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UNITED STATES
  SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

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FORM 10-K


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|    |  |                                                                                     
|--- |  | ------------------------------------------------------------------------------------
|[X] |  | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2001

OR

|      |  |                                                                                         
|----- |  | ----------------------------------------------------------------------------------------
|[   ] |  | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

Commission File Number 0-25871

INFORMATICA CORPORATION(Exact name of registrant as specified in
  its charter)

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

|                                                   |  |                     
|-------------------------------------------------- |  | --------------------
|2100
          Seaport Boulevard                   |  |                     
|Redwood
          City, California                 |  | 94063               
|(Address
          of principal executive offices) |  | (Zip
          Code)

(650) 385-5000(Registrants Telephone Number, Including Area Code)

Securities Registered Pursuant to Section 12(b) of the Act: None

Securities Registered Pursuant to Section 12(g) of the Act:
Common Stock, par value $0.001 per share

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

Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrants knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [   ]

As of February 28, 2002 there were approximately 79,075,379 shares of the
Registrants Common Stock outstanding. The aggregate market value of the Common
Stock held by non-affiliates of the Registrant (based on the closing price for
the Common Stock on the Nasdaq National Market on February 28, 2002) was
approximately $465,936,938. Shares of the Registrants Common Stock held by
each executive officer and director and by each entity that owns 5% or more of
the Registrants Common Stock have been excluded in that such persons may be
deemed to be affiliates. This determination of affiliate status is not
necessarily a conclusive determination for other purposes.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Registrants Proxy Statement for the Registrants 2002 Annual
Meeting of Stockholders are incorporated by reference into Part III of this
Form 10-K to the extent stated herein. The Proxy Statement will be filed within
120 days of Registrants fiscal year ended December 31, 2001.



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TABLE OF CONTENTS



|              |                                                                                                |  |  |  |  |  |  | 
|------------- | ---------------------------------------------------------------------------------------------- |  |  |  |  |  |  | 
|PART I       
|              | Item 1. Business                                                                              
|              | Item 2. Properties                                                                            
|              | Item 3. Legal Proceedings                                                                     
|              | Item 4. Submission of Matters to a Vote of Security Holders                                   
|PART II      
|              | Item 5. Market for Registrants Common Equity and Related Stockholder Matters                 
|              | Item 6. Selected Consolidated Financial Data                                                  
|              | Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations 
|              | Item 7A. Quantitative and Qualitative Disclosure About Market Risk                            
|              | Item 8. Financial Statements and Supplementary Data                                           
|              | Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure  
|PART III     
|              | Item 10. Directors and Executive Officers of the Registrant                                   
|              | Item 11. Executive Compensation                                                               
|              | Item 12. Security Ownership of Certain Beneficial Owners and Management                       
|              | Item 13. Certain Relationships and Related Transactions                                       
|PART IV      
|              | Item 14. Exhibits, Financial Statements, Financial Statement Schedules and Reports on Form 8-K
|SIGNATURES   
|EXHIBIT INDEX
|EXHIBIT 10.16
|EXHIBIT 23.2 



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INFORMATICA CORPORATION

ANNUAL REPORT ON FORM 10-K
Year Ended December 31, 2001

|           |  |                                                                                               |  |     
|---------- |  | --------------------------------------------------------------------------------------------- |  | ----
|           |  |                                                                                               |  | Page
|           |  |                                                                                               |  |     
|PART I    
|Item 1.    |  | Business                                                                                      |  | 3   
|Item 2.    |  | Properties                                                                                    |  | 10  
|Item 3.    |  | Legal Proceedings                                                                             |  | 10  
|Item 4.    |  | Submission of
        Matters to a Vote of Security Holders                                   |  | 10  
|           |  | Executive Officers
        of the Registrant                                                  |  | 11  
|PART II   
|Item 5.    |  | Market for Registrants
        Common Equity and Related Stockholder Matters                 |  | 12  
|Item 6.    |  | Selected Consolidated
        Financial Data                                                  |  | 13  
|Item 7.    |  | Managements
        Discussion and Analysis of Financial Condition and Results of Operations |  | 14  
|           |  | Risk Factors                                                                                  |  | 23  
|Item 7A.   |  | Quantitative and
        Qualitative Disclosure About Market Risk                             |  | 31  
|Item 8.    |  | Financial Statements
        and Supplementary Data                                           |  | 32  
|Item 9.    |  | Changes in and
        Disagreements with Accountants on Accounting and Financial Disclosure  |  | 54  
|PART III  
|Item 10.   |  | Directors and
        Executive Officers of the Registrant                                    |  | 54  
|Item 11.   |  | Executive Compensation                                                                        |  | 54  
|Item 12.   |  | Security Ownership
        of Certain Beneficial Owners and Management                        |  | 54  
|Item 13.   |  | Certain Relationships
        and Related Transactions                                        |  | 54  
|PART IV   
|Item 14.   |  | Exhibits, Financial
        Statements, Financial Statement Schedules and Reports on Form 8-K |  | 54  
|SIGNATURES |  | 56                                                                                           

