##### Table of Contents









UNITED STATES


SECURITIES AND EXCHANGE COMMISSION


Washington, D.C. 20549





FORM 10-K





þ


For the year ended December 31, 2005




o


Commission File Number: 0-25871


INFORMATICA CORPORATION




|                                                                   |  |                                         
|------------------------------------------------------------------ |  | ----------------------------------------
|Delaware                                                           |  | 77-0333710                              
|(State or other jurisdiction of
    incorporation or organization) |  | (I.R.S. Employer
    Identification No.)

100 Cardinal Way


Redwood City, California 94063




(650) 385-5000






None




Common Stock, par value $0.001 per share


Preferred Share Purchase Rights, par value $0.001 per
share


þ o


o þ


þ o


S-K 10-K 10-K. þ


12b-2


þ o o


12b-2 o þ




DOCUMENTS INCORPORATED BY REFERENCE


10-K










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##### 










INFORMATICA CORPORATION


TABLE OF CONTENTS


|              |  |                                                                                                                      |    |          |    | 
|------------- |  | -------------------------------------------------------------------------------------------------------------------- | -- | -------- | -- | 
|              |  |                                                                                                                      |    | Page No. |   
|              |  |                                                                                                                      |    |          |   
|PART I       
|Item 1.       |  | Business                                                                                                             |    |          | 1  | 
|Item 1A.      |  | Risk Factors                                                                                                         |    |          | 8  | 
|Item 1B.      |  | Unresolved Staff Comments                                                                                            |    |          | 20 | 
|Item 2.       |  | Properties                                                                                                           |    |          | 20 | 
|Item 3.       |  | Legal Proceedings                                                                                                    |    |          | 21 | 
|Item 4.       |  | Submission of Matters to a Vote of Security
    Holders                                                              |    |          | 22 | 
|              |  | Executive Officers of the Registrant                                                                                 |    |          | 22 | 
|PART II      
|Item 5.       |  | Market for Registrants Common Equity,
    Related Stockholder Matters and Issuer Purchases of Equity
    Securities |    |          | 23 | 
|Item 6.       |  | Selected Financial Data                                                                                              |    |          | 25 | 
|Item 7.       |  | Managements Discussion and Analysis
    of Financial Condition and Results of Operations                            |    |          | 26 | 
|Item 7A.      |  | Quantitative and Qualitative Disclosures
    About Market Risk                                                       |    |          | 42 | 
|Item 8.       |  | Financial Statements and Supplementary
    Data                                                                      |    |          | 42 | 
|Item 9.       |  | Changes in and Disagreements with
    Accountants on Accounting and Financial Disclosure                             |    |          | 78 | 
|Item 9A.      |  | Controls and Procedures                                                                                              |    |          | 78 | 
|Item 9B.      |  | Other Information                                                                                                    |    |          | 78 | 
|PART III     
|Item 10.      |  | Directors and Executive Officers of the
    Registrant                                                               |    |          | 78 | 
|Item 11.      |  | Executive Compensation                                                                                               |    |          | 79 | 
|Item 12.      |  | Security Ownership of Certain Beneficial
    Owners and Management and Related Stockholder Matters                   |    |          | 79 | 
|Item 13.      |  | Certain Relationships and Related
    Transactions                                                                   |    |          | 79 | 
|Item 14.      |  | Principal Accountant Fees and Services                                                                               |    |          | 79 | 
|PART IV      
|Item 15.      |  | Exhibits and Financial Statement
    Schedules                                                                       |    |          | 79 | 
|Signatures    |  |                                                                                                                      | 81 |         
|EXHIBIT 3.4  
|EXHIBIT 10.20
|EXHIBIT 21.1 
|EXHIBIT 23.1 
|EXHIBIT 31.1 
|EXHIBIT 31.2 
|EXHIBIT 32.1 





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PART I







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

Overview












1



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##### Table of Contents





www.informatica.com


10-K, 10-Q, 8-K, www.sec.gov


Recent Developments




Our Products






end-to




2



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Informatica PowerCenter Standard Edition (SE).


Informatica PowerCenter Advanced Edition (AE).


Informatica PowerExchange.


Additional Options.




| |    |                                                                                                                                                                                                               
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 1) | the Data Federation Option provides virtual data federation
    services or Enterprise Information Integration (EII)
    capabilities;                                                                      
|
| | 2) | the Data Profiling Option supplies thorough, accurate
    information about the content, quality, and structure of the
    data in virtually any operational system;                                          
|
| | 3) | the Data Cleansing Option standardizes, validates, and corrects
    name and address data to maximize the integrity and value of
    enterprise data;                                                         
|
| | 4) | the Metadata Exchange Options coordinate technical and business
    metadata from data modeling tools, business intelligence tools,
    source and target database catalogs, and PowerCenter
    repositories;

3



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| |    |                                                                                                                                                         
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------
| | 5) | the Partitioning Option executes optimal parallel sessions,
    enabling organizations to maximize their technology investments;                        
|
| | 6) | the PowerCenter Connect Options extend broad connectivity to
    enterprise data, eliminating the need for manually coding data
    extraction programs;
|
| | 7) | the Real Time Option extends PowerCenters capabilities to
    transform and process operational data in real time; and                                 
|
| | 8) | the Unstructured Data Option expands PowerCenters data
    access capabilities to include unstructured and semi-structured
    data formats.           

Services








Our Strategic Partners




Our Customers


end-to


4



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Our Market Strategy


Expand from Data Warehousing to Broad Enterprise Data
Integration.


Evolve Departmental Projects to Enterprise Standardization
via Integration Competency Centers.


Focus on Horizontal Data Integration Solutions: Migration
and Consolidation.


Launch Vertical Solutions: Financial Services.


Leverage Installed Customer Base and Community of
Developers.


Increase Base of Strategic Partners.


Sales, Marketing, and Distribution




5



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Research and Development








Intellectual Property and Other Proprietary Rights




6



---



##### Table of Contents







Future Revenues (New Orders, Backlog, and Deferred
Revenue)




Competition






If we do not compete effectively
with companies selling data integration products, our revenues
may not grow and could decline


Seasonality




7



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##### Table of Contents



Employees









|         |             
|-------- | ------------
|ITEM 1A. | RISK FACTORS

10-K,


If we do not compete effectively with companies selling
data integration products, our revenues may not grow and could
decline.








New product introductions and product enhancements may
impact market acceptance of our products and affect our results
of operations.




8



---



##### Table of Contents







| |   |                                                                                                                            
| | - | ---------------------------------------------------------------------------------------------------------------------------
| |  | delay in completion, launch, delivery, or availability;                                                                    
|
| |  | delay in customer purchases in anticipation of new products not
    yet released;                                          
|
| |  | product quality issues including the possibility of defects;                                                               
|
| |  | market confusion based on changes to the product packaging and
    pricing as a result of a new product release;           
|
| |  | interoperability issues with third-party technologies;                                                                     
|
| |  | loss of existing customers that choose a competitors
    product instead of upgrading or migrating to the new product; and
|
| |  | loss of maintenance revenues from existing customers that do not
    upgrade or migrate.                                   



We have experienced and could continue to experience
fluctuations in our quarterly operating results, especially the
amount of license revenues we recognize each quarter, and such
fluctuations have caused and could cause our stock price to
decline.








quarter-to


We rely on our relationships with our strategic partners.
If we do not maintain and strengthen these relationships, our
ability to generate revenue and control expenses could be
adversely affected, which could cause a decline in the price of
our common stock.




9



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If we are unable to accurately forecast revenues, we may
fail to meet stock analysts and investors
expectations of our quarterly operating results, which could
cause our stock price to decline.




We have experienced reduced sales pipeline and pipeline
conversion rates in prior years, which have adversely affected
the growth of our company and the price of our common
stock.




10



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Our international operations expose us to greater risks,
including but not limited to those regarding intellectual
property, collections, exchange rate fluctuations, and
regulations, which could limit our future growth.














| |   |                                                                                                                                                                                                                                                                                               
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | greater difficulty in protecting our ownership rights to
    intellectual property developed in foreign countries, which may
    have laws that materially differ from those in the United States;                                                                                            
|
| |  | communication delays between our main development center in
    Redwood City, California and our development centers in India,
    the Netherlands, and the United Kingdom as a result of time zone
    differences, which may delay the development, testing, or
    release of new products;
|
| |  | greater difficulty in relocating existing trained development
    personnel and recruiting local experienced personnel, and the
    costs and expenses associated with such activities; and                                                                                                   
|
| |  | increased expenses incurred in establishing and maintaining
    office space and equipment for the development centers.                                                                                                                                                                       

11



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| |   |                                                                                                                                                                                                                 
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | greater risk of uncollectible accounts and longer collection
    cycles;                                                                                                                                        
|
| |  | greater risk of unexpected changes in regulatory practices,
    tariffs, and tax laws and treaties;                                                                                                             
|
| |  | greater risk of a failure of our foreign employees to comply
    with both U.S. and foreign laws, including antitrust
    regulations, the Foreign Corrupt Practices Act, and unfair trade
    regulations;     
|
| |  | potential conflicts with our established distributors in
    countries in which we elect to establish a direct sales presence;                                                                                  
|
| |  | our limited experience in establishing a sales and marketing
    presence and the appropriate internal systems, processes, and
    controls in Asia-Pacific, especially China, Hong Kong, Korea,
    and Taiwan;
|
| |  | fluctuations in exchange rates between the U.S. dollar and
    foreign currencies in markets where we do business, if we
    continue to not engage in hedging activities; and                                  
|
| |  | general economic and political conditions in these foreign
    markets.                                                                                                                                         



As a result of our products lengthy sales cycles,
our expected revenues are susceptible to fluctuations, which
could cause us to fail to meet stock analysts and
investors expectations, resulting in a decline in the
price of our common stock.






| |   |                                                                                                                                                                                                                                      
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | our customers budgetary constraints and internal
    acceptance review procedures;                                                                                                                                                  
|
| |  | the timing of our customers budget cycles;                                                                                                                                                                                          
|
| |  | the seasonality of technology purchases, which historically has
    resulted in stronger sales of our products in the fourth quarter
    of the year, especially when compared to lighter sales in the
    first quarter of the year;
|
| |  | our customers concerns about the introduction of our
    products or new products from our competitors; or                                                                                                                          
|
| |  | potential downturns in general economic or political conditions
    that could occur during the sales cycle.                                                                                                                         



12



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Although we believe we currently have adequate internal
control over financial reporting, we are required to assess our
internal control over financial reporting on an annual basis and
any future adverse results from such assessment could result in
a loss of investor confidence in our financial reports and have
an adverse effect on our stock price.


10-K










If our products are unable to interoperate with hardware
and software technologies developed and maintained by third
parties that are not within our control, our ability to develop
and sell our products to our customers could be adversely
affected, which would result in harm to our business and
operating results.




If the market in which we sell our products and services
does not grow as we anticipate, we may not be able to increase
our revenues at an acceptable rate of growth, and the price of
our common stock could decline.




13



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| |   |                                                                             
| | - | ----------------------------------------------------------------------------
| |  | not fully value the benefits of using our products;                         
|
| |  | not achieve favorable results using our products;                           
|
| |  | experience technical difficulties in implementing our
    products; or      
|
| |  | use alternative methods to solve the problems addressed by our
    products.



The loss of our key personnel, an increase in our sales
force personnel turnover rate, or the inability to attract and
retain additional personnel could adversely affect our ability
to grow our company successfully and may negatively impact our
results of operations.










If the current improvement in the U.S. and global
economies does not result in increased sales of our products and
services, our operating results would be harmed, and the price
of our common stock could decline.




14



---



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We rely on the sale of a limited number of products, and
if these products do not achieve broad market acceptance, our
revenues would be adversely affected.




We may not be able to successfully manage the growth of
our business if we are unable to improve our internal systems,
processes, and controls.




The price of our common stock fluctuates as a result of
factors other than our operating results, such as the actions of
our competitors and securities analysts, as well as developments
in our industry and changes in accounting rules.






| |   |                                                                                 
| | - | --------------------------------------------------------------------------------
| |  | the announcement of new products or product enhancements by our
    competitors;
|
| |  | quarterly variations in our competitors results of
    operations;             
|
| |  | changes in earnings estimates and recommendations by securities
    analysts;   
|
| |  | developments in our industry; and                                               
|
| |  | changes in accounting rules.                                                    



15



---



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The price of our common stock may fluctuate when we
account for employee stock option and employee stock purchase
plans using the new fair value method, which could significantly
reduce our net income and earnings per share.


Share-Based
Payment,


We rely on a number of different distribution channels to
sell and market our products. Any conflicts that we may
experience within these various distribution channels could
result in confusion for our customers and a decrease in revenue
and operating margins.




Any significant defect in our products could cause us to
lose revenue and expose us to product liability claims.






If we are unable to successfully respond to technological
advances and evolving industry standards, we could experience a
reduction in our future product sales, which would cause our
revenues to decline.




16



---



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We recognize revenue from specific customers at the time
we receive payment for our products, and if these customers do
not make timely payment, our revenues could decrease.




We have a limited operating history and a cumulative net
loss, which makes it difficult to evaluate our operations,
products, and prospects for the future.




If we are not able to adequately protect our proprietary
rights, third parties could develop and market products that are
equivalent to our own, which would harm our sales
efforts.










17



---



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We may face intellectual property infringement claims that
could be costly to defend and result in our loss of significant
rights.






| |   |                                                                                                                                                   
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------
| |  | we may be forced to enter into royalty or licensing agreements,
    which may not be available on terms favorable to us, or at all;               
|
| |  | we may be required to indemnify our customers or obtain
    replacement products or functionality for our customers;                              
|
| |  | we may be forced to significantly increase our development
    efforts and resources to redesign our products as a result of
    these claims; and
|
| |  | we may be forced to discontinue the sale of some or all of our
    products.                                                                      

Our effective tax rate is difficult to project and changes
in such tax rate could adversely affect our operating
results.






18



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We may not successfully integrate Similaritys
technology, employees or business operations with our own. As a
result, we may not achieve the anticipated benefits of our
acquisition, which could adversely affect our operating results
and cause the price of our common stock to decline.






| |   |                                                                                                                                                      
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------
| |  | the failure to capture the value of the business we acquired,
    including the loss of any key personnel, customers, and business
    relationships;
|
| |  | any inability to generate revenue from the combined products
    that offsets the associated acquisition and maintenance
    costs; and              
|
| |  | the assumption of any contracts or agreements from Similarity
    that contain terms or conditions that are unfavorable to us.                       



We may engage in future acquisitions or investments that
could dilute our existing stockholders or cause us to incur
contingent liabilities, debt, or significant expense.




We have substantial real estate lease commitments that are
currently subleased to third parties, and if subleases for this
space are terminated or cancelled, our operating results and
financial condition could be adversely affected.




Delaware law and our certificate of incorporation and
bylaws contain provisions that could deter potential acquisition
bids, which may adversely affect the market price of our common
stock, discourage merger offers, and prevent changes in our
management or Board of Directors.




19



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We may need to raise additional capital in the future,
which may not be available on reasonable terms to us, if at
all.




Business interruptions could adversely affect our
business.







ITEM 1B.     UNRESOLVED STAFF
COMMENTS









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





20



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

In re
Informatica Corporation Initial Public Offering Securities
Litigation, Civ.
No. 01-9922 (SAS)
(S.D.N.Y.), In re Initial Public Offering
Securities Litigation, 21 MC 92 (SAS) (S.D.N.Y.).








21



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|        |                                                    
|------- | ---------------------------------------------------
|ITEM 4. | SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS






Executive Officers of the Registrant




|                |  |     |    |  |             |                                                                 
|--------------- |  | --- | -- |  | ----------- | ----------------------------------------------------------------
|Name            |  | Age |    |  | Position(s)
|                |  |     |    |  |            
|Sohaib Abbasi   |  |     | 49 |  |             | Chief Executive Officer, President and Director                 
|Earl E. Fry     |  |     | 47 |  |             | Chief Financial Officer, Executive Vice President, and Secretary
|Paul J. Hoffman |  |     | 55 |  |             | Executive Vice President, Worldwide Sales                       
|Girish Pancha   |  |     | 41 |  |             | Executive Vice President of Products                            



Mr. Abbasi


Mr. Fry


Mr. Hoffman


22



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Mr. Pancha





PART II







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

Price Range of Common Stock




|                              |                |      |   |       |     |  |   |       | 
|----------------------------- | -------------- | ---- | - | ----- | --- |  | - | ----- | 
|                              |                | High |   |       | Low | 
|                              |                |      |   |       |     | 
|Year ended December 31, 2005: |                |      |   |       |     |  |   |      
|                              | Fourth quarter |      | $ | 12.63 |     |  | $ | 10.20 | 
|                              | Third quarter  |      | $ | 12.54 |     |  | $ | 8.35  | 
|                              | Second quarter |      | $ | 9.02  |     |  | $ | 7.23  | 
|                              | First quarter  |      | $ | 8.50  |     |  | $ | 6.99  | 
|Year ended December 31, 2004: |                |      |   |       |     |  |   |      
|                              | Fourth quarter |      | $ | 8.67  |     |  | $ | 5.82  | 
|                              | Third quarter  |      | $ | 7.65  |     |  | $ | 5.36  | 
|                              | Second quarter |      | $ | 10.20 |     |  | $ | 6.64  | 
|                              | First quarter  |      | $ | 12.58 |     |  | $ | 8.20  | 

Holders of Record




Dividends




Purchases of Equity Securities by the Issuer and Affiliated
Purchasers




23



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|                         |       |                  |         |         |                |                  |                     |                 |                   |                  |                 |         |  |  |           |   | 
|------------------------ | ----- | ---------------- | ------- | ------- | -------------- | ---------------- | ------------------- | --------------- | ----------------- | ---------------- | --------------- | ------- |  |  | --------- | - | 
|                         |       |                  |         |         |                |                  |                     | (2)             |                  
|                         |       |                  |         |         |                | Total Number of  |                     |                 | Maximum Number of |                 
|                         |       |                  |         |         |                | Shares Purchased |                     |                 | Shares That May   |                 
|                         |       | (1)              |         |         |                |                  | as Part of Publicly |                 |                   | Yet Be Purchased |                
|                         |       | Total Number of  |         |         | Average Price  |                  |                     | Announced Plans |                   |                  | Under the Plans |        
|Period                   |       | Shares Purchased |         |         | Paid per Share |                  |                     | or Programs     |                   |                  | or Programs     |        
|                         |       |                  |         |         |                |                  |                     |                 |                   |                  |                 |        
|October 1  October 31   |       |                  |        |         |                |                  |                    |                 |                   |                  |                |         |  |  | 2,045,000 |  
|November 1  November 30 |       |                  | 910,000 |         |                | $                | 11.37               |                 |                   |                  | 910,000         |         |  |  | 1,135,000 |  
|December 1  December 31 |       |                  |        |         |                |                  |                    |                 |                   |                  |                |         |  |  | 1,135,000 |  
|                         |       |                  |         |         |                |                  |                     |                 |                   |                  |                 |        
|                         | Total |                  |         | 910,000 |                |                  | $                   | 11.37           |                   |                  |                 | 910,000 |  |  |           |  | 
|                         |       |                  |         |         |                |                  |                     |                 |                   |                  |                 |        



|    |                                                                                                                                                                                                   
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | All shares repurchased in open-market transactions under the
    repurchase program.                                                                                                              
|   
|(2) | We announced the repurchase program on July 2, 2004. The
    repurchase program authorizes the repurchase of up to
    5 million shares of our common stock at any time until the
    end of 2005.

