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, 2007


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)








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











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





YES
                x
            NO
                o




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





Large
                accelerated filer x
            Accelerated
                filer o
            Non-accelerated
                filer o





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





YES
                o
            NO
                x





As
      of
      January 31, 2008, there were issued and outstanding 81,231,132 shares of
      Registrant’s Common Stock at $0.00625 par value (Note: the number of shares and
      par value have been adjusted to reflect a two-for-one stock split effective
      on
      February 5, 2008).




1


MICROS
      SYSTEMS, INC. AND SUBSIDIARIES





**Form
      10-Q**


For
      the
      three and six months ended December 31, 2007








**PART
      I - FINANCIAL INFORMATION**








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













2


MICROS
                  SYSTEMS, INC. AND SUBSIDIARIESCONDENSED
                  CONSOLIDATED BALANCE SHEETS(Unaudited,
                  in thousands, except per share
                  data)
  Dec.
                  31,
                2007
              
              June
                  30,
                2007ASSETSCurrent
                  Assets:Cash
                  and cash equivalents
              
              $
              327,804
              
              $
              242,702Short-term
                  investments
              
              
              59,800
              
              
              86,950Accounts
                  receivable, net of allowance for doubtful accounts of$24,726
                  at December 31, 2007 and $23,110 at June 30, 2007
              
              
              169,610
              
              
              180,203Inventory,
                  net
              
              
              53,354
              
              
              47,790Deferred
                  income taxes
              
              
              17,340
              
              
              16,683Prepaid
                  expenses and other current assets
              
              
              31,646
              
              
              27,650Total
                  current assets
              
              
              659,554
              
              
              601,978Property,
                  plant and equipment, net of accumulated depreciation andamortization
                  of $78,738 at December 31, 2007 and $76,352 at June 30,
                  2007
              
              
              29,614
              
              
              27,955Deferred
                  income taxes, non-current
              
              
              24,282
              
              
              23,145Goodwill
              
              
              151,667
              
              
              138,332Intangible
                  assets, net of accumulated amortization of $7,028 at December 31,
                  2007and
                  $4,726 at June 30, 2007
              
              
              16,498
              
              
              14,509Purchased
                  and internally developed software costs, net of
                  accumulatedamortization
                  of $59,563 at December 31, 2007 and $54,708 at June 30,
                  2007
              
              
              34,333
              
              
              36,296Other
                  assets
              
              
              6,499
              
              
              4,541Total
                  assets
              
              $
              922,447
              
              $
              846,756LIABILITIES
                  AND SHAREHOLDERS' EQUITYCurrent
                  Liabilities:Bank
                  lines of credit
              
              $
              2,480
              
              $
              2,308Accounts
                  payable
              
              
              39,381
              
              
              43,126Accrued
                  expenses and other current liabilities
              
              
              119,330
              
              
              117,142Income
                  taxes payable
              
              
              7,229
              
              
              8,094Deferred
                  service revenue
              
              
              80,264
              
              
              86,742Total
                  current liabilities
              
              
              248,684
              
              
              257,412Income
                  taxes payable, non-current
              
              
              12,313
              
              
              -Deferred
                  income taxes, non-current
              
              
              15,304
              
              
              15,934Other
                  non-current liabilities
              
              
              19,048
              
              
              17,554Total
                  liabilities
              
              
              295,349
              
              
              290,900Minority
                  interests and minority ownership put arrangement
              
              
              5,773
              
              
              4,723Commitments
                  and contingenciesShareholders'
                  Equity:Common
                  stock, $0.00625 par value; authorized 120,000 shares; issued
                  andoutstanding
                  81,865 shares at December 31, 2007 and 81,096 shares at June 30,
                  2007
                  (1)
              
              
              512
              
              
              507Capital
                  in excess of par
              
              
              160,144
              
              
              149,089Retained
                  earnings
              
              
              425,204
              
              
              382,785Accumulated
                  other comprehensive income
              
              
              35,465
              
              
              18,752Total
                  shareholders' equity
              
              
              621,325
              
              
              551,133Total
                  liabilities and shareholders' equity
              
              $
              922,447
              
              $
              846,756




(1)
        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 SUBSIDIARIESCONDENSED
                  CONSOLIDATED STATEMENTS OF OPERATIONS(Unaudited,
                  in thousands, except per share
                  data)
  Three
                  Months Ended
              
              Six
                  Months EndedDecember
                  31,
              
              December
                  31,2007
              
              2006
              
              2007
              
              2006Revenue:Hardware
              
              $
              67,194
              
              $
              55,460
              
              $
              132,095
              
              $
              109,603Software
              
              
              44,517
              
              
              32,752
              
              
              75,368
              
              
              60,508Services
              
              
              132,241
              
              
              101,663
              
              
              252,971
              
              
              193,466Total
                  revenue
              
              
              243,952
              
              
              189,875
              
              
              460,434
              
              
              363,577Cost
                  of sales:Hardware
              
              
              44,284
              
              
              36,270
              
              
              84,223
              
              
              70,236Software
              
              
              9,515
              
              
              6,635
              
              
              18,024
              
              
              13,996Services
              
              
              63,591
              
              
              48,116
              
              
              118,384
              
              
              91,822Total
                  cost of sales
              
              
              117,390
              
              
              91,021
              
              
              220,631
              
              
              176,054Gross
                  margin
              
              
              126,562
              
              
              98,854
              
              
              239,803
              
              
              187,523Selling,
                  general and administrative expenses
              
              
              79,860
              
              
              62,445
              
              
              150,755
              
              
              120,726Research
                  and development expenses
              
              
              9,676
              
              
              7,975
              
              
              19,092
              
              
              14,891Depreciation
                  and amortization
              
              
              3,629
              
              
              3,338
              
              
              7,475
              
              
              6,161Total
                  operating expenses
              
              
              93,165
              
              
              73,758
              
              
              177,322
              
              
              141,778Income
                  from operations
              
              
              33,397
              
              
              25,096
              
              
              62,481
              
              
              45,745Non-operating
                  income (expense):Interest
                  income
              
              
              3,732
              
              
              2,634
              
              
              7,246
              
              
              4,831Interest
                  expense
              
              
              (105
              )
              
              (95
              )
              
              (168
              )
              
              (190
              )Other
                  income (expense), net
              
              
              224
              
              
              (144
              )
              
              96
              
              
              (16
              )Total
                  non-operating income, net
              
              
              3,851
              
              
              2,395
              
              
              7,174
              
              
              4,625Income
                  before taxes, minority interests and equity in net earnings of
                  affiliates
              
              
              37,248
              
              
              27,491
              
              
              69,655
              
              
              50,370Income
                  tax provision
              
              
              12,627
              
              
              9,072
              
              
              23,483
              
              
              16,737Income
                  before minority interests and equity in net earnings of
                  affiliates
              
              
              24,621
              
              
              18,419
              
              
              46,172
              
              
              33,633Minority
                  interests and equity in net earnings of affiliates
              
              
              (532
              )
              
              (401
              )
              
              (779
              )
              
              (505
              )Net
                  income (1)
              
              $
              24,089
              
              $
              18,018
              
              $
              45,393
              
              $
              33,128Net
                  income per common share (1)(2):Basic
              
              $
              0.29
              
              $
              0.23
              
              $
              0.55
              
              $
              0.42Diluted
              
              $
              0.29
              
              $
              0.22
              
              $
              0.54
              
              $
              0.40Weighted-average
                  number of shares outstanding (2):Basic
              
              
              82,009
              
              
              79,651
              
              
              81,797
              
              
              78,841Diluted
              
              
              83,917
              
              
              82,450
              
              
              83,711
              
              
              81,898


(1)
        See
        Note 8, "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.




