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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, 2008
 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 no. 001-10824
 
 BORLAND SOFTWARE CORPORATION
 (Exact name of registrant as specified in its charter)
 Delaware
    
    94-2895440(State or other jurisdiction of
    
    (I.R.S. Employerincorporation or organization)
    
    Identification No.)
 8310 NORTH CAPITAL OF TEXAS HIGHWAY, BUILDING 2, SUITE 100
AUSTIN, TEXAS 78731  (Address of principal executive offices, including zip
code)
 (512) 340-2200
(Registrants telephone number, including area code)
 
 Securities registered pursuant to Section 12(b) of the Act:
 Title of Each Class
    
    Name of Each Exchange on Which RegisteredCommon Stock, $0.01 per share
    
    The NASDAQ Stock Market LLC
 Securities registered pursuant to Section 12(g) of the Act:
None
(Title of classes)
 
 Yes
o No
þ
 Yes
o No
þ
 þ o
 þ
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer o
    
    Smaller reporting company þ
 Yes
o No
þ
   DOCUMENTS INCORPORATED BY REFERENCE




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##### 



BORLAND SOFTWARE CORPORATION
 FORM 10-K
 For the Fiscal Year Ended December 31, 2008
 TABLE OF CONTENTS
 PagePART IITEM 1. BUSINESS
    
    
    4ITEM 1A. RISK FACTORS
    
    
    12ITEM 1B. UNRESOLVED STAFF COMMENTS
    
    
    21ITEM 2. PROPERTIES
    
    
    22ITEM 3. LEGAL PROCEEDINGS
    
    
    23ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
    
    
    23PART IIITEM 5. MARKET FOR REGISTRANTS COMMON EQUITY, RELATED
STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY
SECURITIES
    
    
    24ITEM 6. SELECTED FINANCIAL DATA
    
    
    27ITEM 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
    
    
    28ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
    
    
    47ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
    
    
    48ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
    
    
    49ITEM 9A. CONTROLS AND PROCEDURES
    
    
    50ITEM 9B. OTHER INFORMATION
    
    
    51PART IIIITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
    
    
    52ITEM 11. EXECUTIVE COMPENSATION
    
    
    52ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT AND RELATED STOCKHOLDER MATTERS
    
    
    52ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND
DIRECTOR INDEPENDENCE
    
    
    52ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
    
    
    52PART IVITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
    
    
    53SIGNATURES
    
    
    59Exhibit 21.1Exhibit 23.1Exhibit 23.2Exhibit 31.1Exhibit 32.1
   2




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A CAUTION ABOUT FORWARD-LOOKING STATEMENTS
   GENERAL INFORMATION
   WHERE YOU CAN FIND MORE INFORMATION
   3




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PART I
 
 ITEM 1. BUSINESS
  Overview
     Industry Background
   4




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
    
    accelerate application development and deployment by providing an integrated suite of
technologies, consulting services and processes addressing every phase of the application
development process;
 
    
    lower the cost of ownership and enhance the return on investment from existing technology
infrastructure by integrating it with new software applications, including customer facing
front ends;
 
    
    mitigate the risks of failed software delivery by enabling a more collaborative,
disciplined approach to application lifecycle management; and
 
    
    are platform-neutral, facilitate interoperability and allow for maximum flexibility and
freedom of choice across information technology systems, which increasingly require the
ability to function in heterogeneous environments.
 Strategy
  
    
    Technology: Our ALM product portfolio today includes capabilities for software delivery
management, requirements definition and management, modeling, lifecycle quality, testing and
performance management and software configuration and change management. We intend to
continue to develop and buy new technologies to advance and expand our existing technology
set.
 
    
    People: Relying on technology alone is not enough. The individuals involved in the
development process must be trained on the process and the technology to ensure effective
implementation. We intend to continue to develop our educational service offerings to
support the key roles and processes within the software delivery lifecycle, and to build out
multiple avenues of delivering these services to our customers, including through a network
of partners and Web-based delivery programs.
 
    
    Process: We believe that an effective and repeatable process adhering to recognized
standards such as Capability Maturity Model Index, or CMMI, is required for companies to get
the most from their software development efforts. We also are working to provide best
practice consulting for organizations adopting an Agile methodology to software delivery.
The Agile methodology is one which anticipates the need for flexibility and applies a level
of pragmatism into the delivery of the finished product. It is a methodology which an
increasing number of our customers appear to be adopting.
  5




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Our Solutions, Products and Services
 Solutions
  
    
    Software Delivery Management Enables organizations to align delivery efforts to
business priorities, gain visibility into the end-to-end process of software delivery,
measure the results and improve overall performance.
 
    
    Requirements Definition and Management Enables organizations to define, manage and
certify system or project requirements to reduce miscommunication and ensure that IT is
aligned with business priorities.
 
    
    Software Change Management Enables organizations to manage and respond to changes
within the software delivery lifecycle, ultimately helping IT teams to reduce complexity and
improve agility and responsiveness to the business.
 
    
    Lifecycle Quality Management Enables organizations to proactively address and ensure
quality from the very beginning of the software delivery lifecycle, rather than test at the
end of the lifecycle when quality issues are more expensive to fix.
  Products
  Request and Demand Management:
 Project Execution and Management:
 Business Intelligence for ALM:
 Software Release Readiness:
  6




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Requirements Management.
 Requirements Definition.
 Automated Test Management.
 Performance Test Management.
 Functional Test Automation.
 Modeling.
 Software Configuration and Change Management.
 Deployment.
 Services
   7




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Technical Support.
 Consulting Services.
 
    
    Process Consulting Services.Our process consulting services are designed to establish a
process foundation for our customers software delivery platform. Process optimization
begins with formal appraisals and informal checklists to help enterprises evaluate current
performance and set realistic goals. Borland Services build on these assessments by working
with management teams to define optimal software delivery practices. We then combine
workshops and consulting to define and operationalize the necessary changes into software
processes. Throughout the engagement, Borland Services use a customer-tailored approach for
deliverables and actionable recommendations to establish processes designed to improve
reliability, reduce defects, and improve productivity.
 
    
    Technology Implementation Services.We offer integration services to streamline the
assimilation of our solutions into an existing IT environment, thereby protecting existing
investments. Borland Services work with enterprise teams to develop customized
implementation plans, assess their ability to execute, and as necessary, fill gaps to
provide additional leverage. Borland complements integration services with application and
data migration services to successfully transition from an existing software development
platform. We also offer packaged services, including QuickStart and Technical Account
Management, designed to accelerate the rollout of the software delivery platform.
 Education Services.
 Customers and Partners
     8




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Sales and Marketing
  
    
    major accounts by named sales representatives;
 
    
    smaller accounts by sales personnel on the basis of geography; and
 
    
    a specific focus on global system integrators, to reach more customers through a
comprehensive solution selling approach.
  Managements Discussion and Analysis of Financial Condition and Results of Operations 
Critical Accounting Policies and Estimates.
  Research and Development
   Competition
   9




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Manufacturing
  Intellectual Property
  Employees
  Executive Officers
 Managements Discussion & Analysis of Financial Condition and Results of
Operations
 Name
    
    Position
    
    AgeErik E. Prusch
    
    Acting President & Chief
Executive Officer, Chief Financial Officer
    
    
    42Chuck Maples
    
    Senior Vice President, Research and Development
    
    
    55Richard Novak
    
    Senior Vice President of Worldwide Field Operations
    
    
    53Melissa Frugé
    
    Vice President, General Counsel and Corporate Secretary
    
    
    36
 Erik E. Prusch.
 Chuck Maples.
  10




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Richard Novak.
 Melissa Frugé.
  11




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ITEM 1A. RISK FACTORS
  Risks Relating to Our Business
 We have evolved our business to focus on the enterprise market for application lifecycle
management, or ALM, software solutions, which is a complex and evolving market. If we are unable to
successfully achieve our strategic goals, our operating results could be harmed. The recent sale of
the CodeGear assets could increase this risk.
   Our success is dependent upon our ability to develop effective products which meet our customers
complex and evolving needs and to integrate our products into effective ALM solutions.
   We may not be able to compete successfully against current and potential competitors.
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Our inability to forecast our revenue pipeline or convert revenue pipeline into contracts,
especially given our focus on enterprise customers, could increase fluctuations in our revenue and
financial results.
   Adverse global economic conditions could adversely affect our customers and, in turn, our operating
results.
  The complexity of accounting regulations and related interpretations and policies, particularly
those related to revenue recognition, could limit our ability to predict our revenue and materially
affect our financial results for a given period.
 Software Revenue Recognition
  13




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Our failure to implement systems to meet the requirements and manage the large service projects
necessary for our enterprise may result in delays in recognizing revenue on these projects and thus
could harm our profit and adversely affect our results of operations.
  We have recently made changes to our executive officers and management. There may be an adjustment
period which could cause inefficiencies in the management of our business and our operations.
  We are in the process of making changes to our financial reporting systems, which may impact our
ability to comply with our financial reporting and accounting obligations.
  We are in the process of implementing plans for reducing expenses and if we fail to achieve the
results we expect, there will be a negative effect on our financial condition.
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Our common stock has declined over the past two years. If our stock price does not increase, we may
not attract as many investors. In addition, we may be at risk for satisfying the minimum listing
requirements of the Nasdaq Global Market.
   We and our prior independent registered public accounting firm previously determined that we had a
material weakness in our internal control over financial reporting. There can be no assurance that
a material weakness will not arise in the future. As a result, current and potential stockholders
could lose confidence in our financial reporting, which would harm our business and the trading
price of our stock.
   In prior periods, we were unable to timely file our annual and quarterly reports as required by the
Securities Exchange Act of 1934, and our continued inability to file these reports on time could
result in your not having access to important information about us and the delisting of our common
stock from the Nasdaq Stock Market.
    15




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If we are unable to maintain revenue levels for our deployment, or application middleware,
products, our financial results may be harmed.
  Because competition for qualified technical and management personnel is intense, we may not be able
to recruit or retain qualified personnel, which could harm our business.
  Consolidation in our industry or fluctuation in our stock price may impede our ability to compete
effectively.
   We depend on technologies licensed to us by third-parties and the loss of or inability to maintain
these licenses could prevent or delay sales or shipments of certain of our products.
   16




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Failure to manage our international operations could harm our results.
  
    
    fluctuations in foreign currency exchange rates;
 
    
    the difficulty of staffing and managing an organization spread over various countries and
continents;
 
    
    potentially reduced or less certain protection for intellectual property rights than is
available under the laws of the United States;
 
    
    longer payment cycles in some countries and greater difficulty in collecting accounts
receivable;
    
    restrictions on the expatriation of currency;
    
    foreign taxes, export restrictions, tariffs, duties and other trade barriers;
    
    changes in regulatory requirements and resulting costs;
 
    
    differing cultures and business practices not consistent with our regulatory obligations
in the United States;
 
    
    compliance with various conflicting laws and regulations, including employment laws, and
resulting costs; and
 
    
    war, threats of war, terrorist activity or political or economic instability in certain
parts of the world.
  Bundling arrangements or product give-aways by our competitors, including available, cost-free
development technologies, may diminish demand for our products or pressure us to reduce our prices.
   17




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Our future success depends upon enhancing existing relationships and establishing new technology
alliances.
  Our products may contain unknown defects that could result in a loss of revenues, decreased market
acceptance, injury to our reputation and product liability claims.
  
    
    delayed shipping of the product;
    
    delay in or failure to ever achieve market acceptance;
    
    diversion of development resources;
    
    damage to our reputation;
    
    product liability claims; and
    
    increased service and warranty costs.
  Third-party claims of intellectual property infringement may subject us to costly litigation or
settlement terms or limit the sales of our products.
   18




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If we are unable to protect our intellectual property, we may lose valuable assets.
  Our debt obligations expose us to risks that could adversely affect our business, operating results
and financial condition.
  
    
    require us to dedicate a portion of our expected cash flow or our existing cash to
service our indebtedness, which would reduce the amount of our cash available for other
purposes, including working capital, capital expenditures and research and development
expenditures;
 
    
    make it difficult for us to incur additional debt or obtain any necessary financing in
the future for working capital, capital expenditures, debt service, acquisitions or general
corporate purposes;
 
    
    limit our flexibility in planning for or reacting to changes in our business;
    
    limit our ability to sell ourselves or engage in other strategic transactions;
    
    make us more vulnerable in the event of a downturn in our business; or
    
    place us at a possible competitive disadvantage relative to less leveraged competitors
and competitors that have greater access to capital resources.
  Conversion of the Notes would dilute the ownership interests of existing stockholders.
   19




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Under the terms of the Notes, events that we do not control may trigger redemption rights that, if
exercised, may have an adverse effect on our liquidity.
  Our rights plan and our ability to issue additional preferred stock could harm the rights of our
common stockholders.
     
    
    adversely affect the voting power of the stockholders of our common stock;
    
    make it more difficult for a third-party to gain control of us;
    
    discourage bids for our common stock at a premium;
 
    
    limit or eliminate any payments the stockholders of our common stock could expect to
receive upon our liquidation; or
    
    otherwise adversely affect the market price of our common stock.
  20




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Provisions of our certificate of incorporation and bylaws might discourage, delay or prevent a
change of control of our company or changes in our management and, therefore, depress the trading
price of our common stock.
  
    
    authorize the issuance of blank check preferred stock by our board that could increase
the number of outstanding shares and discourage a takeover attempt;
    
    limit the ability of our stockholders to call special meetings of stockholders;
 
    
    prohibit stockholder action by written consent, which requires all stockholder actions to
be taken at a meeting of our stockholders;
 
    
    provide that our board is expressly authorized to amend our bylaws, or enact such other
bylaws as in their judgment may be advisable; and
 
    
    establish advance notice requirements for nominations for election to our board or for
proposing matters that can be acted upon by stockholders at stockholder meetings.
  
 ITEM 1B. UNRESOLVED STAFF COMMENTS
   21




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ITEM 2. PROPERTIES
  ApproximateSquareLocation
    
    Footage
    
    
    UseScotts Valley, California  Enterprise Way
    
    
    149,627
    
    
    Vacant or subleasedAustin, Texas
    
    
    47,309
    
    
    Corporate headquarters, sales, general and administrative and research and developmentCupertino, California
    
    
    39,839
    
    
    Sales, general and administrative, excess capacity and marketed for subleaseAtlanta, Georgia
    
    
    39,839
    
    
    Sales, customer support and research and developmentSingapore
    
    
    20,258
    
    
    Sales, general and administrative and research and developmentSanta Ana, California
    
    
    14,311
    
    
    Sales, research and developmentLinz, Austria
    
    
    14,122
    
    
    Research and developmentTwyford, United Kingdom
    
    
    13,956
    
    
    Sales, general and administrativeLangen, Germany
    
    
    13,624
    
    
    General and administrativeBelfast, Northern Ireland
    
    
    13,097
    
    
    Technical support and subleasedToronto, Ontario
    
    
    11,263
    
    
    Vacant or subleased
     22




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ITEM 3. LEGAL PROCEEDINGS
 Accounting for Contingencies
  
 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
   23




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PART II
 
 ITEM 5. MARKET FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF
EQUITY SECURITIES
   High
    
    
    LowFiscal 2007First Quarter
    
    $
    5.50
    
    
    $
    4.89Second Quarter
    
    $
    6.20
    
    
    $
    5.32Third Quarter
    
    $
    6.03
    
    
    $
    4.31Fourth Quarter
    
    $
    4.49
    
    
    $
    2.75Fiscal Year
    
    $
    6.20
    
    
    $
    2.75Fiscal 2008First Quarter
    
    $
    2.90
    
    
    $
    1.79Second Quarter
    
    $
    2.08
    
    
    $
    1.22Third Quarter
    
    $
    1.94
    
    
    $
    1.24Fourth Quarter
    
    $
    1.51
    
    
    $
    0.89Fiscal Year
    
    $
    2.90
    
    
    $
    0.89
   24




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Purchases of Equity Securities
 Total Number of
    
    
    Maximum Number (orAverage
    
    
    Shares (or Units)
    
    
    Approximate Dollar Value) ofTotal Number
    
    
    Price Paid
    
    
    Purchased as Part of
    
    
    Shares (or Units) that May Yetof Shares (or Units)
    
    
    per share
    
    
    Publicly Announced
    
    
    Be Purchased Under the PlansPeriod
    
    Purchased
    
    
    (or Unit)
    
    
    Plans or Programs
    
    
    or Programs (1)Beginning dollar value
available to be
repurchased as of
September 30, 2008
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    59,332October 1,
2008  October 31, 2008 (2)
    
    
    2,263
    
    
    $
    1.31
    
    
    
    
    
    
    
    November 1,
2008  November 30, 2008 (2)
    
    
    3,306
    
    
    $
    1.08
    
    
    
    
    
    
    
    December 1,
2008  December 31, 2008 (2)
    
    
    
    
    
    $
    
    
    
    
    
    
    
    
    Total shares repurchased
    
    
    5,569
    
    
    $
    1.17
    
    
    
    
    
    
    $
    59,332Ending dollar value available
to be repurchased under
the Discretionary Program
as of December 31, 2008 (1)
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    59,332
 
 (1)
    
