##### 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 March 31, 2007
 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.)
 20450 STEVENS CREEK BOULEVARD, SUITE 800
CUPERTINO, CALIFORNIA 95014
(Address of Principal Executive Offices) (Zip Code)
 Registrants Telephone Number, Including Area Code: (408) 863-2800
 Not Applicable
(Former name, former address and former fiscal year, if changed since last report)
 
 þ o
  o þ o
 o þ




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##### Table of Contents



BORLAND SOFTWARE CORPORATION FORM 10-Q
 TABLE OF CONTENTS
 PAGEPART I FINANCIAL INFORMATIONItem 1.
    
    Financial Statements (unaudited)
    
    
    3Condensed Consolidated Balance Sheets
at March 31, 2007 and December 31, 2006
    
    
    3Condensed Consolidated Statements of Operations
for the three months ended March 31, 2007 and 2006
    
    
    4Condensed Consolidated Statements of Comprehensive Loss
for the three months ended March 31, 2007 and 2006
    
    
    5Condensed Consolidated Statements of Cash Flows
for the three months ended March 31, 2007 and 2006
    
    
    6Notes to Condensed Consolidated Financial Statements
    
    
    7Item 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    21Item 3.
    
    Quantitative and Qualitative Disclosures About Market Risk
    
    
    32Item 4.
    
    Controls and Procedures
    
    
    33PART II OTHER INFORMATIONItem 1.
    
    Legal Proceedings
    
    
    34Item 1A.
    
    Risk Factors
    
    
    34Item 2.
    
    Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    45Item 3.
    
    Defaults upon Senior Securities
    
    
    46Item 4.
    
    Submission of Matters to a Vote of Security Holders
    
    
    46Item 5.
    
    Other Information
    
    
    46Item 6.
    
    Exhibits
    
    
    47Signatures
    
    
    48EXHIBIT 31.1EXHIBIT 31.2EXHIBIT 32.1EXHIBIT 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)
 March 31, 2007
    
    
    December 31, 2006ASSETSCurrent assets:Cash and cash equivalents
    
    $
    208,931
    
    
    $
    55,317Accounts receivable, net of allowances of $5,472
and $5,413, respectively
    
    
    61,288
    
    
    
    62,154Prepaid expenses
    
    
    14,426
    
    
    
    13,341Other current assets
    
    
    459
    
    
    
    1,329Total current assets
    
    
    285,104
    
    
    
    132,141Property and equipment, net
    
    
    10,215
    
    
    
    11,176Goodwill
    
    
    253,277
    
    
    
    253,356Intangible assets, net
    
    
    38,243
    
    
    
    40,521Other non-current assets
    
    
    12,992
    
    
    
    6,705Total assets
    
    $
    599,831
    
    
    $
    443,899LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable
    
    $
    17,860
    
    
    $
    15,591Accrued expenses
    
    
    29,871
    
    
    
    36,438Short-term restructuring
    
    
    6,035
    
    
    
    9,582Income taxes payable
    
    
    582
    
    
    
    14,925Deferred revenue
    
    
    59,800
    
    
    
    58,930Other current liabilities
    
    
    8,216
    
    
    
    7,264Total current liabilities
    
    
    122,364
    
    
    
    142,730Convertible senior notes
    
    
    200,000
    
    
    
Long-term restructuring
    
    
    5,582
    
    
    
    6,231Long-term deferred revenues
    
    
    1,002
    
    
    
    1,610Other long-term liabilities
    
    
    24,040
    
    
    
    7,848Total liabilities
    
    
    352,988
    
    
    
    158,419Stockholders 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; 72,683,479 and 78,704,764 shares issued
and outstanding, respectively
    
    
    727
    
    
    
    787Additional paid-in capital
    
    
    661,013
    
    
    
    659,932Accumulated deficit
    
    
    (283,023
    )
    
    
    (273,892
    )Cumulative other comprehensive income
    
    
    8,535
    
    
    
    9,121387,252
    
    
    
    395,948Less common stock in treasury at cost, 21,158,099 and 15,275,899 shares,
respectively
    
    
    (140,409
    )
    
    
    (110,468
    )Total stockholders equity
    
    
    246,843
    
    
    
    285,480Total liabilities and stockholders equity
    
    $
    599,831
    
    
    $
    443,899
 The accompanying notes are an integral part of these condensed consolidated financial
statements.
 3




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BORLAND SOFTWARE CORPORATION
 
 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts, unaudited)
 Three Months EndedMarch 31, 2007
    
    
    March 31, 2006License and other revenues
    
    $
    37,162
    
    
    $
    39,395Service revenues
    
    
    33,804
    
    
    
    30,177Total revenues
    
    
    70,966
    
    
    
    69,572Cost of license and other revenues
    
    
    1,706
    
    
    
    2,231Cost of service revenues
    
    
    11,237
    
    
    
    13,041Amortization of acquired intangibles and other charges
    
    
    2,119
    
    
    
    525Cost of revenues
    
    
    15,062
    
    
    
    15,797Gross profit
    
    
    55,904
    
    
    
    53,775Selling, general and administrative
    
    
    47,831
    
    
    
    46,204Research and development
    
    
    15,924
    
    
    
    15,405Restructuring, amortization of other intangibles,
acquisition-related expenses and other charges
    
    
    874
    
    
    
    1,050Total operating expenses
    
    
    64,629
    
    
    
    62,659Operating loss
    
    
    (8,725
    )
    
    
    (8,884
    )Interest and other income, net
    
    
    527
    
    
    
    1,342Loss before income taxes
    
    
    (8,198
    )
    
    
    (7,542
    )Income tax provision
    
    
    1,020
    
    
    
    1,397Net loss
    
    $
    (9,218
    )
    
    $
    (8,939
    )Net loss per share:Net loss per share  basic and diluted
    
    $
    (0.12
    )
    
