##### 





UNITED STATES 
    SECURITIES AND EXCHANGE COMMISSIONWashington, D.C.
    20549
  FORM 10-Q
  (Mark One)þ

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934FOR THE QUARTERLY PERIOD ENDED
    FEBRUARY 29, 2008ORo

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934FOR THE TRANSITION PERIOD
    FROM          TO    Commission File Number:
    000-51748
  AVANADE INC.
 (Exact name of registrant as
    specified in its charter)
   Washington

91-2032865(State or other jurisdiction
    of
    incorporation or organization)

(I.R.S. Employer Identification
    No.)   2211 Elliott Avenue, Suite 200
 Seattle, Washington 98121
 (Address of principal executive
    offices)
  (206) 239-5600
 (Registrants telephone
    number, including area code)
  þ o
    Large accelerated
    filer o

Accelerated
    filer o

Non-accelerated
    filer þ
    (Do not check if a smaller reporting company)

Smaller reporting
    Company o   Rule 12b-2 o þ




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##### 





AVANADE
    INC.
  INDEX
   PagePart I.


Financial Information


3Item 1.


Financial Statements


3Consolidated Balance Sheets as of February 29, 2008
    (Unaudited) and August 31, 2007


3Consolidated Income Statements (Unaudited) for the three and six
    months ended February 29, 2008 and March 31, 2007


4Consolidated Shareholders Equity and Comprehensive Income
    Statements (Unaudited) for the six months ended
    February 29, 2008


5Consolidated Cash Flows Statements (Unaudited) for the six
    months ended February 29, 2008 and March 31, 2007


6Notes to Consolidated Financial Statements (Unaudited)


7Item 2.


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


17Item 3.


Quantitative and Qualitative Disclosures About Market Risk


30Item 4T.


Controls and Procedures


30Part II.


Other Information


31Item 1.


Legal Proceedings


31Item 1A.


Risk Factors


31Item 2.


Unregistered Sales of Equity Securities and Use of Proceeds


31Item 3.


Defaults upon Senior Securities


31Item 4.


Submission of Matters to a Vote of Security Holders


32Item 5.


Other Information


32Item 6.


Exhibits


32Signatures


33  2




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##### 



PART I 
    FINANCIAL INFORMATION  ITEM 1.  FINANCIAL
    STATEMENTS
 AVANADE
    INC.



CONSOLIDATED
    BALANCE SHEETS

February 29, 2008 and August 31, 2007

(In thousands of U.S. dollars, except share and per share
    amounts) February 29,


August 31,2008


2007(Unaudited)ASSETSCURRENT ASSETS:Cash and cash equivalents

$
175,469


$
140,345Receivables from clients, net of allowances of $513 and $365,
    respectively


40,752



28,604Due from related parties


78,991



62,094Unbilled services to clients


24,091



19,874Unbilled services to related parties


10,851



41,551Deferred income taxes, net


23,638



24,529Other current assets


7,157



5,218Total current assets


360,949



322,215NON-CURRENT ASSETS:Property and equipment, net of accumulated depreciation of
    $43,230 and $40,707, respectively


9,723



10,675Goodwill


12,976



10,196Other intangible assets, net of accumulated amortization of
    $5,418 and $4,960, respectively


3,584



571Deferred income taxes, net


28,264



32,528Other non-current assets


7,207



4,902Total non-current assets


61,754



58,872TOTAL ASSETS

$
422,703


$
381,087LIABILITIES AND SHAREHOLDERS EQUITYCURRENT LIABILITIES:Due to related parties

$
22,181


$
7,405Accounts payable


18,903



18,148Deferred revenues


6,899



3,771Accrued payroll and related benefits


58,756



59,500Accrued expenses


19,734



17,166Income taxes payable


5,188



13,209Other current liabilities


1,803



7,878Total current liabilities


133,464



127,077NON-CURRENT LIABILITIESIncome taxes payable


13,913



Other non-current liabilities


7,281



5,726Total non-current liabilities


21,194



5,726COMMITMENTS AND CONTINGENCIESREDEEMABLE COMMON STOCK AND EMPLOYEE STOCK OPTIONS


164,484



165,335SHAREHOLDERS EQUITY:Convertible Series A preferred stock, par value of $0.0001
    per share (aggregate liquidation preference of $587,329 as of
    February 29, 2008 and August 31, 2007, respectively),
    105,000,000 shares authorized,74,750,903 shares issued
    and outstanding as of February 29, 2008 and August 31,
    2007, respectively


7



7Common stock, par value $0.0001 per share,
    150,000,000 shares authorized, 4,068,279 and
    4,726,363 shares issued and outstanding as of
    February 29, 2008 and August 31, 2007, respectively






Additional
    paid-in-capital


111,649



125,018Accumulated deficit


(17,159
)


(41,835
)Accumulated other comprehensive income (loss)


9,064



(241
)Total shareholders equity


103,561



82,949TOTAL LIABILITIES AND SHAREHOLDERS EQUITY

$
422,703


$
381,087    3




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##### 



AVANADE
    INC.



