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SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



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FORM 10-K



(Mark One)

|x | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ------------------------------------------------------------------------------------



For the fiscal year ended November 30, 2005



| ̈ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ----------------------------------------------------------------------------------------



For the transition period from
 to



Commission File Number: 000-26579



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TIBCO SOFTWARE INC.

(Exact name of registrant as specified in its charter)



|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|Delaware                                                       |  | 77-0449727                          
|(State or other jurisdiction of incorporation or organization) |  | (I.R.S. Employer Identification No.)



3303 Hillview
Avenue, Palo Alto, CA 94304

(Address of principal executive offices) (Zip Code)



(650) 846-1000

(Registrants telephone number, including area code)



Securities registered pursuant to Section 12(b) of the Act:



None



Securities registered pursuant to Section 12(g) of the Act:



Common Stock, $0.001 par value per share

(Title of Class)



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Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities
Act.    Yes  x    No ̈



Indicate by check mark if the registrant is not required to file reports
pursuant to Section 13 or Section 15(d) of the Act.    Yes ̈No  x



Indicate by check mark whether
the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days.     Yes  x    No ̈



Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrants knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.    x





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. (Check one):



Large accelerated filer  x                        Accelerated filer ̈Non-accelerated filer ̈



Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes ̈No  x



The aggregate market value of the voting stock held by non-affiliates of the registrant (based upon the closing sale price of such shares on the Nasdaq
National Market on May 29, 2005) was approximately $1,078,725,456. Shares of common stock held by each executive officer and director and by each entity that owns 5% or more of the outstanding common stock have been excluded in that such
persons may be deemed to be affiliates. This determination of affiliate status is not necessarily a conclusive determination for other purposes.



As of February 1, 2006, there were 211,136,985 shares of the registrants common stock outstanding.



DOCUMENTS INCORPORATED BY REFERENCE



Portions of the registrants Proxy Statement for the 2006 Annual
Meeting of Stockholders to be held on April 6, 2006 are incorporated by reference into Part III of this Annual Report on Form 10-K to the extent stated herein.



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TIBCO SOFTWARE INC. FORM 10-K

For the Fiscal Year Ended November 30, 2005



TABLE OF CONTENTS



|         |  |                                                                                                              |  |     
|-------- |  | ------------------------------------------------------------------------------------------------------------ |  | ----
|         |  |                                                                                                              |  | Page
|PART I   |  |                                                                                                             
|         |  |                                                                                                             
|ITEM 1.  |  | BUSINESS                                                                                                     |  | 3   
|         |  |                                                                                                             
|ITEM 1A. |  | RISK FACTORS                                                                                                 |  | 8   
|         |  |                                                                                                             
|ITEM 2.  |  | PROPERTIES                                                                                                   |  | 17  
|         |  |                                                                                                             
|ITEM 3.  |  | LEGAL PROCEEDINGS                                                                                            |  | 17  
|         | 
|PART II  |  |                                                                                                             
|         |  |                                                                                                             
|ITEM 5.  |  | MARKET FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES |  | 18  
|         |  |                                                                                                             
|ITEM 6.  |  | SELECTED FINANCIAL DATA                                                                                      |  | 20  
|         |  |                                                                                                             
|ITEM 7.  |  | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS                        |  | 21  
|         |  |                                                                                                             
|ITEM 7A. |  | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                                                   |  | 41  
|         |  |                                                                                                             
|ITEM 8.  |  | FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA                                                                  |  | 41  
|         |  |                                                                                                             
|ITEM 9A. |  | CONTROLS AND PROCEDURES                                                                                      |  | 42  
|         | 
|PART III |  |                                                                                                             
|         |  |                                                                                                             
|ITEM 10. |  | DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT                                                           |  | 43  
|         |  |                                                                                                             
|ITEM 11. |  | EXECUTIVE COMPENSATION                                                                                       |  | 44  
|         |  |                                                                                                             
|ITEM 12. |  | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT                                               |  | 44  
|         |  |                                                                                                             
|ITEM 13. |  | CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS                                                               |  | 45  
|         |  |                                                                                                             
|ITEM 14. |  | PRINCIPAL ACCOUNTING FEES AND SERVICES                                                                       |  | 45  
|         | 
|PART IV  |  |                                                                                                             
|         |  |                                                                                                             
|ITEM 15. |  | EXHIBITS AND FINANCIAL STATEMENT SCHEDULES                                                                   |  | 45  
|         |  |                                                                                                             
|         |  | SIGNATURES                                                                                                   |  | II-1



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Forward Looking Statements



This report contains forward-looking statements within the meaning of Section 27A of the Securities Act of
1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements relate to expectations concerning matters that are not historical facts. Words such as projects, believes, anticipates,
plans, expects, intends and similar words and expressions are intended to identify forward-looking statements. These forward-looking statements include, but are not limited to, statements related to our expected
business, results of operations, future financial position, our ability to increase our revenues, the mix of our revenues between license, service and maintenance revenues, our financing plans and capital requirements, our costs of revenue, our
expenses, our potential tax benefit or liabilities, the effect of recent accounting pronouncements, our investments, debt service and principal repayment obligations, cash flows and our ability to finance operations from cash flows and similar
matters and include statements based on current expectations, estimates, forecasts and projections about the economies and markets in which we operate and our beliefs and assumptions regarding these economies and markets.



These forward-looking statements are based on current expectations and
involve known and unknown risks and uncertainties that may cause our actual results, operating performance or achievements to be materially different from those expressed or implied by the forward-looking statements. We believe that the expectations
reflected in the forward-looking statements are reasonable but we cannot assure you that those expectations will prove to be correct. Factors that could cause or contribute to such differences include but are not limited to our ability to address
new markets and complex technologies by delivering successful, new products on a timely basis, the impact of competitive products and pricing, the success of our strategic relationships, charges for restructuring and option expenses and other costs
and other risk factors detailed in this Annual Report on Form 10-K for the fiscal year ended November 30, 2005 and other periodic filings with the Securities and Exchange Commission. All forward-looking statements are expressly qualified in
their entirety by these factors and all related cautionary statements. We do not undertake any obligation to update any forward-looking statements.



Trademarks



TIBCO, TIBCO Software, the Information Bus and TIBCO BusinessFactor are the trademarks or registered trademarks of TIBCO Software Inc. in the United
States and other countries. This report also refers to the trademarks of other companies.



PART I



|ITEM 1. | BUSINESS
|------- | --------



Overview



Our suite of
business integration, process management and business optimization software solutions makes us a leading enabler of real-time business. We use the term real-time business to mean doing business in such a way that organizations can use
current information to execute their critical business processes and make smarter decisions. We provide software that enables interoperability between applications and information sources, coordinates processes that span systems and people, and
helps companies sense and respond to events and opportunities more quickly and with more certainty and control.



Our software can make corporate assets such as applications and databases more effective and valuable by tying them together with a common framework and
coordinating the interactions between them. Our products can lower IT costs by enabling companies to more quickly and easily create, manage and modify these interactions and can make companies more efficient by automating routine processes to allow
their employees to focus their efforts on managing exceptional problems and opportunities. Our products can also give managers and executives the information they need to identify and understand both the strengths and weaknesses of their business
and external factors that shape their business, along with the ability to quickly reallocate their assets or adapt their operations to fix a problem or capitalize on an opportunity.



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Our products are currently licensed by companies worldwide in diverse industries such as financial
services, telecommunications, retail, healthcare, manufacturing, energy, transportation, logistics, government and insurance. We sell our products through a direct sales force and through alliances with leading software vendors and systems
integrators.



To meet our goal of becoming the worlds
leading provider of business integration and process management software, we are providing our customers with a comprehensive suite of products and services, promoting the widespread adoption of our technology, leveraging our vertical market
expertise and pursuing strategic acquisitions to expand and strengthen our offerings. We believe we are the market leader among independent integration software companies. See Competition.



We are the successor to a portion of the business of Teknekron Software
Systems, Inc. (Teknekron). Teknekron was founded in 1985 and was acquired by Reuters Group PLC (Reuters), a global information company, in 1994. In November 1996, we were incorporated in Delaware and in January 1997, we were
established as an entity separate from Teknekron.



TIBCO Products



We offer a wide range of products that can be sold
individually to solve specific technical challenges, but the emphasis of our product development and sales efforts is to create products that interoperate seamlessly and that can be sold together as a suite to enable businesses to be more
cost-effective, agile and efficient. These products can help organizations achieve success in three areas: Service-Oriented Architecture (SOA), Business Process Management (BPM) and Business Optimization.



| |  |  | SOA:Our software enables organizations to migrate their IT infrastructure to SOA by turning information and functions into discrete and reusable components that can be
invoked from across the business and aggregated with other such services to create composite applications. This helps companies streamline the integration and orchestration of assets across technological, organizational, and geographical
boundaries. Our products give companies the flexibility to do these things using the standards or technologies that best meet their needs in specific situations (such as HTTP, e-mail, J2EE, EDI, Messaging, .Net or Web Services) without replacing
existing technologies or committing to any one technology across their enterprise. Our SOA offerings encompass our traditional messaging and integration products.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | BPM: Our software enables the automation and coordination of the assets and tasks that make up business processes. This software can coordinate the human and electronic
resources inside a business and their network of customers and partners. Our products not only automate routine tasks and exception handling, but orchestrate long-lived activities and transactions that cut across organizational and geographical
boundaries. Our software enables organizations to provide a higher level of customer satisfaction, retain customers, maximize partnerships with other businesses, and out-execute their competitors.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Business Optimization:Our software automatically routes information to appropriate recipients, lets users access up-to-date information whenever they need it, and provides
users with the ability to analyze and act on information. This helps line-level employees perform their jobs, helps managers identify and analyze problems and opportunities, and gives customers the ability to get accurate and consistent information
directly or through salespeople, service personnel or customer care representatives.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Services



Professional Services



Our professional
services offerings include a wide range of consulting services such as systems planning and design, installation and systems integration for the rapid deployment of TIBCO products. We offer our professional services with the initial deployment of
our products as well as on an ongoing basis to address the



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continuing needs of our customers. Our professional services staff is located throughout the Americas, Europe, Africa and the Pacific Rim, enabling us to
perform installations and respond to customer demands rapidly across our global customer base. Many of our professional services employees have advanced degrees, substantial TIBCO experience and industry expertise in systems architecture and design
and also have domain expertise in financial services, telecommunications, manufacturing, energy, logistics, healthcare and other industries.



We also have relationships with resellers, professional service organizations and system integrators including Accenture, Cap Gemini, Deloitte Consulting,
Atos Origin and BearingPoint, to participate in the deployment of our products to customers. These relationships help promote TIBCO products and provide additional technical expertise to enable us to provide the full range of professional services
our customers require to deploy our products.



Maintenance
and Support



We offer a suite of software support and
maintenance options that are designed to meet the needs of our diverse customer base. These support options include twenty-four hour coverage that is available seven days a week, 365 days a year, to meet the needs of our global customers. To
accomplish this level of support we have established a worldwide support organization with major support centers in Palo Alto, California; London and Swindon, England; and Woy Woy, Australia. These centers, working in conjunction with several
smaller support offices located throughout the United States and India, as well as additional support offices in Europe, the Pacific Rim and the Americas, provide seamless support using a follow-the-sun support model.



In addition to support teams around the globe, we have a Customer Support
Website that provides our customers with the ability to submit service requests, receive confirmation that a service request has been opened and to obtain current status on these requests. Additionally, the Customer Support Website provides access
to our support procedures, escalation numbers and late breaking news (LBN). LBN is used to provide updates and new information about our products. It also provides customers with information on generally known problems and suggested
solutions or workarounds that may be available.



We use TIBCO
BusinessFactor in conjunction with our Customer
Relationship Management (CRM) system to provide real-time monitoring of service requests. Through the use of our CRM system, we are able to track high severity problems and latency, allowing us to enhance our responsiveness.



Training



We provide a comprehensive and global training program for customers and
partners. Training is available at our main office in Palo Alto, California and at major training centers in Houston, Texas; Munich, Germany; and Tokyo, Japan. We also deliver training on-site at customer locations. We provide specialized training
for our professional services partners to enhance their effectiveness in integrating our products. Our Educational Services group has the capability to develop solutions to address the specific needs of individual customers and partners. Our
curriculum leads to an industry recognized technical certification in high visibility TIBCO technologies.



Sales and Marketing



Sales



We currently market our software and
services primarily through a direct sales organization complemented by indirect sales channels. Our direct sales force is located across the U.S. and throughout the Americas, Europe, Africa and the Pacific Rim and operates globally through our
foreign subsidiaries. We have established distribution and licensing relationships with several strategic hardware vendors, database providers, software and toolset developers and systems integrators. We have also developed alliances with key
solution providers to target vertical industry sectors, including energy, telecommunications and manufacturing.



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Pursuant to the terms of our license, maintenance and distribution agreement with Reuters, we are
permitted to market and sell our products, other than risk management and market data distribution products, directly and through third party resellers (other than a few specified resellers) to customers in the financial services market. Reuters may
continue to internally use and to embed our products in its solutions. The limitations on our ability to sell risk management and market data distribution products and on reselling through the specified resellers will expire in May 2008. The
distribution relationship with Reuters accounted for 5%, 7% and 12% of our total revenue in each of fiscal years 2005, 2004 and 2003 respectively.



Our revenue consists primarily of license, service and maintenance fees from our customers and distributors which were primarily attributable to sales of
our software. License fees represented approximately 46%, 55% and 53% of our total revenue in 2005, 2004 and 2003, respectively. Revenue from services and maintenance represented approximately 54%, 45% and 47% of our total revenues in 2005, 2004 and
2003, respectively.



Sales to customers outside the United
States totaled $219.9 million, representing 49% of our total revenue for the year ended November 30, 2005. For a geographic breakdown of our revenue and long-lived assets, see Note 13 to our Consolidated Financial Statements included in this
report.



Marketing



We use a mix of market research, analyst updates, seminars, direct mail,
print advertising, trade shows, speaking engagements, public relations, customer newsletters and web marketing in order to achieve our marketing goals. Our marketing department also produces collateral material for distribution to potential
customers including presentation materials, white papers, brochures and fact sheets. We also host annual user conferences for our customers and provide support to our channel partners with a variety of programs, training and product marketing
support materials.



Product Development



Reuters granted us a perpetual, royalty-free license to the Information
Bus (TIB) messaging technology as it
existed on December 31, 1996. We have concentrated our product development efforts since then on further developing messaging technology and on developing new products. We expect that most of our enhancements to existing products and new
products will be developed internally. However, we will evaluate on an ongoing basis the acquisition of externally developed technologies for integration into our product lines.



We expect that a majority of our research and development activities will focus on enhancing and extending our TIBCO
products. In fiscal year 2005, we continued our development focus on creating products that interoperate seamlessly. We expect that we will continue to commit significant resources to product development in the future. Product development costs are
recorded as research and development expenses. Our research and development expenses, including stock-based compensation, were $73.1 million, $61.1 million and $64.6 million in 2005, 2004 and 2003, respectively. To date, all product development
costs have been expensed as incurred since the time period between the achievement of technical feasibility for a product and the general availability of such product has typically been very short.



Competition



The market for our products and services is extremely competitive, continually evolving and subject to rapid change. While
we offer a comprehensive suite of integration solutions and believe we are the market leader among independent integration software companies, we compete with various providers of integration products including BEA, IBM, Microsoft, SAP and
webMethods. We believe that none of these companies has a suite of integration products as complete as ours, but BEA, IBM, Microsoft, Oracle and SAP offer products outside our segment and routinely bundle their broader set of products. We expect
additional competition from other established and emerging companies. In addition, we may face pricing pressures from our current competitors



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and new market entrants in the future. We believe that the competitive factors affecting the market for our products and services include product
functionality and features, quality of professional services offerings, performance and price, ease of product implementation, quality of customer support services, customer training and documentation, and vendor and product reputation. The relative
importance of each of these factors depends upon the specific customer environment. We believe that our products and services currently compete favorably with respect to such factors. However, we may not be able to maintain our competitive position
against current and potential competitors.



Some of our current
competitors have, and some of our potential competitors may have, longer operating histories, significantly greater financial, technical, product development and marketing resources, greater name recognition and larger customer bases than we do. Our
present or future competitors may be able to develop products comparable or superior to those we offer; adapt more quickly than we do to new technologies, evolving industry trends or customer requirements; or devote greater resources to the
development, promotion and sale of their products than we do. Accordingly, we may not be able to compete effectively in our markets, or competition may intensify and harm our business and operating results. If we are not successful in developing new
products and enhancements to our existing products or achieving customer acceptance, our gross margins may decline, and our business and operating results may suffer.



Our license agreement with Reuters does not prohibit Reuters from providing enterprise infrastructure software products and
services in competition with us. In addition, under this license agreement, we have the right to market and sell our products, other than risk management and market data distribution products, directly and through third party resellers (other than a
few specified resellers) to customers in the financial services market. The limitations on our ability to sell risk management and market data distribution products to financial services customers and to resell through the specified resellers will
expire in May 2008. Although Reuters currently does not create TIB-based products designed for general use in all markets, if Reuters were to decide to begin providing information integration products and services in our markets, we would face
additional competition for customers in these markets.



Proprietary
Technology



Our success is dependent upon our proprietary
software technology. We license the patents relating to some of the technology underlying some of our software from Reuters on a royalty-free basis. We have several pending patent applications and five issued patents, although we rely principally on
trade secret, copyright and trademark laws, and nondisclosure and other contractual agreements to protect our technology. We also believe that factors such as the technological and creative skills of our personnel, product enhancements and new
product developments are essential to establishing and maintaining a technology leadership position. We enter into confidentiality and/or license agreements with our employees, distributors and customers, and limit access to and distribution of our
software, documentation and other proprietary information. Nevertheless, the steps we have taken may fail to prevent misappropriation of our technology, and the protections we have may not prevent our competitors from developing products with
functionality or features similar to our products.



Furthermore, third parties might independently develop competing technologies that are substantially equivalent or superior to our technologies. In addition, effective patent, copyright and trade secret protection may be unavailable or
limited in certain foreign countries where we operate. If we fail to protect our proprietary technology, our business could be seriously harmed.



Although we do not believe our products infringe the proprietary rights of any third parties, third parties may nevertheless assert infringement claims
against our customers or us in the future. Furthermore, we may initiate claims or litigation against third parties for infringement of our proprietary rights or to establish the validity of our proprietary rights. Litigation, whether resolved in our
favor or not, would cause us to incur substantial costs and divert our management resources from productive tasks, which would harm our business. Parties making claims against us could secure substantial damages, as well as injunctive or other
equitable relief,



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which could effectively block our ability to sell our products in the United States or abroad. Such a judgment could seriously harm our business. If it
appears necessary or desirable, we may seek licenses to intellectual property if we believe that our technology potentially infringes on such intellectual property. We may not, however, be able to obtain such licenses on commercially reasonable
terms or at all, and the terms of any offered licenses might not be acceptable to us. The failure to obtain necessary licenses or other rights could seriously harm our business.



Employees



As of November 30, 2005, we employed 1,505 persons, including 437 in sales and marketing, 422 in research and development, 191 in finance and
administration and 455 in professional services and technical support. Of our 1,505 employees, 380 were located in Europe and Africa, 245 in the Pacific Rim and 880 in the Americas. Our success is highly dependent on our ability to attract and
retain qualified employees. Competition for employees is intense in the software industry. To date, we believe we have been successful in our efforts to recruit qualified employees, but there is no assurance that we will continue to be as successful
in the future.



Available Information



We are subject to the informational requirements of the Securities Exchange
Act of 1934. Therefore, we file periodic reports, proxy statements and other information with the Securities and Exchange Commission (SEC). Such reports, proxy statements and other information may be obtained by visiting the Public
Reference Room of the SEC at 450 Fifth Street, NW, Washington, DC 20549 or by calling the SEC at 1-800-SEC-0330. In addition, the SEC maintains an Internet site (http://www.sec.gov) that contains reports, proxy statements and other information
required that issuers file electronically.



Our principal
internet address is www.tibco.com. We make available free of charge on www.tibco.com our annual reports on Form 10-K, our quarterly reports on Form 10-Q, our current reports on Form 8-K, and amendments to those reports, as soon as reasonably
practicable after we electronically file such material with, or furnish it to, the SEC. Information contained or referenced on our website is not incorporated by reference in and does not form a part of this Annual Report on Form 10-K.



ITEM 1A.     RISK FACTORS



The following risk factors could materially and adversely affect our future operating results and could cause actual events to differ materially from those predicted in the forward-looking statements we make about
our business.



Our future revenue is unpredictable and we expect our
quarterly operating results to fluctuate, which may cause our stock price to decline.



Period-to-period comparisons of our operating results may not be a good indication of our future performance. Moreover, our operating results in some quarters have not in the past, and may not in the future, meet the
expectations of stock market analysts and investors. This has in the past and may in the future cause our stock price to decline. As a result of the evolving nature of the markets in which we compete and the size of our customer agreements, we have
difficulty accurately forecasting our revenue in any given period. In addition to the factors discussed elsewhere in this section, a number of factors may cause our revenue to fall short of our expectations, or those of stock market analysts and
investors, or cause fluctuations in our operating results, including:



| |  |  | the announcement or introduction of new or enhanced products or services by our competitors;
| | - |  | --------------------------------------------------------------------------------------------



| |  |  | the relatively long sales cycles for many of our products;
| | - |  | ----------------------------------------------------------



| |  |  | the tendency of some of our customers to wait until the end of a fiscal quarter or our fiscal year in the hope of obtaining more favorable terms;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------



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| |  |  | the timing of our new products or product enhancements or any delays in such introductions;
| | - |  | -------------------------------------------------------------------------------------------



| |  |  | the delay or deferral of customer implementations of our products;
| | - |  | ------------------------------------------------------------------



| |  |  | changes in customer budgets and decision making processes that could affect both the timing and size of any transaction;
| | - |  | ------------------------------------------------------------------------------------------------------------------------



| |  |  | our dependence on large deals, which if not closed, can greatly impact revenues for a particular quarter;
| | - |  | ---------------------------------------------------------------------------------------------------------



| |  |  | the impact of our provision of services on our recognition of license revenue;
| | - |  | ------------------------------------------------------------------------------



| |  |  | any difficulty we encounter in integrating acquired businesses, products or technologies;
| | - |  | -----------------------------------------------------------------------------------------



| |  |  | the amount and timing of operating costs and capital expenditures relating to the expansion of our operations;
| | - |  | --------------------------------------------------------------------------------------------------------------



| |  |  | the impact of employee stock-based compensation expenses on our earnings per share; and
| | - |  | ---------------------------------------------------------------------------------------



| |  |  | changes in local, national and international regulatory requirements.
| | - |  | ---------------------------------------------------------------------



In addition, while we may in future years record positive net income and/or increases in net income over prior periods, we may not show period-over-period
earnings per share growth or earnings per share growth that meets the expectations of stock market analysts or investors, as a result of the number of our shares outstanding during such periods. In such case, our stock price may decline.



Our stock price may be volatile, which could cause investors to lose all or part of
their investments in our stock or negatively impact the effectiveness of our equity incentive plans.



The stock market in general and the stock prices of technology companies in particular, have experienced volatility which has often been unrelated to the
operating performance of any particular company or companies. During fiscal year 2005, for example, our stock price fluctuated between a high of $13.50 and a low of $5.60. If market or industry-based fluctuations continue, our stock price could
decline in the future regardless of our actual operating performance and investors could lose all or part of their investments.



Increases in services revenues as a percentage of total revenues may decrease overall margins.



We have in the past realized and may continue in the future realize a higher percentage of revenues from services and
maintenance. For example, for the fiscal year ended November 30, 2005 a substantial increase in our service and maintenance revenue and a decrease in our license revenue meant approximately 54% of our total revenue for the year was derived from
service and maintenance revenue. We realize lower profit margins on our services and maintenance revenues than on our software license revenues. In addition, we may contract with certain third parties to supplement the services we provide to
customers, which generally yields lower margins than our internal services business. As a result, if services and maintenance revenues continue to increase as a percentage of total revenues or if we increase our use of third parties to provide
services, our profit margins may decrease which could impact our stock price.



We must overcome significant competition in order to succeed.



The market for our products and services is extremely competitive and subject to rapid change. We compete with various providers of enterprise application integration solutions, including webMethods. We also compete
with various providers of web services such as Microsoft, BEA, SAP and IBM. We believe that of these companies, IBM has the potential to offer the most complete competitive set of products for enterprise application integration. As a result of our
acquisition of Staffware, we now also compete with various providers of BPM solutions. In addition, some of our competitors are expanding their competitive product offerings and market position through acquisitions. For example, Sun Microsystems
acquired SeeBeyond in August 2005, potentially making Sun Microsystems a direct competitor of ours as well. We expect additional competition from



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other established and emerging companies. We also face competition for certain aspects of our product and service offerings from major systems integrators.
Further, we may face increasing competition from open source software initiatives, in which competitors provide software and intellectual property without charging license fees. If customers choose such open source products over our proprietary
software, our revenues and earnings could be adversely affected.



Many of our current and potential competitors have longer operating histories; significantly greater financial, technical, product development and marketing resources; greater name recognition and larger customer bases than we do. Our
present or future competitors may be able to develop products comparable or superior to those we offer; adapt more quickly than we do to new technologies, evolving industry trends or customer requirements; or devote greater resources to the
development, promotion and sale of their products than we do. Accordingly, we may not be able to compete effectively in our markets or competition may intensify and harm our business and operating results. If we are not successful in developing
enhancements to existing products and new products in a timely manner, achieving customer acceptance or generating higher average selling prices, our gross margins may decline, and our business and operating results may suffer.



Future changes in financial accounting standards may adversely affect our reported results
of operations.



A change in accounting standards can have
a significant effect on our reported results. New accounting pronouncements and varying interpretations of accounting pronouncements have occurred and may occur in the future. These new accounting pronouncements may adversely affect our reported
financial results.



For example, currently we calculate
employee stock-based compensation expenses using the intrinsic value method, and recorded less than $0.1 million in employee compensation expense in each of fiscal years 2005 and 2004. We provided disclosure on pro forma net income and net income
per share as if we had applied the fair value method of accounting only in the notes to our financial statements. Under Statement of Financial Accounting Standards No. 123(R), Share Based Payment (SFAS 123(R)), we will
be required, starting from our first quarter of fiscal year 2006, to calculate compensation expense related to all share-based awards and recognize the expense in our financial statements. We expect such compensation expenses to be significant, and
will cause our net income and net income per share to be significantly reduced.



Our strategy contemplates possible future acquisitions which may result in us incurring unanticipated expenses or additional debt, difficulty in integrating our operations, dilution to our stockholders and may harm our operating results.



Our success depends in part on our ability to continually
enhance and broaden our product offerings in response to changing technologies, customer demands and competitive pressures. We have in the past and may in the future, acquire complementary businesses, products or technologies. In this regard, we
have made strategic acquisitions, including the acquisition of certain assets of Velosel Corporation and ObjectStar International in 2005, and the acquisition of Staffware PLC and General Interface Corporation in 2004. We do not know if we will be
able to complete any subsequent acquisition or that we will be able to successfully integrate any acquired business, operate it profitably, or retain its key employees. Integrating any newly acquired business, product or technology could be
expensive and time-consuming, could disrupt our ongoing business and could distract our management. In particular, integrating sales forces and strategies for marketing and sales has in the past required and will likely require in the future, much
time, effort and expense, especially from our management team. Therefore, we might not be able, either immediately post-acquisition or ever, to replicate the pre-acquisition revenues achieved by companies that we acquire or achieve the benefits of
the acquisition we anticipated in valuing the businesses, products or technologies we acquire. Furthermore, the costs of integrating acquired companies in international transactions can be particularly high, due to local laws and regulations. If we
are unable to integrate any newly acquired entity, products or technology effectively, our business, financial condition and operating results would suffer. In addition, any amortization or impairment of acquired intangible assets, stock-based
compensation or other charges resulting from the costs of acquisitions could harm our operating results.



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In addition, we may face competition for acquisition targets from larger and more established companies
with greater financial resources. Also, in order to finance any acquisition, we might need to raise additional funds through public or private financings or use our cash reserves. In that event, we could be forced to obtain equity or debt financing
on terms that are not favorable to us and, in the case of equity financing, that may result in dilution to our stockholders. Use of our cash reserves for acquisitions could limit our financial flexibility in the future. Moreover, the terms of
existing loan agreements may prohibit certain acquisitions or may place limits on our ability to incur additional indebtedness or issue additional equity securities to finance acquisitions. If we are not able to acquire strategically attractive
businesses, products or technologies we may not be able to remain competitive in our industry.



The past slowdown in the market for infrastructure software and its protracted recovery have caused our revenue to decline in the past and could cause our revenue or results of operations to fall below expectations
in the future.



The market for infrastructure software is
relatively new and evolving. We earn a substantial portion of our revenue from licenses of our infrastructure software, including application integration software, and sales of related services. We expect to earn substantially all of our revenue in
the foreseeable future from sales of these products and services. Our future financial performance will depend on continued growth in the number of organizations demanding software and services for application integration and information delivery
and companies seeking outside vendors to develop, manage and maintain this software for their critical applications. Lower spending by corporate and governmental customers around the world, which has had a disproportionate impact on information
technology spending, has led to a reduction in sales in the past and may continue to do so in the future. Many of our potential customers have made significant investments in internally developed systems and would incur significant costs in
switching to third-party products, which may substantially inhibit the growth of the market for infrastructure software. If the market fails to grow, or grows more slowly than we expect, our sales will be adversely affected. Also, even as corporate
and governmental spending increases and companies make greater investments in information technology and infrastructure software, our revenue may not grow at the same pace.



Our business is subject to seasonal variations which make quarter-to-quarter comparisons difficult.



Our business is subject to variations throughout the year due to seasonal
factors in the U.S. and worldwide. These factors include fewer selling days in Europe during the summer vacation season which has a disproportionate effect on sales in Europe, the impact of the holidays and a slow down in capital expenditures by our
customers at calendar year-end (during our first fiscal quarter). These factors typically result in lower sales activity in our first and third fiscal quarters compared to the rest of the year and they make quarter-to-quarter comparisons of our
operating results less meaningful.



Any failure by us to meet the
requirements of current or newly-targeted customers may have a detrimental impact on our business or operating results.



If we fail to meet the expectations or product and service requirements of our current customers, our reputation and business may be harmed. In addition,
we may wish to expand our customer base into markets in which we have limited experience. In some cases, customers in different markets, such as financial services or government, have specific regulatory or other requirements which we must meet. For
example, in order to maintain contracts with the U.S. Government, we must comply with specific rules and regulations relating to and that govern such contracts. While we have historically met the requirements of our customers, if we fail to meet
such requirements in the future, we could be subject to civil or criminal liability or a reduction of revenue which could harm our business, operating results and financial condition.



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Any losses we incur as a result of our exposure to the credit risk of our customers could harm our results of
operations.



Most of our licenses are sold on an
open credit basis. We monitor individual customer payment capability in granting such open credit arrangements, seek to limit credit to amounts we believe the customers can pay, and maintain reserves we believe are adequate to cover
exposure for doubtful accounts. As we have grown our revenue and customer base, our exposure to credit risk has increased. Although we have not had material losses to date as a result of customer defaults, future defaults, if incurred, could harm
our business and have an adverse effect on our business, operating results and financial condition.



We are required to undertake an annual evaluation of our internal control over financial reporting (ICFR) that may identify internal control weaknesses requiring remediation, which could harm our
reputation and confidence in our financial reporting.



Sarbanes-Oxley imposes duties on us, our executives, and directors. We completed our fiscal year 2005 evaluation of the design, remediation and testing of effectiveness of our internal control over financial reporting required to comply
with the management certification and attestation by our independent registered public accounting firm as required by Section 404 of Sarbanes-Oxley (Section 404). While our assessment, testing and evaluation of the design and
operating effectiveness of our internal control over financial reporting resulted in our conclusion that as of November 30, 2005, our ICFR were effective, we cannot predict the outcome of our testing in future periods. If we conclude in future
periods that our ICFR is not effective, we may be required to change our ICFR to remediate deficiencies, investors may lose confidence in the reliability of our financial statements, and we may be subject to investigation and/or sanctions by
regulatory authorities. Also, if we identify areas of our ICFR that require improvement, we could incur additional expenses to implement enhanced processes and controls to address such issues. Any such events could adversely affect our financial
results and/or may result in a negative reaction in the stock market.



Regulatory requirements have caused us to incur increased costs and operating expenses, may limit our ability to obtain director and officer liability insurance and may make it more difficult for us to attract and retain qualified
officers and directors.



Sarbanes-Oxley and rules enacted
by the SEC and Nasdaq have caused us, and we expect will continue to cause us, to incur significant costs as a result of these regulatory requirements. In this regard, achieving and maintaining compliance with Sarbanes-Oxley and other rules and
regulations, have caused us to hire additional personnel and use additional outside legal, accounting and advisory services and may require us to do so in the future.



Failure to satisfy the rules could make it more difficult for us to obtain certain types of insurance, including director
and officer liability insurance, and we may be forced to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. The impact of these events could also make it more difficult for us to
attract and retain qualified persons to serve on our board of directors, or as executive officers.



We may incur significant expenses in both hiring new employees and reducing or re-aligning our headcount in response to changing market conditions.



We have increased the scope of our operations both domestically and internationally. Our success is dependent on
successfully managing our workforce. As we grow, we must invest significantly in building our sales, marketing and engineering groups. Competition for these people in the software industries is intense, and we may not be able to successfully
recruit, train or retain qualified personnel. In addition, we must successfully integrate new employees into our operations and generate sufficient revenues to justify the costs associated with these employees. If we fail to successfully integrate
employees or to generate the revenue necessary to offset employee-related expenses, we may be forced to reduce our headcount, which would force us to incur significant expenses and would harm our business and operating results. For example, in the
year ended November 30, 2005, we recorded a $3.9 million restructuring charge for a workforce reduction to re-align our resources and cost structure. Failure to manage our operations effectively could interfere with the growth of our business
as a whole.



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If we do not retain our key management personnel and attract, hire and retain other highly skilled employees, we may
not be able to execute our business strategy effectively.



If we fail to retain and recruit key management and other skilled employees, our business and our ability to obtain new customers, develop new products and provide acceptable levels of customer service could suffer. The success of our
business is heavily dependent on the leadership of our key management personnel, including Vivek Ranadivé, our President and Chief Executive Officer. The loss of one or more key employees could adversely affect our continued operations. We
have experienced changes in our management organization over the past several years and may experience additional management changes in the future. Uncertainty created by turnover of key employees could also result in reduced confidence in our
financial performance which could cause fluctuations in our stock price and result in further turnover of our employees.



The value of our equity incentive programs may diminish as a retention tool as a result of the changes in the financial accounting standards and our stock price
volatility.



We have historically used equity incentive
programs, such as employee stock options and stock purchase plans, as a part of overall employee compensation arrangements. As a result of changes in the financial accounting standards, we have changed our stock purchase plan and may reduce the size
and number of stock option grants we give to our employees, both of which may decrease the effectiveness of our plans as employee retention tools. In addition, the volatility of our stock price may negatively impact the value of such equity
incentives, thereby diminishing the value of such incentive programs to employees and decreasing the effectiveness of such programs as retention tools.



The inability to upsell to our current customers or the loss of any significant customer could harm our business and cause our stock price to decline.



We do not have long-term sales contracts with any of our customers. Our
customers may choose not to purchase our products in the future. As a result, a customer that generates substantial revenue for us in one period may not be a source of revenue in subsequent periods. Any inability on our part to upsell to and
generate revenues from our existing customers could adversely affect our business and operating results.



Our products may infringe the intellectual property rights of others, which may cause us to incur unexpected costs or prevent us from selling our products.



We cannot be certain that our products do not infringe issued patents or
other intellectual property rights of others. In addition, our use of Open Source components in our products may make us increasingly vulnerable to claims that our products infringe third-party intellectual property rights, in particular because
many of the Open Source components we may incorporate with our products are developed by numerous independent parties over whom we exercise no supervision or control. Further, because patent applications in the United States and many other countries
are not publicly disclosed until a patent is issued, applications covering technology used in our software products may have been filed without our knowledge. While no claims have been filed against us to date, we may be subject to legal proceedings
and claims from time to time, including claims of alleged infringement of the patents, trademarks and other intellectual property rights of third parties by us or our licensees in connection with their use of our products. Although no claims have
been made in the past, our software license agreements typically provide for indemnification of our customers for intellectual property infringement claims. Intellectual property litigation is expensive and time-consuming and could divert our
managements attention away from running our business and seriously harm our business. If we were to discover that our products violated the intellectual property rights of others, we would have to obtain licenses from these parties in order to
continue marketing our products without substantial reengineering. We might not be able to obtain the necessary licenses on acceptable terms or at all, and if we could not obtain such licenses, we might not be able to reengineer our products
successfully or in a timely fashion. If we fail to address any infringement issues successfully, we would be forced to incur significant costs, including damages and potentially satisfying indemnification obligations that we have with our customers,
and we could be prevented from selling certain of our products.



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Our intellectual property or proprietary rights could be misappropriated, which could force us to become involved in
expensive and time-consuming litigation.



We regard our
copyrights, service marks, trademarks, trade secrets, patents (licensed or others) and similar intellectual property as critical to our success. Any misappropriation of our proprietary information by third parties could harm our business, financial
condition and operating results. In addition, the laws of some countries do not provide the same level of protection of our proprietary information as do the laws of the United States. If our proprietary information or material were misappropriated,
we might have to engage in litigation to protect it. We might not succeed in protecting our proprietary information if we initiate intellectual property litigation, and, in any event, such litigation would be expensive and time-consuming, could
divert our managements attention away from running our business and could seriously harm our business.



Market acceptance of new platforms and web services standards may require us to undergo the expense of developing and maintaining compatible product lines.



Our software products can be licensed for use with a variety of platforms.
There may be future or existing platforms that achieve popularity in the marketplace which may not be architecturally compatible with our software products. In addition, the effort and expense of developing, testing and maintaining software products
will increase as more platforms achieve market acceptance within our target markets. Moreover, future or existing user interfaces that achieve popularity within the enterprise application integration marketplace may not be compatible with our
current software products. If we are unable to achieve market acceptance of our software products or adapt to new platforms, our sales and revenues will be adversely affected.



Developing and maintaining different software products could place a significant strain on our resources and software
product release schedules, which could harm our revenue and financial condition. If we are not able to develop software for accepted platforms or fail to adopt webservices standards, our license and service revenues and our gross margins could be
adversely affected. In addition, if the platforms we have developed software for are not accepted, our license and service revenues and our gross margins could be adversely affected.



We may experience foreign currency gains and losses.



Our operating results are subject to fluctuations in foreign currency exchange rates. We attempt to mitigate a portion of
these risks through foreign currency hedging, based on our judgment of the appropriate trade-offs among risk, opportunity and expense. We have established a hedging program designed to partially hedge our exposure to foreign currency exchange rate
fluctuations, primarily the Euro and the British Pound. We regularly review our hedging program and will make adjustments based on our judgment. Although our hedging activities are designed to offset a portion of the financial impact resulting from
the movement in foreign currency exchange rates, if we are unable to offset the effects of currency fluctuation, our operating results could be adversely affected.



Our agreement with Reuters places certain limitations on our ability to conduct our business.



Pursuant to the terms of our agreement with Reuters, we are permitted to
market and sell our products, other than risk management and market data distribution products, directly and through third party resellers (other than a few specified resellers) to customers in the financial services market. The limitations on our
ability to sell risk management and market data distribution products and on reselling through the specified resellers will continue through May 2008. While we currently do not offer any risk management and market data distribution solutions as part
of our product offerings, if we were to develop any such products, we would have to rely on Reuters to sell those products in the financial services market until these restrictions end. Reuters is not required to help us sell any of these products
in those markets and Reuters may choose not to sell our products over our competitors products.



