                                                                                                                      
|            |  |                                                                                                                                                                                                                                                                                                     
|10.24       |  | First Amendment to May 1, 2000 Trust Agreement
between Fidelity Management Trust Company and Sybase, Inc.
for administration of the Sybase 401(k) plan, dated as of
April 1, 2002                                                                                                                   
|            |  |                                                                                                                                                                                                                                                                                                     
|10.25       |  | November 17, 2003 Letter Agreement between
Fidelity Management Trust Company and Sybase, Inc. for
administration of the Sybase 401(k) plan                                                                                                                                                          

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|            |  |                                                                                                                                                                              
|----------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |  | Description                                                                                                                                                                  
|            |  |                                                                                                                                                                              
|10.26 (5)   |  | Trust Agreement dated May 1, 2000 between
Fidelity Management Trust Company and Sybase, Inc, for
administration of the Sybase Executive Deferred Compensation
Plan           
|            |  |                                                                                                                                                                              
|10.27       |  | First Amendment to Trust Agreement between
Fidelity Management Trust Company and Sybase, Inc. for
administration of Sybase Executive Deferred Compensation Plan              
|            |  |                                                                                                                                                                              
|10.28       |  | November 17, 2003 Letter Agreement between
Fidelity Management Trust Company and Sybase, Inc. for
administration of the Sybase Executive Deferred Compensation
Plan          
|            |  |                                                                                                                                                                              
|10.29 (5)   |  | Financial Fusion, Inc. 2000 Stock Option Plan                                                                                                                                
|            |  |                                                                                                                                                                              
|10.30 (10)  |  | Financial Fusion, Inc. 2001 Stock Option Plan                                                                                                                                
|            |  |                                                                                                                                                                              
|10.31 (10)  |  | iAnywhere Solutions, Inc. Stock Option Plan                                                                                                                                  
|            |  |                                                                                                                                                                              
|10.32 (10)  |  | Form of Notice of Grant and Restricted Stock Purchase Agreement                                                                                                              
|            |  |                                                                                                                                                                              
|10.33(11)   |  | Offer Letter to Michael Bealmear dated May 1, 2002                                                                                                                           
|            |  |                                                                                                                                                                              
|10.34(11)   |  | Offer Letter of Thomas Volk dated September 5, 2002                                                                                                                          
|            |  |                                                                                                                                                                              
|10.35       |  | Retention Letter of Steven M. Capelli dated as of January 2, 2001                                                                                                            
|            |  |                                                                                                                                                                              
|10.36       |  | Executive Financial Planning and Services
Program for Section 16 Officers, effective as of February 5,
2003                                                                  
|            |  |                                                                                                                                                                              
|10.37       |  | Summary Plan Description Description for
Sabbatical Leave Plan of Sybase, Inc. (Amended and Restated
as of May 1, 2003)                                                      
|            |  |                                                                                                                                                                              
|10.38       |  | Sybase, Inc. 2003 Stock Plan (incorporated by
reference to Exhibit 4.1 to the Registrants Registration on
Form S-8 filed on July 25, 2003)                                  
|            |  |                                                                                                                                                                              
|10.39       |  | Letter dated February 7, 2003 to John Chen regarding 2003 compensation                                                                                                       
|            |  |                                                                                                                                                                              
|10.40       |  | Letter dated
February 10, 2003 to Pieter Van der Vorst regarding 2003 compensation                                                                                           
|            |  |                                                                                                                                                                              
|10.41       |  | Letter dated
February 10, 2003 to Marty Beard regarding 2003 compensation                                                                                                    
|            |  |                                                                                                                                                                              
|10.42       |  | Letter dated
February 10, 2003 to Raj Nathan regarding 2003 compensation including 1/1/03 and 7/1/03 variable compensation plans                                             
|            |  |                                                                                                                                                                              
|10.43       |  | Letter dated
February 10, 2003 to Thomas Volk regarding 2003 compensation including 1/1/03 and 7/1/03 variable compensation plans                                            
|            |  |                                                                                                                                                                              
|10.44       |  | Letter dated
February 10, 2003 to Michael Bealmear regarding 2003 compensation including 1/1/03 and 7/1/03 variable compensation plans                                       
|           
|13.1 (1)    |  | Proxy Statement for 2004 Annual Meeting of Stockholders                                                                                                                      
|            |  |                                                                                                                                                                              
|21          |  | Subsidiaries of Registrant                                                                                                                                                   
|            |  |                                                                                                                                                                              
|23.1        |  | Consent of Independent Auditors                                                                                                                                              
|            |  |                                                                                                                                                                              
|24 (7)      |  | Powers of Attorney                                                                                                                                                           
|            |  |                                                                                                                                                                              
|31.1        |  | Certification of Chief Executive Officer pursuant
to Securities Exchange Act Rule 13a-14 or 15d-14, as adopted
pursuant to Section 302(a) of the Sarbanes-Oxley Act of 2002  
|            |  |                                                                                                                                                                              
|31.2        |  | Certification of Chief Financial Officer pursuant
to Securities Exchange Act Rule 13a-14 or 15d-14, as adopted
pursuant to Section 302(a) of the Sarbanes-Oxley Act of 2002  
|            |  |                                                                                                                                                                              
|32          |  | Certification of Chief Executive Officer and
Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002

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(1)  To be filed with Securities and Exchange Commission not later than 120
days after the end of the period covered by this Report on Form 10-K.

(2)  [This footnote has been intentionally left blank.]

(3)  [This footnote has been intentionally left blank.]

(4)  [This footnote has been intentionally left blank.]

(5)  Incorporated by reference to exhibits filed in response to Item 14(a),
Exhibits, of the Companys Annual Report on Form 10-K for the year ended
December 31, 2000.

(6)  Incorporated by reference to the Companys Registration Statement on Form
S-8 filed June 19, 2001.

(7)  Incorporated by reference to the signature page of this Report on Form
10-K.

(8)  Incorporated by reference to exhibits filed in response to Item 16(a),
Exhibits, of the Companys Annual Report on Form 10-K for the year ended
December 31, 1998 (file no. 000-19395).

(9)  Incorporated by reference to Amendment No. 1 to the Companys Registration
Statement on Form S-4 filed March 9, 1994 (file no. 33-75462), as amended by
the Amended and Restated Certificate of Designation of Rights, Preferences and
Privileges of Series A Participating Preferred Stock of Sybase, Inc., attached
as Exhibit 3.3 to Form 8-A filed on August 5, 2002.

(10)  Incorporated by reference to exhibits filed in response to Item 14(a)
Exhibits, of the Companys Annual Report on Form 10-K for the year ended
December 31, 2001.

(11)  Incorporated by reference to exhibits filed in response to Item 14(a)
Exhibits, of the Companys Annual Report on Form 10-K for the year ended
December 31, 2002.

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