4


MICROS
                  SYSTEMS, INC. AND SUBSIDIARIESCONDENSED
                  CONSOLIDATED STATEMENTS OF CASH FLOWS(Unaudited,
                  in thousands)
  Six
                  Months EndedDecember
                  31,2007
              
              2006Net
                  cash flows provided by operating activities
              
              $
              66,154
              
              $
              27,314Cash
                  flows provided by (used in) investing activities:Net
                  cash paid for acquisitions
              
              
              (12,456
              )
              
              (5,512
              )Purchases
                  of property, plant and equipment
              
              
              (7,187
              )
              
              (6,241
              )Internally
                  developed software
              
              
              (1,359
              )
              
              (858
              )Disposal
                  of property, plant and equipment
              
              
              341
              
              
              238Purchases
                  of short-term investments
              
              
              (477,850
              )
              
              -Proceeds
                  from sales of short-term investments
              
              
              505,000
              
              
              -Net
                  cash flows provided by (used in) investing activities
              
              
              6,489
              
              
              (12,373
              )Cash
                  flows provided by financing activities:Proceeds
                  from stock option exercises
              
              
              19,519
              
              
              24,240Realized
                  tax benefits from stock option exercises
              
              
              9,523
              
              
              12,659Repurchases
                  of stock
              
              
              (28,274
              )
              
              (2,395
              )Principal
                  payments on line of credit
              
              
              -
              
              
              (2,483
              )Proceeds
                  from lines of credit
              
              
              -
              
              
              1,650Dividends
                  to minority owners
              
              
              (165
              )
              
              (277
              )Other
              
              
              (340
              )
              
              (41
              )Net
                  cash flows provided by financing activities
              
              
              263
              
              
              33,353Effect
                  of exchange rate changes on cash and cash equivalents
              
              
              12,196
              
              
              (227
              )Net
                  increase in cash and cash equivalents
              
              
              85,102
              
              
              48,067Cash
                  and cash equivalents at beginning of year
              
              
              242,702
              
              
              237,222Cash
                  and cash equivalents at end of period
              
              $
              327,804
              
              $
              285,289
  The
        accompanying notes are an integral part of the condensed consolidated financial
        statements.




5


MICROS
                  SYSTEMS, INC. AND SUBSIDIARIESCONDENSED
                  CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY AND COMPREHENSIVE
                  INCOME(Unaudited,
                  in thousands)
  AccumulatedCapital
              
              
              
              OtherCommon
                  Stock
              
              in
                  Excess
              
              Retained
              
              ComprehensiveShares
                  (1)
              
              Amount
              
              of
                  Par
              
              Earnings
              
              Income
              
              TotalBalance,
                  June 30, 2007 as previously reported
              
              
              81,096
              
              $
              507
              
              $
              149,089
              
              $
              382,785
              
              $
              18,752
              
              $
              551,133Cumulative
                  impact of the adoption of FIN 48
              
              
              -
              
              
              -
              
              
              -
              
              
              (2,647
              )
              
              -
              
              
              (2,647
              )Balance,
                  June 30, 2007, adjusted
              
              
              81,096
              
              
              507
              
              
              149,089
              
              
              380,138
              
              
              18,752
              
              
              548,486Comprehensive
                  income:Net
                  income
              
              
              -
              
              
              -
              
              
              -
              
              
              45,393
              
              
              -
              
              
              45,393Foreign
                  currency translation adjustments
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              16,387
              
              
              16,387Amortization
                  of prior year pension costs
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              326
              
              
              326Total
                  comprehensive income
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              62,106Minority
                  interest put arrangement
              
              
              -
              
              
              -
              
              
              -
              
              
              (327
              )
              
              -
              
              
              (327
              )Share-based
                  compensation
              
              
              -
              
              
              -
              
              
              9,827
              
              
              -
              
              
              -
              
              
              9,827Stock
                  issued upon exercise of options
              
              
              1,617
              
              
              10
              
              
              19,509
              
              
              -
              
              
              -
              
              
              19,519Repurchases
                  of stock
              
              
              (848
              )
              
              (5
              )
              
              (28,269
              )
              
              -
              
              
              -
              
              
              (28,274
              )Income
                  tax benefit from options exercised
              
              
              -
              
              
              -
              
              
              9,988
              
              
              -
              
              
              -
              
              
              9,988Balance,
                  December 31, 2007
              
              
              81,865
              
              $
              512
              
              $
              160,144
              
              $
              425,204
              
              $
              35,465
              
              $
              621,325


(1)
        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.


6




MICROS
      SYSTEMS, INC. AND SUBSIDIARIES


NOTES
      TO
      CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


For
      the
      three and six months December 31, 2007


(unaudited)




1.
            Basis
                of presentation





The
      accompanying condensed consolidated financial statements of MICROS Systems,
      Inc.
      and its subsidiaries (collectively, the “Company”) have been prepared by the
      Company pursuant to the rules and regulations of the Securities and Exchange
      Commission (“SEC”). This Quarterly Report on Form 10-Q should be read in
      conjunction with the Company’s Annual Report on Form 10-K for the year ended
      June 30, 2007.





The
      year-end condensed 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.





On
      February 5, 2008, the Company effected a two-for-one stock split of the
      Company’s common stock, in the form of a stock dividend of one share for each
      share held by shareholders of record as of January 22, 2008. All references
      to
      share data in the accompanying condensed consolidated financial statements
      and
      throughout these notes have been retroactively adjusted to reflect the
      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, 2007 are not
      necessarily indicative of the results to be expected for the full year or any
      future periods.





2.
            Acquisitions





During
      the first quarter of fiscal year 2008, the Company acquired Check-in Data AG
      (“Check in Data”) for an aggregate total cash purchase price of approximately
      $13.5 million, net of cash acquired, in a step acquisition by acquiring 80%
      interest in July 2007 and the remaining 20% interest in September 2007.
      Approximately $2.0 million of the total purchase price was held back to satisfy
      certain claims the Company may have against Check in Data. Any amounts remaining
      after satisfaction of any claims will be paid in two installments, at 12 and
      18
      months after the closing. Headquartered in Switzerland, Check in Data was a
      distributor of MICROS products and services and also provided complementary
      products and services. The assets acquired included approximately $3.6 million
      in cash. Goodwill of approximately $12.4 million and intangible assets and
      capitalized software of approximately $3.3 million were recorded in connection
      with the acquisition. The purchase price allocation is not finalized and is
      subject to adjustments. The acquisition of Check in Data has been included
      in
      the results of the Company since the acquisition date. The pro forma effect
      on
      operating results, due to this acquisition, was not material to the consolidated
      financial position and results of operations presented herein.





In
      connection with the 80% acquisition in July 2007, the arrangement provided
      the
      minority interest holders the option to require the Company to purchase the
      minority shares from the minority interest holders (“Put Option”) based on a
      pre-defined formula, which included certain financial results of the acquired
      company. The put option was terminated when the Company purchased the remaining
      20% interest in September 2007. The effect of the put option was
      immaterial.





3.
            FASB
                Interpretation No. 48





Effective
      July 1, 2007, the Company adopted the provisions of FASB Interpretation No.
      48,
“Accounting for Uncertainty in Income Taxes, an Interpretation of FASB Statement
      No. 109” (“FIN 48”). FIN 48 clarifies the accounting for income taxes by
      prescribing a minimum recognition threshold that a tax position is required
      to
      meet before being recognized in the financial statements.  FIN 48 also
      provides guidance on derecognition, measurement, classification, interest and
      penalties, accounting in interim periods, disclosure and transition. The
      cumulative effect of adopting FIN 48 of approximately $2.6 million, including
      interest and penalties, has been recorded as a reduction to retained earnings
      and an increase in net income taxes payable. As a result of the adoption of
      FIN
      48, the Company had approximately $10.9 million of unrecognized income tax
      benefits as of July 1, 2007, of which approximately $1.9 million represented
      accrual for interest and penalties. These amounts have been recorded
      as non-current since the Company does not anticipate to make a payment within
      12
      months of the balance sheet date. If
      recognized, all of the unrecognized income tax benefits would be recognized
      as a
      reduction of income tax expense, impacting the effective income tax rate. During
      the six months ended December 31, 2007, there has been no significant change
      in
      the unrecognized income tax benefits. The Company has reviewed its uncertain
      income tax positions in accordance with FIN 48, and currently is not able to
      reasonably estimate material changes in the unrecognized income tax benefits
      and
      the impact it would have on its consolidated financial position, results of
      operations and cash flows in the next twelve months.





