UNITED
      STATES


SECURITIES
      AND EXCHANGE COMMISSION


Washington,
      D.C. 20549





FORM
      10-Q





Quarterly
      Report Pursuant to Section 13 or 15(d)


of
      the
      Securities Exchange Act of 1934





For
      the
      quarterly period ended March 31, 2007


Commission
      file number 0-9993




**MICROS
      SYSTEMS, INC.**


(Exact
      name of Registrant as specified in its charter)





MARYLAND
            
            52-1101488(State
                of incorporation)
            
            (I.R.S.
                Employer Identification Number)





7031
                Columbia Gateway Drive, Columbia, Maryland
            
            21046-2289(Address
                of principal executive offices)
            
            (Zip
                code)




Registrant’s
      telephone number, including area code: 443-285-6000




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 report(s)), and (2) has been subject to such filing requirements
      for the past 90 days.





YES þ   NO o




Indicate
      by check mark whether the Registrant is a large accelerated filer, an
      accelerated filer, or a non-accelerated filer. See definition of “accelerated
      filer and large accelerated filer” in Rule 12b-2 of the Exchange
      Act.





Large
      accelerated filer þ   Accelerated
      filer o   Non-accelerated
      filer o





Indicate
      by check mark whether the registrant is a shell company (as defined in Rule
      12b-2 of the Exchange Act).





YES o   NO þ





As
      of
      April 30, 2007, there were issued and outstanding 40,519,998 shares of
      Registrant’s Common Stock, at $0.0125 par value.




1


MICROS
      SYSTEMS, INC. AND SUBSIDIARIES





**Form
      10-Q**


For
      the
      three months and nine months ended March 31, 2007




**PART
      I - FINANCIAL INFORMATION**




**ITEM
      1.**  **FINANCIAL
      STATEMENTS**




2




MICROS
      SYSTEMS, INC. AND SUBSIDIARIES


CONDENSED
      CONSOLIDATED BALANCE SHEETS


(Unaudited,
      in thousands, except per share data)




March
                31,
              2007
            
            June
                30,
              2006ASSETSCurrent
                Assets:Cash
                and cash equivalents
            
            $
            301,101
            
            $
            237,222Accounts
                receivable, net of allowance for doubtful accounts of$23,894
                at March 31, 2007 and $20,335 at June 30, 2006
            
            
            180,174
            
            
            141,159Inventory,
                net
            
            
            44,229
            
            
            46,637Deferred
                income taxes
            
            
            18,700
            
            
            16,649Prepaid
                expenses and other current assets
            
            
            28,689
            
            
            15,485Total
                current assets
            
            
            572,893
            
            
            457,152Property,
                plant and equipment, net of accumulated depreciation andamortization
                of $73,124 at March 31, 2007 and $65,582 at June 30, 2006
            
            
            26,977
            
            
            23,794Deferred
                income taxes, non-current
            
            
            11,569
            
            
            16,192Goodwill
            
            
            140,425
            
            
            98,581Intangible
                assets, net of accumulated amortization of $3,704 at March 31,
                2007and
                $2,592 at June 30, 2006
            
            
            16,044
            
            
            10,427Purchased
                and internally developed software costs, net of
                accumulatedamortization
                of $49,940 at March 31, 2007 and $43,267 at June 30, 2006
            
            
            37,759
            
            
            38,328Other
                assets
            
            
            4,357
            
            
            3,383Total
                assets
            
            $
            810,024
            
            $
            647,857LIABILITIES
                AND SHAREHOLDERS' EQUITYCurrent
                Liabilities:Bank
                lines of credit
            
            $
            2,879
            
            $
            2,134Accounts
                payable
            
            
            34,097
            
            
            36,022Accrued
                expenses and other current liabilities
            
            
            109,025
            
            
            84,897Current
                portion of capital lease obligations
            
            
            427
            
            
            89Income
                taxes payable
            
            
            7,480
            
            
            12,416Deferred
                income taxes
            
            
            199
            
            
            227Deferred
                service revenue
            
            
            92,406
            
            
            68,246Total
                current liabilities
            
            
            246,513
            
            
            204,031Capital
                lease obligations, net of current portion
            
            
            401
            
            
            424Deferred
                income taxes, non-current
            
            
            15,527
            
            
            14,998Other
                non-current liabilities
            
            
            9,663
            
            
            8,146Minority
                interests
            
            
            4,014
            
            
            3,142Commitments
                and contingenciesShareholders'
                Equity:Common
                stock, $0.0125 par value; authorized 50,000 shares; issued
                andoutstanding
                40,676 at March 31, 2007 and 38,980 at June 30, 2006
            
            
            508
            
            
            487Capital
                in excess of par
            
            
            155,083
            
            
            100,723Retained
                earnings
            
            
            355,426
            
            
            302,848Accumulated
                other comprehensive income
            
            
            22,889
            
            
            13,058Total
                shareholders' equity
            
            
            533,906
            
            
            417,116Total
                liabilities and shareholders' equity
            
            $
            810,024
            
            $
            647,857


The
        accompanying notes are an integral part of the condensed consolidated financial
        statements.


3




MICROS
      SYSTEMS, INC. AND SUBSIDIARIES


CONDENSED
        CONSOLIDATED STATEMENTS OF OPERATIONS
 (Unaudited,
          in thousands, except per share data)


Three
                Months Ended
              March
                31,
            
            Nine
                Months Ended
              March
                31,2007
            
            2006
            
            2007
            
            2006Revenue:Hardware
            
            $
            58,541
            
            $
            56,087
            
            $
            168,144
            
            $
            152,585Software
            
            
            34,032
            
            
            28,788
            
            
            94,540
            
            
            85,045Services
            
            
            107,983
            
            
            86,266
            
            
            301,448
            
            
            249,493Total
                revenue
            
            
            200,556
            
            
            171,141
            
            
            564,132
            
            
            487,123Cost
                of sales:Hardware
            
            
            37,745
            
            
            38,234
            
            
            107,981
            
            
            103,371Software
            
            
            7,597
            
            
            6,051
            
            
            21,593
            
            
            18,458Service
            
            
            50,199
            
            
            41,773
            
            
            142,020
            
            
            119,978Total
                cost of sales
            
            
            95,541
            
            
            86,058
            
            
            271,594
            
            
            241,807Gross
                margin
            
            
            105,015
            
            
            85,083
            
            
            292,538
            
            
            245,316Selling,
                general and administrative expenses
            
            
            65,897
            
            
            54,163
            
            
            186,624
            
            
            157,851Research
                and development expenses
            
            
            8,943
            
            
            6,548
            
            
            23,834
            
            
            19,305Depreciation
                and amortization
            
            
            2,961
            
            
            2,450
            
            
            9,122
            
            
            7,557Total
                operating expenses
            
            
            77,801
            
            
            63,161
            
            
            219,580
            
            
            184,713Income
                from operations
            
            
            27,214
            
            
            21,922
            
            
            72,958
            
            
            60,603Non-operating
                income (expense):Interest
                income
            
            
            2,689
            
            
            1,289
            
            
            7,521
            
            
            3,276Interest
                expense
            
            
            (94
            )
            
            (32
            )
            
            (284
            )
            
            (107
            )Other
                income (expense), net
            
            
            136
            
            
            173
            
            
            120
            
            
            (561
            )Total
                non-operating income, net
            
            
            2,731
            
            
            1,430
            
            
            7,357
            
            
            2,608Income
                before taxes, minority interests and equity in net earnings of
                affiliates
            
            
            29,945
            
            
            23,352
            
            
            80,315
            
            
            63,211Income
                tax provision
            
            
            10,156
            
            
            7,589
            
            
            26,893
            
            
            20,544Income
                before minority interests and equity in net earnings of
                affiliates
            
            
            19,789
            
            
            15,763
            
            
            53,422
            
            
            42,667Minority
                interests and equity in net earnings of affiliates
            
            
            (339
            )
            
            (169
            )
            
            (844
            )
            
            (517
            )Net
                income
            
            $
            19,450
            
            $
            15,594
            
            $
            52,578
            
            $
            42,150Net
                income per common share:Basic
            
            $
            0.48
            
            $
            0.40
            
            $
            1.32
            
            $
            1.09Diluted
            
            $
            0.47
            
            $
            0.38
            
            $
            1.28
            
            $
            1.04Weighted-average
                number of shares outstanding:Basic
            
            
            40,582
            
            
            38,914
            
            
            39,802
            
            
            38,619Diluted
            
            
            41,673
            
            
            40,730
            
            
            41,196
            
            
            40,648




The
      accompanying notes are an integral part of the condensed consolidated financial
      statements.




4




MICROS
      SYSTEMS, INC. AND SUBSIDIARIES


CONDENSED
        CONSOLIDATED STATEMENTS OF CASH FLOWS
 (Unaudited,
          in thousands)


Nine
                Months Ended
              March
                31,2007
            
            2006Net
                cash flows provided by operating activities
            
            $
            67,245
            
            $
            67,931Cash
                flows from investing activities:Cash
                paid for acquisitions, net of cash acquired
            
            
            (35,994
            )
            
            (13,200
            )Purchases
                of property, plant and equipment
            
            
            (9,058
            )
            
            (8,281
            )Internally
                developed software
            
            
            (1,381
            )
            
            (3,410
            )Purchases
                of other intangible assets
            
            
            -
            
            
            (575
            )Disposal
                of property, plant and equipment
            
            
            331
            
            
            101Net
                cash flows used in investing activities
            
            
            (46,102
            )
            
            (25,365
            )Cash
                flows from financing activities:Proceeds
                from stock option exercises
            
            
            31,369
            
            
            15,897Realized
                excess tax benefits from stock option exercises
            
            
            15,653
            
            
            12,195Repurchases
                of stock
            
            
            (2,395
            )
            
            (40,205
            )Principal
                payments on lines of credit
            
            
            (3,124
            )
            
            (628
            )Proceeds
                from lines of credit
            
            
            1,650
            
            
            -Dividends
                to minority owners
            
            
            (299
            )
            
            (262
            )Net
                decrease in capital lease obligations
            
            
            (88
            )
            
