Table of Contents

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SECURITIES AND EXCHANGE COMMISSIONWASHINGTON, D.C. 20549

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|X|  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THESECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2004
OR
|   |  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________ to ____________
0-16096
(Commission File Number)
Borland Software Corporation

(Exact Name of Registrant as Specified in its Charter)



|Delaware                                                       |  | 94-2895440                          
|-------------------------------------------------------------- |  | ------------------------------------
|(State or Other Jurisdiction of Incorporation or Organization) |  | (I.R.S. Employer Identification No.)

100 ENTERPRISE WAY
SCOTTS VALLEY, CALIFORNIA
95066-3249

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(Address of Principal Executive Offices)
(Zip Code)
Registrant's Telephone Number, Including Area Code: (831) 431-1000
(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)

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

Indicate by check mark whether the registrant is an accelerated filer (as defined in
Rule 12b-2 of the Exchange Act).  YES |X| NO |   |

The number of shares of the registrant's common stock, par value $0.01 per share,
outstanding as of July 31, 2004, the most recent practicable date prior to the filing of this report, was 80,421,422.

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INDEX



|                               | PAGE                                                                                                                      
|------------------------------ | --------------------------------------------------------------------------------------------------------------------------
|PART I   FINANCIAL INFORMATION |                                                                                                                           
|Item 1.                        | Financial Statements (unaudited)                                                                                          
|                               | Condensed Consolidated Balance Sheets at June 30, 2004 and
December 31, 2003                                              
|                               | Condensed Consolidated Statements of Operations
for the three and six months endedJune 30, 2004 and 2003                  
|                               | Condensed Consolidated Statements of Comprehensive Income (Loss) for the three and six months ended
June 30, 2004 and 2003
|                               | Condensed Consolidated Statements of Cash Flows for
the six months ended June 30, 2004 and 2003                           
|                               | Notes to Condensed Consolidated Financial Statements                                                                      
|Item 2.                        | Management's Discussion and Analysis of Financial
Condition and Results of Operations                                     
|Item 3.                        | Quantitative and Qualitative Disclosures About Market Risk                                                                
|Item 4.                        | Controls and Procedures                                                                                                   
|PART II  OTHER INFORMATION     |                                                                                                                           
|Item 1.                        | Legal Proceedings                                                                                                         
|Item 2.                        | Changes in Securities, Use of Proceeds and Issuer Purchases of
Equity Securities                                          
|Item 4.                        | Submission of Matters to a Vote of Security Holders                                                                       
|Item 6.                        | Exhibits and Reports on Form 8-K                                                                                          
|                               | Signature                                                                                                                 

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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)



|                                                                                                                               | June 30,2004   |   |  | December 31,2003 |  
|------------------------------------------------------------------------------------------------------------------------------ | -------------- | - |  | ---------------- | -
|                                                                                                                               | (unaudited)    |   |  |                  |  
|ASSETS                                                                                                                         |                |   |  |                  |  
|Current assets:                                                                                                                |                |   |  |                  |  
|Cash and cash equivalents                                                                                                      | $    204,716   |   |  | $    197,023     |  
|Short-term investments                                                                                                         | 8,778          |   |  | 5,623            |  
|Accounts receivable, net of allowances of  $13,256 and
$16,825                                                                 | 45,414         |   |  | 54,989           |  
|Other current assets                                                                                                           | 14,526         |   |  | 13,333           |  
|Total current assets                                                                                                           | 273,434        |   |  | 270,968          |  
|Property and equipment, net                                                                                                    | 17,950         |   |  | 20,377           |  
|Goodwill                                                                                                                       | 182,827        |   |  | 183,303          |  
|Intangible assets, net                                                                                                         | 19,489         |   |  | 26,752           |  
|Other non-current assets                                                                                                       | 7,847          |   |  | 10,389           |  
|                                                                                                                               |                |   |  |                  |  
|Total assets                                                                                                                   | $    501,547   |   |  | $    511,789     |  
|                                                                                                                               |                |   |  |                  |  
|LIABILITIES AND STOCKHOLDERS' EQUITY                                                                                           |                |   |  |                  |  
|Current liabilities:                                                                                                           |                |   |  |                  |  
|Accounts payable                                                                                                               | $        8,133 |   |  | $     11,843     |  
|Accrued expenses                                                                                                               | 44,655         |   |  | 50,046           |  
|Short-term restructuring                                                                                                       | 1,536          |   |  | 6,783            |  
|Income taxes payable                                                                                                           | 10,805         |   |  | 6,309            |  
|Deferred revenues                                                                                                              | 50,382         |   |  | 48,330           |  
|Other current liabilities                                                                                                      | 7,846          |   |  | 7,754            |  
|Total current liabilities                                                                                                      | 123,357        |   |  | 131,065          |  
|                                                                                                                               |                |   |  |                  |  
|Long-term restructuring                                                                                                        | 3,109          |   |  | 3,979            |  
|Other long-term liabilities                                                                                                    | 9,767          |   |  | 8,877            |  
|Total liabilities                                                                                                              | 136,233        |   |  | 143,921          |  
|                                                                                                                               |                |   |  |                  |  
|Commitments and contingencies (Notes 10 and 12)                                                                                |                |   |  |                  |  
|Stockholders' equity:                                                                                                          |                |   |  |                  |  
|Common stock; $.01 par value; 200,000,000 shares
authorized;  80,808,576 and          81,001,946 shares issued and outstanding | 808            |   |  | 810              |  
|Additional paid-in capital                                                                                                     | 630,266        |   |  | 624,713          |  
|Accumulated deficit                                                                                                            | (206,637       | ) |  | (210,196         | )
|Deferred compensation                                                                                                          | (1,469         | ) |  | (2,475           | )
|Cumulative comprehensive income                                                                                                | 9,175          |   |  | 9,571            |  
|                                                                                                                               |                |   |  |                  |  
|                                                                                                                               | 432,143        |   |  | 422,423          |  
|Less: Common stock in treasury at cost, 9,029,805 and 7,671,105 shares                                                         | (66,829        | ) |  | (54,555          | )
|                                                                                                                               |                |   |  |                  |  
|Total stockholders'
equity                                                                                                     | 365,314        |   |  | 367,868          |  
|                                                                                                                               |                |   |  |                  |  
|Total liabilities and
stockholders' equity                                                                                     | $    501,547   |   |  | $    511,789     |  
|                                                                                                                               |                |   |  |                  |  

The accompanying notes are an integral part of the financial statements.

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BORLAND SOFTWARE CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts, unaudited)



|                                                                                                     | Three Months Ended June 30, |  | Six Months Ended June 30,
|---------------------------------------------------------------------------------------------------- | --------------------------- |  | -------------------------
|                                                                                                     | 2004                        |  | 2003                     
|License revenues                                                                                     | $        54,134             |  | $        56,622          
|Service revenues                                                                                     | 22,392                      |  | 19,648                   
|Net revenues                                                                                         | 76,526                      |  | 76,270                   
|                                                                                                     |                             |  |                          
|Cost of license revenues                                                                             | 1,643                       |  | 3,012                    
|Cost of service revenues                                                                             | 5,801                       |  | 7,324                    
|Amortization of acquired intangibles                                                                 | 2,375                       |  | 4,752                    
|                                                                                                     |                             |  |                          
|Cost of revenues                                                                                     | 9,819                       |  | 15,088                   
|                                                                                                     |                             |  |                          
|Gross profit                                                                                         | 66,707                      |  | 61,182                   
|                                                                                                     |                             |  |                          
|Selling, general and administrative                                                                  | 42,219                      |  | 44,395                   
|Research and development                                                                             | 17,195                      |  | 17,702                   
|Restructuring, amortization of other intangibles,     acquisition-related expenses and other charges | 1,214                       |  | 3,758                    
|                                                                                                     |                             |  |                          
|Total operating expenses                                                                             | 60,628                      |  | 65,855                   
|                                                                                                     |                             |  |                          
|Operating income (loss)                                                                              | 6,079                       |  | (4,673)                  
|Interest and other income (expense)                                                                  | (245)                       |  | 889                      
|Income (loss) before income taxes                                                                    | 5,834                       |  | (3,784)                  
|Income tax provision                                                                                 | 2,988                       |  | 1,185                    
|Net income (loss)                                                                                    | $         2,846             |  | $        (4,969)         
|                                                                                                     |                             |  |                          
|Net income (loss) per share:                                                                         |                             |  |                          
|Net income (loss) per share -- basic                                                                 | $          0.04             |  | $         (0.06)         
|Net income (loss) per share -- diluted                                                               | $          0.03             |  | $         (0.06)         
|                                                                                                     |                             |  |                          
|Shares used in computing basic net income (loss) per share                                           | 80,381                      |  | 80,547                   
|                                                                                                     |                             |  |                          
|Shares used in computing diluted net income (loss) per share                                         | 81,798                      |  | 80,547                   
|                                                                                                     |                             |  |                          

The accompanying notes are an integral part of the financial statements.

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BORLAND SOFTWARE CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(In thousands, unaudited)



|                                                                  | Three Months Ended June 30, |  | Six Months Ended June 30,
|----------------------------------------------------------------- | --------------------------- |  | -------------------------
|                                                                  | 2004                        |  | 2003                     
|Net income (loss)                                                 | $         2,846             |  | $        (4,969)         
|Other comprehensive income (loss):                                |                             |  |                          
|Foreign currency translation adjustments                          | (56)                        |  | 1,126                    
|Fair market value adjustment for available-for-sale    securities | --                          |  | 11                       
|                                                                  |                             |  |                          
|Comprehensive income (loss)                                       | $         2,790             |  | $        (3,832)         
|                                                                  |                             |  |                          



The accompanying notes are an integral part of the financial statements.

3

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BORLAND SOFTWARE CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands, unaudited)



|                                                                                                      | Six Months Ended June 30,
|----------------------------------------------------------------------------------------------------- | -------------------------
|                                                                                                      | 2004                     
|CASH FLOWS FROM OPERATING ACTIVITIES:                                                                 |                          
|Net income (loss)                                                                                     | $      3,559             
|Adjustments to reconcile net income (loss) to net cash provided
by (used in) operating    activities: |                          
|Depreciation and amortization                                                                         | 10,805                   
|Amortization of deferred stock
compensation                                                           | 380                      
|Write-off of loan receivable                                                                          | --                       
|Loss on disposal of fixed asset                                                                       | 11                       
|Changes in Assets and Liabilities, Net of Effect of Business Acquisitions:                            |                          
|Accounts receivable                                                                                   | 9,062                    
|Other assets                                                                                          | 1,563                    
|Accounts payable and accrued expenses                                                                 | (8,896)                  
|Income taxes payable                                                                                  | 5,706                    
|Short-term restructuring                                                                              | (5,247)                  
|Deferred revenues                                                                                     | 2,510                    
|Other                                                                                                 | (1,531)                  
|                                                                                                      |                          
|Cash provided by (used in) operating
activities                                                       | 17,922                   
|                                                                                                      |                          
|CASH FLOWS FROM INVESTING ACTIVITIES:                                                                 |                          
|Purchase of property and equipment                                                                    | (1,099)                  
|Acquisition of Starbase, net of cash acquired                                                         | --                       
|Acquisition of TogetherSoft, net of cash acquired                                                     | --                       
|Purchases of short-term investments                                                                   | (7,379)                  
|Sales and maturities of short-term investments                                                        | 4,224                    
|Cash used in investing activities                                                                     | (4,254)                  
|                                                                                                      |                          
|CASH FLOWS FROM FINANCING ACTIVITIES:                                                                 |                          
|Proceeds from issuance of common stock, net                                                           | 6,190                    
|Repurchase of common stock                                                                            | (12,287)                 
|                                                                                                      |                          
|Cash provided by (used in) financing
activities                                                       | (6,097)                  
|                                                                                                      |                          
|Effect of exchange rate changes on cash                                                               | 122                      
|                                                                                                      |                          
|Net change in cash and cash equivalents                                                               | 7,693                    
|Cash and cash equivalents at beginning of period                                                      | 197,023                  
|Cash and cash equivalents at end of period                                                            | $   204,716              
|                                                                                                      |                          

The accompanying notes are an integral part of the financial statements.

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BORLAND SOFTWARE CORPORATION
Notes to Condensed Consolidated Financial Statements (unaudited)

NOTE 1--BASIS OF PRESENTATION

The accompanying Borland Software Corporation, or Borland, condensed consolidated
financial statements at June 30, 2004 and December 31, 2003 and for the three and six months ended June 30, 2004 and 2003, are unaudited and have been
prepared in accordance with accounting principles generally accepted in the United States (GAAP) for interim financial information and Rule 10-01 of
Regulation S-X. Accordingly, they do not include all financial information and disclosures required by GAAP for complete financial statements and certain
information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted. The
unaudited interim condensed consolidated financial statements have been prepared on the same basis as the annual consolidated financial statements and,
in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary to present fairly Borland's financial
position at June 30, 2004 and December 31, 2003, and its results of operations and cash flows for the three and six months ended June 30, 2004 and 2003.
Certain amounts in the three and six months ended June 30, information have been reclassified in order to be consistent with current financial statement
presentation. See Note 6 to our Notes to Condensed Consolidated Financial Statements for information regarding our reclassifications of amortization of
intangible assets.

The preparation of condensed consolidated financial statements in conformity with GAAP
requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting period. Actual results could differ
from those estimates. The results of operations for interim periods are not necessarily indicative of the results to be expected for any subsequent quarter
or for the full year. The condensed consolidated financial statements and notes should be read in conjunction with our audited financial statements included
in our Annual Report on Form 10-K for the fiscal year ended December 31, 2003 as filed with the Securities and Exchange Commission, or the SEC, on
March 15, 2004.

Due to the nature of our products and the customers we serve, we have very few contracts
that are accounted for under Statement of Position 81-1 (SOP 81-1) Accounting Performance of Construction-Type and Certain Production-Type Contracts. The majority of our consulting engagements are accounted for on a time and material basis.

NOTE 2--STOCK BASED COMPENSATION

Stock-Based Compensation Plans

We account for stock-based compensation using the intrinsic value method prescribed
in Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees," or APB 25, and related interpretations. Under APB 25,
compensation expense is measured as the excess, if any, of the closing market price of our stock at the date of grant over the exercise price of the option
granted. We recognize compensation cost for stock options, if any, ratably over the vesting period. Generally, we grant options with an exercise price equal
to the closing market price of our stock on the grant date. Accordingly, we have not recognized any compensation expense for our stock option plans. We
have also granted restricted stock awards to certain officers and other executives as an incentive to retain key employees. The awarded shares are made
in common stock and vest at the end of the restriction period. Upon issuance of the award, an amount equivalent to the excess of the market price of the
shares awarded over the price paid by the recipient at the date of grant is recorded in deferred compensation and is amortized using a straight line method
against income over the related vesting period. We provide additional pro forma disclosures as required under Statement of Financial Accounting Standards
No. 123, "Accounting for Stock-Based Compensation," or SFAS No. 123, as amended by SFAS No. 148, "Accounting for Stock-Based Compensation-
Transition and Disclosure-an amendment of FASB Statement No. 123," or SFAS No. 148.

