##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 
 FORM 10-Q
 
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
 For the quarterly period ended September 30, 2008
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
 For the transition period from  to
 001-10824
(Commission File Number)
 
 Borland Software Corporation
 (Exact Name of Registrant as Specified in its Charter)
 
 Delaware
    
    94-2895440(State or other jurisdiction of
    
    (I.R.S. Employerincorporation or organization)
    
    Identification No.)
 8310 NORTH CAPITAL OF TEXAS HIGHWAY, BUILDING 2, SUITE 100
AUSTIN, TEXAS 78731
(Address of Principal Executive Offices) (Zip Code)
 Registrants Telephone Number, Including Area Code: (512) 340-2200
 Former address: 8303 N. MO-PAC EXPRESSWAY, SUITE A-300, AUSTIN, TEXAS 78759
(Former name, former address and former fiscal year, if changed since last report)
 þ o
  Large accelerated filer o
    
    Accelerated filer þ
    
    Non-accelerated filer o
    
    Smaller reporting company o(Do not check if a smaller reporting company)
 o þ




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##### 



BORLAND SOFTWARE CORPORATION FORM 10-Q
 TABLE OF CONTENTS
 PAGEPART I. FINANCIAL INFORMATIONItem 1. Financial Statements (unaudited)Condensed Consolidated Balance Sheets at September 30, 2008 and December 31, 2007
    
    
    3Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2008 and 2007
    
    
    4Condensed Consolidated Statements of Comprehensive Loss for the three and nine months ended September 30, 2008 and 2007
    
    
    5Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2008 and 2007
    
    
    6Notes to Condensed Consolidated Financial Statements
    
    
    7Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    25Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    35Item 4. Controls and Procedures
    
    
    36PART II. OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    36Item 1A. Risk Factors
    
    
    37Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    46Item 3. Defaults upon Senior Securities
    
    
    47Item 4. Submission of Matters to a Vote of Security Holders
    
    
    47Item 5. Other Information
    
    
    47Item 6. Exhibits
    
    
    48Signatures
    
    
    49EX-31.1EX-31.2EX-32.1EX-32.2
  2




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##### Table of Contents



PART I
FINANCIAL INFORMATION
 
 ITEM 1. FINANCIAL STATEMENTS
 BORLAND SOFTWARE CORPORATION
 
 CONDENSED CONSOLIDATED BALANCE SHEETS
 (in thousands, except par value and share amounts, unaudited)
 September 30, 2008
    
    
    December 31, 2007ASSETSCurrent assets:Cash and cash equivalents
    
    $
    103,823
    
    
    $
    90,805Short-term investments
    
    
    62,952
    
    
    
    68,061Accounts receivable, net of allowances of $1,591 and $6,096, respectively
    
    
    33,560
    
    
    
    54,640Prepaid expenses
    
    
    7,347
    
    
    
    9,207Current assets of discontinued operations
    
    
    773
    
    
    
    Other current assets
    
    
    3,267
    
    
    
    5,104Total current assets
    
    
    211,722
    
    
    
    227,817Property and equipment, net
    
    
    7,586
    
    
    
    9,978Goodwill
    
    
    78,969
    
    
    
    226,688Intangible assets, net
    
    
    26,777
    
    
    
    31,658Long-term investments
    
    
    
    
    
    
    37,970Non current assets of discontinued operations
    
    
    3,734
    
    
    
    Other non-current assets
    
    
    4,621
    
    
    
    9,886Total assets
    
    $
    333,409
    
    
    $
    543,997LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable
    
    $
    4,802
    
    
    $
    7,622Accrued expenses
    
    
    17,494
    
    
    
    30,900Short-term restructuring
    
    
    2,366
    
    
    
    9,866Income taxes payable
    
    
    920
    
    
    
    2,315Deferred revenue
    
    
    39,186
    
    
    
    51,449Current liabilities of discontinued operations
    
    
    4,776
    
    
    
    Other current liabilities
    
    
    4,070
    
    
    
    7,176Total current liabilities
    
    
    73,614
    
    
    
    109,328Convertible senior notes
    
    
    159,300
    
    
    
    200,000Long-term restructuring
    
    
    1,235
    
    
    
    5,472Long-term deferred revenue
    
    
    1,254
    
    
    
    1,715Long-term liabilities of discontinued operations
    
    
    3,432
    
    
    
    Other long-term liabilities
    
    
    22,871
    
    
    
    22,944Total liabilities
    
    
    261,706
    
    
    
    339,459Commitments
and Contingencies (Note 11)Stockholders equity:Preferred stock; $.01 par value; 1,000,000 shares authorized; 0 shares issued and outstanding
    
    
    
    
    
    
    Common stock, $.01 par value, 200,000,000 shares authorized (2008: 94,361,749 issued and 72,824,783 outstanding shares; 2007: 94,134,952 issued and 72,975,972 outstanding shares)
    
    
    728
    
    
    
    730Additional paid-in capital
    
    
    670,961
    
    
    
    666,910Accumulated deficit
    
    
    (468,678
    )
    
    
    (333,010
    )Accumulated other comprehensive income
    
    
    9,101
    
    
    
    10,317212,112
    
    
    
    344,947Treasury stock at cost, (2008: 21,536,966 and 2007: 21,158,980 shares)
    
    
    (140,409
    )
    
    
    (140,409
    )Total stockholders equity
    
    
    71,703
    
    
    
    204,538Total liabilities and stockholders equity
    
    $
    333,409
    
    
    $
    543,997
 The accompanying notes are an integral part of these condensed consolidated financial statements.
 3




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##### Table of Contents



BORLAND SOFTWARE CORPORATION
 
 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
 (in thousands, except per share amounts, unaudited)
 Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Revenues:License and other revenues
    
    $
    18,353
    
    
    $
    31,633
    
    
    $
    52,155
    
    
    $
    80,363Service revenues
    
    
    25,959
    
    
    
    28,817
    
    
    
    80,083
    
    
    
    86,838Total revenues
    
    
    44,312
    
    
    
    60,450
    
    
    
    132,238
    
    
    
    167,201Costs of revenues:Cost of license and other revenues
    
    
    973
    
    
    
    764
    
    
    
    2,288
    
    
    
    2,415Cost of service revenues
    
    
    8,520
    
    
    
    9,885
    
    
    
    25,730
    
    
    
    29,334Amortization of acquired intangibles and other charges
    
    
    2,100
    
    
    
    2,107
    
    
    
    6,301
    
    
    
    6,345Cost of revenues
    
    
    11,593
    
    
    
    12,756
    
    
    
    34,319
    
    
    
    38,094Gross profit
    
    
    32,719
    
    
    
    47,694
    
    
    
    97,919
    
    
    
    129,107Selling, general and administrative
    
    
    25,038
    
    
    
    37,534
    
    
    
    85,031
    
    
    
    117,848Research and development
    
    
    10,387
    
    
    
    10,230
    
    
    
    33,827
    
    
    
    31,231Restructuring, amortization of other intangibles, acquisition-related expenses and other charges
    
    
    101
    
    
    
    1,588
    
    
    
    1,832
    
    
    
    4,100Impairment of goodwill
    
    
    106,927
    
    
    
    
    
    
    
    106,927
    
    
    
    Total operating expenses
    
    
    142,453
    
    
    
    49,352
    
    
    
    227,617
    
    
    
    153,179Operating loss
    
    
    (109,734
    )
    
    
    (1,658
    )
    
    
    (129,698
    )
    
    
    (24,072
    )Interest income
    
    
    1,249
    
    
    
    2,346
    
    
    
    4,427
    
    
    
    6,484Interest expense
    
    
    (1,462
    )
    
    
    (1,497
    )
    
    
    (4,956
    )
    
    
    (3,961
    )Gain on debt retirement
    
    
    4,383
    
    
    
    
    
    
    
    10,029
    
    
    
    Other income (expense)
    
    
    55
    
    
    
    (338
    )
    
    
    (286
    )
    
    
    (920
    )Loss from continuing operations before income taxes
    
    
    (105,509
    )
    
    
    (1,147
    )
    
    
    (120,484
    )
    
    
    (22,469
    )Income tax provision
    
    
    700
    
    
    
    146
    
    
    
    2,933
    
    
    
    1,803Loss from continuing operations
    
    $
    (106,209
    )
    
    $
    (1,293
    )
    
    $
    (123,417
    )
    
    $
    (24,272
    )Discontinued operations:Income (loss) from operation of discontinued operations
(net of applicable taxes of $2, $160, $483, and $639)
    
    $
    25
    
    
    $
    1,506
    
    
    $
    (10,096
    )
    
    $
    4,425Loss on disposal of discontinued operations (net of applicable
tax of $263 and $1,218 for 3 and 9 months ended 2008)
    
    
    (601
    )
    
    
    
    
    
    
    (2,155
    )
    
    
    Income (loss) from discontinued operations
    
    $
    (576
    )
    
    $
    1,506
    
    
    $
    (12,251
    )
    
    $
    4,425Net income (loss)
    
    $
    (106,785
    )
    
    $
    213
    
    
    $
    (135,668
    )
    
    $
    (19,847
    )Net income (loss) per share  basic and diluted:Continuing operations
    
    $
    (1.46
    )
    
    $
    (0.02
    )
    
    $
    (1.70
    )
    
    $
    (0.33
    )Discontinued operations
    
    
    (0.01
    )
    
    
    0.02
    
    
    
    (0.16
    )
    
    
    0.06Total net income (loss) per share
    
    $
    (1.47
    )
    
    $
    0.00
    
    
    $
    (1.86
    )
    
    $
    (0.27
    )Shares used in computing basic and diluted net income (loss) per share
    
    
    72,733
    
    
    
    72,371
    
    
    
    72,799
    
    
    
    72,989
 The accompanying notes are an integral part of these condensed consolidated financial statements.
 4




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BORLAND SOFTWARE CORPORATION
 
 CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
 (in thousands, unaudited)
 Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Net income (loss)
    
    $
    (106,785
    )
    