In addition, we license from Reuters the intellectual property that was incorporated into early versions of some of our software products. We do not own
this licensed technology. Because Reuters has access to



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intellectual property used in our products, it could use this intellectual property to compete with us. Reuters is not restricted from using the licensed
technology it has licensed to us to produce products that compete with our products, and it can grant limited licenses to the licensed technology to others who may compete with us. In addition, we must license to Reuters all of the products we own,
and the source code for one of our messaging products, through December 2012. This may place Reuters in a position to more easily develop products that compete with ours.



Natural or other disasters could disrupt our business and result in loss of revenue or in higher expenses.



Natural disasters, terrorist activities and other business disruptions could
seriously harm our revenue and financial condition and increase our costs and expenses. Our corporate headquarters and many of our operations are located in California, a seismically active region. In addition, many of our current and potential
customers are concentrated in a few geographic areas. A natural disaster in one of these regions could have a material adverse impact on our U.S. and foreign operations, operating results and financial condition. Further, although we have not
experienced a disruption to date, any unanticipated business disruption caused by Internet security threats, damage to global communication networks or otherwise could have a material adverse impact on our operating results.



The outcome of litigation pending against us could require us to expend significant
resources and could harm our business and financial resources.



In May 2005, three purported shareholder class action complaints were filed against us and several of our officers in the U.S. District Court for the Northern District of California. The plaintiffs in such actions are seeking to represent a
class of purchasers of TIBCOs common stock from September 21, 2004 through March 1, 2005. The complaints generally allege that we made false or misleading statements concerning our operating results, our business and internal
controls and the integration of Staffware. The complaints seek unspecified monetary damages. We intend to defend ourselves vigorously; however, we expect to incur significant costs in mounting such defense.



In September 2005, a shareholder derivative complaint was filed against
certain of our officers and directors in the Superior Court of the State of California, Santa Clara County. The complaint is based on substantially similar facts and circumstances as the class actions and generally alleged that the named directors
and officers breached their fiduciary duties to TIBCO. The complaint seeks unspecified monetary damages. Given the nature of derivative litigation, any recovery in a derivative suit would be to the benefit of TIBCO.



In addition, certain of our directors and officers and certain investment
bank underwriters have been named in a putative class action for violation of the federal securities laws in the U.S. District Court for the Southern District of New York, captioned In re TIBCO Software Inc. Initial Public Offering Securities
Litigation. This is one of a number of cases challenging underwriting practices in the initial public offerings of more than 300 companies, which have been coordinated for pretrial proceedings as In re Initial Public Offering Securities
Litigation. Plaintiffs generally allege that the underwriters engaged in undisclosed and improper underwriting activities, namely the receipt of excessive brokerage commissions and customer agreements regarding post-offering purchases of stock
in exchange for allocations of IPO shares. Plaintiffs also allege that various investment bank securities analysts issued false and misleading analyst reports. The complaint against us claims that the purported improper underwriting activities were
not disclosed in the registration statements for our IPO and secondary public offering and seeks unspecified damages on behalf of a purported class of persons who purchased our securities or sold put options during the time period from July 13,
1999 to December 6, 2000.



A lawsuit with similar
allegations of undisclosed improper underwriting practices, and part of the same coordinated proceedings, is pending against Talarian, which we acquired in 2002. That action is captioned In re Talarian Corp. Initial Public Offering Securities
Litigation. The complaint against Talarian, certain of its underwriters, and certain of its former directors and officers claims that the purported improper underwriting activities were not disclosed in the registration statement for
Talarians IPO and seeks unspecified damages on behalf of a purported class of persons who purchased Talarian securities during the time period from July 20, 2000 to December 6, 2000.



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A proposal to settle the claims against all of the issuers and individual defendants in the coordinated
litigation was accepted by us and given preliminary Court approval. The completion of the settlement is subject to a number of conditions, including final approval by the Court. Under the settlement, the plaintiffs will dismiss and release all
claims against participating defendants in exchange for a contingent payment guaranty by the insurance companies collectively responsible for insuring the issuers in the action, and the assignment or surrender to the plaintiffs of certain claims the
issuer defendants may have against the underwriters. Under the guaranty, the insurers will be required to pay an amount equal to $1.0 billion less any amounts ultimately collected by the plaintiffs from the underwriter defendants in all the cases.
Unlike most of the defendant issuers insurance policies, including ours, Talarians policy contains a specific self-insured retention in the amount of $0.5 million for IPO laddering claims, including those alleged in this
matter. Thus, under the proposed settlement, if any payment is required under the insurers guaranty, our subsidiary, Talarian, would be responsible for paying its pro rata share of the shortfall, up to $0.5 million of the self-insured
retention remaining under its policy.



The uncertainty
associated with substantial unresolved lawsuits could harm our business, financial condition and reputation. The defense of the lawsuits could result in the diversion of our managements time and attention away from business operations, which
could harm our business. Negative developments with respect to the lawsuits could cause our stock price to decline. In addition, although we are unable to determine the amount, if any, that we may be required to pay in connection with the resolution
of the lawsuits by settlement or otherwise, any such payment could seriously harm our financial condition and liquidity.



The use of Open Source Software in our products may expose us to additional risks.



Open Source Software is software that is covered by a license agreement which permits the user to liberally
copy, modify and distribute the software for free. Certain Open Source Software is licensed pursuant to license agreements that require a user who intends to distribute the Open Source Software as a component of the users software to disclose
publicly part or all of the source code to the users software. This effectively renders what was previously proprietary software Open Source Software. As competition in our markets increases, we must reduce our product development costs. Many
features we may wish to add to our products in the future may be available as Open Source Software and our development team may wish to make use of this software to reduce development costs and speed up the development process. While we monitor the
use of all Open Source Software and try to ensure that no Open Source Software is used in such a way as to require us to disclose the source code to the related product, such use could inadvertently occur. Additionally, if a third party has
incorporated certain types of Open Source Software into its software, has not disclosed the presence of such Open Source Software and we embed that third party software into one or more of our products, we could, under certain circumstances, be
required to disclose the source code to our product. This could have a material adverse effect on our business.



Some provisions in our certificate of incorporation and bylaws, as well as a stockholder rights plan, may have anti-takeover effects.



We have a stockholder rights plan providing for one right for each
outstanding share of our common stock. Each right, when exercisable, entitles the registered holder to purchase certain securities at a specified purchase price. The rights plan may have the anti-takeover effect of causing substantial dilution to a
person or group that attempts to acquire TIBCO on terms not approved by our Board of Directors. The existence of the rights plan could limit the price that certain investors might be willing to pay in the future for shares of our common stock and
could discourage, delay or prevent a merger or acquisition that stockholders may consider favorable. In addition, provisions of our current certificate of incorporation and bylaws, as well as Delaware corporate law, could make it more difficult for
a third party to acquire us without the support of our Board of Directors, even if doing so would be beneficial to our stockholders.



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|ITEM 2. | PROPERTIES
|------- | ----------



Our principal administrative, sales, marketing, service and research and development facilities are located in a four building campus totaling
approximately 292,000 square feet in Palo Alto, California. We purchased these buildings in June 2003. In connection with the purchase, we entered into a 51-year lease of the land upon which the buildings are located. Further information on the
terms of the building acquisition can be found in Managements Discussion and Analysis of Financial Condition and Results of Operations and Note 6 to our Consolidated Financial Statements included in this report.



In addition, we lease field support offices in 61 cities throughout the
world. The field offices range from small executive offices to a 22,000 square foot facility, in Maidenhead, England, that serves as our European sales operations headquarters. Lease terms range from month-to-month on certain offices to ten years on
certain direct leases. Because our professional services are generally performed at the client site, field facilities are generally small. Field facilities are sales offices, development centers or customer support sites, and are used for periodic
meetings, training and administration. We are continually evaluating the adequacy of existing facilities and additional facilities in new cities and we believe that suitable additional space will be available in the future on commercially reasonable
terms as needed.



We have certain facilities under lease that
are in excess of our requirements that we no longer occupy, do not intend to occupy, and have either subleased or plan to sublease. The estimated loss on excess facilities net of sublease income has been included in the accrued excess facilities
costs on the Consolidated Balance Sheet as of November 30, 2005 and 2004.



|ITEM 3. | LEGAL PROCEEDINGS
|------- | -----------------



Securities Class Action and Shareholder Derivative Suits



In May 2005, three purported shareholder class action complaints were filed against us and several of our officers in the U.S. District Court for the
Northern District of California. The plaintiffs in such actions are seeking to represent a class of purchasers of our common stock from September 21, 2004 through March 1, 2005. The complaints generally allege that we made false or
misleading statements concerning our operating results, our business and internal controls, and the integration of Staffware and seek unspecified monetary damages. Because the outcome of this litigation is undetermined and we cannot reasonably
estimate the possible loss or range of loss which may arise from the litigation, we have not recorded an accrual for possible damages.



In September 2005, a shareholder derivative complaint was filed against certain of our officers and directors in the Superior Court of the State of
California, Santa Clara County. The complaint is based on substantially similar facts and circumstances as the class actions and generally alleged that the named directors and officers breached their fiduciary duties to the Company. The complaint
seeks unspecified monetary damages. Given the nature of derivative litigation, any recovery in a derivative suit would be to the benefit of the Company.



IPO Allocation Suit



We, certain of our directors and officers and certain investment bank underwriters have been named in a putative class action for violation of the federal
securities laws in the U.S. District Court for the Southern District of New York (Court), captioned In re TIBCO Software Inc. Initial Public Offering Securities Litigation. This is one of a number of cases challenging
underwriting practices in the initial public offerings (IPOs) of more than 300 companies, which have been coordinated for pretrial proceedings as In re Initial Public Offering Securities Litigation. Plaintiffs generally
allege that the underwriters engaged in undisclosed and improper underwriting activities, namely the receipt of excessive brokerage commissions and customer agreements regarding post-offering purchases of stock in exchange for allocations of IPO
shares. Plaintiffs also allege that various investment bank securities analysts issued false and misleading analyst reports. The complaint against us claims that the purported improper underwriting activities were not disclosed in the registration
statements for



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our IPO and secondary public offering and seeks unspecified damages on behalf of a purported class of persons who purchased our securities or sold put
options during the time period from July 13, 1999 to December 6, 2000.



A lawsuit with similar allegations of undisclosed improper underwriting practices, and part of the same coordinated proceedings, is pending against Talarian Corporation (Talarian), which we acquired in
2002. That action is captioned In re Talarian Corp. Initial Public Offering Securities Litigation. The complaint against Talarian, certain of its underwriters, and certain of its former directors and officers claims that the purported
improper underwriting activities were not disclosed in the registration statement for Talarians IPO and seeks unspecified damages on behalf of a purported class of persons who purchased Talarian securities during the time period from
July 20, 2000 to December 6, 2000.



A proposal to
settle the claims against all of the issuers and individual defendants in the coordinated litigation was accepted by us and given preliminary Court approval. The completion of the settlement is subject to a number of conditions, including final
approval by the Court. Under the settlement, the plaintiffs will dismiss and release all claims against participating defendants in exchange for a contingent payment guaranty by the insurance companies collectively responsible for insuring the
issuers in the action, and the assignment or surrender to the plaintiffs of certain claims the issuer defendants may have against the underwriters. Under the guaranty, the insurers will be required to pay an amount equal to $1.0 billion less any
amounts ultimately collected by the plaintiffs from the underwriter defendants in all the cases. Unlike most of the defendant issuers insurance policies, including ours, Talarians policy contains a specific self-insured retention in the
amount of $0.5 million for IPO laddering claims, including those alleged in this matter. Thus, under the proposed settlement, if any payment is required under the insurers guaranty, our subsidiary, Talarian, would be responsible
for paying its pro rata share of the shortfall, up to $0.5 million of the self-insured retention remaining under its policy.



PART II



|ITEM 5. | MARKET FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
|------- | ------------------------------------------------------------------------------------------------------------



Market Information



Our common stock is quoted on the Nasdaq National Market (Nasdaq) under the symbol TIBX. The
following table presents, for the periods indicated, the high and low intra-day sale prices per share of our common stock during the fiscal quarters indicated, as reported on Nasdaq.



|                                                           |  |      |       |     |   |      
|---------------------------------------------------------- |  | ---- | ----- | --- | - | -----
|Fiscal Year 2004                                           |  | High |       | Low
|First Quarter (from December 1, 2003 to February 29, 2004) |  | $    | 8.79  |     | $ | 5.48 
|Second Quarter (from March 1, 2004 to May 30, 2004)        |  | $    | 9.75  |     | $ | 6.55 
|Third Quarter (from May 31, 2004 to August 29, 2004)       |  | $    | 8.75  |     | $ | 5.53 
|Fourth Quarter (from August 30, 2004 to November 30, 2004) |  | $    | 11.72 |     | $ | 6.11 
|                                                           |  |     
|Fiscal Year 2005                                           |  | High |       | Low
|First Quarter (from December 1, 2004 to February 27, 2005) |  | $    | 13.50 |     | $ | 10.51
|Second Quarter (from February 28, 2005 to May 29, 2005)    |  | $    | 10.75 |     | $ | 6.10 
|Third Quarter (from May 30, 2005 to August 28, 2005)       |  | $    | 8.00  |     | $ | 5.60 
|Fourth Quarter (from August 29, 2005 to November 30, 2005) |  | $    | 8.63  |     | $ | 6.86 



Holders of Record



We had 949 stockholders of record as of November 30, 2005.



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Dividends



We have never declared or paid any cash dividends on our common stock, and we do not anticipate paying any cash dividends in the foreseeable future.



Issuer Purchases of Equity Securities



In September 2004, our Board of Directors authorized a stock repurchase
program for the repurchase of up to $50.0 million of common stock under this program. The remaining authorized amount for stock repurchases under this program as of November 30, 2005 was approximately $1.0 million. Subsequently, in December
2005, our Board of Directors authorized a new stock repurchase plan for the repurchase of up to $100.0 million of our common stock.



|                                         |  |                                  |  |                              |      |                                                                                  |       |                                                                                          |   |       
|---------------------------------------- |  | -------------------------------- |  | ---------------------------- | ---- | -------------------------------------------------------------------------------- | ----- | ---------------------------------------------------------------------------------------- | - | ------
|(In thousands, except per-share amounts) |  | Total Number of Shares Purchased |  | Average Price Paid per Share |      | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs |       | Approximate Dollar Value of Shares That May Yet Be Purchased under the Plans
or Programs
|August 29, 2005 to September 28, 2005    |  |                                 |  | $                            |     |                                                                                  |      |                                                                                          | $ | 15,876
|September 29, 2005 to October 28, 2005   |  | 1,000                            |  |                              | 7.94 |                                                                                  | 1,000 |                                                                                          |   | 7,939 
|October 29, 2005 to November 30, 2005    |  | 900                              |  |                              | 7.71 |                                                                                  | 900   |                                                                                          |   | 1,000 
|                                         |  |                                  |  |                              |      |                                                                                  |       |                                                                                          |   |       
|Total                                    |  | 1,900                            |  | $                            | 7.83 |                                                                                  | 1,900 |                                                                                          | $ | 1,000 
|                                         |  |                                  |  |                              |      |                                                                                  |       |                                                                                          |   |       



Equity Compensation Plan
Information



The following table sets forth information
about our common stock that may be issued upon the exercise of options, warrants and rights under all of our existing equity compensation plans as of November 30, 2005.



|                                                              |  |                                                                                                |  |                                                                                 |       |                                                                                                                                                 |           
|------------------------------------------------------------- |  | ---------------------------------------------------------------------------------------------- |  | ------------------------------------------------------------------------------- | ----- | ----------------------------------------------------------------------------------------------------------------------------------------------- | ----------
|Plan Category                                                 |  | Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights(a) |  | Weighted-Average Exercise Price of Outstanding Options, Warrants and Rights (b) |       | Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (Excluding Securities Reflected in Column (a)) (c)
|Equity compensation plans approved by security holders        |  | 46,203,131                                                                                     |  | $                                                                               | 7.00  |                                                                                                                                                 | 31,493,584
|Equity compensation plans not approved by security holders(1) |  | 62,886                                                                                         |  | $                                                                               | 14.50 |                                                                                                                                                 | 167,061   
|                                                              |  |                                                                                                |  |                                                                                 |       |                                                                                                                                                 |           
|Total                                                         |  | 46,266,017                                                                                     |  | $                                                                               | 7.01  |                                                                                                                                                 | 31,660,645
|                                                              |  |                                                                                                |  |                                                                                 |       |                                                                                                                                                 |           

---

|(1) | Represents options assumed in connection with our acquisition of Talarian in 2002 and of Extensibility in 2000.
|--- | ---------------------------------------------------------------------------------------------------------------



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|ITEM 6. | SELECTED FINANCIAL DATA
|------- | -----------------------



The selected consolidated financial data below have been derived from our audited financial statements. The following table should be read in
conjunction with Managements Discussion and Analysis of Financial Condition and Results of Operations and our Consolidated Financial Statements and notes thereto included elsewhere in this annual report on Form 10-K. The historical
results presented below are not indicative of any future results.



|                                                                                  |  |                                          |           |   |      |   |           |      |  |   |         |   |  |      |         |   |  |   |         |  
|--------------------------------------------------------------------------------- |  | ---------------------------------------- | --------- | - | ---- | - | --------- | ---- |  | - | ------- | - |  | ---- | ------- | - |  | - | ------- | -
|                                                                                  |  | Year Ended November 30,                  |          
|                                                                                  |  | 2005                                     |           |   | 2004 |   |           | 2003 |  |   | 2002    |   |  | 2001 |        
|                                                                                  |  | (in thousands, except per share amounts) |          
|Statement of Operations:                                                          |  |                                          |           |   |      |   |           |      |  |   |         |   |  |      |         |   |  |   |         |  
|Revenue                                                                           |  | $                                        | 445,910   |   |      | $ | 387,220   |      |  | $ | 264,210 |   |  | $    | 273,393 |   |  | $ | 322,091 |  
|Cost of revenue                                                                   |  |                                          | 124,193   |   |      |   | 93,197    |      |  |   | 63,485  |   |  |      | 65,672  |   |  |   | 71,012  |  
|                                                                                  |  |                                          |           |   |      |   |           |      |  |   |         |   |  |      |         |   |  |   |         |  
|Gross profit                                                                      |  |                                          | 321,717   |   |      |   | 294,023   |      |  |   | 200,725 |   |  |      | 207,721 |   |  |   | 251,079 |  
|Operating expenses                                                                |  |                                          | 263,643   |   |      |   | 223,273   |      |  |   | 198,249 |   |  |      | 294,403 |   |  |   | 305,830 |  
|                                                                                  |  |                                          |           |   |      |   |           |      |  |   |         |   |  |      |         |   |  |   |         |  
|Income (loss) from operations                                                     |  |                                          | 58,074    |   |      |   | 70,750    |      |  |   | 2,476   |   |  |      | (86,682 | ) |  |   | (54,751 | )
|Interest and other income, net                                                    |  |                                          | 11,718    |   |      |   | 5,736     |      |  |   | 16,212  |   |  |      | 16,264  |   |  |   | 31,040  |  
|Interest expense                                                                  |  |                                          | (2,711    | ) |      |   | (2,771    | )    |  |   | (1,205  | ) |  |      |        |   |  |   |        |  
|                                                                                  |  |                                          |           |   |      |   |           |      |  |   |         |   |  |      |         |   |  |   |         |  
|Income (loss) before income taxes                                                 |  |                                          | 67,081    |   |      |   | 73,715    |      |  |   | 17,483  |   |  |      | (70,418 | ) |  |   | (23,711 | )
|Provision for (benefit from) income taxes                                         |  |                                          | (5,474    | ) |      |   | 28,795    |      |  |   | 6,043   |   |  |      | 24,162  |   |  |   | (10,469 | )
|                                                                                  |  |                                          |           |   |      |   |           |      |  |   |         |   |  |      |         |   |  |   |         |  
|Net income (loss)                                                                 |  | $                                        | 72,555    |   |      | $ | 44,920    |      |  | $ | 11,440  |   |  | $    | (94,580 | ) |  | $ | (13,242 | )
|                                                                                  |  |                                          |           |   |      |   |           |      |  |   |         |   |  |      |         |   |  |   |         |  
|Total stock based compensation included in cost of revenue and operating expenses |  | $                                        | 129       |   |      | $ | 243       |      |  | $ | 1,063   |   |  | $    | 4,050   |   |  | $ | 26,965  |  
|                                                                                  |  |                                          |           |   |      |   |           |      |  |   |         |   |  |      |         |   |  |   |         |  
|Net income (loss) per shareBasic                                                 |  | $                                        | 0.34      |   |      | $ | 0.22      |      |  | $ | 0.05    |   |  | $    | (0.46   | ) |  | $ | (0.07   | )
|                                                                                  |  |                                          |           |   |      |   |           |      |  |   |         |   |  |      |         |   |  |   |         |  
|Net income (loss) per shareDiluted                                               |  | $                                        | 0.32      |   |      | $ | 0.20      |      |  | $ | 0.05    |   |  | $    | (0.46   | ) |  | $ | (0.07   | )
|                                                                                  |  |                                          |           |   |      |   |           |      |  |   |         |   |  |      |         |   |  |   |         |  
|Shares used to compute net income (loss) per shareBasic                          |  |                                          | 213,263   |   |      |   | 207,506   |      |  |   | 211,555 |   |  |      | 205,821 |   |  |   | 195,001 |  
|                                                                                  |  |                                          |           |   |      |   |           |      |  |   |         |   |  |      |         |   |  |   |         |  
|Shares used to compute net income (loss) per shareDiluted                        |  |                                          | 223,977   |   |      |   | 220,927   |      |  |   | 221,519 |   |  |      | 205,821 |   |  |   | 195,001 |  
|                                                                                  |  |                                          |           |   |      |   |           |      |  |   |         |   |  |      |         |   |  |   |         |  
|                                                                                  | 
|                                                                                  |  | As of November 30,                       |          
|                                                                                  |  | 2005                                     |           |   | 2004 |   |           | 2003 |  |   | 2002    |   |  | 2001 |        
|                                                                                  |  | (in thousands)                           |          
|Balance Sheet Data:                                                               |  |                                          |           |   |      |   |           |      |  |   |         |   |  |      |         |   |  |   |         |  
|Cash, cash equivalents and short-term investments                                 |  | $                                        | 477,638   |   |      | $ | 473,535   |      |  | $ | 604,669 |   |  | $    | 637,853 |   |  | $ | 677,340 |  
|Working capital                                                                   |  |                                          | 458,685   |   |      |   | 439,090   |      |  |   | 549,719 |   |  |      | 563,732 |   |  |   | 638,803 |  
|Total assets                                                                      |  |                                          | 1,122,424 |   |      |   | 1,082,811 |      |  |   | 943,259 |   |  |      | 894,588 |   |  |   | 892,127 |  
|Long-term debt                                                                    |  |                                          | 50,143    |   |      |   | 51,851    |      |  |   | 53,477  |   |  |      |        |   |  |   |        |  
|Stockholders equity                                                              |  |                                          | 873,619   |   |      |   | 820,482   |      |  |   | 762,794 |   |  |      | 744,727 |   |  |   | 771,279 |  



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|ITEM 7. | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|------- | -------------------------------------------------------------------------------------



The following contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933,
as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements relate to expectations concerning matters that are not historical facts. Words such as projects, believes,
anticipates, plans, expects, intends and similar words and expressions are intended to identify forward-looking statements. These forward-looking statements include, but are not limited to, statements
related to our expected business, results of operations, future financial position, our ability to increase our revenues, the mix of our revenues between license, service and maintenance revenues, our financing plans and capital requirements, our
costs of revenue, our expenses, our potential tax benefit or liabilities, the effect of recent accounting pronouncements, our investments, debt service and principal repayment obligations, cash flows and our ability to finance operations from cash
flows and similar matters and include statements based on current expectations, estimates, forecasts and projections about the economies and markets in which we operate and our beliefs and assumptions regarding these economies and markets.



These forward-looking statements are based on current
expectations and involve known and unknown risks and uncertainties that may cause our actual results, operating performance or achievements to be materially different from those expressed or implied by the forward-looking statements. We believe that
the expectations reflected in the forward-looking statements are reasonable but we cannot assure you that those expectations will prove to be correct. Factors that could cause or contribute to such differences include but are not limited to our
ability to address new markets and complex technologies by delivering successful, new products on a timely basis, the impact of competitive products and pricing, the success of our strategic relationships, charges for restructuring and option
expenses and other costs and other risk factors detailed in this Annual Report on Form 10-K for the fiscal year ended November 30, 2005 and other periodic filings with the Securities and Exchange Commission. All forward-looking statements are
expressly qualified in their entirety by these factors and all related cautionary statements. We do not undertake any obligation to update any forward-looking statements.



Executive Overview



Our suite of business integration and process management software solutions makes us a leading enabler of real-time business. We use the term
real-time business to mean doing business in such a way that organizations can use current information to execute their critical business processes and make smarter decisions. We are the successor to a portion of the business of
Teknekron Software Systems, Inc. Teknekron developed software, known as the TIB technology, for the integration and delivery of market data, such as stock quotes, news and other financial information, in trading rooms of large banks and financial
services institutions. In 1992, Teknekron expanded its development efforts to include solutions designed to enable complex and disparate manufacturing equipment and software applications, primarily in the semiconductor fabrication market, to
communicate within the factory environment. Teknekron was acquired by Reuters Group PLC, the global information company, in 1994. Following the acquisition, continued development of the TIB technology was undertaken to expand its use in the
financial services markets.



In January 1997, our company,
TIBCO Software Inc., was established as an entity separate from Teknekron. We were formed to create and market software solutions for use in the integration of business information, processes and applications. In connection with our establishment as
a separate entity, Reuters transferred to us certain assets and liabilities related to our business and granted to us a royalty-free license to the intellectual property from which some of our messaging software products originated.



In June 2004, we acquired Staffware plc, a provider of BPM solutions that
enable businesses to automate, refine and manage their processes. The addition of Staffwares BPM solutions enabled us to offer our combined customer base an expanded real-time business integration solution, by making it easier for our
customers to utilize their existing systems through real-time information exchange and automation and management of enterprise business processes regardless of where such processes reside. BPM enables companies to save time



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and money by driving costs and time out of business processes (for example, reducing error rates or manual steps), while at the same time ensuring that
business processes are compliant with internal procedures and external regulations. Our acquisition of Staffware also increased our distribution capabilities through the cross-selling of products into new geographic regions, as well as an expanded
customer and partner base.



Our products are currently licensed
by companies worldwide in diverse industries such as financial services, telecommunications, retail, healthcare, manufacturing, energy, transportation, logistics, government and insurance. We sell our products through a direct sales force and
through alliances with leading software vendors and systems integrators.



Our revenue consists primarily of license and maintenance fees from our customers and distributors. In addition, we receive fees from our customers for providing consulting services. We also receive revenue from our
strategic relationships with business partners who embed our products in their hardware and networking systems as well as from systems integrators who resell our products.



First-year maintenance typically is sold with the related software license and renewed on an annual basis thereafter.
Maintenance revenue is determined based on vendor-specific objective evidence (VSOE) of fair value and amortized over the term of the maintenance contract, typically twelve months. Consulting and training revenues are typically
recognized as the services are performed, which services are usually performed on a time and materials basis. Such services primarily consist of implementation services related to the installation of our products and generally do not include
significant customization to or development of the underlying software code.



Our revenue is generally derived from a diverse customer base. No single customer represented greater than 10% of total revenue for the year ended November 30, 2005 or 2004. As of November 30, 2005, no
single customer had a balance in excess of 10% of our net accounts receivable. We establish allowances for doubtful accounts based on our evaluation of collectibility and an allowance for returns and discounts based on specifically identified
credits and historical experience.



Relationship with
Reuters



Reuters is a distributor of our products to
customers in the financial services segment. Pursuant to the terms of our license, maintenance and distribution agreement with Reuters, Reuters has the right to distribute certain of our products in conjunction with the sale by Reuters to end users
of its market data delivery solutions for a specified period of time. We have the right to market and sell our products, other than risk management and market data distribution products, directly and through third party resellers (other than a few
specified resellers) to customers in the financial services market. The limitations on our ability to sell risk management and market data distribution products and on reselling through the specified resellers will expire in May 2008. In addition,
Reuters may embed our products in its solutions.



As of
November 30, 2004, Reuters owned less than 10% of our outstanding common stock. During fiscal year 2005, Reuters reduced its holdings such that as of November 30, 2005, Reuters owned less than 1% of our outstanding common stock. Revenue
from Reuters was $23.0 million, or 5% of our total revenue, in fiscal year 2005.



Critical Accounting Policies, Judgments and Estimates



The discussion and analysis of our financial condition and results of operations are based upon our Consolidated Financial Statements, which have been prepared in accordance with generally accepted accounting principles in the United States
of America. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets and liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities at
the date of our financial statements. Actual results may differ from these estimates under different assumptions or conditions.



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Our significant accounting policies are described in Note 2 to our Consolidated Financial Statements as
of and for the year ended November 30, 2005. We believe our most critical accounting policies and estimates include the following:



| |  |  | revenue recognition;
| | - |  | --------------------



| |  |  | allowances for doubtful accounts, returns and discounts;
| | - |  | --------------------------------------------------------



| |  |  | stock-based compensation;
| | - |  | -------------------------



| |  |  | valuation and impairment of investments;
| | - |  | ----------------------------------------



| |  |  | goodwill and other intangible assets;
| | - |  | -------------------------------------



| |  |  | impairment of long-lived assets;
| | - |  | --------------------------------



| |  |  | restructuring and integration costs; and
| | - |  | ----------------------------------------



| |  |  | accounting for income taxes.
| | - |  | ----------------------------



Revenue Recognition.    We recognize license revenue when a signed contract or other persuasive evidence of an arrangement
exists, the software has been shipped or electronically delivered, the license fee is fixed or determinable, and collection of the resulting receivable is reasonably assured. When contracts contain multiple elements wherein vendor specific objective
evidence exists for all undelivered elements, we account for the delivered elements in accordance with the Residual Method prescribed by AICPA Statement of Position 98-9. Revenue from subscription license agreements, which include
software, rights to future products and maintenance, is recognized ratably over the term of the subscription period. Revenue on shipments to resellers, when subject to certain rights of return and price protection, is recognized when the products
are sold by the resellers to the end-user customer and is recorded net of related costs to the resellers. Providing all other revenue criteria are met, non-refundable, prepaid fees from OEM customers are generally recognized upon delivery and on
going royalty fees are generally recognized upon receipt of royalty reports of units shipped.



We assess whether the fee is fixed or determinable and collection is reasonably assured at the time of the transaction. In determining whether the fee is fixed or determinable we compare the payment terms of the
transaction to our normal payment terms. If a significant portion of a fee is due after our normal payment terms, we account for the fee as not being fixed or determinable and recognize revenue as the payments become due. We assess whether
collection is reasonably assured based on a number of factors, including the customers past transaction history and credit-worthiness. Generally, we do not request collateral from our customers. If we determine that collection of a fee is not
reasonably assured, we defer the fee and recognize revenue at the time collection becomes reasonably assured, which is generally upon receipt of cash.



First-year maintenance typically is sold with the related software license and renewed on an annual basis thereafter. For such arrangements with multiple
elements, we allocate revenue to each component of the arrangement based on the fair value of the undelivered elements. Fair values of ongoing maintenance and support obligations are based on separate sales of renewals to other customers or upon
renewal rates quoted in the contracts when the quoted renewal rates are deemed to be substantive. Maintenance revenue is deferred and recognized ratably over the term of the maintenance and support period. Fair value of services, such as consulting
or training, is based upon separate sales of these services. Consulting and training services are generally billed based on hourly or daily rates and revenues are generally recognized as the services are performed. Consulting services primarily
consist of implementation services related to the installation of our products and generally do not include significant customization to or development of the underlying software code. The determination as to whether services involve significant
production, modification or customization of the underlying software code is a matter of judgment and can materially impact the timing of revenue recognition.



Many customers who license our software also enter into separate professional services arrangements with us. In determining whether professional
services revenue should be accounted for separately from license revenue, we evaluate, among other factors, the nature of our software products, whether they are ready for use by



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the customer upon receipt, the nature of our implementation services, which typically do not involve significant customization to or development of the
underlying software code, the availability of services from other vendors, whether the timing of payments for license revenue is coincident with performance of services and whether milestones or acceptance criteria exist that affect the
realizability of the software license fee. Substantially all of our professional services arrangements are billed on a time and materials basis and accordingly, are recognized as the services are performed. Contracts with fixed or not to exceed fees
are recognized on a proportional performance basis. If there is significant uncertainty about the project completion or receipt of payment for professional services, revenue is deferred until the uncertainty is sufficiently resolved. Training
revenue is recognized as training services are delivered.



For
arrangements that do not qualify for separate accounting for the license and professional services revenues, including arrangements that involve significant modification or customization of the software, that include milestones or customer specific
acceptance criteria that may affect collection of the software license fees, or where payment for the software license is tied to the performance of professional services, software license revenue is generally recognized together with the
professional services revenue using either the percentage-of-completion or completed-contract method. Under the percentage-of-completion method, revenue recognized is equal to the ratio of costs expended to date to the anticipated total contract
costs, based on current estimates of costs to complete the project. If the total estimated costs to complete a project exceed the total contract amount, indicating a loss, the entire anticipated loss would be recognized currently.



Significant management judgments and estimates must be made in connection
with determination of the revenue to be recognized in any accounting period. If we made different judgments or utilized different estimates for any period, material differences in the amount and timing of revenue recognized could result.



Allowance for Doubtful Accounts, Returns and
Discounts.    We establish allowances for doubtful accounts, returns and discounts based on our review of credit profiles of our customers, contractual terms and conditions, current economic trends and historical payment,
return and discount experience. We reassess the allowances for doubtful accounts, returns and discounts each period. Historically, our actual losses and credits have been consistent with these provisions. However, unexpected events or significant
future changes in trends could result in a material impact to our future statements of operations and of cash flows. If we made different judgments or utilized different estimates for any period, material differences in the amount and timing of
revenue or bad debt expense recognized could result. Our allowances for doubtful accounts, returns and discounts as a percentage of net revenues were 1.0%, 1.0% and 0.8% in fiscal years 2005, 2004 and 2003, respectively. See Note 5 to our
Consolidated Financial Statements for a summary of activities during the years reported. Based on our results for the year ended November 30, 2005, a one-percentage point deviation in our allowances for doubtful accounts, returns and discounts
as a percentage of net revenues would have resulted in an increase or decrease in expense of approximately $4.5 million.



Stock-Based Compensation.    We account for stock-based compensation related to employee stock-based compensation plans using
the intrinsic value method prescribed by Accounting Principles Board Opinion (APB) No. 25 and have adopted the disclosure provisions of the Statement of Financial Accounting Standard (SFAS) No. 123 Accounting
for Stock-Based Compensation and SFAS 148 Accounting for Stock-Based CompensationTransition and Disclosurean amendment of SFAS 123. Had we accounted for stock-based compensation related to employee stock-based
compensation plans using the fair value method as prescribed by SFAS 123, our net income would have been reduced by $23.0 million, $38.0 million and $50.1 million in fiscal years 2005, 2004 and 2003, respectively. Also see Note 2 to our Consolidated
Financial Statements.



We account for stock-based compensation
related to stock options granted to consultants based on the fair value estimate using the Black-Scholes option pricing model on the date of grant and as remeasured at each reporting date in compliance with Emerging Issues Task Force
(EITF) Issue No. 96-18 Accounting for Equity Instruments That Are Issued to Other Than Employees for Acquiring, or in Conjunction with Selling, Goods or Services. As a result, stock based compensation expense fluctuates
as the fair market value of our common stock fluctuates. Compensation expense is amortized using the multiple option approach in compliance with the



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Financial Accounting Standards Board (FASB) Interpretation (FIN) No. 28. Pursuant to FIN 44 Accounting for Certain
Transactions involving Stock Compensationan interpretation of APB Opinion No. 25, options assumed in a purchase business combination are valued at the date of acquisition at their fair value calculated using the Black-Scholes option
pricing model. The fair value of assumed options is included as a component of the purchase price. The intrinsic value attributable to unvested options is recorded as unearned stock based compensation and amortized over the remaining vesting period
of the options.



In December 2004, FASB issued SFAS
No. 123 (Revised 2004) Share-Based Payment (SFAS 123(R)), which replaces SFAS 123 and supersedes APB Opinion No. 25, Accounting for Stock Issued to Employees. SFAS 123(R) requires that compensation costs
relating to share-based payment transactions be recognized in financial statements. The pro forma disclosure previously permitted under SFAS 123, which we have provided in Note 2 to the Consolidated Financial Statements, will no longer be an
acceptable alternative to recognition of expenses in the financial statements. Due to the Amendment to Rule 4-01(a) issued in April 2005, SFAS 123(R) must be adopted by the first interim reporting period of the fiscal year that begins on or after
June 15, 2005. Accordingly, we are required to adopt SFAS 123(R) starting in our first quarter of fiscal year 2006. We expect the adoption of SFAS 123(R) will have a material adverse impact on our net income and our net income per share by
decreasing our net income by the additional amount of such stock-based compensation charges, net of taxes. We cannot quantify the amount of such impact at this time.



Valuation and Impairment of Investments.    We determine the appropriate classification of
marketable securities at the time of purchase and evaluate such designation as of each balance sheet date. As of November 30, 2005, $268.9 million of marketable securities have been classified as available-for-sale and are carried at fair value
with unrealized gains and losses, if any, included as a component of accumulated other comprehensive income in stockholders equity. Marketable securities are presented as current assets as they are subject to use within one year in
current operations. Realized gains and losses are recognized based on the specific identification method. As of November 30, 2005, gross unrealized losses on our investment portfolio totaled $2.0 million. The decline in value of
these investments is primarily related to changes in interest rates and is considered temporary in nature.



Our investments also include minority equity investments in privately held companies that are generally carried at cost basis and included in other assets
on the balance sheet. The fair value of these investments is dependent on the performance of the companies in which we invested, as well as the volatility inherent in external markets for these investments. In assessing potential impairment, we
consider these factors as well as each of the companies cash position, earnings/revenue outlook, liquidity and management/ownership. If we believe that an other-than-temporary decline exists, we write down the investment to market value and
record the related write-down as a loss on investments in our consolidated statement of operations. In fiscal year 2005, we did not recognize any impairment loss, while in fiscal years 2004 and 2003, we recognized impairment losses of $0.1 million
and $0.3 million, respectively, relating to the other-than-temporary decline in value of certain equity investments. As of November 30, 2005, the net carrying value of our minority equity investments totaled $2.3 million.



Significant management judgment is required in determining whether an
other-than-temporary decline in the value of our investments exists. Estimating the fair value of non-marketable equity investments in early-stage technology companies is inherently subjective. Changes in our assessment of the valuation of our
investments could materially impact our operating results and financial position in future periods if anticipated events and key assumptions do not materialize or change.



Goodwill and Other Intangible Assets.    Our goodwill and intangible assets result from our
corporate acquisition transactions. In accordance with SFAS 142, Goodwill and Other Intangible Assets, which we adopted on December 1, 2002, goodwill and intangible assets with indefinite useful lives are no longer amortized, but
are instead tested for impairment at least annually or as circumstances indicate their value may no longer be recoverable. We generally perform our annual impairment test at the end of the fiscal year. As we



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operate our business in one reporting segment, our goodwill is tested for impairment at the enterprise level. Goodwill impairment testing is a two-step
process. For the first step, we screen for impairment, and if any possible impairment exists, we undertake a second step of measuring such impairment. Other purchased intangible assets with definite useful lives are amortized on a straight line
basis over their useful lives, and periodically tested for impairment. As of November 30, 2005, we had $261.1 million of goodwill and $64.7 million of intangible assets, and had not recorded any impairment charges. If our estimates or the
related assumptions change in the future, we may be required to record impairment charges to reduce the carrying value of these assets. Changes in the valuation of goodwill and intangible assets could be substantial.