    $
    (0.12
    )Shares used in computing basic and diluted net loss per share
    
    
    74,395
    
    
    
    76,640
 The accompanying notes are an integral part of these condensed consolidated financial
statements.
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BORLAND SOFTWARE CORPORATION
 
 CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(In thousands, unaudited)
 Three Months EndedMarch 31, 2007
    
    
    March 31, 2006Net loss
    
    $
    (9,218
    )
    
    $
    (8,939
    )Other comprehensive income (loss):Foreign currency translation adjustments
    
    
    (586
    )
    
    
    (238
    )Fair market value adjustment for
available-for-sale securities, net of
tax
    
    
    
    
    
    
    38Comprehensive loss
    
    $
    (9,804
    )
    
    $
    (9,139
    )
 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)
 Three Months EndedMarch 31, 2007
    
    
    March 31, 2006CASH FLOWS FROM OPERATING ACTIVITIES:Net loss
    
    $
    (9,218
    )
    
    $
    (8,939
    )Adjustments to reconcile net loss to net cash used in
operating activities:Depreciation and amortization
    
    
    4,109
    
    
    
    1,998Stock-based compensation
    
    
    1,230
    
    
    
    2,850Provision for accounts receivable allowances
    
    
    59
    
    
    
    (896)Loss on sale of subsidiary
    
    
    226
    
    
    
    Write-off of fixed assets
    
    
    304
    
    
    
    Changes in assets and liabilities, net of
acquisitions:Accounts receivable
    
    
    754
    
    
    
    7,016Prepaid expenses and
other assets
    
    
    (6,975
    )
    
    
    679Accounts payable and
accrued expenses
    
    
    (4,223
    )
    
    
    1,134Income taxes payable
    
    
    204
    
    
    
    (1,000
    )Short-term restructuring
    
    
    (3,536
    )
    
    
    (41
    )Deferred revenues
    
    
    52
    
    
    
    (3,276
    )Long-term restructuring
    
    
    (649
    )
    
    
    Other liabilities
    
    
    8,176
    
    
    
    339Cash used in operating activities
    
    
    (9,487
    )
    
    
    (136
    )CASH FLOWS FROM INVESTING ACTIVITIES:Purchases of property and equipment
    
    
    (1,253
    )
    
    
    (1,778
    )Proceeds from sale of subsidiary
    
    
    178
    
    
    
    Purchases of short-term investments
    
    
    
    
    
    
    (76,400
    )Sales and maturities of short-term investments
    
    
    
    
    
    
    162,556Cash provided by (used in) investing
activities
    
    
    (1,075
    )
    
    
    84,378CASH FLOWS FROM FINANCING ACTIVITIES:Issuance of convertible senior notes, net
    
    
    194,230
    
    
    
    Proceeds from issuance of stock options, net
    
    
    220
    
    
    
    105Repurchase of common stock
    
    
    (29,941
    )
    
    
    Cash provided by financing activities
    
    
    164,509
    
    
    
    105Effect of exchange rate changes on cash
    
    
    (333
    )
    
    
    (194
    )Net change in cash and cash equivalents
    
    
    153,614
    
    
    
    84,153Beginning cash and cash equivalents
    
    
    55,317
    
    
    
    49,075Ending cash and cash equivalents
    
    $
    208,931
    
    
    $
    133,228
 The accompanying notes are an integral part of these condensed consolidated financial statements.
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BORLAND SOFTWARE CORPORATION
 
 Notes to Condensed Consolidated Financial Statements (unaudited)
 NOTE 1. BASIS OF PRESENTATION
   NOTE 2. STOCK-BASED COMPENSATION
 Share-Based
Payment
 Stock-Based Compensation Expenses
  Three Months EndedMarch 31,2007
    
    
    2006In ThousandsCost of sales
    
    $
    42
    
    
    $
    121Research and development
    
    
    340
    
    
    
    475Selling, general and administrative
    
    
    848
    
    
    
    2,245Stock-based compensation expense
    
    $
    1,230
    
    
    $
    2,841
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Stock Options
  Weighted-Weighted-
    
    
    AverageAverage
    
    
    Remaining
    
    
    AggregateExercise
    
    
    Contractual
    
    
    Intrinsic ValueOptions
    
    
    Price
    
    
    Term (Years)
    
    
    (thousands)Outstanding at December 31, 2006
    
    
    14,840
    
    
    $
    8.04Granted
    
    
    441
    
    
    $
    5.37Exercised
    
    
    (58
    )
    
    $
    4.82Forfeited/expired
    
    
    (2,282
    )
    
    $
    8.63Outstanding at March 31, 2007
    
    
    12,941
    
    
    $
    7.86
    
    
    
    6.26
    
    
    $
    243Vested and expected to vest at March 31, 2007
    
    
    11,098
    
    
    $
    8.23
    
    
    
    5.77
    
    
    $
    183Exercisable at March 31, 2007
    
    
    7,871
    
    
    $
    9.31
    
    
    
    4.61
    
    
    $
    71
   Options Outstanding
    
    
    Options ExercisableWeighted-Number
    
    
    Average
    
    
    Weighted-
    
    
    
    
    
    
    Number
    
    
    Weighted-Outstanding at
    
    
    Remaining
    
    
    Average
    
    
    Aggregate
    
    
    Exercisable at
    
    
    AverageMarch 31,
    
    
    Contractual
    
    
    Exercise
    
    
    Intrinsic Value
    
    
    March 31,
    
    
    Exercise2007
    
    
    Life
    
    
    Price
    
    
    (thousands)
    
    
    2007
    
    
    Price$3.50 - $5.44
    
    
    2,884
    
    
    
    9.21
    
    
    $
    5.21
    
    
    
    
    
    
    
    136
    
    
    $
    4.75$5.45 - $5.73
    
    
    2,652
    
    
    
    5.66
    
    
    $
    5.59
    
    
    
    
    
