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 December 31, 2009


Commission
file number 0-9993





MICROS
SYSTEMS, INC.


(Exact
name of Registrant as specified in its charter)





Maryland
                    
                    52-1101488(State
      of incorporation)
                    
                    (IRS
      Employer Identification
Number)





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





443-285-6000


Registrant’s
telephone number, including area code





Indicate
by check mark whether the Registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the Registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.





YES þ                      NO
o





Indicate
by check mark whether the Registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding
12 months (or for such shorter period that the Registrant was required to submit
and post such files).





YES o                       NO
o





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





Large
      accelerated filer þ
              Accelerated
      filer oNon-accelerated
      filer o
              Smaller
      Reporting Company 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
January 31, 2010, there were issued and outstanding 79,660,338 shares of the
Registrant’s Common Stock, $0.00625 par value.





MICROS
SYSTEMS, INC. AND SUBSIDIARIES





Form
10-Q


For the
three months ended December 31, 2009





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)





December 31,
                    2009
                  
                  
                  June 30,
                    2009(1)ASSETSCurrent
      Assets:Cash
      and cash equivalents
                  
                  $
                  340,540
                  
                  
                  $
                  292,257Short-term
      investments
                  
                  
                  125,561
                  
                  
                  
                  146,679Accounts
      receivable, net of allowance for doubtful accounts of $31,521 at December
      31, 2009 and $31,892 at June 30, 2009
                  
                  
                  148,855
                  
                  
                  
                  155,212Inventory,
      net
                  
                  
                  36,994
                  
                  
                  
                  39,783Deferred
      income taxes
                  
                  
                  22,593
                  
                  
                  
                  19,870Prepaid
      expenses and other current assets
                  
                  
                  31,687
                  
                  
                  
                  27,238Total
      current assets
                  
                  
                  706,230
                  
                  
                  
                  681,039Long-term
      investments
                  
                  
                  64,716
                  
                  
                  
                  57,823Property,
      plant and equipment, net
                  
                  
                  30,547
                  
                  
                  
                  30,520Deferred
      income taxes, non-current
                  
                  
                  14,248
                  
                  
                  
                  11,456Goodwill
                  
                  
                  216,305
                  
                  
                  
                  190,739Intangible
      assets, net
                  
                  
                  23,259
                  
                  
                  
                  17,709Purchased
      and internally developed software costs, net of accumulated amortization
      of $71,851 at December 31, 2009 and $66,804 at June 30,
    2009
                  
                  
                  22,388
                  
                  
                  
                  25,749Other
      assets
                  
                  
                  6,251
                  
                  
                  
                  6,344Total
      assets
                  
                  $
                  1,083,944
                  
                  
                  $
                  1,021,379LIABILITIES
      AND EQUITYCurrent
      Liabilities:Bank
      lines of credit
                  
                  $
                  1,370
                  
                  
                  $
                  1,090Accounts
      payable
                  
                  
                  37,571
                  
                  
                  
                  38,445Accrued
      expenses and other current liabilities
                  
                  
                  112,596
                  
                  
                  
                  104,821Income
      taxes payable
                  
                  
                  9,092
                  
                  
                  
                  7,944Deferred
      revenue
                  
                  
                  118,408
                  
                  
                  
                  112,146Total
      current liabilities
                  
                  
                  279,037
                  
                  
                  
                  264,446Income
      taxes payable, non-current
                  
                  
                  21,359
                  
                  
                  
                  19,611Deferred
      income taxes, non-current
                  
                  
                  2,288
                  
                  
                  
                  1,752Other
      non-current liabilities
                  
                  
                  11,950
                  
                  
                  
                  10,539314,634
                  
                  
                  
                  296,348Commitments
      and contingencies (Note 13)Equity:MICROS
      Systems, Inc. Shareholders' Equity:Common
      stock, $0.00625 par value; authorized 120,000 shares; issued and
      outstanding 79,654 at December 31, 2009 and 80,310 at June 30,
      2009
                  
                  
                  498
                  
                  
                  
                  502Capital
      in excess of par
                  
                  
                  109,378
                  
                  
                  
                  127,146Retained
      earnings
                  
                  
                  625,602
                  
                  
                  
                  575,095Accumulated
      other comprehensive income
                  
                  
                  27,104
                  
                  
                  
                  16,254Total
      MICROS Systems, Inc. shareholders' equity
                  
                  
                  762,582
                  
                  
                  
                  718,997Noncontrolling
      interest
                  
                  
                  6,728
                  
                  
                  
                  6,034Total
      equity
                  
                  
                  769,310
                  
                  
                  
                  725,031Total
      liabilities and equity
                  
                  $
                  1,083,944
                  
                  
                  $
                  1,021,379





(1) See
Note 14, "Revisions to Prior Period Financial Statements" in Notes to Condensed
Consolidated Financial Statements.





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
                              December 31,
                            
                            
                            Six Months Ended
                              December 31,2009
                            
                            
                            2008
                            
                            
                            2009
                            
                            
                            2008(1)
                            
                            
                            
                            (1)
                            
                            
                            
                            (1)Revenue:Hardware
                            
                            $
                            45,793
                            
                            
                            $
                            55,646
                            
                            
                            $
                            89,099
                            
                            
                            $
                            119,118Software
                            
                            
                            30,499
                            
                            
                            
                            37,679
                            
                            
                            
                            55,192
                            
                            
                            
                            75,177Services
                            
                            
                            149,355
                            
                            
                            
                            143,184
                            
                            
                            
                            292,757
                            
                            
                            
                            285,846Total
      revenue
                            
                            
                            225,647
                            
                            
                            
                            236,509
                            
                            
                            
                            437,048
                            
                            
                            
                            480,141Cost
      of sales:Hardware
                            
                            
                            30,364
                            
                            
                            
                            34,326
                            
                            
                            
                            58,416
                            
                            
                            
                            77,179Software
                            
                            
                            7,045
                            
                            
                            
                            6,679
                            
                            
                            
                            12,432
                            
                            
                            
                            13,737Services
                            
                            
                            63,259
                            
                            
                            
                            69,530
                            
                            
                            
                            125,396
                            
                            
                            
                            137,313Total
      cost of sales
                            
                            
                            100,668
                            
                            
                            
                            110,535
                            
                            
                            
                            196,244
                            
                            
                            
                            228,229Gross
      margin
                            
                            
                            124,979
                            
                            
                            
                            125,974
                            
                            
                            
                            240,804
                            
                            
                            
                            251,912Selling,
      general and administrative expenses
                            
                            
                            71,359
                            
                            
                            
                            72,736
                            
                            
                            
                            136,478
                            
                            
                            
                            150,108Research
      and development expenses
                            
                            
                            9,703
                            
                            
                            
                            10,624
                            
                            
                            
                            20,720
                            
                            
                            
                            21,094Depreciation
      and amortization
                            
                            
                            4,319
                            
                            
                            
                            4,291
                            
                            
                            
                            8,161
                            
                            
                            
                            8,378Total
      operating expenses
                            
                            
                            85,381
                            
                            
                            
                            87,651
                            
                            
                            
                            165,359
                            
                            
                            
                            179,580Income
      from operations
                            
                            
                            39,598
                            
                            
                            
                            38,323
                            
                            
                            
                            75,445
                            
                            
                            
                            72,332Non-operating
      income (expense):Interest
      income
                            
                            
                            912
                            
                            
                            
                            2,565
                            
                            
                            
                            1,963
                            
                            
                            
                            5,819Interest
      expense
                            
                            
                            (87
                            )
                            
                            
                            (135
                            )
                            
                            
                            (86
                            )
                            
                            
                            (282
                            )Other
      (expense) income, net
                            
                            
                            (427
                            )
                            
                            
                            (267
                            )
                            
                            
                            (822
                            )
                            
                            
                            420Total
      non-operating income, net
                            
                            
                            398
                            
                            
                            
                            2,163
                            
                            
                            
                            1,055
                            
                            
                            
                            5,957Income
      before taxes
                            
                            
                            39,996
                            
                            
                            
                            40,486
                            
                            
                            
                            76,500
                            
                            
                            
                            78,289Income
      tax provision
                            
                            
                            13,334
                            
                            
                            
                            14,074
                            
                            
                            
                            25,471
                            
                            
                            
                            27,130Net
      income
                            
                            
                            26,662
                            
                            
                            
                            26,412
                            
                            
                            
                            51,029
                            
                            
                            
                            51,159Less:  net
      income attributable to noncontrolling interest
                            
                            
                            (532
                            )
                            
                            
                            (234
                            )
                            
                            
                            (755
                            )
                            
                            
                            (683
                            )Net
      income attributable to MICROS Systems, Inc.
                            
                            $
                            26,130
                            
                            
                            $
                            26,178
                            
                            
                            $
                            50,274
                            
                            
                            $
                            50,476Net
      income per common share attributable to MICROS Systems, Inc. common
      shareholders (2):Basic
                            
                            $
                            0.33
                            
                            
                            $
                            0.32
                            
                            
                            $
                            0.63
                            
                            
                            $
                            0.62Diluted
                            
                            $
                            0.32
                            
                            
                            $
                            0.32
                            
                            
                            $
                            0.62
                            
                            
                            $
                            0.61Weighted-average
      number of shares outstanding:Basic
                            
                            
                            79,700
                            
                            
                            
                            80,424
                            
                            
                            
                            79,724
                            
                            
                            
                            80,556Diluted
                            
                            
                            81,234
                            
                            
                            
                            81,202
                            
                            
                            
                            81,283
                            
                            
                            
                            81,691





The
details of total other-than-temporary impairment losses ("OTTI") of long-term
investments and a reconciliation to OTTI change included in other non-operating
expense are as follows (3):





Three Months Ended
                    December 31,
                  
                  
                  Six Months Ended
                    December 31,2009
                  
                  
                  2008
                  
                  
                  2009
                  
                  
                  2008Increase
      (decrease) in other-than-temporary impairment losses
                  
                  $
                  (119
                  )
                  
                  $
                  -
                  
                  
                  $
                  236
                  
                  
                  $
                  -Add:
      change in non-credit based OTTI recognized in other comprehensive
      income
                  
                  
                  119
                  
                  
                  
                  -
                  
                  
                  
                  151
                  
                  
                  
                  -Credit
      based OTTI charge recognized in non-operating income
    (expense)
                  
                  $
                  -
                  
                  
                  $
                  -
                  
                  
                  $
                  387
                  
                  
                  $
                  -





(1) See
Note 14, "Revisions to Prior Period Financial Statements" in Notes to Condensed
Consolidated Financial Statements.


(2) See
Note 7, "Share-based Compensation" in Notes to Condensed Consolidated Financial
Statements.


(3) See
Note 4, "Financial Instruments and Fair Value Measurements" in Notes to
Consolidated Financial Statements.





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)





Six Months Ended
                      December 31,2009
                    
                    
                    2008Net
      cash flows provided by operating activities
                    
                    $
                    85,921
                    
                    
                    $
                    53,580Cash
      flows from investing activities:Proceeds
      from sales of investments
                    
                    
                    175,428
                    
                    
                    
                    79,920Purchases
      of investments
                    
                    
                    (156,615
                    )
                    
                    
                    (131,899
                    )Net
      cash paid for acquisitions
                    
                    
                    (29,034
                    )
                    
                    
                    (32,701
                    )Purchases
      of property, plant and equipment
                    
                    
                    (4,111
                    )
                    
                    
                    (8,631
                    )Internally
      developed software
                    
                    
                    (933
                    )
                    
                    
                    (233
                    )Disposal
      of property, plant and equipment
                    
                    
                    106
                    
                    
                    
                    171Net
      cash flows used in investing activities
                    
                    
                    (15,159
                    )
                    
                    
                    (93,373
                    )Cash
      flows from financing activities:Repurchases
      of stock
                    
                    
                    (34,973
                    )
                    
                    
                    (15,432
                    )Proceeds
      from stock option exercises
                    
                    
                    6,963
                    
                    
                    
                    1,363Realized
      tax benefits from stock option exercises
                    
                    
                    2,667
                    
                    
                    
                    77Principal
      payments on line of credit and long-tem debt related to an
      acquisition
                    
                    
                    -
                    
                    
                    
                    (18,124
                    )Other
                    
                    
                    372
                    
                    
                    
                    (1,306
                    )Net
      cash flows used in financing activities
                    
                    
                    (24,971
                    )
                    
                    
                    (33,422
                    )Effect
      of exchange rate changes on cash and cash equivalents
                    
                    
                    2,492
                    
                    
                    
                    (24,667
                    )Net
      increase (decrease) in cash and cash equivalents
                    
                    
                    48,283
                    
                    
                    
                    (97,882
                    )Cash
      and cash equivalents at beginning of year
                    
                    
                    292,257
                    
                    
                    
                    377,072Cash
      and cash equivalents at end of period
                    
                    $
                    340,540
                    
                    
                    $
                    279,190





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


5





MICROS
SYSTEMS, INC. AND SUBSIDIARIES


CONDENSED
CONSOLIDATED STATEMENTS OF EQUITY


(Unaudited,
in thousands)





MICROS Systems, Inc. Shareholders(1)AccumulatedCapital
                    
                    
                    
                    
                    
                    Other
                    
                    
                    Non-Common Stock
                    
                    
                    in Excess
                    
                    
                    Retained
                    
                    
                    Comprehensive
                    
                    
                    controllingShares
                    
                    
                    Amount
                    
                    
                    of Par
                    
                    
                    Earnings
                    
                    
                    Income
                    
                    
                    Interest
                    
                    
                    TotalBalance,
      June 30, 2009
                    
                    
                    80,310
                    
                    
                    $
                    502
                    
                    
                    $
                    127,146
                    
                    
                    $
                    575,095
                    
                    
                    $
                    16,254
                    
                    
                    $
                    6,034
                    
                    
                    $
                    725,031Comprehensive
      income:Net
      income
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    50,274
                    
                    
                    
                    
                    
                    
                    
                    755
                    
                    
                    
                    51,029Foreign
      currency translation adjustments, net of tax of $0
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    10,382
                    
                    
                    
                    (61
                    )
                    