Impairment of Long-Lived Assets.We evaluate
the recoverability of our long-lived assets in accordance with SFAS 144, Accounting for the Impairment or Disposal of Long-Lived Assets. When events or changes in circumstances indicate that the carrying amount of long-lived assets may
not be recoverable, we recognize such impairment in the event the net book value of such assets exceeds the future undiscounted cash flows attributable to such assets. We have not recorded any impairment losses to date. If our estimates or the
related assumptions change in the future, we may be required to record impairment charges to reduce the carrying value of these assets. Changes in the valuation of long-lived assets could be substantial.



Restructuring and Integration Costs.    Our
restructuring charges are comprised primarily of costs related to properties abandoned in connection with facilities consolidation, related write-down of leasehold improvements and severance and associated employee termination costs related to
headcount reductions. For restructuring actions initiated prior to December 31, 2002, we followed the guidance provided by EITF 94-3 Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an
Activity. We recorded the liability related to these termination costs when the plan was approved; the termination benefits were determined and communicated to the employees; the number of employees to be terminated, their locations and job
were specifically identified; and the period of time to implement the plan was set. For restructuring actions initiated after January 1, 2003, we adopted SFAS 146, Accounting for Costs Associated with Exit or Disposal Activities
which requires that a liability for costs associated with an exit or disposal activity be recognized and measured initially at fair value only when the liability is incurred.



Our restructuring charges included accruals for estimated losses on facility costs based on our contractual obligations net
of estimated sublease income based on current comparable market rates for leases. We reassess this liability periodically based on market conditions. Revisions to our estimates of this liability could materially impact our operating results and
financial position in future periods if anticipated events and key assumptions, such as the timing and amounts of sublease rental income, either change or do not materialize. Should facilities operating lease rental rates continue to decrease in
these markets or should it take longer than expected to find a suitable tenant to sublease these facilities, the actual loss could exceed this estimate by approximately $2.8 million.



Accounting for Income Taxes.    We make certain estimates and judgments in determining income tax
expense for financial statement purposes. These estimates and judgments occur in the calculation of certain tax assets and liabilities, which arise from differences in the timing of recognition of revenue and expense for tax and financial statement
purposes.



As part of the process of preparing our Consolidated
Financial Statements, we are required to estimate our income taxes in each of the jurisdictions in which we operate. This process involves us estimating our current tax exposure under the most recent tax laws and assessing temporary differences
resulting from differing treatment of items for tax and accounting purposes. These differences result in deferred tax assets and liabilities, which are included in our Consolidated Balance Sheet.



We assess the likelihood that we will be able to recover our deferred tax
assets. We consider all available evidence, both positive and negative, including historical levels of income, expectations and risks associated with estimates of future taxable income and ongoing prudent and feasible tax planning strategies in
assessing the need



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for the valuation allowance. If recovery is not likely, we increase our provision for taxes by recording a valuation allowance against the deferred tax
assets that we estimate will not ultimately be recoverable. The available positive evidence at November 30, 2005 included three years of historical operating profits and a projection of future income limited to three years which coincides with
the period over which we recorded historical operating profits, due to our lack of visibility into earnings further into the future. As a result of our analysis of all available evidence, both positive and negative, we recorded a partial release of
valuation allowance during fiscal year 2005. We continue to closely monitor available evidence and may adjust our valuation allowance in future periods.



As of November 30, 2005, we believed that the amount of the deferred tax assets recorded on our balance sheet as a result of the partial release of
valuation allowance would ultimately be recovered. However, should there be a change in our ability to recover our deferred tax assets, our tax provision would increase in the period in which we determine that the recovery is not probable. If we
have to re-establish the full valuation allowance, it may result in a charge of $19.6 million to the tax provision.



Of the remaining valuation allowance of approximately $219.3 million as of November 30, 2005, we estimate that when released, approximately $21.7
million will result in an income tax benefit, approximately $7.7 million will be credited to goodwill and approximately $189.9 million relating to stock option exercises and related tax credits will be credited directly to additional paid-in
capital.



We have completed an R&D Credit study for fiscal
years 1999 through 2003. As a result, additional credits have been identified and included in the deferred tax assets as of November 30, 2005. R&D credit carryforwards are approximately $25.3 million and $20.0 million, for federal and
California, respectively.



U.S. income taxes and foreign
withholding taxes have not been provided for on a cumulative total of $20.8 million of undistributed earnings for certain non-U.S. subsidiaries. With the exception of our subsidiaries in the United Kingdom, net undistributed earnings of our foreign
subsidiaries are generally considered to be indefinitely reinvested, and accordingly, no provision for U.S. income taxes has been provided thereon. Upon distribution of these earnings in the form of dividends or otherwise, the company will be
subject to U.S. income taxes net of available foreign tax credits associated with these earnings.



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Results of Operations



The following table sets forth, for the fiscal years indicated, certain consolidated statement of income information as a percentage of total revenue:



|                                             |  |                         |   |  |      |   |  |      |  
|-------------------------------------------- |  | ----------------------- | - |  | ---- | - |  | ---- | -
|                                             |  | Year Ended November 30, |  
|                                             |  | 2005                    |   |  | 2004 |   |  | 2003 |  
|Revenue:                                     |  |                         |   |  |      |   |  |      |  
|License revenue:                             |  |                         |   |  |      |   |  |      |  
|Non-related parties                          |  | 42                      | % |  | 51   | % |  | 46   | %
|Related parties                              |  | 4                       |   |  | 4    |   |  | 7    |  
|                                             |  |                         |   |  |      |   |  |      |  
|Total license revenue                        |  | 46                      |   |  | 55   |   |  | 53   |  
|                                             |  |                         |   |  |      |   |  |      |  
|Service and maintenance revenue:             |  |                         |   |  |      |   |  |      |  
|Non-related parties                          |  | 51                      |   |  | 41   |   |  | 40   |  
|Related parties                              |  | 2                       |   |  | 3    |   |  | 6    |  
|Reimbursable expenses                        |  | 1                       |   |  | 1    |   |  | 1    |  
|                                             |  |                         |   |  |      |   |  |      |  
|Total service and maintenance revenue        |  | 54                      |   |  | 45   |   |  | 47   |  
|                                             |  |                         |   |  |      |   |  |      |  
|Total revenue                                |  | 100                     |   |  | 100  |   |  | 100  |  
|                                             |  |                         |   |  |      |   |  |      |  
|Cost of revenue:                             |  |                         |   |  |      |   |  |      |  
|Cost of license revenue                      |  | 3                       |   |  | 3    |   |  | 3    |  
|Cost of service and maintenance              |  | 25                      |   |  | 21   |   |  | 20   |  
|Cost paid to related parties                 |  |                        |   |  |     |   |  | 1    |  
|                                             |  |                         |   |  |      |   |  |      |  
|Total cost of revenue                        |  | 28                      |   |  | 24   |   |  | 24   |  
|                                             |  |                         |   |  |      |   |  |      |  
|Gross profit                                 |  | 72                      |   |  | 76   |   |  | 76   |  
|                                             |  |                         |   |  |      |   |  |      |  
|Operating expenses:                          |  |                         |   |  |      |   |  |      |  
|Research and development                     |  | 16                      |   |  | 16   |   |  | 24   |  
|Sales and marketing                          |  | 32                      |   |  | 32   |   |  | 42   |  
|General and administrative                   |  | 8                       |   |  | 7    |   |  | 8    |  
|Acquired in-process research and development |  |                        |   |  | 1    |   |  |     |  
|Restructuring charge                         |  | 1                       |   |  | 1    |   |  |     |  
|Amortization of acquired intangible assets   |  | 2                       |   |  | 1    |   |  | 1    |  
|                                             |  |                         |   |  |      |   |  |      |  
|Total operating expenses                     |  | 59                      |   |  | 58   |   |  | 75   |  
|                                             |  |                         |   |  |      |   |  |      |  
|Income from operations                       |  | 13                      |   |  | 18   |   |  | 1    |  
|Interest income                              |  | 3                       |   |  | 2    |   |  | 5    |  
|Interest expense                             |  | (1                      | ) |  | (1   | ) |  |     |  
|Other income (expense), net                  |  |                        |   |  |     |   |  |     |  
|                                             |  |                         |   |  |      |   |  |      |  
|Income before income taxes                   |  | 15                      |   |  | 19   |   |  | 6    |  
|Provision for (benefit from) income taxes    |  | (1                      | ) |  | 7    |   |  | 2    |  
|                                             |  |                         |   |  |      |   |  |      |  
|Net income                                   |  | 16                      | % |  | 12   | % |  | 4    | %
|                                             |  |                         |   |  |      |   |  |      |  



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Total Revenue



|                                   |  |                         |         |          |   |         |  |                   |         |  |                   |   |  |    |  
|---------------------------------- |  | ----------------------- | ------- | -------- | - | ------- |  | ----------------- | ------- |  | ----------------- | - |  | -- | -
|                                   |  | Year Ended November 30, |         | % Change |  
|                                   |  | 2005                    |         | 2004     |   | 2003    |  | Year 2004 to 2005 |         |  | Year 2003 to 2004 |  
|(in thousands, except percentages) |  |                         |        
|Total revenue                      |  | $                       | 445,910 |          | $ | 387,220 |  | $                 | 264,210 |  | 15                | % |  | 47 | %



Total revenue
increased 15% for fiscal year 2005 compared to fiscal year 2004, primarily due to a 40% increase in service and maintenance revenue, offset by a 5% decrease in license revenue. Geographically, our total revenue increased by $35.0 million or 18% in
the United States, $16.2 million or 11% in Europe and $5.5 million or 13% in the Pacific Rim in fiscal year 2005. See Note 13 to the Consolidated Financial Statements for further detail on total revenue by region.



Since June 2004, our consolidated results of operations have included
incremental revenue (and costs) related to the former Staffware operations. Consequently, such incremental revenue has been included in our results for the second half of fiscal year 2004 and fiscal year 2005. Pro forma results as if we had acquired
Staffware at the beginning of fiscal year 2003 are provided in Note 3 to our Consolidated Financial Statement. Due to the structure of our multi-product Enterprise License Agreements, which often combine TIBCO and Staffware products, we are not able
to separately report the portion of revenue attributable solely to the Staffware components.



Total revenue increased 47% for fiscal year 2004 compared to fiscal year 2003, primarily due to incremental revenue from Staffware during fiscal year 2004, our direct sales to customers in the financial services
market beginning in October 2003 (pursuant to our agreement with Reuters) and a general increase in information technology spending by our customers.



Revenue from Reuters was $23.0 million, $28.3 million and $30.7 million representing 5%, 7% and 12% of our total revenue in fiscal years 2005, 2004 and
2003, respectively. Until March 2005, our revenue from Reuters consisted primarily of fees under our license agreement, which includes minimum guaranteed fees of $5.0 million per quarter, reduced by an amount equal to 10% of the license and
maintenance revenues from our sales to financial services companies (and, until October 2004, also reduced by 40% of our maintenance revenue from customers who were transitioned to us by Reuters).



License Revenue and Costs



|                                   |  |                         |         |   |          |   |         |      |  |   |                   |   |  |                   |    |  |    |  
|---------------------------------- |  | ----------------------- | ------- | - | -------- | - | ------- | ---- |  | - | ----------------- | - |  | ----------------- | -- |  | -- | -
|                                   |  | Year Ended November 30, |         |   | % Change |  
|                                   |  | 2005                    |         |   | 2004     |   |         | 2003 |  |   | Year 2004 to 2005 |   |  | Year 2003 to 2004 |   
|(in thousands, except percentages) |  |                         |        
|License revenue                    |  | $                       | 203,888 |   |          | $ | 214,086 |      |  | $ | 140,509           |   |  | (5                | )% |  | 52 | %
|As a percentage of total revenue   |  |                         | 46      | % |          |   | 55      | %    |  |   | 53                | % |  |                   |    |  |    |  
|Cost of license revenue            |  | $                       | 12,694  |   |          | $ | 11,586  |      |  | $ | 8,835             |   |  | 10                | %  |  | 31 | %
|As a percentage of total revenue   |  |                         | 3       | % |          |   | 3       | %    |  |   | 3                 | % |  |                   |    |  |    |  
|As a percentage of license revenue |  |                         | 6       | % |          |   | 5       | %    |  |   | 6                 | % |  |                   |    |  |    |  



We license a wide
range of products to customers in various industries and geographic regions. Cost of license revenue mainly consisted of royalties and amortization of developed technology acquired through corporate acquisitions.



License revenue decreased by $10.2 million or 5% for fiscal year 2005
compared to fiscal year 2004, primarily due to a decrease in revenue from the telecommunications, consumer packaged goods and manufacturing sectors, partially offset by an increase in license revenue from the financial services market. License
revenue increased 52% for fiscal year 2004 compared to fiscal year 2003, primarily due to increased revenue from the financial services, consumer packaged goods, telecommunications and manufacturing sectors, and also due to additional revenue
generated from the Staffware acquisition.



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The total number of license revenue transactions over $100,000 increased to 316 in fiscal year 2005, from
260 in fiscal year 2004, and 225 in fiscal year 2003. The average deal size for transactions over $100,000 was approximately $0.6 million, $0.7 million, and $0.4 million in fiscal years 2005, 2004 and 2003, respectively. The number of transactions
equal to or greater than $1 million was 42, 40 and 18 transactions in fiscal years 2005, 2004 and 2003, respectively. Our total license revenue in any particular period is to a certain extent, dependant on the size and timing of larger license
deals. We expect the number of license transactions over $100,000 to increase in fiscal year 2006, while the size and timing of any particular multi-million dollar deal is more difficult to forecast.



Cost of license revenue mainly consisted of royalty costs and amortization of
developed technology acquired through corporate acquisitions. Cost of license revenue remained approximately 3% of total revenue and 5% to 6% of license revenue in each of fiscal years 2005, 2004 and 2003. As stated above, our fiscal year 2005
financial results include incremental revenue and costs attributable to former Staffware operations; whereas, our fiscal year 2004 financial results only include such revenue and costs from June 2004.



We expect license revenues to be approximately 45% to 55% of our total
revenue and cost of license revenue to remain approximately 5% to 7% of license revenue in fiscal year 2006.



Service and Maintenance Revenue and Costs



|                                                   |  |                         |         |   |          |   |         |      |  |   |                   |   |  |                   |   |  |    |  
|-------------------------------------------------- |  | ----------------------- | ------- | - | -------- | - | ------- | ---- |  | - | ----------------- | - |  | ----------------- | - |  | -- | -
|                                                   |  | Year Ended November 30, |         |   | % Change |  
|                                                   |  | 2005                    |         |   | 2004     |   |         | 2003 |  |   | Year 2004 to 2005 |   |  | Year 2003 to 2004 |  
|(in thousands, except percentages)                 |  |                         |        
|Service and maintenance revenue                    |  | $                       | 242,022 |   |          | $ | 173,134 |      |  | $ | 123,701           |   |  | 40                | % |  | 40 | %
|As a percentage of total revenue                   |  |                         | 54      | % |          |   | 45      | %    |  |   | 47                | % |  |                   |   |  |    |  
|Cost of service and maintenance revenue            |  | $                       | 111,499 |   |          | $ | 81,611  |      |  | $ | 52,370            |   |  | 37                | % |  | 56 | %
|As a percentage of total revenue                   |  |                         | 25      | % |          |   | 21      | %    |  |   | 20                | % |  |                   |   |  |    |  
|As a percentage of service and maintenance revenue |  |                         | 46      | % |          |   | 47      | %    |  |   | 42                | % |  |                   |   |  |    |  



Service and
maintenance revenue increased $68.9 million or 40% for fiscal year 2005 compared to fiscal year 2004, and increased 40% for fiscal year 2004 compared to fiscal year 2003. The increase in fiscal year 2005 was comprised of $33.6 million, or a 52%
increase in consulting and training services revenue, and $35.3 million, or a 33% increase in maintenance revenue. The increase in fiscal year 2004 compared to fiscal year 2003 was comprised of $26.9 million, or a 71% increase in consulting and
training services revenue, and $22.5 million, or a 26% increase in maintenance revenue. Consulting revenue increased due to more comprehensive and larger engagements with respect to a number of accounts and an increased focus on providing more
services to customers. Maintenance revenue increased primarily due to growth in our installed software base and our acquisition of Staffware in third quarter of fiscal year 2004 and ObjectStar in the second quarter of fiscal year 2005. Also, in
accordance with our agreement with Reuters, we began providing maintenance and support services directly to customers transitioned from Reuters in the fourth quarter of fiscal year 2003, which contributed to our growth in service and maintenance
revenue in fiscal year 2004.



Cost of service and maintenance
revenue consists primarily of compensation of professional services and customer support personnel and third-party contractors, and associated expenses related to providing consulting services.



The cost of service and maintenance revenue increased as a percentage of
total revenue throughout the three years ended November 30, 2005, as the relative proportion of consulting revenue increased. The increase in absolute dollars in fiscal year 2005 as compared to the prior year resulted primarily from an increase
of approximately $13.6 million related to personnel compensation, $12.7 million for third-party contractor compensation and consulting fees, and $2.4 million in travel costs. Increased compensation cost was primarily



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due to an increase in professional services and customer support staff during the year. Increased third-party contractor and consulting fees were also
directly related to increased service revenues.



The increase
in absolute dollars of cost of service and maintenance revenue in fiscal year 2004 as compared to fiscal year 2003 resulted primarily from an increase of approximately $14.8 million related to personnel compensation, $9.2 million for third-party
contractor compensation and consulting fees, and $3.8 million in travel costs.



We expect service and maintenance revenue to be approximately 45% to 55% of total revenue in fiscal year 2006. We expect the cost of service and maintenance revenue to increase in absolute dollars and in line with
increasing service and maintenance revenue. Beginning in the first quarter of fiscal year 2006, our cost of service and maintenance will include significant share-based compensation expense calculated using the fair value method as required by SFAS
123(R), however, we cannot quantify the amount of such increase at this time.



Research and Development Expenses



Research and development expenses consist primarily of personnel compensation, third-party contractor fees and related costs associated with the development and enhancement of our suite of products.



|                                   |  |                         |        |   |          |   |        |      |  |   |                   |   |  |                   |   |  |    |   
|---------------------------------- |  | ----------------------- | ------ | - | -------- | - | ------ | ---- |  | - | ----------------- | - |  | ----------------- | - |  | -- | --
|                                   |  | Year Ended November 30, |        |   | % Change |  
|                                   |  | 2005                    |        |   | 2004     |   |        | 2003 |  |   | Year 2004 to 2005 |   |  | Year 2003 to 2004 |  
|(in thousands, except percentages) |  |                         |       
|Research and development expenses  |  | $                       | 73,136 |   |          | $ | 61,100 |      |  | $ | 64,588            |   |  | 20                | % |  | (5 | )%
|As a percentage of total revenue   |  |                         | 16     | % |          |   | 16     | %    |  |   | 24                | % |  |                   |   |  |    |   



The increase in fiscal
year 2005 compared to fiscal year 2004 was primarily due to a $9.5 million increase in personnel compensation as a result of headcount increases both from our acquisitions and our establishment of a new research and development center in India. The
remainder of the increase in research and development expenses included increased travel expenses, depreciation of equipment and software and various license fees. Our fiscal year 2005 financial results include incremental costs attributable to
former Staffware operations; whereas, our fiscal year 2004 financial results only include such costs from June 2004.



The decrease in fiscal year 2004 compared to fiscal year 2003 was primarily due to a $1.1 million decrease in third-party contractor fees and a $4.3
million reduction of facility cost expenses, partially offset by a $2.8 million increase in personnel compensation. The reduction in third party contractor fees was largely the result of renegotiated agreements with various third party
contractors. The purchase of our corporate headquarters in June 2003 also contributed to the reduction of facility expenses in fiscal year 2004. Personnel compensation increased in fiscal year 2004 due to an increase in headcount primarily as a
result of the Staffware acquisition, and an increase in variable incentive compensation.



We believe that continued investment in research and development is critical to attaining our strategic objectives and, as a result, we expect that spending on research and development will increase in absolute
dollars in fiscal year 2006. Beginning in the first quarter of fiscal year 2006, our research and development expenses will include significant share-based compensation expense calculated using the fair value method as required by SFAS 123(R),
however, we cannot quantify the amount of such increase at this time.



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Sales and Marketing Expenses



Sales and marketing expenses consist primarily of personnel and related costs of our direct sales force and marketing staff,
the cost of marketing programs, including customer conferences, promotional materials, trade shows and advertising, and related travel expenses.



|                                   |  |                         |         |   |          |   |         |      |  |   |                   |   |  |                   |   |  |    |  
|---------------------------------- |  | ----------------------- | ------- | - | -------- | - | ------- | ---- |  | - | ----------------- | - |  | ----------------- | - |  | -- | -
|                                   |  | Year Ended November 30, |         |   | % Change |  
|                                   |  | 2005                    |         |   | 2004     |   |         | 2003 |  |   | Year 2004 to 2005 |   |  | Year 2003 to 2004 |  
|(in thousands, except percentages) |  |                         |        
|Sales and marketing expenses       |  | $                       | 140,370 |   |          | $ | 123,486 |      |  | $ | 110,230           |   |  | 14                | % |  | 12 | %
|As a percentage of total revenue   |  |                         | 32      | % |          |   | 32      | %    |  |   | 42                | % |  |                   |   |  |    |  



The increase in fiscal
year 2005 as compared to fiscal year 2004 was primarily due to a $9.5 million increase in personnel compensation, a $2.0 million increase in travel expenses, a $3.6 million increase in facility expenses, partially offset by a $2.1 million reduction
in commission expenses and a $1.7 million decrease in sales referral fees. The increase in personnel compensation was due to an increase in headcount. The lower sales commission resulted from a lower effective rate on commissionable revenue and
lower license revenue. Our fiscal year 2005 financial results include incremental costs attributable to former Staffware operations; whereas, our fiscal year 2004 financial results only include such costs from June 2004.



The increase in fiscal year 2004 as compared to fiscal year 2003 was
primarily due to a $7.2 million increase in personnel compensation, a $6.2 million increase in commission expense and a $2.4 million increase in travel expenses, partially offset by a $2.0 million decrease in marketing program costs and a $1.0
million reduction of facility expenses. The increase in personnel compensation was due to an increase in headcount, most significantly in Europe, primarily as a result of the Staffware acquisition. The higher sales commission was a result of higher
commissionable revenue. The reduction in marketing program costs was due to more specific and targeted advertising efforts. The reduction in facility expenses was attributable to the purchase of our corporate headquarters in June 2003.



We intend to selectively increase staff in our direct sales organization
and to increase our marketing efforts in the coming year and, accordingly, expect that sales and marketing expenditures will increase in absolute dollars in fiscal year 2006. Beginning in the first quarter of fiscal year 2006, our sales and
marketing expenses will include significant share-based compensation expense calculated using the fair value method as required by SFAS 123(R), however, we cannot quantify the amount of such increase at this time.



General and Administrative Expenses



General and administrative expenses consist primarily of personnel and
related costs for general corporate functions, including executive, legal, finance, accounting and human resources.



|                                    |  |                         |        |   |          |   |        |      |  |   |                   |   |  |                   |   |  |    |  
|----------------------------------- |  | ----------------------- | ------ | - | -------- | - | ------ | ---- |  | - | ----------------- | - |  | ----------------- | - |  | -- | -
|                                    |  | Year Ended November 30, |        |   | % Change |  
|                                    |  | 2005                    |        |   | 2004     |   |        | 2003 |  |   | Year 2004 to 2005 |   |  | Year 2003 to 2004 |  
|(in thousands, except percentages)  |  |                         |       
|General and administrative expenses |  | $                       | 37,320 |   |          | $ | 29,048 |      |  | $ | 20,334            |   |  | 28                | % |  | 43 | %
|As a percentage of total revenue    |  |                         | 8      | % |          |   | 7      | %    |  |   | 8                 | % |  |                   |   |  |    |  



The increase in fiscal
year 2005 as compared to fiscal year 2004 was primarily due to a $1.8 million increase in personnel compensation and an $8.9 million increase in consulting and outside services, offset by reductions in other administrative costs. Increased headcount
contributed to total higher personnel costs. Consulting and outside services increased substantially, due to our continuous effort to comply with the requirements of the Sarbanes-Oxley Act (Sarbanes-Oxley), and increased legal, tax
consulting and other professional fees. Our fiscal year 2005 financial results include the incremental costs attributable to former Staffware operations; whereas, our fiscal year 2004 financial results only include such costs from June 2004.



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The increase in fiscal year 2004 as compared to fiscal year 2003 was primarily due to an $8.0 million
increase in personnel compensation, a $2.1 million increase in consulting and outside services and a $1.0 million increase in travel expenses, offset by a $0.9 million reduction in facility expenses, and reductions in other administrative costs.
Increased headcount together with an increase in variable incentive compensation contributed to total higher personnel costs. Consulting and outside services increased due to our initiatives to comply with Sarbanes-Oxley. The reduction in facility
expenses was attributable to the purchase of our corporate headquarters in June 2003.



We will continue to invest in improving our corporate infrastructure to enhance effective management and internal controls and therefore expect that general and administrative spending will increase in absolute
dollars in fiscal year 2006. Beginning in the first quarter of fiscal year 2006, our general and administrative expenses will include significant share-based compensation expense calculated using the fair value method as required by SFAS 123(R),
however, we cannot quantify the amount of such increase at this time.



Stock-Based Compensation



We accounted for
employee stock-based compensation using the intrinsic value method prescribed by APB 25 as discussed in Note 2 to our Consolidated Financial Statements. Stock-based compensation expense principally relates to employee stock options assumed in
acquisitions and stock options granted to consultants. Stock-based compensation expense related to stock options granted to consultants is recognized as earned using the multiple option method and is recorded by expense category. At each reporting
date, we re-measure consultant stock options using the Black-Scholes option-pricing model. As a result, stock-based compensation expense will fluctuate.



The stock-based compensation expenses have been incorporated into the respective cost or expense lines in the Consolidated Income Statement, and are not
separately shown on the Consolidated Income Statement because such amounts were insignificant in fiscal year 2005 and 2004. The following table summarizes the expenses:



|                                        |  |                         |     |   |          |   |     |      |  |   |                   |   |  |                   |    |  |     |   
|--------------------------------------- |  | ----------------------- | --- | - | -------- | - | --- | ---- |  | - | ----------------- | - |  | ----------------- | -- |  | --- | --
|                                        |  | Year Ended November 30, |     |   | % Change |  
|                                        |  | 2005                    |     |   | 2004     |   |     | 2003 |  |   | Year 2004 to 2005 |   |  | Year 2003 to 2004 |   
|(in thousands, except percentages)      |  |                         |    
|Stock-based compensation expenses:      |  |                         |     |   |          |   |     |      |  |   |                   |   |  |                   |    |  |     |   
|In cost of revenue                      |  | $                       | 14  |   |          | $ | 34  |      |  | $ | 201               |   |  |                   |    |  |     |   
|In operating expenses                   |  |                         | 115 |   |          |   | 209 |      |  |   | 862               |   |  |                   |    |  |     |   
|                                        |  |                         |     |   |          |   |     |      |  |   |                   |   |  |                   |    |  |     |   
|Total stock-based compensation expenses |  | $                       | 129 |   |          | $ | 243 |      |  | $ | 1,063             |   |  | (47               | )% |  | (77 | )%
|                                        |  |                         |     |   |          |   |     |      |  |   |                   |   |  |                   |    |  |     |   
|As a percentage of total revenue        |  |                         |    | % |          |   |    | %    |  |   |                  | % |  |                   |    |  |     |   



The decrease in
stock-based compensation was mainly the result of continuous amortization of unearned stock-based compensation cost brought forward from prior years, with minimal additions.



As prescribed by SFAS 123(R) issued in December 2004, we will be required to recognize the compensation costs relating to
share-based payment transactions in our financial statements, using the fair value method, starting from our first fiscal quarter of 2006. We expect the adoption of SFAS 123(R) will increase our share-based compensation expense significantly,
however we cannot quantify the amount of such increase at this time.



Acquired In-Process Research and Development



|                                                      |  |                         |   |   |          |   |       |      |  |   |                   |   |  |                   |    |  |    
|----------------------------------------------------- |  | ----------------------- | - | - | -------- | - | ----- | ---- |  | - | ----------------- | - |  | ----------------- | -- |  | ---
|                                                      |  | Year Ended November 30, |   |   | % Change
|                                                      |  | 2005                    |   |   | 2004     |   |       | 2003 |  |   | Year 2004 to 2005 |   |  | Year 2003 to 2004
|(in thousands, except percentages)                    |  |                        
|Acquired in-process research and development expenses |  | $                       |  |   |          | $ | 2,200 |      |  | $ |                  |   |  | (100              | )% |  | N/A
|As a percentage of total revenue                      |  |                         |  | % |          |   | 1     | %    |  |   |                  | % |  |                   |    |  |    



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In fiscal year 2004, we estimated that $2.2 million of the purchase price of Staffware represented
acquired in-process research and development (IPRD) that had not yet reached technological feasibility and had no alternative future use. Accordingly, this amount was immediately charged to expense upon consummation of the acquisition.
We calculated the value of IPRD by estimating the expected cash flows from the projects once commercially viable, discounting the net cash flows back to their present value and then applying a percentage of completion. In determining the value
ultimately assigned to IPRD we considered the stage of completion, complexity of work to date, difficulty of completing the remaining development, costs already incurred and the expected cost to complete the project. As of November 30, 2005, we
had substantially completed the Staffware projects that were in process at the date of the acquisition.



Restructuring Charge



|                                   |  |                         |       |   |          |   |       |      |  |   |                   |   |  |                   |   |  |    |  
|---------------------------------- |  | ----------------------- | ----- | - | -------- | - | ----- | ---- |  | - | ----------------- | - |  | ----------------- | - |  | -- | -
|                                   |  | Year Ended November 30, |       |   | % Change |  
|                                   |  | 2005                    |       |   | 2004     |   |       | 2003 |  |   | Year 2004 to 2005 |   |  | Year 2003 to 2004 |  
|(in thousands, except percentages) |  |                         |      
|Restructuring charge               |  | $                       | 3,905 |   |          | $ | 2,186 |      |  | $ | 1,100             |   |  | 79                | % |  | 99 | %
|As a percentage of total revenue   |  |                         | 1     | % |          |   | 1     | %    |  |   |                  | % |  |                   |   |  |    |  



During fiscal year
2005, we initiated a restructuring plan designed to re-align our resources and cost structure, and accordingly recognized a restructuring charge of approximately $3.9 million for the resulting workforce reduction. The restructuring plan eliminated
49 employees, across all functions and primarily in our European operations. As of November 30, 2005, all such employees have been terminated and of the $3.9 million restructuring charge, $3.2 million was paid, and the remaining $0.7 million
accrual is expected to be utilized in fiscal year 2006.



During
fiscal year 2004, we recorded $2.2 million in restructuring charges related to properties vacated in connection with facilities consolidation. The additional facilities charges resulted from revisions to our estimates of future sublease income due
to further deterioration of real estate market conditions. The estimated facility costs were based on our contractual obligations, net of estimated sublease income, based on current comparable rates for leases in their respective markets. Should
facilities rental rates continue to decrease in these markets or should it take longer than expected to find a suitable tenant to sublease these facilities, the actual loss could exceed this estimate by up to $2.8 million.



During the first quarter of fiscal year 2003, we recorded a restructuring
charge of $1.1 million related to a reduction in headcount to align our cost structure with changing market conditions. This reduction of approximately 44 employees was comprised of 60% sales and marketing staff, 5% general and administrative staff,
and 35% research and development staff. All severance actions were completed by August 31, 2003.



Also see Note 8 Accrued Restructuring and Integration Costs to our Consolidated Financial Statements.



Amortization of Acquired Intangible Assets



Intangible assets acquired through corporate acquisitions are comprised of
the estimated value of developed technologies, patents, trademarks, established customer bases, non-compete agreements, as well as maintenance and OEM customer royalty agreements. Amortization of developed technologies is recorded as a cost of
revenue, and amortization of other acquired intangibles is included in operating expenses.



|                                            |  |                         |        |   |          |   |        |      |  |   |                   |   |  |                   |   |  |    |  
|------------------------------------------- |  | ----------------------- | ------ | - | -------- | - | ------ | ---- |  | - | ----------------- | - |  | ----------------- | - |  | -- | -
|                                            |  | Year Ended November 30, |        |   | % Change |  
|                                            |  | 2005                    |        |   | 2004     |   |        | 2003 |  |   | Year 2004 to 2005 |   |  | Year 2003 to 2004 |  
|(in thousands, except percentages)          |  |                         |       
|Amortization of acquired intangible assets: |  |                         |        |   |          |   |        |      |  |   |                   |   |  |                   |   |  |    |  
|In cost of revenue                          |  | $                       | 5,958  |   |          | $ | 6,702  |      |  | $ | 4,767             |   |  |                   |   |  |    |  
|In operating expenses                       |  |                         | 8,912  |   |          |   | 5,253  |      |  |   | 1,997             |   |  |                   |   |  |    |  
|                                            |  |                         |        |   |          |   |        |      |  |   |                   |   |  |                   |   |  |    |  
|Total amortization expenses                 |  | $                       | 14,870 |   |          | $ | 11,955 |      |  | $ | 6,764             |   |  | 24                | % |  | 77 | %
|                                            |  |                         |        |   |          |   |        |      |  |   |                   |   |  |                   |   |  |    |  
|As a percentage of total revenue            |  |                         | 3      | % |          |   | 3      | %    |  |   | 3                 | % |  |                   |   |  |    |  



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The increase in amortization expense in fiscal year 2005 as compared to fiscal year 2004 was primarily
due to a full year of amortization related to intangible assets acquired from Staffware, and additional amortization related to intangible assets acquired from ObjectStar in second quarter of fiscal year 2005. The increase in amortization expense in
fiscal year 2004 as compared to fiscal year 2003 was primarily due to the amortization of acquired intangible assets from our acquisitions of Staffware and General Interface Corp. (General Interface) in the second half of fiscal year
2004.



We expect the amortization of acquired intangible assets
to be approximately $14.8 million for fiscal year 2006, provided that there are no new acquisitions.



Interest Income



|                                   |  |                         |        |   |          |   |       |      |  |   |                   |   |  |                   |   |  |     |   
|---------------------------------- |  | ----------------------- | ------ | - | -------- | - | ----- | ---- |  | - | ----------------- | - |  | ----------------- | - |  | --- | --
|                                   |  | Year Ended November 30, |        |   | % Change |  
|                                   |  | 2005                    |        |   | 2004     |   |       | 2003 |  |   | Year 2004 to 2005 |   |  | Year 2003 to 2004 |  
|(in thousands, except percentages) |  |                         |       
|Interest income                    |  | $                       | 13,318 |   |          | $ | 8,436 |      |  | $ | 12,536            |   |  | 58                | % |  | (33 | )%
|As a percentage of total revenue   |  |                         | 3      | % |          |   | 2     | %    |  |   | 5                 | % |  |                   |   |  |     |   



The increase in
interest income in fiscal year 2005 compared to fiscal year 2004 was primarily due to the effect of rising interest rates on our investments.



The decrease in interest income in fiscal year 2004 compared to fiscal year 2003 was primarily due to the decline in interest rates on our investments
combined with a decrease in our investment asset base as a result of our repurchase and retirement of $115.0 million of our common stock from Reuters, as well as the net cash outlay of $115.0 million for the Staffware and General Interface
acquisitions.



Interest Expense



|                                   |  |                         |       |   |          |   |       |      |  |   |                   |   |  |                   |    |  |     |  
|---------------------------------- |  | ----------------------- | ----- | - | -------- | - | ----- | ---- |  | - | ----------------- | - |  | ----------------- | -- |  | --- | -
|                                   |  | Year Ended November 30, |       |   | % Change |  
|                                   |  | 2005                    |       |   | 2004     |   |       | 2003 |  |   | Year 2004 to 2005 |   |  | Year 2003 to 2004 |   
|(in thousands, except percentages) |  |                         |      
|Interest expense                   |  | $                       | 2,711 |   |          | $ | 2,771 |      |  | $ | 1,205             |   |  | (2                | )% |  | 130 | %
|As a percentage of total revenue   |  |                         | 1     | % |          |   | 1     | %    |  |   |                  | % |  |                   |    |  |     |  



Interest expense is
related to the mortgage note payable for the purchase of our corporate headquarters in June 2003. We recorded a $54.0 million mortgage note payable to a financial institution collateralized by the commercial real property acquired. The balance of
the mortgage note payable as of November 30, 2005 was $50.1 million. The mortgage note payable carries a fixed annual interest rate of 5.09% and a 20-year amortization. The principal balance that will be remaining at the end of the 10-year term
of $33.9 million will be due as a final balloon payment on July 1, 2013.



Interest expense declined slightly for fiscal year 2005 compared to fiscal year 2004 due to principal amortization.



Interest expense increased for fiscal year 2004 compared to fiscal year 2003 due to the fact that the mortgage note was entered into in June 2003, so
interest expense was incurred only for part of fiscal year 2003, as compared to the entire year for fiscal year 2004.



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Other Income (Expenses), net



Other income (expenses), net, includes realized gains and losses on investments, foreign exchange gain (loss) and other
miscellaneous income and expense items.



|                                               |  |                         |        |   |          |   |        |      |  |   |                   |   |  |                   |   |  |      |   
|---------------------------------------------- |  | ----------------------- | ------ | - | -------- | - | ------ | ---- |  | - | ----------------- | - |  | ----------------- | - |  | ---- | --
|                                               |  | Year Ended November 30, |        |   | % Change |  
|                                               |  | 2005                    |        |   | 2004     |   |        | 2003 |  |   | Year 2004 to 2005 |   |  | Year 2003 to 2004 |  
|(in thousands, except percentages)             |  |                         |       
|Other income (expenses):                       |  |                         |        |   |          |   |        |      |  |   |                   |   |  |                   |   |  |      |   
|Foreign exchange gain (loss)                   |  | $                       | (1,445 | ) |          | $ | (2,326 | )    |  | $ | 738               |   |  |                   |   |  |      |   
|Realized gain (loss) on short-term investments |  |                         | (275   | ) |          |   | (416   | )    |  |   | 2,924             |   |  |                   |   |  |      |   
|Realized gain (loss) on long-term investments  |  |                         |       |   |          |   | 14     |      |  |   | 84                |   |  |                   |   |  |      |   
|Other income (expense), net                    |  |                         | 120    |   |          |   | 28     |      |  |   | (70               | ) |  |                   |   |  |      |   
|                                               |  |                         |        |   |          |   |        |      |  |   |                   |   |  |                   |   |  |      |   
|Total other income (expenses), net             |  | $                       | (1,600 | ) |          | $ | (2,700 | )    |  | $ | 3,676             |   |  | 41                | % |  | (173 | )%
|                                               |  |                         |        |   |          |   |        |      |  |   |                   |   |  |                   |   |  |      |   
|As a percentage of total revenue               |  |                         |       | % |          |   | (1     | )%   |  |   | 1                 | % |  |                   |   |  |      |   



Foreign exchange loss
in fiscal year 2005 and 2004 was primarily attributable to the volatility of the U.S. dollar against the Euro and the British pound. Realized gain (loss) on short-term investments represents gains or losses realized when such short-term investments
are sold and when other-than-temporary impairment on individual securities is recorded. The difference between the realized gain in fiscal year 2003 compared to the realized loss in fiscal year 2004 was primarily due to a rising interest rate
environment in 2004 compared to 2003.