24



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



|                                                     |                                                                         |                                                      |                          |         |         |         |   |          |         |         |      |         |         |         |   |         |        |         |   |         |         |         | 
|---------------------------------------------------- | ----------------------------------------------------------------------- | ---------------------------------------------------- | ------------------------ | ------- | ------- | ------- | - | -------- | ------- | ------- | ---- | ------- | ------- | ------- | - | ------- | ------ | ------- | - | ------- | ------- | ------- | 
|                                                     |                                                                         | Years Ended December 31,                             |                         
|                                                     |                                                                         |                                                      |                         
|                                                     |                                                                         | 2005                                                 |                          |         | 2004    |         |   | 2003     |         |         | 2002 |         |         | 2001    |  
|                                                     |                                                                         |                                                      |                          |         |         |         |   |          |         |         |      |         |         |         |  
|                                                     |                                                                         | (In thousands, except per share data)                |                         
|Selected Consolidated Statements of Operations Data: |                                                                         |                                                      |                          |         |         |         |   |          |         |         |      |         |         |         |   |         |        |         |   |        
|                                                     | Revenues:                                                               |                                                      |                          |         |         |         |   |          |         |         |      |         |         |         |   |         |        |         |   |         |        
|                                                     |                                                                         | License                                              |                          | $       | 120,182 |         |   | $        | 97,941  |         |      | $       | 94,590  |         |   | $       | 99,943 |         |   | $       | 119,937 |        
|                                                     |                                                                         | Service                                              |                          |         | 147,249 |         |   |          | 121,740 |         |      |         | 110,943 |         |   |         | 95,498 |         |   |         | 80,208  |        
|                                                     |                                                                         |                                                      |                          |         |         |         |   |          |         |         |      |         |         |         |  
|                                                     |                                                                         |                                                      | Total revenues           |         |         | 267,431 |   |          |         | 219,681 |      |         |         | 205,533 |   |         |        | 195,441 |   |         |         | 200,145 | 
|                                                     |                                                                         |                                                      |                          |         |         |         |   |          |         |         |      |         |         |         |  
|                                                     | Cost of revenues:                                                       |                                                      |                          |         |         |         |   |          |         |         |      |         |         |         |   |         |        |         |   |         |        
|                                                     |                                                                         | License                                              |                          |         | 4,465   |         |   |          | 3,778   |         |      |         | 3,139   |         |   |         | 6,185  |         |   |         | 4,500   |        
|                                                     |                                                                         | Service(1)                                           |                          |         | 46,801  |         |   |          | 40,346  |         |      |         | 38,856  |         |   |         | 39,250 |         |   |         | 42,559  |        
|                                                     |                                                                         | Amortization of acquired technology                  |                          |         | 922     |         |   |          | 2,322   |         |      |         | 1,031   |         |   |         | 1,040  |         |   |         | 1,040   |        
|                                                     |                                                                         |                                                      |                          |         |         |         |   |          |         |         |      |         |         |         |  
|                                                     |                                                                         |                                                      | Total cost of revenues   |         |         | 52,188  |   |          |         | 46,446  |      |         |         | 43,026  |   |         |        | 46,475  |   |         |         | 48,099  | 
|                                                     |                                                                         |                                                      |                          |         |         |         |   |          |         |         |      |         |         |         |  
|                                                     | Gross profit                                                            |                                                      |                          | 215,243 |         |         |   | 173,235  |         |         |      | 162,507 |         |         |   | 148,966 |        |         |   | 152,046 |        
|                                                     | Operating expenses:                                                     |                                                      |                          |         |         |         |   |          |         |         |      |         |         |         |   |         |        |         |   |         |        
|                                                     |                                                                         | Research and development(1)                          |                          |         | 42,585  |         |   |          | 51,322  |         |      |         | 47,730  |         |   |         | 45,836 |         |   |         | 46,714  |        
|                                                     |                                                                         | Sales and marketing(1)                               |                          |         | 118,770 |         |   |          | 94,900  |         |      |         | 86,810  |         |   |         | 86,770 |         |   |         | 99,898  |        
|                                                     |                                                                         | General and administrative(1)                        |                          |         | 20,583  |         |   |          | 20,755  |         |      |         | 20,921  |         |   |         | 20,286 |         |   |         | 19,638  |        
|                                                     |                                                                         | Amortization of goodwill and other intangible assets |                          |         | 188     |         |   |          | 197     |         |      |         | 147     |         |   |         | 100    |         |   |         | 26,336  |        
|                                                     |                                                                         | Purchased in-process research and development        |                          |         |        |         |   |          |        |         |      |         | 4,524   |         |   |         |       |         |   |         |        |        
|                                                     |                                                                         | Facilities restructuring charges                     |                          |         | 3,683   |         |   |          | 112,636 |         |      |         |        |         |   |         | 17,030 |         |   |         | 12,096  |        
|                                                     |                                                                         |                                                      |                          |         |         |         |   |          |         |         |      |         |         |         |  
|                                                     |                                                                         |                                                      | Total operating expenses |         |         | 185,809 |   |          |         | 279,810 |      |         |         | 160,132 |   |         |        | 170,022 |   |         |         | 204,682 | 
|                                                     |                                                                         |                                                      |                          |         |         |         |   |          |         |         |      |         |         |         |  
|                                                     | Income (loss) from operations                                           |                                                      |                          | 29,434  |         |         |   | (106,575 | )       |         |      | 2,375   |         |         |   | (21,056 | )      |         |   | (52,636 | )      
|                                                     | Interest income and other, net                                          |                                                      |                          | 6,544   |         |         |   | 3,391    |         |         |      | 7,059   |         |         |   | 6,363   |        |         |   | 8,960   |        
|                                                     |                                                                         |                                                      |                          |         |         |         |   |          |         |         |      |         |         |         |  
|                                                     | Income (loss) before income taxes                                       |                                                      |                          | 35,978  |         |         |   | (103,184 | )       |         |      | 9,434   |         |         |   | (14,693 | )      |         |   | (43,676 | )      
|                                                     | Income tax provision                                                    |                                                      |                          | 2,174   |         |         |   | 1,220    |         |         |      | 2,124   |         |         |   | 921     |        |         |   | 1,304   |        
|                                                     |                                                                         |                                                      |                          |         |         |         |   |          |         |         |      |         |         |         |  
|                                                     | Net income (loss)                                                       |                                                      | $                        | 33,804  |         |         | $ | (104,404 | )       |         | $    | 7,310   |         |         | $ | (15,614 | )      |         | $ | (44,980 | )      
|                                                     |                                                                         |                                                      |                          |         |         |         |   |          |         |         |      |         |         |         |  
|                                                     | Basic net income (loss) per common share                                |                                                      | $                        | 0.39    |         |         | $ | (1.22    | )       |         | $    | 0.09    |         |         | $ | (0.20   | )      |         | $ | (0.58   | )      
|                                                     | Diluted net income (loss) per common share                              |                                                      | $                        | 0.37    |         |         | $ | (1.22    | )       |         | $    | 0.09    |         |         | $ | (0.20   | )      |         | $ | (0.58   | )      
|                                                     | Shares used in computing basic net income (loss) per common share       |                                                      |                          | 87,242  |         |         |   | 85,812   |         |         |      | 82,049  |         |         |   | 79,753  |        |         |   | 77,599  |        
|                                                     | Shares used in computing diluted net income (loss) per common
    share |                                                      |                          | 92,083  |         |         |   | 85,812   |         |         |      | 85,200  |         |         |   | 79,753  |        |         |   | 77,599  |        

25



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|                                          |                                             |                |   |         |      |  |   |         |  |  |      |         |  |      |   |         |  |  |   |         | 
|----------------------------------------- | ------------------------------------------- | -------------- | - | ------- | ---- |  | - | ------- |  |  | ---- | ------- |  | ---- | - | ------- |  |  | - | ------- | 
|                                          |                                             | December 31,   |  
|                                          |                                             |                |  
|                                          |                                             | 2005           |   |         | 2004 |  |   | 2003    |  |  | 2002 |         |  | 2001 |  
|                                          |                                             |                |   |         |      |  |   |         |  |  |      |         |  |      |  
|                                          |                                             | (In thousands) |  
|Selected Consolidated Balance Sheet Data: |                                             |                |   |         |      |  |   |         |  |  |      |         |  |      |   |         |  |  |   |        
|                                          | Cash and cash equivalents                   |                | $ | 76,545  |      |  | $ | 88,941  |  |  | $    | 82,903  |  |      | $ | 105,590 |  |  | $ | 119,664 | 
|                                          | Short-term investments                      |                |   | 185,649 |      |  |   | 152,160 |  |  |      | 140,890 |  |      |   | 130,285 |  |  |   | 89,555  | 
|                                          | Restricted cash                             |                |   | 12,166  |      |  |   | 12,166  |  |  |      | 12,166  |  |      |   | 12,166  |  |  |   | 12,166  | 
|                                          | Working capital(2)                          |                |   | 187,759 |      |  |   | 173,816 |  |  |      | 167,011 |  |      |   | 180,750 |  |  |   | 171,018 | 
|                                          | Total assets                                |                |   | 441,022 |      |  |   | 409,768 |  |  |      | 402,808 |  |      |   | 365,194 |  |  |   | 342,903 | 
|                                          | Long-term obligations, less current portion |                |   |        |      |  |   |        |  |  |      |        |  |      |   |        |  |  |   |        | 
|                                          | Total stockholders equity                  |                |   | 222,730 |      |  |   | 195,722 |  |  |      | 289,599 |  |      |   | 252,403 |  |  |   | 260,408 | 



|    |                                                                                                                                                                                                                                      
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Amortization of stock-based compensation has been reclassified
    for periods prior to December 31, 2004 to cost of service
    revenues, research and development, sales and marketing, and
    general and administrative expense.
|   
|(2) | A portion of deferred revenues has been reclassified to
    long-term for periods prior to December 31, 2004.                                                                                                                        






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

10-K




Overview






26



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| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Competition: Inherent in our industry are risks
    arising from competition with existing software solutions,
    technological advances from other vendors, and the perception of
    cost-savings by solving data integration challenges through
    internal development. Our prospective customers may view these
    alternative solutions as more attractive than our offerings.
    Additionally, the recent consolidation activity in our industry
    (including IBMs acquisition of Ascential Software) could
    pose challenges as competitors could potentially offer our
    prospective customers a broader suite of software products or
    solutions.                                                                                                                                                                                                                                                                                                                                        
|
| |  | New Product Introductions: To address the
    expanding data integration and data integrity needs of our
    customers and prospective customers, we continue to introduce
    new products and technology enhancements on a regular basis. For
    example in February 2005, we introduced PowerCenter Advanced
    Edition, which expanded the capabilities of PowerCenter Standard
    Edition. In October, we announced the release of a new major
    release of our core product, PowerCenter 8. Also, in early 2006,
    we announced our intention to integrate Similaritys data
    quality technology into the PowerCenter product suite. New
    product introductions and/or enhancements have inherent risks
    including, but not limited to, product availability, product
    quality and interoperability, and customer adoption or the delay
    in customer purchases. Given the risks and new nature of the
    products, we cannot predict their impact on overall sales and
    revenues.
|
| |  | Quarterly and Seasonal Fluctuations: Historically,
    purchasing patterns in the software industry have followed
    quarterly and seasonal trends and they are likely to do so in
    the future. Specifically, it is the norm for us to recognize a
    substantial portion of our new license orders in the last month
    of each                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           

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| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | quarter and sometimes in the last few weeks of each quarter.
    Seasonally, in recent years, we have generally had weaker demand
    for our software products and services in the first and third
    quarters. Additionally, our consulting and education services
    have sometimes been negatively impacted in the fourth quarter
    and first quarter due to the holiday season and internal
    meetings, which result in fewer billable hours for our
    consultants and fewer education classes.





follow-the






Critical Accounting Policies and Estimates




28



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| |                    
| | -------------------
| | Revenue Recognition



Software Revenue Recognition, Revenue Recognition








29



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| |                                 
| | --------------------------------
| | Facilities Restructuring Charges









| |                            
| | ---------------------------
| | Accounting for Income Taxes

Accounting for
Income Taxes. Accounting for
Contingencies.


30



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| |                                      
| | -------------------------------------
| | Accounting for Impairment of Goodwill

Goodwill and Other Intangible Assets,




31



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Results of Operations




|                               |                                               |                                   |   |    |      |   |   |      |     |    |   |    |     |  
|------------------------------ | --------------------------------------------- | --------------------------------- | - | -- | ---- | - | - | ---- | --- | -- | - | -- | --- | -
|                               |                                               | Years Ended December 31,          |  
|                               |                                               |                                   |  
|                               |                                               | 2005                              |   |    | 2004 |   |   | 2003 |    
|                               |                                               |                                   |   |    |      |   |   |      |    
|Revenues:                      |                                               |                                   |   |    |      |   |   |      |     |    |   |   
|                               | License                                       |                                   |   | 45 | %    |   |   | 45   | %   |    |   | 46 | %  
|                               | Service                                       |                                   |   | 55 |      |   |   | 55   |     |    |   | 54 |    
|                               |                                               |                                   |   |    |      |   |   |      |    
|                               |                                               | Total revenues                    |   |    | 100  |   |   |      | 100 |    |   |    | 100 |  
|                               |                                               |                                   |   |    |      |   |   |      |    
|Cost of revenues:              |                                               |                                   |   |    |      |   |   |      |     |    |   |   
|                               | License                                       |                                   |   | 2  |      |   |   | 2    |     |    |   | 2  |    
|                               | Service                                       |                                   |   | 18 |      |   |   | 18   |     |    |   | 19 |    
|                               | Amortization of acquired technology           |                                   |   |   |      |   |   | 1    |     |    |   |   |    
|                               |                                               |                                   |   |    |      |   |   |      |    
|                               |                                               | Total cost of revenues            |   |    | 20   |   |   |      | 21  |    |   |    | 21  |  
|                               |                                               |                                   |   |    |      |   |   |      |    
|                               |                                               | Gross margin                      |   |    | 80   |   |   |      | 79  |    |   |    | 79  |  
|Operating expenses:            |                                               |                                   |   |    |      |   |   |      |     |    |   |   
|                               | Sales and marketing                           |                                   |   | 44 |      |   |   | 43   |     |    |   | 42 |    
|                               | Research and development                      |                                   |   | 16 |      |   |   | 23   |     |    |   | 23 |    
|                               | General and administrative                    |                                   |   | 8  |      |   |   | 10   |     |    |   | 10 |    
|                               | Purchased in-process research and development |                                   |   |   |      |   |   |     |     |    |   | 2  |    
|                               | Restructuring charges                         |                                   |   | 1  |      |   |   | 52   |     |    |   |   |    
|                               |                                               |                                   |   |    |      |   |   |      |    
|                               |                                               | Total operating expenses          |   |    | 69   |   |   |      | 128 |    |   |    | 77  |  
|                               |                                               |                                   |   |    |      |   |   |      |    
|                               |                                               | Income (loss) from operations     |   |    | 11   |   |   |      | (49 | )  |   |    | 2   |  
|Interest income and other, net |                                               |                                   | 3 |    |      |   | 2 |      |     |    | 3 |   
|                               |                                               |                                   |   |    |      |   |   |      |    
|                               |                                               | Income (loss) before income taxes |   |    | 14   |   |   |      | (47 | )  |   |    | 5   |  
|Income taxes provision         |                                               |                                   | 1 |    |      |   | 1 |      |     |    | 1 |   
|                               |                                               |                                   |   |    |      |   |   |      |    
|                               |                                               | Net income (loss)                 |   |    | 13   | % |   |      | (48 | )% |   |    | 4   | %
|                               |                                               |                                   |   |    |      |   |   |      |    

Revenues






|                  |                          |                                    |         |         |                   |   |         |        |         |   |              |        |         |              |    |    |    |   |   |    |    |  
|----------------- | ------------------------ | ---------------------------------- | ------- | ------- | ----------------- | - | ------- | ------ | ------- | - | ------------ | ------ | ------- | ------------ | -- | -- | -- | - | - | -- | -- | -
|                  |                          | Years Ended December 31,           |         |         | Percentage Change |  
|                  |                          |                                    |         |         |                   |  
|                  |                          | 2005                               |         |         | 2004              |   |         | 2003   |         |   | 2004 to 2005 |        |         | 2003 to 2004 |   
|                  |                          |                                    |         |         |                   |   |         |        |         |   |              |        |         |              |   
|                  |                          | (In thousands, except percentages) |        
|License           |                          | $                                  | 120,182 |         |                   | $ | 97,941  |        |         | $ | 94,590       |        |         |              | 23 | %  |    |   | 4 | % 
|Service revenues: |                          |                                    |         |         |                   |   |         |        |         |   |              |        |         |              |    |    |    |   |   |   
|                  | Maintenance              |                                    |         | 103,573 |                   |   |         | 87,470 |         |   |              | 75,748 |         |              |    | 18 | %  |   |   | 15 | % 
|                  | Consulting and education |                                    |         | 43,676  |                   |   |         | 34,270 |         |   |              | 35,195 |         |              |    | 27 | %  |   |   | (3 | )%
|                  |                          |                                    |         |         |                   |   |         |        |         |   |              |        |         |              |   
|                  |                          | Total service revenues             |         |         | 147,249           |   |         |        | 121,740 |   |              |        | 110,943 |              |    |    | 21 | % |   |    | 10 | %
|                  |                          |                                    |         |         |                   |   |         |        |         |   |              |        |         |              |   
|                  |                          | $                                  | 267,431 |         |                   | $ | 219,681 |        |         | $ | 205,533      |        |         |              | 22 | %  |    |   | 7 | % 
|                  |                          |                                    |         |         |                   |   |         |        |         |   |              |        |         |              |   