            (70
            )Net
                cash flows provided by (used in) financing activities
            
            
            42,766
            
            
            (13,073
            )Effect
                of exchange rate changes on cash and cash equivalents
            
            
            (30
            )
            
            (16
            )Net
                increase in cash and cash equivalents
            
            
            63,879
            
            
            29,477Cash
                and cash equivalents at beginning of period
            
            
            237,222
            
            
            153,521Cash
                and cash equivalents at end of period
            
            $
            301,101
            
            $
            182,998


The
        accompanying notes are an integral part of the condensed consolidated financial
        statements.
  5
  MICROS
        SYSTEMS, INC. AND SUBSIDIARIES
 CONDENSED
          CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY AND COMPREHENSIVE
          INCOME
 (Unaudited,
            in thousands)
  AccumulatedCapital
              
              
              
              OtherCommon
                  Stock
              
              in
                  Excess
              
              Retained
              
              ComprehensiveShares
              
              Amount
              
              of
                  Par
              
              Earnings
              
              Income
              
              TotalBalance,
                  June 30, 2006
              
              
              38,980
              
              $
              487
              
              $
              100,723
              
              $
              302,848
              
              $
              13,058
              
              $
              417,116Comprehensive
                  income:Net
                  income
              
              
              -
              
              
              -
              
              
              -
              
              
              52,578
              
              
              -
              
              
              52,578Foreign
                  currency translation adjustments
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              9,831
              
              
              9,831Total
                  comprehensive income
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              62,409Share-based
                  compensation
              
              
              -
              
              
              -
              
              
              9,273
              
              
              -
              
              
              -
              
              
              9,273Stock
                  issued upon exercise of options
              
              
              1,758
              
              
              22
              
              
              31,347
              
              
              -
              
              
              -
              
              
              31,369Repurchases
                  of stock
              
              
              (62
              )
              
              (1
              )
              
              (2,394
              )
              
              -
              
              
              -
              
              
              (2,395
              )Income
                  tax benefit from options exercised
              
              
              -
              
              
              -
              
              
              16,134
              
              
              -
              
              
              -
              
              
              16,134Balance,
                  March 31, 2007
              
              
              40,676
              
              $
              508
              
              $
              155,083
              
              $
              355,426
              
              $
              22,889
              
              $
              533,906
  The
        accompanying notes are an integral part of the condensed consolidated financial
        statements.
  6


MICROS
      SYSTEMS, INC. AND SUBSIDIARIES


NOTES
      TO
      CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


For
      the
      three months and nine months ended March 31, 2007


(unaudited)




1.  Basis
      of
      presentation





The
      accompanying condensed consolidated financial statements of MICROS Systems,
      Inc.
      and its subsidiaries (collectively, the “Company”) have been prepared by the
      Company pursuant to the rules and regulations of the Securities and Exchange
      Commission (“SEC”). This Quarterly Report on Form 10-Q should be read in
      conjunction with the Company’s Annual Report on Form 10-K for the year ended
      June 30, 2006.





Certain
      information and footnote disclosures that are normally included in financial
      statements prepared in accordance with generally accepted accounting principles
      have been condensed or omitted as permitted by SEC rules and regulations. The
      condensed consolidated financial statements included in this report reflect
      all
      normal and recurring adjustments that, in the opinion of management, are
      necessary for a fair statement of the financial position of the Company, its
      results of operations and cash flows for the interim periods set forth herein.
      The results for the three and nine months ended March 31, 2007 are not
      necessarily indicative of the results to be expected for the full year or any
      future periods.





2.  Acquisitions





In
      January 2007, the Company acquired the RedSky IT Hospitality-Travel and RedSky
      IT Retail subsidiaries (together “RedSky”) of RedSky IT for a total cash
      purchase price of approximately $30.5 million. Approximately $4.8 million of
      the
      total purchase price is currently held in escrow to satisfy certain claims
      the
      Company may have against RedSky. Any amounts remaining in the escrow account
      13
      months after closing on RedSky will be paid to the sellers. Headquartered in
      the
      United Kingdom, the acquired companies provide hotel property management
      software solutions targeted toward the limited-service, independent and economy
      hotel markets, and software solutions for the grocery industry. Goodwill of
      approximately $30.9 million and intangible assets of approximately $8.9 million
      were recorded in connection with the acquisition. The purchase price allocation
      is not finalized and is subject to adjustments.





Additionally,
      during the nine months ended March 31, 2007, the Company acquired various
      distributors of MICROS products and services and two other companies with
      complementary products and services. The aggregate cash purchase price for
      these
      acquisitions was approximately $9.7 million, which includes certain amounts
      that
      were held back to be released on either an agreed upon date or upon the
      resolution of contractual indemnity obligations of the sellers.





The
      aggregate total assets acquired in acquisitions discussed above included total
      cash of approximately $1.9 million, total goodwill of approximately $40.1
      million and total intangible assets of approximately $10.3 million. The pro
      forma effect on operating results due to these acquisitions was not material
      to
      the consolidated financial position and results of operations presented
      herein.





3.  Share-based
      compensation





The
      Company has incentive and non-qualified stock options outstanding that were
      granted to directors, officers, and other employees pursuant to authorization
      by
      the Board of Directors. Currently, options are granted to those directors who
      are either employees of or consultants to the Company. The exercise price per
      share of each option equals the market value of a share of the Company’s common
      stock on the date of the grant. Substantially all of the options granted are
      exercisable pursuant to a three-year vesting schedule whereby one-third of
      the
      options vest upon the first anniversary of the grant, the second third of the
      options vest upon the second anniversary of the grant, and the final third
      of
      the options vest upon the third anniversary of the grant. All outstanding
      options expire ten years from the date of grant. Since its inception
      in 1991, the Company has authorized approximately 16.4 million shares for
      issuance upon exercise of options, of which approximately 1.6 million shares
      were available for future grants as of March 31, 2007. As of March 31, 2007,
      options to purchase approximately 3.7 million shares were outstanding, including
      currently exercisable options to purchase approximately 2.2 million
      shares.





7


The
      Company accounts for its option awards in accordance with Statement of Financial
      Accounting Standards (“SFAS”) No. 123(R), “Share-Based Payment.” The estimated
      fair value of awards granted under the stock option program are measured, and
      non-cash share-based compensation expense adjusted for expected pre-vesting
      forfeitures are recognized ratably over the requisite service period of options
      in the consolidated statements of operations. In addition, non-cash share-based
      compensation expense is recognized for the non-vested portion of awards that
      were granted before the effective date of SFAS No. 123(R) as those options
      become vested. The non-cash share-based compensation expenses, net of tax,
      reduced the diluted earnings per share by $0.07 and $0.06 for the three months
      ended March 31, 2007 and 2006, respectively, and by $0.17 and $0.12 for the
      nine
      months ended March 31, 2007 and 2006, respectively.





The
      non-cash share-based compensation expenses included in the condensed
      consolidated statements of operations are as follows:





Three
                Months Ended March 31,
            
            Nine
                Months Ended March 31,(in
                thousands)
            
            2007
            
            2006
            
            2007
            
            2006Cost
                of sales
            
            $
            0
            
            $
            25
            
            $
            0
            
            $
            25Selling,
                general and administrative
            
            
            3,581
            
            
            2,329
            
            
            8,851
            
            
            6,359Research
                and development
            
            
            182
            
            
            73
            
            
            422
            
            
            143Non-cash
                share-based compensation expense
            
            $
            3,763
            
            $
            2,427
            
            $
            9,273
            
            $
            6,527





The
      non-cash share-based compensation expenses for the three and nine months ended
      March 31, 2007 include a one-time charge of approximately $0.7 million resulting
      from the accelerated vesting of unvested options due to the death of an officer
      of the Company. Under the Company’s stock option plan, options immediately vest
      upon death. No compensation expense was capitalized for the three and nine
      months ended March 31, 2007 and 2006 because no stock options had been granted
      to employees whose labor costs were capitalized as software development
      costs.





The
      Company values stock options using the Black-Scholes option-pricing model,
      which
      was developed for use in estimating the fair value of traded options that are
      fully transferable and have no vesting restrictions. In determining the expected
      term, the Company separates groups of employees that have historically exhibited
      similar behavior with regard to option exercises and post-vesting cancellations.
      The option-pricing model requires the input of highly subjective assumptions,
      including assumptions about volatility rates, expected term of options, and
      applicable interest rates.





Expected
      volatility is based on historical stock prices. The expected term of options
      granted is based on historical data, adjusted for the remaining option life
      cycle by assuming ratable exercise of any unexercised vested options over the
      remaining term. The risk-free interest rate is based on the U.S. Treasury yield
      curve in effect at the time of grant. The total expense to be recorded in future
      periods will depend on several variables, including the number of share-based
      awards that vest, pre-vesting cancellations and the estimated fair value of
      those vested awards.





The
      estimated fair values of options granted during the three and nine months ended
      March 31, 2007 and 2006 were estimated on the date of grant using the following
      assumptions:





Three
                Months Ended
              March
                31,
            
            Nine
                Months Ended
              March
                31,2007
            
            2006
            
            2007
            
            2006Weighted-averageexpected
                volatility
            
            
            36
            %
            
            36
            %
            
            37
            %
            
            42
            %Expected
                volatility
            
            
            36
            %
            
            36
            %
            
            36%
                - 38
            %
            
            34%
                - 46
            %Expected
                term
            
            
            4.6
                years
            
            
            4.8
                years
            
            
            4.6
                - 5.7 years
            
            
            4.0
                - 5.7 yearsExpected
                dividend yield
            
            
            0
            %
            
            0
            %
            
            0
            %
            
            0
            %Risk-free
                interest rate
            
            
            4.9
            %
            
            4.5
            %
            
            4.5%
                - 4.9
            %
            
            3.9%
                - 4.5
            %





8


The
      following is a summary of option activity:





(in
                thousands, except per share data andnumber
                of years)
            
            Number
                of Shares
            
            Weighted-Average
                Exercise Price
            
            Weighted-Average
                Remaining Contractual Term
              (in
                years)
            
            Aggregate
              Intrinsic
                ValueOutstanding
                at June 30, 2006
            
            
            4,810
            
            $
            25.34Granted
            
            
            695
            
            $
            52.61Exercised
            
            
            (1,758
            )
            $
            17.84Forfeited
                or expired
            
            
            (22
            )
            $
            44.89Outstanding
                at March 31, 2007
            
            
            3,725
            
            $
            33.85
            
            
            6.9
            
            $
            75,004Exercisable
                at March 31, 2007
            
            
            2,223
            
            $
            25.03
            
            
            5.6
            
            $
            64,362





The
      weighted-average grant-date estimated fair value per share of options granted
      during the nine months ended March 31, 2007 and 2006 was $21.32 and $20.83,
      respectively. The total intrinsic value, the difference between the exercise
      price and the market price on the date of exercise, of options exercised during
      the nine months ended March 31, 2007 and 2006 was approximately $57.0 million
      and $33.8 million, respectively.