    $
    213
    
    
    $
    (135,668
    )
    
    $
    (19,847
    )Other comprehensive income (loss):Foreign currency translation adjustments
    
    
    (2,597
    )
    
    
    1,210
    
    
    
    (679
    )
    
    
    740Fair market value adjustment for available-for-sale securities, net of tax
    
    
    (429
    )
    
    
    50
    
    
    
    (538
    )
    
    
    50Comprehensive (income) loss
    
    $
    (109,811
    )
    
    $
    1,473
    
    
    $
    (136,885
    )
    
    $
    (19,057
    )
 The accompanying notes are an integral part of these condensed consolidated financial statements.
 5




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BORLAND SOFTWARE CORPORATION
 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 (in thousands, unaudited)
 Nine Months Ended September 30,2008
    
    
    2007CASH FLOWS FROM OPERATING ACTIVITIES:Net loss
    
    $
    (135,668
    )
    
    $
    (19,847
    )Adjustments to reconcile net loss to net cash used in operating activities:Depreciation and amortization
    
    
    10,007
    
    
    
    11,295Stock-based compensation
    
    
    3,784
    
    
    
    4,784Provision for accounts receivable allowances
    
    
    (2,350
    )
    
    
    2,187Loss on sale of subsidiary
    
    
    
    
    
    
    226Loss on sale of CodeGear assets
    
    
    937
    
    
    
    Loss on disposal of assets
    
    
    136
    
    
    
    686Gain on debt repurchase
    
    
    (10,029
    )
    
    
    Goodwill impairment
    
    
    120,227
    
    
    
    Changes in assets and liabilities, net of acquisitions:Accounts receivable
    
    
    19,833
    
    
    
    (6,940
    )Prepaid expenses and other assets
    
    
    3,446
    
    
    
    (4,341
    )Accounts payable and accrued expenses
    
    
    (12,953
    )
    
    
    (7,042
    )Income taxes payable
    
    
    (2,030
    )
    
    
    3,184Restructuring accruals
    
    
    (8,845
    )
    
    
    (7,046
    )Deferred revenues
    
    
    (6,270
    )
    
    
    (8,935
    )Other liabilities
    
    
    415
    
    
    
    7,617Cash used in operating activities
    
    
    (19,360
    )
    
    
    (24,172
    )CASH FLOWS FROM INVESTING ACTIVITIES:Purchases of property and equipment
    
    
    (1,892
    )
    
    
    (4,802
    )Proceeds from sale of CodeGear assets
    
    
    20,368
    
    
    
    Acquisition of Simunication, net of cash acquired
    
    
    (1,970
    )
    
    
    Proceeds from sale of subsidiary
    
    
    
    
    
    
    178Purchase and sale of investments, net
    
    
    42,651
    
    
    
    (114,955
    )Cash provided by (used in) investing activities
    
    
    59,157
    
    
    
    (119,579
    )CASH FLOWS FROM FINANCING ACTIVITIES:Issuance of convertible senior notes, net
    
    
    
    
    
    
    194,230Repurchase of convertible senior notes, net
    
    
    (29,786
    )
    
    
    Proceeds from issuance of stock
    
    
    290
    
    
    
    964Repurchase of common stock and others, net of related fees
    
    
    (29
    )
    
    
    (29,941
    )Cash provided by (used in) financing activities
    
    
    (29,525
    )
    
    
    165,253Effect of exchange rate changes on cash
    
    
    2,746
    
    
    
    (1,103
    )Net change in cash and cash equivalents
    
    
    13,018
    
    
    
    20,399Beginning cash and cash equivalents
    
    
    90,805
    
    
    
    55,317Ending cash and cash equivalents
    
    $
    103,823
    
    
    $
    75,716
 The accompanying notes are an integral part of these condensed consolidated financial statements.
 6




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BORLAND SOFTWARE CORPORATION
 Notes to Condensed Consolidated Financial Statements (unaudited)
 
 NOTE 1. DESCRIPTION OF THE COMPANY AND BASIS OF PRESENTATION
 Description of the Company
  Basis of Presentation
   Estimates and Assumptions
  Reclassification and Correction of Previously Issued Financial Statements
   7




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September 30, 2007Three Months Ended
    
    Nine Months EndedAdjustment
    
    As Adjusted
    
    
    
    
    
    
    
    
    
    
    
    
    
    Adjustment
    
    As Adjustedfor
    
    for
    
    
    
    
    
    
    
    
    
    
    
    
    
    for
    
    forAs
    
    Discontinued
    
    Discontinued
    
    Adjustment
    
    
    
    
    
    
    
    
    
    Discontinued
    
    Discontinued
    
    AdjustmentReported
    
    Operations
    
    Operations
    
    for Errors
    
    As Restated
    
    As Reported
    
    Operations
    
    Operations
    
    for Errors
    
    As RestatedStatement of Operations:Cost of service revenues
    
    $
    9,955
    
    
    $
    (477
    )
    
    $
    9,478
    
    
    $
    407
    
    
    $
    9,885
    
    
    $
    31,525
    
    
    $
    (2,191
    )
    
    $
    29,334
    
    
    $
    
    
    
    $
    29,334Gross profit
    
    
    59,274
    
    
    
    (11,173
    )
    
    
    48,101
    
    
    
    (407
    )
    
    
    47,694
    
    
    
    164,762
    
    
    
    (35,655
    )
    
    
    129,107
    
    
    
    
    
    
    
    129,107Selling, general and administrative
    
    
    43,387
    
    
    
    (5,733
    )
    
    
    37,654
    
    
    
    (120
    )
    
    
    37,534
    
    
    
    135,815
    
    
    
    (17,847
    )
    
    
    117,968
    
    
    
    (120
    )
    
    
    117,848Loss from continuing operations
    
    
    
    
    
    
    (1,006
    )
    
    
    (1,006
    )
    
    
    (287
    )
    
    
    (1,293
    )
    
    
    
    
    
    
    (24,392
    )
    
    
    (24,392
    )
    
    
    120
    
    
    
    (24,272
    )Net income (loss)
    
    $
    500
    
    
    $
    
    
    
    $
    500
    
    
    $
    (287
    )
    
    $
    213
    
    
    $
    (19,967
    )
    
    $
    
    
    
    $
    (19,967
    )
    
    $
    120
    
    
    $
    (19,847
    )Net loss per share  basic and diluted
Continuing operations
    
    $
    
    
    
    $
    
    
    
    $
    (0.01
    )
    
    $
    
    
    
    $
    (0.02
    )
    
    $
    
    
    
    $
    (0.33
    )
    
    $
    (0.33
    )
    
    $
    
    
    
    $
    (0.33
    )Discontinued operations
    
    $
    
    
    
    $
    
    
    
    $
    0.02
    
    
    $
    
    
    
    $
    0.02
    
    
    $
    
    
    
    $
    0.06
    
    
    $
    0.06
    
    
    $
    
    
    
    $
    0.06Total net loss per share
    
    $
    0.01
    
    
    $
    
    
    
    $
    0.01
    
    
    $
    
    
    
    $
    
    
    
    $
    (0.27
    )
    
    $
    
    
    
    $
    (0.27
    )
    
    $
    
    
    
    $
    (0.27
    )
 8




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December 31, 2007Three Months Ended
    
    Twelve Months EndedAs Previously
    
    
    
    
    
    
    
    
    
    As PreviouslyReported
    
    
    
    
    
    
    
    
    
    Reported(excluding
    
    
    
    
    
    
    
    
    
    (excludingDiscontinued
    
    Adjustment for
    
    
    
    
    
    Discontinued
    
    AdjustmentOperations)
    
    Errors
    
    As Restated
    
    Operations)
    
    for Errors
    
    As RestatedStatement of Operations:Cost of service revenues
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Gross profit
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Selling, general and administrative
    
    
    40,391
    
    
    
    (886
    )
    
    
    39,505
    
    
    
    176,206
    
    
    
    (1,006
    )
    
    
    175,200Restructuring, amortization of other intangibles, acquisition-related expenses and other charges
    
    
    9,259
    
    
    
    (1,384
    )
    
    
    7,875
    
    
    
    13,934
    
    
    
    (1,384
    )
    
    
    12,550Interest expense
    
    
    (1,489
    )
    
    
    78
    
    
    
    (1,411
    )
    
    
    (5,449
    )
    
    
    78
    
    
    
    (5,371
    )Net loss
    
    $
    (41,706
    )
    
    $
    2,348
    
    
    $
    (39,358
    )
    
    $
    (61,673
    )
    
    $
    2,468
    
    
    $
    (59,205
    )Net loss per share  basic and diluted
    
    $
    (0.57
    )
    
    $
    0.03
    
    
    $
    (0.54
    )
    
    $
    (0.85
    )
    
    $
    0.04
    
    
    $
    (0.81
    )
  As of December 31, 2007As Previously
    
    Adjustment forReported
    
    Errors
    
    As RestatedBalance sheet:Property and equipment, net
    
    $
    9,998
    
    
    $
    (20
    )
    
    $
    9,978Total assets
    
    $
    544,017
    
    
    $
    (20
    )
    
    $
    543,997Accrued expenses
    
    $
    31,606
    
    
    $
    (706
    )
    
    $
    30,900Other current liabilities
    
    
    7,574
    
    
    
    (398
    )
    
    
    7,176Long-term restructuring
    
    
    5,823
    
    
    
    (351
    )
    
    
    5,472Other long-term liabilities
    
    
    23,977
    
    
    
    (1,033
    )
    
    
    22,944Total liabilities
    
    $
    341,947
    
    
    $
    (2,488
    )
    
    $
    339,459Accumulated deficit
    
    $
    (335,478
    )
    
    $
    2,468
    
    
    $
    (333,010
    )
 NOTE 2. STOCK-BASED COMPENSATION
 Share-Based Payment
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##### Table of Contents



Stock-Based Compensation Expense
  Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Cost of sales
    
    $
    16
    
    
    $
    42
    
    
    $
    52
    
    
    $
    128Research and development
    
    
    293
    
    
    