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This Annual Report on Form 10-K includes forward-looking statements
within the meaning of the federal securities laws, particularly statements
referencing trends in our operating results; the
sufficiency of our cash balances and cash flows for the next twelve months;
potential investments of cash or stock to acquire or invest in complementary
businesses, products or technologies; the impact of recent changes in
accounting standards; and assumptions underlying any of the foregoing. In some
cases, forward-looking statements can be identified by the use of terminology
such as may, will, expects, intends, plans, anticipates,
estimates, potential, or continue, or the negative thereof or other
comparable terminology. Although we believe that the expectations reflected in
the forward-looking statements contained herein are reasonable, these
expectations or any of the forward-looking statements could prove to be
incorrect, and actual results could differ materially from those projected or
assumed in the forward-looking statements. Our future financial condition and
results of operations, as well as any forward-looking statements, are subject
to risks and uncertainties, including but not limited to the factors set forth
in  Risk Factors and elsewhere in this report. All forward-looking statements
and reasons why results may differ included in this report are made as of the
date hereof, and we assume no obligation to update any such forward-looking
statements or reasons why actual results may differ.




PART I




Item 1.Business

Overview

We are a leading provider of enterprise analytics software that enables
our customers to automate the integration, analysis and delivery of critical
corporate information. Using our products, managers and executives gain
valuable business insight they can use to help improve operational performance
and enhance competitive advantage.

Over the last two decades, companies have made significant investments in
a variety of software applications that automate specific business functions.
As a result, companies have amassed large volumes of information stored in
these disparate software systems. More recently, the deployment of e-business
applications and the adoption of the Internet as a business tool have
accelerated this trend by exponentially increasing electronic transaction
activity and the volume of associated data. These developments have made it
increasingly difficult for managers and executives to access and analyze
complete information regarding their customers, operations and suppliers in a
timely manner.

We provide our customers with a comprehensive family of software products
that are designed to support more effective and timely business decision-making
and help transform business insight into competitive advantage. Our data
integration products simplify the process of integrating and analyzing data
from multiple systems, while our complementary analytic application products
provide our customers with standardized reports and metrics that can be
extended to meet their unique business requirements. Our analytics delivery
products enable the deployment of custom or packaged analytic applications to a
broad set of corporate decision-makers via Web, wireless and voice interfaces.
Using our products, customers can evaluate and help improve the performance of their business, including direct and indirect sales, marketing, customer
service, operations, manufacturing, human resources, procurement and finance.

We believe our products provide our customers with the following primary
benefits:



| |  |  | integrated information across a wide range of business functions and disparate data sources; 
| | - |  | ---------------------------------------------------------------------------------------------
|
| |  |  | timely delivery of personalized corporate information and metrics to key decision-makers; and
|
| |  |  | comprehensive business insight to enhance business decision-making.                          

We have over 1,450 customers, which include companies in a wide variety of
industries, ranging from high technology to manufacturing, and from financial
services to telecommunications. We also maintain relationships with a variety
of strategic partners to jointly develop, market, sell and/or implement our
solutions. Our significant strategic partners include Accenture, BEA Systems,
Deloitte Consulting, Hewlett-Packard, i2 Technologies, IBM, KPMG Consulting,
Mitsubishi Electric, PeopleSoft, PwC Consulting, Siebel Systems and Sybase. We
market and sell our software and services through our direct sales force in the
United States as well as Belgium, Canada, France, Germany, the Netherlands,
Switzerland and the United Kingdom. We also have relationships with
distributors in various regions, including Asia-Pacific, Australia, Europe,
Japan and Latin America, who sublicense

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our products and provide service and support within their territories.
More than twenty-five independent software vendors, including several of our
strategic partners, have licensed our technology for inclusion in their
products.

Our principal executive offices are located at 2100 Seaport Boulevard,
Redwood City, California 94063, and our telephone number at that location is
(650) 385-5000. We can also be reached at our Web site at www.informatica.com.
We were incorporated in California in February 1993 and reincorporated in
Delaware in April 1999.

Recent Developments

Business Combinations

In January 2001, we acquired all the outstanding shares of syn-T-sys B.V.
and syn-T-sys N.V. (syn-T-sys), distributors of Informatica products in the
Netherlands and Belgium, respectively, for a total purchase price of $7.5
million. In June 2001, we acquired all the outstanding shares of Informatica
Partners, a distributor of Informatica products in France, for a total purchase
price of $5.0 million. Both business combinations were accounted for under the
purchase method.

Restructuring

In July 2001, we announced our plan to consolidate our four San Francisco
Bay Area locations into the new facility in Redwood City. As a result of the
consolidation of these facilities, we recorded total restructuring charges of
approximately $12.1 million in 2001 for excess leased facilities in the San
Francisco Bay Area and Texas and the related write-offs of property and
equipment.

