SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549  FORM 10-Q  ý
  Quarterly report pursuant to
  Section 13 or 15(d) of the Securities Exchange Act of 1934  for the quarterly period ended March 31,
  2002  or  o
  Transition report pursuant to
  Section 13 or 15(d) of the Securities Exchange Act of 1934  Commission file number:0-26994  ADVENT SOFTWARE, INC. (Exact
name of Registrant as specified in its charter)  Delaware
  
  94-2901952(State
  or other jurisdiction of incorporation or organization)
  
  (IRS
  Employer Identification Number)
  301 Brannan Street, San Francisco,
California 94107 (Address
of principal executive offices and zip code)  (415) 543-7696 (Registrants
telephone number, including area code)   Indicate by check mark
whether the Registrant (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements for the
past 90 days.  YesýNoo  The number of shares of the Registrants Common Stock
outstanding as of April 30, 2002 was 34,767,123. 
  
   INDEX  PART I.
  
  FINANCIAL INFORMATIONItem 1.
  
  Financial StatementsCondensed Consolidated
  Balance Sheets
  
  3Condensed
  Consolidated Statements of Income and Comprehensive Income
  
  4Condensed
  Consolidated Statements of Cash Flows
  
  5Notes
  to the Condensed Consolidated Financial Statements
  
  6Item
  2.
  
  Managements
  Discussion and Analysis of Financial Condition and Results of Operations
  
  10Item
  3.
  
  Quantitative
  and Qualitative Disclosures About Market Risk
  
  20PART II. OTHER INFORMATIONItem
  1.
  
  Legal Proceedings
  
  22Item 2.
  
  Changes in Securities and
  Use of Proceeds
  
  22Item 3.
  
  Defaults Upon
  Senior Securities
  
  22Item
  4.
  
  Submission
  of Matters to a Vote of Security Holders
  
  22Item 5.
  
  Other InformationItem 6.
  
  Exhibits and
  Reports on Form 8-K
  
  23Signatures
  
  24  2 
   PART I. FINANCIAL INFORMATION  Item 1. Financial Statements  ADVENT
SOFTWARE, INC. CONDENSED CONSOLIDATED BALANCE SHEETS   March 31,2002
  
  December
  31,2001(in thousands)
  
  (unaudited)ASSETSCurrent assets:Cash and cash equivalents
  
  $
  103,919
  
  $
  166,794Short-term marketable securities
  
  131,890
  
  121,756Accounts receivable, net
  
  44,582
  
  49,930Prepaid expenses and other
  
  10,126
  
  9,451Deferred income taxes
  
  16,720
  
  10,935Total current assets
  
  307,237
  
  358,866Property and equipment, net
  
  28,927
  
  26,090Other assets, net
  
  156,382
  
  68,719Total assets
  
  $
  492,546
  
  $
  453,675LIABILITIES AND STOCKHOLDERS
  EQUITYCurrent liabilities:Accounts payable
  
  $
  4,384
  
  $
  2,408Accrued liabilities
  
  15,844
  
  13,520Deferred revenues
  
  27,795
  
  25,907Income taxes payable
  
  7,518
  
  5,767Total current liabilities
  
  55,541
  
  47,602Long-term liabilities
  
  9,285
  
  1,684Total liabilities
  
  64,826
  
  49,286Committments and contingencies (Note 6)Stockholders equity:Common stock
  
  348
  
  342Additional paid-in capital
  
  334,013
  
  317,548Retained earnings
  
  93,930
  
  86,621Cumulative other comprehensive loss
  
  (571
  )
  (122
  )Total stockholders equity
  
  427,720
  
  404,389Total liabilities and stockholders equity
  
  $
  492,546
  
  $
  453,675  The accompanying notes are an integral part of
these condensed consolidated financial statements.  3 
   ADVENT
SOFTWARE, INC. CONDENSED CONSOLIDATED STATEMENTS OF
INCOME AND
COMPREHENSIVE INCOME  Three Months Ended March 31,2002
  
  2001(in
  thousands, except per share data)
  
  (unaudited)Revenues:License and development fees
  
  $
  23,010
  
  $
  17,086Maintenance and other
  recurring
  
  21,508
  
  14,938Professional services and
  other
  
  4,679
  
  4,668Net revenues
  
  49,197
  
  36,692Cost of revenues:License and development
  fees
  
  1,782
  
  1,500Maintenance and other
  recurring
  
  5,301
  
  3,881Professional services and
  other
  
  1,585
  
  1,572Total cost of revenues
  
  8,668
  
  6,953Gross margin
  
  40,529
  
  29,739Operating expenses:Sales and marketing
  
  15,370
  
  12,088Product development
  
  9,091
  
  5,926General and administrative
  
  4,788
  
  3,529Amortization of intangibles
  
  1,867
  
  665Total operating expenses
  
  31,116
  
  22,208Income from operations
  
  9,413
  
  7,531Interest and other income,
  net
  
  1,661
  
  1,617Income before income taxes
  
  11,074
  
  9,148Provision for income taxes
  
  3,765
  
  3,110Net income
  
  $
  7,309
  
  $
  6,038Other comprehensive income,
  net of taxUnrealized gain (loss) on
  marketable securities, net of tax
  
  (439
  )
  128Foreign currency
  translations adjustment
  
  (9
  )
  (59
  )Comprehensive income
  
  $
  6,861
  
  $
  6,107NET
  INCOME  PER SHARE DATABasicNet income per share
  
  $
  0.21
  
  $
  0.20Shares used in per share
  calculations
  
  34,357
  
  30,702DilutedNet income per share
  
  $
  0.20
  
  $
  0.18Shares used in per share
  calculations
  
  37,222
  
  34,161  The
accompanying notes are an integral part of these condensed consolidated
financial statements.  4 
   ADVENT
SOFTWARE, INC. CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS  Three Months Ended March 31,2002
  
  2001(in
  thousands)
  
  (unaudited)Cash flows from operating
  activities:Net income
  
  $
  7,309
  
  $
  6,038Adjustments to reconcile
  net income to net cash provided by operating activities:Non-cash stock compensation
  
  75
  
  37Depreciation and
  amortization
  
  4,018
  
  1,965Provision for doubtful
  accounts and returns reserve
  
  1,264
  
  1,587Other-than-temporary loss
  on investments
  
  900
  
  (Gain)/Loss on investments
  
  (246
  )
  Deferred income taxes
  
  (245
  )
  Other
  
  (483)
  
  171Cash provided by (used in)
  operating assets and liabilities net of acquisitions:Accounts receivable
  
  (440
  )
  (2,533
  )Prepaid and other current
  assets
  
  (495
  )
  (1,719
  )Accounts payable
  
  932
  
  (402
  )Accrued liabilities
  
  (206
  )
  698Deferred revenues
  
  (2,130
  )
  1,371Income taxes payable
  
  (228
  )
  827Net cash provided by
  operating activities
  
  $
  10,025
  
  8,040Cash flows from investing
  activities:Net cash used in
  acquisitions including payments of net assumed liabilities
  
  (59,963
  )
  (8,455
  )Purchases of other
  investments
  
  (7,819
  )
  Proceeds from sales and
  maturities of other investments
  
  1,831
  
  Acquisition of fixed assets
  
  (1,455
  )
  (2,227
  )Purchases of short-term
  marketable securities
  
  (41,088
  )
  Sales of short-term
  marketable securities
  
  30,849
  
  Deposits and other
  
  (3,085
  )
  (3,130
  )Net cash used in investing
  activities
  
  (80,730
  )
  (13,812
  )Cash flows from financing
  activities:Proceeds from issuance of
  common stock
  
  7,896
  
  3,228Proceeds from issuance and
  exercise of warrants
  
  2
  
  5,000Net cash provided by
  financing activities
  
  7,898
  
  8,228Effect of exchange rate
  changes on cash and cash equivalents
  
  (68
  )
  (5
  )Net increase (decrease) in
  cash and cash equivalents
  
  (62,875
  )
  2,451Cash and cash equivalents
  at beginning of period
  
  166,794
  
  152,432Cash and cash equivalents
  at end of period
  
  $
  103,919
  
  $
  154,883Supplemental disclosure of
  cash flow information:Cash paid for income taxes
  