    354
    
    
    
    931
    
    
    
    980Selling, general and administrative
    
    
    717
    
    
    
    1,456
    
    
    
    2,744
    
    
    
    3,495Stock-based compensation expense
    
    $
    1,026
    
    
    $
    1,852
    
    
    $
    3,727
    
    
    $
    4,603
 Stock Options
  Weighted-Weighted-
    
    
    AverageShares
    
    
    Average
    
    
    RemainingSubject to
    
    
    Exercise
    
    
    Contractual
    
    
    AggregateStock Options
    
    
    Price
    
    
    Term (Years)
    
    
    Intrinsic ValueOutstanding at December 31, 2007
    
    
    12,610
    
    
    $
    7.38Granted
    
    
    2,547
    
    
    
    1.47Exercised
    
    
    
    
    
    
    Forfeited/expired
    
    
    (4,376
    )
    
    
    7.83Outstanding at September 30, 2008
    
    
    10,781
    
    
    $
    5.80
    
    
    
    7.63
    
    
    $
    245,355Vested and expected to vest at September 30, 2008
    
    
    8,750
    
    
    $
    6.21
    
    
    
    7.38
    
    
    $
    167,340Exercisable at September 30, 2008
    
    
    5,279
    
    
    $
    7.93
    
    
    
    6.37
    
    
    $
    
     10




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##### Table of Contents



Three Months Ended
    
    Nine Months EndedSeptember 30,
    
    September 30,2008
    
    2007
    
    2008
    
    2007Expected life
    
    5.14 years
    
    5.10 years
    
    5.14 years
    
    4.89 yearsRisk-free interest rate
    
    
    2.98%
    
    
    
    4.25%
    
    
    
    3.26%
    
    
    
    4.79%Volatility
    
    
    53.6%
    
    
    
    40.3%
    
    
    
    53.1%
    
    
    
    41.8%Dividend yield
    
    
    0%
    
    
    
    0%
    
    
    
    0%
    
    
    
    0%
 Restricted Stock
  WeightedNumber
    
    
    Averageof Shares
    
    
    Grant DateOutstanding
    
    
    Fair(In Thousands)
    
    
    ValueBalance at December 31, 2007
    
    
    255
    
    
    $
    6.14Vested
    
    
    (164
    )
    
    
    5.93Forfeited
    
    
    (10
    )
    
    
    9.08Balance at September 30, 2008
    
    
    81
    
    
    $
    6.19
  Employee Stock Purchase Plan
    11




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##### Table of Contents



NOTE 3. NET LOSS PER SHARE
 Earnings per Share
  Three Months Ended
    
    Nine Months EndedSeptember 30,
    
    September 30,2008
    
    2007
    
    2008
    
    2007Numerators:Loss from continuing operations
    
    $
    (106,209
    )
    
    $
    (1,293
    )
    
    $
    (123,417
    )
    
    $
    (24,272
    )Income (loss) from discontinued operations
    
    
    (576
    )
    
    
    1,506
    
    
    
    (12,251
    )
    
    
    4,425Net loss
    
    $
    (106,785
    )
    
    $
    213
    
    
    $
    (135,668
    )
    
    $
    (19,847
    )Denominators:Weighted-average shares outstanding, excluding unvested restricted stock
    
    
    72,733
    
    
    
    72,371
    
    
    
    72,799
    
    
    
    72,989Effect of dilutive securities:Employee stock options, restricted stock awards and ESPP shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Denominator for diluted net income (loss) per share  weighted-average shares and assumed conversions
    
    
    72,733
    
    
    
    72,371
    
    
    
    72,799
    
    
    
    72,989Net income (loss) per share attributable to common shareholders:Continuing operations
    
    $
    (1.46
    )
    
    $
    (0.02
    )
    
    $
    (1.70
    )
    
    $
    (0.33
    )Discontinued operations
    
    
    (0.01
    )
    
    
    0.02
    
    
    
    (0.16
    )
    
    
    0.06Total net income (loss) per share  basic and diluted
    
    $
    (1.47
    )
    
    $
    0.00
    
    
    $
    (1.86
    )
    
    $
    (0.27
    )
  12




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##### Table of Contents



NOTE 4. CONVERTIBLE SENIOR NOTES
    Conversion Process and Other Terms of the Notes
    Accounting for Derivative Instruments and Hedging Activities Accounting for Convertible Securities with Beneficial Conversion
Features or Contingently Adjustable Conversion Ratios Application of Issue
98-5 to Certain Convertible Instruments
 13




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##### Table of Contents



Accounting Issues Related to Certain Features of
Contingently Convertible Debt and the Effect on Diluted Earnings per Share Accounting for Derivative Financial Instruments
Indexed to, and Potentially Settled in, a Companys Own Stock
 Accounting For Convertible Debt Instruments That
May Be Settled in Cash upon Conversion (Including Partial Cash Settlement)
 Registration Rights
  NOTE 5. INVESTMENTS IN MARKETABLE SECURITIES AND FAIR VALUE MEASUREMENTS
  September 30, 2008Amortized
    
    
    Gross Unrealized
    
    
    Gross Unrealized
    
    
    Estimated FairCosts
    
    
    Gains
    
    
    Loss
    
    
    ValueCorporate debt securities
    
    $
    29,152
    
    
    $
    
    
    
    $
    (522
    )
    
    $
    28,630U.S. government debt
securities
    
    
    34,296
    
    
    
    
    
    
    
    (92
    )
    
    
    34,204Equity instruments
    
    
    111
    
    
    
    
    
    
    
    
    
    
    
    111Asset-backed securities
    
    
    7
    
    
    
    
    
    
    
    
    
    
    
    7$
    63,566
    
    
    $
    
    
    
    $
    (614
    )
    
    $
    62,952
  September 30, 2008Amortized
    
    
    Estimated FairDue in
    
    Costs
    
    
    ValueLess than one year
    
    $
    63,566
    
    
    $
    62,9521 thru 5 years
    
    
    
    
    
    
    After 5 years
    
    
    
    
    
    
    Total
    
    $
    63,566
    
    
    $
    62,952
 Fair Value Measurements
 Fair Value Measurements i.e.
 14




---



##### Table of Contents




    
    Level 1  Valuations are based on quoted prices in active markets for identical assets or
liabilities, and readily accessible by the Company at the reporting date. Examples of assets
and liabilities utilizing Level 1 inputs are: most U.S. Government securities; certain other
sovereign government obligations; and exchange-traded equity securities and listed
derivatives that are actively traded.
    
    Level 2  Valuations based on inputs other than quoted prices included within Level 1
that are observable for asset or liability, either directly or indirectly. Examples of
assets and liabilities utilizing Level 2 inputs are: U.S. agency securities; municipal
bonds; corporate bonds; certain residential and commercial mortgage-related instruments
(including loans, securities and derivatives); and most over-the-counter (OTC)
derivatives.
    
    Level 3  Valuations based on inputs that are unobservable. Examples of assets and
liabilities utilizing Level 3 inputs are: certain residential and commercial
mortgage-related instruments; real estate and private equity investments; and long-dated or
complex OTC derivatives.
   Fair Value Measurement at Reporting Date usingQuoted Prices inEstimated Fair
    
    
    Active Markets
    
    
    Significant Other
    
    
    SignificantValue at
    
    
    for Identical Assets
    
    
    Observable Inputs
    
    
    Unobservable InputsDescription
    
    September 30, 2008
    
    
    (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)Assets:Money market funds
    
    $
    55,394
    
    
    $
    55,394
    
    
    $
    
    
    
    $
    Corporate debt securities
    
    
    28,630
    
    
    
    
    
    
    
    28,630
    
    
    
    U.S. government debt
securities
    
    
    34,204
    
    
    
    
    
    
    
    34,204
    
    
    
    Equity instruments
    
    
    111
    
    
    
    111
    
    
    
    
    
    
    
    Asset-backed securities
    
    
    7
    
    
    
    
    
    
    
    7
    
    
    
    $
    118,346
    
    
    $
    55,505
    
    
    $
    62,841
    
    
    $
    
 NOTE 6. DISPOSITIONS AND ACQUISITIONS
 Dispositions
   15




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##### Table of Contents



Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Net Sales
    
    $
    442
    
    
    $
    12,510
    
    
    $
    23,472
    
    
    $
    40,125Income (loss) from operation of discontinued operations
(net of applicable taxes of $2, $160, $483, and $639)
    
    
    25
    
    
    
    1,506
    
    
    
    (10,096
    )
    
    
    4,425Loss on disposal of discontinued operations (net of applicable
tax of $263 and $1,218 for 3 and 9 months ended 2008)
    
    
    (601
    )
    
    
    
    
    
    
    (2,155
    )
    
    
    Income (loss) from discontinued operations
    
    $
    (576
    )
    
    $
    1,506
    
    
    $
    (12,251
    )
    
    $
    4,425
  September 30,2008Accounts receivable, net of allowances of $529
    
    $
    251Other current assets
    
    
    522Current assets of discontinued operations
    
    
    773Deposits due to Borland from lessor
    
    
    3,734Non-current assets of discontinued operations
    
    
    3,734Accrued restructuring
    
    
    4,162Income taxes payable
    
    
    263Other current liabilities
    
    
    351Current liabilities of discontinued operations
    
    
    4,776Accrued restructuring
    
    
    2,080Deposits due to subtenant from Borland
    
    
    1,352Long-term liabilities of discontinued operations
    
    $
    3,432
  Acquisitions
 Business Combinations
  16




---



##### Table of Contents



NOTE 7. GOODWILL AND INTANGIBLE ASSETS
  GoodwillBalance as of December 31, 2007
    
    $
    226,688Impairment of Enterprise goodwill
    
    
    (106,927
    )Acquisition of Simunication
    
    
    889Other adjustments
    
    
    (850
    )Discontinued operationImpairment of goodwill
    
    
    (13,300
    )Sale of CodeGear
    
    
    (27,531
    )Balance as of September 30, 2008
    
    $
    78,969
     17




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##### Table of Contents



As of September 30, 2008
    
    
    As of December 31, 2007Gross
    
    
    