32



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| |                 
| | ----------------
| | License Revenues





| |                 
| | ----------------
| | Service Revenues



| |                     
| | --------------------
| | Maintenance Revenues





| |                                           
| | ------------------------------------------
| | Consulting and Education Services Revenues





| |                       
| | ----------------------
| | International Revenues



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Cost of Revenues


|                                                              |  |                                    |        |   |                   |   |        |      |  |   |              |   |  |              |     |    |  |  |     |   
|------------------------------------------------------------- |  | ---------------------------------- | ------ | - | ----------------- | - | ------ | ---- |  | - | ------------ | - |  | ------------ | --- | -- |  |  | --- | --
|                                                              |  | Years Ended December 31,           |        |   | Percentage Change |  
|                                                              |  |                                    |        |   |                   |  
|                                                              |  | 2005                               |        |   | 2004              |   |        | 2003 |  |   | 2004 to 2005 |   |  | 2003 to 2004 |    
|                                                              |  |                                    |        |   |                   |   |        |      |  |   |              |   |  |              |    
|                                                              |  | (In thousands, except percentages) |       
|Cost of license revenues                                      |  | $                                  | 4,465  |   |                   | $ | 3,778  |      |  | $ | 3,139        |   |  |              | 18  | %  |  |  | 20  | % 
|Cost of service revenues                                      |  |                                    | 46,801 |   |                   |   | 40,346 |      |  |   | 38,856       |   |  |              | 16  | %  |  |  | 4   | % 
|Amortization of acquired technology                           |  |                                    | 922    |   |                   |   | 2,322  |      |  |   | 1,031        |   |  |              | (60 | )% |  |  | 125 | % 
|                                                              |  |                                    |        |   |                   |   |        |      |  |   |              |   |  |              |    
|                                                              |  | $                                  | 52,188 |   |                   | $ | 46,446 |      |  | $ | 43,026       |   |  |              | 12  | %  |  |  | 8   | % 
|                                                              |  |                                    |        |   |                   |   |        |      |  |   |              |   |  |              |    
|Cost of license revenues, as a percentage of license revenues |  |                                    | 4      | % |                   |   | 4      | %    |  |   | 3            | % |  |              |    | %  |  |  | 1   | % 
|Cost of service revenues, as a percentage of service revenues |  |                                    | 32     | % |                   |   | 33     | %    |  |   | 35           | % |  |              | (1  | )% |  |  | (2  | )%



| |                         
| | ------------------------
| | Cost of License Revenues





| |                         
| | ------------------------
| | Cost of Service Revenues

Share-Based Payment,




| |                                    
| | -----------------------------------
| | Amortization of Acquired Technology



34



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Operating Expenses




| |                         
| | ------------------------
| | Research and Development

|                         |  |                                    |        |  |                   |   |        |      |  |   |              |  |  |              |       |  |  |  |    | 
|------------------------ |  | ---------------------------------- | ------ |  | ----------------- | - | ------ | ---- |  | - | ------------ |  |  | ------------ | ----- |  |  |  | -- | 
|                         |  | Years Ended December 31,           |        |  | Percentage Change |  
|                         |  |                                    |        |  |                   |  
|                         |  | 2005                               |        |  | 2004              |   |        | 2003 |  |   | 2004 to 2005 |  |  | 2003 to 2004 |      
|                         |  |                                    |        |  |                   |   |        |      |  |   |              |  |  |              |      
|                         |  | (In thousands, except percentages) |       
|Research and development |  | $                                  | 42,585 |  |                   | $ | 51,322 |      |  | $ | 47,730       |  |  |              | (17)% |  |  |  | 8% | 

Share-Based Payment,




| |                    
| | -------------------
| | Sales and Marketing

|                    |  |                                    |         |  |                   |   |        |      |  |   |              |  |  |              |     |  |  |  |    | 
|------------------- |  | ---------------------------------- | ------- |  | ----------------- | - | ------ | ---- |  | - | ------------ |  |  | ------------ | --- |  |  |  | -- | 
|                    |  | Years Ended December 31,           |         |  | Percentage Change |  
|                    |  |                                    |         |  |                   |  
|                    |  | 2005                               |         |  | 2004              |   |        | 2003 |  |   | 2004 to 2005 |  |  | 2003 to 2004 |    
|                    |  |                                    |         |  |                   |   |        |      |  |   |              |  |  |              |    
|                    |  | (In thousands, except percentages) |        
|Sales and marketing |  | $                                  | 118,770 |  |                   | $ | 94,900 |      |  | $ | 86,810       |  |  |              | 25% |  |  |  | 9% | 

Share-Based Payment,


35



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| |                           
| | --------------------------
| | General and Administrative

|                           |  |                                    |        |  |                   |   |        |      |  |   |              |  |  |              |      |  |  |  |      | 
|-------------------------- |  | ---------------------------------- | ------ |  | ----------------- | - | ------ | ---- |  | - | ------------ |  |  | ------------ | ---- |  |  |  | ---- | 
|                           |  | Years Ended December 31,           |        |  | Percentage Change |  
|                           |  |                                    |        |  |                   |  
|                           |  | 2005                               |        |  | 2004              |   |        | 2003 |  |   | 2004 to 2005 |  |  | 2003 to 2004 |     
|                           |  |                                    |        |  |                   |   |        |      |  |   |              |  |  |              |     
|                           |  | (In thousands, except percentages) |       
|General and administrative |  | $                                  | 20,583 |  |                   | $ | 20,755 |      |  | $ | 20,921       |  |  |              | (1)% |  |  |  | (1)% | 

Share-Based Payment,




| |                                              
| | ---------------------------------------------
| | Purchased In-Process Research and Development

|                                              |  |                                    |   |      |                   |      |   |  |              |   |       |              |  |  |  |    |  |  |        | 
|--------------------------------------------- |  | ---------------------------------- | - | ---- | ----------------- | ---- | - |  | ------------ | - | ----- | ------------ |  |  |  | -- |  |  | ------ | 
|                                              |  | Years Ended December 31,           |   |      | Percentage Change |     
|                                              |  |                                    |   |      |                   |     
|                                              |  | 2005                               |   | 2004 |                   | 2003 |   |  | 2004 to 2005 |   |       | 2003 to 2004 | 
|                                              |  |                                    |   |      |                   |      |   |  |              |   |       |              | 
|                                              |  | (In thousands, except percentages) |  
|Purchased in-process research and development |  | $                                  |  |      |                   | $    |  |  |              | $ | 4,524 |              |  |  |  | *% |  |  | (100)% | 



| |   |                             
| | - | ----------------------------
| | * | Percentage is not meaningful





| |                                 
| | --------------------------------
| | Facilities Restructuring Charges

|                                 |  |                                    |       |                   |      |   |         |      |  |              |   |  |              |  |       |  |  |  |  |   
|-------------------------------- |  | ---------------------------------- | ----- | ----------------- | ---- | - | ------- | ---- |  | ------------ | - |  | ------------ |  | ----- |  |  |  |  | --
|                                 |  | Years Ended December 31,           |       | Percentage Change |     
|                                 |  |                                    |       |                   |     
|                                 |  | 2005                               |       |                   | 2004 |   |         | 2003 |  | 2004 to 2005 |   |  | 2003 to 2004 | 
|                                 |  |                                    |       |                   |      |   |         |      |  |              |   |  |              | 
|                                 |  | (In thousands, except percentages) |      
|Facilities restructuring charges |  | $                                  | 3,683 |                   |      | $ | 112,636 |      |  | $            |  |  |              |  | (97)% |  |  |  |  | *%



| |   |                             
| | - | ----------------------------
| | * | Percentage is not meaningful



36



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2004 Restructuring Plan.


2001 Restructuring Plan.






Interest Income and Other, Net


|                               |  |                                    |       |  |                   |   |       |      |  |   |              |  |  |              |     |  |  |  |       | 
|------------------------------ |  | ---------------------------------- | ----- |  | ----------------- | - | ----- | ---- |  | - | ------------ |  |  | ------------ | --- |  |  |  | ----- | 
|                               |  | Years Ended December 31,           |       |  | Percentage Change |  
|                               |  |                                    |       |  |                   |  
|                               |  | 2005                               |       |  | 2004              |   |       | 2003 |  |   | 2004 to 2005 |  |  | 2003 to 2004 |    
|                               |  |                                    |       |  |                   |   |       |      |  |   |              |  |  |              |    
|                               |  | (In thousands, except percentages) |      
|Interest income and other, net |  | $                                  | 6,544 |  |                   | $ | 3,391 |      |  | $ | 7,059        |  |  |              | 93% |  |  |  | (52)% | 



37



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Income Tax Provision


|                     |  |                                    |       |  |                   |   |       |      |  |   |              |  |  |              |     |  |  |  |       | 
|-------------------- |  | ---------------------------------- | ----- |  | ----------------- | - | ----- | ---- |  | - | ------------ |  |  | ------------ | --- |  |  |  | ----- | 
|                     |  | Years Ended December 31,           |       |  | Percentage Change |  
|                     |  |                                    |       |  |                   |  
|                     |  | 2005                               |       |  | 2004              |   |       | 2003 |  |   | 2004 to 2005 |  |  | 2003 to 2004 |    
|                     |  |                                    |       |  |                   |   |       |      |  |   |              |  |  |              |    
|                     |  | (In thousands, except percentages) |       |  |                   |   |      
|Income tax provision |  | $                                  | 2,174 |  |                   | $ | 1,220 |      |  | $ | 2,124        |  |  |              | 78% |  |  |  | (43)% | 







Liquidity and Capital Resources






Operating Activities:


38



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Investing Activities:


Financing Activities:






39



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| |                                             
| | --------------------------------------------
| | Contractual Obligations and Operating Leases



|                             |                          |                                 |         |          |         |   |          |        |        |          |        |        |        |            |        |        |        |   |        |        |        | 
|---------------------------- | ------------------------ | ------------------------------- | ------- | -------- | ------- | - | -------- | ------ | ------ | -------- | ------ | ------ | ------ | ---------- | ------ | ------ | ------ | - | ------ | ------ | ------ | 
|                             |                          | Payment Due by Period           |        
|                             |                          |                                 |        
|                             |                          |                                 |         | 2007 and |         |   | 2009 and |        |        | 2010 and |       
|                             |                          | Total                           |         |          | 2006    |   |          | 2008   |        |          | 2010   |        |        | Thereafter |       
|                             |                          |                                 |         |          |         |   |          |        |        |          |        |        |        |            |       
|Operating lease obligations: |                          |                                 |         |          |         |   |          |        |        |          |        |        |        |            |        |        |        |   |        |       
|                             | Operating lease payments |                                 | $       | 140,293  |         |   | $        | 22,259 |        |          | $      | 38,393 |        |            | $      | 34,800 |        |   | $      | 44,841 |       
|                             | Sublease income          |                                 |         | (11,760  | )       |   |          | (3,116 | )      |          |        | (5,483 | )      |            |        | (2,047 | )      |   |        | (1,114 | )     
|                             |                          |                                 |         |          |         |   |          |        |        |          |        |        |        |            |       
|                             |                          | Net operating lease obligations |         |          | 128,533 |   |          |        | 19,143 |          |        |        | 32,910 |            |        |        | 32,753 |   |        |        | 43,727 | 
|Other obligations*           |                          |                                 | 1,800   |          |         |   | 600      |        |        |          | 1,200  |        |        |            |       |        |        |   |       |       
|                             |                          |                                 |         |          |         |   |          |        |        |          |        |        |        |            |       
|                             |                          | $                               | 130,333 |          |         | $ | 19,743   |        |        | $        | 34,110 |        |        | $          | 32,753 |        |        | $ | 43,727 |       
|                             |                          |                                 |         |          |         |   |          |        |        |          |        |        |        |            |       



|  |                                                                                                                                                                      
|- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------
|* | Other purchase obligations and commitments include minimum
    royalty payments under license agreements and do not include
    purchase obligations discussed below.



| |                        
| | -----------------------
| | Contractual Obligations







| |                 
| | ----------------
| | Operating Leases





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| |                   
| | ------------------
| | Other Uses of Cash





| |                 
| | ----------------
| | Letter of Credit





| |                               
| | ------------------------------
| | Off-Balance Sheet Arrangements



Recent Accounting Pronouncements




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



Interest Rate Risk






|                                            |  |              |         |   |      |   |         |  
|------------------------------------------- |  | ------------ | ------- | - | ---- | - | ------- | -
|                                            |  | Years Ended  |        
|                                            |  | December 31, |        
|                                            |  |              |        
|                                            |  | 2005         |         |   | 2004 |  
|                                            |  |              |         |   |      |  
|Cash equivalents and short-term investments |  | $            | 221,967 |   |      | $ | 153,736 |  
|Average rate of return                      |  |              | 3.0     | % |      |   | 1.6     | %



Foreign Currency Risk











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

10-K.


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REPORT OF MANAGEMENT ON INTERNAL CONTROL OVER FINANCIAL
REPORTING


13a-15(f) 15d-15(f)




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











| |                        
| | -----------------------
| | /s/ Sohaib Abbasi      
| |                        
| | Sohaib Abbasi          
| | Chief Executive Officer
| | February 28, 2006      
|
| | /s/ Earl E. Fry        
| |                        
| | Earl E. Fry            
| | Chief Financial Officer
| | February 28, 2006      

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM


















| |                          
| | -------------------------
| | /s/ Ernst & Young
    LLP





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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM














| |                      
| | ---------------------
| | /s/ Ernst & Young LLP





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INFORMATICA CORPORATION


CONSOLIDATED BALANCE SHEETS




|                                                               |                                                                                                                                                                       |                                            |        |          |         |  |        |          |         | 
|-------------------------------------------------------------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------ | ------ | -------- | ------- |  | ------ | -------- | ------- | 
|                                                               |                                                                                                                                                                       | December 31,                               |       
|                                                               |                                                                                                                                                                       |                                            |       
|                                                               |                                                                                                                                                                       | 2005                                       |        |          | 2004    | 
|                                                               |                                                                                                                                                                       |                                            |        |          |         | 
|Assets                                                         |                                                                                                                                                                       |                                            |        |          |         |  |        |         
|Current assets:                                                |                                                                                                                                                                       |                                            |        |          |         |  |        |         
|                                                               | Cash and cash equivalents                                                                                                                                             |                                            | $      | 76,545   |         |  | $      | 88,941   |        
|                                                               | Short-term investments                                                                                                                                                |                                            |        | 185,649  |         |  |        | 152,160  |        
|                                                               | Accounts receivable, net of allowances of $1,094 in 2005 and
    $849 in 2004                                                                                         |                                            |        | 50,533   |         |  |        | 42,535   |        
|                                                               | Prepaid expenses and other current assets                                                                                                                             |                                            |        | 9,342    |         |  |        | 7,837    |        
|                                                               |                                                                                                                                                                       |                                            |        |          |         | 
|                                                               |                                                                                                                                                                       | Total current assets                       |        |          | 322,069 |  |        |          | 291,473 | 
|Restricted cash                                                |                                                                                                                                                                       |                                            | 12,166 |          |         |  | 12,166 |         
|Property and equipment, net                                    |                                                                                                                                                                       |                                            | 21,026 |          |         |  | 20,063 |         
|Goodwill                                                       |                                                                                                                                                                       |                                            | 81,066 |          |         |  | 82,245 |         
|Other intangible assets, net                                   |                                                                                                                                                                       |                                            | 4,163  |          |         |  | 2,880  |         
|Other assets                                                   |                                                                                                                                                                       |                                            | 532    |          |         |  | 941    |         
|                                                               |                                                                                                                                                                       |                                            |        |          |         | 
|                                                               |                                                                                                                                                                       | Total assets                               |        | $        | 441,022 |  |        | $        | 409,768 | 
|                                                               |                                                                                                                                                                       |                                            |        |          |         | 
|                                                              
|Liabilities and Stockholders Equity                           |                                                                                                                                                                       |                                            |        |          |         |  |        |         
|                                                              
|Current liabilities:                                           |                                                                                                                                                                       |                                            |        |          |         |  |        |         
|                                                               | Accounts payable                                                                                                                                                      |                                            | $      | 3,404    |         |  | $      | 7,476    |        
|                                                               | Accrued liabilities                                                                                                                                                   |                                            |        | 17,424   |         |  |        | 16,053   |        
|                                                               | Accrued compensation and related expenses                                                                                                                             |                                            |        | 20,450   |         |  |        | 15,681   |        
|                                                               | Income taxes payable                                                                                                                                                  |                                            |        | 4,566    |         |  |        | 3,142    |        
|                                                               | Accrued facilities restructuring charges                                                                                                                              |                                            |        | 18,718   |         |  |        | 20,080   |        
|                                                               | Deferred revenues                                                                                                                                                     |                                            |        | 69,748   |         |  |        | 55,225   |        
|                                                               |                                                                                                                                                                       |                                            |        |          |         | 
|                                                               |                                                                                                                                                                       | Total current liabilities                  |        |          | 134,310 |  |        |          | 117,657 | 
|Accrued facilities restructuring charges, less current portion |                                                                                                                                                                       |                                            | 75,815 |          |         |  | 89,171 |         
|Deferred revenues, less current portion                        |                                                                                                                                                                       |                                            | 8,167  |          |         |  | 7,218  |         
|                                                               |                                                                                                                                                                       |                                            |        |          |         | 
|                                                               |                                                                                                                                                                       | Total liabilities                          |        |          | 218,292 |  |        |          | 214,046 | 
|                                                               |                                                                                                                                                                       |                                            |        |          |         | 
|Commitments and contingencies                                  |                                                                                                                                                                       |                                            |        |          |         |  |        |         
|Stockholders equity:                                          |                                                                                                                                                                       |                                            |        |          |         |  |        |         
|                                                               | Common stock, $0.001 par value; 200,000 shares
    authorized; 87,341 shares and 86,771 shares issued and
    outstanding at December 31, 2005 and 2004, respectively |                                            |        | 87       |         |  |        | 87       |        
|                                                               | Additional paid-in capital                                                                                                                                            |                                            |        | 384,653  |         |  |        | 389,948  |        
|                                                               | Deferred stock-based compensation                                                                                                                                     |                                            |        | (187     | )       |  |        | (1,000   | )      
|                                                               | Accumulated other comprehensive income (loss)                                                                                                                         |                                            |        | (539     | )       |  |        | 1,775    |        
|                                                               | Accumulated deficit                                                                                                                                                   |                                            |        | (161,284 | )       |  |        | (195,088 | )      
|                                                               |                                                                                                                                                                       |                                            |        |          |         | 
|                                                               |                                                                                                                                                                       | Total stockholders equity                 |        |          | 222,730 |  |        |          | 195,722 | 
|                                                               |                                                                                                                                                                       |                                            |        |          |         | 
|                                                               |                                                                                                                                                                       | Total liabilities and stockholders equity |        | $        | 441,022 |  |        | $        | 409,768 | 
|                                                               |                                                                                                                                                                       |                                            |        |          |         | 