    
    
    1,811
    
    
    $
    5.60$5.75 - $6.42
    
    
    2,691
    
    
    
    7.50
    
    
    $
    6.23
    
    
    
    
    
    
    
    1,247
    
    
    $
    6.18$6.50 - $9.40
    
    
    2,626
    
    
    
    4.37
    
    
    $
    8.44
    
    
    
    
    
    
    
    2,589
    
    
    $
    8.45$9.45 - $714.22
    
    
    2,088
    
    
    
    3.72
    
    
    $
    15.75
    
    
    
    
    
    
    
    2,088
    
    
    $
    15.75Outstanding at March 31, 2007
    
    
    12,941
    
    
    
    6.26
    
    
    $
    7.86
    
    
    $
    243
    
    
    
    7,871
    
    
    $
    9.31Vested and expected to vest at March 31, 2007
    
    
    11,098
    
    
    
    5.77
    
    
    $
    8.23
    
    
    $
    183
    Three Months EndedMarch 31,2007
    
    2006Expected life
    
    4.84 years
    
    
    4.65 yearsRisk-free interest rate
    
    
    4.50
    %
    
    
    4.20
    %Volatility
    
    
    41.1
    %
    
    
    53.0
    %Dividend yield
    
    
    0
    %
    
    
    0
    %
 8




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Restricted Stock
  Unvested
    
    
    WeightedRestricted
    
    
    AverageStock
    
    
    Grant DateOutstanding
    
    
    Fair(In Thousands)
    
    
    ValueBalance at December 31, 2006
    
    
    850
    
    
    $
    5.94Vested
    
    
    (178
    )
    
    $
    6.24Forfeited
    
    
    (119
    )
    
    $
    5.71Balance at March 31, 2007
    
    
    553
    
    
    $
    5.90
  Employee Stock Purchase Plan
  NOTE 3. NET INCOME (LOSS) PER SHARE
 Earnings per Share.
 9




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Three Months EndedMarch 31,2007
    
    
    2006Numerator:Net loss
    
    $
    (9,218
    )
    
    $
    (8,939
    )Denominator:Weighted-average shares outstanding, excluding
unvested restricted stock
    
    
    74,395
    
    
    
    76,640Effect of dilutive securities:Employee stock options
    
    
    
    
    
    
    Other
    
    
    
    
    
    
    Denominator for diluted net loss per share 
weighted-average shares and assumed conversions
    
    
    74,395
    
    
    
    76,640Net loss per share attributable to common stockholders:Net loss per share  basic and diluted
    
    $
    (0.12
    )
    
    $
    (0.12
    )
  NOTE 4. SENIOR NOTES OFFERING
 General
  Conversion Process and Other Terms of the Convertible Senior 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
  10




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Earnings per Share 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
 Registration Rights
  NOTE 5. ACQUISITIONS
 Segue Software, Inc.
  Cash paid for outstanding common shares
    
    $
    105,358Cash paid for outstanding vested common stock options
    
    
    8,130Direct transaction costs
    
    
    2,451Total purchase price
    
    $
    115,939
 11




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Current assets and other tangible assets:Cash and short-term investments
    
    $
    13,482Accounts receivable
    
    
    4,199Other current assets
    
    
    1,210Property and equipment
    
    
    902Deferred tax assets
    
    
    17,835Goodwill
    
    
    65,528Amortizable intangible assets:Developed technology
    
    
    23,400In-process research and development
    
    
    4,800Customer relationships
    
    
    7,500Trademarks
    
    
    1,000Non-compete agreements
    
    
    300Maintenance agreements
    
    
    11,300Total assets acquired
    
    
    151,456Liabilities assumed:Deferred revenues
    
    
    (9,042
    )Current liabilities
    
    
    (7,276
    )Deferred tax liabilities
    
    
    (17,835
    )Other long-term liabilities
    
    
    (1,364
    )Net assets acquired
    
    $
    115,939
   Accounting for Income Taxes
  Pro Forma Financial Information
  12




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Three MonthsEndedMarch 31,(in thousands, except per share data)
    
    2006Total revenues
    
    $
    78,130Net loss
    
    $
    (18,474
    )Net loss per share:Net loss per sharebasic and diluted
    
    $
    (0.24
    )
 NOTE 6. GOODWILL AND INTANGIBLE ASSETS
  GoodwillBalance as of December 31, 2006
    
    $
    253,356Purchase accounting adjustments
    
    
    (171
    )Effect of exchange rates
    
    
    92Balance as of March 31, 2007
    
    $
    253,277
   March 31, 2007Gross Carrying
    
    
    Accumulated
    
    
    Net CarryingAmount
    
    
    Amortization
    
    
    AmountAcquired technology
    
    $
    46,330
    
    
    $
    (26,079
    )
    
    $
    20,251Maintenance agreements
    
    
    11,300
    
    
    
    (1,525
    )
    
    
    9,775Trade names and trademarks
    
    
    1,100
    
    
    
    (286
    )
    
    
    814Customer relationship
    
    
    9,075
    
    
    
    (1,713
    )
    
    
    7,362Other
    
    
    400
    
    
    
    (359
    )
    
    
    41$
    68,205
    
    
    $
    (29,962
    )
    
    $
    38,243
 December 31, 2006Gross Carrying
    
    
    Accumulated
    
    
    Net CarryingAmount
    
    
    Amortization
    
    
    AmountAcquired technology
    
    $
    46,330
    
    
    $
    (24,701
    )
    
    $
    21,629Maintenance agreements
    
    
    11,300
    
    
    
    (1,121
    )
    
    
    10,179Trade names and trademarks
    
    
    1,100
    
    
    
    (215
    )
    
    
    885Customer relationship
    
    
    9,075
    
    
    
    (1,376
    )
    
    
    7,699Other
    
    
    400
    
    
    
    (271
    )
    