Pro Forma Net Income (Loss) and Pro Forma Net Income (Loss) Per Share

Compensation expense included in pro forma net income (loss) and pro forma net
income (loss) per share is recognized for the fair value of the awards granted under our stock option and stock purchase plans using the Black-Scholes
pricing model. The fair value of each stock option is estimated on the date of grant using the Black-Scholes pricing model with the following weighted
average assumptions:

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|                        | Three Months Ended June 30, |  | Six Months Ended June 30,
|----------------------- | --------------------------- |  | -------------------------
|                        | 2004                        |  | 2003                     
|Expected life           | 4.16 years                  |  | 4.50 years               
|Risk-free interest rate | 3.72%                       |  | 2.57%                    
|Volatility              | 47.0%                       |  | 62.0%                    
|Dividend yield          | 0.00%                       |  | 0.00%                    

The fair value of each employee stock purchase plan award is estimated using
the Black-Scholes pricing model with the following weighted average assumptions:



|                        | Three Months Ended June 30, |  | Six Months Ended June 30,
|----------------------- | --------------------------- |  | -------------------------
|                        | 2004                        |  | 2003                     
|Expected life           | 1.0 years                   |  | 1.0 years                
|Risk-free interest rate | 1.24%                       |  | 1.56%                    
|Volatility              | 52.0%                       |  | 62.0%                    
|Dividend yield          | 0.00%                       |  | 0.00%                    

The weighted average fair value of the stock options granted under our employee
stock option plans and the stock awarded under our employee stock purchase plan during the three months ended June 30, 2004 and 2003, as defined by SFAS
No. 123, was $4.27 and $5.94, respectively, and was $4.28 and $7.69 for the six months ended June 30, 2004 and 2003, respectively.

Had we recorded compensation expenses based on the estimated grant date fair value for
awards granted under our stock option and stock purchase plans as defined by SFAS No. 123, our pro forma net loss and net loss per share for the three
and six months ended June 30, 2004 and 2003 would have been as follows (in thousands, except per share amounts):



|                                                 | Three Months Ended June 30, |  | Six Months Ended June 30,
|------------------------------------------------ | --------------------------- |  | -------------------------
|                                                 | 2004                        |  | 2003                     
|Net income (loss):                               |                             |  |                          
|As reported                                      | $      2,846                |  | $     (4,969)            
|Stock compensation adjustment -- intrinsic value | 7                           |  | (35)                     
|Stock compensation expense -- fair value         | (1,387)                     |  | (6,622)                  
|Pro forma                                        | $      1,466                |  | $    (11,626)            
|                                                 |                             |  |                          
|Net income (loss) per share:                     |                             |  |                          
|As reported -- basic                             | $       0.04                |  | $       (0.06)           
|As reported -- diluted                           | $       0.03                |  | $       (0.06)           
|Pro forma -- basic                               | $       0.02                |  | $       (0.14)           
|Pro forma -- diluted                             | $       0.02                |  | $       (0.14)           

The pro forma amounts include compensation expenses related to stock option grants and stock
purchase rights for the three and six months ended June 30, 2004 and 2003. In future periods, compensation expense may increase as a result of the fair
value of stock options and stock purchase rights granted in those future periods.

NOTE 3--NET INCOME (LOSS) PER SHARE

We compute net income (loss) per share in accordance with SFAS No. 128, "Earnings
per Share," or SFAS No. 128. Under the provisions of SFAS No. 128, basic net income (loss) per share is computed by dividing the net income (loss) by
the weighted average number of common shares outstanding during the period. Diluted net income per share is computed by dividing the net income for the
period by the weighted average number of common and potentially diluted shares outstanding during the period. Potentially diluted shares, which consist of
incremental shares issuable upon exercise of stock options, are included in diluted net income per share to the extent such shares are dilutive. Diluted
net loss per share is the same as the basic net loss per share for the three and six months ended June 30, 2003.

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The following table sets forth the computation of basic and diluted net income (loss) per
share for the three and six months ended June 30, 2004 and 2003 (in thousands, except per share amounts):



|                                                                                     | Three Months Ended June 30, |  | Six Months Ended June 30,
|------------------------------------------------------------------------------------ | --------------------------- |  | -------------------------
|                                                                                     |                             |  |                          
|                                                                                     | 2004                        |  | 2003                     
|                                                                                     |                             |  |                          
|Numerator:                                                                           |                             |  |                          
|Net income (loss)                                                                    | $      2,846                |  | $     (4,969)            
|Denominator:                                                                         |                             |  |                          
|Denominator for basic income (loss) per share -- weighted average shares outstanding | 80,381                      |  | 80,547                   
|Effect of dilutive securities                                                        | 1,417                       |  | --                       
|                                                                                     |                             |  |                          
|Denominator for diluted income (loss) per share                                      | 81,798                      |  | 80,547                   
|                                                                                     |                             |  |                          
|Net income (loss) per share -- basic                                                 | $       0.04                |  | $      (0.06)            
|                                                                                     |                             |  |                          
|Net income (loss) per share -- diluted                                               | $       0.03                |  | $      (0.06)            
|                                                                                     |                             |  |                          

The diluted earnings (loss) per share calculation for the three months ended
June 30, 2004 and 2003 excludes options to purchase approximately 7.9 million and 14.7 million shares, respectively, because their effect would have been
antidilutive. The diluted earnings (loss) per share calculation for the six months ended June 30, 2004 and 2003 excludes options to purchase approximately
7.4 million and 5.3 million shares, respectively, because their effect would have been antidilutive.

NOTE 4--BUSINESS RISK

Transition of Sales Cycle

We are in the process of transforming the company from one focused on selling
individual development tools alone to one focused on selling multi-product enterprise solutions that span the entire software application development
lifecycle. As part of this transformation, we are focused on increasing sales force productivity by generating more sales of our multi-product solutions,
developing stronger alliances with systems integrators and technology partners that have established relationships with enterprise-level customers, and
selling our individual products through our network of channel partners. As we make the transition to selling enterprise solutions, we expect to compete
more directly with larger companies and, as a result, we may face additional pricing pressures, longer sales cycles, and more complex revenue agreements.
          As a result of our transformation efforts we have expected sales of our multi-product enterprise
solutions to become a larger percentage of total revenues and one enterprise-level, multi-product solutions customer, British Telecommunications plc,
located in the United Kingdom, represented 11% of our revenues in the three months ended June 30, 2004. No single customer represented 10% or more of our
total revenues in the six months ended June 30, 2004 or in the three or six months ended June 30, 2003.

NOTE 5--ACQUISITIONS

TogetherSoft Corporation

On January 14, 2003, we completed the acquisition of TogetherSoft Corporation, or
TogetherSoft, a privately-held corporation. The consideration consisted of approximately $82.5 million in cash, 9,050,000 shares of Borland common stock
and the assumption of certain liabilities and obligations of TogetherSoft, including those arising under its stock option plans. The consideration paid
was reduced for certain legal expenses paid by TogetherSoft. Approximately $22.8 million of the total consideration is being held in escrow to indemnify
us against, and reimburse us for, certain events and cover certain liabilities and transaction costs. Unused funds will be released from escrow at certain
times between 2004 and 2007.

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During the three and six months ended June 30, 2004, we recorded approximately $2.8 million
and $5.8 million, respectively, in acquisition-related expenses associated with the amortization of the purchased intangibles from the acquisition of
TogetherSoft.

Of the total purchase price, approximately $150.9 million was allocated to goodwill.
Goodwill represents the excess of the purchase price over the fair value of the net tangible and intangible assets acquired. In accordance with SFAS No.
142, "Goodwill and Other Intangible Assets," or SFAS No. 142, goodwill is not being amortized and is tested for impairment annually during the three
months ending September 30, as well as when circumstances indicate a possible impairment.

Supplemental pro forma information reflecting the acquisition of TogetherSoft as if it
occurred on January 1, 2003 is as follows (in thousands, except per share amounts, unaudited):



|                   | Six Months Ended June 30, 2003
|------------------ | ------------------------------
|                   |                               
|Total net revenues | $      150,640                
|Net loss           | $     (23,239)                
|Net loss per share | $         (0.29)              

Such information is not necessarily representative of the actual results that would have occurred for those periods.

The following table summarizes the short-term portion of our restructuring activity related
to the TogetherSoft acquisition accounted for according to The Emerging Issues Task Force Issue No. 95-3, or EITF 95-3, for the six months ended June 30,
2004 (in thousands):



|                                              | Severanceand Benefits |  | Facilities |  | Total     
|--------------------------------------------- | --------------------- |  | ---------- |  | ----------
|Accrual at December 31, 2003                  | $       405           |  | $      147 |  | $      552
|Cash payments                                 | (85)                  |  | (146)      |  | (231)     
|Reclassification from long-term restructuring | --                    |  | 79         |  | 79        
|                                              |                       |  |            |  |           
|Accrual at June 30, 2004                      | $       320           |  | $       80 |  | $      400
|                                              |                       |  |            |  |           

We expect the amount held in our severance and benefits accrual at June 30, 2004 to be fully
paid by the end of 2004, and we are currently seeking to sublet or terminate the leases on our vacant facilities.

Starbase Corporation

On October 8, 2002, we signed a merger agreement to purchase all of the outstanding
shares of Starbase Corporation, or Starbase, for an aggregate consideration of approximately $24.0 million and $2.0 million in bridge financing that was
forgiven upon the consummation of the transaction. Starbase was a provider of enterprise software lifecycle solutions covering requirements definition and
management, code and content development, and change and configuration management.

During the three and six months ended June 30, 2004, we recorded approximately $0.7 million
and $1.4 million, respectively, in acquisition-related expenses associated with the amortization of the purchased intangibles from the acquisition of
Starbase.

NOTE 6--GOODWILL AND INTANGIBLE ASSETS

The changes in the carrying amount of goodwill for the six months ended June 30, 2004
are as follows (in thousands):



|                                           | Total        
|------------------------------------------ | -------------
|Balance as of Decmeber 31, 2003            | $     183,303
|Adjustments to initial purchase accounting | (476)        
|Balance as of June 30, 2004                | $     182,827
|                                           |              

The adjustments to goodwill during the six months ended June 30, 2004 are related to reversals
of accrued expenses and other reserves originally recorded as part of the purchase accounting for our Togethersoft and Starbase acquisitions and includes
adjustments due to fluctuations in foreign currency exchange rates during the six months ended June 30, 2004.

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The following tables summarize our intangible assets, net (in thousands):



|                                          | June 30, 2004      
|----------------------------------------- | -------------------
|                                          | Gross carryingvalue
|Acquired technology                       | $       30,495     
|Service/maintenance agreements            | 8,700              
|Trademarks, trade names and service marks | 8,300              
|Other                                     | 4,975              
|Total                                     | $       52,470     
|                                          |                    





|                                          | December 31, 2003  
|----------------------------------------- | -------------------
|                                          | Gross carryingvalue
|Acquired technology                       | $       30,495     
|Service/maintenance agreements            | 8,700              
|Trademarks, trade names and service marks | 8,300              
|Other                                     | 4,975              
|Total                                     | $       52,470     
|                                          |                    



Estimated future amortization expense related to our intangible assets at June 30, 2004 is
as follows (in thousands):



|                  | June 30, 2004
|----------------- | -------------
|2004 (six months) | $      7,051 
|2005              | 12,098       
|2006              | 340          
|                  |              
|Total             | $     19,489 
|                  |              



We have reclassified from operating expenses to cost of revenues the amortization of
acquired technology and maintenance contracts for the three and six months ended June 30, 2003 to provide consistent presentation with the three and
six months ended June 30, 2004. This reclassification did not impact total net revenues, net loss, or net loss per share for the three or six months
ended June 30, 2003. The effect of the reclassification on the Condensed Consolidated Statements of Operations is as follows (in thousands):



|                                     | Three Months Ended June 30, 2003 |  | Six Months Ended June 30, 2003
|------------------------------------ | -------------------------------- |  | ------------------------------
|                                     | As Previously Reported           |  | As Revised                    
|Amortization of acquired intangibles | $              --                |  | $      4,752                  
|Total cost of revenues               | $      10,336                    |  | $    15,088                   
|Gross profit                         | $      65,934                    |  | $    61,182                   
|Total operating expenses             | $      70,607                    |  | $    65,855                   

NOTE 7--RESTRUCTURING

The following table summarizes our short-term restructuring and acquisition-related
activity accounted for according to SFAS No. 146, "Accounting for Costs Associated with Exit or Disposal Activities," for the six months ended
June 30, 2004 (in thousands):

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|                                              | Severance and Benefits |  | Facilities |  | Other      |  | Total     
|--------------------------------------------- | ---------------------- |  | ---------- |  | ---------- |  | ----------
|Accrual at December 31, 2003                  | $    3,499             |  | $    2,258 |  | $      474 |  | $    6,231
|Cash payments and write-offs                  | (2,324)                |  | (2,396)    |  | (166)      |  | (5,886)   
|Reclassification from long-term restructuring | --                     |  | 791        |  | --         |  | 791       
|                                              |                        |  |            |  |            |  |           
|Accrual at June 30, 2004                      | $      175             |  | $     653  |  | $      308 |  | $    1,136
|                                              |                        |  |            |  |            |  |           

During the three and six months ended June 30, 2004, we reclassified approximately $0.3 million
and $0.8 million, respectively, from our long-term restructuring accrual to short-term restructuring accrual to properly reflect the current portion of the
lease obligations for vacant facilities in the United Kingdom. At June 30, 2004, we had approximately $3.1 million in our long-term restructuring accrual
related to the lease obligations for vacant facilities. During the six months ended June 30, 2004, we paid approximately $1.5 million in cash for the
termination of a facility lease which is included in cash payments and write-offs under facilities in the table above. We expect our severance and benefits
and other accruals to be fully paid by the end of 2004, and we are currently seeking to sublet or terminate the leases on our vacant facilities.

During the three and six months ended June 30, 2004, we reversed $0.6 million and $0.7
million, respectively, in restructuring expenses related to changes in estimates of outplacement costs and lease termination accruals for abandoned
facilities.

NOTE 8--INCOME TAXES

For the three months ended June 30, 2004 and 2003, we recorded income tax expense of
$3.0 million and $1.2 million, respectively. For the six months ended June 30, 2004 and 2003, we recorded income tax expense of $4.9 million and $2.7
million, respectively. Our tax provisions for the three and six months ended June 30, 2004 and 2003 were not based on our expected annual rate, as we
incurred non-U.S. withholding taxes in a number of foreign jurisdictions, which were not based on our profitability, as well as non-U.S. income taxes
for certain profitable foreign operations.  We also incurred U.S. federal tax expense for Alternative Minimum Tax, or AMT, purposes, as well as state
income tax expense. Tax liabilities incurred in foreign jurisdictions were not offset by the benefits of prior U.S. net operating loss and tax credit
carryforwards.

NOTE 9--REPURCHASE OF COMMON STOCK

Discretionary Repurchase Program

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. In early 2004 the plan approached its $30.0 million
limit and in February 2004, our Board of Directors authorized an additional $30.0 million to repurchase shares of our outstanding stock under the
discretionary program, bringing the total discretionary stock repurchase authorizations to $60.0 million.

As a part of our discretionary stock repurchase program, we repurchased 589,600 common
shares at an average price of $8.48 per share for an aggregate cost of approximately $5.0 million during the three months ended June 30, 2004. We
repurchased 1,112,700 common shares at an average price of $8.99 per share for an aggregate cost of approximately $10.0 million during the six months
ended June 30, 2004.

During the three months ended June 30, 2003, we repurchased 395,000 common shares at an
average price of $9.91 per share for an aggregate cost of approximately $3.9 million. We repurchased 695,000 common shares at an average price of $9.78
per share for an aggregate cost of approximately $6.8 million during the six months ended June 30, 2003.

The discretionary program is currently deemed to be in effect and at June 30, 2004,
approximately $22.7 million remains authorized for future repurchases.

