##### Table of Contents





UNITED STATES SECURITIES AND
    EXCHANGE
 COMMISSION
 Washington, D.C.
    20549
  Form 10-K
  (Mark One)þ

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
    OF THE SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended March
    31, 2009oro

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
    OF THE SECURITIES EXCHANGE ACT OF 1934For the transition period
    from          to   Commission File Number:
    000-22125
  Diamond Management &
    Technology Consultants, Inc.
 (Exact name of registrant as
    specified in its charter)
  Delaware

36-4069408(State or other jurisdiction of
    
    incorporation or organization)

(I.R.S. Employer 
    Identification No.)875 N. Michigan Avenue, Suite 3000
    Chicago, Illinois

60611(Zip Code)(Address of Principal Executive
    Offices)   Registrants telephone number, including area code:
    (312) 255-5000
 Securities registered pursuant to Section 12(b) of the
    Act: None
 Securities registered pursuant to Section 12(g) of the
    Act:
 Common Stock, par value $.001 per share
 Nasdaq Global Select Market
  o þ
  o þ
  þ o
  Regulation S-T o o
  Regulation S-K Form 10-K Form 10-K. o
  12b-2
  Large
    accelerated
    filer o
    Accelerated
    filer þ
    Non-accelerated
    filer o
    Smaller
    reporting
    company o   rule 12b-2 o þ
      DOCUMENTS
    INCORPORATED BY REFERENCE
  Form 10-K




---



##### 





DIAMOND
    MANAGEMENT & TECHNOLOGY CONSULTANTS, INC.
  Annual
    Report on
    Form 10-K
    for the Fiscal Year Ended
 March 31,
    2009
  TABLE OF
    CONTENTS
   
 PagePART IItem 1.


Business


2Item 1A.


Risk Factors


12Item 1B.


Unresolved Staff Comments


17Item 2.


Properties


17Item 3.


Legal Proceedings


17Item 4.


Submission of Matters to a Vote of Security
    Holders


17PART IIItem 5.


Market for Registrants Common Equity,
    Related Stockholder Matters and Issuer Purchases of Equity
    Securities


18Item 6.


Selected Financial Data


21Item 7.


Managements Discussion and Analysis of
    Financial Condition and Results of Operations


22Item 7A.


Quantitative and Qualitative Disclosures About
    Market Risk


35Item 8.


Financial Statements and Supplementary Data


36Item 9.


Changes in and Disagreements with Accountants on
    Accounting and Financial Disclosure


36Item 9A.


Controls and Procedures


36Item 9B.


Other Information


39PART IIIItem 10.


Directors, Executive Officers and Corporate
    Governance


39Item 11.


Executive Compensation


39Item 12.


Security Ownership of Certain Beneficial Owners
    and Management and Related Stockholder Matters


39Item 13.


Certain Relationships and Related Transactions,
    and Director Independence


40Item 14.


Principal Accounting Fees and Services


40PART IVItem 15.


Exhibits, Financial Statement Schedules


40Signatures


42EX-10.3EX-10.13EX-14EX-21EX-23EX-31.1EX-31.2EX-32.1EX-32.2   1




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##### Table of Contents



PART I  Disclosure
    Regarding Forward-Looking Statements
  Form 10-K
  Form 10-K, ® ®
  Item 1.
    Business  Overview
       2




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Form 10-K.
  Industry
    Background and Opportunity
        Our
    Services
       3




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
    Business Design and Performance Improvement 
    translating corporate strategy into a realistic design for
    meeting growth and profit objectives.
    Information Advantage  helping clients make
    better decisions about opportunities and risks by extracting the
    untapped value of data and by increasing the value of
    information management investments.
    Customer Impact  helping companies design and
    implement superior experiences across all interactions, which
    lead to lasting, profitable customer relationships.
    Execution turning high-level strategies into
    measurable results by driving the definition and delivery of the
    strategic vision and business case, translating the vision into
    clear, comprehensive requirements and plans, and managing the
    integrated program through completion.    Industries
    Served
    Financial Services Industry.
  Insurance Industry.
 4




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##### Table of Contents



Healthcare Industry.
  Enterprise Industry.
  Public Sector Industry.
  Our
    Competitive Strengths
    Objectivity.
  Collaborative and Multidisciplinary Model.
 5




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Delivery of Results.
  Strategic Vertical Industry Insight and
    Expertise.
  Ability to Quickly Evolve Our Offerings.
  Strong Culture.
  Continuous Innovation.
  Experienced and Motivated Management.
  Our
    Growth Strategy
   6




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Focus on, and Expand Relationships with Core
    Clients.
  Increase the Awareness of Our Brand through Intellectual
    Capital. ®
  Continue to Develop Client Analytics
    Capability.
  Continue to Diversify Across Industries and Geographic
    Locations.
  Expand the Ratio of Partners to Staff.
  Business
    Development
     7




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##### Table of Contents



www.diamondconsultants.com
    DiamondExchange. ®
  Diamond Network.
  
    Diamond Fellows.  The Diamond Fellows are a
    group of recognized business and technology leaders associated
    with Diamond. Diamond Fellows provide a source of intellectual
    capital, introduce us to prospective clients, author and
    contribute to industry publications, serve as faculty to the
    DiamondExchange program, and participate in client projects.
    Diamond Fellows are contractually committed to dedicate a
    certain number of days annually to Diamond to support marketing
    and client work. Diamond Fellows are compensated with a
    combination of equity and per diem payments for services
    provided to us, or to our clients, on our behalf. As of
    March 31, 2009, we had ten Diamond Fellows. A complete
    biography for each Fellow can be obtained on the Companys
    website www.diamondconsultants.com. The names and titles
    of the Diamond Fellows are listed below:  Dan Ariely,
  Vincent Barabba,
  Gordon Bell, ,
  Dan Bricklin,
  Linda Hill,
  Alan Kay, Ph.D.,
  Andrew Lippman, Ph.D.,
  Chunka Mui,
  David P. Reed, Ph.D.,
  Marvin Zonis, Ph.D.,
 8




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##### Table of Contents




    Independent Advisors executives who offer
    strategic industry oversight and guidance to our growth
    initiatives, intellectual capital development and client
    relationships. At March 31, 2009, we had relationships with
    three independent advisors.
    Industry Advisors leaders spanning the gamut
    from industry to academia enhance Diamonds understanding
    of emerging marketplace developments in target industry
    practices and how they will impact clients in addition to
    providing brand awareness and new client introductions. At
    March 31, 2009, we had five industry advisors.
    Client Relationship Executives.  Client
    Relationship Executives, or CREs, provide an alternative
    business development channel for Diamond. Our CREs consist of
    retired executives,
    executives-in-transition,
    and independent consultants. The program leverages these
    executives senior-level contacts within our targeted
    vertical industries. The program is also designed to enhance
    brand awareness of our capabilities among industry sector senior
    executives. CREs do not directly offer Diamond services, but
    facilitate introductions to industry buyers of consulting
    services. Our CREs have non-exclusive contracts with Diamond and
    are typically paid on a commission basis. At March 31,
    2009, we had 14 CREs.
    Academic Networks We have formal
    relationships with two academic groups that provide seminars and
    other content and networking opportunities: MIT CISR (Center for
    Information Systems Research) conducts field-based research on
    issues related to the management and use of information
    technology (IT) in complex organizations. This network is
    applicable across all of our vertical industries, and is focused
    on technology oriented functions. The second formal network is
    with Harvards Kennedy School of Government. The Kennedy
    School is one of the worlds most eminent social science
    research institutions. This network is focused on our public
    sector practice.
    Alliances leading technology and services
    companies that support Diamond rapidly deliver high-performance
    business and technology solutions. We currently have non-revenue
    alliance relationships with five companies: IBM, Irise, Oracle,
    Hewlett Packard, SAS.  Employees
    and Culture
  Employees.
  Culture.
  
    an environment that intellectually challenges our personnel
    through continuous training and innovative high-impact client
    work;
    consistent compensation and career paths across all competencies
    within Diamond; and
    participation by all of our employees in the continuing
    development and ownership of Diamond.  Recruiting.
 9




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Training and Professional Development.
  Compensation.
    Competition
    Traditional management and strategy consulting firms
  Systems integration and IT consulting firms
  Information technology product and service vendors
         10




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Executive
    Officers of the Registrant
    Name