Income Taxes



|                                        |  |                         |        |    |          |   |        |      |  |   |                   |   |  |                   |    |  |     |  
|--------------------------------------- |  | ----------------------- | ------ | -- | -------- | - | ------ | ---- |  | - | ----------------- | - |  | ----------------- | -- |  | --- | -
|                                        |  | Year Ended November 30, |        |    | % Change |  
|                                        |  | 2005                    |        |    | 2004     |   |        | 2003 |  |   | Year 2004 to 2005 |   |  | Year 2003 to 2004 |   
|(in thousands, except percentages)      |  |                         |       
|Provision for (benefit from) income tax |  | $                       | (5,474 | )  |          | $ | 28,795 |      |  | $ | 6,043             |   |  | (119              | )% |  | 377 | %
|Effective tax rate                      |  |                         | (8.2   | )% |          |   | 39.1   | %    |  |   | 34.6              | % |  |                   |    |  |     |  



Our effective tax rate
was (8.2)%, 39.1% and 34.6% for the fiscal years ended November 30, 2005, 2004 and 2003, respectively. For fiscal year 2005, the decrease in the effective tax rate is primarily due to the tax benefit from the partial release of the valuation
allowance.



We make certain estimates and judgments in
determining income tax expense for financial statement purposes. These estimates and judgments occur in the calculation of certain tax assets and liabilities, which arise from differences in the timing of recognition of revenue and expense for tax
and financial statement purposes.



As part of the process of
preparing our Consolidated Financial Statements, we are required to estimate our income taxes in each of the jurisdictions in which we operate. This process involves us estimating our current tax exposure under the most recent tax laws and assessing
temporary differences resulting from differing treatment of items for tax and accounting purposes. These differences result in deferred tax assets and liabilities, which are included in our Consolidated Balance Sheet.



We assess the likelihood that we will be able to recover our deferred tax
assets. We consider all available evidence, both positive and negative, including historical levels of income, expectations and risks associated with estimates of future taxable income and ongoing prudent and feasible tax planning strategies in
assessing the need for the valuation allowance. If recovery is not likely, we increase our provision for taxes by recording a valuation allowance against the deferred tax assets that we estimate will not ultimately be recoverable. The available
positive evidence at November 30, 2005 included three years of historical operating profits and a projection of future income limited to three years which coincides with the period over which we recorded historical operating



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profits, due to our lack of visibility into earnings further into the future. As a result of our analysis of all available evidence, both positive and
negative, we recorded a partial release of valuation allowance in fiscal year 2005. We continue to closely monitor available evidence and may adjust our valuation allowance in future periods.



As of November 30, 2005, we believed that the amount of the deferred tax
assets recorded on our balance sheet as a result of the partial release of valuation allowance would ultimately be recovered. However, should there be a change in our ability to recover our deferred tax assets, our tax provision would increase in
the period in which we determine that the recovery is not probable. If we have to re-establish the full valuation allowance, it may result in a charge of $19.6 million to the tax provision.



Of the remaining valuation allowance of approximately $219.3 million at
November 30, 2005, we estimate that when released, approximately $21.7 million will result in an income tax benefit, approximately $7.7 million will be credited to goodwill and approximately $189.9 million relating to stock option exercises and
related tax credits will be credited directly to additional paid-in capital.



Our income taxes payable for federal purposes have been reduced by the tax benefits associated with the exercise of employee stock options during the year and utilization of net operating loss carryover applicable to
both stock options and acquired entities. The benefits applicable to stock options were credited directly to stockholders equity and amounted to $26.3 million and $6.0 million for fiscal years 2005 and 2004, respectively. Of the $26.3 million
for fiscal year 2005, $15.9 million reduced taxes payable in the current year and therefore is shown as an increase to cash flow from operating activities on the statement of cash flows. The remaining balance of $10.4 million represents the partial
release of valuation allowance against deferred tax assets that resulted from stock option benefits and, accordingly, was credited directly to stockholders equity. The benefits applicable to acquired entities were credited directly to goodwill
and amounted to $1.2 million and $4.3 million for fiscal years 2005 and 2004, respectively.



As of November 30, 2005, our federal and state net operating loss carryforwards for income tax purposes were $445.7 million and $153.7 million, respectively, which expire through 2023. As of November 30,
2005, our federal and state tax credit carryforwards for income tax purposes were $30.6 million and $20.0 million, respectively, which expire through 2025.



In the event of a change in ownership, as defined under federal and state tax laws, our net operating loss and tax credit carryforwards may be subject to
annual limitations. The annual limitations may result in the expiration of the net operating loss and tax credit carryforwards before utilization.



Liquidity and Capital Resources



Current Cash Flows



As of November 30, 2005, we had cash, cash equivalents and short-term investments totaling $477.6 million, representing an increase of $4.1 million
from November 30, 2004. Our total cash and cash equivalent balance was $208.7 million as of November 30, 2005. Our short-term available-for-sales investments totaled $268.9 million, primarily in high grade corporate bonds and U.S.
government debt securities.



Net cash provided by operating
activities in fiscal year 2005 was $82.8 million, resulting from net income of $72.5 million, adjusted for non-cash charges including $29.9 million of depreciation and amortization and $17.0 million tax benefits from acquisitions and employee stock
options, less $21.9 million for deferred income tax valuation allowance release, and adjusted for net change in assets and liabilities (net of acquisitions), including a $18.9 million increase in deferred revenue mainly related to increased
maintenance revenue, a $10.4 million decrease in accrued restructuring and excess facilities mainly due to payments during the year, and $23.6 million net cash used for other assets and liabilities.



To the extent that non-cash items increase or decrease our future operating
results, there will be no corresponding impact on our cash flows. After excluding the effects of these non-cash charges, the primary changes in cash flows relating to operating activities result from changes in working capital. Our primary source of
operating cash flows is the collection of accounts receivable from our customers, including maintenance which



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is typically billed annually in advance. Our operating cash flows are also impacted by the timing of payments to our vendors for accounts payable. We
generally pay our vendors and service providers in accordance with the invoice terms and conditions. The timing of cash payments in future periods will be impacted by the terms of accounts payable arrangements and the timing of our cash inflows.



Net cash used for investing activities was $17.2 million in
fiscal year 2005, resulting primarily from the use of $21.4 million for the acquisition of the assets of ObjectStar, $3.4 million for the acquisition of the assets of Velosel (also see Note 3 Business Combinations), and $14.9 million for
capital expenditures, partially offset by net sales of short term investments of $23.4 million.



Net cash used for financing activities was $32.4 million in fiscal year 2005, primarily from our $48.3 million repurchase of shares of common stock on the
open market, less $17.6 million cash received from the exercise of stock options and the sale of stock under our Employee Stock Purchase Program. In December 2005, our Board of Directors approved an additional eighteen-month Stock Repurchase Plan
for the repurchase of up to $100 million of our common stock. The timing and amount of any repurchases under the plan will depend upon market conditions and other corporate considerations.



Starting in fiscal year 2006, in accordance with SFAS 123(R), a part of the
tax benefit related to share-based payments will be classified as cash flows from financing activities, instead of cash flows from operating activities. As a result, our cash flows from operating activities are expected to decrease, offset by an
increase in cash flows from financing activities.



We
anticipate our operating expenses will grow in absolute dollars and in line with total revenue for the foreseeable future, and we intend to fund our operating expenses through cash flows from operations. Our capital expenditures are expected to be
approximately $10.0 million to $15.0 million for fiscal year 2006. We expect to use primarily our current cash resources to fund capital expenditures, acquisitions or investments in complementary businesses, technologies or product lines, and
repurchases of our common stock. We believe that our current cash, cash equivalents and short-term investments together with expected cash flows from operations will be sufficient to meet our anticipated cash requirements for working capital,
capital expenditures, and currently approved stock repurchases for at least the next twelve months.



Commitments



In June 2003, we purchased our corporate headquarters with a $54.0 million mortgage note to lower our operating costs. Under the terms of the note, a
balloon payment of $33.9 million, representing the remaining principal balance, will be due on July 1, 2013, the end of the 10-year term. Under the currently applicable terms of the mortgage note agreements, we are prohibited from acquiring
another company without prior consent from the lender unless we maintain at least $300.0 million of cash and cash equivalents, and meet other non-financial terms as defined in the agreements. In addition, we are subject to certain non-financial
covenants as defined in the agreements. We were in compliance with all covenants as of November 30, 2005.



In conjunction with the purchase of our corporate headquarters, we entered into a 51-year land lease of the property. The lease was paid in advance for a
total of $28.0 million, but is subject to adjustment every ten years based upon fluctuations in fair market value of the land. We have the option to prepay any rent increase resulting from fluctuations in fair market value of the land.



We have a $20.0 million revolving line of credit that matures on
June 21, 2006. The revolving line of credit is available for cash borrowings and for the issuance of letters of credit up to $20.0 million. As of November 30, 2005, no borrowings were outstanding under the facility and a $13.0 million
irrevocable letter of credit was outstanding, leaving $7.0 million of available credit for additional letters of credit or cash loans. The $13.0 million irrevocable letter of credit outstanding was issued in connection with the mortgage note
payable. The letter of credit automatically renews for successive one-year periods, until the mortgage note payable has been satisfied in full. We are required to maintain a minimum of $40.0 million in unrestricted cash, cash equivalents,



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and short-term investments net of total current and long-term indebtedness as well as comply with other non-financial covenants defined in the agreement.
During fiscal 2005, we were in compliance with all covenants under the revolving line of credit.



As of November 30, 2005, we had $1.8 million in restricted cash in connection with bank guarantees issued by some of our international subsidiaries.
The cash collateral is presented as restricted cash and included in Other Assets on the Consolidated Balance Sheet as of November 30, 2005.



As of November 30, 2005, our contractual commitments associated with indebtedness, lease obligations and operational restructuring are as follows,
(in thousands):



|                                   |  |       |         |   |      |   |        |      |  |   |        |   |  |      |        |   |      |   |        |            |  |   |        |   |  |   |        |  
|---------------------------------- |  | ----- | ------- | - | ---- | - | ------ | ---- |  | - | ------ | - |  | ---- | ------ | - | ---- | - | ------ | ---------- |  | - | ------ | - |  | - | ------ | -
|                                   |  | Total |         |   | 2006 |   |        | 2007 |  |   | 2008   |   |  | 2009 |        |   | 2010 |   |        | Thereafter | 
|Operating commitments:             |  |       |         |   |      |   |        |      |  |   |        |   |  |      |        |   |      |   |        |            |  |   |        |   |  |   |        |  
|Debt principal                     |  | $     | 50,143  |   |      | $ | 1,798  |      |  | $ | 1,892  |   |  | $    | 1,990  |   |      | $ | 2,094  |            |  | $ | 2,203  |   |  | $ | 40,166 |  
|Debt interest                      |  |       | 16,605  |   |      |   | 2,511  |      |  |   | 2,417  |   |  |      | 2,319  |   |      |   | 2,215  |            |  |   | 2,106  |   |  |   | 5,037  |  
|Operating leases                   |  |       | 27,832  |   |      |   | 6,725  |      |  |   | 4,878  |   |  |      | 3,730  |   |      |   | 3,023  |            |  |   | 2,377  |   |  |   | 7,099  |  
|                                   |  |       |         |   |      |   |        |      |  |   |        |   |  |      |        |   |      |   |        |            |  |   |        |   |  |   |        |  
|Total operating commitments        |  |       | 94,580  |   |      |   | 11,034 |      |  |   | 9,187  |   |  |      | 8,039  |   |      |   | 7,332  |            |  |   | 6,686  |   |  |   | 52,302 |  
|Restructuring-related commitments: |  |       |         |   |      |   |        |      |  |   |        |   |  |      |        |   |      |   |        |            |  |   |        |   |  |   |        |  
|Gross lease obligations            |  |       | 39,789  |   |      |   | 7,761  |      |  |   | 7,700  |   |  |      | 7,779  |   |      |   | 7,816  |            |  |   | 8,051  |   |  |   | 682    |  
|Sublease income                    |  |       | (8,392  | ) |      |   | (2,818 | )    |  |   | (2,013 | ) |  |      | (1,293 | ) |      |   | (1,129 | )          |  |   | (1,050 | ) |  |   | (89    | )
|                                   |  |       |         |   |      |   |        |      |  |   |        |   |  |      |        |   |      |   |        |            |  |   |        |   |  |   |        |  
|Net lease obligations              |  |       | 31,397  |   |      |   | 4,943  |      |  |   | 5,687  |   |  |      | 6,486  |   |      |   | 6,687  |            |  |   | 7,001  |   |  |   | 593    |  
|                                   |  |       |         |   |      |   |        |      |  |   |        |   |  |      |        |   |      |   |        |            |  |   |        |   |  |   |        |  
|Total commitments                  |  | $     | 125,977 |   |      | $ | 15,977 |      |  | $ | 14,874 |   |  | $    | 14,525 |   |      | $ | 14,019 |            |  | $ | 13,687 |   |  | $ | 52,895 |  
|                                   |  |       |         |   |      |   |        |      |  |   |        |   |  |      |        |   |      |   |        |            |  |   |        |   |  |   |        |  



Future minimum lease
payments under restructured non-cancelable operating leases as of November 30, 2005 include $28.1 million provided for as accrued restructuring costs and $1.1 million as accrued acquisition integration liabilities related to our acquisition of
Staffware. See also Note 8 to our Consolidated Financial Statements for further details on accrued restructuring costs.



Indemnification



Our software license agreements typically provide for indemnification of customers for intellectual property infringement claims. To date, no such claims
have been filed against us. We also warrant to customers that software products operate substantially in accordance with specifications. Historically, minimal costs have been incurred related to product warranties, and as such no accruals for
warranty costs have been made. In addition, we indemnify our officers and directors under the terms of indemnity agreements entered into with them, as well as pursuant to our certificate of incorporation, bylaws, and applicable provisions of
Delaware law. To date, we have not incurred any costs related to these indemnification arrangements.



Off Balance Sheet Arrangements



As of November 30, 2005, we had no off balance sheet arrangements as defined in Item 303(a)(4) of Regulation S-K.



Recent Accounting Pronouncements



In November 2005, FASB issued FSP FAS 115-1 and FAS 124-1, The Meaning of Other-Than-Temporary Impairment and Its Application to
Certain Investments (FSP FAS 115-1), which provides guidance on determining when investments in certain debt and equity securities are considered impaired, whether that impairment is other-than-temporary, and on measuring such
impairment loss. FSP FAS 115-1 also includes



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accounting considerations subsequent to the recognition of an other-than temporary impairment and requires certain disclosures about unrealized losses that
have not been recognized as other-than-temporary impairments. FSP FAS 115-1 is required to be applied to reporting periods beginning after December 15, 2005. We are required to adopt FSP FAS 115-1 in the second quarter of fiscal 2006. We
do not expect that the adoption of the statement will have a material impact on our consolidated results or financial condition.



In May 2005, FASB issued SFAS 154, Accounting Changes and Error Correctionsa replacement of APB Opinion No. 20 and FASB Statement
No. 3. SFAS 154 changes the requirements for the accounting for and reporting of a change in accounting principle, and applies to all voluntary changes in accounting principle. It also applies to changes required by an accounting
pronouncement in the unusual instance that the pronouncement does not include specific transition provisions. This statement requires retrospective application to prior periods financial statements of changes in accounting principle, unless it
is impracticable to determine either the period-specific effects or the cumulative effect of the change. SFAS 154 is effective for accounting changes made in fiscal years beginning after December 15, 2005. We do not expect that adoption of this
statement will have a material impact on our results of operations or financial condition.



In December 2004, FASB issued SFAS 123(R), Share-Based Payment (Revised 2004), which replaces SFAS 123 and supersedes APB 25. In March 2005, the SEC issued Staff Accounting Bulletin (SAB)
No. 107, providing supplemental implementation guidance for SFAS 123(R). In April 2005, the SEC issued Amendment to Rule 04-01(a) of Regulation S-X Regarding the Compliance Date for Statement of Financial Accounting Standard No.123(R),
Share-Based Payment (the Amendment to Rule 4-01(a)), changing the effective date for most public companies to adopt SFAS 123(R) to the first interim reporting period of a companys fiscal year that begins on or
after June 15, 2005. Under the Amendment to Rule 4-01(a), we are now required to adopt SFAS 123(R) in our first quarter of fiscal year 2006.



SFAS 123(R) requires that compensation costs relating to share-based payment transactions be recognized in the financial statements. The pro forma
disclosure previously permitted under SFAS 123 will no longer be an acceptable alternative to recognition of expense in the financial statements. SFAS 123(R) also provides three alternative transition methods for its first adoption. Up to the end of
fiscal year 2005, we had measured compensation costs related to share-based payments under APB 25 and as allowed by SFAS 123, and provided pro forma disclosure in notes to our financial statements as required by SFAS 123. On adoption of SFAS 123(R),
we will use the modified prospective application transition method. SFAS 123(R) also requires a classification change in the statement of cash flows, whereby a portion of the tax benefits from stock options will be moved from cash from operating
activities to cash from financing activities, without changing the total cash flows. We are still in the process of finalizing our study on the impact of applying various other provisions of SFAS 123(R). We expect the adoption of SFAS 123(R), SAB
107 and related pronouncements, will have a materially adverse impact on our net income and net income per share. However, we currently cannot accurately estimate the effect of such impact, as such costs will fluctuate as the fair market value of
our common stock fluctuates.



In December 2004, FASB issued
SFAS 153, Exchanges of Nonmonetary Assetsan amendment to APB Opinion No. 29. This statement amends APB 29 to eliminate the exception for nonmonetary exchanges of similar productive assets and replaces it with a general
exception for exchanges of nonmonetary assets that do not have commercial substance. A nonmonetary exchange has commercial substance if the future cash flows of the entity are expected to change significantly as a result of the exchange. Adoption of
this statement is not expected to have a material impact on our results of operations or financial condition.



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|ITEM 7A. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|-------- | ----------------------------------------------------------



We invest in marketable securities in accordance with our investment policy. The primary objectives of our investment policy are to preserve principal,
maintain proper liquidity to meet operating needs and maximize yields. Our investment policy specifies credit quality standards for our investments and limits the amount of credit exposure to any single issue, issuer or type of investment.



At the end of fiscal years 2005, 2004 and 2003, we had an
investment portfolio of fixed income securities totaling $268.9 million, $292.7 million and $521.1 million, excluding those classified as cash and cash equivalents and restricted funds, respectively. Our investments consist primarily of bank and
finance notes, various government obligations and asset-backed securities. These securities are classified as available-for-sale and are recorded on the balance sheet at fair market value with unrealized gains or losses reported as a separate
component of stockholders equity. Unrealized losses are charged against income when a decline in fair market value is determined to be other-than-temporary. The specific identification method is used to determine the cost of securities sold.



The investment portfolio is subject to interest rate risk and
will fall in value in the event market interest rates increase. If market interest rates were to increase immediately and uniformly by 100 basis points from levels as of November 30, 2005, the fair market value of the portfolio would decline by
approximately $1.3 million.



We develop products in the United
States of America and sell in North America, South America, Europe, the Pacific Rim and the Middle East. As a result, our financial results could be affected by factors such as changes in foreign currency exchange rates or weak economic conditions
in foreign markets. The acquisition of Staffware increased our international sales and increased our exposure to foreign exchange fluctuations. A majority of sales are currently made in U.S. dollars; however, a strengthening of the dollar could make
our products less competitive in foreign markets. To manage currency exposure related to net assets and liabilities denominated in foreign currencies, we enter into forward contracts for certain foreign denominated assets or liabilities. We do not
enter into derivative financial instruments for trading purposes. We had two outstanding forward contracts with total notional amounts of $24.6 million as of November 30, 2005.



We performed sensitivity analyses as of November 30, 2005 and November 30, 2004, measuring the change in fair
value arising from a hypothetical adverse movement in foreign currency exchange rates vis-à-vis the U.S. dollar, with all other variables held constant. The analyses covered all of our foreign currency contracts offset by underlying
exposures. We used foreign currency exchange rates based on market rates in effect at November 30, 2005 and November 30, 2004, respectively. The sensitivity analyses indicated that a hypothetical 10% adverse movement in foreign currency
exchange rates would result in a loss in the fair values of our foreign exchange derivative financial instruments, net of exposures, of $2.5 million as of November 30, 2005 and $1.1 million as of November 30, 2004.



|ITEM 8. | FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
|------- | -------------------------------------------



Reference is made to the Index to Consolidated Financial Statements that appears on page F-1 of this report. The Report of Independent Registered Public
Accounting Firm from PricewaterhouseCoopers LLP, the Consolidated Financial Statements and the Notes to Consolidated Financial Statements listed in the Index to Consolidated Financial Statements, which appear beginning on page F-2 of this report,
are incorporated by reference into this Item 8.



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|ITEM 9A. | CONTROLS AND PROCEDURES
|-------- | -----------------------



Evaluation of Disclosure Controls and Procedures.    We maintain disclosure controls and procedures, as such term
is defined in Rule 13a-15(e) under the Securities Exchange Act of 1934 (the Exchange Act), that are designed to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded,
processed, summarized, and reported within the time periods specified in Securities and Exchange Commission rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief
Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating our disclosure controls and procedures, management recognized that disclosure controls and procedures, no matter how well
conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the disclosure controls and procedures are met. Additionally, in designing disclosure controls and procedures, our management necessarily was
required to apply its judgment in evaluating the cost-benefit relationship of possible disclosure controls and procedures. The design of any disclosure controls and procedures also is based in part upon certain assumptions about the likelihood of
future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.



Based on their evaluation as of the end of the period covered by this Annual Report on Form 10-K, our Chief Executive Officer and Chief Financial Officer
have concluded that our disclosure controls and procedures were effective.



Managements Report on Internal Control over Financial Reporting.    Our management is responsible for establishing and maintaining adequate internal control over financial reporting as
defined in Rule 13a-15(f) of the Securities Exchange Act of 1934. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future
periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.



We assessed the effectiveness of the companys internal control over financial reporting as of November 30, 2005.
In making this assessment, we used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal ControlIntegrated Framework. Based on our assessment using those criteria,
we concluded that our internal control over financial reporting was effective as of November 30, 2005.



Our managements assessment of the effectiveness of our internal control over financial reporting as of November 30, 2005 has been audited by
PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report which appears on page F-2 of this Annual Report on Form 10-K.



Changes in Internal Control over Financial Reporting.    There was no change in our internal
control over financial reporting that occurred during the period covered by this Annual Report on Form 10-K that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.



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PART III



|ITEM 10. | DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
|-------- | --------------------------------------------------



The information required by this item concerning our directors and executive officers is incorporated by reference from the information to be set forth in
the sections entitled Election of Directors, Executive Officers, Code of Ethics and Executive Compensation and Employment AgreementsSection 16(a) Beneficial Ownership Reporting Compliance in our Proxy Statement for the 2006 Annual Meeting
of Stockholders to be filed with the Commission within 120 days after the end of our fiscal year ended November 30, 2005.



We have adopted a Code of Ethics for Chief Executive and Senior Financial Officers that applies to our Chief Executive Officer, Chief Financial Officer
and Corporate Controller. The Code of Ethics is posted on our website at www.tibco.com. The information concerning our Code of Ethics required by this item is incorporated by reference from the information to be set forth under the heading
Code of Ethics in our proxy statement. We intend to disclose any amendment to the provisions of the Code of Ethics that apply specifically to our Chief Executive Officer, Chief Financial Officer or Corporate Controller by posting such
information on our website. We intend to disclose any waiver to the provisions of the Code of Ethics that apply specifically to our Chief Executive Officer, Chief Financial Officer or Corporate Controller by filing such information on a Current
Report on Form 8-K with the SEC, to the extent such filing is required by the Nasdaq National Markets listing requirements; otherwise, we will disclose such waiver by posting such information on our website.



Directors



During fiscal year 2005, the following individuals served on our Board of Directors: Vivek Y. Ranadivé, Bernard
Bourigeaud, Eric Dunn, Naren Gupta, Peter Job and Philip K. Wood.



The following table lists the names, ages and positions held by each of our directors as of January 31, 2006:



|                      |  |     |  |                                                                       
|--------------------- |  | --- |  | ----------------------------------------------------------------------
|Name                  |  | Age |  | Position with our Company                                             
|Vivek Y. Ranadivé     |  | 48  |  | Director, President, Chief Executive Officer and Chairman of the Board
|Bernard Bourigeaud    |  | 61  |  | Director                                                              
|Eric Dunn (1)         |  | 47  |  | Director                                                              
|Naren Gupta (1)(2)(3) |  | 57  |  | Director                                                              
|Peter Job (3)         |  | 64  |  | Director                                                              
|Philip K. Wood (1)(2) |  | 50  |  | Director                                                              

---

|(1) | Member of the Audit Committee.
|--- | ------------------------------

|(2) | Member of the Compensation Committee.
|--- | -------------------------------------

|(3) | Member of the Nominating and Governance Committee.
|--- | --------------------------------------------------



Vivek Y. Ranadivé has served as our President, Chief Executive Officer and Chairman of our Board of Directors since our inception in
January 1997. From 1985 to 1997, Mr. Ranadivé served as the Chairman and Chief Executive Officer of Teknekron Software Systems, Inc., our predecessor company. In addition, Mr. Ranadivé served as President, Chief Executive
Officer and Chairman of the Board of TIBCO Finance Technology Inc., a wholly owned subsidiary of Reuters, from its inception until December 1998.



Bernard Bourigeaud has been one of our directors since April 2005. Mr. Bourigeaud currently serves as the Chairman of the Management
Board and Chief Executive Officer of Atos Origin. He has been with Atos Origin, or its predecessors, since 1991, conducting the merger which led to the creation of Axime of which he became chairman. In 1996, Axime acquired Sligos, forming Atos. In
November 2000, Atos merged with the Dutch company Origin to create Atos Origin. In 2002, he completed the acquisition of KPMG Consulting in the UK and The Netherlands, now trading as Atos KPMG Consulting. Before joining Axime, Mr. Bourigeaud
spent 11 years



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at Deloitte Haskins and Sells France, where he headed the management consulting group with responsibility for French operations and corporate finance in
Europe. Mr. Bourigeaud is also a qualified French chartered accountant.



Eric Dunn has been one of our directors since April 2004. Since 2003, Mr. Dunn has been a General Partner at Cardinal Venture Capital. From 2000 to 2003, Mr. Dunn owned and operated Kingston
Creek Ventures. From 1986 to 2000, Mr. Dunn served in a number of senior executive capacities at Intuit, Inc., including Chief Financial Officer and Senior Vice President and Chief Technology Officer. Mr. Dunn is currently on the Board of
Directors of Corillian Corporation and several private companies.



Naren Gupta has been one of our directors since April 2002. Since February 2000, Dr. Gupta has served as Vice Chairman of the Board of Directors of WindRiver Systems, Inc. From June 2004 to January 2005, Dr. Gupta
also served as the Interim President and Chief Executive Officer and as a director of Quick Eagle Networks. He also served as Interim President and Chief Executive Officer of WindRiver Systems from June 2003 to January 2004. Prior to joining
WindRiver Systems, Dr. Gupta was Chief Executive Officer and President of Integrated Systems Inc. from 1980 until 1994 and Chairman of its Board of Directors from 1992 until 2000. In addition, Dr. Gupta serves on the Boards of Directors of
several privately held companies. Dr. Gupta is a fellow of the Institute of Electrical and Electronics Engineers.



Peter Job has been one of our directors since June 2000. From 1963 through his retirement in July 2001, Mr. Job was employed by
Reuters, most recently as its Chief Executive. In addition, Mr. Job currently serves on the Boards of Directors for Schroders PLC, Deutsche Bank AG and Royal Dutch Shell, as well as on the Board of Directors of a privately held company. Until
December 2004, Mr. Job also served on the Board of Directors of Glaxo Smith Kline PLC.



Philip K. Wood has been one of our directors since our inception. From August 2004 to January 2006, Mr. Wood was employed by D1 Oils plc as its Chief Executive Officer. From September 1990 through
May 2004, Mr. Wood was employed by Reuters and served as Managing Director of Business Development. Prior to joining Reuters, Mr. Wood was a partner at Price Waterhouse, a predecessor to PricewaterhouseCoopers LLP. Mr. Wood was on the
Board of Directors of Independent Television News Limited until January 2004. He is a fellow of the Institute of Chartered Accountants and a member of the Association of Corporate Treasurers.



The size of our board is currently set at six members. As of January 31,
2006, we had six directors serving on our board.



|ITEM 11. | EXECUTIVE COMPENSATION
|-------- | ----------------------



The information required by this item regarding executive compensation is incorporated by reference from the information to be set forth in the sections
entitled Election of DirectorsDirector Compensation and Executive Compensation and Employment Agreements in our Proxy Statement for the 2006 Annual Meeting of Stockholders to be filed with the Commission within 120 days after the end of our
fiscal year ended November 30, 2005.



|ITEM 12. | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
|-------- | --------------------------------------------------------------



The information required by this item regarding security ownership of certain beneficial owners and management is incorporated by reference from the
information to be set forth in the section entitled Security Ownership of Certain Beneficial Owners and Management in our Proxy Statement for the 2006 Annual Meeting of Stockholders to be filed with the Commission within 120 days after the end of
our fiscal year ended November 30, 2005.



The information
required by this item regarding equity compensation plans is incorporated by reference from the section entitled Equity Compensation Plan Information set forth in Item 5 of this Annual Report on Form 10-K.



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|ITEM 13. | CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
|-------- | ----------------------------------------------



The information required by this item regarding certain relationships and related transactions is incorporated by reference from the information to be set
forth in the sections entitled Compensation Committee Interlocks, Insider Participation in Compensation Decisions and Certain Transactions in our Proxy Statement for the 2006 Annual Meeting of Stockholders to be filed with the Commission within 120
days after the end of our fiscal year ended November 30, 2005.



|ITEM 14. | PRINCIPAL ACCOUNTING FEES AND SERVICES
|-------- | --------------------------------------



The information required by this item regarding principal accounting fees and services is incorporated by reference from the information to be set forth
in the section entitled Audit Fees and Services in our Proxy Statement for the 2006 Annual Meeting of Stockholders to be filed with the Commission within 120 days after the end of our fiscal year ended November 30, 2005.



PART IV



|ITEM 15. | EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
|-------- | ------------------------------------------



(a) The following documents are filed as part of this report:



1. Financial Statements.    Please see the accompanying Index to Consolidated Financial Statements, which
appears on page F-1 of the report. The Report of Independent Registered Public Accounting Firm, the Consolidated Financial Statements and the Notes to Consolidated Financial Statements listed in the Index to Consolidated Financial Statements, which
appear beginning on page F-2 of this report, are incorporated by reference into Item 8 above.



2. Financial Statement Schedules.    Financial Statement Schedules have been omitted because the information
required to be set forth therein is either not applicable or is included in the Consolidated Financial Statements or the notes thereto.



3. Exhibits.    See Item 15(b) below. Each management contract and compensatory plan or arrangement
required to be filed has been identified.



(b)
Exhibits.    The exhibits listed on the accompanying Exhibit Index immediately following the signature page are filed as part of, or are incorporated by reference into, this Annual Report on Form 10-K.



(c) Financial Statement Schedules.    Reference is
made to Item 15(a)(2) above.



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TIBCO SOFTWARE INC.



INDEX TO
CONSOLIDATED FINANCIAL STATEMENTS



|                                                                         |  |     
|------------------------------------------------------------------------ |  | ----
|                                                                         |  | Page
|Report of Independent Registered Public Accounting Firm                  |  | F-2 
|                                                                         | 
|Consolidated Balance Sheets                                              |  | F-4 
|                                                                         | 
|Consolidated Statements of Operations                                    |  | F-5 
|                                                                         | 
|Consolidated Statements of Stockholders Equity and Comprehensive Income |  | F-6 
|                                                                         | 
|Consolidated Statements of Cash Flows                                    |  | F-7 
|                                                                         | 
|Notes to Consolidated Financial Statements                               |  | F-8 



F-1



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##### Table of Contents

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM



To the Board of Directors and Stockholders of

TIBCO Software Inc.:



We have completed integrated audits of TIBCO Software Inc.s 2005 and 2004 consolidated financial statements and of its internal control over
financial reporting as of November 30, 2005 and an audit of its 2003 consolidated financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Our opinions on TIBCO Software Inc.s
2005, 2004, and 2003 consolidated financial statements and on its internal control over financial reporting as of November 30, 2005, based on our audits, are presented below.



Consolidated financial statements



In our opinion, the consolidated financial statements listed in the index appearing under Item 15(a)(1) present fairly, in all material respects, the
financial position of TIBCO Software Inc. and its subsidiaries at November 30, 2005 and 2004, and the results of their operations and their cash flows for each of the three years in the period ended November 30, 2005 in conformity with
accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the Companys management. Our responsibility is to express an opinion on these financial statements based on our
audits. We conducted our audits of these statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit of financial statements includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting
principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.



Internal control over financial reporting



Also, in our opinion, managements assessment, included in
Managements Report on Internal Control Over Financial Reporting appearing under Item 9A, that the Company maintained effective internal control over financial reporting as of November 30, 2005 based on criteria established in
Internal ControlIntegrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), is fairly stated, in all material respects, based on those criteria. Furthermore, in our opinion, the Company
maintained, in all material respects, effective internal control over financial reporting as of November 30, 2005, based on criteria established in Internal ControlIntegrated Framework issued by the COSO. The Companys
management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting. Our responsibility is to express opinions on managements
assessment and on the effectiveness of the Companys internal control over financial reporting based on our audit. We conducted our audit of internal control over financial reporting in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. An audit
of internal control over financial reporting includes obtaining an understanding of internal control over financial reporting, evaluating managements assessment, testing and evaluating the design and operating effectiveness of internal
control, and performing such other procedures as we consider necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinions.



A companys internal control over financial reporting is a process designed to provide reasonable assurance regarding
the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A companys internal control over financial reporting includes those policies
and procedures that (i) pertain to the maintenance of records that, in reasonable detail,



F-2



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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

(continued)



accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are
recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management
and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the companys assets that could have a material effect on the financial
statements.



Because of its inherent limitations, internal
control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that
the degree of compliance with the policies or procedures may deteriorate.



/s/    PRICEWATERHOUSECOOPERS LLP



San Jose, California

February 10, 2006



F-3



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##### Table of Contents

TIBCO SOFTWARE INC.



CONSOLIDATED BALANCE SHEETS

(in thousands, except par value)



|                                                                                                                             |  |                    |           |   |      |   |           |  
|---------------------------------------------------------------------------------------------------------------------------- |  | ------------------ | --------- | - | ---- | - | --------- | -
|                                                                                                                             |  | As of November 30, |          
|                                                                                                                             |  | 2005               |           |   | 2004 |  
|ASSETS                                                                                                                       |  |                    |           |   |      |   |           |  
|Current assets:                                                                                                              |  |                    |           |   |      |   |           |  
|Cash and cash equivalents                                                                                                    |  | $                  | 208,756   |   |      | $ | 180,849   |  
|Short-term investments                                                                                                       |  |                    | 268,882   |   |      |   | 292,686   |  
|Accounts receivable, net                                                                                                     |  |                    | 121,159   |   |      |   | 109,002   |  
|Due from related parties                                                                                                     |  |                    | 1,243     |   |      |   | 2,886     |  
|Other current assets                                                                                                         |  |                    | 18,111    |   |      |   | 16,984    |  
|                                                                                                                             |  |                    |           |   |      |   |           |  
|Total current assets                                                                                                         |  |                    | 618,151   |   |      |   | 602,407   |  
|                                                                                                                             |  |                   
|Property and equipment, net                                                                                                  |  |                    | 116,457   |   |      |   | 118,058   |  
|Goodwill                                                                                                                     |  |                    | 261,075   |   |      |   | 265,137   |  
|Acquired intangible assets, net                                                                                              |  |                    | 64,742    |   |      |   | 64,820    |  
|Long-term deferred income tax assets                                                                                         |  |                    | 27,440    |   |      |   |          |  
|Other assets                                                                                                                 |  |                    | 34,559    |   |      |   | 32,389    |  
|                                                                                                                             |  |                    |           |   |      |   |           |  
|Total assets                                                                                                                 |  | $                  | 1,122,424 |   |      | $ | 1,082,811 |  
|                                                                                                                             |  |                    |           |   |      |   |           |  
|LIABILITIES AND STOCKHOLDERS EQUITY                                                                                         |  |                    |           |   |      |   |           |  
|Current liabilities:                                                                                                         |  |                    |           |   |      |   |           |  
|Accounts payable                                                                                                             |  | $                  | 9,656     |   |      | $ | 7,058     |  
|Accrued liabilities                                                                                                          |  |                    | 59,872    |   |      |   | 84,429    |  
|Accrued restructuring and excess facilities costs                                                                            |  |                    | 5,840     |   |      |   | 9,489     |  
|Deferred revenue                                                                                                             |  |                    | 82,300    |   |      |   | 60,633    |  
|Current portion of long-term debt                                                                                            |  |                    | 1,798     |   |      |   | 1,708     |  
|                                                                                                                             |  |                    |           |   |      |   |           |  
|Total current liabilities                                                                                                    |  |                    | 159,466   |   |      |   | 163,317   |  
|                                                                                                                             |  |                   
|Accrued excess facilities costs, less current portion                                                                        |  |                    | 24,149    |   |      |   | 29,878    |  
|Long-term deferred income tax liabilities                                                                                    |  |                    | 13,875    |   |      |   | 18,991    |  
|Long-term debt                                                                                                               |  |                    | 48,345    |   |      |   | 50,143    |  
|Other long-term liabilities                                                                                                  |  |                    | 2,970     |   |      |   |          |  
|                                                                                                                             |  |                    |           |   |      |   |           |  
|Total long-term liabilities                                                                                                  |  |                    | 89,339    |   |      |   | 99,012    |  
|                                                                                                                             |  |                   
|Total liabilities                                                                                                            |  |                    | 248,805   |   |      |   | 262,329   |  
|Commitments and contingencies                                                                                                |  |                    |           |   |      |   |           |  
|Stockholders equity:                                                                                                        |  |                    |           |   |      |   |           |  
|Common stock, $0.001 par value; 1,200,000 shares authorized; 210,548 and 213,912 shares issued and outstanding, respectively |  |                    | 211       |   |      |   | 214       |  
|Additional paid-in capital                                                                                                   |  |                    | 928,830   |   |      |   | 933,223   |  
|Unearned stock-based compensation                                                                                            |  |                    | (123      | ) |      |   | (149      | )
|Accumulated other comprehensive income (loss)                                                                                |  |                    | (14,346   | ) |      |   | 702       |  
|Accumulated deficit                                                                                                          |  |                    | (40,953   | ) |      |   | (113,508  | )
|                                                                                                                             |  |                    |           |   |      |   |           |  
|Total stockholders equity                                                                                                   |  |                    | 873,619   |   |      |   | 820,482   |  
|                                                                                                                             |  |                    |           |   |      |   |           |  
|Total liabilities and stockholders equity                                                                                   |  | $                  | 1,122,424 |   |      | $ | 1,082,811 |  
|                                                                                                                             |  |                    |           |   |      |   |           |  



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



F-4



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##### Table of Contents

TIBCO SOFTWARE INC.



CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share data)



|                                                    |  |                         |         |   |      |   |         |      |  |   |         |  
|--------------------------------------------------- |  | ----------------------- | ------- | - | ---- | - | ------- | ---- |  | - | ------- | -
|                                                    |  | Year Ended November 30, |        
|                                                    |  | 2005                    |         |   | 2004 |   |         | 2003 | 
|License revenue:                                    |  |                         |         |   |      |   |         |      |  |   |         |  
|Non-related parties                                 |  | $                       | 187,850 |   |      | $ | 197,753 |      |  | $ | 121,393 |  
|Related parties                                     |  |                         | 16,038  |   |      |   | 16,333  |      |  |   | 19,116  |  
|                                                    |  |                         |         |   |      |   |         |      |  |   |         |  
|Total license revenue                               |  |                         | 203,888 |   |      |   | 214,086 |      |  |   | 140,509 |  
|                                                    |  |                         |         |   |      |   |         |      |  |   |         |  
|Service and maintenance revenue:                    |  |                         |         |   |      |   |         |      |  |   |         |  
|Non-related parties                                 |  |                         | 228,539 |   |      |   | 155,864 |      |  |   | 106,031 |  
|Related parties                                     |  |                         | 6,973   |   |      |   | 12,692  |      |  |   | 15,098  |  
|Reimbursable expenses                               |  |                         | 6,510   |   |      |   | 4,578   |      |  |   | 2,572   |  
|                                                    |  |                         |         |   |      |   |         |      |  |   |         |  
|Total service and maintenance revenue               |  |                         | 242,022 |   |      |   | 173,134 |      |  |   | 123,701 |  
|                                                    |  |                         |         |   |      |   |         |      |  |   |         |  
|Total revenue                                       |  |                         | 445,910 |   |      |   | 387,220 |      |  |   | 264,210 |  
|                                                    |  |                         |         |   |      |   |         |      |  |   |         |  
|Cost of revenue:                                    |  |                         |         |   |      |   |         |      |  |   |         |  
|Cost of license                                     |  |                         | 12,694  |   |      |   | 11,586  |      |  |   | 8,835   |  
|Cost of service and maintenance                     |  |                         | 111,499 |   |      |   | 81,611  |      |  |   | 52,370  |  
|Cost paid to related parties                        |  |                         |        |   |      |   |        |      |  |   | 2,280   |  
|                                                    |  |                         |         |   |      |   |         |      |  |   |         |  
|Total cost of revenue                               |  |                         | 124,193 |   |      |   | 93,197  |      |  |   | 63,485  |  
|                                                    |  |                         |         |   |      |   |         |      |  |   |         |  
|Gross profit                                        |  |                         | 321,717 |   |      |   | 294,023 |      |  |   | 200,725 |  
|                                                    |  |                         |         |   |      |   |         |      |  |   |         |  
|Operating expenses:                                 |  |                         |         |   |      |   |         |      |  |   |         |  
|Research and development                            |  |                         | 73,136  |   |      |   | 61,100  |      |  |   | 64,588  |  
|Sales and marketing                                 |  |                         | 140,370 |   |      |   | 123,486 |      |  |   | 110,230 |  
|General and administrative                          |  |                         | 37,320  |   |      |   | 29,048  |      |  |   | 20,334  |  
|Acquired in-process research and development        |  |                         |        |   |      |   | 2,200   |      |  |   |        |  
|Restructuring charges                               |  |                         | 3,905   |   |      |   | 2,186   |      |  |   | 1,100   |  
|Amortization of acquired intangible assets          |  |                         | 8,912   |   |      |   | 5,253   |      |  |   | 1,997   |  
|                                                    |  |                         |         |   |      |   |         |      |  |   |         |  
|Total operating expenses                            |  |                         | 263,643 |   |      |   | 223,273 |      |  |   | 198,249 |  
|                                                    |  |                         |         |   |      |   |         |      |  |   |         |  
|Income from operations                              |  |                         | 58,074  |   |      |   | 70,750  |      |  |   | 2,476   |  
|                                                    |  |                         |        
|Interest income                                     |  |                         | 13,318  |   |      |   | 8,436   |      |  |   | 12,536  |  
|Interest expense                                    |  |                         | (2,711  | ) |      |   | (2,771  | )    |  |   | (1,205  | )
|Other income (expense), net                         |  |                         | (1,600  | ) |      |   | (2,700  | )    |  |   | 3,676   |  
|                                                    |  |                         |         |   |      |   |         |      |  |   |         |  
|Income before income taxes                          |  |                         | 67,081  |   |      |   | 73,715  |      |  |   | 17,483  |  
|                                                    |  |                         |        
|Provision for (benefit from) income taxes           |  |                         | (5,474  | ) |      |   | 28,795  |      |  |   | 6,043   |  
|                                                    |  |                         |         |   |      |   |         |      |  |   |         |  
|Net income                                          |  | $                       | 72,555  |   |      | $ | 44,920  |      |  | $ | 11,440  |  
|                                                    |  |                         |         |   |      |   |         |      |  |   |         |  
|Net income per share:                               |  |                         |         |   |      |   |         |      |  |   |         |  
|Basic                                               |  | $                       | 0.34    |   |      | $ | 0.22    |      |  | $ | 0.05    |  
|                                                    |  |                         |         |   |      |   |         |      |  |   |         |  
|Shares used to compute net income per shareBasic   |  |                         | 213,263 |   |      |   | 207,506 |      |  |   | 211,555 |  
|                                                    |  |                         |         |   |      |   |         |      |  |   |         |  
|Net income per share:                               |  |                         |         |   |      |   |         |      |  |   |         |  
|Diluted                                             |  | $                       | 0.32    |   |      | $ | 0.20    |      |  | $ | 0.05    |  
|                                                    |  |                         |         |   |      |   |         |      |  |   |         |  
|Shares used to compute net income per shareDiluted |  |                         | 223,977 |   |      |   | 220,927 |      |  |   | 222,519 |  
|                                                    |  |                         |         |   |      |   |         |      |  |   |         |  



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



F-5



---

##### Table of Contents

TIBCO SOFTWARE INC.



CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY AND COMPREHENSIVE INCOME

(in thousands)



|                                                             |  |              |   |  |                            |     |   |                                   |   |          |                                               |  |   |                     |   |  |                            |         |   |                                          |   |          |   |  |   |          |   |  |   |         |  
|------------------------------------------------------------ |  | ------------ | - |  | -------------------------- | --- | - | --------------------------------- | - | -------- | --------------------------------------------- |  | - | ------------------- | - |  | -------------------------- | ------- | - | ---------------------------------------- | - | -------- | - |  | - | -------- | - |  | - | ------- | -
|                                                             |  | Common Stock |   |  | Additional Paid-In Capital |     |   | Unearned Stock-Based Compensation |   |          | Accumulated Other Comprehensive Income (Loss) |  |   | Accumulated Deficit |   |  | Total Stockholders Equity |         |   | Comprehensive Income (Loss) for the Year |  
|                                                             |  | Shares       |   |  | Amount                     |     |   |                                   |   |          |                                               | 
|Balance at November 30, 2002                                 |  | 210,254      |   |  | $                          | 210 |   |                                   | $ | 912,821  |                                               |  | $ | (1,333              | ) |  | $                          | 2,897   |   |                                          | $ | (169,868 | ) |  | $ | 744,727  |   |  |   |         |  
|Components of comprehensive income:                          |  |              |   |  |                            |     |   |                                   |   |          |                                               |  |   |                     |   |  |                            |         |   |                                          |   |          |   |  |   |          |   |  |   |         |  
|Net income                                                   |  |             |   |  |                            |    |   |                                   |   |         |                                               |  |   |                    |   |  |                            |        |   |                                          |   | 11,440   |   |  |   | 11,440   |   |  | $ | 11,440  |  
|Cumulative translation adjustment                            |  |             |   |  |                            |    |   |                                   |   |         |                                               |  |   |                    |   |  |                            | (359    | ) |                                          |   |         |   |  |   | (359     | ) |  |   | (359    | )
|Change in net unrealized loss on investments, no tax         |  |             |   |  |                            |    |   |                                   |   |         |                                               |  |   |                    |   |  |                            | (2,313  | ) |                                          |   |         |   |  |   | (2,313   | ) |  |   | (2,313  | )
|                                                             |  |              |   |  |                            |     |   |                                   |   |          |                                               |  |   |                     |   |  |                            |         |   |                                          |   |          |   |  |   |          |   |  |   |         |  
|Total comprehensive income                                   |  |              |   |  |                            |     |   |                                   |   |          |                                               |  |   |                     |   |  |                            |         |   |                                          |   |          |   |  |   |          |   |  | $ | 8,768   |  
|                                                             |  |              |   |  |                            |     |   |                                   |   |          |                                               |  |   |                     |   |  |                            |         |   |                                          |   |          |   |  |   |          |   |  |   |         |  
|Common stock issued for exercise of options, net             |  | 1,918        |   |  |                            | 2   |   |                                   |   | 2,501    |                                               |  |   |                    |   |  |                            |        |   |                                          |   |         |   |  |   | 2,503    |   |  |   |         |  
|Common stock issued for employee stock purchase plan         |  | 1,194        |   |  |                            | 1   |   |                                   |   | 5,378    |                                               |  |   |                    |   |  |                            |        |   |                                          |   |         |   |  |   | 5,379    |   |  |   |         |  
|Tax benefits from employee stock option plans                |  |             |   |  |                            |    |   |                                   |   | 550      |                                               |  |   |                    |   |  |                            |        |   |                                          |   |         |   |  |   | 550      |   |  |   |         |  
|Unearned stock-based compensation, net                       |  |             |   |  |                            |    |   |                                   |   | (212     | )                                             |  |   | 1,079               |   |  |                            |        |   |                                          |   |         |   |  |   | 867      |   |  |   |         |  
|                                                             |  |              |   |  |                            |     |   |                                   |   |          |                                               |  |   |                     |   |  |                            |         |   |                                          |   |          |   |  |   |          |   |  |   |         |  
|Balance at November 30, 2003                                 |  | 213,366      |   |  |                            | 213 |   |                                   |   | 921,038  |                                               |  |   | (254                | ) |  |                            | 225     |   |                                          |   | (158,428 | ) |  |   | 762,794  |   |  |   |         |  
|Components of comprehensive income:                          |  |              |   |  |                            |     |   |                                   |   |          |                                               |  |   |                     |   |  |                            |         |   |                                          |   |          |   |  |   |          |   |  |   |         |  
|Net income                                                   |  |             |   |  |                            |    |   |                                   |   |         |                                               |  |   |                    |   |  |                            |        |   |                                          |   | 44,920   |   |  |   | 44,920   |   |  | $ | 44,920  |  
|Cumulative translation adjustment                            |  |             |   |  |                            |    |   |                                   |   |         |                                               |  |   |                    |   |  |                            | 2,449   |   |                                          |   |         |   |  |   | 2,449    |   |  |   | 2,449   |  
|Change in net unrealized loss on investments, no tax         |  |             |   |  |                            |    |   |                                   |   |         |                                               |  |   |                    |   |  |                            | (1,972  | ) |                                          |   |         |   |  |   | (1,972   | ) |  |   | (1,972  | )
|                                                             |  |              |   |  |                            |     |   |                                   |   |          |                                               |  |   |                     |   |  |                            |         |   |                                          |   |          |   |  |   |          |   |  |   |         |  
|Total comprehensive income                                   |  |              |   |  |                            |     |   |                                   |   |          |                                               |  |   |                     |   |  |                            |         |   |                                          |   |          |   |  |   |          |   |  | $ | 45,397  |  
|                                                             |  |              |   |  |                            |     |   |                                   |   |          |                                               |  |   |                     |   |  |                            |         |   |                                          |   |          |   |  |   |          |   |  |   |         |  
|Common stock repurchased from Reuters and retired            |  | (16,788      | ) |  |                            | (17 | ) |                                   |   | (114,983 | )                                             |  |   |                    |   |  |                            |        |   |                                          |   |         |   |  |   | (115,000 | ) |  |   |         |  
|Common stock repurchased and retired                         |  | (75          | ) |  |                            |    |   |                                   |   | (702     | )                                             |  |   |                    |   |  |                            |        |   |                                          |   |         |   |  |   | (702     | ) |  |   |         |  
|Common stock issued for acquisition of Staffware             |  | 10,935       |   |  |                            | 11  |   |                                   |   | 92,259   |                                               |  |   |                    |   |  |                            |        |   |                                          |   |         |   |  |   | 92,270   |   |  |   |         |  
|Common stock issued for exercise of options, net             |  | 5,362        |   |  |                            | 6   |   |                                   |   | 24,850   |                                               |  |   |                    |   |  |                            |        |   |                                          |   |         |   |  |   | 24,856   |   |  |   |         |  
|Common stock issued for employee stock purchase plan         |  | 1,112        |   |  |                            | 1   |   |                                   |   | 5,046    |                                               |  |   |                    |   |  |                            |        |   |                                          |   |         |   |  |   | 5,047    |   |  |   |         |  
|Tax benefits from employee stock option plans                |  |             |   |  |                            |    |   |                                   |   | 6,006    |                                               |  |   |                    |   |  |                            |        |   |                                          |   |         |   |  |   | 6,006    |   |  |   |         |  
|Unearned stock-based compensation, net                       |  |             |   |  |                            |    |   |                                   |   | (291     | )                                             |  |   | 105                 |   |  |                            |        |   |                                          |   |         |   |  |   | (186     | ) |  |   |         |  
|                                                             |  |              |   |  |                            |     |   |                                   |   |          |                                               |  |   |                     |   |  |                            |         |   |                                          |   |          |   |  |   |          |   |  |   |         |  
|Balance at November 30, 2004                                 |  | 213,912      |   |  |                            | 214 |   |                                   |   | 933,223  |                                               |  |   | (149                | ) |  |                            | 702     |   |                                          |   | (113,508 | ) |  |   | 820,482  |   |  |   |         |  
|Components of comprehensive income:                          |  |              |   |  |                            |     |   |                                   |   |          |                                               |  |   |                     |   |  |                            |         |   |                                          |   |          |   |  |   |          |   |  |   |         |  
|Net income                                                   |  |             |   |  |                            |    |   |                                   |   |         |                                               |  |   |                    |   |  |                            |        |   |                                          |   | 72,555   |   |  |   | 72,555   |   |  | $ | 72,555  |  
|Cumulative translation adjustment                            |  |             |   |  |                            |    |   |                                   |   |         |                                               |  |   |                    |   |  |                            | (14,904 | ) |                                          |   |         |   |  |   | (14,904  | ) |  |   | (14,904 | )
|Change in net unrealized loss on investments, net of $42 tax |  |             |   |  |                            |    |   |                                   |   |         |                                               |  |   |                    |   |  |                            | (144    | ) |                                          |   |         |   |  |   | (144     | ) |  |   | (144    | )
|                                                             |  |              |   |  |                            |     |   |                                   |   |          |                                               |  |   |                     |   |  |                            |         |   |                                          |   |          |   |  |   |          |   |  |   |         |  
|Total comprehensive income                                   |  |              |   |  |                            |     |   |                                   |   |          |                                               |  |   |                     |   |  |                            |         |   |                                          |   |          |   |  |   |          |   |  | $ | 57,507  |  
|                                                             |  |              |   |  |                            |     |   |                                   |   |          |                                               |  |   |                     |   |  |                            |         |   |                                          |   |          |   |  |   |          |   |  |   |         |  
|Common stock repurchased and retired                         |  | (6,550       | ) |  |                            | (7  | ) |                                   |   | (48,293  | )                                             |  |   |                    |   |  |                            |        |   |                                          |   |         |   |  |   | (48,300  | ) |  |   |         |  
|Common stock issued for exercise of options, net             |  | 2,524        |   |  |                            | 3   |   |                                   |   | 13,556   |                                               |  |   |                    |   |  |                            |        |   |                                          |   |         |   |  |   | 13,559   |   |  |   |         |  
|Common stock issued for employee stock purchase plan         |  | 662          |   |  |                            | 1   |   |                                   |   | 4,041    |                                               |  |   |                    |   |  |                            |        |   |                                          |   |         |   |  |   | 4,042    |   |  |   |         |  
|Tax benefits from employee stock option plans                |  |             |   |  |                            |    |   |                                   |   | 26,210   |                                               |  |   |                    |   |  |                            |        |   |                                          |   |         |   |  |   | 26,210   |   |  |   |         |  
|Unearned stock-based compensation, net                       |  |             |   |  |                            |    |   |                                   |   | 93       |                                               |  |   | 26                  |   |  |                            |        |   |                                          |   |         |   |  |   | 119      |   |  |   |         |  
|                                                             |  |              |   |  |                            |     |   |                                   |   |          |                                               |  |   |                     |   |  |                            |         |   |                                          |   |          |   |  |   |          |   |  |   |         |  
|Balance at November 30, 2005                                 |  | 210,548      |   |  | $                          | 211 |   |                                   | $ | 928,830  |                                               |  | $ | (123                | ) |  | $                          | (14,346 | ) |                                          | $ | (40,953  | ) |  | $ | 873,619  |   |  |   |         |  
|                                                             |  |              |   |  |                            |     |   |                                   |   |          |                                               |  |   |                     |   |  |                            |         |   |                                          |   |          |   |  |   |          |   |  |   |         |  



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



F-6



---

##### Table of Contents

TIBCO SOFTWARE INC.



CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)



|                                                                                             |  |                         |          |   |      |   |          |      |  |   |            |  
|-------------------------------------------------------------------------------------------- |  | ----------------------- | -------- | - | ---- | - | -------- | ---- |  | - | ---------- | -
|                                                                                             |  | Year Ended November 30, |         
|                                                                                             |  | 2005                    |          |   | 2004 |   |          | 2003 | 
|Cash flows from operating activities:                                                        |  |                         |          |   |      |   |          |      |  |   |            |  
|Net income                                                                                   |  | $                       | 72,555   |   |      | $ | 44,920   |      |  | $ | 11,440     |  
|Adjustments to reconcile net income to net cash provided by (used for) operating activities: |  |                         |          |   |      |   |          |      |  |   |            |  
|Depreciation and amortization of property and equipment                                      |  |                         | 14,990   |   |      |   | 13,152   |      |  |   | 15,591     |  
|Amortization of acquired intangibles                                                         |  |                         | 14,870   |   |      |   | 11,955   |      |  |   | 6,764      |  
|Loss on disposal of property and equipment                                                   |  |                         | 109      |   |      |   |         |      |  |   |           |  
|Write-off of in-process research and development                                             |  |                         |         |   |      |   | 2,200    |      |  |   |           |  
|Stock-based compensation                                                                     |  |                         | 129      |   |      |   | 236      |      |  |   | 1,063      |  
|Realized (gain) loss on investments, net                                                     |  |                         | 275      |   |      |   | 402      |      |  |   | (1,128     | )
|Deferred income tax                                                                          |  |                         | (21,893  | ) |      |   | 666      |      |  |   |           |  
|Tax benefits related to acquisitions                                                         |  |                         | 1,149    |   |      |   | 4,315    |      |  |   |           |  
|Tax benefits related to employee stock option plans                                          |  |                         | 15,851   |   |      |   | 6,006    |      |  |   | 550        |  
|Changes in assets and liabilities (net of acquisitions):                                     |  |                         |          |   |      |   |          |      |  |   |            |  
|Accounts receivable                                                                          |  |                         | (8,764   | ) |      |   | (36,817  | )    |  |   | 6,136      |  
|Due from related parties, net                                                                |  |                         | 1,643    |   |      |   | (73      | )    |  |   | (3,176     | )
|Prepaid land lease                                                                           |  |                         | 549      |   |      |   | 549      |      |  |   | (27,770    | )
|Other assets                                                                                 |  |                         | (3,402   | ) |      |   | 3,861    |      |  |   | 681        |  
|Accounts payable                                                                             |  |                         | 2,774    |   |      |   | 1,315    |      |  |   | (1,550     | )
|Accrued liabilities and excess facilities costs                                              |  |                         | (26,823  | ) |      |   | 16,461   |      |  |   | (14,430    | )
|Deferred revenue                                                                             |  |                         | 18,816   |   |      |   | 5,592    |      |  |   | (6,692     | )
|                                                                                             |  |                         |          |   |      |   |          |      |  |   |            |  
|Net cash provided by (used for) operating activities                                         |  |                         | 82,828   |   |      |   | 74,740   |      |  |   | (12,521    | )
|                                                                                             |  |                         |          |   |      |   |          |      |  |   |            |  
|Cash flows from investing activities:                                                        |  |                         |          |   |      |   |          |      |  |   |            |  
|Purchases of short-term investments                                                          |  |                         | (231,489 | ) |      |   | (530,754 | )    |  |   | (1,284,336 | )
|Sales and maturities of short-term investments                                               |  |                         | 254,917  |   |      |   | 757,085  |      |  |   | 1,342,626  |  
|Cash used in acquisitions, net of cash received                                              |  |                         | (24,849  | ) |      |   | (115,009 | )    |  |   |           |  
|Purchase of corporate facilities                                                             |  |                         |         |   |      |   |         |      |  |   | (78,009    | )
|Purchases of other property and equipment                                                    |  |                         | (14,946  | ) |      |   | (7,101   | )    |  |   | (2,309     | )
|Purchases of private equity investments                                                      |  |                         | (382     | ) |      |   | (454     | )    |  |   | (120       | )
|Restricted cash and short-term investments pledged as security                               |  |                         | (465     | ) |      |   | 4,565    |      |  |   |           |  
|                                                                                             |  |                         |          |   |      |   |          |      |  |   |            |  
|Net cash provided by (used for) investing activities                                         |  |                         | (17,214  | ) |      |   | 108,332  |      |  |   | (22,148    | )
|                                                                                             |  |                         |          |   |      |   |          |      |  |   |            |  
|Cash flows from financing activities:                                                        |  |                         |          |   |      |   |          |      |  |   |            |  
|Proceeds from exercise of stock options                                                      |  |                         | 13,559   |   |      |   | 24,452   |      |  |   | 2,503      |  
|Proceeds from employee stock purchase program                                                |  |                         | 4,042    |   |      |   | 5,047    |      |  |   | 5,379      |  
|Repurchase of the Companys common stock                                                     |  |                         | (48,300  | ) |      |   | (115,702 | )    |  |   |           |  
|Proceeds from long term debt                                                                 |  |                         |         |   |      |   |         |      |  |   | 54,000     |  
|Principal payments on long term debt                                                         |  |                         | (1,708   | ) |      |   | (1,626   | )    |  |   | (523       | )
|Payment of financing fees                                                                    |  |                         |         |   |      |   |         |      |  |   | (716       | )
|                                                                                             |  |                         |          |   |      |   |          |      |  |   |            |  
|Net cash provided by (used for) financing activities                                         |  |                         | (32,407  | ) |      |   | (87,829  | )    |  |   | 60,643     |  
|                                                                                             |  |                         |          |   |      |   |          |      |  |   |            |  
|Effect of exchange rate changes on cash                                                      |  |                         | (5,300   | ) |      |   | 2,328    |      |  |   | 75         |  
|                                                                                             |  |                         |          |   |      |   |          |      |  |   |            |  
|Net change in cash and cash equivalents                                                      |  |                         | 27,907   |   |      |   | 97,571   |      |  |   | 26,049     |  
|Cash and cash equivalents at beginning of year                                               |  |                         | 180,849  |   |      |   | 83,278   |      |  |   | 57,229     |  
|                                                                                             |  |                         |          |   |      |   |          |      |  |   |            |  
|Cash and cash equivalents at end of year                                                     |  | $                       | 208,756  |   |      | $ | 180,849  |      |  | $ | 83,278     |  
|                                                                                             |  |                         |          |   |      |   |          |      |  |   |            |  
|Supplemental cash flow information:                                                          |  |                         |          |   |      |   |          |      |  |   |            |  
|Cash paid during the year for taxes                                                          |  | $                       | 7,915    |   |      | $ | 4,445    |      |  | $ | 3,775      |  
|Cash paid during the year for interest                                                       |  |                         | 2,711    |   |      |   | 2,771    |      |  |   | 1,205      |  
|Non-cash investing and financing activities:                                                 |  |                         |          |   |      |   |          |      |  |   |            |  
|Common stock and options issued in connection with acquisition                               |  |                         |         |   |      |   | 92,270   |      |  |   |           |  
|Fair value of net assets (liabilities) assumed in acquisitions                               |  |                         | (514     | ) |      |   | 23,850   |      |  |   |           |  



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



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##### Table of Contents

TIBCO SOFTWARE INC.



NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS



|Note 1. | The Company
|------- | -----------



TIBCO Software Inc. is the successor to a portion of the business of Teknekron Software Systems, Inc. Teknekron developed software, known as the TIB
technology, for the integration and delivery of market data, such as stock quotes, news and other financial information, in trading rooms of large banks and financial services institutions. In 1992, Teknekron expanded its development efforts to
include solutions designed to enable complex and disparate manufacturing equipment and software applications, primarily in the semiconductor fabrication market, to communicate within the factory environment. Teknekron was acquired by Reuters Group
PLC, the global information company, in 1994. Following the acquisition, continued development of the TIB technology was undertaken to expand its use in the financial services markets.



In January 1997, our company, TIBCO Software Inc., was established as an entity separate from Teknekron. We were formed to
create and market software solutions for use in the integration of business information, processes and applications. In connection with our establishment as a separate entity, Reuters transferred to us certain assets and liabilities related to our
business and granted to us a royalty-free license to the intellectual property from which some of our messaging software products originated.



As of November 30, 2003, Reuters owned approximately 49% of the issued and outstanding shares of our capital stock and had a representative on the
Board of Directors. In February 2004, Reuters sold 69 million of our outstanding shares in a registered public offering and we repurchased from Reuters and retired 16.8 million shares of our common stock. Since February 2004, Reuters
ownership of our issued and outstanding shares has been less than 10%, and as of November 30, 2005, Reuters ownership was less than 1% of our issued and outstanding common stock.



|Note 2. | Basis of Presentation and Summary of Significant Accounting Policies
|------- | --------------------------------------------------------------------



Principles of Consolidation



The consolidated financial statements include the accounts of TIBCO Software and our wholly owned subsidiaries. All significant intercompany balances have
been eliminated in consolidation.



Fiscal Years



Our fiscal year is a twelve month period ending on
November 30 of a stated year. For the purpose of presentation, we also refer to the years ended November 30, 2005, 2004 and 2003, as our fiscal years 2005, 2004, and 2003, respectively.



Reclassifications



Certain reclassifications have been made to prior year balances in order to
conform to the current period presentation. These reclassifications have no impact on previously reported net loss or cash flows.



Use of Estimates



The preparation of the consolidated financial statements in conformity with generally accepted accounting principles in the United States of America
requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and
expenses during the reporting period. Actual results could differ from those estimates.



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TIBCO SOFTWARE INC.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



Foreign Currency Translation



All of our foreign subsidiaries use the local currency of their respective countries as their functional currency. Assets
and liabilities of these subsidiaries are translated into U.S. dollars at exchange rates at the balance sheet date. Income and expense items are translated at average exchange rates for the period. Cumulative translation adjustments are included as
a component of accumulated other comprehensive income (loss) in stockholders equity.



Fair Value of Financial Instruments



Carrying amounts of our financial instruments including accounts receivable, accounts payable and accrued liabilities approximate fair value due to their short maturities. The fair values of our available-for-sale
investments in marketable securities and derivative instruments are disclosed in their respective sections of this Note.



Concentration of Credit Risk



Our cash, cash equivalents, short-term investments and accounts receivable are potentially subject to concentration of credit risk. Cash, cash equivalents
and investments are deposited with financial institutions that management believes are creditworthy. Our accounts receivable are derived from revenue earned from customers located primarily in the United States and Europe. We perform ongoing credit
evaluations of our customers financial condition and, generally, require no collateral from our customers. We maintain an allowance for doubtful accounts receivable based on various factors, including our review of credit profiles of our
customers, contractual terms and conditions, current economic trends and historical payment experience. (Also see Note 5.) We do not expect to incur material losses with respect to financial instruments that potentially subject the Company to
concentration of credit risk.



Cash, Cash Equivalents, and
Short-Term Investments



We consider all highly liquid
investment securities with remaining maturities, at the date of purchase, of three months or less to be cash equivalents. Management determines the appropriate classification of marketable securities at the time of purchase and evaluates such
designation as of each balance sheet date. To date, all marketable securities have been classified as available-for-sale and are carried at fair value with unrealized gains and losses, if any, included as a component of accumulated other
comprehensive income (loss) in stockholders equity. Interest, dividends and realized gains and losses are included in interest and other income (expense). Realized gains and losses are recognized based on the specific identification method.



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##### Table of Contents

TIBCO SOFTWARE INC.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



Marketable securities, which are classified as available-for-sale, are summarized below for
November 30, 2005 and 2004 (in thousands):



|                                |  |                          |         |                        |   |                         |  |   |                      |   |                                 |   |                        |  |   |         |  |   |        
|------------------------------- |  | ------------------------ | ------- | ---------------------- | - | ----------------------- |  | - | -------------------- | - | ------------------------------- | - | ---------------------- |  | - | ------- |  | - | -------
|                                |  |                          |         |                        |   |                         |  |   |                      |   | Classified on Balance Sheet as:
|                                |  | Purchase/ Amortized Cost |         | Gross Unrealized Gains |   | Gross Unrealized Losses |  |   | Aggregate Fair Value |   | Cash and Cash Equivalents       |   | Short-term Investments
|As of November 30, 2005         |  |                          |         |                        |   |                         |  |   |                      |   |                                 |   |                        |  |   |         |  |   |        
|U.S. Government debt securities |  | $                        | 117,639 |                        | $ |                        |  | $ | (950                 | ) |                                 | $ | 116,689                |  | $ |        |  | $ | 116,689
|Corporate debt securities       |  |                          | 270,779 |                        |   | 10                      |  |   | (797                 | ) |                                 |   | 269,992                |  |   | 153,823 |  |   | 116,169
|Asset-Backed Securities         |  |                          | 36,273  |                        |   | 7                       |  |   | (264                 | ) |                                 |   | 36,016                 |  |   |        |  |   | 36,016 
|Marketable equity securities    |  |                          | 6       |                        |   | 2                       |  |   |                     |   |                                 |   | 8                      |  |   |        |  |   | 8      
|Money market funds              |  |                          | 8,865   |                        |   |                        |  |   |                     |   |                                 |   | 8,865                  |  |   | 8,865   |  |   |       
|                                |  |                          |         |                        |   |                         |  |   |                      |   |                                 |   |                        |  |   |         |  |   |        
|Total                           |  | $                        | 433,562 |                        | $ | 19                      |  | $ | (2,011               | ) |                                 | $ | 431,570                |  | $ | 162,688 |  | $ | 268,882
|                                |  |                          |         |                        |   |                         |  |   |                      |   |                                 |   |                        |  |   |         |  |   |        
|As of November 30, 2004         |  |                          |         |                        |   |                         |  |   |                      |   |                                 |   |                        |  |   |         |  |   |        
|U.S. Government debt securities |  | $                        | 161,180 |                        | $ |                        |  | $ | (1,022               | ) |                                 | $ | 160,158                |  | $ |        |  | $ | 160,158
|Corporate debt securities       |  |                          | 93,183  |                        |   | 7                       |  |   | (568                 | ) |                                 |   | 92,622                 |  |   |        |  |   | 92,622 
|Notes and other                 |  |                          | 60,117  |                        |   | 12                      |  |   | (320                 | ) |                                 |   | 59,809                 |  |   | 19,943  |  |   | 39,866 
|Marketable equity securities    |  |                          | 40      |                        |   |                        |  |   |                     |   |                                 |   | 40                     |  |   |        |  |   | 40     
|Money market funds              |  |                          | 237     |                        |   |                        |  |   |                     |   |                                 |   | 237                    |  |   | 237     |  |   |       
|                                |  |                          |         |                        |   |                         |  |   |                      |   |                                 |   |                        |  |   |         |  |   |        
|Total                           |  | $                        | 314,757 |                        | $ | 19                      |  | $ | (1,910               | ) |                                 | $ | 312,866                |  | $ | 20,180  |  | $ | 292,686
|                                |  |                          |         |                        |   |                         |  |   |                      |   |                                 |   |                        |  |   |         |  |   |        



As of
November 30, 2005 and 2004, $152.5 million and $123.3 million of fixed income securities had contractual maturities of one year or less, respectively. As of November 30, 2005 and 2004, $116.4 million and $169.4 million of fixed income
securities had contractual maturities of more than one year through three years, respectively.



The following table summarizes the net realized gains (losses) on short term investments for the years presented (in thousands):



|                            |  |                         |      |   |      |   |        |      |  |   |       |  
|--------------------------- |  | ----------------------- | ---- | - | ---- | - | ------ | ---- |  | - | ----- | -
|                            |  | Year Ended November 30, |     
|                            |  | 2005                    |      |   | 2004 |   |        | 2003 | 
|Realized gains              |  | $                       |     |   |      | $ | 2,508  |      |  | $ | 3,173 |  
|Realized losses             |  |                         | (275 | ) |      |   | (2,924 | )    |  |   | (249  | )
|                            |  |                         |      |   |      |   |        |      |  |   |       |  
|Net realized gains (losses) |  | $                       | (275 | ) |      | $ | (416   | )    |  | $ | 2,924 |  
|                            |  |                         |      |   |      |   |        |      |  |   |       |  



Impairment of
Investments



We monitor our investment portfolio for
impairment on a periodic basis. In the event that the carrying value of an investment exceeds its fair value and the decline in value is determined to be other-than-temporary, an impairment charge is recorded and a new cost basis for the investment
is established. In order to determine whether a decline in value is other-than-temporary, we evaluate, among other factors: the duration and extent to which the fair value has been less than the carrying value; our financial condition and business
outlook, including key operational and cash flow metrics, current market conditions and future trends in the companys industry; our relative competitive position within the industry; and our intent and ability to retain the investment for a
period of time sufficient to allow for any anticipated recovery in fair value.



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##### Table of Contents

TIBCO SOFTWARE INC.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



In accordance with FASB Staff Position Nos. FAS 115-1 and FAS 124-1, The Meaning of
Other-Than-Temporary Impairment and Its Application to Certain Investments (FSP FAS 115-1), the following table summarizes the fair value and gross unrealized losses related to available-for-sale securities, aggregated by
investment category and length of time that individual securities have been in a continuous unrealized loss position, as of November 30, 2005 (in thousands):



|                                |  |                     |         |                        |                        |        |            |       |                         |         |  |            |      |                         |  |   |         |  |   |        |  
|------------------------------- |  | ------------------- | ------- | ---------------------- | ---------------------- | ------ | ---------- | ----- | ----------------------- | ------- |  | ---------- | ---- | ----------------------- |  | - | ------- |  | - | ------ | -
|                                |  | Less than 12 months |         |                        | Greater than 12 months |        |            | Total |                        
|                                |  | Fair Value          |         | Gross UnrealizedLosses |                        |        | Fair Value |       | Gross Unrealized Losses |         |  | Fair Value |      | Gross Unrealized Losses | 
|U.S. Government debt securities |  | $                   | 37,418  |                        | $                      | (479   | )          |       | $                       | 79,271  |  | $          | (471 | )                       |  | $ | 116,689 |  | $ | (950   | )
|Corporate debt securities       |  |                     | 59,469  |                        |                        | (500   | )          |       |                         | 47,090  |  |            | (297 | )                       |  |   | 106,559 |  |   | (797   | )
|Asset-Backed Securities         |  |                     | 26,390  |                        |                        | (254   | )          |       |                         | 2,408   |  |            | (10  | )                       |  |   | 28,798  |  |   | (264   | )
|                                |  |                     |         |                        |                        |        |            |       |                         |         |  |            |      |                         |  |   |         |  |   |        |  
|Total                           |  | $                   | 123,277 |                        | $                      | (1,233 | )          |       | $                       | 128,769 |  | $          | (778 | )                       |  | $ | 252,046 |  | $ | (2,011 | )
|                                |  |                     |         |                        |                        |        |            |       |                         |         |  |            |      |                         |  |   |         |  |   |        |  



U.S. Government
Debt Securities.    The unrealized losses on our investments in U.S. Treasury obligations and direct obligations of the U.S. Government agencies were caused by rising interest rates. The contractual terms of these investments
do not permit the issuer to settle the securities at a price less than the amortized cost of the investment. Because we have the ability to hold these investments until a recovery of fair value, which may be maturity, we do not consider these
investments to be other-than-temporarily impaired as of November 30, 2005.



Corporate Debt Securities.The unrealized losses on our investments in corporate bonds were caused by rising interest rates. The contractual terms of these investments do not permit the
issuer to settle the securities at a price less than the amortized cost of the investment. The corporate bonds we hold are all high investment grade and there were no credit events on any of the corporate bonds held by us. Therefore, we do not
believe it is probable that we will be unable to collect all amounts due according to the contractual terms of the investments. It is expected that the corporate bonds would not be settled at a price less than the amortized cost of the investment.
Because we have the ability to hold these investments until a recovery of fair value, which may be maturity, we do not consider these investments to be other-than-temporarily impaired as of November 30, 2005.



Asset-Backed Securities.The unrealized losses
on our investments in asset-backed securities were caused by rising interest rates. The contractual terms of these investments do not permit the issuer to settle the securities at a price less than the amortized cost of the investment. The
asset-backed securities we hold are all high investment grade and there were no credit events on any of the asset-backed securities held by us. Therefore, we do not believe it is probable that we will be unable collect all amounts due according to
the contractual terms of the investments. It is expected that the asset-backed securities would not be settled at a price less than the amortized cost of the investment. Because we have the ability to hold these investments until a recovery of fair
value, which may be maturity, we do not consider these investments to be other-than-temporarily impaired as of November 30, 2005.



Property and Equipment



Property and equipment are stated at cost, net of accumulated depreciation. (Also see Note 6.) Depreciation is computed using the straight-line method
over the estimated useful lives of the assets as follows:



|                       |  |                                                       
|---------------------- |  | ------------------------------------------------------
|                       |  | Estimated useful lives                                
|Equipment and software |  | 2-5 years                                             
|Furniture and fixtures |  | 5 years                                               
|Buildings              |  | 25 years                                              
|Leasehold improvements |  | Shorter of the lease term or the estimated useful life



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##### Table of Contents

TIBCO SOFTWARE INC.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



Depreciation and amortization expense of property and equipment was $15.0 million, $13.2 million and
$15.6 million for fiscal years 2005, 2004 and 2003, respectively.



Capitalized Software Development Costs



Costs
related to research and development are generally charged to expense as incurred. Capitalization of material software development costs begins when a products technological feasibility has been established in accordance with the provisions of
SFAS 86, Accounting for the Costs of Computer Software to be Sold, Leased, or Otherwise Marketed. To date, the period between achieving technological feasibility, which we have defined as the establishment of a working model, and which
typically occurs when beta testing commences, and the general availability of such software has been very short. Accordingly, software development costs have been expensed as incurred.



Costs related to software acquired, developed or modified solely to meet our internal requirements and for which there are
no substantive plans to market are capitalized in accordance with the provisions of AICPA Statement of Position (SOP) 98-1, Accounting for the Costs of Computer Software Developed or Obtained for Internal Use. Costs incurred
after the preliminary planning stage of the project and after management has authorized and committed funds to the project are capitalized. Costs capitalized for computer software developed or obtained for internal use are included in Property and
Equipment on the Consolidated Balance Sheets.



Goodwill and
Other Intangible Assets



Our goodwill and intangible
assets are recorded from our corporate acquisition transactions. In accordance with SFAS 142, Goodwill and Other Intangible Assets, which we adopted effective December 1, 2002, our goodwill and intangible assets with indefinite
useful lives are no longer amortized, but are instead tested for impairment at least annually, or as circumstances indicate their value may no longer be recoverable. We generally perform our annual impairment test at the end of the fiscal year. As
we operate our business in one reporting segment, our goodwill is tested for impairment at the enterprise level. Goodwill impairment testing is a two-step process. For the first step, we screen for impairment, and if any possible impairment exists,
we undertake a second step of measuring such impairment. Other purchased intangible assets with definite useful lives are amortized on a straight-line basis over their useful lives, and periodically tested for impairment. (Also see Note 7.) No
impairment losses were incurred in the years presented.