    
    
    
    
    
    
    
    GrossRange of
    
    
    Carrying
    
    
    Accumulated
    
    
    Net
    
    
    Carrying
    
    
    Accumulated
    
    
    NetCategory
    
    Useful Lives
    
    
    Amount
    
    
    Amortization
    
    
    Amount
    
    
    Amount
    
    
    Amortization
    
    
    AmountAcquired Developed Technology
    
    3 - 7 years
    
    $
    48,132
    
    
    $
    34,453
    
    
    $
    13,679
    
    
    $
    46,330
    
    
    $
    30,187
    
    
    $
    16,143Maintenance Agreements
    
    7 years
    
    
    11,300
    
    
    
    3,946
    
    
    
    7,354
    
    
    
    11,300
    
    
    
    2,735
    
    
    
    8,565Tradenames and Trademarks
    
    4 years
    
    
    1,100
    
    
    
    711
    
    
    
    389
    
    
    
    1,100
    
    
    
    499
    
    
    
    601Customer Relationships
    
    7 years
    
    
    9,075
    
    
    
    3,739
    
    
    
    5,336
    
    
    
    9,075
    
    
    
    2,726
    
    
    
    6,349Other
    
    1 - 3 years
    
    
    425
    
    
    
    406
    
    
    
    19
    
    
    
    400
    
    
    
    400
    
    
    
    Total
    
    
    
    
    
    $
    70,032
    
    
    $
    43,255
    
    
    $
    26,777
    
    
    $
    68,205
    
    
    $
    36,547
    
    
    $
    31,658
  FutureAmortization2008 (3 months)
    
    $
    2,0202009
    
    
    8,0792010
    
    
    7,8072011
    
    
    4,5802012
    
    
    2,946Thereafter
    
    
    1,345Total
    
    $
    26,777
 NOTE 8. RESTRUCTURING AND OTHER CHARGES
 Accounting for Costs Associated with Exit or Disposal Activities, Employers
Accounting for Postemployment Benefitsan amendment of FASB Statement No. 5 and 43, Restructuring and Impairment Charges,
 2006 Restructuring Plan
  18




---



##### Table of Contents



2007 Restructuring Plans
 Quarter 4 Plan.
 Quarter 2 Plan .
  FY 2007 Restructuring
    
    
    FY 2006 RestructuringQuarter 4 Plan
    
    
    Quarter 2 PlanSeverance,
    
    
    
    
    
    
    Severance,
    
    
    Severance,Benefits and Other
    
    
    Facilities (1)
    
    
    Benefits and Other
    
    
    Benefits and Other
    
    
    Facilities (1)
    
    
    TotalAccrual at December 31, 2007
    
    $
    3,737
    
    
    $
    4,800
    
    
    $
    328
    
    
    $
    179
    
    
    $
    6,294
    
    
    $
    15,338Additional accruals
    
    
    1,492
    
    
    
    104
    
    
    
    21
    
    
    
    37
    
    
    
    84
    
    
    
    1,738Cash paid
    
    
    (2,191
    )
    
    
    (728
    )
    
    
    (213
    )
    
    
    (216
    )
    
    
    (935
    )
    
    
    (4,283
    )Reversal of previous restructuring
    
    
    
    
    
    
    
    
    
    
    (94
    )
    
    
    
    
    
    
    
    
    
    
    (94
    )Accrual at March 31, 2008
    
    $
    3,038
    
    
    $
    4,176
    
    
    $
    42
    
    
    $
    
    
    
    $
    5,443
    
    
    $
    12,699Additional accruals
    
    
    62
    
    
    
    363
    
    
    
    44
    
    
    
    
    
    
    
    78
    
    
    
    547Reclassification of other liabilities
    
    
    
    
    
    
    701
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    701Reclassification to discontinued
operations
    
    
    (473
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5,340
    )
    
    
    (5,813
    )Cash paid
    
    
    (873
    )
    
    
    (1,863
    )
    
    
    (59
    )
    
    
    
    
    
    
    (120
    )
    
    
    (2,915
    )Reversal of previous restructuring
    
    
    (524
    )
    
    
    54
    
    
    
    (27
    )
    
    
    
    
    
    
    (17
    )
    
    
    (514
    )Accrual at June 30, 2008
    
    $
    1,230
    
    
    $
    3,431
    
    
    $
    
    
    
    $
    
    
    
    $
    44
    
    
    $
    4,705Additional accruals
    
    
    44
    
    
    
    130
    
    
    
    139
    
    
    
    
    
    
    
    29
    
    
    
    342Reclassification of other liabilities
    
    
    
    
    
    
    61
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    61Cash paid
    
    
    (238
    )
    
    
    (564
    )
    
    
    (139
    )
    
    
    
    
    
    
    (44
    )
    
    
    (985
    )Reversal of previous restructuring
    
    
    (87
    )
    
    
    (420
    )
    
    
    
    
    
    
    
    
    
    
    (15
    )
    
    
    (522
    )Accrual at September 30, 2008
    
    $
    949
    
    
    $
    2,638
    
    
    $
    
    
    
    $
    
    
    
    $
    14
    
    
    $
    3,601
 
 (1)
    
    Facilities accruals represent the net present value of the Companys remaining lease payments
less anticipated sublease rental income plus lease incentives for prospective tenants and
other costs. The Company utilizes qualified third party consultants to evaluate current
market conditions and determine future estimates which serve as the basis for managements
assumptions. NOTE 9. INCOME TAXES
   19




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##### Table of Contents



NOTE 10. REPURCHASES OF STOCK AND EQUITY SECURITIES
  Discretionary Repurchase Program
  Repurchase of Common Stock Following Convertible Senior Notes Offering
  Repurchase of Notes
   NOTE 11. COMMITMENTS AND CONTINGENCIES
 Indemnification Obligations and Guarantees
 Guarantors Accounting and Disclosure Requirements for Guarantees,
Including Indirect Guarantees of Indebtedness of Others.
   20




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##### Table of Contents



Leases and Long Term Debt Obligations
  Payment due by period2008
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2013 and(3 months)
    
    
    2009
    
    
    2010
    
    
    2011
    
    
    2012
    
    
    thereafter
    
    
    TotalOperating leases
    
    $
    1,810
    
    
    $
    6,504
    
    
    $
    5,543
    
    
    $
    4,460
    
    
    $
    3,872
    
    
    $
    13,866
    
    
    $
    36,055Restructured operating
leases
    
    
    1,553
    
    
    
    6,336
    
    
    
    2,618
    
    
    
    1,392
    
    
    
    1,430
    
    
    
    975
    
    
    
    14,304Convertible senior notes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    159,300
    
    
    
    
    
    
    
    159,300Interest payments (a)
    
    
    
    
    
    
    4,381
    
    
    
    4,381
    
    
    
    4,381
    
    
    
    2,190
    
    
    
    
    
    
    
    15,333Gross commitments
    
    
    3,363
    
    
    
    17,221
    
    
    
    12,542
    
    
    
    10,233
    
    
    
    166,792
    
    
    
    14,841
    
    
    
    224,992Sublease rental income
    
    
    (394
    )
    
    
    (1,470
    )
    
    
    (374
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,238
    )Net commitments
    
    $
    2,969
    
    
    $
    15,751
    
    
    $
    12,168
    
    
    $
    10,233
    
    
    $
    166,792
    
    
    $
    14,841
    
    
    $
    222,754
 
 (a)
    
    The interest payments in the above table were based on a fixed rate of 2.75%.  21




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##### Table of Contents



Litigation
 Accounting for
Contingencies
  NOTE 12. SEGMENT REPORTING AND GEOGRAPHIC INFORMATION
 Disclosures about Segments of an Enterprise and Related Information
  Enterprise-wide disclosures
  22




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##### Table of Contents



Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2008
    
    
    2007
    
    
    2008
    
    
    2007(in thousands)Total revenues from unaffiliated customers:Americas
    
    $
    27,137
    
    
    $
    28,567
    
    
    $
    76,366
    
    
    $
    91,747Europe, Middle East and Africa
    
    
    12,292
    
    
    
    26,501
    
    
    
    35,047
    
    
    
    57,684Asia Pacific
    
    
    4,883
    
    
    
    5,382
    
    
    
    20,825
    
    
    
    17,770Total revenues
    
    
    44,312
    
    
    
    60,450
    
    
    
    132,238
    
    
    
    167,201License and other revenues
    
    $
    18,353
    
    
    $
    31,633
    
    
    $
    52,155
    
    
    $
    80,363Technical support
    
    
    20,189
    
    
    
    21,892
    
    
    
    62,169
    
    
    
    65,123Consulting and education services
    
    
    5,770
    
    
    
    6,925
    
    
    
    17,914
    
    
    
    21,715Total revenues
    
    
    44,312
    
    
    
    60,450
    
    
    
    132,238
    
    
    
    167,201Operating income (loss):Americas
    
    $
    (110,316
    )
    
    $
    (10,964
    )
    
    $
    (128,161
    )
    
    $
    (34,920
    )EMEA
    
    
    760
    
    
    
    9,417
    
    
    
    (6,714
    )
    
    
    9,509Asia Pacific
    
    
    (178
    )
    
    
    (111
    )
    
    
    5,177
    
    
    
    1,339Operating loss
    
    
    (109,734
    )
    
    
    (1,658
    )
    
    
    (129,698
    )
    
    
    (24,072
    )Interest and other income, net
    
    
    4,225
    
    
    
    511
    
    
    
    9,214
    
    
    
    1,603Loss from continuing operations before income taxes
    
    $
    (105,509
    )
    
    $
    (1,147
    )
    
    $
    (120,484
    )
    
    $
    (22,469
    )
 23




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##### Table of Contents



September 30, 2008
    
    
    December 31, 2007(in thousands)Long-lived assets:Americas
    
    $
    8,855
    
    
    $
    53,541EMEA
    
    
    1,856
    
    
    