    In September 2001, our Board of Directors authorized the use of up to $30 million to
repurchase shares of our outstanding common stock under a discretionary stock repurchase
program (Discretionary Program). In February 2004, our Board of Directors authorized an
additional $30 million of repurchases under the Discretionary Program, which was announced in
our Current Report on Form 8-K filed with the Securities and Exchange Commission, or SEC, on
February 4, 2004. In May 2005, our Board of Directors authorized an additional $75 million of
repurchases under the Discretionary Program, which was announced in our Current Report on Form
8-K filed with the SEC on May 20, 2005. No shares were repurchased through our Discretionary
Program during the three months ended December 31, 2008(2)
    
    Consists of shares of restricted stock surrendered by Borland employees in order to meet tax
withholding obligations in connection with the vesting of an installment of their restricted
stock awards. These share repurchases are not pursuant to our publicly announced
Discretionary Program. EQUITY COMPENSATION PLAN INFORMATION
   25




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PERFORMANCE GRAPH
 
  26




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ITEM 6. SELECTED FINANCIAL DATA
  Five Year Summary
 Fiscal Year2008
    
    
    2007 (d)
    
    
    2006
    
    
    2005
    
    
    2004(In thousands, except per share data)Selected Consolidated Statements of Operations DataTotal revenues
    
    $
    172,027
    
    
    $
    211,783
    
    
    $
    304,660
    
    
    $
    276,743
    
    
    $
    309,548Restructuring, amortization of other intangibles,
acquisition-related expenses and other expenses (a)
    
    $
    3,871
    
    
    $
    11,533
    
    
    $
    22,073
    
    
    $
    20,611
    
    
    $
    9,841Impairment of goodwill
    
    $
    184,601
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Operating income (loss)
    
    $
    (213,116
    )
    
    $
    (41,509
    )
    
    $
    (53,093
    )
    
    $
    (34,975
    )
    
    $
    18,674Other income items (b)
    
    $
    10,029
    
    
    $
    
    
    
    $
    1,658
    
    
    $
    4,372
    
    
    $
    Income (loss) from continuing operations
    
    $
    (204,372
    )
    
    $
    (41,400
    )
    
    $
    (51,953
    )
    
    $
    (29,832
    )
    
    $
    11,370Loss from discontinued operations (c)
    
    $
    (11,350
    )
    
    $
    (17,805
    )
    
    $
    
    
    
    $
    
    
    
    $
    Net income (loss)
    
    $
    (215,722
    )
    
    $
    (59,205
    )
    
    $
    (51,953
    )
    
    $
    (29,832
    )
    
    $
    11,370Income (loss) per share from continuing operations  basic
    
    $
    (2.81
    )
    
    $
    (0.57
    )
    
    $
    (0.67
    )
    
    $
    (0.38
    )
    
    $
    0.14Income (loss) per share from continuing operations  diluted
    
    $
    (2.81
    )
    
    $
    (0.57
    )
    
    $
    (0.67
    )
    
    $
    (0.38
    )
    
    $
    0.14Loss per share from discontinued operation  basic and diluted
    
    $
    (0.15
    )
    
    $
    (0.24
    )
    
    $
    
    
    
    $
    
    
    
    $
    Net income (loss) per share  basic
    
    $
    (2.96
    )
    
    $
    (0.81
    )
    
    $
    (0.67
    )
    
    $
    (0.38
    )
    
    $
    0.14Net income (loss) per share  diluted
    
    $
    (2.96
    )
    
    $
    (0.81
    )
    
    $
    (0.67
    )
    
    $
    (0.38
    )
    
    $
    0.14Shares used in computing basic income (loss) per share
    
    
    72,805
    
    
    
    72,875
    
    
    
    77,096
    
    
    
    77,557
    
    
    
    80,425Shares used in computing diluted income (loss) per share
    
    
    72,805
    
    
    
    72,875
    
    
    
    77,096
    
    
    
    77,557
    
    
    
    82,052
 Fiscal Year2008
    
    
    2007
    
    
    2006
    
    
    2005
    
    
    2004(In thousands)Selected Consolidated Balance Sheet DataCash, cash equivalents and short-term investments
    
    $
    167,707
    
    
    $
    158,866
    
    
    $
    55,317
    
    
    $
    175,078
    
    
    $
    221,198Total assets
    
    $
    252,982
    
    
    $
    543,997
    
    
    $
    443,899
    
    
    $
    464,530
    
    
    $
    515,283Total long-term obligations
    
    $
    187,755
    
    
    $
    230,131
    
    
    $
    15,689
    
    
    $
    15,514
    
    
    $
    8,930
 
 (a)
    
    Charges consisted of net restructuring costs resulting from workforce
reduction activities and facility lease exit costs, amortization of
other intangibles, acquisition-related expenses including acquired
in-process research and development expenses and earn-out provisions
associated with acquisitions of companies or technologies. See Note 7
to the Consolidated Financial Statements.(b)
    
    In the year ended 2008, other income consisted of gains recognized on
the redemption of our Convertible Senior Notes. See Note 9 of the
Consolidated Financial Statements. In the years prior to 2008, other
income consisted of a gain on sale of fixed assets and gains or
collections on investments previously written down or written off.(c)
    
    Net loss from discontinued operation, net of taxes consisted of income
(loss) from operation of discontinued operation and loss on disposal
of discontinued operation related to the sale of substantially all of
the assets, operations and certain liabilities of our IDE tools
business to Embarcadero on June 30, 2008. See Note 6 of the
Consolidated Financial Statements for more details on our discontinued
operation.(d)
    
    The Companys IDE operations were accounted for and reported as an operating segment, as
defined in SFAS 131, Disclosures about Segments of an Enterprise and Related Information
(SFAS 131), named CodeGear beginning on January 1, 2007. In addition, these operations also
began to meet the criteria of component of an entity in SFAS 144 at this time. The CodeGear
operations were discontinued in 2008 in conjunction with the sale to Embarcadero.
Consequently, the Company has presented its 2008 and 2007 Consolidated Statements of
Operations reflecting the operating results of the CodeGear segment within discontinued
operation. As the Companys IDE operation did not comprise a component of an entity as
defined in SFAS 144 prior to January 1, 2007, the Consolidated Statement of Operations for
2006 and prior periods has not been revised to reflect discontinued operation.  27




---



##### Table of Contents



ITEM 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
  Recent Changes in our Management Team
  Overview of our Business
      28




---



##### Table of Contents



Critical Accounting Policies and Estimates
     Revenue Recognition
 Software
Revenue Recognition, , Modification of SOP No. 97-2 with Respect to
Certain Transactions, Accounting for
Performance of Construction-Type and Certain Production-Type Contracts Revenue Recognition
   29




---



##### Table of Contents



Accounting for Discontinued Operation and Reportable Segments
   Accounting for the
Impairment or Disposal of Long-Lived Assets Disclosures about Segments of an Enterprise and Related Information
  Accounting for Acquisitions
   30




---



##### Table of Contents



Business Combinations
 Impairment of Goodwill and Intangible Assets
 Business Combinations, Goodwill and Other Intangible Assets,
     31




---



##### Table of Contents



Accounting for the
Impairment or Disposal of Long-Lived Assets
 Restructuring
 Accounting for Costs Associated with Exit or Disposal Activities, Employers Accounting for Settlement and Curtailments of Defined Benefit
Pension Plans and for Termination Benefits Employers Accounting for
Postemployment Benefits, an Amendment of FASB Statements No. 5 and 43,
  Allowances for Doubtful Accounts
   32




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##### Table of Contents



Investment Securities
 Accounting for Certain Investments in Debt and Equity
Securities
 Income Taxes
  Accounting for Income
Taxes,
   33




---



##### Table of Contents



Recent Accounting Pronouncements
  Results of Operations
  Year Ended December 31,2008
    
    
    2007
    
    
    2006License and other revenues
    
    $
    68,100
    
    
    
    40
    %
    
    $
    96,686
    
    
    
    46
    %
    
    $
    165,886
    
    
    
    54
    %Service revenues
    
    
    103,927
    
    
    
    60
    
    
    
    115,097
    
    
    
    54
    
    
    
    138,774
    
    
    
    46Total revenues
    
    
    172,027
    
    
    
    100
    
    
    
    211,783
    
    
    
    100
    
    
    
    304,660
    
    
    
    100Cost of license and other revenues
    
    
    3,494
    
    
    
    2
    
    
    
    2,870
    
    
    
    1
    
    
    
    7,439
    
    
    
    3Cost of service revenues
    
    
    33,183
    
    
    
    19
    
    
    
    38,185
    
    
    
    18
    
    
    
    55,381
    
    
    
    18Amortization of acquired intangibles and other charges
    
    
    8,194
    
    
    
    5
    
    
    
    8,445
    
    
    
    4
    
    
    
    6,972
    
    
    
    2Cost of revenues
    
    
    44,871
    
    
    
    26
    
    
    
    49,500
    
    
    
    23
    
    
    
    69,792
    
    
    
    23Gross profit
    
    
    127,156
    
    
    
    74
    
    
    
    162,283
    
    
    
    77
    
    
    
    234,868
    
    
    
    77Selling, general and administrative
    
    
    107,933
    
    
    
    63
    
    
    
    151,512
    
    
    
    72
    
    
    
    195,710
    
    
    
    65Research and development
    
    
    43,867
    
    
    
    26
    
    
    
    40,747
    
    
    
    19
    
    
    
    70,178
    
    
    
    23Restructuring, amortization of other intangibles, acquisition-related
expenses and other expenses
    
    
    3,871
    
    
    
    2
    
    
    
    11,533
    
    
    
    5
    
    
    
    22,073
    
    
    
    7Impairment of goodwill
    
    
    184,601
    
    
    
    107
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total operating expenses
    
    
    340,272
    
    
    
    198
    
    
    
    203,792
    
    
    
    96
    
    
    
    287,961
    
    
    
    95Operating loss
    
    
    (213,116
    )
    
    
    (124
    )
    
    
    (41,509
    )
    
    
    (20
    )
    
    
    (53,093
    )
    
    
    (17
    )Interest income
    
    
    5,451
    
    
    
    3
    
    
    
    8,723
    
    
    
    4
    
    
    
    3,168
    
    
    
    1Interest expense
    
    
    (6,501
    )
    
    
    (4
    )
    
    
    (5,369
    )
    
    
    (3
    )
    
    
    (374
    )
    
    
    (0
    )Gain on debt repurchase, net
    
    
    10,029
    
    
    
    6
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Gain on sale of fixed assets
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,658
    
    
    
    1Other income (expense)
    
    
    348
    
    
    
    0
    
    
    
    (1,023
    )
    
    
    (0
    )
    
    
    (790
    )
    
    
    (0
    )Loss from continuing operations before income taxes
    
    
    (203,789
    )
    
    
    (118
    )
    
    
    (39,178
    )
    
    
    (18
    )
    
    
    (49,431
    )
    
    
    (16
    )Income tax provision
    
    
    (583
    )
    
    
    (0
    )
    
    
    (2,222
    )
    
    
    (1
    )
    
    
    (2,522
    )
    
    
    (1
    )Loss from continuing operations
    
    $
    (204,372
    )
    
    
    (119
    )
    
    $
    (41,400
    )
    
    
    (20
    )
    
    $
    (51,953
    )
    
    
    (17
    )Loss from operation of discontinued operations
    
    $
    (9,831
    )
    
    
    (6
    )
    
    $
    (17,805
    )
    
    
    (8
    )
    
    $
    
    
    
    
    Loss on disposal of discontinued operations
    
    
    (1,519
    )
    
    
    (1
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Loss from discontinued operations
    
    $
    (11,350
    )
    
    
    (7
    )
    
    $
    (17,805
    )
    
    
    (8
    )
    
    $
    
    
    
    
    Net loss
    
    $
    (215,722
    )
    
    
    (125)
    %
    
    $
    (59,205
    )
    
    
    (28)
    %
    
    $
    (51,953
    )
    
    
    (17)
    %
 Impact of the Economic Climate on Our Operating Results and Market Capitalization
   34




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##### Table of Contents



Total Revenues
  Change
    
    
    
    
    
    
    Change2008
    
    
    $
    
    
    %
    
    
    2007
    
    
    $
    
    
    %
    
    
    2006Total revenues
    
    $
    172,027
    
    
    $
    (39,756
    )
    
    
    (19
    %)
    
    $
    211,783
    
    
    $
    (92,877
    )
    
    
    (30
    %)
    
    $
    304,660
  License and Other Revenues by Product
 Accounting for the Impairment or Disposal of
Long-Lived Assets
  2008
    
    
    2007
    
    
    2006ALM
    
    
    DPG
    
    
    Total
    
    
    ALM
    
    
    DPG
    
    
    Total
    
    
    ALM
    
    
    DPG
    
    
    IDE
    
    
    TotalLicense and other revenues
    
    $
    43,025
    
    
    $
    25,075
    
    
    $
    68,100
    
    
    $
    70,253
    
    
    $
    26,433
    
    
    $
    96,686
    
    
    $
    85,030
    
    
    $
    29,224
    
    
    $
    51,632
    
    
    $
    165,886Service revenues
    
    
    86,026
    
    
    
    17,901
    
    
    
    103,927
    
    
    
    95,418
    
    
    
    19,679
    
    
    
    115,097
    
    
    
    90,352
    
    
    
    24,373
    
    
    
    24,049
    
    
    
    138,774Total
    
    $
    129,051
    
    
    $
    42,976
    
    
    $
    172,027
    
    
    $
    165,671
    
    
    $
    46,112
    
    
    $
    211,783
    
    
    $
    175,382
    
    
    $
    53,597
    
    
    $
    75,681
    
    
    $
    304,660
 License and Other Revenues
  Change
    
    
    
    
    
    
    Change2008
    
    
    $
    
    
    %
    
    
    2007
    
    
    $
    
    
    %
    
    
    2006License and other revenues
    
    $
    68,100
    
    
    $
    (28,586
    )
    
    
    (30
    %)
    
    $
    96,686
    
    
    $
    (69,200
    )
    
    
    (42
    %)
    
    $
    165,886As percent of total revenues
    
    
    40
    %
    
    
    
    
    
    
    
    
    
    
    46
    %
    
    
    
    
    
    
    
    
    
    
    54
    %
    35




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##### Table of Contents



Service Revenues
  Change
    
    
    
    
    
    
    Change2008
    
    
    $
    
    
    %
    
    
    2007
    
    
    $
    
    
    %
    
    
    2006Technical support
    
    $
    81,886
    
    
    $
    (4,834
    )
    
    
    (6
    %)
    
    $
    86,720
    
    
    $
    (12,993
    )
    
    
    (13
    %)
    
    $
    99,713Consulting and education services
    
    $
    22,041
    
    
    $
    (6,336
    )
    
    
    (22
    %)
    
    $
    28,377
    
    
    $
    (10,684
    )
    
    
    (27
    %)
    
    $
    39,061Service revenues
    
    $
    103,927
    
    
    $
    (11,170
    )
    
    
    (10
    %)
    
    $
    115,097
    
    
    $
    (23,677
    )
    
    
    (17
    %)
    
    $
    138,774As percent of total revenues
    
    
    60
    %
    
    
    
    
    
    
    
    
    
    
    54
    %
    
    
    
    
    
    
    
    
    
    
    46
    %
   International Revenue
   2008
    
    
    2007
    
    
    2006United States
    
    $
    80,562
    
    
    
    47
    %
    
    $
    99,028
    
    
    
    47
    %
    
    $
    147,050
    
    
    
    48
    %Germany
    
    
    17,133
    
    
    
    10
    %
    
    
    24,350
    
    
    
    11
    %
    
    
    29,210
    
    
    
    10
    %United Kingdom
    
    
    10,444
    
    
    
    6
    %
    
    
    24,763
    
    
    
    12
    %
    
    
    24,427
    
    
    
    8
    %All other countries
    
    
    63,888
    
    
    
    37
    %
    
    
    63,642
    
    
    
    30
    %
    
    
    103,973
    
    
    
    34
    %Total revenues
    
    $
    172,027
    
    
    
    100
    %
    
    $
    211,783
    
    
    
    100
    %
    
    $
    304,660
    
    
    
    100
    %
    36




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##### Table of Contents



Regional Revenues
  Year Ended December 31,2008
    
    
    2007
    
    
    2006Total revenues by geographic region:Americas
    
    $
    98,919
    
    
    
    57
    %
    
    $
    118,564
    
    
    
    56
    %
    
    $
    168,278
    
    
    
    55
    %EMEA
    
    
    48,076
    
    
    
    28
    %
    
    
    70,981
    
    
    
    33
    %
    
    
    99,218
    
    
    
    33
    %Asia Pacific
    
    
    25,032
    
    
    
    15
    %
    
    
    22,238
    
    
    
    11
    %
    
    
    37,164
    
    
    
    12
    %Total revenues
    
    $
    172,027
    
    
    
    100
    %
    
    $
    211,783
    
    
    
    100
    %
    
    $
    304,660
    
    
    
    100
    %
  Americas.
  EMEA.
  APAC.
   37




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##### Table of Contents



Cost of Revenues
  Change
    
    
    
    
    
    
    Change2008
    
    
    $
    
    
    %
    
    
    2007
    
    
    $
    
    
    %
    
    
    2006Cost of license and other revenues
    
    $
    3,494
    
    
    $
    624
    
    
    
    22
    %
    
    $
    2,870
    
    
    $
    (4,569
    )
    
    
    (61
    )%
    
    $
    7,439As percent of license and other revenues
    
    
    5
    %
    
    
    
    
    
    
    
    
    
    
    3
    %
    
    
    
