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, 2008


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 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, 2009, there were issued and outstanding 80,380,632 shares of
Registrant’s Common Stock at $0.00625 par value.









MICROS
SYSTEMS, INC. AND SUBSIDIARIES





Form
10-Q


For the
three and six months ended December 31, 2008





PART
I – FINANCIAL INFORMATION





ITEM
1.  FINANCIAL STATEMENTS





MICROS
SYSTEMS, INC. AND SUBSIDIARIES


CONDENSED
CONSOLIDATED BALANCE SHEETS


(Unaudited,
in thousands, except per share data)





Dec. 31,
                      2008
                    
                    
                    June 30,
                      2008ASSETSCurrent
      Assets:Cash
      and cash equivalents
                    
                    $
                    333,160
                    
                    
                    $
                    381,964Accounts
      receivable, net of allowance for doubtful accounts of $29,688 at December
      31, 2008 and $28,348 at June 30, 2008
                    
                    
                    174,809
                    
                    
                    
                    192,445Inventory,
      net
                    
                    
                    47,966
                    
                    
                    
                    64,575Deferred
      income taxes
                    
                    
                    20,575
                    
                    
                    
                    18,724Prepaid
      expenses and other current assets
                    
                    
                    29,224
                    
                    
                    
                    29,737Total
      current assets
                    
                    
                    605,734
                    
                    
                    
                    687,445Investments,
      non-current
                    
                    
                    57,541
                    
                    
                    
                    65,216Property,
      plant and equipment, net of accumulated depreciation and amortization of
      $80,165 at December 31, 2008 and $78,505 at June 30, 2008
                    
                    
                    32,189
                    
                    
                    
                    29,165Deferred
      income taxes, non-current
                    
                    
                    5,823
                    
                    
                    
                    7,108Goodwill
                    
                    
                    187,800
                    
                    
                    
                    159,722Intangible
      assets, net of accumulated amortization of $8,427 at December 31, 2008 and
      $7,401 at June 30, 2008
                    
                    
                    20,357
                    
                    
                    
                    16,168Purchased
      and internally developed software costs, net of accumulated amortization
      of $62,233 at December 31, 2008 and $61,691 at June 30,
    2008
                    
                    
                    29,545
                    
                    
                    
                    30,846Other
      assets
                    
                    
                    7,225
                    
                    
                    
                    7,336Total
      assets
                    
                    $
                    946,214
                    
                    
                    $
                    1,003,006LIABILITIES
      AND SHAREHOLDERS' EQUITYCurrent
      Liabilities:Bank
      lines of credit
                    
                    $
                    1,157
                    
                    
                    $
                    989Accounts
      payable
                    
                    
                    39,467
                    
                    
                    
                    46,843Accrued
      expenses and other current liabilities
                    
                    
                    111,742
                    
                    
                    
                    124,913Income
      taxes payable
                    
                    
                    1,888
                    
                    
                    
                    6,363Deferred
      revenue
                    
                    
                    92,654
                    
                    
                    
                    115,398Total
      current liabilities
                    
                    
                    246,908
                    
                    
                    
                    294,506Income
      taxes payable, non-current
                    
                    
                    19,142
                    
                    
                    
                    18,302Deferred
      income taxes, non-current
                    
                    
                    2,201
                    
                    
                    
                    2,181Other
      non-current liabilities
                    
                    
                    8,451
                    
                    
                    
                    8,103Total
      liabilities
                    
                    
                    276,702
                    
                    
                    
                    323,092Minority
      interests and minority ownership put arrangement
                    
                    
                    6,460
                    
                    
                    
                    6,898Commitments
      and contingencies (Note 14)Shareholders'
      Equity:Common
      stock, $0.00625 par value; authorized 120,000 shares; issued and
      outstanding 80,381 shares at December 31, 2008 and 80,898 shares at June
      30, 2008
                    
                    
                    502
                    
                    
                    
                    506Capital
      in excess of par
                    
                    
                    125,368
                    
                    
                    
                    131,517Retained
      earnings
                    
                    
                    532,375
                    
                    
                    
                    480,777Accumulated
      other comprehensive income
                    
                    
                    4,807
                    
                    
                    
                    60,216Total
      shareholders' equity
                    
                    
                    663,052
                    
                    
                    
                    673,016Total
      liabilities and shareholders' equity
                    
                    $
                    946,214
                    
                    
                    $
                    1,003,006





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




2




MICROS
SYSTEMS, INC. AND SUBSIDIARIES


CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS


(Unaudited,
in thousands, except per share data)





Three Months Ended
                                        
                                        
                                        Six Months EndedDecember 31,
                                        
                                        
                                        December 31,2008
                                        
                                        
                                        2007
                                        
                                        
                                        2008
                                        
                                        
                                        2007Revenue:Hardware
                                        
                                        $
                                        56,145
                                        
                                        
                                        $
                                        67,194
                                        
                                        
                                        $
                                        119,839
                                        
                                        
                                        $
                                        132,095Software
                                        
                                        
                                        38,196
                                        
                                        
                                        
                                        44,517
                                        
                                        
                                        
                                        75,772
                                        
                                        
                                        
                                        75,368Services
                                        
                                        
                                        143,593
                                        
                                        
                                        
                                        132,241
                                        
                                        
                                        
                                        286,393
                                        
                                        
                                        
                                        252,971Total
      revenue
                                        
                                        
                                        237,934
                                        
                                        
                                        
                                        243,952
                                        
                                        
                                        
                                        482,004
                                        
                                        
                                        
                                        460,434Cost
      of sales:Hardware
                                        
                                        
                                        34,756
                                        
                                        
                                        
                                        44,284
                                        
                                        
                                        
                                        77,815
                                        
                                        
                                        
                                        84,223Software
                                        
                                        
                                        7,098
                                        
                                        
                                        
                                        9,515
                                        
                                        
                                        
                                        14,398
                                        
                                        
                                        
                                        18,024Services
                                        
                                        
                                        69,557
                                        
                                        
                                        
                                        63,591
                                        
                                        
                                        
                                        137,324
                                        
                                        
                                        
                                        118,384Total
      cost of sales
                                        
                                        
                                        111,411
                                        
                                        
                                        
                                        117,390
                                        
                                        
                                        
                                        229,537
                                        
                                        
                                        
                                        220,631Gross
      margin
                                        
                                        
                                        126,523
                                        
                                        
                                        
                                        126,562
                                        
                                        
                                        
                                        252,467
                                        
                                        
                                        
                                        239,803Selling,
      general and administrative expenses
                                        
                                        
                                        72,395
                                        
                                        
                                        
                                        79,860
                                        
                                        
                                        
                                        149,196
                                        
                                        
                                        
                                        150,755Research
      and development expenses
                                        
                                        
                                        10,624
                                        
                                        
                                        
                                        9,676
                                        
                                        
                                        
                                        21,094
                                        
                                        
                                        
                                        19,092Depreciation
      and amortization
                                        
                                        
                                        4,291
                                        
                                        
                                        
                                        3,629
                                        
                                        
                                        
                                        8,378
                                        
                                        
                                        
                                        7,475Total
      operating expenses
                                        
                                        
                                        87,310
                                        
                                        
                                        
                                        93,165
                                        
                                        
                                        
                                        178,668
                                        
                                        
                                        
                                        177,322Income
      from operations
                                        
                                        
                                        39,213
                                        
                                        
                                        
                                        33,397
                                        
                                        
                                        
                                        73,799
                                        
                                        
                                        
                                        62,481Non-operating
      income (expense):Interest
      income
                                        
                                        
                                        2,565
                                        
                                        
                                        
                                        3,732
                                        
                                        
                                        
                                        5,819
                                        
                                        
                                        
                                        7,246Interest
      expense
                                        
                                        
                                        (135
                                        )
                                        
                                        
                                        (105
                                        )
                                        
                                        
                                        (282
                                        )
                                        
                                        
                                        (168
                                        )Other
      (expense) income, net
                                        
                                        
                                        (267
                                        )
                                        
                                        
                                        224
                                        
                                        
                                        
                                        420
                                        
                                        
                                        
                                        96Total
      non-operating income, net
                                        
                                        
                                        2,163
                                        
                                        
                                        
                                        3,851
                                        
                                        
                                        
                                        5,957
                                        
                                        
                                        
                                        7,174Income
      before taxes, minority interests and equity in net earnings of
      affiliates
                                        
                                        
                                        41,376
                                        
                                        
                                        
                                        37,248
                                        
                                        
                                        
                                        79,756
                                        
                                        
                                        
                                        69,655Income
      tax provision
                                        
                                        
                                        14,068
                                        
                                        
                                        
                                        12,627
                                        
                                        
                                        
                                        27,117
                                        
                                        
                                        
                                        23,483Income
      before minority interests and equity in net earnings of
      affiliates
                                        
                                        
                                        27,308
                                        
                                        
                                        
                                        24,621
                                        
                                        
                                        
                                        52,639
                                        
                                        
                                        
                                        46,172Minority
      interests and equity in net earnings of affiliates, net of
      taxes
                                        
                                        
                                        (234
                                        )
                                        
                                        
                                        (532
                                        )
                                        
                                        
                                        (683
                                        )
                                        
                                        
                                        (779
                                        )Net
      income (1)
                                        
                                        $
                                        27,074
                                        
                                        
                                        $
                                        24,089
                                        
                                        
                                        $
                                        51,956
                                        
                                        
                                        $
                                        45,393Net
      income per common share (1)(2):Basic
                                        
                                        $
                                        0.33
                                        
                                        
                                        $
                                        0.29
                                        
                                        
                                        $
                                        0.64
                                        
                                        
                                        $
                                        0.55Diluted
                                        
                                        $
                                        0.33
                                        
                                        
                                        $
                                        0.29
                                        
                                        
                                        $
                                        0.63
                                        
                                        
                                        $
                                        0.54Weighted-average
      number of shares outstanding (2):Basic
                                        
                                        
                                        80,424
                                        
                                        
                                        
                                        82,009
                                        
                                        
                                        
                                        80,556
                                        
                                        
                                        
                                        81,797Diluted
                                        
                                        
                                        81,202
                                        
                                        
                                        
                                        83,917
                                        
                                        
                                        
                                        81,691
                                        
                                        
                                        
                                        83,711





(1) See
Note 9, "Share-based Compensation" in Notes to Condensed Consolidated Financial
Statements.


(2) All
share data has been retroactively adjusted for a two-for-one stock split
effective February 5, 2008.





