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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 FORM 10-K
 þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 For the fiscal year ended December 31, 2007
 OR
 o
    
    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: 1-16493
 SYBASE, INC.
  Delaware
    
    94-2951005(State or other jurisdiction of
    
    (I.R.S. Employerincorporation or organization)
    
    Identification No.)One Sybase Drive, Dublin, California
    
    94568(Address of principal executive offices)
    
    (Zip Code)
 
  Title of each class
    
    Name of each exchange on which registeredCommon Stock, $.001 par value per share
    
    New York Stock Exchange
    þ o
 o þ
 þ o
 o
  Large accelerated filer þ
    
    Accelerated filer o
    
    Non-accelerated filer   o
(Do not check if a smaller reporting company)
    
    Smaller Reporting Company o
 o þ
   Class
    
    Outstanding at February 15, 2008Common Stock, $.001 par value per share
    
    89,180,118 shares
 DOCUMENTS INCORPORATED BY REFERENCE
 Document
    
    Parts Into Which IncorporatedAnnual Report to Stockholders for the Fiscal
Year Ended December 31, 2007 (Annual Report)
    
    Parts I, II, and IVProxy Statement for the Annual Meeting of
Shareholders to be held April 15, 2008
(Proxy Statement)
    
    Part III




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TABLE OF CONTENTS  PART IITEM 1. BUSINESSITEM 1 (A): RISK FACTORSITEM 1 (B): UNRESOLVED STAFF COMMENTSITEM 2. PROPERTIESITEM 3. LEGAL PROCEEDINGSITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERSPART IIITEM 5. MARKET FOR THE REGISTRANTS COMMON STOCK AND RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIESITEM 6. SELECTED FINANCIAL DATAITEM 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATAITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON            ACCOUNTING AND FINANCIAL DISCLOSUREITEM 9A. CONTROLS AND PROCEDURESPART IIIITEM 10. DIRECTORS, EXECUTIVE OFFICERS OF REGISTRANT AND CORPORATE GOVERNANCEITEM 11. EXECUTIVE COMPENSATIONITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERSITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCEITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICESPART IVITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULESSIGNATURESEXHIBIT INDEXEXHIBIT 12EXHIBIT 21EXHIBIT 23.1EXHIBIT 31.1EXHIBIT 31.2EXHIBIT 32    Table of Contents  FORWARD-LOOKING STATEMENTS
   www.sec.gov
 www.sybase.com
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PART I
 
 ITEM 1. BUSINESS
   ®
  ® ® ® ®
  ®
 
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UNWIRED ENTERPRISE
   CUSTOMERS
  
    
    A hedge fund uses Sybase IQs column-based database technology to deliver meaningful
information from trade, bond and market data. Developing a customized, in-house analytics
solution based on Sybase IQ, the hedge fund increased the ability to customize data for
users and the companys overall data agility. This private investment firm, like many
financial service customers, uses Sybase IQ to deliver high speed analytics across large
data sets.
    
    A global leader in medical technology uses Sybase iAnywhere Information Anywhere Suite
and SQL Anywhere to support its field sales and marketing team with a mobile solution. The
mobile solution is powered by SQL Anywheres mobile database and synchronization software,
while Information Anywheres frontline management software provides the ability to
centrally manage and secure these applications.
    
    One of Indias largest banks recently migrated 200 applications onto Sybase Adaptive
Server Enterprise (ASE) in order to reduce their operational costs and improve performance.
The bank utilizes Sybase IQ for fast reporting and query performance in their data
warehouse applications. In addition, the bank employs Sybase replication technology to
implement a reliable disaster recovery solution to ensure high availability. In choosing
Sybase, the bank was able to address its strategic data management pain points while
ensuring support for a heterogeneous data center environment.
    
    One of the worlds largest airlines uses Sybase Information Anywhere Suite to support a
remote team of field engineers who install, maintain and repair on-site computer equipment
and infrastructure across 321 cities in 58 countries and five continents. By using the
Suites comprehensive mobile platform, field engineers are now able to receive, resolve and
report on technology incidents more accurately, efficiently and quickly than ever before.
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
    
    A large, prestigious universitys medical system uses Sybase iAnywhere Information
Anywhere Suite to manage the use of mobile computing and storage devices while ensuring the
confidentiality, integrity, and accessibility of information accessed and stored.
Leveraging the Information Anywheres frontline management capabilities, the university
enforces and ensures compliance with standards governing the use, management, and
configuration of all mobile computing and storage devices.
    
    One of the leading international banks uses Sybase 365 to enhance its Internet banking
security and to strengthen online verification procedures through a two-factor
authentication at login for all types of Internet banking systems. Sybase 365 provides the
SMS connectivity so each time a customer conducts transactions on the banks Internet
banking platform, a login PIN is required, in addition to a user ID and password. After the
customer logs in with their user ID and password, Sybase 365 sends the PIN (a unique
number) via SMS to the customers registered mobile phone.
 PRODUCTS AND SERVICES
  Infrastructure Platform Group (IPG)
 Sybase Adaptive Server Enterprise
 Sybase IQ
 Sybase Risk Analytics Platform (RAP)
 Sybase Replication Server®
 Sybase Data Integration Suite
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Sybase Mirror Activator
 Sybase PowerDesigner
 Sybase WorkSpace
 Sybase PowerBuilder
 Sybase Financial Fusion Banking Solutions
 iAnywhere Solutions (iAS)
 SQL Anywhere
 Information Anywhere Suite
 RemoteWare®
 RFID Anywhere
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Standards-based SDKs ®
 AvantGo®
 Sybase 365
 Operator Services
 Brand and Content Provider Services.
 Enterprise Messaging Services
 WORLDWIDE SERVICES
 Technical Support.
 Standard Support
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Enterprise Support
    Consulting.
 Education.
 SALES AND DISTRIBUTION
 Licensing and Services Model.
 Distribution Method.
 International Business.
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INTELLECTUAL PROPERTY RIGHTS
  RESEARCH AND DEVELOPMENT
  COMPETITION
   Information Management Products.
 Financial Fusion Products:
  Mobile and Embedded Database Products
 Mobile Middleware and Device Management Products.
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AvantGo.
  Operator Services.
 Brand and Content Provider Services.
 Enterprise Messaging Services.
  EMPLOYEES
  
 ITEM 1 (A): RISK FACTORS
 Future Operating Results
  Significant variation in the timing and amount of our revenues may cause fluctuations in our
quarterly operating results and an accurate estimation of our revenues is difficult.
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Economic and credit market conditions in the U.S. and worldwide could adversely affect our
revenues.
  If we fail to maintain or expand our relationships with strategic partners and indirect
distribution channels our license revenues could decline.
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System failures, delays and other problems could harm our reputation and business, cause us to lose
customers and expose us to customer liability.
    Industry consolidation and other competitive pressures could affect prices or demand for our
products and services, and our business may be adversely affected.
   We may encounter difficulties in completing the integration of our Mobile 365 acquisition, other
acquisitions or strategic relationships and we may incur acquisition-related charges that could
adversely affect our operating results.
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The ability to rapidly develop and bring to market advanced products and services that are
successful is crucial to maintaining our competitive position.
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If our existing customers cancel or fail to renew their technical support agreements, our technical
support revenues could be adversely affected.
  Pricing pressure in the mobile messaging market could adversely affect our operating results.
  Unanticipated delays or accelerations in our sales cycles could result in significant fluctuations
in our quarterly operating results.
  Our mobile messaging customer contracts may not continue to generate revenues at or near our
historical levels of revenues from these customers.
  If we do not adapt to rapid technological change in the telecommunications industry, we could lose
customers or market share.
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Restructuring activities and reorganizations in our sales model or business units may not succeed
in increasing revenues and operating results.
   Our results of operations may depend on the compatibility of our products with other software
developed by third parties.
  We are subject to risks arising from our international operations.
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We may not receive significant revenues from our current research and development efforts for
several years, if at all.
  We might experience significant errors or security flaws in our products and services.
  Unanticipated changes in our tax rates could affect our future financial results.
  We face exposure to adverse movements in foreign currency exchange rates.
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Growing market acceptance of open source software could cause a decline in our revenues and
operating margins.
  Insufficient protection for our intellectual property rights may have a material adverse affect on
our results of operations or our ability to compete.
  If third parties claim that we are in violation of their intellectual property rights, it could
have a negative impact on our results of operations or ability to compete.
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Laws and regulations affecting our customers and us and future laws and regulations to which they
or we may become subject may harm our business.
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Our key personnel are critical to our business, and we cannot assure that they will remain with us.
  Our sales to government clients subject us to risks including early termination, audits,
investigations, sanctions and penalties.
   Changes in accounting and legal standards could adversely affect our future operating results.
  
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Accounting for Convertible Debt Instruments That May Be Settled in Cash upon Conversion (Including
Partial Cash Settlement.
 Business Combinations.
 The unfavorable outcome of litigation and other claims against us could have a material adverse
impact on our financial condition and results of operations.
  Our operations and financial results could be severely harmed by certain natural disasters.
  Provisions of our corporate documents have anti-takeover effects that could prevent a change in
control.
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ITEM 1 (B): UNRESOLVED STAFF COMMENTS
  
 ITEM 2. PROPERTIES
         
 ITEM 3. LEGAL PROCEEDINGS
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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 AND ISSUER PURCHASES OF EQUITY SECURITIES
  High
    
    LowFiscal 2006Quarter ended March 31, 2006
    
    $
    22.76
    
    
    $
    20.89Quarter ended June 30, 2006
    
    $
    22.14
    
    
    $
    19.40Quarter ended September 30, 2006
    
    $
    24.77
    
    
    $
    19.60Quarter ended December 31, 2006
    
    $
    26.00
    
    
    $
    23.41Fiscal 2007Quarter ended March 31, 2007
    
    $
    26.28
    
    
    $
    24.01Quarter ended June 30, 2007
    
    $
    26.19
    
    
    $
    22.64Quarter ended September 30, 2007
    
    $
    25.08
    
    
    $
    22.07Quarter ended December 31, 2007
    
    $
    28.60
    
    
    $
    23.50
   Issuer Purchases of Equity Securities
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Avg. PriceNumber of shares
    
    Paid PerPeriod
    
    purchased
    
    ShareOctober 2007
    
    
    572,500
    
    
    $
    28.21November 2007
    
    
    2,198,700
    
    
    $
    26.91December 2007
    
    
    0
    
    
    
    0Total for Fourth Quarter 2007
    
    
    2,771,200
    
    
    $
    27.18
   PERFORMANCE GRAPH
  
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Dec-02
    
    Dec-03
    
    Dec-04
    
    Dec-05
    
    Dec-06
    
    Dec-07Sybase Inc.
    
    $
    100
    
    
    $
    154
    
    
    $
    149
    
    
    $
    163
    
    
    $
    184
    
    
    $
    195S&P © 500
    
    $
    100
    
    
    $
    129
    
    
    $
    143
    
    
    $
    150
    
    
    $
    173
    
    
    $
    183S&P © Systems Software
    
    $
    100
    
    
    $
    117
    
    
    $
    126
    
    
    $
    121
    
    
    $
    143
    
    
    $
    171
 
 ITEM 6. SELECTED FINANCIAL DATA
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Consolidated Statements of Operations Data
 (In thousands, except per share data)
    
    2007
    
    
    2006
    
    
    2005
    
    
    2004
    
    
    2003Revenues:License fees
    
    $
    344,807
    
    
    $
    326,751
    
    
    $
    291,695
    
    
    $
    275,872
    
    
    $
    274,817Services
    
    
    544,209
    
    
    
    531,172
    
    
    
    527,000
    
    
    
    512,664
    
    
    
    503,245Messaging
    
    
    136,514
    
    
    
    18,240
    
    
    
    
    
    
    
    
    
    
    
    Total revenues
    
    
    1,025,530
    
    
    
    876,163
    
    
    
    818,695
    
    
    
    788,536
    
    
    
    778,062Costs and expenses:Cost of license fees
    
    
    53,114
    
    
    
    50,540
    
    
    
    51,556
    
    
    
    60,795
    
    
    
    60,711Cost of services
    
    
    157,790
    
    
    
    152,962
    
    
    
    156,325
    
    
    
    162,016
    
    
    
    162,703Cost of messaging
    
    
    82,598
    
    
    
    11,097
    
    
    
    
    
    
    
    
    
    
    
    Sales and marketing
    
    
    266,995
    
    
    
    263,281
    
    
    
    250,003
    
    
    
    242,778
    
    
    
    239,173Product development and engineering
    
    
    152,571
    
    
    
    149,510
    
    
    
    139,011
    
    
    
    119,959
    
    
    
    116,967General and administrative
    
    
    129,319
    
    
    
    106,025
    
    
    
    92,106
    
    
    
    91,117
    
    
    
    84,750Amortization of other purchased
intangibles
    
    
    13,783
    
    
    
    7,331
    
    
    
    6,639
    
    
    
    5,139
    
    
    
    2,000Reversal of AvantGo restructuring
accrual
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,677
    )
    
    
    Cost of restructuring
    
    
    797
    
    
    
    1,653
    
    
    
    1,115
    
    
    
    20,017
    
    
    
    7,429Total costs and expenses
    
    
    856,967
    
    
    
    742,399
    
    
    
    696,755
    
    
    
    699,144
    
    
    
    673,733Operating income
    
    
    168,563
    
    
    
    133,764
    
    
    
    121,940
    
    
    
    89,392
    
    
    
    104,329Interest income and expense, net
    
    
    21,377
    
    
    
    27,634
    
    
    
    14,824
    
    
    
    11,574
    
    
    
    13,766Minority interest
    
    
    12
    
    
    
    (81
    )
    
    
    (49
    )
    
    
    
    
    
    
    Income before income taxes
    
    
    189,952
    
    
    
    161,317
    
    
    
    136,715
    
    
    
    100,966
    
    
    
    118,095Provision for income taxes
    
    
    41,102
    
    
    
    66,253
    
    
    
    51,132
    
    
    
    33,016
    
    
    
    30,829Net income
    
    $
    148,850
    
    
    $
    95,064
    
    
    $
    85,583
    
    
    $
    67,950
    
    
    $
    87,266Basic net income per share
    
    $
    1.65
    
    
    $
    1.06
    
    
    $
    0.95
    
    
    $
    0.71
    
    
    $
    0.92Shares used in computing basic net
income per share
    
    
    90,019
    
    
    
    89,557
    
    
    
    90,307
    
    
    
    95,550
    
    
    
    94,833Diluted net income per share
    
    $
    1.61
    
    
    $
    1.03
    
    
    $
    0.92
    
    
    $
    0.69
    
    
    $
    0.89Shares used in computing diluted net
income per share
    
    
    92,598
    
    
    
    92,251
    
    
    
    93,257
    
    
    
    98,001
    
    
    
    97,582
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Consolidated Balance Sheet Data
 (In thousands)
    
    2007
    
    2006
    
    2005
    
    2004
    
    2003Cash, cash equivalents and
cash investments
    
    $
    734,907
    
    
    $
    637,696
    
    
    $
    859,936
    
    
    $
    513,632
    
    
    $
    573,793Working capital
    
    
    604,728
    
    
    
    455,143
    
    
    
    573,247
    
    
    
    290,237
    
    
    
    261,023Total assets
    
    
    1,913,483
    
    
    
    1,787,550
    
    
    
    1,570,614
    
    
    
    1,183,522
    
    
    
    1,151,356Long-term obligations
    
    
    549,591
    
    
    
    518,876
    
    
    
    500,339
    
    
    
    33,121
    
    
    
    15,129Stockholders equity
    
    
    930,810
    
    
    
    843,131
    
    
    
    698,830
    
    
    
    756,556
    
    
    
    741,469
 
 ITEM 7.
    
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
  
    
    Executive Overview that discusses at a high level our operating
results and some of the trends that affect our business.
    
    Critical Accounting Policies that we believe are important to
understanding the assumptions and judgments underlying our financial
statements.
    
    Results of Operations that begins with an overview followed by a more
detailed discussion of our revenue and expenses.
    