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INFORMATICA CORPORATION


CONSOLIDATED STATEMENTS OF OPERATIONS




|                                                                        |                                               |                                                 |         |         |         |   |         |         |          |   |         |         |         | 
|----------------------------------------------------------------------- | --------------------------------------------- | ----------------------------------------------- | ------- | ------- | ------- | - | ------- | ------- | -------- | - | ------- | ------- | ------- | 
|                                                                        |                                               | Years Ended December 31,                        |        
|                                                                        |                                               |                                                 |        
|                                                                        |                                               | 2005                                            |         |         | 2004    |   |         | 2003    |         
|                                                                        |                                               |                                                 |         |         |         |   |         |         |         
|Revenues:                                                               |                                               |                                                 |         |         |         |   |         |         |          |   |         |        
|                                                                        | License                                       |                                                 | $       | 120,182 |         |   | $       | 97,941  |          |   | $       | 94,590  |        
|                                                                        | Service                                       |                                                 |         | 147,249 |         |   |         | 121,740 |          |   |         | 110,943 |        
|                                                                        |                                               |                                                 |         |         |         |   |         |         |         
|                                                                        |                                               | Total revenues                                  |         |         | 267,431 |   |         |         | 219,681  |   |         |         | 205,533 | 
|                                                                        |                                               |                                                 |         |         |         |   |         |         |         
|Cost of revenues:                                                       |                                               |                                                 |         |         |         |   |         |         |          |   |         |        
|                                                                        | License                                       |                                                 |         | 4,465   |         |   |         | 3,778   |          |   |         | 3,139   |        
|                                                                        | Service                                       |                                                 |         | 46,801  |         |   |         | 40,346  |          |   |         | 38,856  |        
|                                                                        | Amortization of acquired technology           |                                                 |         | 922     |         |   |         | 2,322   |          |   |         | 1,031   |        
|                                                                        |                                               |                                                 |         |         |         |   |         |         |         
|                                                                        |                                               | Total cost of revenues                          |         |         | 52,188  |   |         |         | 46,446   |   |         |         | 43,026  | 
|                                                                        |                                               |                                                 |         |         |         |   |         |         |         
|Gross profit                                                            |                                               |                                                 | 215,243 |         |         |   | 173,235 |         |          |   | 162,507 |        
|Operating expenses:                                                     |                                               |                                                 |         |         |         |   |         |         |          |   |         |        
|                                                                        | Research and development                      |                                                 |         | 42,585  |         |   |         | 51,322  |          |   |         | 47,730  |        
|                                                                        | Sales and marketing                           |                                                 |         | 118,770 |         |   |         | 94,900  |          |   |         | 86,810  |        
|                                                                        | General and administrative                    |                                                 |         | 20,583  |         |   |         | 20,755  |          |   |         | 20,921  |        
|                                                                        | Amortization of intangible assets             |                                                 |         | 188     |         |   |         | 197     |          |   |         | 147     |        
|                                                                        | Purchased in-process research and development |                                                 |         |        |         |   |         |        |          |   |         | 4,524   |        
|                                                                        | Facilities restructuring charges              |                                                 |         | 3,683   |         |   |         | 112,636 |          |   |         |        |        
|                                                                        |                                               |                                                 |         |         |         |   |         |         |         
|                                                                        |                                               | Total operating expenses                        |         |         | 185,809 |   |         |         | 279,810  |   |         |         | 160,132 | 
|                                                                        |                                               |                                                 |         |         |         |   |         |         |         
|                                                                        |                                               | Income (loss) from operations                   |         |         | 29,434  |   |         |         | (106,575 | ) |         |         | 2,375   | 
|Interest income, net                                                    |                                               |                                                 | 7,256   |         |         |   | 3,449   |         |          |   | 3,807   |        
|Other income (expense), net                                             |                                               |                                                 | (712    | )       |         |   | (58     | )       |          |   | 3,252   |        
|                                                                        |                                               |                                                 |         |         |         |   |         |         |         
|                                                                        |                                               | Income (loss) before provision for income taxes |         |         | 35,978  |   |         |         | (103,184 | ) |         |         | 9,434   | 
|Income tax provision                                                    |                                               |                                                 | 2,174   |         |         |   | 1,220   |         |          |   | 2,124   |        
|                                                                        |                                               |                                                 |         |         |         |   |         |         |         
|                                                                        |                                               | Net income (loss)                               |         | $       | 33,804  |   |         | $       | (104,404 | ) |         | $       | 7,310   | 
|                                                                        |                                               |                                                 |         |         |         |   |         |         |         
|Basic net income (loss) per common share                                |                                               | $                                               | 0.39    |         |         | $ | (1.22   | )       |          | $ | 0.09    |        
|                                                                        |                                               |                                                 |         |         |         |   |         |         |         
|Diluted net income (loss) per common share                              |                                               | $                                               | 0.37    |         |         | $ | (1.22   | )       |          | $ | 0.09    |        
|                                                                        |                                               |                                                 |         |         |         |   |         |         |         
|Shares used in computing basic net income (loss) per common share       |                                               |                                                 | 87,242  |         |         |   | 85,812  |         |          |   | 82,049  |        
|                                                                        |                                               |                                                 |         |         |         |   |         |         |         
|Shares used in computing diluted net income (loss) per common
    share |                                               |                                                 | 92,083  |         |         |   | 85,812  |         |          |   | 85,200  |        
|                                                                        |                                               |                                                 |         |         |         |   |         |         |         



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INFORMATICA CORPORATION


CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY




|                                                                            |                                         |                      |        |   |            |   |    |             |  |   |               |   |  |               |        |       |               |   |       |        |   |   |          |          |   |   |         |          |          |  
|--------------------------------------------------------------------------- | --------------------------------------- | -------------------- | ------ | - | ---------- | - | -- | ----------- |  | - | ------------- | - |  | ------------- | ------ | ----- | ------------- | - | ----- | ------ | - | - | -------- | -------- | - | - | ------- | -------- | -------- | -
|                                                                            |                                         |                      |        |   |            |   |    | Accumulated |  |   |               |   | 
|                                                                            |                                         | Common Stock         |        |   | Additional |   |    | Deferred    |  |   | Other         |   |  |               |        | Total |              
|                                                                            |                                         |                      |        |   | Paid-In    |   |    | Stock-based |  |   | Comprehensive |   |  | Accumulated   |        |       | Stockholders |  
|                                                                            |                                         | Shares               |        |   | Amount     |   |    | Capital     |  |   | Compensation  |   |  | Income (Loss) |        |       | Deficit       |   |       | Equity |  
|                                                                            |                                         |                      |        |   |            |   |    |             |  |   |               |   |  |               |        |       |               |   |       |        |  
|Balances, December 31, 2002                                                 |                                         |                      | 80,750 |   |            | $ | 81 |             |  | $ | 348,550       |   |  | $             | (74    | )     |               | $ | 1,840 |        |   | $ | (97,994  | )        |   | $ | 252,403 |         
|Components of comprehensive income:                                         |                                         |                      |        |   |            |   |    |             |  |   |               |   |  |               |        |       |               |   |       |        |   |   |          |          |   |   |         |         
|                                                                            | Net income                              |                      |        |  |            |   |    |            |  |   |               |  |  |               |        |      |               |   |       |       |   |   |          | 7,310    |   |   |         | 7,310    |         
|                                                                            | Foreign currency translation adjustment |                      |        |  |            |   |    |            |  |   |               |  |  |               |        |      |               |   |       | 517    |   |   |          |         |   |   |         | 517      |         
|                                                                            | Unrealized loss on investments          |                      |        |  |            |   |    |            |  |   |               |  |  |               |        |      |               |   |       | (571   | ) |   |          |         |   |   |         | (571     | )       
|                                                                            |                                         |                      |        |   |            |   |    |             |  |   |               |   |  |               |        |       |               |   |       |        |  
|                                                                            |                                         | Comprehensive income |        |   |            |   |    |             |  |   |               |   |  |               |        |       |               |   |       |        |   |   |          |          |   |   |         |          | 7,256    |  
|Common stock options exercised                                              |                                         |                      | 1,532  |   |            |   | 2  |             |  |   | 6,986         |   |  |               |       |       |               |   |      |        |   |   |         |          |   |   | 6,988   |         
|Common stock issued under employee stock purchase plan                      |                                         |                      | 788    |   |            |   | 1  |             |  |   | 4,635         |   |  |               |       |       |               |   |      |        |   |   |         |          |   |   | 4,636   |         
|Compensation expense related to stock options                               |                                         |                      |       |   |            |   |   |             |  |   | 47            |   |  |               |       |       |               |   |      |        |   |   |         |          |   |   | 47      |         
|Issuance of common stock and assumption of stock options in
    acquisition |                                         |                      | 3,190  |   |            |   | 3  |             |  |   | 33,540        |   |  |               | (4,719 | )     |               |   |      |        |   |   |         |          |   |   | 28,824  |         
|Common stock issued for services rendered                                   |                                         |                      | 11     |   |            |   |   |             |  |   | 76            |   |  |               |       |       |               |   |      |        |   |   |         |          |   |   | 76      |         
|Repurchase and retirement of common stock                                   |                                         |                      | (1,642 | ) |            |   | (2 | )           |  |   | (11,446       | ) |  |               |       |       |               |   |      |        |   |   |         |          |   |   | (11,448 | )       
|Deferred stock-based compensation adjustments and other                     |                                         |                      |       |   |            |   |   |             |  |   | 82            |   |  |               | (82    | )     |               |   |      |        |   |   |         |          |   |   |        |         
|Amortization of stock-based compensation                                    |                                         |                      |       |   |            |   |   |             |  |   |              |   |  |               | 817    |       |               |   |      |        |   |   |         |          |   |   | 817     |         
|                                                                            |                                         |                      |        |   |            |   |    |             |  |   |               |   |  |               |        |       |               |   |       |        |  
|Balances, December 31, 2003                                                 |                                         |                      | 84,629 |   |            |   | 85 |             |  |   | 382,470       |   |  |               | (4,058 | )     |               |   | 1,786 |        |   |   | (90,684  | )        |   |   | 289,599 |         
|Components of comprehensive loss:                                           |                                         |                      |        |   |            |   |    |             |  |   |               |   |  |               |        |       |               |   |       |        |   |   |          |          |   |   |         |         
|                                                                            | Net loss                                |                      |        |  |            |   |    |            |  |   |               |  |  |               |        |      |               |   |       |       |   |   |          | (104,404 | ) |   |         | (104,404 | )       
|                                                                            | Foreign currency translation adjustment |                      |        |  |            |   |    |            |  |   |               |  |  |               |        |      |               |   |       | 786    |   |   |          |         |   |   |         | 786      |         
|                                                                            | Unrealized loss on investments          |                      |        |  |            |   |    |            |  |   |               |  |  |               |        |      |               |   |       | (797   | ) |   |          |         |   |   |         | (797     | )       
|                                                                            |                                         |                      |        |   |            |   |    |             |  |   |               |   |  |               |        |       |               |   |       |        |  
|                                                                            |                                         | Comprehensive loss   |        |   |            |   |    |             |  |   |               |   |  |               |        |       |               |   |       |        |   |   |          |          |   |   |         |          | (104,415 | )
|Common stock options exercised                                              |                                         |                      | 2,392  |   |            |   | 2  |             |  |   | 8,848         |   |  |               |       |       |               |   |      |        |   |   |         |          |   |   | 8,850   |         
|Common stock issued under employee stock purchase plan                      |                                         |                      | 805    |   |            |   | 1  |             |  |   | 4,447         |   |  |               |       |       |               |   |      |        |   |   |         |          |   |   | 4,448   |         
|Compensation expense related to stock options                               |                                         |                      |       |   |            |   |   |             |  |   | 1,341         |   |  |               |       |       |               |   |      |        |   |   |         |          |   |   | 1,341   |         
|Repurchase and retirement of common stock                                   |                                         |                      | (1,055 | ) |            |   | (1 | )           |  |   | (6,117        | ) |  |               |       |       |               |   |      |        |   |   |         |          |   |   | (6,118  | )       
|Deferred stock-based compensation adjustments and other                     |                                         |                      |       |   |            |   |   |             |  |   | (1,041        | ) |  |               | 1,041  |       |               |   |      |        |   |   |         |          |   |   |        |         
|Amortization of stock-based compensation                                    |                                         |                      |       |   |            |   |   |             |  |   |              |   |  |               | 2,017  |       |               |   |      |        |   |   |         |          |   |   | 2,017   |         
|                                                                            |                                         |                      |        |   |            |   |    |             |  |   |               |   |  |               |        |       |               |   |       |        |  
|Balances, December 31, 2004                                                 |                                         |                      | 86,771 |   |            |   | 87 |             |  |   | 389,948       |   |  |               | (1,000 | )     |               |   | 1,775 |        |   |   | (195,088 | )        |   |   | 195,722 |         
|Components of comprehensive income:                                         |                                         |                      |        |   |            |   |    |             |  |   |               |   |  |               |        |       |               |   |       |        |   |   |          |          |   |   |         |         
|                                                                            | Net income                              |                      |        |  |            |   |    |            |  |   |               |  |  |               |        |      |               |   |       |       |   |   |          | 33,804   |   |   |         | 33,804   |         
|                                                                            | Foreign currency translation adjustment |                      |        |  |            |   |    |            |  |   |               |  |  |               |        |      |               |   |       | (2,257 | ) |   |          |         |   |   |         | (2,257   | )       
|                                                                            | Unrealized loss on investments          |                      |        |  |            |   |    |            |  |   |               |  |  |               |        |      |               |   |       | (57    | ) |   |          |         |   |   |         | (57      | )       
|                                                                            |                                         |                      |        |   |            |   |    |             |  |   |               |   |  |               |        |       |               |   |       |        |  
|                                                                            |                                         | Comprehensive income |        |   |            |   |    |             |  |   |               |   |  |               |        |       |               |   |       |        |   |   |          |          |   |   |         |          | 31,490   |  
|Common stock options exercised                                              |                                         |                      | 2,504  |   |            |   | 2  |             |  |   | 16,736        |   |  |               |       |       |               |   |      |        |   |   |         |          |   |   | 16,738  |         
|Common stock issued under employee stock purchase plan                      |                                         |                      | 909    |   |            |   | 1  |             |  |   | 4,764         |   |  |               |       |       |               |   |      |        |   |   |         |          |   |   | 4,765   |         
|Repurchase and retirement of common stock                                   |                                         |                      | (2,843 | ) |            |   | (3 | )           |  |   | (26,705       | ) |  |               |       |       |               |   |      |        |   |   |         |          |   |   | (26,708 | )       
|Deferred stock-based compensation adjustments and other                     |                                         |                      |       |   |            |   |   |             |  |   | (90           | ) |  |               | 90     |       |               |   |      |        |   |   |         |          |   |   |        |         
|Amortization of stock-based compensation                                    |                                         |                      |       |   |            |   |   |             |  |   |              |   |  |               | 723    |       |               |   |      |        |   |   |         |          |   |   | 723     |         
|                                                                            |                                         |                      |        |   |            |   |    |             |  |   |               |   |  |               |        |       |               |   |       |        |  
|Balances, December 31, 2005                                                 |                                         |                      | 87,341 |   |            | $ | 87 |             |  | $ | 384,653       |   |  | $             | (187   | )     |               | $ | (539  | )      |   | $ | (161,284 | )        |   | $ | 222,730 |         
|                                                                            |                                         |                      |        |   |            |   |    |             |  |   |               |   |  |               |        |       |               |   |       |        |  