We recorded a restructuring charge of approximately $10.6 million related
to the consolidation of excess leased facilities. These costs include remaining
lease liabilities and brokerage fees reduced by estimated sublease income over
the estimated sublease period or the remaining lease terms through 2007. The
estimated costs of excess leased facilities, including estimated costs to
sublease, were based on market information and trend analyses provided by a
commercial real estate brokerage firm. Actual future cash requirements will
differ from the restructuring liability balances at December 31, 2001 if we are
unable to sublease the excess leased facilities or actual sublease income is
different from estimates. Property and equipment from these facilities that was
disposed of or removed from operations resulted in a charge of $1.5 million and
consisted primarily of leasehold improvements and furniture and fixtures.

Stock Option Exchange Program

In July 2001, we announced a voluntary stock option exchange program for
our employees. Under the program, employees were given the option to cancel
outstanding stock options previously granted in exchange for a new
non-qualified stock option grant for an equal number of shares to be granted at
a future date, at least six months and one day from the cancellation date of
the exchanged options, which was September 14, 2001. Under the exchange
program, options to purchase approximately 7.9 million shares of our common
stock were tendered and cancelled.

On March 15, 2002, replacement options were granted to participating
employees under the Stock Option Exchange Program for approximately 7.7 million shares of common stock.
Each participant received a one-for-one replacement option for each option included in the exchange at an exercise
price of $7.90 per share, which was the fair market value of our common stock on March 15, 2002. The new options have
terms and conditions that are substantially the same as those of the cancelled options. The exchange program
will not result in any additional compensation charges or variable plan accounting.

Our Products

Our enterprise analytics products enable our customers and partners to deploy and
manage data warehouses and analytic applications across their organizations.
Our products, which include data integration products, analytics delivery
products and a suite of packaged analytic applications, enable enterprises to
implement a decision support infrastructure that can be as sophisticated or as
simple as required. Our data integration products include our flagship data
integration platform and a set of supporting products that simplify the
integration, transformation and analysis of data from disparate sources. Our
analytics delivery products are Internet-based and enable customers to rapidly
develop and deploy analytic dashboards to a broad range of corporate
decision-makers. Our analytic applications leverage our integration and
delivery products and provide customers with packaged analytic functionality.
Using our products, customers can evaluate and help improve the performance of their
business, including direct and indirect sales, marketing, customer
service, operations, manufacturing, human resources, procurement and finance.

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The following information summarizes the key features and benefits of our
products and services:

Data Integration Products

Our data integration products feature a high-performance, scalable
architecture designed to support the demanding requirements of global companies
and rapidly growing enterprises. Our core integration offerings, Informatica
PowerCenter and Informatica PowerMart, integrate and unify the diverse
applications and the various types of users that populate todays enterprises.
Our data integration products extract data from virtually all sources, enrich it for
analytics, catalog it for use and reuse, and deliver it to data warehouses and
analytic applications. In addition, we offer a number of extension products
that provide technical capabilities to accelerate and simplify customer
implementation and deployment of our products, including Informatica
PowerChannel, a number of Informatica PowerConnects, Informatica PowerPlugs and
Informatica PowerBridge products.

|                                                   |  |                                                                                                                                                                                                                                                     |  |                                                                                                                                                                                                                                                                        
|-------------------------------------------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Product                                            |  | Description                                                                                                                                                                                                                                         |  | Benefit                                                                                                                                                                                                                                                                
|                                                   |  |                                                                                                                                                                                                                                                     |  |                                                                                                                                                                                                                                                                        
|Informatica
PowerCenter                            |  | An enterprise
        data integration platform for the creation and real-time management of
        data warehouses and analytic applications.                                                                                                     |  | Speeds integration
        and simplifies management of enterprise-wide information by integrating
        analytics, enforcing consistent data definitions, and synchronizing and
        integrating disparate data marts, data warehouses and analytic applications.
|                                                   |  |                                                                                                                                                                                                                                                     |  |                                                                                                                                                                                                                                                                        
|Informatica
PowerMart                              |  | A departmental
        integration platform that can be expanded as a companys needs grow
        to an enterprise level with Informatica PowerCenter.                                                                                             |  | Speeds integration
        and simplifies management of departmental information by integrating analytics
        and enforcing consistent data definitions.                                                                                                           
|                                                   |  |                                                                                                                                                                                                                                                     |  |                                                                                                                                                                                                                                                                        
|Informatica PowerChannel                           |  | An extension product
        that supports the interchange and integration of sensitive, high volume
        and geographically dispersed data across a wide area network within an
        enterprise, or across the Internet between enterprises. |  | Provides comprehensive
        and reliable integration of geographically distributed data, improved
        visibility and global data management and is designed to significantly save time and resources.                                                           
|                                                   |  |                                                                                                                                                                                                                                                     |  |                                                                                                                                                                                                                                                                        
|Informatica
PowerConnects,
PowerPlugs,
PowerBridge |  | A set of extension
        products to provide direct access to various enterprise data sources and
        metadata, including SAP, PeopleSoft, Siebel, DB2, IBM MQSeries, mainframe,
        AS/400 and Hyperion.                                 |  | Simplifies access
        to ERP, CRM, real-time messaging, mainframe, AS/400 and legacy environments
        and allows the reuse of metadata in order to reduce information technology
        cost and improve system manageability.                                