As
      of
      March 31, 2007, there were approximately $25.5 million in non-cash share-based
      compensation costs related to non-vested awards not yet recognized in the
      Company’s consolidated statements of operations. This cost is expected to be
      recognized over a weighted-average period of 2.3 years.





Cash
      received from options exercised during the nine months ended March 31, 2007
      and
      2006 was approximately $31.4 million and $15.9 million,
      respectively.




4.  Inventory





The
      components of inventory are as follows:





(in
                thousands)
            
            March
                31, 2007
            
            June
                30,
              2006Raw
                materials
            
            $
            9,909
            
            $
            8,290Work-in-process
            
            
            13
            
            
            20Finished
                goods
            
            
            34,307
            
            
            38,327$
            44,229
            
            $
            46,637





The
      Company maintained a reserve for obsolescence for inventory of approximately
      $9.2 million at March 31, 2007 compared to approximately $9.9 million at June
      30, 2006. The Company reserved approximately $2.1 million and $2.9 million
      during the nine months ended March 31, 2007 and 2006, respectively, related
      to
      older products. Inventory balance as of March 31, 2007 was increased by foreign
      currency translation adjustments of approximately $0.2 million as compared
      to
      June 30, 2006.





5.  Goodwill
      and intangible assets





During
      the three months ended September 30, 2006, the Company completed its annual
      impairment tests on its goodwill and trademarks as of July 1, 2006. Based on
      its
      annual impairment test results, the Company determined that no impairment of
      goodwill or trademarks existed as of July 1, 2006.





9


6.  Other
      comprehensive income





The
      components of comprehensive income, net of tax, were as follows:





Three
                Months Ended
              March
                31,
            
            Nine
                Months Ended
              March
                31,(in
                thousands)
            
            2007
            
            2006
            
            2007
            
            2006Net
                income
            
            $
            19,450
            
            $
            15,594
            
            $
            52,578
            
            $
            42,150Other
                comprehensive income (loss):Change
                in cumulative translationadjustment,
                net of tax
            
            
            2,277
            
            
            3,175
            
            
            9,831
            
            
            (129
            )$
            21,727
            
            $
            18,769
            
            $
            62,409
            
            $
            42,021





7.  Line
      of
      credit





The
      Company has two credit agreements (the “Credit Agreements”), an international
      facility and a U.S. facility, that, in the aggregate, provide a $65.0 million
      multi-currency committed line of credit that expires on July 31, 2009. The
      international facility is secured by 65% of the capital stock of the Company’s
      main operating Ireland subsidiary and 100% of all of the capital stock of the
      Company’s other major foreign subsidiaries. The U.S. facility is secured by 100%
      of the capital stock of the Company’s major U.S. subsidiaries as well as all of
      the Company’s inventory and receivables located in the U.S.





For
      borrowings in U.S. currency, the interest rate under the Credit Agreements
      is
      equal to the higher of the prime rate or the federal funds rate plus 50 basis
      points. For borrowings in foreign currencies, the interest rate is determined
      by
      a LIBOR-based formula, plus an additional margin of 125 to 200 basis points
      depending upon the Company’s consolidated earnings before interest, taxes,
      depreciation and amortization (“EBITDA”) for the immediately preceding four
      calendar quarters. The Company is required to pay insignificant commitment
      fees
      on the unused portion of the line of credit to the Lenders. The Credit
      Agreements also contain certain financial covenants and restrictions on the
      Company’s ability to assume additional debt, repurchase stock, sell subsidiaries
      or acquire companies. In case of an event of default, as defined in the Credit
      Agreements, that is not cured within the applicable cure period (with respect
      to
      those defaults for which the Credit Agreements provide a cure period), the
      Lenders’ remedies include their ability to declare all outstanding loans, plus
      interest and other related amounts owed, to be immediately due and payable
      in
      full, and to pursue all rights and remedies available to them under the Credit
      Agreements or under applicable law.





As
      of
      March 31, 2007, the Company had approximately $2.9 million outstanding and
      had
      approximately $62.1 million available for future borrowings under the above
      lines of credit. The total outstanding balance consisted of the
      following:




·
            JPY
                (Japanese Yen) - 165.0 million (approximately $1.4 million at the
                March
                31, 2007 exchange rate);


·
            SEK
                (Swedish Krona) - 4.0 million (approximately $0.6 million at the
                March 31,
                2007 exchange rate), and


·
            NZD
                (New Zealand Dollar) - 1.3 million (approximately $0.9 million at
                the
                March 31, 2007 exchange rate).





The
      Company also has a credit relationship with a European bank in the amount of
      EUR
      1.0 million (approximately $1.3 million at the March 31, 2007 exchange rate).
      Under the terms of this facility, the Company may borrow in the form of either
      a
      line of credit or term debt. As of March 31, 2007, there were no balances
      outstanding on this credit facility, but approximately EUR 0.2 million
      (approximately $0.2 million at the March 31, 2007 exchange rate) of the credit
      facility has been utilized for guarantees. As of March 31, 2007, approximately
      $1.1 million is available for future borrowings.





As
      of
      March 31, 2007, the Company had approximately $63.2 million available to borrow
      under all of its credit facilities available at that time. The weighted-average
      interest rate on the outstanding balances under the lines of credit as of March
      31, 2007 was 4.7%.





10


8.  Recent
      accounting pronouncements





SFAS
      No. 159




In
      February 2007, the Financial Accounting Standards Board (“FASB”) issued SFAS No.
      159, “The Fair Value Option for Financial Assets and Financial Liabilities”
(“SFAS No. 159”), which allows entities to choose to measure eligible financial
      instruments at fair value as of specified dates. Such election, which may be
      applied on an instrument by instrument basis, is typically irrevocable once
      elected. SFAS 159 is effective for fiscal years beginning after November 15,
      2007. The Company is currently reviewing the impact of the adoption of the
      SFAS
      159 on the Company’s consolidated financial position, results of operations and
      cash flows.





SFAS
      No. 158




In
      September 2006, the FASB issued SFAS No. 158, “Employers’ Accounting for Defined
      Benefit Pension and Other Postretirement Plans - an amendment of FASB Statements
      No. 87, 88, 106 and 132(R)” (“SFAS No. 158”), which requires an employer to
      recognize the overfunded or underfunded status of a defined benefit
      postretirement plan (other than a multiemployer plan) as an asset or liability
      on its statement of financial position and to recognize changes in that funded
      status in the year in which the changes occur through comprehensive income.
      The
      statement also requires an employer to measure the funded status of a plan
      as of
      the date of its year-end statement of financial position, with limited
      exceptions. SFAS No. 158 is effective for fiscal years ending after December
      15,
      2006. SFAS No. 158 will not change the amount of net periodic benefit expense
      recognized in an entity’s results of operations. Application of this statement
      at June 30, 2006 would have required adjustment to the Company’s accrued pension
      liability relating to its Supplemental Executive Retirement Plan (the “SERP
      Plan”), resulting in an increase to accrued employee benefit liabilities of
      approximately $4.8 million and a decrease in stockholders’ equity of
      approximately $4.8 million, net of tax. The effect at June 30, 2007, the
      adoption date, or any other future date could significantly differ depending
      on
      the measurement of pension obligations at such date, but the Company does not
      believe SFAS No. 158 will have a material impact on the Company’s consolidated
      financial position, results of operations and cash flows.





SFAS
      No. 157




In
      September 2006, the FASB issued SFAS No. 157 “Fair Value Measurements”
(“SFAS No. 157”) to establish a framework for measuring fair value under
      generally accepted accounting principles and to expand disclosures on fair
      value
      measurements. The statement applies to previously established valuation
      pronouncements, but is to be applied prospectively, so that it does not require
      the changing of any previous fair value measurements. SFAS No. 157 may cause
      some valuation procedures used by the Company to change after its adoption.
      Under SFAS No. 157, fair value is established by the price that would be
      received to sell the item or the amount to be paid to transfer the liability
      or
      the asset (an exit price), as opposed to the price to be paid for the asset
      or
      received to assume the liability (an entry price). SFAS No. 157 is effective
      for
      all assets valued in financial statements for fiscal years beginning after
      November 15, 2007. The Company is currently reviewing the impact of the
      adoption of the SFAS 157 on the Company’s consolidated financial position,
      results of operations and cash flows.





SAB
      108




In
      September 2006, the SEC issued Staff Accounting Bulletin No. 108 (“SAB 108”),
      which provides interpretive guidance on the process of quantifying financial
      statement misstatements. The provisions under SAB 108 will be applied in the
      first fiscal year ending after November 15, 2006, which is the Company’s current
      fiscal year. The Company does not believe SAB 108 will have a material impact
      on
      the Company’s consolidated financial position, results of operations and cash
      flows.





FIN
      48




In
      June
      2006, the FASB issued Interpretation No. 48, “Accounting for Uncertainty in
      Income Taxes, an interpretation of FAS 109, ‘Accounting for Income Taxes’” (“FIN
      48”), to create a single model to address accounting for uncertainty in tax
      positions.  FIN 48 clarifies the accounting for income taxes by prescribing
      a minimum recognition threshold a tax position is required to meet before being
      recognized in the financial statements.  FIN 48 also provides guidance on
      derecognition, measurement, classification, interest and penalties, accounting
      in interim periods, disclosure and transition.  FIN 48 is effective for
      fiscal years beginning after December 15, 2006. As required, the Company will
      adopt FIN 48 in fiscal year 2008.  The cumulative effect of adopting FIN 48
      will be recorded in retained earnings and other accounts as applicable.
 The Company is currently reviewing the impact of the adoption of FIN 48 on
      the Company’s consolidated financial position, results of operations and cash
      flows.