    
    
    
    
    
    
    
    4
    %Cost of service revenues
    
    $
    33,183
    
    
    $
    (5,002
    )
    
    
    (13
    )%
    
    $
    38,185
    
    
    $
    (17,196
    )
    
    
    (31
    )%
    
    $
    55,381As percent of service revenues
    
    
    32
    %
    
    
    
    
    
    
    
    
    
    
    33
    %
    
    
    
    
    
    
    
    
    
    
    40
    %Amortization of acquired intangibles
and other charges
    
    $
    8,194
    
    
    $
    (251
    )
    
    
    (3
    )%
    
    $
    8,445
    
    
    $
    1,473
    
    
    
    21
    %
    
    $
    6,972As percent of license and other revenues
    
    
    12
    %
    
    
    
    
    
    
    
    
    
    
    9
    %
    
    
    
    
    
    
    
    
    
    
    4
    %
 Cost of License and Other Revenues
   Cost of Service Revenues
   Amortization of Acquired Intangibles and Other Charges
    38




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##### Table of Contents



Operating Expenses
 Selling, General and Administrative Expenses
  Change
    
    
    
    
    
    
    Change2008
    
    
    $
    
    
    %
    
    
    2007
    
    
    $
    
    
    %
    
    
    2006Selling, general and
administrative expenses
    
    $
    107,933
    
    
    $
    (43,579
    )
    
    
    (29
    )%
    
    $
    151,512
    
    
    $
    (44,198
    )
    
    
    (23
    )%
    
    $
    195,710As percent of total revenues
    
    
    63
    %
    
    
    
    
    
    
    
    
    
    
    72
    %
    
    
    
    
    
    
    
    
    
    
    64
    %
   Research and Development Expenses
  Change
    
    
    
    
    
    
    Change2008
    
    
    $
    
    
    %
    
    
    2007
    
    
    $
    
    
    %
    
    
    2006Research and development expenses
    
    $
    43,867
    
    
    $
    3,120
    
    
    
    8
    %
    
    $
    40,747
    
    
    $
    (29,431
    )
    
    
    (42
    )%
    
    $
    70,178As percent of total revenues
    
    
    26
    %
    
    
    
    
    
    
    
    
    
    
    19
    %
    
    
    
    
    
    
    
    
    
    
    23
    %
    39




---



##### Table of Contents



Impairment of Goodwill, Restructuring, Amortization of Other Intangibles, Acquisition-Related
Expenses and Other Charges
  2008
    
    
    2007
    
    
    2006Impairment of goodwill
    
    $
    184,601
    
    
    $
    
    
    
    $
    Restructuring
    
    
    3,012
    
    
    
    8,853
    
    
    
    12,880Amortization of other intangibles
    
    
    540
    
    
    
    413
    
    
    
    557Acquisition-related expenses
    
    
    319
    
    
    
    2,267
    
    
    
    3,836In-process research and development
    
    
    
    
    
    
    
    
    
    
    4,800Total
    
    $
    188,472
    
    
    $
    11,533
    
    
    $
    22,073
 Impairment of Goodwill:
      
    
    A forecast of operating results for 2009 through 2014 including projected revenues by
product and revenue line, as well as operating expenses, expected margins, and income
taxes, were utilized in the analysis. Given the continued economic decline noted in Q3 and the uncertainties in the
global economy and in our market, our forecasts assumed no significant revenue growth.
    
    Forecasts of working capital and capital expenditure requirements to support the revenue
forecasts were utilized in the analysis. These assumptions were based upon the reporting
units historical requirements and consideration of guideline company requirements within
our industry. Our forecasts assumed that we would make some investment to support
innovation but also stayed consistent with our cost cutting efforts.
  40




---



##### Table of Contents




    
    The cash flows utilized in the discounted cash flow analysis were estimated into
perpetuity based on a terminal year growth rate. The elements considered in developing the
terminal year growth rate for the reporting unit were the long-term inflation forecast and
long-term real growth potential for our business.
    
    The per-share price of our common stock and our overall market capitalization was also
considered in the fair value analysis. We also factored in a control premium and the
estimated fair value of the outstanding Notes.
    Accounting for the Impairment or Disposal of
Long-Lived Assets
 Restructuring:
     41




---



##### Table of Contents



Amortization of other intangibles.
  Acquisition-related expenses.
 Write-off of in-process research and development.
 Interest Income, Interest Expense, Gain on Debt Retirement and Other Expense, net
  Change
    
    
    
    
    
    
    Change2008
    
    
    $
    
    
    %
    
    
    2007
    
    
    $
    
    
    %
    
    
    2006Interest income
    
    $
    5,451
    
    
    $
    (3,272
    )
    
    
    (38
    )%
    
    $
    8,723
    
    
    $
    5,555
    
    
    
    175
    %
    
    $
    3,168Interest expense
    
    
    (6,501
    )
    
    
    (1,132
    )
    
    
    21
    
    
    
    (5,369
    )
    
    
    (4,995
    )
    
    
    1,336
    
    
    
    (374
    )Gain on debt retirement, net
    
    
    10,029
    
    
    
    10,029
    
    
    
    100
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Gain on sale of fixed assets
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,658
    )
    
    
    (100
    )
    
    
    1,658Other income (expense)
    
    
    348
    
    
    
    1,371
    
    
    
    (134
    )
    
    
    (1,023
    )
    
    
    (233
    )
    
    
    30
    
    
    
    (790
    )Total
    
    $
    9,327
    
    
    $
    6,996
    
    
    
    300
    %
    
    $
    2,331
    
    
    $
    (1,331
    )
    
    
    (36
    )%
    
    $
    3,662
 Interest income.
 Interest Expense
 Gain on Debt Retirement, net.
 Gain on Sale of Fixed Assets.
  42




---



##### Table of Contents



Other Income (Expense).
 Income Tax Provision
  Change
    
    
    
    
    
    
    Change2008
    
    
    $
    
    
    %
    
    
    2007
    
    
    $
    
    
    %
    
    
    2006Income tax provision
    
    $
    (583
    )
    
    $
    1,639
    
    
    
    (74
    )%
    
    $
    (2,222
    )
    
    $
    300
    
    
    
    (12
    )%
    
    $
    (2,522
    )As percent of total revenues
    
    
    (0
    )%
    
    
    
    
    
    
    
    
    
    
    (1
    )%
    
    
    
    
    
    
    
    
    
    
    (1
    )%
      Liquidity and Capital Resources
 As of December 31,(in thousands)
    
    2008
    
    
    2007
    
    
    2006Cash and cash equivalents
    
    $
    108,132
    
    
    $
    90,805
    
    
    $
    55,317Short-term investments
    
    
    59,575
    
    
    
    68,061
    
    
    
    Total cash, cash equivalents and short-term investments
    
    $
    167,707
    
    
    $
    158,866
    
    
    $
    55,317
  43




---



##### Table of Contents



Year Ended December 31,(in thousands)
    
    2008
    
    
    2007
    
    
    2006Net cash provided by (used in):Operating activities
    
    $
    (14,283
    )
    
    $
    (18,305
    )
    
    $
    (28,110
    )Investing activities
    
    
    62,086
    
    
    
    (111,298
    )
    
    
    27,818Financing activities
    
    
    (29,310
    )
    
    
    165,901
    
    
    
    4,863Effect of exchange rate changes on cash
    
    
    (1,166
    )
    
    
    (810
    )
    
    
    1,671Net change in cash and cash equivalents
    
    $
    17,327
    
    
    $
    35,488
    
    
    $
    6,242
 Cash and cash equivalents and short-term investments.
  Net cash provided by and used in operating activities.
    Net cash provided by and used in investing activities.
  44




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Net cash provided by and used in financing activities.
   Operating Capital and Capital Expenditure Requirements.
   Currency.
  45




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##### Table of Contents



Contractual Obligations and Off-Balance Sheet Arrangements
  2014 and2009
    
    
    2010
    
    
    2011
    
    
    2012
    
    
    2013
    
    
    thereafter
    
    
    Other (e)
    
    
    TotalOperating leases (a)
    
    $
    6,325
    
    
    $
    5,060
    
    
    $
    4,338
    
    
    $
    3,803
    
    
    $
    3,736
    
    
    $
    9,713
    
    
    $
    
    
    
    $
    32,975Restructured operating
leases (b)
    
    
    6,336
    
    
    
    2,618
    
    
    
    1,392
    
    
    
    1,430
    
    
    
    975
    
    
    
    
    
    
    
    
    
    
    
    12,751Non-current income tax
payable
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    17,157
    
    
    
    17,157Convertible senior notes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    159,300
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    159,300Interest payments (c)
    
    
    4,381
    
    
    
    4,381
    
    
    
    4,381
    
    
    
    2,190
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    15,333Gross commitments
    
    
    17,042
    
    
    
    12,059
    
    
    
    10,111
    
    
    
    166,723
    
    
    
    4,711
    
    
    
    9,713
    
    
    
    17,157
    
    
    
    237,516Sublease rental income (d)
    
    
    (1,575
    )
    
    
    (493
    )
    
    
    (128
    )
    
    
    (128
    )
    
    
    (128
    )
    
    
    (600
    )
    
    
    
    
    
    
    (3,052
    )Net commitments
    
    $
    15,467
    
    
    $
    11,566
    
    
    $
    9,983
    
    
    $
    166,595
    
    
    $
    4,583
    
    
    $
    9,113
    
    
    $
    17,157
    
    
    $
    234,464
 
 (a)
    
    The Company leases its facilities under various cancellable and non-cancellable
operating leases. The payments for operating leases represent its commitments under the
non-cancellable leases, which expire at various times through 2021.(b)
    
    The restructured operating leases represent total lease commitments that are not
associated with continuing operations and include facilities exited under the Companys
restructuring plans. All of these facilities are located in California.(c)
    
    The interest payments are based on a fixed rate of 2.75%.(d)
    
    The sublease rental income represents the future minimum lease payments under
non-cancellable operating subleases of facilities in the Companys various world-wide
locations.(e)
    
    Represents the non-current tax payable obligation under FIN 48. We are unable to make a
reasonably reliable estimate of the
timing of payments in individual years beyond 12 months due to uncertainties in the timing
of tax audit outcomes. Issues Relating to Accounting for
Leases
 Indemnifications.
 Royalties.
 Off-Balance Sheet Arrangements.
  46




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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
  Foreign Currency Risk
    Interest Rate Risk
  Short-term investments
  Credit Risks
   47




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##### Table of Contents



ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
 Selected Quarterly Data
  Fiscal 2008 (Unaudited)Fourth
    
    
    Third
    
    
    Second
    
    
    FirstQuarter
    
    
    Quarter
    
    
    Quarter
    
    
    QuarterTotal revenues
    
    $
    39,789
    
    
    $
    44,312
    
    
    $
    41,867
    
    
    $
    46,059Gross profit
    
    $
    29,237
    
    
    $
    32,719
    
    
    $
    30,782
    
    
    $
    34,418Restructuring, amortization of other intangibles, acquisition-related
expenses and other expenses (a)
    
    $
    2,039
    
    
    $
    101
    
    
    $
    268
    
    
    $
    1,463Impairment of goodwill
    
    $
    77,674
    
    
    $
    106,927
    
    
    $
    
    
    
    $
    Operating loss
    
    $
    (83,415
    )
    
    $
    (109,734
    )
    
    $
    (8,074
    )
    
    $
    (11,893
    )Other charge items (b)
    
    $
    
    
    
    $
    (4,383
    )
    
    $
    (5,646
    )
    
    $
    Loss from continuing operations
    
    $
    (80,952
    )
    
    $
    (106,209
    )
    
    $
    (4,639
    )
    
    $
    (12,572
    )Income (loss) from discontinued operation (c)
    
    $
    901
    
    
    $
    (576
    )
    
    $
    (947
    )
    
    $
    (10,728
    )Net loss
    
    $
    (80,051
    )
    
    $
    (106,785
    )
    
    $
    (5,586
    )
    
    $
    (23,300
    )Loss per share from continuing operations  basic and diluted
    
    $
    (1.11
    )
    
    $
    (1.46
    )
    
    $
    (0.07
    )
    
    $
    (0.17
    )Income (loss) per share from discontinued operation  basic and diluted
    
    $
    0.01
    
    
    $
    (0.01
    )
    
    $
    (0.01
    )
    
    $
    (0.15
    )Net loss per share
    
    $
    (1.10
    )
    
    $
    (1.47
    )
    
    $
    (0.08
    )
    
    $
    (0.32
    )Shares used in computing basic and diluted net loss per share
    
    
    72,823
    
    
    
    72,733
    
    
    
    72,914
    
    
    
    72,751
 Fiscal 2007 (Unaudited)Fourth
    
    
    Third
    
    
    Second
    
    
    FirstQuarter
    
    
    Quarter
    
    
    Quarter
    
    
    QuarterTotal revenues
    
    $
    44,582
    
    
    $
    60,450
    
    
    $
    49,823
    
    
    $
    56,928Gross profit
    
    $
    33,176
    
    
    $
    47,694
    
    
    $
    37,852
    
    
    $
    43,561Restructuring, amortization of other intangibles, acquisition-related
expenses and other expenses (a)
    
    $
    7,433
    
    
    $
    1,588
    
    
    $
    1,647
    
    
    $
    865Operating income (loss)
    
    $
    (17,435
    )
    
    $
    (1,658
    )
    
    $
    (11,812
    )
    
    $
    (10,604
    )Loss from continuing operations
    
    $
    (17,126
    )
    
    $
    (1,293
    )
    
    $
    (12,137
    )
    
    $
    (10,844
    )Income (loss) from discontinued operation (c)
    
    $
    (22,230
    )
    
    $
    1,506
    
    
    $
    1,295
    
    
    $
    1,624Net income (loss)
    
    $
    (39,356
    )
    
    $
    213
    
    
    $
    (10,842
    )
    
    $
    (9,220
    )Loss per share from continuing operations  basic and diluted
    
    $
    (0.24
    )
    
    $
    (0.02
    )
    
    $
    (0.17
    )
    
    $
    (0.15
    )Income (loss) per share from discontinued operation  basic and diluted
    
    $
    (0.30
    )
    
    $
    0.02
    
    
    $
    0.02
    
    
    $
    0.02Net loss per share
    
    $
    (0.54
    )
    
    $
    
    
    
    $
    (0.15
    )
    
    $
    (0.13
    )Shares used in computing basic net income (loss) per share
    
    
    72,533
    
    
    
    72,371
    
    
    
    72,201
    
    
    
    74,395Shares used in computing diluted net income (loss) per share
    
    
    72,533
    
    
    
    72,371
    
    
    
    72,201
    
    
    
    74,395
 
 (a)
    
    Charges consisted of net restructuring costs resulting from workforce reduction activities,
facility lease exit costs, amortization of other intangibles, and acquisition-related
expenses. See Note 7 to the Consolidated Financial Statements.(b)
    
    Other income (charge) items consisted of gains recognized on the redemption of our
convertible senior notes during 2008. See Note 9 to the Consolidated Financial Statements.(c)
    
    Loss from discontinued operation, net of taxes consisted of income (loss) from operation of
discontinued operation and loss on disposal of discontinued operation related to the sale of
substantially all of the assets, operations and certain liabilities of our IDE tools business
to Embarcadero on June 30, 2008. See Note 6 to the Consolidated Financial Statements.   48




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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
   49




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ITEM 9A. CONTROLS AND PROCEDURES
 CEO and CFO Certifications
  Evaluation of Our Disclosure Controls and Procedures
   Managements Report on Internal Control Over Financial Reporting
  
    
    pertain to the maintenance of records that in reasonable detail accurately and fairly
reflect our transactions and dispositions of our assets;
    
    provide reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with GAAP, and that receipts and
expenditures are being made only in accordance with authorizations of our management and
directors; and
    
    provide reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use or disposition of our assets that could have a material effect on the
financial statements.
   50




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##### Table of Contents



Internal Control  Integrated Framework
   Report of Independent Registered Public Accounting Firm
 
 Internal Control  Integrated Framework
    Internal Control  Integrated Framework
   
 Changes in Internal Control Over Financial Reporting
  
 ITEM 9B. OTHER INFORMATION
   51




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##### Table of Contents



PART III
 
 ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
  
 ITEM 11. EXECUTIVE COMPENSATION
  
 ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER
MATTERS
  
 ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE
  
 ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
   52




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PART IV
 
 ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
         53




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EXHIBIT INDEX
  Exhibit
    
    
    
    Incorporated by Reference
    
    FiledNumber
    
    Description of Exhibit
    
    Form
    
    Date
    
    Number
    
    Herewith2.1
    
    
    Agreement and Plan of Merger, dated as of February 7, 2006,
by and among Segue Software,
Inc., Borland Software Corporation and
Beta Merger Sub, Inc.
    
    8-K
    
    2/8/2006
    
    
    2.13.1
    
    
    Restated Certificate of Incorporation of Borland Software Corporation
    
    10-Q
    
    8/9/2005
    
    
    3.13.2
    
    
    Amended and Restated Bylaws of Borland Software Corporation
    
    10-Q
    
    8/9/2005
    
    
    3.24.1
    
    
    Stockholder Rights Agreement, dated as of October 26, 2001, between Borland
Software Corporation and Mellon Investor Services, L.L.C.
    