                    
                    10,321Non-credit
      other-than-temporary gain on long-term investments, net of tax of
      $286
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    468
                    
                    
                    
                    -
                    
                    
                    
                    468Total
      comprehensive income
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    61,818Minority
      interest put arrangement
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    233
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    233Share-based
      compensation
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    7,429
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    7,429Stock
      issued upon exercise of options
                    
                    
                    606
                    
                    
                    
                    4
                    
                    
                    
                    6,959
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    6,963Repurchases
      of stock
                    
                    
                    (1,262
                    )
                    
                    
                    (8
                    )
                    
                    
                    (34,965
                    )
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    (34,973
                    )Income
      tax benefit from options exercised
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    2,809
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    2,809Balance,
      December 31, 2009
                    
                    
                    79,654
                    
                    
                    $
                    498
                    
                    
                    $
                    109,378
                    
                    
                    $
                    625,602
                    
                    
                    $
                    27,104
                    
                    
                    $
                    6,728
                    
                    
                    $
                    769,310





MICROS Systems, Inc. Shareholders(1)AccumulatedCapital
                    
                    
                    
                    
                    
                    Other
                    
                    
                    Non-Common Stock
                    
                    
                    in Excess
                    
                    
                    Retained
                    
                    
                    Comprehensive
                    
                    
                    controllingShares
                    
                    
                    Amount
                    
                    
                    of Par
                    
                    
                    Earnings
                    
                    
                    Income
                    
                    
                    Interest
                    
                    
                    TotalBalance,
      June 30, 2008
                    
                    
                    80,898
                    
                    
                    $
                    506
                    
                    
                    $
                    131,517
                    
                    
                    $
                    479,547
                    
                    
                    $
                    60,154
                    
                    
                    $
                    5,892
                    
                    
                    $
                    677,616Comprehensive
      income:Net
      income
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    50,476
                    
                    
                    
                    -
                    
                    
                    
                    683
                    
                    
                    
                    51,159Foreign
      currency translation adjustments, net of tax of $0
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    (53,038
                    )
                    
                    
                    (641
                    )
                    
                    
                    (53,679
                    )Non-credit
      other-than-temporary losses on long-term investments, net of tax of
      $1,608
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    (2,692
                    )
                    
                    
                    -
                    
                    
                    
                    (2,692
                    )Total
      comprehensive loss
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    (5,212
                    )Minority
      interest put arrangement
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    (358
                    )
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    (358
                    )Dividends
      to non-controlling interest
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    (619
                    )
                    
                    
                    (619
                    )Share-based
      compensation
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    7,832
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    7,832Stock
      issued upon exercise of options
                    
                    
                    78
                    
                    
                    
                    -
                    
                    
                    
                    1,363
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    1,363Repurchases
      of stock
                    
                    
                    (595
                    )
                    
                    
                    (4
                    )
                    
                    
                    (15,428
                    )
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    (15,432
                    )Income
      tax benefit from options exercised
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    84
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    84Balance,
      December 31, 2008
                    
                    
                    80,381
                    
                    
                    $
                    502
                    
                    
                    $
                    125,368
                    
                    
                    $
                    529,665
                    
                    
                    $
                    4,424
                    
                    
                    $
                    5,315
                    
                    
                    $
                    665,274





(1) See
Note 14, "Revisions to Prior Period Financial Statements" in Notes to Condensed
Consolidated Financial Statements.





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


6


MICROS
SYSTEMS, INC. AND SUBSIDIARIES


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS





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, 2009.


The
accompanying condensed consolidated financial statements of the Company have
been prepared in accordance with accounting principles generally accepted in the
United States of America for interim financial information and in accordance
with the instructions for Form 10-Q and Rule 10-01 of Regulation S-X,
promulgated by the Securities and Exchange Commission.  Accordingly,
they do not include all disclosures required by U.S. generally accepted
accounting principles for complete financial statements.


During January 2010, the Company
uncovered certain fraudulent activities in its subsidiary in Japan which spanned
the period from fiscal year 2006 to the three months ended December 31,
2009.  The Company has determined that fraudulent transactions
resulted in a cumulative overstatement of revenue and net income of
approximately $6.9 million and $4.9 million, respectively, over this
period.  The Company concluded that the misstatements do not
materially affect the previously issued financial statements for any of its
prior periods.  Appropriate adjustments have been made to prior period
information included in the accompanying condensed consolidated financial
statements and described in these notes to the consolidated financial
statements.  See Note 14 below for further detail.


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 presentation 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 six months ended December 31,
2009 are not necessarily indicative of the results to be expected for the full
year or any future periods.


There
were no subsequent events that the Company was required to recognize or disclose
in the accompanying consolidated financial statements.  Subsequent
events have been evaluated through February 16, 2010, the date these financial
statements are issued.





2.
            ACQUISITIONS


On
December 31, 2009, the Company acquired TIG Global, LLC (“TIG Global”), an
online marketer specializing in hotel and destination internet marketing,
headquartered in the Washington, D.C. metropolitan area, for a total cash
purchase price of approximately $29.0 million, net of cash
acquired.  Approximately $3.0 million of the total purchase price is
held in escrow and, if specified claims against TIG Global arise, such amounts
may be used to satisfy those claims.  Any amounts remaining in escrow
after the satisfaction of any such claims are to be paid in two installments, at
12 and 18 months after closing.  The selling TIG Global members may
receive up to an additional approximately $0.9 million based upon achievement of
specified financial targets for calendar year 2010.  Approximately
$0.6 million of the $0.9 million has been included in the purchase price
allocation.  In connection with the acquisition, the Company recorded
goodwill of approximately $24.0 million and intangible assets of approximately
$6.8 million, principally customer relationships which will be amortized over 10
years.  The acquisition of TIG Global has been included in the
Company’s results since the acquisition date of December 31,
2009.  The Company expects to finalize the purchase price allocation
in the third quarter of 2010.  The pro forma effect of this
acquisition is not material to the consolidated financial position and results
of operations presented in this report.





3.
            INVENTORY


The components of inventory are as
follows:





December 31,
                    2009
                  
                  
                  June 30,
                    2009(in
      thousands)Raw
      materials
                  
                  $
                  1,597
                  
                  
                  $
                  1,889Work-in-process
                  
                  
                  8
                  
                  
                  
                  15Finished
      goods
                  
                  
                  35,389
                  
                  
                  
                  37,879Total
      inventory
                  
                  $
                  36,994
                  
                  
                  $
                  39,783





The
Company maintained a reserve for inventory obsolescence of approximately $11.8
million at December 31, 2009, compared to approximately $11.4 million at June
30, 2009.  During the three months ended December 31, 2009 and 2008
the Company reserved approximately $0.9 million and $0.1 million,
respectively.  During the six months ended December 31, 2009 and 2008,
the Company reserved approximately $1.6 million and $1.7 million,
respectively.  All reserves related to potentially obsolete and slow
moving products.  As of December 31, 2009, foreign currency
translation increased the reserve for inventory obsolescence by approximately
$0.1 million as compared to June 30, 2009.


7


4.
            FINANCIAL
      INSTRUMENTS AND FAIR VALUE
MEASUREMENTS


Short-term and long-term investments
consist of the following:





December 31, 2009
                  
                  
                  June 30, 2009(in thousands)
                  
                  Amortized
                    CostBasis
                  
                  
                  Aggregate
                    FairValue
                  
                  
                  Amortized
                    CostBasis
                  
                  
                  AggregateFairValueTime
      deposit - international
                  
                  $
                  85,247
                  
                  
                  $
                  85,247
                  
                  
                  $
                  115,762
                  
                  
                  $
                  115,762Auction
      rate securities
                  
                  
                  64,275
                  
                  
                  
                  58,190
                  
                  
                  
                  64,275
                  
                  
                  
                  57,823U.S.
      government
                  
                  
                  39,204
                  
                  
                  
                  39,204
                  
                  
                  
                  25,084
                  
                  
                  
                  25,084Foreign
      corporate debt security
                  
                  
                  7,123
                  
                  
                  
                  7,123
                  
                  
                  
                  4,209
                  
                  
                  
                  4,209Time
      deposit - U.S.
                  
                  
                  513
                  
                  
                  
                  513
                  
                  
                  
                  970
                  
                  
                  
                  970Other
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  654
                  
                  
                  
                  654Total
      investments
                  
                  $
                  196,362
                  
                  
                  $
                  190,277
                  
                  
                  $
                  210,954
                  
                  
                  $
                  204,502





Fair value is the price that would be
received to sell an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date (exit
price).  The following hierarchy prioritizes the inputs (generally,
assumptions that market participants use in pricing an asset or liability) used
to measure fair value based on the quality and reliability of the information
provided by the inputs:


·
            Level
      1 - Unadjusted quoted prices in active markets that are accessible at the
      measurement date for identical, unrestricted assets or
      liabilities.  The Company considers active markets as those in
      which transactions for the assets or liabilities occur with sufficient
      frequency and volume to provide pricing information on an ongoing
      basis.


·
            Level
      2 - Quoted prices for similar assets or liabilities in active markets;
      quoted prices for identical assets or liabilities in markets that are not
      active; inputs that are observable, either directly or indirectly, for
      substantially the full term of the asset or liability; or inputs that are
      derived principally from or corroborated by observable market data or
      other means.


·
            Level
      3 - Measured based on prices or valuation models using unobservable inputs
      to the extent relevant observable inputs are not available (i.e., where
      there is little or no market activity for the asset or
      liability).





The financial assets accounted for at
fair value were as follows (excludes cash and cash equivalents of approximately
$340.5 million and $292.3 million as of December 31, 2009 and June 30,
2009):





(in
      thousands)
                      
                      Level 1
                      
                      
                      Level 2
                      
                      
                      Level 3
                      
                      
                      TotalBalance
      at December 31, 2009:Short-term
      and long-term investments:Time
      deposit - international
                      
                      $
                      -
                      
                      
                      $
                      85,247
                      
                      
                      $
                      -
                      
                      
                      $
                      85,247Auction
      rate securities
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      58,190
                      
                      
                      
                      58,190U.S.
      government
                      
                      
                      39,204
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      39,204Foreign
      corporate debt security
                      
                      
                      7,123
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      7,123Time
      deposit - U.S.
                      
                      
                      -
                      
                      
                      
                      513
                      
                      
                      
                      -
                      
                      
                      
                      513Total
      short-term and long-term investments
                      
                      $
                      46,327
                      
                      
                      $
                      85,760
                      
                      
                      $
                      58,190
                      
                      
                      $
                      190,277Balance
      at June 30, 2009:Short-term
      and long-term investments:Time
      deposit - international
                      
                      $
                      -
                      
                      
                      $
                      115,762
                      
                      
                      $
                      -
                      
                      
                      $
                      115,762Auction
      rate securities
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      57,823
                      
                      
                      
                      57,823U.S.
      government
                      
                      
                      25,084
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      25,084Foreign
      corporate debt security
                      
                      
                      4,209
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      4,209Time
      deposit - U.S.
                      
                      
                      -
                      
                      
                      
                      970
                      
                      
                      
                      -
                      
                      
                      
                      970Other
                      
                      
                      -
                      
                      
                      
                      654
                      
                      
                      
                      -
                      
                      
                      
                      654Total
      short-term and long-term investments
                      
                      $
                      29,293
                      
                      
                      $
                      117,386
                      
                      
                      $
                      57,823
                      
                      
                      $
                      204,502





At December 31, 2009 and June 30, 2009,
other than the Company’s investments in auction rate securities, the Company’s
investments were recognized at fair value determined based upon observable input
information provided by the Company’s pricing service vendors for identical or
similar assets.  For these investments, cost approximates fair
value.  See “Auction Rate Securities” below for further discussion on
the valuation of the Company’s investments in auction rate
securities.


During the six months ended December
31, 2009 and 2008, the Company did not recognize any gains or losses on its
investments, other than related to the Company’s investments in auction rate
securities.


8


The
contractual maturities of investments held at December 31, 2009 are as
follows:





(in
      thousands)
                    
                    Amortized
                      Cost Basis
                    
                    
                    Aggregate
                      Fair ValueDue
      within one year
                    
                    $
                    125,561
                    
                    
                    $
                    125,561Due
      between 1 - 2 years
                    
                    
                    6,526
                    
                    
                    
                    6,526Due
      after 10 years - auction rate securities
                    
                    
                    64,275
                    
                    
                    
                    58,190Balance
      at December 31, 2009
                    
                    $
                    196,362
                    
                    
                    $
                    190,277





AUCTION
RATE SECURITIES


The Company’s investments in auction
rate securities, carried at estimated fair values, were its only assets valued
on the basis of Level 3 inputs.  Auction rate securities are long-term
debt instruments with variable interest rates that are designed to reset to
prevailing market interest rates every 7 to 35 days through the auction
process.  The auction rate securities held by the Company are
supported by student loans for which repayment is guaranteed either by the
Federal Family Education Loan Program or insured by AMBAC Financial
Group.  Due to the liquidity previously provided by the interest rate
reset mechanism and the short-term nature of the Company’s investment, the
auction rate securities previously (prior to February 2008) were classified as
short-term investments available-for-sale in the Company’s consolidated balance
sheets.  Beginning in February 2008, auctions for these securities
failed to obtain sufficient bids to establish a clearing rate and the securities
were not saleable in auction, thereby no longer providing short-term
liquidity.  As a result, the auction rate securities have been
classified as long-term investments available-for-sale as of December 31, 2009
and June 30, 2009 instead of being classified as short-term investments, as was
the case prior to February 2008.


As of December 31, 2009, the Company
updated its assessment as to whether it would likely recover the entire cost
basis of each of the auction rate securities, and, therefore, whether the
securities had incurred an other-than-temporary impairment. Determination of
whether the impairment is temporary or other-than-temporary requires significant
judgment.  The primary factors that are considered in assessing the
nature of the impairment include (a) the credit quality of the underlying
security, (b) the extent to which and time period during which the fair value of
each investment has been below cost, (c) the expected holding or recovery period
for each investment, (d) the Company’s intent to hold each investment until
recovery and likelihood that the Company will not be required to sell the
security prior to recovery, and (e) the existence of any evidence of default by
the issuer. The Company engaged an independent valuation firm to perform a
valuation of its auction rate securities in conjunction with the Company's
assessment of any impairment as temporary versus other-than-temporary. The
valuation firm used a discounted cash flow model that considered various inputs
including:  (a) the coupon rate specified under the debt instruments,
(b) the current credit ratings of the underlying issuers, (c) collateral
characteristics, (d) discount rates, (e) severity of default and (f) probability
of failing or passing auction or early redemption.  The valuation firm
used a mark to model approach to arrive at this valuation, which the Company
reviewed and with which it agreed.