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




3




MICROS
SYSTEMS, INC. AND SUBSIDIARIES


CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS


(Unaudited,
in thousands)





Six Months EndedDecember 31,2008
                            
                            
                            2007Net
      cash flows provided by operating activities
                            
                            $
                            53,580
                            
                            
                            $
                            66,154Cash
      flows provided by investing activities:Net
      cash paid for acquisitions
                            
                            
                            (32,701
                            )
                            
                            
                            (12,456
                            )Purchases
      of property, plant and equipment
                            
                            
                            (8,631
                            )
                            
                            
                            (7,187
                            )Internally
      developed software
                            
                            
                            (233
                            )
                            
                            
                            (1,359
                            )Disposal
      of property, plant and equipment
                            
                            
                            171
                            
                            
                            
                            341Purchases
      of investments
                            
                            
                            -
                            
                            
                            
                            (477,850
                            )Proceeds
      from sales of investments
                            
                            
                            3,375
                            
                            
                            
                            505,000Net
      cash flows (used in) provided by investing activities
                            
                            
                            (38,019
                            )
                            
                            
                            6,489Cash
      flows provided by financing activities:Principal
      payments on line of credit and long-term debt related to an
      acquisition
                            
                            
                            (18,124
                            )
                            
                            
                            -Repurchases
      of stock
                            
                            
                            (15,432
                            )
                            
                            
                            (28,274
                            )Proceeds
      from stock option exercises
                            
                            
                            1,363
                            
                            
                            
                            19,519Realized
      tax benefits from stock option exercises
                            
                            
                            77
                            
                            
                            
                            9,523Dividends
      to minority owners
                            
                            
                            (619
                            )
                            
                            
                            (165
                            )Other
                            
                            
                            (687
                            )
                            
                            
                            (340
                            )Net
      cash flows (used in) provided by financing activities
                            
                            
                            (33,422
                            )
                            
                            
                            263Effect
      of exchange rate changes on cash and cash equivalents
                            
                            
                            (30,943
                            )
                            
                            
                            12,196Net
      (decrease) increase in cash and cash equivalents
                            
                            
                            (48,804
                            )
                            
                            
                            85,102Cash
      and cash equivalents at beginning of year
                            
                            
                            381,964
                            
                            
                            
                            242,702Cash
      and cash equivalents at end of period
                            
                            $
                            333,160
                            
                            
                            $
                            327,804





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




4




MICROS
SYSTEMS, INC. AND SUBSIDIARIES


CONDENSED
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY AND COMPREHENSIVE
INCOME


(Unaudited,
in thousands)





AccumulatedCapital
                        
                        
                        
                        
                        
                        OtherCommon Stock
                        
                        
                        in Excess
                        
                        
                        Retained
                        
                        
                        ComprehensiveShares
                        
                        
                        Amount
                        
                        
                        of Par
                        
                        
                        Earnings
                        
                        
                        Income
                        
                        
                        TotalBalance,
      June 30, 2008
                        
                        
                        80,898
                        
                        
                        $
                        506
                        
                        
                        $
                        131,517
                        
                        
                        $
                        480,777
                        
                        
                        $
                        60,216
                        
                        
                        $
                        673,016Comprehensive
      income (loss):Net
      income
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        51,956
                        
                        
                        
                        -
                        
                        
                        
                        51,956Foreign
      currency translation adjustments, net of tax
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        (52,717
                        )
                        
                        
                        (52,717
                        )Changes
      in unrealized losses on non-current investments, net of
tax
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        (2,692
                        )
                        
                        
                        (2,692
                        )Total
      comprehensive loss
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        (3,453
                        )Minority
      interest put arrangement
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        (358
                        )
                        
                        
                        -
                        
                        
                        
                        (358
                        )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
                        
                        
                        $
                        532,375
                        
                        
                        $
                        4,807
                        
                        
                        $
                        663,052





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




5




MICROS
SYSTEMS, INC. AND SUBSIDIARIES
 NOTES TO
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 For the
three and six months ended December 31, 2008
 (unaudited)




1.
            Basis
      of presentation


The
accompanying condensed consolidated financial statements of MICROS Systems, Inc.
and its subsidiaries (collectively, the “Company”) have been prepared by the
Company pursuant to the rules and regulations of the Securities and Exchange
Commission (“SEC”).  This Quarterly Report on Form 10-Q should be read
in conjunction with the Company’s Annual Report on Form 10-K for the year ended
June 30, 2008.





The
year-end condensed consolidated balance sheet data was derived from audited
financial statements, but does not include all disclosures required by
accounting principles generally accepted in the United States of
America.  Certain information and footnote disclosures that are
normally included in financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted as permitted by
SEC rules and regulations.





All
references to share data in the accompanying condensed consolidated financial
statements and throughout these notes have been retroactively adjusted to
reflect the February 2008 two-for-one stock split.





The
condensed consolidated financial statements included in this report reflect all
normal and recurring adjustments that, in the opinion of management, are
necessary for a fair statement of the financial position of the Company, its
results of operations and cash flows for the interim periods set forth
herein.  The results for the three and six months ended December 31,
2008 are not necessarily indicative of the results to be expected for the full
year or any future periods.





2.
            Acquisitions


During
August 2008, the Company acquired Fry, Inc. (“Fry”), an e-commerce design,
development and managed services provider headquartered in Ann Arbor, Michigan,
for a total cash purchase price of approximately $32.7 million, net of cash
acquired.  The Company also assumed debt of approximately $18.1
million, which was paid off immediately after the
acquisition.  Approximately $6.0 million of the total purchase price
is currently held in escrow and, if specified Company claims against Fry arise,
such amounts may be used to satisfy these claims.  Any amounts then
remaining after the satisfaction of any such claims will be paid in two
installments, at 12 and 18 months after closing.  The selling Fry
shareholders are eligible to earn up to an additional $17 million in earn out
payments over the next approximately two year period following closing, which
are payable based upon achievement of specified financial targets.  As
of December 31, 2008, the Company has accrued approximately $4.5 million payable
to selling Fry shareholders for meeting the initial set of specified financial
targets, and will pay that amount during the quarter ended June 30,
2009.  In connection with the acquisition, the Company recorded
goodwill of approximately $39.1 million, intangible assets of approximately $7.0
million and capitalized software of approximately $4.7 million.  The
acquisition of Fry has been included in the Company’s results since the
acquisition date.  The pro forma effect of this acquisition is not
material to the consolidated financial position and results of operations
presented herein.





3.
            Inventory


The components of inventory are as
follows:





(in
      thousands)
              
              December 31,2008
              
              
              June 30,2008Raw
      materials
              
              $
              4,010
              
              
              $
              5,521Work-in-process
              
              
              9
              
              
              
              21Finished
      goods
              
              
              43,947
              
              
              
              59,033Total
      inventory
              
              $
              47,966
              
              
              $
              64,575




The
Company maintained a reserve for inventory obsolescence of approximately $10.6
million at December 31, 2008, compared to approximately $11.5 million at June
30, 2008.  During the three months ended December 31, 2008 and
December 31, 2007, the Company reserved approximately $0.1 million and
approximately $0.6 million, respectively.  During the six months ended
December 31, 2008 and December 31, 2007, the Company reserved approximately $1.7
million and approximately $1.1 million, respectively.  All reserves
related to potentially obsolete and slow moving
products.  Approximately $0.4 million of the reserve recorded during
the six months ended December 31, 2008 related to a potential obsolete product
which will be replaced with a new product currently being developed by the
Company.  As of December 31, 2008, foreign currency translation
decreased the reserve for inventory obsolescence by approximately $1.6 million
as compared to June 30, 2008.




6




4.
            Investments,
      non-current


As of
December 31, 2008, the Company continues to hold auction rate securities that
are classified as available for sale, investments, non-current.  These
investments are classified as non-current as, beginning February 2008, auctions
for these securities failed to obtain sufficient bids to establish a clearing
rate.  As a result, the securities were not saleable in the auction,
thereby no longer providing short-term liquidity.  In the absence of a
liquid market or a negotiated sales transaction, the Company engaged an
independent valuation firm to update the valuation of its auction rate
securities as of December 31, 2008.  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 the fair value determination described
below in Note 5, Fair value measurements, the fair value of the auction rate
securities held as of December 31, 2008 decreased compared to the cost and the
fair value of the securities as of June 30, 2008.  Accordingly, the
Company increased its temporary unrealized losses on these investments to
approximately $8.5 million (approximately $5.3 million, net of tax) in the other
comprehensive income component of stockholders’ equity.





During
the six months ended December 31, 2008, the Company redeemed approximately $3.4
million of its auction rate securities at their par value.  The
Company recognized no gains or losses related to the sale of its investments in
auction rate securities during the six months ended December 31, 2008 and
2007.





5.
            Fair
      value measurements


Effective
July 1, 2008, the Company adopted the Financial Accounting Standards Board’s
(FASB) Statement of Financial Accounting Standards (SFAS) 157, “Fair Value
Measurements,” for financial assets and liabilities and for non-financial assets
and liabilities recognized or disclosed at fair value in the financial
statements on a recurring basis (at least annually).  Additionally,
the Company also adopted FASB Staff Position (FSP) No.157-2, which delayed the
effective date of SFAS No. 157 by one year for other non-financial assets and
liabilities.  As defined in SFAS No. 157, 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).  SFAS No. 157 establishes a framework for measuring fair value
and expands disclosure about fair value measurements.  To increase
consistency and comparability in fair value measurements and related disclosure,
SFAS No. 157 establishes a hierarchy that 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, as follows:





·
            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 in markets that are not active, or inputs that are
      observable, either directly or indirectly, for substantially the full term
      of the asset or liability.  This category includes those
      derivative instruments that the Company values using observable market
      data.


·
            Level
      3 - Measured based on prices or valuation models that require inputs that
      are both significant to the fair value measurement and less observable
      from objective sources (i.e., supported by little or no market
      activity).





The Company’s investments in auction
rate securities, classified as investments, non-current, are its only Level 3
assets.  The Company engaged an independent valuation firm to update
the valuation of its auction rate securities as of December 31,
2008.  The Company’s valuation methodology for investments is a
discounted cash flow model that considers various inputs including: (a) the
coupon rate specified under the debt instruments, (b) the current credit
ratings of the underlying issuers, (c) collateral characteristics and
(d) risk adjusted discount rates. The valuation firm used a mark to model
approach to arrive at this valuation, which the Company reviewed and with which
it agreed.  The valuation was prepared in accordance with FSP No.
157-3, “Determining the Fair Value of a Financial Asset When the Market for That
Asset Is Not Active,” which FASB issued in October 2008.  FSP No.
157-3 clarified the application of SFAS No. 157 in determining the fair value of
an asset where the market for that asset is not active.




7




The
Company reviews impairments in accordance with Emerging Issues Task Force Issue
No. 03-1 and FSP No. 115-1 and FAS No. 124-1, each of which is titled “The
Meaning of Other-Than-Temporary Impairment and Its Application to Certain
Investments” to determine the classification of the impairment as temporary or
other-than-temporary.  A temporary impairment charge results in an
unrealized loss being recorded in the other comprehensive income component of
stockholders' equity.  Such an unrealized loss does not reduce net
income for the applicable accounting period because the loss is viewed as
temporary.  Unrealized losses are recognized in the statement of
operations when a decline in fair value is determined to be
other-than-temporary.  Determination of whether the impairment is
temporary or other-than-temporary requires significant judgment.  The
primary factors that are considered in classifying the impairment include the
credit quality of the underlying security, the extent to which and time period
during which the fair value of each investment has been below cost, the expected
holding or recovery period for each investment, the Company’s intent and ability
to hold each investment until recovery and the existence of any evidence of
default by the issuer.  Based on its review, the Company has
determined that its investments in auction rate securities have been impaired
and has determined that the impairment is temporary.  The Company
plans to continue to monitor the liquidity situation in the marketplace and the
creditworthiness of its holdings and will perform periodic impairment
analysis.  If, as a result of this analysis, the Company determines
that the decline in fair value of the auction rate securities is
other-than-temporary, the Company would have to recognize the impairment as a
loss in its consolidated statement of operations.





