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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549
_______________

FORM 10-Q

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

For the quarterly period ended September 30, 2001

OR

|                                                                                                       
|-------------------------------------------------------------------------------------------------------
|box    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 0-26934

Hyperion Solutions
Corporation(Exact name of registrant as specified in its charter)

|                                                                        |  |                                                
|----------------------------------------------------------------------- |  | -----------------------------------------------
|Delaware
(State or other jurisdiction of
incorporation or organization) |  | 77-0277772
(I.R.S. Employer
Identification No.)

1344 Crossman Avenue, Sunnyvale, California 94089
(Address of principal executive offices, including zip code)

(408) 744-9500
(Registrants telephone number, including area code)

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

As of November 12, 2001, there were 32,756,191 shares of the
Registrants common stock, $.001 par value, outstanding



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Hyperion Solutions Corporation

Form 10-Q

Contents

|                                                                                                  |                                                                                                                                   |  |      |   | 
|------------------------------------------------------------------------------------------------- | --------------------------------------------------------------------------------------------------------------------------------- |  | ---- | - | 
|                                                                                                  |                                                                                                                                   |  | Page
|                                                                                                  |                                                                                                                                   |  |     
|Part I.   Financial Information                                                                   |                                                                                                                                   |  |      |  
|                                                                                                 
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|                                                                                                  |                                                                                                                                   |  |      |  
|                                                                                                 
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|                                                                                                 
|Item 1.     Financial Statements                                                                  |                                                                                                                                   |  |      |  
|                                                                                                 
|                                                                                                 
|                                                                                                 
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|                                                                                                  |                                                                                                                                   |  |      |  
|                                                                                                 
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|                                                                                                 
|                                                                                                 
|                                                                                                  | Condensed Consolidated Balance Sheets  September 30, 2001 (unaudited) and June 30, 2001                                          |  |      | 2 | 
|                                                                                                 
|                                                                                                 
|                                                                                                 
|                                                                                                 
|                                                                                                  |                                                                                                                                   |  |      |  
|                                                                                                 
|                                                                                                 
|                                                                                                 
|                                                                                                 
|                                                                                                  | Condensed Consolidated Statements of Income and Comprehensive Income (unaudited) 
Three Months Ended September 30, 2001 and 2000 |  |      | 3 | 
|                                                                                                 
|                                                                                                 
|                                                                                                 
|                                                                                                 
|                                                                                                  |                                                                                                                                   |  |      |  
|                                                                                                 
|                                                                                                 
|                                                                                                 
|                                                                                                 
|                                                                                                  | Condensed Consolidated Statements of Cash Flows (unaudited) 
Three Months Ended September 30, 2001 and 2000                      |  |      | 4 | 
|                                                                                                 
|                                                                                                 
|                                                                                                 
|                                                                                                 
|                                                                                                  |                                                                                                                                   |  |      |  
|                                                                                                 
|                                                                                                 
|                                                                                                 
|                                                                                                 
|                                                                                                  | Notes to Condensed Consolidated Financial Statements (unaudited)  September 30, 2001                                             |  |      | 5 | 
|                                                                                                 
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|                                                                                                 
|                                                                                                  |                                                                                                                                   |  |      |  
|                                                                                                 
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|                                                                                                 
|                                                                                                 
|Item 2.     Managements Discussion and Analysis of Financial Condition and Results of Operations |                                                                                                                                   |  | 8    |  
|                                                                                                 
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|                                                                                                  |                                                                                                                                   |  |      |  
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|                                                                                                 
|                                                                                                 
|Item 3.     Quantitative and Qualitative Disclosures About Market Risk                            |                                                                                                                                   |  | 13   |  
|                                                                                                 
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|                                                                                                 
|                                                                                                  |                                                                                                                                   |  |      |  
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|                                                                                                 
|Part II.     Other Information                                                                    |                                                                                                                                   |  |      |  
|                                                                                                 
|                                                                                                 
|                                                                                                 
|                                                                                                 
|                                                                                                  |                                                                                                                                   |  |      |  
|                                                                                                 
|                                                                                                 
|                                                                                                 
|                                                                                                 
|Item 1.     Legal Proceedings                                                                     |                                                                                                                                   |  | 14   |  
|                                                                                                 
|                                                                                                 
|                                                                                                 
|                                                                                                 
|                                                                                                  |                                                                                                                                   |  |      |  
|                                                                                                 
|                                                                                                 
|                                                                                                 
|                                                                                                 
|Item 6.     Exhibits and Reports on Form 8-K                                                      |                                                                                                                                   |  | 14   |  
|                                                                                                 
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|                                                                                                  |                                                                                                                                   |  |      |  
|                                                                                                 
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|                                                                                                 
|                                                                                                 
|Signatures                                                                                        |                                                                                                                                   |  | 15   |  

Hyperion, the Hyperion H Logo, and Essbase are registered trademarks, and
Hyperion Solutions is a trademark of Hyperion Solutions Corporation. All other
trademarks and company names mentioned are the property of their respective
owners. All rights reserved

For further information, refer to the Hyperion Solutions Corporation annual
report on Form 10-K for the year ended June 30, 2001.

1



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##### 



Hyperion Solutions Corporation
Condensed Consolidated Balance Sheets
(in thousands)