    
    129$
    68,205
    
    
    $
    (27,684
    )
    
    $
    40,521
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FutureAmortization2007 (9 months)
    
    $
    6,5812008
    
    
    8,4692009
    
    
    7,9672010
    
    
    6,4672011
    
    
    5,272Thereafter
    
    
    3,487Total
    
    $
    38,243
 NOTE 7. RESTRUCTURING
 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,
   Severanceand Benefits
    
    
    Facilities
    
    
    Other
    
    
    TotalAccrual at December 31, 2006
    
    $
    4,178
    
    
    $
    11,551
    
    
    $
    84
    
    
    $
    15,813Cash paid
    
    
    (2,666
    )
    
    
    (1,451
    )
    
    
    (79
    )
    
    
    (4,196
    )Accrual at March 31, 2007
    
    $
    1,512
    
    
    $
    10,100
    
    
    $
    5
    
    
    $
    11,617
    NOTE 8. INCOME TAXES
   14




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Accounting for Uncertainty in Income Taxes  an interpretation of FASB
Statement No. 109
    NOTE 9. STOCK REPURCHASES
 Discretionary Repurchase Program
  Repurchase Following Senior Notes Offering
   NOTE 10. COMMITMENTS AND CONTINGENCIES
 Indemnification Obligations and Guarantees
 Guarantors Accounting and Disclosure Requirements for Guarantees,
Including Indirect Guarantees of Indebtedness of Others
  15




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Leases
 Accounting for Leases. ,
  Remainderof 2007
    
    2008
    
    2009
    
    2010
    
    2011
    
    Thereafter
    
    TotalOperating Leases
    
    $
    9,853
    
    
    $
    10,486
    
    
    $
    9,086
    
    
    $
    7,327
    
    
    $
    6,453
    
    
    $
    19,327
    
    
    $
    62,532Restructured Operating Leases
    
    
    3,504
    
    
    
    3,148
    
    
    
    2,985
    
    
    
    760
    
    
    
    
    
    
    
    
    
    
    
    10,397Capital Lease
    
    
    291
    
    
    
    41
    
    
    
    43
    
    
    
    41
    
    
    
    
    
    
    
    
    
    
    
    416Gross Commitments
    
    
    13,648
    
    
    
    13,675
    
    
    
    12,114
    
    
    
    8,128
    
    
    
    6,453
    
    
    
    19,327
    
    
    
    73,345Sublease Income
    
    
    (460
    )
    
    
    (314
    )
    
    
    (95
    )
    
    
    (32
    )
    
    
    
    
    
    
    
    
    
    
    (901
    )Net Commitments
    
    $
    13,188
    
    
    $
    13,361
    
    
    $
    12,019
    
    
    $
    8,096
    
    
    $
    6,453
    
    
    $
    19,327
    
    
    $
    72,444
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Litigation
 Accounting for Contingencies,
  Service Commitments
  NOTE 11. REPORTABLE SEGMENTS
 Disclosures about Segments of an
Enterprise and Related Information
 Description of Segments
  Enterprise.
 CodeGear.
 17




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Segment Data
   Three months ended March 31, 2007Enterprise
    
    
    CodeGear
    
    
    TotalLicense and other revenues
    
    $
    27,422
    
    
    $
    9,740
    
    
    $
    37,162Service revenues
    
    
    29,506
    
    
    
    4,298
    
    
    
    33,804Total revenues
    
    $
    56,928
    
    
    $
    14,038
    
    
    $
    70,966Operating income (loss)
    
    $
    (10,604
    )
    
    $
    1,879
    
    
    $
    (8,725
    )
  TotalEnterprise
    
    
    CodeGear
    
    
    ConsolidatedLong-lived assets:Goodwill
    
    $
    185,937
    
    
    $
    67,340
    
    
    $
    253,277Other non-current assets
    
    
    61,029
    
    
    
    421
    
    
    
    61,450Non-current assets
    
    
    246,966
    
    
    
    67,761
    
    
    
    314,727Total assets
    
    $
    497,448
    
    
    $
    102,383
    
    
    $
    599,831
 Enterprise-wide disclosures
  18




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Three Months EndedMarch 31,2007
    
    
    2006In ThousandsTotal revenues from unaffiliated customers:Americas
    
    $
    39,555
    
    
    $
    33,434EMEA
    
    
    23,460
    
    
    
    26,214Asia Pacific
    
    
    7,951
    
    
    
    9,924Total revenues
    
    
    70,966
    
    
    
    69,572License and other revenues
    
    $
    37,162
    
    
    $
    39,395Technical support
    
    
    25,856
    
    
    
    21,428Consulting and education services
    
    
    7,948
    
    
    
    8,749Total revenues
    
    
    70,966
    
    
    
    69,572Inter-company revenue U.S.
    
    $
    3,181
    
    
    $
    200Elimination of inter-company-revenues
    
    
    (3,181
    )
    
    
    (200
    )Reported inter-company revenues
    
    $
    
    
    
    $
    Operating loss:Americas
    
    $
    (13,656
    )
    
    $
    (21,050
    )EMEA
    
    
    3,824
    
    
    
    10,435Asia Pacific
    
    
    1,107
    
    
    
    1,731Operating loss
    
    
    (8,725
    )
    
    
    (8,884
    )Interest and other income, net
    
    
    527
    
    
    
    1,342Loss before income taxes
    
    $
    (8,198
    )
    
    $
    (7,542
    )
 March 31,
    
    
    December 31,2007
    
    
    2006In ThousandsLong-lived assets:Americas
    
    $
    16,973
    
    
    $
    11,143EMEA
    
    
    2,835
    
    
    
    2,549Asia Pacific
    
    
    2,022
    
    
    
    4,190Long-lived assets:
    
    
    21,830
    
    
    
    17,882Other non-current assets
    
    
    292,897
    
    
    
    293,876Non-current assets
    
    
    314,727
    
    
    