Age

PositionAdam J. Gutstein


46


President, Chief Executive Officer and DirectorKarl E. Bupp


47


Chief Financial OfficerJohn J. Sviokla


51


Vice Chairman and DirectorStephen Warrington


47


Vice President and Managing Partner, United Kingdom and IndiaThomas E. Weakland


42


Vice President and Managing Partner, Healthcare   Adam J. Gutstein
  Karl E. Bupp
  John J. Sviokla Marketspace Managing in the Marketspace Exploiting the Virtual Value Chain Harvard Business Review.
  Stephen Warrington
  Thomas E. Weakland
 11




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Available
    Information
  (312) 255-5000. http://www.diamondconsultants.com Form 10-K, Form 10-Q, Form 8-K Form 10-K.
  1-800-SEC-0330. (http://www.sec.gov)
  Item 1A.
    Risk
    Factors    Our
    Profitability Will Suffer If We Are Not Able to Maintain Our
    Pricing and Utilization Rates and Control Our Costs.
    
    our clients perception of our ability to add value through
    our services;
    competition;
    introduction of new services or products by us or our
    competitors;
    pricing policies of our competitors; and
    general economic conditions that affect the demand for our
    services.    
    seasonal trends, primarily as a result of our hiring cycle and
    holiday vacations;
    our ability to transition employees from completed projects to
    new engagements; and
    our ability to forecast demand for our services and thereby
    maintain an appropriate headcount in the appropriate areas of
    our workforce.   12




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Our
    Inability to Retain Client Serving Professionals Could Have a
    Material Adverse Affect on our Business.
    Our
    Revenue Could Be Adversely Affected by the Loss of a Significant
    Client or the Failure to Collect a Large Account
    Receivable.
    A
    Significant or Prolonged Economic Downturn Could Have a Material
    Adverse Effect on Our Results of Operations.
    Our
    Quarterly Operating Results Will Vary From Quarter to Quarter,
    Which May Increase the Volatility of Our Stock Price.
      
    the business decisions of our clients regarding the use of our
    services;
    the timing of projects and their termination;
    the timing of revenue or income;
    the timing of hiring, compensation and benefits expenses;
    our ability to transition employees quickly from completed
    projects to new engagements;
    the introduction of new products or services by us or our
    competitors;
    changes in our pricing policies or those of our competitors;
    our ability to manage costs, including personnel costs and
    support services costs; and
    global economic and political conditions.   13




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Competition
    in Our Industry is Intense and Could Harm Our
    Business.
    
    results orientation;
    technical and industry expertise;
    perceived value;
    effectiveness of strategic business models;
    service delivery approach;
    diagnostic capabilities; and
    scope of services.      The
    Absence of Long-Term Contracts With Our Clients Reduces the
    Predictability of Our Revenue.
  and/or
  Failure
    to Meet Client Expectations Could Result in Losses and Negative
    Publicity.
     14




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The Price
    for Our Common Stock Has Been Volatile and
    Unpredictable.
    
    negative news about other publicly traded companies in our
    industry;
    general economic or stock market conditions unrelated to our
    operating performance;
    quarterly variations in our operating results;
    changes in earnings estimates by analysts;
    announcements of new contracts or service offerings by us or our
    competitors;
    financial performance of the Company; and
    other events or factors.    Inability
    to Keep Pace with Rapidly Changing Technology May Impair Our
    Ability to Remain Competitive.
    
    continue to develop our strategic and technical experience;
    develop new services that meet changing client needs; and
    effectively understand leading technologies.    If We Are
    Unable to Protect Our Intellectual Property Rights or If We
    Infringe Upon the Intellectual Property Rights of Others Our
    Business May Be Harmed.
     15




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We Must
    Continue to Build Recognition and Client Acceptance of Our
    Name.
      Our
    Global Operations Pose Complex Management, Business, Financial
    and Regulatory Risks, Which We May Not Adequately
    Address.
    
    the burdens of complying with a wide variety of national and
    local laws;
    multiple and possibly overlapping and conflicting tax laws;
    coordinating geographically separated organizations;
    restrictions on movement of cash;
    the absence in some jurisdictions of effective laws to protect
    our intellectual property rights;
    political instability;
    currency fluctuations and translation risk;
    longer payment cycles;
    restrictions on our ability to operate in certain geographic
    markets and industries for a period of time pursuant to the
    non-compete provisions of the agreement to sell a portion of our
    international operations;
    cultural differences; and
    trade barriers.  The
    Failure to Integrate or Negotiate Successfully Any Future
    Acquisitions Could Harm Our Business and Operating
    Results.
    We May
    Need to Raise Additional Capital in the Future Which May Not Be
    Available.
   16




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Future
    Sales of Our Common Stock in the Public Market Could Cause the
    Price of Our Stock to Decline.
    Our
    Charter Documents and Delaware Law May Discourage an Acquisition
    of Diamond.
    Certain
    of Our Contracts Pose Unique Risks.
    Item 1B.
    Unresolved
    Staff Comments    Item 2.
    Properties    Item 3.
    Legal
    Proceedings  Form 10-K,
  Item 4.
    Submission
    of Matters to a Vote of Security Holders   17




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PART II  Item 5.
    Market
    for Registrants Common Equity, Related Stockholder Matters
    and Issuer Purchases of Equity Securities  Market
    Information
    Sales Price PerShareHigh


LowFiscal year ended March 31, 2008:First Quarter

$
14.13


$
11.03Second Quarter


13.68



7.75Third Quarter


10.70



6.51Fourth Quarter


7.46



4.34Fiscal year ended March 31, 2009:First Quarter

$
7.23


$
4.40Second Quarter


6.33



1.84Third Quarter


4.96



3.20Fourth Quarter


4.43



1.96   Holders
    Dividends
    2008


2009Declaration date


November 6, 2007



November 11, 2008Per share dividend


$0.35



$0.35Record date


November 20, 2007



November 21, 2008Total amount (in thousands)


$10,748



$9,032Payment date


December 6, 2007



December 5, 2008     Securities
    Authorized for Issuance Under Equity Compensation
    Plans
  Form 10-K.
 18




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Shareholder
    Return Performance Graph
    COMPARISON
    OF 5 YEAR CUMULATIVE TOTAL RETURN*
    Among Diamond Management & Technology Consultants
    Inc., The NASDAQ Composite Index
 And The Dow Jones US Business Support Services TSM Index
  
     3/04


3/05


3/06


3/07


3/08


3/09Diamond Management & Technology Consultants, Inc.


$
100.00



$
166.84



$
110.88



$
124.22



$
72.03



$
31.06NASDAQ Composite Index



100.00




101.44




120.49




127.08




118.9




78.48Dow Jones US Business Support Services TSM



100.00




100.33




123.00




138.05




121.40




83.35  19




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##### Table of Contents



Purchases
    of Equity Securities by the Issuer and Affiliated
    Purchasers
    Issuer Purchases of Equity SecuritiesTotal Number of Shares

Maximum Approximate DollarTotal Number of

Average Price

Purchased as Part of

Value of Shares That May bePeriod

Shares Purchased

Paid per Share(1)

Publicly Announced Plans

Purchased Under the PlanApril 1, 2008  June 30, 2008


1,026,890


$
5.25



1,026,890


$
34,683,031July 1, 2008  September 30, 2008


1,120,842


$
5.07



1,120,842


$
29,003,501October 1, 2008  December 31, 2008


516,272


$
4.01



516,272


$
26,932,451January 1, 2009    March 31, 2009













$
26,932,451     (1)
    
    Average price paid per share of stock repurchased under the
    Buy-Back Program is execution price, including commissions paid
    to brokers and expenses of the tender offer. 20




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Item 6.
    Selected
    Financial Data  Form 10-K.
  Year Ended March 31,2005


2006


2007


2008


2009(Amounts in thousands, except per share data)Statement of Operations Data:Revenue:Net revenue

$
144,900


$
145,224


$
168,699


$
182,288


$
152,166Reimbursable expenses


16,848



18,444



21,574



22,768



22,812Total revenue


161,748



163,668



190,273



205,056



174,978Project personnel expenses:Project personnel costs before reimbursable expenses


86,243



99,111



118,596



125,772



113,703Reimbursable expenses


16,848



18,444



21,574



22,768



22,812Stock-based compensation acceleration  tender offer


















14,290Total project personnel expenses


103,091



117,555



140,170



148,540



150,805Gross margin


58,657



46,113



50,103



56,516



24,173Other operating expenses:Professional development and recruiting


6,107



6,689



8,838



9,420



6,716Marketing and sales


3,507



3,522



3,766



4,451



3,103Management and administrative support


24,328



25,328



27,499



26,947



25,846Stock-based compensation acceleration  tender offer


















2,402Restructuring charges (recovery)