|                                                                                                                            |                                                                                                            |   |               |         |          |   |         |         |  
|--------------------------------------------------------------------------------------------------------------------------- | ---------------------------------------------------------------------------------------------------------- | - | ------------- | ------- | -------- | - | ------- | ------- | -
|                                                                                                                            |                                                                                                            |   | September 30, |         | June 30,
|                                                                                                                            |                                                                                                            |   | 2001          |         | 2001    
|                                                                                                                            |                                                                                                            |   |               |         |         
|                                                                                                                            |                                                                                                            |   | (unaudited)   |         |          |   |        
|ASSETS                                                                                                                      |                                                                                                            |   |               |         |          |   |         |        
|                                                                                                                           
|                                                                                                                           
|                                                                                                                           
|                                                                                                                           
|Current Assets:                                                                                                             |                                                                                                            |   |               |         |          |   |         |        
|                                                                                                                           
|                                                                                                                           
|                                                                                                                           
|                                                                                                                           
|                                                                                                                            | Cash and cash equivalents                                                                                  |   | $             | 261,564 |          |   | $       | 232,904 |  
|                                                                                                                           
|                                                                                                                           
|                                                                                                                           
|                                                                                                                           
|                                                                                                                            | Short-term investments                                                                                     |   |               | 22,475  |          |   |         | 22,462  |  
|                                                                                                                           
|                                                                                                                           
|                                                                                                                           
|                                                                                                                           
|                                                                                                                            | Accounts receivable  net of allowances of $19,450 and $12,476                                             |   |               | 121,689 |          |   |         | 156,835 |  
|                                                                                                                           
|                                                                                                                           
|                                                                                                                           
|                                                                                                                           
|                                                                                                                            | Prepaid expenses and other current assets                                                                  |   |               | 16,511  |          |   |         | 20,491  |  
|                                                                                                                           
|                                                                                                                           
|                                                                                                                           
|                                                                                                                           
|                                                                                                                            | Deferred income taxes                                                                                      |   |               | 22,417  |          |   |         | 19,175  |  
|                                                                                                                            |                                                                                                            |   |               |         |          |   |         |         |  
|TOTAL CURRENT ASSETS                                                                                                        |                                                                                                            |   | 444,656       |         |          |   | 451,867 |        
|                                                                                                                           
|                                                                                                                           
|                                                                                                                           
|                                                                                                                           
|Property and equipment  at cost, less accumulated depreciation and
amortization of $106,948 and $102,124                   |                                                                                                            |   | 76,028        |         |          |   | 80,752  |        
|                                                                                                                           
|                                                                                                                           
|                                                                                                                           
|                                                                                                                           
|Acquired technologies, goodwill and other intangible assets  at cost, less
accumulated amortization of $29,719 and $28,865 |                                                                                                            |   | 16,325        |         |          |   | 16,472  |        
|                                                                                                                           
|                                                                                                                           
|                                                                                                                           
|                                                                                                                           
|Other assets                                                                                                                |                                                                                                            |   | 6,030         |         |          |   | 8,008   |        
|                                                                                                                           
|                                                                                                                           
|                                                                                                                           
|                                                                                                                           
|Deferred income taxes                                                                                                       |                                                                                                            |   | 13,185        |         |          |   | 13,294  |        
|                                                                                                                            |                                                                                                            |   |               |         |          |   |         |         |  
|TOTAL ASSETS                                                                                                                |                                                                                                            | $ | 556,224       |         |          | $ | 570,393 |        
|                                                                                                                            |                                                                                                            |   |               |         |          |   |         |         |  
|LIABILITIES AND STOCKHOLDERS EQUITY                                                                                        |                                                                                                            |   |               |         |          |   |         |        
|                                                                                                                           
|                                                                                                                           
|                                                                                                                           
|                                                                                                                           
|Current liabilities:                                                                                                        |                                                                                                            |   |               |         |          |   |         |        
|                                                                                                                           
|                                                                                                                           
|                                                                                                                           
|                                                                                                                           
|                                                                                                                            | Accounts payable and accrued expenses                                                                      |   | $             | 43,880  |          |   | $       | 52,211  |  
|                                                                                                                           
|                                                                                                                           
|                                                                                                                           
|                                                                                                                           
|                                                                                                                            | Accrued employee compensation and benefits                                                                 |   |               | 28,553  |          |   |         | 31,554  |  
|                                                                                                                           
|                                                                                                                           
|                                                                                                                           
|                                                                                                                           
|                                                                                                                            | Income taxes payable                                                                                       |   |               | 443     |          |   |         |        |  
|                                                                                                                           
|                                                                                                                           
|                                                                                                                           
|                                                                                                                           
|                                                                                                                            | Deferred revenue                                                                                           |   |               | 95,320  |          |   |         | 100,234 |  
|                                                                                                                           
|                                                                                                                           
|                                                                                                                           
|                                                                                                                           
|                                                                                                                            | Other liabilities                                                                                          |   |               | 12,611  |          |   |         | 13,727  |  
|                                                                                                                            |                                                                                                            |   |               |         |          |   |         |         |  
|TOTAL CURRENT LIABILITIES                                                                                                   |                                                                                                            |   | 180,807       |         |          |   | 197,726 |        
|                                                                                                                           
|                                                                                                                           
|                                                                                                                           
|                                                                                                                           
|Other long-term liabilities                                                                                                 |                                                                                                            |   | 11,965        |         |          |   | 14,303  |        
|                                                                                                                           
|                                                                                                                           
|                                                                                                                           
|                                                                                                                           
|Long-term debt                                                                                                              |                                                                                                            |   | 90,986        |         |          |   | 91,045  |        
|                                                                                                                           
|                                                                                                                           
|                                                                                                                           
|                                                                                                                           
|Stockholders equity:                                                                                                       |                                                                                                            |   |               |         |          |   |         |        
|                                                                                                                           
|                                                                                                                           
|                                                                                                                           
|                                                                                                                           
|                                                                                                                            | Preferred stock  $.001 par value; 5,000 shares authorized;
none issued                                    |   |               |        |          |   |         |        |  
|                                                                                                                           
|                                                                                                                           
|                                                                                                                           
|                                                                                                                           
|                                                                                                                            | Common stock  $.001 par value; 300,000 shares authorized;
33,738 and 33,715 shares issued and outstanding |   |               | 34      |          |   |         | 34      |  
|                                                                                                                           
|                                                                                                                           
|                                                                                                                           
|                                                                                                                           
|                                                                                                                            | Additional paid-in capital                                                                                 |   |               | 213,520 |          |   |         | 212,952 |  
|                                                                                                                           
|                                                                                                                           
|                                                                                                                           
|                                                                                                                           
|                                                                                                                            | Less treasury stock, at cost: 1,344 and 1,355 common shares                                                |   |               | (23,097 | )        |   |         | (23,270 | )
|                                                                                                                           
|                                                                                                                           
|                                                                                                                           
|                                                                                                                           
|                                                                                                                            | Retained earnings                                                                                          |   |               | 90,436  |          |   |         | 88,599  |  
|                                                                                                                           
|                                                                                                                           
|                                                                                                                           
|                                                                                                                           
|                                                                                                                            | Accumulated other comprehensive loss                                                                       |   |               | (8,427  | )        |   |         | (10,996 | )
|                                                                                                                            |                                                                                                            |   |               |         |          |   |         |         |  
|TOTAL STOCKHOLDERS EQUITY                                                                                                  |                                                                                                            |   | 272,466       |         |          |   | 267,319 |        
|                                                                                                                            |                                                                                                            |   |               |         |          |   |         |        
|TOTAL LIABILITIES AND STOCKHOLDERS EQUITY                                                                                  |                                                                                                            | $ | 556,224       |         |          | $ | 570,393 |        
|                                                                                                                            |                                                                                                            |   |               |         |          |   |         |         |  

See accompanying notes to condensed consolidated financial statements.

2



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##### 



Hyperion Solutions Corporation
Condensed Consolidated Statements of Income and Comprehensive Income
(in thousands, except per share data)
(unaudited)

|                                              |                          |   |                    |        |      |   |         |        |  
|--------------------------------------------- | ------------------------ | - | ------------------ | ------ | ---- | - | ------- | ------ | -
|                                              |                          |   | Three Months Ended
|                                              |                          |   | September 30,     
|                                              |                          |   |                   
|                                              |                          |   | 2001               |        | 2000
|                                              |                          |   |                    |        |     
|REVENUES                                      |                          |   |                    |        |      |   |         |       
|                                             
|                                             
|                                             
|                                             
|                                              | Software licenses        |   | $                  | 38,808 |      |   | $       | 45,023 |  
|                                             
|                                             
|                                             
|                                             
|                                              | Maintenance and services |   |                    | 75,851 |      |   |         | 70,031 |  
|                                              |                          |   |                    |        |      |   |         |        |  
|TOTAL REVENUES                                |                          |   | 114,659            |        |      |   | 115,054 |       
|                                              |                          |   |                    |        |      |   |         |        |  
|COSTS AND EXPENSES                            |                          |   |                    |        |      |   |         |       
|                                             
|                                             
|                                             
|                                             
|Cost of revenues:                             |                          |   |                    |        |      |   |         |       
|                                             
|                                             
|                                             
|                                             
|                                              | Software licenses        |   |                    | 2,995  |      |   |         | 3,791  |  
|                                             
|                                             
|                                             
|                                             
|                                              | Maintenance and services |   |                    | 33,848 |      |   |         | 35,696 |  
|                                             
|                                             
|                                             
|                                             
|Sales and marketing                           |                          |   | 41,267             |        |      |   | 48,540  |       
|                                             
|                                             
|                                             
|                                             
|Research and development                      |                          |   | 18,892             |        |      |   | 19,426  |       
|                                             
|                                             
|                                             
|                                             
|General and administrative                    |                          |   | 15,598             |        |      |   | 16,606  |       
|                                              |                          |   |                    |        |      |   |         |        |  
|TOTAL COSTS AND EXPENSES                      |                          |   | 112,600            |        |      |   | 124,059 |       
|                                              |                          |   |                    |        |      |   |         |        |  
|OPERATING INCOME (LOSS)                       |                          |   | 2,059              |        |      |   | (9,005  | )     
|                                             
|                                             
|                                             
|                                             
|Interest income                               |                          |   | 2,142              |        |      |   | 3,756   |       
|                                             
|                                             
|                                             
|                                             
|Interest expense                              |                          |   | (1,161             | )      |      |   | (1,353  | )     
|                                              |                          |   |                    |        |      |   |         |        |  
|INCOME (LOSS) BEFORE INCOME TAXES             |                          |   | 3,040              |        |      |   | (6,602  | )     
|                                             
|                                             
|                                             
|                                             
|Provision for (benefit from) income taxes     |                          |   | 1,094              |        |      |   | (2,509  | )     
|                                              |                          |   |                    |        |      |   |         |        |  
|NET INCOME (LOSS)                             |                          | $ | 1,946              |        |      | $ | (4,093  | )     
|                                              |                          |   |                    |        |      |   |         |        |  
|Other comprehensive income (loss)             |                          |   | 2,569              |        |      |   | (287    | )     
|                                              |                          |   |                    |        |      |   |         |        |  
|COMPREHENSIVE INCOME (LOSS)                   |                          | $ | 4,515              |        |      | $ | (4,380  | )     
|                                              |                          |   |                    |        |      |   |         |        |  
|EARNINGS (LOSS) PER SHARE                     |                          |   |                    |        |      |   |         |       
|                                             
|                                             
|                                             
|                                             
|                                              | Basic                    |   | $                  | 0.06   |      |   | $       | (0.12  | )
|                                             
|                                             
|                                             
|                                             
|                                              | Diluted                  |   | $                  | 0.06   |      |   | $       | (0.12  | )
|                                             
|                                             
|                                             
|                                             
|WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING |                          |   |                    |        |      |   |         |       
|                                             
|                                             
|                                             
|                                             
|                                              | Basic                    |   |                    | 32,444 |      |   |         | 32,813 |  
|                                             
|                                             
|                                             
|                                             
|                                              | Diluted                  |   |                    | 32,542 |      |   |         | 32,813 |  

See accompanying notes to condensed consolidated financial statements.