    2,621Asia Pacific
    
    
    1,176
    
    
    
    1,672Long-lived assets of discontinued operations
    
    
    3,734
    
    
    
    Long-lived assets:
    
    
    15,621
    
    
    
    57,834Other non-current assets
    
    
    106,066
    
    
    
    258,346Non-current assets
    
    $
    121,687
    
    
    $
    316,180Identifiable assets:Americas
    
    $
    131,068
    
    
    $
    344,907EMEA
    
    
    23,383
    
    
    
    31,691Asia Pacific
    
    
    7,676
    
    
    
    8,533Assets of discontinued operations
    
    
    4,507
    
    
    
    Identifiable assets:
    
    
    166,634
    
    
    
    385,131General corporate assets (cash, cash
equivalents and short-term investments)
    
    
    166,775
    
    
    
    158,866Total assets
    
    $
    333,409
    
    
    $
    543,997
 NOTE 13. RECENT ACCOUNTING PRONOUNCEMENTS
 Accounting For Convertible Debt Instruments That
May Be Settled in Cash upon Conversion (Including Partial Cash Settlement)
 Transition Guidance for Conforming Changes to
Issue No. 98-5 Accounting for Convertible Securities with Beneficial Conversion Features or Contingently
Adjustable Conversion Ratios Application of Issue No. 98-5
to Certain Convertible Instruments Accounting for Certain Financial Instruments
with Characteristics of both Liabilities and Equity
 Business Combinations
 Fair Value Option for Financial Assets
and Financial Liabilitiesincluding an amendment of FASB Statement No. 115
 Partial Deferral
of the Effective Date of Statement 157
 24




---



##### Table of Contents



Accounting by Lessees for Nonrefundable
Maintenance Deposits
 
 ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 In this Quarterly Report on Form 10-Q , the terms the Company, we, our, and us refer to
Borland Software Corporation on a consolidated basis.
 Forward-Looking Statements
   Overview
   25




---



##### Table of Contents



Goodwill Impairment
  Disposition of CodeGear Assets
  Acquisition of Simunication
   Summary of Key Financial Results
  
    
    Total revenues decreased 27% to $44.3 million for the three months ended September 30,
2008, from $60.5 million for the three months ended September 30, 2007 and decreased 21% to
$132.2 million for the nine months ended September 30, 2008, from $167.2 million for the
nine months ended September 30, 2007.
    
    License and other revenues decreased 42% to $18.4 million for the three months ended
September 30, 2008, from $31.6 million for the three months ended September 30, 2007 and
decreased 35% to $52.2 million for the nine months ended September 30, 2008, from $80.4
million for the nine months ended September 30, 2007.
    
    Service revenues decreased 10% to $26.0 million for the three months ended September 30,
2008, from $28.8 million for the three months ended September 30, 2007 and decreased 8% to
$80.1 million for the nine months ended September 30, 2008, from $86.8 million for the nine
months ended September 30, 2007.
    
    Gross profit as a percentage of revenue decreased to 74% for the three months ended
September 30, 2008, compared to 79% in the three months ended September 30, 2007 and
decreased to 74% for the nine months ended September 30, 2008, from 77% for the nine months
ended September 30, 2007.
    
    Goodwill impairment expense increased to $106.9 million for the three months ended
September 30, 2008, from nil for the three months ended September 30, 2007 and increased to
$106.9 million for the nine months ended September 30, 2008, from nil for the nine months
ended September 30, 2007.
    
    Operating expenses increased 189% to $142.5 million for the three months ended September
30, 2008, from $49.4 million for the three months ended September 30, 2007 and increased 49%
to $227.6 million for the nine months ended September 30, 2008, from $153.2 million for the
nine months ended September 30, 2007.
 26




---



##### Table of Contents




    
    Net loss was $106.8 million for the three months ended September 30, 2008, compared to a
net income of $213,000 for the three months ended September 30, 2007. Net loss for the nine
months ended September 30, 2008 was $135.7 million, compared to $19.9 million for the nine
months ended September 30, 2007.
    
    Cash, cash equivalents and short-term investments increased $7.9 million to $166.8
million as of September 30, 2008, from $158.9 million as of December 31, 2007.
 Results of Operations
  Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2008
    
    
    2007
    
    
    Change
    
    
    2008
    
    
    2007
    
    
    Change% of
    
    
    
    
    
    
    % of
    
    
    
    
    
    
    
    
    
    
    
    
    
    % of


    
    
    
    
    
    
    % ofAmount
    
    
    Total
    
    
    Amount
    
    
    Total
    
    
    $
    
    
    %
    
    
    Amount
    
    
    Total
    
    
    Amount
    
    
    Total
    
    
    $
    
    
    %License and other
revenues
    
    $
    18,353
    
    
    
    41
    %
    
    $
    31,633
    
    
    
    52
    %
    
    $
    (13,280
    )
    
    
    (42
    %)
    
    $
    52,155
    
    
    
    39
    %
    
    $
    80,363
    
    
    
    48
    %
    
    $
    (28,208
    )
    
    
    (35
    %)Service revenues
    
    
    25,959
    
    
    
    59
    %
    
    
    28,817
    
    
    
    48
    %
    
    
    (2,858
    )
    
    
    (10
    %)
    
    
    80,083
    
    
    
    61
    %
    
    
    86,838
    
    
    
    52
    %
    
    
    (6,755
    )
    
    
    (8
    %)Total revenues
    
    $
    44,312
    
    
    
    100
    %
    
    $
    60,450
    
    
    
    100
    %
    
    $
    (16,138
    )
    
    
    (27
    %)
    
    $
    132,238
    
    
    
    100
    %
    
    $
    167,201
    
    
    
    100
    %
    
    $
    (34,963
    )
    
    
    (21
    %)
  Revenues by Product
   Three Months Ended
    
    
    Three Months EndedSeptember 30, 2008
    
    
    September 30, 2007ALM
    
    
    DPG
    
    
    Total
    
    
    ALM
    
    
    DPG
    
    
    TotalLicense and other revenues
    
    $
    13,806
    
    
    $
    4,547
    
    
    $
    18,353
    
    
    $
    23,683
    
    
    $
    7,950
    
    
    $
    31,633Service revenues
    
    
    21,697
    
    
    
    4,262
    
    
    
    25,959
    
    
    
    23,695
    
    
    
    5,122
    
    
    
    28,817Total
    
    $
    35,503
    
    
    $
    8,809
    
    
    $
    44,312
    
    
    $
    47,378
    
    
    $
    13,072
    
    
    $
    60,450
 Nine Months Ended
    
    
    Nine Months EndedSeptember 30, 2008
    
    
    September 30, 2007ALM
    
    
    DPG
    
    
    Total
    
    
    ALM
    
    
    DPG
    
    
    TotalLicense and other revenues
    
    $
    33,233
    
    
    $
    18,922
    
    
    $
    52,155
    
    
    $
    58,213
    
    
    $
    22,150
    
    
    $
    80,363Service revenues
    
    
    66,585
    
    
    
    13,498
    
    
    
    80,083
    
    
    
    71,723
    
    
    
    15,115
    
    
    
    86,838Total
    
    $
    99,818
    
    
    $
    32,420
    
    
    $
    132,238
    
    
    $
    129,936
    
    
    $
    37,265
    
    
    $
    167,201
 License and Other Revenues
  27




---



##### Table of Contents



Service Revenues
   Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2008
    
    
    2007
    
    
    Change
    
    
    2008
    
    
    2007
    
    
    Change% of
    
    
    
    
    
    
    % of
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    % of
    
    
    
    
    
    
    % ofAmount
    
    
    Total
    
    
    Amount
    
    
    Total
    
    
    $
    
    
    %
    
    
    Amount
    
    
    Total
    
    
    Amount
    
    
    Total
    
    
    $
    
    
    %Technical support
    
    $
    20,189
    
    
    
    46
    %
    
    $
    21,892
    
    
    
    36
    %
    
    $
    (1,703
    )
    
    
    (8
    %)
    
    $
    62,169
    
    
    
    47
    %
    
    $
    65,123
    
    
    
    39
    %
    
    $
    (2,954
    )
    
    
    (5
    %)Consulting and
education
    
    
    5,770
    
    
    
    13
    %
    
    
    6,925
    
    
    
    11
    %
    
    
    (1,155
    )
    
    
    (17
    %)
    
    
    17,914
    
    
    
    14
    %
    
    
    21,715
    
    
    
    13
    %
    
    
    (3,801
    )
    
    
    (18
    %)Total services
revenues
    
    $
    25,959
    
    
    
    59
    %
    
    $
    28,817
    
    
    
    48
    %
    
    $
    (2,858
    )
    
    
    (10
    %)
    
    $
    80,083
    
    
    
    61
    %
    
    $
    86,838
    
    
    
    52
    %
    
    $
    (6,755
    )
    
    
    (8
    %)
    International Revenues
  28




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##### Table of Contents



Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    Change
    
    
    September 30,
    
    
    Change2008
    
    
    2007
    
    
    $
    
    
    %
    
    
    2008
    
    
    2007
    
    
    $
    
    
    %United States
    
    $
    22,067
    
    
    $
    24,492
    
    
    $
    (2,425
    )
    
    
    (10
    %)
    
    $
    61,806
    
    
    $
    77,373
    
    
    $
    (15,567
    )
    
    
    (20
    %)United Kingdom
    
    
    2,130
    
    
    
    12,992
    
    
    
    (10,862
    )
    
    
    (84
    %)
    
    
    7,489
    
    
    
    21,390
    
    
    
    (13,901
    )
    
    
    (65
    %)Japan
    
    
    2,664
    
    
    
    2,822
    
    
    
    (158
    )
    
    
    (6
    %)
    
    
    13,415
    
    
    
    8,959
    
    
    
    4,456
    
    
    
    50
    %Germany
    
    
    5,014
    
    
    
    8,646
    
    
    
    (3,632
    )
    