The
financial assets and liabilities accounted for at fair value as of December 31,
2008 are as follows (does not include cash on hand or assets and liabilities
that are measured at historical cost or any basis other than fair
value):





(in
      thousands)
                  
                  Level 1
                  
                  
                  Level 2
                  
                  
                  Level 3
                  
                  
                  TotalCash equivalents
                  
                  $
                  251,433
                  
                  
                  $
                  -
                  
                  
                  $
                  -
                  
                  
                  $
                  251,433Investments,
      non-current:Auction
      rate securities
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  57,541
                  
                  
                  
                  57,541Balance
      at December 31, 2008
                  
                  $
                  251,433
                  
                  
                  $
                  -
                  
                  
                  $
                  57,541
                  
                  
                  $
                  308,974





Cash
equivalents consist primarily of certificates of deposit, in addition to money
market funds and overnight repurchase agreements.





A
reconciliation of changes in the fair value of investments, non-current,
classified as Level 3, and the related unrealized losses included in other
comprehensive income is as follows:





(in
      thousands)
                  
                  Cost
                  
                  
                  TemporaryUnrealizedLoss
                  
                  
                  Fair ValueBalance
      at June 30, 2008
                  
                  $
                  69,450
                  
                  
                  $
                  (4,234
                  )
                  
                  $
                  65,216Changes
      in unrealized losses related to investments
                  
                  
                  -
                  
                  
                  
                  676
                  
                  
                  
                  676Redemption
                  
                  
                  (3,375
                  )
                  
                  
                  145
                  
                  
                  
                  (3,230
                  )Balance
      at September 30, 2008
                  
                  
                  66,075
                  
                  
                  
                  (3,413
                  )
                  
                  
                  62,662Changes
      in unrealized losses related to investments
                  
                  
                  
                  
                  
                  
                  (5,121
                  )
                  
                  
                  (5,121
                  )Balance
      at December 31, 2008
                  
                  $
                  66,075
                  
                  
                  $
                  (8,534
                  )
                  
                  $
                  57,541





During
the six months ended December 31, 2008, the Company redeemed approximately $3.4
million of its auction rate securities at their par value.  The
Company recognized no gains or losses related to the sale of its investments in
auction rate securities during the six months ended December 31, 2008 and
2007.  Subsequent to December 31, 2008, the Company redeemed
approximately $0.7 million of its auction rate securities at their par value as
a result of partial buyback by the issuer of the security and recognized no
gains or losses related to the redemption.




8





6.
              Goodwill
      and intangible assets


During its first quarter of fiscal year
2009, the Company completed its annual impairment tests on its goodwill and
trademarks as of July 1, 2008.  Based on its annual impairment test
results, the Company determined that no impairment of goodwill or trademarks
existed as of July 1, 2008, and subsequent to July 1, 2008, there has not been
any event or change in circumstances that have impaired goodwill or
trademarks.





7.
            Other
      comprehensive income (loss)


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





Three Months Ended
                      December 31,
                    
                    
                    Six Months Ended
                      December 31,(in
      thousands)
                    
                    2008
                    
                    
                    2007
                    
                    
                    2008
                    
                    
                    2007Net
      income
                    
                    $
                    27,074
                    
                    
                    $
                    24,089
                    
                    
                    $
                    51,956
                    
                    
                    $
                    45,393Other
      comprehensive income (loss):Foreign
      currency translation adjustments
                    
                    
                    (13,200
                    )
                    
                    
                    5,056
                    
                    
                    
                    (52,717
                    )
                    
                    
                    16,387Unrealized
      loss on non-current investments
                    
                    
                    (3,206
                    )
                    
                    
                    —
                    
                    
                    
                    (2,692
                    )
                    
                    
                    —Amortization
      of prior year pension costs
                    
                    
                    —
                    
                    
                    
                    164
                    
                    
                    
                    —
                    
                    
                    
                    326Total
      comprehensive income (loss)
                    
                    $
                    10,668
                    
                    
                    $
                    29,309
                    
                    
                    $
                    (3,453
                    )
                    
                    $
                    62,106





The foreign currency translation
adjustments of approximately $13.2 million and approximately $5.1 million for
the three months ended December 31, 2008 and 2007, respectively, and
approximately $52.7 million and approximately $16.4 million for the six months
ended December 31, 2008 and 2007, respectively, were due to foreign currency
exchange rate fluctuations, mainly between the Euro and the U.S. dollar, which
has suffered an approximate 11% devaluation since June 30, 2008 and 1%
devaluation since September 30, 2008 and between the British pound sterling to
U.S. dollar, which also has suffered an approximately 27% devaluation since June
30, 2008 and 18% devaluation since September 30, 2008.  Approximately
$283.9 million and $42.4 million of the Company’s net assets at December
30, 2008 are denominated in Euros and British pound sterling,
respectively.





8.
            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.  The lenders under the Credit Agreements are Bank of America,
N.A., Wachovia Bank, N.A., 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.  During the three months ended
December 31, 2008, the Credit Agreements were amended to (i) extend the
expiration of the agreements from July 31, 2009 to July 31, 2010 (ii) modify or
eliminate certain financial reporting requirements, and (iii) modify or
eliminate certain restrictions on the Company’s ability to assume additional
debt, repurchase stock, sell subsidiaries, or acquire companies.





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, 2008, the Company had approximately $1.2 million outstanding under
the Credit Agreements and had an additional approximately $0.4 million of the
line used for guarantees.  A total of approximately $63.4 million was
available for future borrowings as of December 31, 2008.  The total
outstanding balance consisted of 105.0 million in JPY (Japanese Yen)
(approximately $1.2 million at the December 31, 2008 exchange
rate).




9




The
Company also has a credit relationship with a European bank in the amount of EUR
1.0 million (approximately $1.4 million at the December 31, 2008 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,
2008, there were no balances outstanding on this credit facility, but
approximately EUR 0.1 million (approximately $0.2 million at the December 31,
2008 exchange rate) of the credit facility has been used for
guarantees.





As of
December 31, 2008, the Company had approximately $64.6 million borrowing
capacity under all of the credit facilities described above.  The
weighted-average interest rate on the outstanding balances under the lines of
credit as of December 31, 2008 was 2.3% per annum.





9.
            Share-based
      compensation


The
Company has incentive and non-qualified stock options outstanding that were
granted to directors, officers, and other employees.  With respect to
directors, the Company’s policy and practice during the relevant period was that
only those directors who are employees of the Company were eligible to receive
options.  The exercise price per share of each option equals the
market value of a share of the Company’s common stock on the date of the
grant.  Substantially all of the options granted are exercisable
pursuant to a three-year vesting schedule whereby one-third of the options vest
upon the first anniversary of the grant, the second third of the options vest
upon the second anniversary of the grant, and the final third of the options
vest upon the third anniversary of the grant.  All outstanding options
expire ten years from the date of grant.  Since the inception of the
stock option plan in 1991, the Company has authorized 35.2 million shares for
issuance upon exercise of options, of which approximately 3.5 million shares are
available for future grants as of December 31, 2008.  On that date,
options to purchase approximately 6.9 million shares were outstanding, including
currently exercisable options to purchase approximately 4.6 million
shares.





The
Company accounts for its option awards in accordance with SFAS No. 123(R),
“Share-Based Payment.”  The estimated fair value of option awards is
measured as of the date of grant, and non-cash share-based compensation expenses
adjusted for expected pre-vesting forfeitures are recognized ratably over the
requisite service (i.e. vesting) period of options in the consolidated
statements of operations.  In addition, for the three and six months
ended December 31, 2007, non-cash share-based compensation expenses adjusted for
expected pre-vesting forfeitures were also recognized for the non-vested portion
of awards that were granted before the effective date of SFAS No. 123(R) as
those options vested.





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





Three
      Months Ended
                  December
      31,
                
                
                Six
      Months Ended
                  December
      31,(in
      thousands)
                
                2008
                
                
                2007
                
                
                2008
                
                
                2007Selling,
      general and administrative
                
                $
                3,886
                
                
                $
                5,730
                
                
                $
                7,411
                
                
                $
                9,271Research
      and development
                
                
                213
                
                
                
                253
                
                
                
                421
                
                
                
                556Total
      non-cash share-based compensation expense
                
                
                4,099
                
                
                
                5,983
                
                
                
                7,832
                
                
                
                9,827Income
      tax benefit
                
                
                (978
                )
                
                
                (1,673
                )
                
                
                (1,819
                )
                
                
                (2,513
                )Total
      non-cash share-based compensation expense,net
      of tax benefit
                
                $
                3,121
                
                
                $
                4,310
                
                
                $
                6,013
                
                
                $
                7,314Impact
      on diluted net income per share
                
                $
                0.04
                
                
                $
                0.05
                
                
                $
                0.08
                
                
                $
                0.09




10




During
the three months ended December 31, 2008 and 2007, the Company granted to the
Company’s Chairman, President, and CEO, A.L. Giannopoulos, options to purchase
150,000 shares and 240,000 shares, respectively.  In accordance with
the terms of the option plan, any options that he holds that have not yet vested
at the time of his retirement will vest immediately upon his retirement as he is
over the retirement age of 62.  Mr. Giannopoulos has not retired, but
because he was over the age of 62 at the time he received the options, the
Company recorded 100% of the non-cash share-based compensation expense related
to the options granted to Mr. Giannopoulos during the three months ended
December 31, 2008 and 2007.  As a result, the Company recorded
approximately $0.8 million (approximately $0.5 million net of tax benefits or
$0.01 diluted earnings per share) for the three months ended December 31, 2008
and approximately $3.2 million (approximately $2.0 million net of tax benefits
or $0.02 diluted earnings per share) for the three months ended December 31,
2007 related to options granted to Mr. Giannopoulos.





No
compensation expense was capitalized for the three and six months ended December
31, 2008 and 2007 because no stock options were granted to employees whose labor
costs were capitalized as software development costs.





As of December 31, 2008, there was
approximately $16.0 million in non-cash share-based compensation costs related
to non-vested awards not yet recognized in the Company’s consolidated statements
of operations.  This cost is expected to be recognized over a
weighted-average period of 1.7 years.





10.
            Net
      income per share


Basic net
income per common share is computed by dividing net income available to 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 available
to common shareholders and the weighted-average number of common shares
outstanding assuming dilution is as follows:





Three
      Months Ended
                          December
      31,
                        
                        
                        Six
      Months Ended
                          December
      31,(in
      thousands, except per share data)
                        
                        2008
                        
                        
                        2007
                        
                        
                        2008
                        
                        
                        2007Net
      income
                        
                        $
                        27,074
                        
                        
                        $
                        24,089
                        
                        
                        $
                        51,956
                        
                        
                        $
                        45,393Effect
      of minority put arrangement
                        
                        
                        (167
                        )
                        
                        
                        (169
                        )
                        
                        
                        (358
                        )
                        
                        
                        (327
                        )Net
      income available to common shareholders
                        
                        $
                        26,907
                        
                        
                        $
                        23,920
                        
                        
                        $
                        51,598
                        
                        
                        $
                        45,066Average
      number of common shares outstanding
                        
                        
                        80,424
                        
                        
                        
                        82,009
                        
                        
                        
                        80,556
                        
                        
                        
                        81,797Dilutive
      effect of outstanding stock options
                        
                        
                        778
                        
                        
                        
                        1,908
                        
                        
                        
                        1,135
                        
                        
                        
                        1,914Average number of
      common shares outstandingassuming
      dilution
                        
                        
                        81,202
                        
                        
                        
                        83,917
                        
                        
                        
                        81,691
                        
                        
                        
                        83,711Basic
      net income per share
                        
                        $
                        0.33
                        
                        
                        $
                        0.29
                        
                        
                        $
                        0.64
                        
                        
                        $
                        0.55Diluted
      net income per share
                        
                        $
                        0.33
                        
                        
                        $
                        0.29
                        
                        
                        $
                        0.63
                        
                        
                        $
                        0.54Anti-dilutive
      weighted average number of sharesexcluded from
      reconciliation
                        
                        
                        4,521
                        
                        
                        
                        555
                        
                        
                        
                        3,195
                        
                        
                        
                        1,418





Net
income for the three months ended December 31, 2008 and 2007 include
approximately $4.1 million ($3.1 million, net of tax) and $6.0 million ($4.3
million, net of tax), respectively, in non-cash share-based compensation
expense.  These non-cash share-based compensation expenses reduced
diluted net income per share by $0.04 and $0.05 per share for the three months
ended December 31, 2008 and December 31, 2007, respectively.