10b5-1 Repurchase Program

In August 2003, our Board of Directors authorized a 10b5-1 repurchase program
whereby up to 1,000,000 shares or $15.0 million worth of our outstanding common stock, whichever comes first, may be repurchased with a per trading day
limit of 2,000 shares. Under this program we repurchased 122,000 common shares at an average price of $8.84 a share for an aggregate cost of $1.1 million
during the three months ended June 30, 2004 and repurchased 246,000 common shares at an average price of $9.27 a share for an aggregate cost of $2.3
million during the six months ended June 30, 2004.

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This 10b5-1 repurchase program is currently deemed to be in effect and at June 30, 2004
approximately $10.9 million, or 554,000 shares, whichever comes first, remains authorized for future repurchases.

NOTE 10--LITIGATION

On November 27, 2002, a stockholder class action and derivative lawsuit, Dieterich v.
Harrer, et al., Case No. 02CC00350, was filed against Starbase Corporation, or Starbase, and five former directors of Starbase in the Superior Court of
the State of California for Orange County, claiming that the former directors had breached fiduciary duties owed to Starbase and stockholders of Starbase.
We are paying the costs of defending this litigation pursuant to indemnification obligations under the merger agreement relating to our acquisition of
Starbase. Following a series of motions, the case was dismissed without prejudice on August 20, 2003. On October 28, 2003, a stockholder class action
relating to the same matter, Dieterich v. Harrer, et al, Case No. 024-N, was filed against the former directors of Starbase in Chancery Court of the
State of Delaware, alleging breach of fiduciary duties by the former directors of Starbase, Borland, Dale L. Fuller, Keith E. Gottfried, Frederick A. Ball,
and Doug Barre. We intend to defend ourselves vigorously. There is no indication at present whether the lawsuit will have a material effect on our financial condition or
liquidity.

From time to time, we may be involved in other lawsuits, claims, investigations and
proceedings, consisting of intellectual property, commercial, employment and other matters, which arise in the ordinary course of business. In accordance
with SFAS No. 5, "Accounting for Contingencies," or SFAS No. 5, we make a provision for a liability when it is both probable that a liability has
been incurred and the amount of the loss can be reasonably estimated. These accruals are reviewed at least quarterly and adjusted to reflect the impacts
of negotiations, settlements, rulings, advice of legal counsel and other information and events pertaining to a particular case. Litigation is inherently
unpredictable. However, we believe that we have valid defenses with respect to the legal matters pending against us, as well as adequate accruals for
any probable and estimable losses. If an unfavorable ruling were to occur in any specific period, there exists the possibility of a material adverse impact
on the results of operations for that period. We believe that, except as listed above, given our current liquidity and cash and investment balances, even
were we to receive an adverse judgment with respect to litigation that we are currently a party to, it is likely that such a judgment would not have a
material impact on our financial condition or liquidity.

NOTE 11--LOAN RECEIVABLE WRITE-OFF

During the first quarter of 2003, we had a loan receivable with a book value of $2.2
million related to our investment in AltoWeb, Inc., or AltoWeb, a provider of J2EE applications. Subsequent to March 31, 2003, we were informed by AltoWeb
that it had ceased substantially all of its operations and we recorded a $2.2 million write-off charge for the loan during the three months ended
March 31, 2003. Since our investment in Altoweb was related to AltoWeb's attempt to extend their product development efforts for the Borland platform,
we recorded the loan write-off charge in research and development.

NOTE 12--INDEMNIFICATIONS AND GUARANTEES

The following is a summary of our agreements that we have determined are within the
scope of FASB Interpretation No. 45, "Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness
of Others," or FIN No. 45, which are specifically grandfathered because the guarantees were in effect prior to December 31, 2002. Accordingly, we have
no liabilities recorded for these agreements as of June 30, 2004, except as noted below.

As permitted under Delaware law, we have agreements whereby we indemnify our officers and
directors for certain events or occurrences while the officer or director is, or was serving, at our request in such capacity. The term of the
indemnification period is for the officer or director's lifetime. The maximum potential amount of future payments we could be required to make under these
indemnification agreements is unlimited; however, we have a Director and Officer insurance policy that limits our exposure and enables us to recover a
portion of any future amounts paid. As a result of our insurance policy coverage, we believe the estimated fair value of these indemnification agreements
is minimal.

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As part of the Starbase and TogetherSoft acquisitions, we entered into agreements whereby
we indemnify the officers and directors of the acquired company for certain events or occurrences while such officers or directors served in such capacity.
The term of the indemnification period is for the officer's or director's lifetime. The maximum potential amount of future payments we could be required
to make under these indemnification agreements is unlimited; however, we have purchased Director and Officer insurance policies for Starbase and
TogetherSoft that limit our exposure for six years. These insurance policies enable us to recover a portion of any future amounts paid. As a result of our
insurance policy coverage, we believe the estimated fair value of these indemnification agreements is minimal.

We entered into an agreement for the outsourcing of inventory fulfillment. As a component
of this agreement, we guarantee that in the event we terminate the fulfillment agreement, we will purchase all inventory held by the vendor at the time of
termination. We estimate and accrue reserves for excess inventory at the fulfillment vendor. As of June 30, 2004, we had inventory in excess of the reserves
of approximately $0.3 million, which represents the potential charge relating to this guarantee.

During the year ended December 31, 2003, we entered into an operating lease for our U.S.
regional sales headquarters in Cupertino, California. In the event that we do not exercise our option to extend the term of the lease, we guarantee certain
costs to restore the property to certain conditions in place at the time the lease commenced. We are accruing the estimated lease restoration costs over
the lease term.

During 1999, we entered into a ten-year operating lease for our corporate headquarters
buildings in Scotts Valley, California. In the event that we do not exercise our option to extend the term of the lease, we guarantee certain costs to
restore the property to certain conditions in place at the time the lease commenced. We believe the estimated fair value of this guarantee is minimal.

We enter into standard indemnification agreements in our ordinary course of business.
Pursuant to these agreements, we indemnify and agree to repair, replace or reimburse the indemnified party for losses suffered or incurred by the
indemnified party, generally our business partners or customers, in connection with any U.S. patent, or any copyright or other intellectual property
infringement claim by any third party with respect to our products. The term of these indemnification agreements is generally perpetual. The maximum
potential amount of future payments we could be required to make under these indemnification agreements is presently unknown. We have never incurred
costs to defend lawsuits or settle claims related to these indemnification agreements. As a result, we believe the estimated fair value of these agreements
is minimal.

NOTE 13--RECENT ACCOUNTING PRONOUNCEMENTS

In December 2003, the FASB issued additional guidance clarifying the provisions of FASB
Interpretation No. 46, "Consolidation of Variable Interest Entities, an Interpretation of ARB No. 51," or FIN No. 46-R. FIN No. 46-R provides a
deferral of FIN No. 46 for certain entities. FIN No. 46 requires certain variable interest entities to be consolidated by the primary beneficiary of the
entity if the equity investors in the entity do not have the characteristics of a controlling financial interest or do not have sufficient equity at risk
for the entity to finance its activities without additional subordinated financial support from other parties. We do not have any interests in variable
interest entities and the adoption of FIN No. 46-R is not expected to have a material impact on our financial position, results of operations or cash flows.

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Item 2.  Management's Discussion and Analysis of Financial Condition and Results of Operations

Forward-Looking Statements

The statements made throughout this Quarterly Report on Form 10-Q that are not
historical facts are forward-looking statements and, accordingly, involve estimates, projections, goals, forecasts, assumptions and uncertainties that
could cause actual results or outcomes to differ materially from those expressed or implied in the forward-looking statements.

These forward-looking statements may relate to, but are not limited to, future capital
expenditures, acquisitions, timing of the integration of acquired businesses, the ultimate cost of acquired businesses, revenue "pipeline," revenues,
including revenues from recently acquired businesses, cash flows, earnings, margins, costs, strategy, demand for our products, market and technological
trends in the software industry, effective tax rates, interest rates, foreign currency exchange rates, inflation and various economic and business trends.
Generally, you can identify forward-looking statements by the use of words such as "expect," "estimate," "project," "budget," "forecast," "anticipate,"
"goal," "intend," "plan," "may," "will," "could," "should," "believes," "predicts," "potential," "continue" and similar expressions or the negative or
other variations thereof. These forward-looking statements involve substantial risks and uncertainties. Examples of such risks and uncertainties are
described under "Factors That May Affect Future Results and Market Price of Stock" and elsewhere in this report, as well as in our other filings with the
SEC or in materials incorporated by reference herein or therein. You should be aware that the occurrence of any of these risks and uncertainties may cause
our actual results to differ materially from those anticipated in our forward-looking statements and have a material and adverse effect on our business,
results of operations and financial condition. New factors may emerge from time to time, and it is not possible for us to predict new factors, nor can we
assess the potential effect of any new factors on us.

These forward-looking statements are found at various places throughout this Form 10-Q. We
caution you not to place undue reliance on these forward-looking statements, which, unless otherwise indicated, speak only as of the date they were made.
We do not undertake any obligation to update or release publicly any revisions to these forward-looking statements to reflect events or circumstances after
the date of this Form 10-Q, except as required by law.

General

We are a leading global provider of software development and deployment solutions
that are designed to accelerate the application development lifecycle. We provide our customers solutions that help them deliver better software faster
and manage software development projects from beginning to end. By connecting managers, testers, designers and developers, our solutions are designed to
improve software quality, accelerate the delivery of software, lower the cost of ownership and reduce the risk of project failure.  In support of our
solutions, we also provide training, consulting and support services through our professional services organization.

Over the past year, we have been transforming the company from one focused on selling
individual development tools alone to one focused on selling multi-product enterprise solutions that span the entire software application development
lifecycle. As part of this transformation, we are focused on increasing sales force productivity by generating more sales of our multi-product solutions,
developing stronger alliances with systems integrators and technology partners that have established relationships with enterprise-level customers, and
selling our individual products through our network of channel partners. As we make the transition to selling enterprise solutions, we expect to compete
more directly with larger companies. As a result, we may face additional pricing pressures. We believe that, over time as we compete for these larger
enterprise customers, the pricing of our individual products may become less meaningful than the overall blend of our enterprise solutions offered.
We also expect to experience longer sales cycles, which is typical for larger solution sales.

We are and have been transitioning certain product lines into a "software assurance"
model in which upgrades are sold as part of a customer's maintenance offering and are reported as service revenues instead of license revenues as is the
case when sold as stand-alone product upgrades.  Additionally, we are selling software assurance contracts with greater frequency to our enterprise
customers. Typically, enterprise customers purchase software assurance with significant license commitments to reduce the risk of technological
obsolescence. As such, our service revenues have become a larger portion of our business.

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We remain focused on improving operating margins. We believe we are structured appropriately
at this time and expect our overall expenses will increase slightly as we pursue our enterprise marketing and selling strategy and we incur additional
expenses in connection with our Sarbanes-Oxley testing and compliance project.

We achieved the following financial results during the three and six months ended June 30,
2004:

| | · | Net revenues increased to $76.5 million for the three months ended June 30, 2004 from $76.3 million for the three months ended June 30,
2003. For the six months ended June 30, 2004, net revenues decreased 1% to $149.4 million from $150.6 million for the six months ended June 30,
2003.                                                                                                            
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | · | License revenues decreased 4% to $54.1 million for the three months ended June 30, 2004 from $56.6 million for the three months ended
June 30, 2003. For the six months ended June 30, 2004, license revenues decreased 7% to $105.0 million from $113.4 million for the six months ended
June 30, 2003.                                                                                                 
| | · | Service revenues increased 14% to $22.4 million for the three months ended June 30, 2004 from $19.6 million for the three months ended
June 30, 2003. For the six months ended June 30, 2004, service revenues increased 19% to $44.4 million from $37.2 million for the six months ended
June 30, 2003.                                                                                                 
| | · | Gross margins increased to 87% for the three months ended June 30, 2004 from 80% for the three months ended June 30, 2003. For the six
months ended June 30, 2004, gross margins increased to 86% from 81% for the six months ended June 30, 2003.                                                                                                                                                       
| | · | Operating expenses decreased 8% to $60.6 million for the three months ended June 30, 2004 from $65.9 million for the three months ended
June 30, 2003. For the six months ended June 30, 2004, operating expenses decreased 17% to $119.7 million from $143.6 million for the six months ended
June 30, 2003.                                                                                            
| | · | Net income was $2.8 million for the three months ended June 30, 2004 compared to a net loss of $5.0 million for the three months ended
June 30, 2003. For the six months ended June 30, 2004, net income was $3.6 million compared to a net loss of $22.7 million for the six months ended June
30, 2003.                                                                                                
| | · | Expenses from the amortization of acquired and other intangible assets decreased to $3.5 million for the three months ended June 30, 2004
from $5.9 million for the three months ended June 30, 2003. For the six months ended June 30, 2004, expenses from the amortization of acquired and other
intangible assets decreased to $7.3 million from $11.2 million for the six months ended June 30, 2003.
| | · | Cash, cash equivalents and short-term investments increased $10.9 million to $213.5 million as of June 30, 2004 from $202.6
million as of December 31, 2003.                                                                                                                                                                                                                                             
| | · | We repurchased 711,600 shares of our common stock under our stock repurchase programs for an aggregate cost of approximately $6.1 
million during the three months ended June 30, 2004 and we repurchased 1,358,700 shares of our common stock for an aggregate cost of $12.3 million during
the six months ended June 30, 2004.                                                                         

For a more in-depth discussion of our business, including a discussion of our critical
accounting policies and estimates, please read our Annual Report on Form 10-K for the year ended December 31, 2003 as filed with the SEC on March 15,
2004.

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Results of Operations

The following table presents our Condensed Consolidated Statements of Operations
data and the related percentage of net revenues for the three and six months ended June 30, 2004 and 2003 (dollars in thousands):



|                                                                                                   | Three Months Ending June 30, |      | Six Months Ending June 30,
|-------------------------------------------------------------------------------------------------- | ---------------------------- | ---- | --------------------------
|                                                                                                   | 2004                         |      | 2003                      
|License revenues                                                                                   | $  54,134                    | 71%  |                           
|Service revenues                                                                                   | 22,392                       | 29%  |                           
|Net revenues                                                                                       | 76,526                       | 100% |                           
|                                                                                                   |                              |      |                           
|Cost of license revenues                                                                           | 1,643                        | 2%   |                           
|Cost of service revenues                                                                           | 5,801                        | 8%   |                           
|Amortization of acquired intangibles (*)                                                           | 2,375                        | 3%   |                           
|                                                                                                   |                              |      |                           
|Cost of revenues                                                                                   | 9,819                        | 13%  |                           
|                                                                                                   |                              |      |                           
|Gross profit                                                                                       | 66,707                       | 87%  |                           
|                                                                                                   |                              |      |                           
|Selling, general and administrative                                                                | 42,219                       | 55%  |                           
|Research and development                                                                           | 17,195                       | 22%  |                           
|Restructuring, amortization of other  intangibles, acquisition-related expenses and  other charges | 1,214                        | 2%   |                           
|                                                                                                   |                              |      |                           
|Total operating expenses                                                                           | 60,628                       | 79%  |                           
|                                                                                                   |                              |      |                           
|Operating income (loss)                                                                            | 6,079                        | 8%   |                           
|Interest and other income (expense)                                                                | (245)                        | 0%   |                           
|Income (loss) before income taxes                                                                  | 5,834                        | 8%   |                           
|Income tax provision                                                                               | 2,988                        | 4%   |                           
|Net income (loss)                                                                                  | $   2,846                    | 4%   |                           
|                                                                                                   |                              |      |                           





> *  We have reclassified from operating expenses to cost of revenues the amortization of purchased technology and maintenance contracts for
> the three and six months ended June 30, 2003 to provide consistent      presentation with the three and six months ended June 30, 2004. This reclassification
> did not impact total net revenues, net loss, or net loss per share. See Note 6 of our Notes to Condensed Consolidated      Financial Statements.