CONSOLIDATED
    INCOME STATEMENTS

For the Three and Six Months Ended February 29, 2008
    and March 31, 2007

(In thousands of U.S. dollars)

(Unaudited) Three Months Ended


Six Months EndedFebruary 29,


March 31,


February 29,


March 31,2008


2007


2008


2007REVENUES:Revenues before reimbursements:Related parties

$
147,115


$
117,192


$
297,744


$
219,190Other


51,854



44,225



100,549



80,195198,969



161,417



398,293



299,385Reimbursements:Related parties


5,753



5,110



11,538



10,501Other


5,799



4,702



10,691



8,89211,552



9,812



22,229



19,393Revenues


210,521



171,229



420,522



318,778OPERATING EXPENSES:Cost of services:Cost of services before reimbursable expenses


138,917



98,978



271,862



189,302Reimbursable expenses


11,552



9,812



22,229



19,393Cost of services


150,469



108,790



294,091



208,695Selling, general and administrative costs


41,976



36,014



85,749



69,698Total operating expenses


192,445



144,804



379,840



278,393OPERATING INCOME


18,076



26,425



40,682



40,385Interest income


1,580



881



2,816



1,602Interest expense


(68
)






(76
)


(8
)Other (expense) income


(517
)


203



(265
)


340INCOME BEFORE INCOME TAXES


19,071



27,509



43,157



42,319Provision (benefit) for income taxes


8,063



7,625



17,657



(33,744
)NET INCOME

$
11,008


$
19,884


$
25,500


$
76,063    4




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##### 



AVANADE
    INC.
  CONSOLIDATED
    SHAREHOLDERS EQUITY AND COMPREHENSIVE INCOME
    STATEMENTS
 For the Six Months Ended February 29, 2008
 (In thousands of U.S. dollars, except share amounts)
 (Unaudited)
  ConvertibleSeries A








Additional





Accumulated Other


TotalPreferred Stock


Common Stock


Paid-In


Accumulated


Comprehensive


ShareholdersAmount


No. Shares


Amount


No. Shares


Capital


Deficit


Income (Loss)


EquityBalance as of August 31, 2007

$
7



74,750,903


$




4,726,363


$
125,018


$
(41,835
)

$
(241
)

$
82,949Adoption of EITF Issue
    06-2






















(1,035
)






(1,035
)Adoption of FASB Interpretation No. 48






















211







211Comprehensive income:Net income






















25,500







25,500Foreign currency translation adjustments


























9,305



9,305Comprehensive income






























34,805Income tax benefit on share-based compensation plans


















120











120Change in redeemable common stock and employee stock options


















851











851Share-based compensation expense


















357











357Issuances of common stock related to employee share programs














991,978



2,705











2,705Purchases of common stock














(1,650,062
)


(17,402
)










(17,402
)Balance as of February 29, 2008

$
7



74,750,903


$




4,068,279


$
111,649


$
(17,159
)

$
9,064


$
103,561    5




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##### 



AVANADE
    INC.
 CONSOLIDATED
    CASH FLOWS STATEMENTS

For the Six Months Ended February 29, 2008 and
    March 31, 2007

(In thousands of U.S. dollars)

(Unaudited) Six Months EndedFebruary 29,


March 31,2008


2007CASH FLOWS FROM OPERATING ACTIVITIES:Net income

$
25,500


$
76,063Adjustments to reconcile Net income to Net cash provided by
    operating activities Depreciation and amortization


5,575



3,379Unrealized foreign currency gain on intercompany notes


(2,650
)


(5,471
)Loss on disposal of property and equipment, net


35



12Deferred income tax expense (benefit)


6,235



(42,319
)Share-based compensation expense


357



1,360Change in assets and liabilities, net of acquisition Receivables from clients, net


(9,348
)