    311,758Identifiable assets:Americas
    
    $
    342,579
    
    
    $
    339,086EMEA
    
    
    38,629
    
    
    
    38,646Asia Pacific
    
    
    9,692
    
    
    
    10,850Identifiable assets:
    
    
    390,900
    
    
    
    388,582General corporate assets (cash, cash equivalents and short-term investments)
    
    
    208,931
    
    
    
    55,317Total assets
    
    $
    599,831
    
    
    $
    443,899
 NOTE 12. SUBSEQUENT EVENT
  19




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NOTE 13. RECENT ACCOUNTING PRONOUNCEMENTS
 Fair Value Option for Financial Assets
and Financial LiabilitiesIncluding an amendment of FASB Statement No. 115
 Fair Value Measurements .
 Accounting for Uncertainty in Income
Taxes  an interpretation of FASB Statement No. 109 Accounting for
Income Taxes.
 Accounting for Certain Hybrid Financial
Instruments Accounting for Derivative Instruments and
Hedging Activities Accounting for Transfers and Servicing of Financial
Assets and Extinguishments of Liabilities
 20




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##### Table of Contents



ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 Forward-Looking Statements
   Overview
  Enterprise
  CodeGear
 Summary
of key financial results
  
    
    Total revenues increased 2% to $71 million for the three months ended March
31, 2007, from $70 million for the three months ended March 31, 2006.
    
    License and other revenues decreased 6% to $37 million for the three months
ended March 31, 2007, from $39 million for the three months ended March 31, 2006.
 21




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##### Table of Contents




    
    Service revenues increased 12% to $34 million for the three months ended
March 31, 2007, from $30 million for the three months ended March 31, 2006.
    
    Gross profit as a percentage of revenue increased to 79% for the three
months ended March 31, 2007, compared to 77% in the three months ended March 31,
2006.
    
    Operating expenses increased 3% to $65 million for the three months ended
March 31, 2007, from $63 million for the three months ended March 31, 2006.
    
    Net loss was $9.2 million for the three months ended March 31, 2007,
compared to net loss of $8.9 million for the three months ended March 31, 2006.
    
    Cash, cash equivalents and short-term investments increased $154 million to
$209 million as of March 31, 2007, from $55 million as of December 31, 2006.
  22




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##### Table of Contents



Results of Operations
  Three Months EndedMarch 31,2007
    
    
    % of Rev
    
    
    2006
    
    
    % of RevLicense and other revenues
    
    $
    37,162
    
    
    
    52
    %
    
    $
    39,395
    
    
    
    57
    %Service revenues
    
    
    33,804
    
    
    
    48
    %
    
    
    30,177
    
    
    
    43
    %Total revenues
    
    
    70,966
    
    
    
    100
    %
    
    
    69,572
    
    
    
    100
    %Cost of license and other revenues
    
    
    1,706
    
    
    
    2
    %
    
    
    2,231
    
    
    
    3
    %Cost of service revenues
    
    
    11,237
    
    
    
    16
    %
    
    
    13,041
    
    
    
    19
    %Amortization of acquired intangibles and other
charges
    
    
    2,119
    
    
    
    3
    %
    
    
    525
    
    
    
    1
    %Total cost of revenues
    
    
    15,062
    
    
    
    21
    %
    
    
    15,797
    
    
    
    23
    %Gross profit
    
    
    55,904
    
    
    
    79
    %
    
    
    53,775
    
    
    
    77
    %Operating expenses:Selling, general and administrative
    
    
    47,831
    
    
    
    67
    %
    
    
    46,204
    
    
    
    66
    %Research and development
    
    
    15,924
    
    
    
    22
    %
    
    
    15,405
    
    
    
    22
    %Restructuring, amortization of other
intangibles and acquisition related expenses
and other charges
    
    
    874
    
    
    
    1
    %
    
    
    1,050
    
    
    
    2
    %Total operating expenses
    
    
    64,629
    
    
    
    91
    %
    
    
    62,659
    
    
    
    90
    %Operating loss
    
    
    (8,725
    )
    
    
    (12
    %)
    
    
    (8,884
    )
    
    
    (13
    %)Interest and other income, net
    
    
    527
    
    
    
    1
    %
    
    
    1,342
    
    
    
    2
    %Loss before income taxes
    
    
    (8,198
    )
    
    
    (12
    %)
    
    
    (7,542
    )
    
    
    (11
    %)Income tax provision
    
    
    1,020
    
    
    
    1
    %
    
    
    1,397
    
    
    
    2
    %Net loss
    
    $
    (9,218
    )
    
    
    (13
    %)
    
    $
    (8,939
    )
    
    
    (13
    %)
 23




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For Three Months EndedMarch 31, 2007
    
    
    March 31, 2006
    
    
    ChangeAmount
    
    
    % of Total
    
    
    Amount
    
    
    % of Total
    
    
    $
    
    
    %License and other revenues
    
    $
    37,162
    
    
    
    52
    %
    
    $
    39,395
    
    
    
    57
    %
    
    $
    (2,233
    )
    
    
    (6
    %)Service revenues
    
    
    33,804
    
    
    
    48
    %
    
    
    30,177
    
    
    
    43
    %
    
    
    3,627
    
    
    
    12
    %Total revenues
    
    $
    70,966
    
    
    
    100
    %
    
    $
    69,572
    
    
    
    100
    %
    
    $
    1,394
    
    
    
    2
    %
  Revenues by Product
   Three Months Ended
    
    
    Three Months EndedMarch 31, 2007
    
    
    March 31, 2006ALM
    
    
    DPG
    
    
    IDE
    
    
    Total
    
    
    ALM
    
    
    DPG
    
    

IDE
    
    
    TotalLicense and other revenues
    
    $
    19,120
    
    
    $
    8,302
    
    
    $
    9,740
    
    
    $
    37,162
    
    
    $
    15,552
    
    
    $
    6,195
    
    
    $
    17,648
    
    
    $
    39,395Service revenues
    
    
    24,216
    
    
    