3



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##### 



Hyperion Solutions Corporation
Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited)

|                                                                                                                      |                                                                          |                                                   |         |                    |       |      |         |         |       | 
|--------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------ | ------------------------------------------------- | ------- | ------------------ | ----- | ---- | ------- | ------- | ----- | 
|                                                                                                                      |                                                                          |                                                   |         | Three Months Ended
|                                                                                                                      |                                                                          |                                                   |         | September 30,     
|                                                                                                                      |                                                                          |                                                   |         |                   
|                                                                                                                      |                                                                          |                                                   |         | 2001               |       | 2000
|                                                                                                                      |                                                                          |                                                   |         |                    |       |     
|CASH FLOWS FROM OPERATING ACTIVITIES:                                                                                 |                                                                          |                                                   |         |                    |       |      |         |        
|                                                                                                                     
|                                                                                                                     
|                                                                                                                     
|                                                                                                                     
|Net income (loss)                                                                                                     |                                                                          | $                                                 | 1,946   |                    |       | $    | (4,093  | )      
|                                                                                                                     
|                                                                                                                     
|                                                                                                                     
|                                                                                                                     
|Adjustments to reconcile net income (loss) to net cash provided by
operating activities
Depreciation and amortization |                                                                          |                                                   | 8,305   |                    |       |      | 9,185   |        
|                                                                                                                     
|                                                                                                                     
|                                                                                                                     
|                                                                                                                     
|                                                                                                                      | Provision for accounts receivable allowance and returns                  |                                                   |         | 5,666              |       |      |         | 8,323   |      
|                                                                                                                     
|                                                                                                                     
|                                                                                                                     
|                                                                                                                     
|                                                                                                                      | Deferred income taxes                                                    |                                                   |         | (3,099             | )     |      |         | (2,276  | )    
|                                                                                                                     
|                                                                                                                     
|                                                                                                                     
|                                                                                                                     
|Changes in assets and liabilities:                                                                                    |                                                                          |                                                   |         |                    |       |      |         |        
|                                                                                                                     
|                                                                                                                     
|                                                                                                                     
|                                                                                                                     
|                                                                                                                      | Accounts receivable                                                      |                                                   |         | 31,116             |       |      |         | 14,676  |      
|                                                                                                                     
|                                                                                                                     
|                                                                                                                     
|                                                                                                                     
|                                                                                                                      | Prepaid expenses and other current assets                                |                                                   |         | 838                |       |      |         | (2,428  | )    
|                                                                                                                     
|                                                                                                                     
|                                                                                                                     
|                                                                                                                     
|                                                                                                                      | Other assets                                                             |                                                   |         | (27                | )     |      |         | 771     |      
|                                                                                                                     
|                                                                                                                     
|                                                                                                                     
|                                                                                                                     
|                                                                                                                      | Accounts payable and accrued expenses                                    |                                                   |         | (9,656             | )     |      |         | (504    | )    
|                                                                                                                     
|                                                                                                                     
|                                                                                                                     
|                                                                                                                     
|                                                                                                                      | Accrued employee compensation and benefits                               |                                                   |         | (3,396             | )     |      |         | (4,388  | )    
|                                                                                                                     
|                                                                                                                     
|                                                                                                                     
|                                                                                                                     
|                                                                                                                      | Income taxes payable                                                     |                                                   |         | 4,035              |       |      |         | (820    | )    
|                                                                                                                     
|                                                                                                                     
|                                                                                                                     
|                                                                                                                     
|                                                                                                                      | Deferred revenue                                                         |                                                   |         | (6,245             | )     |      |         | (1,879  | )    
|                                                                                                                     
|                                                                                                                     
|                                                                                                                     
|                                                                                                                     
|                                                                                                                      | Other liabilities                                                        |                                                   |         | (1,116             | )     |      |         |        |      
|                                                                                                                     
|                                                                                                                     
|                                                                                                                     
|                                                                                                                     
|                                                                                                                      | Other long-term liabilities                                              |                                                   |         | (2,338             | )     |      |         |        |      
|                                                                                                                      |                                                                          |                                                   |         |                    |       |      |         |        
|Net cash provided by operating activities                                                                             |                                                                          |                                                   | 26,029  |                    |       |      | 16,567  |        
|                                                                                                                      |                                                                          |                                                   |         |                    |       |      |         |        
|CASH FLOWS FROM INVESTING ACTIVITIES:                                                                                 |                                                                          |                                                   |         |                    |       |      |         |        
|                                                                                                                     
|                                                                                                                     
|                                                                                                                     
|                                                                                                                     
|                                                                                                                      | Proceeds from maturity of investments, net                               |                                                   |         | 2,022              |       |      |         | 2,234   |      
|                                                                                                                     
|                                                                                                                     
|                                                                                                                     
|                                                                                                                     
|                                                                                                                      | Purchases of property and equipment                                      |                                                   |         | (2,008             | )     |      |         | (20,374 | )    
|                                                                                                                     
|                                                                                                                     
|                                                                                                                     
|                                                                                                                     
|                                                                                                                      | Disposals of property and equipment                                      |                                                   |         | 155                |       |      |         | 962     |      
|                                                                                                                     
|                                                                                                                     
|                                                                                                                     
|                                                                                                                     
|                                                                                                                      | Purchases of intangible and other assets                                 |                                                   |         | (1,251             | )     |      |         | (839    | )    
|                                                                                                                      |                                                                          |                                                   |         |                    |       |      |         |        
|Net cash used in investing activities                                                                                 |                                                                          |                                                   | (1,082  | )                  |       |      | (18,017 | )      
|                                                                                                                      |                                                                          |                                                   |         |                    |       |      |         |        
|CASH FLOWS FROM FINANCING ACTIVITIES                                                                                  |                                                                          |                                                   |         |                    |       |      |         |        
|                                                                                                                     
|                                                                                                                     
|                                                                                                                     
|                                                                                                                     
|                                                                                                                      | Principal payments on notes payable                                      |                                                   |         | (59                | )     |      |         | (37     | )    
|                                                                                                                     
|                                                                                                                     
|                                                                                                                     
|                                                                                                                     
|                                                                                                                      | Treasury stock transactions, net                                         |                                                   |         | 64                 |       |      |         | -       |      
|                                                                                                                     
|                                                                                                                     
|                                                                                                                     
|                                                                                                                     
|                                                                                                                      | Proceeds from exercise of stock options and employee stock purchase plan |                                                   |         | 426                |       |      |         | 3,016   |      
|                                                                                                                      |                                                                          |                                                   |         |                    |       |      |         |        
|Net cash provided by financing activities                                                                             |                                                                          |                                                   | 431     |                    |       |      | 2,979   |        
|                                                                                                                      |                                                                          |                                                   |         |                    |       |      |         |        
|Effect of exchange rate on cash and cash equivalents                                                                  |                                                                          |                                                   | 3,282   |                    |       |      | (287    | )      
|                                                                                                                      |                                                                          |                                                   |         |                    |       |      |         |        
|INCREASE IN CASH AND CASH EQUIVALENTS                                                                                 |                                                                          |                                                   | 28,660  |                    |       |      | 1,242   |        
|                                                                                                                     
|                                                                                                                     
|                                                                                                                     
|                                                                                                                     
|Cash and cash equivalents at beginning of period                                                                      |                                                                          |                                                   | 232,904 |                    |       |      | 262,408 |        
|                                                                                                                      |                                                                          |                                                   |         |                    |       |      |         |        
|CASH AND CASH EQUIVALENTS AT END OF PERIOD                                                                            |                                                                          | $                                                 | 261,564 |                    |       | $    | 263,650 |        
|                                                                                                                      |                                                                          |                                                   |         |                    |       |      |         |        
|SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION                                                                      |                                                                          |                                                   |         |                    |       |      |         |        
|                                                                                                                     
|                                                                                                                     
|                                                                                                                     
|                                                                                                                     
|                                                                                                                      | Cash paid during the year for:                                           |                                                   |         |                    |       |      |         |         |      
|                                                                                                                     
|                                                                                                                     
|                                                                                                                     
|                                                                                                                     
|                                                                                                                      |                                                                          | Income taxes                                      |         | $                  | 452   |      |         | $       | 250   | 
|                                                                                                                     
|                                                                                                                     
|                                                                                                                     
|                                                                                                                     
|                                                                                                                      |                                                                          | Interest                                          |         |                    | 2,036 |      |         |         | 2,292 | 
|                                                                                                                     
|                                                                                                                     
|                                                                                                                     
|                                                                                                                     
|                                                                                                                      | Non-cash operating and financing activity:                               |                                                   |         |                    |       |      |         |         |      
|                                                                                                                     
|                                                                                                                     
|                                                                                                                     
|                                                                                                                     
|                                                                                                                      |                                                                          | Income tax benefit from exercise of stock options |         | $                  | 141   |      |         | $       | 1,020 | 

See accompanying notes to condensed consolidated financial statements.

4



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##### 



HYPERION SOLUTIONS CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
SEPTEMBER 30, 2001

1.     Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with accounting principles generally accepted in
the United States for interim financial information and pursuant to the rules
and regulations of the Securities and Exchange Commission (SEC). Certain
information and footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have been
condensed or omitted pursuant to such rules and regulations. Accordingly, they
do not include all of the information and notes required by generally accepted
accounting principles for complete financial statements. However, management
believes that the disclosures are adequate to make the information presented
not misleading. In the opinion of management, all adjustments, consisting only
of normal recurring accruals, considered necessary for a fair presentation have
been included in the accompanying unaudited financial statements. Operating
results for the three-month period ended September 30, 2001 are not necessarily
indicative of the results that may be expected for the full year ending June
30, 2002. For further information, refer to the consolidated
financial statements and accompanying notes for the year ended June 30, 2001
included in the Hyperion Solutions Corporation (Hyperion) report on Form 10-K.