(6,484
)Due from related parties


(14,114
)


(8,378
)Unbilled services to clients


(2,264
)


2,175Unbilled services to related parties


28,574



(12,293
)Other current assets


(1,531
)


1,511Due to related parties


14,712



5,366Accounts payable


(1,383
)


733Deferred revenues


2,292



736Accrued payroll and related benefits


(5,375
)


4,303Accrued expenses


1,011



948Income taxes payable


7,352



2,919Other liabilities


(7,170
)


4,420Net cash provided by operating activities


47,808



28,980CASH FLOWS FROM INVESTING ACTIVITIES:Proceeds from sales of property and equipment


6



8Purchases of property and equipment


(3,806
)


(2,777
)Purchase of business, net of cash acquired


(4,223
)


Deferred technology infrastructure costs


(1,529
)


(432
)Other, net


(629
)


(363
)Net cash used in investing activities


(10,181
)


(3,564
)CASH FLOWS FROM FINANCING ACTIVITIES:Purchases of common shares


(17,150
)


(9,460
)Proceeds from exercise of stock options


2,454



3,236Repayments of employee notes receivable






1Capital contribution from Accenture






90Excess tax benefits from share-based payment arrangements


96



73Net cash used in financing activities


(14,600
)


(6,060
)Effect of exchange rate changes on cash and cash equivalents


12,097



1,460NET INCREASE IN CASH AND CASH EQUIVALENTS


35,124



20,816CASH AND CASH EQUIVALENTS,beginning of period


140,345



72,898CASH AND CASH EQUIVALENTS,end of period

$
175,469


$
93,714    6




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##### 



AVANADE
    INC.
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (In thousands of U.S. dollars, except share amounts or as
    otherwise disclosed)
 (Unaudited)
   1.
    SUMMARY
    OF SIGNIFICANT ACCOUNTING POLICIES  Basis of
    Presentation
  Form 10-Q 11-months Form 10-K Form 10-K).
  Change in
    Fiscal Year
    Revenue
    Recognition
  81-1, Accounting for Performance of Construction-Type and Certain
    Production-Type Contracts (SOP 81-1).
  Revenue Recognition in
    Financial Statements Revenue Recognition
 7




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##### 



AVANADE
    INC.
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
 (In thousands of U.S. dollars, except share amounts or as
    otherwise disclosed)
 (Unaudited)
    No. 99-19, Reporting Revenues Gross as a Principal versus Net as an
    Agent (EITF 99-19). EITF 99-19.
    Other
    Significant Accounting Policies
  Form 10-K 11-months
  Reclassification
    of prior-period amounts
    Three Months Ended

Six Months EndedMarch 31, 2007

March 31, 2007As Reported in



As Reported inAdjusted

Fiscal 2007

Adjusted

Fiscal 2007Cost of services before reimbursable expenses

$
98,978


$
104,614


$
189,302


$
199,993Selling, general and administrative costs


36,014



30,378



69,698



59,007  8




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##### 



AVANADE
    INC.
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
 (In thousands of U.S. dollars, except share amounts or as
    otherwise disclosed)
 (Unaudited)
    Three Months Ended


Six Months EndedMarch 31, 2007


March 31, 2007As Reported in





As Reported inAdjusted


Fiscal 2007


Adjusted


Fiscal 2007Operating income (loss):Americas

$
20,051


$
20,187


$
32,126


$
32,529Europe


11,594



11,802



18,845



19,438Asia Pacific


1,145



1,253



1,649



1,841Corporate and eliminations


(6,365
)


(6,817
)


(12,235
)


(13,423
)Total

$
26,425


$
26,425


$
40,385


$
40,385   Recently
    Adopted Accounting Pronouncements
  Accounting for Uncertainty in
    Income Taxes  an interpretation of FASB Statement
    No. 109
  No. 06-2, Accounting for Sabbatical Leave and Other Similar Benefits
    Pursuant to FASB Statement No. 43 (EITF 06-2). EITF 06-2 EITF 06-2 EITF 06-2
  New
    Accounting Pronouncements
  Business Combinations Business Combinations
  Fair Value Measurements
 9




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##### 



AVANADE
    INC.
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
 (In thousands of U.S. dollars, except share amounts or as
    otherwise disclosed)
 (Unaudited)
    FAS 157-2, Effective Date of FASB Statement No. 157 FAS 157-2). FAS 157-2 FAS 157-2 FAS 157-2
  2.
    INCOME
    TAXES  Effective
    Tax Rate
      Uncertain
    Tax Provisions
       10