Total Net Revenues

The following table presents our net revenues for the three and six months ended
June 30, 2004 and 2003, and the absolute dollar and percentage change from the comparable prior year periods (dollars in thousands):



|             | Three Months Ended June 30, |  | Six Months Ended June 30,
|------------ | --------------------------- |  | -------------------------
|             |                             |  |                          
|             | 2004                        |  | 2003                     
|Net revenues | $   76,526                  |  | $   76,270               



We derive revenues from licenses of our software and the sale of related services. A single customer, British Telecommunications plc located in the
United Kingdom, represented 11% of our total net revenues in the three months ended June 30, 2004 and 6% of our total revenues in the six months ended
June 30, 2004. There was no single customer that represented 10% or more of our total revenues in the six months ended June 30, 2004 or in the three or
six months ended June 30, 2003.

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License Revenues

The following table presents our license revenues for the three and six months
ended June 30, 2004 and 2003, and the absolute dollar and percentage change from the comparable prior year periods (dollars in thousands):



|                                 | Three Months Ended June 30, |  | Six Months Ended June 30,
|-------------------------------- | --------------------------- |  | -------------------------
|                                 |                             |  |                          
|                                 | 2004                        |  | 2003                     
|License revenues                 | $  54,134                   |  | $   56,622               
|As a percentage of net  revenues | 71%                         |  | 74%                      

With the integration of the acquisitions of TogetherSoft and Starbase, we have aligned our
presentation of license revenues to better reflect our application lifecycle strategy. Specifically, our Application Lifecycle Management, or ALM,
offerings comprise three major product categories: Design, Develop and Deploy. Design includes the products from our acquisitions of TogetherSoft and
Starbase: StarTeam, CaliberRM, Together and other related design and management products. Develop includes two major categories: Java, which includes
JBuilder, Java Studio and Optimizeit, and .NET, which includes Delphi, C++Builder, Kylix and C++ Mobile Edition. Deploy is comprised of our Visibroker,
Borland Enterprise Server products, InterBase and other enterprise products.

License revenues represent amounts for license fees and royalties earned for granting
customers the right to use our software products. License revenues represented 71% of net revenues in the three months ended June 30, 2004 compared to
74% in the three months ended June 30, 2003, and represented 70% in the six months ended June 30, 2004 compared to 75% in the six months ended June 30,
2003. The change in mix between license and service revenues is due to our transition of certain products from a stand-alone upgrade selling model to a
software assurance model. Through our stand-alone upgrade selling model, periodic product upgrades and updates are sold upon the release of new versions
and the associated revenues are recorded in license revenues. Through our software assurance model, customers pay annually for the right to receive
future product upgrades and the associated revenues are recorded in service revenues.

The following table presents our license revenues by product category and the percentage
of license revenues of each category for the three and six months ended June 30, 2004 and 2003 (dollars in thousands):



|                     | Three Months Ended June 30, |  | Six Months Ended June 30,
|-------------------- | --------------------------- |  | -------------------------
|                     | 2004                        |  | 2003                     
|Design               | $   17,553                  |  | $  14,469                
|Develop              | 25,322                      |  | 32,555                   
|Deploy               | 11,259                      |  | 9,598                    
|                     |                             |  |                          
|Net license revenues | $   54,134                  |  | $  56,622                
|                     |                             |  |                          

In the future, as our integrated ALM solutions become a larger portion of our business, it may
prove difficult to provide a meaningful segregation of license revenues on a product category basis, as the functionality of the previously products will
become increasingly integrated.

Design.The increase in Design license revenues in the three and six months ended
June 30, 2004 from the three and six months ended June 30, 2003 was due to higher revenues generated fromthe sales of our StarTeam and CaliberRM
product lines. In the three and six months ended June 30, 2004, we closed a number of significant enterprise deals as a result of our efforts to promote
our ALM solution to large enterprises. The increase in revenue from our StarTeam and CaliberRM product lines was partially offset by a decrease in revenue
from our Together product line during the three and six months ended June 30, 2004 over the comparable prior year periods. In the future, we expect license
revenues from the Design product group to represent a larger percentage of our total license revenues as these products represent a significant portion of
our ALM strategy. As we transform the Together product line into a pure modeling solution and promote JBuilder and Delphi as our flagship development
solutions, license revenue from the Together product line may decrease as a percentage of total license revenues, but we believe the Together product line
is an important element of our ALM studio product, Borland Enterprise Studio.

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Develop. The decrease in Develop license revenues in the three and six months ended
June 30, 2004 from the three and six months ended June 30, 2003 was due to the maturation of the Java IDE market as well as the aforementioned focus on
selling software assurance that includes upgrades, which is reflected in service revenues, versus our previous model of emphasizing software upgrades.
License revenues from our Develop products group included license revenues of $13.9 million and $21.4 million in the three months ended June 30, 2004 and
2003, respectively, from our Java product line. In the six months ended June 30, 2004, revenues from our Java product line were $27.2 million compared to
$42.3 million in the six months ended June 30, 2003. The decrease in license revenues in our Java product line was due specifically to lower revenues from
our JBuilder product line. While unit sales of the current version of JBuilder (JBuilder X) are higher than unit sales of the version of JBuilder that was
current as of June 30, 2003 (JBuilder 8), our JBuilder revenue has declined. We believe that revenue trends for our JBuilder product will depend upon the
maturation of the Java development market and the success of our ALM solutions in the Java market.

License revenues from our Develop products group included $11.4 million and $11.2 million
in the three months ended June 30, 2004 and 2003, respectively, from our .NET product line. In the six months ended June 30, 2004 license revenues from
our .NET product line were $26.7 million compared to $25.6 million in the six months ended June 30, 2003. The increase in license revenues from our .NET
product line was due to higher license revenues generated from our Delphi products following a release of Delphi 8 in late December 2003. We have
historically experienced an increase in revenues from our Delphi product following the release of a new version, as a majority of our Delphi customers
purchase stand-alone upgrades instead of purchasing software assurance contracts.

Deploy.The increase in license revenues in the three and six months ended
June 30, 2004 from the three and six months ended June 30, 2003 was due to higher revenues generated from enterprise level transactions in the
telecommunications and government markets. While we expect to receive a short-term benefit from the increased spending in these markets, more sustained
growth in our deployment revenue will require broader adoption of next generation telecommunication technologies.

Service revenues

The following table presents our service revenues for the three and six months
ended June 30, 2004 and 2003, and the absolute dollar and percentage change from the comparable prior year periods (dollars in thousands):



|                                 | Three Months Ended June 30, |  | Six Months Ended June 30,
|-------------------------------- | --------------------------- |  | -------------------------
|                                 |                             |  |                          
|                                 | 2004                        |  | 2003                     
|Service revenues                 | $   22,392                  |  | $  19,648                
|As a percentage of net  revenues | 29%                         |  | 26%                      

Service revenues represent amounts earned for technical support, which includes call support
and maintenance, and consulting and training services for our software products. The increase in service revenues in the three and six months ended
June 30, 2004 from the three and six months ended June 30, 2003 primarily resulted from an increase in technical support revenues. We believe that our
technical support revenues have benefited from increased revenues generated from larger enterprises, which generally purchase support contract with their
software licenses. We expect our service revenues to represent between 30% and 35% of total net revenues in the near future as a result of our efforts to
transition customers of our Develop products to our software assurance model. Our service revenues may also grow as our new enterprise solution offerings
increase in complexity and include more services as a component of larger sales contracts. However, if we are unsuccessful in our efforts to transition
customers to a software assurance model or in selling new enterprise solutions, we may experience decreases in our service revenues.



International Net Revenues

Revenues from sources outside the United States, or non-U.S. revenues, represented
approximately 63% and 54% of net revenues for the three months ended June 30, 2004 and 2003, respectively. The increase in the percentage of non-U.S.
revenues for the three months ended June 30, 2004, as compared to the three months ended June 30, 2003, was due to a $4.2 million increase in our Europe,
Middle East and Africa (EMEA) revenues, primarily as a result of a single large enterprise deal which closed in the EMEA region during the three months
ended June 30, 2004. Additionally, revenues attributable to the United States decreased $6.4 million in the three months ended June 30, 2004 compared to
year ago quarter primarily as a result of a $3.2 million decrease in revenues from our Java product line, a $1.4 million decrease in revenues from our
..Net product line, and a $1.4 million decrease in our Design revenues in the United States. Enhancing U.S. sales force productivity is a primary operational
focus.

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Non-U.S. revenues represented approximately 60% and 55% of net revenues for the six months
ended June 30, 2004 and 2003, respectively. The increase in the percentage of non-U.S. revenues for the six months ended June 30, 2004, as compared to the
six months ended June 30, 2003, was principally due to a $5.6 million increase in EMEA revenues as a result of the large enterprise deal completed in 2004
in the EMEA region and due to the weaker U.S. Dollar versus the Euro in 2004 compared to 2003. In addition, revenues attributable to the United States
decreased $8.2 million as a result of a decrease in revenues from our Java, .NET and Design product lines in the United States. We believe that our
transformation to an enterprise solutions focused company has created the most disturbance with our sales efforts in the United States, and we expect this
disturbance to continue in the near-term as new personnel gain experience and as we continue to modify our go-to-market effort. On a percentage basis, we
expect non-U.S. revenues to decline slightly during the three months ending September 30, 2004 due anticipated seasonal weakness in EMEA.

Our non-U.S. revenues would be harmed if the U.S. Dollar were to strengthen against major
foreign currencies, including the Japanese Yen, United Kingdom Pound Sterling and Euro.

The following table presents our net revenues by region and as a percentage of total net
revenues for the three and six months ended June 30, 2004 and 2003 (dollars in thousands):



|                               | Three Months Ended June 30, |  | Six Months Ended June 30,
|------------------------------ | --------------------------- |  | -------------------------
|                               | 2004                        |  | 2003                     
|Americas                       | $   33,114                  |  | $   38,825               
|Europe, Middle East and Africa | 31,353                      |  | 27,147                   
|Asia Pacific                   | 12,059                      |  | 10,298                   
|                               |                             |  |                          
|Net revenues                   | $   76,526                  |  | $   76,270               
|                               |                             |  |                          

Revenues in our Europe, Middle East and Africa (EMEA) region were impacted by fluctuations
in the Euro versus the United States Dollar over the periods presented. The increase of $4.2 million in the EMEA region in the three months ended June 30,
2004, as compared to the three months ended June 30, 2003, was due to an increase of approximately $3.3 million in license and service sales and
approximately $0.9 million was the result of fluctuations in the Euro. The increase of $5.6 million in the EMEA region in the six months ended June 30,
2004, as compared to the six months ended June 30, 2003, was attributable to an increase in license and service sales of approximately $1.0 million and
approximately $4.6 million was attributable to fluctuations in the Euro.

Cost of Revenues

The following table presents cost of revenues for the three and six months ended
June 30, 2004 and 2003, and the absolute dollar and percentage changes from the comparable prior year periods (dollars in thousands):



|                                     | Three Months Ended June 30, |  | Six Months Ended June 30,
|------------------------------------ | --------------------------- |  | -------------------------
|                                     |                             |  |                          
|                                     | 2004                        |  | 2003                     
|Cost of license revenues             | $   1,643                   |  | $   3,012                
|As a percent of license  revenues    | 3%                          |  | 5%                       
|Cost of service revenues             | $   5,801                   |  | $   7,324                
|As a percent of service  revenues    | 26%                         |  | 37%                      
|Amortization of acquired intangibles | $   2,375                   |  | $   4,752                
|As a percent of license  revenues    | 4%                          |  | 8%                       

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Cost of License Revenues

Cost of license revenues consists primarily of production costs, product packaging
and royalty fees paid to third-party vendors. The reduction in the cost of license revenues in the three and six months ended June 30, 2004 over the
comparable periods in 2003 was a result of a decrease in direct production costs along with a decrease in royalty fees. We experienced lower production
costs, as a larger percentage of our license revenues was comprised of enterprise level sales versus channel sales. Production costs associated with our
enterprise level sales revenues are substantially lower than for channel sales as there are usually minimal physical deliverables to the customer.

Royalty fees paid to third-party vendors totaled $0.1 million and $1.0 million in the three
months ended June 30, 2004 and 2003, respectively, and totaled $0.9 million and $1.9 million in the six months ended June 30, 2004 and 2003, respectively.
Additionally, royalty fees in the three months ended June 30, 2004 benefited from a $0.7 million reversal of a royalty accrual in relation to a settlement
agreement with a technology partner. The level of royalty fees in future periods will depend on our ability to obtain favorable licensing terms for our
products that include third-party technology and the extent to which we include such third-party technology in our product offerings.

Cost of Service Revenues

Cost of service revenues consists primarily of salaries and benefits, third-party contractor
costs and related expenses incurred in providing customer support, consulting and training. Service revenues gross margins were 74% and 63% in the three
months ended June 30, 2004 and 2003, respectively, and were 73% and 63% in the six months ended June 30, 2004 and 2003, respectively. The increase in gross
margins was due to an increase in support revenues coupled with a decrease in technical support and consulting and training costs. In future periods, we
expect our cost of service revenues to increase if consulting and training revenues, which typically have lower margins, become a larger component of
service revenues.

Amortization of Acquired Intangibles

Amortization of acquired intangibles consists of the amortization of acquired
technology and maintenance contracts from the TogetherSoft and Starbase acquisitions. Amortization of acquired intangibles decreased 50% to approximately
$2.4 million in the three months ended June 30, 2004 from $4.8 million in the three months ended June 30, 2003.We recorded no amortization of
acquired maintenance contracts in the three months ended June 30, 2004 and we recorded $2.2 million of amortization expense in the three months ended
June 30, 2003 associated with maintenance contracts assumed in the TogetherSoft and Starbase acquisitions. In the six months ended June 30, 2004 and 2003
we recorded $0.2 million and $4.2 million, respectively, of amortization expense associated with maintenance contracts assumed in the TogetherSoft and
Starbase acquisitions.

Operating Expenses

Selling, General and Administrative Expenses

The following table presents our selling, general and administrative expenses for
the three and six months ended June 30, 2004 and 2003, and the absolute dollar and percentage change from the comparable prior year periods (dollars in
thousands):



|                                             | Three Months Ended June 30, |  | Six Months Ended June 30,
|-------------------------------------------- | --------------------------- |  | -------------------------
|                                             |                             |  |                          
|                                             | 2004                        |  | 2003                     
|Selling, general and administrative expenses | $  42,219                   |  | $  44,395                
|As a percent of net revenues                 | 55%                         |  | 58%                      

The decrease in selling, general and administrative expenses was primarily attributable to a
decrease in headcount and a decrease in facilities and contractor costs following our restructuring efforts during 2003. These efforts resulted in a 7%
decrease in employee-related selling, general and administrative expenses in the three months ended June 30, 2004 as compared to the three months ended
June 30, 2003. In addition, we incurred lower discretionary costs of approximately $0.9 million, including marketing, outside services and business travel,
during the three months ended June 30, 2004 when compared to the three months ended June 30, 2003, which included start-up costs incurred as part of the
TogetherSoft and Starbase integrations. The decrease in expenses in the three months ended June 30, 2004 was partially offset by costs incurred as a result
of our Sarbanes-Oxley testing and compliance project. We expect selling, general and administrative expenses to increase in absolute dollars for the
remainder of 2004 due to costs associated with this project.