7


The
      Company historically classified interest and penalties related to unrecognized
      income tax benefits as a component of income tax expense. The Company is
      maintaining this practice following its adoption of FIN 48.





In
      the
      ordinary course of the Company’s business, transactions occur for which the
      ultimate tax outcome may be uncertain. In addition, tax authorities periodically
      audit the Company’s income tax returns. These audits include examination of the
      Company’s significant tax filing positions, including the timing and amounts of
      deductions and the allocation of income and expenses among tax jurisdictions.
      The Company is currently under audits in certain of its major taxing
      jurisdictions, with open tax years beginning in fiscal year 1999. Currently,
      the
      Company is not able to reasonably estimate the completion date of these ongoing
      audits. The Company’s major taxing jurisdictions include Australia, Ireland,
      Germany, Singapore, the United Kingdom and the United States.





4.
            Inventory





The
      components of inventory are as follows:





(in
                thousands)
            
            December
                31,
              2007
            
            June
                30,
              2007Raw
                materials
            
            $
            6,811
            
            $
            5,687Work-in-process
            
            
            69
            
            
            38Finished
                goods
            
            
            46,474
            
            
            42,065Total
                inventory
            
            $
            53,354
            
            $
            47,790





The
      Company maintains a reserve for obsolescence for inventory of approximately
      $10.5 million at December 31, 2007 compared to approximately $9.9 million at
      June 30, 2007. The Company reserved approximately $1.1 million and approximately
      $1.4 million during the six months ended December 31, 2007 and December 31,
      2006, respectively, all related to potentially obsolete and slow moving
      products. The foreign currency translation increased the reserve for
      obsolescence for inventory by approximately $0.5 million as of December 31,
      2007.





5.
            Goodwill
                and intangible assets





During
      the first quarter of fiscal year 2008, the Company completed its annual
      impairment tests on its goodwill and trademarks as of July 1, 2007. Based on
      its
      annual impairment test results, the Company determined that no impairment of
      goodwill or trademarks existed as of July 1, 2007.





6.
            Other
                comprehensive income





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





Three
                Months Ended
              December
                31,
            
            Six
                Months Ended
              December
                31,(in
                thousands)
            
            2007
            
            2006
            
            2007
            
            2006Net
                income
            
            $
            24,089
            
            $
            18,018
            
            $
            45,393
            
            $
            33,128Other
                comprehensive income:Foreign
                currency translation adjustments
            
            
            5,056
            
            
            8,613
            
            
            16,387
            
            
            7,554Amortization
                of prior year pension costs
            
            
            164
            
            
            --
            
            
            326
            
            
            --Total
                comprehensive income
            
            $
            29,309
            
            $
            26,631
            
            $
            62,106
            
            $
            40,682




8


7.
            Line
                of credit





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





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





As
      of
      December 31, 2007, the Company had approximately $2.5 million outstanding on
      the
      lines of credit mentioned above and had approximately $62.5 million available
      for future borrowings. The total outstanding balance consisted of the
      following:





·  JPY
      (Japanese Yen) - 165.0 million (approximately $1.5 million at the December
      31,
      2007 exchange rate);


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


·  NZD
      (New
      Zealand Dollar) - 0.5 million (approximately $0.4 million at the December 31,
      2007 exchange rate.)





The
      Company also has a credit relationship with a European bank in the amount of
      EUR
      1.0 million (approximately $1.5 million at the December 31, 2007 exchange rate.)
      Under the terms of this facility, the Company may borrow in the form of either
      a
      line of credit or term debt. As of December 31, 2007, there were no balances
      outstanding on this credit facility, but approximately EUR 0.2 million
      (approximately $0.3 million at the December 31, 2007 exchange rate) of the
      credit facility has been utilized for guarantees.





As
      of
      December 31, 2007, the Company had approximately $63.7 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, 2007 was 4.4%.





8.
            Share-based
                compensation





The
      Company has incentive and non-qualified stock options outstanding that were
      granted to directors, officers, and other employees pursuant to authorization
      by
      the Board of Directors. With respect to directors, the Company’s policy and
      practice during the current period was that only those directors who are either
      employees of or consultants to 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 34.0
      million shares for issuance upon exercise of options, of which approximately
      3.4
      million shares are available for future grants as of December 31, 2007. As
      of
      December 31, 2007, options to purchase approximately 6.4 million shares were
      outstanding, including currently exercisable options to purchase approximately
      3.8 million shares.





9


The
      Company accounts for its option awards in accordance with Statement of Financial
      Accounting Standard (“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 period of options in the
      consolidated statements of operations. In addition, non-cash share-based
      compensation expense adjusted for expected pre-vesting forfeitures is recognized
      for the non-vested portion of awards that were granted before the effective
      date
      of SFAS No. 123(R) as those options incrementally vest.





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)
            
            2007
            
            2006
            
            2007
            
            2006Selling,
                general and administrative
            
            $
            5,730
            
            $
            2,578
            
            $
            9,271
            
            $
            5,270Research
                and development
            
            
            253
            
            
            117
            
            
            556
            
            
            240Total
                non-cash share-based compensation expense
            
            
            5,983
            
            
            2,695
            
            
            9,827
            
            
            5,510Income
                tax benefit
            
            
            (1,673
            )
            
            (545
            )
            
            (2,513
            )
            
            (1,115
            )Total
                non-cash share-based compensation expense, net of tax
                benefit
            
            $
            4,310
            
            $
            2,150
            
            $
            7,314
            
            $
            4,395Impact
                on diluted net income per share
            
            $
            0.05
            
            $
            0.02
            
            $
            0.09
            
            $
            0.06





During
      the three months ended December 31, 2007, the Company granted to the Company’s
      Chairman, President, and CEO, A.L. Giannopoulos, options to purchase 240,000
      shares. 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.
      Although Mr. Giannopoulos has not retired, the Company recorded 100% of the
      non-cash share-based compensation expense related to the 240,000 options granted
      to Mr. Giannopoulos during the three months ended December 31, 2007 of
      approximately $3.2 million (approximately $2.0 million net of tax benefits
      or
      $0.02 diluted earnings per share) because he was over the age of 62 at the
      time
      he received the options.





No
      compensation expense was capitalized for the three and six months ended December
      31, 2007 and December 31, 2006 because no stock options were granted to
      employees whose labor costs were capitalized as software development
      costs.





As
      of
      December 31, 2007, there was approximately $23.8 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 1.6 years.





9.
            Recent
                accounting pronouncements





SFAS
      141(R)





In
      December 2007, the FASB issued SFAS No. 141 (Revised), “Business Combinations” (“SFAS 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 acquiree.
      SFAS 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 141(R) is effective for business combinations for
      which the acquisition dates are on or after the beginning of the first annual
      reporting period beginning on or after December 15,
      2008. The
      Company will not be able to determine the impact of the adoption of SFAS 141(R)
      on the Company’s consolidated financial position, results of operations and cash
      flows until the quarter in which the Company completes an acquisition for which
      the acquisition date will be on or after the effective date of SFAS
      141(R).




10


SFAS
      160





In
      December 2007, the FASB issued SFAS No. 160,
      “Noncontrolling Interests in Consolidated Financial Statements — an
      Amendment of ARB 51”, (“SFAS 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 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 be initially measured at
      fair value. SFAS 160 is
      effective for business combinations for which the acquisition dates are on
      or
      after the beginning of the first annual reporting period beginning on or after
      December 15, 2008. The
      Company will not be able to determine the impact of the adoption of SFAS 160
      on
      the Company’s consolidated financial position, results of operations and cash
      flows until the quarter in which the Company completes an acquisition for which
      the acquisition date will be on or after the effective date of SFAS
      160.