  $
  3,891
  
  $
  2,204Unrealized loss on
  marketable securities, net of tax
  
  $
  439
  
  $
  128  The
accompanying notes are an integral part of these condensed consolidated
financial statements.  5 
   ADVENT SOFTWARE, INC.  NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)  1. Basis of Presentation  The condensed consolidated
financial statements include the accounts of Advent Software, Inc. (Advent)
and its wholly-owned subsidiaries. We have eliminated all significant
intercompany balances and transactions.  We prepared the condensed
consolidated financial statements in accordance with the rules and regulations
of the Securities and Exchange Commission (SEC) applicable to interim
financial information. Certain information and footnote disclosures included in
financial statements prepared in accordance with generally accepted accounting
principles have been omitted in these interim statements pursuant to such SEC
rules and regulations. We recommend that these interim financial statements be
read in conjunction with the audited financial statements and related notes
included in our 2001 Annual Report on Form 10-K filed with the SEC. Interim
results are not necessarily indicative of the results to be expected for the
full year.  In our opinion, the
condensed consolidated financial statements include all adjustments necessary
to present fairly the financial position and results of operations for each
interim period shown.   2.Net
Income Per Share  (in thousands, except per share data)
  
  Three
  Months Ended, March 31,2002
  
  2001Net
  Income
  
  $7,309
  
  $6,038Reconciliation
  of shares used in basic and diluted per share calculationsBasicWeighted
  average common shares outstanding
  
  34,357
  
  30,702Basic
  net income per share
  
  $0.21
  
  $0.20DilutedWeighted
  average common shares outstanding
  
  34,357
  
  30,702Dilutive
  effect of stock options
  
  2,865
  
  3,459Shares
  used in diluted net income per share calculation
  
  37,222
  
  34,161Diluted
  net income per share
  
  $0.20
  
  $0.18Options
  and warrants outstanding at March 31, 2002 and 2001 not included in the
  computation of diluted EPS because the exercise price was greater than the
  average market price
  
  793
  
  1,001Price
  range of options not used in diluted EPS calculation
  
  $55.800 - 60.375
  
  $45.375 -
  $60.375   3.
Acquisition  On February 14, 2002, we
acquired Kinexus Corporation of New York, New York.  Kinexus provides internal account aggregation and manual data
management services which we will use in our Advent TrustedNetwork service. The
acquisition has been accounted for using the purchase method of accounting and
accordingly, the purchase price has been allocated to the tangible and
intangible assets and liabilities acquired on the basis of their respective
fair values on the acquisition date. The results of operations are included in
the consolidated financial statements beginning on the acquisition date. In
order to further increase our deployment of Advent  6 
   TrustedNetwork, we acquired Kinexus at
amounts exceeding the tangible and identifiable intangible fair values of
assets and liabilities resulting in goodwill of $29.4 million.  The total purchase price of
approximately $45.5 million included cash of approximately $34 million, closing
costs of $3 million and a warrant to purchase 165,176 shares of our Common
Stock valued at $8.5 million.   The fair
value of the warrant was calculated using the Black-Scholes method using the
following assumptions:  Fair value of
common stock of $51.34 per share, interest rate of 3%, volatility of 65.9% and
a dividend rate of zero.  The warrant
had an exercise price of $0.01 per share and was exercised in February 2002.
There is $3.8 million of additional contingent consideration that is held in
escrow for 14 months, which if released will be recorded as additional
goodwill.  There is also a potential
earn-out distribution to shareholders of up to $115 million over the next two
years in cash or stock at the option of Advent under a formula based on revenue
and expenses measured based on the years ended December 31, 2002 and 2003,
which if earned will be recorded as additional goodwill.  The preliminary allocation
of the purchase price to tangible and intangible assets and liabilities at
February 14, 2002 is summarized below (in thousands):  Estimated Remaining
  Useful Life
  
  Balance at
  February 14, 2002Goodwill
  
  
  
  $
  29,388Existing technologies
  
  3 Years
  
  3,900Existing technologies  internal
  
  2 Years
  
  498Core technologies
  
  3 Years
  
  2,100Trade name/trademarks
  
  3 Years
  
  600Contracts and customer relationships
  
  3 Years
  
  9,400Tangible assets
  
  
  
  3,593Net deferred tax assets
  
  
  
  39,807Liabilities assumed
  
  
  
  (43,748
  )Total Purchase Price
  
  
  
  $
  45,538  Liabilities assumed of $43.7
million include cash advances from Advent of $4.9 million, estimated
change-in-control separation obligations of $11.1 million and estimated
long-term lease obligations of $8.2 million. 
The purchase price is subject to further refinement and change over the
next year due primarily to assessing the liabilities assumed.  The amount allocated to intangibles was
determined based on managements estimates using established valuation
techniques.  The following proforma
supplemental information presents selected financial information as though the
purchase of Kinexus had been completed as of the beginning of the periods being
reported on and after giving effect to purchase accounting adjustments.  The pro forma consolidated net income (loss)
include certain pro forma adjustments, primarily the amortization of
identifiable intangible assets, tax provision (benefit) adjustments on pro
forma pre-tax income (loss) at a statutory tax rate of 41% and the elimination
of interest income on cash used in the acquisition. The pro forma consolidated
information below does not include acquisitions completed in 2001 as they were
not material (in thousands, except earnings per share):  Three
  Months Ended March 31,2002
  
  2001Revenue
  
  $
  49,673
  
  $
  38,524Net income (loss)
  
  $
  4,344
  
  $
  (77
  )Basic net income (loss) per share
  
  $
  0.13
  
  $
  (0.00
  )Diluted net income (loss) per share
  
  $
  0.12
  
  $
  (0.00
  )   4. Other
Assets  Components of other assets were as follows (in thousands):  Weighted-Average
  
  March 31,
  
  December
  31,Amortization Period
  
  2002
  
  2001Goodwill, net
  
  
  
  $
  41,367
  
  $
  12,650Purchased technologies
  
  4.4 years
  
  16,195
  
  10,600Customer relationships
  
  4.2 years
  
  19,005
  
  10,438Other intangibles
  
  4.6 years
  
  1,106
  
  637Deferred tax assets
  
  
  
  39,414
  
  3,147Long-term equity investments
  
  
  
  22,624
  
  17,905Other
  
  
  
  16,671
  
  13,342$
  156,382
  
  $
  68,719  7 
   We adopted Statement of Financial Accounting
Standards No. 142 (SFAS 142), Goodwill and Other Intangible Assets in the
first fiscal quarter of 2002.  SFAS 142
supercedes Accounting Principles Board Opinion No. 17 Intangible Assets and
discontinues the amortization of goodwill. 
SFAS 142 primarily addresses the accounting for goodwill and intangible
assets subsequent to their initial recognition. The provisions of SFAS 142 (1)
prohibit the amortization of goodwill and indefinite-lived intangible assets,
(2) require that goodwill and indefinite-lived intangibles assets be tested
annually for impairment (and in interim periods if certain events occur
indicating that the carrying value of goodwill and/or indefinite-lived
intangible assets may be impaired), (3) require that reporting units be
identified for the purpose of assessing potential future impairments of
goodwill, and (4) remove the forty-year limitation on the amortization period
of intangible assets that have finite lives.  SFAS 142 requires that goodwill be tested
annually for impairment using a two-step process. The first step is to identify
a potential impairment and, in transition, this step must be measured as of the
beginning of the fiscal year. However, a company has six months from the date
of adoption to complete the first step. We expect to complete that first step
of the goodwill impairment test during the second quarter of 2002. The second
step of the goodwill impairment test measures the amount of the impairment loss
(measured as of the beginning of the year of adoption), if any, and must be
completed by the end of our fiscal year. Intangible assets deemed to have an
indefinite life will be tested for impairment using a one-step process, which
compares the fair value to the carrying amount of the asset as of the beginning
of the fiscal year, and pursuant to the requirements of SFAS 142 will be
completed during the second quarter of 2002. Any impairment loss resulting from
the transitional impairment tests will be reflected as the cumulative effect of
a change in accounting principle in the second quarter 2002. We have not yet
determined what effect these impairment tests will have on our financial
position or results of operations.  The changes in the carrying value of goodwill
and intangible assets for the three months ended March 31, 2002 were as follows
(in thousands):  Gross
  
  Accumulated
  Amortization
  
  NetGoodwillBalance at December 31, 2001
  
  $
  15,946
  
  $
  3,296
  
  $
  12,650Additions
  
  29,388
  
  
  