Impairment of Long-Lived Assets



We evaluate
the recoverability of our long-lived assets in accordance with SFAS 144, Accounting for the Impairment or Disposal of Long-Lived Assets. When events or changes in circumstances indicate that the carrying amount of long-lived assets may
not be recoverable we recognize such impairment in the event the net book value of such assets exceeds the future undiscounted cash flows attributable to such assets. No impairment losses were incurred in the years presented.



Revenue Recognition



License revenue consists principally of revenue earned under software
license agreements. License revenue is generally recognized when a signed contract or other persuasive evidence of an arrangement exists, the software has been shipped or electronically delivered, the license fee is fixed or determinable, and
collection of the resulting receivable is reasonably assured. When contracts contain multiple elements wherein vendor specific objective evidence exists for all undelivered elements, we account for the delivered elements in accordance with the
Residual Method prescribed by SOP 98-9. Revenue from subscription license agreements, which include



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##### Table of Contents

TIBCO SOFTWARE INC.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



software, rights to unspecified future products and maintenance, is recognized ratably over the term of the subscription period. Revenue on shipments to
resellers, which is generally subject to certain rights of return and price protection, is recognized when the products are sold by the resellers to an end-user customer and recorded net of related costs to the resellers. Providing all other revenue
criteria are met, non-refundable, prepaid fees from OEM customers are generally recognized upon delivery and on going royalty fees are generally recognized upon reported units shipped.



Professional services revenue consists primarily of revenue received for performing implementation of our software, on-site
support, consulting and training. Many customers who license our software also enter into separate professional services arrangements with us. In determining whether professional services revenue should be accounted for separately from license
revenue, we evaluate, among other factors, the nature of our software products, whether they are ready for use by the customer upon receipt, the nature of our implementation services, which typically do not involve significant customization to or
development of the underlying software code, the availability of services from other vendors, whether the timing of payments for license revenue is coincident with performance of services and whether milestones or acceptance criteria exist that
affect the realizability of the software license fee. Substantially all of our professional services arrangements are billed on a time and materials basis and accordingly, are recognized as the services are performed. Contracts with fixed or not to
exceed fees are recognized on a proportional performance basis. If there is significant uncertainty about the project completion or receipt of payment for professional services, revenue is deferred until the uncertainty is sufficiently resolved.
Training revenue is recognized as training services are delivered.



For arrangements that do not qualify for separate accounting for the license and professional services revenues, including arrangements that involve significant modification or customization of the software, that include milestones or
customer specific acceptance criteria that may affect collection of the software license fees, or where payment for the software license is tied to the performance of professional services, software license revenue is generally recognized together
with the professional services revenue using either the percentage-of-completion or completed-contract method. Under the percentage-of-completion method, revenue recognized is equal to the ratio of costs expended to date to the anticipated total
contract costs, based on current estimates of costs to complete the project. If the total estimated costs to complete a project exceed the total contract amount, indicating a loss, the entire anticipated loss would be recognized currently.



Maintenance revenue consists of fees for providing software
updates on a when and if available basis and technical support for software products (post-contract support or PCS). Maintenance revenue is recognized ratably over the term of the agreement.



Payments received in advance of services performed are deferred. Allowances
for estimated future returns and discounts are provided for upon recognition of revenue.



Advertising Expense



Advertising costs are expensed as incurred and totaled approximately $1.1 million, $0.4 million and $2.9 million for the fiscal years 2005, 2004, and 2003, respectively.



Restructuring Charges



Our restructuring charges are comprised primarily of costs related to properties abandoned in connection with facilities consolidation, related write-down
of leasehold improvements and severance and associated employee termination costs related to headcount reductions. For restructuring actions initiated prior to December 31, 2002, we complied with the guidance provided by EITF 94-3
Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity. We recorded the liability related to these termination costs when the plan was approved; the termination benefits were determined and
communicated to the employees; the number of employees to be terminated, their locations and job were specifically identified;



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TIBCO SOFTWARE INC.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



and the period of time to implement the plan was set. For restructuring actions initiated after January 1, 2003, we adopted SFAS 146, Accounting
for Costs Associated with Exit or Disposal Activities which requires that a liability for costs associated with an exit or disposal activity be recognized and measured initially at fair value only when the liability is incurred. (Also see Note
8.)



Stock-Based Compensation



We accounted for employee stock-based compensation plans using the intrinsic
value method prescribed by APB 25 and have adopted the disclosure provisions of SFAS 123 Accounting for Stock-Based Compensation and SFAS 148 Accounting for Stock-Based CompensationTransition and Disclosurean amendment
of FASB Statement No. 123. We accounted for stock compensation expense related to stock options granted to consultants based on the fair value estimated using the Black-Scholes option pricing model on the date of grant and remeasured at
each reporting date in compliance with EITF 96-18 Accounting for Equity Instruments That Are Issued to Other Than Employees for Acquiring, or in Conjunction with Selling, Goods or Services. As a result, stock based compensation expense
fluctuates as the fair market value of our common stock fluctuates. Compensation expense is amortized using the multiple option approach in compliance with FIN 28. Pursuant to FIN 44 Accounting for Certain Transactions involving Stock
Compensationan interpretation of APB Opinion No. 25, options assumed in a purchase business combination are valued at the date of acquisition at their fair value calculated using the Black-Scholes option pricing model. The fair
value of assumed options is included as a component of the purchase price. The intrinsic value attributable to unvested options is recorded as unearned stock based compensation and amortized over the remaining vesting period of the options.



In our Consolidated Statements of Operations, stock-based
compensation expenses have been incorporated into the respective cost and expense lines, and are summarized as follows (in thousands):



|                                     |  |                         |     |      |   |      |  |   |      
|------------------------------------ |  | ----------------------- | --- | ---- | - | ---- |  | - | -----
|                                     |  | Year Ended November 30,
|                                     |  | 2005                    |     | 2004 |   | 2003
|Stock-based compensation related to: |  |                         |     |      |   |      |  |   |      
|Cost of revenue                      |  | $                       | 14  |      | $ | 34   |  | $ | 201  
|Research and development             |  |                         | 10  |      |   | 40   |  |   | 513  
|Sales and marketing                  |  |                         | 104 |      |   | 156  |  |   | 276  
|General and administrative           |  |                         | 1   |      |   | 13   |  |   | 73   
|                                     |  |                         |     |      |   |      |  |   |      
|Total                                |  | $                       | 129 |      | $ | 243  |  | $ | 1,063
|                                     |  |                         |     |      |   |      |  |   |      



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TIBCO SOFTWARE INC.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



If we had applied a fair value method for stock-based compensation as prescribed by SFAS 123, the
effect on our net income and net income per share for the years indicated would have been as follows (in thousands, except per share data):



|                                                                                                                                              |  |                         |         |   |      |   |         |      |  |   |         |  
|--------------------------------------------------------------------------------------------------------------------------------------------- |  | ----------------------- | ------- | - | ---- | - | ------- | ---- |  | - | ------- | -
|                                                                                                                                              |  | Year Ended November 30, |        
|                                                                                                                                              |  | 2005                    |         |   | 2004 |   |         | 2003 | 
|Net income, as reported                                                                                                                       |  | $                       | 72,555  |   |      | $ | 44,920  |      |  | $ | 11,440  |  
|Add: Total stock-based employee compensation expense determined under intrinsic value based method for all awards, net of related tax
effects |  |                         | 24      |   |      |   | 94      |      |  |   | 1,136   |  
|Deduct: Total stock-based employee compensation expense determined under fair value based method for all awards, net of related tax
effects   |  |                         | (22,993 | ) |      |   | (38,080 | )    |  |   | (51,283 | )
|                                                                                                                                              |  |                         |         |   |      |   |         |      |  |   |         |  
|Pro forma net income (loss)                                                                                                                   |  | $                       | 49,586  |   |      | $ | 6,934   |      |  | $ | (38,707 | )
|                                                                                                                                              |  |                         |         |   |      |   |         |      |  |   |         |  
|Net income (loss) per share:                                                                                                                  |  |                         |         |   |      |   |         |      |  |   |         |  
|Basicas reported                                                                                                                             |  | $                       | 0.34    |   |      | $ | 0.22    |      |  | $ | 0.05    |  
|                                                                                                                                              |  |                         |         |   |      |   |         |      |  |   |         |  
|Basicpro forma                                                                                                                               |  | $                       | 0.23    |   |      | $ | 0.03    |      |  | $ | (0.18   | )
|                                                                                                                                              |  |                         |         |   |      |   |         |      |  |   |         |  
|Dilutedas reported                                                                                                                           |  | $                       | 0.32    |   |      | $ | 0.20    |      |  | $ | 0.05    |  
|                                                                                                                                              |  |                         |         |   |      |   |         |      |  |   |         |  
|Dilutedpro forma                                                                                                                             |  | $                       | 0.23    |   |      | $ | 0.03    |      |  | $ | (0.18   | )
|                                                                                                                                              |  |                         |         |   |      |   |         |      |  |   |         |  



The following table
summarizes the assumptions we used to calculate the value of each option grant on the date of the grant using the Black-Scholes option-pricing model:



|                          |  |                         |   |  |                              |   |  |         |   |  |         |   |  |         |   |  |         |  
|------------------------- |  | ----------------------- | - |  | ---------------------------- | - |  | ------- | - |  | ------- | - |  | ------- | - |  | ------- | -
|                          |  | Stock Option Plans      |   |  | Employee Stock Purchase Plan |  
|                          |  | Year Ended November 30, |   |  | Year Ended November 30,      |  
|                          |  | 2005                    |   |  | 2004                         |   |  | 2003    |   |  | 2005    |   |  | 2004    |   |  | 2003    |  
|Risk free interest rates  |  | 3.5-4.4                 | % |  | 2.1-3.3                      | % |  | 1.9-3.5 | % |  | 1.8-2.5 | % |  | 1.0-2.5 | % |  | 2.6     | %
|Expected lives (in years) |  | 3.0                     |   |  | 3.0                          |   |  | 3.0     |   |  | 0.5-2.0 |   |  | 0.5-2.0 |   |  | 0.5-2.0 |  
|Dividend yield            |  | 0.0                     |   |  | 0.0                          |   |  | 0.0     |   |  | 0.0     |   |  | 0.0     |   |  | 0.0     |  
|Expected volatility       |  | 52-64                   | % |  | 67-102                       | % |  | 97-113  | % |  | 54-63   | % |  | 47-116  | % |  | 98      | %



In December 2004, FASB
issued SFAS 123(R), Share-Based Payment (Revised 2004), which replaces SFAS 123 and supersedes APB 25. From the first quarter of fiscal year 2006, we will be required to adopt SFAS 123(R) and measure all employee share-based compensation
awards using a fair value based method and record the share-based compensation expenses in our consolidated statements of operations if the requisite service to earn the award is provided. The above disclosed pro forma results and assumptions used
in fiscal years 2005, 2004 and 2003 were based solely on historical volatility of our common stock over the most recent period commensurate with the estimated expected life of our stock options, and will not be indicative of the effect for future
periods or years after adoption of SFAS 123(R). Upon adoption of SFAS 123(R), we will change the computation of expected volatility used in the Black-Scholes calculations for new grants from being solely based on historical volatility to being based
on a combination of historical and implied volatilities. In addition, we will also refine the expected life assumptions by excluding certain options, such as pre-IPO options and very highly priced options, for the purpose of deriving the normalized
exercise behavior.



In response to the recent changes in
accounting for share-based payments, as stated in SFAS 123(R), we also modified our Employee Stock Purchase Plan (ESPP) from February 2005. The duration for ESPP offering



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TIBCO SOFTWARE INC.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



periods was changed to six months and the price at which the common stock is purchased under the plan was set at 95% of the fair market value of our common
stock on the last day of the purchase period. The modified ESPP is no longer considered compensatory and therefore there was no ESPP related compensation expense after February 2005.



Income Taxes



We make certain estimates and judgments in determining income tax expense for financial statement purposes. These estimates and judgments occur in the
calculation of certain tax assets and liabilities, which arise from differences in the timing of recognition of revenue and expense for tax and financial statement purposes.



We assess the likelihood that we will be able to recover our deferred tax assets. We consider all available evidence, both
positive and negative, including historical levels of income, expectations and risks associated with estimates of future taxable income and ongoing prudent and feasible tax planning strategies in assessing the need for the valuation allowance. If
recovery is not likely, we increase our provision for taxes by recording a valuation allowance against the deferred tax assets that we estimate will not ultimately be recoverable. (Also see Note 9.)



Comprehensive Income (Loss)



Comprehensive income (loss) includes net income and other comprehensive
income (loss), which consists of unrealized gains and losses on available-for-sale securities and cumulative translation adjustments.



Total comprehensive income (loss) of fiscal years 2005, 2004 and 2004 are presented in the accompanying Consolidated Statement of Stockholders
Equity. Total accumulated other comprehensive income (loss) is displayed as a separate component of stockholders equity in the accompanying Consolidated Balance Sheets. The accumulated balances for each component of other comprehensive income
(loss) consist of the following, net of taxes (in thousands):



|                                |  |                                                         |        |   |                             |   |         |                                             |  |   |         |  
|------------------------------- |  | ------------------------------------------------------- | ------ | - | --------------------------- | - | ------- | ------------------------------------------- |  | - | ------- | -
|                                |  | Unrealized Gain (Loss) in Available-for-Sale Securities |        |   | Foreign CurrencyTranslation |   |         | AccumulatedOtherComprehensive Income (Loss) | 
|Balance as of November 30, 2002 |  | $                                                       | 2,412  |   |                             | $ | 485     |                                             |  | $ | 2,897   |  
|Change during year              |  |                                                         | (2,313 | ) |                             |   | (359    | )                                           |  |   | (2,672  | )
|                                |  |                                                         |        |   |                             |   |         |                                             |  |   |         |  
|Balance as of November 30, 2003 |  |                                                         | 99     |   |                             |   | 126     |                                             |  |   | 225     |  
|Change during year              |  |                                                         | (1,972 | ) |                             |   | 2,449   |                                             |  |   | 477     |  
|                                |  |                                                         |        |   |                             |   |         |                                             |  |   |         |  
|Balance as of November 30, 2004 |  |                                                         | (1,873 | ) |                             |   | 2,575   |                                             |  |   | 702     |  
|Change during year              |  |                                                         | (144   | ) |                             |   | (14,904 | )                                           |  |   | (15,048 | )
|                                |  |                                                         |        |   |                             |   |         |                                             |  |   |         |  
|Balance as of November 30, 2005 |  | $                                                       | (2,017 | ) |                             | $ | (12,329 | )                                           |  | $ | (14,346 | )
|                                |  |                                                         |        |   |                             |   |         |                                             |  |   |         |  



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TIBCO SOFTWARE INC.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



Net Income Per Share



Basic net income per share is computed by dividing the net income available to common stockholders for the period by the
weighted-average number of common stock shares outstanding during the period less common stock subject to repurchase. Diluted net income per share is computed by dividing the net income for the period by the weighted-average number of common stock
shares and potential common stock equivalents outstanding during the period if their effect is dilutive. Certain potential common stock equivalents were not included in computing net income per share because their effect was anti-dilutive. The
following table sets forth the computation of basic and diluted net income per share for the years indicated (in thousands, except per share amounts):



|                                                                                  |  |                         |         |      |   |         |  |   |        
|--------------------------------------------------------------------------------- |  | ----------------------- | ------- | ---- | - | ------- |  | - | -------
|                                                                                  |  | Year Ended November 30,
|                                                                                  |  | 2005                    |         | 2004 |   | 2003   
|Net income                                                                        |  | $                       | 72,555  |      | $ | 44,920  |  | $ | 11,440 
|                                                                                  |  |                         |         |      |   |         |  |   |        
|Weighted-average common stock shares used to compute basic net income per share   |  |                         | 213,263 |      |   | 207,506 |  |   | 211,555
|Effect of dilutive common stock equivalents:                                      |  |                         |         |      |   |         |  |   |        
|Options to purchase common stock                                                  |  |                         | 10,714  |      |   | 13,418  |  |   | 10,781 
|Common stock subject to repurchase                                                |  |                         |        |      |   | 3       |  |   | 183    
|                                                                                  |  |                         |         |      |   |         |  |   |        
|Weighted-average common stock shares used to compute diluted net income per share |  |                         | 223,977 |      |   | 220,927 |  |   | 222,519
|                                                                                  |  |                         |         |      |   |         |  |   |        
|Net income per shareBasic                                                        |  | $                       | 0.34    |      | $ | 0.22    |  | $ | 0.05   
|                                                                                  |  |                         |         |      |   |         |  |   |        
|Net income per shareDiluted                                                      |  | $                       | 0.32    |      | $ | 0.20    |  | $ | 0.05   
|                                                                                  |  |                         |         |      |   |         |  |   |        



The following
potential common stock equivalents were not included in the diluted net income per share calculation above, because their effect was anti-dilutive for the years indicated (in thousands):



|                                   |  |                         |  |        |  |       
|---------------------------------- |  | ----------------------- |  | ------ |  | ------
|                                   |  | Year Ended November 30,
|                                   |  | 2005                    |  | 2004   |  | 2003  
|Options to purchase common stock   |  | 17,099                  |  | 18,393 |  | 32,047
|Common stock subject to repurchase |  |                        |  |       |  | 23    
|                                   |  |                         |  |        |  |       
|Total                              |  | 17,099                  |  | 18,393 |  | 32,070
|                                   |  |                         |  |        |  |       



Derivative
Financial Instruments



We account for derivative
instruments and hedging activities under SFAS 133 Accounting for Derivative Instruments and Hedging Activities. This statement establishes accounting and reporting standards for derivative instruments and requires recognition of all
derivatives as assets or liabilities in the statement of financial position and measurement of those instruments at fair value. Derivatives that are not hedges must be adjusted to fair value through earnings. If the derivative is a hedge, depending
on the nature of the hedge, its change in fair value will either be offset against the change in fair value of the hedged asset or liability, firm commitment through earnings or recognized in other comprehensive income (loss) until the hedged item
is recognized in earnings.



To manage currency exposure related
to net assets and liabilities denominated in foreign currencies, we enter into forward contracts for certain foreign denominated assets or liabilities. We do not enter into derivative



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TIBCO SOFTWARE INC.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



financial instruments for trading purposes. We had two outstanding forward contracts with total notional amounts of $24.6 million as of November 30,
2005. These derivative instruments are fair value hedges of certain foreign currency transaction exposures in various currencies. The fair value of these forward contracts as of November 30, 2005 was approximately $24.6 million.



These derivative instruments do not subject us to material balance sheet risk
due to exchange rate movements because gains and losses on these derivatives are intended to offset gains and losses on the foreign currency denominated assets and liabilities being hedged. As of November 30, 2005, the outstanding balance sheet
hedging derivatives had maturities of 30 days or less.



Recent Accounting Pronouncements



In
November 2005, FASB issued FSP FAS 115-1 and FAS 124-1, The Meaning of Other-Than-Temporary Impairment and Its Application to Certain Investments (FSP FAS 115-1), which provides guidance on determining
when investments in certain debt and equity securities are considered impaired, whether that impairment is other-than-temporary, and on measuring such impairment loss. FSP FAS 115-1 also includes accounting considerations subsequent to the
recognition of an other-than temporary impairment and requires certain disclosures about unrealized losses that have not been recognized as other-than-temporary impairments. FSP FAS 115-1 is required to be applied to reporting periods beginning
after December 15, 2005. We are required to adopt FSP FAS 115-1 in the second quarter of fiscal 2006. We do not expect the adoption of this statement will have a material impact on our results of operations or financial condition.



In May 2005, FASB issued SFAS 154, Accounting Changes and Error
Correctionsa replacement of APB Opinion No. 20 and FASB Statement No. 3. SFAS 154 changes the requirements for the accounting for and reporting of a change in accounting principle, and applies to all voluntary changes in
accounting principle. It also applies to changes required by an accounting pronouncement in the unusual instance that the pronouncement does not include specific transition provisions. This statement requires retrospective application to prior
periods financial statements of changes in accounting principle, unless it is impracticable to determine either the period-specific effects or the cumulative effect of the change. SFAS 154 is effective for accounting changes made in fiscal
years beginning after December 15, 2005. We do not expect the adoption of this statement will have a material impact on our results of operations or financial condition.



In December 2004, FASB issued SFAS 123(R), Share-Based Payment (Revised 2004), which replaces SFAS 123 and
supersedes APB 25. In March 2005, the SEC issued Staff Accounting Bulletin (SAB) No. 107, providing supplemental implementation guidance for SFAS 123(R). In April 2005, the SEC issued Amendment to Rule 04-01(a) of Regulation
S-X Regarding the Compliance Date for Statement of Financial Accounting Standard No.123(R), Share-Based Payment (the Amendment to Rule 4-01(a)), changing the effective date for most public companies to adopt SFAS 123(R)
to the first interim reporting period of a companys fiscal year that begins on or after June 15, 2005. Under the Amendment to Rule 4-01(a), we are now required to adopt SFAS 123(R) in our first quarter of fiscal year 2006.



SFAS 123(R) requires that compensation costs relating to share-based payment
transactions be recognized in the financial statements. The pro forma disclosure previously permitted under SFAS 123 will no longer be an acceptable alternative to recognition of expense in the financial statements. SFAS 123(R) also provides three
alternative transition methods for its first adoption. Up to the end of fiscal year 2005, we had measured compensation costs related to share-based payments under APB 25 and as allowed by SFAS 123, and provided pro forma disclosure in notes to our
financial statements as required by SFAS 123. On adoption of SFAS 123(R), we will use the modified prospective application transition method. SFAS 123(R) also requires a classification change in the statement of cash flows, whereby a portion of the
tax benefits from stock options will be moved



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TIBCO SOFTWARE INC.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



from cash from operating activities to cash from financing activities, without changing the total cash flows. We are still in the process of finalizing our
study on the impact of applying various other provisions of SFAS 123(R). We expect the adoption of SFAS 123(R) and SAB 107 will have a material adverse impact on our net income and net income per share. However, we currently cannot accurately
estimate the effect of such impact, as the compensation costs will fluctuate.



In December 2004, FASB issued SFAS 153, Exchanges of Nonmonetary Assetsan amendment to APB Opinion No. 29. This statement amends APB 29 to eliminate the exception for nonmonetary exchanges of
similar productive assets and replaces it with a general exception for exchanges of nonmonetary assets that do not have commercial substance. A nonmonetary exchange has commercial substance if the future cash flows of the entity are expected to
change significantly as a result of the exchange. Adoption of this statement is not expected to have a material impact on our results of operations or financial condition.



|Note 3. | Business Combinations
|------- | ---------------------



Velosel Corporation



On August 1, 2005, we acquired certain assets of Velosel Corporation (Velosel), a Delaware corporation providing product information
management. The total purchase price was approximately $3.4 million which was paid in cash. Under the purchase price allocation, substantially all of the purchase price is related to amortizable intangible assets, including developed technology. The
acquired intangible assets are amortizable over their estimated useful lives of three to six years. No goodwill has been recorded for this acquisition as the fair value of acquired assets exceeds the purchase price.



ObjectStar International Limited



On March 7, 2005, we acquired substantially all of the assets and
certain liabilities of ObjectStar International Limited (ObjectStar), a privately held native mainframe integration solutions provider.



The total purchase price was approximately $21.4 million, comprised of $20.9 million in cash and $0.5 million in direct transaction costs, including legal
and valuation fees. The ObjectStar acquisition was accounted for under SFAS 141 Business Combinations and certain specified provisions of SFAS 142 Goodwill and Other Intangible Assets. The assets acquired and liabilities
assumed are based on their fair values at the date of acquisition. ObjectStars existing technology had reached technological feasibility at the time of the acquisition; therefore we did not record an in-process research and development charge.
The results of operations of ObjectStar have been included in our Consolidated Statement of Operations from March 7, 2005. As the effect of this acquisition would not have been material to our results of operations in past fiscal years, pro
forma results as if we had acquired ObjectStar at the beginning of any reported fiscal years, are not presented in this report.



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TIBCO SOFTWARE INC.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



The following table summarizes the allocation of the purchase price to the assets acquired and
liabilities assumed based on their fair values on the date of acquisition (in thousands):



|                                    |  |   |        |   |  |   |        |  
|----------------------------------- |  | - | ------ | - |  | - | ------ | -
|Tangible assets acquired:           |  |   |        |   |  |   |        |  
|Accounts Receivable                 |  | $ | 3,331  |   |  |   |        |  
|Other                               |  |   | 205    |   |  |   |        |  
|                                    |  |   |        |   |  |   |        |  
|Total tangible assets acquired      |  |   | 3,536  |   |  | $ | 3,536  |  
|Amortizable intangible assets:      |  |   |        |   |  |   |        |  
|Developed technology                |  |   | 1,600  |   |  |   |        |  
|Patents/core technology             |  |   | 1,100  |   |  |   |        |  
|Maintenance contracts               |  |   | 9,400  |   |  |   |        |  
|Non-compete agreements              |  |   | 200    |   |  |   |        |  
|Customer base                       |  |   | 1,600  |   |  |   |        |  
|                                    |  |   |        |   |  |   |        |  
|Total amortizable intangible assets |  |   | 13,900 |   |  |   | 13,900 |  
|Goodwill                            |  |   |        |   |  |   | 7,359  |  
|                                    |  |   |        |   |  |   |        |  
|Total assets acquired               |  |   |        |   |  |   | 24,795 |  
|Liabilities assumed:                |  |   |        |   |  |   |        |  
|Deferred revenue                    |  |   | (3,018 | ) |  |   |        |  
|Other                               |  |   | (328   | ) |  |   |        |  
|                                    |  |   |        |   |  |   |        |  
|Total liabilities assumed           |  |   | (3,346 | ) |  |   | (3,346 | )
|                                    |  |   |        |   |  |   |        |  
|Total purchase price                |  |   |        |   |  | $ | 21,449 |  
|                                    |  |   |        |   |  |   |        |  



We assessed the
potential benefits from this acquisition, including the broadening of our mainframe product set, improvement of our competitive position and the possibility of increased revenues, and determined that the purchase price represented appropriate
consideration for the acquisition. As the purchase price exceeded the fair value of the assets purchased, we recorded $7.4 million of goodwill in connection with this transaction, of which approximately $1.8 million is amortizable for income tax
purposes. In accordance with SFAS 142, goodwill is not being amortized and is tested for impairment at least annually or sooner if circumstances indicate that impairment may have occurred.



In-process research and development, relating to development projects which
had not reached technological feasibility and that were of no future alternative use, were expensed upon consummation of the acquisition. Developed technology and in-process research and development were identified and valued through extensive
interviews, analysis of data provided by Staffware concerning development projects, their stage of development, the time and resources needed to complete them, if applicable, and their expected income generating ability and associated risks. Where
development projects had reached technological feasibility, they were classified as developed technology and the value assigned to developed technology was capitalized. The income approach, which includes an analysis of the cash flows and risks
associated with achieving such cash flows, was the primary technique utilized in valuing acquired intangible assets. Key assumptions included a discount rate of 16% and estimates of revenue growth, maintenance contract renewal rates, cost of sales,
operating expenses and taxes.



Amounts allocated to developed
technology, patents/core technology, and customer base are amortized over their estimated useful lives of five years. Maintenance agreements are amortized over their estimated useful lives of nine years and non-competition agreements are amortized
over their estimated useful lives of three years.



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TIBCO SOFTWARE INC.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



General Interface Corp.



On October 12, 2004, we acquired General Interface Corp. (General Interface), a provider of a solution for
developing and deploying rich, high-performance client-side applications in a standards-based browser environment. The addition of General Interfaces solution enables us to offer a user-interface for building rich composite applications in a
browser-based environment, enabling companies to leverage their existing IT investment.



The total purchase price of the acquisition was $3.5 million in cash. The total purchase price was allocated to the assets acquired, principally $1.1 million in identifiable intangible assets and approximately $2.4
million in goodwill. Identifiable intangible assets consist of developed technology, trade name, and customer relationships, and are being amortized on a straight-line basis over three to four years. Goodwill is not amortized, but tested for
impairment at least annually or sooner if circumstances indicate that impairment may have occurred. The goodwill recorded is deductible through amortization for income tax purposes. The results of operations of General Interface are included in our
Consolidated Statements of Operations from the date of acquisition.



Staffware plc



On June 7, 2004, we
acquired Staffware plc (Staffware), a provider of business process management (BPM) solutions that enable companies to automate, refine and manage their business processes. The addition of Staffwares BPM solutions
enabled us to offer our combined customer base a more robust and expanded real-time business integration solution, and increased our distribution capabilities through the cross-selling of products into new geographic regions. These factors
contributed to a purchase price exceeding the fair value of Staffwares net tangible and intangible assets acquired. As a result, we recorded $163.3 million of goodwill in connection with this transaction, which is not deductible for income tax
purposes. In accordance with SFAS 142, goodwill is not being amortized and will be tested for impairment at least annually or sooner if circumstances indicate that impairment may have occurred.



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TIBCO SOFTWARE INC.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



The following table summarizes the allocation of the purchase price to the assets acquired and
liabilities assumed based on their fair values at the date of acquisition, and as adjusted (in thousands):



|                                                |  |   |         |   |  |   |         |  
|----------------------------------------------- |  | - | ------- | - |  | - | ------- | -
|Cash acquired:                                  |  |   |         |   |  | $ | 27,190  |  
|Tangible assets acquired:                       |  |   |         |   |  |   |         |  
|Accounts receivable                             |  | $ | 16,967  |   |  |   |         |  
|Other current assets                            |  |   | 2,078   |   |  |   |         |  
|Property and equipment                          |  |   | 4,623   |   |  |   |         |  
|Deferred tax assets                             |  |   | 5,244   |   |  |   |         |  
|Other non-current assets                        |  |   | 1,743   |   |  |   |         |  
|                                                |  |   |         |   |  |   |         |  
|Total tangible assets acquired                  |  |   | 30,655  |   |  |   | 30,655  |  
|Amortizable intangible assets:                  |  |   |         |   |  |   |         |  
|Developed technology                            |  |   | 21,700  |   |  |   |         |  
|Patents/core technology                         |  |   | 14,200  |   |  |   |         |  
|Maintenance contracts                           |  |   | 14,400  |   |  |   |         |  
|Customer base                                   |  |   | 14,000  |   |  |   |         |  
|Trademarks                                      |  |   | 3,500   |   |  |   |         |  
|                                                |  |   |         |   |  |   |         |  
|Total amortizable intangible assets             |  |   | 67,800  |   |  |   | 67,800  |  
|In-process research and development             |  |   |         |   |  |   | 2,200   |  
|Goodwill, as adjusted                           |  |   |         |   |  |   | 163,147 |  
|                                                |  |   |         |   |  |   |         |  
|Total assets acquired                           |  |   |         |   |  |   | 290,992 |  
|Liabilities assumed:                            |  |   |         |   |  |   |         |  
|Accounts payable                                |  |   | (1,854  | ) |  |   |         |  
|Accrued liabilities                             |  |   | (19,882 | ) |  |   |         |  
|Deferred revenue                                |  |   | (11,391 | ) |  |   |         |  
|                                                |  |   |         |   |  |   |         |  
|Total liabilities assumed                       |  |   | (33,127 | ) |  |   | (33,127 | )
|                                                |  |  
|Deferred tax liability for acquired intangibles |  |   |         |   |  |   | (20,736 | )
|                                                |  |   |         |   |  |   |         |  
|Total purchase price                            |  |   |         |   |  | $ | 237,129 |  
|                                                |  |   |         |   |  |   |         |  



The total purchase
price of approximately $237.1 million was comprised of $139.7 million in cash, the issuance of 10.9 million shares of our common stock valued at $92.3 million and approximately $5.1 million in direct transaction costs, including legal,
valuation and accounting fees.



In-process research and
development of $2.2 million was expensed upon consummation of the acquisition. Other identifiable intangible assets, including developed technology, customer base and trademarks, are being amortized over their useful lives of five years; and
patents/core technology and maintenance contracts are being amortized over their estimated useful lives of eight years.



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TIBCO SOFTWARE INC.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



The results of operations of Staffware have been included in our Consolidated Statements of
Operations from the date of acquisition, June 7, 2004. If we had acquired Staffware at the beginning of fiscal year 2003, our unaudited pro forma net revenues, net income and net income per share for fiscal year 2004 and 2003 would have been as
follows (in thousands, except per share data):



|                               |  |                         |         |      |   |        
|------------------------------ |  | ----------------------- | ------- | ---- | - | -------
|                               |  | Year Ended November 30,
|                               |  | 2004                    |         | 2003
|Revenue                        |  | $                       | 423,573 |      | $ | 334,233
|                               |  |                         |         |      |   |        
|Net income                     |  | $                       | 35,253  |      | $ | 7,206  
|                               |  |                         |         |      |   |        
|Net income per share - Basic   |  | $                       | 0.17    |      | $ | 0.03   
|                               |  |                         |         |      |   |        
|Net income per share - Diluted |  | $                       | 0.16    |      | $ | 0.03   
|                               |  |                         |         |      |   |        



Talarian
Corporation



On April 23, 2002, we acquired Talarian
Corporation (Talarian), a provider of infrastructure software that enables businesses to exchange information in real time, both internally and with their partners, suppliers, and customers. We recorded $68.3 million of goodwill in
connection with this acquisition in fiscal year 2002, which had taken into account, accrued acquisition integration expenses for incremental costs to exit and consolidate activities at various Talarian facilities. In fourth quarter of fiscal year
2005, in accordance with EITF 95-3 Recognition of Liabilities in a Purchase Business Combination, we determined that there are no further liabilities related to Talarian facilities and therefore the carrying value of goodwill was reduced
by $0.9 million. (Also see Notes 7 and 8.)



|Note 4. | Balance Sheet Components
|------- | ------------------------



Certain balance sheet components are summarized below (in thousands):



|                                                        |  |                    |        |   |      |   |        |  
|------------------------------------------------------- |  | ------------------ | ------ | - | ---- | - | ------ | -
|                                                        |  | As of November 30, |       
|                                                        |  | 2005               |        |   | 2004 |  
|Other non-current assets:                               |  |                    |        |   |      |   |        |  
|Prepaid land lease                                      |  | $                  | 26,124 |   |      | $ | 26,673 |  
|Private equity investments, net                         |  |                    | 2,305  |   |      |   | 1,923  |  
|Restricted cash                                         |  |                    | 1,798  |   |      |   | 1,333  |  
|Other                                                   |  |                    | 4,332  |   |      |   | 2,460  |  
|                                                        |  |                    |        |   |      |   |        |  
|Total other non-current assets                          |  | $                  | 34,559 |   |      | $ | 32,389 |  
|                                                        |  |                    |        |   |      |   |        |  
|Accrued liabilities:                                    |  |                    |        |   |      |   |        |  
|Compensation and benefits                               |  | $                  | 36,879 |   |      | $ | 46,127 |  
|Taxes                                                   |  |                    | 7,911  |   |      |   | 19,695 |  
|Expenses                                                |  |                    | 15,082 |   |      |   | 18,607 |  
|                                                        |  |                    |        |   |      |   |        |  
|Total accrued liabilities                               |  | $                  | 59,872 |   |      | $ | 84,429 |  
|                                                        |  |                    |        |   |      |   |        |  
|Accrued restructuring and excess facilities costs:      |  |                    |        |   |      |   |        |  
|Restructuring costs                                     |  | $                  | 28,852 |   |      | $ | 34,421 |  
|Acquisition integration costs                           |  |                    | 1,137  |   |      |   | 4,946  |  
|                                                        |  |                    |        |   |      |   |        |  
|Total accrued restructuring and excess facilities costs |  |                    | 29,989 |   |      |   | 39,367 |  
|Less: current portion                                   |  |                    | (5,840 | ) |      |   | (9,489 | )
|                                                        |  |                    |        |   |      |   |        |  
|Long-term accrued excess facilities costs               |  | $                  | 24,149 |   |      | $ | 29,878 |  
|                                                        |  |                    |        |   |      |   |        |  



F-23



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##### Table of Contents

TIBCO SOFTWARE INC.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



|Note 5. | Accounts Receivable and Allowances for Doubtful Accounts, Returns and Discounts
|------- | -------------------------------------------------------------------------------



|                                                              |  |                    |         |   |      |   |         |  
|------------------------------------------------------------- |  | ------------------ | ------- | - | ---- | - | ------- | -
|                                                              |  | As of November 30, |        
|                                                              |  | 2005               |         |   | 2004 |  
|Accounts receivable                                           |  | $                  | 116,434 |   |      | $ | 104,582 |  
|Unbilled fees and services                                    |  |                    | 9,246   |   |      |   | 8,265   |  
|                                                              |  |                    |         |   |      |   |         |  
|                                                              |  |                    | 125,680 |   |      |   | 112,847 |  
|Less: Allowances for doubtful accounts, returns and discounts |  |                    | (4,521  | ) |      |   | (3,845  | )
|                                                              |  |                    |         |   |      |   |         |  
|Net Accounts receivable                                       |  | $                  | 121,159 |   |      | $ | 109,002 |  
|                                                              |  |                    |         |   |      |   |         |  



Trade accounts
receivable are recorded at invoiced or to be invoiced amounts and do not bear interest. We perform ongoing credit evaluations of our customers financial condition and, generally, require no collateral from our customers. Allowances for
doubtful accounts, returns and discounts were established based on various factors including credit profiles of our customers, contractual terms and conditions, historical payments, returns and discounts experience, and current economic trends. We
review our allowances monthly by assessing individual accounts receivable over a specific aging and amount, and all other balances on a pooled basis based on historical collection experience. Accounts receivable are written off on a case-by-case
basis, net of any amounts that may be collected.



The following
is a summary of activities in allowances for doubtful accounts, returns and discounts for the years indicated (in thousands):



|                             |  |                              |       |                         |   |                     |  |                                          |     |  |                          |        |   |  |   |      
|---------------------------- |  | ---------------------------- | ----- | ----------------------- | - | ------------------- |  | ---------------------------------------- | --- |  | ------------------------ | ------ | - |  | - | -----
|                             |  | Allowances Beginning Balance |       | Charged Against Revenue |   | Charged to Expenses |  | Write-offs, Adjustments, Net of Recovery |     |  | AllowancesEnding Balance
|Year ended November 30, 2003 |  | $                            | 5,686 |                         | $ | 1,760               |  | $                                        | 400 |  | $                        | (3,131 | ) |  | $ | 4,715
|Year ended November 30, 2004 |  |                              | 4,715 |                         |   |                    |  |                                          | 230 |  |                          | (1,100 | ) |  |   | 3,845
|Year ended November 30, 2005 |  |                              | 3,845 |                         |   | 1,599               |  |                                          | 197 |  |                          | (1,120 | ) |  |   | 4,521



|Note 6. | Property and Equipment
|------- | ----------------------



Property and equipment by category is as follows (in thousands):



|                               |  |                    |         |   |      |   |         |  
|------------------------------ |  | ------------------ | ------- | - | ---- | - | ------- | -
|                               |  | As of November 30, |        
|                               |  | 2005               |         |   | 2004 |  
|Property and equipment:        |  |                    |         |   |      |   |         |  
|Buildings                      |  | $                  | 77,938  |   |      | $ | 77,938  |  
|Equipment and software         |  |                    | 64,498  |   |      |   | 57,276  |  
|Furniture and fixtures         |  |                    | 6,569   |   |      |   | 5,622   |  
|Facility improvements          |  |                    | 39,284  |   |      |   | 35,604  |  
|                               |  |                    |         |   |      |   |         |  
|                               |  |                    | 188,289 |   |      |   | 176,440 |  
|Less: Accumulated depreciation |  |                    | (71,832 | ) |      |   | (58,382 | )
|                               |  |                    |         |   |      |   |         |  
|                               |  | $                  | 116,457 |   |      | $ | 118,058 |  
|                               |  |                    |         |   |      |   |         |  



F-24



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##### Table of Contents

TIBCO SOFTWARE INC.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



Building acquisition



In June 2003, we purchased the four buildings comprising our corporate headquarters in Palo Alto, California for $80.0
million. In connection with the purchase we entered into a 51-year lease of the land upon which the buildings are located. The lease was paid in advance in the amount of $28.0 million. (Also see Note 11.) The total consideration paid for the land
lease and the buildings of $108.0 million was comprised of $54.0 million in cash and a $54.0 million mortgage note payable. (Also see Note 10.)