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)
            
            2007
            
            2006
            
            2007
            
            2006Net
                income
            
            $
            24,089
            
            $
            18,018
            
            $
            45,393
            
            $
            33,128Effect
                of minority put arrangement
            
            
            (169
            )
            
            --
            
            
            (327
            )
            
            --Net
                income available to common shareholders
            
            $
            23,920
            
            $
            18,018
            
            $
            45,066
            
            $
            33,128Average
                common shares outstanding
            
            
            82,009
            
            
            79,651
            
            
            81,797
            
            
            78,841Dilutive
                effect of outstanding stock options
            
            
            1,908
            
            
            2,799
            
            
            1,914
            
            
            3,057Average
                common shares outstandingassuming
                dilution
            
            
            83,917
            
            
            82,450
            
            
            83,711
            
            
            81,898Basic
                net income per share
            
            $
            0.29
            
            $
            0.23
            
            $
            0.55
            
            $
            0.42Diluted
                net income per share
            
            $
            0.29
            
            $
            0.22
            
            $
            0.54
            
            $
            0.40Anti-dilutive
                weighted shares excludedfrom
                reconciliation
            
            
            555
            
            
            2,274
            
            
            1,418
            
            
            2,152





Net
      income for the three months ended December 31, 2007 and December 31, 2006
      include approximately $6.0 million ($4.3 million, net of tax) and $2.7 million
      ($2.2 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 $0.05 and $0.02 for the three months ended December 31,
      2007
      and December 31, 2006, respectively.





Net
      income for the six months ended December 31, 2007 and December 31, 2006 include
      approximately $9.8 million ($7.3 million, net of tax) and $5.5 million ($4.4
      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 $0.09 and $0.06 for the six months ended December 31, 2007
      and December 31, 2006, respectively. See Note 8, “Share-based
      Compensation.”


11


11.
            Segment
                reporting data





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





The
      Company 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 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. The 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 have been of companies that offer
      similar or complementary products and services 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 and managed as a part of the applicable operating
      segment.





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





Three
                Months Ended
              December
                31,
            
            Six
                Months Ended
              December
                31,(in
                thousands)
            
            2007
            
            2006
            
            2007
            
            2006Revenue(1):U.S.
            
            $
            108,507
            
            $
            90,309
            
            $
            208,494
            
            $
            176,368International
            
            
            185,556
            
            
            135,260
            
            
            348,999
            
            
            256,271Intersegment
                eliminations
            
            
            (50,111
            )
            
            (35,694
            )
            
            (97,059
            )
            
            (69,062
            )Total
                revenue
            
            $
            243,952
            
            $
            189,875
            
            $
            460,434
            
            $
            363,577Income
                before taxes, minority interests and equityin
                net earnings of affiliates(1):U.S.
            
            $
            8,289
            
            $
            7,478
            
            $
            18,162
            
            $
            14,296International
            
            
            69,731
            
            
            49,157
            
            
            130,497
            
            
            92,352Intersegment
                eliminations
            
            
            (40,772
            )
            
            (29,144
            )
            
            (79,004
            )
            
            (56,278
            )Total
                income before taxes, minority interests and equity in net earnings
                of
                affiliates
            
            $
            37,248
            
            $
            27,491
            
            $
            69,655
            
            $
            50,370




As
                of(in
                thousands)
            
            December
                31,
              2007
            
            June
                30,
              2007Identifiable
                assets(2):U.S.
            
            $
            457,271
            
            $
            443,331International
            
            
            465,176
            
            
            403,425Total
                identifiable assets
            
            $
            922,447
            
            $
            846,756





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


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





12


12.
            Shareholders’
                equity




In
      fiscal
      year 2002, the Board of Directors authorized the purchase of up to four million
      shares of the Company’s common stock, and during fiscal year 2005 the Company
      purchased all of the remaining unpurchased shares under the fiscal year 2002
      authorization. In fiscal year 2005, the Board of Directors authorized the
      purchase of an additional four million shares of the Company’s common stock. As
      of October 2007, the Company purchased all of the remaining unpurchased shares
      under the fiscal year 2005 authorization.





In
      November 2007, the Board of Directors authorized the purchase of an additional
      two million shares of the Company’s common stock. As of December 31, 2007, the
      Company had purchased approximately 0.4 million shares under the November 2007
      authorization.





During
      the three months ended December 31, 2007, the Company purchased and retired
      approximately 0.8 million shares under the fiscal year 2005 and November 2007
      authorizations.





Through
      December 31, 2007, the Company purchased and retired approximately 8.4 million
      shares of its stock, with an average purchase price per share of $16.65 or
      total
      purchase price of $139.6 million. The Company has incurred an aggregate of
      approximately $0.1 million in fees related to all three of the stock purchase
      plans.





13.
            Pension
                benefits




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





The
      components of net period pension cost are as follows:





Three
                Months Ended
              December
                31,
            
            Six
                Months Ended
              December
                31,(in
                thousands)
            
            2007
            
            2006
            
            2007
            
            2006Service
                cost
            
            $
            161
            
            $
            139
            
            $
            323
            
            $
            278Interest
                cost
            
            
            217
            
            
            174
            
            
            434
            
            
            348Amortization
                of prior service cost
            
            
            164
            
            
            137
            
            
            326
            
            
            274$
            542
            
            $
            450
            
            $
            1,083
            
            $
            900





14.
            Contingencies





In
      its
      Annual Report on Form 10-K for the fiscal year ended June 30, 2007, the Company
      reported on 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 customers of the
      Company. The Company is currently providing indemnity coverage to five of the
      defendants who are customers of the Company in accordance with applicable
      provisions of the contracts between the Company and those customers. Through
      December 31, 2007, the Company’s legal fees with respect to indemnity coverage
      for this matter have not been material. During the three month period ended
      December 31, 2007, the Court ordered the case stayed pending the completion
      of
      the United States Patent and Trademark Office’s reexamination of the patent that
      is the subject of the lawsuit.





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 seeks monetary damages in excess of $12 million, and also
      injunctive and other equitable relief. Our response to the complaint is not
      due
      until February 15, 2008. Based on currently available information, and analysis
      by counsel, we do not believe that our relationships and agreements with
      Merchant Link and Paymentech are anti-competitive or otherwise violate either
      federal antitrust law or applicable New Jersey law.





13


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.





15.  Subsequent
      Events





On
      February 5, 2008, the Company effected a two-for-one stock split of the
      Company’s common stock, in the form of a stock dividend of one share for each
      share held by shareholders of record as of January 22, 2008. All references
      in
      the accompanying condensed consolidated financial statements to share data,
      and
      in the preceding notes, have been retroactively adjusted to reflect the
      two-for-one stock split.





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. Past performance is not necessarily a strong
      or
      reliable indicator of future performance. Actual results could differ materially
      from past results, estimates, projections, or forward-looking statements made
      by, or on behalf of us. 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
                expectations regarding the impact of competition on product and service
                margins;


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


·
            our
                expectation that customers with which we do the largest amount of
                business
                with 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, revenues, and total 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
                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 conditions, and world political and economic uncertainty, make it
      difficult to predict whether we can continue to achieve revenue and
      profitability growth over the remainder of the current fiscal year. 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. Rising oil and gas prices
      also directly and indirectly can have a significant impact on our customers,
      and, accordingly, on our business. In sum, our primary customers - the
      hospitality, travel, restaurant, and retail industries - are highly sensitive
      to
      economic, political, and environmental disturbances, all of which are not only
      outside of our (and, frequently, their) control, but also are extraordinarily
      difficult to predict with any accuracy, and those matters accordingly directly
      affect our financial position and the results of our operations.





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.
      Margins on services and on existing products have tended generally to decline
      over time, and we expect that trend to continue.





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.





15


Our
      quarterly financial results are frequently dependent upon the timing and size
      of
      customer orders, because larger orders have at times accounted for a meaningful
      portion of quarterly earnings in particular quarters. 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 one quarter may not be realized until a subsequent
      quarter.





Our
      products and services must continually be updated to comply with applicable
      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 those laws, regulations, and standards. Laws,
      regulations, and standards, and the interpretations and applications of those
      laws, regulations, and standards frequently change. Accordingly, we expect
      to
      continue to incur costs associated with modifying our products and services
      to
      become and remain compliant, and it is difficult to reliably predict the
      magnitude of those costs.




The
      foregoing 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
      our Annual Report on Form 10-K for the Fiscal Year ended June 30, 2007.





Overview





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





(1)
      Hotel
      information systems, which consist of software encompassing property management
      systems, sales and catering systems, central reservation systems, and customer
      information systems. We have provided hotel information systems to more than
      20,000 hotels worldwide.