Net
income for the six months ended December 31, 2008 and 2007 include approximately
$7.8 million ($6.0 million, net of tax) and $9.8 million ($7.3 million, net of
tax), respectively, in non-cash share-based compensation
expense.  These non-cash share-based compensation expenses reduced
diluted net income per share by $0.08 and $0.09 per share for the six months
ended December 31, 2008 and December 31, 2007, respectively.





11.
            Recent
      accounting pronouncements


FSP
142-3


In April
2008, the FASB issued FASB Staff Position (“FSP”) FAS 142-3, “Determination of
the Useful Life of Intangible Assets,” which amends the factors that should be
considered in developing renewal or extension assumptions used to determine the
useful life of a recognized intangible asset under SFAS No. 142, “Goodwill and
Other Intangible Assets” (“SFAS No. 142”).  The intent of this FSP is
to improve the consistency between the useful life of a recognized intangible
asset under SFAS No. 142 and the period of expected cash flows used to measure
the fair value of the asset under SFAS No. 141(R), “Business Combinations,” and
other U.S. generally accepted accounting principles.  This FSP is
effective for fiscal years beginning after December 15, 2008 (the Company’s
fiscal year 2010), and interim periods within those fiscal years.  The
Company does not believe the adoption of FSP 142-3 will have a material impact
on the Company’s consolidated financial position, results of operations and cash
flows.




11




SFAS
No. 161


In March
2008, the FASB issued SFAS No. 161, “Disclosures about Derivative Instruments
and Hedging Activities, an amendment of FASB Statement No. 133,” (“SFAS No.
161”) which requires additional disclosures about the objectives of the
derivative instruments and hedging activities, the method of accounting for such
instruments under SFAS No. 133 and its related interpretations, and a tabular
disclosure of the effects of such instruments and related hedged items on our
financial position, financial performance, and cash flows.  SFAS No.
161 is effective for financial statements issued for fiscal years and interim
periods beginning after November 15, 2008 (the Company’s fiscal year
2010).  Historically the Company has not had material hedging
transactions and unless the Company engages in such transactions, the impact of
the adoption of SFAS No. 161 on its consolidated financial position, results of
operations and cash flows will not be material.  Nevertheless, the
impact of the adoption of SFAS No. 161 cannot currently be determined, as it
will depend on the nature and extent of any hedging transactions, if any, that
are in effect at the time of the adoption or thereafter.





SFAS
No. 141(R)


In
December 2007, the FASB issued SFAS No. 141 (Revised), “Business Combinations”
(“SFAS No. 141(R)”), which establishes principles and requirements for how 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.  SFAS No. 141(R) also provides
guidance for recognizing and measuring the goodwill acquired in the business
combination and disclosing information to enable users of the financial
statements to evaluate the nature and financial effects of the business
combination.  SFAS No. 141(R) is effective for business combinations
for which the acquisition dates are on or after July 1, 2009 (the Company’s
fiscal year 2010).  The Company is currently reviewing the impact of
the adoption of SFAS No. 141(R) on the Company’s consolidated financial
position, results of operations and cash flows.





SFAS
No. 160


In
December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in
Consolidated Financial Statements — an Amendment of ARB 51”, (“SFAS No.
160”).  This statement amends Accounting Research Bulletin No. 51 to
establish accounting and reporting standards for the noncontrolling interest
(minority interest) in a subsidiary and for the deconsolidation of a
subsidiary.  SFAS No. 160 establishes accounting and reporting
standards that require noncontrolling interests to 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
noncontrolling equity investment upon the deconsolidation of a subsidiary
initially be measured at fair value.  SFAS No. 160 is effective for
business combinations for which the acquisition dates are on or after July 1,
2009 (the Company’s fiscal year 2010).  The Company does not believe
the adoption of SFAS No. 160 will have a material impact on the Company’s
consolidated financial position, results of operations and cash
flows.





12.
            Segment
      reporting data


The
Company is organized and operates in four operating segments:  U.S.,
Europe, the Pacific Rim, and Latin America.  For the purposes of
applying SFAS No. 131, 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.





All of
the Company’s recent business acquisitions involved companies offering products
and services that are similar or complementary to those currently offered by the
Company; accordingly, the acquired businesses have been incorporated into the
existing four operating segments based on their geographic locations, and they
are then operated, managed, and evaluated as a part of the applicable operating
segment.




12




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





Three
      Months Ended
                      December
      31,
                    
                    
                    Six
      Months Ended
                      December
      31,(in
      thousands)
                    
                    2008
                    
                    
                    2007
                    
                    
                    2008
                    
                    
                    2007Revenue(1):U.S.
                    
                    $
                    117,540
                    
                    
                    $
                    108,507
                    
                    
                    $
                    233,786
                    
                    
                    $
                    208,494International
                    
                    
                    168,029
                    
                    
                    
                    185,556
                    
                    
                    
                    350,013
                    
                    
                    
                    348,999Intersegment
      eliminations
                    
                    
                    (47,635
                    )
                    
                    
                    (50,111
                    )
                    
                    
                    (101,795
                    )
                    
                    
                    (97,059
                    )Total
      revenue
                    
                    $
                    237,934
                    
                    
                    $
                    243,952
                    
                    
                    $
                    482,004
                    
                    
                    $
                    460,434Income before taxes,
      minority interests and equityin net earnings of
      affiliates(1):U.S.
                    
                    $
                    14,115
                    
                    
                    $
                    8,289
                    
                    
                    $
                    26,246
                    
                    
                    $
                    18,162International
                    
                    
                    66,257
                    
                    
                    
                    69,731
                    
                    
                    
                    136,524
                    
                    
                    
                    130,497Intersegment
      eliminations
                    
                    
                    (38,996
                    )
                    
                    
                    (40,772
                    )
                    
                    
                    (83,014
                    )
                    
                    
                    (79,004
                    )Total
      income before taxes, minority interests and equity in net earnings of
      affiliates
                    
                    $
                    41,376
                    
                    
                    $
                    37,248
                    
                    
                    $
                    79,756
                    
                    
                    $
                    69,655





As
      of(in
      thousands)
                
                December
      31,
                  2008
                
                
                June
      30,
                  2008Identifiable
      assets (2):U.S.
                
                $
                456,282
                
                
                $
                466,028International
                
                
                489,932
                
                
                
                536,978Total
      identifiable assets
                
                $
                946,214
                
                
                $
                1,003,006





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


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





13.
            Shareholders’
      equity


During
the period from fiscal year 2002 through fiscal year 2007, the Board of
Directors authorized the purchase of up to an aggregate of 10 million shares of
the Company’s common stock.  The Company completed the repurchases of
10 million shares as of July 2008.  On July 9, 2008, the Board of
Directors authorized the repurchase of up to 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 $0.2 million in fees related to all stock
repurchases.  As of December 31, 2008, approximately 1.5 million
additional shares may be repurchased under the most recent
authorization.





The
following table provides a summary of the cumulative number of shares purchased
since the inception of the current repurchase program through December 31, 2008,
plus the shares purchased under the previous repurchase programs.  All
repurchased shares reverted to the status of authorized but unissued
shares.





Number
      of
                    Shares
                  
                  
                  Purchase
                    Price
      per
                    Share
                  
                  
                  Total
      Price
                    Paid
                    (in
      thousands)Total
      shares purchased as of June 30, 2008
                  
                  
                  9,862,500
                  
                  
                  $
                  18.82
                  
                  
                  $
                  185,587July
      1, 2008 – December 31, 2008
                  
                  
                  594,900
                  
                  
                  $
                  25.94
                  
                  
                  
                  15,432Total
      shares purchased as of December 31, 2008
                  
                  
                  10,457,400
                  
                  
                  $
                  19.22
                  
                  
                  $
                  201,019




13




14.
            Contingencies


In Part I, Item 3 of the Company’s
Annual Report on Form 10-K for the fiscal year ended June 30, 2008 (the “Form
10-K”), the Company provided disclosure regarding 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 its customers, based on the terms of its 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 is currently providing 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.  As of December 31, 2008, the Company’s estimated indemnity
obligation is not material, and through December 31, 2008, the Company’s legal
fees with respect to indemnity coverage for this matter have not been
material.  Currently, the case is subject to a court-ordered stay
pending the completion of the United States Patent and Trademark Office’s
reexamination of the patent that is the subject of the lawsuit.  There
were no material developments to this proceeding during the three and six-month
periods ended December 31, 2008.





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.  The case is styled Heartland Payment Systems,
Inc. v. MICROS Systems, Inc., et al.  In its complaint,
Heartland claims that MICROS, Merchant Link, and Paymentech have engaged in an
anti-competitive arrangement relating to credit and debit card payment
processing for restaurant point-of-sale systems, and further claims that this
arrangement violates federal antitrust law and applicable New Jersey state
laws.  Heartland claims it has been damaged by virtue of being
required to deal with Merchant Link if it wishes 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
seeks 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, and the Company 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.  No trial date has
been set in this matter.





In Part I, Item 3 of the Form 10-K, the
Company also provided disclosure regarding two consolidated cases pending in the
Court of Common Pleas of Allegheny County, Pennsylvania, styled Roth Cash Register v. MICROS
Systems, Inc., et al., and Shenango Systems Solutions
v. MICROS Systems, Inc., et al.  On May 22, 2008, a jury
returned a combined verdict of $7.5 million against the Company in those
actions.   The cases initially were filed in 2000, and 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.  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.  Following the jury verdict, the Company moved for
judgment notwithstanding the verdict and for a new trial, and the plaintiffs
also moved for judgment notwithstanding the verdict and for a new
trial.  On December 23, 2008, the Court denied all of the
motions.  On December 30, 2008, the plaintiffs filed praecipes for
entry of judgment on the verdicts.  The Company filed its notices of
appeal on January 27, 2009.  On February 3, 2009, both plaintiffs
filed notices of cross appeal. There are no other litigation matters
relating to the restructuring of the dealer channel in the year
2000.  The Company has established only an immaterial reserve for any
potential liability relating to the dealer litigation, as the Company believes
that it has raised and can present strong points through appeal, and therefore
that an unfavorable outcome in the case is not probable.  However,
even if the verdict were not reversed or reduced as a result of the post-trial
motions or any subsequent appeals, payments of the resulting obligation 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 or financial position or cash
flows.