400



(24
)






(284
)Total other operating expenses


33,942



35,939



40,079



40,818



37,783Income (loss) from operations


24,715



10,174



10,024



15,698



(13,610
)Interest income, net


1,652



2,868



4,238



3,230



784Other income (expense), net


(216
)


102



(139
)


180



(128
)Total other income, net


1,436



2,970



4,099



3,410



656Income (loss) from continuing operations before income taxes


26,151



13,144



14,123



19,108



(12,954
)Income tax expense (benefit)


(13,420
)


11,151



6,908



8,873



(4,156
)Income from continuing operations after income taxes


39,571



1,993



7,215



10,235



(8,798
)Discontinued operations:Gain on disposal of discontinued operations, including income
    taxes










22,932



7,000



Income (loss) from discontinued operations, net of income taxes


(6,533
)


(12,577
)


1,254



3,859



400Discontinued operations, net of income taxes


(6,533
)


(12,577
)


24,186



10,859



400Net income (loss)

$
33,038


$
(10,584
)

$
31,401


$
21,094


$
(8,398
)Basic income (loss) per share of Common Stock(1) :Income (loss) from continuing operations


1.18



0.06



0.23



0.34



(0.34
)Income (loss) from discontinued operations, net of income taxes


(0.19
)


(0.38
)


0.76



0.36



0.02Net income (loss)

$
0.99


$
(0.32
)

$
0.98


$
0.70


$
(0.32
)Diluted income (loss) per share of Common Stock(1):Income (loss) from continuing operations


1.09



0.06



0.21



0.33



(0.34
)Income (loss) from discontinued operations, net of income taxes


(0.18
)


(0.36
)


0.71



0.34



0.02Net income (loss)

$
0.91


$
(0.31
)

$
0.92


$
0.67


$
(0.32
)Shares used in computing basic income (loss) per share of Common
    Stock(1)


33,516



32,963



31,951



30,200



26,209Shares used in computing diluted income (loss) per share of
    Common Stock(1)


36,281



34,682



34,076



31,492



26,209Cash dividends declared per share of Common Stock

$



$



$
0.30


$
0.35


$
0.35   21




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##### Table of Contents



March 31,2005


2006


2007


2008


2009(Amounts in thousands)Balance Sheet Data:Cash and cash equivalents(2)

$
42,270


$
69,899


$
84,125


$
53,267


$
46,112Short-term investments


55,975















Restricted cash






5,493



6,095



7,338



4,099Working capital(2)


104,506



76,091



81,905



55,566



55,072Total assets


153,060



127,620



120,875



92,395



89,149Total stockholders equity(3)

$
117,945


$
91,888


$
95,927


$
74,852


$
70,040     (1)
    
    See Note (11) of the Notes to the Consolidated Financial
    Statements included elsewhere in this Annual Report on
    Form 10-K
    for an explanation of the methods used to compute basic and
    diluted income (loss) per share data.(2)
    
    As of March 31, 2006, 2007, 2008 and 2009, balance sheet
    amounts reported include only continuing operations. Prior to
    March 31, 2006, amounts reported include combined
    (continuing and discontinued) operations.(3)
    
    Total stockholders equity includes the effect of the
    repurchase of the Companys Common Stock.  Item 7.
    Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations  The following discussion and analysis should be read in
    conjunction with the information contained in the Consolidated
    Financial Statements and related Notes included elsewhere in
    this Annual Report on
    Form 10-K.
    This discussion and analysis also contains forward-looking
    statements that involve risks and uncertainties. See
    Disclosure Regarding Forward-Looking Statements and
    Risk Factors contained in this Annual Report on
    Form 10-K.
    We use the terms we, our,
    us, the Company, and Diamond
    in this report to refer to Diamond Management &
    Technology Consultants, Inc. and its wholly-owned
    subsidiaries.
  Overview
       22




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23




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®
     24




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Critical
    Accounting Policies and Estimates
    Revenue
    Recognition
  out-of-pocket
    Allowance
    for Doubtful Accounts and Deferred Revenue
     25




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Stock-based
    Compensation
      Operating
    Expenses
      Valuation
    of Deferred Tax Assets
   26




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Recent
    Accounting Pronouncements
    Revenue
        Billed Fee Revenue


New Client RevenueIndustry

2007


2008


2009


2007


2008


2009Financial Services


32
%


30
%


30
%


37
%


20
%


32
%Insurance


26
%


23
%


24
%


7
%


12
%


7
%Healthcare


19
%


21
%


19
%


22
%


19
%


23
%Enterprise


19
%


23
%


23
%


22
%


46
%


30
%Public Sector


4
%


3
%


4
%


12
%


3
%


8
%100
%


100
%


100
%


100
%


100
%


100
%  27




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##### Table of Contents



Operating
    Expenses
  Project
    Personnel Costs
        2007


2008


2009Practice headcount


507



510



465Annualized net revenue per practice professional (in thousands)

$
351


$
358


$
315Utilization rate


63
%


62
%


63
%Annualized voluntary attrition


18
%


16
%


12
%Total annualized attrition(1)


22
%


22
%


25
%     (1)
    
    Defined as voluntary attrition plus Company initiated attrition.  Stock-based
    compensation acceleration  tender offer (project
    personnel)
    Professional
    Development and Recruiting
     28




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Marketing
    and Sales
  tm
    Management
    and Administrative Support
      Stock-based
    compensation acceleration  tender offer (other
    operating)
    Restructuring
    Charges (Recovery)
      Other
    Income, Net
   29




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available-for-sale
    Income
    Tax Expense
        Discontinued
    Operations
     30




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Liquidity
    and Capital Resources
    March 31,2008


2009(In millions)Working capital(1)

$
55.6


$
55.1Cash and cash equivalents(1)


53.3



46.1Restricted cash


7.3



4.1Unutilized bank credit facilities


17.5



17.8Stockholders equity(1)

$
74.9


$
70.0     (1)
    
    We repurchased 6.3 million and 2.7 million shares of
    treasury stock during fiscal years 2008 and 2009, respectively,
    for an aggregate cost of $50.9 million and
    $13.1 million, respectively.        2007


2008


2009Declaration date


November 7, 2006



November 6, 2007



November 11, 2008Per share dividend


$0.30



$0.35



$0.35Record date


November 22, 2006



November 20, 2007



November 21, 2008Total amount (in thousands)


$9,716



$10,748



$9,032Payment date


December 8, 2006



December 6, 2007



December 5, 2008    31




---



##### Table of Contents



Cash
    Flows from Operating Activities
    Fiscal Year EndedMarch 31, 2009Net loss

$
(8.4
)Non-cash charges(1)


33.1Deferred income taxes(2)


(5.8
)Excess tax benefits from employee stock Plans(3)


(0.3
)Total increases in cash flows from operating activities due to
    changes in assets and liabilities(4)


2.3Total decreases in cash flows from operating activities due to
    changes in assets and liabilities(5)


(6.3
)Net cash provided by operating activities

$
14.6     (1)
    
    Total non-cash items aggregating $33.1 million, consisting
    primarily of stock-based compensation expense, were added to net
    loss of $8.4 million to arrive at net cash provided by
    operating activities. These non-cash items are summarized as
    follows (in millions):  Fiscal Year EndedMarch 31, 2009Stock-based compensation

$
31.6Depreciation and amortization


1.8Restructuring recovery


(0.3
)Total non-cash items

$
33.1   (2)
    
    Deferred income taxes increased $5.8 million during fiscal
    year 2009, primarily related to an increase in future deductions
    associated with restricted stock units that vested during fiscal
    year 2009. The impact of this increase was excluded from net
    loss of $8.4 million to arrive at cash flows from
    operations.(3)
    
    Excess tax benefits from employee stock plans was
    $0.3 million and was excluded from net loss of
    $8.4 million to arrive at net cash provided by operating
    activities. 32




---



##### Table of Contents



(4)
    
    The total increase in cash flows from operating activities due
    to changes in assets and liabilities was $2.3 million. The
    increase was primarily the result of an increase in accounts
    payable. The increases are summarized as follows (in millions):  Fiscal Year EndedMarch 31, 2009Accounts payable