    Liquidity and Capital Resources which discusses key aspects of our
statements of cash flows, changes in our balance sheets and our
financial commitments.
 Risk Factors, Future Operating Results
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Executive Overview
 Our Business
     Our Results
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Business Trends
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Critical Accounting Policies and Estimates
  
    
    Revenue RecognitionRevenue recognition rules for software and message services companies are very complex. We
follow specific and detailed guidance in measuring revenue, although certain judgments affect
the application of our revenue recognition policy. These judgments would include, for example,
the determination of a customers creditworthiness, whether two separate transactions with a
customer should be accounted for as a single transaction, reporting certain third party content
delivery revenues gross as a principal versus net as an agent, or whether included software
services are essential to the functionality of a product.
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License and Service Revenues
We recognize software revenue in accordance with Statement of Position (SOP) 97-2, Software
Revenue Recognition, 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 or SEC
Staff Accounting Bulletin, or SAB, No. 104, Revenue Recognition. We license software under
non-cancelable license agreements. License fee revenues are recognized when (a) a non-cancelable
license agreement is in force, (b) the product has been delivered, (c) the license fee is fixed
or determinable, and (d) collection is reasonably assured. If the fee is not fixed or
determinable, revenue is recognized as payments become due from the customer and all other
revenue recognition criteria have been met.
 Residual Method Accounting
 Percentage of Completion Accounting
 Sublicense Revenues
 Service Revenues
 Message Revenues
We recognize message revenue in accordance with SAB No. 104, Emerging Issues Task Force No.
00-21, Revenue Arrangements with Multiple Deliverables(EITF 00-21) and where applicable in
accordance with EITF, No. 99-19, Reporting Revenue Gross as a Principal Versus Net as an Agent
(EITF 99-19). We recognize revenue when (a) there is persuasive evidence of an arrangement;
(b) the service has been provided to the customer; (c) the amount of the fees to be paid by the
customer is fixed and determinable; and (d) the collection of the fees is reasonable assured.
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Our agreements with mobile operators and application providers to provide messaging data
delivery and settlement services generally have an initial term of one year. We generate a
significant portion of our message revenue from per message transaction fees and to a lesser
extent, from revenue share agreements related to the delivery of third party content. We
recognize revenue from transaction fees based upon the number of messages successfully processed
by our platforms and delivered in accordance with the terms of our arrangements.In some instances third party content providers, and other enterprises enter into revenue
sharing arrangements with us. Under a standard revenue sharing transaction we deliver content
from a third party provider to the cell phone of a mobile operatiors subscriber. Third party
content includes, among other, ringtones, wallpapers, interactive games, competitions, directory
inquiry services, and information services. The subscriber is invoiced by their mobile
operator, who upon receipt of payment, remits a portion of the charge to us. Upon payment from
the mobile operator, we remit payment to the third party content provider. In accordance with
EITF 99-19, we have determined that we act as an agent under these revenue sharing arrangements
and accordingly, record as revenue the net amount retained by us. The net amount retained by us
reflects the gross amount billed to the operator less amounts due to the content provider.
    
    Impairment of Goodwill, Non-amortizable Intangible Assets and Other Purchased Intangible AssetsGoodwill and other non-amortizable intangible assets, such as tradenames, have generally
resulted from our business combinations accounted for as purchases. We are required to test
amounts recorded as goodwill or other non-amortizable intangible assets with indeterminate
lives, at least annually for impairment. The review of goodwill and indeterminate lived
intangibles for potential impairment is highly subjective and requires us to make numerous
estimates, using a discounted cash flow model, to determine the fair 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 8,
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 purchased intangible
assets with determinate and indeterminate useful lives including in-process research and
development, and developed technology. We performed our annual impairment analysis for each of
our historical operating units (IPG, iAS, and SY365) and for each indeterminate lived intangible
asset as of December 31, 2007. This analysis indicated that the estimated fair value of each
reporting unit or indeterminate lived intangible exceeded its carrying value. Therefore, we were
not required to recognize an impairment loss in 2007. As of December 31, 2007, our goodwill
balance totaled $533.3 million and our other purchased intangibles totaled $7.1 million.
Changes in our internal business structure, increases in the applicable discount rate, 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 impairment charge.We also continue to separately review our other intangible assets (e.g., purchased technology,
customer lists and covenants not to compete) for indications of impairment whenever events or
changes in circumstances indicate the carrying amount of any such 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, technology obsolescence, customer terminations including
message customers due to technology interoperability and other factors could result in
impairment losses associated with other intangible assets. There were no indicators of
impairment during 2007.
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
    
    Valuation of InvestmentsIn 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, 2007, we have classified all 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. Realized gains and losses are determined on the specific identification
method and are reflected in income.On January 1, 2006 we adopted the FASB Staff positions FAS Nos. 115-1 and FAS 124-1,
The Meaning of Other-Than-Temporary Impairment and its Application to Certain Investments (the
FSPs).The FSPs were issued on November 3, 2005 and nullified certain provisions of EITF No.
03-01 related to evaluating an other-than temporary impairment and clarified the accounting
policies set forth in FASB Statement No. 115, Accounting for Certain Investments in Debt and
Equity Securities.During 2006, we did not recognize impairment losses related to unrealized losses on
debt securities as a charge to income as we believed that the decline in market value
was due to changes in interest rates and not due to increased credit
risk and we had the ability
and intent to hold the securities until a recovery of fair value, which may be maturity.As of December 31, 2007, long-term cash investments totaling $36.6 million include six auction
rate securities (ARS) with an aggregate par value of $28.9 million. As of December 31, 2007, the
temporary impairment associated with three of these ARS representing an aggregate par value of
$14.9 million and the other-than-temporary impairment associated with the remaining three ARS
representing an aggregate par value of $14.0 million were not material.Our ARS are floating rate securities with longer-term maturities which are marketed by financial
institutions with auction reset dates at 28 day intervals to provide short term liquidity. The
underlying collateral of the ARS held by us consist primarily of commercial paper, debt
instruments issued by governmental agencies and governmental sponsored entities, and similar
assets. Certain of the ARS may have limited direct or indirect investments in mortgage or
mortgage related securities. The credit ratings for five of the ARS were AAA and for one of the
ARS was AA at the time of purchase. Beginning in August 2007 and into September 2007, each of
the ARS auctions began to fail due to a lack of market for these securities. The failed auctions
have resulted in higher interest rates being earned on these investments, but the investments
currently lack short-term liquidity. We will not be able to access these funds until a future
auction for the ARS investments is successful or until we sell the securities in a secondary
market which currently does not exist. Based on our cash, cash equivalents and cash investment
balances of $734.9 million and expected operating cash flows, we do not anticipate that the lack
of liquidity for the ARS to adversely affect our ability to conduct business and believe we have
the ability and intent to hold the temporarily impaired securities through the currently
estimated recovery period. The fair values of the ARS as of December 31, 2007 are based on an
estimation using a discounted cash flow model for each of the six ARS using credit related
discount rates and term to recovery as key inputs. The determination if the security is other
then temporarily impaired is based on a variety of factors including (i) the quality of the
investments held by the trust/issuer; (ii) the financial condition of the credit rating of the
trust, issuer, sponsors, and insurers; and, (iii) the frequency of the auction function failing.
Changes in assumptions and other factors could result in additional realized and
unrealized impairment losses.These securities are being analyzed each reporting period for
changes in estimated fair values
and temporary and other-than-temporary impairment factors. We expect additional
impairment amounts may be recorded in future periods.
 - 33 -




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
    
    Allowance for Doubtful AccountsWe maintain an allowance for doubtful accounts to reflect the expected non-collection of
accounts receivable. In determining the amount of the allowance we consider our historical
level of credit losses; judgments about the creditworthiness of significant customers; an
assessment current
economic and industry trends that might impact the level of credit losses in the future; and
other factors. Our allowances have generally been adequate to cover our actual credit losses.
However, since we cannot reliably predict future changes in the financial stability of our
customers, we cannot guarantee that our allowance will continue to be adequate. For example,
our allowance for doubtful accounts totaled $3.7 million at December 31, 2007. If our allowance
for doubtful accounts, including identified specific customer matters, changed by 10% our
allowance for doubtful accounts and operating results would change by $0.4 million.
    
    Capitalized SoftwareWe capitalize certain software development costs after a product becomes technologically
feasible and before its general release to customers. Our net capitalized software totaled $74.3
million at December 31, 2007. Significant 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 of the product. Quarterly, 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 (reduced by the estimated future costs of completing and selling 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 selling certain
products. Changes in these estimates could result in write-offs of capitalized software costs.
See Note One to Consolidated Financial Statements, Part II, Item 8, incorporated here by
reference.
    
    Income Taxes  Estimates of Effective Tax Rates, Deferred Taxes and Valuation AllowanceWe 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 in any period that
we could realize a larger net deferred tax asset than the recorded amount, we would adjust the
deferred tax asset and record a corresponding reduction to our income tax expense for the
period. For example, during the quarter ending December 31 2007, management reduced its estimate
of foreign subsidiaries earnings permanently reinvested. As a result of this change and other
projected changes in the Companys future US taxable income, management re-evaluated the need
for valuation allowances for the Companys US deferred tax assets. As a result of this
re-evaluation, during the quarter ending December 31, 2007, the Company released approximately
$27.6 million of valuation allowances relating to federal research tax credit and foreign tax
credit carryforwards, of which $26.4 million reduced tax expense and approximately $1.2 million
reduced goodwill.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 and record a charge to income tax
expense for the period. Significant judgment is required in assessing the future tax
consequences of events that have been recognized in our financial statements or tax returns.
Fluctuations between the actual outcomes of these future tax consequences (e.g., the income we
earn within the United States) could materially impact our financial position or results of
operations. See Note Eight to the Consolidated Financial Statements  Income Taxes, Part II,
Item 8.Our effective tax rate is based on expected geographic income, statutory rates and enacted tax
rules, including transfer pricing. We are required to exercise significant judgment in
determining our effective rate and in evaluating various positions that apply to our worldwide
operations. We believe that our tax positions, including intercompany transfer pricing policies,
are consistent with the tax laws in the jurisdictions in which we conduct business. It is
possible, however, that these positions will be challenged which may have a significant impact
on our effective tax rate.
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On January 1, 2007, we adopted FASB Interpretation No. 48, Accounting for Uncertainty in Income
Taxes: An Interpretation of FASB Statement No. 109, or FIN No. 48. FIN 48 prescribes a
recognition
and measurement threshold for a tax position taken or expected to be taken in a tax return. The
adoption of FIN 48 did not have a material impact on the Companys consolidated financial
position.
    
    Accounting for Stock-Based Compensation PlansPrior to January 1, 2006, we accounted for our stock-based employee compensation plans under the
measurement and recognition provisions of Accounting Principles Board (APB) Opinion No. 25,
Accounting for Stock Issued to Employees,and related Interpretations, as permitted by
Financial Accounting Standards Board (FASB) Statement of Financial Accounting Standards (SFAS)
No. 123, Accounting for Stock-Based Compensation.Accordingly we were not required to record
compensation expense when stock options were granted to eligible participants as long as the
exercise price was not less than the fair market value of the stock when the option was granted.
Prior to January 1, 2006, we generally recorded stock-based employee compensation relating to
restricted stock grants. We recorded no compensation expense in connection with our Employee
Stock Purchase Plan as the purchase price of the stock was not less than 85% of the lower of the
fair market value of our common stock at the beginning of each offering period or at the end of
each purchase period. In accordance with SFAS 123 and SFAS 148, Accounting for Stock-Based
Compensation  Transition and Disclosure,we disclosed our pro forma net income or loss and
net income or loss per share as if we had applied the fair value-based method in measuring
compensation expense for our stock-based incentive programs.Effective January 1, 2006, we adopted the fair value recognition provisions of SFAS 123(R),
Share-Based Payment,using the modified prospective transition method. Under that transition
method, compensation expense that we recognize beginning on that date includes: (a) period
compensation expense for all share-based payments granted prior to, but not yet vested as of,
January 1, 2006, based on the grant date fair value estimated in accordance with the original
provisions of SFAS 123, adjusted for estimated forfeitures, and (b) period compensation expense
for all stock-based payments granted on or after January 1, 2006, based on the grant date fair
value estimated in accordance with the provisions of SFAS 123(R). Because we elected to use the
modified prospective transition method, results for prior periods have not been restated.At December 31, 2007, there was $43.4 million of total unrecognized compensation cost before
income tax benefit related to non-vested stock-based compensation arrangements granted under all
equity compensation plans which we will amortize to expense in the future. Total unrecognized
compensation cost will be adjusted for future changes in estimated forfeitures. We expect to
recognize that cost over a weighted average period of 2.2 years.We estimate the fair value of options granted using the Black-Scholes option valuation model and
the assumptions shown in Note Seven to the Consolidated Financial Statements  Stockholders
Equity , Part II, Item 8. We estimated the expected term of options granted based on historical
exercise patterns. Beginning in the second quarter of 2005 we estimated the volatility of our
options and stock appreciation rights considering both the historical volatility of our stock
over the average expected life of our options and the prices of publicly traded options,
consistent with SFAS 123(R) and Securities and Exchange Commission Staff Accounting Bulletin No.
107. Prior to that, we estimated the volatility factors for stock options and stock
appreciation rights considering the historical volatility of our stock over the most recent four
year period which was approximately equal to the average expected life of our options. We base
the risk-free interest rate that we use in the Black-Scholes option valuation model on the
average of the 3 and 5 year treasury rates as published by the Federal Reserve. We have never
paid any cash dividends on our common stock and we do not anticipate paying any cash dividends
in the foreseeable future. Consequently, we use an expected dividend yield of zero in the
Black-Scholes option valuation model. SFAS 123(R) requires us to estimate forfeitures at the
time of grant and revise those estimates in subsequent periods if actual forfeitures differ from
those estimates. We use historical data to estimate pre-vesting option forfeitures and
 - 35 -




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##### Table of Contents



record
share-based compensation expense only for those awards that are expected to vest. For purposes
of calculating pro forma information under SFAS 123 for periods prior to 2006, we accounted for
 forfeitures as they occurred. We amortize the fair value on a ratable basis over the requisite
service periods of the awards, which are generally the vesting periods.Changes in the subjective input assumptions can materially affect the fair value estimates
determined under the Black-Scholes option valuation model. In the future, changes in the
assumptions under the Black-Scholes valuation model or our election to use a different valuation
model, could result in a significantly different impact on our net income or loss.
    
    Purchase AccountingWe have made estimates of the fair values of purchased intangible and other assets acquired in
conjunction with our purchase of Mobile 365, Inc. as of November 8, 2006, and other acquired
companies based primarily on appraisals from third parties and certain internally generated
information.Purchased intangible assets, excluding goodwill, totaled $130.6 million at December 31, 2007.
If the subsequent actual and updated projections of the underlying business activity are less as
compared to the underlying assumptions and projections used to develop these values, then we
could experience impairment losses, as described above. In addition, we have estimated the
economic lives of certain of these assets and these lives were used to calculate depreciation
and amortization expense. If our estimates of the economic lives change, then additional
depreciation or amortization expense could be incurred on an annual basis. Historically, we have
not made any changes in these areas. If the estimates of the economic lives of the
definite-lived intangible assets acquired as part of our acquisition of Mobile 365 were reduced
by one year, our 2007 amortization expense would increase by approximately $1.7 million.
    