Based on its fair value assessment, the
Company determined that its investments in auction rate securities as of
December 31, 2009 were impaired by approximately $6.1 million as compared to an
impairment of approximately $6.7 million as of September 30, 2009 and $6.5
million as of June 30, 2009.  Approximately $2.2 million of this
impairment at December 31, 2009 was deemed to be
other-than-temporary.  The valuations further evaluated the amount of
the other-than-temporary impairment attributable to credit loss.  The
factors considered in making an evaluation of the amount attributable to credit
loss included the following:  (a) default probability and the
likelihood of restructuring of the security, (b) payment structure of the
security to determine how the expected underlying collateral cash flows will be
distributed to each security issued from the structure and (c) performance
indicators of the underlying assets in the trust (including default and
delinquency rates).  These assumptions are subject to change as the
underlying market conditions change.  Based on its evaluations, the
Company determined that approximately $1.7 million of the cumulative
impairment losses were credit based which is unchanged from the September 30,
2009 evaluation.  For the three months ended September 30, 2009, the
Company had recorded $0.4 million, the incremental credit based losses as
compared to June 30, 2009, in its consolidated statement of
operations.  Because there were no incremental credit based losses at
December 31, 2009 as compared to September 30, 2009, no additional amounts were
required to be recorded for the three months ended December 31,
2009.


The remaining impairment losses of
approximately $4.4 million (approximately $2.7 million, net of tax) were
recorded in accumulated other comprehensive income as of December 31,
2009.


9


A
reconciliation of changes in the fair value of auction rate securities, and the
related realized and unrealized losses were as follows:





(in thousands)
                    
                    Cost
                    
                    
                    Temporary
                      Impairment
                      Loss(1)
                    
                    
                    OTTI-
                      Non-Credit
                      Loss(1)
                    
                    
                    OTTI-
                      CreditLoss
                      (2)
                    
                    
                    Fair
                      ValueBalance
      at June 30, 2009
                    
                    $
                    64,275
                    
                    
                    $
                    (4,474
                    )
                    
                    $
                    (712
                    )
                    
                    $
                    (1,266
                    )
                    
                    $
                    57,823Changes
      in losses related to investments
                    
                    
                    -
                    
                    
                    
                    140
                    
                    
                    
                    32
                    
                    
                    
                    (387
                    )
                    
                    
                    (215
                    )Balance
      at September 30, 2009
                    
                    
                    64,275
                    
                    
                    
                    (4,334
                    )
                    
                    
                    (680
                    )
                    
                    
                    (1,653
                    )
                    
                    
                    57,608Changes
      in losses related to investments
                    
                    
                    -
                    
                    
                    
                    463
                    
                    
                    
                    119
                    
                    
                    
                    -
                    
                    
                    
                    582Balance
      at December 31, 2009
                    
                    $
                    64,275
                    
                    
                    $
                    (3,871
                    )
                    
                    $
                    (561
                    )
                    
                    $
                    (1,653
                    )
                    
                    $
                    58,190





(1)
Recorded in the accumulated other comprehensive income (loss) component of
stockholders' equity.


(2)
Recorded in the condensed consolidated statement of operations.





During the six months ended December
31, 2009, the Company had no sales or redemptions of its auction rate
securities.


The Company plans to continue to
monitor its investments, including the liquidity of and creditworthiness of the
issuers of its auction rate securities, on an ongoing basis for indications of
further impairment and, if an impairment is identified, for proper
classification of the impairment.  Based on the Company’s expected
operating cash flows and sources of cash, the Company does not believe that any
reduction in the liquidity of its auction rate securities will have a material
impact on its overall ability to meet its liquidity needs.





5.
            GOODWILL
      AND INTANGIBLE ASSETS


During the three months ended September
30, 2009, the Company completed its annual impairment test on its goodwill and
its indefinite-lived trademarks as of July 1, 2009.  Based on its
annual impairment test results, the Company determined that no impairment of its
goodwill or indefinite-lived trademarks existed as of July 1, 2009, and
subsequent to July 1, 2009, there have not been any events or changes in
circumstances indicating that it is more likely than not that goodwill or
indefinite-lived trademarks have been impaired.


During the three months ended December
31, 2009, the Company recorded goodwill of approximately $24.0 million in
connection with its acquisition of TIG Global (see Note 2).





6.
            LINE
      OF CREDIT


The Company has 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,
2010.  The lenders under the Credit Agreements are Bank of America,
N.A., Wells Fargo and US Bank (“Lenders”).  The international facility
is secured by 65% of the capital stock of the Company’s main operating Ireland
subsidiary and 100% of the capital stock of all of the remaining 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 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 the
Company’s consolidated earnings before interest, taxes, depreciation and
amortization for the immediately preceding four calendar
quarters.  Under the terms of the Credit Agreements, the Company is
required to pay to the Lenders insignificant commitment fees on the unused
portion of the line of credit.  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 including those not cured within the applicable cure period, if any,
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 December 31, 2009, the Company
had approximately $1.4 million outstanding under the Credit Agreements and has
applied an additional approximately $0.4 million to guarantees.


The Company also has a credit agreement
with a European bank under which the Company may borrow up to EUR 1.0 million
(approximately $1.4 million at the December 31, 2009 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 December 31,
2009, there were no balances outstanding on this credit facility, but
approximately EUR 0.3 million (approximately $0.5 million at the December 31,
2009 exchange rate) of the credit facility has been used for
guarantees.


As of December 31, 2009, the Company
had approximately $64.1 million borrowing capacity under all of the credit
facilities described above.  The weighted-average interest rate on the
outstanding balances under the Credit Agreements as of December 31, 2009 was
1.5%.


10


7.
            SHARE-BASED
      COMPENSATION


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





Three Months Ended
                  
                  
                  Six Months EndedDecember 31,
                  
                  
                  December 31,(in thousands)
                  
                  2009
                  
                  
                  2008
                  
                  
                  2009
                  
                  
                  2008Selling,
      general and administrative
                  
                  $
                  4,235
                  
                  
                  $
                  3,886
                  
                  
                  $
                  7,139
                  
                  
                  $
                  7,411Research
      and development
                  
                  
                  143
                  
                  
                  
                  213
                  
                  
                  
                  290
                  
                  
                  
                  421Total
      non-cash share-based compensation expense
                  
                  
                  4,378
                  
                  
                  
                  4,099
                  
                  
                  
                  7,429
                  
                  
                  
                  7,832Income
      tax benefit
                  
                  
                  (1,464
                  )
                  
                  
                  (978
                  )
                  
                  
                  (2,406
                  )
                  
                  
                  (1,819
                  )Total
      non-cash share-based compensation expense, net of tax
    benefit
                  
                  $
                  2,914
                  
                  
                  $
                  3,121
                  
                  
                  $
                  5,023
                  
                  
                  $
                  6,013Impact
      on diluted net income per share
                  
                  $
                  0.03
                  
                  
                  $
                  0.04
                  
                  
                  $
                  0.05
                  
                  
                  $
                  0.08





No non-cash share-based compensation
expense has been capitalized for the six months ended December 31, 2009 and
2008, as stock options were not granted to employees whose labor cost was
capitalized as software development costs or inventory.


As of December 31, 2009, there was
approximately $14.6 million (net of estimated forfeitures) in non-cash
share-based compensation related to non-vested awards, which is expected to be
recognized in the Company’s consolidated statements of operations over a
weighted-average period of 1.9 years.





8.
            NET
      INCOME PER SHARE


Basic net income per common share is
computed by dividing net income available to MICROS Systems, Inc. common
shareholders by the weighted-average number of shares
outstanding.  Diluted net income per share includes the dilutive
effect of stock options.  A reconciliation of the net income
attributable to MICROS Systems, Inc. and the weighted-average number of common
shares outstanding to the net income available to MICROS Systems, Inc. common
shareholders and the weighted-average number of common shares outstanding on a
diluted basis is as follows:





Three Months Ended
                    December 31,
                  
                  
                  Six Months Ended
                    December 31,(in
      thousands, except per share data)
                  
                  2009
                  
                  
                  2008
                  
                  
                  2009
                  
                  
                  2008Net
      income attributable to MICROS Systems, Inc.
                  
                  $
                  26,130
                  
                  
                  $
                  26,178
                  
                  
                  $
                  50,274
                  
                  
                  $
                  50,476Effect
      of minority put arrangement
                  
                  
                  173
                  
                  
                  
                  (167
                  )
                  
                  
                  233
                  
                  
                  
                  (358
                  )Net
      income available to MICROS Systems, Inc. common
    shareholders
                  
                  $
                  26,303
                  
                  
                  $
                  26,011
                  
                  
                  $
                  50,507
                  
                  
                  $
                  50,118Average
      common shares outstanding
                  
                  
                  79,700
                  
                  
                  
                  80,424
                  
                  
                  
                  79,724
                  
                  
                  
                  80,556Dilutive
      effect of outstanding stock options
                  
                  
                  1,534
                  
                  
                  
                  778
                  
                  
                  
                  1,559
                  
                  
                  
                  1,135Average
      common shares outstanding assuming dilution
                  
                  
                  81,234
                  
                  
                  
                  81,202
                  
                  
                  
                  81,283
                  
                  
                  
                  81,691Basic
      net income per share
                  
                  $
                  0.33
                  
                  
                  $
                  0.32
                  
                  
                  $
                  0.63
                  
                  
                  $
                  0.62Diluted
      net income per share
                  
                  $
                  0.32
                  
                  
                  $
                  0.32
                  
                  
                  $
                  0.62
                  
                  
                  $
                  0.61Anti-dilutive
      weighted shares excluded from reconciliation
                  
                  
                  1,786
                  
                  
                  
                  4,521
                  
                  
                  
                  1,695
                  
                  
                  
                  3,195





Results for the three months ended
December 31, 2009 and 2008 include approximately $4.4 million ($2.9 million, net
of tax) and $4.1 million ($3.1 million, net of tax), in non-cash share-based
compensation expense, respectively.  These non-cash share-based
compensation expenses reduced diluted net income per share by $0.03 and $0.04
for the three months ended December 31, 2009 and 2008,
respectively.


Results for the six months ended
December 31, 2009 and 2008 include approximately $7.4 million ($5.0 million, net
of tax) and $7.8 million ($6.0 million, net of tax), in non-cash share-based
compensation expense, respectively.  These non-cash share-based
compensation expenses reduced diluted net income per share by $0.05 and $0.08
for the six months ended December 31, 2009 and 2008,
respectively.


11




9.
              OTHER
      COMPREHENSIVE INCOME (LOSS)
 The components of comprehensive income
(loss), net of tax, were as follows:


Three
      Months Ended
                
                
                Six
      Months EndedDecember
      31,
                
                
                December
      31,(in
      thousands)
                
                2009
                
                
                2008
                
                
                2009
                
                
                2008Net
      income
                
                $
                26,662
                
                
                $
                26,412
                
                
                $
                51,029
                
                
                $
                51,159Other
      comprehensive income (loss), net of tax:Foreign
      currency translation adjustments
                
                
                (5,401
                )
                
                
                (13,667
                )
                
                
                10,321
                
                
                
                (53,679
                )Unrealized
      loss on non-current investments
                
                
                361
                
                
                
                (3,206
                )
                
                
                468
                
                
                
                (2,692
                )Other
      comprehensive (loss) income, net of tax
                
                
                (5,040
                )
                
                
                (16,873
                )
                
                
                10,789
                
                
                
                (56,371
                )Total
      comprehensive income (loss)
                
                
                21,622
                
                
                
                9,539
                
                
                
                61,818
                
                
                
                (5,212
                )Less:  Net
      income attributable to non-controlling interest
                
                
                (532
                )
                
                
                (234
                )
                
                
                (755
                )
                
                
                (683
                )Less:  Foreign
      currency translation adjustmentsattributable to non-controlling interest
                
                
                306
                
                
                
                144
                
                
                
                61
                
                
                
                641Total
      comprehensive income (loss) attributable to MICROS Systems,
      Inc.
                
                $
                21,396
                
                
                $
                9,449
                
                
                $
                61,124
                
                
                $
                (5,254
                )
 
 The foreign currency translation
adjustments of approximately $5.4 million (unfavorable) and approximately $13.7
million (unfavorable) for the three months ended December 31, 2009 and 2008,
respectively, and approximately $10.3 million (favorable) and approximately
$53.7 million (unfavorable) for the six months ended December 31, 2009 and 2008,
respectively, were due to foreign currency exchange rate fluctuations, mainly
between the U.S. dollar and the Euro, and between the U.S. dollar and the
Australian dollar.  As of December 31, 2009, the Euro has increased in
value by approximately 2% against the dollar since June 30, 2009 and has
suffered a 2% decrease in value against the dollar since September 30,
2009.  As of December 31, 2009, the Australian dollar has increased by
approximately 11% in value against the U.S. dollar since June 30, 2009, and
approximately 2% since September 30, 2009.  Approximately $299.7
million and $8.1 million of the Company’s net assets at December 31, 2009 are
denominated in Euros and Australian dollar, respectively.


10.
            RECENT
      ACCOUNTING GUIDANCE





RECENTLY
ADOPTED ACCOUNTING GUIDANCE


On July 1, 2009, the Company adopted
the authoritative guidance issued by the Financial Accounting Standards Board
(“FASB”) on business combinations.  The guidance addresses the manner
in which the acquirer of a business recognizes and measures in its financial
statements the identifiable assets acquired, the liabilities assumed, and any
non-controlling interest in the acquired business.  This guidance also
provides standards for recognizing and measuring the goodwill acquired in the
business combination and for disclosure of information to enable users of the
financial statements to evaluate the nature and financial effects of the
business combination.  The Company’s acquisition of TIG Global on
December 31, 2009 was accounted for under this guidance.