    8-A
    
    10/31/2001
    
    
    14.2
    
    
    Specimen Stock Certificate of Borland Software Corporation
    
    10-Q
    
    5/13/2002
    
    
    4.14.3
    
    
    Indenture by and between the Company and U.S. Bank National Association, as
trustee, dated February 6, 2007
    
    8-K
    
    2/08/2007
    
    
    4.14.4
    
    
    Global Note representing the Companys 2.75% Convertible Senior Note due 2012
    
    8-K
    
    2/08/2007
    
    
    4.24.5
    
    
    Registration Rights Agreement by and between the Company and J.P. Morgan
Securities Inc., dated February 6, 2007
    
    8-K
    
    2/08/2007
    
    
    4.310.1
    
    
    Form of Indemnity Agreement.+
    
    S-8
    
    9/26/199010.2
    
    
    2005 Incentive Compensation Plan for Executive Officers.+
    
    10-K
    
    3/25/2005
    
    
    10.210.3
    
    
    2006 Incentive Compensation Plan for Executive Officers.+
    
    8-K
    
    3/20/2006
    
    
    10.8610.4
    
    
    1985 Stock Option Plan.+
    
    10-K
    
    3/28/2003
    
    
    10.410.5
    
    
    Non-Employee Directors Stock Option Plan.+
    
    8-K
    
    12/27/199110.6
    
    
    1992 Stock Option Plan.+
    
    S-8
    
    7/4/199210.7
    
    
    1993 Stock Option Plan.+
    
    S-8
    
    3/11/199310.8
    
    
    1997 Stock Option Plan.+
    
    S-8
    
    12/19/1997
    
    
    4.410.9
    
    
    Amendment to the 1997 Stock Option Plan.+
    
    S-8
    
    9/1/2000
    
    
    4.910.10
    
    
    Second Amendment to the 1997 Stock Option Plan.+
    
    S-8
    
    6/1/2001
    
    
    4.610.11
    
    
    1998 Nonstatutory Stock Option Plan.+
    
    10-K
    
    3/28/2003
    
    
    10.1210.12
    
    
    1999 Employee Stock Purchase Plan.+
    
    10-Q
    
    8/9/2005
    
    
    10.1210.13
    
    
    2002 Stock Incentive Plan.+
    
    8-K
    
    5/16/2005
    
    
    99.2
  54




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Exhibit
    
    
    
    Incorporated by Reference
    
    FiledNumber
    
    Description of Exhibit
    
    Form
    
    Date
    
    Number
    
    Herewith10.14
    
    
    Form of Notice of Grant under the Discretionary Option Grant Program
of the 2002 Stock Incentive Plan.+
    
    10-Q
    
    
    11/9/2004
    
    
    
    10.7310.15
    
    
    Form of Stock Option Agreement under the Discretionary Option Grant
Program of the 2002 Stock Incentive Plan.+
    
    10-Q
    
    
    11/9/2004
    
    
    
    10.7410.16
    
    
    Form of Stock Issuance Agreement under the 2002 Stock Incentive Plan.+
    
    10-K
    
    
    3/25/2005
    
    
    
    10.1710.17
    
    
    Form of Option Agreement under the Automatic Option Grant Program of
the 2002 Stock Incentive Plan.+
    
    10-K
    
    
    3/25/2005
    
    
    
    10.1810.18
    
    
    Form of Addendum to Stock Option Agreement under the 2002 Stock
Incentive Plan (Twelve Months Acceleration).+
    
    10-K
    
    
    3/25/2005
    
    
    
    10.1910.19
    
    
    Form of Addendum to Stock Option Agreement under the 2002 Stock
Incentive Plan (50% Acceleration).+
    
    10-K
    
    
    3/25/2005
    
    
    
    10.2010.20
    
    
    Form of Addendum to Stock Option Agreement under the 2002 Stock
Incentive Plan (100% Acceleration).+
    
    10-K
    
    
    3/25/2005
    
    
    
    10.2110.21
    
    
    Form of Stock Issuance Agreement under the Stock Issuance Program of
the 2002 Stock Incentive Plan.+
    
    10-Q
    
    
    11/8/2005
    
    
    
    10.7410.22
    
    
    Form of Acceleration Addendum to Stock Issuance Agreement under the
Stock Issuance Program of the 2002 Stock Incentive Plan.+
    
    10-Q
    
    
    11/8/2005
    
    
    
    10.7510.23
    
    
    Form of Stock Option Agreement under the Discretionary Option grant
program of the 2002 Stock Incentive Plan, as amended on October 27,
2005.+
    
    10-Q
    
    
    11/8/2005
    
    
    
    10.7610.24
    
    
    Form of Acceleration Addendum to Stock Option Agreement under the
Discretionary grant program of the 2002 Stock Incentive Plan.+
    
    10-Q
    
    
    11/8/2005
    
    
    
    10.7710.25
    
    
    Borland Software Corporation 2003 Supplemental Stock Option Plan.+
    
    8-K
    
    
    3/20/2006
    
    
    
    10.8710.26
    
    
    Starbase Corporation 2001 Stock Plan.+
    
    S-8
    
    
    1/24/2003
    
    
    
    99.110.27
    
    
    Starbase Corporation 1996 Stock Option Plan.+
    
    S-8
    
    
    1/24/2003
    
    
    
    99.210.28
    
    
    Starbase Corporation NSO Stock Option Program.+
    
    S-8
    
    
    1/24/2003
    
    
    
    99.310.29
    
    
    TogetherSoft Corporation 2000 Stock Plan.+
    
    S-8
    
    
    1/24/2003
    
    
    
    99.610.30
    
    
    TogetherSoft Corporation 2001 Non-U.S. Plan.+
    
    S-8
    
    
    1/24/2003
    
    
    
    99.810.31
    
    
    Employment Agreement between Borland Software
Corporation and Matthew Thompson, dated October 1,
2003.+
    
    10-Q
    
    
    11/14/2003
    
    
    
    10.610.32
    
    
    Separation Agreement and
Full and Final Release of
Claims between the Company
and Matthew Thompson,
dated January 5, 2007.+
    
    8-K
    
    
    1/08/2007
    
    
    
    10.100
  55




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##### Table of Contents



Exhibit
    
    
    
    Incorporated by Reference
    
    FiledNumber
    
    Description of Exhibit
    
    Form
    
    Date
    
    Number
    
    Herewith10.33
    
    
    Employment Agreement
between the Company and
Tod Nielsen, dated
November 1, 2005.+
    
    8-K
    

    11/8/2005
    
    
    10.7310.34
    
    
    Form of Addendum to
Employment Offer Letters
for Severance Benefits for
Named Executive Officers.+
    
    10-Q
    

    11/8/2005
    
    
    10.7810.35
    
    
    2003 Stock Option Agreement for Tod Nielsen under the 2003
Supplemental Stock Option Plan.+
    
    10-K
    
    5/02/2006
    
    
    10.5210.36
    
    
    Addendum to Stock Option Agreement for Tod Nielsen.+
    
    10-K
    
    5/02/2006
    
    
    10.5310.37
    
    
    Stock Issuance Agreement for Tod Nielsen.+
    
    10-K
    
    5/02/2006
    
    
    10.5410.38
    
    
    Addendum to Stock Issuance Agreement for Tod Nielsen.+
    
    10-K
    
    5/02/2006
    
    
    10.5510.39
    
    
    Amendment to Employment Agreement between the Company and
Tod Nielsen effective as of November 1, 2005.+
    
    8-K/A
    
    11/23/2005
    
    
    10.7910.40
    
    
    Employment Offer Letter between the Company and Peter
Morowski, dated June 3, 2006.+
    
    8-K
    
    8/21/2006
    
    
    10.9310.41
    
    
    Addendum to Employment Offer Letter for Severance Benefits
between the Company and Peter Morowski, dated June 3,
2006.+
    
    8-K
    
    8/21/2006
    
    
    10.9410.42
    
    
    Employment Offer Letter between the Company and Greg Wrenn,
dated September 7, 2006.+
    
    8-K
    
    10/19/2006
    
    
    10.9610.43
    
    
    Addendum to Employment Offer Letter for Severance Benefits
between the Company and Greg Wrenn, dated September 7,
2006.+
    
    8-K
    
    10/19/2006
    
    
    10.9710.44
    
    
    Employment Offer Letter between the
Company and Erik Prusch, dated
October 2, 2006.+
    
    8-K
    
    11/14/2006
    
    
    10.9810.45
    
    
    Addendum to Employment Offer Letter
for Severance Benefits between the
Company and Erik Prusch, dated
October 2, 2006.+
    
    8-K
    
    11/14/2006
    
    
    10.9910.46
    
    
    Employment Offer Letter between the
Company and David Packer, dated
January 4, 2007.+
    
    8-K
    
    1/08/2007
    
    
    10.10110.47
    
    
    Addendum to Employment Offer Letter
for Severance Benefits between the
Company and David Packer.+
    
    8-K
    
    1/08/2007
    
    
    10.10210.48
    
    
    Lease Agreement by and between Borland
Software Corporation and
ScanlanKemperBard Companies dated as
of February 17, 2000.
    
    10-K
    
    3/29/2001
    
    
    10.4410.49
    
    
    First Amendment to Lease Agreement by
and between Borland Software
Corporation and Enterprise Way
Associates, LLC as dated as of
September 30, 2000.
    
    10-K
    
    3/29/2001
    
    
    10.45
  56




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##### Table of Contents



Exhibit
    
    
    
    Incorporated by Reference
    
    FiledNumber
    
    Description of Exhibit
    
    Form
    
    Date
    
    Number
    
    Herewith10.50
    
    
    Second Amendment to Lease Agreement by
and between Borland Software
Corporation and Enterprise Way Associates,
LLC as dated as of
June 1, 2001.
    
    10-K
    
    3/28/2003
    
    
    10.5410.51
    
    
    Third Amendment to Lease Agreement by and
between Borland Software
Corporation and Enterprise Way Associates,
LLC as dated as of
November 1, 2001.
    
    10-K
    
    3/28/2003
    
    
    10.5510.52
    
    
    Office Lease and amendment between Starwood O.C. Portfolio I,
L.L.C., and Starbase Corporation.
    
    10-K
    
    3/28/2003
    
    
    10.5710.53
    
    
    Lease and amendment between Davis Sandler Three LLC and
TogetherSoft Corporation.
    
    10-K
    
    3/28/2003
    
    
    10.5810.54
    
    
    Agreement of Purchase and Sale dated May 30, 2006 between Borland
Software Corporation and Fowler Property Acquisitions, LLC.
    
    8-K
    
    6/5/2006
    
    
    10.110.55
    
    
    First Amendment to Agreement of Purchase and Sale dated May 30,
2006 between Borland Software Corporation and Fowler Property
Acquisitions, LLC, dated June 30, 2006.
    
    8-K
    
    7/7/2006
    
    
    10.9110.56
    
    
    Visual Studio Partner Master Agreement between
Microsoft Corporation and Borland Software
Corporation, dated August 11, 2006.
    
    10-K
    
    3/15/2007
    
    
    10.9710.57
    
    
    Lease Agreement Between Prominent Northpoint L.P.,
as Landlord, and Borland Software Corporation, as
Tenant, covering the building known as Prominent
Pointe Two, located at 8310 Capital of Texas Hwy.
North, Building Two, Austin, TX 78731
    
    8-K
    
    4/24/2008
    
    
    10.8410.58
    
    
    Purchase Agreement by and among Borland Software
Corporation, the Foreign Sellers set forth on
Schedule A thereto and Embarcadero Technologies,
Inc., dated as of May 6, 2008
    
    8-K
    
    5/7/2008
    
    
    10.8510.59
    
    
    Employment Offer Letter and Addendum between
Borland Software Corporation and Rich Novak, dated
July 3, 2008+
    
    8-K
    
    8/7/2008
    
    
    10.8610.60
    
    
    Separation Agreement between Borland Software
Corporation and David Packer, executed August 15,
2008+
    
    8-K/A
    
    8/19/2008
    
    
    10.8710.61
    
    
    Employment Agreement and Addendum between Borland
Software Corporation and Chuck Maples, dated
February 9, 2009+
    
    
    
    2/11/2009
    
    
    10.8710.62
    
    
    Employment Agreement Amendment between Borland
Software Corporation and Erik E. Prusch, dated
February 19, 2009+
    
    
    
    2/23/2009
    
    
    10.8810.63
    
    
    Separation Agreement between Borland Software
Corporation and Gregory J. Wrenn, dated February
20, 2009+
    
    8-K
    
    2/20/2009
    
    
    10.89
  57




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##### Table of Contents



Exhibit
    
    
    
    Incorporated by Reference
    
    FiledNumber
    
    Description of Exhibit
    
    Form
    
    Date
    
    Number
    
    Herewith10.64
    
    
    Employment Agreement and Addendum between Borland
Software Corporation and Melissa Frugé, dated
February 20, 2009+
    
    8-K
    
    2/20/2009
    

    10.9016.1
    
    
    Letter from PricewaterhouseCoopers LLP to the
Securities and Exchange Commission, dated March 27,
2008
    
    8-K
    
    3/27/2008
    

    16.121.1
    
    
    Subsidiaries of Borland Software Corporation.
    
    
    
    
    
    
    
    
    X23.1
    
    

Consent
of KPMG LLP, Independent Registered Public Accounting Firm.
    
    
    
    
    
    
    
    
    X23.2
    
    
    Consent of PricewaterhouseCoopers LLP, Independent Registered Public Accounting Firm.
    
    
    
    
    
    
    
    
    X31.1
    
    
    Certification of Erik E. Prusch Acting Chief Executive Officer;
Chief Financial Officer of Borland Software Corporation, pursuant
to Rule 13a-14(a).
    
    
    
    
    
    
    
    
    X32.1
    
    
    Certification of Erik E. Prusch, Acting Chief Executive Officer;
Chief Financial Officer of Borland Software Corporation, pursuant
to Rule 13a-14(b) and 18 U.S.C. Section 1350.++
    
    
    
    
    
    
    
    
    X
 
 +
    
    Management contract or compensatory plan or arrangement.++
    
    The certification attached as Exhibit 32.1 that accompanies this Annual Report on Form 10-K is not
deemed filed with the Securities and Exchange Commission and are not to be incorporated by reference
into any filing of Borland Software Corporation under the Securities Act of 1933 or the Securities
Exchange Act of 1934 whether made before or after the date of this Form 10-K, irrespective of any
general incorporation language contained in such filing.   58




---



##### Table of Contents



SIGNATURES
  Borland Software Corporation
(Registrant)By:
    /s/  ERIK E. PRUSCHErik E. PruschActing President, Chief Executive
Officer and
Chief Financial Officer
(principal executive officer and principal financial and
accounting officer)   /s/ John F. Olsen

John F. Olsen
    

Chairman
of the Board/s/ Erik E. Prusch

Erik E. Prusch
    
    Acting President, Chief Executive Officer
and Chief Financial Officer
(principal executive officer and principal
financial and accounting officer)/s/ Tod NIELSEN

Tod Nielsen
    

Director/s/ Charles F. Kane

Charles F. Kane
    

Director/s/ Bryan LeBlanc

Bryan LeBlanc
    

Director/s/ T. Michael Nevens

T. Michael Nevens
    

Director/s/ William K. Hooper

William K. Hooper
    

Director/s/ Robert Tarkoff

Robert Tarkoff
    

Director
  59




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##### Table of Contents



ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
  PageReports of Independent Registered Public Accounting Firms
    
    
    61Consolidated Balance Sheets as of December 31, 2008 and 2007
    
    
    62Consolidated Statements of Operations for the years ended December 31, 2008, 2007 and 2006
    
    
    63Consolidated Statements of Comprehensive Loss for the years ended December 31, 2008, 2007 and 2006
    
    
    64Consolidated Statements of Stockholders Equity (Deficit) for the years ended December 31, 2008, 2007 and 2006
    
    
    65Consolidated Statements of Cash Flows for the years ended December 31, 2008, 2007 and 2006
    
    
    66Notes to Consolidated Financial Statements
    
    
    67
  60




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##### Table of Contents



Report of Independent Registered Public Accounting Firm
 
    Internal Control  Integrated Framework
  
  61




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##### Table of Contents



BORLAND SOFTWARE CORPORATION
 
 CONSOLIDATED BALANCE SHEETS
(In thousands, except par value and share amounts)
 December 31,2008
    
    
    2007ASSETSCurrent assets:Cash and cash equivalents
    
    $
    108,132
    
    
    $
    90,805Investments
    
    
    59,575
    
    
    
    68,061Accounts receivable, net of allowances of $1,174 and $6,096, respectively
    
    
    33,159
    
    
    
    54,640Prepaid expenses
    
    
    7,642
    
    
    
    9,207Assets of discontinued operation
    
    
    443
    
    
    
    Other assets
    
    
    2,098
    
    
    
    5,104Total current assets
    
    
    211,049
    
    
    
    227,817Property and equipment, net
    
    
    8,494
    
    
    
    9,978Goodwill
    
    
    
    
    
    
    226,688Intangible assets, net
    
    
    24,520
    
    
    
    31,658Investments
    
    
    
    
    
    
    37,970Assets of discontinued operation
    
    
    3,734
    
    
    
    Other assets
    
    
    5,185
    
    
    
    9,886Total assets
    
    $
    252,982
    
    
    $
    543,997LIABILITIES AND STOCKHOLDERS EQUITY (DEFICIT)Current liabilities:Accounts payable
    