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We experienced an 8% decrease in employee-related selling, general and administrative
expenses in the six months ended June 30, 2004 as compared to the six months ended June 30, 2003 due to our restructuring efforts during 2003. We also
incurred higher discretionary costs of approximately $3.2 million, including marketing, outside services, business travel and other expenses, during the
six months ended June 30, 2003 when compared to the six months ended June 30, 2004 primarily as a result of higher start-up costs incurred as part of the
TogetherSoft and Starbase integrations.

Since January 1, 2004, certain employees have been reclassified from selling, general and
administrative to research and development and to conform to our 2004 presentations, we have reclassified their associated employee-related expenses in our
2003 presentations. As a result, we reclassified approximately $2.2 million and $4.5 million of associated employee-related expenses from selling, general
and administrative to research and development for the three and six months ended June 30, 2003, respectively, to conform to our 2004 presentation. The
reclassification had no effect on operating loss as previously reported. The effect of the reclassification on our Condensed Consolidated Statements of
Operations is as follows (in thousands):



|                                             | Three Months Ended June 30, 2003 |  | Six Months Ended June 30, 2003
|-------------------------------------------- | -------------------------------- |  | ------------------------------
|                                             | As Previously Reported           |  | As Revised                    
|Selling, general and administrative expenses | $          46,640                |  | $      44,395                 
|Research and development expenses            | 15,457                           |  | 17,702                        
|                                             | $          62,097                |  | $      62,097                 
|                                             |                                  |  |                               



Research and Development Expenses

The following table presents our research and development expenses for the three
and six months ended June 30, 2004 and 2003, and the absolute dollar and percentage change from the comparable prior year periods (dollars in thousands):



|                                  | Three Months Ended June 30, |  | Six Months Ended June 30,
|--------------------------------- | --------------------------- |  | -------------------------
|                                  |                             |  |                          
|                                  | 2004                        |  | 2003                     
|Research and development expenses | $  17,195                   |  | $  17,702                
|As a percent of net revenues      | 22%                         |  | 23%                      

The decrease in research and development expenses for the three months ended June 30, 2004,
as compared to the three months ended June 30, 2003, was in part due to a decline in headcount of 11% and an associated decrease in employee-related
expenses of approximately $1.4 million as a result of our restructuring efforts in 2003. Additionally, outside services expenses decreased $0.8 million,
primarily as a result of a $0.6 million reduction in outside contractor expenses. During the three months ended June 30, 2004 we employed fewer outside
contractors than during the three months ended June 30, 2003 as a result of our restructuring efforts. Also, the three months ended June 30, 2003 benefited
from a $1.3 million reclassification of expenses from research and development to cost of revenues related to a project with a technology partner. There
was no similar recalssification recorded for the three months ended June 30, 2004.

The decrease in research and development expenses for the six months ended June 30, 2004
compared to the three months ended June 30, 2003 was partially attributable to a decrease of $3.5 million in employee-related expenses from the comparable
period following our restructuring efforts in 2003. Additionally, the decrease in our research and development expense was attributable to a charge of
$2.2 for outsourced research and development related to the write-off of a loan receivable during the six months ended June 30, 2003 (see Note 11 of the Notes to Condensed Consolidated Financial
Statements). Also, we reclassified $2.1 million of expenses to research and development to cost of revenues in the six months ended June 30, 2003 related
to a project with a technology partner. For the three months ended June 30, 2004, we reclassified $0.7 million of expenses fom research and development to
cost of revenues.

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Restructuring, Amortization of Other Intangibles, Acquisition-Related Expenses and Other Charges

The following table summarizes our restructuring, amortization of other intangibles,
acquisition-related expenses and other charges for the three and six months ended June 30, 2004 and 2003, and the absolute dollar and percentage change
from the comparable prior year periods (dollars in thousands):



|                                    | Three Months Ended June 30, |  | Six Months Ended June 30,
|----------------------------------- | --------------------------- |  | -------------------------
|                                    |                             |  |                          
|                                    | 2004                        |  | 2003                     
|Restructuring expenses              | $   (591)                   |  | $    (79)                
|Amortization of other intangibles   | 1,164                       |  | 1,151                    
|Acquisition-related expenses        | 641                         |  | 2,686                    
|In-process research and development | --                          |  | --                       
|Total                               | $   1,214                   |  | $   3,758                
|                                    |                             |  |                          
|As a percent of net revenues        | 2%                          |  | 5%                       

During the three months ended June 30, 2004, we reversed $0.6 million in restructuring expenses
related to changes in estimates of outplacement costs and lease termination accruals for abandoned facilities, incurred $1.2 million of amortization expense
related to acquired intangibles from our TogetherSoft, Starbase and Boldsoft acquisitions, and recorded $0.6 million in acquisition-related expenses, which
includes $0.5 million of contingent consideration payable under the terms of the VMGear acquisition agreement. During the three months ended June 30, 2003,
we incurred $1.2 million in amortization expense from purchased intangibles from the TogetherSoft, Starbase, VMGear, Boldsoft and Highlander acquisitions,
recorded $2.7 million in acquisition-related expense, which is primarily associated with the earn-out provision of the VMGear acquisition.

During the six months ended June 30, 2004, we reversed $0.7 million in restructuring expenses
related to changes in estimates of outplacement costs and lease termination accruals for abandoned facilities, incurred $2.4 million of amortization expense
related to acquired intangibles from our TogetherSoft, Starbase and Boldsoft acquisitions, and recorded $1.3 million in acquisition-related expenses, which
includes $1.0 million of contingent consideration payable under the terms of the VMGear acquisition agreement. During the six months ended June 30, 2003, we
recorded $5.3 million in restructuring costs from redundancies as a result of the TogetherSoft and Starbase acquisitions and excess facilities in the United
Kingdom and also incurred $2.2 million in amortization expense from purchased intangibles from the TogetherSoft, Starbase, VMGear, Bedouin, Boldsoft and
Highlander acquisitions. Additionally, we recorded $5.2 million in acquisition-related expense, which is primarily associated with the earn-out provision
of the VMGear acquisition, and incurred a $4.6 million charge for the write-off of in-process research and development from the TogetherSoft acquisition.

The following table summarizes our restructuring activity for the six months ended June 30,
2004 (in thousands):



|                                              | Severance and Benefits |  | Facilities |  | Other      |  | Total     
|--------------------------------------------- | ---------------------- |  | ---------- |  | ---------- |  | ----------
|Accrual at December 31, 2003                  | $    3,499             |  | $    2,258 |  | $     474  |  | $    6,231
|Cash payments and write-offs                  | (3,324)                |  | (2,396)    |  | (166)      |  | (5,886)   
|Reclassification from long-term restructuring | --                     |  | 791        |  | --         |  | 791       
|                                              |                        |  |            |  |            |  |           
|Accrual at June 30, 2004                      | $      175             |  | $     653  |  | $      308 |  | $    1,136
|                                              |                        |  |            |  |            |  |           

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We estimate that the 2003 restructuring activities reduced our operating expenses by
approximately $5.0 million for the three months ended June 30, 2004 and will reduce our operating expenses by up to approximately $5.0 million per
quarter for the remainder of 2004 from where operating expenses would have been absent the restructuring activities. We expect our severance benefits
and other restructuring accruals to be fully paid by the end of 2004 and we are currently seeking to sublet or terminate the leases on our vacant
facilities.

Interest and Other Income (Expense)

The following table presents our interest and other income (expense) for the three
and six months ended June 30, 2004 and 2003, and the absolute dollar and percentage change from the comparable prior year periods (dollars in thousands):



|                                    | Three Months Ended June 30, |  | Six Months Ended June 30,
|----------------------------------- | --------------------------- |  | -------------------------
|                                    |                             |  |                          
|                                    | 2004                        |  | 2003                     
|Interest and other income (expense) | $   (245)                   |  | $    889                 
|As a percent of net revenues        | 0%                          |  | 1%                       

The decline in interest and other income (expense) during the three and six months ended
June 30, 2004 as compared to the same period in 2003 is due primarily to foreign currency losses recorded in 2004. For the three months ended June 30,
2004, we recorded approximately $0.7 million of foreign currency losses, compared to approximately $0.2 million foreign of currency gains recorded during
the three months ended June 30, 2003. For the six months ended June 30, 2004, we recorded approximately $1.3 million of foreign currency losses, compared
to approximately $0.5 million foreign of currency gains recorded during the six months ended June 30, 2003.

Income Taxes

For the three months ended June 30, 2004 and 2003, we recorded income tax expense
of $3.0 million and $1.2 million, respectively. For the six months ended June 30, 2004 and 2003, we recorded income tax expense of $4.9 million and $2.7
million, respectively. Our tax provisions for the three and six months ended June 30, 2004 and 2003 were not based on our expected annual rate, as we
incurred non-U.S. withholding taxes in a number of foreign jurisdictions, which were not based on our profitability, as well as non-U.S. income taxes for
certain profitable foreign operations. We also incurred U.S. federal tax expense for Alternative Minimum Tax, or AMT, purposes, as well as state income
tax expense. Tax liabilities incurred in foreign jurisdictions were not offset by the benefits of prior U.S. net operating loss and tax credit
carryforwards.

Liquidity and Capital Resources

As of June 30, 2004, cash, cash equivalents and short-term investments totaled
$213.5 million, an increase of $10.9 million from $202.6 million at December 31, 2003. Working capital increased from $139.9 million at December 31,
2003 to $150.1 million at June 30, 2004. The increase in working capital of $10.2 million during the six months ended June 30, 2004 was primarily due
to the increase in cash, cash equivalents and short-term investments of $10.9 million. Additionally, we experienced a decrease in accounts payable and
accrued expenses of $9.1 million related to the timing of cash disbursements and a decrease of $5.2 million in short-term restructuring accruals related
to cash payments for employee severance and facilities costs. These costs were offset, in part, by an $9.6 million decrease in accounts receivable related
to collection activities and a $5.7 million increase in income and business taxes payable.

Cash provided by operating activities for the six months ended June 30, 2004 was $17.9
million, consisting of $3.6 million of net income, $11.2 million of depreciation and amortization, and a increase in non-cash working capital of $3.1
million. Cash used in operating activities for the six months ended June 30, 2003 was $15.1 million, consisting of $22.7 million of net loss offset by
$15.6 million of depreciation and amortization, a change in short-term restructuring of $10.9 million, a $2.2 million loss on a write-off of a loan
receivable and a decrease in non-cash working capital, excluding change in short-term restructuring, of $0.7 million.

In relation to our restructuring activities during the year ended December 31, 2003, we
expect to make restructuring-related payments during our fiscal quarter ending September 30, 2004 of approximately $0.2 million in severance-related
payments and approximately $0.2 million in facility-related payments. We are currently seeking to terminate or sublet several other facilities that are
not in use and may consolidate other facilities. These activities may result in additional cash payments in future periods.

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To the extent that non-cash items increase or decrease our future operating results, there
will be no corresponding impact on our cash flows. After excluding the effects of these non-cash charges, the primary changes in cash flows relating to
operating activities result from changes in working capital. Our primary source of operating cash flows has been the collection of accounts receivable
from our customers. Our operating cash flows are also affected by the timing of payments to our vendors. We generally pay our vendors and service
providers in accordance with the invoice terms and conditions. Our ability to generate positive cash flow from our non-cash working capital will be
dependent on our ability to negotiate favorable payment terms with our customers and suppliers and collect our outstanding receivables from our customers
on a timely basis. We anticipate our operating expenses to remain relatively stable for the foreseeable future and as a result we intend to fund our
operating expenses through cash flows from operations.

Cash used in investing activities for the six months ended June 30, 2004 was $4.3 million,
including $7.4 million used for purchases of short-term investments partially offset by $4.2 million provided by the sales and maturities of short-term
investments and $1.1 million used for purchases of property and equipment. Cash used in investing activities for the six months ended June 30, 2003
totaled $48.9 million, including $71.6 million and $5.3 million used for the acquisitions of TogetherSoft and Starbase, respectively, as discussed in
Note 5 to the Condensed Consolidated Financial Statements. Additionally, $24.4 million of cash was used for the purchases of short-term investments and
$3.3 million of cash was used for the purchases of property and equipment in the six months ended June 30, 2003. These amounts were offset by $55.7
million provided by the sales and maturities of short-term investments.

During the remainder of 2004, we may experience significant activity in purchases and
sales of short-term investments as we adjust investments in light of movements in short-term interest rates while considering our short-term cash
requirements. In the future, we may utilize cash resources to fund acquisitions or investments in other businesses, technologies or products lines.

Cash used in financing activities was $6.1 million for the six months ended June 30, 2004
and principally consisted of $12.3 million used to purchase our common shares under our stock repurchase programs partially offset by $6.2 million of
proceeds from the issuance of common stock to employees under our employee stock option plans. Cash provided by financing activities was $2.4 million
for the six months ended June 30, 2003 and principally consisted of $9.4 million of proceeds from the issuance of common stock to employees partially
offset by $7.1 million in repurchases of common stock.

Although we partially hedge our foreign currency exchange rate risk, fluctuations of the
U.S. Dollar against the Euro, United Kingdom Pound Sterling, Australian, New Zealand and Singapore Dollars, Japanese Yen, Indian Rupee and Korean Won
could harm our business. We cannot predict currency exchange rate fluctuations, and there can be no assurance that foreign currency exchange rates will
not have a material adverse impact on our future cash flows and operating results. See further discussion of foreign currency risk in Item 3,
"Quantitative and Qualitative Disclosures About Market Risk."

For the remainder of 2004, we expect that operating expenses will remain at
current levels or increase slightly in absolute dollars when compared with the six months ended June 30, 2004. We anticipate that operating expenses
and planned capital expenditures will continue to constitute a material use of our cash resources. We believe that our available cash and cash
equivalents, together with our anticipated future cash provided by operating activities, will be sufficient to meet our working capital and operating
expense requirements for at least the next twelve months. At some point in the future, we may seek additional funds to support our working capital
and operating expense requirements or for other purposes, and we may seek to raise additional funds through public or private debt or equity financings.
If we seek additional financing, there is no assurance that this additional financing will be available, or if available, will be on reasonable terms
and not dilutive to our stockholders.

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We operate in a rapidly changing environment that involves many risks, some of which
are beyond our control. The following discussion highlights some of these risks. Additional risks and uncertainties not presently known to us or that we
currently deem immaterial also may impair our business operations or results. If any of these risks actually occur, our business operations or results
could be harmed.

We are in the process of transforming the company from one that focuses on the development and distribution of point solutions to one that focuses
on the development and distribution of enterprise solutions. If we are unable to successfully complete this transformation quickly and smoothly, our
operating results could be harmed.

We are undergoing a transformation from a company that focuses on the development
and distribution of discrete software development tools alone to the development and distribution of enterprise software development solutions. This
transformation has taken many forms (each of which involves substantial risks), including:

| | · | Changes in go-to-market strategy. To achieve increased sales force productivity, we must complete more large revenue, multi-product
sales of our Application Lifecycle Management, or ALM, solutions. To do so, we must coordinate the efforts of our marketing, sales, and services
organizations to focus on the needs of large enterprises. These tasks are complicated and involve many people and processes. If we fail to coordinate
these efforts, we will not satisfy the demands of the large enterprise customers that we are targeting and our revenues will suffer.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | · | Changes in our sales organization. We have recently focused our sales effort on enterprise customers. As a part of this effort to
transform our sales organization, we are making these changes throughout our global sales force, but they have been particularly acute in the United States
and Japan. These efforts may prove unsuccessful in increasing our sales to enterprise customers and may prove unsuccessful in increasing our
revenues.                                                                                                                           
| | · | Changes in our sales cycles. Sales to large enterprises often are accompanied by long sales cycles. Given our relative inexperience
in serving enterprise customers, we may be unable to accurately forecast revenues derived from these customers. If we fail to accurately forecast revenues,
we may not achieve the revenue or net income that we anticipate, which could harm our stock price.                                                                                                                                                                             
| | · | Changes in the make-up of our executive management. Several members of our executive management team and senior personnel in a
wide range of managerial roles recently joined Borland. As a result, our management team has a relatively short history working together, and it is unclear
whether they will be able to manage the company effectively. If they are unable to manage the company effectively, our business will suffer.                                                                                                                                        

These are just a few of the types of risks associated with transforming the company to a provider of enterprise software development solutions. There are
several other types of risks inherent in such a process, generally described in the following paragraphs and throughout this document. While we believe
that transforming the organization to focus on the development and delivery of comprehensive solutions to enterprise customers is critical to growing our
revenue and achieving higher operating margins, we may be unable to complete this transformation smoothly and quickly. If we are unable to manage the
process smoothly and quickly, our business will be harmed.