On July 1, 2009, the Company adopted
authoritative guidance issued by the FASB that changes the accounting and
reporting for non-controlling interests.  This guidance requires,
among other things, that: non-controlling interests be reported as a component
of equity; changes in a parent’s ownership interest while the parent retains its
controlling interest be accounted for as equity transactions; and any retained
non-controlling equity investment upon the deconsolidation of a subsidiary
initially be measured at fair value.  The adoption of this guidance
did not have a material impact on the Company’s consolidated financial
statements.


On July 1, 2009, the Company adopted
the authoritative guidance issued by the FASB which revises the factors that
should be considered in developing renewal or extension assumptions used to
determine the useful life of a recognized intangible asset.  This
guidance is intended to improve the consistency between the useful life of a
recognized intangible asset and the period of expected cash flows used to
measure the fair value of the asset under other U.S. generally accepted
accounting principles.  The adoption of this guidance did not have a
material impact on the Company’s consolidated financial statements.


On July 1, 2009, the Company adopted
authoritative guidance issued by the FASB on fair value measurement for
nonfinancial assets and liabilities, other than non-financial assets and
liabilities that are recognized or disclosed at fair value in the financial
statements on a recurring basis (at least annually), which already were subject
to the FASB guidance.  The adoption of this guidance did not have a
material impact on the Company’s consolidated financial statements.





RECENT
ACCOUNTING GUIDANCE NOT YET ADOPTED


In January 2010, the FASB issued
guidance amending the disclosure requirements related to recurring and
nonrecurring fair value measurements. The guidance requires new disclosures on
the transfers of assets and liabilities between Level 1 inputs (quoted prices in
active market for identical assets or liabilities) and Level 2 inputs
(significant other observable inputs) of the fair value measurement hierarchy,
including the reasons and the timing of the transfers. Additionally, the
guidance requires separate disclosure of purchases, sales, issuance, and
settlements of assets and liabilities measured using significant unobservable
inputs (Level 3 fair value measurements). This standard is effective for the
Company beginning January 1, 2010, except for the disclosure on the activities
for Level 3 fair value measurements, which is effective for the Company
beginning July 1, 2011. Other than requiring additional disclosures, adoption of
this guidance will not have a material impact on its consolidated financial
statements.


12





In October 2009, the FASB issued an
authoritative guidance on revenue arrangements with multiple deliverables that
are outside the scope of the software revenue recognition
guidance.  Under the guidance, when vendor-specific objective evidence
or third-party evidence of selling price is not available, a best estimate of
the selling price is required to separate deliverables and allocate arrangement
consideration based on the relative selling prices of the separate deliverables
(the “relative selling price method”).  The relative selling price
method allocates any discount in the arrangement proportionately to each
deliverable on the basis of each deliverable’s selling price.  The
guidance also significantly expands related disclosure
requirements.  This standard is effective for the Company beginning
July 1, 2010.  The Company is continuing to evaluate the impact that
the adoption of this guidance will have on its consolidated financial
statements.


In October 2009, the FASB also issued
an authoritative guidance on revenue recognition for arrangements that include
software elements.  Under the guidance, tangible products containing
software components and non-software components that function together to
deliver the tangible product’s essential functionality are excluded from the
scope of software revenue recognition guidance and will be subject to other
relevant revenue recognition guidance.  This guidance will become
effective for the Company beginning July 1, 2010.  The Company does
not believe the adoption of this guidance will have a material impact on its
consolidated financial statements.





11.
            SEGMENT
      INFORMATION


The Company is organized and operates
in four operating segments:  U.S., Europe, the Pacific Rim, and Latin
America regions.  The Company has identified the 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 its business,
although the products and services are similar for each segment.


Historically, all of the Company’s new
business acquisitions have been incorporated into the existing operating
segments, based on their respective geographic locations, and are subsequently
operated and managed as part of the applicable operating segment.


The following table summarizes the
Company’s reportable segments:





Three Months Ended
                  
                  
                  Six Months EndedDecember 31,
                  
                  
                  December 31,(in
      thousands)
                  
                  2009
                  
                  
                  2008
                  
                  
                  2009
                  
                  
                  2008Revenues
      (1):United
      States
                  
                  $
                  117,026
                  
                  
                  $
                  130,020
                  
                  
                  $
                  228,416
                  
                  
                  $
                  257,457International
                  
                  
                  118,530
                  
                  
                  
                  115,959
                  
                  
                  
                  226,626
                  
                  
                  
                  241,158Intersegment
      eliminations (2)
                  
                  
                  (9,909
                  )
                  
                  
                  (9,470
                  )
                  
                  
                  (17,994
                  )
                  
                  
                  (18,474
                  )Total
      revenues
                  
                  $
                  225,647
                  
                  
                  $
                  236,509
                  
                  
                  $
                  437,048
                  
                  
                  $
                  480,141





Three
      Months Ended
                  
                  
                  Six
      Months EndedDecember 31,
                  
                  
                  December 31,(in
      thousands)
                  
                  2009
                  
                  
                  2008
                  
                  
                  2009
                  
                  
                  2008Income
      before taxes (1):United
      States
                  
                  $
                  19,906
                  
                  
                  $
                  21,065
                  
                  
                  $
                  37,814
                  
                  
                  $
                  37,919International
                  
                  
                  27,492
                  
                  
                  
                  26,073
                  
                  
                  
                  51,804
                  
                  
                  
                  52,793Intersegment
      eliminations (2)
                  
                  
                  (7,402
                  )
                  
                  
                  (6,652
                  )
                  
                  
                  (13,118
                  )
                  
                  
                  (12,423
                  )Total
      income before taxes
                  
                  $
                  39,996
                  
                  
                  $
                  40,486
                  
                  
                  $
                  76,500
                  
                  
                  $
                  78,289





As
      of(in
      thousands)
                          
                          December
      31,
                            2009
                          
                          
                          June
      30,
                            2009Identifiable
      assets (3):United
      States
                          
                          $
                          498,456
                          
                          
                          $
                          492,402International
                          
                          
                          585,488
                          
                          
                          
                          528,977Total
      identifiable assets
                          
                          $
                          1,083,944
                          
                          
                          $
                          1,021,379





(1)
            Amounts
      based on the location of the selling
entity.


(2)
            Amounts
      primarily represent elimination of U.S.’s intercompany
      business.


(3)
            Amounts
      based on the physical location of the
asset.


13





12.
            SHAREHOLDERS’
      EQUITY


During the period from fiscal year 2002
through fiscal year 2009, the Board of Directors authorized the purchase of up
to an aggregate of 12 million shares of the Company’s common
stock.  On August 25, 2009, the Board of Directors authorized the
purchase of an additional two million shares of the Company’s common stock over
the next three years, to be purchased from time to time depending on market
conditions and other corporate considerations as determined by
management.  The Company has incurred an aggregate of approximately
$0.3 million in fees related to all stock purchases.  As of December
31, 2009, approximately 2.0 million shares remain available for purchase under
the outstanding authorizations.


The following table summarizes the
cumulative number of shares purchased under the purchase authorizations, all of
which have been retired:





Number of
                    Shares
                  
                  
                  Average
                    Purchase Price
                    Per Share
                  
                  
                  Total
                    Purchase
                    Value
                    (in thousands)Total
      shares purchased:As
      of June 30, 2009
                  
                  
                  10,717,800
                  
                  
                  $
                  19.39
                  
                  
                  $
                  207,829Three
      months ended September 30, 2009
                  
                  
                  1,101,200
                  
                  
                  $
                  27.55
                  
                  
                  
                  30,336Three
      months ended December 31, 2009
                  
                  
                  160,350
                  
                  
                  $
                  28.92
                  
                  
                  
                  4,637As
      of December 31, 2009
                  
                  
                  11,979,350
                  
                  
                  
                  
                  
                  
                  $
                  242,802





13.
            CONTINGENCIES


There is a case pending in the U.S.
District Court for the Northern District of Georgia, styled Ware v. Abercrombie &
Fitch Stores, Inc. et al.; although the Company is not a party to that
case, the Company may have some obligation to indemnify certain of the
defendants who are the Company’s customers, based on the terms of the Company’s
contracts with those customers.  The plaintiff has alleged that the
defendants are infringing a patent relating to the processing of credit card
transactions.  The defendants include approximately 107 individual
retailers, 13 of whom are the Company’s customers for retail point-of-sale
software.  The Company initially agreed to provide indemnity coverage
to five of the defendants who are the Company’s customers in accordance with
applicable provisions of the contracts between the Company and those
customers.  However, one such customer has filed for protection under
the U.S. Bankruptcy Code and the Company is now providing indemnity coverage
only for four of the customers.  Through December 31, 2009, the
Company’s legal fees with respect to indemnity coverage for this matter have not
been material, and the Company does not anticipate that its future
indemnification obligations will be material.  As previously
disclosed, on September 4, 2009, the Court lifted a stay on the proceedings
following the issuance by the United States Patent and Trademark Office of a
Reexamination Certificate upholding the validity of the patent.  The
parties then filed a Joint Preliminary Planning Report and Scheduling Plan
whereby the Defendants sought, among other things, a moratorium on discovery
pending the Court’s ruling on two separate motions for summary judgment filed by
one defendant in this case and another defendant in a related
case.  On January 12, 2010, and December 29, 2009, the Court denied
without prejudice the two motions for summary judgment and the Defendants’
request for a moratorium on discovery. The Parties are now proceeding with
discovery and claims construction.  Based on currently available
information, the Company does not believe that the Company’s products infringe
the patent and will vigorously defend the action.


On November 26, 2007, Heartland Payment
Systems, Inc., filed an action in the U.S. District Court for the District of
New Jersey naming as defendants MICROS Systems, Inc., Merchant Link LLC, and
Chase Paymentech Solutions, LLC.  In its complaint, Heartland claimed
that MICROS, Merchant Link, and Paymentech engaged in an anti-competitive
arrangement relating to credit and debit card payment processing for restaurant
point-of-sale systems, and further claimed that this arrangement violates
federal antitrust law and applicable New Jersey state laws.  Heartland
claimed it was damaged by virtue of being required to deal with Merchant Link if
it wished to provide services to users of MICROS point-of-sale software, by
being required to pay fees to Merchant Link that it claims are inappropriate or
excessive, and by being competitively disadvantaged relative to Chase
Paymentech’s services.  Heartland is seeking monetary damages in
excess of $12 million, and also injunctive and other equitable
relief.  The Company and the other defendants have filed answers to
the complaint, in which the Company and the other defendants have denied all
material allegations.  The Company also has asserted counterclaims,
alleging that Heartland has engaged in tortious activity by defaming and
libeling the Company and by improperly interfering with the Company’s customer
contracts and customer relationships.  Heartland has filed answers to
the counterclaims denying all material allegations.  The case is
currently in the discovery phase, and no trial date has been set in this
matter.


14


As disclosed in previous filings, on
May 22, 2008, a jury returned verdicts totaling $7.5 million against the Company
in the consolidated actions of Roth Cash Register v. MICROS
Systems, Inc., et al. and Shenango Systems Solutions
v. MICROS Systems, Inc., et al.   The cases initially were
filed in 2000 in the Court of Common Pleas of Allegheny County,
Pennsylvania.  The complaints both related to the non-renewal of
dealership agreements in the year 2000 between the Company and the respective
plaintiffs.  The agreements were non-renewed as part of a
restructuring of the dealer channel.  There is no other outstanding
litigation relating to the restructuring of the dealer channel in the year
2000.  The plaintiffs alleged that the Company and certain of its
subsidiaries and employees entered into a plan to eliminate the plaintiffs as
authorized dealers and improperly interfere with the plaintiffs' relationships
with their respective existing and potential future clients and customers
without compensation to the plaintiffs.  As a result, the plaintiffs
claimed that the Company was liable for, among other things, breach of contract
and tortious interference with existing and prospective contractual
relationships.  The Company and the plaintiffs have appealed the
verdicts on various grounds.  Oral argument on the appeal is scheduled
on February 24, 2010.  The Company has established only an immaterial
reserve for any potential liability relating to these matters, as the Company
believes that it can present strong arguments to reverse the verdicts on appeal,
and therefore believes that an unfavorable outcome in these cases is not
probable.  Nevertheless, even if the verdicts were not reversed or
reduced on appeal, payment of the resulting obligations would not have a
material adverse effect on the Company’s consolidated financial position or
liquidity.


The Company is and has been involved in
legal proceedings arising in the normal course of business, and, subject to the
matters referenced above, 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.
            REVISIONS
      TO PRIOR PERIOD FINANCIAL
STATEMENTS





During January 2010, the Company
uncovered certain fraudulent activities in its Japanese subsidiary which spanned
the period from fiscal year 2006 to the three months ended December 31, 2009.
 As a result of the Company’s investigation, the Company determined that
fraudulent transactions resulted in a cumulative overstatement of revenue and
net income of approximately $6.9 million and $4.9 million, respectively, over
this period. The transactions served principally to inflate revenue and cost of
sales through the creation of fraudulent revenue documentation and to understate
liabilities for loans executed where the Company was the guarantor over this
period.  These off-balance sheet loans were indirectly used to pay down a
portion of the Company's fictitious accounts receivable balances.  The
Company has concluded, based on its investigation, that the fraud was solely
perpetrated by one employee of the Company's Japanese subsidiary who was not a
member of senior management and that the individual involved expended
significant effort over the period to create a variety of schemes which
deliberately circumvented or manipulated the entity's local controls and
procedures.  These schemes were primarily designed to inflate revenues and
cost of sales and to obtain financing from third parties to pay off the accounts
receivable balances in order to prolong the schemes.  The Company
terminated the employee upon completion of its investigation.