    
    (42
    %)
    
    
    12,768
    
    
    
    19,784
    
    
    
    (7,016
    )
    
    
    (35
    %)All other countries
    
    
    12,437
    
    
    
    11,498
    
    
    
    939
    
    
    
    8
    %
    
    
    36,760
    
    
    
    39,695
    
    
    
    (2,935
    )
    
    
    (7
    %)Total revenues
    
    $
    44,312
    
    
    $
    60,450
    
    
    $
    (16,138
    )
    
    
    (27
    %)
    
    $
    132,238
    
    
    $
    167,201
    
    
    $
    (34,963
    )
    
    
    (21
    %)
  Regional Revenues
  Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    Change
    
    
    September 30,
    
    
    Change2008
    
    
    2007
    
    
    $
    
    
    %
    
    
    2008
    
    
    2007
    
    
    $
    
    
    %Americas
    
    $
    27,137
    
    
    $
    28,567
    
    
    $
    (1,430
    )
    
    
    (5
    %)
    
    $
    76,366
    
    
    $
    91,747
    
    
    $
    (15,381
    )
    
    
    (17
    %)Europe, Middle East
and Africa
    
    
    12,292
    
    
    
    26,501
    
    
    
    (14,209
    )
    
    
    (54
    %)
    
    
    35,047
    
    
    
    57,684
    
    
    
    (22,637
    )
    
    
    (39
    %)Asia Pacific
    
    
    4,883
    
    
    
    5,382
    
    
    
    (499
    )
    
    
    (9
    %)
    
    
    20,825
    
    
    
    17,770
    
    
    
    3,055
    
    
    
    17
    %Total revenues
    
    $
    44,312
    
    
    $
    60,450
    
    
    $
    (16,138
    )
    
    
    (27
    %)
    
    $
    132,238
    
    
    $
    167,201
    
    
    $
    (34,963
    )
    
    
    (21
    %)
  Americas.
 EMEA.
 APAC.
 29




---



##### Table of Contents



Cost of revenues
  Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    Change
    
    
    September 30,
    
    
    Change2008
    
    
    2007
    
    
    $
    
    
    %
    
    
    2008
    
    
    2007
    
    
    $
    
    
    %Cost of license and other revenues
    
    $
    973
    
    
    $
    764
    
    
    $
    209
    
    
    
    27
    %
    
    $
    2,288
    
    
    $
    2,415
    
    
    $
    (127
    )
    
    
    (5
    %)As a percentage of license and other
revenues
    
    
    5
    %
    
    
    2
    %
    
    
    
    
    
    
    
    
    
    
    4
    %
    
    
    3
    %Cost of service revenues
    
    $
    8,520
    
    
    $
    9,885
    
    
    $
    (1,365
    )
    
    
    (14
    %)
    
    $
    25,730
    
    
    $
    29,334
    
    
    $
    (3,604
    )
    
    
    (12
    %)As a percentage of service revenues
    
    
    33
    %
    
    
    34
    %
    
    
    
    
    
    
    
    
    
    
    32
    %
    
    
    34
    %Amortization of acquired intangibles
and other charges
    
    $
    2,100
    
    
    $
    2,107
    
    
    $
    (7
    )
    
    
    (0
    %)
    
    $
    6,301
    
    
    $
    6,345
    
    
    $
    (44
    )
    
    
    (1
    %)As a percentage of total revenues
    
    
    5
    %
    
    
    3
    %
    
    
    
    
    
    
    
    
    
    
    5
    %
    
    
    4
    %
 Cost of License and Other Revenues
  Cost of Service Revenues
  Amortization of Acquired Intangibles and Other Charges
  Operating Expenses
 Selling, General and Administrative Expenses
  Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    Change
    
    
    September 30,
    
    
    Change2008
    
    
    2007
    
    
    $
    
    
    %
    
    
    2008
    
    
    2007
    
    
    $
    
    
    %Selling, general and
administrative expenses
    
    $
    25,038
    
    
    $
    37,534
    
    
    $
    (12,496
    )
    
    
    (33
    %)
    
    $
    85,031
    
    
    $
    117,848
    
    
    $
    (32,817
    )
    
    
    (28
    %)As a percentage of total revenues
    
    
    57
    %
    
    
    62
    %
    
    
    
    
    
    
    
    
    
    
    64
    %
    
    
    70
    %
 30




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##### Table of Contents

\

Research and Development Expenses
  Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    Change
    
    
    September 30,
    
    
    Change2008
    
    
    2007
    
    
    $
    
    
    %
    
    
    2008
    
    
    2007
    
    
    $
    
    
    %Research and development expenses
    
    $
    10,387
    
    
    $
    10,230
    
    
    $
    157
    
    
    
    2
    %
    
    $
    33,827
    
    
    $
    31,231
    
    
    $
    2,596
    
    
    
    8
    %As a percentage of
total revenues
    
    
    23
    %
    
    
    17
    %
    
    
    
    
    
    
    
    
    
    
    26
    %
    
    
    19
    %
  Impairment of Goodwill, Restructuring, Amortization of Other Intangibles, and Acquisition-Related
Expenses
  Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    Change
    
    
    September 30,
    
    
    Change2008
    
    
    2007
    
    
    $
    
    
    %
    
    
    2008
    
    
    2007
    
    
    $
    
    
    %Impairment of
goodwill
    
    $
    106,927
    
    
    
    
    
    
    $
    106,927
    
    
    
    
    
    
    $
    106,927
    
    
    
    
    
    
    $
    106,927
    
    
    
    Restructuring
    
    
    (85
    )
    
    
    791
    
    
    
    (876
    )
    
    
    (111
    %)
    
    
    1,222
    
    
    
    1,563
    
    
    
    (341
    )
    
    
    (22
    %)Amortization of
other intangibles
    
    
    138
    
    
    
    84
    
    
    
    54
    
    
    
    64
    %
    
    
    418
    
    
    
    342
    
    
    
    76
    
    
    
    22
    %Acquisition-related
expenses
    
    
    48
    
    
    
    713
    
    
    
    (665
    )
    
    
    (93
    %)
    
    
    192
    
    
    
    2,195
    
    
    
    (2,003
    )
    
    
    (91
    %)Total
    
    $
    107,028
    
    
    $
    1,588
    
    
    $
    105,440
    
    
    
    6,640
    %
    
    $
    108,759
    
    
    $
    4,100
    
    
    $
    104,659
    
    
    
    2,553
    %As a percentage of
total revenues
    
    
    242
    %
    
    
    3
    %
    
    
    
    
    
    
    
    
    
    
    82
    %
    
    
    2
    %
 Impairment of Goodwill:
 Restructuring:
 31




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##### Table of Contents



FY 2007 Restructuring
    
    
    FY 2006 RestructuringQuarter 4 Plan
    
    
    Quarter 2 PlanSeverance,
    
    
    
    
    
    
    Severance,
    
    
    Severance,Benefits and Other
    
    
    Facilities (1)
    
    
    Benefits and Other
    
    
    Benefits and Other
    
    
    Facilities (1)
    
    
    TotalAccrual at December 31,
2007
    
    $
    3,737
    
    
    $
    4,800
    
    
    $
    328
    
    
    $
    179
    
    
    $
    6,294
    
    
    $
    15,338Additional accruals
    
    
    1,492
    
    
    
    104
    
    
    
    21
    
    
    
    37
    
    
    
    84
    
    
    
    1,738Cash paid
    
    
    (2,191
    )
    
    
    (728
    )
    
    
    (213
    )
    
    
    (216
    )
    
    
    (935
    )
    
    
    (4,283
    )Reversal of previous
restructuring
    
    
    
    
    
    
    
    
    
    
    (94
    )
    
    
    
    
    
    
    
    
    
    
    (94
    )Accrual at March 31, 2008
    
    $
    3,038
    
    
    $
    4,176
    
    
    $
    42
    
    
    $
    
    
    
    $
    5,443
    
    
    $
    12,699Additional accruals
    
    
    62
    
    
    
    363
    
    
    
    44
    
    
    
    
    
    
    
    78
    
    
    
    547Reclassification of
other liabilities
    
    
    
    
    
    
    701
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    701Reclassification to
discontinued operations
    
    
    (473
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5,340
    )
    
    
    (5,813
    )Cash paid
    
    
    (873
    )
    
    
    (1,863
    )
    
    
    (59
    )
    
    
    
    
    
    
    (120
    )
    
    
    (2,915
    )Reversal of previous
restructuring
    
    
    (524
    )
    
    
    54
    
    
    
    (27
    )
    
    
    
    
    
    
    (17
    )
    
    
    (514
    )Accrual at June 30, 2008
    
    $
    1,230
    
    
    $
    3,431
    
    
    $
    
    
    
    $
    
    
    
    $
    44
    
    
    $
    4,705Additional accruals
    
    
    44
    
    
    
    130
    
    
    
    139
    
    
    
    
    
    
    
    29
    
    
    
    342Reclassification of
other liabilities
    
    
    
    
    
    
    61
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    61Cash paid
    
    
    (238
    )
    
    
    (564
    )
    
    
    (139
    )
    
    
    
    
    
    
    (44
    )
    
    
    (985
    )Reversal of previous
restructuring
    
    
    (87
    )
    
    
    (420
    )
    
    
    
    
    
    
    
    
    
    
    (15
    )
    
    
    (522
    )Accrual at September 30,
2008
    
    $
    949
    
    
    $
    2,638
    
    
    $
    
    
    
    $
    
    
    
    $
    14
    
    
    $
    3,601
 
 (1)
    
    Facilities accruals represent the net present value of the Companys remaining lease payments
less anticipated sublease rental income plus lease incentives for prospective tenants and
other costs. Amortization of other intangibles.
 Acquisition-related expenses.
 Interest Income, Interest Expense, Gain on Debt Repurchase and Other Expense, net
  Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    Change
    
    
    September 30,
    
    
    Change2008
    
    
    2007
    
    
    $
    
    
    %
    
    
    2008
    
    
    2007
    
    
    $
    
    
    %Interest income
    
    $
    1,249
    
    
    $
    2,346
    
    
    $
    (1,097
    )
    