Certain prior period amounts have been reclassified to conform to the current
period presentation.

2.     Revenue
Recognition

Hyperion derives revenues from licensing its
software products and providing related maintenance and support,
product installation and implementation, and training services.
Hyperion records revenue from licensing of software products to
end-users when there is persuasive evidence of an arrangement, the
fee is fixed and determinable, collection is reasonably assured and
delivery of the product has occurred as prescribed by Statement of
Position ("SOP") No. 97-2, "Software Revenue Recognition." When
contracts contain multiple elements, and for which vendor specific
objective evidence ("VSOE") of fair value exists for the undelivered
elements, Hyperion recognizes revenue for the delivered elements
based upon the residual method, in accordance with SOP No. 98-9,
"Modifications of SOP No. 97-2 with Respect to Certain Transactions."
Undelivered elements consist primarily of maintenance and support and
other services such as consulting and training. VSOE of fair value
for annual maintenance and support contracts is established with the
optional stated future renewal rates included in the contracts. VSOE
of fair value for the services element is based upon the standard
hourly rates Hyperion charges for services when such services are
sold separately. Services are generally not considered essential to
the functionality of the software. Hyperion recognizes revenue
allocated to maintenance and support ratably over the period of the
maintenance and support contracts, respectively, which is generally
twelve months. For revenue related to consulting and training
services, Hyperion recognizes revenue as the related services are
performed. In instances where services are deemed essential to the
software, both the software license fee and consulting fees are
recognized using the percentage-of-completion method of contract
accounting with SOP No. 81, "Accounting for Performance of
Construction-Type and Certain Product-Type Contracts" and Accounting
Research Bulletin ("ARB") No. 45, "Long-Term Construction-Type
Contracts."

Revenues from reseller arrangements are recognized
on the "sell-through" method, when the reseller reports to Hyperion
the sale of Hyperion's software products to end-users. Hyperion's
agreements with its customers and resellers do not contain product
return rights.

3.     Earnings Per Share

Earnings per share (EPS) is computed in accordance with Statement of
Financial Accounting Standards (SFAS) No. 128, Earnings Per Share. Basic
EPS is computed by dividing net income (loss) available to common stockholders
by the weighted average number of common shares outstanding during the period.
Diluted EPS is computed using the weighted average number of shares of common
stock and potentially dilutive securities outstanding during the period.
Potentially dilutive securities consist of convertible preferred stock (using
the if-converted method) and stock options (using the treasury stock method)
and shares issuable upon conversion of the convertible subordinated notes
(using the if-converted method). Potentially dilutive securities are excluded
from the computation if the effect is antidilutive.

The following table sets forth the computation of basic and diluted earnings
(loss) per share (EPS) (in thousands, except per share data):

|                                                                                       |                                   |                                |                     |      |                    |    |        |       |   |   | 
|-------------------------------------------------------------------------------------- | --------------------------------- | ------------------------------ | ------------------- | ---- | ------------------ | -- | ------ | ----- | - | - | 
|                                                                                       |                                   |                                |                     |      | Three Months Ended
|                                                                                       |                                   |                                |                     |      | September 30,     
|                                                                                       |                                   |                                |                     |      |                   
|                                                                                       |                                   |                                |                     |      | 2001               |    | 2000  
|                                                                                       |                                   |                                |                     |      |                    |    |       
|Numerator  net income (loss)                                                          |                                   | $                              | 1,946               |      |                    | $  | (4,093 | )    
|                                                                                      
|                                                                                      
|                                                                                      
|                                                                                      
|Denominator for basis EPS  weighted-average shares                                    |                                   |                                | 32,444              |      |                    |    | 32,813 |      
|                                                                                      
|                                                                                      
|                                                                                      
|                                                                                      
|                                                                                       |                                   | Effect of dilutive securities: |                     |      |                    |    |        |       |   |  
|                                                                                      
|                                                                                      
|                                                                                      
|                                                                                      
|                                                                                       |                                   |                                | Stock option rights |      |                    | 98 |        |       |   |  | 
|                                                                                       |                                   |                                |                     |      |                    |    |        |      
|Denominator for diluted EPS  adjusted
weighted-average shares and assumed conversions |                                   |                                | 32,542              |      |                    |    | 32,813 |      
|                                                                                       |                                   |                                |                     |      |                    |    |        |      
|                                                                                       | Basic earnings (loss) per share   |                                | $                   | 0.06 |                    |    | $      | (0.12 | )
|                                                                                      
|                                                                                      
|                                                                                      
|                                                                                      
|                                                                                       | Diluted earnings (loss) per share |                                | $                   | 0.06 |                    |    | $      | (0.12 | )

For the three-month period ended September 30, 2001, certain stock option
rights of 7.6 million common shares were excluded from the diluted EPS
calculation because their effect would be antidilutive. For the three-month
period ended September 30, 2000, all stock option rights totaling 7.9 million
were excluded from the diluted EPS calculation because their effect would be

5



---



##### 



antidilutive as a result of the net loss. Similarly, 1.6 million shares of
common stock issuable upon conversion of the convertible subordinated notes due
2005 have been excluded from the diluted EPS calculation for all periods
presented.

4.     Contingencies

From time to time, in the normal course of business, various claims are made
against Hyperion. At this time, in the opinion of management, there are no
pending claims the outcome of which is expected to result in a material adverse
effect on the financial position, results of operations and cash flows of
Hyperion.

5.     Restructuring

In June 2001, Hyperion announced a corporate restructuring plan designed to
bring costs more in line with revenues and strengthen the financial performance
of the business. The restructuring plan included a company-wide initiative to
align personnel with Hyperions new strategy, which resulted in a reduction of
the workforce by approximately 300 or 12% of the worldwide headcount which was
complete as of September 30, 2001. Employee groups impacted by the
restructuring included personnel involved in corporate services, product
business units, sales and customer support. In addition, Hyperion has
consolidated certain facilities and exited other facilities.

The restructuring reserve balance declined by $3.4 million in the three months
ended September 30, 2001 primarily due to cash paid for severance and employee
costs of $2.8 million, and real estate exit costs of
$0.4 million. The accrued balance of $24.6 million, related
primarily to future lease obligations and employee separation
payments, is included in Other liabilities and Other long-term
liabilities in the accompanying condensed consolidated balance sheets.

6.     Recent Accounting Pronouncements

In July 2001, the Financial Accounting Standards Board (FASB) issued SFAS No.
141, Business Combinations which supercedes Accounting Principles Board
(APB) Opinion No. 16, Business Combinations. SFAS No. 141 requires the
purchase method of accounting for business combinations initiated after June
30, 2001 and eliminates the pooling-of-interests method. In addition, SFAS No.
141 establishes specific criteria for the recognition of intangible assets
separately from goodwill and requires unallocated negative goodwill to be
written off immediately as an extraordinary gain. Hyperion adopted the
provisions of SFAS 141 effective July 1, 2001.

In July 2001, the FASB also issued SFAS No. 142, Goodwill and Other Intangible
Assets. SFAS No. 142 supercedes APB Opinion No. 17 Intangible Assets and
requires, among other things, the discontinuance of amortization related to
goodwill and indefinite lived intangible assets. These assets will then be
subject to an impairment test at least annually. In addition, the standard
includes provisions upon adoption for the reclassification of certain existing
recognized intangibles as goodwill, reassessment of the useful lives of
existing recognized intangibles and reclassification of certain intangibles out
of previously reported goodwill. Hyperion adopted SFAS No. 142 effective July
1, 2001, which resulted in Hyperion no longer amortizing its existing goodwill
balance of $10.5 million.

In October 2001, the FASB issued SFAS No. 144, Accounting for the Impairment
or Disposal of Long-Lived Assets, which supercedes SFAS No. 121, Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to be
Disposed Of and certain provisions of APB Opinion No. 30, Reporting Results
of Operations  Reporting the Effects of Disposal of a Segment of a Business.
SFAS No. 144 requires that long-lived assets to be disposed of by sale,
including discontinued operations, be measured at the lower of carrying amount
or fair value less cost to sell, whether reported in continuing operations or
in discontinued operations. As a result, discontinued operations will no longer
be measured at net realizable value or include amounts for operating losses
that have not yet occurred. SFAS No. 144 also broadens the reporting
requirements of discontinued operations to include all components of an entity
that can be distinguished and eliminated from the rest of the entitys ongoing
operations. The provisions of SFAS No. 144 will be effective for
the fiscal year
beginning July 1, 2002. We are currently evaluating the impact of SFAS No. 144,
but do not expect that our adoption on July 1, 2002 will have a material effect
on our financial statements.