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##### 



AVANADE
    INC.
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
 (In thousands of U.S. dollars, except share amounts or as
    otherwise disclosed)
 (Unaudited)
    3.
    ACCUMULATED
    OTHER COMPREHENSIVE INCOME (LOSS)      February 29,

March 31,2008

2007Three months ended

$
16,900


$
20,242Six months ended


34,805



74,011   4.
    MATERIAL
    TRANSACTIONS AFFECTING SHAREHOLDERS EQUITY    30-day
   11




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##### 



AVANADE
    INC.
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
 (In thousands of U.S. dollars, except share amounts or as
    otherwise disclosed)
 (Unaudited)
    February 29,


August 31,2008


2007Vested common stock subject to put rights

$
46,783


$
49,956Intrinsic value of stock options


117,701



115,379$
164,484


$
165,335     Shares


AmountShares acquired pursuant to exercise of put/call rights(1)


1,500,011


$
15,855Other purchases(2)(3)


150,051



1,5471,650,062



17,402Less:Non-cash amounts related to stock-swaps(3)






252Net cash out-lay





$
17,150     (1)
    
    During the 30 day period
    following the Semi-annual Valuation approved by the Board
    effective November 8, 2007, the Company exercised its call
    rights to purchase shares and certain employee holders of the
    Companys common stock exercised their put rights. This
    resulted in the repurchase, effective December 10, 2007, of
    an aggregate of 1,500,011 shares of the Companys
    common stock at a price of $10.57 per share.(2)
    
    During the six months ended
    February 29, 2008, as authorized under its option plans,
    the Company acquired 125,901 shares of its common stock via
    share withholdings for payroll tax obligations due from
    employees in connection with the delivery of the Companys
    common shares under the option plans.(3)
    
    During the six months ended
    February 29, 2008, as authorized under its option plans,
    the Company acquired 24,150 shares of its common stock as a
    result of shares surrendered to the Company to pay the exercise
    price in connection with so-called stock-swap
    exercises of employee stock options.    Form 10-K 11-months
  5.
    COMMITMENTS
    AND CONTINGENCIES  Guarantees
   12




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##### 



AVANADE
    INC.
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
 (In thousands of U.S. dollars, except share amounts or as
    otherwise disclosed)
 (Unaudited)
  and/or
  Legal
    Contingencies
  and/or
  6.
    RELATED
    PARTY BALANCES AND TRANSACTIONS   13




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##### 



AVANADE
    INC.
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
 (In thousands of U.S. dollars, except share amounts or as
    otherwise disclosed)
 (Unaudited)
    Three Months Ended


Six Months EndedFebruary 29,


March 31,


February 29,


March 31,2008


2007


2008


2007Related-party revenues before reimbursements:Accenture

$
134,450


$
107,842


$
270,207


$
201,236Microsoft


12,665



9,350



27,537



17,954Total

$
147,115


$
117,192


$
297,744


$
219,190Related-party reimbursements:Accenture

$
4,405


$
4,224


$
8,776


$
8,300Microsoft


1,348



886



2,762



2,201Total

$
5,753


$
5,110


$
11,538


$
10,501Related-party expenses:Cost of services(1)Accenture

$
25,082


$
11,271


$
44,979


$
20,697Microsoft


955



206



1,383



40326,037



11,477



46,362



21,100Selling, general and administrative costs(2)Accenture


631



2,351



2,099



2,996Microsoft


394



655



1,144



1,4121,025



3,006



3,243



4,408Total related-party expenses

$
27,062


$
14,483


$
49,605


$
25,508     (1)
    
    Includes amounts primarily for
    subcontracting for professional services with Accenture and
    Microsoft.(2)
    
    Includes amounts primarily incurred
    for technology infrastructure costs with Accenture. 14




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##### 



AVANADE
    INC.
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
 (In thousands of U.S. dollars, except share amounts or as
    otherwise disclosed)
 (Unaudited)
     February 29,


August 31,2008


2007Due from related parties:Accenture

$
70,226


$
55,008Microsoft


8,765



7,086Total

$
78,991


$
62,094Unbilled services to related parties:Accenture

$
4,440


$
35,540Microsoft


6,411



6,011Total

$
10,851


$
41,551Due to related parties:Accenture

$
21,405


$
6,907Microsoft


776



498Total

$
22,181


$
7,405Deferred revenues:Accenture

$
2,214


$
590Microsoft


1,237



1,577Total

$
3,451


$
2,167   Intercompany
    borrowing facility
     15




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##### 



AVANADE
    INC.
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
 (In thousands of U.S. dollars, except share amounts or as
    otherwise disclosed)
 (Unaudited)
  7.
    SEGMENT
    REPORTING    Three Months Ended