  29,388Adjustment related to prior acquisition
  
  (671
  )
  
  
  (671
  )Balance at March 3, 2002
  
  $
  44,663
  
  $
  3,296
  
  $
  41,367IntangiblesBalance at December 31, 2001
  
  $
  26,393
  
  $
  4,718
  
  $
  21,675Additions
  
  16,498
  
  
  
  16,498Amortization
  
  
  
  1,867
  
  (1,867
  )Balance at March 31, 2002
  
  $
  42,891
  
  $
  6,585
  
  $
  36,306  The estimated intangibles amortization expense for each year ended
December 31 is: $8.3million for 2002; $8.3 million for 2003; $7.9 million for
2004; $3.1 million for 2005; $2.2 million for 2006; and $0.5 million
thereafter.  Net income on a proforma basis, excluding goodwill amortization
expense, would have been as follows (in thousands, except per share data):  Three
  months ended
  March 31,2002
  
  2001Net IncomeReported net income
  
  $
  7,309
  
  $
  6,038Add: 
  goodwill amortization, net of tax
  
  
  
  186Adjusted net income
  
  $7,309
  
  $
  6,224Basic net income per shareReported net income per share
  
  $
  0.21
  
  $
  0.20Goodwill amortization
  
  
  
  Adjusted net income per share
  
  $
  0.21
  
  $
  0.20Shares used in per share calculation
  
  34,357
  
  30,702Diluted net ncome per shareReported net income per share
  
  $
  0.20
  
  $
  0.18Goodwill amortization
  
  
  
  Adjusted net income per share
  
  $
  0.20
  
  $
  0.18Shares used in per share calculation
  
  37,222
  
  34,161   8 
   5. Stock
Buyback  In March 2001, Advents Board of Directors authorized the repurchase of
up to one million shares of outstanding Common Stock.  On May 9, 2002, the Board of Directors authorized an expansion of
this existing repurchase program to add an additional one million shares.   A total of 430,000 shares were repurchased
in 2001 with no further repurchases in 2002 to date. The purchases may be made,
from time to time, on the open market or in privately negotiated transactions
and will be funded from available working capital.  The repurchase program will allow us to help manage the dilution
of our shares from our employee stock programs.   6. Commitments and Contingencies  A European distributor and its subsidiaries that operate in certain European locations have the exclusive right to sell our software in the European Union, excluding certain locations, until July 1, 2004 subject to achieving certain revenue levels. During this period the distributor also has the contingent right to require us to purchase any one or any group of their subsidiaries. Our requirement to purchase is contingent upon the distributor achieving specified operating margins greater than 20% and specified customer satisfaction criteria. The purchase price would be two times the preceding twelve months total revenue of the purchased subsidiaries plus potential additional consideration equal to 50% of operating margins greater than 20% that are achieved in the two years subsequent to our acquisition. In addition, Advent has the right to purchase any one or any group of the distributors subsidiaries under certain conditions. In the event these rights are exercised by Advent or the distributor, the purchase of these subsidiaries would principally result in an increase in intangible assets, goodwill and amortization of intangible assets.  In May 2002 we were notified by
the European distributor that they may have met the criteria that would require
us to purchase its Greek subsidiary.  We
have not yet begun performing due diligence and evaluating the criteria. If the
criteria are met, the purchase price is expected to be $6 million to $8 million
and the transaction is expected to close sometime in the next few months.  Our operating lease commitments
after 2001 increased to $81 million for the years 2002 through 2012,
cumulatively, primarily due to a new operating lease signed in 2002 and leases
assumed in connection with the Kinexus acquisition. Approximately $8 million
related to vacant Kinexus facilities was included in net liabilities assumed.  On November 8, 2001, Charles
Schwab & Co, Inc. (Schwab) filed suit against us alleging claims for
declaratory relief, anticipatory breach of contract and breach of the covenant
of good faith and fair dealing, arising from our intention to cease maintenance
of an existing software interface that allows institutional investment
customers to download data received from Schwabs systems into our software
product used by the investment customers. We intended to cease maintenance of
the existing interface and to transition to a new, and what we believe to be
improved, software interface (the Advent Custodial Data or ACD system). On
December 11, 2001, Schwab filed a motion for preliminary injunction seeking to enjoin
us from ceasing maintenance of the existing interface.  For nearly the entire period
from February 8, 2002 through May 3, 2002, the parties agreed not to engage
each other in litigation-related activity so that the parties could pursue
settlement negotiations.  On March 15,
2002, we voluntarily agreed to extend maintenance of the existing interface
through December 30, 2002.  On May 6,
2002, we filed our answer to Schwabs complaint and filed a cross-complaint
against Schwab for tortious interference with contractual relations, tortious
interference with prospective business advantage, unfair competition in
violation of the California Business and Professions Code, and common law
unfair competition.  The parties are
currently pursuing settlement negotiations. 
At this time it is too early to predict the outcome of these
negotiations or estimate any potential losses from this action.  We are subject to other legal proceedings, claims and litigation
arising in the ordinary course of business. We do not expect that the ultimate
costs to resolve these matters will have a material adverse effect on our
consolidated financial position, results of operations, or cash flows.  7. Subsequent Event  In May 2002, the Board of
Directors of Encompys, Inc. informed us that it has decided to sell the assets
of Encompys or wind down operations. 
Encompys was formed in April 2001 by Accenture, Microsoft, Compaq and
the Bank of New York to provide an Internet-based straight-through-processing
solution for the global asset management community.  As a result, Advent will incur a one-time non-operating charge of
$8.8 million for the quarter ended June 30, 2002.  9 
    Item 2.
Managements Discussion and Analysis of Financial Condition and Results of
Operations  SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS  You
should read the following discussion in conjunction with our consolidated
financial statements and related notes. Except for historical information, the
following discussion contains forward-looking statements within the meaning of
Section 27a of the Securities Act of 1933 and Section 21e of the Securities
Exchange Act of 1934. These forward-looking statements involve risks and
uncertainties, including, among other things, statements regarding our
anticipated product offerings, gross margins and operating costs and expenses.
Our actual results may differ significantly from those projected in the
forward-looking statements.  Factors
that might cause future results to differ materially from those discussed in
the forward-looking statements include, but are not limited to, those discussed
in Managements Discussion and Analysis of Financial Condition and Results of
Operations, Risk Factors and Forward-Looking Statements and elsewhere in
this document as well as other information set forth in our Form 10-K for the
year ended December 31, 2001, and other documents we file from time to time
with the Securities and Exchange Commission.  Acquisitions  On February 14, 2002, we acquired
Kinexus Corporation of New York, New York. 
Kinexus provides internal account aggregation and manual data management
services which we will use in our Advent TrustedNetwork service. The
acquisition has been accounted for using the purchase method of accounting and
accordingly, the purchase price has been allocated to the tangible and
intangible assets and liabilities acquired on the basis of their respective
fair values on the acquisition date. In order to further increase our
deployment of Advent TrustedNetwork, we acquired Kinexus at amounts exceeding
the tangible and identifiable intangible fair values of assets and liabilities
resulting in goodwill of $29.4 million.  The total purchase price of
approximately $45.5 million included cash of approximately $34 million, closing
costs of $3 million and a warrant to purchase 165,176 shares of our Common
Stock valued at $8.5 million.   The fair
value of the warrant was calculated using the Black-Scholes method using the
following assumptions:  Fair value of
common stock of $51.34 per share, interest rate of 3%, volatility of 65.9% and
a dividend rate of zero.  The warrant
had an exercise price of $0.01 per share and was exercised in February 2002.
There is $3.8 million of additional contingent consideration that is held in
escrow for 14 months, which if released will be recorded as additional
goodwill.  There is also a potential
earn-out distribution to shareholders of up to $115 million over the next two
years in cash or stock at the option of Advent under a formula based on revenue
and expenses measured based on the years ended December 31, 2002 and 2003,
which if earned will be recorded as additional goodwill.  The preliminary allocation
of the purchase price to tangible and intangible assets and liabilities at
February 14, 2002 is summarized below (in thousands):   Estimated
  Remaining
  
  Balance atUseful
  Life
  
  February
  14, 2002Goodwill
  
  
  
  $
  29,388Existing technologies
  
  3 Years
  
  3,900Existing technologies  internal
  
  2 Years
  
  498Core technologies
  
  3 Years
  
  2,100Trade name/trademarks
  
  3 Years
  
  600Contracts and customer relationships
  
  3 Years
  
  9,400Tangible assets
  
  
  