7.     Segment and Geographical Information

SFAS No. 131, Disclosures about Segments of an Enterprise and Related
Information established standards for reporting information about operating
segments in Hyperions financial statements. Operating segments are defined as
components of an enterprise about which separate financial information is
available that is evaluated regularly by the chief operating decision maker, or
decision making group, in deciding how to allocate resources and in assessing
performance. Hyperion has identified one industry segment: the development and
marketing of enterprise analytic application software and related services.
This segment operates in four geographic regions: North America, Europe, Asia
Pacific and Latin America. Hyperions products are marketed internationally
through Hyperions direct sales force, independent distributors and application
resellers.

6



---



##### 



Enterprise-wide information is provided in accordance with SFAS No. 131.
Geographic sales information is primarily based on the ordering location of the
customer. Long-lived asset information is based on the physical location of
the assets.

The significant accounting policies of the reportable segments are the same as
those summarized in Hyperions annual report on Form 10-K filed on September
14, 2001.

The following table is a breakdown of financial information by geographic area
(in thousands):(1)

|                                      |  |         |         |        |  |         |        |         |  |       |       |  |  |   |       |  |  |   |         |  
|------------------------------------- |  | ------- | ------- | ------ |  | ------- | ------ | ------- |  | ----- | ----- |  |  | - | ----- |  |  | - | ------- | -
|                                      |  | North   |         |        |  |         |        | Asia    |  | Latin |       |  |  |  
|                                      |  | America |         | Europe |  | Pacific |        | America |  | Total
|                                      |  |         |         |        |  |         |        |         |  |      
|Three Months Ended September 30, 2001 |  |         |         |        |  |         |        |         |  |       |       |  |  |   |       |  |  |   |         |  
|                                     
|                                     
|                                     
|                                     
|Total revenues                        |  | $       | 76,291  |        |  | $       | 30,598 |         |  | $     | 6,413 |  |  | $ | 1,357 |  |  | $ | 114,659 |  
|                                     
|                                     
|                                     
|                                     
|Operating income (loss)               |  |         | (9,319  | )      |  |         | 7,966  |         |  |       | 2,545 |  |  |   | 867   |  |  |   | 2,059   |  
|                                     
|                                     
|                                     
|                                     
|Long-lived assets                     |  |         | 66,081  |        |  |         | 8,391  |         |  |       | 1,395 |  |  |   | 161   |  |  |   | 76,028  |  
|                                     
|                                     
|                                     
|                                     
|Three Months Ended September 30, 2000 |  |         |         |        |  |         |        |         |  |       |       |  |  |   |       |  |  |   |         |  
|                                     
|                                     
|                                     
|                                     
|Total revenues                        |  | $       | 74,968  |        |  | $       | 31,484 |         |  | $     | 7,460 |  |  | $ | 1,142 |  |  | $ | 115,054 |  
|                                     
|                                     
|                                     
|                                     
|Operating income (loss)               |  |         | (24,445 | )      |  |         | 11,559 |         |  |       | 3,075 |  |  |   | 806   |  |  |   | (9,005  | )
|                                     
|                                     
|                                     
|                                     
|Long-lived assets                     |  |         | 76,187  |        |  |         | 6,823  |         |  |       | 1,415 |  |  |   |      |  |  |   | 84,425  |  



---

|(1) |  | Certain segment data related to prior periods has been reclassified to
conform to the current year presentation.
|--- |  | ----------------------------------------------------------------------------------------------------------------

The following table presents external revenues for groups of similar products
and services (in thousands):

|                                       |                                |   |                    |        |      |   |         |        | 
|-------------------------------------- | ------------------------------ | - | ------------------ | ------ | ---- | - | ------- | ------ | 
|                                       |                                |   | Three Months Ended
|                                       |                                |   | September 30,     
|                                       |                                |   |                   
|                                       |                                |   | 2001               |        | 2000
|                                       |                                |   |                    |        |     
|Software Licenses                      |                                |   |                    |        |      |   |         |       
|                                      
|                                      
|                                      
|                                      
|                                       | Technology Products            |   | $                  | 23,097 |      |   | $       | 25,626 | 
|                                      
|                                      
|                                      
|                                      
|                                       | Financial Application Products |   |                    | 15,711 |      |   |         | 19,397 | 
|                                       |                                |   |                    |        |      |   |         |       
|Total Software License Revenue         |                                |   | 38,808             |        |      |   | 45,023  |       
|                                      
|                                      
|                                      
|                                      
|Maintenance and Services               |                                |   |                    |        |      |   |         |       
|                                      
|                                      
|                                      
|                                      
|                                       | Maintenance                    |   |                    | 43,876 |      |   |         | 40,058 | 
|                                      
|                                      
|                                      
|                                      
|                                       | Consulting and training        |   |                    | 31,975 |      |   |         | 29,973 | 
|                                       |                                |   |                    |        |      |   |         |       
|Total Maintenance and Services Revenue |                                |   | 75,851             |        |      |   | 70,031  |       
|                                       |                                |   |                    |        |      |   |         |       
|Total Revenues                         |                                | $ | 114,659            |        |      | $ | 115,054 |       
|                                       |                                |   |                    |        |      |   |         |       

7



---



##### 



HYPERION SOLUTIONS CORPORATION

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

FORWARD-LOOKING STATEMENTS

Certain information contained in this Quarterly Report on Form 10-Q is
forward-looking in nature. All statements included in this Quarterly Report on
Form 10-Q or made by management of Hyperion Solutions Corporation and its
subsidiaries (Hyperion), other than statements of historical fact, are
forward-looking statements. Examples of forward-looking statements include
statements regarding Hyperions future financial results, operating results,
business strategies, projected costs, products, competitive positions and plans
and objectives of management for future operations. In some cases,
forward-looking statements can be identified by terminology such as may,
will, should, would, expects, plans, anticipates, intends,
believes, estimates, predicts, potential, continue, or the negative
of these terms or other comparable terminology. Any expectations based on these
forward-looking statements are subject to risks and uncertainties and other
important factors, including those discussed in the section below entitled
Risk Factors. Other risks and uncertainties are disclosed in Hyperions
prior SEC filings, including its Annual Report on Form 10-K for the fiscal year
ended June 30, 2001. These and many other factors could affect Hyperions
future financial and operating results, and could cause actual results to
differ materially from expectations based on forward-looking statements made in
this document or elsewhere by Hyperion or on its behalf. Hyperion does not
undertake an obligation to update its forward-looking statements to reflect
future events or circumstances.

OVERVIEW

Hyperion develops, markets and supports business intelligence software, which
helps turn raw data into business information. Hyperions products and services
enable companies and their employees to plan, manage and execute business
strategies to measure performance and drive profitability, and ultimately
create value for their shareholders.

Hyperions products analyze the raw data captured in operational systems, which
improves the return on investment that organizations have made in enterprise
resource planning (ERP), supply chain management (SCM), customer
relationship management (CRM), marketing automation, Web and e-commerce
systems and data warehouses.

Hyperion offers customers an open, scalable, flexible and integrated business
intelligence platform which consists of technology products and financial
applications. Technology products include: Hyperion online analytical
processing (OLAP) Essbase server (its OLAP server technology), Hyperion
tools, incorporating domain-specific business rules, data storage, integration,
interoperability and visualization capabilities. Financial applications
include financial and business performance management products that provide
customers the opportunity to strategize, model, plan and measure performance.
Taken together, Hyperion and its more than 400 partners offer a suite of
business intelligence solutions that are compelling in the industry and help
customers measure performance and drive profitability.

Hyperion derives revenues from licensing its software products and providing
related maintenance and support, product installation and implementation and
training services. Customers are billed an initial license fee for the software
upon delivery. An optional maintenance and support fee entitling customers to
routine support and product updates is billed annually. Services revenues
consist of product installation, implementation and training services and are
generally billed on a time-and-materials basis.