14




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





Forward-looking
statements




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





Examples
of such forward-looking statements include:





·
            Our
      assumptions regarding the materiality of any subsequent adjustments to the
      purchase price of our acquisitions during the relevant
    period;


·
            Our
      expectations regarding the effect of the adoption of various accounting
      pronouncements;


·
            Our
      expectations regarding the impact of competition on product and service
      margins;


·
            Our
      statements regarding the effects of Euro fluctuations (and other currency
      fluctuations) on our financial
performance;


·
            Our
      expectation that customers with which we do the largest amount of business
      will change from period to period;


·
            Our
      belief that our reserve against future indemnity expenditures will be
      sufficient;


·
            Our
      statements about the effects of larger customer orders on our quarterly
      earnings and revenues;


·
            Our
      statements regarding the costs associated with maintaining compliance with
      applicable legal, financial, and industry requirements and
      standards;


·
            Our
      beliefs regarding the effects on our results of operations or financial
      position of any current legal proceedings in which we may be
      involved;


·
            Our
      expectations regarding effective tax rates in future periods, and the
      effects of tax audits in certain
jurisdictions;


·
            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
      beliefs regarding impairment of our investments in auction rate
      securities, and our intention and ability to retain those investments
      under current market conditions;


·
            Our
      expectations regarding our exposure to interest rate risk;
    and


·
            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.





Factors that may affect
future results





Current
market and economic conditions, and world political and economic uncertainty,
make it difficult to predict whether we can achieve revenue and profitability
growth over the remainder of the current fiscal year and future
periods.  Economic concerns relating to liquidity, fluctuations in the
stock market, vacillating oil and gas prices, and worldwide recession also
directly and indirectly have a significant impact on our customers, and,
accordingly, on our business.  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, frequently, their) control, but also are
difficult to predict with any accuracy.  In particular, declines in
consumer spending and general recessionary conditions directly affect our
primary customers, limiting their ability to purchase our systems and
services.





Further,
because of the nature of the industries in which our customers operate, we are
subject to political risk, including as a result of instability in the Middle
East and the worldwide threat of terrorism, and especially in developing
countries with uncertain or unstable political structures or
regimes.




15




The
market for our products and services is highly competitive, which, among other
things, results in gross margin pressure on our hardware and software
products.  While our margins on services and products have increased
in the quarter ended December 31, 2008, we cannot continue to expect such a
trend, and margins may actually decline given the highly competitive nature of
the industries in which we operate.





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





We have
invested a portion of our cash in auction rate securities, which, in light of
current market conditions, are subject to constraints on
liquidity.  There is also the possibility that the underlying security
and collateral could have their ratings further downgraded by the applicable
credit rating agencies, which could further impair the value of our
investment.





Our
quarterly financial results frequently are dependent upon the timing and size of
customer orders, because larger orders have at times accounted for a meaningful
portion of quarterly earnings.  We expect that the customers with whom
we do the largest amount of business will change from year to year and sometimes
from quarter to quarter, depending on the timing of the roll-outs of their
systems.  Moreover, any changes to a customer’s delivery requirements
could affect the timing of our recognition of the associated
revenue.





Changes
to the schedule for completion and release of new products and services can also
directly affect our quarterly financial results – if, for example, a product’s
expected general release date must be delayed, revenues that we may have
expected in a particular quarter may not be realized until a subsequent
quarter.





Our
products and services must continually be updated to comply with applicable new
laws, regulations, and industry standards, including, by way of example, the
security and data protection rules promulgated by the credit card associations,
and to comply with changes to existing laws, regulations, and
standards.  Because laws, regulations, and standards, and the
interpretation and application of those laws, regulations, and standards
frequently change, we expect to continue to incur costs associated with
modifying our products and services to become and remain
compliant.  It is difficult to reliably predict the magnitude of those
costs.





The foregoing discussion of factors
that may affect future results is in addition to those other risks and
uncertainties disclosed in this report and our other SEC filings, including in
the section titled “Business and Investment Risks; Information Relating to
Forward-Looking Statements,” in Item 1A, “Risk Factors” in our Annual Report on
Form 10-K for the Fiscal Year ended June 30, 2008.





Overview





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:





(1) Hotel information systems, which
include software encompassing property management systems, sales and catering
systems, central reservation systems, customer information systems, revenue
management systems, and an Internet/Global Distribution System based hotel
reservation service;





(2) Restaurant information systems,
which include hardware and software for point-of-sale and operational
applications, a suite of back office applications, including inventory, labor,
and financial management, and certain centrally hosted enterprise applications;
and





(3) Specialty retail information
systems, which include retail store software automation systems and business
intelligence applications, including software encompassing point-of-sale, loss
prevention, business analytics, and customer gift cards, as well as enterprise
applications.





In
addition to our software and hardware products, we offer an extensive array of
related services to our customers.  These services include
installation, operator and manager training, on-site hardware maintenance,
custom software development, application software support, credit card software
support, help desk, systems configuration, network support, consulting and
software hosting.  We distribute our products and services directly
and through our domestic branch offices and our international subsidiary
offices, as well as indirectly (both domestically and internationally) through a
network of independent dealers and distributors.




16




The
markets in which we operate are highly competitive.  We compete on
various bases, including product functionality, service capabilities, price and
geography.  We believe that our competitive strengths include our
established global distribution and service network, our ability to offer a
broad array of hardware, software and service products to the hospitality and
retail industry and our focus on providing specialized information systems
solutions.





We manage
our business geographically and are organized and operate in two reportable
segments for financial reporting purposes:  U.S. and
International.  International reportable segment operations are
primarily in Europe, the Pacific Rim and Latin America.  For purposes
of applying Statement of Financial Accounting Standards (“SFAS”) No. 131,
“Disclosures about Segments of an Enterprise and Related Information,”
management views the U.S. and International reportable segments separately in
operating our business, although the products and services are similar for each
segment.  In each of these two reportable segments, we have developed
an infrastructure through which we license and sell all of our products and
services.  While the products and services that are sold must be
customized to address local issues, laws, tax requirements and customer
preferences, the products and services are substantially similar
worldwide.





Results of
Operations





The results of our operations were
adversely affected by the strengthening of U.S. dollar against foreign
currencies as 52% of our total revenue for the six months ended December 31,
2008 was generated by our international segment.  All references to
share data in this Item 2 have been adjusted to reflect the two-for-one stock
split effected on February 5, 2008.





Revenue:





Three Months Ended December
31, 2008:





An
analysis of the sales mix by reportable segments is as follows (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)
                
                2008
                
                
                2007
                
                
                2008
                
                
                2007
                
                
                2008
                
                
                2007Hardware
                
                $
                29,425
                
                
                $
                33,436
                
                
                $
                26,720
                
                
                $
                33,758
                
                
                $
                56,145
                
                
                $
                67,194Software
                
                
                13,271
                
                
                
                17,481
                
                
                
                24,925
                
                
                
                27,036
                
                
                
                38,196
                
                
                
                44,517Service
                
                
                73,090
                
                
                
                55,036
                
                
                
                70,503
                
                
                
                77,205
                
                
                
                143,593
                
                
                
                132,241$
                115,786
                
                
                $
                105,953
                
                
                $
                122,148
                
                
                $
                137,999
                
                
                $
                237,934
                
                
                $
                243,952





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





Three
      Months Ended
                    December
      31,2008
                  
                  
                  2007Hardware
                  
                  
                  23.6
                  %
                  
                  
                  27.5
                  %Software
                  
                  
                  16.1
                  %
                  
                  
                  18.3
                  %Service
                  
                  
                  60.3
                  %
                  
                  
                  54.2
                  %100.0
                  %
                  
                  
                  100.0
                  %





For the
three months ended December 31, 2008, total revenue was approximately $237.9
million, a decrease of approximately $6.0 million, or 2.5% compared to the same
period last year.  The unfavorable foreign currency exchange rate
fluctuations, primarily British pound sterling, Euro and Australian dollar
versus U.S. dollar, negatively affected total revenue by approximately $17.8
million.  The decrease in total revenue was also due to decreases in
hardware and software revenue, substantially offset by an increase in services
revenue.  We believe decreases in hardware and software revenue
are due to a slowdown in demand from our customers because of the
uncertainties surrounding the current U.S. and global economic
conditions.  Services revenue compared to the same period last year
increased due to additional service revenue generated as a result of the
acquisition of Fry, Inc. (“Fry”) in August 2008.  Excluding the
additional revenue generated from Fry, recurring support revenue was relatively
comparable to the same period last year, but installation revenue decreased
approximately 3% compared to the same period last year due to decreases in
hardware and software sales.




17




The
decrease in international segment sales for the three months ended December 31,
2008 of approximately $15.9 million is due to foreign currency exchange rate
fluctuations.





U.S.
segment sales increased approximately $9.8 million for the three months ended
December 31, 2008 compared to the same period last year.  The increase
was primarily the result of additional service revenue generated as a result of
the acquisition of Fry in August 2008.  The increase was partially
offset by decreases in hardware and software revenues, which we believe are due
to a slowdown in demand from our customers because of the uncertainties
surrounding the overall current U.S. and global economic
conditions.





Six Months Ended December
31, 2008:





An
analysis of the sales mix by reportable segments is as follows (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)
                
                2008
                
                
                2007
                
                
                2008
                
                
                2007
                
                
                2008
                
                
                2007Hardware
                
                $
                61,668
                
                
                $
                66,479
                
                
                $
                58,171
                
                
                $
                65,616
                
                
                $
                119,839
                
                
                $
                132,095Software
                
                
                27,211
                
                
                
                29,658
                
                
                
                48,561
                
                
                
                45,710
                
                
                
                75,772
                
                
                
                75,368Service
                
                
                140,494
                
                
                
                106,453
                
                
                
                145,899
                
                
                
                146,518
                
                
                
                286,393
                
                
                
                252,971$
                229,373
                
                
                $
                202,590
                
                
                $
                252,631
                
                
                $
                257,844
                
                
                $
                482,004
                
                
                $
                460,434





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





Six
      Months Ended
                    December
      31,2008
                  
                  
                  2007Hardware
                  
                  
                  24.9
                  %
                  
                  
                  28.7
                  %Software
                  
                  
                  15.7
                  %
                  
                  
                  16.4
                  %Service
                  
                  
                  59.4
                  %
                  
                  
                  54.9
                  %100.0
                  %
                  
                  
                  100.0
                  %





For the
six months ended December 31, 2008, total revenue was approximately $482.0
million, an increase of approximately $21.6 million, or 4.7% compared to the
same period last year.  The unfavorable foreign currency exchange rate
fluctuations, primarily British pound sterling, Australian dollar and Euro
versus U.S. dollar, negatively affected total revenue by approximately $15.3
million.  The increase in total revenue was due to increase in
services revenue, partially offset by a decrease in hardware
revenue.  The service revenue increased primarily due to additional
revenue generated as a result of the acquisition of Fry in August
2008.  Excluding the additional revenue generated from Fry, recurring
support revenue increased approximately 6% and installation revenue increased
approximately 8% compared to the same period last year.  We believe
the decrease in hardware revenue is due to a slowdown in demand from our
customers because of the uncertainties surrounding the current U.S. and
global economic conditions.





The
decrease in international segment sales for the six months ended December 31,
2008 of approximately $5.2 million is primarily due to foreign currency exchange
rate fluctuations, partially offset by an increase in services
revenue.





U.S.
segment sales increased approximately $26.8 million for the six months ended
December 31, 2008 compared to the same period last year.  The increase
was primarily the result of additional revenue generated as a result of the
acquisition of Fry in August 2008.  The increase was partially offset
by decreases in hardware and software revenues which we believe are due to
a slowdown in demand from our customers because of the uncertainties
surrounding the overall current U.S. and global economic
conditions.