    RestructuringHistorically, we have recorded significant accruals in connection with various restructuring
activities. Our remaining restructuring accruals primarily relate to the estimated net costs to
settle certain lease obligations based on analysis of independent real estate consultants. While
we do not anticipate significant changes to these estimates in the future, the actual costs may
differ from 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 or goodwill. Alternatively, if we are unable to
negotiate affordable termination fees, if rental rates decrease in the markets where the
properties are located, or if it takes us longer than expected to find suitable sublease
tenants, the actual costs could exceed our estimates See Note Thirteen to Consolidated Financial
Statements Restructuring Costs, Part II, Item 8.
 - 36 -




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##### Table of Contents



 Contingencies and Liabilities
   Results of Operations
 Revenues
 2007
    
    
    Change
    
    
    2006
    
    
    Change
    
    
    2005License fees by segment:IPG
    
    $
    275.5
    
    
    
    6
    %
    
    $
    261.1
    
    
    
    10
    %
    
    $
    237.2iAS
    
    
    100.3
    
    
    
    9
    %
    
    
    92.1
    
    
    
    13
    %
    
    
    81.4SY365
    
    
    
    
    
    
    *
    
    
    
    
    
    
    
    *
    
    
    
    Eliminations
    
    
    (31.0
    )
    
    
    17
    %
    
    
    (26.4
    )
    
    
    (2
    %)
    
    
    (26.9
    )Total license fees
    
    $
    344.8
    
    
    
    6
    %
    
    $
    326.8
    
    
    
    12
    %
    
    $
    291.7Percentage of total revenues
    
    
    34
    %
    
    
    
    
    
    
    37
    %
    
    
    
    
    
    
    36
    %Services by segment:IPG
    
    $
    496.6
    
    
    
    2
    %
    
    $
    485.4
    
    
    
    (1
    %)
    
    $
    488.1iAS
    
    
    77.0
    
    
    
    7
    %
    
    
    72.1
    
    
    
    9
    %
    
    
    65.9SY365
    
    
    
    
    
    
    *
    
    
    
    
    
    
    
    *
    
    
    
    Eliminations
    
    
    (29.4
    )
    
    
    12
    %
    
    
    (26.3
    )
    
    
    (3
    %)
    
    
    (27.0
    )Total services
    
    $
    544.2
    
    
    
    2
    %
    
    $
    531.2
    
    
    
    1
    %
    
    $
    527.0Percentage of total revenues
    
    
    53
    %
    
    
    
    
    
    
    61
    %
    
    
    
    
    
    
    64
    %Messaging by segment:SY365
    
    $
    136.5
    
    
    
    650
    %
    
    $
    18.2
    
    
    
    *
    
    
    
    Total messaging
    
    $
    136.5
    
    
    
    650
    %
    
    $
    18.2
    
    
    
    *
    
    
    
    Percentage of total revenues
    
    
    13
    %
    
    
    
    
    
    
    2
    %
    
    
    
    
    
    
    Total revenues
    
    $
    1,025.5
    
    
    
    17
    %
    
    $
    876.2
    
    
    
    7
    %
    
    $
    818.7
 
 *
    
    Not meaningful - 37 -




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.
     - 38 -




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##### Table of Contents



Geographical Revenues
 2007
    
    
    Change
    
    
    2006
    
    
    Change
    
    
    2005North America
    
    $
    532.0
    
    
    
    12
    %
    
    $
    474.0
    
    
    
    2
    %
    
    $
    464.9Percentage of total revenues
    
    
    52
    %
    
    
    
    
    
    
    54
    %
    
    
    
    
    
    
    57
    %International:EMEA (Europe, Middle East and
Africa)
    
    $
    342.0
    
    
    
    22
    %
    
    $
    279.3
    
    
    
    20
    %
    
    $
    233.5Percentage of total revenues
    
    
    33
    %
    
    
    
    
    
    
    32
    %
    
    
    
    
    
    
    28
    %Intercontinental (Asia Pacific
and Latin America)
    
    $
    151.5
    
    
    
    23
    %
    
    $
    122.9
    
    
    
    2
    %
    
    $
    120.3Percentage of total revenues
    
    
    15
    %
    
    
    
    
    
    
    14
    %
    
    
    
    
    
    
    15
    %Total Outside North America
    
    $
    493.5
    
    
    
    23
    %
    
    $
    402.2
    
    
    
    14
    %
    
    $
    353.8Percentage of total revenues
    
    
    48
    %
    
    
    
    
    
    
    46
    %
    
    
    
    
    
    
    43
    %Total revenues
    
    $
    1,025.5
    
    
    
    17
    %
    
    $
    876.2
    
    
    
    7
    %
    
    $
    818.7
     - 39 -




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Cost and Expenses
 2007
    
    
    Change
    
    
    2006
    
    
    Change
    
    
    2005Cost of license fees
    
    $
    53.1
    
    
    
    5
    %
    
    $
    50.5
    
    
    
    (2
    %)
    
    $
    51.6Percentage of license fee revenues
    
    
    15
    %
    
    
    
    
    
    
    15
    %
    
    
    
    
    
    
    18
    %Cost of services
    
    $
    157.8
    
    
    
    3
    %
    
    $
    153.0
    
    
    
    (2
    %)
    
    $
    156.3Percentage of services revenues
    
    
    29
    %
    
    
    
    
    
    
    29
    %
    
    
    
    
    
    
    30
    %Cost of messaging
    
    $
    82.6
    
    
    
    644
    %
    
    $
    11.1
    
    
    
    *
    
    
    
    Percentage of messaging revenues
    
    
    61
    %
    
    
    
    
    
    
    61
    %
    
    
    
    
    
    
    Sales and marketing
    
    $
    267.0
    
    
    
    1
    %
    
    $
    263.3
    
    
    
    5
    %
    
    $
    250.0Percentage of total revenues
    
    
    26
    %
    
    
    
    
    
    
    30
    %
    
    
    
    
    
    
    31
    %Product development and engineering
    
    $
    152.6
    
    
    
    2
    %
    
    $
    149.5
    
    
    
    8
    %
    
    $
    139.0Percentage of total revenues
    
    
    15
    %
    
    
    
    
    
    
    17
    %
    
    
    
    
    
    
    17
    %General and administrative
    
    $
    129.3
    
    
    
    22
    %
    
    $
    106.0
    
    
    
    15
    %
    
    $
    92.1Percentage of total revenues
    
    
    13
    %
    
    
    
    
    
    
    12
    %
    
    
    
    
    
    
    11
    %Amortization of other purchased intangibles
    
    $
    13.8
    
    
    
    89
    %
    
    $
    7.3
    
    
    
    11
    %
    
    $
    6.6Percentage of total revenues
    
    
    1
    %
    
    
    
    
    
    
    1
    %
    
    
    
    
    
    
    1
    %Cost of restructuring
    
    $
    0.8
    
    
    
    (53
    %)
    
    $
    1.7
    
    
    
    55
    %
    
    $
    1.1Percentage of total revenues
    
    
    *
    
    
    
    
    
    
    
    *
    
    
    
    
    
    
    
    *
 
 *
    
    Not meaningful Cost of license fees
    - 40 -




---



##### Table of Contents



Cost of services
  Cost of messaging
  Sales and marketing
  Product development and engineering
    - 41 -




---



##### Table of Contents



General and administrative
   Stock-based compensation expense
  (Amounts in thousands)
    
    2007
    
    2006
    
    2005Costs of services
    
    
    1,544
    
    
    
    1,629
    
    
    
    380Costs of messaging
    
    
    544
    
    
    
    124
    
    
    
    0Sales and marketing
    
    
    5,304
    
    
    
    4,432
    
    
    
    302Product development and engineering
    
    
    2,982
    
    
    
    2,679
    
    
    
    38General and administrative
    
    
    13,670
    
    
    
    12,861
    
    
    
    6,58624,044
    
    
    
    21,725
    
    
    
    7,306
  Amortization of other purchased intangibles
  - 42 -




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- 43 -




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Restructuring Activities
    Operating income
 (Dollars in millions)
    
    2007
    
    
    Change
    
    
    2006
    
    
    Change
    
    
    2005Operating income by segment:IPG
    
    $
    167.9
    
    
    
    17
    %
    
    $
    142.9
    
    
    
    40
    %
    
    $
    101.9IAS
    
    
    24.7
    
    
    
    58
    %
    
    
    15.6
    
    
    
    (28
    %)
    
    
    21.6SY365
    
    
    1.8
    
    
    
    *
    
    
    
    (1.0
    )
    
    
    *
    
    
    
    Unallocated (costs) savings
    
    
    (25.8
    )
    
    
    9
    %
    
    
    (23.7
    )
    
    
    1381
    %
    
    
    (1.6
    )Total operating income
    
    $
    168.6
    
    
    
    26
    %
    
    $
    133.8
    
    
    
    10
    %
    
    $
    121.9Percentage of total revenues
    
    
    16
    %
    
    
    
    
    
    
    15
    %
    
    
    
    
    
    
    15
    %
 
 *
    
    Not meaningful       - 44 -




---



##### Table of Contents



Other income (expense), net
 (Dollars in millions)
    
    2007
    
    
    Change
    
    
    2006
    
    
    Change
    
    
    2005Interest income
    
    $
    33.5
    
    
    
    (13
    %)
    
    $
    38.7
    
    
    
    51
    %
    
    $
    25.7Percentage of total revenues
    
    
    3
    %
    
    
    
    
    
    
    4
    %
    
    
    
    
    
    
    3
    %Interest expense and other, net
    
    $
    (12.1
    )
    
    
    10
    %
    
    $
    (11.0
    )
    
    
    1
    %
    
    $
    (10.9
    )Percentage of total revenues
    
    
    (1
    %)
    
    
    
    
    
    
    (1
    %)
    
    
    
    
    
    
    (1
    %)Minority interest
    
    
    *
    
    
    
    *
    
    
    $
    (0.1
    )
    
    
    *
    
    
    
    *Percentage of total revenues
    
    
    *
    
    
    
    
    
    
    
    *
    
    
    
    
    
    
    
    *
 
 *
    
    Not meaningful    Provision for Income Taxes
 (Dollars in millions)
    
    2007
    
    
    Change
    
    
    2006
    
    
    Change
    
    
    2005Provision for income taxes
    
    $
    41.1
    
    
    
    (38
    %)
    
    $
    66.3
    
    
    
    30
    %
    
    $
    51.1
   - 45 -




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##### Table of Contents



Net income per share
 (Dollars and shares in millions)
    
    2007
    
    
    Change
    
    
    2006
    
    
    Change
    
    
    2005Net income
    
    $
    148.9
    
    
    
    57
    %
    
    $
    95.1
    
    
    
    11
    %
    
    $
    85.6Percentage of total revenues
    
    
    15
    %
    
    
    
    
    
    
    11
    %
    
    
    
    
    
    
    10
    %Basic:Net income per share
    
    $
    1.65
    
    
    
    56
    %
    
    $
    1.06
    
    
    
    12
    %
    
    $
    0.95Shares used in computing
basic net income per share
    
    
    90.0
    
    
    
    *
    
    
    
    89.6
    
    
    
    (1
    %)
    
    
    90.3Diluted:Net income per share
    
    $
    1.61
    
    
    
    56
    %
    
    $
    1.03
    
    
    
    12
    %
    
    $
    0.92Shares used in computing
diluted net income per
share
    
    
    92.6
    
    
    
    *
    
    
    
    92.3
    
    
    
    (1
    %)
    
    
    93.3
 - 46 -




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##### Table of Contents



*
    
    Not meaningful   .
  Liquidity and capital resources
 (Dollars in millions)
    
    2007
    
    
    Change
    
    
    2006
    
    
    Change
    
    
    2005Working capital
    
    $
    604.7
    
    
    
    33
    %
    
    $
    455.1
    
    
    
    (20
    %)
    
    $
    573.2Cash and cash equivalents
    
    $
    604.8
    
    
    
    70
    %
    
    $
    355.3
    
    
    
    (11
    %)
    
    $
    398.7Net cash provided by operating activities
    
    $
    254.0
    
    
    
    18
    %
    
    $
    214.6
    
    
    
    26
    %
    
    $
    170.0Net cash provided by (used for) investing activities
    
    $
    86.7
    
    
    
    *
    
    
    $
    (276.3
    )
    
    
    (29
    %)
    
    $
    (389.4
    )Net cash provided by (used for) financing activities
    
    $
    (112.6
    )
    
    
    *
    
    
    $
    (0.1
    )
    
    
    *
    
    
    $
    328.5
 
 *
    
    Not meaningful Working Capital
  - 47 -




---



##### Table of Contents



Cash Flow
          - 48 -




---



##### Table of Contents



Cash and Cash Equivalents
  Short-term and Long-term Cash Investments and Auction-Rate Securities
      - 49 -




---



##### Table of Contents



Contractual Obligations
  Payments Due by Period(Dollars in Millions)
    
    
    
    
    
    2008
    
    
    2009-2010
    
    
    2011-2012Contractual Obligations
    
    Total
    
    
    Commitments
    
    
    Commitments
    
    
    Commitments
    
    
    After 2012Operating leases
    
    $
    246.1
    
    
    $
    44.9
    
    
    $
    75.7
    
    
    $
    49.2
    
    
    $
    76.3Capital lease
    
    
    14.0
    
    
    
    1.3
    
    
    
    2.4
    
    
    
    2.3
    
    
    
    8.0Debt obligations:Sale-and-leaseback
    
    
    2.5
    
    
    
    0.4
    
    
    
    0.9
    
    
    
    0.9
    
    
    
    0.3Note(s) payable
    
    
    2.9
    
    
    
    0.6
    
    
    
    0.4
    
    
    
    0.4
    
    
    
    1.5Convertible
subordinated notes
    
    
    480.1
    
    
    
    8.0
    
    
    
    472.1
    
    
    
    
    
    
    
    Purchase Obligations
    
    
    20.8
    
    
    
    15.1
    
    
    
    5.7
    
    
    
    
    
    
    
    Total commitments
    
    $
    766.4
    
    
    $
    70.3
    
    
    $
    557.2
    
    
    $
    52.8
    
    
    $
    86.1
     - 50 -




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##### Table of Contents



New Accounting Pronouncements  SFAS 157, Fair Value Measurements
  SFAS 158, Employers Accounting for Defined Benefit Pension and Other Postretirement
Plans
 SFAS 159, The Fair Value Option for Financial Assets and Financial Liabilities  The Fair Value Option for Financial Assets and
Financial Liabilities ( Fair Value Measurements, Disclosures about Fair Value of Financial Instruments.
 SFAS 160, NonControlling Interests in Consolidated Financial Statements
 SFAS 141(R), Business Combinations Business Combinations.
 - 51 -




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##### Table of Contents



Financial Risk Management
 Foreign Exchange Risk
 .
   - 52 -




---



##### Table of Contents



(Amounts in thousands except exchange rates)
    
    US $
    
    
    AverageForward Contracts - As of December 31, 2007
    
    Notional amount
    
    
    Contract rateContracts for the sale of US Dollars and purchase of:Canadian Dollars
    
    $
    18,438
    
    
    
    1.0130Euro
    
    $
    15,056
    
    
    
    1.4618Singapore Dollars
    
    $
    2,018
    
    
    
    0.6957Contracts for the sale of GBP and purchase of:South African Rand
    
    $
    1,299
    
    
    
    13.7194Contracts for the purchase of US Dollars and sale of:Japanese Yen
    
    $
    16,899
    
    
    
    111.8400British Pound
    
    $
    5,544
    
    
    
    0.5051Korean Won
    
    $
    1,814
    
    
    
    937.2000Contracts for the purchase of Euros and sale of:Swedish Krona
    
    $
    524
    
    
    
    9.4842Swiss Franc
    
    $
    2,292
    
    
    
    1.6572UK Pound
    
    $
    19,585
    
    
    
    0.7384Norwegian Krone
    
    $
    3,388
    
    
    
    7.9763Australian Dollars
    
    $
    2,621
    
    
    
    1.6718Hong Kong Dollars
    
    $
    1,667
    
    
    
    11.3904South African Rand
    
    $
    2,466
    
    
    
    10.1288Malaysian Ringits
    
    $
    908
    
    
    
    4.8268Total
    
    $
    94,519
 (Amounts in thousands except exchange rates)
    
    US $
    
    
    AverageForward Contracts - As of December 31, 2006
    
    Notional amount
    
    
    Contract rateContracts for the sale of US Dollars and purchase of:Canadian Dollars
    
    $
    4,293
    
    
    
    0.8585Euro
    
    $
    19,545
    
    
    
    1.3206Singapore Dollars
    
    $
    3,206
    
    
    
    0.6543Mexican Pesos
    
    $
    954
    
    
    
    0.0926Indian Rupee
    
    $
    2,966
    
    
    
    0.0226Contracts for the purchase of US Dollars and sale of:Japanese Yen
    
    $
    1,604
    
    
    
    118.45Swiss Franc
    
    $
    1,801
    
    
    
    1.22Korean Won
    
    $
    667
    
    
    