(2)
      Restaurant information systems, which consist of hardware and software for
      point-of-sale and operational applications, a suite of back office applications,
      including inventory, labor, and financial management, and certain centrally
      hosted enterprise applications. We have installed over 200,000 systems in table
      and quick service restaurants, hotels, motels, casinos, leisure and
      entertainment, and retail operations in more than 140 countries and on all
      seven
      continents.





(3)
      Specialty retail information systems, which consist of software encompassing
      point-of-sale, loss prevention, business analytics, customer gift cards, and
      enterprise applications. We have provided retail information systems to more
      than 50,000 specialty retail stores worldwide.





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, customized software
      development, application software support, credit card software support, help
      desk, systems configuration, network support, consulting and software hosting.
      We distribute our products and services directly and through our district and
      subsidiary offices, as well as through a network of independent dealers and
      distributors.





The
      markets in which we operate are highly competitive. We compete on various bases,
      including product functionality, service capabilities, price and geography.
      There are at least 20 significant competitors worldwide that offer some form
      of
      sophisticated restaurant point-of-sale system, over 15 significant hotel systems
      competitors and over 10 significant retail systems competitors. We believe
      that
      our competitive strengths include our established global distribution and
      service network, our ability to offer a broad array of hardware, software and
      service products to the hospitality and retail industry and our focus on
      providing specialized information systems solutions.





16


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





Results
      of Operations





All
      references to share data in this Item 2 have been retroactively adjusted to
      reflect the two-for-one stock split effected on February 5, 2008. See Note
      15,
“Subsequent Events” in the accompanying notes to the condensed consolidated
      financial statements.





***Revenue:***





*Three
      Months Ended December 31, 2007:*





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)
            
            2007
            
            2006
            
            2007
            
            2006
            
            2007
            
            2006Hardware
            
            $
            33,436
            
            $
            28,522
            
            $
            33,758
            
            $
            26,938
            
            $
            67,194
            
            $
            55,460Software
            
            
            17,481
            
            
            12,138
            
            
            27,036
            
            
            20,614
            
            
            44,517
            
            
            32,752Service
            
            
            55,036
            
            
            46,434
            
            
            77,205
            
            
            55,229
            
            
            132,241
            
            
            101,663$
            105,953
            
            $
            87,094
            
            $
            137,999
            
            $
            102,781
            
            $
            243,952
            
            $
            189,875





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





Three
                Months Ended
              December
                31,2007
            
            2006Hardware
            
            
            27.5
            %
            
            29.2
            %Software
            
            
            18.3
            %
            
            17.3
            %Service
            
            
            54.2
            %
            
            53.5
            %100.0
            %
            
            100.0
            %





For
      the
      three months ended December 31, 2007, total revenue was approximately $244.0
      million, an increase of approximately $54.1 million, or 28.5% compared to the
      same period last year, of which approximately $12.1 million was a result of
      favorable foreign currency exchange rate fluctuation, mainly between the Euro
      and the U.S. dollar. The increase in total revenue is primarily due to an
      increase in service revenue. The increase in our service revenue primarily
      resulted from expansion of our customer base and increases in the volume of
      our
      support services that resulted from increased recurring support revenue from
      existing customers. The increase in recurring support revenue contributed 49.9%
      and the increase in installation revenue contributed 32.0% of the service
      revenue increase. The increase in hardware revenue reflects an overall sales
      volume increase. We released Workstation 5, our latest point of sale hardware,
      in October 2007.





The
      International segment sales for the three months ended December 31, 2007
      increased approximately $35.2 million as a result of the following:





·
            An
                approximately $22.0 million or 39.8% increase in services
                revenue;


·
            An
                approximately $6.8 million or 25.3% increase in hardware sales;
                and


·
            An
                approximately $6.4 million or 31.2% increase in software sales.





17


The
      above
      increases were due to continued expansion of our customer base coupled with
      increased recurring support revenue from existing customers, approximately
      $12.1
      million in additional revenue generated from favorable foreign currency exchange
      rate fluctuation, mainly between Euro and U.S. dollar and additional revenue
      generated from various acquisitions that were completed after December 31,
      2006.





U.S.
      segment sales increased approximately $18.9 million for the three months ended
      December 31, 2007 compared to the same period last year. The increase was
      primarily the result of an increase in service revenues from expansion of our
      customer base coupled with recurring support revenue from existing
      customers.





*Six
      Months Ended December 31, 2007:*





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)
            
            2007
            
            2006
            
            2007
            
            2006
            
            2007
            
            2006Hardware
            
            $
            66,479
            
            $
            56,997
            
            $
            65,616
            
            $
            52,606
            
            $
            132,095
            
            $
            109,603Software
            
            
            29,658
            
            
            23,207
            
            
            45,710
            
            
            37,301
            
            
            75,368
            
            
            60,508Service
            
            
            106,453
            
            
            89,465
            
            
            146,518
            
            
            104,001
            
            
            252,971
            
            
            193,466$
            202,590
            
            $
            169,669
            
            $
            257,844
            
            $
            193,908
            
            $
            460,434
            
            $
            363,577





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





Six
                Months Ended
              December
                31,2007
            
            2006Hardware
            
            
            28.7%
            
            
            30.2%Software
            
            
            16.4%
            
            
            16.6%Service
            
            
            54.9%
            
            
            53.2%100.0%
            
            
            100.0%





For
      the
      six months ended December 31, 2007, total revenue was approximately $460.4
      million, an increase of approximately $96.9 million, or 26.6% compared to the
      same period last year, of which approximately $20.7 million was a result of
      favorable foreign currency exchange rate fluctuation, mainly between the Euro
      and the U.S. dollar. The increase in total revenue is primarily due to increases
      in service and hardware revenues. The increase in our services revenue primarily
      resulted from expansion of our customer base and increases in the volume of
      our
      support services that resulted from increased recurring support revenue from
      existing customers. The increase in recurring support revenue contributed 53.7%
      and the increase in installation revenue contributed 28.8% of the service
      revenue increase. The increase in hardware revenue reflects an overall sales
      volume increase. As stated above, we released Workstation 5, our latest point
      of
      sale hardware, in October 2007.





The
      International segment sales for the six months ended December 31, 2007 increased
      approximately $63.9 million as a result of the following:





·
            An
                approximately $42.5 million or 40.9% increase in services
                revenue;


·
            An
                approximately $13.0 million or 24.7% increase in hardware sales;
                and


·
            An
                approximately $8.4 million or 22.5% increase in software sales.





The
      above
      increases were due to continued expansion of our customer base coupled with
      increased recurring support revenue from existing customers, approximately
      $20.7
      million in additional revenue generated from favorable foreign currency exchange
      rate fluctuation, mainly between Euro and U.S. dollar and additional revenue
      generated from various acquisitions that were completed after December 31,
      2006.





U.S.
      segment sales increased approximately $32.9 million for the six months ended
      December 31, 2007 compared to the same period last year. The increase was
      primarily the result of an increase in service revenues from expansion of our
      customer base coupled with recurring support revenue from existing
      customers.





18


***Cost
      of Sales:***





*Three
      Months Ended December 31, 2007:*





An
      analysis of the cost of sales is as follows:





Three
                Months Ended December 31,2007
            
            2006(in
                thousands)
            
            Cost
                of
              Sales
            
            %
                of
              Related
              Revenue
            
            Costs
                of
              Sales
            
            %
                of
              Related
              RevenueHardware
            
            $
            44,284
            
            
            65.9%
            
            $
            36,270
            
            
            65.4%Software
            
            
            9,515
            
            
            21.4%
            
            
            6,635
            
            
            20.3%Service
            
            
            63,591
            
            
            48.1%
            
            
            48,116
            
            
            47.3%$
            117,390
            
            
            48.1%
            
            $
            91,021
            
            
            47.9%





For
      the
      three months ended December 31, 2007, cost of sales as a percent of revenue
      were
      48.1%, an increase of 0.2% compared to the same period last year. Hardware
      cost
      of sales as a percent of related revenue increased 0.5% compared to the same
      period last year primarily as a result of an increase in freight costs partially
      offset by a change in sales product mix. The sale of Workstation 4 and
      Workstation 5 (released in October 2007) generate higher margin than the third
      party hardware sales.