$
1.7Prepaid expenses and other


0.2Other assets and liabilities


0.4Total increases in cash flows from operating activities due to
    changes in assets and liabilities

$
2.3   (5)
    
    The total decrease in cash flows from operating activities due
    to changes in assets and liabilities was $6.3 million. The
    decrease was primarily the result of an increase in accounts
    receivable and a decrease in income taxes payable. The decreases
    are summarized as follows (in millions):  Fiscal Year EndedMarch 31, 2009Accounts receivable

$
(3.3
)Accrued compensation


(0.3
)Income taxes payable


(2.2
)Deferred revenue


(0.4
)Restructuring accrual


(0.1
)Total decreases in cash flows from operating activities due to
    changes in assets and liabilities

$
(6.3
)     Contractual
    Obligations
    Payments Due By PeriodLess Than








More ThanOne Year


1-3 Years


3-5 Years


5 Years


TotalOperating leases

$
1,714


$
2,310


$
2,077


$
269


$
6,370Purchase obligations(1)


653



540











1,193Other long-term liabilities(2)(3)














368



368Total

$
2,367


$
2,850


$
2,077


$
637


$
7,931     (1)
    
    Purchase obligations represent minimum commitments due to third
    parties, including IT maintenance contracts in support of
    internal use software and hardware and other marketing and
    consulting contracts. Contracts for which our commitment is
    variable based on volumes, with no fixed minimum quantities, 33




---



##### Table of Contents



and contracts that can be cancelled without payment penalties,
    have been excluded. Amounts presented also exclude accounts
    payable and accrued expenses at March 31, 2009.(2)
    
    The $0.4 million long-term liability related to the net tax
    indemnification obligation as discussed in
    Contingencies below is reflected on our consolidated
    balance sheet under GAAP.(3)
    
    The table excludes our liability for uncertain tax positions,
    which totaled $0.7 million as of March 31, 2009, since
    we cannot predict with reasonable reliability the timing of cash
    settlements to the respective tax authorities.  Contingencies
      Off
    Balance Sheet Arrangements
    Cash
    Flows from Investing Activities
   34




---



##### Table of Contents



Cash
    Flows from Financing Activities
      Treasury
    Stock Transactions
      Summary
    Item 7A.
    Quantitative
    and Qualitative Disclosures About Market Risk  Foreign
    Currency Risk
   35




---



##### Table of Contents



non-U.S. businesses
  Interest
    Rate Risk
    Item 8.
    Financial
    Statements and Supplementary Data    Item 9.
    Changes
    in and Disagreements With Accountants on Accounting and
    Financial Disclosure    Item 9A.
    Controls
    and Procedures  Evaluation
    of Disclosure Controls and Procedures
  Rules 13a-15(e) 15d-15(e)
  Managements
    Report on Internal Control Over Financial
    Reporting
  Rule 13a-15(f) Rule 15d-15(f)
     36




---



##### Table of Contents



Internal Control 
    Integrated Framework
  Changes
    in Internal Control Over Financial Reporting
   37




---



##### Table of Contents



Report of
    Independent Registered Public Accounting Firm
     Internal Control  Integrated
    Framework
        Internal
    Control  Integrated Framework
      38




---



##### Table of Contents



Item 9B.
    Other
    Information   PART III  Form 10-K 120-day Form 10-K 120-day
  Item 10.
    Directors,
    Executive Officers and Corporate Governance  Form 10-K. Form 10-K Regulation S-K. Regulation S-K Form 10-K.
  Form 10-K.
  Item 11.
    Executive
    Compensation  Form 10-K.
  Item 12.
    Security
    Ownership of Certain Beneficial Owners and Management and
    Related Stockholder Matters    Number of





Number of securitiessecurities to be





remaining available forissued upon


Weighted-average


future issuance underexercise of


exercise price of


equity compensationoutstanding


outstanding


plans (excludingoptions, warrants


options, warrants


securities reflected inPlan Category

and rights


and rights


column (a))(a)


(b)


(c)Equity compensation plans approved by security holders


5,905,632
(1)

$
8.36
(2)


7,277,124
(3)Equity compensation plans not approved by security holders










Total


5,905,632







7,277,124     (1)
    
    Includes 931,293 shares issuable upon vesting of
    outstanding Stock Awards and 4,278,686 stock-settled stock
    appreciation rights (SARs).(2)
    
    The weighted-average exercise price does not take into account
    the shares issuable upon vesting of outstanding Stock Awards
    which have no exercise price.(3)
    
    Includes 566,380 shares available for future issuance under
    the Companys Employee Stock Purchase Plan. 39




---



##### Table of Contents



Form 10-K.
  Item 13.
    Certain
    Relationships and Related Transactions, and Director
    Independence  Form 10-K.
  Item 14.
    Principal
    Accounting Fees and Services  Form 10-K.
 PART IV  Item 15.
    Exhibits,
    Financial Statement Schedules  Financial Statements and Schedules
  page F-1 Form 10-K.
        Exhibits
  Form 10-K.
  ExhibitNo.

Description3
.1

Form of Restated Certificate of Incorporation of the Company
    (filed as Exhibit 3.1(a) to the Companys Quarterly Report
    on Form 10-Q for the quarter ended September 30, 2006
    (File No. 000-22125)
    and incorporated herein by reference).3
.2

Amended and Restated By-laws of the Company (filed as Exhibit
    3.2 to the Companys Quarterly Report on Form 10-Q for the
    quarter ended September 30, 2006 (File No. 000-22125) and
    incorporated herein by reference).10
.1

Stock Purchase Agreement dated July 19, 2006 by and between
    DiamondCluster International B.V. and Mercer Management
    Consulting, Inc. (filed as Exhibit 10.1 to the Companys
    Quarterly Report on Form 10-Q for the quarter ended September
    30, 2006 (File No. 000-22125) and incorporated herein by
    reference).10
.2

Employment Agreement between each of the Executive Officers and
    the Company (filed as Exhibit 10.2 to the Companys Annual
    Report on Form 10-K for the year ended March 31, 2006 (File No.
    000-22125) and incorporated herein by reference).10
.3*

Partners Operating Agreement dated as of April 1, 2009.10
.4

Amended and Restated 1998 Equity Incentive Plan (filed as
    Exhibit 10.2 to the Companys Quarterly Report on Form 10-Q
    for the quarter ended September 30, 2006 (File No. 000-22125)
    and incorporated herein by reference). 40




---



##### Table of Contents



ExhibitNo.

Description10
.5

Form of Notices of Grant and Restricted Stock Unit Agreement
    (filed as Exhibit 10.4 to the Companys Annual Report on
    Form 10-K for the period ended March 31, 2007 (File No.
    000-22125) and incorporated herein by reference).10
.6

Form of Notices of Grant and Stock Appreciation Rights Agreement
    (filed as Exhibit 10.5 to the Companys Annual Report on
    Form 10-K for the period ended March 31, 2005 (File No.
    000-22125) and incorporated herein by reference).10
.7

2000 Stock Option Plan, as amended December 31, 2008 (filed as
    Exhibit 10.7 to the Companys Quarterly Report on Form 10-Q
    for the quarter ended December 31, 2008 (File No. 000-22125) and
    incorporated herein by reference).10
.8

Form of Notices of Grant and Restricted Stock Unit Agreement
    under the 2000 Stock Option Plan (filed as Exhibit 10.8 to the
    Companys Quarterly Report on Form 10-Q for the period
    ended December 31, 2008 (File No. 000-22125) and incorporated
    herein by reference).10
.9

Employee Stock Purchase Plan (filed as Exhibit 10.9 to the
    Companys Quarterly Report on Form 10-Q for the period
    ended September 30, 2008 (File No 000-22125) and
    incorporated herein by reference).10
.10

Summary of Outside Director Board Compensation filed as Exhibit
    10.10 to the Companys Quarterly Report on Form 10-Q for
    the period ended September 30, 2008 (File No 000-22125) and
    incorporated herein by reference).10
.11

Amended and Restated Credit Agreement between the Company and JP
    Morgan Chase Bank, N.A. dated July 31, 2007 (filed as Exhibit
    10.10 to the Companys Annual Report on Form 10-K for the
    period ended March 31, 2008 (File No. 000-22125) and
    incorporated herein by reference).10
.12