18




Cost
of Sales:





Three Months Ended December
31, 2008:





An
analysis of the cost of sales is as follows:





Three
      Months Ended December 31,2008
                
                
                2007(in
      thousands)
                
                Cost
      of
                  Sales
                
                
                %
      of
                  Related
                  Revenue
                
                
                Costs
      of
                  Sales
                
                
                %
      of
                  Related
                  RevenueHardware
                
                $
                34,756
                
                
                
                61.9
                %
                
                $
                44,284
                
                
                
                65.9
                %Software
                
                
                7,098
                
                
                
                18.6
                %
                
                
                9,515
                
                
                
                21.4
                %Service
                
                
                69,557
                
                
                
                48.4
                %
                
                
                63,591
                
                
                
                48.1
                %$
                111,411
                
                
                
                46.8
                %
                
                $
                117,390
                
                
                
                48.1
                %





For the
three months ended December 31, 2008 and 2007, cost of sales as a percent of
revenue were 46.8% and 48.1%, respectively.  Hardware cost of sales as
a percent of related revenue for the three months ended December 31, 2008
decreased 4.0% compared to the same period last year primarily as a result of
(1) a more favorable sales mix (i.e., the sales generated from products with
higher margins represented a higher percentage of total hardware sales); (2) an
improvement in margins on substantially all hardware product sales; and (3)
sales of certain product inventory which had previously been reserved for due to
an unexpected increase in demand.  Software cost of sales as a percent
of related revenue decreased approximately 2.8% compared to the same period last
year as a result of a 19% increase in sale of Opera suite software products
compared to the same period last year.  Opera suite software products
are internally developed and generate higher margins than sales of third party
software.  Service costs as a percent of related revenue increased
approximately 0.3% compared to the same period last year due to lower margins
generally realized on Fry service revenue compared to MICROS’ service revenue,
partially offset by lower costs related to recurring support
services.





Six Months Ended December
31, 2008:





An
analysis of the cost of sales is as follows:





Six
      Months Ended December 31,2008
                
                
                2007(in
      thousands)
                
                Cost
      of
                  Sales
                
                
                %
      of
                  Related
                  Revenue
                
                
                Costs
      of
                  Sales
                
                
                %
      of
                  Related
                  RevenueHardware
                
                $
                77,815
                
                
                
                64.9
                %
                
                $
                84,223
                
                
                
                63.8
                %Software
                
                
                14,398
                
                
                
                19.0
                %
                
                
                18,024
                
                
                
                23.9
                %Service
                
                
                137,324
                
                
                
                47.9
                %
                
                
                118,384
                
                
                
                46.8
                %$
                229,537
                
                
                
                47.6
                %
                
                $
                220,631
                
                
                
                47.9
                %





For the
six months ended December 31, 2008 and 2007, cost of sales as a percent of
revenue were 47.6% and 47.9%, respectively.  Hardware cost of sales as
a percent of related revenue for the six months ended December 31, 2008
increased 1.1% compared to the same period last year primarily as a result of a
higher provision for inventory obsolescence resulting from a potential obsolete
product which will be replaced with a new product we are currently
developing.  Additionally, the margin realized during the six months
ended December 31, 2008 on the sale of Workstation 5 was lower than the margin
realized on the sale of Workstation 4 during the six months ended December 31,
2007.  Workstation 5 was released in October 2007 and is the larger
version of the next generation Workstation 4.




19




Software
cost of sales as a percent of related revenue decreased approximately 4.9%
compared to the same period last year.  The decrease was primarily as
a result of a 33% increase in the sale of Opera suite software products compared
to the same period last year.  Opera suite software products are
internally developed and generate higher margins than sales of third party
software.  Service costs as a percent of related revenue increased
approximately 1.1% compared to the same period last year due to lower margins
generally realized on Fry service revenue compared to MICROS’ service
revenue.





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





SG&A
expenses, as a percentage of revenue, for the three months ended December 31,
2008, were 30.4%, a decrease of 2.3% compared to the same period last
year.  This decrease primarily was due to our ability to manage our
costs and lower share-based compensation expense compared to the same period
last year.





SG&A
expenses, as a percentage of revenue, for the six months ended December 31,
2008, were 31.0%, a decrease of 1.7% compared to the same period last
year.  This decrease primarily was due to our ability to manage our
costs and lower share-based compensation expense compared to the same period
last year.





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





R&D
expenses consist primarily of labor costs less capitalized software development
costs.  An analysis of R&D activities is as follows:





Three
      Months Ended
                  December
      31,
                
                
                Six
      Months Ended
                  December
      31,(in
      thousands)
                
                2008
                
                
                2007
                
                
                2008
                
                
                2007Total
      R&D incurred
                
                $
                10,732
                
                
                $
                10,424
                
                
                $
                21,327
                
                
                $
                20,451Capitalized
      software development costs
                
                
                (108
                )
                
                
                (748
                )
                
                
                (233
                )
                
                
                (1,359
                )Total
      R&D expenses
                
                $
                10,624
                
                
                $
                9,676
                
                
                $
                21,094
                
                
                $
                19,092%
      of Revenue
                
                
                4.5
                %
                
                
                4.0
                %
                
                
                4.4
                %
                
                
                4.1
                %





Depreciation
and Amortization Expenses:





Depreciation
and amortization expenses for the three months ended December 31, 2008 increased
approximately $0.7 million to approximately $4.3 million compared to the same
period last year.  The increase is primarily due to additional
depreciation expense on capital expenditures since December 31, 2007 and recent
acquisitions.





Depreciation
and amortization expenses for the six months ended December 31, 2008 increased
approximately $0.9 million to approximately $8.4 million compared to the same
period last year.  The increase is primarily due to additional
depreciation expense on capital expenditures since December 31, 2007 and recent
acquisitions.





Share-Based
Compensation Expenses:





We
account for our option awards in accordance with SFAS No. 123(R), “Share-Based
Payment.”  The estimated fair value of awards granted under the stock
option program are measured as of the date of grant, and non-cash share-based
compensation expenses, adjusted for expected pre-vesting forfeitures, are
recognized ratably over the requisite service (i.e. vesting) period of options
in the consolidated statements of operations.  In addition, for the
three and six months ended December 31, 2007, non-cash share-based compensation
expenses, adjusted for expected pre-vesting forfeitures, was also recognized for
the non-vested portion of awards that were granted before the effective date of
SFAS No. 123(R) as those options vested.  The SG&A expenses and
R&D expenses discussed above include the following allocations of non-cash
share-based compensation expense:




20




Three
      Months Ended
                  December
      31,
                
                
                Six
      Months Ended
                  December
      31,(in
      thousands)
                
                2008
                
                
                2007
                
                
                2008
                
                
                2007SG&A
                
                $
                3,886
                
                
                $
                5,730
                
                
                $
                7,411
                
                
                $
                9,271R&D
                
                
                213
                
                
                
                253
                
                
                
                421
                
                
                
                556Total
      non-cash share-based compensation expense
                
                
                4,099
                
                
                
                5,983
                
                
                
                7,832
                
                
                
                9,827Income
      tax benefit
                
                
                (978
                )
                
                
                (1,673
                )
                
                
                (1,819
                )
                
                
                (2,513
                )Total
      non-cash share-based compensation expense,net
      of tax benefit
                
                $
                3,121
                
                
                $
                4,310
                
                
                $
                6,013
                
                
                $
                7,314Impact
      on diluted net income per share
                
                $
                0.04
                
                
                $
                0.05
                
                
                $
                0.08
                
                
                $
                0.09





During
the three months ended December 31, 2008 and 2007, we granted to our Chairman,
President, and CEO, A.L. Giannopoulos, options to purchase 150,000 shares and
240,000 shares, respectively.  In accordance with the terms of the
option plan, any options that he holds that have not yet vested at the time of
his retirement will vest immediately upon his retirement as he is over the
retirement age of 62.  Mr. Giannopoulos has not retired, but because
he was over the age of 62 at the time he received the options, we recorded 100%
of the non-cash share-based compensation expense related to the options granted
to Mr. Giannopoulos during the three months ended December 31, 2008 and
2007.  As a result, we recorded approximately $0.8 million
(approximately $0.5 million net of tax benefits or $0.01 diluted earnings per
share) for the three months ended December 31, 2008 and approximately $3.2
million (approximately $2.0 million net of tax benefits or $0.02 diluted
earnings per share) for the three months ended December 31, 2007 related to
options granted to Mr. Giannopoulos.





Non-operating
Income:





Net
non-operating income for the three months ended December 31, 2008, was
approximately $2.2 million, a decrease of approximately $1.7 million compared to
the same period last year.  The decrease was due to a decline in
interest income of approximately $1.2 million due to overall lower interest
rates earned on cash and cash equivalents.





Net
non-operating income for the six months ended December 31, 2008, was
approximately $6.0 million, a decrease of approximately $1.2 million compared to
the same period last year.  The decrease was due to a decrease in
interest income of approximately $1.4 million due to overall lower interest
rates earned on cash and cash equivalents.





Income
Tax Provisions:





The
effective tax rate for the three months ended December 31, 2008 and 2007 was
34.0% and 33.9%, respectively.  The effective tax rate for the six
months ended December 31, 2008 and 2007 was 34.0% and 33.7%,
respectively.  The effective tax rates for the three and six months
ended December 31, 2008 and December 31, 2007 were less than the 35.0% U.S.
statutory federal income tax rate, mainly due to the mix of earnings from
jurisdictions that have a lower statutory tax rate than the U.S. and from the
phase-in of the deduction for domestic production activities under the Internal
Revenue Code.  These benefits were partially offset by the
non-deductible nature of certain non-cash share-based compensation items, other
non-deductible compensation items, non-deductible foreign withholding taxes and
the inclusion of foreign income in our U.S. tax base.  The increases
in tax rates as compared to the same periods last year were primarily
attributable to changes in the mix of earnings from foreign jurisdictions
included in our U.S. tax base and other non-deductible
compensation.





We have
reviewed our uncertain income tax positions in accordance with FASB
Interpretation No. 48 “Accounting for Uncertainty in Income Taxes, an
Interpretation of FASB Statement No. 109.”  We are currently under
audit in certain major taxing jurisdictions, with open tax years beginning in
fiscal year 1999.  It is reasonably possible to estimate that within the
next 12 months we will decrease unrecognized tax benefits by approximately $2
million to $8 million due to the expiration of statutes of limitations,
settlement of issues with tax authorities and other events.  Based on
current estimates, this estimated decrease in unrecognized tax benefits could
increase earnings by approximately $1 million to $4 million thru its impact on
the effective tax rate.  Audit outcomes and the timing of audit
settlements are subject to significant uncertainty.  Further, over the
next twelve months, it is reasonably possible that our tax positions will
continue to generate liabilities for unrecognized tax benefits.




21




Based on
currently available information, we estimate that the fiscal year 2009 effective
tax rate will be approximately 34%.  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 in accordance with the interim reporting
requirements of FASB Interpretation No. 18, “Accounting for Income Taxes in
Interim Periods,” there may be some degree of adjustment to the effective tax
rate on a quarterly basis.