    930.60Contracts for the purchase of Euros and sale of:Swedish Krona
    
    $
    293
    
    
    
    8.9966Swiss Franc
    
    $
    4,005
    
    
    
    1.6131UK Pound
    
    $
    9,375
    
    
    
    0.6751Norwegian Krone
    
    $
    1,197
    
    
    
    8.2643Total
    
    $
    49,906
 - 53 -




---



##### Table of Contents



Interest Income Rate and Investment Level Risk
     Amortized
    
    
    Weighted Average(Dollars in Thousands)
    
    Principal Amount
    
    
    Interest RateCash and cash equivalents
    
    $
    604,808Cash investments
    
    
    130,099Total Cash, cash equivalents and cash investments
    
    $
    734,907
    
    
    
    4.60
    %
 Default Risk
  Failed Auction Securities
  - 54 -




---



##### Table of Contents



Interest Expense Rate Risk
 ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
  - 55 -




---



##### Table of Contents



ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
  PageReport of Management on Internal Controls over Financial Reporting
    
    57Report of Independent Registered Public Accounting Firm on Internal Controls over
Financial Reporting
    
    58Report of Independent Registered Public Accounting Firm
    
    59Consolidated Balance Sheets as of December 31, 2007 and 2006
    
    60Consolidated Statements of Operations for the Years Ended December 31, 2007, 2006 and 2005
    
    61Consolidated Statements of Stockholders Equity for the Years Ended December 31, 2007,
2006 and 2005
    
    62Consolidated Statements of Cash Flows for the Years Ended December 31, 2007, 2006 and 2005
    
    63Notes to Consolidated Financial Statements
    
    64
 - 56 -




---



##### Table of Contents



Report of Management on Internal Controls over Financial Reporting
    - 57 -




---



##### Table of Contents



Report of Independent Registered Public Accounting Firm on Internal Control Over Financial
Reporting
         
 - 58 -




---



##### Table of Contents



Report of Independent Registered Public Accounting Firm
        
 - 59 -




---



##### Table of Contents



Consolidated Balance Sheets
 December 31(Dollars in thousands, except share and per share data)
    
    2007
    
    
    2006Assets
Current assets:Cash and cash equivalents
    
    $
    604,808
    
    
    $
    355,303Short-term cash investments
    
    
    93,462
    
    
    
    269,612Total cash, cash equivalents and short-term cash investments
    
    
    698,270
    
    
    
    624,915Restricted cash
    
    
    3,424
    
    
    
    6,014Accounts receivable, less allowance for doubtful accounts of $3,735
(2006 - $3,998)
    
    
    245,267
    
    
    
    218,016Deferred income taxes
    
    
    37,979
    
    
    
    6,224Prepaid income taxes
    
    
    17,604
    
    
    
    Prepaid expenses and other current assets
    
    
    25,182
    
    
    
    16,392Total current assets
    
    
    1,027,726
    
    
    
    871,561Long-term cash investments
    
    
    36,637
    
    
    
    12,781Property, equipment and improvements, net
    
    
    64,841
    
    
    
    66,458Deferred income taxes
    
    
    10,038
    
    
    
    36,069Capitalized software, net
    
    
    74,278
    
    
    
    71,179Goodwill
    
    
    533,339
    
    
    
    540,303Other purchased intangibles, less accumulated amortization
of $147,311 (2006  $119,393)
    
    
    130,608
    
    
    
    149,648Other assets
    
    
    36,016
    
    
    
    39,551Total assets
    
    $
    1,913,483
    
    
    $
    1,787,550Liabilities and stockholders equityCurrent liabilities:Accounts payable
    
    $
    30,290
    
    
    $
    23,439Accrued compensation and related expenses
    
    
    63,852
    
    
    
    59,748Accrued income taxes
    
    
    273
    
    
    
    31,364Other accrued liabilities
    
    
    124,849
    
    
    
    108,436Deferred revenue
    
    
    203,734
    
    
    
    193,431Total current liabilities
    
    
    422,998
    
    
    
    416,418Other liabilities
    
    
    44,669
    
    
    
    44,428Deferred income taxes
    
    
    14,115
    
    
    
    14,448Long-term tax liability
    
    
    30,807
    
    
    
    Long-term deferred revenue
    
    
    4,937
    
    
    
    3,965Minority interest
    
    
    5,147
    
    
    
    5,160Convertible subordinated notes
    
    
    460,000
    
    
    
    460,000Commitments and contingent liabilitiesStockholders 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 87,210,339 shares outstanding (2006 
105,337,362 shares issued and 91,281,805 shares outstanding)
    
    
    105
    
    
    
    105Additional paid-in capital
    
    
    1,019,930
    
    
    
    977,672Accumulated earnings
    
    
    241,329
    
    
    
    92,817Accumulated other comprehensive income
    
    
    66,954
    
    
    
    40,850Cost of 18,127,023 shares of treasury stock (2006  14,055,557 shares)
    
    
    (397,508
    )
    
    
    (268,313
    )Total stockholders equity
    
    
    930,810
    
    
    
    843,131Total liabilities and stockholders equity
    
    $
    1,913,483
    
    
    $
    1,787,550See accompanying notes.
 - 60 -




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##### Table of Contents



Consolidated Statements of Operations
 For the years ended December 31(In thousands, except per share data)
    
    2007
    
    
    2006
    
    
    2005Revenues:License fees
    
    $
    344,807
    
    
    $
    326,751
    
    
    $
    291,695Services
    
    
    544,209
    
    
    
    531,172
    
    
    
    527,000Messaging
    
    
    136,514
    
    
    
    18,240
    
    
    
    Total revenues
    
    
    1,025,530
    
    
    
    876,163
    
    
    
    818,695Costs and expenses:Cost of license fees
    
    
    53,114
    
    
    
    50,540
    
    
    
    51,556Cost of services
    
    
    157,790
    
    
    
    152,962
    
    
    
    156,325Cost of messaging
    
    
    82,598
    
    
    
    11,097
    
    
    
    Sales and marketing
    
    
    266,995
    
    
    
    263,281
    
    
    
    250,003Product development and engineering
    
    
    152,571
    
    
    
    149,510
    
    
    
    139,011General and administrative
    
    
    129,319
    
    
    
    106,025
    
    
    
    92,106Amortization of other purchased intangibles
    
    
    13,783
    
    
    
    7,331
    
    
    
    6,639Cost of restructuring
    
    
    797
    
    
    
    1,653
    
    
    
    1,115Total costs and expenses
    
    
    856,967
    
    
    
    742,399
    
    
    
    696,755Operating income
    
    
    168,563
    
    
    
    133,764
    
    
    
    121,940Interest income
    
    
    33,521
    
    
    
    38,662
    
    
    
    25,707Interest expense and other income, net
    
    
    (12,144
    )
    
    
    (11,028
    )
    
    
    (10,883
    )Minority interest
    
    
    12
    
    
    
    (81
    )
    
    
    (49
    )Income before income taxes
    
    
    189,952
    
    
    
    161,317
    
    
    
    136,715Provision for income taxes
    
    
    41,102
    
    
    
    66,253
    
    
    
    51,132Net income
    
    $
    148,850
    
    
    $
    95,064
    
    
    $
    85,583Basic net income per share
    
    $
    1.65
    
    
    $
    1.06
    
    
    $
    0.95Shares used in computing basic net income
per share
    
    
    90,019
    
    
    
    89,557
    
    
    
    90,307Diluted net income per share
    
    $
    1.61
    
    
    $
    1.03
    
    
    $
    0.92Shares used in computing diluted net income
per share
    
    
    92,598
    
    
    
    92,251
    
    
    
    93,257See accompanying notes.
 - 61 -




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##### Table of Contents



Consolidated Statements of Stockholders Equity
 Three years ended December 31, 2007AccumulatedCommon stock
    
    
    Additional
    
    
    Accumulated
    
    
    Other
    
    
    
    
    
    
    UnearnedOutstanding
    
    
    Par
    
    
    paid-in
    
    
    Earnings/
    
    
    Comprehensive
    
    
    Treasury
    
    
    Stock(Dollars and shares in thousands)
    
    Shares
    
    
    Value
    
    
    capital
    
    
    (Deficit)
    
    
    Income/(Loss)
    
    
    Stock
    
    
    Compensation
    
    
    TotalBalances at December 31, 2004
    
    
    95,519
    
    
    $
    105
    
    
    $
    940,806
    
    
    $
    (66,690
    )
    
    $
    49,356
    
    
    $
    (159,617
    )
    
    $
    (7,404
    )
    
    $
    756,556Common stock issued and treasury
stock reissued under stock option,
stock purchase plans and other
    
    
    3,764
    
    
    
    
    
    
    
    101
    
    
    
    (2,913
    )
    
    
    
    
    
    
    51,375
    
    
    
    
    
    
    
    48,563Treasury stock repurchased due toForfeiture in restricted stock
option plan
    
    
    (15
    )
    
    
    
    
    
    
    (267
    )
    
    
    215
    
    
    
    
    
    
    
    (216
    )
    
    
    267
    
    
    
    (1
    )Acquisition of treasury stock
    
    
    (8,737
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (169,052
    )
    
    
    
    
    
    
    (169,052
    )Restricted stock
    
    
    
    
    
    
    
    
    
    
    13,131
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (13,131
    )
    
    
    Amortization of unearned stock
compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,306
    
    
    
    7,306Subtotal
    
    
    90,531
    
    
    
    105
    
    
    
    953,771
    
    
    
    (69,388
    )
    
    
    49,356
    
    
    
    (277,510
    )
    
    
    (12,962
    )
    
    
    643,372Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    85,583
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    85,583Foreign currency translation adjustments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (29,840
    )
    
    
    
    
    
    
    
    
    
    
    (29,840
    )Unrealized gains/(losses) on
marketable securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (285
    )
    
    
    
    
    
    
    
    
    
    
    (285
    )Comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    55,458Balances at December 31, 2005
    
    
    90,531
    
    
    $
    105
    
    
    $
    953,771
    
    
    $
    16,195
    
    
    $
    19,231
    
    
    $
    (277,510
    )
    
    $
    (12,962
    )
    
    $
    698,830Common stock issued and treasury
stock reissued under stock option,
stock purchase plans and other
    
    
    3,467
    
    
    
    
    
    
    
    
    
    
    
    (18,744
    )
    
    
    
    
    
    
    69,317
    
    
    
    
    
    
    
    50,573Treasury stock repurchased due toForfeiture in restricted stock option plan
    
    
    (23
    )
    
    
    
    
    
    
    
    
    
    
    302
    
    
    
    
    
    
    
    (305
    )
    
    
    
    
    
    
    (3
    )Acquisition of treasury stock
    
    
    (2,693
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (59,815
    )
    
    
    
    
    
    
    (59,815
    )Reclassification of unearned stock
compensation balance upon adoption
of SFAS 123(R)
    
    
    
    
    
    
    
    
    
    
    (12,962
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    12,962
    
    
    
    Stock-based compensation  restricted
stock
    
    
    
    
    
    
    
    
    
    
    8,141
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,141Stock-based compensation  all other
    
    
    
    
    
    
    
    
    
    
    13,585
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    13,585Tax benefit from stock-based
compensation plans
    
    
    
    
    
    
    
    
    
    
    15,137
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    15,137Subtotal
    
    
    91,282
    
    
    
    105
    
    
    
    977,672
    
    
    
    (2,247
    )
    
    
    19,231
    
    
    
    (268,313
    )
    
    
    
    
    
    
    726,448Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    95,064
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    95,064Foreign currency translation adjustments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    21,521
    
    
    
    
    
    
    
    
    
    
    
    21,521Unrealized gains on
marketable securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    98
    
    
    
    
    
    
    
    
    
    
    
    98Comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    116,683Balances at December 31, 2006
    
    
    91,282
    
    
    $
    105
    
    
    $
    977,672
    
    
    $
    92,817
    
    
    $
    40,850
    
    
    $
    (268,313
    )
    
    $
    
    
    
    $
    843,131Common stock issued and treasury
stock reissued under stock option,
stock purchase plans and other
    
    
    2,514
    
    
    
    
    
    
    
    3,985
    
    
    
    (338
    )
    
    
    
    
    
    
    37,543
    
    
    
    
    
    
    
    41,190Acquisition of treasury stock
    
    
    (6,586
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (166,738
    )
    
    
    
    
    
    
    (166,738
    )Stock-based compensation  restricted
stock
    
    
    
    
    
    
    
    
    
    
    10,155
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10,155Stock-based compensation  all other
    
    
    
    
    
    
    
    
    
    
    13,889
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    13,889Tax benefit from stock-based
compensation plans
    
    
    
    
    
    
    
    
    
    
    14,229
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    14,229Subtotal
    
    
    87,210
    
    
    
    105
    
    
    
    1,019,930
    
    
    
    92,479
    
    
    
    40,850
    
    
    
    (397,508
    )
    
    
    
    
    
    
    755,856Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    148,850
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    148,850Foreign currency translation adjustments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    26,881
    
    
    
    
    
    
    
    
    
    
    
    26,881Unrealized losses on
marketable securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (540
    )
    
    
    
    
    
    
    
    
    
    
    (540
    )Adjustment to apply FASB
Statement No. 158
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (237
    )
    
    
    
    
    
    
    
    
    
    
    (237
    )Comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    174,954Balances at December 31, 2007
    
    
    87,210
    
    
    $
    105
    
    
    $
    1,019,930
    
    
    $
    241,329
    
    
    $
    66,954
    
    
    $
    (397,508
    )
    
    $
    
    
    
    $
    930,810See accompanying notes.
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##### Table of Contents



Consolidated Statements of Cash Flows
 For the years ended December 31(Dollars in thousands)
    
    2007
    
    
    2006
    
    
    2005Cash flows from operating activities:Net income
    
    $
    148,850
    
    
    $
    95,064
    
    
    $
    85,583Adjustments to reconcile net income to net cashProvided by operating activities:Depreciation and amortization
    
    
    87,923
    
    
    
    72,803
    
    
    
    73,600Minority interest in income of subsidiaries
    
    
    (12
    )
    
    
    81
    
    
    
    49Loss on disposal of assets
    
    
    37
    
    
    
    811
    
    
    
    528Deferred income taxes
    
    
    (14,008
    )
    
    
    (1,306
    )
    
    
    8,928Stock-based compensation  restricted stock
    
    
    10,155
    
    
    
    8,141
    
    
    
    7,306Stock-based compensation  all other
    
    
    13,889
    
    
    
    13,585
    
    
    
    Tax benefit from stock-based compensation plans
    
    
    14,229
    
    
    
    15,137
    
    
    
    Excess tax benefit from stock-based compensation plans
    
    
    (14,485
    )
    
    
    (9,569
    )
    
    
    Amortization of note issuance costs
    
    
    1,969
    
    
    
    1,969
    
    
    
    1,671Changes in assets and liabilities:Accounts receivable
    
    
    (23,232
    )
    
    
    6,005
    
    
    
    (1,914
    )Prepaid income taxes
    
    
    (17,604
    )
    
    
    
    
    
    
    Other current assets
    
    
    372
    
    
    
    3,552
    
    
    
    (1,298
    )Other assets  operating
    
    
    2,202
    
    
    
    (2,406
    )
    
    
    651Accounts payable
    
    
    6,784
    
    
    
    (7,838
    )
    
    
    (2,410
    )Accrued compensation and related expenses
    
    
    3,708
    
    
    
    2,427
    
    
    
    7,072Accrued income taxes
    
    
    12,852
    
    
    
    13,237
    
    
    
    24,724Other accrued liabilities
    
    
    9,617
    
    
    
    (828
    )
    
    
    (10,570
    )Deferred revenues
    
    
    11,288
    
    
    
    928
    
    
    
    (26,436
    )Other liabilities
    
    
    (520
    )
    
    
    2,817
    
    
    
    2,508Net cash provided by operating activities
    
    
    254,014
    
    
    
    214,610
    
    
    
    169,992Cash flows from investing activities:(Increase) Decrease in restricted cash
    
    
    2,590
    
    
    
    (641
    )
    
    
    2,583Purchases of available-for-sale cash investments
    
    
    (280,632
    )
    