Software
      cost of sales as a percent of related revenue increased approximately 1.1%
      compared to the same period last year. The increase was primarily as a result
      of
      a change in sales product mix. Although the revenue from OPERA suite software
      increased approximately 7.7% compared to the same period last year, it
      represented a lower percentage of total software revenue. Because the OPERA
      suite products generate much higher margins than the third party software that
      we resell, this product mix change had the impact of increasing the overall
      software cost of sales as a percent of related revenue. Service costs as a
      percent of related revenue increased approximately 0.8% compared to the same
      period last year primarily due to an increase in overall service labor costs.





*Six
      Months Ended December 31, 2007:*





An
      analysis of the cost of sales is as follows:





Six
                Months Ended December 31,2007
            
            2006(in
                thousands)
            
            Cost
                of
              Sales
            
            %
                of
              Related
              Revenue
            
            Costs
                of
              Sales
            
            %
                of
              Related
              RevenueHardware
            
            $
            84,223
            
            
            63.8%
            
            $
            70,236
            
            
            64.1%Software
            
            
            18,024
            
            
            23.9%
            
            
            13,996
            
            
            23.1%Service
            
            
            118,384
            
            
            46.8%
            
            
            91,822
            
            
            47.5%$
            220,631
            
            
            47.9%
            
            $
            176,054
            
            
            48.4%





For
      the
      six months ended December 31, 2007, cost of sales as a percent of revenue was
      47.9%, a decrease of 0.5% compared to the same period last year. Hardware cost
      of sales as a percent of related revenue decreased 0.3% compared to the same
      period last year. The decrease is primarily as a result of a favorable change
      in
      product mix, combined with lower cost of sales for third party hardware compared
      to the same period last year. These decreases to cost of sales as a percent
      of
      revenue were partially offset by an increase in freight costs.





Software
      cost of sales as a percent of related revenue increased approximately 0.8%
      compared to the same period last year. The increase was primarily as a result
      of
      a change in sales product mix. Although the revenue from OPERA suite software
      increased approximately 7.7% compared to the same period last year, it
      represented a lower percentage of total software revenue. Because the OPERA
      suite products generate much higher margins than the third party software that
      we resell, this product mix change had the impact of increasing the overall
      software cost of sales as a percent of related revenue. Service costs as a
      percent of related revenue decreased approximately 0.7% compared to the same
      period last year primarily due to a decrease in maintenance service part costs.





19


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





SG&A
      expenses, as a percentage of revenue, for the three months ended December 31,
      2007, were 32.7%, a decrease of 0.2% compared to the same period last year.
      SG&A expenses as a percentage of revenue for the six months ended December
      31, 2007, were 32.7%, a decrease of 0.5% compared to the same period last year.
      These decreases are primarily due to our ability to leverage our costs with
      the
      increase in total revenue, partially offset by increases in non-cash share-based
      compensation expenses of approximately $3.2 million and $4.0 million recorded
      as
      a component of SG&A expenses for the three and six months ended December 31,
      2007, respectively, compared to the same periods last year. The non-cash
      share-based compensation expenses include a one-time charge of approximately
      $3.2 million resulting from the grant of options to our Chairman, President,
      and
      CEO, A.L. Giannopoulos, during the three months ended December 31, 2007. See
      “Share-Based Compensation Expense” below for further discussion.





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





R&D
      expenses consist primarily of labor costs less capitalized software development
      costs. Non-cash share-based compensation expenses allocated to R&D were not
      capitalized as software development costs during the three and six months ended
      December 31, 2007 and 2006 because no stock options were granted to employees
      whose labor costs were capitalized as software development costs. An analysis
      of
      R&D activities is as follows:





Three
                Months Ended
              December
                31,
            
            Six
                Months Ended
              December
                31,(in
                thousands)
            
            2007
            
            2006
            
            2007
            
            2006Total
                R&D incurred
            
            $
            10,424
            
            $
            8,411
            
            $
            20,451
            
            $
            15,749Capitalized
                software development costs
            
            
            (748
            )
            
            (436
            )
            
            (1,359
            )
            
            (858
            )Total
                R&D expenses
            
            $
            9,676
            
            $
            7,975
            
            $
            19,092
            
            $
            14,891%
                of Revenue
            
            
            4.0%
            
            
            4.2%
            
            
            4.1%
            
            
            4.1%





The
      increases in total capitalized software development costs for the three and
      six
      months ended December 31, 2007 are primarily due to additional R&D incurred
      for our retail software products. Total R&D incurred includes approximately
      $0.3 million and approximately $0.1 million for the non-cash share-based
      compensation expense allocated to R&D for the three months ended December
      31, 2007 and December 31, 2006, respectively and approximately $0.6 million
      and
      approximately $0.2 million for the six months ended December 31, 2007 and
      December 31, 2006, respectively.





***Depreciation
      and Amortization Expenses:***





Depreciation
      and amortization expenses for the three months ended December 31, 2007 increased
      approximately $0.3 million to approximately $3.6 million compared to the same
      period last year. Depreciation and amortization expenses for the six months
      ended December 31, 2007 increased approximately $1.3 million to approximately
      $7.5 million compared to the same period last year. The increases are primarily
      due to additional depreciation expenses on capitalized software development
      costs since December 31, 2006 and due to 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 forfeitures, are recognized ratably
      over the requisite service period of options in the consolidated statements
      of
      operations. In addition, non-cash share-based compensation expense is recognized
      for the non-vested portion of awards that were granted before the effective
      date
      of SFAS No. 123(R) as those options become vested.





20


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





Three
                Months Ended
              December
                31,
            
            Six
                Months Ended
              December
                31,(in
                thousands)
            
            2007
            
            2006
            
            2007
            
            2006SG&A
            
            $
            5,730
            
            $
            2,578
            
            $
            9,271
            
            $
            5,270R&D
            
            
            253
            
            
            117
            
            
            556
            
            
            240Total
                non-cash share-based compensation expense
            
            
            5,983
            
            
            2,695
            
            
            9,827
            
            
            5,510Income
                tax benefit
            
            
            (1,673
            )
            
            (545
            )
            
            (2,513
            )
            
            (1,115
            )Total
                non-cash share-based compensation expense, net of tax
                benefit
            
            $
            4,310
            
            $
            2,150
            
            $
            7,314
            
            $
            4,395Impact
                on diluted net income per share
            
            $
            0.05
            
            $
            0.02
            
            $
            0.09
            
            $
            0.06





The
      non-cash share-based compensation expenses for the three and six months ended
      December 31, 2007 include a one-time charge of approximately $3.2 million
      (approximately $2.0 million net of tax benefits or $0.02 diluted earnings per
      share) resulting from the grant of options to our Chairman, President, and
      CEO,
      A.L. Giannopoulos, during the period. In accordance with the terms of the
      Company’s option plan, any options that he holds at the time of his retirement
      that have not yet vested will vest immediately upon his retirement, as he is
      over the retirement age of 62. Although Mr. Giannopoulos has not retired, we
      expensed 100% of share-based payment charge related to his option grant during
      the three months ended December 31, 2007, because he was over the age of 62
      at
      the time he received the options.




***Income
      from Operations:***





Income
      from operations for the three months ended December 31, 2007 was approximately
      $33.4 million, an increase of approximately $8.3 million or 33.1%, compared
      to
      the same period last year. Income from operations for the six months ended
      December 31, 2007 was approximately $62.5 million, an increase of approximately
      $16.7 million or 36.6%, compared to the same period last year. The increase
      for
      the three months ended December 31, 2007 was primarily due to an increase in
      revenue, a decrease in operating expenses as a percent of revenue and an
      increase due to favorable foreign currency exchange rate fluctuation (mainly
      between Euro and U.S. dollar), partially offset by an increase of approximately
      $3.3 million in non-cash share-based compensation expense compared to the same
      period last year. The increase for the six months ended December 31, 2007 was
      primarily due to an increase in revenue, higher margins and decreases in
      operating expenses as a percent of revenue, partially offset by an increase
      of
      approximately $4.3 million in non-cash share-based compensation expense compared
      to the same period last year.