Analytics Delivery Products

Our analytics delivery products are comprised of the Informatica Analytics
Server and Informatica Mobile. When combined, these Internet-based products
enable customers and partners to rapidly develop and deploy analytic dashboards
to a broad range of decision-makers within an enterprise. Informatica
Analytics Server provides Web-based analytic dashboards and a Web-based
administrative console, while Informatica Mobile is the mobile dashboard
delivery option for wireless (WAP, PDA, text pager, RIM pager) and voice
recognition interfaces. This analytics delivery platform is designed to give
end users intuitive access to critical data at the point of work. In addition,
the platform provides benefits via rapid development and deployment
capabilities. By allowing users to be alerted to, navigate through and interact
with key business metrics such as sales trends, customer order records, support
logs and enterprise communication tools, the Informatica Analytics Delivery
Platform empowers employees, suppliers and customers to make informed decisions
while in the office or on the road. This enables faster reactions to trends,
more responsive customer support, more consistent decision-making and,
therefore, a more effective enterprise. Our analytics delivery products are
tightly integrated with our data integration products and provide the
deployment and delivery capabilities for our analytic application products.

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|                             |  |                                                                                                                                                                                                                             |  |                                                                                                                                                                                
|---------------------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Product                      |  | Description                                                                                                                                                                                                                 |  | Benefit                                                                                                                                                                        
|                             |  |                                                                                                                                                                                                                             |  |                                                                                                                                                                                
|Informatica
Analytics Server |  | A scalable platform
        for building and deploying Web-based analytic dashboards, reports, analytic
        workflows, alerts and indicators.                                                                           |  | Allows companies
        to deploy real-time, customizable analytics to a broad range of decision-makers
        across the enterprise, resulting in better-informed decisions.
|                             |  |                                                                                                                                                                                                                             |  |                                                                                                                                                                                
|Informatica
Mobile           |  | An optional component
        that automates delivery of analytic dashboards via mobile devices with
        support for device-specific interfaces; also supports analytic dashboard
        delivery via voice interface. |  | Allows mobile users
        to access key business metrics and communications tools remotely, enabling
        greater productivity.                                           

Analytic Application Products

Our analytical application products are comprised of a tightly integrated suite of
analytic applications that provide key business metrics and analytic reports
across a range of business functions. Because our analytic application products
span multiple business functions, we believe they uniquely offer managers and
executives an integrated, enterprise-wide view of their businesses that they
have not traditionally been able to achieve. These analytic applications are
designed to integrate data from a variety of operational systems, such as
Ariba, i2 Technologies, Manugistics, Oracle, PeopleSoft, SAP, Siebel Systems, legacy systems and Web commerce
servers, to provide valuable business insight. They do this by enabling
companies to analyze and manipulate the aggregated and normalized information.
Our analytic applications are designed to help companies leverage industry best
practices and minimize implementation time and cost for enterprise-wide
analytics. They include analytic dashboards that are role-based, easily
personalized and able to deliver information in real time, and are integrated
with alerts and enterprise communication tools such as Microsoft Exchange. The
analytic dashboards allow full interaction with the server, including the use
of Informatica Analytic Workflows, which aid in the discovery of root causes by
guiding users through a series of saved drill paths, based on business
processes. These innovations make our applications more powerful and at the
same time easier to use, especially for users who may not have experience in
business analysis. Our analytic applications are built on our data integration
and analytics delivery products and can therefore be easily modified and
extended to meet the requirements of most enterprises. Our suite of packaged analytic applications is comprised of four integrated applications, summarized in the table
below.

|                                            |  |                                                                                                                                                                                                                                        |  |                                                                                                                                                                                                        
|------------------------------------------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Product                                     |  | Description                                                                                                                                                                                                                            |  | Benefit                                                                                                                                                                                                
|                                            |  |                                                                                                                                                                                                                                        |  |                                                                                                                                                                                                        
|Informatica
Customer Relationship
Analytics |  | Metrics and packaged
analytics for improving
the effectiveness of
customer-facing
business processes,
including direct and
indirect sales,
marketing, and customer
service.                                                            |  | Helps companies increase sales and
customer profitability
by attracting,
retaining and better
serving customers
across all sales and
distribution channels.                                            
|                                            |  |                                                                                                                                                                                                                                        |  |                                                                                                                                                                                                        
|Informatica
Web Channel Analytics           |  | Metrics and packaged
analytics to help
information technology
and business users
analyze Web-based
clickstream data,
including segmentation
of Web visitors by
geography and domain
and measuring the
success of Web-based
promotions. |  | Helps companies
understand customer
behavior on the Web
site and measure the
effectiveness of
customer facing Web
applications.                                                                        
|                                            |  |                                                                                                                                                                                                                                        |  |                                                                                                                                                                                                        
|Informatica
Business Operations
Analytics   |  | Metrics and packaged
analytics for various
back-office business
operations, including
finance, human
resources,
manufacturing and
logistics.                                                                                           |  | Enables companies to
identify areas to
reduce costs, improve
responsiveness and
better manage human
resources and other
corporate assets in
order to drive business
improvements across the
enterprise.
|                                            |  |                                                                                                                                                                                                                                        |  |                                                                                                                                                                                                        
|Informatica
Supply Chain Analytics          |  | Metrics and packaged
analytics improving the
effectiveness of
procurement processes,
including the
acquisition of raw
materials, components
and other supplies, as
well as supplier
relationships.                                     |  | Helps companies reduce direct and
indirect procurement
time and costs, improve
product quality and
monitor supplier
performance.                                                                       