Six Months EndedFebruary 29,


March 31,


February 29,


March 31,2008


2007


2008


2007Revenues before reimbursements:Americas

$
99,392


$
81,060


$
195,064


$
147,697Europe


80,454



64,574



164,141



123,983Asia Pacific


17,390



14,766



36,813



26,458Corporate and eliminations


1,733



1,017



2,275



1,247Total

$
198,969


$
161,417


$
398,293


$
299,385Operating income (loss):Americas

$
19,599


$
20,051


$
38,029


$
32,126Europe


7,398



11,594



21,194



18,845Asia Pacific


(1,406
)


1,145



(1,952
)


1,649Corporate and eliminations


(7,515
)


(6,365
)


(16,589
)


(12,235
)Total

$
18,076


$
26,425


$
40,682


$
40,385   8.
    BUSINESS
    COMBINATIONS AND GOODWILL  18-month 18-month
  Business Combinations
 16




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##### 



ITEM 2.
    MANAGEMENTS
    DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
    OPERATIONS  The following discussion and analysis should be read in
    conjunction with our Consolidated Financial Statements and
    related Notes included elsewhere in this Quarterly Report on
    Form 10-Q
    and in our Transition Report on
    Form 10-K
    for the
    11-months
    ended August 31, 2007, and with the information under the
    heading Managements Discussion and Analysis of
    Financial Condition and Results of Operations in our
    Transition Report on
    Form 10-K
    for the
    11-months
    ended August 31, 2007.
  We use the terms Avanade, we,
    our Company, our and us in
    this report to refer to Avanade Inc. and its subsidiaries. We
    use the term Accenture to refer to our majority
    shareholder, which is a subsidiary of Accenture Ltd, a Bermuda
    holding company, and its affiliates. We use the term
    Microsoft to refer to Microsoft Corporation, a
    Washington corporation, and its affiliates, a minority
    shareholder. All references to years, unless otherwise noted,
    refer to our fiscal year, which ends on August 31. For
    example, a reference to fiscal 2007 means the
    11-month
    period that ended on August 31, 2007. All references to
    quarters, unless otherwise noted, refer to the quarters of our
    fiscal year. All amounts expressed in dollars are in thousands
    of dollars unless otherwise indicated. For example, a reference
    to $40,800 means $40.8 million.
  Disclosure
    Regarding Forward-Looking Statements
  Form 10-Q
  
    Our results of operations could be negatively affected if we
    cannot expand and develop our services and solutions in response
    to changes in technology and client demand.
    The consulting and systems integration and technology markets
    are highly competitive, and we might not be able to compete
    effectively.
    Our business could be adversely affected if our clients are not
    satisfied with our services.
    Our results of operations may be affected by the rate of growth
    in the use of technology in business and the type and level of
    technology spending by our clients.
    If we are unable to attract, retain and motivate employees or
    efficiently utilize their skills, we might not be able to
    compete effectively and will not be able to grow our business.
    Our results of operations could be affected by economic and
    political conditions and the effects of these conditions on our
    clients businesses and levels of business activity.
    Our profitability could suffer if we are not able to maintain
    favorable pricing rates.
    Our profitability could suffer if we are not able to maintain
    favorable utilization rates.
    Our profitability could suffer if we are not able to control our
    costs.
    Our work with government clients exposes us to additional risks
    inherent in the government contracting environment.
    Our global operations are subject to complex risks, some of
    which might be beyond our control. 17