  3,593Net deferred tax assets
  
  
  
  39,807Liabilities assumed
  
  
  
  (43,748
  )Total Purchase Price
  
  
  
  $
  45,538  Liabilities assumed of $43.7
million include cash advances from Advent of $4.9 million, estimated
change-in-control separation obligations of $11.1 million and estimated
long-term lease obligations of $8.2 million. 
The purchase price is subject to further refinement and change over the
next year due primarily to assessing the liabilities assumed.  The amount allocated to intangibles was
determined based on managements estimates using established valuation
techniques.  10 
   Distributor
Relationship  We rely on a number of strategic alliances to
help us achieve market acceptance of our products and to leverage our
development, sales, and marketing resources. In 1998 we established one such
relationship with a company in Scandinavia to distribute our products within
Scandinavia. In the third quarter of 1999, this distributor formed Advent
Europe. Advent Europe and its subsidiaries have the exclusive right to
distribute our software in the European Union, excluding certain locations,
until July 1, 2004 subject to achieving certain revenue levels. Incorporated in
The Netherlands, Advent Europe is an independent entity which is not
financially backed by us and is entirely capitalized by independent third party
investors. It makes tax and language modifications to Advent Office to fit the
various needs of the local jurisdictions and then markets and licenses the
Advent Office suite and related services. All transactions between Advent
Europe and us are transacted in U.S. dollars and are arms length transactions.
Revenue from sales to this distributor is recognized when the distributor
submits a signed contract, the product has been delivered, the fee is fixed and
determinable, and the resulting receivable is reasonably assured. Our revenues
from this distributor in each of the three years ended December 31, 2001, 2000,
and 1999 and in the quarter ended March 31, 2002, were less than 4% of our
total net revenue.  Through July 1, 2004, subject to achieving
certain revenue levels, Advent Europe also has the contingent right to require
us to purchase any one or any group of their subsidiaries. Our requirement to
purchase is contingent upon the distributor achieving specified operating
margins in excess of 20% as well as customer satisfaction criteria as specified
in the agreement. The purchase price would be two times the preceding twelve
months total revenue of the purchased subsidiaries plus an earn-out equal to
50% of operating margins that exceed 20% for the two years after the
acquisition. In addition, we have the right to purchase any one or any group of
the distributors subsidiaries under certain conditions. In the event these
rights are exercised by us or the distributor, the purchase of these
subsidiaries would principally result in an increase in intangible assets,
goodwill and amortization of intangible assets. In November 2001, we acquired
three of Advent Europes companies located in Norway, Sweden, and Denmark. In
addition to the purchase price paid for these three companies, there is
potential additional consideration equal to 50% of operating margins greater
than 20% that are achieved in the two years subsequent to our acquisition of
these companies as described above.  In May 2002 we were notified by Advent Europe
that they may have met the criteria that would require us to purchase its Greek
subsidiary.  We have not yet begun
performing due diligence and evaluating the criteria. If the criteria are met,
the purchase price is expected to be $6 million to $8 million and the
transaction is expected to close sometime in the next few months.  Results of
Operations  REVENUES  Our net revenues are made up of three components:  license and development fees, maintenance
and recurring, and professional services and other.  Our net revenues for the first quarter of 2002 increased 34% to
$49.2 million, compared with net revenues of $36.7 million for the same period
in 2001.  This primarily reflects
increases in license revenue and development fees as well as maintenance and
other recurring revenues.  License Revenue and
Development Fees. 
License revenue and development fees for the first quarter of 2002
increased 35% to $23 million compared with license revenue and development fees
of $17.1 million for the first quarter of 2001.  The increase in license and development fees was primarily due to
increased sales of the Advent Office suite and our Geneva software.  Maintenance and Other Recurring revenue.Maintenance and other recurring revenue for
the first quarter of 2002 increased 44% to $21.5 million, compared with
maintenance and other recurring revenue of $15 million for the first quarter of
2001.  The increase was due primarily to
an increase in the client base and higher average maintenance fees.  Higher average maintenance fees are
primarily due to clients selecting more components for a full feature,
multi-product solution and clients expanding the number of users and sites
licensing our software.  Increased
demand for pricing data and data services also contributed to the increase in
maintenance and other recurring revenues.  Professional Services and Other Revenue.Professional services and other revenue for
the first quarter of 2002 remained constant at $4.7 million, compared with
professional services and other revenue of $4.7 million for the first quarter
of 2001.  The flat revenue between the
first quarter of 2002 and the first quarter of 2001 reflects our continued
encouragement of independent third-party implementers to provide services to
our clients.   11 
   COST OF REVENUES  Our cost of revenues is made
up of three components: cost of license and development fees, cost of
maintenance and other recurring and cost of professional services and
other.   Our cost of revenues for the
first quarter of 2002 increased 24.5% to $8.7 million, compared with cost of
revenues of $7 million for the first quarter of 2001.  Cost of revenues as a percentage of net revenues decreased to 18%
from 19% for the three months ended March 31, 2002 and 2001, respectively.  Cost of License and Development Fees.Cost of license and development fees revenue
consists primarily of the cost of product media and duplication, manuals,
packaging materials, the direct labor involved with producing and distributing
our software; labor costs associated with generating development fees; and
royalties paid to third parties.  Cost
of license and development fees will fluctuate between periods due to the mix
of license and development fee revenues.  
The increase in costs, in absolute dollars, in each period is primarily
related to increase in associated revenues. 
Cost of license and development fees increased 18.9% to $1.8 million in
the first quarter of 2002 from $1.5 million in the first quarter of 2001.  The increase in cost of license and
development fees is directly related to the increase in license and development
fees revenue.  Cost of license and
development fees as a percentage of the related revenues decreased to 7.7% from
8.8% for the three months ended March 31, 2002 and 2001.  This decrease was due to changes in product
mix and higher average deal size.  Cost of Maintenance and Other Recurring.Cost of maintenance and other recurring
revenues are primarily comprise of the direct costs of providing technical
support and other services for recurring revenues, the engineering costs
associated with product updates and royalties paid to third party
subscription-based and transaction-based vendors.  Cost of maintenance and other recurring revenues increased 36% to
$5.3 million for the first quarter of 2002 from $3.9 million for the first
quarter of 2001.  This increase was due
to additional staffing required to support a larger customer base, continued
interface development and increased royalties paid to third party
subscription-based and transaction-based vendors.  Cost of maintenance and other recurring revenues as a percentage
of the related revenues decreased to 24.6% in the first quarter of 2002 from
26% in the first quarter of 2001.  The
decrease was primarily due to economies of scale associated with absorbing
personnel and related costs over a larger maintenance revenue base as well as
changes in product mix.  Cost of Professional Services and Other.  Cost of professional services revenue
primarily consists of personnel related costs associated with the client
services and support organization in providing consulting, custom report
writing, and conversions of data from clients previous systems.  To the extent that such personnel are not
fully used in consulting, training, conversion or custom report writing
projects, they are used by presales, marketing and engineering activities and
the resultant costs are charged to operating expenses.  Cost of professional services and other
revenue remained stable at $1.6 million for the first quarter of 2002, compared
with $1.6 million for the same period in 2001.    Cost of professional services and other revenue as a percentage
of the related revenues remained stable at 34% for both the first quarter of
2002 and first quarter 2001.  OPERATING EXPENSES  Sales and Marketing.  Sales and marketing expenses consist primarily
of the cost of personnel involved in the sales and marketing process, sales
commissions, advertising and promotional materials, sales facilities expense,
trade shows and seminars.  Our sales and
marketing expenses for the first quarter of 2002 increased 27% to $15.4
million, compared with sales and marketing expenses of $12.1 million for the first
quarter of 2001. The increase in expense for the three months ended March 31,
2002 was primarily due to an increase in sales and marketing personnel and
increased sales and marketing in our core markets as well as in our efforts
towards our Internet initiatives, including Advent TrustedNetwork and
Wealthline.  Sales and marketing
expenses as a percentage of net revenues decreased to 31% in the first quarter
of 2002 compared to 33% in the first quarter of 2001.  Product Development.Research and development expenses consist primarily of salary and
benefits for our development staff as well as contractors fees and other costs
associated with the enhancements of existing products and services and
development of new products and services. 
Costs associated with product updates are included in cost of
maintenance and other recurring revenue. 
Our product development expenses for the first quarter of 2002 increased
53% to $9 million, compared with product development expenses of $5.9 million
for the first quarter of 2001.  Product
development expenses increased primarily due to a growth in personnel as we
increased our product development efforts to accelerate the rate of product
enhancements and new product introductions. Additionally, we have increased our
expenditures to develop and launch Advent TrustedNetwork and our continued
development of related wealth management solutions both released and
unreleased.  Product development
expenses as a percentage of net revenues increased to 18% from 16% for the
first quarter of 2002 compared to the first quarter of 2001. The  12 
   increase was primarily due to our
continued  development of our wealth
management solutions such as Advent TrustedNetwork and Wealthline.  General and Administrative.General and administrative
expenses consist primarily of personnel costs for finance, administration,
operations and general management, as well as legal and accounting
expenses.  Our general and
administrative expenses for the first quarter of 2002 increased 36% to $4.8
million, compared with general and administrative expenses of $3.5 million for
the first quarter of 2001.  The increase
was due to increased number of personnel and related costs to support our
growth and increasing complexities of our business. General and administrative
expenses as a percentage of net revenues remained stable at 10% in the first
quarter of 2002, compared with 10% in the first quarter of 2001.  Amortization of Intangibles.  This amortization is based on the goodwill