    5,290
    
    
    
    4,298
    
    
    
    33,804
    
    
    
    17,345
    
    
    
    6,051
    
    
    
    6,781
    
    
    
    30,177Total
    
    $
    43,336
    
    
    $
    13,592
    
    
    $
    14,038
    
    
    $
    70,966
    
    
    $
    32,897
    
    
    $
    12,246
    
    
    $
    24,429
    
    
    $
    69,572
 License and Other Revenues
  Service Revenues
   24




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International Revenues
   Three Months EndedMarch 31,
    
    
    Change2007
    
    
    2006
    
    
    $
    
    
    %United States
    
    $
    32,390
    
    
    $
    28,142
    
    
    $
    4,248
    
    
    
    15
    %Germany
    
    
    8,840
    
    
    
    7,677
    
    
    
    1,163
    
    
    
    15
    %All other countries
    
    
    29,736
    
    
    
    33,753
    
    
    
    (4,017
    )
    
    
    (12
    %)Total revenues
    
    $
    70,966
    
    
    $
    69,572
    
    
    $
    1,394
    
    
    
    2
    %
  25




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##### Table of Contents



Regional Revenues
  Three Months EndedMarch 31,
    
    
    Change2007
    
    
    2006
    
    
    $
    
    
    %Americas
    
    $
    39,555
    
    
    $
    33,434
    
    
    $
    6,121
    
    
    
    18
    %Europe, Middle East and Africa
    
    
    23,460
    
    
    
    26,214
    
    
    
    (2,754
    )
    
    
    (11
    %)Asia Pacific
    
    
    7,951
    
    
    
    9,924
    
    
    
    (1,973
    )
    
    
    (20
    %)Total revenues
    
    $
    70,966
    
    
    $
    69,572
    
    
    $
    1,394
    
    
    
    2
    %
  Americas.
 EMEA.
 APAC.
 26




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##### Table of Contents



Cost of Revenues
  Three Months EndedMarch 31,
    
    
    Change2007
    
    
    2006
    
    
    $
    
    
    %Cost of license and other revenues
    
    $
    1,706
    
    
    $
    2,231
    
    
    $
    (525
    )
    
    
    (24
    %)As a percentage of license and other revenues
    
    
    5
    %
    
    
    6
    %Cost of service revenues
    
    $
    11,237
    
    
    $
    13,041
    
    
    $
    (1,804
    )
    
    
    (14
    %)As a percentage of service revenues
    
    
    33
    %
    
    
    43
    %Amortization of acquired intangibles and other charges
    
    $
    2,119
    
    
    $
    525
    
    
    $
    1,594
    
    
    
    304
    %As a percentage of total revenues
    
    
    3
    %
    
    
    1
    %
 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 EndedMarch 31,
    
    Change2007
    
    2006
    
    $
    
    %Selling, general and administrative expenses
    
    $
    47,831
    
    
    $
    46,204
    
    
    $
    1,627
    
    
    
    4
    %As a percentage of total revenues
    
    
    67
    %
    
    
    66
    %
 27




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##### Table of Contents



Research and Development Expenses
  Three Months EndedMarch 31,
    
    Change2007
    
    2006
    
    $
    
    %Research and development expenses
    
    $
    15,924
    
    
    $
    15,405
    
    
    $
    519
    
    
    
    3
    %As a percentage of total revenues
    
    
    22
    %
    
    
    22
    %
  Restructuring, Amortization of Other Intangibles, Acquisition-Related Expenses and Other
Charges
  Three Months EndedMarch 31,
    
    
    Change2007
    
    
    2006
    
    
    $
    
    
    %Restructuring
    
    $
    
    
    
    $
    (68
    )
    
    $
    68
    
    
    
    (100
    %)Amortization of other intangibles
    
    
    159
    
    
    
    113
    
    
    
    46
    
    
    
    41
    %Acquisition-related expenses
    
    
    715
    
    
    
    1,005
    
    
    
    (290
    )
    
    
    (29
    %)Total
    
    $
    874
    
    
    $
    1,050
    
    
    $
    (176
    )
    
    
    (17
    %)As a percentage of total revenues
    
    
    1
    %
    
    
    2
    %
 Restructuring.
  Severanceand Benefits
    
    
    Facilities
    
    
    Other
    
    
    TotalAccrual at December 31, 2006
    
    $
    4,178
    
    
    $
    11,551
    
    
    $
    84
    
    
    $
    15,813Cash paid write-offs
    
    
    (2,666
    )
    
    
    (1,451
    )
    
    
    (79
    )
    
    
    (4,196
    )Accrual at March 31, 2007
    
    $
    1,512
    
    
    $
    10,100
    
    
    $
    5
    
    
    $
    11,617
  28




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##### Table of Contents



Amortization of other intangibles.
 Acquisition-related expenses.
 Interest and Other Income, Net
  Three Months EndedMarch 31,
    
    Change2007
    
    2006
    
    $
    
    %Interest and other income, net
    
    $
    527
    
    
    $
    1,342
    
    
    $
    (815
    )
    
    
    (61
    %)As a percentage of total revenues
    
    
    1
    %
    
    
    2
    %
  Income Taxes
  Three Months EndedMarch 31,
    
    Change2007
    
    2006
    
    $
    
    %Income tax provision
    
    $
    1,020
    
    
    $
    1,397
    
    
    $
    (377
    )
    
    
    (27
    %)As a percentage of total revenues
    
    
    1
    %
    
    
    2
    %
   29




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Liquidity and Capital Resources
 Three Months EndedMarch 31, 2007
    
    
    March 31, 2006In
ThousandsNet cash provided by (used for):Operating activities
    
    $
    (9,487
    )
    
    $
    (136
    )Investing activities
    
    
    (1,075
    )
    