***Non-operating
      Income:***





Net
      non-operating income for the three months ended December 31, 2007, was
      approximately $3.9 million, an increase of approximately $1.5 million compared
      to the same period last year. Net non-operating income for the six months ended
      December 31, 2007 was approximately $7.2 million, an increase of approximately
      $2.5 million compared to the same period last year. The increases were primarily
      due to increases in interest income resulting from overall higher cash and
      cash
      equivalents balances and short term investment balances.





***Income
      Tax Provisions:***





The
      effective tax rates for the three months ended December 31, 2007 and 2006 were
      33.9% and 33.0%, respectively. The effective tax rates for the six months ended
      December 31, 2007 and 2006 were 33.7% and 33.2%, respectively. The effective
      tax
      rates for the three and six months ended December 31, 2007 were less than the
      35.0% U.S. statutory federal income tax rate mainly due to the increased
      proportion 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.  These benefits were partially offset by the
      non-deductible nature of certain non-cash share-based compensation items, other
      non-deductible compensation items, foreign withholding taxes and enacted tax
      rate changes in foreign jurisdictions and the recognition of certain discrete
      items in the periods.




21


Based
      on
      currently available information, we estimate that the fiscal year 2008 effective
      tax rate will be approximately 33.0%.  We believe that due to changes in
      the mix of earnings among jurisdictions, the fluctuation of earnings, and the
      impact of certain discrete items recognized 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.





Effective
      July 1, 2007, we adopted the provisions of FASB Interpretation No. 48,
“Accounting for Uncertainty in Income Taxes, an Interpretation of FASB Statement
      No. 109” (“FIN 48”). FIN 48 clarifies the accounting for income taxes by
      prescribing a minimum recognition threshold that a tax position is required
      to
      meet before being recognized in the financial statements.  FIN 48 also
      provides guidance on derecognition, measurement, classification, interest and
      penalties, accounting in interim periods, disclosure and transition. The
      cumulative effect of adopting FIN 48 of approximately $2.6 million, including
      interest and penalties, has been recorded as a reduction to retained earnings
      and an increase in net income taxes payable. As a result, we had approximately
      $10.9 million of unrecognized income tax
      benefits as of July 1, 2007, of which approximately $1.9 million represented
      accrual for interest and penalties. These amounts have been recorded
      as non-current since we do not anticipate to make a payment within 12 months of
      the
      balance sheet date. If
      recognized, all of the unrecognized income tax benefits would be recognized
      as a
      reduction of income tax expense, impacting the effective income tax rate. During
      the three months and six months ended December 31, 2007, there has been no
      significant change in the unrecognized income tax benefits. We have reviewed
      our
      uncertain income tax positions in accordance with FIN 48, and currently we
      are
      not able to reasonably estimate material changes in the unrecognized income
      tax
      benefits and the impact it would have on our consolidated financial position,
      results of operations and cash flows in the next twelve months.





We
      historically classified interest and penalties related to unrecognized income
      tax benefits as a component of income tax expense. We are maintaining this
      practice following our adoption of FIN 48.





In
      the
      ordinary course of business, transactions occur for which the ultimate tax
      outcome may be uncertain. In addition, tax authorities periodically audit our
      income tax returns. These audits include examination of our significant tax
      filing positions, including the timing and amounts of deductions and the
      allocation of income and expenses among tax jurisdictions. We are currently
      under audits in certain of our major taxing jurisdictions, with open tax years
      beginning in fiscal year 1999. Currently, we are not able to reasonably estimate
      the completion date of these ongoing audits. Our major taxing jurisdictions
      include Australia, Ireland, Germany, Singapore, the United Kingdom and the
      United States.





**Recent
      accounting pronouncements**





SFAS
      141(R)





In
      December 2007, the FASB issued SFAS No. 141 (Revised), “Business
      Combinations” (“SFAS 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 acquiree. SFAS 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 141(R) is
      effective for business combinations for which the acquisition dates are on
      or
      after the beginning of the first annual reporting period beginning on or after
      December 15, 2008. We
      will
      not be able to determine the impact of the adoption of SFAS 141(R) on our
      consolidated financial position, results of operations and cash flows until
      the
      quarter in which we complete an acquisition for which the acquisition date
      will
      be on or after the effective date of SFAS 141(R).





SFAS
      160





In
      December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in
      Consolidated Financial Statements — an Amendment of ARB 51”, (“SFAS 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
      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 be initially measured at
      fair value. SFAS 160 is effective for business combinations for which the
      acquisition dates are on or after the beginning of the first annual reporting
      period beginning on or after December 15, 2008. We
      will
      not be able to determine the impact of the adoption of SFAS 160 on our
      consolidated financial position, results of operations and cash flows until
      the
      quarter in which we complete an acquisition for which the acquisition date
      will
      be on or after the effective date of SFAS 160.





22


**Critical
      accounting policies**





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. Actual results may
      differ from these estimates under different assumptions or
      conditions.





We
      believe the following are our critical accounting policies 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


·
            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,
      2007 in Item 7, “Management’s Discussion and Analysis of Financial Condition and
      Results of Operations,” under the heading “Critical Accounting Policies and
      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)
            
            2007
            
            2006Net
                cash provided by (used in):Operating
                activities
            
            $
            66,154
            
            $
            27,314Investing
                activities
            
            
            6,489
            
            
            (12,373
            )Financing
                activities
            
            
            263
            
            
            33,353





***Operating
      activities:***


Net
      cash
      provided by operating activities for the six months ended December 31, 2007
      increased approximately $38.8 million compared to the six months ended December
      31, 2006 due primarily to an approximately $12.3 million increase in net income
      and an increase in cash provided by improved accounts receivables
      collection.





***Investing
      activities:***


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. Additionally,
      approximately $8.5 million was used to purchase property, plant and equipment
      and internally develop software to be licensed to others.





23


Net
      cash
      used in investing activities for the six months ended December 31, 2006 was
      approximately $12.4 million, including approximately $7.1 million to purchase
      property, plant, and equipment and internally developed software to be licensed
      to others. **** We
      also
      used approximately $5.5 million for acquisitions, of which approximately $4.7
      million was for two international acquisitions and approximately $0.8 million
      for a domestic acquisition. We did not invest in auction rate securities during
      the six months ended December 31, 2006.





***Financing
      activities:***


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.





Net
      cash
      provided by financing activities for the six months ended December 31, 2006
      was
      approximately $33.4 million, consisting primarily of proceeds from stock option
      exercises of approximately $24.2 million and realized tax benefits from stock
      option exercises of approximately $12.7 million, partially offset by our
      repurchases of stock of approximately $2.4 million.





At
      December 31, 2007, all cash and
      cash
      equivalents were being retained for the operation, expansion of the business
      and
      the repurchase of our common stock.





**Capital
      Resources**





At
      December 31, 2007, we had approximately $327.8 million in cash and cash
      equivalents, in addition to approximately $59.8 million invested in auction
      rate
      securities, which are classified as short-term investments in the accompanying
      condensed consolidated balance sheets. During December 2007, we started the
      process of selling off all of the auction rate securities. Subsequent to
      December 31, 2007, we completed the sale of all of the auction rate securities
      and received 100% of the recorded values from all sales. That process,
      therefore, confirmed the collectability and the creditworthiness of auction
      rate
      securities we had invested in. In January 2008, we started to re-invest in
      auction rate securities.




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





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





As
      of
      December 31, 2007, we had approximately $2.5 million outstanding on the above
      lines of credit and had approximately $62.5 million available for future
      borrowings. The total outstanding balance consisted of the
      following:


·  JPY
      (Japanese Yen) - 165.0 million (approximately $1.5 million at the December
      31,
      2007 exchange rate);


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


·  NZD
      (New
      Zealand Dollar) - 0.5 million (approximately $0.4 million at the December 31,
      2007 exchange rate.)





24


We
      also
      have a credit relationship with a European bank in the amount of EUR 1.0 million
      (approximately $1.5 million at the December 31, 2007 exchange rate.) Under
      the
      terms of this facility, we may borrow in the form of either a line of credit
      or
      term debt. As of December 31, 2007, there were no balances outstanding on his
      credit facility, but approximately EUR 0.2 million (approximately $0.3 million
      at the December 31, 2007 exchange rate) of the credit facility has been utilized
      for guarantees.