and other intangibles we recorded in connection with our acquisitions.  We typically record goodwill and other
intangibles based on the application of established valuation techniques using
our estimates of market potential, product introductions, technology trends,
and any other relevant cash flow assumptions. 
The revenues and costs associated with the goodwill and other
intangibles have been materially consistent with these assumptions.  We periodically assess our estimates related
to the valuation model to determine if assets acquired have been impaired.  If we determine that there has been
impairment, there could be additional charges to income.  In accordance with FAS 142 issued in July
2001, we did not record any amortization of goodwill in the first quarter of
2002.  We recorded amortization of other
intangibles totaling $1.9 million in the first quarter of 2002 compared with
$0.4 million in the first quarter of 2001. 
The increase is attributed to amortization of other intangibles associated
with acquisitions of Rex Development Partners, NPO, ManagerLink.com, our
Scandanavia distributors and Kinexus Corporation.  INTEREST AND OTHER INCOME, NET  Interest and other income,
net consists primarily of interest income, as well as interest expense,
realized gains and losses on investments that are other than temporary, and
miscellaneous non-operating income and expense items.  Interest and other income, net was approximately $1.7 million in
the first quarter of 2002, compared with $1.6 million in the first quarter of
2001, reflecting a minimal increase. 
Net interest did not change significantly.  The increase included other-than-temporary net losses on
investments of $0.9 million offset by $0.6 million attributable to non-cash
fixed assets activity and a $0.3 million gain on sale of a private investment.  In May 2002, the Board of Directors of Encompys, Inc. informed us that
it has decided to sell the assets of Encompys or wind down operations.  Encompys was formed in April 2001 by
Accenture, Microsoft, Compaq and the Bank of New York to provide an
Internet-based straight-through-processing solution for the global asset
management community.  As a result,
Advent will incur a one-time non-operating charge of $8.8 million for the
quarter ended June 30, 2002.  PROVISION FOR INCOME TAXES  For the three months ended
March 31, 2002 we recorded a tax provision of $3.8 million based on our pretax
income using an effective tax rate of 34%, which is our anticipated effective
tax rate for the fiscal year 2002.  The
actual effective tax rate for the entire fiscal year could vary substantially
depending on actual results achieved. We had an effective tax rate of 34% for
fiscal 2001.  Liquidity and
Capital Resources  Our cash, cash equivalents
and short-term marketable securities at March 31, 2002 were $235.8 million,
decreasing by $52.8 million from $288.6 million at December 31, 2001. The
decrease was primarily due to payments made in connection with the Kinexus
acquisition, including a $34 million cash purchase price, $3 million in closing
costs, $3.8 million of additional contingent consideration to be held in escrow
for 14 months, $11.1 million for change-in-control separation payments and
approximately $8 million in payments for other assumed Kinexus liabilities,
partially offset by $10 million in cash generated from operations.  The
net cash of $10 million provided by operating activities for the three months
ended March 31, 2002 was primarily due to net income and increases in
depreciation and amortization partially offset by a decrease in deferred
revenue. Net cash used in investing activities of $80.7 million for the three
months ended March 31, 2002 is primarily comprised of $60 million cash paid in
connection with the purchase of Kinexus, the net acquisition of short-term
marketable securities of $10.2 million and $7.8 million paid for investments in
privately held companies. Financing activities provided $7.9 million from the
exercise of common stock options for the three months ended March 31, 2002.  13 
   At
March 31, 2002, we had $251.7 million in working capital. We currently have no
significant capital commitments other than commitments under our operating
leases.Our
operating lease commitments after 2001 have increased to $81 million for the
years 2002 through 2012, cumulatively, primarily due to a new operating leases
in signed in 2002 and leases assumed in connection with the Kinexus
acquisition.  Approximately $8 million
related to vacant Kinexus facilities was included in net liabilities assumed.  At
March 31, 2002 and December 31, 2001, we did not have any relationships with
unconsolidated entities or financial partnerships, such as entities often
referred to as structured finance or special purpose entities, which would have
been established for the purpose of facilitating off-balance sheet arrangements
or other contractually narrow or limited purposes. As such, we are not
materially exposed to any financing, liquidity, market or credit risk that
could arise if we had engaged in such relationships.  Our principal source of liquidity is our
operating cash flows, which is dependent upon continued market acceptance of
our products and services. We believe that our available sources of funds and
anticipated cash flows from operations will be adequate to finance current
operations and anticipated capital expenditures for at least the next twelve
months.   Risk Factors and
Forward-Looking Statements  Our Operating Results Fluctuate Significantly and We May Not
Be Able to Maintain Our Existing Growth Rates.  Licenses into multi-user networked environments have
increased both in individual size and number, and the timing and size of
individual license transactions are becoming increasingly important factors in
quarterly operating results. The sales cycles for these transactions are often
lengthy and unpredictable. We may not be successful in closing large license
transactions such as these on a timely basis or at all. Accordingly, because
revenues from large licenses are increasing as a portion of our net revenues,
the timing of such licenses could cause additional variability in our quarterly
operating results. Software product backlog at the beginning of any quarter
typically represents only a small portion of that quarters expected revenues.
Our expense levels are based in significant part on our expectations of future
revenues and therefore are relatively fixed in the short term. Due to the fixed
nature of these expenses combined with the relatively high gross margin
historically achieved by us on products and services, an unanticipated decline
in net revenues in any particular quarter is likely to disproportionately
adversely affect our operating results.  We have generally realized lower revenues from
license fees in the first quarter of the year than in the last quarter of the
prior year. We believe that this has been due primarily to the concentration by
some clients of larger capital purchases in the fourth quarter of the calendar
year and their lower purchasing activity during the subsequent first quarter.
We believe our annual incentive compensation plans, which tend to produce
increased year-end sales activity, compound this factor. Furthermore, we have
often recognized a substantial portion of each quarters license revenues in
the last month, weeks or even days of that quarter. As a result, the magnitude
of quarterly fluctuations in revenue or earnings may not be evident until late
in or after the close of a particular quarter and a disruption late in the
quarter may have a disproportionately large negative impact on our quarterly
results.  Because of the above factors, we believe that
period-to-period comparisons of our operating results are not necessarily
meaningful and that these comparisons cannot be relied upon as indicators of future
performance.  Our stock price has fluctuated significantly
since our initial public offering in November 1995. Like many companies in
the technology and emerging growth sector, our stock price may be subject to
wide fluctuations, particularly during times of high market volatility. If net
revenues or earnings in any quarter fail to meet the investment communitys
expectations, our stock price is likely to decline. In addition, our stock
price may be affected by trends in the financial service sector and by broader
market trends unrelated to our performance.   14 
   Our Sales Cycle Is Long and We Have Limited Ability to
Forecast the Timing and Amount of Specific Sales.  Because the purchase of our software products
often requires significant, executivelevel investment and systems
architecture decisions by prospective customers, we must generally engage in a
relatively lengthy sales effort. These transactions may be delayed during the
customer decision process because we must provide a significant level of
education to prospective customers regarding the use and benefit of our
products. As a result, the sales cycle associated with the purchase of our
software products is typically between two and twelve months depending upon the
size of the client, though it can be considerably longer, and is subject to a
number of significant risks over which we have little or no control, including
customers budgeting constraints and internal selection procedures, among other
factors. As a result of a lengthy and unpredictable sales cycle, we have
limited ability to forecast the timing and amount of specific sales. The timing
of large individual sales is especially difficult to forecast. As a result,
there can be no assurance that we will be successful in closing large license
transactions on a timely basis or at all. In addition, customers may postpone
their purchases of our existing products or product enhancements in advance of
the anticipated introduction of new products or product enhancements by us or
our competitors. Because our expenses are generally relatively fixed in the
near term, any shortfall from anticipated revenues could result in significant
variations in our operating results from quarter to quarter.  We Depend Heavily on Our Product, Axys.  In 2001, 2000, and 1999, we derived a majority of
our net revenues from the licensing of Axys, part of our Advent Office suite,
and related applications and services. In addition, many of our other
applications, such as Moxy, Qube and various data interfaces were designed to
operate with Axys to provide an integrated solution. As a result, we believe
that a majority of our net revenues, for the foreseeable future, will depend
upon continued market acceptance of Axys, enhancements or upgrades to Axys and
related products and services.  We Depend upon Financial Markets.  The target clients for our products include a
range of organizations that manage investment portfolios, including investment
advisors, brokerage firms, banks and hedge funds. In addition, we target
corporations, public funds, universities and non-profit organizations, which
also manage investment portfolios and have many of the same needs. The success
of many of our clients is intrinsically linked to the health of the financial
markets. We believe that demand for our products could be disproportionately
affected by fluctuations, disruptions, instability or downturns in the
financial markets which may cause clients and potential clients to exit the
industry or delay, cancel or reduce any planned expenditures for investment
management systems and software products. In addition, a slowdown in formation
of new investment firms or a decline in the growth of assets under management
would cause a decline in demand for our products. Any resulting decline in
demand for our products could have a material adverse effect on our business
and results of operations.  Difficulties in Integrating Our Acquisitions Could Adversely
Impact Our Business and We Face Risks Associated With Potential Acquisitions,
Investments or Divestitures.  In 2001 we completed
acquisitions of Rex Development Partners, L.P., NPO Solutions, Inc.,
ManagerLink.com and our Scandinavian distributors located in Norway, Sweden and
Denmark.  In February 2002, we completed
the acquisition of Kinexus.  Our
acquisition of Kinexus Corporation is our largest acquisition to date, and the