    
    (47
    %)
    
    $
    4,427
    
    
    $
    6,484
    
    
    $
    (2,057
    )
    
    
    (32
    %)Interest expense
    
    
    (1,462
    )
    
    
    (1,497
    )
    
    
    35
    
    
    
    (2
    %)
    
    
    (4,956
    )
    
    
    (3,961
    )
    
    
    (995
    )
    
    
    25
    %Gain on debt
repurchase
    
    
    4,383
    
    
    
    
    
    
    
    4,383
    
    
    
    
    
    
    
    10,029
    
    
    
    
    
    
    
    10,029
    
    
    
    Other expense, net
    
    
    55
    
    
    
    (338
    )
    
    
    393
    
    
    
    (116
    %)
    
    
    (286
    )
    
    
    (920
    )
    
    
    634
    
    
    
    (69
    %)Total
    
    $
    4,225
    
    
    $
    511
    
    
    $
    3,714
    
    
    
    727
    %
    
    $
    9,214
    
    
    $
    1,603
    
    
    $
    7,611
    
    
    
    475
    %As a percentage of
total revenues
    
    
    10
    %
    
    
    1
    %
    
    
    
    
    
    
    
    
    
    
    7
    %
    
    
    1
    %
  32




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##### Table of Contents



Income Taxes
  Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    Change
    
    
    September 30,
    
    
    Change2008
    
    
    2007
    
    
    $
    
    
    %
    
    
    2008
    
    
    2007
    
    
    $
    
    
    %Income tax provision
    
    $
    700
    
    
    $
    146
    
    
    $
    554
    
    
    
    379
    %
    
    $
    2,933
    
    
    $
    1,803
    
    
    $
    1,130
    
    
    
    63
    %As a percentage of total revenues
    
    
    2
    %
    
    
    0
    %
    
    
    
    
    
    
    
    
    
    
    2
    %
    
    
    1
    %
   Liquidity and Capital Resources
 Nine Months EndedSeptember 30,2008
    
    
    2007(in thousands)Net cash provided by (used in):Operating activities
    
    $
    (19,360
    )
    
    $
    (24,172
    )Investing activities
    
    
    59,157
    
    
    
    (119,579
    )Financing activities
    
    
    (29,525
    )
    
    
    165,253Effect of exchange rate changes on cash
    
    
    2,746
    
    
    
    (1,103
    )Net change in cash and cash equivalents
    
    $
    13,018
    
    
    $
    20,399
 Net cash used in operating activities.
 Net cash provided by (used in) investing activities.
 33




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##### Table of Contents



et cash used by (provided by) financing activities.
 Currency.
  Contractual Obligations and Off-Balance Sheet Arrangements
 Leases and Long Term Debt Obligations.
  Payment due by period2008
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2013 and(3 months)
    
    
    2009
    
    
    2010
    
    
    2011
    
    
    2012
    
    
    thereafter
    
    
    TotalOperating leases
    
    $
    1,810
    
    
    $
    6,504
    
    
    $
    5,543
    
    
    $
    4,460
    
    
    $
    3,872
    
    
    $
    13,866
    
    
    $
    36,055Restructured operating leases
    
    
    1,553
    
    
    
    6,336
    
    
    
    2,618
    
    
    
    1,392
    
    
    
    1,430
    
    
    
    975
    
    
    
    14,304Convertible senior notes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    159,300
    
    
    
    
    
    
    
    159,300Interest payments (a)
    
    
    
    
    
    
    4,381
    
    
    
    4,381
    
    
    
    4,381
    
    
    
    2,190
    
    
    
    
    
    
    
    15,333Gross commitments
    
    
    3,363
    
    
    
    17,221
    
    
    
    12,542
    
    
    
    10,233
    
    
    
    166,792
    
    
    
    14,841
    
    
    
    224,992Sublease rental income
    
    
    (394
    )
    
    
    (1,470
    )
    
    
    (374
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,238
    )Net commitments
    
    $
    2,969
    
    
    $
    15,751
    
    
    $
    12,168
    
    
    $
    10,233
    
    
    $
    166,792
    
    
    $
    14,841
    
    
    $
    222,754
 
 (a)
    
    The interest payments in the above table were based on a fixed rate of 2.75%.   FIN 48 Liability.
 Indemnification Obligations and Guarantees.
 34




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##### Table of Contents



Off-Balance Sheet Arrangements.
 Critical Accounting Policies and Estimates
    
    
    We adopted SFAS 157, which impacts the disclosure regarding our investment securities
as described in Note 13 of our Notes to unaudited Condensed Consolidated Financial
Statements.
    
    Due to the sale of the CodeGear assets on June 30, 2008, we report one reporting unit
instead of two. Thus, effective July 1, 2008, goodwill impairment testing is performed
on a single reporting unit in accordance with SFAS 142.
 Effect of New Accounting Pronouncements
  
 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
  Foreign Currency Risk
    35




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Interest Rate Risk
  Short-term investments
 Credit Risks
  
 ITEM 4. CONTROLS AND PROCEDURES
 Evaluation of Our Disclosure Controls and Procedures
   Changes in Internal Control over Financial Reporting
  
 PART II
 OTHER INFORMATION
 
 ITEM 1. LEGAL PROCEEDINGS
 Accounting for Contingencies
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ITEM 1A. RISK FACTORS
  Risks Relating to Our Business
 We have limited experience in the enterprise market for application lifecycle management, or
ALM, software solutions. If we are unable to successfully achieve our strategic goals, our
operating results could be harmed. The recent sale of the CodeGear assets could increase this risk.
*
   Our success is dependent upon our ability to develop effective products which meet our customers
complex and evolving needs and to integrate our products into effective ALM solutions.
   37




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We may not be able to compete successfully against current and potential competitors. *
  Our inability to forecast our revenue pipeline or convert revenue pipeline into contracts,
especially given our focus on enterprise customers, could increase fluctuations in our revenue and
financial results.
   The complexity of accounting regulations and related interpretations and policies, particularly
those related to revenue recognition, could limit our ability to predict our revenue and materially
affect our financial results for a given period.
 Software Revenue Recognition
 38




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Our failure to implement systems to meet the requirements and manage the large service projects
necessary for our enterprise may result in delays in recognizing revenue on these projects and thus
could harm our profit and adversely affect our results of operations.
  We hired a new Senior Vice President of Worldwide Field Operations in August 2008. There may be an
adjustment period which could cause inefficiencies in our field operations, customer relationships
and management team.*
  We have recently undergone significant changes to our financial reporting and accounting team and
systems and are still in the process of making changes to these systems in international regions,
which may impact our ability to comply with our financial reporting and accounting obligations.
  We are in the process of implementing plans for reducing expenses and if we fail to achieve the
results we expect, there will be a negative effect on our financial condition.*
  Our common stock has declined over the past year. If our stock price does not increase, we may not
attract as many investors. In addition, if our stock price declines further, we could fail to meet
the minimum listing requirements of the Nasdaq Global Market.*
  39




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We may incur additional impairment charges which may adversely affect our results of operations.
  We and our prior independent registered public accounting firm previously determined that we had a
material weakness in our internal control over financial reporting. There can be no assurance that
a material weakness will not arise in the future. As a result, current and potential stockholders
could lose confidence in our financial reporting, which would harm our business and the trading
price of our stock. *
   In prior periods, we were unable to timely file our annual and quarterly reports as required by the
Securities Exchange Act of 1934, and our continued inability to file these reports on time could
result in your not having access to important information about us and the delisting of our common
stock from the Nasdaq Stock Market.*
   If we are unable to maintain revenue levels for our deployment, or application middleware,
products, our financial results may be harmed.
  40




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Because competition for qualified technical and management personnel is intense, we may not be able
to recruit or retain qualified personnel, which could harm our business.*
  Consolidation in our industry or fluctuation in our stock price may impede our ability to compete
effectively.
   We depend on technologies licensed to us by third-parties and the loss of or inability to maintain
these licenses could prevent or delay sales or shipments of certain of our products. *
  Failure to manage our international operations could harm our results.
  
    
    fluctuations in foreign currency exchange rates;
    
    the difficulty of staffing and managing an organization spread over various countries and
continents;
    
    potentially reduced or less certain protection for intellectual property rights than is
available under the laws of the United States;
    
    longer payment cycles in some countries and greater difficulty in collecting accounts
receivable;
    
    restrictions on the expatriation of currency;
 41




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##### Table of Contents




    
    foreign taxes, export restrictions, tariffs, duties and other trade barriers;
    
    changes in regulatory requirements and resulting costs;
    
    differing cultures and business practices not consistent with our regulatory obligations
in the United States;
    
    compliance with various conflicting laws and regulations, including employment laws, and
resulting costs; and
    
    war, threats of war, terrorist activity or political or economic instability in certain
parts of the world.
  Bundling arrangements or product give-aways by our competitors, including available, cost-free
development technologies, may diminish demand for our products or pressure us to reduce our prices.
  Our future success depends upon enhancing existing relationships and establishing new technology
alliances.
  Our products may contain unknown defects that could result in a loss of revenues, decreased market
acceptance, injury to our reputation and product liability claims.
  
    
    delayed shipping of the product;
    
    delay in or failure to ever achieve market acceptance;
    
    diversion of development resources;
    
    damage to our reputation;
    
    product liability claims; and
    
    increased service and warranty costs.
 42




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Third-party claims of intellectual property infringement may subject us to costly litigation or
settlement terms or limit the sales of our products.
  If we are unable to protect our intellectual property, we may lose valuable assets.
  43




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Our debt obligations expose us to risks that could adversely affect our business, operating results
and financial condition.
  