We are relatively new to selling comprehensive solutions for the application development lifecycle, and we may not be able to successfully compete
in this broader market.

The application development lifecycle market is evolving, and customers are
increasingly demanding software that integrates and addresses each stage of the application development lifecycle. Historically, we have focused on
selling particular products for particular segments of the application development lifecycle, most notably development tools. We have done this utilizing
a combination of an indirect sales channel that sells individual point products and a direct sales force that managed largely modest accounts on the
basis of geography. We have recently focused our sales efforts on selling enterprise solutions to large customers, as we believe our future growth will
depend in large measure on our ability to sell comprehensive ALM solutions to these larger enterprises. To that end, we have introduced sales personnel
who will be dedicated exclusively to named enterprise accounts. However, we have little history of selling comprehensive ALM solutions, and we may be
unable to transition effectively to selling these solutions to large enterprises. To compete successfully in the application development lifecycle
market, we believe we will need to:

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| | · | develop and reinforce corporate-level messaging that convinces executive-level IT professionals of the need
to consider our solutions;
| | - | --------------------------------------------------------------------------------------------------------------------------------------
| | · | develop stronger relationships with systems integrators and other strategic partners with access to
enterprise accounts;              
| | · | develop stronger relationships with executive-level IT professionals responsible for making enterprise-wide
purchasing decisions; and 
| | · | compete with several very large and well-established companies with more experience in these markets.                                 



We do not have extensive experience in these areas. If we are unable to do any of the foregoing, our operating results could suffer.

If we fail to establish strategic relationships with systems integrators or fail to offer services in support of their implementation efforts,
our ability to sell comprehensive solutions to enterprise customers will be harmed.

We believe that growth in our license revenues will depend on our ability to
provide our customers with professional services that support the utilization of our solutions. This will require establishing stronger relationships
with the large systems integrators that have experience implementing enterprise solutions across large organizations. We believe these systems
integrators are important to our sales, marketing and support activities with enterprise customers given their access to large enterprises. If
successful, we believe that these relationships will expand the distribution of our products. If we are unsuccessful in establishing good relations
with large systems integrators, our ability to sell our solutions to large enterprises will be greatly diminished, and as a consequence, our revenues
will be harmed.

To succeed in establishing relationships with systems integrators, we believe we need to
provide services that complement the core service offerings of these systems integrators. These professional services include maintenance, architectural
consulting, training, education and project management. If we fail to provide the professional services that complement the core service offerings of
systems integrators, our ability to maintain mutually beneficial relations with these systems integrators will be harmed. If this occurs, our ability
to sell comprehensive solutions to enterprise customers will be greatly diminished, and as a consequence, our revenues will be harmed.

Our increasing focus on enterprise customers may lengthen our sales cycles and increase fluctuations in our financial results.

As we seek to license our software directly to large enterprises, we have
experienced sales cycles that are substantially more lengthy and uncertain than those associated with our traditional business of licensing software
through indirect and retail channels and more modest direct sales. As we focus on large transactions that involve multiple elements, enterprise
customers generally require us to expend substantial time, effort and money in establishing a relationship and in educating them about our solutions.
Also, sales to enterprise customers generally require an extensive sales effort throughout many levels within the customer's organization and often
require final approval by the customer's chief information officer, chief financial officer or other senior executive employee. In particular, we
believe that purchase decisions on complete ALM solutions often involve more senior-level employees than sales of the discrete development products
that we have traditionally sold. These factors substantially extend the sales cycle and increase the uncertainty of whether a sale will be made in
any particular quarter, or at all. We have experienced and expect to continue to experience delays and uncertainties in our sales cycle as well as
increased up-front expenses in connection with our enterprise sales efforts. The timing of the execution of enterprise volume licenses, or their
non-renewal by large customers, could cause our results of operations to vary significantly from quarter to quarter.

We rely on independent software vendors, value-added resellers, and other channel partners to complement our direct sales. If we cease doing
business with one or more of these parties, our revenues could suffer.

We rely on independent software vendors, or ISVs, value-added resellers, or VARs,
and other channel partners to complement our direct sales. The pricing, terms and conditions of our agreements with these parties are individually
negotiated and vary by agreement. A majority of these agreements are non-exclusive. Many of our agreements do not require these channel partners to make
a minimum number of purchases, and we have virtually no control over the shipping dates or volumes of systems shipped by our channel partners. Although
we believe our relationships with these parties have been successful to date, we cannot guarantee that these relationships will continue to be successful
or grow or that the channel partners will continue to purchase our products at the anticipated levels in the future. If we do not maintain good relations
with our channel and other partners or if we are unable to secure arrangements with these parties on favorable terms, our business may suffer.

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In addition, we depend on a small number of distributors for a significant portion of
our revenue, and we expect that a small number of distributors will continue to account for a significant portion of our revenues for the foreseeable
future. Presently, some software distributors are experiencing financial weakness. If we lose a major distributor, such as Ingram Micro, or if we fail
to increase the number of our distributors, our ability to maintain or increase our market share could be significantly harmed. As a result, our revenues
could decrease quickly and unexpectedly.

A number of factors affecting our revenues make our future results for a particular period difficult to predict, and therefore we may not meet
expectations for a particular period.

We believe that our revenues have the potential to vary significantly from time
to time. These variations could cause our stock price to fluctuate significantly. We believe that these variations may result from many factors, including,
but not limited to:

| | · | our limited sophistication in consistently forecasting revenues across many of our business units and
across our geographic regions;
| | - | ------------------------------------------------------------------------------------------------------------------------------------
| | · | the mix of channels through which we sell our products;                                                                             
| | · | timing, and any delay in the introduction, of upgrades or localizations to existing products or releases
of new products;           
| | · | the relative mix of demand for our various products and services;                                                                   
| | · | the size and timing of significant orders and their fulfillment;                                                                    
| | · | changes in pricing policies by us or our competitors;                                                                               
| | · | customer order deferrals; and                                                                                                       
| | · | product defects that may be discovered from time to time and other product quality problems.                                        

As a result of the foregoing, revenues may be difficult to predict, and any shortfall in
revenues for a quarterly period may not be known until late in the quarter. Additionally, our costs, while based on projected revenues, are relatively
fixed in the short term. Therefore, if our revenue levels fall below projections, net income may be significantly reduced or result in losses. As a
result, we believe that quarterly revenues and operating results will continue to be difficult to forecast, and period-to-period comparisons of our
results of operations are not necessarily meaningful and should not be relied upon as indications of trends or our future performance.

We may not be able to successfully compete against current and potential competitors.

Our markets are intensely competitive. As we enter the market for comprehensive
software development solutions, we face competition from some of the largest software providers in the world. For example, IBM, Microsoft, Sun
Microsystems, BEA, Mercury Interactive and others today provide or have stated they intend to provide more comprehensive enterprise software development,
deployment and integration solutions. Presently, some of these competitors partner with us to enhance the depth of comprehensive solutions and enhance
their reach to our established developer customer base; however, if strategies change, some of these current partners could become more competitive.
Many of these competitors have substantially greater financial, management, marketing and technical resources than we have. In addition, many of our
competitors have well established relationships with our current and potential customers, extensive knowledge of the market, substantial experience
in selling enterprise solutions, strong professional services and technical support offerings and extensive product development, sales and marketing
resources. As a result of their greater resources and established relationships, these competitors may be more successful than we are at developing
and marketing products and solutions in our markets.

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In addition, the markets for our individual products are characterized by rapid change, new and emerging technologies, and fierce competition. Below
is a table of our largest competitors for each of our largest product lines:



|Product                     | Competitive Products                                                                                                                                       
|--------------------------- | -----------------------------------------------------------------------------------------------------------------------------------------------------------
|CaliberRM                   | IBM's Rational Requisite Pro, Telelogic's DOORS and Computer Associates' AllFusion                                                                         
|Together ControlCenter      | IBM's Rational XDE, Embarcadero's Describe and Computer Associates' AllFusion                                                                              
|JBuilder                    | Eclipse, IBM's WebSphere Studio Application Developer, BEA Systems' Workshop, Oracle's JDeveloper,
JetBrains' IntelliJ and Sun Microsystems' Sun One Studio
|Delphi/C++Builder/C#Builder | Microsoft's Visual Studio and Visual Basic                                                                                                                 
|Optimizeit                  | IBM's Rational Purify Plus, Quest's JProbe and Quest's PerformaSure                                                                                        
|StarTeam                    | Telelogic's CM Synergy, Serena's PVCS, IBM's Rational ClearCase and ClearQuest and MKS' Source Integrity                                                   
|Enterprise Server           | Iona's Orbix, BEA Systems' WebLogic, IBM's WebSphere and Microsoft's Content Management Server                                                             

We attempt to differentiate our products from those of our competitors based on interoperability, total cost of ownership, performance, level of
integration and reliability. In the future, we may be unable to successfully differentiate our products from those of our competitors, and we may be
unable to compete with the substantially greater resources that many of our competitors have.  If so, our business will suffer.

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.

Some of our competitors, particularly those that are primarily hardware vendors or
platform providers, generate a substantially greater proportion of their sales in markets in which we do not directly compete. We believe a number of
these competitors view sales of software development technologies as important for enhancing the functionality of, and the demand for, their core
products. As a result, some companies may bundle software development products that compete with our offerings with their other products, such as
application servers, work stations, personal computers, operating systems and databases. When competitors do so, the effective price for software
development products that compete with our development products may be heavily discounted or offered at no charge. This could require us to reduce
the price of our products and related services, diminish our revenues and harm our profitability. Similarly, industry alliances and arrangements
exist or may be formed in the future under which our competitors ally with companies in markets in which we do not compete to bundle products. These
arrangements may result in lower effective prices for our competitors' products than for our products, putting pressure on our business and diminishing
our competitive position.

In addition to bundled offerings and bundling arrangements, some competitors make available
to their customers at no charge products that compete with our software development solutions, including our JBuilder product. While we believe that
products made available at minimal or no cost are not able to compete with our offerings on the basis of quality, performance and reliability, cost-free
competitive technologies are a risk to our business. At a minimum, technologies offered at no charge increase pricing pressure and threaten revenue
potential. For example, IBM has donated some of its proprietary software to the open source Eclipse initiative. Eclipse has created an open source
toolkit in which customers can access and create development technologies at no charge. Wide adoption of this model may reduce demand for some of our
products.

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Consolidation in our industry may impede our ability to compete effectively.

Consolidation continues to occur among companies that compete in our markets as
firms seek to offer more extensive suites of software products and to take advantage of efficiencies and economies of scale. Additionally, a number of
major hardware companies have sought to expand their software and services offerings through acquisitions. For instance, in early 2003, IBM acquired
Rational Software, a competitor of ours. Changes resulting from this and other consolidations may harm our competitive position, particularly as certain
products, when offered as part of a bundled suite, are offered for free or are given away to sell more hardware or infrastructure components. In addition,
as the trend toward consolidation continues, we may encounter increased competition for attractive acquisition targets and may have to pay higher prices
for those businesses or technologies we seek to acquire.

We depend on technologies licensed to us by third parties, particularly 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.

Today, we depend on licenses from third-party suppliers for some elements of our
products such as various file libraries. In particular, we depend on technology licenses from Sun Microsystems for our Java and Janeva products, and we
depend on licenses from Microsoft for our Delphi, C++Builder, C#Builder and Janeva products. If any of these licenses were terminated or were not renewed,
or if these third parties failed to notify us in a timely manner of any new or updated technology, we might not be able to ship such products or provide
support for such products, including upgrades. We would then have to seek an alternative to the third party's technology and, in some cases, an alternative
may not exist. This could result in delays in releasing and/or shipping our products, increased costs or reduced functionality of our products, which in
turn could substantially reduce our revenues.

Our future success is dependent upon enhancing existing and establishing new technology alliances.

The market landscape for enterprise software development, deployment and management
solutions is broad, and our products and solutions must integrate with a wide variety of technologies. To be successful, we must establish and enhance
strategic alliances with a wide variety of companies in the software development ecosystem.  Many of these companies have competitive products or have
stated a desire to move broadly into the software development space. In addition, many of these companies are competitive with one another and approach
partnering with us cautiously. This has made it difficult in some cases to establish or enhance desired relationships or achieve intended objectives. We
currently have a number of important strategic alliances and technology relationships with industry leaders. Additionally, where we have established
working relationships, our allies may choose to terminate their arrangements with us where no binding contractual arrangements exist. The failure to
develop or maintain our strategic alliances and technology relationships or our allies' inability to perform or to opt out of their arrangements with
us may impede our ability to introduce new products or enter new markets, and consequently harm our revenue prospects.

Our historical financial results are based on sales of development solutions for currently adopted platforms and languages. As the markets for
our products in these currently adopted languages mature, our revenues could be harmed.

Our historical financial information relating to a number of our software
development technologies is based on sales of software designed to develop applications for currently adopted platforms and languages (e.g., Windows,
C++ and Java) as well as traditional computer hardware platforms (e.g., mainframes, work stations, applications servers, desktop personal computers
and notebook computers). For example, many of our most popular products are focused on the Java language and platform, and we continue to invest heavily
in software solutions for the Java platform as it evolves, including enterprise-focused standards such as Java 2 Platform, Enterprise Edition, or J2EE,
and Enterprise JavaBeans, or EJB. The market for our Java solutions is maturing. Similarly, our deployment products, including Borland Enterprise Server,
are based on Common Object Request Broker Architecture, or CORBA, a standard for communicating across large enterprise networks. While we believe that
CORBA has achieved widespread acceptance, its penetration tends to be narrow and deep, resulting in large investments by relatively few enterprises. As
a result, while we continue to enhance the functionality of these products and expect sales of these technologies to continue to generate a significant
percentage of our revenues, we believe these markets are maturing. If Java and CORBA do not sustain the level of adoption that we anticipate, our
expected revenues would diminish.

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If our products for Microsoft's .NET Framework are not successful, our business would be harmed.

We are currently investing resources in our research and development efforts for
the .NET Framework, Microsoft's operating environment for software applications. While we have and will continue to release software products that
support the .NET Framework, our business would be harmed if our products for the .NET Framework fail to address the needs of our customers, or if our
competitors, particularly Microsoft, develop more effective or efficient products. In addition, despite our efforts to provide effective and compatible
development products for the .NET Framework, customers may still elect to use an all-Microsoft development platform. Furthermore, the success of our .NET
products is dependent upon Microsoft gaining market acceptance of its .NET Framework. If Microsoft's .NET Framework does not gain market acceptance or
gains acceptance more slowly than we anticipate, our investments in .NET compatible products may not generate their anticipated return. In conjunction
with the .NET Framework, Microsoft has a new development language, C#. An alternative to Java, C# is an object-oriented programming language and is
based on C++. We believe that C# is gaining in market acceptance. If certain emerging programming languages, such as Microsoft's C#, gain significantly
in popularity and we do not offer a development technology to facilitate development in such languages, our competitiveness could be diminished.