    
    (468,518
    )
    
    
    (837,237
    )Maturities of available-for-sale cash investments
    
    
    241,292
    
    
    
    282,403
    
    
    
    439,737Sales of available-for-sale cash investments
    
    
    190,778
    
    
    
    365,962
    
    
    
    127,648Business combinations, net of cash acquired
    
    
    (6,848
    )
    
    
    (399,676
    )
    
    
    (71,890
    )Purchases of property, equipment and improvements
    
    
    (23,883
    )
    
    
    (18,356
    )
    
    
    (16,366
    )Proceeds from sale of fixed assets
    
    
    44
    
    
    
    9
    
    
    
    25Capitalized software development costs
    
    
    (36,431
    )
    
    
    (37,531
    )
    
    
    (33,906
    )Decrease in other assets  investing
    
    
    (188
    )
    
    
    13
    
    
    
    2Net cash provided by (used for) investing activities
    
    
    86,722
    
    
    
    (276,335
    )
    
    
    (389,404
    )Cash flows from financing activities:Proceeds from the issuance of convertible subordinated notes, net
of issuance costs
    
    
    
    
    
    
    
    
    
    
    450,234Repayments of long-term obligations
    
    
    (193
    )
    
    
    (60
    )
    
    
    (1,012
    )Payments on capital lease
    
    
    (1,389
    )
    
    
    (343
    )
    
    
    (274
    )Net proceeds from the issuance of common stock and
reissuance of treasury stock
    
    
    41,190
    
    
    
    50,570
    
    
    
    48,564Purchases of treasury stock
    
    
    (166,738
    )
    
    
    (59,815
    )
    
    
    (169,053
    )Excess tax benefit from stock-based compensation plans
    
    
    14,485
    
    
    
    9,569
    
    
    
    Net cash provided by (used for) financing activities
    
    
    (112,645
    )
    
    
    (79
    )
    
    
    328,459Effect of exchange rate changes on cash
    
    
    21,414
    
    
    
    18,366
    
    
    
    (31,723
    )Net increase (decrease) in cash and cash equivalents
    
    
    249,505
    
    
    
    (43,438
    )
    
    
    77,324Cash and cash equivalents, beginning of year
    
    
    355,303
    
    
    
    398,741
    
    
    
    321,417Cash and cash equivalents, end of year
    
    $
    604,808
    
    
    $
    355,303
    
    
    $
    398,741Supplemental disclosures:Interest paid
    
    $
    9,663
    
    
    $
    9,516
    
    
    $
    5,265Income taxes paid, net of refunds
    
    $
    43,345
    
    
    $
    34,442
    
    
    $
    15,997See accompanying notes.
 - 63 -




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##### Table of Contents



Notes to Consolidated Financial Statements
 Note One: Summary of Significant Accounting Policies
 The Company
   Principles of Consolidation
  Share-Based Payment,
 Use of Estimates
  - 64 -




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##### Table of Contents



Accounts Receivable and Allowance for Doubtful Accounts
  Concentration of Credit Risk
  Capitalized Software
   Property, Equipment and Improvements
  - 65 -




---



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Goodwill and Other Purchased Intangible Assets
   Impairment of Long-Lived Property, Equipment and Improvements
  Revenue Recognition
  License and Services Revenues
  - 66 -




---



##### Table of Contents



Message Revenues
 Revenue Arrangements with Multiple Deliverables Reporting Revenue Gross as a Principal Versus Net as an Agent
   - 67 -




---



##### Table of Contents



Foreign Currencies
   Income Taxes
  Stock-Based Compensation
 Accounting for Stock Issued to
Employees,  Accounting for Stock-Based Compensation, Accounting for Stock-Based Compensation  Transition and
Disclosure.
 - 68 -




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##### Table of Contents



Net Income Per Share
   (In thousands, except per share data)
    
    2007
    
    
    2006
    
    
    2005Net income
    
    $
    148,850
    
    
    $
    95,064
    
    
    $
    85,583Shares used in computing basic net income
per share
    
    
    90,019
    
    
    
    89,557
    
    
    
    90,307Dilutive effect of stock options, restricted
stock, and stock appreciation rights
    
    
    2,109
    
    
    
    2,694
    
    
    
    2,950Dilutive effect of convertible subordinated debt
    
    
    470
    
    
    
    
    
    
    
    Shares used in computing diluted net income per share
    
    
    92,598
    
    
    
    92,251
    
    
    
    93,257Basic net income per share
    
    $
    1.65
    
    
    $
    1.06
    
    
    $
    0.95Diluted net income per share
    
    $
    1.61
    
    
    $
    1.03
    
    
    $
    0.92
  - 69 -




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##### Table of Contents



Comprehensive Income
  Advertising
  Recent Accounting Pronouncements
 SFAS 157, Fair Value Measurements
  SFAS 158, Employers Accounting for Defined Benefit Pension and Other Postretirement
Plans
  SFAS 159, The Fair Value Option for Financial Assets and Financial Liabilities
 The Fair Value Option for Financial Assets and
Financial Liabilities Fair Value Measurements, Disclosures about Fair Value of Financial Instruments.
 - 70 -




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##### Table of Contents



SFAS 160, NonControlling Interests in Consolidated Financial Statements
 NonControlling Interests in Consolidated Financial
Statements
 SFAS 141(R), Business Combinations
 Business Combinations.
 Note Two: Financial Instruments
 Cash, Cash Equivalents and Cash Investments
  The
Meaning of Other-Than-Temporary Impairment and its Application to Certain Investments (the FSPs). Accounting for Certain Investments in Debt and Equity Securities
  - 71 -




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##### Table of Contents



Amortized
    
    Unrealized
    
    Unrealized
    
    Fair Market(In thousands)
    
    Cost
    
    Gains
    
    Losses
    
    ValueDecember 31, 2007:Cash and cash equivalents
    
    $
    604,808
    
    
    $
    
    
    
    $
    
    
    
    $
    604,808Short-term corporate notes and bonds
(maturities of one year or less)
    
    
    42,201
    
    
    
    69
    
    
    
    (17
    )
    
    
    42,253Short-term government obligations
(maturities of one year or less)
    
    
    26,468
    
    
    
    8
    
    
    
    (6
    )
    
    
    26,470Short-term government sponsored enterprise
obligations (maturities of one year or less)
    
    
    24,696
    
    
    
    43
    
    
    
    
    
    
    
    24,739Long-term corporate notes and bonds
(maturities over one year)
    
    
    33,064
    
    
    
    50
    
    
    
    (1,536
    )
    
    
    31,578Long-term government obligations
(maturities over one year)
    
    
    5,063
    
    
    
    
    
    
    
    (4
    )
    
    
    5,059$
    736,300
    
    
    $
    170
    
    
    $
    (1,563
    )
    
    $
    734,907December 31, 2006:Cash and cash equivalents
    
    $
    355,304
    
    
    $
    1
    
    
    $
    (2
    )
    
    $
    355,303Short-term corporate notes and bonds
(maturities of one year or less)
    
    
    166,241
    
    
    
    19
    
    
    
    (306
    )
    
    
    165,954Short-term government obligations
(maturities of one year or less)
    
    
    68,050
    
    
    
    
    
    
    
    (120
    )
    
    
    67,930Short-term government sponsored enterprise
obligations (maturities of one year or less)
    
    
    35,785
    
    
    
    
    
    
    
    (57
    )
    
    
    35,728Long-term corporate notes and bonds
(maturities over one year)
    
    
    4,958
    
    
    
    
    
    
    
    (6
    )
    
    
    4,952Long-term government sponsored enterprise
obligations (maturities over one year)
    
    
    7,849
    
    
    
    
    
    
    
    (20
    )
    
    
    7,829$
    638,187
    
    
    $
    20
    
    
    $
    (511
    )
    
    $
    637,696
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##### Table of Contents



In a Loss Position for
    
    
    In a Loss Position forLess Than 12 Months
    
    
    12 Months or More
    
    
    Total In a Loss PositionGross
    
    
    
    
    
    
    Gross
    
    
    
    
    
    
    GrossUnrealized
    
    
    
    
    
    
    Unrealized
    
    
    
    
    
    
    Unrealized(In thousands)
    
    Fair Value
    
    
    Losses
    
    
    Fair Value
    
    
    Losses
    
    
    Fair Value
    
    
    LossesCorporate notes and bonds
    
    
    31,323
    
    
    
    (1,546
    )
    
    
    1,956
    
    
    
    (7
    )
    
    
    33,279
    
    
    
    (1,553
    )Government obligations
    
    
    25,183
    
    
    
    (10
    )
    
    
    
    
    
    
    
    
    
    
    25,183
    
    
    
    (10
    )Totals
    
    $
    56,506
    
    
    $
    (1,556
    )
    
    $
    1,956
    
    
    $
    (7
    )
    
    $
    58,462
    
    
    $
    (1,563
    )
  In a Loss Position for
    
    
    In a Loss Position forLess Than 12 Months
    
    
    12 Months or More
    
    
    Total In a Loss PositionGross
    
    
    
    
    
    
    Gross
    
    
    
    
    
    
    GrossUnrealized
    
    
    
    
    
    
    Unrealized
    
    
    
    
    
    
    Unrealized(In thousands)
    
    Fair Value
    
    
    Losses
    
    
    Fair Value
    
    
    Losses
    
    
    Fair Value
    
    
    LossesCash and
cash equivalents
    
    $
    11,965
    
    
    $
    (2
    )
    
    $
    
    
    
    $
    
    
    
    $
    11,965
    
    
    $
    (2
    )Corporate notes and bonds
    
    
    14,843
    
    
    
    (10
    )
    
    
    67,433
    
    
    
    (302
    )
    
    
    82,276
    
    
    
    (312
    )Government obligations
    
    
    
    
    
    
    
    
    
    
    19,858
    
    
    
    (120
    )
    
    
    19,858
    
    
    
    (120
    )Government sponsored enterprise obligations
    
    
    27,597
    
    
    
    (30
    )
    
    
    15,960
    
    
    
    (47)
    
    
    
    43,557
    
    
    
    (77
    )Totals
    
    $
    54,405
    
    
    $
    (42
    )
    
    $
    103,251
    
    
    $
    (469
    )
    
    $
    157,656
    
    
    $
    (511
    )
 Restricted Cash
  Foreign Currency Forward Exchange Contracts
  - 73 -




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- 74 -




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##### Table of Contents



Note Three: Property, Equipment and Improvements
 Estimated useful(In thousands)
    
    2007
    
    
    2006
    
    
    livesComputer equipment and software
    
    $
    228,474
    
    
    $
    282,278
    
    
    
    3 to 5 yearsFurniture and fixtures
    
    
    62,185
    
    
    
    60,319
    
    
    
    5 to 10 yearsLeasehold improvements and real property
    
    
    78,578
    
    
    
    70,907
    
    
    Improvementsover shorter of 5years or leaseterm; propertyover 7 to 40years369,237
    
    
    
    413,504Less accumulated depreciation
    
    
    (304,396
    )
    
    
    (347,046
    )Net property, equipment and improvements
    
    $
    64,841
    
    
    $
    66,458
  Note Four: Goodwill and Other Purchased Intangibles
  (In thousands)
    
    IPG
    
    
    iAS
    
    
    SY365
    
    
    Consolidated TotalBalance at January 1, 2006
    
    $
    116,184
    
    
    $
    122,680
    
    
    $
    
    
    
    $
    238,864Addition in goodwill recorded on Extended Systems
acquisition
    
    
    
    
    
    
    500
    
    
    
    
    
    
    
    500Goodwill recorded on Mobile 365 acquisition
    
    
    
    
    
    
    
    
    
    
    335,088
    
    
    
    335,088Goodwill recorded on Solonde acquisition
    
    
    2,065
    
    
    
    
    
    
    
    
    
    
    
    2,065Goodwill recorded on iFoundry acquisition
    
    
    
    
    
    
    490
    
    
    
    
    
    
    
    490Reduction for utilization of acquired tax assets
    
    
    (22,600
    )
    
    
    (13,273
    )
    
    
    (1,379
    )
    
    
    (37,252
    )Foreign currency translation adjustments and other
    
    
    537
    
    
    
    11
    
    
    
    
    
    
    
    548Balance at December 31, 2006
    
    $
    96,186
    
    
    $
    110,408
    
    
    $
    333,709
    
    
    $
    540,303Goodwill recorded on CoboPlan acquisition
    
    
    
    
    
    
    3,510
    
    
    
    
    
    
    
    3,510Addition in goodwill recorded on Mobile 365
acquisition
    
    
    
    
    
    
    
    
    
    
    2,829
    
    
    
    2,829Reduction for utilization of acquired tax assets
    
    
    (4,901
    )
    
    
    (3,699
    )
    
    
    (5,783
    )
    
    
    (14,383
    )Foreign currency translation adjustments and other
    
    
    907
    
    
    
    173
    
    
    
    
    
    
    
    1,080Balance at December 31, 2007
    
    $
    92,192
    
    
    $
    110,392
    
    
    $
    330,755
    
    
    $
    533,339
 - 75 -




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##### Table of Contents



Gross
    
    
    
    
    
    
    
    
    
    
    GrossCarrying
    
    
    Accumulated
    
    
    Net Carrying
    
    
    Carrying
    
    
    Accumulated
    
    
    Net CarryingAmount
    
    
    Amortization
    
    
    Amount
    
    
    Amount
    
    
    Amortization
    
    
    Amount(In thousands)
    
    12/31/07
    
    
    12/31/07
    
    
    12/31/07
    
    
    12/31/06
    
    
    12/31/06
    
    
    12/31/06Purchased technology
    
    $
    168,436
    
    
    $
    (108,997
    )
    
    $
    59,439
    
    
    $
    163,333
    
    
    $
    (95,193
    )
    
    $
    68,140AvantGo tradenames
    
    
    3,100
    
    
    
    
    
    
    
    3,100
    
    
    
    3,100
    
    
    
    
    
    
    
    3,100XcelleNet tradenames
    
    
    4,000
    
    
    
    
    
    
    
    4,000
    
    
    
    4,000
    
    
    
    
    
    
    
    4,000Covenant not to compete
    
    
    319
    
    
    
    (165
    )
    
    
    154
    
    
    
    319
    
    
    
    (59
    )
    
    
    260Customer lists
    
    
    102,064
    
    
    
    (38,149
    )
    
    
    63,915
    
    
    
    98,289
    
    
    
    (24,141
    )
    
    
    74,148Totals
    
    $
    277,919
    
    
    $
    (147,311
    )
    
    $
    130,608
    
    
    $
    269,041
    
    
    $
    (119,393
    )
    
    $
    149,648
   2008
    
    
    27,2042009
    
    
    26,8122010
    
    
    24,3772011
    
    
    18,8672012
    
    
    11,691
 Note Five: Other Assets
  2007
    
    
    2006Deposits
    
    $
    28,021
    
    
    $
    30,655Other
    
    
    7,995
    
    
    
    8,896$
    36,016
    
    
    $
    39,551
  - 76 -




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##### Table of Contents



Note Six: Lease Obligations, Other Liabilities and Commitments
 Capital Lease
    2008
    
    $
    1,2512009
    
    
    1,2252010
    
    
    1,1752011
    
    
    1,1752012
    
    
    1,175Thereafter
    
    
    7,978Sub-total
    
    
    13,979Less amount representing interest
    
    
    5,233Total minimum lease payments
    
    $
    8,746
 Sale-and-Leaseback
   Leasehold Improvements Note
  Operating leases and Commitments
  - 77 -




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##### Table of Contents



2008
    
    $
    44,9282009
    
    
    41,8032010
    
    
    33,8692011
    
    
    25,6072012
    
    
    23,646Thereafter
    
    
    76,284Total minimum lease payments*
    
    $
    246,137
 
 *
    
    Minimum payments have not been reduced by minimum sublease rentals of $7.5 million due in the
future under non-cancelable subleases.  Year ending December 31,2007
    
    
    2006
    
    
    2005Rent expense
    
    $
    47,913
    
    
    $
    46,051
    
    
    $
    45,990Less: sublease rentals
    
    
    4,011
    
    
    
    4,289
    
    
    