The following table shows the revised
financial statement line items for the various fiscal periods affected by the
adjustments described above:





FY
      2010
                        
                        
                        Fiscal
      Year Ended June 30, 2009
                        
                        
                        Fiscal
      Year Ended June 30,(in
      thousands, except for EPS)
                        
                        Q1
                        
                        
                        Q1
                        
                        
                        Q2
                        
                        
                        Q3
                        
                        
                        2009
                        
                        
                        2008
                        
                        
                        2007
                        
                        
                        2006Revenue:As
      previously reported
                        
                        $
                        212,473
                        
                        
                        $
                        244,069
                        
                        
                        $
                        237,934
                        
                        
                        $
                        205,666
                        
                        
                        $
                        911,847
                        
                        
                        $
                        954,184
                        
                        
                        $
                        785,727
                        
                        
                        $
                        678,953Adjustment
                        
                        
                        (1,072
                        )
                        
                        
                        (437
                        )
                        
                        
                        (1,425
                        )
                        
                        
                        (923
                        )
                        
                        
                        (4,122
                        )
                        
                        
                        (234
                        )
                        
                        
                        (754
                        )
                        
                        
                        (720
                        )As
      revised
                        
                        $
                        211,401
                        
                        
                        $
                        243,632
                        
                        
                        $
                        236,509
                        
                        
                        $
                        204,743
                        
                        
                        $
                        907,725
                        
                        
                        $
                        953,950
                        
                        
                        $
                        784,973
                        
                        
                        $
                        678,233Net
      income:As
      previously reported
                        
                        $
                        24,771
                        
                        
                        $
                        24,882
                        
                        
                        $
                        27,074
                        
                        
                        $
                        23,353
                        
                        
                        $
                        99,297
                        
                        
                        $
                        101,284
                        
                        
                        $
                        79,988
                        
                        
                        $
                        63,528Adjustment
                        
                        
                        (624
                        )
                        
                        
                        (584
                        )
                        
                        
                        (896
                        )
                        
                        
                        (401
                        )
                        
                        
                        (3,005
                        )
                        
                        
                        (547
                        )
                        
                        
                        (113
                        )
                        
                        
                        (565
                        )As
      revised
                        
                        $
                        24,147
                        
                        
                        $
                        24,298
                        
                        
                        $
                        26,178
                        
                        
                        $
                        22,952
                        
                        
                        $
                        96,292
                        
                        
                        $
                        100,737
                        
                        
                        $
                        79,875
                        
                        
                        $
                        62,963Basic
      EPS:As
      previously reported
                        
                        $
                        0.31
                        
                        
                        $
                        0.31
                        
                        
                        $
                        0.33
                        
                        
                        $
                        0.29
                        
                        
                        $
                        1.22
                        
                        
                        $
                        1.23
                        
                        
                        $
                        1.00
                        
                        
                        $
                        0.82Adjustment
                        
                        
                        (0.01
                        )
                        
                        
                        (0.01
                        )
                        
                        
                        (0.01
                        )
                        
                        
                        (0.01
                        )
                        
                        
                        (0.03
                        )
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        (0.01
                        )As
      revised
                        
                        $
                        0.30
                        
                        
                        $
                        0.30
                        
                        
                        $
                        0.32
                        
                        
                        $
                        0.28
                        
                        
                        $
                        1.19
                        
                        
                        $
                        1.23
                        
                        
                        $
                        1.00
                        
                        
                        $
                        0.81Diluted
      EPS:As
      previously reported
                        
                        $
                        0.31
                        
                        
                        $
                        0.30
                        
                        
                        $
                        0.33
                        
                        
                        $
                        0.29
                        
                        
                        $
                        1.21
                        
                        
                        $
                        1.21
                        
                        
                        $
                        0.97
                        
                        
                        $
                        0.78Adjustment
                        
                        
                        (0.01
                        )
                        
                        
                        (0.01
                        )
                        
                        
                        (0.01
                        )
                        
                        
                        (0.01
                        )
                        
                        
                        (0.04
                        )
                        
                        
                        (0.01
                        )
                        
                        
                        -
                        
                        
                        
                        (0.01
                        )As
      revised
                        
                        $
                        0.30
                        
                        
                        $
                        0.29
                        
                        
                        $
                        0.32
                        
                        
                        $
                        0.28
                        
                        
                        $
                        1.17
                        
                        
                        $
                        1.20
                        
                        
                        $
                        0.97
                        
                        
                        $
                        0.77





Based on the materiality guidelines
contained in SEC Staff Accounting Bulletin No. 99, "Materiality" and SEC Staff
Accounting Bulletin No. 108, "Considering the Effects of Prior Year
Misstatements in Current Year Financial Statements", the Company believes that
the adjustments to correct for the fraudulent activities are not material to any
of its current financial statements for periods beginning with the year ended
June 30, 2006 and through the three months ended September 30,
2009.  However, the Company believes that the adjustments would be
material to the quarterly results and trend for the three months ended December
31, 2009.   Accordingly, the Company determined that it would
revise its previous financial statements to record these adjustments; however,
because the effect of the adjustments were not material to any previously issued
financial statements, the Company determined not to amend its previously filed
Quarterly Reports on Form 10-Q or its Annual Reports on Form 10-K, rather the
Company will make corresponding adjustments to prior periods, as appropriate,
the next time those financial statements are filed.


15





The Condensed Consolidated Statements
of Operations for the three months and six months ended December 31, 2008 and
the Condensed Consolidated Balance Sheet as of June 30, 2009 included in this
Form 10-Q have been revised as follows:





Three Months Ended
                
                
                Six Months EndedDecember31,2008
                
                
                December31,2008(in thousands, except for EPS)
                
                As
                  Previously
                  Reported
                
                
                Adjustment
                
                
                As Revised
                
                
                As
                  Previously
                  Reported
                
                
                Adjustment
                
                
                As RevisedRevenue:Hardware
                
                $
                56,145
                
                
                $
                (499
                )
                
                $
                55,646
                
                
                $
                119,839
                
                
                $
                (721
                )
                
                $
                119,118Software
                
                
                38,196
                
                
                
                (517
                )
                
                
                37,679
                
                
                
                75,772
                
                
                
                (595
                )
                
                
                75,177Services
                
                
                143,593
                
                
                
                (409
                )
                
                
                143,184
                
                
                
                286,393
                
                
                
                (547
                )
                
                
                285,846Total
                
                
                237,934
                
                
                
                (1,425
                )
                
                
                236,509
                
                
                
                482,004
                
                
                
                (1,863
                )
                
                
                480,141COS:Hardware
                
                
                34,756
                
                
                
                (430
                )
                
                
                34,326
                
                
                
                77,815
                
                
                
                (636
                )
                
                
                77,179Software
                
                
                7,098
                
                
                
                (419
                )
                
                
                6,679
                
                
                
                14,398
                
                
                
                (661
                )
                
                
                13,737Services
                
                
                69,557
                
                
                
                (27
                )
                
                
                69,530
                
                
                
                137,324
                
                
                
                (11
                )
                
                
                137,313Total
                
                
                111,411
                
                
                
                (876
                )
                
                
                110,535
                
                
                
                229,537
                
                
                
                (1,308
                )
                
                
                228,229Gross
      margin
                
                
                126,523
                
                
                
                (549
                )
                
                
                125,974
                
                
                
                252,467
                
                
                
                (555
                )
                
                
                251,912Selling,
      general and administrative expenses
                
                
                72,395
                
                
                
                341
                
                
                
                72,736
                
                
                
                149,196
                
                
                
                912
                
                
                
                150,108Income
      before taxes
                
                
                41,376
                
                
                
                (890
                )
                
                
                40,486
                
                
                
                79,756
                
                
                
                (1,467
                )
                
                
                78,289Income
      tax provision
                
                
                14,068
                
                
                
                6
                
                
                
                14,074
                
                
                
                27,117
                
                
                
                13
                
                
                
                27,130Net
      income attributable to MICROS Systems, Inc.
                
                
                27,074
                
                
                
                (896
                )
                
                
                26,178
                
                
                
                51,956
                
                
                
                (1,480
                )
                
                
                50,476Basic
      EPS
                
                $
                0.33
                
                
                $
                (0.01
                )
                
                $
                0.32
                
                
                $
                0.64
                
                
                $
                (0.02
                )
                
                $
                0.62Diluted
      EPS
                
                $
                0.33
                
                
                $
                (0.01
                )
                
                $
                0.32
                
                
                $
                0.63
                
                
                $
                (0.02
                )
                
                $
                0.61





As of June 30, 2009(in thousands)
                  
                  As Previously
                    Reported
                  
                  
                  Adjustment
                  
                  
                  As
                    RevisedAccounts
      receivable, net
                  
                  $
                  157,479
                  
                  
                  $
                  (2,267
                  )
                  
                  $
                  155,212Deferred
      income taxes, current
                  
                  
                  20,283
                  
                  
                  
                  (413
                  )
                  
                  
                  19,870Deferred
      income taxes, non-current
                  
                  
                  11,483
                  
                  
                  
                  (27
                  )
                  
                  
                  11,456Total
      assets
                  
                  
                  1,024,086
                  
                  
                  $
                  (2,707
                  )
                  
                  
                  1,021,379Accounts
      payable
                  
                  $
                  36,647
                  
                  
                  $
                  1,798
                  
                  
                  $
                  38,445Income
      taxes payable
                  
                  
                  7,999
                  
                  
                  
                  (55
                  )
                  
                  
                  7,944Retained
      earnings
                  
                  
                  579,331
                  
                  
                  
                  (4,236
                  )
                  
                  
                  575,095Accumulated
      other comprehensive income
                  
                  
                  16,468
                  
                  
                  
                  (214
                  )
                  
                  
                  16,254Total
      MICROS Systems, Inc. shareholders' equity
                  
                  
                  723,447
                  
                  
                  
                  (4,450
                  )
                  
                  
                  718,997Total
      liabilities and equity
                  
                  
                  1,024,086
                  
                  
                  $
                  (2,707
                  )
                  
                  
                  1,021,379





The adjustments noted above have no
impact on the consolidated statements of cash flows, other than to change
certain reconciling items in arriving at cash provided by operations, however,
cash provided by operations in total is unaffected for any of the annual or
interim periods.


16


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





We are a leading worldwide designer,
manufacturer, marketer, and servicer of enterprise information solutions for the
global hospitality and specialty retail industries.  Our enterprise
solutions comprise three major areas: hotel information systems, restaurant
information systems, and specialty retail information systems.  We
also offer a wide range of related services.  We distribute our
products and services directly and through a network of independent dealers and
distributors.


We are organized and operate in four
operating segments:  U.S., Europe, the Pacific Rim, and Latin America
regions.  We have identified our U.S. operating segment as a separate
reportable segment and we have aggregated our three international operating
segments into one reportable segment, international, as the three international
operating segments share many similar economic characteristics.  Our
management views the U.S. and international segments separately in operating our
business, although the products and services are similar for each
segment.


We have been and continue to be
adversely affected by the current global recession.  We believe that
weakened consumer spending, coupled with difficulties in obtaining credit
(including the cost of credit) have negatively affected our customers’ abilities
to acquire or open new hospitality and retail venues, and also limit their
willingness and ability to make significant capital expenditures on new systems
and system upgrades.  In light of these very challenging and uncertain
conditions, we continue to implement actions to enhance our liquidity and
maintain a solid balance sheet.  These actions include: (i) reducing
certain discretionary expenses; (ii) reducing certain rates for third party
contractors; (iii) implementing headcount reductions in certain departments; and
(iv) implementing hiring freezes in certain departments.





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.  Our actual results may differ
materially from those anticipated in these forward-looking statements as a
result of specified factors, including those set forth in Item 1A, “Risk
Factors” in our Annual Report on Form 10-K for the Fiscal Year ended June 30,
2009 and in Part II, Item 1A, “Risk Factors” in this report.


Examples
of such forward-looking statements include:


·
            our
      statements about the growth of and conditions in the hospitality and
      retail industries generally, and our analysis of the growth and direction
      of various sectors within those
industries;


·
            our
      statements regarding the effects of foreign currency rate fluctuations (in
      particular, the Euro and the Australian dollar) on our financial
      performance;


·
            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
      beliefs about our competitive
strengths;


·
            our
      expectations regarding effective tax rates in future
    periods;


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


·
            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 about our capital expenditures for future
      periods;


·
            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
      expectations regarding valuation and liquidity of auction rate securities
      in which we have invested.





RESULTS
OF OPERATIONS


During January 2010, we uncovered
certain fraudulent activities in our Japanese subsidiary which spanned the
period from fiscal year 2006 to the three months ended December 31,
2009.  As a result of our investigation, we determined that
fraudulent transactions resulted in a cumulative overstatement of revenue
and net income of approximately $6.9 million and $4.9 million, respectively,
over this period. The transactions served principally to inflate revenue and
cost of sales through the creation of fraudulent revenue documentation and to
understate liabilities for loans executed where we were the guarantor over this
period.  These off-balance sheet loans were indirectly used to pay
down a portion of our fictitious accounts receivable balances.  We
have concluded, based on our investigation, that the fraud was solely
perpetrated by one employee of our Japanese subsidiary who was not a member of
senior management and that the individual involved expended significant effort
over the period to create a variety of schemes which deliberately circumvented
or manipulated the entity's local controls and procedures.  These
schemes were primarily designed to inflate revenues and cost of sales and to
obtain financing from third parties to pay off the accounts receivable balances
in order to prolong the schemes.  We terminated the employee upon
completion of our investigation.


17





Based on the materiality guidelines
contained in SEC Staff Accounting Bulletin No. 99, "Materiality" and SEC Staff
Accounting Bulletin No. 108, "Considering the Effects of Prior Year
Misstatements in Current Year Financial Statements", we believe that the
adjustments to correct for the fraudulent activities are not material to any of
our current financial statements for periods beginning with the year ended June
30, 2006 and through the three months ended September 30,
2009.  However, we believe that the adjustments would be material to
the quarterly results and trend for the three months ended December 31,
2009.   Accordingly, we determined that we would revise our
previous financial statements to record these adjustments; however because the
effect of the adjustments were not material to any previously issued financial
statements, we determined not to amend our previously filed Quarterly
Reports on Form 10-Q or our Annual Reports on Form 10-K; rather, we will
make corresponding adjustments to other prior periods as appropriate the next
time those financial statements are filed.