The capitalized cost of the buildings was reduced by the existing deferred rent in the amount of $3.1 million related to the previous operating lease on
the buildings. In addition, we capitalized $1.1 million of acquisition costs incurred in connection with the purchase. The net purchase price of the buildings of $78.0 million is stated at cost, net of accumulated depreciation, and is included as a
component of Property and Equipment on the Consolidated Balance Sheets. Depreciation is computed using the straight-line method over the estimated useful life of 25 years.



|Note 7. | Goodwill and Other Acquired Intangible Assets
|------- | ---------------------------------------------



Goodwill



Goodwill represents the excess of costs of our corporate acquisitions, over the fair value of assets acquired and liabilities assumed from the acquired
entities. In accordance with SFAS 142, goodwill is not amortized, but is tested for impairment annually or sooner if circumstances indicate that impairment may have occurred. SFAS 142 requires impairment testing of goodwill based on reporting units
and prescribes a two-step process for the impairment testing. The first step screens for impairment, while the second step, measures the impairment, if any.



Periodically and after major acquisitions, such as our Staffware acquisition in fiscal year 2004, we re-evaluate our business to determine if we operate
in one reportable segment. We have concluded that as of November 30, 2005, we are operating and will continue to operate in one reportable segment which we consider our sole reporting unit. Therefore, our goodwill will continue to be tested for
impairment at the enterprise level. Our most current annual impairment test was performed at the end of fiscal year 2005. The fair value of the enterprise, which was determined based on our current market capitalization, exceeded its carrying value,
and the goodwill was determined not to be impaired. No goodwill impairment charges have been recorded as of November 30, 2005.



The changes in the carrying amount of goodwill for the years ended November 30, 2005 and 2004 are as follows (in thousands):



|                                                        |  |          |         |  
|------------------------------------------------------- |  | -------- | ------- | -
|                                                        |  | Goodwill |        
|Balance as of November 30, 2003                         |  | $        | 103,006 |  
|Acquisition of Staffware                                |  |          | 164,023 |  
|Acquisition of General Interface                        |  |          | 2,423   |  
|Tax benefit from acquired deferred tax assets           |  |          | (4,315  | )
|                                                        |  |          |         |  
|Balance as of November 30, 2004                         |  |          | 265,137 |  
|Acquisition of ObjectStar                               |  |          | 7,359   |  
|Tax benefit from acquired deferred tax assets           |  |          | (1,149  | )
|Foreign currency translation                            |  |          | (8,957  | )
|Write-back excess accrued integration cost for Talarian |  |          | (878    | )
|Other adjustments                                       |  |          | (437    | )
|                                                        |  |          |         |  
|Balance as of November 30, 2005                         |  | $        | 261,075 |  
|                                                        |  |          |         |  



F-25



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##### Table of Contents

TIBCO SOFTWARE INC.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



Acquired Intangible Assets



Our acquired intangible assets are subject to amortization on a straight line basis over their estimated useful lives, as
follows:



|                                |  |                |  |                                             
|------------------------------- |  | -------------- |  | --------------------------------------------
|                                |  | Estimated Life |  | Weighted Average Life As of November 30,2005
|Developed technology            |  | 3 to 5 years   |  | 4.8 years                                   
|Customer base                   |  | 3 to 5 years   |  | 4.8 years                                   
|Patents/core technology         |  | 4 to 8 years   |  | 7.7 years                                   
|Trademarks                      |  | 3.5 to 5 years |  | 4.9 years                                   
|Non-compete agreements          |  | 2 to 3 years   |  | 2.3 years                                   
|OEM customer royalty agreements |  | 5 years        |  | 5.0 years                                   
|Maintenance agreements          |  | 3.5 to 9 years |  | 8.2 years                                   



The carrying values of
our amortized acquired intangible assets as of November 30, 2005 and 2004 are as follows (in thousands):



|                                |  |                         |         |                          |   |         |                     |  |                       |        |                          |   |        |                     |   |         |   |  |   |       
|------------------------------- |  | ----------------------- | ------- | ------------------------ | - | ------- | ------------------- |  | --------------------- | ------ | ------------------------ | - | ------ | ------------------- | - | ------- | - |  | - | ------
|                                |  | As of November 30, 2005 |         | As of November 30, 2004 
|                                |  | Gross Carrying Amount   |         | Accumulated Amortization |   |         | Net Carrying Amount |  | Gross Carrying Amount |        | Accumulated Amortization |   |        | Net Carrying Amount
|Developed technology            |  | $                       | 45,721  |                          | $ | (27,811 | )                   |  | $                     | 17,910 |                          | $ | 43,630 |                     | $ | (22,230 | ) |  | $ | 21,400
|Customer base                   |  |                         | 21,156  |                          |   | (9,380  | )                   |  |                       | 11,776 |                          |   | 19,060 |                     |   | (6,365  | ) |  |   | 12,695
|Patents/core technology         |  |                         | 14,671  |                          |   | (2,689  | )                   |  |                       | 11,982 |                          |   | 14,200 |                     |   | (887    | ) |  |   | 13,313
|Trademarks                      |  |                         | 4,947   |                          |   | (2,568  | )                   |  |                       | 2,379  |                          |   | 5,150  |                     |   | (1,878  | ) |  |   | 3,272 
|Non-compete agreements          |  |                         | 680     |                          |   | (530    | )                   |  |                       | 150    |                          |   | 480    |                     |   | (480    | ) |  |   |      
|OEM customer royalty agreements |  |                         | 1,000   |                          |   | (717    | )                   |  |                       | 283    |                          |   | 1,000  |                     |   | (517    | ) |  |   | 483   
|Maintenance agreements          |  |                         | 24,280  |                          |   | (4,018  | )                   |  |                       | 20,262 |                          |   | 15,000 |                     |   | (1,343  | ) |  |   | 13,657
|                                |  |                         |         |                          |   |         |                     |  |                       |        |                          |   |        |                     |   |         |   |  |   |       
|Total                           |  | $                       | 112,455 |                          | $ | (47,713 | )                   |  | $                     | 64,742 |                          | $ | 98,520 |                     | $ | (33,700 | ) |  | $ | 64,820
|                                |  |                         |         |                          |   |         |                     |  |                       |        |                          |   |        |                     |   |         |   |  |   |       



Amortization of
developed technologies is recorded in cost of revenue, while the amortization of other acquired intangibles is included in operating expenses. The following summarizes the amortization expense of acquired intangible assets for the years indicated
(in thousands):



|                                            |  |                         |        |      |   |        |  |   |      
|------------------------------------------- |  | ----------------------- | ------ | ---- | - | ------ |  | - | -----
|                                            |  | Year Ended November 30,
|                                            |  | 2005                    |        | 2004 |   | 2003  
|Amortization of acquired intangible assets: |  |                         |        |      |   |        |  |   |      
|In cost of revenue                          |  | $                       | 5,958  |      | $ | 6,702  |  | $ | 4,767
|In operating expenses                       |  |                         | 8,912  |      |   | 5,253  |  |   | 1,997
|                                            |  |                         |        |      |   |        |  |   |      
|Total                                       |  | $                       | 14,870 |      | $ | 11,955 |  | $ | 6,764
|                                            |  |                         |        |      |   |        |  |   |      



F-26



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##### Table of Contents

TIBCO SOFTWARE INC.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



As of November 30, 2005, we expect the amortization of acquired intangible assets for the future
years to be as follows (in thousands):



|                              |  |                                |       
|----------------------------- |  | ------------------------------ | ------
|                              |  | Estimated Amortization Expense
|Year ending November 30, 2006 |  | $                              | 14,777
|Year ending November 30, 2007 |  |                                | 14,655
|Year ending November 30, 2008 |  |                                | 14,329
|Year ending November 30, 2009 |  |                                | 9,777 
|Year ending November 30, 2010 |  |                                | 4,888 
|Thereafter                    |  |                                | 6,316 
|                              |  |                                |       
|Total                         |  | $                              | 64,742
|                              |  |                                |       



|Note 8. | Accrued Restructuring and Integration Costs
|------- | -------------------------------------------



In fiscal year 2005, we initiated a restructuring plan designed to re-align our resources and cost structure, and accordingly recognized a restructuring
charge of approximately $3.9 million for the resulting workforce reduction. The restructuring plan eliminated 49 employees, across all functions and primarily in our European operations. As of November 30, 2005, $3.2 million related to this
plan has been paid. We expect to utilize the remaining accrual by the end of fiscal year 2006.



In fiscal year 2003 we recorded restructuring charges totaling $1.1 million related to headcount reduction. This plan was completed in fiscal year 2003.



In fiscal year 2002, we recorded restructuring charges totaling $49.3 million, consisting of $1.7 million for headcount
reductions, and $47.6 million related to consolidation of facilities. These restructuring charges were recorded to align our cost structure with changing market conditions. We have been working with corporate real estate brokers to sublease
unoccupied facilities, and since 2003, we have subleased certain facilities.



In fiscal year 2004, we recorded an additional $2.2 million restructuring charges related to properties vacated in connection with facilities consolidation. The additional facilities charges resulted from revisions to
our estimates of future sublease income due to further deterioration of real estate market conditions. The estimated facility costs were based on our contractual obligations, net of estimated sublease income, based on current comparable rates for
leases in their respective markets. Should facilities operating lease rental rates continue to decrease in these markets or should it take longer than expected to find a suitable tenant to sublease these facilities, the actual loss could exceed this
estimate by approximately $2.8 million.



In connection with our
acquisitions of Staffware in the third quarter of fiscal year 2004, and Talarian in the second quarter of fiscal year 2002, we recorded accruals for acquisition integration liabilities which include the incremental costs to exit and consolidate
activities at acquired locations, termination of certain employees, and other costs to integrate operating locations and other activities of the acquired companies. The accruals were recorded using the guidance provided by EITF 95-3
Recognition of Liabilities in a Purchase Business Combination which requires that these acquisition integration expenses, which are not associated with the generation of future revenues and have no future economic benefit, be reflected
as assumed liabilities in the allocation of the purchase price to the net assets acquired. In connection with the acquisition of Staffware, we recorded an accrual of $2.9 million for the estimated losses on Staffware facilities that we abandoned. In
addition, we recorded an accrual of $2.6 million for severance related to the termination of redundant Staffware personnel and $0.2 million related to cancellation of marketing programs. In connection with the acquisition of Talarian, we abandoned
the Talarian facilities and recorded an accrual of $7.4 million for the estimated losses to



F-27



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##### Table of Contents

TIBCO SOFTWARE INC.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



be incurred to sublet such facilities. In addition, we recorded an accrual of $1.0 million for severance related to the termination of redundant personnel.
As of November 30, 2005, we had determined that there are no future liabilities relating to Talarian acquisition integration costs and consequently released the excess accrual of $0.9 million, offsetting goodwill by the same amount.



The following is a summary of activities in accrued restructuring related
and acquisition integration costs for each of the three years ended November 30, 2005 (in thousands):



|                                             |  |                           |        |   |                             |   |        |                       |  |   |          |   |  |               |        |   |                       |   |        |          |  |   |        |   |  |   |        |   |  |   |         |  
|-------------------------------------------- |  | ------------------------- | ------ | - | --------------------------- | - | ------ | --------------------- |  | - | -------- | - |  | ------------- | ------ | - | --------------------- | - | ------ | -------- |  | - | ------ | - |  | - | ------ | - |  | - | ------- | -
|                                             |  | Accrued Excess Facilities |        |   | Accrued Severance and Other |   |        | Total                 | 
|                                             |  | Headquarter Facilities    |        |   | Talarian Integration        |   |        | Staffware Integration |  |   | Subtotal |   |  | Restructuring |        |   | Staffware Integration |   |        | Subtotal |  |  
|Balance as of Nov 30, 2002                   |  | $                         | 45,187 |   |                             | $ | 6,124  |                       |  | $ |         |   |  | $             | 51,311 |   |                       | $ | 198    |          |  | $ |       |   |  | $ | 198    |   |  | $ | 51,509  |  
|Restructuring charge                         |  |                           |       |   |                             |   |       |                       |  |   |         |   |  |               |       |   |                       |   | 1,100  |          |  |   |       |   |  |   | 1,100  |   |  |   | 1,100   |  
|Cash utilized in 2003                        |  |                           | (6,432 | ) |                             |   | (1,972 | )                     |  |   |         |   |  |               | (8,404 | ) |                       |   | (1,298 | )        |  |   |       |   |  |   | (1,298 | ) |  |   | (9,702  | )
|Non-cash write-down of furniture and fixture |  |                           | (385   | ) |                             |   |       |                       |  |   |         |   |  |               | (385   | ) |                       |   |       |          |  |   |       |   |  |   |       |   |  |   | (385    | )
|                                             |  |                           |        |   |                             |   |        |                       |  |   |          |   |  |               |        |   |                       |   |        |          |  |   |        |   |  |   |        |   |  |   |         |  
|Balance as of Nov 30, 2003                   |  |                           | 38,370 |   |                             |   | 4,152  |                       |  |   |         |   |  |               | 42,522 |   |                       |   |       |          |  |   |       |   |  |   |       |   |  |   | 42,522  |  
|Restructuring charge                         |  |                           | 2,186  |   |                             |   |       |                       |  |   |         |   |  |               | 2,186  |   |                       |   |       |          |  |   |       |   |  |   |       |   |  |   | 2,186   |  
|Acquisition integration costs                |  |                           |       |   |                             |   |       |                       |  |   | 2,913    |   |  |               | 2,913  |   |                       |   |       |          |  |   | 2,774  |   |  |   | 2,774  |   |  |   | 5,687   |  
|Cash utilized in 2004                        |  |                           | (6,135 | ) |                             |   | (1,693 | )                     |  |   | (68      | ) |  |               | (7,896 | ) |                       |   |       |          |  |   | (1,719 | ) |  |   | (1,719 | ) |  |   | (9,615  | )
|Non-cash write-down of furniture and fixture |  |                           |       |   |                             |   | (358   | )                     |  |   |         |   |  |               | (358   | ) |                       |   |       |          |  |   |       |   |  |   |       |   |  |   | (358    | )
|                                             |  |                           |        |   |                             |   |        |                       |  |   |          |   |  |               |        |   |                       |   |        |          |  |   |        |   |  |   |        |   |  |   |         |  
|Balance as of Nov 30, 2004                   |  |                           | 34,421 |   |                             |   | 2,101  |                       |  |   | 2,845    |   |  |               | 39,367 |   |                       |   |       |          |  |   | 1,055  |   |  |   | 1,055  |   |  |   | 40,422  |  
|Restructuring charge                         |  |                           |       |   |                             |   |       |                       |  |   |         |   |  |               |       |   |                       |   | 3,905  |          |  |   |       |   |  |   | 3,905  |   |  |   | 3,905   |  
|Adjustments to acquisition integration costs |  |                           |       |   |                             |   | (878   | )                     |  |   |         |   |  |               | (878   | ) |                       |   |       |          |  |   | (352   | ) |  |   | (352   | ) |  |   | (1,230  | )
|Cash utilized in 2005                        |  |                           | (6,196 | ) |                             |   | (1,223 | )                     |  |   | (827     | ) |  |               | (8,246 | ) |                       |   | (3,158 | )        |  |   | (690   | ) |  |   | (3,848 | ) |  |   | (12,094 | )
|Non-cash write-down of furniture and fixture |  |                           | (120   | ) |                             |   |       |                       |  |   | (881     | ) |  |               | (1,001 | ) |                       |   |       |          |  |   |       |   |  |   |       |   |  |   | (1,001  | )
|                                             |  |                           |        |   |                             |   |        |                       |  |   |          |   |  |               |        |   |                       |   |        |          |  |   |        |   |  |   |        |   |  |   |         |  
|Balance as of Nov 30, 2005                   |  | $                         | 28,105 |   |                             | $ |       |                       |  | $ | 1,137    |   |  | $             | 29,242 |   |                       | $ | 747    |          |  | $ | 13     |   |  | $ | 760    |   |  | $ | 30,002  |  
|                                             |  |                           |        |   |                             |   |        |                       |  |   |          |   |  |               |        |   |                       |   |        |          |  |   |        |   |  |   |        |   |  |   |         |  



The remaining accrued
excess facilities costs represent the estimated loss on abandoned facilities, net of sublease income, which is expected to be paid over the next five years. As of November 30, 2005, $24.1 million of the $30.0 million accrued restructuring and
excess facilities costs were classified as long-term liabilities based on our current expectation that we will have to pay the remaining lease payments over the remaining term of the related leases. Accrued severance costs related to the Staffware
integration are included in the Consolidated Balance Sheets as a component of accrued liabilities.



F-28



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##### Table of Contents

TIBCO SOFTWARE INC.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



|Note 9. | Income Taxes
|------- | ------------



Significant components of the provision for (benefit from) income taxes are as follows (in thousands):



|                                          |  |                         |         |   |      |   |        |  |   |      
|----------------------------------------- |  | ----------------------- | ------- | - | ---- | - | ------ |  | - | -----
|                                          |  | Year Ended November 30,
|                                          |  | 2005                    |         |   | 2004 |   | 2003  
|Federal:                                  |  |                         |         |   |      |   |        |  |   |      
|Current                                   |  | $                       | 10,370  |   |      | $ | 10,865 |  | $ | 550  
|Deferred                                  |  |                         | (17,552 | ) |      |   |       |  |   | 1,578
|                                          |  |                         |         |   |      |   |        |  |   |      
|                                          |  |                         | (7,182  | ) |      |   | 10,865 |  |   | 2,128
|                                          |  |                         |         |   |      |   |        |  |   |      
|State:                                    |  |                         |         |   |      |   |        |  |   |      
|Current                                   |  |                         | 2,575   |   |      |   | 3,314  |  |   | 510  
|Deferred                                  |  |                         | (2,086  | ) |      |   |       |  |   | 302  
|                                          |  |                         |         |   |      |   |        |  |   |      
|                                          |  |                         | 489     |   |      |   | 3,314  |  |   | 812  
|                                          |  |                         |         |   |      |   |        |  |   |      
|Foreign:                                  |  |                         |         |   |      |   |        |  |   |      
|Current                                   |  |                         | 3,474   |   |      |   | 13,950 |  |   | 3,103
|Deferred                                  |  |                         | (2,255  | ) |      |   | 666    |  |   |     
|                                          |  |                         |         |   |      |   |        |  |   |      
|                                          |  |                         | 1,219   |   |      |   | 14,616 |  |   | 3,103
|                                          |  |                         |         |   |      |   |        |  |   |      
|Provision for (benefit from) income taxes |  | $                       | (5,474  | ) |      | $ | 28,795 |  | $ | 6,043
|                                          |  |                         |         |   |      |   |        |  |   |      



We paid income taxes
of $7.9 million, $4.4 million and $3.8 million for the years ended November 30, 2005, 2004 and 2003, respectively. Income before provision for income taxes consisted of the following (in thousands):



|              |  |                         |        |      |   |        |  |   |       
|------------- |  | ----------------------- | ------ | ---- | - | ------ |  | - | ------
|              |  | Year Ended November 30,
|              |  | 2005                    |        | 2004 |   | 2003  
|United States |  | $                       | 61,690 |      | $ | 38,419 |  | $ | 14,549
|International |  |                         | 5,391  |      |   | 35,296 |  |   | 2,934 
|              |  |                         |        |      |   |        |  |   |       
|Total         |  | $                       | 67,081 |      | $ | 73,715 |  | $ | 17,483
|              |  |                         |        |      |   |        |  |   |       



The provision for
income taxes was at rates other than the U.S. Federal statutory tax rate for the following reasons:



|                                          |  |                         |    |  |      |   |  |       |  
|----------------------------------------- |  | ----------------------- | -- |  | ---- | - |  | ----- | -
|                                          |  | Year Ended November 30, |   
|                                          |  | 2005                    |    |  | 2004 |   |  | 2003  |  
|U.S. Federal statutory rate               |  | 35.0                    | %  |  | 35.0 | % |  | 35.0  | %
|State taxes                               |  | 0.5                     |    |  | 2.9  |   |  | 5.0   |  
|Research and Development credits          |  | (0.8                    | )  |  | (0.2 | ) |  | (2.5  | )
|Goodwill and intangibles                  |  | (0.6                    | )  |  | (0.3 | ) |  | (1.5  | )
|Stock option compensation                 |  | 0.1                     |    |  | 0.1  |   |  | 2.4   |  
|Foreign income taxed at different rate    |  | 1.0                     |    |  | 1.1  |   |  | 6.0   |  
|Change in valuation allowance             |  | (43.3                   | )  |  | (1.3 | ) |  | (11.9 | )
|Meals and entertainment                   |  | 0.6                     |    |  | 0.6  |   |  | 2.5   |  
|Other                                     |  | (0.7                    | )  |  | 1.2  |   |  | (0.4  | )
|                                          |  |                         |    |  |      |   |  |       |  
|Provision for (benefit from) income taxes |  | (8.2                    | )% |  | 39.1 | % |  | 34.6  | %
|                                          |  |                         |    |  |      |   |  |       |  



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TIBCO SOFTWARE INC.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



U.S. income taxes and foreign withholding taxes have not been provided for on a cumulative total of
$20.8 million of undistributed earnings for certain non-U.S. subsidiaries. With the exception of our subsidiaries in the United Kingdom, net undistributed earnings of our foreign subsidiaries are generally considered to be indefinitely reinvested,
and accordingly, no provision for U.S. income taxes has been provided thereon. Upon distribution of these earnings in the form of dividends or otherwise, we will be subject to U.S. income taxes net of available foreign tax credits associated with
these earnings.



The components of deferred tax assets
(liabilities) are as follows (in thousands):



|                                                   |  |                    |          |   |      |   |          |  
|-------------------------------------------------- |  | ------------------ | -------- | - | ---- | - | -------- | -
|                                                   |  | As of November 30, |         
|                                                   |  | 2005               |          |   | 2004 |  
|Deferred tax assets:                               |  |                    |          |   |      |   |          |  
|Net operating loss carryforward                    |  | $                  | 154,982  |   |      | $ | 187,641  |  
|Reserves and accruals                              |  |                    | 19,820   |   |      |   | 20,640   |  
|Credit carryforwards                               |  |                    | 48,447   |   |      |   | 7,197    |  
|Depreciation and amortization                      |  |                    | 19,487   |   |      |   | 12,050   |  
|Unrealized losses on investments                   |  |                    | 7,475    |   |      |   | 6,658    |  
|Other                                              |  |                    | 196      |   |      |   | 1,225    |  
|                                                   |  |                    |          |   |      |   |          |  
|                                                   |  |                    | 250,407  |   |      |   | 235,411  |  
|Deferred tax liabilities:                          |  |                    |          |   |      |   |          |  
|Intangible assets                                  |  |                    | (14,440  | ) |      |   | (19,575  | )
|                                                   |  |                    |          |   |      |   |          |  
|Net deferred tax assets before valuation allowance |  |                    | 235,967  |   |      |   | 215,836  |  
|Valuation allowance                                |  |                    | (219,320 | ) |      |   | (232,202 | )
|                                                   |  |                    |          |   |      |   |          |  
|Net deferred tax assets/(liabilities)              |  | $                  | 16,647   |   |      | $ | (16,366  | )
|                                                   |  |                    |          |   |      |   |          |  



As of
November 30, 2005, approximately $189.9 million of the deferred tax assets resulted from stock option benefits. When the tax benefits of these assets are recognized, they will be credited to stockholders equity.



As of November 30, 2005, approximately $7.7 million of the deferred tax
assets relate to acquired entities. When the tax benefits of these assets are recognized, they will be allocated to reduce goodwill.



As of November 30, 2005, we believed that the amount of the deferred tax assets recorded on our balance sheet as a result of the partial release of
valuation allowance would ultimately be recovered. However, should there be a change in our ability to recover our deferred tax assets, our tax provision would increase in the period in which we determine that the recovery is not probable. If we
have to re-establish the full valuation allowance, it may result in a charge of $19.6 million to the tax provision.



In fiscal year 2005, the valuation allowance decreased by a net of $12.9 million primarily resulting from the partial release of valuation allowance. In
fiscal year 2004, the valuation allowance decreased by $5.6 million primarily resulting from the utilization of $4.3 million of pre-acquisition net operating loss carryforwards, the benefit of which was credited directly to goodwill, and a $1.0
million reduction in temporary differences. In fiscal year 2003, the valuation allowance increased by $7.2 million resulting from a $2.2 million increase in other temporary differences and a $5.0 million adjustment to deferred tax assets due to a
change in the federal tax rate.



Our income taxes payable for
federal purposes have been reduced by the tax benefits associated with the exercise of employee stock options during the year and utilization of net operating loss carryover applicable to



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TIBCO SOFTWARE INC.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



both stock options and acquired entities. The benefits applicable to stock options were credited directly to stockholders equity and amounted to $26.3
million and $6.0 million for fiscal years 2005 and 2004, respectively. Of the $26.3 million for fiscal year 2005, $15.9 million reduced taxes payable in the current year and therefore is shown as an increase to cash flows from operating activities
on the statement of cash flows. The remaining balance of $10.4 million represents the partial release of valuation allowance against deferred tax assets that resulted from stock option benefits and, accordingly, was credited directly to
stockholders equity. The benefits applicable to acquired entities were credited directly to goodwill and amounted to $1.2 million and $4.3 million for fiscal years 2005 and 2004, respectively.



As of November 30, 2005, our federal and state net operating loss
carryforwards for income tax purposes were $445.7 million and $153.7 million, respectively, which expire through 2023. As of November 30, 2005, our federal and state tax credit carryforwards for income tax purposes were $30.6 million and $20.0
million, respectively, which expire through 2025.



In the event
of a change in ownership, as defined under federal and state tax laws, our net operating loss and tax credit carryforwards may be subject to annual limitations. The annual limitations may result in the expiration of the net operating loss and tax
credit carryforwards before utilization.



|Note 10. | Long Term Debt and Line of Credit
|-------- | ---------------------------------



Mortgage Note Payable



In connection with the corporate headquarters purchase in June 2003, we recorded a $54.0 million mortgage note payable to a financial institution
collateralized by the commercial real property acquired. The balance on the mortgage note payable was $50.1 million as of November 30, 2005.



The mortgage note payable carries a fixed annual interest rate of 5.09% and a 20-year amortization. The principal balance of $33.9 million that will be
remaining at the end of the 10-year term will be due as a final balloon payment on July 1, 2013. Under the currently applicable terms of the mortgage note agreements, we are prohibited from acquiring another company without prior consent from
the lender unless we maintain at least $300.0 million of cash and cash equivalents, and meet other non-financial terms as defined in the agreements. In addition, we are subject to certain non-financial covenants as defined in the agreements. We were
in compliance with all covenants as of November 30, 2005.



We also capitalized $0.7 million in financing fees in connection with the mortgage note payable. These fees are being amortized to interest expense over the term of the loan of 10 years.



Line of Credit



We have a $20.0 million revolving line of credit that matures on
June 21, 2006. The revolving line of credit is available for cash borrowings and for the issuance of letters of credit up to $20.0 million. As of November 30, 2005, no borrowings were outstanding under the facility and a $13.0 million
irrevocable letter of credit was outstanding, leaving $7.0 million of available credit for additional letters of credit or cash loans. The $13.0 million irrevocable letter of credit outstanding was issued in connection with the mortgage note
payable. The letter of credit automatically renews for successive one-year periods, until the mortgage note payable has been satisfied in full. We are required to maintain a minimum of $40.0 million in unrestricted cash, cash equivalents, and
short-term investment net of total current and long-term indebtedness as well as comply with other non-financial covenants defined in the agreement. During fiscal year 2005, we were in compliance with all covenants under the revolving line of
credit.



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TIBCO SOFTWARE INC.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



|Note 11. | Commitments and Contingencies
|-------- | -----------------------------



Letters of Credit and Bank Guarantees



In connection with the mortgage note payable (also see Note 10), we entered into an irrevocable letter of credit in the amount of $13.0 million. The
letter of credit automatically renews for successive one-year periods, until the mortgage note payable has been satisfied in full and is collateralized by the line of credit.



In connection with a facility lease, we entered into an irrevocable letter of credit in the amount of $4.5 million. The
letter of credit automatically renews annually for the duration of the lease term, which expires in December 2010.



In connection with a facility surrender agreement, we entered into an irrevocable letter of credit in the amount of $0.9 million. The letter of credit
automatically renews annually and expires in June 2006.



As of
November 30, 2005, in connection with bank guarantees issued by some of our international subsidiaries, we had $1.8 million of restricted cash which is included in Other Assets on our Condensed Consolidated Balance Sheets.



Prepaid Land Lease



In June 2003, we purchased the four buildings comprising our corporate
headquarters in Palo Alto, California, and entered into a 51-year lease of the land upon which the buildings are located. The land lease was paid in advance for a total of $28.0 million, but is subject to adjustments every ten years based upon
changes in fair market value. Should it become necessary, we have the option to prepay any rent increases due as a result of a change in fair market value. This prepaid land lease is being amortized using the straight-line method over the life of
the lease; the portion to be amortized over the next twelve months is included in Other Current Assets and the remainder is included in Other Assets on the Consolidated Balance Sheets.



Operating Commitments



We lease office space and equipment in various worldwide locations under non-cancelable operating leases with various expiration dates through March 2014.
Rental expense, net of sublease income, was approximately $8.5 million, $7.1 million, and $15.3 million for the fiscal years 2005, 2004 and 2003, respectively.



As of November 30, 2005, contractual commitments associated with indebtedness and lease obligations are as follows (in thousands):



|                                   |  |       |         |   |      |   |        |      |  |   |        |   |  |      |        |   |      |   |        |            |  |   |        |   |  |   |        |  
|---------------------------------- |  | ----- | ------- | - | ---- | - | ------ | ---- |  | - | ------ | - |  | ---- | ------ | - | ---- | - | ------ | ---------- |  | - | ------ | - |  | - | ------ | -
|                                   |  | Total |         |   | 2006 |   |        | 2007 |  |   | 2008   |   |  | 2009 |        |   | 2010 |   |        | Thereafter | 
|Operating commitments:             |  |       |         |   |      |   |        |      |  |   |        |   |  |      |        |   |      |   |        |            |  |   |        |   |  |   |        |  
|Debt principal                     |  | $     | 50,143  |   |      | $ | 1,798  |      |  | $ | 1,892  |   |  | $    | 1,990  |   |      | $ | 2,094  |            |  | $ | 2,203  |   |  | $ | 40,166 |  
|Debt interest                      |  |       | 16,605  |   |      |   | 2,511  |      |  |   | 2,417  |   |  |      | 2,319  |   |      |   | 2,215  |            |  |   | 2,106  |   |  |   | 5,037  |  
|Operating leases                   |  |       | 27,832  |   |      |   | 6,725  |      |  |   | 4,878  |   |  |      | 3,730  |   |      |   | 3,023  |            |  |   | 2,377  |   |  |   | 7,099  |  
|                                   |  |       |         |   |      |   |        |      |  |   |        |   |  |      |        |   |      |   |        |            |  |   |        |   |  |   |        |  
|Total operating commitments        |  |       | 94,580  |   |      |   | 11,034 |      |  |   | 9,187  |   |  |      | 8,039  |   |      |   | 7,332  |            |  |   | 6,686  |   |  |   | 52,302 |  
|                                   |  |       |         |   |      |   |       
|Restructuring-related commitments: |  |       |         |   |      |   |        |      |  |   |        |   |  |      |        |   |      |   |        |            |  |   |        |   |  |   |        |  
|Gross lease obligations            |  |       | 39,789  |   |      |   | 7,761  |      |  |   | 7,700  |   |  |      | 7,779  |   |      |   | 7,816  |            |  |   | 8,051  |   |  |   | 682    |  
|Sublease income                    |  |       | (8,392  | ) |      |   | (2,818 | )    |  |   | (2,013 | ) |  |      | (1,293 | ) |      |   | (1,129 | )          |  |   | (1,050 | ) |  |   | (89    | )
|                                   |  |       |         |   |      |   |        |      |  |   |        |   |  |      |        |   |      |   |        |            |  |   |        |   |  |   |        |  
|Net lease obligations              |  |       | 31,397  |   |      |   | 4,943  |      |  |   | 5,687  |   |  |      | 6,486  |   |      |   | 6,687  |            |  |   | 7,001  |   |  |   | 593    |  
|                                   |  |       |         |   |      |   |        |      |  |   |        |   |  |      |        |   |      |   |        |            |  |   |        |   |  |   |        |  
|Total commitments                  |  | $     | 125,977 |   |      | $ | 15,977 |      |  | $ | 14,874 |   |  | $    | 14,525 |   |      | $ | 14,019 |            |  | $ | 13,687 |   |  | $ | 52,895 |  
|                                   |  |       |         |   |      |   |        |      |  |   |        |   |  |      |        |   |      |   |        |            |  |   |        |   |  |   |        |  



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TIBCO SOFTWARE INC.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



Future minimum lease payments under restructured non-cancelable operating leases as of
November 30, 2005 include $28.1 million provided for as accrued restructuring costs and $1.1 million as accrued acquisition integration liabilities related to our acquisitions of Staffware. (Also see Note 8.)



Derivative Instruments



We conduct business in North America, South America, Europe, the Pacific Rim
and the Middle East. As a result, our financial results could be affected by factors such as changes in foreign currency exchange rates or changes in economic conditions in foreign markets. A majority of our sales are currently made in U.S. dollars.
To manage currency exposure related to net assets and liabilities denominated in foreign currencies, we enter into forward contracts for certain foreign denominated assets and liabilities. We do not enter into derivative financial instruments for
trading purposes. Gains and losses on forward contracts are included in Other Income (Expense) in our Condensed Consolidated Statements of Operations. Our forward contracts generally have original maturities of thirty days. We had two outstanding
forward contracts with total notional amounts of $24.6 million as of November 30, 2005. The fair value of these contracts was insignificant as of November 30, 2005.



Indemnification



Our software license agreements typically provide for indemnification of customers for intellectual property infringement claims. To date, no such claims
have been filed against us. We also warrant to customers that software products operate substantially in accordance with such software products specifications. Historically, minimal costs have been incurred related to product warranties, and
as such no accruals for warranty costs have been made. In addition, we indemnify our officers and directors under the terms of indemnity agreements entered into with them, as well as pursuant to our certificate of incorporation, bylaws, and
applicable Delaware law. To date, we have not incurred any costs related to these indemnifications.



Legal Proceedings



In May 2005, three purported shareholder class action complaints were filed against us and several of our officers in the U.S. District Court for the
Northern District of California. The plaintiffs in such actions are seeking to represent a class of purchasers of TIBCOs common stock from September 21, 2004 through March 1, 2005. The complaints generally allege that we made false
or misleading statements concerning our operating results, our business and internal controls and the integration of Staffware. The complaints seek unspecified monetary damages. We intend to defend ourselves vigorously; however we expect to incur
significant costs in mounting such defense.



In September 2005,
a shareholder derivative complaint was filed against certain of our officers and directors in the Superior Court of the State of California, Santa Clara County. The complaint is based on substantially similar facts and circumstances as the class
actions and generally alleged that the named directors and officers breached their fiduciary duties to the Company. The complaint seeks unspecified monetary damages. Given the nature of derivative litigation, any recovery in a derivative suit would
be to the benefit of the Company.



In addition, certain of our
directors and officers and certain investment bank underwriters have been named in a putative class action for violation of the federal securities laws in the U.S. District Court for the Southern District of New York, captioned In re TIBCO
Software Inc. Initial Public Offering Securities Litigation. This is one of a number of cases challenging underwriting practices in the initial public offerings of more than 300 companies, which have been coordinated for pretrial proceedings
as In re Initial Public Offering Securities Litigation. Plaintiffs generally allege that the underwriters engaged in undisclosed and improper underwriting



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TIBCO SOFTWARE INC.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



activities, namely the receipt of excessive brokerage commissions and customer agreements regarding post-offering purchases of stock in exchange for
allocations of IPO shares. Plaintiffs also allege that various investment bank securities analysts issued false and misleading analyst reports. The complaint against us claims that the purported improper underwriting activities were not disclosed in
the registration statements for our IPO and secondary public offering and seeks unspecified damages on behalf of a purported class of persons who purchased our securities or sold put options during the time period from July 13, 1999 to
December 6, 2000.



A lawsuit with similar allegations of
undisclosed improper underwriting practices, and part of the same coordinated proceedings, is pending against Talarian, which we acquired in 2002. That action is captioned In re Talarian Corp. Initial Public Offering Securities
Litigation. The complaint against Talarian, certain of its underwriters, and certain of its former directors and officers claims that the purported improper underwriting activities were not disclosed in the registration statement for
Talarians IPO and seeks unspecified damages on behalf of a purported class of persons who purchased Talarian securities during the time period from July 20, 2000 to December 6, 2000.



A proposal to settle the claims against all of the issuers and individual
defendants in the coordinated litigation was accepted by us and given preliminary Court approval. The completion of the settlement is subject to a number of conditions, including final approval by the Court. Under the settlement, the plaintiffs will
dismiss and release all claims against participating defendants in exchange for a contingent payment guaranty by the insurance companies collectively responsible for insuring the issuers in the action, and the assignment or surrender to the
plaintiffs of certain claims the issuer defendants may have against the underwriters. Under the guaranty, the insurers will be required to pay an amount equal to $1.0 billion less any amounts ultimately collected by the plaintiffs from the
underwriter defendants in all the cases. The disposition of this matter is limited to our $0.5 million corporate insurance deductible. We completed payment of the insurance deductible in the third quarter of fiscal year 2003. Unlike most of the
defendant issuers insurance policies, including ours, Talarians policy contains a specific self-insured retention in the amount of $0.5 million for IPO laddering claims, including those alleged in this matter. Thus, under the
proposed settlement, if any payment is required under the insurers guaranty, Talarian would be responsible for paying its pro rata share of the shortfall, up to $0.5 million of the self-insured retention remaining under its policy. The self
insured retention of $0.5 million was accrued at the time of the acquisition.



|Note 12. | Stockholders Equity
|-------- | --------------------



Preferred Stock



Our certificate of incorporation, as amended, authorizes us to issue 75.0 million shares of $0.001 par value preferred stock. As of November 30,
2005, no preferred stock is issued or outstanding.



Common
Stock



Our certificate of incorporation, as amended,
authorizes us to issue 1.2 billion shares of $0.001 par value common stock. As of November 30, 2005, 210,548,428 shares of common stock were issued and outstanding. There were no shares subject to repurchase as of November 30, 2005 or
2004.