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Services

We offer a comprehensive
  set of professional services, including product-related consulting services,
  training and customer support. Our consulting services range from designing
  and deploying analytic applications and data warehouses to data transformation
  and performance tuning. Our consulting strategy is to provide specialized expertise
  regarding our products to enable our end user customers and systems integrator
  partners to successfully implement our analytic solutions. Our systems integrator
  partners include major, global firms such as Accenture, Cap Gemini Ernst &
  Young, Computer Sciences Corporation, Deloitte Consulting, EDS, KPMG Consulting
  and PwC Consulting as well as smaller, regional firms specializing in data warehouse
  consulting. We also offer a comprehensive curriculum of product-related training
  to help our customers and strategic partners build proficiency in using our
  products. In 2001, we established the Informatica Certification Program to create
  a database of expert professionals with verifiable skills in the design and
  administration of Informatica-based analytic systems. Through our technical
  support centers in the United States and the United Kingdom, we offer high-quality
  technical support on a global basis to customers over the phone, via e-mail
  and through the Internet.

Our Strategic Partners and Customers

Our strategic partners
  include industry leaders in enterprise and e-business software, business intelligence
  tools, computer hardware and systems integration. We offer a comprehensive strategic
  partner program for major companies in these areas so that they can provide
  sales and marketing leverage, access to required technology and complementary
  products and services to our joint customers. In addition to our systems integrator
  partners listed above, our strategic partners include BEA Systems, Brio Technology,
  Business Objects, Cognos, Compaq Computer, EMC, Hewlett-Packard, Hyperion Solutions,
  i2 Technologies, IBM, Manugistics, Microsoft, MicroStrategy, Mitsubishi Electric,
  PeopleSoft, Siebel Systems, Sun Microsystems, Sybase, TIBCO, Vitria and webMethods.

Our customers include
  leading companies in a wide range of industries as well as major governmental
  and educational institutions. A representative sampling of customers who have
  purchased at least $750,000 of our software and related services since January
  1996 includes:

|                                                                                                                                                                                                                                                                                                              |  |                                                                                                                                                                                                                 |  |                                                                                                                                                                                                                                                                                                                                                                  |  |                                                                                                                                                               |  |                                                                                                                                                                 
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------
|Banking/Financial                                                                                                                                                                                                                                                                                             |  |                                                                                                                                                                                                                 |  |                                                                                                                                                                                                                                                                                                                                                                  |  |                                                                                                                                                               |  |                                                                                                                                                                 
|Services                                                                                                                                                                                                                                                                                                      |  | Insurance                                                                                                                                                                                                       |  | Manufacturing/High Tech                                                                                                                                                                                                                                                                                                                                          |  | Communications                                                                                                                                                |  | Pharmaceuticals/Chemicals                                                                                                                                       
|                                                                                                                                                                                                                                                                                                              |  |                                                                                                                                                                                                                 |  |                                                                                                                                                                                                                                                                                                                                                                  |  |                                                                                                                                                               |  |                                                                                                                                                                 
| Abbey National
         ABN AMRO Bank
         American Express
         Bank of Tokyo
         Charles Schwab
         Citigroup
         Credit Suisse First Boston
         Deutsche Bank
         Fair, Isaac
         Goldman Sachs
         JP Morgan
         Merrill Lynch
         UBS |  |  Aegon USA 
         AXA
         Blue Cross/Blue Shield 
         CNA 
         Hartford 
         John Hancock 
         Liberty Mutual Group
         Met Life 
         Prudential 
         USAA |  |  Autodesk 
         Boeing
         Brocade Communications Cisco 
         Freightliner 
         Gateway
         General Electric 
         Hewlett-Packard 
         Lockheed Martin 
         Lucent Technologies
         Motorola 
         Philips
         Solectron
         Siemens
         Steris
         Toyota
         Verisign |  |  AirTouch AT&T
         Bell Atlantic Cingular Wireless Deutsche Telekom NTL One 2 One
         Sprint UUNET Verizon Williams Information Services |  |  Abbott Laboratories
         American Home Products
         Amgen
         Astra Zeneca
         Bristol-Meyers Squibb
         Corning
         Pfizer

|                                               |  |                                                    |  |                                                                                            |  |                                                                                                                      
|---------------------------------------------- |  | -------------------------------------------------- |  | ------------------------------------------------------------------------------------------ |  | ---------------------------------------------------------------------------------------------------------------------
|Retail/Consumer                                |  |                                                    |  |                                                                                            |  |                                                                                                                      
|Packaged Goods                                 |  | Utilities/Energy                                   |  | Government                                                                                 |  | Other                                                                                                                
|                                               |  |                                                    |  |                                                                                            |  |                                                                                                                      
| Best Buy Con Agra Nestlé
         Pepsico |  |  EDF GDF TransCanada Pipelines Waste Management |  |  Internal
Revenue Service TriCare Management Activities US Air Force US Postal Service |  |  ABB Infosystems Cap Gemini Ernst & Young Federal Express
         Intuit Sysco Tetra Pak Data Systems Vizzavi