    
    84,378Financing activities
    
    
    164,509
    
    
    
    105Effect of exchange rate changes on cash
    
    
    (333
    )
    
    
    (194
    )Net change in cash and cash equivalents
    
    $
    153,614
    
    
    $
    84,153
 Cash, cash equivalents and short-term investments.
  Net cash used in operating activities.
 Net cash used by investing activities.
 Net cash provided by financing activities.
 Currency.
 Contractual Obligations and Off-Balance Sheet Arrangements
 Leases. Accounting for Leases.
 30




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##### Table of Contents



Remainderof 2007
    
    2008
    
    2009
    
    2010
    
    2011
    
    Thereafter
    
    TotalOperating Leases
    
    $
    9,853
    
    
    $
    10,486
    
    
    $
    9,086
    
    
    $
    7,327
    
    
    $
    6,453
    
    
    $
    19,327
    
    
    $
    62,532Restructured Operating Leases
    
    
    3,504
    
    
    
    3,148
    
    
    
    2,985
    
    
    
    760
    
    
    
    
    
    
    
    
    
    
    
    10,397Capital Lease
    
    
    291
    
    
    
    41
    
    
    
    43
    
    
    
    41
    
    
    
    
    
    
    
    
    
    
    
    416Gross Commitments
    
    
    13,648
    
    
    
    13,675
    
    
    
    12,114
    
    
    
    8,128
    
    
    
    6,453
    
    
    
    19,327
    
    
    
    73,345Sublease Income
    
    
    (460
    )
    
    
    (314
    )
    
    
    (95
    )
    
    
    (32
    )
    
    
    
    
    
    
    
    
    
    
    (901
    )Net Commitments

    

    $
    13,188
    

    
   $
    13,361
    

    
    $
    12,019
    

    
    $
    8,096
    

    
    $
    6,453
    

    
    $
    19,327
    

    
    $
    72,444
   Indemnification Obligations and Guarantees.
 Off-Balance Sheet Arrangements.
 Critical Accounting Estimates and Policies
 Goodwill and Purchased Intangible Assets
 Business Combinations Goodwill and Other Intangible Assets.
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Reportable Segments
 Disclosures about Segments of an Enterprise and Related Information,
  Effect of New Accounting Pronouncements
  
 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
  Foreign Currency Risk
     32




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Weighted
    
    
    Net FairAverage
    
    
    Value atNotional
    
    
    Contracts
    
    
    March 31,Amount
    
    
    Rate
    
    
    2007Foreign currency forward exchange contracts:Australian dollar
    
    $
    810
    
    
    
    0.8000
    
    
    $
    810Canadian dollar
    
    
    2,826
    
    
    
    1.1610
    
    
    
    2,828Czech Koruna
    
    
    (22
    )
    
    
    20.9080
    
    
    
    (22
    )Euro
    
    
    4,219
    
    
    
    1.3317
    
    
    
    4,224Hong Kong dollar
    
    
    (767
    )
    
    
    7.8044
    
    
    
    (767
    )Russian Ruble
    
    
    (687
    )
    
    
    25.8137
    
    
    
    (692
    )Singapore dollar
    
    
    8,048
    
    
    
    1.1506
    
    
    
    8,050Taiwan dollar
    
    
    312
    
    
    
    33.2010
    
    
    
    310United Kingdom Pound Sterling
    
    
    298
    
    
    
    1.9698
    
    
    
    298$
    15,037
    
    
    
    
    
    
    $
    15,039
 Interest Rate Risk
   Credit Risks
  
 ITEM 4. CONTROLS AND PROCEDURES
 Evaluation of Our Disclosure Controls and Procedures
     33




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##### Table of Contents



Remediation Plan
  Changes in Internal Control Over Financial Reporting
  
 PART II
 OTHER INFORMATION
 
 ITEM 1. LEGAL PROCEEDINGS
 Accounting for Contingencies
  
 ITEM 1A. RISK FACTORS
  34




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##### Table of Contents



Risks Relating to Our Business
 We are re-focusing the company to primarily focus on the development and distribution of enterprise
software development solutions. If we are unable to successfully complete this change to the
business quickly and smoothly, our operating results could be harmed.
  
    
    Changes in go-to-market strategy.Our ALM offerings are sold to enterprises, whereas our
CodeGear offerings are primarily sold to individual software developers. As a result, to
achieve revenue growth with our ALM strategy, we must enhance our enterprise selling
capability, increase sales force productivity and generally complete more large revenue,
multi-product sales of our ALM solutions. We will also need to further define our product
roadmaps and generally continue to evolve our ALM offerings. To do so, we must coordinate
the efforts of our marketing, sales, services and research and development organizations to
focus on the needs of large enterprises. These tasks are complicated, involve many people
and processes, and require consistency and persistence in the market place to be effective.
In addition, this enterprise-focused strategy involves different skills, partners and
competencies than our historical IDE strategy, which focused principally on sales through
distribution channels. If we fail to coordinate our efforts and deliver broader value to
large enterprise customers, our operating results may suffer.
    
    Changes in our sales organization and sales leadership.Our ALM strategy requires us to
focus our sales effort on enterprise customers. To drive these changes, we will continue to
make changes throughout our global sales force, particularly in Asia Pacific, or APAC,
markets (other than Japan and Australia) where direct sales models are being replaced in
some instances with indirect partner models. While we believe these changes will enhance our
leadership in those regions, these efforts may prove unsuccessful in increasing our sales to
enterprise customers.
    
    Changes in our sales cycles.Sales to large enterprises often involve long and
unpredictable sales cycles. We are becoming more dependent on large revenue, multi-product
transactions to meet our revenue expectations. These transactions often have long sales
cycles and we may be unable to accurately forecast revenues derived from these transactions.
If we fail to accurately forecast revenues, we may not achieve the anticipated financial
performance, which could harm our business and operating results.
    