First Modification Agreement (to that certain Amended and
    Restated Credit Agreement dated July 31, 2007) among the
    Company, JP Morgan Chase Bank, N.A., and certain of the
    Companys subsidiaries dated March 31, 2008 (filed as
    Exhibit 10.11 to the Companys Annual Report on Form 10-K
    for the period ended March 31, 2008 (File No. 000-22125) and
    incorporated herein by reference).10
.13*

Second Modification Agreement (to that certain Amended and
    Restated Credit Agreement dated July 31, 2007) among the
    Company, JP Morgan Chase Bank, N.A., and certain of the
    Companys subsidiaries dated March 25, 2009.14
*

Code of Business Conduct and Ethics and Supplemental Code of
    Ethics for Senior Financial Officers.21
*

Subsidiaries of the Company.23
*

Consent of Independent Registered Public Accounting Firm.24
*

Power of Attorney (included on signature page).31
.1*

Certification of the President and Chief Executive Officer
    pursuant to Rule 13a-14(a)/15d-14(a), as adopted pursuant to
    section 302 of the Sarbanes-Oxley Act of 2002.31
.2*

Certification of the Chief Financial Officer pursuant to Rule
    13a-14(a)/15d-14(a), as adopted pursuant to section 302 of the
    Sarbanes-Oxley Act of 2002.32
.1*

Certification of the President and Chief Executive Officer
    pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
    section 906 of the Sarbanes-Oxley Act of 2002.32
.2*

Certification of the Chief Financial Officer pursuant to
    18 U.S.C. Section 1350, as adopted pursuant to section 906
    of the Sarbanes-Oxley Act of 2002.     *
    
    Filed herewith. 41




---



##### Table of Contents



SIGNATURES    Diamond Management &
    Technology Consultants, Inc.
  By:
    /s/  Adam
    J. Gutstein   President and Chief Executive Officer
    POWER OF
    ATTORNEY
  Form 10-K,
    Signature

Title

Date/s/  Adam
    J. GutsteinAdam
    J. Gutstein

President and Chief Executive Officer (Principal Executive
    Officer); Director

June 10, 2009/s/  Karl
    E. BuppKarl
    E. Bupp

Chief Financial Officer (Principal Financial Officer and
    Principal Accounting Officer)

June 10, 2009/s/  John
    J. SvioklaJohn
    J. Sviokla

Vice Chairman and Director

June 10, 2009/s/  Edward
    R. AndersonEdward
    R. Anderson

Director

June 10, 2009/s/  Melvyn
    E. BergsteinMelvyn
    E. Bergstein

Director

June 10, 2009/s/  Donald
    R. CaldwellDonald
    R. Caldwell

Director

June 10, 2009/s/  Michael
    E. MikolajczykMichael
    E. Mikolajczyk

Director

June 10, 2009 42




---



##### Table of Contents



Signature

Title

Date/s/  Michael
    H. MoskowMichael
    H. Moskow

Director

June 10, 2009/s/  Javier
    RubioJavier
    Rubio

Director

June 10, 2009/s/  Pauline
    A. SchneiderPauline
    A. Schneider

Director

June 10, 2009/s/  Samuel
    K. SkinnerSamuel
    K. Skinner

Director

June 10, 2009/s/  Arnold
    R. WeberArnold
    R. Weber

Director

June 10, 2009  43




---



##### 



DIAMOND
    MANAGEMENT & TECHNOLOGY CONSULTANTS, INC.
  INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
   
 PageConsolidated Financial Statements:Report of Independent Registered Public
    Accounting Firm


F-2Consolidated Balance Sheets as of March 31,
    2008 and 2009


F-3Consolidated Statements of Operations and
    Comprehensive Income (Loss) for the Years Ended March 31,
    2007, 2008 and 2009


F-4Consolidated Statements of Stockholders
    Equity for the Years Ended March 31, 2007, 2008 and 2009


F-5Consolidated Statements of Cash Flows for the
    Years Ended March 31, 2007, 2008 and 2009


F-6Notes to Consolidated Financial Statements


F-7Supplemental Financial Schedules:Report of Independent Registered Public
    Accounting Firm


S-1Schedule II  Valuation and
    Qualifying Accounts


S-2   F-1




---



##### Table of Contents



REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM             Internal Control  Integrated
    Framework
    F-2




---



##### Table of Contents



DIAMOND
    MANAGEMENT & TECHNOLOGY CONSULTANTS, INC.
  CONSOLIDATED
    BALANCE SHEETS
 March 31, 2008 and 2009
  2008


2009(In thousands,except per share data)ASSETSCurrent assets:Cash and cash equivalents

$
53,267


$
46,112Accounts receivable, net of allowance of $695 and $566 as of
    March 31, 2008 and 2009, respectively


13,215



15,872Income taxes receivable


256



Deferred tax asset  current portion


1,236



6,747Prepaid expenses


1,970



1,323Other current assets


1,276



1,479Total current assets


71,220



71,533Restricted cash


7,338



4,099Computers, equipment, leasehold improvements and software, net


4,572



4,280Deferred tax asset  long-term portion


7,710



7,757Other assets


1,555



1,480Total assets

$
92,395


$
89,149LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable

$
2,416


$
4,595Accrued compensation


4,648



4,269Deferred revenue


1,092



722Accrued benefits


2,704



2,481Income taxes payable  current portion






1,493Restructuring accrual  current portion


220



Other accrued liabilities


4,574



2,901Total current liabilities


15,654



16,461Restructuring accrual  long-term portion


119



Deferred rent  long term portion


34



1,593Accrued income tax liabilities  long-term portion


1,286



687Net tax indemnification obligation


450



368Total liabilities


17,543



19,109Commitments and contingenciesStockholders equity:Preferred Stock, $1.00 par value, 2,000 shares
    authorized, no shares issued






Common Stock, $0.001 par value, 300,000 shares
    authorized, 40,024 and 40,087 shares issued as of
    March 31, 2008 and 2009, respectively


40



40Additional paid-in capital


622,849



622,967Accumulated other comprehensive loss


(2,748
)


(4,636
)Accumulated deficit


(424,831
)


(442,261
)195,310



176,110Less Common Stock in treasury, at cost, 12,936 and
    12,885 shares held at March 31, 2008 and 2009,
    respectively


120,458



106,070Total stockholders equity


74,852



70,040Total liabilities and stockholders equity

$
92,395


$
89,149    F-3




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##### Table of Contents



DIAMOND
    MANAGEMENT & TECHNOLOGY CONSULTANTS, INC.
  CONSOLIDATED STATEMENTS OF OPERATIONS AND
    COMPREHENSIVE INCOME (LOSS)
 Fiscal years ended March 31, 2007, 2008 and 2009
  2007


2008


2009(In thousands, except per share data)Revenue:Net revenue

$
168,699


$
182,288


$
152,166Reimbursable expenses


21,574



22,768



22,812Total revenue


190,273



205,056



174,978Project personnel expenses:Project personnel costs before reimbursable expenses


118,596



125,772



113,703Reimbursable expenses


21,574



22,768



22,812Stock-based compensation acceleration  tender offer










14,290Total project personnel expenses


140,170



148,540



150,805Gross margin


50,103



56,516



24,173Other operating expenses:Professional development and recruiting


8,838



9,420



6,716Marketing and sales


3,766



4,451



3,103Management and administrative support


27,499



26,947



25,846Stock-based compensation acceleration  tender offer










2,402Restructuring recovery


(24
)






(284
)Total other operating expenses


40,079



40,818



37,783Income from operations


10,024



15,698



(13,610
)Interest income


4,301



3,323



957Interest expense


(63
)


(93
)


(173
)Other income (expense), net


(139
)


180



(128
)Total other income, net


4,099



3,410



656Income (loss) from continuing operations before income taxes


14,123



19,108



(12,954
)Income tax expense (benefit)


6,908



8,873



(4,156
)Income (loss) from continuing operations after income taxes


7,215



10,235



(8,798
)Discontinued operations:Gain on disposal of discontinued operations, including income
    tax benefit of $574, $0 and $0 for the fiscal years ended
    March 31, 2007, 2008 and 2009, respectively


22,932



7,000



Income from discontinued operations, including income tax
    benefit of $0, $0 and $575 for the fiscal years ended
    March 31, 2007, 2008 and 2009, respectively


1,254



3,859



400Income from discontinued operations, net of income taxes


24,186



10,859



400Net income (loss)


31,401



21,094



(8,398
)Foreign currency translation adjustments:Foreign currency translation adjustments arising during the
    period