Recent accounting
pronouncements





FSP
142-3


In April
2008, the FASB issued FSP FAS 142-3, “Determination of the Useful Life of
Intangible Assets,” which amends the factors that should be considered in
developing renewal or extension assumptions used to determine the useful life of
a recognized intangible asset under SFAS No. 142, “Goodwill and Other Intangible
Assets” (“SFAS No. 142”).  The intent of this FSP is to improve the
consistency between the useful life of a recognized intangible asset under SFAS
No. 142 and the period of expected cash flows used to measure the fair value of
the asset under SFAS No. 141(R), “Business Combinations,” and other U.S.
generally accepted accounting principles.  This FSP is effective for
fiscal years beginning after December 15, 2008 (our fiscal year 2010), and
interim periods within those fiscal years.  We do not believe the
adoption of FSP FAS 142-3 will have a material impact on our consolidated
financial position, results of operations and cash flows.





SFAS
No. 161


In March
2008, the FASB issued SFAS No. 161, “Disclosures about Derivative Instruments
and Hedging Activities, an amendment of FASB Statement No. 133” (“SFAS No.
161”), which requires additional disclosures about the objectives of the
derivative instruments and hedging activities, the method of accounting for such
instruments under SFAS No. 133 and its related interpretations, and a tabular
disclosure of the effects of such instruments and related hedged items on our
financial position, results of operations, and cash flows.  SFAS No.
161 is effective for financial statements issued for fiscal years and interim
periods beginning after November 15, 2008 (our fiscal year
2010).  Historically we have not had material hedging transactions
and, unless we engage in such transactions, the impact of the adoption of SFAS
No. 161 on our consolidated financial position, results of operations and cash
flows will not be material.  Nevertheless, the impact of the adoption
of SFAS No. 161 cannot currently be determined, as it will depend on the nature
and extent of any hedging transactions, if any, that are in effect at the time
of the adoption or thereafter.





SFAS
No. 141(R)


In
December 2007, the FASB issued SFAS No. 141 (Revised), “Business Combinations”
(“SFAS No. 141(R)”), which establishes principles and requirements for how the
acquirer of a business recognizes and measures in its financial statements the
identifiable assets acquired, the liabilities assumed, and any noncontrolling
interest in the acquired business.  SFAS No. 141(R) also provides
guidance for recognizing and measuring the goodwill acquired in the business
combination and disclosing information to enable users of the financial
statements to evaluate the nature and financial effects of the business
combination.  SFAS No. 141(R) is effective for business combinations
for which the acquisition dates are on or after July 1, 2009 (our fiscal year
2010).  We are currently reviewing the impact of the adoption of SFAS
No. 141(R) on our consolidated financial position, results of operations and
cash flows.





SFAS
No. 160


In
December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in
Consolidated Financial Statements — an Amendment of ARB 51”, (“SFAS No.
160”).  This statement amends Accounting Research Bulletin No. 51 to
establish accounting and reporting standards for the noncontrolling interest
(minority interest) in a subsidiary and for the deconsolidation of a
subsidiary.  SFAS No. 160 establishes accounting and reporting
standards requiring that noncontrolling 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
noncontrolling equity investment upon the deconsolidation of a subsidiary
initially be measured at fair value.  SFAS No. 160 is effective for
business combinations for which the acquisition dates are on or after July 1,
2009 (our fiscal year 2010).  We do not believe the adoption of SFAS
No. 160 will have a material impact on our consolidated financial position,
results of operations and cash flows.




22




Critical accounting policies
and estimates





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





We
believe the following are our accounting policies and estimates that involve our
more significant judgments and estimates used in the preparation of the
condensed financial statements:





·
            Revenue
      recognition and deferred revenue;


·
            Allowance
      for doubtful accounts;


·
            Inventory;


·
            Investments,
      non-current;


·
            Non-cash
      share-based compensation;


·
            Capitalized
      software development costs;


·
            Valuation
      of long-lived assets, including intangible assets and impairment review of
      goodwill;


·
            Contingencies
      and litigation;


·
            Income
      taxes; and


·
            Foreign
      currency translation.





We have
reviewed our critical accounting policies and estimates and the related
disclosures with our Audit Committee.  These policies and procedures
are described further in our Annual Report on Form 10-K for the year ended June
30, 2008 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 and Cash Equivalents





The
Company’s consolidated statements of cash flows summary is as
follows:





Six
      Months Ended
                    December
      31,(in
      thousands)
                  
                  2008
                  
                  
                  2007Net
      cash provided by (used in):Operating
      activities
                  
                  $
                  53,580
                  
                  
                  $
                  66,154Investing
      activities
                  
                  
                  (38,019
                  )
                  
                  
                  6,489Financing
      activities
                  
                  
                  (33,422
                  )
                  
                  
                  263





Operating
activities:


Net cash
provided by operating activities for the six months ended December 31, 2008
decreased approximately $12.6 million compared to the six months ended December
31, 2007.  The decrease is primarily due to an increase in net
operating assets for the six months ended December 31, 2008 compared to the same
period last year, partially offset by an increase in net income of approximately
$6.6 million.





Investing
activities:


Net cash
used in investing activities for the six months ended December 31, 2008 was
approximately $38.0 million, as a result of approximately $32.7 million used for
our acquisition of Fry, Inc. and approximately $8.9 million used to purchase
property, plant and equipment and internally developed software to be licensed
to others.  During the six months ended December 31, 2008, we redeemed
approximately $3.4 million of our auction rate securities at par
value.  See “Capital Resources,” below, for a discussion of our
investments in auction rate securities.




23




Net cash
provided by investing activities for the six months ended December 31, 2007 was
approximately $6.5 million, primarily as a result of net proceeds from the sale
of auction rate securities exceeding investments in auction rate securities by
approximately $27.2 million.  We also used approximately $12.5 million
substantially in connection with our acquisition of Check-in-Data
AG.  Additionally, approximately $8.5 million was used to purchase
property, plant and equipment and internally developed software to be licensed
to others.





Financing
activities:


Net cash
used in financing activities for the six months ended December 31, 2008 was
approximately $33.4 million, primarily due to principal payments of
approximately $18.1 million on the line of credit and long-term debt that we
assumed as a result of our acquisition of Fry, Inc. in August
2008.  Additionally, we used approximately $15.4 million for our stock
repurchases during the period.





Net cash
provided by financing activities for the six months ended December 31, 2007 was
approximately $0.3 million, primarily due to proceeds from stock option
exercises of approximately $19.5 million and realized tax benefits from stock
option exercises of approximately $9.5 million, substantially offset by
approximately $28.3 million utilized to repurchase our stock during the
period.





At
December 31, 2008, 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.  The Company’s December 31, 2008 cash and cash
equivalents’ balance had increased from its September 30, 2008
balance.





Capital
Resources





At
December 31, 2008, we had approximately $333.2 million in cash and cash
equivalents.  Additionally, we continued to hold auction rate
securities (long-term instruments with variable interest rates that are designed
to periodically reset to prevailing market rates every 7 to 35 days through an
auction process) with a fair value of approximately $57.5
million.  These securities are supported by student loans for which
repayment is either backed by the Federal Family Education Loan Program or
insured by AMBAC Financial Group.  Due to the liquidity previously
provided by the interest reset mechanism and the short-term nature of our
investments, we initially classified the auction rate securities as short-term
investments.  Beginning in February 2008, there were insufficient bids
in the auctions for these auction rate securities to establish a clearing rate,
and the securities were not saleable in the auction.  As a result, the
auction process no longer provided short-term liquidity and the auction rate
securities have been classified as non-current investments available-for-sale as
of December 31, 2008 and June 30, 2008.  We also engaged an
independent valuation firm to update the valuation of the auction rate
securities as of December 31, 2008.  The valuation of auction rate
securities held as of December 31, 2008 reflected a further decrease in fair
value of those securities of approximately $4.4 million (approximately $2.8
million, net of tax) as compared to their fair value as of June 30,
2008.  We do not believe the decrease in fair value to be
other-than-temporary based on the extent to which and time during which the fair
value of each investment has been below cost, the expected holding or recovery
period for each investment, and our intention and ability to hold each
investment until recovery.  Based on the valuation, we have increased
the temporary unrealized losses on these investments to approximately $8.5
million (approximately $5.3 million, net of tax).  We plan to continue
to monitor the liquidity situation in the marketplace and the creditworthiness
of our holdings and will perform periodic impairment analysis.





We have
two credit agreements (the “Credit Agreements”) that in the aggregate provide a
$65.0 million multi-currency committed line of credit.  During the
quarter ended December 31, 2008, the Credit Agreements were amended to (i)
extend the expiration of the agreements from July 31, 2009 to July 31, 2010 (ii)
modify or eliminate certain financial reporting requirements, and (iii) modify
or eliminate certain restrictions on our ability to assume additional debt,
repurchase stock, sell subsidiaries, or acquire companies.  For
borrowings in U.S. currency, the interest rate under the Credit Agreements is
equal to the higher of the federal funds rate plus 50 basis points or the prime
rate.  For borrowings in foreign currencies, the interest rate is
determined by a LIBOR-based formula, plus an additional margin of 125 to 200
basis points, depending upon our consolidated earnings before interest, taxes,
depreciation and amortization for the immediately preceding four calendar
quarters.  As of December 31, 2008, we had approximately $1.2 million
outstanding under the Credit Agreements and had an additional approximately $0.4
million of the line used for guarantees.  A total of approximately
$63.4 million was available for future borrowings as of December 31,
2008.  The total outstanding balance consisted of 105.0 million in JPY
(Japanese Yen) (approximately $1.2 million at the December 31, 2008 exchange
rate).




24




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, 2008 exchange
rate.)  Under the terms of this facility, we may borrow in the form of
either a line of credit or term debt.  As of December 31, 2008, there
were no balances outstanding on this credit facility, but approximately EUR 0.1
million (approximately $0.2 million at the December 31, 2008 exchange rate) of
the credit facility has been used for guarantees.





As of
December 31, 2008, we had approximately $64.6 million borrowing capacity under
all of the credit facilities described above.  The weighted-average
interest rate on the outstanding balances under the lines of credit as of
December 31, 2008 was 2.3% per annum.  See Note 8 to the condensed
consolidated financial statements included in this report for additional
information regarding the Credit Agreements.





Except
for approximately $1.2 million outstanding on the above line of credit, our only
other long-term debt is approximately $0.2 million in capital lease related
obligations.





We
believe that our cash and cash equivalents, additional cash to be generated from
operations during the foreseeable future and our available lines of credit will
be 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 in recent months, we cannot
assume that funds would be available from other sources if required to fund
acquisitions, or any unanticipated and substantial cash needs.  We
currently anticipate that our property, plant, and equipment expenditures for
fiscal year 2009 will be approximately $14 million.





ITEM
      3.
            QUANTITATIVE
      AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK





We
recorded foreign sales, including exports from the United States, of
approximately $252.6 million and approximately $257.8 millionduring the six months
ended December 31, 2008 and December 31, 2007, respectively.





Since a
substantial portion of our business is conducted in foreign countries, a
downturn in the economies of foreign countries could adversely affect our
financial results.  Our significant international business and
presence expose us to certain market risks, such as currency fluctuation,
interest rate changes, and political risks.  While, under certain
circumstances, reliance on foreign operations can have a moderating impact (as
one region’s improving conditions can offset another region’s declining
conditions), our foreign businesses nonetheless add a degree of uncertainty to
our planning and forecasting process.





With
respect to currency risk, we transact business in different currencies through
our foreign subsidiaries.  The fluctuation of currencies affects sales
and profitability.  Frequently, sales and the costs associated with
those sales are not denominated in the same currency.





In the
six months ended December 31, 2008 and December 31, 2007, we transacted business
in 37 currencies.