---



##### 




    If we are unable to manage the organizational challenges
    associated with the expansion of our Company, we might be unable
    to achieve our business objectives.
    Our business could be negatively affected if we incur legal
    liability in connection with providing our solutions and
    services.
    If our pricing structures do not accurately anticipate the cost
    and complexity of performing our work, then our contracts could
    be unprofitable.
    Our results of operations could be adversely affected if our
    clients terminate their contracts with us on short notice.
    If we are unable to collect our receivables or unbilled
    services, our results of operations and cash flows could be
    adversely affected.
    We could be subject to liabilities if our subcontractors or the
    third parties with whom we partner cannot deliver their project
    contributions on time or at all.
    We have only a limited ability to protect our intellectual
    property rights, which are important to our success.
    Our services or solutions could infringe upon the intellectual
    property rights of others or we might lose our ability to
    utilize the intellectual property of others.
    Consolidation in the industries that we serve could adversely
    affect our business.
    There will not be a consistent pattern in our financial results
    from quarter to quarter, which may result in increased
    volatility of the value of our stock.
    Loss of our significant corporate relationships could reduce our
    revenue and growth prospects.
    Because we are controlled by Accenture, we have limited ability
    to set our own independent strategies, and our business strategy
    and direction may be dictated by Accentures overall
    business strategy.
    We rely on Accenture for the majority of our revenue. The loss
    of that revenue would have a significant adverse impact on our
    results of operations and may affect our ability to continue to
    operate.
    Our Global Delivery Network relies on Accenture, and the loss of
    that network would increase our operating expenses.
    Microsoft has certain minority rights, and may exercise those
    rights to protect its own interests which may not align with our
    own.
    We are committed to using Microsoft-related technologies, and
    our inability to use those technologies would adversely impact
    our results of operations.
    All stock issued pursuant to awards granted under our stock
    option plans is subject to certain put rights, which, if
    exercised, could have a materially adverse impact on our
    liquidity.  Form 10-K 11-months
  Change in
    Fiscal Year
   18




---



##### 



Overview
          Three Months Ended


Six Months EndedFebruary 29,


March 31,


February 29,


March 31,2008


2007


2008


2007Related-party revenues before reimbursements:Accenture


68
%


67
%


68
%


67
%Microsoft


6
%


6
%


7
%


6
%          19




---



##### 



Critical
    Accounting Policies and Estimates
   20




---



##### 



Revenue
    Recognition
  81-1, Accounting for Performance of Construction-Type and Certain
    Production-Type Contracts (SOP 81-1).
  Revenue Recognition in
    Financial Statements Revenue Recognition
  No. 99-19, Reporting Revenues Gross as a Principal versus Net as an
    Agent (EITF 99-19). EITF 99-19.
        Form 10-K 11-months
 21




---



##### 



Reclassification
    of prior-period amounts
    Three Months Ended

Six Months EndedMarch 31, 2007

March 31, 2007As Reported in



As Reported inAdjusted

Fiscal 2007

Adjusted

Fiscal 2007Cost of services before reimbursable expenses

$
98,978


$
104,614


$
189,302


$
199,993Selling, general and administrative costs


36,014



30,378



69,698



59,007       Three Months Ended


Six Months EndedMarch 31, 2007


March 31, 2007As Reported in





As Reported inAdjusted


Fiscal 2007


Adjusted


Fiscal 2007Operating income (loss):Americas

$
20,051


$
20,187


$
32,126


$
32,529Europe


11,594



11,802



18,845



19,438Asia Pacific


1,145



1,253



1,649



1,841Corporate and eliminations


(6,365
)


(6,817
)


(12,235
)


(13,423
)Total

$
26,425


$
26,425


$
40,385


$
40,385   Revenues
    by Segment/Geographic Business Area
   22




---



##### 



Percent ofNet RevenuesPercent


for the ThreeThree Months Ended


Percent


Increase


Months EndedFebruary 29,


March 31,


Increase


Local


February 29,


March 31,2008


2007


US$


Currency


2008


2007SEGMENTAmericas

$
99,392


$
81,060



23
%


21
%


50
%


50
%Europe


80,454



64,574



25
%


12
%


40
%


40
%Asia Pacific


17,390



14,766



18
%


7
%


9
%


9
%Corporate and eliminations(1)


1,733



1,017



n/m



n/m



1
%


1
%TOTAL Net Revenues


198,969



161,417



23
%


17
%


100
%


100
%Reimbursements


11,552



9,812



18
%


12
%TOTAL Revenues

$
210,521


$
171,229



23
%


16
%       (1)
    
    Corporate and eliminations include
    inter-company eliminations and other revenues associated with
    our GDN resources, which are not attributable to a specific
    geographic business area.  Three Months Ended February 29, 2008 Compared to Three
    Months Ended March 31, 2007
  Revenues
          Operating
    Expenses
   23




---



##### 



Cost
    of Services
    Selling,
    General and Administrative Costs
    Operating
    Income
    Three Months EndedFebruary 29,