890



27



(1,869
)Less: reclassification adjustment for foreign currency
    translation realized from the sale of discontinued operations


(6,065
)






Total foreign currency translation adjustments


(5,175
)


27



(1,869
)Unrealized loss on investment


(69
)


(4
)


(19
)Comprehensive income (loss)

$
26,157


$
21,117


$
(10,286
)Basic income (loss) per share of Common Stock:Income (loss) from continuing operations

$
0.23


$
0.34


$
(0.34
)Income from discontinued operations


0.76



0.36



0.02Net income (loss)

$
0.98


$
0.70


$
(0.32
)Diluted income (loss) per share of Common Stock:Income (loss) from continuing operations

$
0.21


$
0.33


$
(0.34
)Income from discontinued operations


0.71



0.34



0.02Net income (loss)

$
0.92


$
0.67


$
(0.32
)Shares used in computing basic income (loss) per share of Common
    Stock


31,951



30,200



26,209Shares used in computing diluted income (loss) per share of
    Common Stock


34,076



31,492



26,209     2007


2008


2009Project personnel costs before reimbursable expenses

$
11,318


$
15,059


$
11,687Professional development and recruiting


101



124



110Marketing and sales


345



332



265Management and administrative support


2,925



2,841



2,861SBC included in income (loss) from continuing operations


14,689



18,356



14,923SBC included in income from discontinued operations


527







15,216



18,356



14,923SBC recorded against the gain on disposal of discontinued
    operations


1,379







Total SBC

$
16,595


$
18,356


$
14,923    F-4




---



##### Table of Contents



DIAMOND
    MANAGEMENT & TECHNOLOGY CONSULTANTS, INC. CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY
 Fiscal years ended March 31, 2007, 2008 and 2009
  AccumulatedAdditional








Other


TotalCommon


Paid-in


Accumulated


Treasury


Comprehensive


StockholdersStock


Capital


Deficit


Stock


Income (Loss)


Equity(In thousands)Balance at March 31, 2006

$
40


$
623,760


$
(456,878
)

$
(77,507
)

$
2,473


$
91,888Issuance, forfeiture and cancellation of stock


1



















1Stock-based compensation






16,595















16,595Tender offer cash settlements for employee stock options






(1,805
)














(1,805
)Exercise of stock options


1



9,819















9,820Shares withheld for taxes






(4,990
)














(4,990
)Issuance of treasury stock under equity incentive plans


(2
)


(21,208
)






21,208







(2
)Income tax expense related to stock-based compensation, net of
    adjustments






3,459















3,459Purchase of treasury stock














(37,465
)






(37,465
)Employee stock purchase plan






1,969















1,969Unrealized loss on investment


















(69
)


(69
)Translation adjustment


















(5,175
)


(5,175
)Dividend paid on Common Stock, $0.30 per share










(9,700
)










(9,700
)Net income










31,401











31,401Balance at March 31, 2007

$
40


$
627,599


$
(435,177
)

$
(93,764
)

$
(2,771
)

$
95,927Issuance, forfeiture and cancellation of stock


1



















1Stock-based compensation






18,356















18,356Exercise of stock options






2,132















2,132Shares withheld for taxes






(3,436
)














(3,436
)Issuance of treasury stock under equity incentive plans


(1
)


(24,243
)






24,243







(1
)Income tax expense related to stock-based compensation, net of
    adjustments






281















281Purchase of treasury stock














(50,937
)






(50,937
)Employee stock purchase plan






2,160















2,160Unrealized loss on investment


















(4
)


(4
)Translation adjustment


















27



27Dividend paid on Common Stock, $0.35 per share










(10,748
)










(10,748
)Net income










21,094











21,094Balance at March 31, 2008

$
40


$
622,849


$
(424,831
)

$
(120,458
)

$
(2,748
)

$
74,852Stock-based compensation






31,615















31,615Exercise of stock options






18















18Shares withheld for taxes






(2,675
)














(2,675
)Issuance of treasury stock under equity incentive plans






(27,533
)






27,533







Income tax expense related to stock-based compensation, net of
    adjustments






(3,341
)














(3,341
)Purchase of treasury stock














(13,145
)






(13,145
)Employee stock purchase plan






2,034















2,034Unrealized loss on investment


















(19
)


(19
)Translation adjustment


















(1,869
)


(1,869
)Dividend paid on Common Stock, $0.35 per share










(9,032
)










(9,032
)Net loss










(8,398
)










(8,398
)Balance at March 31, 2009

$
40


$
622,967


$
(442,261
)

$
(106,070
)

$
(4,636
)

$
70,040    F-5




---



##### Table of Contents



DIAMOND
    MANAGEMENT & TECHNOLOGY CONSULTANTS, INC.
  CONSOLIDATED
    STATEMENTS OF CASH FLOWS(1)
 Fiscal Years ended March 31, 2007, 2008 and 2009
  2007


2008


2009(In thousands)Cash flows from operating activities:Net income (loss)

$
31,401


$
21,094


$
(8,398
)Adjustments to reconcile income (loss) to net cash provided by
    operating activities:Restructuring recovery


(478
)






(284
)Depreciation and amortization


1,754



1,550



1,801Stock-based compensation


15,216



18,356



31,615Gain on sale of discontinued operations


(22,358
)


(7,000
)


Deferred income taxes


757



(254
)


(5,783
)Excess tax benefits from employee stock plans


(4,387
)


(1,220
)


(307
)Changes in assets and liabilities:Accounts receivable


(8,395
)


1,742



(3,332
)Prepaid expenses and other


154



89



216Accounts payable


(1,088
)


693



1,730Accrued compensation


3,638



(3,261
)


(344
)Restructuring accrual


(1,309
)


(221
)


(55
)Deferred revenue


306



(339
)


(369
)Income taxes payable


5,265



(429
)


(2,244
)Other assets and liabilities


1,746



(4,799
)


354Net cash provided by operating activities


22,222



26,001



14,600Cash flows from investing activities:Decrease (increase) in restricted cash


(602
)


(132
)


3,082Distribution from
    available-for-sale
    investments










289Net proceeds from sale of discontinued operations


29,462



7,000



Capital expenditures, net


(2,902
)


(3,066
)


(1,642
)Other assets


227



44



Net cash provided by investing activities


26,185



3,846



1,729Cash flows from financing activities:Stock option and employee stock purchase plan proceeds


11,685



4,292



2,052Payment of employee withholding taxes from equity transactions


(4,990
)


(3,436
)


(2,675
)Tender offer cash settlements for employee stock options


(1,805
)






Common stock cash dividends


(9,700
)


(10,748
)


(9,032
)Excess tax benefits from employee stock plans


4,387



1,220



307Purchase of treasury stock


(36,293
)


(52,110
)


(13,145
)Net cash used in financing activities


(36,716
)


(60,782
)


(22,493
)Effect of exchange rate changes on cash


211



77



(991
)Net increase (decrease) in cash and cash equivalents


11,902



(30,858
)


(7,155
)Cash and cash equivalents at beginning of year(2)


72,223



84,125



53,267Cash and cash equivalents at end of year

$
84,125


$
53,267


$
46,112Supplemental disclosure of cash flow information:Cash paid during the year for interest

$
12


$
9


$
110Cash paid during the year for income taxes


808



9,530



3,323Non-cash financing activities:Treasury stock repurchase obligation

$
1,172


$



$
     (1)
    
    The Consolidated Statements of Cash Flows is prepared on a
    combined basis and the reported results include both continuing
    and discontinued operations for the fiscal years ended
    March 31, 2007, 2008 and 2009.(2)
    
    Cash and cash equivalents includes $2,324 of cash and cash
    equivalents classified as discontinued operations as of
    April 1, 2006.   F-6




---



##### Table of Contents



DIAMOND
    MANAGEMENT & TECHNOLOGY CONSULTANTS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
  (1)
    Description
    of the Business and Basis of Presentation            (2)
    Summary
    of Significant Accounting Policies  Principles
    of Consolidation
    Foreign
    Currency Translation and Revaluation
     F-7




---



##### Table of Contents



DIAMOND
    MANAGEMENT & TECHNOLOGY CONSULTANTS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Revenue
    Recognition
  out-of-pocket
  Allowance
    for Doubtful Accounts and Deferred Revenue
      Stock-based
    Compensation
     F-8