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INFORMATICA CORPORATION


CONSOLIDATED STATEMENTS OF CASH FLOWS




|                                                                             |                                                                                              |                                                                |                                           |                                                     |       |         |         |          |        |        |         |          |        |        |         |  
|---------------------------------------------------------------------------- | -------------------------------------------------------------------------------------------- | -------------------------------------------------------------- | ----------------------------------------- | --------------------------------------------------- | ----- | ------- | ------- | -------- | ------ | ------ | ------- | -------- | ------ | ------ | ------- | -
|                                                                             |                                                                                              | Years Ended December 31,                                       |                                          
|                                                                             |                                                                                              |                                                                |                                          
|                                                                             |                                                                                              | 2005                                                           |                                           |                                                     | 2004  |         |         | 2003     |       
|                                                                             |                                                                                              |                                                                |                                           |                                                     |       |         |         |          |       
|Operating activities:                                                        |                                                                                              |                                                                |                                           |                                                     |       |         |         |          |        |        |         |         
|                                                                             | Net income (loss)                                                                            |                                                                | $                                         | 33,804                                              |       |         | $       | (104,404 | )      |        | $       | 7,310    |       
|                                                                             | Adjustments to reconcile net income (loss) to net cash
    provided by operating activities: |                                                                |                                           |                                                     |       |         |         |          |        |        |         |          |       
|                                                                             |                                                                                              | Depreciation and amortization                                  |                                           |                                                     | 9,198 |         |         |          | 9,261  |        |         |          | 11,224 |       
|                                                                             |                                                                                              | Amortization and compensation expense related to stock options |                                           |                                                     | 723   |         |         |          | 3,358  |        |         |          | 940    |       
|                                                                             |                                                                                              | Amortization of intangible assets and acquired technology      |                                           |                                                     | 1,144 |         |         |          | 2,519  |        |         |          | 1,178  |       
|                                                                             |                                                                                              | Allowance for doubtful accounts and sales returns allowances   |                                           |                                                     | 350   |         |         |          | 5      |        |         |          | 145    |       
|                                                                             |                                                                                              | Purchased in-process research and development                  |                                           |                                                     |      |         |         |          |       |        |         |          | 4,524  |       
|                                                                             |                                                                                              | Non-cash restructuring charges                                 |                                           |                                                     | 3,683 |         |         |          | 21,556 |        |         |          |       |       
|                                                                             |                                                                                              | Gain on the sale of investments                                |                                           |                                                     |      |         |         |          |       |        |         |          | (121   | )     
|                                                                             |                                                                                              | Investment impairment charge                                   |                                           |                                                     |      |         |         |          | 500    |        |         |          |       |       
|                                                                             |                                                                                              | Changes in operating assets and liabilities:                   |                                           |                                                     |       |         |         |          |        |        |         |          |        |       
|                                                                             |                                                                                              |                                                                | Accounts receivable                       |                                                     |       | (8,348  | )       |          |        | (8,165 | )       |          |        | (3,108 | )      
|                                                                             |                                                                                              |                                                                | Prepaid expenses and other assets         |                                                     |       | (3,596  | )       |          |        | (2,876 | )       |          |        | 3,300  |        
|                                                                             |                                                                                              |                                                                | Accounts payable and accrued liabilities  |                                                     |       | (2,571  | )       |          |        | (6,784 | )       |          |        | (482   | )      
|                                                                             |                                                                                              |                                                                | Accrued compensation and related expenses |                                                     |       | 4,769   |         |          |        | 1,430  |         |          |        | 1,558  |        
|                                                                             |                                                                                              |                                                                | Income taxes payable                      |                                                     |       | 1,606   |         |          |        | 917    |         |          |        | (81    | )      
|                                                                             |                                                                                              |                                                                | Accrued facilities restructuring charges  |                                                     |       | (18,299 | )       |          |        | 94,084 |         |          |        | (4,539 | )      
|                                                                             |                                                                                              |                                                                | Deferred revenues                         |                                                     |       | 15,472  |         |          |        | 11,131 |         |          |        | (1,349 | )      
|                                                                             |                                                                                              |                                                                |                                           |                                                     |       |         |         |          |       
|                                                                             |                                                                                              |                                                                |                                           | Net cash provided by operating activities           |       |         | 37,935  |          |        |        | 22,532  |          |        |        | 20,499  |  
|                                                                             |                                                                                              |                                                                |                                           |                                                     |       |         |         |          |       
|Investing activities:                                                        |                                                                                              |                                                                |                                           |                                                     |       |         |         |          |        |        |         |         
|                                                                             | Purchases of property and equipment                                                          |                                                                |                                           | (9,913                                              | )     |         |         | (12,515  | )      |        |         | (2,569   | )     
|                                                                             | Purchases of investments                                                                     |                                                                |                                           | (227,132                                            | )     |         |         | (217,849 | )      |        |         | (193,019 | )     
|                                                                             | Maturities of investments                                                                    |                                                                |                                           | 104,586                                             |       |         |         | 75,930   |        |        |         | 70,384   |       
|                                                                             | Sales of investments                                                                         |                                                                |                                           | 89,000                                              |       |         |         | 129,852  |        |        |         | 111,580  |       
|                                                                             | Acquisition, net of cash acquired                                                            |                                                                |                                           |                                                    |       |         |         |         |        |        |         | (30,279  | )     
|                                                                             |                                                                                              |                                                                |                                           |                                                     |       |         |         |          |       
|                                                                             |                                                                                              |                                                                |                                           | Net cash used in investing activities               |       |         | (43,459 | )        |        |        | (24,582 | )        |        |        | (43,903 | )
|                                                                             |                                                                                              |                                                                |                                           |                                                     |       |         |         |          |       
|Financing activities:                                                        |                                                                                              |                                                                |                                           |                                                     |       |         |         |          |        |        |         |         
|                                                                             | Proceeds from issuance of common stock                                                       |                                                                |                                           | 21,503                                              |       |         |         | 13,298   |        |        |         | 11,624   |       
|                                                                             | Repurchases of common stock and treasury stock                                               |                                                                |                                           | (26,500                                             | )     |         |         | (6,118   | )      |        |         | (11,448  | )     
|                                                                             |                                                                                              |                                                                |                                           |                                                     |       |         |         |          |       
|                                                                             |                                                                                              |                                                                |                                           | Net cash provided by (used in) financing activities |       |         | (4,997  | )        |        |        | 7,180   |          |        |        | 176     |  
|                                                                             |                                                                                              |                                                                |                                           |                                                     |       |         |         |          |       
|Effect of foreign exchange rate changes on cash and cash
    equivalents     |                                                                                              |                                                                | (1,875                                    | )                                                   |       |         | 908     |          |        |        | 541     |         
|Net increase (decrease) in cash and cash equivalents                         |                                                                                              |                                                                | (12,396                                   | )                                                   |       |         | 6,038   |          |        |        | (22,687 | )       
|Cash and cash equivalents at beginning of year                               |                                                                                              |                                                                | 88,941                                    |                                                     |       |         | 82,903  |          |        |        | 105,590 |         
|                                                                             |                                                                                              |                                                                |                                           |                                                     |       |         |         |          |       
|Cash and cash equivalents at end of year                                     |                                                                                              | $                                                              | 76,545                                    |                                                     |       | $       | 88,941  |          |        | $      | 82,903  |         
|                                                                             |                                                                                              |                                                                |                                           |                                                     |       |         |         |          |       
|Supplemental disclosures:                                                    |                                                                                              |                                                                |                                           |                                                     |       |         |         |          |        |        |         |         
|                                                                             | Interest paid                                                                                |                                                                | $                                         | 122                                                 |       |         | $       |         |        |        | $       | 6        |       
|                                                                             |                                                                                              |                                                                |                                           |                                                     |       |         |         |          |       
|                                                                             | Income taxes paid                                                                            |                                                                | $                                         | 1,014                                               |       |         | $       | 304      |        |        | $       | 2,126    |       
|                                                                             |                                                                                              |                                                                |                                           |                                                     |       |         |         |          |       
|Supplemental disclosures of non-cash investing and financing
    activities: |                                                                                              |                                                                |                                           |                                                     |       |         |         |          |        |        |         |         
|                                                                             | Deferred stock-based compensation related to options granted and
    other                   |                                                                | $                                         | (90                                                 | )     |         | $       | (1,041   | )      |        | $       | 4,801    |       
|                                                                             |                                                                                              |                                                                |                                           |                                                     |       |         |         |          |       
|                                                                             | Common stock issued for acquisitions                                                         |                                                                | $                                         |                                                    |       |         | $       |         |        |        | $       | 27,796   |       
|                                                                             |                                                                                              |                                                                |                                           |                                                     |       |         |         |          |       
|                                                                             | Unrealized loss on investments                                                               |                                                                | $                                         | (57                                                 | )     |         | $       | (797     | )      |        | $       | (571     | )     
|                                                                             |                                                                                              |                                                                |                                           |                                                     |       |         |         |          |       



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INFORMATICA CORPORATION


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS




|   |                          
|-- | -------------------------
|1. | Organization and Business





|   |                                           
|-- | ------------------------------------------
|2. | Summary of Significant Accounting Policies



| |                      
| | ---------------------
| | Basis of Presentation





| |                  
| | -----------------
| | Reclassifications





| |                 
| | ----------------
| | Use of Estimates





| |                                            
| | -------------------------------------------
| | Cash, Cash Equivalents, and Restricted Cash





| |                                
| | -------------------------------
| | Allowance for Doubtful Accounts



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INFORMATICA CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




| |                            
| | ---------------------------
| | Allowance for Sales Returns





| |            
| | -----------
| | Investments





| |                       
| | ----------------------
| | Property and Equipment





| |                           
| | --------------------------
| | Software Development Costs

Accounting for the Costs of
Computer Software to be Sold, Leased, or Otherwise Marketed


98-1, Accounting for Costs of Computer Software Developed or
Obtained for Internal Use




| |         
| | --------
| | Goodwill

Goodwill and Other Intangible
Assets


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INFORMATICA CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






| |                                
| | -------------------------------
| | Impairment of Long-Lived Assets

Accounting for the
Impairment or Disposal of Long-Lived Assets




| |                                                                                               
| | ----------------------------------------------------------------------------------------------
| | Fair Value of Financial Instruments, Concentrations of
    Credit Risk, and Credit Evaluations









| |                    
| | -------------------
| | Revenue Recognition

97-2, Software Revenue Recognition, 98-9, Modification of
SOP 97-2, Software
Revenue Recognition, With Respect to Certain
Transactions, 81-1, Accounting for Performance of Construction-type and Certain
Production-type Contracts,


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INFORMATICA CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


97-2,


Persuasive evidence of an arrangement exists.


Delivery has occurred.


The fee is fixed or determinable.


Collection is probable.












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INFORMATICA CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




| |                                 
| | --------------------------------
| | Facilities Restructuring Charges

Accounting
for Costs Associated with Exit or Disposal Activities. Costs Associated
with Lease Modification or Termination.








| |                            
| | ---------------------------
| | Shipping and Handling Costs





| |                    
| | -------------------
| | Advertising Expense





| |                                   
| | ----------------------------------
| | Net Income (Loss) per Common Share

Earnings per
Share,


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INFORMATICA CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|                                                                        |  |                          |        |   |      |   |          |      |  |   |        |  
|----------------------------------------------------------------------- |  | ------------------------ | ------ | - | ---- | - | -------- | ---- |  | - | ------ | -
|                                                                        |  | Years Ended December 31, |       
|                                                                        |  |                          |       
|                                                                        |  | 2005                     |        |   | 2004 |   |          | 2003 | 
|                                                                        |  |                          |        |   |      |   |          |      | 
|Net income (loss)                                                       |  | $                        | 33,804 |   |      | $ | (104,404 | )    |  | $ | 7,310  |  
|                                                                        |  |                          |        |   |      |   |          |      | 
|Weighted-average shares outstanding                                     |  |                          | 87,266 |   |      |   | 85,919   |      |  |   | 82,158 |  
|Weighted-average unvested common shares subject to repurchase           |  |                          | (24    | ) |      |   | (107     | )    |  |   | (109   | )
|                                                                        |  |                          |        |   |      |   |          |      | 
|Shares used in computing basic net income (loss) per common share       |  |                          | 87,242 |   |      |   | 85,812   |      |  |   | 82,049 |  
|Effect of dilutive securities (stock options)                           |  |                          | 4,841  |   |      |   |         |      |  |   | 3,151  |  
|                                                                        |  |                          |        |   |      |   |          |      | 
|Shares used in computing diluted net income (loss) per common
    share |  |                          | 92,083 |   |      |   | 85,812   |      |  |   | 85,200 |  
|                                                                        |  |                          |        |   |      |   |          |      | 
|Basic net income (loss) per common share                                |  | $                        | 0.39   |   |      | $ | (1.22    | )    |  | $ | 0.09   |  
|                                                                        |  |                          |        |   |      |   |          |      | 
|Diluted net income (loss) per common share                              |  | $                        | 0.37   |   |      | $ | (1.22    | )    |  | $ | 0.09   |  
|                                                                        |  |                          |        |   |      |   |          |      | 





| |             
| | ------------
| | Income Taxes

Accounting for Income Taxes, Accounting for
Contingencies.




| |                         
| | ------------------------
| | Stock-Based Compensation

Accounting for
Stock Issued to Employees, Accounting for
Stock-Based Compensation, Accounting for Stock-Based Compensation 
Transition and Disclosure. Accounting for
Equity Instruments that are Issued to Other Than Employees for
Acquiring, or in Conjunction with Selling, Goods or Services.




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INFORMATICA CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


Accounting for Stock
Appreciation Rights and Other Variable Stock Option or Awards
Plans (an interpretation of APB Opinions No. 15 and 25).




|               |                                  |              |  |      |      |  |  |      |   |  |  |      |  
|-------------- | -------------------------------- | ------------ |  | ---- | ---- |  |  | ---- | - |  |  | ---- | -
|               |                                  | Years Ended  | 
|               |                                  | December 31, | 
|               |                                  |              | 
|               |                                  | 2005         |  |      | 2004 |  |  | 2003 |  
|               |                                  |              |  |      |      |  |  |      |  
|Option grants: |                                  |              |  |      |      |  |  |      |   |  |  |     
|               | Expected life of options (years) |              |  | 3.3  |      |  |  | 3.0  |   |  |  | 3.1  |  
|               | Risk-free interest rate          |              |  | 3.9  | %    |  |  | 3.0  | % |  |  | 1.7  | %
|               | Volatility                       |              |  | 57   | %    |  |  | 80   | % |  |  | 80   | %
|ESPP:          |                                  |              |  |      |      |  |  |      |   |  |  |     
|               | Expected life of options (years) |              |  | 1.25 |      |  |  | 1.25 |   |  |  | 1.25 |  
|               | Risk-free interest rate          |              |  | 3.5  | %    |  |  | 1.8  | % |  |  | 1.4  | %
|               | Volatility                       |              |  | 44   | %    |  |  | 60   | % |  |  | 88   | %



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INFORMATICA CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|                                            |                                                                                                      |                          |   |         |      |  |   |          |   |  |   |         |  
|------------------------------------------- | ---------------------------------------------------------------------------------------------------- | ------------------------ | - | ------- | ---- |  | - | -------- | - |  | - | ------- | -
|                                            |                                                                                                      | Years Ended December 31, |  
|                                            |                                                                                                      |                          |  
|                                            |                                                                                                      | 2005                     |   |         | 2004 |  |   | 2003     |  
|                                            |                                                                                                      |                          |   |         |      |  |   |          |  
|Net income (loss):                          |                                                                                                      |                          |   |         |      |  |   |          |   |  |   |        
|                                            | As reported                                                                                          |                          | $ | 33,804  |      |  | $ | (104,404 | ) |  | $ | 7,310   |  
|                                            | Stock-based employee compensation included in net income (loss)
    as reported, net of related tax* |                          |   | 723     |      |  |   | 3,358    |   |  |   | 940     |  
|                                            | Stock-based employee compensation using the fair value method,
    net of related tax*               |                          |   | (16,010 | )    |  |   | (18,897  | ) |  |   | (27,427 | )
|                                            |                                                                                                      |                          |   |         |      |  |   |          |  
|                                            | Pro forma                                                                                            |                          | $ | 18,517  |      |  | $ | (119,943 | ) |  | $ | (19,177 | )
|                                            |                                                                                                      |                          |   |         |      |  |   |          |  
|Basic net income (loss) per common share:   |                                                                                                      |                          |   |         |      |  |   |          |   |  |   |        
|                                            | As reported                                                                                          |                          | $ | 0.39    |      |  | $ | (1.22    | ) |  | $ | 0.09    |  
|                                            | Pro forma                                                                                            |                          | $ | 0.21    |      |  | $ | (1.40    | ) |  | $ | (0.23   | )
|Diluted net income (loss) per common share: |                                                                                                      |                          |   |         |      |  |   |          |   |  |   |        
|                                            | As reported                                                                                          |                          | $ | 0.37    |      |  | $ | (1.22    | ) |  | $ | 0.09    |  
|                                            | Pro forma                                                                                            |                          | $ | 0.20    |      |  | $ | (1.40    | ) |  | $ | (0.23   | )



| |   |                                                                                                          
| | - | ---------------------------------------------------------------------------------------------------------
| | * | The tax effects on stock-based compensation have been fully
    reserved by way of a valuation allowance.





| |                   
| | ------------------
| | Reporting Segments

Disclosures about Segments of an
Enterprise and Related Information,






| |                             
| | ----------------------------
| | Foreign Currency Translation



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INFORMATICA CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






| |                                 
| | --------------------------------
| | Recent Accounting Pronouncements

Accounting Changes and Error Corrections Reporting Accounting Changes in Interim
Financial Statements


Accounting for Conditional Asset Retirement
Obligations Accounting for Asset Retirement
Obligations


Share-Based
Payment Accounting for Stock-Based Compensation Accounting for Stock Issued to Employees Statement of Cash Flows requires


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INFORMATICA CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


Stock-Based Compensation


3.     Cash, Cash Equivalents and
Short-Term Investments






|                                                         |                                 |                              |         |            |         |   |            |        |   |           |            |      |      |   |         |         |         | 
|-------------------------------------------------------- | ------------------------------- | ---------------------------- | ------- | ---------- | ------- | - | ---------- | ------ | - | --------- | ---------- | ---- | ---- | - | ------- | ------- | ------- | 
|                                                         |                                 | December 31, 2005            |        
|                                                         |                                 |                              |        
|                                                         |                                 |                              |         | Gross      |         |   | Gross      |        |   |          
|                                                         |                                 |                              |         | Unrealized |         |   | Unrealized |        |   | Estimated |           
|                                                         |                                 | Cost                         |         |            | Gains   |   |            | Losses |   |           | Fair Value |     
|                                                         |                                 |                              |         |            |         |   |            |        |   |           |            |     
|Cash                                                     |                                 | $                            | 40,227  |            |         | $ |           |        |   | $         |           |      |      | $ | 40,227  |        
|                                                         |                                 |                              |         |            |         |   |            |        |   |           |            |     
|Cash equivalents:                                        |                                 |                              |         |            |         |   |            |        |   |           |            |      |      |   |         |        
|                                                         | Money market funds              |                              |         | 1,261      |         |   |            |       |   |           |            |     |      |   |         | 1,261   |        
|                                                         | Commercial paper                |                              |         | 20,996     |         |   |            |       |   |           |            | (3   | )    |   |         | 20,993  |        
|                                                         | U.S. government notes and bonds |                              |         | 14,063     |         |   |            | 2      |   |           |            | (1   | )    |   |         | 14,064  |        
|                                                         |                                 |                              |         |            |         |   |            |        |   |           |            |     
|                                                         |                                 | Total cash equivalents       |         |            | 36,320  |   |            |        | 2 |           |            |      | (4   | ) |         |         | 36,318  | 
|                                                         |                                 |                              |         |            |         |   |            |        |   |           |            |     
|                                                         | Total cash and cash equivalents |                              |         | 76,547     |         |   |            | 2      |   |           |            | (4   | )    |   |         | 76,545  |        
|                                                         |                                 |                              |         |            |         |   |            |        |   |           |            |     
|Short-term investments:                                  |                                 |                              |         |            |         |   |            |        |   |           |            |      |      |   |         |        
|                                                         | Money market funds              |                              |         | 451        |         |   |            |       |   |           |            |     |      |   |         | 451     |        
|                                                         | Commercial paper                |                              |         | 997        |         |   |            |       |   |           |            |     |      |   |         | 997     |        
|                                                         | Certificates of deposit         |                              |         | 2,000      |         |   |            |       |   |           |            |     |      |   |         | 2,000   |        
|                                                         | Corporate notes and bonds       |                              |         | 27,455     |         |   |            |       |   |           |            | (184 | )    |   |         | 27,271  |        
|                                                         | Municipal securities            |                              |         | 4,198      |         |   |            |       |   |           |            | (9   | )    |   |         | 4,189   |        
|                                                         | U.S. government notes and bonds |                              |         | 109,084    |         |   |            |       |   |           |            | (507 | )    |   |         | 108,577 |        
|                                                         | Auction rate securities         |                              |         | 41,850     |         |   |            |       |   |           |            |     |      |   |         | 41,850  |        
|                                                         | France government bonds         |                              |         | 314        |         |   |            |       |   |           |            |     |      |   |         | 314     |        
|                                                         |                                 |                              |         |            |         |   |            |        |   |           |            |     
|                                                         |                                 | Total short-term investments |         |            | 186,349 |   |            |        |  |           |            |      | (700 | ) |         |         | 185,649 | 
|                                                         |                                 |                              |         |            |         |   |            |        |   |           |            |     
|Total cash, cash equivalents, and short-term investments |                                 | $                            | 262,896 |            |         | $ | 2          |        |   | $         | (704       | )    |      | $ | 262,194 |        
|                                                         |                                 |                              |         |            |         |   |            |        |   |           |            |     