    $
    5,045
    
    
    $
    7,622Accrued expenses
    
    
    13,956
    
    
    
    30,900Accrued restructuring
    
    
    3,990
    
    
    
    9,866Income taxes payable
    
    
    210
    
    
    
    2,315Deferred revenue
    
    
    40,720
    
    
    
    51,449Liabilities of discontinued operation
    
    
    4,208
    
    
    
    Other liabilities
    
    
    5,654
    
    
    
    7,176Total current liabilities
    
    
    73,783
    
    
    
    109,328Long-term liabilities:Convertible senior notes
    
    
    159,300
    
    
    
    200,000Accrued restructuring
    
    
    911
    
    
    
    5,472Deferred revenue
    
    
    2,298
    
    
    
    1,715Income taxes payable
    
    
    17,157
    
    
    
    17,828Liabilities of discontinued operation
    
    
    2,382
    
    
    
    Other liabilities
    
    
    5,707
    
    
    
    5,116Total liabilities
    
    
    261,538
    
    
    
    339,459Commitments and Contingencies (Note 16)Stockholders equity (deficit):Preferred stock; $.01 par value; 1,000,000 shares authorized; 0 shares issued and outstanding
    
    
    
    
    
    
    Common stock, $.01 par value, 200,000,000 shares authorized (2008: 94,552,738 issued and
73,015,772 outstanding shares; 2007: 94,134,952 issued and 72,975,972 outstanding shares)
    
    
    730
    
    
    
    730Additional paid-in capital
    
    
    672,524
    
    
    
    666,910Accumulated deficit
    
    
    (548,732
    )
    
    
    (333,010
    )Accumulated other comprehensive income
    
    
    7,331
    
    
    
    10,317Treasury stock at cost, (2008: 21,536,966 and 2007: 21,158,980 shares)
    
    
    (140,409
    )
    
    
    (140,409
    )Total stockholders equity (deficit)
    
    
    (8,556
    )
    
    
    204,538Total liabilities and stockholders equity (deficit)
    
    $
    252,982
    
    
    $
    543,997
   62




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##### Table of Contents



BORLAND SOFTWARE CORPORATION
 
 CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
 Year Ended December 31,2008
    
    
    2007
    
    
    2006Revenues:License and other revenues
    
    $
    68,100
    
    
    $
    96,686
    
    
    $
    165,886Service revenues
    
    
    103,927
    
    
    
    115,097
    
    
    
    138,774Total revenues
    
    
    172,027
    
    
    
    211,783
    
    
    
    304,660Costs of revenues:Cost of license and other revenues
    
    
    3,494
    
    
    
    2,870
    
    
    
    7,439Cost of service revenues
    
    
    33,183
    
    
    
    38,185
    
    
    
    55,381Amortization of acquired intangibles and other charges
    
    
    8,194
    
    
    
    8,445
    
    
    
    6,972Cost of revenues
    
    
    44,871
    
    
    
    49,500
    
    
    
    69,792Gross profit
    
    
    127,156
    
    
    
    162,283
    
    
    
    234,868Operating expenses:Selling, general and administrative
    
    
    107,933
    
    
    
    151,512
    
    
    
    195,710Research and development
    
    
    43,867
    
    
    
    40,747
    
    
    
    70,178Restructuring, amortization of other intangibles, acquisition-related expenses and other
    
    
    3,871
    
    
    
    11,533
    
    
    
    22,073Impairment of goodwill
    
    
    184,601
    
    
    
    
    
    
    
    Total operating expenses
    
    
    340,272
    
    
    
    203,792
    
    
    
    287,961Operating loss
    
    
    (213,116
    )
    
    
    (41,509
    )
    
    
    (53,093
    )Interest income
    
    
    5,451
    
    
    
    8,723
    
    
    
    3,168Interest expense
    
    
    (6,501
    )
    
    
    (5,369
    )
    
    
    (374
    )Gain on debt repurchase, net
    
    
    10,029
    
    
    
    
    
    
    
    Gain on sale of fixed assets
    
    
    
    
    
    
    
    
    
    
    1,658Other income (expense)
    
    
    348
    
    
    
    (1,023
    )
    
    
    (790
    )Loss from continuing operations before income taxes
    
    
    (203,789
    )
    
    
    (39,178
    )
    
    
    (49,431
    )Income tax provision
    
    
    (583
    )
    
    
    (2,222
    )
    
    
    (2,522
    )Loss from continuing operations
    
    $
    (204,372
    )
    
    $
    (41,400
    )
    
    $
    (51,953
    )Discontinued operation:Loss from operation of discontinued operation
(inclusive of applicable taxes of $735 for 2008 and $914 for 2007)
    
    $
    (9,831
    )
    
    $
    (17,805
    )
    
    $
    Loss on disposal of discontinued operation (inclusive of applicable
taxes of $868 for 2008)
    
    
    (1,519
    )
    
    
    
    
    
    
    Net loss from discontinued operation
    
    $
    (11,350
    )
    
    $
    (17,805
    )
    
    $
    Net loss
    
    $
    (215,722
    )
    
    $
    (59,205
    )
    
    $
    (51,953
    )Net loss per share  basic and diluted:Continuing operations
    
    $
    (2.81
    )
    
    $
    (0.57
    )
    
    $
    (0.67
    )Discontinued operations
    
    
    (0.15
    )
    
    
    (0.24
    )
    
    
    Total net loss per share
    
    $
    (2.96
    )
    
    $
    (0.81
    )
    
    $
    (0.67
    )Shares used in computing basic and diluted net loss per share
    
    
    72,805
    
    
    
    72,875
    
    
    
    77,096
   63




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##### Table of Contents



BORLAND SOFTWARE CORPORATION
 
 CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(In thousands)
 Year Ended December 31,2008
    
    
    2007
    
    
    2006Net loss
    
    $
    (215,722
    )
    
    $
    (59,205
    )
    
    $
    (51,953
    )Other comprehensive income (loss):Foreign currency translation adjustments
    
    
    (3,033
    )
    
    
    1,182
    
    
    
    2,517Fair market value adjustment for available-for-sale securities, net of tax
    
    
    47
    
    
    
    14
    
    
    
    72Comprehensive loss
    
    $
    (218,708
    )
    
    $
    (58,009
    )
    
    $
    (49,364
    )
   64




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##### Table of Contents



BORLAND SOFTWARE CORPORATION
 
 CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY (DEFICIT)
(In thousands)
 AccumulatedAdditional
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    OtherCommon Stock
    
    
    Paid-in
    
    
    Accumulated
    
    
    Treasury Stock
    
    
    Comprehensive
    
    
    DeferredShares
    
    
    Amount
    
    
    Capital
    
    
    Deficit
    
    
    Shares
    
    
    Amount
    
    
    Loss
    
    
    Compensation
    
    
    TotalAdjusted balances as of
December 31, 2005
    
    
    77,807
    
    
    $
    778
    
    
    $
    652,407
    
    
    $
    (221,939
    )
    
    
    15,310
    
    
    $
    (110,468
    )
    
    $
    6,532
    
    
    $
    (7,191
    )
    
    $
    320,119Net issuance under employee stock plans
    
    
    1,076
    
    
    
    11
    
    
    
    4,863
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,874Issuance of restricted stock
    
    
    363
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Repurchase of Common Stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (34
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Cancellation of restricted stock
    
    
    (390
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Repurchases and retirements of
restricted stock
    
    
    (151
    )
    
    
    (2
    )
    
    
    (835
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (837
    )Amortization of restricted stock
    
    
    
    
    
    
    
    
    
    
    3,515
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,515Stock-based compensation
    
    
    
    
    
    
    
    
    
    
    7,173
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,173Reclassification of unearned stock-based
compensation upon adoption of SFAS 123R
    
    
    
    
    
    
    
    
    
    
    (7,191
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,191
    
    
    
    Fair market value adjustment
available-for-sale securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    72
    
    
    
    
    
    
    
    72Foreign
currency translation adjustments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,517
    
    
    
    
    
    
    
    2,517Net Loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (51,953
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (51,953
    )Balances at December 31, 2006
    
    
    78,705
    
    
    $
    787
    
    
    $
    659,932
    
    
    $
    (273,892
    )
    
    
    15,276
    
    
    $
    (110,468
    )
    
    $
    9,121
    
    
    $
    
    
    
    $
    285,480Net issuance under employee stock plans
    
    
    453
    
    
    
    4
    
    
    
    1,805
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,809Repurchase of Common Stock
    
    
    (5,883
    )
    
    
    (60
    )
    
    
    
    
    
    
    
    
    
    
    5,883
    
    
    
    (29,941
    )
    
    
    
    
    
    
    
    
    
    
    (30,001
    )Cancellation of restricted stock
    
    
    (129
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Repurchases and retirements of
restricted stock
    
    
    (170
    )
    
    
    (1
    )
    
    
    (819
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (820
    )Stock-based compensation
    
    
    
    
    
    
    
    
    
    
    6,033
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,033Fair market value adjustment
available-for-sale securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    14
    
    
    
    
    
    
    
    14Foreign currency translation
adjustments
    
    
    
    
    
    
    
    
    
    
    (41
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,182
    
    
    
    
    
    
    
    1,141Net Loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (59,205
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (59,205
    )Balances at December 31, 2007
    
    
    72,976
    
    
    $
    730
    
    
    $
    666,910
    
    
    $
    (333,097
    )
    
    
    21,159
    
    
    $
    (140,409
    )
    
    $
    10,317
    
    
    $
    
    
    
    $
    204,451Cumulative effect of adjustments
from the adoption of FIN 48
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    87
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    87Adjusted balances as of
December 31, 2007
    
    
    72,976
    
    
    $
    730
    
    
    $
    666,910
    
    
    $
    (333,010
    )
    
    
    21,159
    
    
    $
    (140,409
    )
    
    $
    10,317
    
    
    $
    
    
    
    $
    204,538Net issuance under employee stock plans
    
    
    460
    
    
    
    5
    
    
    
    534
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    539Repurchase of Common Stock
    
    
    (378
    )
    
    
    (4
    )
    
    
    
    
    
    
    
    
    
    
    378
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4
    )Cancellation of restricted stock
    
    
    (10
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Repurchases and retirements of
restricted stock
    
    
    (32
    )
    
    
    (1
    )
    
    
    (58
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (59
    )Stock-based compensation
    
    
    
    
    
    
    
    
    
    
    5,138
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,138Fair market value adjustment
available-for-sale securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    47
    
    
    
    
    
    
    
    47Foreign currency translation
adjustments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,033
    )
    
    
    
    
    
    
    (3,033
    )Net Loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (215,722
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (215,722
    )Balances at December 31, 2008
    
    
    73,016
    
    
    $
    730
    
    
    $
    672,524
    
    
    $
    (548,732
    )
    
    
    21,537
    
    
    $
    (140,409
    )
    
    $
    7,331
    
    
    $
    
    
    
    $
    (8,556
    )
   65




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##### Table of Contents



BORLAND SOFTWARE CORPORATION
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
 Year Ended December 31,2008
    
    
    2007
    
    
    2006CASH FLOWS FROM OPERATING ACTIVITIES:Net loss
    
    $
    (215,722
    )
    
    $
    (59,205
    )
    
    $
    (51,953
    )Adjustments to reconcile net loss to net cash used in operating activities:Depreciation and amortization
    
    
    12,989
    
    
    
    14,726
    
    
    
    12,773Stock-based compensation
    
    
    5,138
    
    
    
    6,033
    
    
    
    10,688Acquired in-process research & development charge
    
    
    
    
    
    
    
    
    
    
    4,800Developed technology impairment charge
    
    
    
    
    
    
    
    
    
    
    497Provision for (recovery of) accounts receivable
    
    
    (3,103
    )
    
    
    1,570
    
    
    
    (2,952
    )Loss on closure of subsidiaries
    
    
    366
    
    
    
    226
    
    
    
    Loss on sale of CodeGear assets
    
    
    651
    
    
    
    
    
    
    
    Loss (gain) on disposal of fixed assets
    
    
    423
    
    
    
    751
    
    
    
    (1,658
    )Gain on debt repurchase, net
    
    
    (10,029
    )
    
    
    
    
    
    
    Goodwill impairment
    
    
    197,901
    
    
    
    26,509
    
    
    
    Changes in assets and liabilities, net of acquisitions:Accounts receivable
    
    
    22,608
    
    
    
    7,497
    
    
    
    960Prepaid expenses and other assets
    
    
    4,653
    
    
    
    (2,856
    )
    
    
    5,456Accounts payable and accrued expenses
    
    
    (15,903
    )
    
    
    (12,916
    )
    
    
    3,400Income taxes payable
    
    
    (1,716
    )
    
    
    297
    
    
    
    (1,747
    )Restructuring accruals
    
    
    (8,583
    )
    
    
    (567
    )
    
    
    (695
    )Deferred revenues
    
    
    (3,549
    )
    
    
    (7,853
    )
    
    
    (7,559
    )Other liabilities
    
    
    (407
    )
    
    
    7,483
    
    
    
    (120
    )Cash used in operating activities
    
    
    (14,283
    )
    
    
    (18,305
    )
    
    
    (28,110
    )CASH FLOWS FROM INVESTING ACTIVITIES:Purchases of property and equipment
    
    
    (3,102
    )
    
    
    (5,495
    )
    
    
    (6,187
    )Proceeds from sale of fixed assets
    
    
    105
    
    
    
    
    
    
    
    11,015Acquisition of Segue Software, net of cash acquired
    
    
    
    
    
    
    
    
    
    
    (102,457
    )Proceeds from sale of CodeGear assets
    
    
    20,304
    
    
    
    
    
    
    
    Acquisition of Simunication, net of cash acquired
    
    
    (1,970
    )
    
    
    
    
    
    
    Proceeds from sale of subsidiary
    
    
    
    
    
    
    178
    
    
    
    Acquisition of developed technology
    
    
    
    
    
    
    
    
    
    
    (497
    )Purchases of investments
    
    
    (73,884
    )
    
    
    (155,859
    )
    
    
    Sales and maturities of investments
    
    
    120,633
    
    
    
    49,878
    
    
    
    125,944Cash provided by (used in) investing activities
    
    
    62,086
    
    
    
    (111,298
    )
    
    
    27,818CASH FLOWS FROM FINANCING ACTIVITIES:Issuance of convertible senior notes, net
    
    
    
    
    
    
    194,230
    
    
    
    Repurchase of convertible senior notes, net
    
    
    (29,786
    )
    
    
    
    
    
    
    Proceeds from issuance of common stock, employee stock purchase plan and other, net
    
    
    539
    
    
    
    1,612
    
    
    
    4,863Repurchase of common stock and others, net of related fees
    
    
    (63
    )
    
    
    (29,941
    )
    
    
    Cash provided by (used in) financing activities
    
    
    (29,310
    )
    
    
    165,901
    
    
    
    4,863Effect of exchange rate changes on cash
    
    
    (1,166
    )
    
    
    (810
    )
    
    
    1,671Net change in cash and cash equivalents
    
    
    17,327
    
    
    
    35,488
    
    
    
    6,242Beginning cash and cash equivalents
    
    
    90,805
    
    
    
    55,317
    
    
    
    49,075Ending cash and cash equivalents
    
    $
    108,132
    
    
    $
    90,805
    
    
    $
    55,317Cash paid during the year for:Interest
    
    $
    5,663
    
    
    $
    3,291
    
    
    $
    300Income taxes, net of refunds
    
    $
    2,915
    
    
    $
    2,209
    
    
    $
    3,715Supplemental disclosure of non-cash items:Deferred tax asset effect of acquired tax attributes
    
    $
    
    
    
    $
    12,470
    
    
    $
    17,835
   66




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##### Table of Contents



BORLAND SOFTWARE CORPORATION
 
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2008
 NOTE 1. THE COMPANY
   NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 Principles of Consolidation
   Management Estimates and Assumptions
  Disposition of CodeGear Assets and Discontinued Operation Reclassifications
    67




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Accounting for the Impairment or Disposal of Long-Lived Assets Disclosures about Segments of an
Enterprise and Related Information
 Risks and Uncertainties
     68




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##### Table of Contents



Correction of Previously Issued Financial Statements
   Year Ended December 31, 2007Adjustment
    
    
    As AdjustedAs
    
    
    for
    
    
    forPreviously
    
    
    Discontinued
    
    
    Discontinued
    
    
    Adjustment forReported
    
    
    Operations
    
    
    Operations
    
    
    Errors
    
    
    As RestatedStatement of Operations:Selling, general and administrative
    
    $
    176,206
    
    
    $
    (23,688
    )
    
    $
    152,518
    
    
    $
    (1,006
    )
    
    $
    151,512Restructuring, amortization of other
intangibles, acquisition-related
expenses and other charges
    
    
    13,934
    
    
    
    (1,017
    )
    
    
    12,917
    
    
    
    (1,384
    )
    
    
    11,533Interest expense
    
    
    (5,449
    )
    
    
    2
    
    
    
    (5,447
    )
    
    
    78
    
    
    
    (5,369
    )Net loss
    
    $
    (61,673
    )
    
    $
    
    
    
    $
    (61,673
    )
    
    $
    2,468
    
    
    $
    (59,205
    )Net loss per share  basic and diluted
    
    $
    (0.85
    )
    
    $
    (0.00
    )
    
    $
    (0.85
    )
    