    4,339$
    43,902
    
    
    $
    41,762
    
    
    $
    41,651
 Letters of Credit
  Note Seven: Stockholders Equity
 Preferred Stock Rights
  Restricted Stock Grants
  - 78 -




---



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Stock Repurchase Program
    Employee Stock Purchase Plans
  - 79 -




---



##### Table of Contents



Stock Option Plans
    FFI Stock Option Plans
   - 80 -




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##### Table of Contents



iAS Stock Option Plan
  Impact of the Adoption of SFAS 123(R)
 Stock-Based Compensation Expense
  Year EndedDecember 31,In thousands, except per share data
    
    2007
    
    
    2006Cost of services
    
    $
    1,544
    
    
    $
    1,629Cost of messaging
    
    
    544
    
    
    
    124Sales and marketing
    
    
    5,304
    
    
    
    4,432Product development and engineering
    
    
    2,982
    
    
    
    2,679General and administrative
    
    
    13,670
    
    
    
    12,861Stock-based compensation expense included in total costs and expenses
    
    
    24,044
    
    
    
    21,725Tax benefit related to stock-based compensation expense
    
    
    (6,775
    )
    
    
    (5,730
    )Stock-based compensation expense included in net income
    
    $
    17,269
    
    
    $
    15,995Reduction of net income per share:Basic
    
    $
    0.19
    
    
    $
    0.18Diluted
    
    $
    0.19
    
    
    $
    0.17
   Determining Fair Value
 Valuation and Amortization Method.
 - 81 -




---



##### Table of Contents



Expected Term
 Expected Volatility
 Risk-Free Interest Rate.
 Dividends.
 Forfeitures.
  2007
    
    2006
    
    2005Expected volatility
    
    
    25.84
    %
    
    
    27.73
    %
    
    
    36.93
    %Risk-free interest rates
    
    
    4.51
    %
    
    
    4.71
    %
    
    
    3.81
    %Expected lives (years)
    
    
    4.52
    
    
    
    3.98
    
    
    
    4.24Expected dividend yield
    
    
    
    
    
    
    
    
    
    
    
 - 82 -




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##### Table of Contents



Equity Compensation Plans
  Outstanding Options,Stock AppreciationRights and Restricted
    
    Weighted AverageStock
    
    Exercise Price(Number of Shares)
    
    Per ShareBalance at December 31, 2004
    
    
    16,928,217
    
    
    $
    15.15Granted
    
    
    2,329,981
    
    
    
    14.45Exercised
    
    
    (3,640,478
    )
    
    
    12.15Forfeited or expired
    
    
    (855,106
    )
    
    
    18.95Balance at December 31, 2005
    
    
    14,762,614
    
    
    $
    15.59Granted
    
    
    3,413,093
    
    
    
    17.15Exercised
    
    
    (3,380,478
    )
    
    
    13.92Forfeited or expired
    
    
    (794,710
    )
    
    
    17.26Balance at December 31, 2006
    
    
    14,000,519
    
    
    $
    16.26Granted
    
    
    2,268,607
    
    
    
    18.60Exercised
    
    
    (2,952,576
    )
    
    
    12.94Forfeited or expired
    
    
    (630,646
    )
    
    
    17.13Balance at December 31, 2007
    
    
    12,685,904
    
    
    $
    17.41
   - 83 -




---



##### Table of Contents



Options, Restricted Stock, & Stock Appreciation RightsOutstanding
    
    Options & Stock Appreciation Rights ExercisableWeighted-
    
    
    
    
    
    
    
    
    
    
    
    
    
    Weighted-Average
    
    Weighted-
    
    
    
    
    
    
    
    
    
    Average
    
    Weighted-Remaining
    
    Average
    
    Aggregate
    
    
    
    
    
    Remaining
    
    Average
    
    AggregateRanges of
    
    
    
    
    
    Contractual
    
    Exercise
    
    Intrinsic
    
    
    
    
    
    Contractual
    
    Exercise
    
    IntrinsicExercisable Prices
    
    Shares
    
    Life
    
    Price
    
    Value
    
    Shares
    
    Life
    
    Price
    
    Value$0.00 to $9.93
    
    
    2,294,347
    
    
    
    5.69
    
    
    $
    2.90
    
    
    $
    53,212,397
    
    
    
    680,734
    
    
    
    3.90
    
    
    $
    8.86
    
    
    $
    11,730,049$10.10 to $18.09
    
    
    2,214,311
    
    
    
    4.41
    
    
    $
    13.81
    
    
    
    27,195,153
    
    
    
    2,188,205
    
    
    
    4.39
    
    
    $
    13.79
    
    
    
    26,907,119$18.24 to $20.72
    
    
    2,158,184
    
    
    
    4.92
    
    
    $
    19.65
    
    
    
    13,895,407
    
    
    
    1,675,022
    
    
    
    4.86
    
    
    $
    19.67
    
    
    
    10,750,612$20.77 to $22.56
    
    
    2,372,933
    
    
    
    4.76
    
    
    $
    21.63
    
    
    
    10,575,015
    
    
    
    1,223,728
    
    
    
    4.20
    
    
    $
    21.81
    
    
    
    5,240,107$22.63 to $24.44
    
    
    2,124,738
    
    
    
    5.09
    
    
    $
    24.06
    
    
    
    4,320,757
    
    
    
    787,460
    
    
    
    2.77
    
    
    $
    23.90
    
    
    
    1,725,196$24.50 to $28.13
    
    
    1,521,391
    
    
    
    4.10
    
    
    $
    25.50
    
    
    
    1,062,404
    
    
    
    1,093,336
    
    
    
    3.25
    
    
    $
    25.39
    
    
    
    907,094$0.00 to $28.13
    
    
    12,685,904
    
    
    
    4.87
    
    
    $
    17.41
    
    
    $
    110,261,133
    
    
    
    7,648,485
    
    
    
    4.09
    
    
    $
    18.62
    
    
    $
    57,260,177
   Weighted-averagegrant date fairShares
    
    value per shareNonvested at December 31, 2006
    
    
    1,557,689
    
    
    $
    19.02Granted
    
    
    551,437
    
    
    
    24.97Vested
    
    
    (561,700
    )
    
    
    17.59Forfeited
    
    
    (42,100
    )
    
    
    22.43Nonvested at December 31, 2007
    
    
    1,505,326
    
    
    $
    21.64
 - 84 -




---



##### Table of Contents



FFI Stock Plans
    
    iAS PlanOutstanding
    
    Weighted
    
    Outstanding
    
    Weightedoptions
    
    average
    
    options
    
    averagenumber of
    
    Exercise price
    
    number of
    
    Exercise priceshares
    
    Per share
    
    shares
    
    Per shareBalance at December 31, 2004
    
    
    7,865,456
    
    
    $
    3.37
    
    
    
    11,527,354
    
    
    $
    2,51Granted
    
    
    
    
    
    
    
    
    
    
    46,750
    
    
    
    2.51Forfeited or expired
    
    
    (112,950
    )
    
    
    3.33
    
    
    
    (57,405
    )
    
    
    2.51Balance at December 31, 2005
    
    
    7,752,506
    
    
    $
    3.37
    
    
    
    11,516,699
    
    
    $
    2.51Forfeited or expired
    
    
    (4,574,138
    )
    
    
    3.51
    
    
    
    (1,283,359
    )
    
    
    2.51Balance at December 31, 2006
    
    
    3,178,368
    
    
    $
    3.22
    
    
    
    10,233,340
    
    
    $
    2.51Forfeited or expired
    
    
    (876,078
    )
    
    
    1.98
    
    
    
    (1,079,021
    )
    
    
    2.51Balance at December 31, 2007
    
    
    2,302,290
    
    
    $
    2.83
    
    
    
    9,154,319
    
    
    $
    2.51
   Options outstanding
    
    Options exercisableWeighted-Average
    
    Weighted-
    
    
    
    
    
    Weighted-Remaining
    
    Average
    
    
    
    
    
    AverageRanges of
    
    
    
    
    
    Contractual
    
    Exercise
    
    
    
    
    
    ExerciseExercisable prices
    
    Shares
    
    Life
    
    Price
    
    Shares
    
    Price$0.75
    
    
    558,500
    
    
    
    4.90
    
    
    $
    0.75
    
    
    
    558,500
    
    
    $
    0.75$0.78
    
    
    620,500
    
    
    
    5.46
    
    
    $
    0.78
    
    
    
    616,020
    
    
    $
    0.78$5.00
    
    
    1,123,290
    
    
    
    2.64
    
    
    $
    5.00
    
    
    
    1,123,290
    
    
    $
    5.00$0.75 to $5.00
    
    
    2,302,290
    
    
    
    3.95
    
    
    $
    2.83
    
    
    
    2,297,810
    
    
    $
    2.84
    - 85 -




---



##### Table of Contents



Comparable Disclosures
  (Dollars in thousands, except per share data)
    
    2005As reported net income  stock-based employee
compensation determined using the intrinsic value method
    
    $
    85,583Add: Stock-based employee compensation cost, net of tax,
Included in net income as reported
    
    
    7,306Less: Pro-forma stock-based employee compensation cost,
net of tax, determined under the fair value method
    
    
    (18,848
    )Pro-forma net income  stock-based employee
Compensation determined under the fair value method
    
    $
    74,041Basic net income per shareAs reported
    
    $
    0.95Pro forma
    
    
    0.82Diluted net income per shareAs reported
    
    $
    0.92Pro forma
    
    
    0.79
 - 86 -




---



##### Table of Contents



Note Eight: Income Taxes
   2007
    
    
    2006
    
    
    2005United States
    
    $
    118,655
    
    
    $
    51,110
    
    
    $
    24,755Foreign
    
    
    71,297
    
    
    
    110,207
    
    
    
    111,960Total
    
    $
    189,952
    
    
    $
    161,317
    
    
    $
    136,715
  2007
    
    
    2006
    
    
    2005FederalCurrent
    
    $
    5,005
    
    
    $
    20,840
    
    
    $
    16,595Deferred
    
    
    11,366
    
    
    
    4,171
    
    
    
    7,19916,371
    
    
    
    25,011
    
    
    
    23,794StateCurrent
    
    $
    2,572
    
    
    $
    2,323
    
    
    $
    2,413Deferred
    
    
    3,659
    
    
    
    2,696
    
    
    
    2,0026,231
    
    
    
    5,019
    
    
    
    4,415ForeignCurrent
    
    $
    21,417
    
    
    $
    41,910
    
    
    $
    21,952Deferred
    
    
    (2,917
    )
    
    
    (5,687
    )
    
    
    97118,500
    
    
    
    36,223
    
    
    
    22,923Total
    
    $
    41,102
    
    
    $
    66,253
    
    
    $
    51,132
   - 87 -




---



##### Table of Contents



2007
    
    
    2006
    
    
    2005Tax (credit) at U.S. statutory rate
    
    $
    66,483
    
    
    $
    56,461
    
    
    $
    47,850State tax, net of federal benefit
    
    
    11,453
    
    
    
    5,019
    
    
    
    4,415Operating tax losses and credits used
    
    
    (10,461
    )
    
    
    0
    
    
    
    (275
    )Valuation allowances released
    
    
    (26,428
    )
    
    
    0
    
    
    
    0Domestic production activities deduction
    
    
    (1,848
    )
    
    
    0
    
    
    
    0Difference between estimated amounts
recorded and actual liabilities resulting
from the filing of prior years tax return
    
    
    (804
    )
    
    
    (2,806
    )
    
    
    (2,646
    )Expired federal research credits
    
    
    0
    
    
    
    854
    
    
    
    0Effect of foreign operations
    
    
    (18,567
    )
    
    
    (2,683
    )
    
    
    410Amortization/impairment of intangible assets
    
    
    0
    
    
    
    0
    
    
    
    1,054Stock-based compensation
    
    
    2,660
    
    
    
    3,012
    
    
    
    2,570Increase (decrease) of deferred tax
liability associated with certain foreign
earnings
    
    
    15,480
    
    
    
    1,464
    
    
    
    (1,174
    )Reserve for tax contingencies, net
    
    
    3,674
    
    
    
    4,889
    
    
    
    (2,056
    )Other
    
    
    (540
    )
    
    
    43
    
    
    
    984Total
    
    $
    41,102
    
    
    $
    66,253
    
    
    $
    51,132
  2007
    
    
    2006Depreciation
    
    $
    9,960
    
    
    $
    6,725Deferred revenue
    
    
    1,865
    
    
    
    1,023Accrued expenses
    
    
    28,039
    
    
    
    26,890Allowance for doubtful accounts
    
    
    504
    
    
    
    667Net operating loss carryovers and tax credits
carryforwards
    
    
    127,168
    
    
    
    168,236Intangible assets
    
    
    46,357
    
    
    
    53,887Stock-based compensation
    
    
    11,450
    
    
    
    6,563Capital loss carryforward
    
    
    1,203
    
    
    
    11,453Other assets
    
    
    2,119
    
    
    
    8,558Gross deferred tax asset
    
    
    228,665
    
    
    
    284,002Unremitted foreign earnings
    
    
    (29,701
    )
    
    
    (5,759
    )Acquired Intangibles
    
    
    (43,590
    )
    
    
    (50,663
    )Capitalized Software
    
    
    (29,711
    )
    
    
    (29,613
    )Gross deferred tax liability
    
    
    (103,002
    )
    
    
    (86,035
    )Total before valuation allowance
    
    
    125,663
    
    
    
    197,967Valuation allowance
    
    
    (91,761
    )
    
    
    (170,122
    )Net deferred tax assets
    
    $
    33,902
    
    
    $
    27,845Recorded as:Current deferred tax assets
    
    $
    37,979
    
    
    $
    6,224Noncurrent deferred tax assets
    
    
    10,038
    
    
    
    36,069Noncurrent deferred tax liabilities
    
    
    (14,115
    )
    
    
    (14,448
    )$
    33,902
    
    
    $
    27,845
 - 88 -




---



##### Table of Contents



Valuation allowance reclassified to Uncertain Tax Position under FIN 48 adopted
on January 1, 2007
    
    $
    (18,687
    )Valuation allowance associated with tax loss carryforwards and tax credits used
during the year
    
    
    (25,156
    )Valuation allowance reduced for tax credit carryforwards expected to be realized
    
    
    (27,637
    )Valuation allowance associated with deferred tax assets adjusted to tax return
amounts
    
    
    (292
    )Valuation allowance attributable to capital loss that expired in 2007
    
    
    (9,884
    )Valuation allowance attributable to foreign tax credits relating to Uncertain
Tax Position
    
    
    1,795Valuation allowance attributable to State research tax credits earned during 2007
    
    
    1,500$
    (78,361
    )
     - 89 -




---



##### Table of Contents



Unrecognized tax benefits balance at January 1, 2007
    
    $
    44,447Gross increases for tax positions of prior years
    
    
    1,678Gross increases for tax positions of the current year
    
    
    9,608Settlements
    
    
    0Reductions as a result of a lapse of the applicable statute of limitations
    
    
    (5,551
    )Unrecognized tax benefits balance at December 31, 2007
    
    $
    50,182
     Note Nine: Retirement Plan
 401(k) Defined Contribution Retirement Plan
  Note Ten: Segment and Geographical Information
  - 90 -




---



##### Table of Contents



Consolidated(In thousands)
    
    IPG
    
    
    iAS
    
    
    SY365
    
    
    Elimination
    
    
    TotalRevenues:License feesInfrastructure
    
    $
    238,336
    
    
    $
    511
    
    
    $
    22
    
    
    $
    
    
    
    $
    238,869Mobile and Embedded
    
    
    36,744
    
    
    
    69,194
    
    
    
    
    
    
    
    
    
    
    
    105,938Subtotal license fees
    
    
    275,080
    
    
    
    69,705
    
    
    
    22
    
    
    
    
    
    
    
    344,807Intersegment license revenues
    
    
    384
    
    
    
    30,627
    
    
    
    
    
    
    
    (31,011
    )
    
    
    Total license fees
    
    
    275,464
    
    
    
    100,332
    
    
    
    22
    
    
    
    (31,011
    )
    
    
    344,807ServicesDirect service revenue
    
    
    496,198
    
    
    
    48,007
    
    
    
    4
    
    
    