If we are unable to meet rapid changes in technology and introduce competitive products, our existing products could become technologically
obsolete.

The market for our products is characterized by continuous technological
advancement, evolving industry standards and changing customer requirements. While we believe that to date we have successfully developed and acquired
products that incorporate the latest technologies and standards, we cannot be certain that we will successfully design and market new products and
upgrades of our current products that are competitive and work with existing and new computer platforms and operating environments. This is especially
true regarding the development of comprehensive solutions for the .NET Framework.

If our products do not operate with the wide variety of hardware, software, operating systems, environments and programming languages used by
our customers, our revenues would be harmed.

Our customers use a wide variety of constantly changing hardware, software and
operating platforms. We invest and will continue to invest significant resources to develop products for new or emerging software and hardware platforms
in the server, desktop, mobile and other environments that may develop from time to time. However, there is a risk that a new hardware or software
platform for which we do not provide products could rapidly grow in popularity. In particular, we believe that this risk is substantial for particular
proprietary platforms and languages for which we may not be given economically feasible access or access at all. As a result, we may not be in a
position to develop products for such platforms or may be late in doing so. If we fail to introduce new products that address the needs of emerging
market segments or if our new products do not achieve market acceptance as a result of delays in development or other factors, our future growth and
revenue opportunity could suffer.

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.

Software products occasionally contain errors or defects, especially when they
are first introduced or when new versions are released. We have not experienced any substantial problems to date from potential defects and errors, but
we cannot assure you that our products are or in the future will be completely free of defects and errors. The discovery of a defect or error in a new
version or product may result in the following consequences, among others:

| | · | delayed shipping of the product;     
| | - | -------------------------------------
| | · | delay in market acceptance;          
| | · | diversion of development resources;  
| | · | damage to our reputation; and        
| | · | increased service and warranty costs.

In addition, as we transition to selling larger, more complex solutions, there is the risk
that our current products will not prove scalable without substantial effort.

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Failure to manage our international operations could harm our financial results.

A substantial portion of our revenues is from international sales. International
sales accounted for approximately 63% of our revenues during the three months ended June 30, 2004, with each of Germany, the UK and Japan accounting for
significant portions of our total revenue. In addition, an increasing portion of our operations consists of activities outside the United States. We now
have research and development facilities in Russia, Singapore, the Czech Republic and Sweden, and we have a direct sales force in place in more than
twenty countries around the world. We have a complicated corporate structure, and historically have had geographically dispersed operational controls.
Given this, we may experience difficulty in efficiently and effectively managing our dispersed and complicated organization. As a result, our results of
operations may suffer. In particular, we rely on personnel in our international locations to properly account for and manage our international operations,
which introduces inherent difficulties in managing and controlling our operations. Historically we have experienced weaknesses in our financial reporting
and operations. Given our complicated and geographically diverse operations, despite our best efforts, other issues could arise in the future. Other
risks inherent in doing business internationally include:

| | · | 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;                                     
| | · | fluctuations in foreign currency exchange rates;                                                                                      
| | · | restrictions on the expatriation of currency from a particular country;                                                               
| | · | export restrictions, tariffs, duties and other trade barriers;                                                                        
| | · | changes in regulatory requirements and resulting costs;                                                                               
| | · | 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.                           

One or more of these risks could harm our future research operations and international sales. If we are unable to manage these risks of doing business
internationally, our results of operations could suffer.

Because competition for qualified technical and management personnel is intense, we may not be able to recruit or retain qualified personnel,
which could harm the development of our products.

We believe that our ability to successfully grow and manage our business and to
develop new products will depend, in large part, on our ability to recruit and retain qualified employees, particularly highly skilled software engineers,
sales personnel and management personnel. In particular, a number of skilled technical personnel have left of their own choosing. As a result, some of
our personnel, especially research and development and sales personnel, are unfamiliar with the particular needs of our customers.  This could harm our
ability to provide solutions that effectively solve customers' problems, and as a result, we may lose customers or may not achieve anticipated sales
during a particular period.  In addition, the loss of technical talent may result in us being unable to ship new products or product upgrades at the
times that we originally planned. If we experience delays in the shipment of new products or product upgrades, we may be unable to achieve anticipated
sales during a particular period.

In addition, in the past some of our competitors have utilized their greater resources
to provide substantial signing bonuses and other inducements to lure key personnel away from us. We employ a variety of measures to retain our key
people, including the grant of stock options, promotions, bonuses and special assignments. We are not certain that our efforts to retain our key
employees will succeed, and our failure to attract and retain key personnel could significantly harm our business.

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If we fail to effectively manage our growth, our ability to effectively manage our businesses could be diminished and our operating results
could suffer.

Our future success depends on growing our company. Failure to manage growth
effectively could strain our resources, which would impede our ability to increase revenues. During the past two years, we have increased the number
of product releases we make each year and have introduced a number of new products and services. In addition, we have undertaken a number of acquisitions
in the last two years, diversified our product offerings and increased our international operations. There is a risk, especially following our recent
reductions in force, that we will be unable to manage the growth that we have recently experienced and that we will be unable to manage our increasingly
dispersed organization, including our international operations. If we fail to manage these risks, our operating results could suffer.

As we expand and diversify our product and customer base, we may be required to increase
staffing and other expenditures in order to meet the anticipated demands of our customers. However, given that our customers do not commit to license
our software for more than a short time in advance, any increase in expenses in anticipation of future orders that do not materialize could reduce our
net income. If we are unable to match our increased staffing and other expenditures with similarly increased revenue, our profitability would be harmed.

Changes in accounting regulations and related interpretations and policies regarding revenue recognition could cause us to defer recognition
of revenue or recognize lower revenue and profits.

Although we use standardized license agreements designed to meet current revenue
recognition criteria under generally accepted accounting principles, we must often negotiate and revise terms and conditions of these standardized
agreements, particularly in multi-product transactions. As our transactions increase in complexity with the sale of larger, multi-product licenses,
negotiation of mutually acceptable terms and conditions can extend the sales cycle and, in certain situations, may require us to defer recoginition
of revenue on such licenses. We believe that we are in compliance with Statement of Position 97-2, "Software Revenue Recognition" as amended,
however these future, more complex, multi-product license transactions may require additional accounting analysis to account for them accurately, could
lead to unanticipated changes in our current revenue accounting practices and may contain terms affecting the timing of revenue recognition.

We may incur future impairment losses related to intangible assets from prior acquisitions that could harm our future operating results.

In the past few years, we have acquired significant assets and businesses.
If the assets and businesses do not perform as expected, we may be required to take impairment charges related to the intangible assets from these
acquisitions. Such charges could harm our operating results.

If we are unable to protect our intellectual property, we may lose valuable assets.

As a software company, our intellectual property rights are among our most
valuable assets. We rely on a combination of patent, copyright, trademark, trade secret laws, domain name registrations, confidentiality agreements
and other contractual arrangements and other methods to protect our intellectual property rights, but these measures may provide only limited protection.
The protective steps we have taken may be inadequate to deter misappropriations of our intellectual property rights. In addition, it may be possible for
an unauthorized third party to reverse-engineer or decompile our software products. We may be unable to detect the unauthorized use of, or take
appropriate steps to enforce, our intellectual property rights, particularly in certain international markets, making misappropriation of our
intellectual property more likely. Litigation may be necessary to protect our intellectual property rights, and such litigation can be time consuming
and expensive.

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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.

From time to time, we have received notices claiming that we have infringed a
third party's patent or other intellectual property right. We expect that software products in general will increasingly be subject to these claims as
the number of products and competitors increase, the functionality of products overlap and as the patenting of software functionality becomes more
widespread. Further, the receipt of a notice alleging infringement may require in some situations that a costly opinion of counsel be obtained to
prevent an allegation of intentional infringement. Regardless of its merits, responding to any claim can be time consuming and costly and divert the
efforts of our technical and management personnel from productive tasks. In the event of a successful claim against us, we may be required to pay
significant monetary damages, including treble damages if we are held to have willfully infringed, discontinue the use and sale of the infringing products,
expend significant resources to develop non-infringing technology and/or enter into royalty and licensing agreements that might not be offered or be
available on acceptable terms. If a successful claim were made against us and we failed to commercially develop or license a substitute technology, our
business could be harmed. In addition, we may not have insurance coverage for these types of claims or our insurance coverage for these types of claims
may not be adequate.

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Market risks relating to our operations result primarily from changes in interest rates
and foreign currency exchange rates, as well as credit risk concentrations. To address the foreign currency exchange rate risk we enter into various
hedging transactions as described below. We do not use financial instruments for trading purposes.

Foreign Currency Risk

We transact business in various foreign countries and have established a foreign
currency hedging program utilizing foreign currency forward exchange contracts to hedge intercompany balances and other monetary assets denominated in
foreign currencies. The goal of the hedging program is to offset the earnings impact of foreign currency-denominated balances by entering into contracts
to sell or buy foreign currency at the time a foreign currency receivable or payable is generated. We do not use foreign currency forward exchange
contracts for trading purposes. At month-end, foreign currency-denominated balances and the forward exchange contracts are marked-to-market and unrealized
gains and losses are included in current period net income.

During the three and six months ended June 30, 2004, we recorded net foreign exchange losses
totaling $0.7 million and $1.3 million, respectively. The foreign exchange losses were generated primarily due to the fluctuations of the U.S. Dollar
relative to the Euro, the United Kingdom Pound Sterling, the Australian Dollar and the Singapore Dollar. If these currency fluctuations continue, we may
experience further foreign exchange losses on our intercompany receivables to the extent that we have not hedged the exposure with foreign currency forward
exchange contracts. Such foreign exchange losses could have a material adverse effect on our operating results and cash flows.

During the three and six months ended June 30, 2004, we recorded foreign currency losses of
approximately $1.2 million and $0.9 million, respectively, as part of other comprehensive income due to foreign currency movements on our long-term
intercompany balances. As of June 30, 2004, we had $11.9 million, $3.0 million and $1.8 million in long-term intercompany balances that will be settled in
Australian Dollars, Singapore Dollars and Brazilian Reals, respectively.

As of June 30, 2004, our most significant foreign assets were denominated in Euros. We
translate our foreign currency balances each month into U.S. Dollars using end of month exchange rates and record any translation gains or losses in
comprehensive income on the balance sheet. A movement of 1% in the Euro in relation to the U.S. Dollar on June 30, 2004 would have had an impact of
approximately $0.2 million on our EMEA net assets on June 30, 2004.

The table below provides information about our derivative financial instruments,
comprised of foreign currency forward exchange contracts as of June 30, 2004. The information is provided in U.S. Dollar equivalent amounts, as
presented in our financial statements. For foreign currency forward exchange contracts, the table presents the notional amounts (at the contract
exchange rates), the weighted average contractual foreign currency exchange rates and the net fair value as of June 30, 2004. All instruments mature
within twelve months (dollars in thousands).



|                                             | Notional Amount |  | Average Contract Rate |  | Change in Net Fair Value at
June 30, 2004
|-------------------------------------------- | --------------- |  | --------------------- |  | -----------------------------------------
|Foreign currency forward exchange contracts: |                 |  |                       |  |                                          
|Australian Dollar                            | $     4,400     |  | 0.6838                |  | $     (100)                              
|Singapore Dollar                             | 7,400           |  | 0.5825                |  | 5                                        
|Korean Won                                   | 700             |  | 0.0009                |  | (5)                                      
|New Zealand Dollar                           | 800             |  | 0.6207                |  | (19)                                     
|Japanese Yen                                 | 3,500           |  | 0.0092                |  | (4)                                      
|Indian Rupee                                 | 1,000           |  | 0.0216                |  | (6)                                      
|United Kingdom Pound Sterling                | 2,800           |  | 1.8072                |  | (19)                                     
|Euro                                         | 3,600           |  | 1.2051                |  | (43)                                     
|                                             |                 |  |                       |  |                                          
|Total                                        | $    24,200     |  |                       |  | $    (191)                               
|                                             |                 |  |                       |  |                                          

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Interest Rate Risk

Our exposure to market risk for changes in interest rates relate primarily to
our investment portfolio. We do not use derivative financial instruments in our investment portfolio. We place our cash equivalents and short-term
investments in a variety of financial instruments such as commercial paper. By corporate policy, we limit the amount of our credit exposure to $5.0
million to any one commercial issuer.

We mitigate default risk by investing in securities rated at least A2/P2 as published by
Standard and Poor's and Moody's, and by positioning our portfolio to respond appropriately to a significant reduction in the credit rating of any
investment issuer. To ensure portfolio liquidity, our portfolio includes only marketable securities with active secondary and resale markets.

Cash and cash equivalents includes investments which have an original maturity of 90
days or less and short term investments includes investments which have an original maturity of 91 days up to a year. As of June 30, 2004 and December
31, 2003, we held no investments with maturities in excess of 180 days. The table below presents principal (or notional) amounts and related weighted
average interest rates for our investment portfolio as of June 30, 2004 and December 31, 2003 (dollars in thousands).



|                                      | June 30, 2004         |  | December 31, 2003    
|------------------------------------- | --------------------- |  | ---------------------
|Included in cash and cash equivalents | $           204,716   |  | $           197,023  
|Weighted average interest rate        | 0.96%                 |  | 0.89%                
|Included in short-term investments    | $               8,778 |  | $               5,623
|Weighted average interest rate        | 2.16%                 |  | 3.14%                

Credit Risks

Our financial instruments that are exposed to concentrations of credit risk
consist primarily of cash equivalents, short-term investments, and trade receivables. Our cash equivalents and short-term investments are in high
quality securities placed with major banks and financial institutions and commercial paper. Concentrations of credit risk with respect to receivables
are limited due to the large number of customers and their dispersion across geographic areas. We perform periodic credit evaluations of our customers'
financial condition and generally do not require collateral. As of June 30, 2004, no single group or customer represented greater than 10% of our total
accounts receivable. A single customer, British Telecommunications plc located in the United Kingdom, represented 11% of our total revenues in the
three months ended June 30, 2004. As of June 30, 2004, the majority of the related accounts receivable had been collected.

Item 4.   Controls and Procedures

Evaluation of our Disclosure Controls and Internal Controls

As of the end of the period covered by this report, we evaluated the effectiveness
of the design and operation of our disclosure controls and procedures and our internal controls and procedures for financial reporting. This controls
evaluation was done under the supervision and with the participation of management, including our Chief Executive Officer and Chief Financial Officer.
Rules adopted by the Securities and Exchange Commission ("SEC") require that in this section of the Quarterly Report on Form 10-Q, we present the
conclusions of the CEO and the CFO about the effectiveness of our disclosure controls and internal controls based on and as of the date of the controls
evaluation.

CEO and CFO Certifications

Included as exhibits to this Quarterly Report on Form 10-Q, there are
"Certifications" of the Chief Executive Officer and the Chief Financial Officer. The first form of Certification is required in accordance with
Section 302 of the Sarbanes-Oxley Act of 2002. This section of the Quarterly Report contains the information concerning the controls evaluation
referred to in the Section 302 Certifications and this information should be read in conjunction with the Section 302 Certifications for a more
complete understanding of the topics presented.

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Disclosure Controls and Internal Controls

Disclosure controls are procedures that are designed with the objective of
ensuring that information required to be disclosed in our reports filed under the Securities Exchange Act of 1934 ("Exchange Act") such as this
Quarterly Report, is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms. Disclosure controls
are also designed with the objective of ensuring that such information is accumulated and communicated to our management, including the Chief Executive
Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure. Internal controls are procedures which
are designed with the objective of providing reasonable assurance that our transactions are properly authorized, our assets are safeguarded against
unauthorized or improper use and our transactions are properly recorded and reported, all to permit the preparation of our financial statements in
conformity with generally accepted accounting principles.