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Our Market Positioning

Comprehensive Enterprise Analytics Product Offering.Our strategy is to
provide our customers with a comprehensive suite of analytic products to help
them quickly and cost effectively deploy analytic solutions to improve their
business effectiveness. Our data integration, analytics delivery and analytic
application products combine to provide the industrys most comprehensive
enterprise analytics product suite. This full stack of products allows us to
offer our customers a highly attractive and differentiated value proposition in
terms of ease of implementation, ease of management, total cost of ownership
and business improvement.

Analytic Solutions Spanning the Entire Value Chain.Our products combine
to provide our customers with a complete, enterprise-wide analytic capability
that can span the full range of business functions, such as direct and indirect
sales, marketing, customer service, operations, manufacturing, human resources,
procurement and finance. By leveraging this integrated and comprehensive view
of their operations, our customers are better able to manage their businesses
and improve their competitive position.

Highly Scalable and Flexible Data Integration Architecture.Our products
are capable of supporting the needs of large global enterprises due to our
highly scalable and extensible architecture. In particular, our analytics
delivery products are based on an industry-standard J2EE architecture that
provides significant scalability and manageability advantages. In addition,
our infrastructure products are developed to be compatible with major software
applications. Our platform and set of supporting products are both
flexible and extensible, allowing customers to build or extend sophisticated
analytic applications to meet their specific requirements. The open
architecture design of our products enables our customers to support and
inter-operate with a wide range of computing platforms, applications and data
sources.

Significant Installed Customer Base.We have an installed customer base
that spans a wide range of industries. Our products have been licensed by over
1,450 customers around the world. As of December 31, 2001, our customers
included over 60% of the Fortune 100 companies. Our success in these
deployments serves to strengthen our brand awareness while providing an
opportunity to license additional products to these existing customers
including our analytic applications and analytics delivery products.

Strong Base of Leading Strategic Partners.We have alliances and strategic
partnerships with leading enterprise and e-business software providers, systems
integrators and hardware vendors. These alliances provide sales and marketing
leverage and access to required technology while also providing complementary
products and services to our joint customers. Currently, more than 200
companies market and resell our products around the world, which we believe has
helped accelerate market adoption of our products.

Research and Development

As of December 31, 2001, we employed 215 people in our research and
development organization. This team is responsible for the design, development
and release of our products. The group is organized into four disciplines:
development, quality assurance, documentation and program management. Members
from each discipline, along with a product-marketing manager from our marketing
department, form separate product teams that work closely with sales,
marketing, services, customers and prospects to better understand market needs
and user requirements. These product teams utilize a well-defined software
development methodology that we believe enables us to deliver products that
satisfy real business needs for the global market while also meeting commercial
quality expectations.

When appropriate, we also utilize third parties to expand the capacity and
technical expertise of our internal research and development team. On occasion,
we have licensed third-party technology. We believe this approach shortens
time-to-market without compromising competitive position or product quality,
and we plan to continue to draw on third-party resources as needed in the
future. Our research and development expenditures were $46.3 million in 2001,
$26.5 million in 2000 and $11.8 million in 1999.

Sales, Marketing and Distribution

We market and sell software and services through a direct sales force in
the United States as well as Belgium, Canada, France, Germany, the Netherlands,
Switzerland and the United Kingdom, and also through distributors in various
regions around the world. As of December 31, 2001, we employed 311 people in
our sales and marketing organization worldwide.

Marketing programs are focused on creating awareness as well as lead
generation and customer references for our products. These programs are
targeted at key executives such as chief executive officers, chief information
officers, other information technology managers and vice presidents of specific
functional areas, such as marketing, sales, service, finance, human resources,
manufacturing, distribution and procurement. Our marketing personnel engage in
a variety of activities, including positioning our software products

8



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and services, conducting public relations programs, establishing and
maintaining relationships with industry analysts, producing product collateral
and generating qualified sales leads.

Our sales process consists of several phases: lead generation, opportunity
qualification, needs assessment, product demonstration, proposal generation and
contract negotiation. Although the typical sales cycle requires 120 days, some
sales cycles in the past have lasted substantially longer,
particularly the sales cycle for our
analytic application products. In a number of instances, our relationships with
systems integrators and other strategic partners have reduced sales cycles by
generating qualified sales leads, making initial customer contacts and
assessing needs prior to our introduction to the customer. Also, partners have
assisted in the creation of presentations and demonstrations, which we believe
enhances our overall value proposition and competitive position.