    $
    0.04
    
    
    $
    (0.81
    )
  69




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##### Table of Contents



As of December 31, 2007AsPreviously
    
    
    Adjustment forReported
    
    
    Errors
    
    
    As RestatedBalance sheet:Property and equipment, net
    
    $
    9,998
    
    
    $
    (20
    )
    
    $
    9,978Total assets
    
    
    544,017
    
    
    
    (20
    )
    
    
    543,997Accrued expenses
    
    
    31,606
    
    
    
    (706
    )
    
    
    30,900Other current liabilities
    
    
    7,574
    
    
    
    (398
    )
    
    
    7,176Long-term restructuring
    
    
    5,823
    
    
    
    (351
    )
    
    
    5,472Other long-term liabilities
    
    
    23,977
    
    
    
    (1,033
    )
    
    
    22,944Total liabilities
    
    
    341,947
    
    
    
    (2,488
    )
    
    
    339,459Accumulated deficit
    
    
    (335,478
    )
    
    
    2,468
    
    
    
    (333,010
    )
 Revenue Recognition
 Software Revenue Recognition, , Modification of SOP No. 97-2
with Respect to Certain Transactions, Accounting for Performance of Construction-Type and Certain Production-Type Contracts Revenue Recognition
     70




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##### Table of Contents



Basic and Diluted Net Loss per Share
 Earnings Per Share
  Year Ended December 31,2008
    
    
    2007
    
    
    2006Numerators:Loss from continuing operations
    
    $
    (204,372
    )
    
    $
    (41,400
    )
    
    $
    (51,953
    )Loss from discontinued operations
    
    
    (11,350
    )
    
    
    (17,805
    )
    
    
    Net Loss
    
    $
    (215,722
    )
    
    $
    (59,205
    )
    
    $
    (51,953
    )Denominator for basic net loss per share
    
    
    72,805
    
    
    
    72,875
    
    
    
    77,096Net loss per share attributable to common stockholders:Continuing operations
    
    $
    (2.81
    )
    
    $
    (0.57
    )
    
    $
    (0.67
    )Discontinued operations
    
    
    (0.15
    )
    
    
    (0.24
    )
    
    
    Net loss per share  basic and diluted
    
    $
    (2.96
    )
    
    $
    (0.81
    )
    
    $
    (0.67
    )
  Cash, Cash Equivalents and Short-Term Investments
  Foreign Currencies
   71




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##### Table of Contents



Concentration of Credit Risk
    Property
and Equipment, net
  Computer software and equipment
    
    3 yearsFurniture, fixtures and equipment
    
    3 yearsLeasehold improvements
    
    Shorter of lease term or useful life
  Accounting for the Costs of Computer Software Developed or Obtained for Internal
Use.
 Accounting for Asset Retirement Obligations
 Leases
 Issues Relating to Accounting for
Leases
  72




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##### Table of Contents



Taxes Collected from Customers
 How Taxes Collected from
Customers and Remitted to Governmental Authorities Should Be Presented in the Income Statement
 Stock-Based Compensation Plans
 Shared-Based Payment
  Research and Development
 Accounting for the Costs of Computer Software to be Sold, Leased, or
Otherwise Marketed.
 Goodwill and Acquired Intangibles
 Business Combinations, Goodwill and Other Intangible Assets,
   73




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Accounting for the
Impairment or Disposal of Long-Lived Assets
  Advertising Costs
  Income Taxes
  Accounting for Income
Taxes,
  74




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##### Table of Contents



Accounting for Uncertainty
in Income Taxes, an interpretation of FASB Statement No. 109 (FIN 48), which became effective for
the Company beginning in 2007
 Recent Accounting Pronouncements
 Accounting For Convertible Debt Instruments That
May Be Settled in Cash upon Conversion (Including Partial Cash Settlement)
 Fair Value Measurements
 Business Combinations
 The Fair Value Option for Financial Assets and
Financial Liabilitiesincluding an amendment of FASB Statement No. 115
 Transition Guidance for Conforming Changes to
Issue No. 98-5 Accounting for Certain Financial Instruments
with Characteristics of both Liabilities and Equity
  75




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##### Table of Contents



Determination of the Useful Life of
Intangible Assets Goodwill and Other Intangible Assets
 NOTE 3. INVESTMENTS
  December 31, 2008Amortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    Estimated FairCosts
    
    
    Gains
    
    
    Loss
    
    
    ValueCorporate debt securities
    
    $
    27,152
    
    
    $
    
    
    
    $
    (250
    )
    
    $
    26,902U.S. government debt securities
    
    
    32,363
    
    
    
    241
    
    
    
    
    
    
    
    32,604Equity instruments
    
    
    
    
    
    
    111
    
    
    
    (42
    )
    
    
    69$
    59,515
    
    
    $
    352
    
    
    $
    (292
    )
    
    $
    59,575
 December 31, 2007Amortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    Estimated FairCosts
    
    
    Gains
    
    
    Loss
    
    
    ValueCorporate debt securities
    
    $
    46,199
    
    
    $
    22
    
    
    $
    (212
    )
    
    $
    46,009U.S. government debt securities
    
    
    20,284
    
    
    
    57
    
    
    
    (3
    )
    
    
    20,338Asset-backed securities
    
    
    35,534
    
    
    
    152
    
    
    
    (2
    )
    
    
    35,684Auction rate securities
    
    
    4,000
    
    
    
    
    
    
    
    
    
    
    
    4,000$
    106,017
    
    
    $
    231
    
    
    $
    (217
    )
    
    $
    106,031
   December 31, 2008
    
    
    December 31, 2007Amortized
    
    
    Estimated Fair

    
    Amortized
    
    
    Estimated FairDue in
    
    Costs
    
    
    Value
    
    
    Costs
    
    
    ValueLess than one year
    
    $
    59,515
    
    
    $
    59,575
    
    
    $
    63,906
    
    
    $
    64,0611 thru 5 years
    
    
    
    
    
    
    
    
    
    
    38,111
    
    
    
    37,970After 5 years
    
    
    
    
    
    
    
    
    
    
    4,000
    
    
    
    4,000Total
    
    $
    59,515
    
    
    $
    59,575
    
    
    $
    106,017
    
    
    $
    106,031
  76




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##### Table of Contents



December 31, 2008Less than twelve months
    
    
    Greater than twelve months
    
    
    TotalEstimated Fair
    
    
    Gross Unrealized
    
    
    Estimated Fair
    
    
    Gross Unrealized
    
    
    Estimated Fair
    
    
    Gross UnrealizedValue
    
    
    (Losses)
    
    
    Value
    
    
    (Losses)
    
    
    Value
    
    
    (Losses)Corporate debt securities
    
    $
    26,902
    
    
    $
    (250
    )
    
    $
    
    
    
    $
    
    
    
    $
    26,902
    
    
    $
    (250
    )U.S. government debt securities
    
    
    32,604
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    32,604
    
    
    
    Equity instruments
    
    
    69
    
    
    
    (42
    )
    
    
    
    
    
    
    
    
    
    
    69
    
    
    
    (42
    )$
    59,575
    
    
    $
    (292
    )
    
    $
    
    
    
    $
    
    
    
    $
    59,575
    
    
    $
    (292
    )
 December 31, 2007Less than twelve months
    
    
    Greater than twelve months
    
    
    TotalEstimated Fair
    
    
    Gross Unrealized
    
    
    Estimated Fair
    
    
    Gross Unrealized
    
    
    Estimated Fair
    
    
    Gross UnrealizedValue
    
    
    Losses
    
    
    Value
    
    
    Losses
    
    
    Value
    
    
    LossesCorporate debt securities
    
    $
    16,180
    
    
    $
    (8
    )
    
    $
    29,829
    
    
    $
    (204
    )
    
    $
    46,009
    
    
    $
    (212
    )U.S. government debt securities
    
    
    19,041
    
    
    
    (3
    )
    
    
    1,297
    
    
    
    
    
    
    
    20,338
    
    
    
    (3
    )Asset-backed securities
    
    
    28,841
    
    
    
    (2
    )
    
    
    6,843
    
    
    
    
    
    
    
    35,684
    
    
    
    (2
    )Auction rate securities
    
    
    4,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,000
    
    
    
    $
    68,062
    
    
    $
    (13
    )
    
    $
    37,969
    
    
    $
    (204
    )
    
    $
    106,031
    
    
    $
    (217
    )
  Fair Value Measurements
 Fair Value Measurements i.e.
       77




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##### Table of Contents



Fair Value Measurement at Reporting Date usingQuoted Prices inEstimated Fair
    
    
    Active Markets
    
    
    Significant OtherValue at
    
    
    for Identical Assets
    
    
    Observable InputsDescription
    
    December 31, 2008
    
    
    (Level 1)
    
    
    (Level 2)Assets:Money market funds (1)
    
    $
    60,006
    
    
    $
    60,006
    
    
    $
    Corporate debt securities (2)
    
    
    26,902
    
    
    
    
    
    
    
    26,902U.S. government debt securities (2)
    
    
    32,604
    
    
    
    
    
    
    
    32,604Equity instruments (2)
    
    
    69
    
    
    
    69
    
    
    
    $
    119,581
    
    
    $
    60,075
    
    
    $
    59,506
 (1)
    
    Included in cash and cash equivalents on the consolidated balance sheet.(2)
    
    Included in short-term investments in our consolidated balance sheet. NOTE 4. GOODWILL AND INTANGIBLE ASSETS
  GoodwillBalance as of December 31, 2006
    
    $
    253,356Impairment of CodeGear goodwill
    
    
    (26,509
    )Other adjustments*
    
    
    (159
    )Balance as of December 31, 2007
    
    $
    226,688Impairment of goodwill in continuing operations
    
    
    (184,601
    )Acquisition of Simunication
    
    
    889Other adjustments*
    
    
    (2,145
    )Discontinued operationsImpairment of CodeGear goodwill
    
    
    (13,300
    )Sale of CodeGear
    
    
    (27,531
    )Balance as of December 31, 2008
    
    $
    
 *
    
    Other adjustments consist primarily of changes in balances due to fluctuations in foreign
exchange rates.    78




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##### Table of Contents




    
    A forecast of operating results for 2009 through 2014 including projected revenues by
product and revenue line, as well as operating expenses, expected margins, and income
taxes, were utilized in the analysis. Given the continued economic decline noted in Q3 and
the uncertainties in the global economy and in the Companys market, the Companys
forecasts assumed no significant revenue growth.
    
    Forecasts of working capital and capital expenditure requirements to support the revenue
forecasts were utilized in the analysis. These assumptions were based upon the reporting
units historical requirements and consideration of guideline company requirements within
the its industry. The Companys forecasts assumed that it would make some investment to
support innovation but also stayed consistent with its cost cutting efforts.
    
    The cash flows utilized in the discounted cash flow analysis were estimated into
perpetuity based on a terminal year growth rate. The elements considered in developing the
terminal year growth rate for the reporting unit were the long-term inflation forecast and
long-term real growth potential for the Companys business.
    
    The per-share price of the Companys common stock and overall market capitalization was
also considered in the fair value analysis. The Company also factored in a control premium
and the estimated fair value of the outstanding Notes.
      As of December 31, 2008
    
    
    As of December 31, 2007Gross
    
    
    
    
    
    
    
    
    
    
    GrossRange
    
    
    Carrying
    
    
    Accumulated
    
    
    Net
    
    
    Carrying
    
    
    Accumulated
    
    
    NetCategory
    
    Useful Lives
    
    
    Amount
    
    
    Amortization
    
    
    Amount
    
    
    Amount
    
    
    Amortization
    
    
    AmountAcquired Developed Technology
    
    3 - 7 years
    
    $
    47,860
    
    
    $
    35,637
    
    
    $
    12,223
    
    
    $
    46,330
    
    
    $
    30,187
    
    
    $
    16,143Maintenance Agreements
    
    7 years
    
    
    11,300
    
    
    
    4,215
    
    
    
    7,085
    
    
    
    11,300
    
    
    
    2,735
    
    
    
    8,565Tradenames and Trademarks
    
    3 years
    
    
    1,100
    
    
    
    774
    
    
    
    326
    
    
    
    1,100
    
    
    
    499
    
    
    
    601Customer Relationships
    
    3 - 7 years
    
    
    9,075
    
    
    
    4,203
    
    
    
    4,872
    
    
    
    9,075
    
    
    
    2,726
    
    
    
    6,349Other
    
    1 - 3 years
    
    
    421
    
    
    
    407
    
    
    
    14
    
    
    
    400
    
    
    
    400
    
    
    
    Total
    
    
    
    
    
    $
    69,756
    
    
    $
    45,236
    
    
    $
    24,520
    
    
    $
    68,205
    
    
    $
    36,547
    
    
    $
    31,658
  FutureAmortization2009
    
    $
    8,0792010
    
    
    7,8072011
    
    
    4,5802012
    
    
    2,9462013
    
    
    1,081Thereafter
    
    
    27Total
    
    $
    24,520
   79




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##### Table of Contents



NOTE 5. FINANCIAL STATEMENT COMPONENTS
  December 31,2008
    
    
    2007Accounts receivable, net:Gross accounts receivable
    
    $
    34,333
    
    
    $
    60,736Allowance for rebates and returns
    
    
    
    
    
    
    (1,778
    )Allowance for doubtful accounts
    
    
    (1,174
    )
    
    
    (4,318
    )Total
    
    $
    33,159
    
    
    $
    54,640Other non-current assets:Deferred taxes
    
    $
    1,099
    
    
    $
    Convertible debt fees
    
    
    3,030
    
    
    
    5,024Other
    
    
    1,056
    
    
    
    4,862Total
    
    $
    5,185
    
    
    $
    9,886Property and equipment, net:Computer equipment
    
    $
    24,205
    
    
    $
    27,372Furniture, fixtures and equipment
    
    
    6,351
    
    
    
    8,014Other
    
    
    8,601
    
    
    
    9,09039,157
    
    
    
    44,476Less accumulated depreciation and amortization
    
    
    (30,663
    )
    
    
    (34,498
    )Total
    
    $
    8,494
    
    
    $
    9,978Accrued expenses:Accrued payroll and incentives
    
    $
    7,775
    
    
    $
    17,789Professional service fees and settlement costs
    
    
    1,216
    
    
    
    3,883Accrued self funded insurance
    
    
    858
    
    
    
    1,642Other
    
    
    4,107
    
    
    
    7,586Total
    
    $
    13,956
    
    
    $
    30,900Other current liabilities:Business taxes, net
    
    $
    2,370
    
    
    $
    2,046Other
    
    
    3,284
    
    
    
    5,130Total
    
    $
    5,654
    
    
    $
    7,176
  Year Ended December 31,2008
    
    
    2007
    
    
    2006Restructuring
    
    $
    3,012
    
    
    $
    8,853
    
    
    $
    12,880Amortization of other intangibles
    
    
    540
    
    
    
    413
    
    
    
    557Acquisition-related expenses
    
    
    319
    
    
    
    2,267
    
    
    
    3,836Other charges:In-process research and development
    
    
    
    
    
    
    
    
    
    
    4,800Restructuring, amortization of other intangibles,
acquisition-related expenses and other
    
    $
    3,871
    
    
    $
    11,533
    
    
    $
    22,073
  80




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##### Table of Contents



NOTE 6. DISPOSITION AND ACQUISITIONS
 Disposition
     Year Ended December 31,2008
    
    
    2007Net Sales
    
    $
    23,679
    
    
    $
    56,998Loss from operation of discontinued operation
(inclusive of
applicable taxes of
$735 for 2008 and $914
for 2007)
    
    
    (9,831
    )
    
    
    (17,805
    )Loss on disposal of discontinued operation
(inclusive of applicable taxes of $868 for 2008)
    
    
    (1,519
    )
    
    
    Net loss from discontinued operation
    
    $
    (11,350
    )
    
    $
    (17,805
    )
  81




---



##### Table of Contents



December
31, 2008Income taxes receivable
    
    $
    97Other current assets
    
    
    346Current assets of discontinued operation
    
    $
    443Deposits due to Borland from lessor
    
    
    3,734Non-current assets of discontinued operation
    
    $
    3,734Accrued restructuring
    
    
    4,162Other current liabilities
    
    
    46Current liabilities of discontinued operation
    
    $
    4,208Accrued restructuring
    
    
    1,030Deposits due to subtenant from Borland
    
    
    1,352Long-term liabilities of discontinued operation
    
    $
    2,382
 Acquisitions
 Simunication, Inc.
 Business Combinations
   Segue Software, Inc.
   82




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##### Table of Contents



NOTE 7. RESTRUCTURING AND MERGER-RELATED CHARGES
 Accounting for
Costs Associated with Exit or Disposal Activities Employers Accounting for
Postemployment Benefits  an amendment of FASB Statement No. 5 and 4, Employers Accounting for Settlement and Curtailments of Defined Benefit Pension Plans and for
Termination Benefits
 FY 2008 Restructuring
    
    
    FY 2007 Restructuring
    
    
    FY 2006 RestructuringQuarter 4 Plan
    
    
    Quarter 2 PlanSeverance,
    
    
    Severance,
    
    
    
    
    
    
    Severance,
    
    
    Severance,Benefits and Other
    
    
    Benefits and Other
    
    
    Facilities
    
    
    Benefits and Other
    
    
    Benefits and Other
    
    
    Facilities
    
    
    TotalAccrual at December
31, 2005
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    496
    
    
    $
    12,684
    
    
    $
    13,180Acquired from Segue
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,507
    
    
    
    542
    
    
    
    4,049Additions/adjustments/accretion
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9,755
    
    
    
    3,125
    
    
    
    12,880Payments and
adjustments for
non-cash write-offs
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (9,496
    )
    
    
    (4,800
    )
    
    
    (14,296
    )Accrual at December
31, 2006
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    4,262
    
    
    $
    11,551
    
    
    $
    15,813Additions/adjustments/accretion
    
    
    
    
    
    
    3,755
    
    
    
    4,800
    
    
    
    3,000
    
    
    
    (515
    )
    
    
    (138
    )
    
    $
    10,902Payments and
adjustments for
non-cash write-offs
    
    
    
    
    
    
    (18
    )
    
    
    
    
    
    
    (2,672
    )
    
    
    (3,568
    )
    
    
    (5,119
    )
    
    $
    (11,377
    )Accrual at December
31, 2007
    
    $
    
    
    
    $
    3,737
    
    
    $
    4,800
    
    
    $
    328
    
    
    $
    179
    
    
    $
    6,294
    
    
    $
    15,338Additions/adjustments
to accrual
    
    
    1,810
    
    
    
    487
    
    
    
    976
    
    
    
    83
    
    
    
    37
    
    
    
    (5,183
    )
    
    
    (1,790
    )Payments and
adjustments for
non-cash write-offs
    
    
    
    
    
    
    (3,356
    )
    
    
    (3,553
    )
    
    
    (411
    )
    
    
    (216
    )
    
    
    (1,111
    )
    
    
    (8,647
    )Accrual at December
31, 2008
    
    $
    1,810
    
    
    $
    868
    
    
    $
    2,223
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    4,901
    FY 2008
   FY 2007 4th Quarter
   83




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##### Table of Contents



FY 2007 2nd Quarter
  FY 2006
  NOTE 8. INCOME TAXES
  Year Ended December 31,2008
    
    
    2007
    
    
    2006U.S.
    