---



##### Table of Contents



DIAMOND
    MANAGEMENT & TECHNOLOGY CONSULTANTS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Cash
    and Cash Equivalents
    Restricted
    Cash
    Long-Lived
    Assets
    Costs
    Incurred to Develop Software for Internal Use
  98-1, SOP 98-1,
  Accumulated
    Other Comprehensive Income (Loss)
  available-for-sale
  Financial
    Instruments and Concentration of Credit Risk
     F-9




---



##### Table of Contents



DIAMOND
    MANAGEMENT & TECHNOLOGY CONSULTANTS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Income
    Taxes
      Taxes
    Remitted to Government Authorities
  No. 06-3 (EITF 06-3)
  Use of
    Estimates
    (3)
    Recent
    Accounting Pronouncements    
    Level 1  Quoted prices in active markets for
    identical assets and liabilities.
    Level 2  Quoted prices in active markets for
    similar assets and liabilities, or other inputs that are
    observable for the asset or liability, either directly or
    indirectly, for substantially the full term of the financial
    instrument.
    Level 3  Unobservable inputs that are supported
    by little or no market activity and that are significant to the
    fair value of the assets and liabilities. This includes certain
    pricing models, discounted cash flow methodologies and similar
    techniques that use significant unobservable inputs. F-10




---



##### Table of Contents



DIAMOND
    MANAGEMENT & TECHNOLOGY CONSULTANTS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   No. 157-2, FSP 157-2
    06-11, (EITF 06-11). EITF 06-11 paid-in-capital EITF 06-11
  EITF 03-6-1, EITF 03-6-1). EITF 03-6-1, EITF 03-6-1
  (4)
    Discontinued
    Operations     F-11




---



##### Table of Contents



DIAMOND
    MANAGEMENT & TECHNOLOGY CONSULTANTS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
               F-12




---



##### Table of Contents



DIAMOND
    MANAGEMENT & TECHNOLOGY CONSULTANTS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      Fiscal Year Ended March 31,2007


2008


2009Net revenue

$
22,339


$



$
Total revenue


25,757







Gross margin


4,077



2,864



(175
)Income (loss) from discontinued operations


(132
)


3,481



(175
)Other income


1,213







Income (loss) from discontinued operations before income taxes


1,081



3,481



(175
)Income tax benefit


(173
)


(378
)


(575
)Income from discontinued operations (net of income taxes)


1,254



3,859



400Net gain on disposal of discontinued operations (net of income
    taxes)


22,932



7,000



     (5)
    Geographic
    Data      2007


2008


2009Net revenue:North America

$
155,948


$
166,497


$
135,546United Kingdom and India


12,751



15,791



16,620Total net revenue

$
168,699


$
182,288


$
152,166Long-lived assets (as of March 31):North America





$
5,264


$
5,176United Kingdom and India






863



584Total long-lived assets





$
6,127


$
5,760    F-13




---



##### Table of Contents



DIAMOND
    MANAGEMENT & TECHNOLOGY CONSULTANTS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    (6)
    Restricted
    Cash    (7)
    Computers,
    Equipment, Leasehold Improvements and Software, Net    2008


2009Computers and equipment

$
5,459


$
5,628Leasehold improvements


5,258



5,239Software


7,468



8,34718,185



19,214Less accumulated depreciation and amortization


(13,613
)


(14,934
)$
4,572


$
4,280   (8)
    Other
    Accrued Liabilities    2008


2009Accrued employee expenses

$
1,371


$
1,140Other accrued liabilities


3,203



1,761Total

$
4,574


$
2,901   (9)
    Commitments,
    Guarantees and Contingencies  Lease
    Commitments
   F-14




---



##### Table of Contents



DIAMOND
    MANAGEMENT & TECHNOLOGY CONSULTANTS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Fiscal Year Ending March 31,2010

$
1,7142011


1,3082012


1,0022013


1,0132014


1,064Thereafter


269Total

$
6,370       Guarantees
      Legal
    Contingencies
    (10)
    Line of
    Credit   F-15




---



##### Table of Contents



DIAMOND
    MANAGEMENT & TECHNOLOGY CONSULTANTS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    (11)
    Income
    (Loss) Per Share    Fiscal Year Ended March 31,2007


2008


2009Shares used in computing basic income (loss) per share


31,951



30,200



26,209Dilutive effect of stock options, SARs, and restricted
    stock/units


2,125



1,292



Shares used in computing diluted income (loss) per share


34,076



31,492



26,209Antidilutive securities not included in dilutive net income
    (loss) per share calculation


2,352



2,448



6,436Potentially dilutive shares not included due to loss for fiscal
    year










1,183   (12)
    Stockholders
    Equity  Stockholder
    Rights Plan Adoption & Termination
   F-16




---



##### Table of Contents



DIAMOND
    MANAGEMENT & TECHNOLOGY CONSULTANTS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Dividend
    Distribution
    2007

2008

2009Declaration date

November 7, 2006

November 6, 2007

November 11, 2008Per share dividend

$0.30

$0.35

$0.35Record date

November 22, 2006

November 20, 2007

November 21, 2008Total amount (in thousands)

$9,716

$10,748

$9,032Payment date

December 8, 2006

December 6, 2007

December 5, 2008     Stock
    Repurchases
      Repurchases of Common StockFiscal Year Ended March 31,

Shares


Amount


Average Price2009


2,664


$
13,145


$
4.932008


6,296


$
50,937


$
8.092007


3,341


$
37,465


$
11.21Inception to 2006


10,306


$
127,021


$
12.32Total


22,607


$
228,568


$
10.11    F-17




---



##### Table of Contents



DIAMOND
    MANAGEMENT & TECHNOLOGY CONSULTANTS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Common StockHeld inIssued


Treasury


NetBalance at March 31, 2006


40,071



(7,572
)


32,499Issued:Equity incentive plans


615



2,588Treasury Stock:Repurchases






(3,341
)Shares withheld under equity incentive plans






(663
)Retirement


(663
)


663Balance at March 31, 2007


40,023



(8,325
)


31,698Issued:Equity incentive plans


647



1,685Treasury Stock:Repurchases






(6,296
)Shares withheld under equity incentive plans






(646
)Retirement


(646
)


646Balance at March 31, 2008


40,024



(12,936
)


27,088Issued:Equity incentive plans


963



2,715Treasury Stock:Repurchases






(2,664
)Shares withheld under equity incentive plans






(900
)Retirement


(900
)


900Balance at March 31, 2009


40,087



(12,885
)


27,202   (13)
    Stock
    Plans  Share-Based
    Plans
       F-18




---



##### Table of Contents



DIAMOND
    MANAGEMENT & TECHNOLOGY CONSULTANTS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
        Restricted
    Stock and Restricted Stock Units (Stock Awards)
         F-19




---



##### Table of Contents



DIAMOND
    MANAGEMENT & TECHNOLOGY CONSULTANTS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Non-Vested


Weighted-Stock


AverageAwards


Grant-Date(In thousands)


Fair ValueNon-vested at March 31, 2006


4,052


$
8.87Granted


2,359



10.41Vested


(1,439
)


8.18Forfeited


(1,344
)


9.11Non-vested at March 31, 2007


3,628


$
10.01Granted


2,170



9.95Vested


(1,348
)


(10.08
)Forfeited


(704
)


10.15Non-vested at March 31, 2008


3,746


$
9.92Granted


1,485



5.31Vested in tender offer


(1,727
)


8.91Vested


(1,311
)


9.59Forfeited in tender offer


(431
)


8.91Forfeited


(706
)


9.36Non-vested at March 31, 2009


1,056


$
7.49     Stock
    Options and SARs
     F-20




---



##### Table of Contents



DIAMOND
    MANAGEMENT & TECHNOLOGY CONSULTANTS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
        2007

2008

2009Expected volatility

46% - 56%

n/a

50% - 51%Weighted-average volatility

54%

n/a

50%Expected dividend yield

0% - 2.6%

n/a

5.6% - 5.9%Average expected life (in years)

3.61

n/a

3.58Risk-free interest rate

4.54% - 5.14%

n/a

2.26% - 2.9%Weighted-average grant date fair value of options/SARs granted

$4.41

n/a

$1.59     Weighted-Shares


Weighted-


Average


AggregateUnder


Average


Remaining


IntrinsicOption/SARs


Exercise Price


Contractual


ValueOptions/SARs

(000)


Per Share


Term


($000)Outstanding at March 31, 2006


9,893


$
10.90



2.86


$
14,680Granted


37



10.71Exercised


(2,076
)