March 31,2008


2007


(Decrease)Americas

$
19,599


$
20,051


$
(452
)Europe


7,398



11,594



(4,196
)Asia Pacific


(1,406
)


1,145



(2,551
)Corporate and eliminations


(7,515
)


(6,365
)


(1,150
)$
18,076


$
26,425


$
(8,349
)     
    Americas operating income decreased primarily due to lower
    margins resulting from staffing inefficiencies primarily in
    Canada, partially offset by lower selling, general and
    administrative costs as a percentage of net revenues as a result
    of cost-management initiatives.
    Europe operating income decreased primarily due to lower margins
    resulting from lower average bill rates and staffing
    inefficiencies in the United Kingdom, partially offset by lower
    selling, general and administrative costs as a percentage of net
    revenues as a result of cost-management initiatives.
    Asia Pacific incurred an operating loss compared to operating
    income in the prior year period primarily due to lower margins
    resulting from staffing inefficiencies primarily in Australia.
    Corporate and eliminations operating loss increased primarily
    due to higher compensation costs.  Interest
    Income
   24




---



##### 



Provision
    (Benefit) for Income Taxes
        Six
    Months Ended February 29, 2008 Compared to Six Months Ended
    March 31, 2007
    Percent ofNet RevenuesPercent


for the SixSix Months Ended


Percent


Increase


Months EndedFebruary 29,


March 31,


Increase


Local


February 29,


March 31,2008


2007


US$


Currency


2008


2007SEGMENTAmericas

$
195,064


$
147,697



32
%


31
%


49
%


49
%Europe


164,141



123,983



32
%


20
%


41
%


41
%Asia Pacific


36,813



26,458



39
%


27
%


9
%


10
%Corporate and eliminations(1)


2,275



1,247



n/m



n/m



1
%


TOTAL Net Revenues


398,293



299,385



33
%


26
%


100
%


100
%Reimbursements


22,229



19,393



15
%


10
%TOTAL Revenues

$
420,522


$
318,778



32
%


25
%       (1)
    
    Corporate and eliminations include
    inter-company eliminations and other revenues associated with
    our GDN resources, which are not attributable to a specific
    geographic business area.  Revenues
     25




---



##### 



Operating
    Expenses
    Cost
    of Services
    Selling,
    General and Administrative Costs
    Operating
    Income
    Six Months EndedFebruary 29,


March 31,


Increase2008


2007


(Decrease)Americas

$
38,029


$
32,126


$
5,903Europe


21,194



18,845



2,349Asia Pacific


(1,952
)


1,649



(3,601
)Corporate and eliminations


(16,589
)


(12,235
)


(4,354
)$
40,682


$
40,385


$
297  26




---



##### 




    Americas operating income increased primarily due to strong
    revenue growth, partially offset by lower margins resulting from
    staffing inefficiencies primarily in Canada.
    Europe operating income increased primarily due to strong
    revenue growth and a lower growth rate of selling, general and
    administrative costs than the net revenue growth rate, partially
    offset by lower margins resulting from lower average bill rates
    and staffing inefficiencies in the United Kingdom.
    Asia Pacific incurred an operating loss compared to operating
    income in the prior year period primarily due to lower margins
    resulting from staffing inefficiencies in Australia.
    Corporate and eliminations operating loss increased primarily
    due to higher compensation costs.  Interest
    Income
    Provision
    (Benefit) for Income Taxes
        Liquidity
    and Capital Resources
      Six Months EndedFebruary 29,


March 31,


Increase2008


2007


(Decrease)Net cash provided by (used in):Operating activities

$
47,808


$
28,980


$
18,828Investing activities


(10,181
)


(3,564
)


(6,617
)Financing activities


(14,600
)


(6,060
)


(8,540
)Effect of exchange rate changes on cash and cash equivalents


12,097



1,460



10,637Net increase in cash and cash equivalents

$
35,124


$
20,816


$
14,308  27




---



##### 



Operating activities:
  Investing activities:
  Financing activities:
  Borrowing
    Facilities
        Foreign
    Exchange Instruments
  Accounting for Derivative Instruments and Hedging Activities.
  Redeemable
    Common Stock and Employee Put Rights
  30-day
   28




---



##### 



Obligations
    and Commitments
    Off-Balance
    Sheet Arrangements
  and/or
  Recently
    Adopted Accounting Pronouncements
   29