We distribute our products through systems integrators and resellers in
the United States and through systems integrators, resellers and distributors
internationally. Systems integrators typically have expertise in vertical or
functional markets. They resell our products, bundling them in most cases with
their broader service offerings. In other cases, they influence direct sales of
our products. Distributors sublicense our products and provide service and
support within their territories.

Intellectual Property and Other Proprietary Rights

Our success depends upon our proprietary technology. We rely on a
combination of patent, copyright, trademark and trade secret rights,
confidentiality procedures and licensing arrangements to establish and protect
our proprietary rights. As part of our confidentiality procedures, we generally
enter into non-disclosure agreements with our employees, distributors and
corporate partners and into license agreements with respect to our software,
documentation and other proprietary information. In addition, we have five
patents granted in the U.S., fourteen patent applications pending in the U.S.,
and nine international patent applications pending.

Competition

The market for our products is highly competitive, quickly evolving and
subject to rapidly changing technology. We compete principally against
providers of decision support, data warehousing and analytic application
software. Such competitors include Acta Technology, Inc., Ascential Software,
Brio Technology, Inc., Business Objects S.A., Cognos Inc., E.piphany, Inc.,
MicroStrategy, Inc., and Sagent Technology, Inc. In addition, we compete or may
compete against database vendors and enterprise applications vendors that
currently offer, or may develop, products with functionalities that compete
with our products. Such potential competitors include IBM Corporation,
Microsoft Corporation, Oracle Corporation, PeopleSoft, SAP and Siebel Systems.

Many of our competitors or potential competitors have longer operating
histories, substantially greater financial, technical, marketing or other
resources, or greater name recognition than we do. Our competitors may be able
to respond more quickly than we can to new or emerging technologies and changes
in customer requirements. Competition could seriously impede our ability to
sell additional products and services on terms favorable to us. Our current and
potential competitors may develop and market new technologies that render our
existing or future products obsolete, unmarketable or less competitive. If our
competitors develop similar or superior functionality, we may have difficulty
competing more substantially on the basis of price. Our current and potential
competitors may make strategic acquisitions or establish cooperative
relationships among themselves or with other solution providers, thereby
increasing the ability of their products to address the needs of our
prospective customers. Our current and potential competitors may establish or
strengthen cooperative relationships with our current or future channel or
strategic partners, thereby limiting our ability to sell products through these
channels. Competitive pressures could reduce our market share or require us to
reduce our prices, either of which could materially and adversely affect our
business, results of operations or financial condition.

We currently compete more on the basis of our products functionality than
on the basis of price. Additionally, we compete on the basis of certain
factors, including:



| |  |  | product performance |  |  |  | product reliability   |  |  |  | customer support
| | - |  | ------------------- |  | - |  | --------------------- |  | - |  | ----------------
|
| |  |  | product features    |  |  |  | analytic capabilities |  |  |  | product pricing 
|
| |  |  | user scalability    |  |  |  | open architecture    
|
| |  |  | ease of use         |  |  |  | time-to-market       

We believe that we currently compete favorably with respect to the above
factors. See Risk Factors  The market in which
we sell products is highly competitive.

9



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##### Table of Contents



Employees

As of December 31, 2001, we had a total of 838 employees, including 215
people in research and development, 311 people in sales and marketing, 208
people in consulting, customer support and training and 104 people in general
and administrative services. None of our employees is represented by a labor
union. We have not experienced any work stoppages, and we consider employee
relations to be good.




Item 2.Properties

Our headquarters are located in two buildings at the newly constructed
Pacific Shores Center in Redwood City, California. These buildings comprise
290,300 square feet of office space and are leased through July 2013. We also
lease 6,500 square feet of office space for sales activities in New York, New
York through February 2010 and 25,000 square feet of office space for sales,
professional services and product development activities in Carrollton, Texas
through January 2006. We occupy approximately 10,000 square feet of office
space in Maidenhead, United Kingdom for our European headquarters leased
through May 2010. We also lease other office space in the United States and
other various countries under operating leases.

We leased 30,000 square feet in Palo Alto, California under a lease that
expires in July 2007. We also subleased 13,800 square feet in Palo Alto,
California under a sublease that expires in April 2002. In San Francisco,
California we leased approximately 19,193 square feet under a lease that
expires in March 2007. We are attempting to sublease all of these surplus
properties for the remaining lease terms.