8.62Forfeited or expired


(3,036
)


11.76Outstanding at March 31, 2007


4,818


$
11.37



2.37


$
9,674Granted






Exercised


(806
)


8.87Forfeited or expired


(690
)


17.82Outstanding at March 31, 2008


3,322


$
10.63



1.76


$
143Granted


3,450



6.51Exercised


(8
)


2.31Forfeited or expired


(1,791
)


9.03Outstanding at March 31, 2009


4,973


$
8.36



2.87


$
0Exercisable at March 31, 2009


2,101


$
10.03



2.01


$
0     Employee
    Stock Purchase Plan
   F-21




---



##### Table of Contents



DIAMOND
    MANAGEMENT & TECHNOLOGY CONSULTANTS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
        Weighted-AveragePurchase PriceShares Issued


Range of Prices


Per ShareIssued fiscal year 2007


308



$6.11 to $11.44


$
6.39Issued fiscal year 2008


341



$4.93 to $12.04


$
6.33Issued fiscal year 2009


502



$3.13 to $ 5.39


$
4.04     2007

2008

2009Expected volatility

21% - 57%

34% - 66%

44% - 84%Weighted-average volatility

42%

51%

69%Expected dividend yield

0% - 2.6%(1)

2.7% - 7.4%

5.7% - 13.7%Average expected life (in years)

1.13

1.13

0.35Risk-free interest rate

4.7% - 5.2%

2.1% - 5.0%

0.27% - 2.1%Weighted average grant date fair value of ESPP granted

$1.92

$1.07

$0.56     (1)
    
    For ESPP enrollment dates since November 7, 2006, the date
    the Board first declared an annual dividend.  Other
   F-22




---



##### Table of Contents



DIAMOND
    MANAGEMENT & TECHNOLOGY CONSULTANTS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
        (14)
    Income
    Taxes    2007


2008


2009Current:Federal

$
5,747


$
7,881


$
1,470State


206



1,047



80Foreign


137



15



102$
6,090


$
8,943


$
1,652Deferred:Federal


168



(654
)


(4,488
)State


650



584



(1,061
)Foreign










(259
)$
818


$
(70
)

$
(5,808
)$
6,908


$
8,873


$
(4,156
)     2007


2008


2009Federal income taxes at statutory rate

$
4,944


$
6,688


$
(4,534
)Effect of intercompany revenue and expenses eliminated in
    consolidation and related to discontinued operations


(189
)






Nondeductible meals and entertainment


407



520



500Nondeductible stock-based compensation


304



450



663Effect of tax on foreign exchange gain in foreign company










993State income taxes, net of federal benefit


556



1,060



(638
)Other


371



(218
)


313Change in valuation allowance for deferred tax assets allocated
    to income tax expense


515



373



(1,453
)$
6,908


$
8,873


$
(4,156
)  F-23




---



##### Table of Contents



DIAMOND
    MANAGEMENT & TECHNOLOGY CONSULTANTS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    2008


2009Deferred tax assets attributable to:Net operating loss carryforwards

$
8,343


$
5,432Foreign tax credit and carryforwards


264



101Allowances and accruals


1,574



1,745Stock-based compensation


5,363



11,058Goodwill


1,420



1,186Depreciation


192



224Capital loss carryforwards


1,245



1,135Total gross deferred tax assets


18,401



20,881Less valuation allowance(1)


(9,004
)


(6,027
)Net deferred tax assets


9,397



14,854Deferred tax liabilities attributable to:Prepaids


419



339Other


32



11Total deferred tax liabilities


451



350Net deferred income taxes

$
8,946


$
14,504     (1)
    
    Decrease in valuation allowance from March 31, 2008 balance
    includes $1,524 reduction due to effect of foreign currency
    translation adjustment    paid-in-capital paid-in-capital
     F-24




---



##### Table of Contents



DIAMOND
    MANAGEMENT & TECHNOLOGY CONSULTANTS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
        2008


2009Unrecognized tax benefits

$
1.4


$
1.3Gross increases  tax positions in prior periods






0.6Gross increases  current period tax positions


0.1



Settlements


(0.1
)


(1.0
)Lapse of statute of limitations


(0.1
)


(0.2
)Unrecognized tax benefits

$
1.3


$
0.7     (15)
    Benefit
    Plans  401(k)
    Plan
    (16)
    Foreign
    Exchange Risk Management  Objectives
    and Context
     F-25




---



##### Table of Contents



DIAMOND
    MANAGEMENT & TECHNOLOGY CONSULTANTS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Strategies
    (17)
    Related
    Party Transactions    (18)
    Subsequent
    Event   F-26




---



##### Table of Contents



DIAMOND
    MANAGEMENT & TECHNOLOGY CONSULTANTS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  (19)
    Quarterly
    Financial Information (Unaudited)    Quarter EndedJune 30


Sept 30


Dec 31


Mar 31Year Ended March 31, 2008Net revenue

$
47,940


$
45,259


$
46,724


$
42,365Total revenue (including reimbursable expenses)


53,931



50,808



52,434



47,883Gross margin


15,197



13,881



15,907



11,531Professional development and recruiting


2,390



2,161



2,732



2,137Marketing and sales


673



731



1,019



2,028Management and administrative support


6,682



6,353



6,804



7,108Income from operations


5,452



4,636



5,352



258Income from continuing operations before income taxes


6,415



5,613



6,051



1,029Income from continuing operations after income taxes


3,953



2,864



2,842



576Per share of Common Stock  basic


0.13



0.09



0.09



0.02Per share of Common Stock  diluted


0.12



0.09



0.09



0.02Gain on disposal of discontinued operations, including income
    taxes














7,000Income (loss) from discontinued operations, net of income taxes


273



(689
)


(311
)


4,586Discontinued operations, net of income taxes


273



(689
)


(311
)


11,586Per share of Common Stock  basic


0.01



(0.02
)


(0.01
)


0.40Per share of Common Stock  diluted


0.01



(0.02
)


(0.01
)


0.40Net income


4,226



2,175



2,531



12,162Per share of Common Stock  basic

$
0.14


$
0.07


$
0.08


$
0.42Per share of Common Stock  diluted

$
0.13


$
0.07


$
0.08


$
0.42   F-27




---



##### Table of Contents



DIAMOND
    MANAGEMENT & TECHNOLOGY CONSULTANTS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Quarter EndedJune 30


Sept 30


Dec 31


Mar 31Year Ended March 31, 2009Net revenue

$
38,813


$
40,506


$
36,960


$
35,887Total revenue (including reimbursable expenses)


43,565



46,157



43,256



42,001Gross margin


8,403



11,027



9,792



(5,048
)Professional development and recruiting


2,277



1,719



1,688



1,032Marketing and sales


642



1,300



104



1,057Management and administrative support


6,687



6,327



5,944



6,889Income (loss) from operations


(1,203
)


1,965



2,056



(16,428
)Income (loss) from continuing operations before income taxes


(1,049
)


2,096



2,400



(16,401
)Income (loss) from continuing operations after income taxes


720



521



14



(10,053
)Per share of Common Stock  basic


0.03



0.02







(0.39
)Per share of Common Stock  diluted


0.03



0.02







(0.39
)Income from discontinued operations, net of income taxes














400Discontinued operations, net of income taxes










Per share of Common Stock  basic














0.02Per share of Common Stock  diluted














0.02Net income (loss)


720



521



14



(9,653
)Per share of Common Stock  basic

$
0.03


$
0.02


$



$
(0.37
)Per share of Common Stock  diluted

$
0.03


$
0.02


$



$
(0.37
)  F-28




---



##### Table of Contents



REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM           S-1




---



##### Table of Contents



DIAMOND
    MANAGEMENT & TECHNOLOGY CONSULTANTS, INC.
 SCHEDULE II 
    VALUATION AND QUALIFYING ACCOUNTS  Column A

Column B


Column C


Column D


Column EBalance at


Charged to





Balance atBeginning


Costs and





End ofDescription

of Period


Expenses


Deductions


Period(Amounts in thousands)For the Year Ended March 31, 2009:Deducted from accounts receivable for uncollectible accounts

$
695


$
159


$
288


$
566For the Year Ended March 31, 2008:Deducted from accounts receivable for uncollectible accounts

$
573


$
143


$
21


$
695For the Year Ended March 31, 2007:Deducted from accounts receivable for uncollectible accounts

$
629


$
(19
)

$
37


$
573  S-2