    
    require us to dedicate a portion of our expected cash flow or our existing cash to
service our indebtedness, which would reduce the amount of our cash available for other
purposes, including working capital, capital expenditures and research and development
expenditures;
    
    make it difficult for us to incur additional debt or obtain any necessary financing in
the future for working capital, capital expenditures, debt service, acquisitions or general
corporate purposes;
    
    limit our flexibility in planning for or reacting to changes in our business;
    
    limit our ability to sell ourselves or engage in other strategic transactions;
    
    make us more vulnerable in the event of a downturn in our business; or
    
    place us at a possible competitive disadvantage relative to less leveraged competitors
and competitors that have greater access to capital resources.
  Conversion of the Notes will dilute the ownership interests of existing stockholders.
    44




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Under the terms of the Notes, events that we do not control may trigger conversion rights that, if
exercised, may have an adverse effect on our liquidity.
  Our rights plan and our ability to issue additional preferred stock could harm the rights of our
common stockholders.
     
    
    adversely affect the voting power of the stockholders of our common stock;
    
    make it more difficult for a third-party to gain control of us;
    
    discourage bids for our common stock at a premium;
    
    limit or eliminate any payments the stockholders of our common stock could expect to
receive upon our liquidation; or
    
    otherwise adversely affect the market price of our common stock.
  Provisions of our certificate of incorporation and bylaws might discourage, delay or prevent a
change of control of our company or changes in our management and, therefore, depress the trading
price of our common stock.
  
    
    authorize the issuance of blank check preferred stock by our board that could increase
the number of outstanding shares and discourage a takeover attempt;
    
    limit the ability of our stockholders to call special meetings of stockholders;
 45




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##### Table of Contents




    
    prohibit stockholder action by written consent, which requires all stockholder actions to
be taken at a meeting of our stockholders;
    
    provide that our board is expressly authorized to amend our bylaws, or enact such other
bylaws as in their judgment may be advisable; and
    
    establish advance notice requirements for nominations for election to our board or for
proposing matters that can be acted upon by stockholders at stockholder meetings.
  
 ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
 SALES OF UNREGISTERED SECURITIES
  ISSUER PURCHASES OF EQUITY SECURITIES
 Total Number of
    
    
    Maximum Number (orAverage
    
    
    Shares (or Units)
    
    
    Approximate Dollar Value) ofTotal Number
    
    
    Price Paid
    
    
    Purchased as Part of
    
    
    Shares (or Units) that May Yetof Shares (or Units)
    
    
    per share
    
    
    Publicly Announced
    
    
    Be Purchased Under the PlansPeriod
    
    Purchased
    
    
    (or Unit)
    
    
    Plans or Programs
    
    
    or Programs (1)Beginning dollar value
available to be
repurchased as of
September 30, 2008
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    59,332July 1, 2008 -
July 31, 2008 (2)
    
    
    2,393
    
    
    $
    1.56
    
    
    
    
    
    
    
    August 1, 2008 -
August 31, 2008 (2)
    
    
    5,951
    
    
    $
    1.52
    
    
    
    
    
    
    
    September 1, 2008 -
September 30, 2008 (2)
    
    
    1,653
    
    
    $
    1.23
    
    
    
    
    
    
    
    Total shares repurchased
    
    
    9,997
    
    
    $
    1.48
    
    
    
    
    
    
    $
    59,332Ending dollar value available
to be repurchased under
the Discretionary Program
as of September 30, 2008
(1)
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    59,332
 
 (1)
    
    In September 2001, our Board of Directors authorized the use of up to $30 million to
repurchase shares of our outstanding common stock under a discretionary stock repurchase
program (Discretionary Program). In February 2004, our Board of Directors authorized an
additional $30 million of repurchases under the Discretionary Program, which was announced in
our Current Report on Form 8-K filed with the Securities and Exchange Commission, or SEC, on
February 4, 2004. In May 2005, our Board of Directors authorized an additional $75 million of
repurchases under the Discretionary Program, which was announced
in our Current Report on Form 8-K filed with the SEC on May 20, 2005. No shares were repurchased
through our Discretionary Program during the nine months ended September 30, 2008.(2)
    
    Consists of shares of restricted stock surrendered by Borland employees in order to meet tax
withholding obligations in connection with the vesting of an installment of their restricted
stock awards. 46




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ISSUER REPURCHASES OF CONVERTIBLE SENIOR NOTES
  Total number of
    
    Maximum number (orAverage
    
    shares (or units)
    
    approximate dollarprice paid
    
    purchased as part of
    
    value) of shares (orTotal number of
    
    per share
    
    publicly announced
    
    units) that may yet beshares (or units)
    
    (or unit)
    
    plans or programs
    
    purchased under thePeriod
    
    purchased (a)
    
    (b)
    
    (c)
    
    plans or programs (d)July 1, 2008 - July 31, 2008
    
    
    
    
    
    $
    
    
    
    
    
    
    
    
    August 1, 2008 - August 31, 2008
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    September 1, 2008 - September 30, 2008
    
    
    19,800
    
    
    
    757.50
    
    
    
    19,800
    
    
    
    19,800Total
    
    
    19,800
    
    
    $
    757.50
    
    
    
    19,800
    
    
    
    19,800
 
 (a)
    
    Notes in the aggregate principal amount of $19,800,000 were repurchased by the Company.(b)
    
    The price the Company paid for the repurchase of the Notes was $757.50 per every $1,000 of
Notes repurchased.(c)
    
    The Company used approximately $15.0 million of available cash to repurchase the Notes. The
Board authorized the Company to use up to $15.0 million for the repurchase. 
 ITEM 3. DEFAULTS UPON SENIOR SECURITIES
  
 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
  
 ITEM 5. OTHER INFORMATION
  47




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ITEM 6. EXHIBITS
   Exhibit
    
    
    
    Incorporated by Reference
    
    FiledNumber
    
    Description of Exhibit
    
    Form
    
    Date
    
    Number
    
    Herewith3.1
    
    Restated Certificate of Incorporation of Borland Software
Corporation.
    
    10-Q
    
    08/09/05
    
    
    3.13.2
    
    Amended and Restated Bylaws of Borland Software Corporation.
    
    10-Q
    
    08/09/05
    
    
    3.24.1
    
    Stockholder Rights Agreement, dated as of October 26, 2001,
between Borland Software Corporation and Mellon Investor
Services, L.L.C.
    
    8-A
    
    10/31/01
    
    
    14.2
    
    Specimen Stock Certificate of Borland Software Corporation.
    
    10-Q
    
    05/13/02
    
    
    4.131.1
    
    Certification of Tod Nielsen, Chief Executive Officer of
Borland Software Corporation, pursuant to Rule 13a-14(a).
    
    
    
    
    
    
    
    
    
    X31.2
    
    Certification of Erik E. Prusch, Principal Financial
Officer of Borland Software Corporation, pursuant to Rule
13a-14(a).
    
    
    
    
    
    
    
    
    
    X32.1
    
    Certification of Tod Nielsen, Chief Executive Officer of
Borland Software Corporation, pursuant to Rule 13a-14(b)
and 18 U.S.C. Section 1350. +
    
    
    
    
    
    
    
    
    
    X32.2
    
    Certification of Erik E. Prusch, Principal Financial
Officer of Borland Software Corporation, pursuant to Rule
13a-14(b) and 18 U.S.C. Section 1350. +
    
    
    
    
    
    
    
    
    
    X
 
 +
    
    The certifications attached as Exhibit 32.1 and Exhibit 32.2 that accompany this Quarterly
Report on Form 10-Q, are not deemed filed with the Securities and Exchange Commission and are
not to be incorporated by reference into any filing of Borland Software Corporation under the
Securities Act of 1933 or the Securities Exchange Act of 1934 whether made before or after the
date of this Form 10-Q, irrespective of any general incorporation language contained in such
filing.  48




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##### Table of Contents



SIGNATURES
  BORLAND SOFTWARE CORPORATION
(Registrant)/s/ ERIK E. PRUSCH

Erik E. Prusch Principal Financial Officer(Principal Financial Officer and Duly Authorized Officer)
 
 49




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##### Table of Contents



EXHIBIT INDEX
 Exhibit
    
    
    
    Incorporated by Reference
    
    FiledNumber
    
    Description of Exhibit
    
    Form
    
    Date
    
    Number
    
    Herewith3.1
    
    Restated Certificate of Incorporation of Borland Software
Corporation.
    
    10-Q
    
    08/09/05
    
    
    3.13.2
    
    Amended and Restated Bylaws of Borland Software Corporation.
    
    10-Q
    
    08/09/05
    
    
    3.24.1
    
    Stockholder Rights Agreement, dated as of October 26, 2001,
between Borland Software Corporation and Mellon Investor
Services, L.L.C.
    
    8-A
    
    10/31/01
    
    
    14.2
    
    Specimen Stock Certificate of Borland Software Corporation.
    
    10-Q
    
    05/13/02
    
    
    4.131.1
    
    Certification of Tod Nielsen, Chief Executive Officer of
Borland Software Corporation, pursuant to Rule 13a-14(a).
    
    
    
    
    
    
    
    
    
    X31.2
    
    Certification of Erik E. Prusch, Principal Financial
Officer of Borland Software Corporation, pursuant to Rule
13a-14(a).
    
    
    
    
    
    
    
    
    
    X32.1
    
    Certification of Tod Nielsen, Chief Executive Officer of
Borland Software Corporation, pursuant to Rule 13a-14(b)
and 18 U.S.C. Section 1350. +
    
    
    
    
    
    
    
    
    
    X32.2
    
    Certification of Erik E. Prusch, Principal Financial
Officer of Borland Software Corporation, pursuant to Rule
13a-14(b) and 18 U.S.C. Section 1350. +
    
    
    
    
    
    
    
    
    
    X
 
 +
    
    The certifications attached as Exhibit 32.1 and Exhibit 32.2 that accompany this Quarterly
Report on Form 10-Q, are not deemed filed with the Securities and Exchange Commission and are
not to be incorporated by reference into any filing of Borland Software Corporation under the
Securities Act of 1933 or the Securities Exchange Act of 1934 whether made before or after the
date of this Form 10-Q, irrespective of any general incorporation language contained in such
filing.