11




9.  Net
      income per share





Basic
      net
      income per common share is computed by dividing net income by the
      weighted-average number of shares outstanding. Diluted net income per share
      includes the dilutive effect of stock options. A reconciliation of the
      weighted-average number of common shares outstanding assuming dilution is as
      follows:





Three
                Months Ended
              March
                31,
            
            Nine
                Months Ended March 31,(in
                thousands, except per share data)
            
            2007
            
            2006
            
            2007
            
            2006Net
                income
            
            $
            19,450
            
            $
            15,594
            
            $
            52,578
            
            $
            42,150Average
                common shares outstanding
            
            
            40,582
            
            
            38,914
            
            
            39,802
            
            
            38,619Dilutive
                effect of outstanding stock options
            
            
            1,091
            
            
            1,816
            
            
            1,394
            
            
            2,029Average
                common shares outstandingassuming
                dilution
            
            
            41,673
            
            
            40,730
            
            
            41,196
            
            
            40,648Basic
                net income per share
            
            $
            0.48
            
            $
            0.40
            
            $
            1.32
            
            $
            1.09Diluted
                net income per share
            
            $
            0.47
            
            $
            0.38
            
            $
            1.28
            
            $
            1.04Anti-dilutive
                weighted shares excludedfrom
                reconciliation
            
            
            947
            
            
            776
            
            
            1,154
            
            
            418





10.  Segment
      reporting data





SFAS
      No.
      131, “Disclosures about Segments of an Enterprise and Related Information,”
establishes standards for reporting information about operating segments. This
      standard requires segmentation based on the Company’s internal organization and
      reporting of financial results. The Company’s financial reporting systems
      present various data for management to run the business. The segments are
      designed to allocate resources internally and provide a framework to determine
      management responsibility. Operating segments are defined as components of
      an
      enterprise about which separate financial information is available that is
      evaluated regularly by the chief operating decision maker, or decision making
      group, in deciding how to allocate resources and in assessing performance.
      The
      Company’s chief operating decision maker is the Company’s Chief Executive
      Officer.





The
      Company manages its business geographically and is organized and operates in
      four operating segments: U.S., Europe, the Pacific Rim and Latin America
      regions. For the purposes of applying SFAS No. 131, the Company has identified
      U.S. as a separate reportable segment and has aggregated its three international
      operating segments into one reportable segment, International, as the three
      international operating segments share many similar economic characteristics.
      Management views the U.S. and International segments separately in operating
      the
      business, although the products and services are similar for each
      segment.





A
      summary
      of the Company’s reportable segments is as follows:





Three
                Months Ended
              March
                31,
            
            Nine
                Months Ended
              March
                31,(in
                thousands)
            
            2007
            
            2006
            
            2007
            
            2006Revenue(1):U.S.
            
            $
            93,226
            
            $
            90,422
            
            $
            269,594
            
            $
            261,436International
            
            
            147,718
            
            
            106,487
            
            
            403,988
            
            
            311,091Intersegment
                eliminations
            
            
            (40,388
            )
            
            (25,768
            )
            
            (109,450
            )
            
            (85,404
            )$
            200,556
            
            $
            171,141
            
            $
            564,132
            
            $
            487,123




12





Income
                before taxes, minority interests and equityin
                net earnings of affiliates(1):U.S.
            
            $
            8,437
            
            $
            8,191
            
            $
            22,733
            
            $
            18,634International
            
            
            55,082
            
            
            36,168
            
            
            147,434
            
            
            113,264Intersegment
                eliminations
            
            
            (33,574
            )
            
            (21,007
            )
            
            (89,852
            )
            
            (68,687
            )$
            29,945
            
            $
            23,352
            
            $
            80,315
            
            $
            63,211





(in
                thousands)
            
            March
                31, 2007
            
            June
                30,
              2006Identifiable
                assets(2):U.S.
            
            $
            400,498
            
            $
            383,663International
            
            
            409,526
            
            
            264,194$
            810,024
            
            $
            647,857





(1)  Amounts
      based on the location of the selling entity, and include export
      sales.


(2)  Amounts
      based on the physical location of the asset.





11.  Shareholders’
      equity




In
      fiscal
      year 2005, the Board of Directors authorized the purchase of up to two million
      shares of the Company’s common stock. Since the inception of the repurchase
      programs, the Company has incurred approximately $0.1 million in fees related
      to
      the programs. A summary of the cumulative number of shares purchased and retired
      since the inception of the current repurchase program through March 31, 2007,
      plus the shares purchased and retired under the previous repurchase program,
      is
      as follows:





Number
                of
              Shares
            
            Average
                Purchase Price Per Share
            
            Total
              Purchase
                Value
              (in
                thousands)Total
                shares purchased as of June 30, 2006
            
            
            3,417,999
            
            $
            27.33
            
            $
            93,414July
                2006 - March 2007
            
            
            62,100
            
            $
            38.56
            
            
            2,3953,480,099
            
            $
            27.53
            
            $
            95,809





12.  Pension
      benefits




The
      Company’s SERP plan provides designated officers and executives of the Company
      with benefits upon retirement or immediate vesting of benefits upon a
      participant’s pre-retirement death. The Company funds the benefits under the
      plan with corporate owned life insurance policies held by a segregated trust
      (known as a “Rabbi Trust”), whose assets are subject to the claims of creditors
      of the Company. The plan is accounted for in accordance with SFAS No. 87,
“Employers Accounting for Pensions.” The components of net period pension cost
      are as follows:





Three
                Months Ended March 31,
            
            Nine
                Months Ended March 31,(in
                thousands)
            
            2007
            
            2006
            
            2007
            
            2006Service
                cost
            
            $
            139
            
            $
            127
            
            $
            418
            
            $
            381Interest
                cost
            
            
            174
            
            
            124
            
            
            521
            
            
            373Amortization
                of prior service cost
            
            
            137
            
            
            124
            
            
            411
            
            
            371$
            450
            
            $
            375
            
            $
            1,350
            
            $
            1,125





During
      the three months ended March 31, 2007, an officer of the Company who was a
      participant in the SERP plan died. The pre-retirement death benefit will be
      funded by the death benefit to be received from the corporate owned life
      insurance policy.




13


13.  Contingencies





The
      Company is and has been involved in legal proceedings arising in the normal
      course of business. The Company is of the opinion, based upon presently
      available information and the advice of counsel concerning pertinent legal
      matters, that any resulting liability should not have a material adverse effect
      on the Company’s results of operations, financial position or cash flows.





14


**ITEM
                2.**
            **MANAGEMENT’S
                DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
                OPERATIONS**





Forward-looking
      statements




The
      following discussion and analysis of our financial condition and results of
      operations should be read in conjunction with the condensed consolidated
      financial statements and the related notes and other financial information
      included elsewhere in this Quarterly Report on Form 10-Q. Statements contained
      in this Quarterly Report on Form 10-Q that are not historical facts are forward
      looking statements within
      the meaning of Section 27A of the Securities Act of 1933, as amended (the
“Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as
      amended (the “Exchange Act”), that
      involve risks and uncertainties, and are made in reliance upon safe harbor
      provisions of the Private Securities Litigation Reform Act of 1995. Our actual
      results may differ materially from those anticipated in these forward-looking
      statements as a result of specified factors, including those set forth below
      under the heading “Factors that May Affect Future Results.”





Examples
      of such forward-looking statements include :





·
            our
                expectation that product and service margins may decline in response
                to
                the competitive nature of our
                market;


·
            our
                statements regarding the effects of currency fluctuations (in particular,
                Euro fluctuations) on our financial
                performance;


·
            our
                expectations that the customers with whom we do the largest amount
                of
                business will fluctuate from year to year, and our statements about
                the
                effects of large customer orders on our quarterly earnings, revenues,
                and
                total revenues;


·
            our
                statements concerning the fluctuations in the market price of our
                common
                stock, whether as a result of variations in our quarterly operating
                results or other factors;


·
            our
                belief that any existing legal claims or proceedings will not have
                a
                material adverse effect on our results of operations or financial
                position;


·
            our
                expectations regarding the impact or lack of impact on our financial
                position and results of operations of the application of recent accounting
                standards;


·
            our
                expectations about the adequacy of our cash flows and our available
                lines
                of credit to meet our working capital needs, and our ability to raise
                additional funds if and when needed;


·
            our
                expectations that our exposure to interest rate risk will not materially
                change in the future;


·
            our
                expectation that we will evaluate our need to invest in instruments
                to
                protect against interest rate fluctuations and our exposure to such
                interest rate risk;


·
            our
                statements about the effects on our revenue recognition as a result
                of
                changes to a customers’ delivery requirements or a products’ completion;


·
            our
                statements regarding our ability to increase sales of our higher
                margin
                products;


·
            our
                expected costs associated with modifying our products to comply with
                applicable legal rules, regulations, and guidelines, including the
                credit
                card associations’ security and data protection rules;
                and


·
            our
                statements and expectations regarding our effective tax rates for
                the
                current fiscal year and future
                periods.





**Factors
      that may affect future results**





Current
      market conditions, and world political and economic uncertainty, make it
      difficult to predict whether we can continue to achieve revenue and
      profitability growth over the remainder of the current fiscal year. One reason
      for this difficulty is that our primary customers - the hospitality, travel,
      restaurant, and retail industries - are highly sensitive to economic, political,
      and environmental disturbances, all of which are not only outside of our (and,
      frequently, their own) control, but also are very difficult to predict with
      any
      accuracy. Accordingly, there can be no assurance that any particular level
      of
      growth is reasonable or can be achieved.





We
      continue to experience gross margin pressure on our hardware and software
      products, and our service offerings, due to the highly competitive nature of
      the
      market for our products and services, and we expect that product and service
      margins generally will tend to decline. There can be no assurance that we will
      be able to increase sufficiently the sales of our higher margin products,
      including software, to prevent future declines in our overall gross
      margin.