RESULTS OF OPERATIONS

REVENUES

|                          |                       |      |                                  |          |  |      |       |          |   |   |         |        |      |  |       |      |  
|------------------------- | --------------------- | ---- | -------------------------------- | -------- |  | ---- | ----- | -------- | - | - | ------- | ------ | ---- |  | ----- | ---- | -
|                          |                       |      | THREE MONTHS ENDED SEPTEMBER 30,
|                          |                       |      |                                 
|                          |                       |      |                                  |          |  |      | % of  |          |   |   |         |        | % of
|(in thousands)            |                       | 2001 |                                  | revenues |  | 2000 |       | revenues
|                          |                       |      |                                  |          |  |      |       |         
|Software licenses         |                       | $    | 38,808                           |          |  |      | 33.8  | %        |   | $ | 45,023  |        |      |  | 39.1  | %   
|                         
|                         
|                         
|                         
|Maintenance and services: |                       |      |                                  |          |  |      |       |          |   |   |         |        |      |  |       |     
|                         
|                         
|                         
|                         
|                          | Maintenance revenue   |      |                                  | 43,876   |  |      |       | 38.3     | % |   |         | 40,058 |      |  |       | 34.8 | %
|                         
|                         
|                         
|                         
|                          | Consulting & training |      |                                  | 31,975   |  |      |       | 27.9     | % |   |         | 29,973 |      |  |       | 26.1 | %
|                          |                       |      |                                  |          |  |      |       |          |   |   |         |        |      |  |       |     
|                          |                       |      | 75,851                           |          |  |      | 66.2  | %        |   |   | 70,031  |        |      |  | 60.9  | %   
|                          |                       |      |                                  |          |  |      |       |          |   |   |         |        |      |  |       |     
|Total Revenues            |                       | $    | 114,659                          |          |  |      | 100.0 | %        |   | $ | 115,054 |        |      |  | 100.0 | %   
|                          |                       |      |                                  |          |  |      |       |          |   |   |         |        |      |  |       |     

8



---



##### 



Total revenues for the first quarter of fiscal 2002 remained relatively flat as
compared to the first quarter of fiscal 2001. Software license revenues
declined by 13.8% in the first quarter of fiscal 2002 versus the first quarter
of fiscal 2001, as a result of a decrease in the number of licenses sold. This
decline was primarily attributable to continued economic uncertainty in North
America, growing global weakness, new financial application products in the
early stages of their product life cycles and the disrupted sales cycles
following the tragic events of September 11, 2001.

The increase of 8.3% in maintenance and services revenue is mainly attributable
to the year-to-year growth of Hyperions installed customer base and an
increase in technology product related services. Maintenance revenues and
services revenues for the three months ended September 30, 2001 increased 9.5%
and 6.7%, respectively, over the three months ended September 30, 2000.

Hyperion markets its products through the direct sales force and indirect
channel partners. Historically, we have generated the majority of our revenue
from the direct sales force. Hyperion continues to focus on complementing its
direct sales force with indirect channel partners, which consist of Original
Equipment Manufacturers (OEMs), Value Added Resellers (VARs), independent
distributors and sales agents. Revenue from all indirect channel partners
comprised 27.7% and 29.5% of license revenue in the first quarter of fiscal
2002 and 2001, respectively. The decline in channel revenues year over year in
absolute dollars and as a percentage of total revenues was primarily due to a
decrease in the number of licenses sold (unit volume). The indirect revenue
compares favorably to the fourth quarter 2001 ratio of 19.7% for two primary
reasons. First, the relative weakness in direct sales, and second, the
majority of channel revenues are booked in arrears, which means that the events
of September 11, 2001 did not impact these results as much as they impacted
direct sales. We are currently unable to predict with certainty the impact
that the events of September 11, 2001 will have on the future results of
Hyperion.

No single partner represented more than 10 percent of total revenue during the
quarter, which is consistent with fiscal 2001.

Total revenues generated from markets outside North America, including export
sales, for the first quarter of fiscal 2002 and 2001 were $38.4 million and
$40.1 million, or 33.5% and 34.8% of total revenues, respectively.

The split between technology products and financial application revenues was
59.5%  40.5% in the first quarter of fiscal 2002 and 56.9%  43.1% in fiscal
2001. This 60/40 split in fiscal 2002 reflects the relative weakness of
application revenue. We are currently working with our
customers to gain acceptance for our newest financial application products as a key
element of Hyperions future.

COST OF REVENUES

|                         |  |                                  |        |          |  |       |      |          |  |   |        |       |  |  |      |  
|------------------------ |  | -------------------------------- | ------ | -------- |  | ----- | ---- | -------- |  | - | ------ | ----- |  |  | ---- | -
|                         |  | THREE MONTHS ENDED SEPTEMBER 30,
|                         |  |                                 
|                         |  |                                  |        |          |  | Gross |      |          |  |   |        | Gross
|(in thousands)           |  | 2001                             |        | Profit % |  | 2000  |      | Profit %
|                         |  |                                  |        |          |  |       |      |         
|Software licenses        |  | $                                | 2,995  |          |  |       | 92.3 | %        |  | $ | 3,791  |       |  |  | 91.6 | %
|                        
|                        
|                        
|                        
|Maintenance and services |  |                                  | 33,848 |          |  |       | 55.4 | %        |  |   | 35,696 |       |  |  | 49.0 | %

Software Licenses. Cost of software license revenues consists primarily of
royalty expenses, cost of product packaging and documentation materials,
amortization of capitalized software costs, and amortization of certain
intangible assets related to business acquisitions. The amortization of
capitalized software costs begins upon the general release of the software to
customers. The decrease in the cost of software license revenues in the first
quarter of fiscal 2002 year over year principally reflects a decrease in royalty payments to third parties
for software supplied by them and distributed by Hyperion. The cost as a
percentage of software revenues was 7.7% and 8.4% for the first quarters of
fiscal 2002 and 2001, respectively.

In the first quarter of fiscal 2002 and 2001,
Hyperion capitalized $0.2 million and
$0.5 million of software development costs, respectively, in accordance with
Statement of Financial Accounting Standards (SFAS) No. 86, Accounting for
the Costs of Computer Software to be Sold, Leased, or Otherwise Marketed. The
amounts capitalized relate to Hyperions development and localization of its
OLAP server technology, tools and analytic application solutions. Capitalized
software costs are amortized over the estimated economic life of the product,
but generally not for more than three years.

Maintenance and Services. The decrease of 5.2% in the cost of maintenance and
service revenues for the first quarter of fiscal 2002 year over year was due to
a decrease in independent contractors and employee and related
expenses, primarily as a result of our restructuring in the fourth quarter of
fiscal 2001. The key operating variance this quarter is the improvement in
gross margin on Maintenance and Services from 49.0% to 55.4%, reflecting our
focus on margin improvement and the results of rebalancing our cost structure.

9



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##### 



OPERATING EXPENSES

|                           |  |                                  |        |          |  |      |      |          |  |   |        |      |  |  |      |  
|-------------------------- |  | -------------------------------- | ------ | -------- |  | ---- | ---- | -------- |  | - | ------ | ---- |  |  | ---- | -
|                           |  | THREE MONTHS ENDED SEPTEMBER 30,
|                           |  |                                 
|                           |  |                                  |        |          |  | % of |      |          |  |   |        | % of
|(in thousands)             |  | 2001                             |        | revenues |  | 2000 |      | revenues
|                           |  |                                  |        |          |  |      |      |         
|Sales and marketing        |  | $                                | 41,267 |          |  |      | 36.0 | %        |  | $ | 48,540 |      |  |  | 42.2 | %
|                          
|                          
|                          
|                          
|Research and development   |  |                                  | 18,892 |          |  |      | 16.5 | %        |  |   | 19,426 |      |  |  | 16.9 | %
|                          
|                          
|                          
|                          
|General and administrative |  |                                  | 15,598 |          |  |      | 13.6 | %        |  |   | 16,606 |      |  |  | 14.4 | %
|                           |  |                                  |        |          |  |      |      |          |  |   |        |      |  |  |      |  
|Total operating expenses   |  | $                                | 75,757 |          |  |      |      |          |  | $ | 84,572 |      |  |  |      |  
|                           |  |                                  |        |          |  |      |      |          |  |   |        |      |  |  |      |  

Total operating expenses declined 10.4% year over
year reflecting the strong focus on controlling our costs.

Sales and Marketing. The decrease in absolute dollars of 15.0% in the first
quarter of fiscal 2002, over the corresponding prior period, was
primarily attributable to decreased marketing
expense as a result of the recent formation of a centralized
marketing organization in connection with our recent restructuring,
sales commissions due to lower volumes as discussed above and business travel
and related expenditures as a result of our efforts to control costs and the
events of September 11, 2001.

Research and Development. The slight decrease of 2.7% in absolute dollars for
the first quarter in fiscal 2002, over the corresponding prior period, is due
to a decrease in the utilization of independent contractors.

General and administrative. The decrease in absolute dollars of 6.1% for the
first quarter in fiscal 2002, over the corresponding prior period, was due
primarily to a decrease in bad debt expense and salaries and related
expenses reflecting the positive effects from the fiscal 2001 fourth quarter
restructuring charge.

PROVISION FOR INCOME TAXES

Hyperions effective income tax rate was 36% for the first quarter ended
September 30, 2001 as compared to 38% for the first quarter ended September 30,
2000. The decrease in the effective income tax rate is attributable to the
elimination of a permanent difference related to the amortization of goodwill,
and a change in the geographical mix of income. Hyperions expected effective
tax rate for the remainder of fiscal 2002 is 36%.

NET INCOME (LOSS)

As a result of the above factors, Hyperion had net income of $1.9 million or
$.06 cents per diluted share for the three-month period ended September 30,
2001, compared to a net loss of $4.1 million or $.12 cents per diluted share for the corresponding period of 2000.