number of acquisitions completed in 2001 is unprecedented for us.  15 
   The complex process of integrating Kinexus
and our other acquisitions has required and will continue to require
significant resources, particularly in light of our relative inexperience
integrating acquisitions.  Integrating
these acquisitions has been and will continue to be time consuming, expensive
and disruptive to our business.  This
integration process has strained our financial and managerial controls and
reporting systems and procedures, and has resulted in the diversion of
management and financial resources from our core business objectives.  Failure to achieve the anticipated benefits
of these acquisitions or to successfully integrate the operations of these
entities could harm our business, results of operations and cash flows.  We may not realize the benefits we
anticipate from these acquisitions because of the following significant
challenges:  ·expected synergy benefits from these acquisitions,
such as lower costs or increased revenues, may not be realized or may be
realized more slowly than anticipated, particularly with regard to costs
associated with a reduction in headcount and facilities; ·potentially incompatible cultural differences
between the companies; ·incorporating these companies technologies and
products into our current and future product lines; ·geographic dispersion of operations and the
complexities of international operations; ·integrating the technical teams of these companies
with our engineering organizations; ·generating market demand for an expanded product
line; ·integrating the products of these companies with our
business, because we do not have distribution, manufacturing, marketing or
support experience for these products; ·the difficulty of leveraging our combined
technologies and capabilities across all product lines and customer bases; and ·our inability to retain previous customers or
employees of these entities.  We have incurred and expect to continue to
incur significant costs and commit significant management time integrating the
operations, technology, development programs, products, information systems,
customers and personnel of these acquisitions. 
These costs have been and will likely continue to be substantial and
include costs for:  ·integrating and reorganizing operations, including
combining teams, facilities and processes in various functional areas; ·identifying duplicative or redundant resources and
facilities, developing plans for resource consolidation and implementing those
plans; ·fees and expenses of professionals and consultants
involved in completing the integration process; ·settling existing liabilities of these companies; ·uncovering through our audit process new issues
reflected on the companies financial statements; ·costs associated with vacating, subleasing and
closing facilities; ·employee relocation, redeployment or severance
costs; ·integrating technology and products; and ·other transaction costs associated with the
acquisition, including financial advisor, attorney, accountant and exchange
agent fees.  We may make additional acquisitions of
complementary companies, products or technologies in the future which would
further exacerbate these issues.  In
addition, we continually evaluate the performance of all our products and
product lines and may sell or discontinue current products or product
lines.  Failure to achieve the
anticipated benefits of any future acquisition or divestiture could also harm
our business, results of operations and cash flows.  Furthermore, we may have to incur debt, write-off investments,
infrastructure costs or other assets, incur severance liabilities, write-off
impaired goodwill or other intangible assets or issue equity securities to pay
for any future acquisitions.  The
issuance of equity securities could dilute our existing stockholders ownership.  Finally, we may not identify suitable businesses
to acquire or negotiate acceptable terms for acquisitions.   16 
  Difficulties We May Encounter Managing a
Substantially Larger Business Could Adversely Affect Our Operating Results. Our business has grown in recent
years through both internal expansion and acquisitions, and that growth along
with any continued growth may cause a significant strain on our infrastructure,
internal systems and managerial resources. For example, during the last 18 months,
we acquired Rex Development Partners, L.P., NPO Solutions, Inc.,
ManagerLink.com, our Scandinavian distributors located in Norway, Sweden and
Denmark and Kinexus. Further, our headcount increased from 481 employees at
December 31, 1998 to 837 employees at December 31, 2001. To manage
our growth effectively, we must continue to improve and expand our
infrastructure, including operating and administrative systems and controls,
and continue managing headcount, capital and processes in an efficient manner.
Our productivity and the quality of our products may be adversely affected if
we do not integrate and train our new employees quickly and effectively and
coordinate among our executive, engineering, finance, marketing, sales,
operations and customer support organizations, all of which add to the
complexity of our organization and increase our operating expenses. In
addition, our revenues may not grow at a sufficient rate to absorb the costs
associated with a larger overall headcount. Integrating our recent acquisitions
will complicate these tasks. For example, we are currently converting and
integrating Kinexuss information systems with ours, which is a complex and
time-consuming process.  Writing Off
Investments Could Harm Our Results of Operations  In addition, we have made investments in private companies which we
classify as Other assets in our balance sheet. The value of these investments
is influenced by many factors, including the operating effectiveness of these
companies, the overall health of these companies industries, the strength of
the private equity markets and general market conditions. Due to these and
other factors, we have previously determined, and may in the future determine,
that the value of these investments is impaired, which has caused and would
cause us to write down the stated value of these investments. Further, we
cannot assure you that future investment, license, fixed asset or other asset
write-downs will not happen. If future write-downs do occur, they could harm
our business and results of operations.  General Economic Conditions May Reduce Our Revenues.  We believe that the market for large management
software systems may be negatively impacted by a number of factors, including
reductions in capital expenditures by large customers; poor performance of
major financial markets, and increasing competition.  Those factors may, in turn, give rise to a number of market
trends that may slow revenue growth across the industry, including longer sales
cycles, deferral or delay of information technology projects and generally
reduced expenditures for software and related services, and increased price
competition.  If the current economic slowdown continues, the
presence of these factors in the market for large management software systems
could materially adversely affect our business and results of operations.   17 
   Business Interruptions Could Adversely Affect Our Business.  Our operations are exposed to interruption by
fire, earthquake, power loss, telecommunications failure, and other events
beyond our control.  Additionally,
we are vulnerable to interruption caused by political and terrorist
incidents.  For example, our facilities
in New York were temporarily closed due to the September 11, 2001 terrorist
attacks.Immediately after the
terrorist attacks, our clients who were located in the World Trade Center area
were concentrating on disaster recovery rather than licensing additional
software components, while the grounding of transportation impeded our ability
to deliver professional services at client sites.  Additionally, during the temporary closure of the U.S. stock
markets, our clients did not use our market data services. Such
interruptions could affect our ability to sell and deliver products and
services and other critical functions of our business and could seriously harm
us.  Further, such attacks could cause
instability in the financial markets upon which we depend.  We Are Continuing to Expand Our Internet Based  Enabled Solutions, such as Advent
TrustedNetwork and Wealthline.  To take advantage of the internet, we are
continuing to develop solutions  to
bring internetbased products and services to our clients.  As we develop these new products and
services, we have entered, and will continue to enter, into development
agreements with information providers, clients or other companies in order to
accelerate the delivery of new products and services. We may not be successful
in marketing our internet services or in developing other internet services.
Additionally, we may not be successful in being able to replace our current
technology with new technology.  Our
failure to do so could seriously harm our business. In addition, we cannot assure
you that there will not be disruptions in internet services beyond our control
or that of our third party vendors. Any such disruptions could harm our
business.  Security Risks and Concerns May Deter the Use of the Internet
for Conducting Business.  A significant barrier to commerce and communications
over public networks is the secure transmission of confidential information.
Advances in computer capabilities, new discoveries in the field of cryptography
or other events or developments could result in compromises or breaches of our
security systems or those of other web sites to protect proprietary
information. If any well-publicized compromises of security were to occur, it
could have the effect of substantially reducing the use of the internet for
commerce and communications. Anyone who circumvents our security measures could
misappropriate proprietary information or cause interruptions in our services
or operations. The internet is a public network, and data is sent over this
network from many sources. In the past, computer viruses, software programs
that disable or impair computers, have been distributed and have rapidly spread
over the internet. Computer viruses could be introduced into our systems or
those of our customers or other third parties, which could disrupt or make it
inaccessible to customers. We may be required to expend significant capital and
other resources to protect against the threat of security breaches or to
alleviate problems caused by breaches. To the extent that our activities may
involve the storage and transmission of proprietary information, security
breaches could expose us to a risk of loss or litigation and possible
liability. Our security measures may be inadequate to prevent security
breaches, and our business would be harmed if our security is breached  We Face Risks Related to Our New Business Areas.  We have expanded in recent periods into a number
of new business areas to foster long-term growth including international
operations, strategic alliances, and Advent TrustedNetwork. These areas are
still relatively new to our product development and sales personnel. New
business areas require significant management time and resources prior to
generating significant revenues and may divert management from our core
business. There is no assurance that we will compete effectively or will
generate significant revenues in these areas. The success of our ability to
develop and market new internet based products and services, such as Advent
TrustedNetwork, and Wealthline, is difficult to predict because it represents a
new area of business for our entire industry. Additionally, to help manage our
growth, we will need to continually improve our operational, financial,
management and information systems and controls.  We Expect Our Gross and Operating Margins May Fluctuate over
Time.  We expect that our gross and operating margins
may fluctuate from period to period as we continue to introduce new products,
change  our professional services
organization and associated revenue, continue to hire and acquire additional