15


Currency
      fluctuations directly affect our financial results because we conduct business
      in many different currencies. In particular, a weakening or strengthening Euro
      could significantly affect our financial performance due to the volume of
      business that we conduct in the European market.





Our
      quarterly financial results are dependent upon the timing and size of customer
      orders. Large
      software orders from customers may account for more than an insignificant
      portion of earnings in any quarter. Based on past experience, we expect that
      the
      customers with whom we do the largest amount of business will vary from year
      to
      year, in part as a result of the timing of the rollouts of each customer’s
      systems. Further, if a customer delays or accelerates its delivery requirements,
      or if a product’s completion is delayed or accelerated, revenues that we may
      have expected in one quarter could be deferred or accelerated into a subsequent
      or earlier quarter.





The
      market price of our common stock is volatile. It may be subject to significant
      fluctuations in response to variations in our quarterly operating results,
      and
      also may vary as a result of other factors, such as announcements of
      technological developments or new products by us or by our competitors, customer
      rollouts, the emergence of new competitors and consolidations of our existing
      competitors, and general market conditions in the hospitality, travel,
      restaurant, and retail industries. In addition, conditions in the stock market
      in general, and shares of technology companies in particular, have experienced
      significant price and volume fluctuations, which we believe have, at times,
      been
      unrelated to the operating performance of the companies.





Because
      of the nature of the industries in which our customers operate, we are subject
      to political risk, including as a result of instability in the Middle East
      and
      the worldwide threat of terrorism, and especially in developing countries with
      uncertain or unstable political structures or regimes. Additionally, we are
      subject to the effects of, and changes in, laws and regulations, and other
      activities of governments, agencies and similar regulatory organizations.
      Moreover, to be able to offer commercially viable and competitive products,
      we
      must also assure that our products and services comply with applicable rules
      of
      the credit card associations, including their security and data protection
      rules. These rules have changed over time, and may change again in the future;
      we anticipate that we will continue to incur costs associated with modifying
      our
      products and services to become and remain compliant with these
      rules.





Past
      performance is not necessarily a strong or reliable indicator of future
      performance. Actual results could differ materially from past results,
      estimates, or projections, or forward-looking statements made by, or on behalf
      of us.





The
      foregoing is in addition to those other risks and uncertainties disclosed in
      our
      periodic press releases and SEC filings, including those disclosed under “Risk
      Factors” in Item 1A of our Annual Report on Form 10-K for the Fiscal Year ended
      June 30, 2006.





Overview





We
      are a
      leading worldwide designer, manufacturer, marketer and servicer of enterprise
      information solutions for the global hospitality and specialty retail
      industries. The information solutions consist of application-specific software
      and hardware systems, supplemented by a wide range of services including
      installation, training, maintenance and support, customer development and
      software hosting. Our enterprise solutions comprise three major
      areas:





Hotel
      information systems - consist of software encompassing property management
      systems, sales and catering systems, central reservation systems, and customer
      information systems; we have provided hotel information systems to more than
      20,000 hotels worldwide.





Restaurant
      information systems - consist of hardware and software for point-of-sale and
      operational applications, a suite of back office applications, including
      inventory, labor and financial management, and certain centrally hosted
      enterprise applications; we have installed over 200,000 systems in table and
      quick service restaurants, hotels, motels, casinos, leisure and entertainment,
      and retail operations in more than 140 countries and on all seven
      continents.





Specialty
      retail information systems - consist of software encompassing point-of-sale,
      loss prevention, business analytics, customer gift cards, and enterprise
      applications; we have provided specialty retail information systems to more
      than
      50,000 specialty retail stores worldwide.





16




In
      addition to our software enterprise solutions and hardware products, we offer
      a
      wide range of support services to our customers. These services include
      installation, operator and manager training, on-site hardware maintenance,
      customized software development, application software support, credit card
      software support, help desk, systems configuration, network support, consulting
      and software hosting. We distribute our products and services directly and
      through our district and subsidiary offices, as well as through a network of
      independent dealers and distributors.





The
      markets in which we operate are highly competitive. We compete on various bases,
      including product functionality, service capabilities, price and geography.
      There are at least 40 competitors worldwide that offer some form of
      sophisticated restaurant point-of-sale system, over 100 hotel systems
      competitors and over 50 retail systems competitors. We believe that our
      competitive strengths include our established global distribution and service
      network, our ability to offer a broad array of hardware, software and service
      products to the hospitality and retail industry and our corporate focus on
      providing specialized information systems solutions.





We
      manage
      our business geographically and are organized and operate in two reportable
      segments: U.S. and International. The International reportable segment is
      primarily in Europe, the Pacific Rim and Latin America. For purposes of applying
      Statement of Financial Accounting Standards (“SFAS”) No. 131, “Disclosures about
      Segments of an Enterprise and Related Information,” management views the U.S.
      and International reportable segments separately in operating our business,
      although the products and services are similar for each segment.





Results
      of Operations





***Revenue:***





*Three
      Months Ended March 31, 2007:*





An
      analysis of the sales mix by reportable segments is as follows (based on
      location of the selling entity, and include export sales; intersegment sales
      are
      eliminated):





Three
                Months Ended March 31,U.S.
            
            International
            
            Total(in
                thousands)
            
            2007
            
            2006
            
            2007
            
            2006
            
            2007
            
            2006Hardware
            
            $
            29,878
            
            $
            32,109
            
            $
            28,663
            
            $
            23,978
            
            $
            58,541
            
            $
            56,087Software
            
            
            12,406
            
            
            12,049
            
            
            21,626
            
            
            16,739
            
            
            34,032
            
            
            28,788Service
            
            
            48,090
            
            
            43,430
            
            
            59,893
            
            
            42,836
            
            
            107,983
            
            
            86,266$
            90,374
            
            $
            87,588
            
            $
            110,182
            
            $
            83,553
            
            $
            200,556
            
            $
            171,141





An
      analysis of the total sales mix as a percent of total revenue is as
      follows:





Three
                Months Ended March 31,2007
            
            2006Hardware
            
            
            29.2
            %
            
            32.8
            %Software
            
            
            17.0
            %
            
            16.8
            %Service
            
            
            53.8
            %
            
            50.4
            %100.0
            %
            
            100.0
            %




17




For
      the
      three months ended March 31, 2007, total revenue increased approximately $29.4
      million, or 17.2% to approximately $200.6 million compared to the same period
      last year. The increase in revenue was a result of the following:




·
            approximately
                $21.7 million or 25% increase in services primarily due to additional
                revenue generated from various acquisitions and the continued expansion
                of
                our customer base coupled with increased recurring support revenue
                from
                existing customers (primarily through additional services). We acquired
                the RedSky IT Hospitality-Travel and RedSky IT Retail subsidiaries
                of
                RedSky IT in January 2007 and various distributors of MICROS products
                and
                services and two other companies with complementary products and
                services
                during the nine months ended March 31, 2007. Additionally, we acquired
                CommercialWare, Inc. in February
                2006;


·
            approximately
                $5.2 million or 18% increase in software primarily due to additional
                revenue generated from the acquisitions, as discussed above, and
                the
                foreign currency translation mainly between the Euro and U.S. dollar;
                and,


·
            approximately
                $2.5 million or 4% increase in hardware primarily due to the foreign
                currency translation and additional revenue generated from the
                acquisitions, both as discussed above. These increases were partially
                offset by a decrease in overall sales
                volume.





The
      recurring support revenue contributed 54.9% and the increase in installation
      revenue contributed 25.7% of the total service revenue increase of approximately
      $21.7 million for the three months ended March 31, 2007 compared to the same
      period last year.





The
      International segment sales for the three months ended March 31, 2007 increased
      approximately $26.6 million, which was a result of the following:




·
            approximately
                $17.1 million or 40% increase in services primarily due to additional
                revenue generated from the acquisitions and the foreign currency
                translation, both as discussed
                above;


·
            approximately
                $4.9 million or 29% increase in software due to foreign currency
                translation, additional revenue generated from the acquisitions,
                both as
                discussed above and increased sales volume;
                and,


·
            approximately
                $4.6 million or 20% increase in hardware primarily due to foreign
                currency
                translation and the acquisitions, both as discussed
                above.





U.S.
      segment sales for the three months ended March 31, 2007 increased approximately
      $2.8 million due to an increase in service revenue from continued expansion
      of
      our customer base coupled with increased recurring support revenue from existing
      customers (primarily through additional services) and additional revenue
      generated from the acquisitions, as discussed above. These increases were
      partially offset by a decrease in overall hardware sales volume.





*Nine
      Months Ended March 31, 2007:*





An
      analysis of the sales mix by reportable segments is as follows (based on
      location of the selling entity, and including export sales; intersegment sales
      are eliminated):





Nine
                Months Ended March 31,U.S.
            
            International
            
            Total(in
                thousands)
            
            2007
            
            2006
            
            2007
            
            2006
            
            2007
            
            2006Hardware
            
            $
            86,875
            
            $
            90,338
            
            $
            81,269
            
            $
            62,247
            
            $
            168,144
            
            $
            152,585Software
            
            
            35,613
            
            
            37,294
            
            
            58,927
            
            
            47,751
            
            
            94,540
            
            
            85,045Service
            
            
            137,554
            
            
            126,546
            
            
            163,894
            
            
            122,947
            
            
            301,448
            
            
            249,493$
            260,042
            
            $
            254,178
            
            $
            304,090
            
            $
            232,945
            
            $
            564,132
            
            $
            487,123





18


An
      analysis of the total sales mix as a percent of total revenue is as
      follows:





Nine
                Months Ended March 31,2007
            
            2006Hardware
            
            
            29.8
            %
            
            31.3
            %Software
            
            
            16.8
            %
            
            17.5
            %Service
            
            
            53.4
            %
            
            51.2
            %100.0
            %
            
            100.0
            %





For
      the
      nine months ended March 31, 2007, total revenue increased approximately $77.0
      million, or 15.8% to approximately $564.1 million compared to the same period
      last year. The increase in revenue was a result of the following:




·
            approximately
                $52.0 million or 21% increase in services primarily due to the continued
                expansion of our customer base coupled with increased recurring support
                revenue from existing customers (primarily through additional services)
                and additional revenue generated through the acquisitions, as discussed
                above, and;


·
            approximately
                $15.5 million or 10% increase in hardware primarily due to foreign
                currency translation and additional revenue generated through the
                acquisitions, both as discussed above;
                and,


·
            approximately
                $9.5 million or 11% increase in software primarily due to additional
                revenue generated through the acquisitions and foreign currency
                translation, both as discussed
                above.