RECENT ACCOUNTING PRONOUNCEMENTS

In July 2001, the Financial Accounting Standards Board (FASB) issued SFAS No.
141, Business Combinations which supercedes Accounting Principles Board
(APB) Opinion No. 16, Business Combinations. SFAS No. 141 requires the
purchase method of accounting for business combinations initiated after June
30, 2001 and eliminates the pooling-of-interests method. In addition, SFAS No.
141 establishes specific criteria for the recognition of intangible assets
separately from goodwill and requires unallocated negative goodwill to be
written off immediately as an extraordinary gain. Hyperion adopted the
provisions of SFAS 141 effective July 1, 2001.

In July 2001, the FASB also issued SFAS No. 142, Goodwill and Other Intangible
Assets. SFAS No. 142 supercedes APB Opinion No. 17 Intangible Assets and
requires, among other things, the discontinuance of amortization related to
goodwill and indefinite lived intangible assets. These assets will then be
subject to an impairment test at least annually. In addition, the standard
includes provisions upon adoption for the reclassification of certain existing
recognized intangibles as goodwill, reassessment of the useful lives of
existing recognized intangibles and reclassification of certain intangibles out
of previously reported goodwill. Hyperion adopted SFAS No. 142 effective July
1, 2001, which resulted in Hyperion no longer amortizing its existing goodwill
balance of $10.5 million.

In October 2001, the FASB issued SFAS No. 144, Accounting for the Impairment
or Disposal of Long-Lived Assets, which supercedes SFAS No. 121, Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to be
Disposed Of and certain provisions of APB Opinion No. 30, Reporting Results
of Operations  Reporting the Effects of Disposal of a Segment of a Business.
SFAS No. 144 requires that long-lived assets to be disposed of by sale,
including discontinued operations, be measured at the lower of carrying amount
or fair value less cost to sell, whether reported in continuing operations or
in discontinued operations. As a result, discontinued operations will no longer
be measured at net realizable value or include amounts for operating losses
that have not yet occurred. SFAS No. 144 also broadens the reporting
requirements of discontinued

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##### 



operations to include all components of an entity that can be distinguished and
eliminated from the rest of the entitys ongoing operations. The provisions of
SFAS No. 144 will be effective for the fiscal year beginning July 1, 2002. We are
currently evaluating the impact of SFAS No. 144, but do not expect that our
adoption on July 1, 2002 will have a material effect on our financial
statements.

LIQUIDITY AND CAPITAL RESOURCES

|                                                   |  |                                  |         |        |  |      |       |   |  |   |         |  
|-------------------------------------------------- |  | -------------------------------- | ------- | ------ |  | ---- | ----- | - |  | - | ------- | -
|                                                   |  | THREE MONTHS ENDED SEPTEMBER 30,
|                                                   |  |                                 
|                                                   |  |                                  |         |        |  | %    |       |   |  |  
|(in thousands)                                     |  | 2001                             |         | change |  | 2000
|                                                   |  |                                  |         |        |  |     
|Working capital                                    |  | $                                | 263,849 |        |  |      | -8.2  | % |  | $ | 287,480 |  
|                                                  
|                                                  
|                                                  
|                                                  
|Cash, cash equivalents, and short-term investments |  |                                  | 284,039 |        |  |      | -3.4  | % |  |   | 294,167 |  
|                                                  
|                                                  
|                                                  
|                                                  
|Net cash provided by operating activities          |  |                                  | 26,029  |        |  |      | 57.1  | % |  |   | 16,567  |  
|                                                  
|                                                  
|                                                  
|                                                  
|Net cash used in investing activities              |  |                                  | (1,082  | )      |  |      | -94.0 | % |  |   | (18,017 | )
|                                                  
|                                                  
|                                                  
|                                                  
|Net cash provided by financing activities          |  |                                  | 431     |        |  |      | -85.5 | % |  |   | 2,979   |  

To date, Hyperion has financed its business through positive cash flow from
operations and, to a lesser extent, through the issuance of its capital stock
and convertible subordinated notes. During the first quarter of fiscal 2002 and
2001, respectively, we invested our cash primarily in state and municipal
bonds, U.S. government and agency obligations, corporate notes and other highly
liquid securities with maturities of three months or less.

For the three months ended September 30, 2001 and 2000, Hyperion generated
positive net cash from operations of $26.0 million and $16.6 million,
respectively.

Net cash used in investing activities amounted to $1.1 million for the first
quarter of fiscal 2002, and $18.0 million for the first quarter of fiscal 2001.
Capital expenditures decreased significantly as a result of our focus
on capital investments and management of expenses.

Financing activities in the first quarter of fiscal 2002, including stock
options exercised by employees and payments of indebtedness, generated cash of
$0.4 million, as compared to $3.0 million for the first quarter of fiscal 2001.
In connection with the stock options exercised by certain of its employees,
Hyperion recognized (as a credit to additional paid-in capital) an income tax
benefit of $0.1 million for the three months ended September 30, 2001, and $1.0
million for the three months ended September 30, 2000.

Hyperion believes that its current cash and short-term investment balances, and
the funds generated from its operations, if any, will be sufficient to finance
Hyperions business for at least the next year.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

At September 30, 2001, Hyperions investment portfolio consisted of
investment-grade debt securities, excluding those classified as cash
equivalents, of $22.5 million. The portfolio is invested predominantly in
short-term securities to minimize interest rate risk and for liquidity purposes
in the event of immediate cash needs. Accordingly, if market interest rates
were to increase immediately and uniformly by 10% from levels as of September
30, 2001, the decline in the fair value of the portfolio would not be material.

Hyperions long-term debt bears interest, for the most part, at a fixed rate.
Therefore, relative to its long-term debt, an immediate 10% change in market
interest rates would not materially impact Hyperions financial statements.

RISK FACTORS

FACTORS THAT MAY AFFECT FUTURE RESULTS

Hyperion operates in a very competitive and rapidly changing environment that
involves numerous risks, some of which are beyond Hyperions control. The
following discussion highlights some of these risks.

GENERAL ECONOMIC CONDITIONS. The revenue growth and profitability of Hyperion
depends on the overall demand for computer software and services, which in turn
depends on general economic and business conditions. Revenue for the first
fiscal quarter of 2002 was adversely affected by general economic conditions.
Going forward, the nature and extent of the effect of the current economic
climate on Hyperions ability to sell its products is uncertain. Continued
reduced demand for computer software caused by weakening of the economy may
result in decreased revenues or lower growth rates. There can be no assurance
that Hyperion will be able to effectively promote revenue growth rates in all
economic conditions.

11



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PRODUCT ENHANCEMENT AND NEW PRODUCT INTRODUCTIONS.Hyperion competes in a
market characterized by rapid technological advances in hardware and software
development, evolving standards in computer hardware and software technology
and frequent new product introductions and enhancements. Hyperion has recently
expanded and refreshed its product offerings to include newer features or
products. The introduction of new products has inherent risks, including, but
not limited to, product quality and the fit of the new products with the
customers needs, educating Hyperions sales, marketing, and consulting
personnel to work with the new products, competition from earlier and more
established entrants, general economic conditions, market acceptance of initial
product releases, marketing effectiveness and the accuracy of assumptions about
the nature of customer demand. Hyperions failure to successfully introduce,
market and sell new products or enhance and improve its existing products in a
timely manner, and position and/or price its products, undetected errors or
delays in new products or new versions of a product and/or the failure of
anticipated market growth could have a material adverse effect on Hyperions
business, results of operations or financial position.

SALES FORCE TRANSITION.Hyperion has restructured and made other adjustments to
its sales force operations in the past and may do so in the future. These
changes have historically resulted in temporary sales productivity issues in
the short term. The restructured sales force must deliver significantly greater
dollars of revenue per dollar of cost than it has in the recent past in order
to provide adequate operating margins to Hyperion. Failure of the organization
to make this improvement could materially impact Hyperions ability to improve
operating margins, which have not been adequate in the recent past to support
Hyperions profit targets.

COMPETITIVE ENVIRONMENT.The markets in which Hyperion competes are intensely
competitive, highly fragmented and characterized by rapidly changing technology
and evolving standards. Hyperion has experienced, and expects that it will
continue to experience, vigorous competition from both current and new
competitors, some of whom may have significantly greater financial, technical,
marketing and other resources than Hyperion. Hyperion expects additional
competition as other established and emerging companies enter into both the
OLAP and application parts of the enterprise business analysis software market.
This competition could result in price reductions, fewer customer orders,
reduced gross margins and loss of market share, any of which would materially
adversely affect Hyperions business, operating results and financial
condition.

PRICING.Intense competition in the various markets in which Hyperion competes
may put pressure on Hyperion to reduce prices on certain products, particularly
in the markets where certain vendors offer deep discounts in an effort to
recapture or gain market share or to sell other software or hardware products.
Moreover, any broadly based changes to Hyperions or its competitors pricing,
packaging or distribution models could lead to a decline or delay in sales as
Hyperions sales force and its customers adjust to the new models. Any such
price reductions and resulting lower license revenues could have a material
adverse effect on Hyperions business, results of operations or financial
position if Hyperion cannot offset these price reductions with a corresponding
increase in sales volumes or lower spending.