The Condensed Consolidated Statement of
Operations for the six months ended December 31, 2009 included in this Form 10-Q
has been revised to reflect the corrections of the misstatements in the three
months ended September 30, 2009.  The corrections decreased revenue
and net income for the six months ended December 31, 2009 by approximately $1.1
million and $0.6 million, respectively.  The Condensed Consolidated
Statements of Operations for the three and six months ended December 31, 2008
also have been revised to reflect corrections of the misstatements in those
respective periods.  The corrections decreased revenue for the three
and six months ended December 31, 2008 by approximately $1.4 million and $1.9
million, respectively, and decreased net income by approximately $0.9 million
and $1.5 million, respectively.





Revenue:





Three Months Ended December
31, 2009:


The
following table provides information regarding the sales mix by reportable
segments (amounts are net of intersegment eliminations, based on location of the
selling entity, and include export sales):





Three Months Ended December
    31,U.S.
                  
                  
                  International
                  
                  
                  Total(in
      thousands)
                  
                  2009
                  
                  
                  2008
                  
                  
                  2009
                  
                  
                  2008
                  
                  
                  2009
                  
                  
                  2008Hardware
                  
                  $
                  21,879
                  
                  
                  $
                  29,425
                  
                  
                  $
                  23,914
                  
                  
                  $
                  26,221
                  
                  
                  $
                  45,793
                  
                  
                  $
                  55,646Software
                  
                  
                  12,621
                  
                  
                  
                  13,271
                  
                  
                  
                  17,878
                  
                  
                  
                  24,408
                  
                  
                  
                  30,499
                  
                  
                  
                  37,679Service
                  
                  
                  69,034
                  
                  
                  
                  73,090
                  
                  
                  
                  80,321
                  
                  
                  
                  70,094
                  
                  
                  
                  149,355
                  
                  
                  
                  143,184Total
      Revenue
                  
                  $
                  103,534
                  
                  
                  $
                  115,786
                  
                  
                  $
                  122,113
                  
                  
                  $
                  120,723
                  
                  
                  $
                  225,647
                  
                  
                  $
                  236,509





The
following table provides information regarding the total sales mix as a
percentage of total revenue:





Three Months EndedDecember 31,(in thousands)
                  
                  2009
                  
                  
                  2008Hardware
                  
                  
                  20.3
                  %
                  
                  
                  23.5
                  %Software
                  
                  
                  13.5
                  %
                  
                  
                  15.9
                  %Service
                  
                  
                  66.2
                  %
                  
                  
                  60.6
                  %Total
                  
                  
                  100.0
                  %
                  
                  
                  100.0
                  %





For the
three months ended December 31, 2009, total revenue was approximately $225.6
million, a decrease of approximately $10.9 million, or 4.6% compared to the same
period last year, reflecting the following:


·
            Hardware
      and software revenue decreased by 17.7% and 19.1%, respectively, compared
      to the same period last year.  Service revenue increased by 4.3%
      compared to the same period last year, which represents a lower than
      historical average increase.  We believe these changes primarily
      were due to a slow down in demand from our customers as a result of
      adverse global economic conditions.


·
            The
      decline in total revenue was offset partially by favorable foreign
      currency exchange rate fluctuations, for substantially all foreign
      currencies against the U.S. dollar, which positively impacted total
      revenue by approximately $10.8
million.





The
international segment revenue for the three months ended December 31, 2009
increased by approximately $1.4 million, an increase of 1.2% compared to the
same period last year, reflecting the following:


·
            Hardware
      and software revenue decreased by 8.8% and 26.8%, respectively, compared
      to the same period last year.  We believe these decreases
      primarily were due to a slow down in demand from our customers as a result
      of adverse global economic
conditions.


·
            Service
      revenue increased by 14.6% compared to the same period last year,
      principally due to favorable foreign currency exchange rate
      fluctuations.


·
            Favorable
      foreign currency exchange rate fluctuations, for substantially all foreign
      currencies against the U.S. dollar, positively impacted international
      revenue by approximately $10.8
million.


18





U.S.
segment revenue for the three months ended December 31, 2009 decreased
approximately $12.3 million, a decrease of 10.6% compared to the same period
last year due to the following:


·
            Hardware,
      software and service revenue decreased by 25.6%, 4.9% and 5.5%,
      respectively, compared to the same period last year.  We believe
      these changes primarily were due to a slow down in demand from our
      customers as a result of the adverse global economic
      conditions.





Six Months Ended December
31, 2009:


The
following table provides information regarding the sales mix by reportable
segments (amounts are net of intersegment eliminations, based on location of the
selling entity, and include export sales):





Six Months Ended December
    31,U.S.
                  
                  
                  International
                  
                  
                  Total(in
      thousands)
                  
                  2009
                  
                  
                  2008
                  
                  
                  2009
                  
                  
                  2008
                  
                  
                  2009
                  
                  
                  2008Hardware
                  
                  $
                  42,842
                  
                  
                  $
                  61,668
                  
                  
                  $
                  46,257
                  
                  
                  $
                  57,450
                  
                  
                  $
                  89,099
                  
                  
                  $
                  119,118Software
                  
                  
                  21,958
                  
                  
                  
                  27,211
                  
                  
                  
                  33,234
                  
                  
                  
                  47,966
                  
                  
                  
                  55,192
                  
                  
                  
                  75,177Service
                  
                  
                  139,067
                  
                  
                  
                  140,494
                  
                  
                  
                  153,690
                  
                  
                  
                  145,352
                  
                  
                  
                  292,757
                  
                  
                  
                  285,846Total
      Revenue
                  
                  $
                  203,867
                  
                  
                  $
                  229,373
                  
                  
                  $
                  233,181
                  
                  
                  $
                  250,768
                  
                  
                  $
                  437,048
                  
                  
                  $
                  480,141





The
following table provides information regarding the total sales mix as a
percentage of total revenue:





Six Months EndedDecember 31,(in
      thousands)
                  
                  2009
                  
                  
                  2008Hardware
                  
                  
                  20.4
                  %
                  
                  
                  24.8
                  %Software
                  
                  
                  12.6
                  %
                  
                  
                  15.7
                  %Service
                  
                  
                  67.0
                  %
                  
                  
                  59.5
                  %Total
                  
                  
                  100.0
                  %
                  
                  
                  100.0
                  %





For the
six months ended December 31, 2009, total revenue was approximately $437.0
million, a decrease of approximately $43.1 million, or 9.0% compared to the same
period last year due to the following:


·
            Hardware
      and software revenue decreased by 25.2% and 26.6%, respectively, compared
      to the same period last year.  Service revenue increased by 2.4%
      compared to the same period last year, which represents a lower than
      historical average increase.  We believe these changes primarily
      were due to a slow down in demand from our customers as a result of
      adverse global economic conditions.


·
            The
      decline in total revenue was offset partially by favorable foreign
      currency exchange rate fluctuations, for substantially all foreign
      currencies against the U.S. dollar, which positively impacted total
      revenue by approximately $5.3
million.





The
international segment revenue for the six months ended December 31, 2009
decreased by approximately $17.6 million, a decrease of 7.0% compared to the
same period last year due to the following:


·
            Hardware
      and software revenue decreased by 19.5% and 30.7%, respectively, compared
      to the same period last year.  We believe these decreases
      primarily were due to a slow down in demand from our customers as a result
      of adverse global economic
conditions.


·
            Service
      revenue increased by 5.7% compared to the same period last year, of which
      approximately 2.4% was due to favorable foreign currency exchange rate
      fluctuations.


·
            Favorable
      foreign currency exchange rate fluctuations for substantially all foreign
      currencies against the U.S. dollar positively impacted international
      revenue by approximately $5.3
million.





U.S.
segment revenue for the six months ended December 31, 2009 decreased
approximately $25.5 million, a decrease of 11.1% compared to the same period
last year due to the following:


·
            Hardware,
      software and service revenue decreased by 30.5%, 19.3% and 1.0%,
      respectively, compared to the same period last year.  We believe
      these changes primarily were due to a slow down in demand from our
      customers as a result of adverse global economic
    conditions.


19


Cost
of Sales:





Three Months Ended December
31, 2009:


The
following table provides information regarding the cost of sales:





Three Months Ended December 31,2009
                                
                                
                                2008(in thousands)
                                
                                Cost
                                  of
      Sales
                                
                                
                                % of Related
                                  Revenue
                                
                                
                                Cost
                                  of
      Sales
                                
                                
                                % of Related
                                  RevenueHardware
                                
                                $
                                30,364
                                
                                
                                
                                66.3
                                %
                                
                                $
                                34,326
                                
                                
                                
                                61.7
                                %Software
                                
                                
                                7,045
                                
                                
                                
                                23.1
                                %
                                
                                
                                6,679
                                
                                
                                
                                17.7
                                %Service
                                
                                
                                63,259
                                
                                
                                
                                42.4
                                %
                                
                                
                                69,530
                                
                                
                                
                                48.6
                                %Total
      Cost of Sales
                                
                                $
                                100,668
                                
                                
                                
                                44.6
                                %
                                
                                $
                                110,535
                                
                                
                                
                                46.7
                                %





For the
three months ended December 31, 2009 and 2008, cost of sales as a percentage of
revenue was 44.6% and 46.7%, respectively.  The decrease in cost of
sales as a percentage of revenue reflects the following:


·
            A
      6.2% decrease in service costs as a percentage of revenue due to lower
      labor and travel costs.


·
            The
      decrease was offset partially by the 4.6% increase in hardware cost of
      sales as a percentage of related revenue primarily as a result of lower
      margins on substantially all third party hardware product sales and a 5.4%
      increase in software cost of sales as a percentage of related revenue
      primarily as a result of an adverse change in sales mix and an increase in
      capitalized software amortization expense as a percentage of software
      revenue.





Six Months Ended December
31, 2009:


The
following table provides information regarding the cost of sales:





Six Months Ended December 31,2009
                                  
                                  
                                  2008(in thousands)
                                  
                                  Cost
                                    of Sales
                                  
                                  
                                  % of
                                    Related
                                    Revenue
                                  
                                  
                                  Cost
                                    of Sales
                                  
                                  
                                  % of
                                    Related
                                    RevenueHardware
                                  
                                  $
                                  58,416
                                  
                                  
                                  
                                  65.6
                                  %
                                  
                                  $
                                  77,179
                                  
                                  
                                  
                                  64.8
                                  %Software
                                  
                                  
                                  12,432
                                  
                                  
                                  
                                  22.5
                                  %
                                  
                                  
                                  13,737
                                  
                                  
                                  
                                  18.3
                                  %Service
                                  
                                  
                                  125,396
                                  
                                  
                                  
                                  42.8
                                  %
                                  
                                  
                                  137,313
                                  
                                  
                                  
                                  48.0
                                  %Total
      Cost of Sales
                                  
                                  $
                                  196,244
                                  
                                  
                                  
                                  44.9
                                  %
                                  
                                  $
                                  228,229
                                  
                                  
                                  
                                  47.5
                                  %





For the
six months ended December 31, 2009 and 2008, cost of sales as a percentage of
revenue was 44.9% and 47.5%, respectively. This decrease in cost of sales as a
percentage of revenue reflects the following:


·
            A
      5.2% decrease in service costs as a percentage of revenue due to lower
      labor and travel costs.


·
            The
      decrease was partially offset by the 0.8% increase in hardware cost of
      sales as a percentage of related revenue primarily as a result of lower
      margins on substantially all third party hardware product sales and a 4.2%
      increase in software cost of sales as a percentage of related revenue
      primarily as a result of an adverse change in sales mix, lower margin on
      third party software sales and an increase in capitalized software
      amortization expense as a percentage of software
  revenue.





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


SG&A
expenses decreased by approximately $1.4 million for the three months ended
December 31, 2009 primarily due to our global collection efforts which resulted
in a lower reserve for potential uncollectible accounts receivable and the
collection of certain old receivables that previously were fully reserved
for.  We were also able to reduce our non-customer related travel
expenses.  However, SG&A as a percentage of revenue increased 0.8%
to 31.6% for the three months ended December 31, 2009, compared to the same
period last year primarily due to certain fixed costs that we were not able to
leverage with the decrease in total revenue.


SG&A
expenses decreased by approximately $13.6 million for the six months ended
December 31, 2009, primarily due to our global collection efforts, which
resulted in a lower reserve for potential uncollectible accounts receivable and
the collection of certain old receivables that previously were fully reserved
for.  We were also able to significantly reduce our non-customer
related travel expenses.  Nevertheless, SG&A expenses as a
percentage of revenue decreased 0.1% to 31.2% for the three months ended
December 31, 2009 compared to the same period last year.





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


R&D
expenses consisted primarily of labor costs less capitalized software
development costs.  The following table provides information regarding
R&D activities:


20





Three Months Ended
                  
                  
                  Six Months EndedDecember31,
                  
                  
                  December31,(in
      thousands)
                  
                  2009
                  
                  
                  2008
                  
                  
                  2009
                  
                  
                  2008R&D
      labor and other costs
                  
                  $
                  10,436
                  
                  
                  $
                  10,732
                  
                  
                  $
                  21,653
                  
                  
                  $
                  21,327Capitalized
      software development costs
                  
                  
                  (733
                  )
                  
                  
                  (108
                  )
                  
                  
                  (933
                  )
                  
                  
                  (233
                  )Total
      R&D expenses
                  
                  $
                  9,703
                  
                  
                  $
                  10,624
                  
                  
                  $
                  20,720
                  
                  
                  $
                  21,094%
      of Revenue
                  
                  
                  4.3
                  %
                  
                  
                  4.5
                  %
                  
                  
                  4.7
                  %
                  
                  
                  4.4
                  %





Depreciation
and Amortization Expenses:


Depreciation
and amortization expenses for the three months ended December 31, 2009 and
December 31, 2008, remained constant at approximately $4.3
million.  Depreciation and amortization expenses for the six months
ended December 31, 2009 decreased to approximately $8.2 million, an
approximately $0.2 million decline compared to the same period last
year.