The
      recurring support revenue contributed 58.9% and the increase in installation
      revenue contributed 22.9% of the total service revenue increase of approximately
      $52.0 million for the nine months ended March 31, 2007 compared to the same
      period last year.





The
      International segment sales for the nine months ended March 31, 2007 increased
      approximately $71.1 million which was a result of the following:





·
            approximately
                $40.9 million or 33% increase in services due to the continued expansion
                of our customer base coupled with increased recurring support revenue
                from
                existing customers (primarily through additional services), additional
                revenue generated through the acquisitions and foreign currency
                translation, as discussed above;


·
            approximately
                $19.0 million or 31% increase in hardware primarily due to increased
                sales
                volume and foreign currency translation, as discussed above;
                and,


·
            approximately
                $11.2 million or 23% increase in software due to foreign currency
                translation, increased sales volume and additional revenue generated
                from
                the acquisitions.





U.S.
      segment sales increased approximately $5.9 million for the nine months ended
      March 31, 2007 compared to the same period last year primarily resulting from
      additional revenue generated through the acquisitions, as discussed above,
      and
      an increase in services revenue due to the continued expansion of our customer
      base coupled with increased recurring support revenue from existing customers
      (primarily through additional services). These increases were partially offset
      by decreases in hardware and software revenues resulting from decreases in
      sales
      volume.




19


***Cost
      of Sales:***





*Three
      Months Ended March 31, 2007:*





An
      analysis of the cost of sales is as follows:





Three
                Months Ended March 31,2007
            
            2006(in
                thousands)
            
            Cost
                of
              Sales
            
            %
                of Related Revenue
            
            Costs
                of Sales
            
            %
                of Related RevenueHardware
            
            $
            37,745
            
            
            64.5
            %
            $
            38,234
            
            
            68.2
            %Software
            
            
            7,597
            
            
            22.3
            %
            
            6,051
            
            
            21.0
            %Service
            
            
            50,199
            
            
            46.5
            %
            
            41,773
            
            
            48.4
            %$
            95,541
            
            
            47.6
            %
            $
            86,058
            
            
            50.3
            %





For
      the
      three months ended March 31, 2007, cost of sales as a percent of revenue
      decreased 270 basis points to 47.6% compared to the same period last year.
      Hardware cost of sales as a percent of related revenue decreased approximately
      370 basis points compared to the same period last year. The decrease is
      primarily as a result of an improvement in Workstation 4 margin percentage,
      coupled with an increased percentage of revenue attributable to Workstation
      4
      compared to the same period last year. Workstation 4 generate higher margin
      than
      other hardware products.





Software
      cost of sales as a percent of related revenue increased approximately 130 basis
      points primarily as a result of a decrease in the third party software margin
      percentage compared to the comparable period last year. Service costs as a
      percent of related revenue decreased approximately 190 basis points compared
      to
      the same period last year primarily due to decrease in travel
      expenses.





*Nine
      Months Ended March 31, 2007:*





An
      analysis of the cost of sales is as follows:





Nine
                Months Ended March 31,2007
            
            2006(in
                thousands)
            
            Cost
                of
              Sales
            
            %
                of Related Revenue
            
            Costs
                of Sales
            
            %
                of Related RevenueHardware
            
            $
            107,981
            
            
            64.2
            %
            $
            103,371
            
            
            67.7
            %Software
            
            
            21,593
            
            
            22.8
            %
            
            18,458
            
            
            21.7
            %Service
            
            
            142,020
            
            
            47.1
            %
            
            119,978
            
            
            48.1
            %$
            271,594
            
            
            48.1
            %
            $
            241,807
            
            
            49.6
            %





For
      the
      nine months ended March 31, 2007, cost of sales as a percent of revenue
      decreased 150 basis points to 48.1% compared to the same period last year.
      Hardware cost of sales as a percent of related revenue decreased approximately
      350 basis points compared to the same period last year. The decrease is
      primarily as a result of an improvement in Workstation 4 margin compared to
      the
      same period last year, coupled with an increased percentage of revenues
      attributable to Workstation 4, compared to the same period last year. As
      discussed above, Workstation 4 generate higher margin than other hardware
      products.





Software
      cost of sales as a percent of related revenue increased approximately 110 basis
      points primarily as a result of a decrease in the third party software margin
      percentage compared to the comparable period last year. Service costs as a
      percent of related revenue decreased approximately 100 basis points compared
      to
      the same period last year.





20


***Selling,
      General and Administrative (“SG&A”) Expenses:***





*Three
      Months Ended March 31, 2007:*





SG&A
      expenses, as a percent of revenue, increased 130 basis points to 32.9% compared
      to the same period last year. This increase reflects the following:





·
            Higher
                SG&A expenses as a percent of related revenue for the acquisitions as
                discussed above in Revenue; and,


·
            Increase
                in non-cash share-based compensation expenses of approximately $1.3
                million recorded as a component of SG&A expenses for the three months
                ended March 31, 2007 compared to the same period last year. The non-cash
                share-based compensation expenses include a one-time charge of
                approximately $0.7 million resulting from accelerated vesting of
                unvested
                options due to the death of an officer of the Company. See “Share-Based
                Compensation Expense” below for further
                discussion.





*Nine
      Months Ended March 31, 2007:*





SG&A
      expenses, as a percent of revenue, increased 70 basis points to 33.1% compared
      to the same period last year. This increase reflects the following:





·
            Higher
                SG&A expenses as a percent of related revenue for the acquisitions as
                discussed above in Revenue; and,


·
            Increase
                in non-cash share-based compensation expenses of approximately $2.5
                million recorded as a component of SG&A expenses for the nine months
                ended March 31, 2007 compared to the same period last year. The non-cash
                share-based compensation expenses include a one-time charge of
                approximately $0.7 million resulting from accelerated vesting of
                unvested
                options due to the death of an officer of the Company. See “Share-Based
                Compensation Expense” below for further
                discussion.





***Research
      and Development (“R&D”):***





R&D
      expenses consist primarily of labor costs less capitalized software development
      costs. Non-cash share-based compensation expenses allocated to R&D were not
      capitalized as software development costs during the three and nine months
      ended
      March 31, 2007 and 2006 because stock options were not granted to employees
      whose labor costs were capitalized as software development costs. An analysis
      of
      R&D activities is as follows:





Three
                Months Ended March 31,
            
            Nine
                Months Ended March 31,(in
                thousands)
            
            2007
            
            2006
            
            2007
            
            2006Total
                R&D incurred
            
            $
            9,467
            
            $
            7,638
            
            $
            25,215
            
            $
            22,715Capitalized
                software development costs
            
            
            (524
            )
            
            (1,090
            )
            
            (1,381
            )
            
            (3,410
            )Total
                R&D expenses
            
            $
            8,943
            
            $
            6,548
            
            $
            23,834
            
            $
            19,305%
                of Revenue
            
            
            4.5
            %
            
            3.8
            %
            
            4.2
            %
            
            4.0
            %





The
      decreases in total R&D capitalized software development costs for the nine
      months ended March 31, 2007 is primarily due to the release of our retail
      capitalized software product in December of 2005. As a result, the volume of
      costs for development of products that had reached the technological feasibility
      stage but were not yet complete and ready for general release had
      declined.





***Depreciation
      and Amortization Expenses:***





Depreciation
      and amortization expenses for the three months ended March 31, 2007 increased
      approximately $0.5 million to approximately $3.0 million compared to the same
      period last year. Depreciation and amortization expenses for the nine months
      ended March 31, 2007 increased approximately $1.6 million to approximately
      $9.1
      million compared to the same period last year. The increases are primarily
      due
      to additional depreciation expenses on assets capitalized since March 31, 2006
      and due to the acquisitions discussed above. Additionally, foreign currency
      fluctuation increased depreciation and amortization expenses for the three
      and
      nine months ended March 31, 2007 by approximately $0.2 million and $0.4
      million, respectively.





21




***Share-Based
      Compensation Expenses:***





We
      account for our option awards in accordance with SFAS No. 123(R), “Share-Based
      Payment.” The estimated fair value of awards granted under the stock option
      program are measured and non-cash share-based compensation expenses, adjusted
      for expected forfeitures, are recognized ratably over the requisite service
      period of options in the consolidated statements of operations. In addition,
      non-cash share-based compensation expense is recognized for the non-vested
      portion of awards that were granted before the effective date of SFAS No. 123(R)
      as those options become vested. The non-cash share-based compensation expenses,
      net of tax, reduced our diluted earnings per share by $0.07 and $0.06 for the
      three months ended March 31, 2007 and 2006, respectively, and by $0.17 and
      $0.12
      for the nine months ended March 31, 2007 and 2006, respectively.





The
      SG&A expenses and R&D expenses discussed above include the following
      allocations of non-cash share-based compensation expense:





Three
                Months Ended March 31,
            
            Nine
                Months Ended March 31,(in
                thousands)
            
            2007
            
            2006
            
            2007
            
            2006Cost
                of sales
            
            $
            0
            
            $
            25
            
            $
            0
            
            $
            25SG&A
            
            
            3,581
            
            
            2,329
            
            
            8,851
            
            
            6,359R&D
            
            
            182
            
            
            73
            
            
            422
            
            
            143$
            3,763
            
            $
            2,427
            
            $
            9,273
            
            $
            6,527





The
      non-cash share-based compensation expenses allocated to SG&A for the three
      and nine months ended March 31, 2007 include a one-time charge of approximately
      $0.7 million resulting from accelerated vesting of unvested options due to
      the
      death of an officer of the Company. Under the Company’s stock option plan,
      options immediately vest upon death.