The
relative currency mix for the three and six months ended December 31, 2008 and
2007 were as follows:





%
      of Reported RevenueThree
      Months Ended
                        December
      31,
                      
                      
                      Six
      Months Ended
                        December
      31,
                      
                      
                      Exchange
      Rates
                        December
      31,Revenues
      by currency (1):
                      
                      2008
                      
                      
                      2007
                      
                      
                      2008
                      
                      
                      2007
                      
                      
                      2008
                      
                      
                      2007United
      States Dollar
                      
                      
                      54
                      %
                      
                      
                      49
                      %
                      
                      
                      53
                      %
                      
                      
                      50
                      %
                      
                      
                      1.0000
                      
                      
                      
                      1.0000European
      Euro
                      
                      
                      20
                      %
                      
                      
                      21
                      %
                      
                      
                      21
                      %
                      
                      
                      21
                      %
                      
                      
                      1.3969
                      
                      
                      
                      1.4598British
      Pound Sterling
                      
                      
                      7
                      %
                      
                      
                      10
                      %
                      
                      
                      8
                      %
                      
                      
                      10
                      %
                      
                      
                      1.4593
                      
                      
                      
                      1.9870Australian
      Dollar
                      
                      
                      3
                      %
                      
                      
                      3
                      %
                      
                      
                      2
                      %
                      
                      
                      2
                      %
                      
                      
                      0.7114
                      
                      
                      
                      0.8765Japanese
      Yen
                      
                      
                      2
                      %
                      
                      
                      1
                      %
                      
                      
                      2
                      %
                      
                      
                      1
                      %
                      
                      
                      0.0110
                      
                      
                      
                      0.0090Swiss
      Franc
                      
                      
                      2
                      %
                      
                      
                      2
                      %
                      
                      
                      2
                      %
                      
                      
                      2
                      %
                      
                      
                      0.9369
                      
                      
                      
                      0.8825Mexican
      Peso
                      
                      
                      1
                      %
                      
                      
                      2
                      %
                      
                      
                      1
                      %
                      
                      
                      2
                      %
                      
                      
                      0.0729
                      
                      
                      
                      0.0916Canadian
      Dollar
                      
                      
                      1
                      %
                      
                      
                      1
                      %
                      
                      
                      1
                      %
                      
                      
                      2
                      %
                      
                      
                      0.8218
                      
                      
                      
                      1.0063All
      Other Currencies (2), (3)
                      
                      
                      10
                      %
                      
                      
                      11
                      %
                      
                      
                      10
                      %
                      
                      
                      10
                      %
                      
                      
                      0.1801
                      
                      
                      
                      0.2054Total
                      
                      
                      100
                      %
                      
                      
                      100
                      %
                      
                      
                      100
                      %
                      
                      
                      100
                      %




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




25




(2) The
“% of Reported Revenue” for “All Other Currencies” is calculated based on the
weighted average three and six months’ exchange rates for all other
currencies.


(3) The
“Exchange Rates as of December 31” for “All Other Currencies” represents the
weighted average December 31 exchange rates for all other currencies based on
the six months revenue.





A 10%
increase or decrease in the value of the Euro and British pound sterling in
relation to the U.S. dollar in the six months ended December 31, 2008 would have
affected total revenues by approximately $13.5 million, or 2.8%.  The
sensitivity analysis assumes a weighted average 10% change in the exchange rate
during the respective period with all other variables being held
constant.  This sensitivity analysis does not consider the effect of
exchange rate changes on either cost of sales, operating expenses, or income
taxes, and accordingly, is not necessarily an indicator of the effect of
potential exchange rate changes on our net income.





We are
also subject to interest rate fluctuations in foreign countries to the extent
that we elect to borrow in the local foreign currency.  In the past,
this has not been an issue of concern as we have the capacity to elect to borrow
in other currencies with more favorable interest rates.  We will
continue to evaluate the need to invest in financial instruments designed to
protect against interest rate fluctuations.





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.  Our interest rate risk has not changed
materially from June 30, 2008, and we do not currently foresee any significant
changes in exposure or in how we manage this exposure in the near
future.  For borrowings in U.S. currency, the Credit Agreements bear
interest at higher of the federal funds rate plus 50 basis points or the prime
rate.  For borrowings in foreign currencies, the interest rate is
determined by a LIBOR-based formula plus an additional margin of 125 to 200
basis points, depending upon our consolidated earnings before interest, taxes,
depreciation and amortization for the immediately preceding four calendar
quarters.   At December 31, 2008, we had total borrowings of
approximately $1.2 million, and had not entered into any instruments to hedge
the resulting exposure to interest-rate risk.  Management believes
that the fair value of the debt equals its carrying value at December 31,
2008.  Our exposure to fluctuations in interest rates will be affected
by the outstanding amount under the Credit Agreements, the applicable interest
rate, and any outstanding instruments to hedge exposure to interest rate
risk.  As our total borrowing as of December 31, 2008 was
approximately $1.2 million, a 1% change in interest rate would have resulted in
an immaterial impact on our consolidated financial position, results of
operations and cash flows.





To
minimize our exposure to credit risk associated with financial instruments, we
place our temporary cash investments with high-credit-quality institutions,
typically maintaining an investment grade rating from at least one of the three
credit rating institutions.  See “Capital Resources,” in Item 2 above
for a discussion of our investments in auction rate securities.





ITEM
      4.
            CONTROLS
      AND PROCEDURES





Evaluation
of Disclosure Controls and Procedures





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





Change in
Internal Control over Financial Reporting





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




26




PART
II – OTHER INFORMATION





ITEM
1.  LEGAL PROCEEDINGS





Refer to Note 14 to the condensed
consolidated financial statements of this Form 10-Q.





ITEM 1A. RISK
FACTORS.





Current
market and economic conditions, and world political and economic uncertainty,
make it difficult to predict whether we can achieve revenue and profitability
growth over the remainder of the current fiscal year and future
periods.  Economic concerns relating to liquidity, fluctuations in the
stock market, vacillating oil and gas prices, and worldwide recession also
directly and indirectly have a significant impact on our customers, and,
accordingly, on our business.  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, frequently, their) control, but also are
difficult to predict with any accuracy.  In particular, declines in
consumer spending and general recessionary conditions directly affect our
primary customers, limiting their ability to purchase our systems and
services.





These conditions also could affect the
Company’s business directly, in that while the Company believes its cash and
cash equivalents, additional cash generated from operations, and available lines
of credit will be sufficient to provide 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 in recent months, the
Company cannot assume that funds would be available from other sources if there
were an extraordinary need for external capital.





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





On November 21, 2008, the Company held
its Annual Meeting of Stockholders.  Shareholders voted on the
following matters:





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




Nominee
                
                For
                
                
                Vote WithheldA.L.
      Giannopoulos
                
                
                75,906,178
                
                
                
                641,364Louis
      M. Brown, Jr.
                
                
                74,814,619
                
                
                
                1,705,923B.
      Gary Dando
                
                
                76,325,019
                
                
                
                222,523F.
      Suzanne Jenniches
                
                
                76,337,833
                
                
                
                209,709John
      G. Puente
                
                
                75,195,691
                
                
                
                1,351,851Dwight
      S. Taylor
                
                
                66,216,877
                
                
                
                10,330,665




2.      Ratification
of Appointment of Independent Registered Public Accounting Firm - The
stockholders ratified the appointment of PricewaterhouseCoopers LLP as the
independent registered public accounting firm for the Company for the fiscal
year ending June 30, 2009 by the following vote:





For
                      
                      
                      75,622,946Against
                      
                      
                      785,577Abstain
                      
                      
                      139,019





3.      Amendment
to the Option Plan - The stockholders approved an amendment to the Company’s
Option Plan to increase the number of shares under the Option Plan by an
additional 1.2 million shares by the following vote.





For
                      
                      
                      60,115,289Against
                      
                      
                      10,316,709Abstain
                      
                      
                      69,125Non-vote
                      
                      
                      6,046,419




27




ITEM
      5.
            OTHER INFORMATION





On November 21, 2008, the Board of
Directors of the Company authorized and directed the Company to enter into the
Eleventh Amendment to the Employment Agreement between the Company and A.L.
Giannopoulos, its Chairman, President, and Chief Executive
Officer.  The Eleventh Amendment extends the term of the Employment
Agreement an additional three years until June 30, 2014, and establishes Mr.
Giannopoulos’s base salary and target bonus during that three-year
period.  The foregoing summary of the changes to Mr. Giannopoulos’s
Employment Agreement is qualified in its entirety by reference to the full text
of the Eleventh Amendment, a copy of which was attached to and incorporated by
reference the Company’s Current Report on Form 8-K, filed on November 24,
2008.





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 December 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 December 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 (filed herewith).10(a)
                      
                      Eleventh
      Amendment to Employment Agreement dated November 21, 2008, between MICROS
      Systems, Inc. and A.L. Giannopoulos is incorporated herein by reference to
      Exhibit 10 to the Current Report on Form 8-K filed on November 24,
      2008.10(b)
                      
                      First
      Amendment to Credit Agreements, dated December 11, 2008 among MICROS
      Systems, Inc., DV Technology Holdings Corporation, Datavantage
      Corporation, Micros Fidelio Nevada, LLC, MSI Delaware, LLC, Micros-Fidelio
      Worldwide, Inc., and Jtech Communications, Inc., as Borrower,
      Micros-Fidelio (Ireland) Ltd. as Guarantor, Bank of America, N.A., as
      Administrative Agent, and Bank of America, N.A., Wachovia Bank, N.A., and
      U.S. Bank, N.A., as Lenders. (filed herewith)10(c)
                      
                      First
      Amendment To Credit Agreements, Dated December 11, 2008 among Micros
      Fidelio (Ireland) Ltd), Micros Fidelio Systems (UK) Ltd., Micros Fidelio
      España S.L., Micros Fidelio (Canada), Ltd., Micros Fidelio Brazil, Ltda.,
      Micros Fidelio France S.A.S., Hospitality Technologies, S.A., Micros
      Fidelio Mexico S.A. de C.V., Micros Systems Holding GmbH, Micros Fidelio
      GmbH, Micros Fidelio Software Portugal Unipessoal LDA, Micros Fidelio
      (Thailand) Co., Ltd., Micros Fidelio Singapore Pte Ltd., Micros Fidelio
      Software (Philippines), Inc., Micros Fidelio Japan Ltd., Micros Fidelio
      Australia Pty. Ltd., Micros Fidelio Hong Kong, Ltd., Micros Fidelio Norway
      A/S, Micros Fidelio Finland Oy, Micros Fidelio Sweden, A.B., and Hotelbk,
      A.B., as Borrower, MICROS Systems, Inc., DV Technology Holdings
      Corporation, Datavantage Corporation, Micros Fidelio Nevada, LLC, MSI
      Delaware, LLC, Micros-Fidelio Worldwide, Inc., Jtech Communications, Inc.,
      and Micros Fidelio (Ireland) Ltd.,. as Guarantor, Bank of America, N.A.,
      as Administrative Agent, and Bank of America, N.A., Wachovia Bank, N.A.,
      and U.S. Bank, N.A., as Lenders. (filed herewith)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).




28




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
      5, 2009
                /s/
      Gary C. KaufmanGary C. KaufmanExecutive Vice President,Finance and Administration/Chief Financial OfficerDate:  February
      5, 2009
                /s/
      Cynthia A. RussoCynthia A. RussoSenior Vice President andCorporate Controller




29