59



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INFORMATICA CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


|                                                         |                                 |                              |         |            |         |            |        |   |           |            |      |      |      |   |         |        |         | 
|-------------------------------------------------------- | ------------------------------- | ---------------------------- | ------- | ---------- | ------- | ---------- | ------ | - | --------- | ---------- | ---- | ---- | ---- | - | ------- | ------ | ------- | 
|                                                         |                                 | December 31, 2004            |        
|                                                         |                                 |                              |        
|                                                         |                                 |                              |         | Gross      |         | Gross      |        |   |          
|                                                         |                                 |                              |         | Unrealized |         | Unrealized |        |   | Estimated |           
|                                                         |                                 | Cost                         |         |            | Gains   |            | Losses |   |           | Fair Value |     
|                                                         |                                 |                              |         |            |         |            |        |   |           |            |     
|Cash                                                     |                                 | $                            | 87,365  |            |         | $          |       |   |           | $          |     |      |      | $ | 87,365  |       
|                                                         |                                 |                              |         |            |         |            |        |   |           |            |      |     
|Cash equivalents:                                        |                                 |                              |         |            |         |            |        |   |           |            |      |      |      |   |         |       
|                                                         | Money market funds              |                              |         | 1,576      |         |            |        |  |           |            |      |     |      |   |         | 1,576  |        
|                                                         |                                 |                              |         |            |         |            |        |   |           |            |      |     
|                                                         |                                 | Total cash equivalents       |         |            | 1,576   |            |        |   |          |            |      |      |     |   |         |        | 1,576   | 
|                                                         |                                 |                              |         |            |         |            |        |   |           |            |      |     
|                                                         | Total cash and cash equivalents |                              |         | 88,941     |         |            |        |  |           |            |      |     |      |   |         | 88,941 |        
|                                                         |                                 |                              |         |            |         |            |        |   |           |            |      |     
|Short-term investments:                                  |                                 |                              |         |            |         |            |        |   |           |            |      |      |      |   |         |       
|                                                         | Money market funds              |                              |         | 451        |         |            |        |  |           |            |      |     |      |   |         | 451    |        
|                                                         | Corporate notes and bonds       |                              |         | 19,446     |         |            |        |  |           |            |      | (146 | )    |   |         | 19,300 |        
|                                                         | Municipal securities            |                              |         | 40,326     |         |            |        |  |           |            |      | (9   | )    |   |         | 40,317 |        
|                                                         | U.S. government notes and bonds |                              |         | 79,782     |         |            |        |  |           |            |      | (490 | )    |   |         | 79,292 |        
|                                                         | Auction rate securities         |                              |         | 12,800     |         |            |        |  |           |            |      |     |      |   |         | 12,800 |        
|                                                         |                                 |                              |         |            |         |            |        |   |           |            |      |     
|                                                         |                                 | Total short-term investments |         |            | 152,805 |            |        |   |          |            |      |      | (645 | ) |         |        | 152,160 | 
|                                                         |                                 |                              |         |            |         |            |        |   |           |            |      |     
|Total cash, cash equivalents, and short-term investments |                                 | $                            | 241,746 |            |         | $          |       |   |           | $          | (645 | )    |      | $ | 241,101 |       
|                                                         |                                 |                              |         |            |         |            |        |   |           |            |      |     

03-1,


|                                |  |                     |         |            |                     |   |      |       |       |            |        |  |  |            |            |   |        |   |         |  |  |   |      |  
|------------------------------- |  | ------------------- | ------- | ---------- | ------------------- | - | ---- | ----- | ----- | ---------- | ------ |  |  | ---------- | ---------- | - | ------ | - | ------- |  |  | - | ---- | -
|                                |  | Less than 12 Months |         |            | More than 12 Months |   |      | Total |      
|                                |  |                     |         |            |                     |   |      |       |      
|                                |  |                     |         | Gross      |                     |   |      |       | Gross |            |        |  |  | Gross      |           
|                                |  |                     |         | Unrealized |                     |   | Fair |       |       | Unrealized |        |  |  |            | Unrealized |  
|                                |  | Fair Value          |         |            | Losses              |   |      | Value |       |            | Losses |  |  | Fair Value |            |   | Losses |  
|                                |  |                     |         |            |                     |   |      |       |       |            |        |  |  |            |            |   |        |  
|Corporate notes and bonds       |  | $                   | 22,549  |            |                     | $ | (131 | )     |       | $          | 4,722  |  |  | $          | (54        | ) |        | $ | 27,271  |  |  | $ | (185 | )
|Municipal securities            |  |                     | 4,189   |            |                     |   | (9   | )     |       |            |       |  |  |            |           |   |        |   | 4,189   |  |  |   | (9   | )
|Commercial paper                |  |                     | 7,034   |            |                     |   | (3   | )     |       |            |       |  |  |            |           |   |        |   | 7,034   |  |  |   | (3   | )
|U.S. government notes and bonds |  |                     | 90,998  |            |                     |   | (349 | )     |       |            | 19,324 |  |  |            | (158       | ) |        |   | 110,322 |  |  |   | (507 | )
|                                |  |                     |         |            |                     |   |      |       |       |            |        |  |  |            |            |   |        |  
|                                |  | $                   | 124,770 |            |                     | $ | (492 | )     |       | $          | 24,046 |  |  | $          | (212       | ) |        | $ | 148,816 |  |  | $ | (704 | )
|                                |  |                     |         |            |                     |   |      |       |       |            |        |  |  |            |            |   |        |  





|                          |  |      |         |  |            |   |         | 
|------------------------- |  | ---- | ------- |  | ---------- | - | ------- | 
|                          |  | Cost |         |  | Fair Value |  
|                          |  |      |         |  |            |  
|Due within one year       |  | $    | 156,561 |  |            | $ | 156,071 | 
|Due one year to two years |  |      | 24,258  |  |            |   | 24,046  | 
|Due after two years       |  |      | 41,850  |  |            |   | 41,850  | 
|                          |  |      |         |  |            |  
|                          |  | $    | 222,669 |  |            | $ | 221,967 | 
|                          |  |      |         |  |            |  

60



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INFORMATICA CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




4.     Property and Equipment




|                                                |  |              |         |   |      |   |         |  
|----------------------------------------------- |  | ------------ | ------- | - | ---- | - | ------- | -
|                                                |  | December 31, |        
|                                                |  |              |        
|                                                |  | 2005         |         |   | 2004 |  
|                                                |  |              |         |   |      |  
|Computer and office equipment                   |  | $            | 31,184  |   |      | $ | 27,436  |  
|Furniture and fixtures                          |  |              | 3,130   |   |      |   | 516     |  
|Leasehold improvements                          |  |              | 14,653  |   |      |   | 4,216   |  
|Capital work-in-progress                        |  |              | 1,170   |   |      |   | 8,708   |  
|                                                |  |              |         |   |      |  
|                                                |  |              | 50,137  |   |      |   | 40,876  |  
|Less: Accumulated depreciation and amortization |  |              | (29,111 | ) |      |   | (20,813 | )
|                                                |  |              |         |   |      |  
|                                                |  | $            | 21,026  |   |      | $ | 20,063  |  
|                                                |  |              |         |   |      |  

work-in




|   |                               
|-- | ------------------------------
|5. | Goodwill and Intangible Assets



|                       |  |                |       |  |              |   |        |        |  |   |                |  |  |              |       |  |        |   |        |   |  |   |       | 
|---------------------- |  | -------------- | ----- |  | ------------ | - | ------ | ------ |  | - | -------------- |  |  | ------------ | ----- |  | ------ | - | ------ | - |  | - | ----- | 
|                       |  | 2005           |       |  | 2004         |  
|                       |  |                |       |  |              |  
|                       |  | Gross Carrying |       |  | Accumulated  |   |        | Net    |  |   | Gross Carrying |  |  | Accumulated  |       |  | Net    |  
|                       |  | Amount         |       |  | Amortization |   |        | Amount |  |   | Amount         |  |  | Amortization |       |  | Amount |  
|                       |  |                |       |  |              |   |        |        |  |   |                |  |  |              |       |  |        |  
|Core technology        |  | $              | 6,357 |  |              | $ | (5,178 | )      |  | $ | 1,179          |  |  | $            | 6,429 |  |        | $ | (4,257 | ) |  | $ | 2,172 | 
|Purchased technology   |  |                | 2,500 |  |              |   | (35    | )      |  |   | 2,465          |  |  |              |      |  |        |   |       |   |  |   |      | 
|Customer relationships |  |                | 945   |  |              |   | (426   | )      |  |   | 519            |  |  |              | 945   |  |        |   | (237   | ) |  |   | 708   | 
|                       |  |                |       |  |              |   |        |        |  |   |                |  |  |              |       |  |        |  
|                       |  | $              | 9,802 |  |              | $ | (5,639 | )      |  | $ | 4,163          |  |  | $            | 7,374 |  |        | $ | (4,494 | ) |  | $ | 2,880 | 
|                       |  |                |       |  |              |   |        |        |  |   |                |  |  |              |       |  |        |  



61



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INFORMATICA CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)








|                                |  |              |        |   |      |   |        | 
|------------------------------- |  | ------------ | ------ | - | ---- | - | ------ | 
|                                |  | December 31, |       
|                                |  |              |       
|                                |  | 2005         |        |   | 2004 |  
|                                |  |              |        |   |      |  
|Beginning balance               |  | $            | 82,245 |   |      | $ | 82,186 | 
|Subsequent goodwill adjustments |  |              | (1,179 | ) |      |   | 59     | 
|                                |  |              |        |   |      |  
|Ending balance                  |  | $            | 81,066 |   |      | $ | 82,245 | 
|                                |  |              |        |   |      |  



6.     Facilities Restructuring
Charges




| |                        
| | -----------------------
| | 2004 Restructuring Plan





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INFORMATICA CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




| |                        
| | -----------------------
| | 2001 Restructuring Plan









|                        |                         |               |         |        |               |   |       |             |  |   |               |            |         |              |         |         |      |   |      |      |   |   |        |        | 
|----------------------- | ----------------------- | ------------- | ------- | ------ | ------------- | - | ----- | ----------- |  | - | ------------- | ---------- | ------- | ------------ | ------- | ------- | ---- | - | ---- | ---- | - | - | ------ | ------ | 
|                        |                         | Accrued       |         |        |               |   |       |             |  |   |               |            | Accrued |             
|                        |                         | Restructuring |         |        |               |   |       |             |  |   | Restructuring |           
|                        |                         | Charges at    |         |        | Restructuring |   |       |             |  |   |               | Charges at |        
|                        |                         | December 31,  |         |        |               |   |       | Net Cash    |  |   | Non-cash      |            |         | December 31, |        
|                        |                         | 2004          |         |        | Charges       |   |       | Adjustments |  |   | Payment       |            |         | Reclass      |         |         | 2005 |  
|                        |                         |               |         |        |               |   |       |             |  |   |               |            |         |              |         |         |      |  
|2004 Restructuring Plan |                         |               |         |        |               |   |       |             |  |   |               |            |         |              |         |         |      |   |      |      |   |   |        |       
|                        | Excess lease facilities |               | $       | 88,521 |               |   | $     | 4,767       |  |   | $             | (1,133     | )       |              | $       | (13,924 | )    |   | $    | (102 | ) |   | $      | 78,129 | 
|2001 Restructuring Plan |                         |               |         |        |               |   |       |             |  |   |               |            |         |              |         |         |      |   |      |      |   |   |        |       
|                        | Excess lease facilities |               |         | 20,730 |               |   |       |            |  |   |               | 49         |         |              |         | (4,375  | )    |   |      |     |   |   |        | 16,404 | 
|                        |                         |               |         |        |               |   |       |             |  |   |               |            |         |              |         |         |      |  
|                        |                         | $             | 109,251 |        |               | $ | 4,767 |             |  | $ | (1,084        | )          |         | $            | (18,299 | )       |      | $ | (102 | )    |   | $ | 94,533 |       
|                        |                         |               |         |        |               |   |       |             |  |   |               |            |         |              |         |         |      |  

63



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##### Table of Contents



INFORMATICA CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|                        |                                   |               |        |        |               |   |         |         |  |   |               |            |   |              |         |         |   |   |         |        | 
|----------------------- | --------------------------------- | ------------- | ------ | ------ | ------------- | - | ------- | ------- |  | - | ------------- | ---------- | - | ------------ | ------- | ------- | - | - | ------- | ------ | 
|                        |                                   | Accrued       |        |        |               |   |         |         |  |   | Accrued       |           
|                        |                                   | Restructuring |        |        |               |   |         |         |  |   | Restructuring |           
|                        |                                   | Charges at    |        |        |               |   | Net     |         |  |   |               | Charges at |  
|                        |                                   | December 31,  |        |        | Restructuring |   |         | Cash    |  |   | Non-cash      |            |   | December 31, |        
|                        |                                   | 2003          |        |        | Charges       |   |         | Payment |  |   | Reclass       |            |   | 2004         |        
|                        |                                   |               |        |        |               |   |         |         |  |   |               |            |   |              |        
|2004 Restructuring Plan |                                   |               |        |        |               |   |         |         |  |   |               |            |   |              |         |         |   |   |         |       
|                        | Excess lease facilities           |               | $      |       |               |   | $       | 82,015  |  |   | $             |           |   |              | $       | 6,506   |   |   | $       | 88,521 | 
|                        | Property and equipment write-offs |               |        |       |               |   |         | 21,556  |  |   |               |           |   |              |         | (21,556 | ) |   |         |       | 
|2001 Restructuring Plan |                                   |               |        |        |               |   |         |         |  |   |               |            |   |              |         |         |   |   |         |       
|                        | Excess lease facilities           |               |        | 15,167 |               |   |         | 9,065   |  |   |               | (4,465     | ) |              |         | 963     |   |   |         | 20,730 | 
|                        |                                   |               |        |        |               |   |         |         |  |   |               |            |   |              |        
|                        |                                   | $             | 15,167 |        |               | $ | 112,636 |         |  | $ | (4,465        | )          |   | $            | (14,087 | )       |   | $ | 109,251 |       
|                        |                                   |               |        |        |               |   |         |         |  |   |               |            |   |              |        









|   |                              
|-- | -----------------------------
|7. | Commitments and Contingencies



| |                  
| | -----------------
| | Lease Obligations





64



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##### Table of Contents



INFORMATICA CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






|           |  |           |         |  |          |   |         |     |  |   |         | 
|---------- |  | --------- | ------- |  | -------- | - | ------- | --- |  | - | ------- | 
|           |  | Operating |         |  | Sublease |   |         |    
|           |  | Leases    |         |  | Income   |   |         | Net | 
|           |  |           |         |  |          |   |         |     | 
|2006       |  | $         | 22,259  |  |          | $ | (3,116  | )   |  | $ | 19,143  | 
|2007       |  |           | 21,077  |  |          |   | (2,731  | )   |  |   | 18,346  | 
|2008       |  |           | 17,316  |  |          |   | (2,752  | )   |  |   | 14,564  | 
|2009       |  |           | 17,453  |  |          |   | (1,623  | )   |  |   | 15,830  | 
|2010       |  |           | 17,347  |  |          |   | (424    | )   |  |   | 16,923  | 
|Thereafter |  |           | 44,841  |  |          |   | (1,114  | )   |  |   | 43,727  | 
|           |  |           |         |  |          |   |         |     | 
|           |  | $         | 140,293 |  |          | $ | (11,760 | )   |  | $ | 128,533 | 
|           |  |           |         |  |          |   |         |     | 







| |           
| | ----------
| | Warranties

Accounting for Contingencies


65



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##### Table of Contents



INFORMATICA CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




| |                
| | ---------------
| | Indemnification







Accounting for Contingencies




|   |                     
|-- | --------------------
|8. | Stockholders Equity



| |                
| | ---------------
| | Preferred Stock





| |             
| | ------------
| | Common Stock





| |                          
| | -------------------------
| | Stockholders Rights Plan



66



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##### Table of Contents



INFORMATICA CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






| |                      
| | ---------------------
| | Stock Repurchase Plan





| |                  
| | -----------------
| | Repurchase Rights





| |                                   
| | ----------------------------------
| | Stock Issued for Services Rendered





| |                             
| | ----------------------------
| | Employee Stock Purchase Plan



67



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##### Table of Contents



INFORMATICA CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


6-month 24-month




| |                   
| | ------------------
| | Stock Option Plans



| |                          
| | -------------------------
| | 1999 Stock Incentive Plan

7-year




| |                                                
| | -----------------------------------------------
| | 1999 Non-Employee Director Stock Incentive Plan