personnel and increase other expenses to support our business.. Because these
expenses are relatively fixed in the short term, a fluctuation in revenue could
lead to operating results differing from expectations.  18 
   We Must Continue to Introduce New Products and Product
Enhancements.  The market for our products is characterized by
rapid technological change, changes in customer demands and evolving industry
standards. As a result, our future success will continue to depend upon our
ability to develop new products or product enhancements that address the future
needs of our target markets and to respond to these changing standards and
practices. We may not be successful in developing, introducing and marketing
new products or product enhancements on a timely and cost effective basis, or
at all, and our new products and product enhancements may not adequately meet
the requirements of the marketplace or achieve market acceptance. Delays in the
commencement of commercial shipments of new products or enhancements may result
in client dissatisfaction and delay or loss of product revenues. If we are
unable, for technological or other reasons, to develop and introduce new
products or enhancements of existing products in a timely manner in response to
changing market conditions or client requirements, or if new products or new
versions of existing products do not achieve market acceptance, our business
would be seriously harmed. In addition, our ability to develop new products and
product enhancements is dependent upon the products of other software vendors,
including certain system software vendors, such as Microsoft Corporation,
database vendors and development tool vendors. If the products of such vendors
have design defects or flaws, or if such products are unexpectedly delayed in
their introduction, our business could be seriously harmed. Software products
as complex as those offered by us may contain undetected defects or errors when
first introduced or as new versions are released. Although we have not
experienced adverse effects resulting from any software errors, we cannot
assure you that, despite testing by us and our clients, defects or errors will
not be found in new products after commencement of commercial shipments,
resulting in loss of or delay in market acceptance, which could seriously harm
our business.  If Our Relationship with Interactive Data Is Terminated, Our
Business May Be Harmed.  Many of our clients use our proprietary interface
to electronically retrieve pricing and other data from Interactive Data.
Interactive Data pays us a commission based on their revenues from providing
this data to our clients. Our software products have been customized to be
compatible with their system and this software would need to be redesigned if
their services were unavailable for any reason. Termination of our agreement
with Interactive Data would require at least two years notice by either us or
them, or 90 days in the case of material breach. If our relationship with
Interactive Data were terminated or their services were unavailable to our
clients for any reason, replacing these services could be costly and time
consuming.  We Face Intense Competition.  The market for investment management software is
intensely competitive and highly fragmented, subject to rapid change and highly
sensitive to new product introductions and marketing efforts by industry
participants. Our competitors include providers of software and related
services as well as providers of timeshare services.  Our competitors vary in size, scope of services
offered and platforms supported. In addition, we compete indirectly with
existing and potential clients, many of whom develop their own software for
their particular needs and therefore may be reluctant to license software
products offered by independent vendors like us. Many of our competitors have
longer operating histories and greater financial, technical, sales and
marketing resources than we do. In addition, we also face competition from
potential new entrants into our market who may develop innovative technologies
or business models. We cannot guarantee that we will be able to compete
successfully against current and future competitors or that competitive
pressures will not result in price reductions, reduced operating margins and
loss of market share, any one of which could seriously harm our business.  We Face Challenges in Expanding Our International Operations.  We market and sell our products in the United
States and, to a lesser extent, internationally. In November 1998, we
established a subsidiary located in Australia, Advent Australia Pty. Ltd., to
market and license our products in Australia. In addition, we entered into a
distributor relationship in 1999 with Advent Europe, an independent distributor
of our products in selected European markets. 
In November 2001, we acquired the Norwegian, Swedish, and Danish
companies of this independent distributor. 
In order to further expand our international operations, we will need to
continue to establish additional facilities, acquire other businesses or enter
into additional distribution relationships in other parts of the world. The
expansion of our existing international operations and entry into additional
international markets will require significant management attention and
financial resources. We cannot be certain that our  19 
   establishment of
facilities in other countries will produce desiredlevelsof revenue. We currently have limited experience
in developing localized versions of our products and marketing and distributing
our products internationally. In addition, international operations are subject
to other inherent risks, including:  ·The impact of recessions in
economies outside the United States; ·Greater difficulty in accounts
receivable collection and longer collection periods; ·Unexpected changes in
regulatory requirements; ·Difficulties in successfully
adapting our products to the language, regulatory and technology standards of
other countries; ·Difficulties and costs of
staffing and managing foreign operations; ·Reduced protection for
intellectual property rights in some countries; ·Potentially adverse tax
consequences; and ·Political and economic
instability.  The revenues, expenses, assets and liabilities of
our international subsidiaries are primarily denominated in local currencies.
We have not historically undertaken foreign exchange hedging transactions to
cover potential foreign currency exposure. Future fluctuations in currency
exchange rates may adversely affect revenues from international sales and the
U.S. dollar value of our foreign subsidiaries revenues, expenses, assets and
liabilities.  Our international revenues
from our distributors are generally denominated in U.S. dollars.  Undetected Software Errors or Failures Found in New Products
May Result in Loss of or Delay in Market Acceptance of Our Products That Could
Seriously Harm Our Business.  Our products may contain undetected software
errors or failures when first introduced or as new versions are released.
Despite testing by us and by current and potential customers, errors may not be
found in new products until after commencement of commercial shipments,
resulting in loss of or a delay in market acceptance, which could seriously
harm our business.  If We Are Unable to Protect Our Intellectual Property We May
Be Subject to Increased Competition That Could Seriously Harm Our Business.  Our success depends significantly upon our
proprietary technology. We currently rely on a combination of copyright and
trademark laws, trade secrets, confidentiality procedures and contractual
provisions to protect our proprietary rights. We have registered trademarks for
many of our products and services and will continue to evaluate the registration
of additional trademarks as appropriate. We generally enter into
confidentiality agreements with our employees and with our resellers and
customers. We seek to protect our software, documentation and other written
materials under trade secret and copyright laws, which afford only limited
protection. Despite these efforts, it may be possible for unauthorized third
parties to copy certain portions of our products or to reverse engineer or
otherwise obtain and use our proprietary information. We do not have any
patents, and existing copyright laws afford only limited protection. In
addition, we cannot be certain that others will not develop substantially
equivalent or superseding proprietary technology, or that equivalent products
will not be marketed in competition with our products, thereby substantially
reducing the value of our proprietary rights. We cannot assure you that we will
develop proprietary products or technologies that are patentable, that any
patent, if issued, would provide us with any competitive advantages or would
not be challenged by third parties, or that the patents of others will not
adversely affect our ability to do business.  Litigation may be necessary to protect our
proprietary technology. This litigation may be time-consuming and expensive.
Despite our efforts to protect our proprietary rights, unauthorized parties may
attempt to copy aspects of our products or to obtain and use information that
we regard as proprietary. In addition, the laws of some foreign countries do
not protect proprietary rights to as great an extent as do the laws of the
United States. We cannot assure you that our means of protecting our
proprietary rights will be adequate or that our competitors will not
independently develop similar technology, duplicate our products or design
around any patent that may be issued to us or other intellectual property
rights of ours.  20 
   We Must Retain Key Employees and Recruit Qualified Technical
and Sales Personnel.  We
believe that our success will depend on the continued employment of our senior
management and key technical personnel, none of who has an employment agreement
with us. Additionally, our continued success depends, in part, on our ability
to identify, attract, motivate and retain qualified technical, sales and other
personnel. Because our future success is dependent on our ability to continue
to enhance and introduce new products, we are particularly dependent on our
ability to identify, attract, motivate and retain qualified engineers with the
requisite education, backgrounds and industry experience. Competition for
qualified engineers, particularly in Northern California and the San Francisco
Bay Area, is intense. The loss of the services of a significant number of our
engineers or sales people could be disruptive to our development efforts or
business relationships and could seriously harm our business.   Item 3. Quantitative and Qualitative Disclosures About
Market Risk  We are exposed to financial market risks, including
changes in foreign currency exchange rates and interest rates.  Much of our revenue and capital spending is
transacted in U.S. dollars. However, since the formation of Advent Australia,
Advent Denmark, Advent Norway and Advent Sweden, whose revenues and capital
spending are transacted in local country currencies, we have greater exposure
to foreign currency fluctuations. 
Results of operations from Advent Australia, Advent Denmark, Advent
Norway and Advent Sweden are not material to our operating results; therefore,
we believe that foreign currency exchange rates should not materially adversely
affect our overall financial position, results of operations or cash
flows.  We believe that the fair value
of our investment portfolio or related income would not be significantly
impacted by increases or decreases in interest rates due mainly to the
short-term nature of our investment portfolio. However, immediate sharp
increases in interest rates could have a material adverse affect on the fair
value of our investment portfolio. 
Conversely, immediate sharp declines in interest rates could seriously
harm interest earnings of our investment portfolio.  The
table below presents principal amounts by expected maturity (in U.S. dollars)
and related weighted average interest rates by year of maturity for our
investment portfolio.  Estimated
  Fair Value
  at March
  31,2003
  