As
      of
      December 31, 2007, we had approximately $63.7 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, 2007
      was 4.4%.





We
      believe that our cash and cash equivalents, short-term investments, cash
      generated from operations and our available lines of credit will be sufficient
      to provide our working capital needs for the foreseeable future. Nevertheless,
      if we need to raise additional funds, we believe we will be able to raise the
      necessary amounts either by entering into additional financing agreements or
      through the issuance of our common stock. We currently anticipate that our
      property, plant, and equipment expenditures for fiscal year 2008 will be
      approximately $15 million.





25




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





The
      Company recorded foreign sales, including exports from the United States, of
      approximately $257.8 million and approximately $193.9 million **** during
      the six months ended December 31, 2007 and December 31, 2006, respectively.





The
      Company’s significant international business and presence expose the Company to
      certain market risks, such as currency fluctuation, interest rate changes,
      and
      political risks. With respect to currency risk, the Company transacts business
      in different currencies through its foreign subsidiaries. The fluctuation of
      currencies affects 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, 2007 and December 31, 2006, the Company transacted
      business in 37 currencies and 32 currencies, respectively.





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




%
                of Reported RevenueThree
                Months Ended December 31,
            
            Six
                Months Ended
              December
                31,
            
            Exchange
                Rates
              December
                31,Revenues
                by currency (1):
            
            2007
            
            2006
            
            2007
            
            2006
            
            2007
            
            2006United
                States Dollar
            
            
            49%
            
            
            52%
            
            
            50%
            
            
            53%
            
            
            1.0000
            
            
            1.0000European
                Euro
            
            
            21%
            
            
            23%
            
            
            21%
            
            
            22%
            
            
            1.4598
            
            
            1.3201British
                Pound Sterling
            
            
            10%
            
            
            6%
            
            
            10%
            
            
            7%
            
            
            1.9870
            
            
            1.9580Canadian
                Dollar
            
            
            1%
            
            
            1%
            
            
            2%
            
            
            1%
            
            
            1.0063
            
            
            0.8576Australian
                Dollar
            
            
            3%
            
            
            3%
            
            
            2%
            
            
            3%
            
            
            0.8765
            
            
            0.7895Mexican
                Peso
            
            
            2%
            
            
            2%
            
            
            2%
            
            
            2%
            
            
            0.0916
            
            
            0.0926All
                Other Currencies (2), (3)
            
            
            14%
            
            
            13%
            
            
            13%
            
            
            12%
            
            
            0.2718
            
            
            0.1697Total
            
            
            100%
            
            
            100%
            
            
            100
            
            
            100%




(1)
                Calculated using weighted average exchange rates for the
                period.(2)
                The “% of Reported Revenue” for “All Other Currencies” is calculated based
                on the weighted average three and 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 in relation to the U.S. dollar
      in
      the six months ended December 31, 2007, would have affected total revenues
      by
      approximately $9.7 million, or 2.1%. 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 the Company’s net income.





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





26


The
      Company’s committed lines of credit bear interest at a floating rate, which exposes the
      Company to interest rate risks. The Company manages its exposure to this risk
      by
      minimizing, to the extent feasible, overall borrowing and monitoring available
      financing alternatives. The Company’s interest rate risk has not changed
      materially from June 30, 2007, and the Company does not currently foresee any
      significant changes in exposure or in how it manages this exposure in the near
      future. For borrowings in U.S. currency, the Company’s lines of credit 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 the Company’s consolidated earnings before interest, taxes,
      depreciation and amortization for the immediately preceding four calendar
      quarters. At December 31, 2007, the Company had total borrowings of
      approximately $2.5 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, 2007. The Company’s
      exposure to fluctuations in interest rates will be affected by the outstanding
      amount under the line of credit, the applicable interest rate, and any
      outstanding instruments to hedge exposure to interest rate risk. As the
      Company’s total borrowing as of December 31, 2007 was approximately $2.5
      million, a 1% change in interest rate would have resulted in an immaterial
      impact on the Company’s consolidated financial position, results of operations
      and cash flows.





To
      minimize the Company’s exposure to credit risk associated with financial
      instruments, the Company places its temporary cash investments with
      high-credit-quality institutions, generally with bond rating of “A” and above.





27


**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.




28


**PART
      II - OTHER INFORMATION**





**ITEM
      1. LEGAL PROCEEDINGS**





In
      its
      Annual Report on Form 10-K for the fiscal year ended June 30, 2007, the Company
      reported on 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 customers of the
      Company. The Company is currently providing indemnity coverage to five of the
      defendants who are customers of the Company in accordance with applicable
      provisions of the contracts between the Company and those customers. Through
      December 31, 2007, the Company’s legal fees with respect to indemnity coverage
      for this matter have not been material. During the three month period ended
      December 31, 2007, the Court ordered the case stayed pending the completion
      of
      the United States Patent and Trademark Office’s reexamination of the patent that
      is the subject of the lawsuit.





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 seeks monetary damages in excess of $12 million, and also
      injunctive and other equitable relief. Our response to the complaint is not
      due
      until February 15, 2008. Based on currently available information, and analysis
      by counsel, we do not believe that our relationships and agreements with
      Merchant Link and Paymentech are anti-competitive or otherwise violate either
      federal antitrust law or applicable New Jersey law.





We
      are
      and have been involved in legal proceedings arising in the normal course of
      business, and, subject to the matters referenced above, we are 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 our results of operations or financial position or cash flows.





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





(Note:
      for purposes of this Item 4, the shareholders vote results were not
      retroactively adjusted to reflect the stock split).





On
      November 16, 2007, 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
                Withheld**A.L.
                Giannopoulos
            
            
            38,259,125
            
            
            1,166,608Louis
                M. Brown, Jr.
            
            
            37,548,619
            
            
            1,877,114B.
                Gary Dando
            
            
            39,259,757
            
            
            165,976John
                G. Puente
            
            
            38,791,122
            
            
            634,611Dwight
                S. Taylor
            
            
            35,036,413
            
            
            4,389,320William
                S. Watson
            
            
            39,113,652
            
            
            312,081





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, 2008 by the following vote:





For
            
            
            38,961,348Against
            
            
            444,025Abstain
            
            
            20,360





29


3. Amendment
      to the Articles of Incorporation - The stockholders approved an amendment to
      increase the
      aggregate number of shares of Common Stock that the Company is authorized to
      issue from 50,000,000 to 120,000,000 shares by the
      following vote:





For
            
            
            34,440,937Against
            
            
            4,961,620Abstain
            
            
            23,176





4. 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 0.6 million shares by the following vote.





(Note:  for
      purposes of this Item 4, the foregoing number was not retroactively adjusted
      to
      reflect the stock split; when the stock split is completed, the number of shares
      under the Option Plan will be increased by 1.2 million as a result of this
      amendment).





For
            
            
            29,721,007Against
            
            
            6,498,647Abstain
            
            
            69,486Non-vote
            
            
            3,136,593








**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 are incorporated herein by reference
                to
                Exhibit 3(i) to the Quarterly Report on Form 10-Q of the Company
                for the
                period ended December 31, 1997.


3(i)(b)
            
            Amendment
                to Articles of Incorporation are incorporated herein by reference
                to
                Exhibit 3(i) to the Quarterly Report on Form 10-Q of the Company
                for the
                period ended December 31, 1998.


3(i)(c)
            
            Amendment
                to Articles of Incorporation are incorporated herein by reference
                to
                Exhibit 3(i) to the Form 8-K filed on November 16,
                2007.


3(ii)
            
            By-laws
                of the Company, as amended, are incorporated herein by reference
                to
                Exhibit 3(ii) to the Form 8-K filed on October 17,
                2007.


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).





30


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 6, 2008
            /s/
            Gary
                C. KaufmanGary
                C. KaufmanExecutive
                Vice President,Finance
                and Administration/Chief
                Financial OfficerDate:
                February 6, 2008
            /s/
            Cynthia
                A. RussoCynthia
                A. RussoSenior
                Vice President andCorporate
                Controller








31