***Income
      from Operations:***





Income
      from operations for the three months ended March 31, 2007 increased
      approximately $5.3 million or 24.1%, to approximately $27.2 million, compared
      to
      the same period last year. Income from operations for the nine months ended
      March 31, 2007 increased approximately $12.4 million or 20.4%, to approximately
      $73.0 million, compared to the same period last year. The increases were mainly
      due to increased revenues and higher margins, partially offset by increase
      in
      SG&A expenses as a percent of revenue.





***Non-operating
      Income:***





Net
      non-operating income for the three months ended March 31, 2007 increased
      approximately $1.3 million to approximately $2.7 million compared to the same
      period last year. Net non-operating income for the nine months ended March
      31,
      2007 increased approximately $4.7 million to approximately $7.4 million compared
      to the same period last year. The increases were primarily due to increases
      in
      interest income resulting from overall higher cash and cash equivalents balances
      and overall higher interest rates earned on these balances.





***Income
      Tax Provisions:***





The
      effective tax rates for the three months ended March 31, 2007 and 2006 were
      33.9% and 32.5%, respectively. The effective tax rates for the nine months
      ended
      March 31, 2007 and 2006 were 33.5% and 32.5%, respectively. The increases in
      tax
      rates were primarily attributable to the negative impact of the changes in
      legislation related to the exclusion of certain qualified foreign income
      (extra-territorial income exclusions) as well as the non-deductible nature
      of
      certain non-cash share-based compensation items and other non-deductible
      compensation items, foreign withholding taxes and enacted tax rate changes
      in
      foreign jurisdictions. These negative factors for the three and nine months
      ended March 31, 2007 were partially offset by the benefit recognized from an
      increase in the proportion of earnings from jurisdictions that have a lower
      statutory tax rate than the U.S., renewal of the research and development tax
      credit, and the phase-in of the deduction for domestic production
      activities.





22




Based
      on
      currently available information, we estimate that the fiscal year 2007 effective
      tax rate will be approximately 33.5% compared to fiscal year 2006 effective
      tax
      rate of 32.9%. The increase is primarily attributable to the negative impact
      of
      the changes in legislation related to the exclusion of certain qualified foreign
      income (extra-territorial income exclusions) as well as the non-deductible
      nature of certain non-cash share-based compensation items and other
      non-deductible compensation items, foreign withholding taxes and enacted tax
      rate changes in foreign jurisdictions.





We
      believe that due to changes in the mix of earnings among jurisdictions, the
      fluctuation of earnings and the impact of certain discrete items, there will
      always be some degree of adjustment to the effective tax rate on a quarterly
      basis.





**Liquidity
      and capital resources**





We
      have
      two credit agreements (the “Credit Agreements”) that, in the aggregate, provide
      a $65.0 million multi-currency committed line of credit which expires on July
      31, 2009. The international facility is secured by 65% of the capital stock
      of
      our main operating Ireland subsidiary and 100% of all of the major foreign
      subsidiaries. The U.S. facility is secured by 100% of the capital stock of
      our
      major U.S. subsidiaries as well as all inventory and receivables located in
      the
      U.S.





For
      borrowings in U.S. currency, the interest rate under the Credit Agreements
      is
      equal to the higher of the federal funds rate plus 50 basis points or the prime
      rate. For borrowings in foreign currencies, the interest rate is determined by a
      LIBOR-based formula, plus an additional margin of 125 to 200 basis points
      depending upon our consolidated earnings before interest, taxes, depreciation
      and amortization (“EBITDA”) for the immediately preceding four calendar
      quarters. Under the terms of the Credit Agreements, we are required to pay
      insignificant commitment fees on the unused portion of the line of credit to
      the
      Lenders. The Credit Agreements also contain certain financial covenants and
      restrictions on our ability to assume additional debt, repurchase stock, sell
      subsidiaries or acquire companies. In case of an event of default, as defined
      in
      the Credit Agreements, that is not cured within the applicable cure period
      (with
      respect to those defaults for which the Credit Agreements provide a cure
      period), the Lenders’ remedies include their ability to declare all outstanding
      loans, plus interest and other related amounts owed, to be immediately due
      and
      payable in full, and to pursue all rights and remedies available to them under
      the Credit Agreements or under applicable law.





As
      of
      March 31, 2007, we had approximately $2.9 million outstanding on the lines
      of
      credit and had approximately $62.1 million available for future borrowings
      under
      the above lines of credit. The total outstanding balance consisted of the
      following:





·
            JPY
                (Japanese Yen) - 165.0 million (approximately $1.4 million at the
                March
                31, 2007 exchange rate);


·
            SEK
                (Swedish Krona) - 4.0 million (approximately $0.6 million at the
                March 31,
                2007 exchange rate), and


·
            NZD
                (New Zealand Dollar) - 1.3 million (approximately $0.9 million at
                the
                March 31, 2007 exchange rate).





We
      also
      have a credit relationship with a European bank in the amount of EUR 1.0 million
      (approximately $1.3 million at the March 31, 2007 exchange rate). Under the
      terms of this facility, we may borrow in the form of either a line of credit
      or
      term debt. As of March 31, 2007, there were no balances outstanding on this
      credit facility, but approximately EUR 0.2 million (approximately $0.2 million
      at the March 31, 2007 exchange rate) of the credit facility has been utilized
      for guarantees. As of March 31, 2007, approximately $1.1 million is available
      for future borrowings .





As
      of
      March 31, 2007, we had approximately $63.2 million borrowing capacity under
      all
      of the credit facilities described above. The weighted-average interest rate
      on
      the outstanding balances under the lines of credit as of March 31, 2007 was
      4.7%.





Net
      cash
      provided by operating activities for the nine months ended March 31, 2007 was
      approximately $67.2 million as compared to approximately $67.9 million for
      the
      nine months ended March 31, 2006. The decrease is primarily due to additional
      income tax payments made during the nine months ended March 31, 2007 compared
      to
      the same period last year. This decrease was substantially offset by an increase
      in net income. We also used approximately $46.1 million in investing activities,
      consisting primarily of approximately $36.0 million for acquisitions, of which
      approximately $29.8 million was for the acquisition of RedSky in January 2007
      and approximately $6.2 million was for acquisitions of various distributors
      of
      MICROS products and services and two other companies with complementary products
      and services. We also used approximately $9.1 million to purchase property,
      plant, and equipment, and approximately $1.4 million to internally develop
      software. **** Net
      cash
      provided by financing activities was approximately $42.8 million, consisting
      primarily of proceeds from the issuance of stock upon exercise of stock options
      of approximately $31.4 million and tax benefits realized from stock option
      exercises of approximately $15.7 million, partially offset by our repurchases
      of
      stock of approximately $2.4 million.





23




We
      believe that our cash and cash equivalents, cash generated from operations,
      and
      our available lines of credit will be sufficient to provide our working capital
      needs for the foreseeable future. Nevertheless, if we need to raise additional
      funds, we believe we will be able to raise the necessary amounts either by
      entering into additional financing agreements or through the issuance of our
      common stock. We currently anticipate that our property, plant, and equipment
      expenditures for fiscal year 2007 will be approximately $12
      million.





**Recent
      accounting standards**





***SFAS
      No. 159***




In
      February 2007, the Financial Accounting Standards Board (“FASB”) issued SFAS No.
      159, “The Fair Value Option for Financial Assets and Financial Liabilities”
(“SFAS No. 159”), which allows entities to choose to measure eligible financial
      instruments at fair value as of specified dates. Such election, which may be
      applied on an instrument by instrument basis, is typically irrevocable once
      elected. SFAS 159 is effective for fiscal years beginning after November 15,
      2007. We are currently reviewing the impact of the adoption of the SFAS 159
      on
      our consolidated financial position, results of operations and cash
      flows.





***SFAS
      No. 158***




In
      September 2006, the FASB issued SFAS No. 158, “Employers’ Accounting for Defined
      Benefit Pension and Other Postretirement Plans - an amendment of FASB Statements
      No. 87, 88, 106 and 132(R)” (“SFAS No. 158”), which requires an employer to
      recognize the overfunded or underfunded status of a defined benefit
      postretirement plan (other than a multiemployer plan) as an asset or liability
      on its statement of financial position and to recognize changes in that funded
      status in the year in which the changes occur through comprehensive income.
      The
      statement also requires an employer to measure the funded status of a plan
      as of
      the date of its year-end statement of financial position, with limited
      exceptions. SFAS No. 158 is effective for fiscal years ending after December
      15,
      2006. SFAS No. 158 will not change the amount of net periodic benefit expense
      recognized in an entity’s results of operations. Application of this statement
      at June 30, 2006 would have required adjustment to our accrued pension liability
      relating to our Supplemental Executive Retirement Plan (“SERP Plan”), resulting
      in an increase to accrued employee benefit liabilities of approximately $4.8
      million and a decrease in stockholders’ equity of approximately $4.8 million,
      net of tax. The effect at June 30, 2007, the adoption date, or any other future
      date could significantly differ depending on the measurement of pension
      obligations at such date, but we do not believe SFAS No. 158 will have a
      material impact on our consolidated financial position, results of operations
      and cash flows.





***SFAS
      No. 157***




In
      September 2006, the FASB issued SFAS No. 157 “Fair Value Measurements”
(“SFAS No. 157”) to establish a framework for measuring fair value under
      generally accepted accounting principles and to expand disclosures on fair
      value
      measurements. The statement applies to previously established valuation
      pronouncements, but is to be applied prospectively, so that it does not require
      the changing of any fair value measurements. SFAS No. 157 may cause some
      valuation procedures used by the Company to change after its adoption. Under
      SFAS No. 157, fair value is established by the price that would be received
      to sell the item or the amount to be paid to transfer the liability or the
      asset
      (an exit price), as opposed to the price to be paid for the asset or received
      to
      assume the liability (an entry price). SFAS No. 157 is effective for all assets
      valued in financial statements for fiscal years beginning after
      November 15, 2007. We are currently reviewing the impact of the adoption of
      the SFAS 157 on our consolidated financial position, results of operations
      and
      cash flows.