  2004
  
  2005
  
  TotalFederal Instruments
  
  7,601,000
  
  14,250,000
  
  12,200,000
  
  34,051,000Weighted Average Interest Rate
  
  5.65
  %
  3.21
  %
  3.81
  %Commercial Paper & Short-term obligations
  
  64,370,000
  
  64,370,000Weighted Average Interest Rate
  
  1.99
  %Corporate Notes & Bonds
  
  28,526,000
  
  16,255,000
  
  8,391,000
  
  53,172,000Weighted Average Interest Rate
  
  4.60
  %
  6.75
  %
  6.39
  %Municipal Notes & Bonds
  
  1,000,000
  
  27,590,000
  
  5,245,000
  
  33,835,000Weighted Average Interest Rate
  
  5.70
  %
  5.39
  %
  5.78
  %Total Portfolio, excluding equity securities
  
  101,497,000
  
  58,095,000
  
  25,836,000
  
  185,428,000  At March 31, 2002, cash, cash equivalents and short-term
marketable securities totaled approximately $235.8 million, which is comprised
of the $185.4 million in our investment portfolio presented above and $50.4
million in other cash and cash equivalents.  We
also invested in numerous privately held companies, many of which can still be
considered in the start-up or development stages which are classified as other
assets in our balance sheet. These investments are inherently risky as the
market for the technologies or products they have under development are
typically in the early stages and may never materialize.  The value of these investments is influenced
by many factors, including the operating effectiveness of these companies, the
overall health of the companies industries, the strength of the private equity
markets and general market conditions. 
We could lose our entire initial investment in these companies.   21 
   PART II. OTHER INFORMATION  Item 1.    Legal Proceedings(MELISSA TO UPDATE)  From time to time we are involved in
litigation incidental to the conduct of our business. We are not party to any
lawsuit or proceeding that, in our opinion, is likely to seriously harm our
business.  On November 8, 2001, Charles Schwab & Co,
Inc. (Schwab) filed suit against us alleging claims for declaratory relief,
anticipatory breach of contract and breach of the covenant of good faith and
fair dealing, arising from our intention to cease maintenance of an existing
software interface that allows institutional investment customers to download
data received from Schwabs systems into our software product used by the
investment customers. We intended to cease maintenance of the existing interface
and to transition to a new, and what we believe to be improved, software
interface (the Advent Custodial Data or ACD system). On December 11, 2001,
Schwab filed a motion for preliminary injunction seeking to enjoin us from
ceasing maintenance of the existing interface.  For
nearly the entire period from February 8, 2002 through May 3, 2002, the parties
agreed not to engage each other in litigation-related activity so that the
parties could pursue settlement negotiations. 
On March 15, 2002, we voluntarily agreed to extend maintenance of the
existing interface through December 30, 2002. 
On May 6, 2002, we filed our answer to Schwabs complaint and filed a
cross-complaint against Schwab for tortious interference with contractual
relations, tortious interference with prospective business advantage, unfair
competition in violation of the California Business and Professions Code, and
common law unfair competition.  The
parties are currently pursuing settlement negotiations.  At this time it is too early to predict the
outcome of these negotiations or estimate any potential losses from this
action.   Item 2.    Changes
in Securities  In February
2002, we acquired Kinexus Corporation of New York, New York.  Consideration included a warrant to purchase
165,176 shares of our Common Stock and a potential earn-out to be paid in cash
or stock at Advents election.  The
warrant exercise price was $0.01 per share and was immediately exercisable,
with an expiration date of January 1, 2003. 
The warrant was exercised in February 2002.  Advent relied upon the exemptions from registration provided by
Section 4(2) under the Securities Act of 1933, as amended, for such issuances.  Item 3.    Defaults
Upon Senior Securities  None.  Item 4.    Submission
of Matters to a Vote of Security Holders  None.  Item 5.    Other Information  None.  22 
   Item 6.    Exhibits
And Reports On Form 8-K  (a)Exhibits  10.1  Advent Software, Inc. 2002 Stock Plan  (b)Reports on Form
8-K  A
report on Form 8-K was filed on March 1, 2002 regarding the completion of the
acquisition of Kinexus Corporation on February 14, 2002. The financial
statements required for such report were filed by amendment on April 30, 2002
on Form 8-K/A.  23 
   SIGNATURES  Pursuant to the requirements of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned thereunto duly authorized.    ADVENT
  SOFTWARE, INC.Dated:May 15, 2002
  By:
  /s/
  IRV H. LICHTENWALDIrv
  H. LichtenwaldExecutive
  Vice President,Chief
  Financial Officerand
  Secretary(Principal
  Financial Officer)Dated:May 15, 2002
  By:
  /s/
  PATRICIA VOLLPatricia
  VollVice
  President of Finance   24