    Changes in our marketing strategy.As part of our change in focus, we continue to
redefine our marketing strategy. We must increase lead generation and develop appropriate
marketing programs targeted at the enterprise customer. As an organization, we are
relatively new at this. If we are unable to develop effective marketing programs and
increase our pipeline of sales opportunities, or if our sales organization in turn is unable
to effectively convert leads into customers, our revenues will suffer.
    
    Changes in our services organization.In 2006, we consolidated our consulting services
and sales organizations to better focus on customer engagements. We also combined our
technical support organization with our field operations organization to more closely align
our efforts relating to customers. The implementation of these changes will continue to
require careful planning and coordination to ensure we maintain customer satisfaction. In
addition, such changes may result in the loss of key services personnel. In the event
customer satisfaction is harmed or we lose key personnel, our business could be harmed.
  35




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Our failure to efficiently complete the separation of our CodeGear division from our enterprise
business and effectively operate CodeGear could harm our operating results.
  We have experienced significant changes in our senior management team and if we are not able to
effectively integrate new senior management members, our business could be harmed.
  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.
  Our inability to forecast our revenue pipeline or convert revenue pipeline into contracts,
especially given our increasing focus on enterprise customers, could increase fluctuations in our
revenue and financial results.
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Because competition for qualified finance, technical and management personnel is intense and
because we are in the process of moving headquarters, we may not be able to recruit or retain
qualified personnel quickly, which could harm our business.
    Our success is dependent upon our ability to enhance the quality and scalability of our various
products, improve the integration and overall functionality of these products, and evolve our
solutions toward our ALM strategy.
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If we are unable to maintain revenue levels for our deployment products, our financial results may
be harmed.
  We may not be able to compete successfully against current and potential competitors.
   The complexity of accounting regulations and related interpretations and policies, particularly
those related to revenue recognition, could materially affect our financial results for a given
period.
 Software Revenue Recognition
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We, and our independent registered public accounting firm, have determined that we have a material
weakness in our internal control over financial reporting as of December 31, 2006, which was not remediated as of March 31, 2007. 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.*
     We have been 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 Global Market.
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We are in the midst of significant changes to our financial reporting and accounting team and
systems, which may impact our ability to comply with our financial reporting and accounting
obligations.
  We are in the process of moving our headquarters and 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.*
  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, such as Sun Microsystems and Microsoft,
and the loss of or inability to maintain these licenses could prevent or delay sales or shipments
of certain of our products.
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Failure to effectively 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;
    
    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.
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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.
  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.
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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 Convertible Senior Notes will dilute the ownership interests of existing
stockholders.
    Under the terms of the 2.75% Convertible Senior Notes due 2012, events that we do not control may
trigger conversion rights that, if exercised, may have an adverse effect on our liquidity.
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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.
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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;
    
    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 SECURITES
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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)In ThousandsBeginning dollar value
available to be
repurchased as of
December 30, 2006
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    59,332January 1, 2007 
January 31, 2007 (2)
    
    
    19,650
    
    
    $
    5.20
    
    
    
    
    
    
    
    February 1, 2007 
Feburary 28, 2007 (3)
    
    
    5,882,456
    
    
    $
    5.10
    
    
    
    
    
    
    
    March 1, 2007 
March 31, 2007 (4)
    
    
    57,712
    
    
    $
    4.96
    
    
    
    
    
    
    
    Total shares repurchased
    
    
    5,959,818
    
    
    $
    5.02
    
    
    
    
    
    
    $
    59,332Ending dollar value available
to be repurchased under
the Discretionary Program
as of March 31, 2007 (5)
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    59,332
 
 (1)
    
    In September 2001, our Board of Directors authorized the use of up to $30.0 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 $30.0 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 $75.0
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 three months ended March 31, 2007.(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.(3)
    
    Includes: (a) 256 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; and (b) 5,882,200 shares we repurchased at an average price of $5.10 per share for the total consideration of approximately $30.0 million in
 connection with our offering of our Convertible Senior Notes in February
2007.(4)
    
    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.(5)
    
    Consists of  $59,332,237 available for repurchase under our Discretionary Program. The restricted
stock surrendered by Borland employees in order to meet tax withholding obligations in
connection with the vesting of installments of their restricted stock awards were not repurchased under
the Discretionary Program and nor was the repurchase in connection with our offering of Convertible Senior Notes. 
 ITEM 3. DEFAULTS UPON SENIOR SECURITIES
  
 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
  
 ITEM 5. OTHER INFORMATION
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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.  47




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SIGNATURES
 th
 BORLAND SOFTWARE CORPORATION

(Registrant)/s/ ERIK E. PRUSCHErik E. PruschPrincipal Financial Officer(Principal Financial Officer and Duly Authorized Officer)
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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
    
    8-A
    
    10/31/01
    
    1Borland Software Corporation and Mellon Investor Services, L.L.C.4.2
    
    Specimen Stock Certificate of Borland Software Corporation.
    
    10-Q
    
    05/13/02
    
    4.131.1
    
    Certification of Tod Nielsen, Chief Executive Officer of Borland
    
    
    
    
    
    
    
    XSoftware Corporation, pursuant to Rule 13a-14(a).31.2
    
    Certification of Erik E. Prusch, Principal Financial Officer of
    
    
    
    
    
    
    
    XBorland Software Corporation, pursuant to Rule 13a-14(a).32.1
    
    Certification of Tod Nielsen, Chief Executive Officer of Borland
    
    
    
    
    
    
    
    XSoftware Corporation, pursuant to Rule 13a-14(b) and 18 U.S.C.Section 1350. +32.2
    
    Certification of Erik E. Prusch, Principal Financial Officer of
    
    
    
    
    
    
    
    XBorland Software Corporation, pursuant to Rule 13a-14(b) and 18U.S.C. Section 1350. +
 
 +
    
    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.