CONTINUED OPERATIONAL IMPROVEMENTS.As part of Hyperions focus on improving
its operating margins, it is driving toward continued efficiencies in not only
its sales force, but also its product development, finance, and other
administrative processes. The ability to continue to realize current
efficiencies, and find ways to improve on past performance is crucial to the
improvement of operating margins. Any increase in the relative cost of these
functions, or failure to continue to realize current efficiencies, could have a
material adverse effect on Hyperions profits.

BACK-ENDED QUARTERS.Quarterly revenues and operating results are highly
dependent on the volume and timing of the signing of licensing agreements and
product deliveries during the quarter, which are difficult to forecast.
Significant portions of Hyperions quarterly software licensing agreements are
concluded in the last month of the fiscal quarter, generally with a
concentration of such revenues earned in the final ten business days of that
month. Due to the relatively fixed nature of certain costs, including personnel
and facilities expenses, a decline or shortfall in quarterly and/or annual
revenues typically results in lower profitability or may result in losses.
Prior to the very end of any quarter, Hyperion must rely on its forecasts of
revenue for planning, modeling and other purposes. Forecasts are only estimates
and may not correlate to revenues in a particular quarter or over a longer
period of time. A significant discrepancy between actual results and sales
forecasts could cause Hyperion to improperly plan or budget and thereby
adversely affect its business or results of operations. Any publicly stated
revenue or earnings projections by Hyperion are especially subject to this
risk.

INTERNATIONAL OPERATIONS.A substantial portion of Hyperions revenues is
derived from international sales and is therefore subject to the related risks,
including the general economic conditions in each country, the overlap of
different tax structures, the difficulty of managing an organization spread
over various countries, changes in regulatory requirements, compliance with a
variety of foreign laws and regulations, longer payment cycles, volatilities of
exchange rates, import and export licensing requirements, trade restrictions
and changes in tariff rates. There can be no assurances that Hyperion will be
able to successfully address each of these challenges.

HIRING AND RETENTION OF EMPLOYEES.Hyperions future operating results depend
significantly upon the retention and hiring of technical and management
personnel. Competition for such personnel is intense, and there can be no
assurance that Hyperion will retain its key managerial or technical personnel
or attract such personnel in the future. Hyperion, either directly or

12



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through personnel search firms, actively recruits qualified research and
development, financial and sales and marketing personnel. Hyperion has at times
experienced difficulty recruiting or retaining qualified personnel and there
can be no assurance that Hyperion will not experience such difficulties in the
future, which could have a material adverse effect on Hyperions business,
operating results and financial condition.

ORGANIZATIONAL AND PRODUCT INTEGRATION RELATED TO BUSINESS COMBINATIONS.
Hyperion has made and may in the future make acquisitions of, mergers with, or
significant investments in, businesses that offer complementary products,
services and technologies. There are risks involved in business combinations,
including but not limited to: the possibility that Hyperion pays more than the
value it derives from the acquisition; the difficulty of integrating the
operations and personnel of the acquired businesses; the possibility that all
aspects of the integration are not completed or that all of the anticipated
synergies of the acquisition are not realized; the potential product liability
associated with selling the acquired companys products; the potential
disruption of Hyperions ongoing business and the distraction of management
from Hyperions business. These factors could have a material adverse effect on
Hyperions business, results of operations or financial position, especially in
the case of a large acquisition.

POSSIBILITY OF INFRINGEMENT CLAIMS.Hyperion expects that software product
developers will increasingly be subject to infringement claims as the number of
products and competitors in Hyperions industry segment grows and the
functionality of products in different industry segments overlaps. Any such
claims, with or without merit, could be time consuming to defend, result in
costly litigation, divert managements attention and resources, cause product
shipment delays or require Hyperion to enter into royalty or licensing
agreements. Such royalty or licensing agreements, if required, may not be
available on terms acceptable to Hyperion, if at all. In the event of a
successful claim of product infringement against Hyperion and failure or
inability of Hyperion to license the infringed or similar technology,
Hyperions business, operating results and financial condition would be
materially adversely affected.

ENFORCEMENT OF HYPERIONS INTELLECTUAL PROPERTY RIGHTS.Hyperion relies
primarily on a combination of patent, copyright and trademark laws, trade
secrets, confidentiality procedures and contractual provisions to protect its
proprietary rights. There can be no assurance that Hyperions means of
protecting its proprietary rights in the United States or abroad will be
adequate or that competitors will not independently develop similar technology.

POSSIBLE VOLATILITY OF STOCK PRICE.The market price of Hyperions Common Stock
has experienced significant fluctuations and may continue to fluctuate
significantly. The market price of the Common Stock may be significantly
affected by factors, including but not limited to, the announcement of new
products, product enhancements or technological innovation by Hyperion or its
competitors, changes in Hyperions or its competitors results of operations,
changes in revenue, revenue growth rates and revenue mix for Hyperion as a
whole or for specific geographic areas or business units, changes in earnings
estimates by market analysts and general market conditions or market conditions
specific to particular industries. Technology stocks have experienced wide
fluctuations in prices, which sometimes have been unrelated to their operating
performance. The market price of Hyperions Common Stock could be adversely
affected by such fluctuations.

ITEM 3.   QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

This item is incorporated by reference to Item 7. Managements Discussion and
Analysis of Financial Condition and Results of Operations  Quantitative and
Qualitative Disclosures About Market Risk.

13



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##### 



HYPERION SOLUTIONS CORPORATION
PART II. OTHER INFORMATION

Item 1.     Legal Proceedings

On June 27, 2001, Timeline, Inc. filed a complaint against Hyperion in the
United States District Court for the Western District of Washington alleging
that Hyperion infringes U.S. Patent Nos. 5,802,511; 6,023,694; and 6,026,392
(the Timeline patents), and seeking a permanent injunction and monetary
damages, including treble damages. On September 25, 2001, Timeline served its
complaint on Hyperion. On October 25, 2001, Hyperion filed its answer,
including a counterclaim seeking a declaratory judgment that the Timeline
patents are invalid and not infringed by Hyperion. Hyperion and Timeline are
currently exploring settlement of the complaint. While patent litigation can
be costly, and the outcome is inherently unpredictable, Hyperion believes that
Timelines complaint will not have a material adverse effect on the financial
position, results of operations and cash flows of Hyperion.

On July 11, 1997, Gentia Software filed a request for reexamination of
Hyperions U.S. Patent No. 5,359,724 with the United States Patent and
Trademark Office (the PTO) arguing that the 724 patent was anticipated and
obvious in light of certain prior art references. On September 11, 1997, the
PTO granted the request for reexamination. On February 27, 1998, Gentia
Software filed with the PTO a request for a second reexamination of the 724
patent based on additional prior art references. On May 22, 1998, the PTO
granted that request for reexamination, which was later consolidated with the
first reexamination. On March 31, 1999, the PTO issued a non-final office
action rejecting the claims of the `724 patent. Hyperion filed its response to
the office action on May 31, 1999. No final office action has been issued by
the PTO. Hyperion believes that the outcome of such action will not have a
material adverse effect on the financial position, results of operations and
cash flows of Hyperion.

On June 30, 2000, Hyperion Software (UK) plc was named as a defendant in a
lawsuit in the Technology and Construction Court in England for damages of
approximately 1.1 million pounds sterling (UK) in connection with an OLAP and
Hyperion Enterprise implementation that the claimants claim failed to meet its
requirement. This case was settled in July 2001 and did not have a material
adverse impact on the financial position, results of operations and
cash flows of Hyperion.

From time to time, in the normal course of business, various claims are made
against Hyperion. At this time, in the opinion of management, there are no
pending claims the outcome of which is expected to result in a material adverse
effect on the financial position, results of operations and cash flows of
Hyperion.

Item 6.     Exhibits and Reports on Form 8-K



|(a) |  | Exhibits           
|--- |  | -------------------
|   
|    |  | None               
|   
|(b) |  | Reports on Form 8-K
|   
|    |  | None               

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HYPERION SOLUTIONS CORPORATION

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.

|                         |  |  |  |                                             
|------------------------ |  |  |  | --------------------------------------------
|Date:  November 13, 2001 |  |  |  | Hyperion Solutions Corporation
(Registrant) 
|                        
|                        
|                        
|                        
|                         |  |  |  |                                             
|                        
|                        
|                        
|                        
|                         |  |  |  | By: /s/ David W. Odell                      
|                         |  |  |  |                                             
|                         |  |  |  | David W. Odell
Chief Financial Officer      
|                        
|                        
|                        
|                        
|                         |  |  |  |                                             
|                        
|                        
|                        
|                        
|                         |  |  |  | By: /s/ Nolene P. Fabre                     
|                         |  |  |  |                                             
|                         |  |  |  | Nolene P. Fabre
Principal Accounting Officer

15