    $
    (192,395
    )
    
    $
    (60,438
    )
    
    $
    (52,033
    )Non-U.S.
    
    
    (11,394
    )
    
    
    21,260
    
    
    
    2,602$
    (203,789
    )
    
    $
    (39,178
    )
    
    $
    (49,431
    )
  Year Ended December 31,2008
    
    
    2007
    
    
    2006Current:Federal
    
    $
    (549
    )
    
    $
    70
    
    
    $
    (70
    )State
    
    
    60
    
    
    
    8
    
    
    
    118Non-U.S.
    
    
    1,245
    
    
    
    1,954
    
    
    
    930$
    756
    
    
    $
    2,032
    
    
    $
    978Deferred:Federal
    
    $
    (173
    )
    
    $
    190
    
    
    $
    State
    
    
    
    
    
    
    
    
    
    
    Non-U.S.
    
    
    
    
    
    
    
    
    
    
    1,544(173
    )
    
    
    190
    
    
    
    1,544$
    583
    
    
    $
    2,222
    
    
    $
    2,522
  84




---



##### Table of Contents



Year Ended December 31,2008
    
    
    2007
    
    
    2006Tax provision computed at U.S. statutory rate
    
    $
    (71,326
    )
    
    $
    (13,712
    )
    
    $
    (17,301
    )Goodwill impairment
    
    
    69,220
    
    
    
    
    
    
    
    State taxes
    
    
    60
    
    
    
    (1,721
    )
    
    
    (2,966
    )Limitation or (benefit) on utilization of U.S. losses, credits and
future deductions
    
    
    (1,116
    )
    
    
    18,047
    
    
    
    13,350Non-U.S. withholding taxes
    
    
    535
    
    
    
    78
    
    
    
    1,139Tax effect of acquisition-related non-deductible goodwill and
intangibles
    
    
    3,402
    
    
    
    4,063
    
    
    
    4,821Tax effect of foreign income inclusions
    
    
    
    
    
    
    2,991
    
    
    
    3,209Subsidiaries results subject to tax at rates other than U.S.
statutory rates
    
    
    (155
    )
    
    
    (5,705
    )
    
    
    (1,569
    )Limitation or (benefit) on utilization of non-U.S. losses, credits
and future deductions
    
    
    
    
    
    
    (2,434
    )
    
    
    972FIN 48  unrecognized tax benefit
    
    
    (794
    )
    
    
    617
    
    
    
    Other and permanent differences
    
    
    757
    
    
    
    (2
    )
    
    
    867Income tax provision
    
    $
    583
    
    
    $
    2,222
    
    
    $
    2,522
  Year Ended December 31,2008
    
    
    2007Accrued expenses
    
    $
    5,442
    
    
    $
    9,709Accounts receivables reserves
    
    
    363
    
    
    
    1,271Deprecation, amortization and other
    
    
    5,105
    
    
    
    4,710U.S. federal and state loss and credit carryforwards
    
    
    85,722
    
    
    
    97,308Non-U.S. loss carryforwards
    
    
    1,883
    
    
    
    2,195Gross deferred tax assets
    
    
    98,515
    
    
    
    115,193Deferred tax assets valuation allowance
    
    
    (80,246
    )
    
    
    (90,519
    )Deferred tax assets, net of valuation allowance
    
    $
    18,269
    
    
    $
    24,674Deferred tax liability
    
    $
    (8,178
    )
    
    $
    (11,582
    )Acquired intangibles
    
    $
    (9,655
    )
    
    $
    (12,470
    )Deferred tax liability, net
    
    $
    (17,833
    )
    
    $
    (24,052
    )Total deferred tax assets (liabilities), net
    
    $
    436
    
    
    $
    622
     85




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##### Table of Contents



Beginning balance at January 1, 2007
    
    $
    58,283Decreases in UTBs taken in prior years
    
    
    (9,140
    )Increases in UTBs taken in current year
    
    
    1,363Decreases in UTBs related to lapsing of
statute of limitations
    
    
    (1,073
    )Ending balance at December 31, 2007
    
    
    49,433Increases in UTBs taken in prior years
    
    
    1,998Increases in UTBs taken in current year
    
    
    267Decreases in UTBs related to lapsing of
statute of limitations
    
    
    (995
    )Ending balance at December 31, 2008
    
    $
    50,703
      86




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##### Table of Contents



NOTE 9. SENIOR NOTES OFFERING
 General
   Conversion Process and Other Terms of the Convertible Senior Notes
   Accounting for Derivative Instruments and Hedging Activities Accounting for
Convertible Securities with Beneficial Conversion Features or Contingently Adjustable Conversion
Ratios Application of Issue 98-5 to Certain Convertible Instruments
   87




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##### Table of Contents



Earnings per Share Accounting Issues Related to
Certain Features of Contingently Convertible Debt and the Effect on Diluted Earnings per Share Convertible Bonds with Issuer Option to Settle for Cash upon Conversion
 Accounting For Convertible Debt Instruments That
May Be Settled in Cash upon Conversion (Including Partial Cash Settlement)
 NOTE 10. COMMON SHARES RESERVED FOR FUTURE ISSUANCE
  Convertible Senior Notes
    
    
    24,988,228Stock Option Plans
    
    
    15,340,803Employee Stock Purchase Plan
    
    
    2,113,118Total
    
    
    42,442,149
 NOTE 11. STOCK REPURCHASE PROGRAMS
 Discretionary Repurchase Program
   NOTE 12. STOCK BENEFIT PLAN AND STOCK-BASED COMPENSATION
 General
   88




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##### Table of Contents



Stock Incentive Plans
    Stock Option Activities
  Weighted-Weighted-
    
    
    AverageAverage
    
    
    Remaining
    
    
    AggregateExercise
    
    
    Contractual
    
    
    IntrinsicShares
    
    
    Price
    
    
    Term
    
    
    ValueOptions outstanding at December 31, 2007:
    
    
    12,610
    
    
    $
    7.38Stock options:Granted
    
    
    2,588
    
    
    
    1.47Exercised
    
    
    
    
    
    
    Canceled
    
    
    (5,070
    )
    
    
    7.55Options outstanding at December 31, 2008:
    
    
    10,128
    
    
    $
    5.78
    
    
    
    5.74
    
    
    
    Vested and expected to vest at December
31, 2008
    
    
    8,304
    
    
    $
    6.20
    
    
    
    5.53
    
    
    
    Exercisable at December 31, 2008
    
    
    5,294
    
    
    $
    7.83
    
    
    
    4.74
    
    
    
    
   89




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##### Table of Contents



Restricted Stock
    WeightedUnvested
    
    
    AverageRestricted
    
    
    Grant DateStock
    
    
    FairOutstanding
    
    
    ValueBalance at December 31, 2007
    
    
    255
    
    
    $
    6.14Granted
    
    
    
    
    
    
    Vested
    
    
    (182
    )
    
    
    5.87Forfeited
    
    
    (10
    )
    
    
    9.08Balance at December 31, 2008
    
    
    63
    
    
    $
    6.43
  Employee Stock Purchase Plan
   90




---



##### Table of Contents



Stock-Based Compensation Expense
     91




---



##### Table of Contents



Assumptions for Estimating Fair Value of Stock Option Grants and Stock Purchases
   Year Ended December 31 ,2008
    
    
    2007
    
    
    2006Expected term
    
    5.1 years
    
    
    4.9 years
    
    
    5.0 yearsRisk-free interest rate
    
    
    3.23
    %
    
    
    4.74
    %
    
    
    4.51
    %Volatility
    
    
    53.2
    %
    
    
    41.7
    %
    
    
    47.5
    %Dividend yield
    
    
    0.00
    %
    
    
    0.00
    %
    
    
    0.00
    %
  Year Ended December 31,2008
    
    
    2007
    
    
    2006Expected Life
    
    6 months
    
    
    6 months
    
    
    6 monthsRisk-free interest rate
    
    
    1.36
    %
    
    
    5.02
    %
    
    
    4.39
    %Volatility
    
    
    67.0
    %
    
    
    31.0
    %
    
    
    40.7
    %Dividend yield
    
    
    0.00
    %
    
    
    0.00
    %
    
    
    0.00
    %
    Year Ended December 31,2008
    
    
    2007
    
    
    2006Cost of service revenues
    
    $
    63
    
    
    $
    169
    
    
    $
    431Selling, general and administrative
    
    
    3,774
    
    
    
    4,439
    
    
    
    8,379Research and development
    
    
    1,243
    
    
    
    1,151
    
    
    
    1,878Total
    
    $
    5,080
    
    
    $
    5,759
    
    
    $
    10,688
 NOTE 13. EMPLOYEE 401(k) PLAN
   92




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##### Table of Contents



NOTE 14. STOCKHOLDER RIGHTS AGREEMENT
  NOTE 15. REPORTABLE SEGMENTS
 Disclosures about Segments of an
Enterprise and Related Information
   93




---



##### Table of Contents



Enterprise-wide disclosures
  Year Ended December 31,2008
    
    
    2007
    
    
    2006Total revenues by geographic region:Americas
    
    $
    98,919
    
    
    $
    118,564
    
    
    $
    168,278EMEA
    
    
    48,076
    
    
    
    70,981
    
    
    
    99,218Asia Pacific
    
    
    25,032
    
    
    
    22,238
    
    
    
    37,164Total revenues
    
    $
    172,027
    
    
    $
    211,783
    
    
    $
    304,660Total revenues by type:License and other revenues
    
    $
    68,100
    
    
    $
    96,686
    
    
    $
    165,886Technical support
    
    
    81,886
    
    
    
    86,720
    
    
    
    99,713Consulting and education services
    
    
    22,041
    
    
    
    28,377
    
    
    
    39,061Total revenues
    
    $
    172,027
    
    
    $
    211,783
    
    
    $
    304,660Operating income (loss):Americas
    
    $
    (206,861
    )
    
    $
    (46,735
    )
    
    $
    (76,308
    )EMEA
    
    
    (11,140
    )
    
    
    4,986
    
    
    
    18,955Asia Pacific
    
    
    4,885
    
    
    
    240
    
    
    
    4,260Operating loss:
    
    
    (213,116
    )
    
    
    (41,509
    )
    
    
    (53,093
    )Gain on debt retirement
    
    
    10,029
    
    
    
    
    
    
    
    Interest and other income, net
    
    
    (702
    )
    
    
    2,331
    
    
    
    3,662Loss from continuing operations before income taxes
    
    $
    (203,789
    )
    
    $
    (39,178
    )
    
    $
    (49,431
    )Long-lived assets:Americas
    
    $
    9,920
    
    
    $
    53,559EMEA
    
    
    1,475
    
    
    
    2,621Asia Pacific
    
    
    1,185
    
    
    
    1,654Long-lived assets of discontinued operations
    
    
    3,734
    
    
    
    Long-lived assets:
    
    
    16,314
    
    
    
    57,834Other non-current assets
    
    
    25,619
    
    
    
    258,346Non-current assets
    
    $
    41,933
    
    
    $
    316,180Identifiable assets:Americas
    
    $
    55,084
    
    
    $
    344,907EMEA
    
    
    19,989
    
    
    
    31,691Asia Pacific
    
    
    5,990
    
    
    
    8,533Identifiable assets of discontinued operations
    
    
    4,212
    
    
    
    Identifiable assets:
    
    
    85,275
    
    
    
    385,131General corporate assets (cash, cash equivalents and short-term investments)
    
    
    167,707
    
    
    
    158,866Total assets
    
    $
    252,982
    
    
    $
    543,997
   2008
    
    
    2007
    
    
    2006ALM
    
    
    DPG
    
    
    Total
    
    
    ALM
    
    
    DPG
    
    
    Total
    
    
    ALM
    
    
    DPG
    
    
    IDE
    
    
    TotalLicense and other revenues
    
    $
    43,025
    
    
    $
    25,075
    
    
    $
    68,100
    
    
    $
    70,253
    
    
    $
    26,433
    
    
    $
    96,686
    
    
    $
    85,030
    
    
    $
    29,224
    
    
    $
    51,632
    
    
    $
    165,886Service revenues
    
    
    86,026
    
    
    
    17,901
    
    
    
    103,927
    
    
    
    95,418
    
    
    
    19,679
    
    
    
    115,097
    
    
    
    90,352
    
    
    
    24,373
    
    
    
    24,049
    
    
    
    138,774Total
    
    $
    129,051
    
    
    $
    42,976
    
    
    $
    172,027
    
    
    $
    165,671
    
    
    $
    46,112
    
    
    $
    211,783
    
    
    $
    175,382
    
    
    $
    53,597
    
    
    $
    75,681
    
    
    $
    304,660
  2008
    
    
    2007
    
    
    2006United States
    
    $
    80,562
    
    
    
    47
    %
    
    $
    99,028
    
    
    
    47
    %
    
    $
    147,050
    
    
    
    48
    %Germany
    
    
    17,133
    
    
    
    10
    %
    
    
    24,350
    
    
    
    11
    %
    
    
    29,210
    
    
    
    10
    %United Kingdom
    
    
    10,444
    
    
    
    6
    %
    
    
    24,763
    
    
    
    12
    %
    
    
    24,427
    
    
    
    8
    %All other countries
    
    
    63,888
    
    
    
    37
    %
    
    
    63,642
    
    
    
    30
    %
    
    
    103,973
    
    
    
    34
    %Total revenues
    
    $
    172,027
    
    
    
    100
    %
    
    $
    211,783
    
    
    
    100
    %
    
    $
    304,660
    
    
    
    100
    %
  94




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##### Table of Contents



NOTE 16. COMMITMENTS AND CONTINGENCIES
 Indemnification Obligations and Guarantees
 Guarantors Accounting and Disclosure Requirements for Guarantees,
Including Indirect Guarantees of Indebtedness of Others.
       95




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##### Table of Contents



Leases and Long Term Debt Obligations
   2014 and2009
    
    
    2010
    
    
    2011
    
    
    2012
    
    
    2013
    
    
    thereafter
    
    
    Other (e)
    
    
    TotalOperating leases (a)
    
    $
    6,325
    
    
    $
    5,060
    
    
    $
    4,338
    
    
    $
    3,803
    
    
    $
    3,736
    
    
    $
    9,713
    
    
    $
    
    
    
    $
    32,975Restructured operating leases (b)
    
    
    6,336
    
    
    
    2,618
    
    
    
    1,392
    
    
    
    1,430
    
    
    
    975
    
    
    
    
    
    
    
    
    
    
    
    12,751Non-current income tax payable
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    17,157
    
    
    
    17,157Convertible senior notes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    159,300
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    159,300Interest payments (c)
    
    
    4,381
    
    
    
    4,381
    
    
    
    4,381
    
    
    
    2,190
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    15,333Gross commitments
    
    
    17,042
    
    
    
    12,059
    
    
    
    10,111
    
    
    
    166,723
    
    
    
    4,711
    
    
    
    9,713
    
    
    
    17,157
    
    
    
    237,516Sublease rental income (d)
    
    
    (1,575
    )
    
    
    (493
    )
    
    
    (128
    )
    
    
    (128
    )
    
    
    (128
    )
    
    
    (600
    )
    
    
    
    
    
    
    (3,052
    )Net commitments
    
    $
    15,467
    
    
    $
    11,566
    
    
    $
    9,983
    
    
    $
    166,595
    
    
    $
    4,583
    
    
    $
    9,113
    
    
    $
    17,157
    
    
    $
    234,464
 
 (a)
    
    The Company leases its facilities under various cancellable and non-cancellable
operating leases. The payments for operating leases represent its commitments under the
non-cancellable leases, which expire at various times through 2021.(b)
    
    The restructured operating leases represent total lease commitments that are not
associated with continuing operations and include facilities exited under the Companys
restructuring plans. All of these facilities are located in California.(c)
    
    The interest payments are based on a fixed rate of 2.75%.(d)
    
    The sublease rental income represents the future minimum lease payments under
non-cancellable operating subleases of facilities in the Companys various world-wide
locations.(e)
    
    Represents the non-current tax payable obligation under FIN 48. We are unable to make a
reasonably reliable estimate of the timing of payments in individual years beyond 12 months
due to uncertainties in the timing of tax audit outcomes. Issues Relating to Accounting for
Leases
  96




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##### Table of Contents



Litigation
 Accounting for
Contingencies
  NOTE 17. SUBSEQUENT EVENTS
   97




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##### Table of Contents



SCHEDULE II
BORLAND SOFTWARE CORPORATION
 VALUATION AND QUALIFYING ACCOUNTS
 For the Years Ended December 31, 2008, 2007 and 2006
(in thousands)
 Balance at
    
    
    Charged to
    
    
    Charged toBeginning of
    
    
    Continuing
    
    
    Discontinued
    
    
    Deductions /
    
    
    Balance at EndPeriod
    
    
    Operations
    
    
    Operation
    
    
    Adjustments
    
    
    of PeriodDecember 31, 2008:Allowance for sales returns, rebates and doubtful accounts
    
    $
    6,096
    
    
    
    (1,703
    )
    
    
    (1,400
    )
    
    
    (1,600
    )
    
    $
    1,393December 31, 2007:Allowance for sales returns, rebates and doubtful accounts
    
    $
    5,413
    
    
    
    1,161
    
    
    
    409
    
    
    
    (887
    )
    
    $
    6,096December 31, 2006:Allowance for sales returns, rebates and doubtful accounts
    
    $
    7,235
    
    
    
    (2,946
    )
    
    
    
    
    
    
    1,124
    
    
    $
    5,413
  98




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##### Table of Contents



EXHIBIT
INDEX
 Exhibit
    
    
    
    Incorporated by Reference
    
    FiledNumber
    
    Description of Exhibit
    
    Form
    
    Date
    
    Number
    
    Herewith2.1
    
    
    Agreement and Plan of Merger, dated as of February 7, 2006,
by and among Segue Software,
Inc., Borland Software Corporation and
Beta Merger Sub, Inc.
    