***SAB
      108***




In
      September 2006, the SEC issued Staff Accounting Bulletin No. 108 (“SAB 108”),
      which provides interpretive guidance on the process of quantifying financial
      statement misstatements. The provisions under SAB 108 will be applied in the
      first fiscal year ending after November 15, 2006, which is our current fiscal
      year. We do not believe SAB 108 will have a material impact on our consolidated
      financial position, results of operations and cash flows.





24




***FIN
      48***




In
      June
      2006, the FASB issued Interpretation No. 48, “Accounting for Uncertainty in
      Income Taxes, an interpretation of FAS 109, ‘Accounting for Income Taxes’” (“FIN
      48”), to create a single model to address accounting for uncertainty in tax
      positions.  FIN 48 clarifies the accounting for income taxes by prescribing
      a minimum recognition threshold a tax position is required to meet before being
      recognized in the financial statements.  FIN 48 also provides guidance on
      derecognition, measurement, classification, interest and penalties, accounting
      in interim periods, disclosure and transition.  FIN 48 is effective for
      fiscal years beginning after December 15, 2006.   As required, the Company
      will adopt FIN 48 in fiscal year 2008.  The cumulative effect of adopting
      FIN 48 will be recorded in retained earnings and other accounts as applicable.
       We are currently reviewing the impact of the adoption of FIN 48 on our
      consolidated financial position, results of operations and cash
      flows.





**ITEM
      3.**  **QUANTITATIVE
      AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK**





The
      Company recorded foreign sales, including exports from the United States, of
      approximately $304.1 million and approximately $232.9 million **** during
      the nine months ended March 31, 2007 and 2006, respectively, to customers
      located primarily in Europe and Asia.





The
      Company’s international business exposes the Company to certain market risks,
      such as currency fluctuation, interest rate changes, and political risks. With
      respect to currency risk, the Company transacts business in different currencies
      through its foreign subsidiaries. The fluctuation of currencies affects reported
      sales and profitability. Frequently, sales and the costs associated with those
      sales are not denominated in the same currency.





In
      the
      nine months ended March 31, 2007 and 2006, the Company transacted business
      in 34
      currencies and 27 currencies, respectively.





The
      relative currency mix for the three and nine months ended March 31, 2007 and
      2006 were as follows:





%
                of Reported RevenueThree
                Months Ended March 31,
            
            Nine
                Months Ended
              March
                31,
            
            Exchange
                Rates
              March
                31,Revenues
                by currency (1):
            
            2007
            
            2006
            
            2007
            
            2006
            
            2007
            
            2006United
                States Dollar
            
            
            51
            %
            
            57
            %
            
            52
            %
            
            59
            %
            
            1.0000
            
            
            1.0000European
                Euro
            
            
            26
            %
            
            23
            %
            
            24
            %
            
            21
            %
            
            1.3358
            
            
            1.2121British
                Pound Sterling
            
            
            7
            %
            
            5
            %
            
            7
            %
            
            5
            %
            
            1.9679
            
            
            1.7366Australian
                Dollar
            
            
            3
            %
            
            2
            %
            
            3
            %
            
            2
            %
            
            0.8092
            
            
            0.7167Mexican
                Peso
            
            
            2
            %
            
            2
            %
            
            2
            %
            
            1
            %
            
            0.0906
            
            
            0.0918All
                Other Currencies (2), (3)
            
            
            11
            %
            
            11
            %
            
            12
            %
            
            12
            %
            
            0.0259
            
            
            0.0274Total
            
            
            100
            %
            
            100
            %
            
            100
            %
            
            100
            %


(1)
              Calculated
                  using weighted average exchange rates for the
                  period.
 (2)
                The
                    “% of Reported Revenue” for “All Other Currencies” is calculated based on
                    the weighted average three and nine months’ exchange rates for all other
                    currencies.
 (3)
                  The
                      “Exchange Rates as of March 31” for “All Other Currencies” represents the
                      weighted average March 31 exchange rates for all other currencies
                      based on
                      the nine months
                      revenue.




A
      10%
      increase or decrease in the value of the Euro in relation to the U.S. dollar
      in
      the three and nine months ended March 31, 2007, would have affected total
      revenues by approximately $5.3 million, or 2.6%, and approximately $13.4
      million, or 2.4%, respectively. The sensitivity analysis assumes a weighted
      average 10% change in the exchange rate during the respective periods with
      all
      other variables being held constant. This sensitivity analysis does not consider
      the effect of exchange rate changes on either cost of sales, operating expenses,
      or income taxes, and accordingly, is not necessarily an indicator of the effect
      of potential exchange rate changes on the Company’s net income.





The
      Company is also subject to interest rate fluctuations in foreign countries
      to
      the extent that the Company elects to borrow in the local foreign currency.
      In
      the past, this has not been an issue of concern as the Company has the capacity
      to elect to borrow in other currencies with more favorable interest rates.





25




The
      Company’s committed lines of credit bear interest at a floating rate, which exposes the
      Company to interest rate risks. The Company manages its exposure to this risk
      by
      minimizing, to the extent feasible, overall borrowing and monitoring available
      financing alternatives. The Company’s interest rate risk has not changed
      materially from June 30, 2006, and the Company does not foresee any significant
      changes in exposure or in how it manages this exposure in the near future.
      For
      borrowings in U.S. currency, the interest rate under the Credit Agreements
      is
      equal to the higher of the federal funds rate plus 50 basis points or the prime
      rate. For borrowings in foreign currencies, the interest rate is determined
      by a
      LIBOR-based formula, plus an additional margin of 125 to 200 basis points
      depending upon the Company’s EBITDA for the immediately preceding four calendar
      quarters. At March 31, 2007, the Company had total borrowings of approximately
      $2.9 million, and had not entered into any instruments to hedge the resulting
      exposure to interest-rate risk. While the Company has not invested in financial
      instruments designed to protect against interest rate fluctuations, the Company
      will continue to evaluate the need to do so in the future. Management believes
      that the fair value of the debt approximates its carrying value at March 31,
      2007. The Company’s exposure to fluctuations in interest rates will increase or
      decrease in the future with increases or decreases in the outstanding amount
      under the line of credit.





The
      Company invests its excess cash in overnight deposits, money market funds and
      short term highly liquid investments with original maturities of three months
      or
      less. These instruments are classified as cash and cash equivalents for
      financial reporting purposes and also have minimal or no interest risk due
      to
      their short-term nature. Additionally to minimize the Company’s exposure to
      credit risk associated with these instruments, the Company invests with
      high-credit-quality institutions. Substantial balance of the Company’s cash and
      cash equivalents are held outside of U.S. and are not necessarily available
      for
      use by U.S. operations as a result of funds necessary to support foreign
      operations and tax implications, among others.





26


**ITEM
      4.**  **CONTROLS
      AND PROCEDURES**





Evaluation
      of Disclosure Controls and Procedures





Our
      management, with the participation of our Chief Executive Officer and Chief
      Financial Officer, evaluated the effectiveness of our disclosure controls and
      procedures as of the end of the period covered by this report. Based on that
      evaluation, the Chief Executive Officer and Chief Financial Officer concluded
      that our disclosure controls and procedures as of the end of the period covered
      by this report are functioning effectively to provide reasonable assurance
      that
      the information required to be disclosed by us in reports filed under the
      Securities Exchange Act of 1934 is (i) recorded, processed, summarized and
      reported within the time periods specified in the SEC’s rules and forms and (ii)
      accumulated and communicated to our management, including the Chief Executive
      Officer and Chief Financial Officer, as appropriate to allow timely decisions
      regarding disclosure. A controls system cannot provide absolute assurance,
      however, that the objectives of the controls system are met, and no evaluation
      of controls can provide absolute assurance that all control issues and instances
      of fraud, if any, within a company have been detected.





Change
      in
      Internal Control over Financial Reporting





No
      change
      in our internal control over financial reporting occurred during the Company’s
      most recent fiscal quarter that has materially affected, or is reasonably likely
      to materially affect, our internal control over financial
      reporting.





27


**PART
      II - OTHER INFORMATION**





**ITEM
      6.**  **EXHIBITS**


3(i)
              
              Articles
                  of Incorporation of the Company are incorporated herein by reference
                  to
                  Exhibit 3 to the Annual Report on Form 10-K of the Company for
                  the Fiscal
                  Year ended June 30, 1990.3(i)(a)
              
              Articles
                  of Amendment to Articles of Incorporation are incorporated herein
                  by
                  reference to Exhibit 3(i) to the Quarterly Report on Form 10-Q
                  of the
                  Company for the period ended December 31, 1997.3(i)(b)
              
              Articles
                  of Amendment to Articles of Incorporation are incorporated herein
                  by
                  reference to Exhibit 3(i) to the Quarterly Report on Form 10-Q
                  of the
                  Company for the period ended December 31, 1998.3(ii)(a)
              
              By-laws
                  of the Company are incorporated herein by reference to Exhibit
                  3 to the
                  Annual Report on Form 10-K of the Company for the Fiscal Year ended
                  June
                  30, 1990.3(ii)(b)
              
              By-laws
                  of the Company, as amended, are incorporated herein by reference
                  to
                  Exhibit 3(ii) to the Form 8-K filed on August 30, 2004.31.1
              
              Certification
                  by CEO 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 2002.*31.2
              
              Certification
                  by CFO 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 2002.*32.1
              
              Certification
                  by CEO pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities
                  Exchange
                  Act of 1934, and 18 U.S.C. Section 1350.32.2
              
              Certification
                  by CFO pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities
                  Exchange
                  Act of 1934, and 18 U.S.C. Section
                  1350.
  *  Filed
        herewith.





28


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.




MICROS
                SYSTEMS, INC.
              (Registrant)Date:
              May 8,
              2007
            
            
            /s/
                Gary C. KaufmanGary
                C. Kaufman
              Executive
                Vice President,
              Finance
                and Administration/
              Chief
                Financial Officer


Date:
                May 8,
                2007
              
              
              /s/
                  Cynthia A. RussoCynthia
                  A. Russo
                Vice
                    President and Corporate
                    Controller
  29