Benefit Plans



1996 Stock Option Plan.    In 1996, we adopted
the 1996 Stock Option Plan (1996 Plan). The 1996 Plan provides for the granting of stock options to our employees and consultants. Options granted under the 1996 Plan may be either incentive stock options or nonqualified stock options.
Incentive stock options may be granted only



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TIBCO SOFTWARE INC.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



to employees (including officers and directors who are employees). Nonqualified stock options may be granted to our employees and consultants. Options
granted before our IPO in 1999 are exercisable immediately upon grant and generally vest over five years and are subject to repurchase until vested. Options granted after our IPO are not generally exercisable immediately and generally vest over four
years. The 1996 Plan provides for an automatic increase to the number of shares of common stock reserved for issuance (to be added on the first day of each fiscal year beginning in 2000) equal to the lesser of (i) 60 million shares,
(ii) 5% of the outstanding shares of our common stock, or (iii) a lesser amount determined by the Board of Directors. As of November 30, 2005, there were 28.1 million shares reserved for grant under this plan.



Talarian Stock Option Plans.    In April 2002, we
assumed all of the Talarian Stock Option Plans (the Talarian Plans) in connection with our acquisition of Talarian. At the date of acquisition all outstanding options of Talarian common stock were converted, according to the exchange
ratio, into options of our common stock with terms and conditions equivalent to those applicable at the time of conversion. We recorded an initial $0.7 million of deferred compensation related to 486,000 options assumed and converted under this plan
in fiscal year 2002. Though we have no intention of issuing additional grants, there were 0.1 million shares reserved for grant under this plan as of November 30, 2005.



2000 Extensibility Stock Option Plan.    In 2000, we adopted the 2000 Extensibility Stock Option
Plan (the Extensibility Plan) in connection with options assumed in our acquisition of Extensibility. Extensibility employees who continued service with us were granted options with terms and conditions equivalent to those applicable at
the date of acquisition. Though we have no intention of issuing additional grants, there were 22,000 shares reserved for grant under this plan as of November 30, 2005.



1998 Director Option Plan.    In February 1998, we adopted the 1998 Director Option Plan (the
Director Plan). As amended in April 2002, the Director Plan provides for an automatic initial grant of 100,000 shares to members of the Board who are not employees of the Company or Reuters (External Directors). At any
subsequent annual re-election, each External Director shall be granted an option to purchase 40,000 additional shares. Options are granted at an exercise price not less than the fair market value of the stock on the date of grant, have a term not to
exceed ten years and become exercisable over a three-year period with a third of the shares vesting annually. Any External Director with over one year of consecutive service prior to the effective date of the Director Plan received an initial grant
of 450,000 shares. As of November 30, 2005, there were 2.5 million shares reserved for grant under this plan.



The activities under all stock option plans are summarized as follows (in thousands, except per share data):



|                                 |  |                         |   |      |                                 |      |         |        |   |                                 |   |         |  |        |                                 |  |   |     
|-------------------------------- |  | ----------------------- | - | ---- | ------------------------------- | ---- | ------- | ------ | - | ------------------------------- | - | ------- |  | ------ | ------------------------------- |  | - | ----
|                                 |  | Year Ended November 30,
|                                 |  | 2005                    |   | 2004 |                                 | 2003
|                                 |  | Options                 |   |      | Weighted Average Exercise Price |      | Options |        |   | Weighted Average Exercise Price |   | Options |  |        | Weighted Average Exercise Price
|Outstanding at beginning of year |  | 44,194                  |   |      | $                               | 6.96 |         | 42,330 |   |                                 | $ | 7.18    |  | 43,460 |                                 |  | $ | 7.55
|Granted                          |  | 7,310                   |   |      |                                 | 7.18 |         | 13,618 |   |                                 |   | 7.06    |  | 7,179  |                                 |  |   | 4.92
|Exercised                        |  | (2,524                  | ) |      |                                 | 5.44 |         | (5,362 | ) |                                 |   | 4.63    |  | (2,047 | )                               |  |   | 1.62
|Canceled                         |  | (2,714                  | ) |      |                                 | 8.03 |         | (6,392 | ) |                                 |   | 10.58   |  | (6,262 | )                               |  |   | 8.99
|                                 |  |                         |   |      |                                 |      |         |        |   |                                 |   |         |  |        |                                 |  |   |     
|Outstanding at end of year       |  | 46,266                  |   |      |                                 | 7.01 |         | 44,194 |   |                                 |   | 6.96    |  | 42,330 |                                 |  |   | 7.18
|                                 |  |                         |   |      |                                 |      |         |        |   |                                 |   |         |  |        |                                 |  |   |     
|Options exercisable at year end  |  | 30,718                  |   |      | $                               | 6.98 |         | 27,287 |   |                                 | $ | 6.82    |  | 26,795 |                                 |  | $ | 6.83
|                                 |  |                         |   |      |                                 |      |         |        |   |                                 |   |         |  |        |                                 |  |   |     



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TIBCO SOFTWARE INC.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



The estimated weighted-average fair value of options at the grant date during fiscal years 2005, 2004
and 2003, were $3.06, $3.69, and $3.94, respectively. See Note 2 for the assumptions we used to calculate the value of each option grant on the date of the grant using the Black-Scholes option-pricing model.



The following table summarizes information about stock options outstanding at
November 30, 2005 (in thousands, except number of years and per share data):



|                        |  |                                     |  |                                             |  |                                 |       |                                     |        |                                 |   |      
|----------------------- |  | ----------------------------------- |  | ------------------------------------------- |  | ------------------------------- | ----- | ----------------------------------- | ------ | ------------------------------- | - | -----
|                        |  | Options Outstanding                 |  | Options Exercisable                        
|Range of Exercise Price |  | Number of Shares Underlying Options |  | Weighted Average Remaining Contractual Life |  | Weighted Average Exercise Price |       | Number of Shares Underlying Options |        | Weighted Average Exercise Price
|$0.20                   |  | 5,866                               |  | 1.09                                        |  | $                               | 0.20  |                                     | 5,866  |                                 | $ | 0.20 
|$0.21 to $5.54          |  | 5,727                               |  | 5.55                                        |  |                                 | 3.35  |                                     | 4,299  |                                 |   | 2.89 
|$5.55 to $5.99          |  | 5,219                               |  | 7.42                                        |  |                                 | 5.99  |                                     | 2,931  |                                 |   | 5.99 
|$6.00 to $6.63          |  | 6,014                               |  | 9.19                                        |  |                                 | 6.58  |                                     | 1,162  |                                 |   | 6.46 
|$6.64 to $7.50          |  | 5,955                               |  | 8.52                                        |  |                                 | 7.24  |                                     | 1,898  |                                 |   | 7.27 
|$7.51 to $8.00          |  | 6,470                               |  | 6.44                                        |  |                                 | 7.95  |                                     | 5,396  |                                 |   | 7.98 
|$8.01 to $11.96         |  | 4,798                               |  | 6.84                                        |  |                                 | 10.44 |                                     | 3,469  |                                 |   | 10.95
|$11.97 to $13.58        |  | 5,602                               |  | 6.16                                        |  |                                 | 12.54 |                                     | 5,112  |                                 |   | 12.50
|$13.59 to $71.81        |  | 615                                 |  | 4.56                                        |  |                                 | 29.52 |                                     | 585    |                                 |   | 29.23
|                        |  |                                     |  |                                             |  |                                 |       |                                     |        |                                 |   |      
|Total                   |  | 46,266                              |  | 6.37                                        |  | $                               | 7.01  |                                     | 30,718 |                                 | $ | 6.98 
|                        |  |                                     |  |                                             |  |                                 |       |                                     |        |                                 |   |      



Employee Stock
Purchase Program.In June 1999, we amended the 1996 Plan to include the Employee Stock Purchase Program. Employees are generally eligible to participate in the ESPP if they are customarily employed by us for more than 20
hours per week and more than 5 months in a calendar year and are not (and would not become as a result of being granted an option under the ESPP) 5% stockholders of the Company. Under the ESPP, eligible employees may select a rate of payroll
deduction up to 10% of their eligible compensation subject to certain maximum purchase limitations.



Our ESPP was modified in 2005, in response to the recent changes in accounting for stock-based payments, as stated in SFAS 123(R) issued in December 2004.
The duration for offering periods was changed to six months and the price at which the common stock is purchased under the ESPP was set at 95% of the fair market value of our common stock on the last day of the respective purchase period. These
modifications to the ESPP are effective as of the purchase period beginning February 1, 2005. Since the administrative burden and tax consequences appear to outweigh any benefit that our international employees might receive from participating
in the ESPP, we have also chosen to exclude all non-U.S. employees from the ESPP, on a country-by-country basis.



We issued approximately 0.6 million, 1.1 million and 1.2 million shares under our ESPP, representing approximately $4.0 million, $5.0
million and $5.4 million in employee contributions for fiscal years 2005, 2004 and 2003, respectively. As of November 30, 2005, there were 0.9 million shares reserved for grant under this program.



401(k) Plan.    Our employee savings and
retirement plan is qualified under Section 401 of the Internal Revenue Code. Employees may elect to reduce their current compensation by up to the statutory prescribed annual limit and have the amount of such reduction contributed to the 401(k)
Plan. We provide 100% match to employee contributions up to 4% of an employees base pay and an additional 25% match (reduced from 50% in



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TIBCO SOFTWARE INC.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



fiscal year 2004 and earlier) on employee contributions of the next 2% of base pay. Our matching contributions to the 401(k) Plan totaled $4.1 million, $3.2
million and $3.5 million in fiscal years 2005, 2004 and 2003, respectively.



Adoption of Stockholder Rights Plan



In February 2004, our Board of Directors adopted a stockholder rights plan designed to guard against partial tender offers and other coercive tactics to gain control of the Company without offering a fair and adequate
price and terms to all of our stockholders.



In connection with
the plan, the Board declared a dividend of one right (a Right) to purchase one one-thousandth share of our Series A Participating Preferred Stock (Series A Preferred) for each share of our common stock outstanding on
March 5, 2004 (the Record Date). Of the 75.0 million shares of preferred stock authorized under our certificate of incorporation, as amended, 25.0 million have been designated as Series A Preferred. The Board further
directed the issuance of one such right with respect to each share of our common stock that is issued after the Record Date, except in certain circumstances. The rights will expire on March 5, 2014.



The Rights are initially attached to our common stock and will not be traded
separately. If a person or a group (an Acquiring Person) acquires 15% or more of our common stock, or announces an intention to make a tender offer for 15% or more of our common stock, the Rights will be distributed and will thereafter
be traded separately from the common stock. Each Right will be exercisable for 1/1000th of a share of Series A Preferred at an exercise price of $70 (the Purchase Price). The Series A Preferred has been structured so that the value of
1/1000th of a share of such preferred stock will approximate the value of one share of common stock. Upon a person becoming an Acquiring Person, holders of the Rights (other than the Acquiring Person) will have the right to receive, upon exercise,
shares of our common stock having a value equal to two times the Purchase Price.



If a person becomes an Acquiring Person and we are acquired in a merger or other business combination, or 50% or more of our assets are sold to an Acquiring Person, the holder of Rights (other than the Acquiring
Person) will have the right to receive shares of common stock of the acquiring corporation having a value equal to two times the Purchase Price. After a person has become an Acquiring Person, our Board of Directors may, at its option, require the
exchange of outstanding Rights (other than those held by the Acquiring Person) for common stock at an exchange ratio of one share of our common stock per Right.



The Board may redeem outstanding rights at any time prior to a person becoming an Acquiring Person at a price of $0.001 per Right. Prior to such time,
the terms of the Rights may be amended by the Board.



Repurchased Shares from Reuters in Fiscal Year 2004



As of November 30, 2003, Reuters owned approximately 49% of the issued and outstanding shares of our capital stock. In February 2004, Reuters sold 69 million of our outstanding shares in a registered public offering at a price of
$6.85. Pursuant to the terms of the Registration and Repurchase Agreement with Reuters, we purchased from Reuters and retired 16.8 million shares of our common stock at the same price of $6.85 per share, totaling $115.0 million.



Stock Repurchase Program



In September 2004, our Board of Directors approved a two-year stock
repurchase program pursuant to which we may repurchase up to $50.0 million of our outstanding common stock from time to time on the open market or through privately negotiated transactions.



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##### Table of Contents

TIBCO SOFTWARE INC.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



In December 2005, the Board of Directors approved a new eighteen-month stock repurchase program
pursuant to which we may repurchase up to $100.0 million of our outstanding common stock. The timing and amount of any repurchases is dependent upon market conditions and other corporate considerations.



Since the inception of the stock repurchase program, we have repurchased a
total of 6.6 million shares of our common stock for a total of $49.0 million, of which, 6.6 million shares for a total of $48.3 million was repurchased in fiscal year 2005. The repurchased shares of common stock have been retired.



|Note 13. | Segment Information
|-------- | -------------------



We operate our business in one reportable segment: the development and marketing of a suite of software products that enables businesses to link internal
operations, business partners and customer channels through the real-time distribution of information. Operating segments are defined as components of an enterprise for which separate financial information is available and evaluated regularly by the
chief operating decision maker, or decision-making group, in deciding how to allocate resources and in assessing performance. Our chief operating decision maker is our Chief Executive Officer.



Our revenue by geographic region, based on the location at which each sale
originates, is summarized as follows (in thousands):



|               |  |                         |         |      |   |         |  |   |        
|-------------- |  | ----------------------- | ------- | ---- | - | ------- |  | - | -------
|               |  | Year Ended November 30,
|               |  | 2005                    |         | 2004 |   | 2003   
|Americas:      |  |                         |         |      |   |         |  |   |        
|United States  |  | $                       | 226,024 |      | $ | 191,004 |  | $ | 134,776
|Other Americas |  |                         | 5,923   |      |   | 3,877   |  |   | 6,196  
|Europe:        |  |                         |         |      |   |         |  |   |        
|United Kingdom |  |                         | 68,029  |      |   | 62,722  |  |   | 47,502 
|Other Europe   |  |                         | 98,921  |      |   | 88,076  |  |   | 59,150 
|Pacific Rim    |  |                         | 47,013  |      |   | 41,541  |  |   | 16,586 
|               |  |                         |         |      |   |         |  |   |        
|Total Revenue  |  | $                       | 445,910 |      | $ | 387,220 |  | $ | 264,210
|               |  |                         |         |      |   |         |  |   |        



Revenue from Reuters
is primarily included in the revenue from European geographic region and accounted for 5%, 7% and 12% of total revenue for the years ended November 30, 2005, 2004 and 2003, respectively. (Also see Note 14.)



No other customer accounted for more than 10% of total revenue for the fiscal
year 2005, 2004 or 2003. No customer had a balance in excess of 10% of our net accounts receivable as of November 30, 2005 or 2004.



Our long-lived assets, which are tangible assets such as property and equipment, by major country are summarized as follows (in thousands):



|                        |  |              |         |      |   |        
|----------------------- |  | ------------ | ------- | ---- | - | -------
|                        |  | November 30,
|                        |  | 2005         |         | 2004
|United States           |  | $            | 110,063 |      | $ | 111,871
|United Kingdom          |  |              | 3,615   |      |   | 3,401  
|Other countries         |  |              | 2,779   |      |   | 2,786  
|                        |  |              |         |      |   |        
|Total long-lived assets |  | $            | 116,457 |      | $ | 118,058
|                        |  |              |         |      |   |        



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##### Table of Contents

TIBCO SOFTWARE INC.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



|Note 14. | Transactions with Reuters and Other Related Parties
|-------- | ---------------------------------------------------



Reuters



We have commercial arrangement with affiliates of Reuters Group PLC (Reuters), one of our stockholders. During fiscal year 2005, Reuters
reduced its holding such that as of November 30, 2005, Reuters owned less than 1% of our outstanding shares of common stock. Revenue from Reuters consists primarily of product license and maintenance fees on its sales of TIBCO products under the
terms of our license, maintenance and distribution agreement with Reuters. We have presented revenue from Reuters as related party revenue for all periods.



Reuters is a distributor of our products to customers in the financial services market. In February 2005, we entered into an amended license, maintenance
and distribution agreement with Reuters, pursuant to which Reuters has the right to distribute certain of our products in conjunction with the sale by Reuters to end users of its market data delivery solutions. The initial term of the amendment is
one year, which may be extended by Reuters for two additional one-year periods, on payment of additional license fees. The initial $9.9 million non-refundable prepaid royalty was recognized as related party license revenue in the first quarter of
fiscal year 2005. Another $1.1 million under the amended agreement represents maintenance fees and is being recognized ratably over the one year maintenance period. In addition, Reuters is eligible to receive between 5% and 30% of revenue (depending
upon the level of assistance provided by Reuters) from sales to approved customers referred to TIBCO by Reuters. Furthermore, the amended agreement requires us to provide Reuters with internal maintenance and support for a fee of $1.0 million per
year plus an annual CPI-based increase until December 2012. This amount was recognized ratably over the corresponding period as related party service and maintenance revenue.



The following is a summary of revenue from Reuters (in thousands):



|                                 |  |                         |        |      |   |        |  |   |       
|-------------------------------- |  | ----------------------- | ------ | ---- | - | ------ |  | - | ------
|                                 |  | Year Ended November 30,
|                                 |  | 2005                    |        | 2004 |   | 2003  
|License fees                     |  | $                       | 16,038 |      | $ | 16,308 |  | $ | 16,936
|                                 |  |                         |       
|Service and maintenance revenue: |  |                         |        |      |   |        |  |   |       
|Maintenance                      |  |                         | 6,827  |      |   | 11,566 |  |   | 13,145
|Services contracts               |  |                         | 146    |      |   | 432    |  |   | 654   
|                                 |  |                         |        |      |   |        |  |   |       
|Total service and maintenance    |  |                         | 6,973  |      |   | 11,998 |  |   | 13,799
|                                 |  |                         |        |      |   |        |  |   |       
|Total revenue from Reuters       |  | $                       | 23,011 |      | $ | 28,306 |  | $ | 30,735
|                                 |  |                         |        |      |   |        |  |   |       



We had no royalty
costs payable to Reuters in fiscal year 2005 and 2004, while such cost of revenue was $2.3 million for fiscal years 2003. We incurred a total of $0.4 million in referral fees payable to Reuters during fiscal year 2005, and the fees were included in
our sales and marketing expenses. Such fees were in negligible amounts in fiscal year 2004 and 2003. Accounts receivable due from Reuters totaled $1.2 million and $2.9 million, as of November, 2005 and 2004, respectively.



Cisco Systems



Prior to the third quarter of fiscal year 2004, Cisco Systems, Inc.
(Cisco) owned more than 5% of our outstanding common stock. During the second half of fiscal year 2004, Ciscos ownership was reduced to less than 5% of our outstanding common stock. Accordingly, beginning in the third quarter of
fiscal year 2004, we no longer considered Cisco to be a related party.



We recorded revenue of $0.7 million in the first half of fiscal year 2004 when Cisco was considered a related party, and revenue of $3.5 million for the entire fiscal year 2003.



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TIBCO SOFTWARE INC.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



|Note 15. | Unaudited Quarterly Results of Operations
|-------- | -----------------------------------------



The following sets forth our quarterly results of operations for fiscal years 2005 and 2004 (in thousands, except per share data):



|                                                    |  |                                      |         |   |                                      |   |         |              |  |   |               |   |  |               |         |   |               |   |         |              |  |   |               |   |  |   |         |   |  |   |         |  
|--------------------------------------------------- |  | ------------------------------------ | ------- | - | ------------------------------------ | - | ------- | ------------ |  | - | ------------- | - |  | ------------- | ------- | - | ------------- | - | ------- | ------------ |  | - | ------------- | - |  | - | ------- | - |  | - | ------- | -
|                                                    |  | Fiscal Year 2005, Three Months Ended |         |   | Fiscal Year 2004, Three Months Ended |  
|                                                    |  | Nov. 30, 2005                        |         |   | Aug. 31, 2005                        |   |         | May 31, 2005 |  |   | Feb. 28, 2005 |   |  | Nov. 30, 2004 |         |   | Aug. 31, 2004 |   |         | May 31, 2004 |  |   | Feb. 29, 2004 |  
|Revenue:                                            |  |                                      |         |   |                                      |   |         |              |  |   |               |   |  |               |         |   |               |   |         |              |  |   |               |   |  |   |         |   |  |   |         |  
|License revenue:                                    |  |                                      |         |   |                                      |   |         |              |  |   |               |   |  |               |         |   |               |   |         |              |  |   |               |   |  |   |         |   |  |   |         |  
|Non-related parties                                 |  | $                                    | 66,753  |   |                                      | $ | 44,365  |              |  | $ | 40,082        |   |  | $             | 36,650  |   |               | $ | 66,336  |              |  | $ | 53,697        |   |  | $ | 41,261  |   |  | $ | 36,459  |  
|Related parties                                     |  |                                      |        |   |                                      |   |        |              |  |   | 1,668         |   |  |               | 14,370  |   |               |   | 4,214   |              |  |   | 3,751         |   |  |   | 4,057   |   |  |   | 4,311   |  
|                                                    |  |                                      |         |   |                                      |   |         |              |  |   |               |   |  |               |         |   |               |   |         |              |  |   |               |   |  |   |         |   |  |   |         |  
|Total license revenue                               |  |                                      | 66,753  |   |                                      |   | 44,365  |              |  |   | 41,750        |   |  |               | 51,020  |   |               |   | 70,550  |              |  |   | 57,448        |   |  |   | 45,318  |   |  |   | 40,770  |  
|Services and maintenance revenue:                   |  |                                      |         |   |                                      |   |         |              |  |   |               |   |  |               |         |   |               |   |         |              |  |   |               |   |  |   |         |   |  |   |         |  
|Non-related parties                                 |  |                                      | 64,457  |   |                                      |   | 58,488  |              |  |   | 56,456        |   |  |               | 49,138  |   |               |   | 50,599  |              |  |   | 44,279        |   |  |   | 31,644  |   |  |   | 29,342  |  
|Related parties                                     |  |                                      | 1,233   |   |                                      |   | 1,404   |              |  |   | 1,556         |   |  |               | 2,780   |   |               |   | 2,996   |              |  |   | 2,860         |   |  |   | 3,317   |   |  |   | 3,519   |  
|Billed expenses                                     |  |                                      | 1,988   |   |                                      |   | 1,688   |              |  |   | 1,626         |   |  |               | 1,208   |   |               |   | 1,514   |              |  |   | 1,324         |   |  |   | 970     |   |  |   | 770     |  
|                                                    |  |                                      |         |   |                                      |   |         |              |  |   |               |   |  |               |         |   |               |   |         |              |  |   |               |   |  |   |         |   |  |   |         |  
|Total services and maintenance revenue              |  |                                      | 67,678  |   |                                      |   | 61,580  |              |  |   | 59,638        |   |  |               | 53,126  |   |               |   | 55,109  |              |  |   | 48,463        |   |  |   | 35,931  |   |  |   | 33,631  |  
|                                                    |  |                                      |         |   |                                      |   |         |             
|Total revenue                                       |  |                                      | 134,431 |   |                                      |   | 105,945 |              |  |   | 101,388       |   |  |               | 104,146 |   |               |   | 125,659 |              |  |   | 105,911       |   |  |   | 81,249  |   |  |   | 74,401  |  
|Cost of revenue:                                    |  |                                      |         |   |                                      |   |         |              |  |   |               |   |  |               |         |   |               |   |         |              |  |   |               |   |  |   |         |   |  |   |         |  
|Cost of license                                     |  |                                      | 3,542   |   |                                      |   | 2,995   |              |  |   | 3,225         |   |  |               | 2,932   |   |               |   | 3,940   |              |  |   | 3,853         |   |  |   | 1,968   |   |  |   | 1,825   |  
|Cost of service and maintenance                     |  |                                      | 30,644  |   |                                      |   | 28,039  |              |  |   | 28,177        |   |  |               | 24,639  |   |               |   | 26,761  |              |  |   | 23,811        |   |  |   | 16,451  |   |  |   | 14,588  |  
|                                                    |  |                                      |         |   |                                      |   |         |              |  |   |               |   |  |               |         |   |               |   |         |              |  |   |               |   |  |   |         |   |  |   |         |  
|Total cost of revenue                               |  |                                      | 34,186  |   |                                      |   | 31,034  |              |  |   | 31,402        |   |  |               | 27,571  |   |               |   | 30,701  |              |  |   | 27,664        |   |  |   | 18,419  |   |  |   | 16,413  |  
|Gross profit                                        |  |                                      | 100,245 |   |                                      |   | 74,911  |              |  |   | 69,986        |   |  |               | 76,575  |   |               |   | 94,958  |              |  |   | 78,247        |   |  |   | 62,830  |   |  |   | 57,988  |  
|                                                    |  |                                      |         |   |                                      |   |         |              |  |   |               |   |  |               |         |   |               |   |         |              |  |   |               |   |  |   |         |   |  |   |         |  
|Operating expenses:                                 |  |                                      |         |   |                                      |   |         |              |  |   |               |   |  |               |         |   |               |   |         |              |  |   |               |   |  |   |         |   |  |   |         |  
|Research and development                            |  |                                      | 21,604  |   |                                      |   | 18,073  |              |  |   | 17,269        |   |  |               | 16,190  |   |               |   | 17,954  |              |  |   | 16,189        |   |  |   | 13,839  |   |  |   | 13,118  |  
|Sales and marketing                                 |  |                                      | 36,683  |   |                                      |   | 34,392  |              |  |   | 35,089        |   |  |               | 34,206  |   |               |   | 36,998  |              |  |   | 32,960        |   |  |   | 26,891  |   |  |   | 26,637  |  
|General and administrative                          |  |                                      | 10,051  |   |                                      |   | 8,814   |              |  |   | 8,655         |   |  |               | 9,800   |   |               |   | 9,766   |              |  |   | 8,740         |   |  |   | 5,736   |   |  |   | 4,806   |  
|Acquired in-process research and development        |  |                                      |        |   |                                      |   |        |              |  |   |              |   |  |               |        |   |               |   |        |              |  |   | 2,200         |   |  |   |        |   |  |   |        |  
|Restructuring charges                               |  |                                      |        |   |                                      |   | 162     |              |  |   | 3,743         |   |  |               |        |   |               |   | 2,186   |              |  |   |              |   |  |   |        |   |  |   |        |  
|Amortization of goodwill and acquired intangibles   |  |                                      | 2,397   |   |                                      |   | 2,317   |              |  |   | 2,315         |   |  |               | 1,883   |   |               |   | 2,053   |              |  |   | 2,218         |   |  |   | 483     |   |  |   | 499     |  
|                                                    |  |                                      |         |   |                                      |   |         |              |  |   |               |   |  |               |         |   |               |   |         |              |  |   |               |   |  |   |         |   |  |   |         |  
|Total operating expenses                            |  |                                      | 70,735  |   |                                      |   | 63,758  |              |  |   | 67,071        |   |  |               | 62,079  |   |               |   | 68,957  |              |  |   | 62,307        |   |  |   | 46,949  |   |  |   | 45,060  |  
|                                                    |  |                                      |         |   |                                      |   |         |              |  |   |               |   |  |               |         |   |               |   |         |              |  |   |               |   |  |   |         |   |  |   |         |  
|Income from operations                              |  |                                      | 29,510  |   |                                      |   | 11,153  |              |  |   | 2,915         |   |  |               | 14,496  |   |               |   | 26,001  |              |  |   | 15,940        |   |  |   | 15,881  |   |  |   | 12,928  |  
|                                                    |  |                                      |         |   |                                      |   |         |             
|Interest income                                     |  |                                      | 3,786   |   |                                      |   | 3,150   |              |  |   | 3,598         |   |  |               | 2,784   |   |               |   | 2,311   |              |  |   | 1,920         |   |  |   | 2,092   |   |  |   | 2,113   |  
|Interest expense                                    |  |                                      | (671    | ) |                                      |   | (670    | )            |  |   | (688          | ) |  |               | (682    | ) |               |   | (693    | )            |  |   | (690          | ) |  |   | (691    | ) |  |   | (697    | )
|Other income (expenses), net                        |  |                                      | (1,217  | ) |                                      |   | (1,142  | )            |  |   | 406           |   |  |               | 353     |   |               |   | (1,087  | )            |  |   | (569          | ) |  |   | (1,243  | ) |  |   | 199     |  
|                                                    |  |                                      |         |   |                                      |   |         |              |  |   |               |   |  |               |         |   |               |   |         |              |  |   |               |   |  |   |         |   |  |   |         |  
|Income before income taxes                          |  |                                      | 31,408  |   |                                      |   | 12,491  |              |  |   | 6,231         |   |  |               | 16,951  |   |               |   | 26,532  |              |  |   | 16,601        |   |  |   | 16,039  |   |  |   | 14,543  |  
|Provision for (benefit from) income taxes           |  |                                      | 4,821   |   |                                      |   | (1,358  | )            |  |   | (15,500       | ) |  |               | 6,563   |   |               |   | 8,308   |              |  |   | 8,031         |   |  |   | 6,441   |   |  |   | 6,015   |  
|                                                    |  |                                      |         |   |                                      |   |         |              |  |   |               |   |  |               |         |   |               |   |         |              |  |   |               |   |  |   |         |   |  |   |         |  
|Net income                                          |  | $                                    | 26,587  |   |                                      | $ | 13,849  |              |  | $ | 21,731        |   |  | $             | 10,388  |   |               | $ | 18,224  |              |  | $ | 8,570         |   |  | $ | 9,598   |   |  | $ | 8,528   |  
|                                                    |  |                                      |         |   |                                      |   |         |              |  |   |               |   |  |               |         |   |               |   |         |              |  |   |               |   |  |   |         |   |  |   |         |  
|Net income per shareBasic                          |  | $                                    | 0.13    |   |                                      | $ | 0.07    |              |  | $ | 0.10          |   |  | $             | 0.05    |   |               | $ | 0.09    |              |  | $ | 0.04          |   |  | $ | 0.05    |   |  | $ | 0.04    |  
|                                                    |  |                                      |         |   |                                      |   |         |              |  |   |               |   |  |               |         |   |               |   |         |              |  |   |               |   |  |   |         |   |  |   |         |  
|Shares used to compute net income per shareBasic   |  |                                      | 211,444 |   |                                      |   | 212,308 |              |  |   | 214,551       |   |  |               | 214,751 |   |               |   | 212,432 |              |  |   | 209,442       |   |  |   | 198,816 |   |  |   | 209,188 |  
|                                                    |  |                                      |         |   |                                      |   |         |              |  |   |               |   |  |               |         |   |               |   |         |              |  |   |               |   |  |   |         |   |  |   |         |  
|Net income per shareDiluted                        |  | $                                    | 0.12    |   |                                      | $ | 0.06    |              |  | $ | 0.10          |   |  | $             | 0.04    |   |               | $ | 0.08    |              |  | $ | 0.04          |   |  | $ | 0.05    |   |  | $ | 0.04    |  
|                                                    |  |                                      |         |   |                                      |   |         |              |  |   |               |   |  |               |         |   |               |   |         |              |  |   |               |   |  |   |         |   |  |   |         |  
|Shares used to compute net income per shareDiluted |  |                                      | 220,513 |   |                                      |   | 219,775 |              |  |   | 221,943       |   |  |               | 233,675 |   |               |   | 227,628 |              |  |   | 221,413       |   |  |   | 212,658 |   |  |   | 222,452 |  
|                                                    |  |                                      |         |   |                                      |   |         |              |  |   |               |   |  |               |         |   |               |   |         |              |  |   |               |   |  |   |         |   |  |   |         |  



F-40



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SIGNATURES



Pursuant to the
requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this Annual Report on Form 10-K to be signed on its behalf by the undersigned, thereunto duly authorized, on this 10th day of February
2006.



TIBCO Software Inc.By:

/s/ MURRAY D. RODEMurray D. RodeChief Financial Officer andExecutive Vice President, Strategic Operations




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POWER OF ATTORNEY



KNOW ALL THESE, PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Vivek Y.
Ranadivé and Murray D. Rode, and each of them, his attorneys-in-fact, each with full power of substitution, for him in any and all capacities, to sign any and all amendments to this Annual Report on Form 10-K, and to file the same, with
exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, hereby ratifying and confirming all that each said attorneys-in-fact or his substitute or substitutes, may do or cause to be done by virtue
hereof.



Pursuant to the requirements of the Securities
Exchange Act of 1934, this Annual Report on Form 10-K has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.



|                                         |  |                                                                                                          |  |                  
|---------------------------------------- |  | -------------------------------------------------------------------------------------------------------- |  | -----------------
|Signature                                |  | Title                                                                                                    |  | Date             
|                                         |  |                                                                                                         
|/S/ VIVEK Y. RANADIVÉVivek Y. Ranadivé   |  | President, Chief Executive Officer, and Chairman of the Board and Director (Principal Executive Officer) |  | February 10, 2006
|                                         |  |                                                                                                         
|/S/ MURRAY D. RODEMurray D. Rode         |  | Chief Financial Officer and Executive Vice President, Strategic Operations (Principal Financial Officer) |  | February 10, 2006
|                                         |  |                                                                                                         
|/S/ SYDNEY L. CAREYSydney L. Carey       |  | Senior Vice President, Corporate Controller and Chief Accounting Officer (Principal Accounting Officer)  |  | February 10, 2006
|                                         |  |                                                                                                         
|/S/ BERNARD BOURIGEAUDBernard Bourigeaud |  | Director                                                                                                 |  | February 10, 2006
|                                         |  |                                                                                                         
|/S/ ERIC DUNNEric Dunn                   |  | Director                                                                                                 |  | February 10, 2006
|                                         |  |                                                                                                         
|/S/ NAREN GUPTANaren Gupta               |  | Director                                                                                                 |  | February 10, 2006
|                                         |  |                                                                                                         
|/S/ PETER JOBPeter Job                   |  | Director                                                                                                 |  | February 10, 2006
|                                         |  |                                                                                                         
|/S/ PHILIP K. WOODPhilip K. Wood         |  | Director                                                                                                 |  | February 10, 2006



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EXHIBIT INDEX



|           |  |                                                                                                                                                                                                                            
|---------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|ExhibitNo. |  | Exhibits                                                                                                                                                                                                                   
|3.1(1)     |  | Certificate of Incorporation of Registrant.                                                                                                                                                                                
|3.2        |  | Bylaws of Registrant.                                                                                                                                                                                                      
|4.1(2)     |  | Form of Registrants Common Stock certificate.                                                                                                                                                                             
|10.1(2)    |  | Form of Indemnification Agreement.                                                                                                                                                                                         
|10.2(3)    |  | Third Amended and Restated Stockholders Agreement, dated as of July 13, 1999, among Reuters Nederland B.V., Reuters Limited, Cisco Systems, Inc., Mayfield IX, Mayfield Associated Fund III,
Vivek Ranadivé and Registrant.
|10.3(4)#   |  | 1996 Stock Plan, as amended.                                                                                                                                                                                               
|10.4(4)#   |  | 1998 Director Option Plan, as amended.                                                                                                                                                                                     
|10.5(4)#   |  | Employment Agreement between Registrant and Vivek Y. Ranadivé dated November 30, 2004.                                                                                                                                     
|10.6(5)    |  | Lease Agreement dated January 21, 2000 between Spieker Properties, L.P. and the Registrant.                                                                                                                                
|10.7(6)#   |  | Extensibility Inc. 2000 Stock Option Plan.                                                                                                                                                                                 
|10.8(7)#   |  | Talarian Corporation 2000 Equity Incentive Plan.                                                                                                                                                                           
|10.9(7)#   |  | Talarian Corporation 1998 Equity Incentive Plan.                                                                                                                                                                           
|10.10(7)#  |  | White Barn, Inc. Stock Option Plan.                                                                                                                                                                                        
|10.11(7)#  |  | White Barn, Inc. 2000 Equity Incentive Plan.                                                                                                                                                                               
|10.12(8)  |  | Second Amended and Restated License, Maintenance and Distribution Agreement, dated October 1, 2003, between Reuters Limited and the Registrant.                                                                            
|10.13(9)  |  | Amendment No. 1, dated February 27, 2005, to Second Amended and Restated License, Maintenance and Distribution Agreement, dated October 1, 2003, between Reuters Limited and the
Registrant.                               
|10.14(10)  |  | Agreement to Lease and Sell Assets, dated as of June 2, 2003, by and between the Board of Trustees of the Leland Stanford Junior University and 3301 Hillview Holdings, Inc.                                               
|10.15(10)  |  | Ground Lease, dated as of June 25, 2003, by and between the Board of Trustees of the Leland Stanford Junior University and 3301 Hillview Holdings, Inc.                                                                    
|10.16(10)  |  | Promissory Note issued on June 25, 2003 to SunAmerica Life Insurance Company by 3301 Hillview Holdings, Inc.                                                                                                               
|10.17(11)# |  | Change in Control Severance Plan.                                                                                                                                                                                          
|10.18(12)# |  | Summary of 2005 Executive Incentive Compensation Plan.                                                                                                                                                                     
|10.19#     |  | Transition Agreement and Release between the Registrant and Chris OMeara dated October 11, 2005.                                                                                                                          
|21.1       |  | List of subsidiaries.                                                                                                                                                                                                      
|23.1       |  | Consent of PricewaterhouseCoopers LLP, Independent Registered Public Accounting Firm.                                                                                                                                      
|24.1       |  | Power of Attorney (included on signature page).                                                                                                                                                                            
|31.1       |  | Rule 13a  14(a) / 15d  14(a) Certification by Chief Executive Officer.                                                                                                                                                   
|31.2       |  | Rule 13a  14(a) / 15d  14(a) Certification by Chief Financial Officer.                                                                                                                                                   
|32.1       |  | Section 1350 Certification by Chief Executive Officer.                                                                                                                                                                     
|32.2       |  | Section 1350 Certification by Chief Financial Officer.                                                                                                                                                                     

---

|(1) | Incorporated by reference to exhibits filed with the Registrants Registration Statement on Form 8-A, filed with the Commission on February 23, 2004.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Incorporated by reference to exhibits filed with the Registrants Registration Statement on Form S-1 File No. 333-78195, filed with the Commission on June 18, 1999,
as amended.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | Incorporated by reference to exhibits filed with the Registrants Registration Statement on Form S-1 File No. 333-31358, filed with the Commission on February 29,
2000, as amended.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(4) | Incorporated by reference to exhibits filed with the Registrants Annual Report on Form 10-K, filed with the Commission on February 14, 2005.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------

|(5) | Incorporated by reference to exhibits filed with the Registrants Quarterly Report on Form 10-Q, filed with the Commission on April 17, 2000.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------



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|(6) | Incorporated by reference to exhibits filed with the Registrants Registration Statement on Form S-8 File No. 333-48260, filed with the Commission on October 19,
2000.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(7) | Incorporated by reference to exhibits filed with the Registrants Registration Statement on Form S-8 File No. 333-88730, filed with the Commission on May 21, 2002.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(8) | Incorporated by reference to exhibits filed with the Registrants Registration Statement on Form S-3 File No. 333-110304, filed with the Commission on November 6,
2003, as amended.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(9) | Incorporated by reference to exhibits filed with the Registrants Quarterly Report on Form 10-Q, filed with the Commission on April 8, 2005.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------

|(10) | Incorporated by reference to exhibits filed with the Registrants Annual Report on Form 10-K, filed with the Commission on January 20, 2004.
|---- | --------------------------------------------------------------------------------------------------------------------------------------------

|(11) | Incorporated by reference to exhibits filed with the Registrants Current Report on Form 8-K, filed with the Commission on July 13, 2005.
|---- | -----------------------------------------------------------------------------------------------------------------------------------------

|(12) | Incorporated by reference to exhibits filed with the Registrants Current Report on Form 8-K, filed with the Commission on July 6, 2005.
|---- | ----------------------------------------------------------------------------------------------------------------------------------------

|# | Indicates management contract or compensatory plan or arrangement.
|- | ------------------------------------------------------------------

| | Confidential treatment granted for certain portions of this exhibit.
|- | --------------------------------------------------------------------