Share-Based
Compensation Expenses:


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





Three Months Ended
                  
                  
                  Six Months EndedDecember 31,
                  
                  
                  December 31,(in
      thousands)
                  
                  2009
                  
                  
                  2008
                  
                  
                  2009
                  
                  
                  2008SG&A
                  
                  $
                  4,235
                  
                  
                  $
                  3,886
                  
                  
                  $
                  7,139
                  
                  
                  $
                  7,411R&D
                  
                  
                  143
                  
                  
                  
                  213
                  
                  
                  
                  290
                  
                  
                  
                  421Total
      non-cash share-based compensation expense
                  
                  
                  4,378
                  
                  
                  
                  4,099
                  
                  
                  
                  7,429
                  
                  
                  
                  7,832Income
      tax benefit
                  
                  
                  (1,464
                  )
                  
                  
                  (978
                  )
                  
                  
                  (2,406
                  )
                  
                  
                  (1,819
                  )Total
      non-cash share-based compensation expense, net of tax
    benefit
                  
                  $
                  2,914
                  
                  
                  $
                  3,121
                  
                  
                  $
                  5,023
                  
                  
                  $
                  6,013Impact
      on diluted net income per share
                  
                  $
                  0.03
                  
                  
                  $
                  0.04
                  
                  
                  $
                  0.05
                  
                  
                  $
                  0.08





As of December 31, 2009, there was
approximately $14.6 million in non-cash share-based compensation cost related to
non-vested awards not yet recognized in our consolidated statements of
operations.  This cost is expected to be recognized over a
weighted-average period of 1.9 years.





Non-operating
Income:


Net
non-operating income for the three months ended December 31, 2009, was
approximately $0.4 million compared to approximately $2.2 million for the same
period last year.  This decrease is primarily due to approximately
$1.7 million decline in interest earned on cash and cash equivalent balances and
investments (short-term and long-term).


Net
non-operating income for the six months ended December 31, 2009, was
approximately $1.1 million compared to approximately $6.0 million for the same
period last year.  The decrease of approximately $4.9 million
reflects:


·
            A
      decrease in interest income of approximately $3.9 million due to overall
      lower interest earned on cash and cash equivalent balances and investments
      (short-term and long-term);


·
            The
      credit based other-than-temporary impairment losses of approximately $0.4
      million for investments in auction rate securities;
  and,


·
            Foreign
      currency exchange loss of approximately $0.4 million for six months ended
      December 31, 2009 compared to foreign currency exchange gain of
      approximately $0.4 million for the same period last
  year.





Income
Tax Provisions:


The effective tax rate for the three
months ended December 31, 2009 and 2008 was 33.3% and 34.8%,
respectively.  The effective tax rate for the six months ended
December 31, 2009 and 2008 was 33.3% and 34.7%, respectively.


Based on currently available
information, we estimate that the fiscal year 2010 effective tax rate will be
approximately 33.0%.  We believe that due to changes in the mix of earnings
among jurisdictions, the fluctuation of earnings, and the impact of certain
discrete items recognized during the interim reporting periods, there may be
some degree of adjustment to the effective tax rate on a quarterly
basis.


21


RECENT
ACCOUNTING STANDARDS





Recently
Adopted Accounting Guidance


On July 1, 2009, we adopted
authoritative guidance issued by the Financial Accounting Standards Board
(“FASB”) on business combinations.  The guidance addresses the manner
in which the acquirer of a business recognizes and measures in its financial
statements the identifiable assets acquired, the liabilities assumed, and any
non-controlling interest in the acquired business.  This guidance also
provides standards for recognizing and measuring the goodwill acquired in the
business combination and for disclosure of information to enable users of the
financial statements to evaluate the nature and financial effects of the
business combination.  Our acquisition of TIG Global on December 31,
2009 was accounted for under this guidance.


On July 1, 2009, we adopted
authoritative guidance issued by the FASB that changes the accounting and
reporting for non-controlling interests.  This guidance requires,
among other things, that: non-controlling interests be reported as a component
of equity: changes in a parent’s ownership interest while the parent retains its
controlling interest be accounted for as equity transactions; and any retained
non-controlling equity investment upon the deconsolidation of a subsidiary
initially be measured at fair value.  The adoption of this guidance
did not have a material impact on our consolidated financial
statements.


On July 1, 2009, we adopted
authoritative guidance issued by the FASB which revises the factors that should
be considered in developing renewal or extension assumptions used to determine
the useful life of a recognized intangible asset.  This guidance is
intended to improve the consistency between the useful life of a recognized
intangible asset and the period of expected cash flows used to measure the fair
value of the asset under other U.S. generally accepted accounting
principles.  The adoption of this guidance did not have a material
impact on our consolidated financial statements.


On July 1, 2009, we adopted
authoritative guidance issued by the FASB on fair value measurement for
nonfinancial assets and liabilities, other than non-financial assets and
liabilities that are recognized or disclosed at fair value in the financial
statements on a recurring basis (at least annually), which already were subject
to FASB guidance.  The adoption of this guidance did not have a
material impact on our consolidated financial statements.





Recent
Accounting Guidance Not Yet Adopted


In January 2010, the FASB issued
guidance amending the disclosure requirements related to recurring and
nonrecurring fair value measurements. The guidance requires new disclosures on
the transfers of assets and liabilities between Level 1 inputs (quoted prices in
active market for identical assets or liabilities) and Level 2 inputs
(significant other observable inputs) of the fair value measurement hierarchy,
including the reasons and the timing of the transfers. Additionally, the
guidance requires separate disclosure of activities on purchases, sales,
issuance, and settlements of the assets and liabilities measured using
significant unobservable inputs (Level 3 fair value measurements). This standard
is effective for us beginning January 1, 2010, except for the disclosure of
activities for Level 3 fair value measurements, which is effective for us
beginning July 1, 2011. Other than requiring additional disclosures, adoption of
this guidance will not have a material impact on our consolidated financial
statements.


In October 2009, the FASB issued an
authoritative guidance on revenue arrangements with multiple deliverables that
are outside the scope of software revenue recognition guidance.  Under
the guidance, when vendor-specific objective evidence or third-party evidence of
selling price is not available, a best estimate of the selling price is required
to separate deliverables and allocate arrangement consideration based on the
relative selling prices of the separate deliverables (the “relative selling
price method”).  The relative selling price method allocates any
discount in the arrangement proportionately to each deliverable on the basis of
each deliverable’s selling price.  The guidance also significantly
expands related disclosure requirements.  This standard is effective
for us beginning July 1, 2010.  We are continuing to evaluate the
impact that the adoption of this guidance will have on our consolidated
financial statements.


In October 2009, the FASB also issued
an authoritative guidance on revenue recognition for arrangements that include
software elements.  Under the guidance, tangible products containing
software components and non-software components that function together to
deliver the tangible product’s essential functionality are excluded from the
scope of software revenue recognition guidance and will be subject to other
relevant revenue recognition guidance.  This guidance will become
effective for us beginning July 1, 2010.  We do not believe the
adoption of this guidance will have a material impact on our consolidated
financial statements.





CRITICAL
ACCOUNTING ESTIMATES





Our
discussion and analysis of our financial condition and results of operations are
based on our condensed consolidated financial statements, which have been
prepared in accordance with accounting principles generally accepted in the
United States of America.  The preparation of these financial
statements requires us to make estimates that affect the reported amounts of
assets, liabilities, revenue and expenses.  We base our estimates on
historical experience and on various assumptions that we believe to be
reasonable under the circumstances.  Actual results may differ from
these estimates.


The
following comprise the critical accounting estimates that we used in the
preparation of our condensed consolidated financial statements:


·      Revenue
recognition;


·      Allowance
for doubtful accounts;


·      Inventory;


·      Financial
instruments and fair value measurements;


·      Capitalized
software development costs;


·      Valuation
of long-lived assets and intangible assets


·      Goodwill
and indefinite-lived intangible assets;


22





·      Share-based
compensation; and


·      Income
taxes.





We have
reviewed our critical accounting estimates and the related disclosures with our
Audit Committee.  Critical accounting estimates are described further
in our Annual Report on Form 10-K for the year ended June 30, 2009 in Item 7,
“Management’s Discussion and Analysis of Financial Condition and Results of
Operations,” under the heading “Critical Accounting Estimates.”





LIQUIDITY
AND CAPITAL RESOURCES





Sources
and Uses of Cash


The following summarizes our condensed
consolidated statement of cash flows:





Six Months EndedDecember 31,(in thousands)
                  
                  2009
                  
                  
                  2008Net
      cash provided by (used in):Operating
      activities
                  
                  $
                  85,921
                  
                  
                  $
                  53,580Investing
      activities
                  
                  
                  (15,159
                  )
                  
                  
                  (93,373
                  )Financing
      activities
                  
                  
                  (24,971
                  )
                  
                  
                  (33,422
                  )





Operating
activities:


Net cash
provided by operating activities for the six months ended December 31, 2009
increased approximately $32.3 million compared to the six months ended December
31, 2008.  This increase was primarily due to an improvement in
collections of accounts receivable for the six months ended December 31, 2009 as
compared to the same period last year.





Investing
activities:


Net cash
flows used in investing activities for the six months ended December 31, 2009
was approximately $15.2 million principally reflecting approximately $29.0
million used in connection with the acquisition of TIG Global on December 31,
2009.  Additionally, approximately $5.0 million was used to purchase
property, plant and equipment and for internally developed software to be
licensed to others.  These amounts were partially offset by
approximately $18.8 million received from the sale of investments, net of cash
used to purchase investments.





Financing
activities:


Net cash
used in financing activities for the six months ended December 31, 2009 was
approximately $25.0 million, principally reflecting stock repurchases of
approximately $35.0 million.  This amount was partially offset by
proceeds from stock option exercises of approximately $7.0 million and realized
tax benefits from stock option exercises of approximately $2.7
million.





Capital
Resources


During
the six months ended December 31, 2009, the favorable foreign exchange rate
fluctuations for substantially all foreign currencies against the U.S. dollar
positively affected our cash and cash equivalents’ balance by approximately $2.5
million.  Our cash and cash equivalents’ balance of approximately
$340.5 million at December 31, 2009 is an increase of approximately $48.3
million from the June 30, 2009 balance.  All cash and cash equivalents
were being retained for the operation and expansion of the business, as well as
for the repurchase of our common stock.


We have two credit agreements (the
“Credit Agreements”) that in the aggregate provide a $65.0 million
multi-currency committed line of credit.  As of December 31, 2009, we
had approximately $1.4 million outstanding under the Credit Agreements and had
applied approximately an additional $0.4 million to guarantees.  We
also have a credit relationship with a European bank in the amount of EUR 1.0
million (approximately $1.4 million at the December 31, 2009 exchange
rate).  As of December 31, 2009, there were no balances outstanding on
this credit facility, but approximately EUR 0.3 million (approximately $0.5
million at the December 31, 2009 exchange rate) of the credit facility has been
used for guarantees.  As of December 31, 2009, we had approximately
$64.1 million borrowing capacity under all of the credit facilities described
above.  The weighted-average interest rate on the outstanding balances
under the Credit Agreements as of December 31, 2009 was 1.5%.


We do not currently invest in financial
instruments designed to protect against interest rate fluctuations, although we
will continue to evaluate the need to do so in the future.


We believe that our cash and cash
equivalents, short-term investments, cash generated from operations and our
available lines of credit are sufficient to provide our working capital needs
for the foreseeable future.  In light of current economic conditions
generally and in light of the overall performance of the stock market beginning
in 2008, we cannot assure that funds would be available from other sources if
required in connection with acquisitions or any unanticipated and substantial
cash needs.  We currently anticipate that our property, plant and
equipment expenditures for fiscal year 2010 will be approximately $11
million.


23





Financial indicators of our liquidity
and capital resources as of December 31, 2009 and June 30, 2009, were as
follows:





(in thousands, except ratios)
                  
                  December 31,
                    2009
                  
                  
                  June 30,
                    2009Cash
      and cash equivalents and short-term investments (1)
                  
                  $
                  466,101
                  
                  
                  $
                  438,936Available
      credit facilities
                  
                  $
                  66,432
                  
                  
                  $
                  66,403Outstanding
      credit facilities
                  
                  
                  (1,370
                  )
                  
                  
                  (1,090
                  )Outstanding
      guarantees
                  
                  
                  (921
                  )
                  
                  
                  (778
                  )Unused
      credit facilities
                  
                  $
                  64,141
                  
                  
                  $
                  64,535Working
      capital (2)
                  
                  $
                  427,193
                  
                  
                  $
                  416,593MICROS
      Systems, Inc.’s shareholders’ equity
                  
                  $
                  762,582
                  
                  
                  $
                  718,997Current
      ratio (3)
                  
                  
                  2.53
                  
                  
                  
                  2.58





(1)
            Does
      not include approximately $58.2 million and $57.8 million invested in
      auction rate securities, classified as long-term investments in our
      condensed consolidated balance sheet as of December 31, 2009 and June 30,
      2009, respectively. Cash and cash equivalents and short term
      investments at December 31, 2009 also does not include other long-term
      investments of approximately $6.5
million.


(2)
            Current
      assets less current liabilities.


(3)
            Current
      assets divided by current liabilities.  The Company does not
      have any long-term debt.





ITEM
      3.
            QUANTITATIVE
      AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK





Currency
exchange rate risk


We recorded foreign sales, including
exports from the United States, of approximately $233.2 million and $250.8
million during the six months ended December 31, 2009 and 2008, respectively, to
customers located primarily in Europe, Asia and Latin America.  See
Note 11 “Segment Information” in the Notes to Condensed Consolidated Financial
Statements as well as Item 2 (Management’s Discussion and Analysis of Financial
Condition and Results of Operations) above for additional geographic
data.


Our international business and presence
expose us to certain risks, such as currency, interest rate and political
risks.  With respect to currency risk, we transact business in
different currencies primarily through our foreign subsidiaries.  The
fluctuation of currency exchange rates impacts our sales and
profitability.  Frequently, sales and the costs associated with those
sales are not denominated in the same currency.