    
    
    
    
    544,209Intersegment service revenues
    
    
    445
    
    
    
    29,002
    
    
    
    
    
    
    
    (29,447
    )
    
    
    Total services
    
    
    496,643
    
    
    
    77,009
    
    
    
    4
    
    
    
    (29,447
    )
    
    
    544,209Messaging
    
    
    
    
    
    
    
    
    
    
    136,514
    
    
    
    
    
    
    
    136,514
 - 91 -




---



##### Table of Contents



Consolidated(In thousands)
    
    IPG
    
    
    iAS
    
    
    SY365
    
    
    Elimination
    
    
    TotalTotal revenues
    
    
    772,107
    
    
    
    177,341
    
    
    
    136,540
    
    
    
    (60,458
    )
    
    
    1,025,530Total allocated costs and expenses before
amortization of other purchased intangibles,
purchased technology, cost of restructure,
and unallocated costs
    
    
    600,462
    
    
    
    140,301
    
    
    
    123,454
    
    
    
    (60,458
    )
    
    
    803,759Operating income before amortization of other
purchased intangibles, purchased technology,
cost of restructure, and unallocated costs
    
    
    171,645
    
    
    
    37,040
    
    
    
    13,086
    
    
    
    
    
    
    
    221,771Amortization of other purchased intangibles
    
    
    2,108
    
    
    
    4,168
    
    
    
    7,507
    
    
    
    
    
    
    
    13,783Amortization of purchased technology
    
    
    1,611
    
    
    
    8,222
    
    
    
    3,758
    
    
    
    
    
    
    
    13,591Operating income before cost of restructure and
unallocated costs
    
    
    167,926
    
    
    
    24,650
    
    
    
    1,821
    
    
    
    
    
    
    
    194,397Cost of restructure  2007 Activity
    
    
    (13
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (13
    )Operating income before unallocated costs
    
    
    167,939
    
    
    
    24,650
    
    
    
    1,821
    
    
    
    
    
    
    
    194,410Unallocated costs
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    25,847Operating income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    168,563Interest income, interest expense and other, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    21,377Minority interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    12Income before income taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    189,952
 - 92 -




---



##### Table of Contents



Consolidated(In thousands)
    
    IPG
    
    
    iAS
    
    
    SY365
    
    
    Elimination
    
    
    TotalRevenues:License feesInfrastructure
    
    $
    229,376
    
    
    $
    235
    
    
    $
    
    
    
    $
    
    
    
    $
    229,611Mobile and Embedded
    
    
    31,621
    
    
    
    65,519
    
    
    
    
    
    
    
    
    
    
    
    97,140Subtotal license fees
    
    
    260,997
    
    
    
    65,754
    
    
    
    
    
    
    
    
    
    
    
    326,751Intersegment license revenues
    
    
    86
    
    
    
    26,333
    
    
    
    
    
    
    
    (26,419
    )
    
    
    Total license fees
    
    
    261,083
    
    
    
    92,087
    
    
    
    
    
    
    
    (26,419
    )
    
    
    326,751ServicesDirect service revenue
    
    
    485,016
    
    
    
    46,156
    
    
    
    
    
    
    
    
    
    
    
    531,172Intersegment service revenues
    
    
    367
    
    
    
    25,905
    
    
    
    
    
    
    
    (26,272
    )
    
    
    Total services
    
    
    485,383
    
    
    
    72,061
    
    
    
    
    
    
    
    (26,272
    )
    
    
    531,172Messaging
    
    
    
    
    
    
    
    
    
    
    18,240
    
    
    
    
    
    
    
    18,240Total revenues
    
    
    746,466
    
    
    
    164,148
    
    
    
    18,240
    
    
    
    (52,691
    )
    
    
    876,163Total allocated costs and expenses before
amortization of other purchased intangibles,
purchased technology, cost of restructure,
and unallocated costs
    
    
    598,864
    
    
    
    136,500
    
    
    
    17,596
    
    
    
    (52,691
    )
    
    
    700,269Operating income before amortization of other
purchased intangibles, purchased technology,
cost of restructure, and unallocated costs
    
    
    147,602
    
    
    
    27,648
    
    
    
    644
    
    
    
    
    
    
    
    175,894Amortization of other purchased intangibles
    
    
    2,060
    
    
    
    4,184
    
    
    
    1,087
    
    
    
    
    
    
    
    7,331Amortization of purchased technology
    
    
    1,654
    
    
    
    7,883
    
    
    
    543
    
    
    
    
    
    
    
    10,080Operating income (loss) before cost of
restructure and unallocated costs
    
    
    143,888
    
    
    
    15,581
    
    
    
    (986
    )
    
    
    
    
    
    
    158,483Cost of restructure  2006 Activity
    
    
    961
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    961Operating income (loss) before unallocated costs
    
    
    142,927
    
    
    
    15,581
    
    
    
    (986
    )
    
    
    
    
    
    
    157,522Unallocated costs
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    23,758Operating income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    133,764Interest income, interest expense and other, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    27,634Minority interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (81
    )Income before income taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    161,317
 - 93 -




---



##### Table of Contents



Consolidated(In thousands)
    
    IPG
    
    
    iAS
    
    
    Elimination
    
    
    TotalRevenues:License feesInfrastructure
    
    $
    204,975
    
    
    $
    48
    
    
    $
    
    
    
    $
    205,023Mobile and Embedded
    
    
    32,171
    
    
    
    54,501
    
    
    
    
    
    
    
    86,672Subtotal license fees
    
    
    237,146
    
    
    
    54,549
    
    
    
    
    
    
    
    291,695Intersegment license revenues
    
    
    86
    
    
    
    26,854
    
    
    
    (26,940
    )
    
    
    Total license fees
    
    
    237,232
    
    
    
    81,403
    
    
    
    (26,940
    )
    
    
    291,695ServicesDirect service revenue
    
    
    488,019
    
    
    
    38,981
    
    
    
    
    
    
    
    527,000Intersegment service revenues
    
    
    59
    
    
    
    26,907
    
    
    
    (26,966
    )
    
    
    Total services
    
    
    488,078
    
    
    
    65,888
    
    
    
    (26,966
    )
    
    
    527,000Total revenues
    
    
    725,310
    
    
    
    147,291
    
    
    
    (53,906
    )
    
    
    818,695Total allocated costs and expenses before
amortization of other purchased intangibles,
purchased technology, cost of restructure,
and unallocated costs
    
    
    613,912
    
    
    
    116,402
    
    
    
    (53,906
    )
    
    
    676,408Operating income before amortization of other
purchased intangibles, purchased technology,
cost of restructure, and unallocated costs
    
    
    111,398
    
    
    
    30,889
    
    
    
    
    
    
    
    142,287Amortization of other purchased intangibles
    
    
    2,000
    
    
    
    4,639
    
    
    
    
    
    
    
    6,639Amortization of purchased technology
    
    
    7,224
    
    
    
    4,626
    
    
    
    
    
    
    
    11,850Operating income before cost of restructure and
unallocated costs
    
    
    102,174
    
    
    
    21,624
    
    
    
    
    
    
    
    123,798Cost of restructure  2005 Activity
    
    
    284
    
    
    
    
    
    
    
    
    
    
    
    284Operating income before unallocated costs
    
    
    101,890
    
    
    
    21,624
    
    
    
    
    
    
    
    123,514Unallocated costs
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,574Operating income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    121,940Interest income, interest expense and other, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    14,824Minority interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (49
    )Income before income taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    136,715
 - 94 -




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##### Table of Contents



2007
    
    
    2006
    
    
    2005Revenues:Unaffiliated customers:United States
    
    $
    499,815
    
    
    $
    442,432
    
    
    $
    441,809Europe
    
    
    342,029
    
    
    
    279,306
    
    
    
    233,524Other
    
    
    183,686
    
    
    
    154,425
    
    
    
    143,362Total
    
    $
    1,025,530
    
    
    $
    876,163
    
    
    $
    818,695Long-lived assets, net:United States
    
    $
    770,210
    
    
    $
    788,052
    
    
    $
    571,976Europe
    
    
    59,380
    
    
    
    60,086
    
    
    
    13,572Other
    
    
    46,129
    
    
    
    31,782
    
    
    
    26,237Total
    
    $
    875,719
    
    
    $
    879,920
    
    
    $
    611,785
 Note Eleven: Business Combinations
    - 95 -




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##### Table of Contents



Note Twelve: Litigation
     - 96 -




---



##### Table of Contents



Note Thirteen: Restructuring Costs
    Accrued
    
    
    
    
    
    
    
    
    
    AccruedLiabilities
    
    
    
    
    
    Amounts
    
    Liabilitiesat
    
    Amounts
    
    Accrued
    
    at12/31/06
    
    Paid
    
    (Reversed)
    
    12/31/072004 Plan
    
    
    4.2
    
    
    
    (1.2
    )
    
    
    0.1
    
    
    
    3.12003 Plan
    
    
    0.2
    
    
    
    (0.1
    )
    
    
    (0.1
    )
    
    
    2002 Plan
    
    
    8.3
    
    
    
    (3.1
    )
    
    
    0.8
    
    
    
    6.02001 Plan
    
    
    2.0
    
    
    
    (0.7
    )
    
    
    
    
    
    
    1.3AvantGo
    
    
    0.9
    
    
    
    (0.8
    )
    
    
    (0.1
    )
    
    
    Mobile 365
    
    
    1.3
    
    
    
    (0.5
    )
    
    
    
    
    
    
    0.8
 - 97 -




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##### Table of Contents



Note Fourteen: Guarantees
  - 98 -




---



##### Table of Contents



Contingent Change of Control Provisions
  Note Fifteen: Convertible Subordinated Notes
     Note Sixteen: Subsequent Events
  - 99 -




---



##### Table of Contents



Quarterly Financial Information (Unaudited)
 Three months ended (in thousands,
    
    March 31
    
    
    June 30
    
    
    September 30
    
    
    December 31
    
    
    Totalexcept per share and stock price data)
    
    2007
    
    
    2007
    
    
    2007
    
    
    2007
    
    
    2007Revenues:License fees
    
    $
    69,365
    
    
    $
    77,435
    
    
    $
    85,141
    
    
    $
    112,866
    
    
    $
    344,807Services
    
    
    129,651
    
    
    
    135,230
    
    
    
    135,838
    
    
    
    143,490
    
    
    
    544,209Messaging
    
    
    31,021
    
    
    
    32,358
    
    
    
    34,287
    
    
    
    38,848
    
    
    
    136,514Total revenues:
    
    
    230,037
    
    
    
    245,023
    
    
    
    255,266
    
    
    
    295,204
    
    
    
    1,025,530Costs and expenses:Cost of license fees
    
    
    12,753
    
    
    
    13,083
    
    
    
    12,667
    
    
    
    14,611
    
    
    
    53,114Cost of services
    
    
    38,742
    
    
    
    39,539
    
    
    
    38,684
    
    
    
    40,825
    
    
    
    157,790Cost of messaging
    
    
    18,889
    
    
    
    18,906
    
    
    
    21,428
    
    
    
    23,375
    
    
    
    82,598Sales and marketing
    
    
    64,575
    
    
    
    64,916
    
    
    
    64,415
    
    
    
    73,089
    
    
    
    266,995Product development and engineering
    
    
    38,753
    
    
    
    36,920
    
    
    
    38,739
    
    
    
    38,159
    
    
    
    152,571General and administrative
    
    
    31,496
    
    
    
    32,680
    
    
    
    31,231
    
    
    
    33,912
    
    
    
    129,319Amortization of other purchased
intangibles
    
    
    3,410
    
    
    
    3,436
    
    
    
    3,445
    
    
    
    3,492
    
    
    
    13,783Cost (reversal) of restructure
    
    
    4
    
    
    
    (51
    )
    
    
    17
    
    
    
    827
    
    
    
    797Total costs and expenses
    
    
    208,622
    
    
    
    209,429
    
    
    
    210,626
    
    
    
    228,290
    
    
    
    856,967Operating income
    
    
    21,415
    
    
    
    35,594
    
    
    
    44,640
    
    
    
    66,914
    
    
    
    168,563Interest income, expense, and other, net
    
    
    5,005
    
    
    
    5,142
    
    
    
    5,710
    
    
    
    5,520
    
    
    
    21,377Minority interest
    
    
    (20
    )
    
    
    
    
    
    
    
    
    
    
    32
    
    
    
    12Income before income taxes
    
    
    26,400
    
    
    
    40,736
    
    
    
    50,350
    
    
    
    72,466
    
    
    
    189,952Provision for income taxes
    
    
    11,252
    
    
    
    14,708
    
    
    
    16,220
    
    
    
    (1,078
    )
    
    
    41,102Net income
    
    $
    15,148
    
    
    $
    26,028
    
    
    $
    34,130
    
    
    $
    73,544
    
    
    $
    148,850Basic net income per share
    
    $
    0.17
    
    
    $
    0.29
    
    
    $
    0.38
    
    
    $
    0.83
    
    
    $
    1.65Diluted net income per share
    
    $
    0.16
    
    
    $
    0.28
    
    
    $
    0.37
    
    
    $
    0.81
    
    
    $
    1.61
 Three months ended (in thousands,
    
    March 31
    
    
    June 30
    
    
    September 30
    
    
    December 31
    
    
    Totalexcept per share and stock price data)
    
    2006
    
    
    2006
    
    
    2006
    
    
    2006
    
    
    2006Revenues:License fees
    
    $
    66,888
    
    
    $
    83,141
    
    
    $
    76,338
    
    
    $
    100,384
    
    
    $
    326,751Services
    
    
    128,120
    
    
    
    132,418
    
    
    
    132,794
    
    
    
    137,840
    
    
    
    531,172Messaging
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    18,240
    
    
    
    18,240Total revenues:
    
    
    195,008
    
    
    
    215,559
    
    
    
    209,132
    
    
    
    256,464
    
    
    
    876,163Costs and expenses:Cost of license fees
    
    
    12,792
    
    
    
    11,930
    
    
    
    12,160
    
    
    
    13,658
    
    
    
    50,540Cost of services
    
    
    38,352
    
    
    
    38,338
    
    
    
    37,681
    
    
    
    38,591
    
    
    
    152,962Cost of messaging
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    11,097
    
    
    
    11,097Sales and marketing
    
    
    61,355
    
    
    
    67,833
    
    
    
    62,019
    
    
    
    72,074
    
    
    
    263,281Product development and engineering
    
    
    36,997
    
    
    
    37,543
    
    
    
    37,327
    
    
    
    37,643
    
    
    
    149,510General and administrative
    
    
    24,987
    
    
    
    25,947
    
    
    
    26,103
    
    
    
    28,988
    
    
    
    106,025Amortization of other purchased
intangibles
    
    
    1,546
    
    
    
    1,552
    
    
    
    1,573
    
    
    
    2,660
    
    
    
    7,331Cost of restructure
    
    
    34
    
    
    
    66
    
    
    
    39
    
    
    
    1,514
    
    
    
    1,653Total costs and expenses
    
    
    176,063
    
    
    
    183,209
    
    
    
    176,902
    
    
    
    206,225
    
    
    
    742,399Operating income
    
    
    18,945
    
    
    
    32,350
    
    
    
    32,230
    
    
    
    50,239
    
    
    
    133,764Interest income, expense, and other, net
    
    
    6,058
    
    
    
    7,217
    
    
    
    7,936
    
    
    
    6,423
    
    
    
    27,634Minority interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (81
    )
    
    
    (81
    )Income before income taxes
    
    
    25,003
    
    
    
    39,567
    
    
    
    40,166
    
    
    
    56,581
    
    
    
    161,317Provision for income taxes
    
    
    7,751
    
    
    
    13,234
    
    
    
    15,081
    
    
    
    30,187
    
    
    
    66,253Net income
    
    $
    17,252
    
    
    $
    26,333
    
    
    $
    25,085
    
    
    $
    26,394
    
    
    $
    95,064Basic net income per share
    
    $
    0.19
    
    
    $
    0.30
    
    
    $
    0.28
    
    
    $
    0.29
    
    
    $
    1.06Diluted net income per share
    
    $
    0.19
    
    
    $
    0.29
    
    
    $
    0.27
    
    
    $
    0.28
    
    
    $
    1.03
 - 100 -




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##### Table of Contents



ITEM 9.
    
    CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
  
 ITEM 9A. CONTROLS AND PROCEDURES
 Report of Management on Internal Controls over Financial Reporting
  Evaluation of Disclosure Controls and Procedures
  Changes in Internal Control over Financial Reporting
  
 PART III
 
 ITEM 10. DIRECTORS, EXECUTIVE OFFICERS OF REGISTRANT AND CORPORATE GOVERNANCE
 Current Executive Officers
  - 101 -




---



##### Table of Contents



Identification of Directors
  Compliance with Section 16(a) of the Exchange Act
  Audit Committee Financial Expert
  Standing Audit Committee
  Corporate Governance Guidelines
 www.sybase.com
 Certifications
  Code of Ethics
 www.sybase.com
 
 
 ITEM 11. EXECUTIVE COMPENSATION
  - 102 -




---



##### Table of Contents



ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER
MATTERS
    Weighted average
    
    Number of Securities remainingNumber of Securities to be
    
    exercise price of
    
    available for future issuance underissued upon exercise of
    
    outstanding
    
    equity compensation plansoutstanding options, warrants
    
    options, warrants
    
    (excluding securities reflected inand rights (#)
    
    and rights ($/sh.)
    
    column (a)) (#)Plan category (1)
    
    (a)
    
    (b)
    
    (c)Equity
compensation plans
approved by
security holders
(1)
    
    
    11,242,515
    
    
    $
    15.64
    
    
    
    5,225,214Equity
compensation plans
not approved by
security holders
(2)
    
    
    1,460,161
    
    
    
    13.69
    
    
    
    0Total
    
    
    12,702,676
    
    
    
    15.42
    
    
    
    5,225,214
 
 (1)
    
    Includes all equity compensation plans in each category that were assumed by the Company
in connection with merger, consolidation and acquisition transactions pursuant to which the Company
may make subsequent grants or awards of Company securities in the appropriate category.(2)
    
    A description of the Companys equity compensation plans, including the 1999 Plan, the
Companys only non-stockholder approved equity plan, is set forth in Note Seven to the Companys
Consolidated Financial Statements, Part II, Item 8. The Company has not made grants under the 1999
Plan since April 2, 2004 and no shares remain available for grant in the 1999 Plan. 
 ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE
  
 ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
  - 103 -




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##### Table of Contents



PART IV
 
 ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
  Financial Statements
 Financial Statement Schedules
 Exhibits
 Exhibits
 Schedules.
 Form 10-KPageII Valuation and Qualifying Accounts
    
    
    105
  - 104 -




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##### Table of Contents



TranslationBeginning
    
    
    Charged to
    
    
    
    
    
    
    Adjustments and
    
    
    Ending(Dollars in thousands)
    
    Balance
    
    
    perations (A)
    
    
    Write-offs (B)
    
    
    Other
    
    
    BalanceYear ended December 31, 2007:Allowance for doubtful accounts
    
    $
    3,998
    
    
    $
    1,343
    
    
    $
    (1,951
    )
    
    $
    345
    
    
    $
    3,735Year ended December 31, 2006:Allowance for doubtful accounts
    
    $
    2,651
    
    
    $
    2,330
    
    
    $
    (1,277
    )
    
    $
    294
    
    
    $
    3,998Year ended December 31, 2005:Allowance for doubtful accounts
    
    $
    1,852
    
    
    $
    2,263
    
    
    $
    (1,480
    )
    
    $
    16
    
    
    $
    2,651
 
 A
    
    Sales returns and credit memos allowancesB
    
    Uncollectible accounts written off and recoveries  - 105 -




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##### Table of Contents



SIGNATURES
  SYBASE, INC.By:
    
    /S/ JOHN S. CHENFebruary 29, 2008
    
    
    
    John S. ChenChairman of the Board, ChiefExecutive Officer and President
 POWER OF ATTORNEY
  Signature
    
    Title
    
    Date/S/ JOHN S. CHEN
    
    Chairman of the Board, Chief Executive Officer
    
    February 29, 2008(John S. Chen)
    
    (Principal Executive Officer), President and Director/S/ JEFFREY G ROSS
    
    Senior Vice President and Chief Financial
    
    February 29, 2008(Jeffrey G. Ross)
    
    Officer (Principal Financial Officer)/S/ KEITH JENSEN
    
    Vice President and Corporate
    
    February 29, 2008(Keith Jensen)
    
    Controller
(Principal Accounting
Officer)/S/ RICHARD C. ALBERDING
    
    Director
    
    February 29, 2008(Richard C. Alberding)/S/ CECILIA CLAUDIO
    
    Director
    
    February 29, 2008(Cecilia Claudio)/S/ MICHAEL A. DANIELS
    
    Director
    
    February 29, 2008(Michael A. Daniels)/S/ L. WILLIAM KRAUSE
    
    Director
    
    February 29, 2008(L. William Krause)/S/ ALAN B. SALISBURY
    
    Director
    
    February 29, 2008(Alan B. Salisbury)/S/ JACK E. SUM
    
    Director
    
    February 29, 2008(Jack E. Sum)/S/ ROBERT P. WAYMAN
    
    Director
    
    February 29, 2008(Robert P. Wayman)/S/ LINDA K. YATES
    
    Director
    
    February 29, 2008(Linda K. Yates)
 - 106 -




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##### Table of Contents



EXHIBIT INDEX
 Exhibit No.
    
    Description2.1 (1)
    
    Agreement and Plan of Reorganization dated as of November
29, 1999, among the Company, On-Line Financial Services, Inc., and Home
Financial Network, Inc.2.2 (2)
    
    Agreement and Plan of Merger dated as of February 20,
2001, among the Company, New Era of Networks, Inc., and Neel Acquisition Corp.2.3 (3)
    
    Agreement and Plan of Merger dated as of December 19,
2002, by and among the Company, Seurat Acquisition Corporation and AvantGo,
Inc.2.4 (12)
    
    Agreement and Plan of Merger dated as of July
28, 2005, by and among the Company, Ernst Acquisition Corporation and Extended
Systems Incorporated.2.5 (19)
    
    Agreement and Plan of Merger dated as of September 5,
2006, by and among Sybase, Inc., Monaco Acquisition Corporation, Mobile 365,
Inc., and with respect to Section 6.16(e), Article VIII and Article X only,
John Backus.3.1 (4)
    
    Amended and Restated Certificate of Incorporation of the
Company and Amended and Restated Certificate of Rights, Preferences &
Privileges of Series A Participating Preferred Stock of Sybase, Inc.3.2 (4)
    
    Amended and Restated Bylaws of the Company as of June 11, 2007.4.1 (6)
    
    Preferred Share Rights Agreement dated as of July 31, 2002
between the Company and American Stock Transfer and Trust Co.4.2 (7)
    
    Amendment No. 1 dated as of February 14, 2005 to the
Preferred Share Rights Agreement dated as of July 31, 2002 between the Company
and American Stock Transfer and Trust Co.4.3 (8)
    
    Indenture dated as of February 22, 2005 between the
Company and U.S. Bank National Association, as Trustee (including form of
1.75% Convertible Subordinated Notes due 2025).4.4 (8)
    
    Registration Rights Agreement dated as of February 22,
2005 between the Company and Merrill Lynch, Pierce, Fenner & Smith
Incorporated and Lehman Brothers Inc.10.1 (9)*
    
    New Era of Networks, Inc. Amended and Restated 1995 Stock
Option Plan.10.2 (9)*
    
    New Era of Networks, Inc. 1998 Nonstatutory Stock Option Plan.10.3 (9)*
    
    Convoy Corporation 1997 Stock Option Plan.10.4 (9)*
    
    Microscript, Inc. 1997 Stock Option Plan.10.5 (10)*
    
    1988 Stock Option Plan and Forms of Incentive Stock
Option Agreements and Nonstatutory Stock Option Agreements, as amended.10.6 (11)*
    
    1991 Employee Stock Purchase Plan and 1991 Foreign
Subsidiary Employee Stock Purchase Plan, as amended.10.7 (22)*
    
    Sybase, Inc. 401(k) Plan, as amended.10.8 (22)*
    
    Amendment No. 2 to the Sybase, Inc. 401(k) Plan dated
December 22, 2005.
 - 107 -




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##### Table of Contents



Exhibit No.
    
    Description10.9 (14)*
    
    Sybase, Inc. 1992 Director Stock Option Plan, as amended.10.10 (9)*
    
    Sybase, Inc. 2001 Director Stock Option Plan.10.11 (5)*
    
    Executive Deferred Compensation Plan, as amended December 5, 2003.10.12 (22)*
    
    Amendment No. 1 to the Executive Deferred Compensation
Plan, dated November 3, 2005.10.13 (9)*
    
    Sybase, Inc. 1996 Stock Plan, as amended.10.14 (21) *
    
    Form of Indemnification Agreement10.15 (13)*
    
    Form of Amended and Restated Change of Control
Agreement (standard version).10.16 (13)*
    
    Form of Amended and Restated Change of Control
Agreement (enhanced version).10. 17(20) *
    
    Amended and Restated 1991 Employee Stock Purchase
Plan, as amended February 2, 2005 and Amended and Restated 1991 Foreign
Subsidiary Employee Stock Purchase Plan, as amended February 2, 2005.10.18 (13)*
    
    Second Amended and Restated Employment Agreement
between the Company and John S. Chen dated as of December 18, 2007.10.19 (13)*
    
    Amended and Restated Change of Control Agreement
between the Company and John Chen dated December 18, 2007.10.20 (18)*
    
    Amended and Restated Sybase, Inc. 1999 Nonstatutory
Stock Plan.10.21 (16)*
    
    InphoMatch, Inc. 2000 Equity Incentive Plan, Mobile
365, Inc. 2004 Equity Incentive Plan and MobileWay, Inc. 2000 Stock Option
Plan.10.22 (17)
    
    Corporate Headquarters Lease, dated January 28, 2000,
between the Company and WDS-Dublin, LLC, as amended on November 29, 2000, and
December 13, 2001.10.23 (14)
    
    Amendment to Corporate Headquarters Lease, dated December
13, 2001, between the Company and WDS-Dublin, LLC.10.24 (17)
    
    Trust Agreement dated May 1, 2000 between Fidelity
Management Trust Company and the Company for administration of the Sybase
Executive Deferred Compensation Plan.10.25 (5)
    
    First Amendment to Trust Agreement between Fidelity
Management Trust Company and the Company for administration of Sybase
Executive Deferred Compensation Plan.
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##### Table of Contents



Exhibit No.
    
    Description10.26 (22)
    
    Second Amendment to May 1, 2000 Trust Agreement between
Fidelity Management Trust Company and the Company for administration of Sybase
Executive Deferred Compensation Plan, dated as of February 11, 2005.10.27 (5)
    
    November 17, 2003 Letter Agreement between Fidelity
Management Trust Company and Sybase, Inc. for administration of the Sybase
Executive Deferred Compensation Plan.10.28 (17)*
    
    Financial Fusion, Inc. 2000 Stock Option Plan.10.29 (14)*
    
    Financial Fusion, Inc. 2001 Stock Option Plan.10.30 (14)*
    
    iAnywhere Solutions, Inc. Stock Option Plan.10.31 (14)*
    
    Form of Notice of Grant and Restricted Stock Purchase Agreement.10.32 (23)*
    
    Letter dated February 5, 2008 to John S. Chen regarding
2008 compensation.10.33 (5)*
    
    Executive Financial Planning and Services Program for
Section 16 Officers, effective as of February 5, 2003.10.34 (5)*
    
    Summary Plan Description for Sabbatical Leave Plan of
Sybase, Inc., as Amended and Restated as of May 1, 2003.10.35 (16)*
    
    Amended and Restated Sybase, Inc. 2003 Stock Plan.10.36 (23)*
    
    Letter dated February 5, 2008 to Jeffrey Ross regarding
2008 compensation.10.37 (23)*
    
    Letter dated February 5, 2008 to Marty Beard regarding
2008 compensation.10.38 (23)*
    
    Letter dated February 5, 2008 to Raj Nathan regarding
2008 compensation.10.39 (23)*
    
    Letter dated February 5, 2008 to Steve Capelli
regarding 2008 compensation.10.40 (23)*
    
    Summary of Vesting Terms for 2008 Grants to Chen, Ross,
Beard, Nathan and Capelli.10.41 (21)
    
    Purchase Agreement, dated February 15, 2005 between the
Company and Merrill Lynch, Pierce, Fenner & Smith Incorporated and Lehman
Brothers Inc.10.42 (25)
    
    Agreement, dated February 25, 2008, between the Company
and Sandell Asset Management Corp. and its affiliated entities.12
    
    Computation of Ratio of Earnings to Fixed Charges21
    
    Subsidiaries of the Company23.1
    
    Consent of Independent Registered Public Accounting Firm24 (24)
    
    Powers of Attorney31.1
    
    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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##### Table of Contents



*
    
    Indicates Management Contract or Compensatory Plan.(1)
    
    Incorporated by reference to Exhibit 2.1 to the Companys Registration Statement on Form S-3
filed on January 31, 2000.(2)
    
    Incorporated by reference to Exhibit 2(a) to the Companys Registration Statement on Form S-4
filed March 15, 2001.(3)
    
    Incorporated by reference to Exhibit 1 to the Companys Schedule 13D filed with the
Securities and Exchange Commission on December 30, 2002.(4)
    
    Incorporated by reference to the Exhibits filed with the Companys Quarterly Report on Form
10-Q for the quarter ended June 30, 2007.(5)
    
    Incorporated by reference to the Exhibits filed with the Companys Annual Report on Form 10-K
for the year ended December 31, 2003.(6)
    
    Incorporated by reference to Exhibit 4.1 to the Companys Report on Form 8-K filed on August
5, 2002.(7)
    
    Incorporated by reference to Exhibit 4.2 to the Companys Report on Form 8-K filed on
February 17, 2005.(8)
    
    Incorporated by reference to the Exhibits filed with the Companys Report on Form 8-K filed
on February 22, 2005.(9)
    
    Incorporated by reference to the Companys Registration Statement on Form S-8 filed June 19,
2001.(10)
    
    Incorporated by reference to the Exhibits filed with the Companys Annual Report on Form 10-K
for the year ended December 31, 1997.(11)
    
    Incorporated by reference to the Companys Registration Statement on Form S-8 (file no.
333-83271) filed July 20, 1999.(12)
    
    Incorporated by reference to the Exhibits filed with the Schedule 13D the Company filed
August 8, 2005.(13)
    
    Incorporated by reference to the Exhibits filed with the Companys Report on Form 8-K filed
on December 20, 2007.(14)
    
    Incorporated by reference to the Exhibits filed with the Companys Annual Report on Form 10-K
for the year ended December 31, 2001.(15)
    
    Incorporated by reference to the Companys Registration Statement on Form S-8 filed August
20, 1999.(16)
    
    Incorporated by reference to the Companys Registration Statement on Form S-8 filed on August
9, 2007.(17)
    
    Incorporated by reference to the Exhibits filed with the Companys Annual Report on Form 10-K
for the year ended December 31, 2000.(18)
    
    Incorporated by reference to the Exhibits filed with the Companys Registration Statement on
Form S-8 filed on August 25, 2004.(19)
    
    Incorporated by reference to the Exhibits filed with the Companys Report on Form 8-K filed
on September 9, 2006.(20)
    
    Incorporated by reference to the Exhibits filed with the Companys Registration Statement on
Form S-8 filed on July 29, 2005.(21)
    
    Incorporated by reference to the Exhibits filed with the Companys Annual Report on Form 10-K
for the year ended December 31, 2004.(22)
    
    Incorporated by reference to the Exhibits filed with the Companys Annual Report on Form 10-K
for the year ended December 31, 2005.(23)
    
    Incorporated by reference to the Exhibits filed with the Companys Report on Form 8-K filed
on February 8, 2008.(24)
    
    Incorporated by reference to the signature page of this Report on Form 10-K.(25)
    
    Incorporated by reference to the Exhibits filed with the Companys Report on Form 8-K filed
on February 26, 2008. - 110 -