    8-K
    
    2/8/2006
    
    
    2.13.1
    
    
    Restated Certificate of Incorporation of Borland Software Corporation
    
    10-Q
    
    8/9/2005
    
    
    3.13.2
    
    
    Amended and Restated Bylaws of Borland Software Corporation
    
    10-Q
    
    8/9/2005
    
    
    3.24.1
    
    
    Stockholder Rights Agreement, dated as of October 26, 2001, between Borland
Software Corporation and Mellon Investor Services, L.L.C.
    
    8-A
    
    10/31/2001
    
    
    14.2
    
    
    Specimen Stock Certificate of Borland Software Corporation
    
    10-Q
    
    5/13/2002
    
    
    4.14.3
    
    
    Indenture by and between the Company and U.S. Bank National Association, as
trustee, dated February 6, 2007
    
    8-K
    
    2/08/2007
    
    
    4.14.4
    
    
    Global Note representing the Companys 2.75% Convertible Senior Note due 2012
    
    8-K
    
    2/08/2007
    
    
    4.24.5
    
    
    Registration Rights Agreement by and between the Company and J.P. Morgan
Securities Inc., dated February 6, 2007
    
    8-K
    
    2/08/2007
    
    
    4.310.1
    
    
    Form of Indemnity Agreement.+
    
    S-8
    
    9/26/199010.2
    
    
    2005 Incentive Compensation Plan for Executive Officers.+
    
    10-K
    
    3/25/2005
    
    
    10.210.3
    
    
    2006 Incentive Compensation Plan for Executive Officers.+
    
    8-K
    
    3/20/2006
    
    
    10.8610.4
    
    
    1985 Stock Option Plan.+
    
    10-K
    
    3/28/2003
    
    
    10.410.5
    
    
    Non-Employee Directors Stock Option Plan.+
    
    8-K
    
    12/27/199110.6
    
    
    1992 Stock Option Plan.+
    
    S-8
    
    7/4/199210.7
    
    
    1993 Stock Option Plan.+
    
    S-8
    
    3/11/199310.8
    
    
    1997 Stock Option Plan.+
    
    S-8
    
    12/19/1997
    
    
    4.410.9
    
    
    Amendment to the 1997 Stock Option Plan.+
    
    S-8
    
    9/1/2000
    
    
    4.910.10
    
    
    Second Amendment to the 1997 Stock Option Plan.+
    
    S-8
    
    6/1/2001
    
    
    4.610.11
    
    
    1998 Nonstatutory Stock Option Plan.+
    
    10-K
    
    3/28/2003
    
    
    10.1210.12
    
    
    1999 Employee Stock Purchase Plan.+
    
    10-Q
    
    8/9/2005
    
    
    10.1210.13
    
    
    2002 Stock Incentive Plan.+
    
    8-K
    
    5/16/2005
    
    
    99.210.14
    
    
    Form of Notice of Grant under the Discretionary Option Grant Program
of the 2002 Stock Incentive Plan.+
    
    10-Q
    

    11/9/2004
    
    
    10.73
  99




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##### Table of Contents



Exhibit
    
    
    
    Incorporated by Reference
    
    FiledNumber
    
    Description of Exhibit
    
    Form
    
    Date
    
    Number
    
    Herewith10.15
    
    
    Form of Stock Option Agreement under the Discretionary Option Grant
Program of the 2002 Stock Incentive Plan.+
    
    10-Q
    
    
    11/9/2004
    
    
    
    10.7410.16
    
    
    Form of Stock Issuance Agreement under the 2002 Stock Incentive Plan.+
    
    10-K
    
    
    3/25/2005
    
    
    
    10.1710.17
    
    
    Form of Option Agreement under the Automatic Option Grant Program of
the 2002 Stock Incentive Plan.+
    
    10-K
    
    
    3/25/2005
    
    
    
    10.1810.18
    
    
    Form of Addendum to Stock Option Agreement under the 2002 Stock
Incentive Plan (Twelve Months Acceleration).+
    
    10-K
    
    
    3/25/2005
    
    
    
    10.1910.19
    
    
    Form of Addendum to Stock Option Agreement under the 2002 Stock
Incentive Plan (50% Acceleration).+
    
    10-K
    
    
    3/25/2005
    
    
    
    10.2010.20
    
    
    Form of Addendum to Stock Option Agreement under the 2002 Stock
Incentive Plan (100% Acceleration).+
    
    10-K
    
    
    3/25/2005
    
    
    
    10.2110.21
    
    
    Form of Stock Issuance Agreement under the Stock Issuance Program of
the 2002 Stock Incentive Plan.+
    
    10-Q
    
    
    11/8/2005
    
    
    
    10.7410.22
    
    
    Form of Acceleration Addendum to Stock Issuance Agreement under the
Stock Issuance Program of the 2002 Stock Incentive Plan.+
    
    10-Q
    
    
    11/8/2005
    
    
    
    10.7510.23
    
    
    Form of Stock Option Agreement under the Discretionary Option grant
program of the 2002 Stock Incentive Plan, as amended on October 27,
2005.+
    
    10-Q
    
    
    11/8/2005
    
    
    
    10.7610.24
    
    
    Form of Acceleration Addendum to Stock Option Agreement under the
Discretionary grant program of the 2002 Stock Incentive Plan.+
    
    10-Q
    
    
    11/8/2005
    
    
    
    10.7710.25
    
    
    Borland Software Corporation 2003 Supplemental Stock Option Plan.+
    
    8-K
    
    
    3/20/2006
    
    
    
    10.8710.26
    
    
    Starbase Corporation 2001 Stock Plan.+
    
    S-8
    
    
    1/24/2003
    
    
    
    99.110.27
    
    
    Starbase Corporation 1996 Stock Option Plan.+
    
    S-8
    
    
    1/24/2003
    
    
    
    99.210.28
    
    
    Starbase Corporation NSO Stock Option Program.+
    
    S-8
    
    
    1/24/2003
    
    
    
    99.310.29
    
    
    TogetherSoft Corporation 2000 Stock Plan.+
    
    S-8
    
    
    1/24/2003
    
    
    
    99.610.30
    
    
    TogetherSoft Corporation 2001 Non-U.S. Plan.+
    
    S-8
    
    
    1/24/2003
    
    
    
    99.810.31
    
    
    Employment Agreement between Borland Software
Corporation and Matthew Thompson, dated October 1,
2003.+
    
    10-Q
    
    
    11/14/2003
    
    
    
    10.610.32
    
    
    Separation Agreement and
Full and Final Release of
Claims between the Company
and Matthew Thompson,
dated January 5, 2007.+
    
    8-K
    
    
    1/08/2007
    
    
    
    10.10010.33
    
    
    Employment Agreement
between the Company and
Tod Nielsen, dated
November 1, 2005.+
    
    8-K
    
    
    11/8/2005

    
    
    

    10.73
  100




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##### Table of Contents



Exhibit
    
    
    
    Incorporated by Reference
    
    FiledNumber
    
    Description of Exhibit
    
    Form
    
    Date
    
    Number
    
    Herewith10.34
    
    
    Form of Addendum to
Employment Offer Letters
for Severance Benefits for
Named Executive Officers.+
    
    10-Q
    

    11/8/2005
    
    
    10.7810.35
    
    
    2003 Stock Option Agreement for Tod Nielsen under the 2003
Supplemental Stock Option Plan.+
    
    10-K
    
    5/02/2006
    
    
    10.5210.36
    
    
    Addendum to Stock Option Agreement for Tod Nielsen.+
    
    10-K
    
    5/02/2006
    
    
    10.5310.37
    
    
    Stock Issuance Agreement for Tod Nielsen.+
    
    10-K
    
    5/02/2006
    
    
    10.5410.38
    
    
    Addendum to Stock Issuance Agreement for Tod Nielsen.+
    
    10-K
    
    5/02/2006
    
    
    10.5510.39
    
    
    Amendment to Employment Agreement between the Company and
Tod Nielsen effective as of November 1, 2005.+
    
    8-K/A
    
    11/23/2005
    
    
    10.7910.40
    
    
    Employment Offer Letter between the Company and Peter
Morowski, dated June 3, 2006.+
    
    8-K
    
    8/21/2006
    
    
    10.9310.41
    
    
    Addendum to Employment Offer Letter for Severance Benefits
between the Company and Peter Morowski, dated June 3,
2006.+
    
    8-K
    
    8/21/2006
    
    
    10.9410.42
    
    
    Employment Offer Letter between the Company and Greg Wrenn,
dated September 7, 2006.+
    
    8-K
    
    10/19/2006
    
    
    10.9610.43
    
    
    Addendum to Employment Offer Letter for Severance Benefits
between the Company and Greg Wrenn, dated September 7,
2006.+
    
    8-K
    
    10/19/2006
    
    
    10.9710.44
    
    
    Employment Offer Letter between the
Company and Erik Prusch, dated
October 2, 2006.+
    
    8-K
    
    11/14/2006
    
    
    10.9810.45
    
    
    Addendum to Employment Offer Letter
for Severance Benefits between the
Company and Erik Prusch, dated
October 2, 2006.+
    
    8-K
    
    11/14/2006
    
    
    10.9910.46
    
    
    Employment Offer Letter between the
Company and David Packer, dated
January 4, 2007.+
    
    8-K
    
    1/08/2007
    
    
    10.10110.47
    
    
    Addendum to Employment Offer Letter
for Severance Benefits between the
Company and David Packer.+
    
    8-K
    
    1/08/2007
    
    
    10.10210.48
    
    
    Lease Agreement by and between Borland
Software Corporation and
ScanlanKemperBard Companies dated as
of February 17, 2000.
    
    10-K
    
    3/29/2001
    
    
    10.4410.49
    
    
    First Amendment to Lease Agreement by
and between Borland Software
Corporation and Enterprise Way
Associates, LLC as dated as of
September 30, 2000.
    
    10-K
    
    3/29/2001
    
    
    10.45
  101




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##### Table of Contents



Exhibit
    
    
    
    Incorporated by Reference
    
    FiledNumber
    
    Description of Exhibit
    
    Form
    
    Date
    
    Number
    
    Herewith10.50
    
    
    Second Amendment to Lease Agreement by
and between Borland Software
Corporation and Enterprise Way Associates,
LLC as dated as of
June 1, 2001.
    
    10-K
    
    3/28/2003
    

    
    10.5410.51
    
    
    Third Amendment to Lease Agreement by and
between Borland Software
Corporation and Enterprise Way Associates,
LLC as dated as of
November 1, 2001.
    
    10-K
    
    3/28/2003
    
    
    10.5510.52
    
    
    Office Lease and amendment between Starwood O.C. Portfolio I,
L.L.C., and Starbase Corporation.
    
    10-K
    
    3/28/2003
    
    
    10.5710.53
    
    
    Lease and amendment between Davis Sandler Three LLC and
TogetherSoft Corporation.
    
    10-K
    
    3/28/2003
    
    
    10.5810.54
    
    
    Agreement of Purchase and Sale dated May 30, 2006 between Borland
Software Corporation and Fowler Property Acquisitions, LLC.
    
    8-K
    
    6/5/2006
    
    
    10.110.55
    
    
    First Amendment to Agreement of Purchase and Sale dated May 30,
2006 between Borland Software Corporation and Fowler Property
Acquisitions, LLC, dated June 30, 2006.
    
    8-K
    
    7/7/2006
    
    
    10.9110.56
    
    
    Visual Studio Partner Master Agreement between
Microsoft Corporation and Borland Software
Corporation, dated August 11, 2006.
    
    10-K
    
    3/15/2007
    
    
    10.9710.57
    
    
    Lease Agreement Between Prominent Northpoint L.P.,
as Landlord, and Borland Software Corporation, as
Tenant, covering the building known as Prominent
Pointe Two, located at 8310 Capital of Texas Hwy.
North, Building Two, Austin, TX 78731
    
    8-K
    
    4/24/2008
    
    
    10.8410.58
    
    
    Purchase Agreement by and among Borland Software
Corporation, the Foreign Sellers set forth on
Schedule A thereto and Embarcadero Technologies,
Inc., dated as of May 6, 2008
    
    8-K
    
    5/7/2008
    
    
    10.8510.59
    
    
    Employment Offer Letter and Addendum between
Borland Software Corporation and Rich Novak, dated
July 3, 2008+
    
    8-K
    
    8/7/2008
    
    
    10.8610.60
    
    
    Separation Agreement between Borland Software
Corporation and David Packer, executed August 15,
2008+
    
    8-K/A
    
    8/19/2008
    
    
    10.8710.61
    
    
    Employment Agreement and Addendum between Borland
Software Corporation and Chuck Maples, dated
February 9, 2009+
    
    
    
    2/11/2009
    
    
    10.8710.62
    
    
    Employment Agreement Amendment between Borland
Software Corporation and Erik E. Prusch, dated
February 19, 2009+
    
    
    
    2/23/2009
    
    
    10.8810.63
    
    
    Separation Agreement between Borland Software
Corporation and Gregory J. Wrenn, dated February
20, 2009+
    
    8-K
    
    2/20/2009
    
    
    10.8910.64
    
    
    Employment Agreement and Addendum between Borland
Software Corporation and Melissa Frugé, dated
February 20, 2009+
    
    8-K
    
    2/20/2009
    
    
    10.90
  102




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##### Table of Contents



Exhibit
    
    
    
    Incorporated by Reference
    
    FiledNumber
    
    Description of Exhibit
    
    Form
    
    Date
    
    Number
    
    Herewith16.1
    
    
    Letter from PricewaterhouseCoopers LLP to the
Securities and Exchange Commission, dated March 27,
2008
    
    8-K
    
    3/27/2008
    

    16.121.1
    
    
    Subsidiaries of Borland Software Corporation.
    
    
    
    
    
    
    
    
    X23.1
    
    

Consent
of KPMG LLP, Independent Registered Public Accounting Firm.
    
    
    
    
    
    
    
    
    X23.2
    
    
    Consent of PricewaterhouseCoopers LLP, Independent Registered Public Accounting Firm.
    
    
    
    
    
    
    
    
    X31.1
    
    
    Certification of Erik E. Prusch Acting Chief Executive Officer;
Chief Financial Officer of Borland Software Corporation, pursuant
to Rule 13a-14(a).
    
    
    
    
    
    
    
    
    X32.1
    
    
    Certification of Erik E. Prusch, Acting Chief Executive Officer;
Chief Financial Officer of Borland Software Corporation, pursuant
to Rule 13a-14(b) and 18 U.S.C. Section 1350.++
    
    
    
    
    
    
    
    
    X
 
 +
    
    Management contract or compensatory plan or arrangement.++
    
    The certification attached as Exhibit 32.1 that accompanies this Annual Report on Form 10-K is not
deemed filed with the Securities and Exchange Commission and are not to be incorporated by reference
into any filing of Borland Software Corporation under the Securities Act of 1933 or the Securities
Exchange Act of 1934 whether made before or after the date of this Form 10-K, irrespective of any
general incorporation language contained in such filing.   103