We transacted business in approximately
39 currencies in the six months ended December 31, 2009 compared to 37
currencies in the six months ended December 31, 2008.  The relative
currency mix for the three and six months ended December 31, 2009 and 2008 were
as follows:





% of Reported Revenue (1)
                                    
                                    
                                    Exchange Rates toThree Months Ended
                                      December 31,
                                    
                                    
                                    Six Months Ended
                                      December 31,
                                    
                                    
                                    U.S. Dollar as of
                                      December 31,(in
      thousands)
                                    
                                    2009
                                    
                                    
                                    2008
                                    
                                    
                                    2009
                                    
                                    
                                    2008
                                    
                                    
                                    2009
                                    
                                    
                                    2008United
      States Dollar
                                    
                                    
                                    51
                                    %
                                    
                                    
                                    54
                                    %
                                    
                                    
                                    52
                                    %
                                    
                                    
                                    54
                                    %
                                    
                                    
                                    1.0000
                                    
                                    
                                    
                                    1.0000European
      Euro
                                    
                                    
                                    21
                                    %
                                    
                                    
                                    20
                                    %
                                    
                                    
                                    22
                                    %
                                    
                                    
                                    21
                                    %
                                    
                                    
                                    1.4316
                                    
                                    
                                    
                                    1.3969British
      Pound Sterling
                                    
                                    
                                    7
                                    %
                                    
                                    
                                    7
                                    %
                                    
                                    
                                    7
                                    %
                                    
                                    
                                    8
                                    %
                                    
                                    
                                    1.6163
                                    
                                    
                                    
                                    1.4593Swiss
      Franc
                                    
                                    
                                    2
                                    %
                                    
                                    
                                    2
                                    %
                                    
                                    
                                    2
                                    %
                                    
                                    
                                    1
                                    %
                                    
                                    
                                    0.9658
                                    
                                    
                                    
                                    0.9369Canadian
      Dollar
                                    
                                    
                                    2
                                    %
                                    
                                    
                                    1
                                    %
                                    
                                    
                                    1
                                    %
                                    
                                    
                                    1
                                    %
                                    
                                    
                                    0.9512
                                    
                                    
                                    
                                    0.8218Australian
      Dollar
                                    
                                    
                                    2
                                    %
                                    
                                    
                                    3
                                    %
                                    
                                    
                                    1
                                    %
                                    
                                    
                                    2
                                    %
                                    
                                    
                                    0.8983
                                    
                                    
                                    
                                    0.7114Singapore
      Dollar
                                    
                                    
                                    1
                                    %
                                    
                                    
                                    2
                                    %
                                    
                                    
                                    1
                                    %
                                    
                                    
                                    2
                                    %
                                    
                                    
                                    0.7116
                                    
                                    
                                    
                                    0.6981Mexican
      Peso
                                    
                                    
                                    1
                                    %
                                    
                                    
                                    1
                                    %
                                    
                                    
                                    1
                                    %
                                    
                                    
                                    1
                                    %
                                    
                                    
                                    0.0765
                                    
                                    
                                    
                                    0.0729Sweden
      Krona
                                    
                                    
                                    1
                                    %
                                    
                                    
                                    1
                                    %
                                    
                                    
                                    1
                                    %
                                    
                                    
                                    1
                                    %
                                    
                                    
                                    0.1397
                                    
                                    
                                    
                                    0.1278Thailand
      Baht
                                    
                                    
                                    1
                                    %
                                    
                                    
                                    1
                                    %
                                    
                                    
                                    1
                                    %
                                    
                                    
                                    1
                                    %
                                    
                                    
                                    0.0300
                                    
                                    
                                    
                                    0.0288All
      Other Currencies(2)
                                    
                                    
                                    11
                                    %
                                    
                                    
                                    8
                                    %
                                    
                                    
                                    11
                                    %
                                    
                                    
                                    8
                                    %
                                    
                                    
                                    0.1748
                                    
                                    
                                    
                                    0.1646Total
                                    
                                    
                                    100
                                    %
                                    
                                    
                                    100
                                    %
                                    
                                    
                                    100
                                    %
                                    
                                    
                                    100
                                    %





(1)
            Calculated
      using weighted average exchange rates for the fiscal
    period.


(2)
            The
      “% of Reported Revenue” for “All Other Currencies” is calculated based on
      the weighted average three month and six month exchange rates (as
      applicable) for all other currencies. The “Exchange Rates to U.S. Dollar
      as of December 31” for ‘All Other Currencies’ represents the weighted
      average December 31 exchange rates for all other
      currencies.  Weighting is based on the six month revenue for
      each country or region whose currency is included in the ‘All Other
      Currencies’ category.  Revenues from each currency included in
      “All Other Currencies” were less than 1% of our total revenues for the
      three month period ended December 31,
2009.


24





A 10% increase or decrease in the value
of the Euro and Australian dollar in relation to the U.S. dollar in
the six months ended December 31, 2009 would have affected our total revenues by
approximately $10.1 million, or 2.3%.  The sensitivity analysis
assumes a weighted average 10% change in the exchange rate during the period
with all other variables being held constant.  This sensitivity
analysis does not consider the effect of exchange rate changes on cost of sales,
operating expenses, or income taxes, and accordingly, is not necessarily an
indicator of the effect of potential exchange rate changes on our net
income.





Interest
rate risk


Our committed lines of credit bear
interest at a floating rate, which exposes us to interest rate
risks.  We manage our exposure to this risk by minimizing, to the
extent feasible, overall borrowing and monitoring available financing
alternatives.  At December 31, 2009, we had total borrowings of
approximately $1.4 million, and had not entered into any instruments to hedge
the resulting exposure to interest-rate risk.   We believe that
the fair value of the debt equals its carrying value at December 31, 2009 and
June 30, 2009.  Our exposure to fluctuations in interest rates will
increase or decrease in the future with increases or decreases in the
outstanding amount under our lines of credit.  As our total borrowing
at December 31, 2009 was approximately $1.4 million, a 1% change in interest
rate would have resulted in an immaterial impact on our condensed consolidated
financial position, results of operations and cash flows. Our cash equivalents
and our portfolio of marketable securities, including auction rate securities,
are subject to market risk due to changes in interest rates.  Fixed
interest rate securities may have their market value adversely impacted due to a
rise in interest rates, while floating rate securities may produce less income
than expected if interest rates fall.  Should interest rates fluctuate
by 1%, the change in value of our marketable securities would not have been
material as of December 31, 2009, and the change in our interest income would
not have been material for the three and six months ended December 31,
2009.


To minimize our exposure to credit risk
associated with financial instruments, we place our temporary cash investments
with high-credit-quality institutions, generally with bond rating of “A” and
above.  However, see Note 4 “Financial Instruments and Fair Value
Measurements” in the Notes to Condensed Consolidated Financial Statements for a
discussion regarding auction rate securities.





Finally, we are subject to, among
others, those environmental and geopolitical risks, and economic, pricing,
financial, and other risks described in Item 1A, “Risk Factors,” in our annual
report on Form 10-K for the year ended June 30, 2009, and Part II, Item 1A,
“Risk Factors,” in this report.





ITEM
      4.
            CONTROLS
      AND PROCEDURES





Evaluation
of Disclosure Controls and Procedures





In
February 2010, we concluded that our prior period financial statements should be
revised to reflect adjustments necessitated by fraudulent activities perpetrated
by a single employee in our Japanese subsidiary.  Our decision to
revise our financial statements was based on our investigation of these
matters.  Based upon our current controls and procedures, we have also
concluded that there are currently no material weaknesses in our controls and
procedures related to our international operations.  Additional
information regarding this matter and the impact on our financial statements is
included in this report in Note 14 to the accompanying financial
statements.


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, which took into account the matter described above, 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.





Change
in Internal Control over Financial Reporting


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





PART
II – OTHER INFORMATION





ITEM
1.  LEGAL PROCEEDINGS





Refer to Note 13 to the condensed
consolidated financial statements of this Form 10-Q for information regarding
certain pending legal proceedings.





ITEM
1A.   RISK FACTORS.





In addition to other information
presented in this report, including the risk factors set forth below, you should
consider carefully the factors discussed in Item 1A, “Risk Factors” in our
Annual Report on Form 10-K for the year ended June 30, 2009.


25





We have experienced declines in total
revenues that we believe are attributable to reduced demand resulting from
current global economic conditions.  Economic conditions that are
beyond our control, including the global recession, tightening of the credit
markets, reductions in consumer spending, and fluctuations in exchange rates,
have resulted in decreases in demand for our products and
services.  Our primary customers – the hospitality, restaurant, and
retail industries – are highly sensitive to economic, political, and
environmental disturbances and uncertainty, all of which are not only outside of
our and our customers’ control, but also are difficult to predict with any
accuracy.  In particular, weakened consumer spending, coupled with
difficulties many businesses are encountering in obtaining credit, have
negatively affected our customers’ operating results, which we believe has had
an adverse impact on their ability to acquire or open new hospitality and retail
venues, as well as their ability to make significant capital expenditures for
the systems that we sell.  We believe these constraints may cause and
in some cases may have already caused our customers to maintain their existing
systems rather than purchase newer systems.


In addition, continued weakness in
domestic and foreign economies may cause some of our distributors and customers
to become illiquid and delay payments, or may otherwise adversely affect our
ability to collect on their accounts, which would result in higher levels of bad
debt expense.  Although adverse changes in the financial condition of
our customers and distributors have not had a material effect on our financial
condition or operating results, continued adverse economic conditions may
require that we institute protective measures such as financial reviews,
modified customer credit limits and identification of alternative vendors, and
ultimately could materially adversely affect our business.


While we believe that our cash and cash
equivalents, additional cash generated from operations, and available lines of
credit will be sufficient to fund our working capital needs for the foreseeable
future, current economic conditions, including the overall performance of the
stock market beginning in 2008, may limit the availability of funds from other
sources if we encounter an extraordinary need for external
capital.  These factors also affect us indirectly, to the extent that
they serve to limit our customers’ ability to purchase our systems and
services.





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





On November 20, 2009, the Company held
its Annual Meeting of Shareholders.  Shareholders voted on the
following matters:





1.      Election
of Directors - The shareholders elected the following individuals as the
Company’s directors by the following vote:





Nominee
                  
                  For
                  
                  
                  VoteWithheldA.L.
      Giannopoulos
                  
                  
                  75,015,025
                  
                  
                  
                  962,009Louis
      M. Brown, Jr.
                  
                  
                  74,587,304
                  
                  
                  
                  1,389,730B.
      Gary Dando
                  
                  
                  75,571,029
                  
                  
                  
                  406,005F.
      Suzanne Jenniches
                  
                  
                  75,485,745
                  
                  
                  
                  491,289John
      G. Puente
                  
                  
                  75,109,928
                  
                  
                  
                  867,106Dwight
      S. Taylor
                  
                  
                  71,635,752
                  
                  
                  
                  4,341,282





2.Ratification
of Appointment of Independent Registered Public Accounting Firm - The
shareholders ratified the appointment of PricewaterhouseCoopers LLP as the
independent registered public accounting firm for the Company for the fiscal
year ending June 30, 2010 by the following vote:





For
                  
                  
                  75,468,355Against
                  
                  
                  468,499Abstain
                  
                  
                  40,180





3.Amendment
to the Option Plan – The shareholders approved an amendment to the Company’s
Stock Option Plan that changes the termination date of the plan to December 31,
2014, by the following vote.





For
                  
                  
                  64,177,187Against
                  
                  
                  6,503,126Abstain
                  
                  
                  143,862Broker
      Non-Vote
                  
                  
                  5,152,859





4.Amendment
to the Option Plan - The shareholders approved an amendment to the Company’s
Option Plan that increases the number of shares under the plan by an additional
1.2 million shares by the following vote.





For
                    
                    
                    64,102,043Against
                    
                    
                    6,575,843Abstain
                    
                    
                    146,289Broker
      Non-Vote
                    
                    
                    5,152,859


26





ITEM
      5.
            OTHER
      INFORMATION





MICROS leases its worldwide corporate
headquarters building from Columbia Gateway Office Corporation under a lease
that, as amended, terminates on February 29, 2016.  We sublease one of
the five floors of that building to Motorola, Inc.  In January 2010,
the Motorola sublease was amended to, among other things, reduce the amount of
space rented by Motorola by approximately 10,000 square feet, and extend the
term of the sublease to March 10, 2015, unless sooner terminated by one of the
parties in accordance with its terms.





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)
                Amendment
      to Articles of Incorporation is incorporated herein by reference to
      Exhibit 3(i) to the Quarterly Report on Form 10-Q of the Company for the
      period ended March 31, 1997.3(i)(b)
                Amendment
      to Articles of Incorporation is incorporated herein by reference to
      Exhibit 3(i) to the Quarterly Report on Form 10-Q of the Company for the
      period ended March 31, 1998.3(i)(c)
                Amendment
      to Articles of Incorporation is incorporated herein by reference to
      Exhibit 3(i) to the Form 8-K filed on November 16,
2007.3(ii)
                By-laws
      of the Company, as amended, are incorporated herein by reference to
      Exhibit 3(ii) to the Quarterly Report on Form 10-Q of the Company for the
      period ended December 31, 2008.23
                Consent
      of Houlihan Smith & Co., Inc. (filed herewith).31(a)
                Certification
      of Principal Executive Officer pursuant to Rule 13a-14(a)under the
      Securities Exchange Act of 1934 (filed herewith).31(b)
                Certification
      of Principal Financial Officer pursuant to Rule 13a-14(a) under the
      Securities Exchange Act of 1934 (filed herewith).32(a)
                Certification
      of Principal Executive Officer pursuant to Rule 13a-14(b) under the
      Securities Exchange Act of 1934 and 18 U.S.C. 1350 (filed
      herewith).32(b)
                Certification
      of Principal Financial Officer pursuant to Rule 13a-14(b) under the
      Securities Exchange Act of 1934 and 18 U.S.C. 1350 (filed
      herewith).


27


SIGNATURES





Pursuant
to the requirements of the Securities Exchange Act of 1934, the Registrant has
duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.





MICROS SYSTEMS, INC.(Registrant)Date:  February
      16, 2010
                /s/ Gary C. KaufmanGary
      C. KaufmanExecutive
      Vice President,Finance
      and Administration/Chief
      Financial OfficerDate:  February
      16, 2010
                /s/ Cynthia A. RussoCynthia
      A. RussoSenior
      Vice President andCorporate
      Controller


28