---



##### 



No. 06-2, Accounting for Sabbatical Leave and Other Similar Benefits
    Pursuant to FASB Statement No. 43 (EITF 06-2). EITF 06-2 EITF 06-2 EITF 06-2
  New
    Accounting Pronouncements
  Business Combinations Business Combinations
  Fair Value Measurements
  FAS 157-2, Effective Date of FASB Statement No. 157 FAS 157-2). FAS 157-2 FAS 157-2 FAS 157-2
  ITEM 3.
    QUANTITATIVE
    AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK  Form 10-K 11-months
  ITEM 4T.
    CONTROLS
    AND PROCEDURES  Evaluation
    of Disclosure Controls and Procedures
  Form 10-Q, Rule 13a-15(e) 15d-15(e)
  Changes
    in Internal Control Over Financial Reporting
   30




---



##### 



PART II 
    OTHER INFORMATION  ITEM 1.
    LEGAL
    PROCEEDINGS  and/or
    ITEM 1A.
    RISK
    FACTORS  Form 10-K 11-months Form 10-K 11-months
  ITEM 2.
    UNREGISTERED
    SALES OF EQUITY SECURITIES AND USE OF PROCEEDS    Purchases
    of Common Shares
    ApproximateTotal Number of


Dollar Value ofShares


Shares that MayPurchased as


Yet BePart of Publicly


Purchased UnderTotal Number


Average


Announced


Publiclyof Shares


Price Paid


Plans or


Announced PlansPeriod

Purchased(1)


per Share


Programs


or ProgramsDecember 1, 2007  December 31, 2007


1,527,104


$
10.57







January 1, 2008  January 31, 2008


26,109



10.57







February 1, 2008  February 29, 2008


10,274



11.26







Total


1,563,487


$
10.57







     (1)
    
    During the second quarter of fiscal
    2008, we purchased 1,563,487 of our common shares in
    transactions unrelated to publicly announced share plans or
    programs. Of these shares, 1,500,011 were purchased by us as a
    result of exercising our right to call shares, or the
    shareholder exercising their right to put shares, under our
    equity share plans. These transactions also included the
    acquisition of 57,142 shares of our common stock via share
    withholding for payroll obligations due from employees in
    connection with the delivery of shares of our common stock under
    our various equity share plans, in addition to 6,334 shares
    surrendered to us to pay the exercise price in connection with
    so-called stock-swap exercises of employee stock
    options.  ITEM 3.
    DEFAULTS
    UPON SENIOR SECURITIES   31




---



##### 



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


Against


Abstain/Withheld


Broker Non-VotesElection of Directors:Pamela J. Craig


76,079,938



0



3,847,786




*Karl-Heinz Flöther


76,079,938



0



3,847,786




*Robert N. Frerichs


76,079,938



0



3,847,786




*Basilio Rueda


76,079,938



0



3,847,786




*Simon Witts


76,079,938



0



3,847,786




*Mitchell C. Hill


76,079,938



0



3,847,786




*    *
    
    not applicable  ITEM 5.
    OTHER
    INFORMATION      ITEM 6.
    EXHIBITS    ExhibitNumber

Description of Document3
.1

Restated Articles of Incorporation of the Company, dated as of
    December 4, 2003 (incorporated by reference to
    Exhibit 3.1 to the Companys Form 10, filed
    January 20, 2006)3
.2

Amended and Restated By-laws of the Company, dated as of
    February 29, 2003 (incorporated by reference to
    Exhibit 3.2 to the Companys Form 10, filed
    January 20, 2006)4
.1

Endorsement of Mitchell C. Hill dated February 14, 200831
.1

Certification of Chief Executive Officer pursuant to
    Rule 13a-14(a)
    or 15d-14(a) of the Securities Exchange Act of 1934, as adopted
    pursuant to Section 302 of the Sarbanes-Oxley Act of 200231
.2

Certification of Chief Financial Officer pursuant to
    Rule 13a-14(a)
    or 15d-14(a) of the Securities Exchange Act of 1934, as adopted
    pursuant to Section 302 of the Sarbanes-Oxley Act of 200232
.1

Certification of the Chief Executive Officer and the Chief
    Financial Officer pursuant to 18 U.S.C. Section 1350,
    as adopted pursuant to Section 906 of the Sarbanes-Oxley
    Act of 2002  32




---



##### 



SIGNATURES    Date: April 14, 2008

AVANADE INC.   By:
    /s/  Dennis
    K. Knapp   Title:
    Chief Financial Officer  33