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##### Table of Contents



INFORMATICA CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




| |                                   
| | ----------------------------------
| | 2000 Employee Stock Incentive Plan





| |                     
| | --------------------
| | Assumed Option Plans





| |                           
| | --------------------------
| | Stock Option Plan Activity



|                                 |           |           |        |           |                |   |      |       | 
|-------------------------------- | --------- | --------- | ------ | --------- | -------------- | - | ---- | ----- | 
|                                 |           |           |        | Weighted- |               
|                                 |           |           |        | Average   |               
|                                 |           | Number of |        |           | Exercise Price |  
|                                 |           | Shares    |        |           | per Share      |  
|                                 |           |           |        |           |                |  
|Outstanding at December 31, 2002 |           |           | 14,917 |           |                | $ | 7.81 |      
|                                 | Granted   |           |        | 4,368     |                |   |      | 6.59  | 
|                                 | Exercised |           |        | (1,532    | )              |   |      | 4.56  | 
|                                 | Canceled  |           |        | (2,168    | )              |   |      | 11.67 | 
|                                 |           |           |        |           |                |  
|Outstanding at December 31, 2003 |           |           | 15,585 |           |                |   | 7.26 |      
|                                 | Granted   |           |        | 7,901     |                |   |      | 6.97  | 
|                                 | Exercised |           |        | (2,392    | )              |   |      | 3.70  | 
|                                 | Canceled  |           |        | (3,209    | )              |   |      | 8.06  | 
|                                 |           |           |        |           |                |  
|Outstanding at December 31, 2004 |           |           | 17,885 |           |                |   | 7.47 |      
|                                 | Granted   |           |        | 3,735     |                |   |      | 8.99  | 
|                                 | Exercised |           |        | (2,504    | )              |   |      | 6.68  | 
|                                 | Canceled  |           |        | (2,003    | )              |   |      | 10.51 | 
|                                 |           |           |        |           |                |  
|Outstanding at December 31, 2005 |           |           | 17,113 |           |                | $ | 7.56 |      
|                                 |           |           |        |           |                |  



69



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INFORMATICA CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|                    |                  |                  |                     |  |           |                  |  |         |                |          |        |         |       |         |                |  |       |  |  |   |       | 
|------------------- | ---------------- | ---------------- | ------------------- |  | --------- | ---------------- |  | ------- | -------------- | -------- | ------ | ------- | ----- | ------- | -------------- |  | ----- |  |  | - | ----- | 
|Options Outstanding |                  |                  | Options Exercisable | 
|                    |                  |                  |                     | 
|                    |                  | Weighted-Average |                     |  | Weighted  |                  |  |         |                | Weighted |       
|                    |                  | Number           |                     |  | Remaining |                  |  | Average |                |          | Number |         |       | Average |               
|Range of            |                  |                  | of                  |  |           | Contractual Life |  |         | Exercise Price |          |        | of      |       |         | Exercise Price | 
|Exercise Prices     |                  |                  | Options             |  |           | (Years)          |  |         | per Share      |          |        | Options |       |         | per Share      | 
|                    |                  |                  |                     |  |           |                  |  |         |                |          |        |         |       |         |                | 
|                    | $ 0.06 to $ 4.05 |                  |                     |  | 1,047     |                  |  |         | 4.13           |          |        | $       | 2.23  |         |                |  | 958   |  |  | $ | 2.15  | 
|                    | $ 4.19 to $ 5.69 |                  |                     |  | 2,812     |                  |  |         | 8.19           |          |        | $       | 5.64  |         |                |  | 1,034 |  |  | $ | 5.58  | 
|                    | $ 5.72 to $ 7.26 |                  |                     |  | 3,701     |                  |  |         | 5.06           |          |        | $       | 6.86  |         |                |  | 1,787 |  |  | $ | 6.83  | 
|                    | $ 7.30 to $ 7.82 |                  |                     |  | 2,526     |                  |  |         | 5.79           |          |        | $       | 7.63  |         |                |  | 586   |  |  | $ | 7.64  | 
|                    | $ 7.83 to $ 8.00 |                  |                     |  | 3,563     |                  |  |         | 4.50           |          |        | $       | 7.90  |         |                |  | 3,294 |  |  | $ | 7.90  | 
|                    | $ 8.01 to $12.00 |                  |                     |  | 2,817     |                  |  |         | 6.09           |          |        | $       | 9.80  |         |                |  | 1,028 |  |  | $ | 8.56  | 
|                    | $12.20 to $48.63 |                  |                     |  | 647       |                  |  |         | 4.21           |          |        | $       | 16.59 |         |                |  | 577   |  |  | $ | 17.11 | 
|                    |                  |                  |                     |  |           |                  |  |         |                |          |        |         |       |         |                | 
|                    |                  |                  |                     |  | 17,113    |                  |  |         | 5.65           |          |        | $       | 7.56  |         |                |  | 9,264 |  |  | $ | 7.47  | 
|                    |                  |                  |                     |  |           |                  |  |         |                |          |        |         |       |         |                | 



| |                         
| | ------------------------
| | Stock-Based Compensation



|                           |  |                          |     |  |      |   |       |      |  |   |     | 
|-------------------------- |  | ------------------------ | --- |  | ---- | - | ----- | ---- |  | - | --- | 
|                           |  | Years Ended December 31, |    
|                           |  |                          |    
|                           |  | 2005                     |     |  | 2004 |   |       | 2003 | 
|                           |  |                          |     |  |      |   |       |      | 
|Cost of service revenues   |  | $                        | 41  |  |      | $ | 48    |      |  | $ | 12  | 
|Sales and marketing        |  |                          | 156 |  |      |   | 1,172 |      |  |   | 252 | 
|Research and development   |  |                          | 525 |  |      |   | 2,216 |      |  |   | 468 | 
|General and administrative |  |                          | 1   |  |      |   | (78   | )    |  |   | 208 | 
|                           |  |                          |     |  |      |   |       |      | 
|                           |  | $                        | 723 |  |      | $ | 3,358 |      |  | $ | 940 | 
|                           |  |                          |     |  |      |   |       |      | 





|   |                                                     
|-- | ----------------------------------------------------
|9. | Interest Income, net and Other Income (Expense), net



70



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INFORMATICA CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






|                             |  |                          |      |   |      |   |      |      |  |   |       | 
|---------------------------- |  | ------------------------ | ---- | - | ---- | - | ---- | ---- |  | - | ----- | 
|                             |  | Years Ended December 31, |     
|                             |  |                          |     
|                             |  | 2005                     |      |   | 2004 |   |      | 2003 | 
|                             |  |                          |      |   |      |   |      |      | 
|Foreign currency gain (loss) |  | $                        | (617 | ) |      | $ | 540  |      |  | $ | 1,613 | 
|Other                        |  |                          | (95  | ) |      |   | (598 | )    |  |   | 1,639 | 
|                             |  |                          |      |   |      |   |      |      | 
|                             |  | $                        | (712 | ) |      | $ | (58  | )    |  | $ | 3,252 | 
|                             |  |                          |      |   |      |   |      |      | 



|    |                            
|--- | ---------------------------
|10. | Comprehensive Income (Loss)





|                                   |                                    |                          |        |        |      |   |          |      |   |   |       |      |  
|---------------------------------- | ---------------------------------- | ------------------------ | ------ | ------ | ---- | - | -------- | ---- | - | - | ----- | ---- | -
|                                   |                                    | Years Ended December 31, |       
|                                   |                                    |                          |       
|                                   |                                    | 2005                     |        |        | 2004 |   |          | 2003 |  
|                                   |                                    |                          |        |        |      |   |          |      |  
|Net income (loss), as reported     |                                    | $                        | 33,804 |        |      | $ | (104,404 | )    |   | $ | 7,310 |     
|Other comprehensive income (loss): |                                    |                          |        |        |      |   |          |      |   |   |       |     
|                                   | Unrealized loss on investments*    |                          |        | (57    | )    |   |          | (797 | ) |   |       | (571 | )
|                                   | Cumulative translation adjustment* |                          |        | (2,257 | )    |   |          | 786  |   |   |       | 517  |  
|                                   |                                    |                          |        |        |      |   |          |      |  
|Comprehensive income (loss)        |                                    | $                        | 31,490 |        |      | $ | (104,415 | )    |   | $ | 7,256 |     
|                                   |                                    |                          |        |        |      |   |          |      |  



| |   |                                                                                                                                 
| | - | --------------------------------------------------------------------------------------------------------------------------------
| | * | The tax effect on unrealized gain (loss) on investment and
    foreign currency translation adjustment has not been significant.



|                                                         |  |              |      |   |      |   |       |  
|-------------------------------------------------------- |  | ------------ | ---- | - | ---- | - | ----- | -
|                                                         |  | December 31, |     
|                                                         |  |              |     
|                                                         |  | 2005         |      |   | 2004 |  
|                                                         |  |              |      |   |      |  
|Unrealized gain (loss) on available-for-sale investments |  | $            | (702 | ) |      | $ | (645  | )
|Cumulative translation adjustment                        |  |              | 163  |   |      |   | 2,420 |  
|                                                         |  |              |      |   |      |  
|                                                         |  | $            | (539 | ) |      | $ | 1,775 |  
|                                                         |  |              |      |   |      |  



|    |                      
|--- | ---------------------
|11. | Investment Impairment



71



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INFORMATICA CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|    |                     
|--- | --------------------
|12. | Employee 401(K) Plan





|    |             
|--- | ------------
|13. | Income Taxes



|         |         |                          |       |       |      |   |       |      |  |   |       |       | 
|-------- | ------- | ------------------------ | ----- | ----- | ---- | - | ----- | ---- |  | - | ----- | ----- | 
|         |         | Years Ended December 31, |      
|         |         |                          |      
|         |         | 2005                     |       |       | 2004 |   |       | 2003 | 
|         |         |                          |       |       |      |   |       |      | 
|Current: |         |                          |       |       |      |   |       |      |  |   |       |      
|         | Federal |                          | $     | 350   |      |   | $     | 211  |  |   | $     | 817   | 
|         | State   |                          |       | 450   |      |   |       | 150  |  |   |       | 150   | 
|         | Foreign |                          |       | 1,374 |      |   |       | 859  |  |   |       | 1,157 | 
|         |         |                          |       |       |      |   |       |      | 
|         |         | $                        | 2,174 |       |      | $ | 1,220 |      |  | $ | 2,124 |      
|         |         |                          |       |       |      |   |       |      | 



|         |  |                          |        |   |      |   |          |      |  |   |         |  
|-------- |  | ------------------------ | ------ | - | ---- | - | -------- | ---- |  | - | ------- | -
|         |  | Years Ended December 31, |       
|         |  |                          |       
|         |  | 2005                     |        |   | 2004 |   |          | 2003 | 
|         |  |                          |        |   |      |   |          |      | 
|Domestic |  | $                        | 42,343 |   |      | $ | (94,384  | )    |  | $ | 24,905  |  
|Foreign  |  |                          | (6,365 | ) |      |   | (8,800   | )    |  |   | (15,471 | )
|         |  |                          |        |   |      |   |          |      | 
|         |  | $                        | 35,978 |   |      | $ | (103,184 | )    |  | $ | 9,434   |  
|         |  |                          |        |   |      |   |          |      | 



|                                                                                 |  |                          |         |   |      |   |         |      |  |   |        |  
|-------------------------------------------------------------------------------- |  | ------------------------ | ------- | - | ---- | - | ------- | ---- |  | - | ------ | -
|                                                                                 |  | Years Ended December 31, |        
|                                                                                 |  |                          |        
|                                                                                 |  | 2005                     |         |   | 2004 |   |         | 2003 | 
|                                                                                 |  |                          |         |   |      |   |         |      | 
|Income tax provision (benefit) computed at federal statutory
    income tax rate |  | $                        | 12,592  |   |      | $ | (36,114 | )    |  | $ | 3,302  |  
|Federal alternative minimum tax                                                  |  |                          | 1,062   |   |      |   | 611     |      |  |   | 817    |  
|State taxes                                                                      |  |                          | 293     |   |      |   | 98      |      |  |   | 98     |  
|Foreign taxes                                                                    |  |                          | 1,374   |   |      |   | 859     |      |  |   | 1,157  |  
|Non-deductible purchased technology                                              |  |                          |        |   |      |   |        |      |  |   | 1,583  |  
|Amortization of deferred stock-based compensation and intangibles                |  |                          | 642     |   |      |   | 1,928   |      |  |   | 508    |  
|Other                                                                            |  |                          | (554    | ) |      |   | (437    | )    |  |   | 293    |  
|Valuation allowance                                                              |  |                          | (13,235 | ) |      |   | 34,275  |      |  |   | (5,634 | )
|                                                                                 |  |                          |         |   |      |   |         |      | 
|                                                                                 |  | $                        | 2,174   |   |      | $ | 1,220   |      |  | $ | 2,124  |  
|                                                                                 |  |                          |         |   |      |   |         |      | 

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INFORMATICA CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|                          |                                                     |              |     |         |      |   |       |          |  
|------------------------- | --------------------------------------------------- | ------------ | --- | ------- | ---- | - | ----- | -------- | -
|                          |                                                     | December 31, |    
|                          |                                                     |              |    
|                          |                                                     | 2005         |     |         | 2004 |  
|                          |                                                     |              |     |         |      |  
|Deferred tax assets:      |                                                     |              |     |         |      |   |       |         
|                          | Net operating loss carryforwards                    |              | $   | 16,875  |      |   | $     | 23,278   |  
|                          | Tax credit carryforwards                            |              |     | 12,441  |      |   |       | 11,291   |  
|                          | Deferred revenue                                    |              |     | 1,576   |      |   |       | 2,920    |  
|                          | Reserves and accrued costs not currently deductible |              |     | 743     |      |   |       | 3,691    |  
|                          | Depreciable assets                                  |              |     | 8,416   |      |   |       | 4,518    |  
|                          | Accrued restructuring costs                         |              |     | 48,395  |      |   |       | 53,908   |  
|                          | Amortization of intangibles                         |              |     | 1,131   |      |   |       | 1,811    |  
|                          | Capitalized research and development                |              |     | 2,329   |      |   |       | 3,133    |  
|                          | Other                                               |              |     | 205     |      |   |       | 204      |  
|                          | Valuation allowance                                 |              |     | (91,678 | )    |   |       | (103,283 | )
|                          |                                                     |              |     |         |      |  
|                          |                                                     |              | 433 |         |      |   | 1,471 |         
|Deferred tax liabilities: |                                                     |              |     |         |      |   |       |         
|                          | Non-deductible intangible assets                    |              |     | (433    | )    |   |       | (1,471   | )
|                          |                                                     |              |     |         |      |  
|                          |                                                     | $            |    |         |      | $ |      |         
|                          |                                                     |              |     |         |      |  











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INFORMATICA CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|    |                   
|--- | ------------------
|14. | Lawsuit Settlement





|    |           
|--- | ----------
|15. | Litigation

In re Informatica Corporation Initial Public
Offering Securities Litigation, Civ.
No. 01-9922 (SAS)
(S.D.N.Y.) In re Initial Public
Offering Securities Litigation, 21 MC 92 (SAS)
(S.D.N.Y.) follow-on








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INFORMATICA CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


continuation-in








|    |                          
|--- | -------------------------
|16. | Related Party Transaction





|    |                                                         
|--- | --------------------------------------------------------
|17. | Significant Customer Information and Segment Information





|          |               |                          |         |         |      |   |         |         |  |   |         |         | 
|--------- | ------------- | ------------------------ | ------- | ------- | ---- | - | ------- | ------- |  | - | ------- | ------- | 
|          |               | Years Ended December 31, |        
|          |               |                          |        
|          |               | 2005                     |         |         | 2004 |   |         | 2003    | 
|          |               |                          |         |         |      |   |         |         | 
|Revenues: |               |                          |         |         |      |   |         |         |  |   |         |        
|          | North America |                          | $       | 185,118 |      |   | $       | 156,565 |  |   | $       | 149,736 | 
|          | Europe        |                          |         | 73,398  |      |   |         | 54,951  |  |   |         | 47,778  | 
|          | Other         |                          |         | 8,915   |      |   |         | 8,165   |  |   |         | 8,019   | 
|          |               |                          |         |         |      |   |         |         | 
|          |               | $                        | 267,431 |         |      | $ | 219,681 |         |  | $ | 205,533 |        
|          |               |                          |         |         |      |   |         |         | 