Limitations on the Effectiveness of Controls

Our management, including our Chief Executive Officer and our Chief Financial
Officer, does not expect that our disclosure controls or our internal controls will prevent all error and all fraud. A control system, no matter how
well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design
of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs.
Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances
of fraud, if any, within the company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty,
and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by
collusion of two or more people, or by management override of the control. The design of any system of controls also is based in part upon certain
assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all
potential future conditions; over time, control may become inadequate because of changes in conditions, or the degree of compliance with the policies
or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur
and not be detected.

Scope of the Controls Evaluation

The evaluation of our disclosure controls and our internal controls by our Chief
Executive Officer and our Chief Financial Officer included a review of the controls' objectives and design, the controls' implementation by us and the
effect of the controls on the information generated for use in this Quarterly Report on Form 10-Q. In accordance with SEC requirements, our Chief Executive
Officer and our Chief Financial Officer note that, since the date of the controls evaluation to the date of this Quarterly Report, there have been no
significant changes in our internal controls or in other factors that could significantly affect our internal controls.

Conclusion

Based upon the controls evaluation, our Chief Executive Officer and our Chief
Financial Officer have concluded that, subject to the limitations noted above, our disclosure controls are effective to ensure that material information
relating to the company is made known to management, including our Chief Executive Officer and our Chief Financial Officer, particularly during the period
when our periodic reports are being prepared, and that our internal controls are effective to provide reasonable assurance that our financial statements
are fairly presented in conformity with generally accepted accounting principles.

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PART II
OTHER INFORMATION

Item 1. Legal Proceedings

On November 27, 2002, a stockholder class action and derivative lawsuit, Dieterich
v. Harrer, et al., Case No. 02CC00350, was filed against Starbase Corporation, or Starbase, and five former directors of Starbase in the Superior Court of
the State of California for Orange County, claiming that the former directors had breached fiduciary duties owed to Starbase and stockholders of Starbase.
We are paying the costs of defending this litigation pursuant to indemnification obligations under the merger agreement relating to our acquisition of
Starbase. Following a series of motions, the case was dismissed without prejudice on August 20, 2003. On October 28, 2003, a stockholder class action
relating to the same matter, Dieterich v. Harrer, et al, Case No. 024-N, was filed against the former directors of Starbase in Chancery Court of the State
of Delaware, alleging breach of fiduciary duties by the former directors of Starbase, Borland, Dale L. Fuller, Keith E. Gottfried, Frederick A. Ball, and
Doug Barre. We intend to defend ourselves vigorously. There is no indication at present whether the lawsuit will have a material effect on our financial
condition, results of operations or liquidity.

In the ordinary course of business, we are involved in other lawsuits, claims,
investigations, proceedings, and threats of litigation consisting of intellectual property, commercial, employment and other matters. In accordance
with Statement of Financial Accounting Standards No. 5, "Accounting for Contingencies," we make a provision for a liability when it is both
probable that a liability has been incurred and the amount of the loss can be reasonably estimated. These provisions are reviewed at least quarterly
and adjusted to reflect the impacts of negotiations, settlements, rulings, advice of legal counsel and other information and events pertaining to a
particular case. Litigation is inherently unpredictable. However, we believe that we have valid defenses with respect to the legal matters pending
against us, as well as adequate provisions for any probable and estimable losses. If an unfavorable ruling were to occur in any specific period, there
exists the possibility of a material adverse impact on the results of operations for that period. We believe that, except as noted above, given our
current liquidity and cash and investment balances, even were we to receive an adverse judgment with respect to litigation that we are currently a party
to, it is likely that such a judgment would not have a material impact on our financial condition, results of operations or liquidity.

Item 2. Changes in Securities, Use of Proceeds and Issuer Purchases of Equity Securities

(a)  Below is a summary of stock repurchases for the three months ended June 30, 2004.  See Note 9 of our Notes to Condensed
Consolidated Financial Statements for information regarding our stock repurchase programs.

PURCHASES OF EQUITY SECURITIES(1)



|Period                         |  | (a) Total Number of Shares (or Units) Purchased |  | (b) Average Price Paid per Share (or Unit) |  | (c) Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or
Programs |  | (d) Maximum Number (or Approximate Dollar Value) of Shares (or Units) that May Yet
Be Purchased Under the Plans or
Programs
|------------------------------ |  | ----------------------------------------------- |  | ------------------------------------------ |  | ----------------------------------------------------------------------------------------------- |  | ---------------------------------------------------------------------------------------------------------------------------
|April 1, 2004 - April 30, 2004 |  | 302,000                                         |  | $  8.65                                    |  | 302,000                                                                                         |  | $ 37,049,984 (2)                                                                                                           
|May 1, 2004 - May 31, 2004     |  | 367,600                                         |  | $  8.45                                    |  | 367,600                                                                                         |  | $ 33,944,344 (3)                                                                                                           
|June 1, 2004 - June 31, 2004   |  | 42,000                                          |  | $  8.54                                    |  | 42,000                                                                                          |  | $ 33,585,664 (4)                                                                                                           
|Total                          |  | 711,600                                         |  |                                            |  | 711,600                                                                                         |  |                                                                                                                            

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No shares were repurchased other than through our Discretionary Program and our 10b5-1 Program.

(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 (the "Discretionary Program"). The program was announced in our Annual Report on Form 10-K filed
with the Securities and Exchange Commission on April 15, 2002. 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
on February 4, 2004.

In August 2003, our Board of Directors authorized the use of up to $15.0 million of our outstanding common stock, or 1,000,000 shares, whichever
comes first, to repurchase shares of our common stock pursuant to a 10b5-1 repurchase program (the "10b5-1 Program"). The program was announced in our
Current Report on Form 8-K filed with the Securities and Exchange Commission on August 7, 2003.

(2)  Includes $25,490,977 under our Discretionary Program and $11,559,007 under our 10b5-1 Program.

(3)  Includes $22,711,478 under our Discretionary Program and $11,232,866 under our 10b5-1 Program.

(4)  Includes $22,711,478 under our Discretionary Program and $10,874,186 under our 10b5-1 Program.

Item 4. Submission of Matters to a Vote of Security Holders

At the annual meeting of Borland stockholders held on May 14, 2004 at our
corporate headquarters, located at 100 Enterprise Way, Scotts Valley, California (the "Annual Meeting"), the following matters were voted
upon:

(1)  The following individuals were elected to serve as directors on our Board of Directors:

|Nominee           |  | For        |  | Withheld 
|----------------- |  | ---------- |  | ---------
|William F. Miller |  | 66,741,375 |  | 5,519,452
|Laura S. Unger    |  | 63,580,529 |  | 8,680,298
|T. Michael Nevens |  | 68,691,011 |  | 3,569,816

There were no broker non-votes as to this proposal.

The following additional proposals were considered at the Annual Meeting and were
approved by the vote of stockholders, in accordance with the tabulation shown below:

(2)  Approval of a proposal to declassify the Board of Directors so that all directors are elected annually.

|For        |  | Against   |  | Abstain  
|---------- |  | --------- |  | ---------
|53,095,926 |  | 3,019,483 |  | 2,166,568

There were 13,978,850 broker non-votes as to this proposal.

(3)  Ratification of the selection of PricewaterhouseCoopers LLP as our independent accountants for the fiscal year ending December 31, 2004.

|For        |  | Against   |  | Abstain  
|---------- |  | --------- |  | ---------
|67,351,187 |  | 3,342,966 |  | 1,566,674

There were no broker non-votes as to this proposal.

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Item 6. Exhibits and Reports on Form 8-K

(a)  Exhibits

Except as so indicated in Exhibits 32.1 and 32.2, the following exhibits are filed as
part of, or incorporated by reference into, this Quarterly Report.

|               |                                                                                                                                                                                                                                                                                                           | Incorporated by Reference |         
|-------------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------- | --------
|Exhibit Number | Description of Exhibit                                                                                                                                                                                                                                                                                    | Form                      | Date    
|               |                                                                                                                                                                                                                                                                                                           |                           |         
|2.1            | Agreement and Plan of Merger and Reorganization by and among Borland Software Corporation, Targa Acquisition Corp. I, Targa Acquisition
Corp. II, TogetherSoft Corporation, Peter Coad, as Primary Stockholders' Agent, and Kurt Jaggers, as Secondary Stockholders' Agent, dated as of October
29, 2002. | 8-K                       | 11/01/02
|2.2            | Agreement and Plan of Merger among Borland Software Corporation, Galaxy Acquisition Corp. and Starbase Corporation, dated as of
October 8, 2002.                                                                                                                                                          | 8-K                       | 10/10/02
|3.1            | Restated Certificate of Incorporation of Borland Software Corporation.                                                                                                                                                                                                                                    | 10-Q                      | 11/14/03
|3.2            | Amended and Restated Bylaws of Borland Software Corporation.                                                                                                                                                                                                                                              | 10-K                      | 03/15/04
|4.1            | 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
|4.2            | Specimen Stock Certificate of Borland Software Corporation.                                                                                                                                                                                                                                               | 10-Q                      | 05/13/02
|4.4            | Investor Rights Agreement between Borland Software Corporation and Microsoft Corporation, dated as of June 7, 1999.                                                                                                                                                                                       | 8-K                       | 07/06/99
|4.5            | Stockholder Lock-up Agreement between Borland Software Corporation and Object International, Inc., dated as of January 14, 2003.                                                                                                                                                                          | 10-K                      | 03/28/03
|4.6            | Stockholder Lock-up Agreement between Borland Software Corporation and Dietrich Charisius, dated as of January 14, 2003.                                                                                                                                                                                  | 10-K                      | 03/28/03
|10.72          | Amendment to the Employment Agreement between Borland Software Corporation and Kenneth
R. Hahn, dated as of June 7, 2004. +                                                                                                                                                                               |                           |         
|24.1           | Power of Attorney (see signature page).                                                                                                                                                                                                                                                                   |                           |         
|31.1           | Certification of Dale L. Fuller, Chief Executive Officer of Borland Software Corporation,
pursuant to Rule 13a-14(a).                                                                                                                                                                                     |                           |         
|31.2           | Certification of Kenneth R. Hahn, Chief Financial Officer of Borland Software Corporation,
pursuant to Rule 13a-14(a).                                                                                                                                                                                    |                           |         
|32.1           | Certification of Dale L. Fuller, Chief Executive Officer of Borland Software Corporation,
pursuant to Rule 13a-14(b) and 18 U.S.C. Section 1350.                                                                                                                                                          |                           |         
|32.2           | Certification of Kenneth R. Hahn, Chief Financial Officer of Borland Software Corporation,
pursuant to Rule 13a-14(b) and 18 U.S.C. Section 1350.                                                                                                                                                         |                           |         

38

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____________________
+     Management contract or compensatory plan or arrangement.

++   Confidential treatment has been requested with respect to certain portions of this exhibit.  Omitted portions have been filed
separately with the SEC.

*     Attached as Exhibit A-1 to the Software License Agreement between Sun Microsystems, Inc. and Borland Software
Corporation, dated as of December 29, 2000.

A copy of any exhibit will be furnished (at a reasonable cost) to any stockholder of
Borland upon receipt of a written request. Such request should be sent to Borland Software Corporation, 100 Enterprise Way, Scotts Valley, California
95066-3249, Attention: Investor Relations.

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(b)  Reports on Form 8-K

During the three months ended June 30, 2004, Borland filed with or furnished to the
Securities and Exchange Commission the following Current Reports on Form 8-K:





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SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the
Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
          August 9, 2004



|BORLAND SOFTWARE CORPORATION                              | 
|--------------------------------------------------------- | 
|(Registrant)                                              | 
|                                                          | 
|                                                          | 
|                                                          | 
|/s/    KENNETH R. HAHN                                    | 
|Kenneth R. Hahn                                           | 
|Senior Vice President and Chief Financial Officer         | 
|(Principal Financial Officer and Duly Authorized Officer) | 

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EXHIBIT INDEX

|               |                                                                                                                                                                                                                                                                                                           | Incorporated by Reference |         
|-------------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------- | --------
|Exhibit Number | Description of Exhibit                                                                                                                                                                                                                                                                                    | Form                      | Date    
|               |                                                                                                                                                                                                                                                                                                           |                           |         
|2.1            | Agreement and Plan of Merger and Reorganization by and among Borland Software Corporation, Targa Acquisition Corp. I, Targa Acquisition
Corp. II, TogetherSoft Corporation, Peter Coad, as Primary Stockholders' Agent, and Kurt Jaggers, as Secondary Stockholders' Agent, dated as of
October 29, 2002. | 8-K                       | 11/01/02
|2.2            | Agreement and Plan of Merger among Borland Software Corporation, Galaxy Acquisition Corp. and Starbase Corporation, dated as of
October 8, 2002.                                                                                                                                                          | 8-K                       | 10/10/02
|3.1            | Restated Certificate of Incorporation of Borland Software Corporation.                                                                                                                                                                                                                                    | 10-Q                      | 11/14/03
|3.2            | Amended and Restated Bylaws of Borland Software Corporation.                                                                                                                                                                                                                                              | 10-K                      | 03/15/04
|4.1            | 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
|4.2            | Specimen Stock Certificate of Borland Software Corporation.                                                                                                                                                                                                                                               | 10-Q                      | 05/13/02
|4.4            | Investor Rights Agreement between Borland Software Corporation and Microsoft Corporation, dated as of June 7, 1999.                                                                                                                                                                                       | 8-K                       | 07/06/99
|4.5            | Stockholder Lock-up Agreement between Borland Software Corporation and Object International, Inc., dated as of January 14, 2003.                                                                                                                                                                          | 10-K                      | 03/28/03
|4.6            | Stockholder Lock-up Agreement between Borland Software Corporation and Dietrich Charisius, dated as of January 14, 2003.                                                                                                                                                                                  | 10-K                      | 03/28/03
|10.72          | Amendment to the Employment Agreement between Borland Software Corporation and
Kenneth R. Hahn, dated as of June 7, 2004. +                                                                                                                                                                               |                           |         
|24.1           | Power of Attorney (see signature page).                                                                                                                                                                                                                                                                   |                           |         
|31.1           | Certification of Dale L. Fuller, Chief Executive Officer of Borland Software Corporation,
pursuant to Rule 13a-14(a).                                                                                                                                                                                     |                           |         
|31.2           | Certification of Kenneth R. Hahn, Chief Financial Officer of Borland Software Corporation,
pursuant to Rule 13a-14(a).                                                                                                                                                                                    |                           |         
|32.1           | Certification of Dale L. Fuller, Chief Executive Officer of Borland Software Corporation,
pursuant to Rule 13a-14(b) and 18 U.S.C. Section 1350.                                                                                                                                                          |                           |         
|32.2           | Certification of Kenneth R. Hahn, Chief Financial Officer of Borland Software Corporation,
pursuant to Rule 13a-14(b) and 18 U.S.C. Section 1350.                                                                                                                                                         |                           |         

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____________________
+     Management contract or compensatory plan or arrangement.

++   Confidential treatment has been requested with respect to certain portions of this exhibit.  Omitted portions have been filed
separately with the SEC.

*     Attached as Exhibit A-1 to the Software License Agreement between Sun Microsystems, Inc. and Borland Software
Corporation, dated as of December 29, 2000.

A copy of any exhibit will be furnished (at a reasonable cost) to any stockholder of
Borland upon receipt of a written request. Such request should be sent to Borland Software Corporation, 100 Enterprise Way, Scotts Valley,
California 95066-3249, Attention: Investor Relations.

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