75



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INFORMATICA CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


|                                        |               |              |        |        |      |   |        |        | 
|--------------------------------------- | ------------- | ------------ | ------ | ------ | ---- | - | ------ | ------ | 
|                                        |               | December 31, |       
|                                        |               |              |       
|                                        |               | 2005         |        |        | 2004 |  
|                                        |               |              |        |        |      |  
|Long-lived assets (excluding goodwill): |               |              |        |        |      |   |        |       
|                                        | North America |              | $      | 21,708 |      |   | $      | 18,982 | 
|                                        | Europe        |              |        | 2,571  |      |   |        | 3,476  | 
|                                        | Other         |              |        | 910    |      |   |        | 485    | 
|                                        |               |              |        |        |      |  
|                                        |               | $            | 25,189 |        |      | $ | 22,943 |       
|                                        |               |              |        |        |      |  



|                         |  |                          |         |  |      |   |         |      |  |   |         | 
|------------------------ |  | ------------------------ | ------- |  | ---- | - | ------- | ---- |  | - | ------- | 
|                         |  | Years Ended December 31, |        
|                         |  |                          |        
|                         |  | 2005                     |         |  | 2004 |   |         | 2003 | 
|                         |  |                          |         |  |      |   |         |      | 
|License                  |  | $                        | 120,182 |  |      | $ | 97,941  |      |  | $ | 94,590  | 
|Maintenance              |  |                          | 103,573 |  |      |   | 87,470  |      |  |   | 75,748  | 
|Consulting and education |  |                          | 43,676  |  |      |   | 34,270  |      |  |   | 35,195  | 
|                         |  |                          |         |  |      |   |         |      | 
|                         |  | $                        | 267,431 |  |      | $ | 219,681 |      |  | $ | 205,533 | 
|                         |  |                          |         |  |      |   |         |      | 



|    |                  
|--- | -----------------
|18. | Subsequent Events



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INFORMATICA CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|    |                                                     
|--- | ----------------------------------------------------
|19. | Selected Quarterly Financial Information (Unaudited)

|                                                            |         |                                       |        |        |               |   |        |          |  |   |           |        |  |   |        |        | 
|----------------------------------------------------------- | ------- | ------------------------------------- | ------ | ------ | ------------- | - | ------ | -------- |  | - | --------- | ------ |  | - | ------ | ------ | 
|                                                            |         | Three Months Ended                    |       
|                                                            |         |                                       |       
|                                                            |         | December 31,                          |        |        | September 30, |   |        | June 30, |  |   | March 31, |       
|                                                            |         | 2005                                  |        |        | 2005          |   |        | 2005     |  |   | 2005      |       
|                                                            |         |                                       |        |        |               |   |        |          |  |   |           |       
|                                                            |         | (In thousands, except per share data) |       
|Total revenues                                              |         | $                                     | 79,838 |        |               | $ | 64,997 |          |  | $ | 64,205    |        |  | $ | 58,391 |       
|Gross profit                                                |         |                                       | 64,469 |        |               |   | 52,360 |          |  |   | 51,450    |        |  |   | 46,964 |       
|Facilities restructuring charges                            |         |                                       | 781    |        |               |   | 1,274  |          |  |   | 70        |        |  |   | 1,558  |       
|Income from operations                                      |         |                                       | 11,131 |        |               |   | 6,804  |          |  |   | 6,851     |        |  |   | 4,648  |       
|Net income                                                  |         |                                       | 13,553 |        |               |   | 8,301  |          |  |   | 7,641     |        |  |   | 4,309  |       
|Net income per common share:                                |         |                                       |        |        |               |   |        |          |  |   |           |        |  |   |        |       
|                                                            | Basic   |                                       | $      | 0.15   |               |   | $      | 0.09     |  |   | $         | 0.09   |  |   | $      | 0.05   | 
|                                                            | Diluted |                                       | $      | 0.14   |               |   | $      | 0.09     |  |   | $         | 0.09   |  |   | $      | 0.05   | 
|Shares used in computing basic net income per common share: |         |                                       |        |        |               |   |        |          |  |   |           |        |  |   |        |       
|                                                            | Basic   |                                       |        | 87,651 |               |   |        | 87,568   |  |   |           | 86,876 |  |   |        | 86,886 | 
|                                                            | Diluted |                                       |        | 94,163 |               |   |        | 93,571   |  |   |           | 89,760 |  |   |        | 89,284 | 

|                                                                       |                   |                                       |         |        |               |   |        |          |   |   |           |        |  |   |        |        | 
|---------------------------------------------------------------------- | ----------------- | ------------------------------------- | ------- | ------ | ------------- | - | ------ | -------- | - | - | --------- | ------ |  | - | ------ | ------ | 
|                                                                       |                   | Three Months Ended                    |        
|                                                                       |                   |                                       |        
|                                                                       |                   | December 31,                          |         |        | September 30, |   |        | June 30, |   |   | March 31, |       
|                                                                       |                   | 2004                                  |         |        | 2004          |   |        | 2004     |   |   | 2004      |       
|                                                                       |                   |                                       |         |        |               |   |        |          |   |   |           |       
|                                                                       |                   | (In thousands, except per share data) |        
|Total revenues                                                         |                   | $                                     | 60,046  |        |               | $ | 52,428 |          |   | $ | 53,034    |        |  | $ | 54,173 |       
|Gross profit                                                           |                   |                                       | 47,937  |        |               |   | 40,717 |          |   |   | 42,166    |        |  |   | 42,415 |       
|Facilities restructuring charges                                       |                   |                                       | 102,963 |        |               |   | 9,673  |          |   |   |          |        |  |   |       |       
|Income (loss) from operations                                          |                   |                                       | (99,153 | )      |               |   | (9,866 | )        |   |   | 895       |        |  |   | 1,549  |       
|Net income (loss)                                                      |                   |                                       | (98,689 | )      |               |   | (8,585 | )        |   |   | 979       |        |  |   | 1,891  |       
|Net income (loss) per common share:                                    |                   |                                       |         |        |               |   |        |          |   |   |           |        |  |   |        |       
|                                                                       | Basic and diluted |                                       | $       | (1.14  | )             |   | $      | (0.10    | ) |   | $         | 0.01   |  |   | $      | 0.02   | 
|Shares used in computing basic net income (loss) per common
    share: |                   |                                       |         |        |               |   |        |          |   |   |           |        |  |   |        |       
|                                                                       | Basic             |                                       |         | 86,565 |               |   |        | 86,002   |   |   |           | 85,557 |  |   |        | 84,811 | 
|                                                                       | Diluted           |                                       |         | 86,565 |               |   |        | 86,002   |   |   |           | 88,394 |  |   |        | 89,752 | 

period-to


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|        |                                                                                         
|------- | ----------------------------------------------------------------------------------------
|ITEM 9. | CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
    AND FINANCIAL DISCLOSURE








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

Evaluation of disclosure controls and procedures. 10-K.


Managements annual report on internal control
over financial reporting. 10-K,


Change in internal control over financial reporting.







|         |                  
|-------- | -----------------
|ITEM 9B. | OTHER INFORMATION








PART III







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

S-K


78



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##### Table of Contents



Code of Business Conduct










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








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








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








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






PART IV







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

10-K:




| |    |                                   
| | -- | ----------------------------------
| | 1. | Consolidated Financial Statements:





| |    |                              
| | -- | -----------------------------
| | 2. | Financial Statement Schedule:







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Schedule II  Valuation and Qualifying
Accounts




|                                 |                              |            |   |     |            |  |   |            |   |            |        |      |   |  |   |     |  |  |  |  | 
|-------------------------------- | ---------------------------- | ---------- | - | --- | ---------- |  | - | ---------- | - | ---------- | ------ | ---- | - |  | - | --- |  |  |  |  | 
|                                 |                              | Balance at |   |     | Charged to |  |   |            |   | Balance at |        |      |  
|                                 |                              | Beginning  |   |     | Costs and  |  |   |            |   | End of     |        |      |  
|Description                      |                              | of Period  |   |     | Expenses   |  |   | Deductions |   |            | Period |      |   | 
|                                 |                              |            |   |     |            |  |   |            |   |            |        |      |   | 
|Provision for Doubtful Accounts: |                              |            |   |     |            |  |   |            |   |            |        |      |   |  |   |     |  |  |  | 
|                                 | Year ended December 31, 2005 |            | $ | 811 |            |  | $ | 150        |   |            | $      | (91  | ) |  | $ | 870 |  |  |  |  | 
|                                 | Year ended December 31, 2004 |            | $ | 564 |            |  | $ | 361        |   |            | $      | (114 | ) |  | $ | 811 |  |  |  |  | 
|                                 | Year ended December 31, 2003 |            | $ | 461 |            |  | $ | 145        |   |            | $      | (42  | ) |  | $ | 564 |  |  |  |  | 
|Sales and Returns Allowances:    |                              |            |   |     |            |  |   |            |   |            |        |      |   |  |   |     |  |  |  | 
|                                 | Year ended December 31, 2005 |            | $ | 38  |            |  | $ | 200        |   |            | $      | (14  | ) |  | $ | 224 |  |  |  |  | 
|                                 | Year ended December 31, 2004 |            | $ | 705 |            |  | $ | (356       | ) |            | $      | (311 | ) |  | $ | 38  |  |  |  |  | 
|                                 | Year ended December 31, 2003 |            | $ | 888 |            |  | $ |           |   |            | $      | (183 | ) |  | $ | 705 |  |  |  |  | 



|   |         
|-- | --------
|3. | Exhibits

10-K.


80



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SIGNATURES






| |                        
| | -----------------------
| | INFORMATICA CORPORATION



| |     |                  
| | --- | -----------------
| | By: | /s/ Sohaib Abbasi

| |                                        
| | ---------------------------------------
| |                                        
| | Sohaib Abbasi                          
| | Chief Executive Officer, President, and
| | Chairman of the Board                  



|                                       |  |                                                                                                                   |  |                   |  | 
|-------------------------------------- |  | ----------------------------------------------------------------------------------------------------------------- |  | ----------------- |  | 
|Signature                              |  | Title                                                                                                             |  | Date             
|                                       |  |                                                                                                                   |  |                  
|                                      
|/s/ Sohaib AbbasiSohaib Abbasi         |  | Chief Executive Officer, President, and Chairman of the Board of
    Directors(Principal Executive Officer)       |  | February 28, 2006
|                                      
|/s/ Earl E. FryEarl E. Fry             |  | Chief Financial Officer, Executive Vice President, and Secretary
    (Principal Financial and Accounting Officer) |  | February 28, 2006
|                                      
|/s/ David W. PidwellDavid W. Pidwell   |  | Director                                                                                                          |  | February 28, 2006
|                                      
|/s/ Mark A. BertelsenMark A. Bertelsen |  | Director                                                                                                          |  | February 28, 2006
|                                      
|/s/ Janice D. ChaffinJanice D. Chaffin |  | Director                                                                                                          |  | February 28, 2006
|                                      
|/s/ Charles J. RobelCharles J. Robel   |  | Director                                                                                                          |  | February 28, 2006
|                                      
|/s/ A. Brooke SeawellA. Brooke Seawell |  | Director                                                                                                          |  | February 28, 2006
|                                      
|/s/ Geoff W. SquireGeoff W. Squire     |  | Director                                                                                                          |  | February 28, 2006
|                                      
|/s/ Carl J. YankowskiCarl J. Yankowski |  | Director                                                                                                          |  | February 28, 2006

81



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##### Table of Contents



INFORMATICA CORPORATION


EXHIBITS TO FORM 10-K ANNUAL REPORT




|        |    |          |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|------- | -- | -------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |         
|Number  |    | Document
|        |    |         
|        | 2  | .1       |  | Agreement and Plan of Merger, dated September 11, 2003, by
    and among Informatica Corporation, a Delaware corporation,
    Stopwatch Acquisition Corporation, a Delaware corporation,
    Striva Corporation, a Delaware corporation, and Pete Sinclair as
    Stockholder Representative (incorporated by reference to the
    identically numbered exhibit to the Companys Current
    Report on Form 8-K filed on October 7, 2003,
    Commission File No. 0-25871).
|        | 2  | .2       |  | Amendment No. 1 to Agreement and Plan of Merger, dated
    September 22, 2003 (incorporated by reference to
    Exhibit 2.2 to the Companys Current Report on
    Form 8-K filed on October 7, 2003, Commission File
    No. 0-25871).                                                                                                                                                                                                                                    
|        | 2  | .3       |  | Amendment No. 2 to Agreement and Plan of Merger, dated
    September 29, 2003 (incorporated by reference to
    Exhibit 2.3 to the Companys Current Report on
    Form 8-K filed on October 7, 2003, Commission File
    No. 0-25871).                                                                                                                                                                                                                                    
|        | 3  | .1       |  | Amended and Restated Certificate of Incorporation of Informatica
    Corporation (incorporated by reference to Exhibit 3.1 to
    Amendment No. 1 of the Companys Registration
    Statement on Form S-1 (Commission File No. 333-72677)
    filed on April 8, 1999).                                                                                                                                                                                                     
|        | 3  | .2       |  | Certificate of Amendment to the Companys Amended and
    Restated Certificate of Incorporation to increase the aggregate
    number of shares of the Companys common stock authorized
    for issuance from 100,000,000 to 200,000,000 shares
    (incorporated by reference to Exhibit 3.4 to the
    Companys Quarterly Report on Form 10-Q filed on
    August 14, 2000, Commission File No. 0-25871).                                                               
|        | 3  | .3       |  | Certificate of Designation of the Rights, Preferences and
    Privileges of Series A Participating Preferred Stock of
    Informatica Corporation (incorporated by reference to
    Exhibit 3.5 to the Companys Registration Statement on
    Form 8-A filed on November 6, 2001, Commission
    File No. 0-25871).                                                                                                                                                       
|        | 3  | .4       |  | Bylaws, as amended, of Informatica Corporation.                                                                                                                                                                                                                                                                                                                                                                                                                            
|        | 4  | .1       |  | Reference is made to Exhibits 3.1 through 3.4.                                                                                                                                                                                                                                                                                                                                                                                                                             
|        | 4  | .2       |  | Preferred Stock Rights Agreement, dated as of October 17,
    2001, between Informatica Corporation and American Stock
    Transfer & Trust Company (incorporated by
    reference to Exhibit 4.2 to the Companys Registration
    Statement on Form 8-A filed on November 6, 2001,
    Commission File No. 0-25871).                                                                                                                                                     
|        | 10 | .1*      |  | Companys 2000 Employee Stock Incentive Plan, as amended
    (incorporated by reference to Exhibit 10.1 to the
    Companys Quarterly Report on Form 10-Q filed on
    August 8, 2001, Commission File No. 0-25871).                                                                                                                                                                                                                                                      
|        | 10 | .2*      |  | Form of Indemnification Agreement between the Company and each
    of its executive officers and directors (incorporated by
    reference to Exhibit 10.1 to Amendment No. 1 of the
    Companys Registration Statement on Form S-1
    (Commission File No. 333-72677) filed on April 8,
    1999).                                                                                                                                                                      
|        | 10 | .3*      |  | Companys 1996 Flexible Stock Incentive Plan, including
    forms of agreements thereunder (incorporated by reference to
    Exhibit 10.10 to the Companys Registration Statement
    on Form S-1 (Commission File No. 333-72677) filed on
    February 19, 1999).                                                                                                                                                                                                        
|        | 10 | .4*      |  | Companys 1999 Stock Incentive Plan, as amended
    (incorporated by reference to Exhibit 4.3 to the
    Companys Registration Statement on Form S-8
    (Commission File No. 333-66754) filed on August 3,
    2001).                                                                                                                                                                                                                                                    
|        | 10 | .5*      |  | Companys 1999 Employee Stock Purchase Plan, as amended,
    including forms of agreements thereunder (incorporated by
    reference to Exhibit 4.4 to the Companys Registration
    Statement on Form S-8 (Commission File No. 333-66754)
    filed on August 3, 2001).                                                                                                                                                                                                  
|        | 10 | .6*      |  | Companys 1999 Non-Employee Director Stock Incentive Plan
    (incorporated by reference to Exhibit 10.13 to Amendment
    No. 1 of the Companys Registration Statement on
    Form S-1 (Commission File No. 333-72677) filed on
    April 8, 1999).                                                                                                                                                                                                                      



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##### Table of Contents



|        |    |          |  |                                                                                                                                                                                                                                                                                                                       
|------- | -- | -------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |         
|Number  |    | Document
|        |    |         
|        | 10 | .7       |  | Lease Agreement regarding Building 1 Lease, dated as of
    February 22, 2000, by and between the Company and Pacific
    Shores Center LLC (incorporated by reference to
    Exhibit 10.14 to the Annual Report on Form 10-K filed
    on March 30, 2000, Commission File No. 0-25871).                              
|        | 10 | .8       |  | Lease Agreement regarding Building 2 Lease, dated as of
    February 22, 2000, by and between the Company and Pacific
    Shores Center LLC (Incorporated by reference to
    Exhibit 10.15 to the Annual Report on Form 10-K filed
    on March 30, 2000, Commission File No. 0-25871).                              
|        | 10 | .9*      |  | Description of management arrangement with Earl E. Fry
    (incorporated by reference to Exhibit 10.20 to the
    Companys Quarterly Report on Form 10-Q filed on
    November 13, 2002, Commission File No. 0-25871).                                                                                               
|        | 10 | .10*     |  | Amendment to 1999 Non-Employee Director Stock Incentive Plan
    (incorporated by reference to Exhibit 10.21 to the
    Companys Quarterly Report on Form 10-Q filed on
    August 7, 2003, Commission File No. 0-25871).                                                                                            
|        | 10 | .11*     |  | Agreement on the Forgiveness of Employee Loan dated
    September 13, 2001, by and between the Company and Earl E.
    Fry (incorporated by reference to Exhibit 99.1 to Amendment
    No. 1 of the Companys Registration Statement on
    Form S-3 (Commission File No. 333-109683) filed on
    December 24, 2003).
|        | 10 | .12*     |  | Employment Agreement dated July 19, 2004 by and between
    Company and Sohaib Abbasi (incorporated by reference to
    Exhibit 10.26 of the Companys Quarterly Report on
    Form 10-Q filed on August 5, 2004, Commission File
    No. 0-25871).                                                                   
|        | 10 | .13*     |  | Offer Letter dated September 21, 2004, by and between the
    Company and John Entenmann (incorporated by reference to
    Exhibit 10.27 of the Companys Quarterly Report on
    Form 10-Q filed on November 5, 2004, Commission File
    No. 0-25871).                                                              
|        | 10 | .14      |  | Lease Agreement dated as of October 7, 2004, by and between
    the Company and Seaport Plaza Associates, LLC (incorporated by
    reference to Exhibit 10.28 of the Companys Annual
    Report on Form 10-K filed on March 8, 2005, Commission
    File No. 0-25871).                                               
|        | 10 | .15*     |  | Form of Executive Severance Agreement dated November 15,
    2004 by and between the Company and each of John Entenmann, Earl
    E. Fry and Girish Pancha (incorporated by reference to
    Exhibit 10.29 of the Companys Annual Report on
    Form 10-K filed on March 8, 2005, Commission File
    No. 0-25871).  
|        | 10 | .16*     |  | Offer Letter dated January 4, 2005, by and between the
    Company and Paul J. Hoffman (incorporated by reference to
    Exhibit 10.31 of the Companys Quarterly Report on
    Form 10-Q filed on May 9, 2005, Commission File
    No. 0-25871).                                                                     
|        | 10 | .17*     |  | Executive Severance Agreement dated January 4, 2005 by and
    between the Company and Paul J. Hoffman (incorporated by
    reference to Exhibit 10.31 of the Companys Quarterly
    Report on Form 10-Q filed on May 9, 2005, Commission
    File No. 0-25871).                                                     
|        | 10 | .18*     |  | 2005 Cash Bonus Plan (incorporated by reference to
    Exhibit 10.31 of the Companys Quarterly Report on
    Form 10-Q filed on May 9, 2005, Commission File
    No. 0-25871).                                                                                                                                       
|        | 10 | .19*     |  | Summary of amended standard director cash compensation
    arrangements (incorporated by reference to Item 1.01 of the
    Companys Current Report on Form 8-K filed on
    October 20, 2005, Commission File No. 0-25871).                                                                                          
|        | 10 | .20*     |  | Severance Agreement and Release dated November 1, 2005 by
    and between the Company and John Entenmann.                                                                                                                                                                                                             
|        | 21 | .1       |  | List of Subsidiaries.                                                                                                                                                                                                                                                                                                 
|        | 23 | .1       |  | Consent of Independent Registered Public Accounting Firm.                                                                                                                                                                                                                                                             
|        | 31 | .1       |  | Certification of Chief Executive Officer pursuant to
    Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                               
|        | 31 | .2       |  | Certification of Chief Financial Officer pursuant to
    Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                               
|        | 32 | .1       |  | Certification of Chief Executive Officer and Chief Financial
    Officer pursuant to 18 U.S.C. Section 1350, as adopted
    pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.                                                                                                                                






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