Item 3.Legal Proceedings

On November 8, 2001, a putative securities class action, captioned Neuman
v. Informatica Corporation et al., Civil Action No. 01-CV-9922, was filed
against us, certain company officers and directors (the individual
defendants), and six underwriters of our initial public offering of common stock (IPO) on
April 28, 1999 and our follow-on offering of common stock on September 27, 2000, in the United
States District Court for the Southern District of New York. The complaint
alleges violations of Section 11 of the Securities Act of 1933 (Securities
Act) against all defendants,a violation of Section 15 of the Securities Act
against the individual defendants, and violations of Section 12(a)(2) of the
Securities Act and Section 10(b) of the Securities Exchange Act (and Rule
10b-5, promulgated thereunder)against the underwriters. The complaint seeks
unspecified damages on behalf of a purported class of purchasers of common
stock between April 28, 1999 and December 6, 2000 (the class period), on the
grounds that the prospectus(es) incorporated in the registration statement(s)
for one or both offerings failed to disclose, among other things, that (i) the
underwriters had solicited and received excessive and undisclosed commissions
from certain investors in exchange for which the underwriters allocated to
those investors material portions of the shares of the common stock we sold in
the offering(s), and (ii) the underwriters agreed to allocate shares of the
common stock we sold in the offering(s) to those customers in exchange for
which the customers agreed to purchase additional shares of our common stock
in the aftermarket at pre-determined prices. No specific damages are claimed.

We are aware that similar allegations have been made in lawsuits relating
to more than 300 other initial public offerings conducted in 1999 and 2000.
Those cases have been consolidated for pretrial purposes before the Honorable
Judge Shira A. Scheindlin. Defendants time to respond to the complaints has
been stayed pending a plan for further coordination. We believe that we have
meritorious defenses to the claims against us, and we intend to defend
ourselves vigorously.

We are also subject to other various legal proceedings and claims, either
asserted or unasserted, which arise in the ordinary course of business. While
the outcome of these claims cannot be predicted with certainty, we
believe the claims are without merit and intend to defend the
actions vigorously. However, an unfavorable outcome could have a
material adverse effect on our operating results and financial
condition.




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

Not Applicable.

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Executive Officers of the Registrant

The following table sets forth certain information concerning our
executive officers as of March 1, 2002:

|                  |  |     |    |             |  |                                                     
|----------------- |  | --- | -- | ----------- |  | ----------------------------------------------------
|Name              |  | Age |    | Position(s)
|                  |  |     |    |            
|Gaurav S. Dhillon |  |     | 36 |             |  | Chief Executive Officer, Secretary and Director     
|Diaz H. Nesamoney |  |     | 36 |             |  | President, Chief Operating Officer and Director     
|Kyle L. Bowker    |  |     | 42 |             |  | Executive Vice President, Worldwide Field Operations
|Earl E. Fry       |  |     | 43 |             |  | Chief Financial Officer and Senior Vice President   
|Barton S. Foster  |  |     | 37 |             |  | Senior Vice President, Worldwide Marketing          

Our executive officers are appointed by, and serve at the discretion of,
the Board of Directors. Each executive officer is a full-time employee. There
is no family relationship between any of our executive officers or directors.

Mr. Dhillonis one of our co-founders and has been our Chief Executive
Officer, Secretary and a member of our Board of Directors since our inception.
Prior to co-founding Informatica in February 1993, Mr. Dhillon was employed by
Sterling Software, a software company, from December 1991 to November 1992,
where his last position was Project Manager. Prior to that, he was a Systems
Architect with Unisys Corporation. Mr. Dhillon holds a B.S.E.E. from Punjab
University, India.

Mr. Nesamoneyis one of our co-founders and has been a member of our Board
of Directors and an officer since our inception. He is currently our President
and Chief Operating Officer. Prior to co-founding Informatica in February 1993,
Mr. Nesamoney was employed by Unisys Corporation from May 1988 to February
1993, where his last position was Development Manager. Mr. Nesamoney holds an
M.S.C.S. degree from Birla Institute of Technology and Science, India.

Mr. Bowkerjoined us in August 2001 as Executive Vice President, Worldwide
Field Operations. Mr. Bowker previously served as senior vice president and
general manager for SAP Americas manufacturing sector. Mr. Bowker served SAP
America for eight years in various management and engineering positions.
Previously, he served as a technology and management consultant with a number
of organizations, including Oracle Corp., Dun & Bradstreet Software and
Management Science, America. He holds a B.B.A. degree in Business
Administration from Southern Methodist University and an M.B.A. from the
University of Texas.

Mr. Fryhas been our Chief Financial Officer and Senior Vice President
since December 1999. From November 1995 to December 1999, Mr. Fry was Vice
President and Chief Financial Officer at Omnicell Technologies, Inc. From July
1994 to November 1995, he was Vice President and Chief Financial Officer at
C*ATS Software, Inc. Mr. Fry holds a B.B.A. degree in Accounting from the
University of Hawaii and an M.B.A. degree in Finance and Marketing from
Stanford University.

Mr. Fosterhas been our Senior Vice President, Worldwide Marketing since
June 2000. Prior to joining us, Mr. Foster held various management positions at
CrossWorlds Software, including Senior Vice President, Marketing and Business
Development from June 1998 to June 2000. Prior to CrossWorlds, Mr. Foster
served as Executive Vice President, Sales and Marketing at Connect, Inc. from
March 1996 to June 1998. From November 1993 to March 1996, Mr. Foster held
various management positions at Oracle Corporation, including Vice President,
Applications and Industry Marketing. Mr. Foster holds a B.A. degree from
Stanford University and an M.B.A. degree from Harvard University.

11



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PART II




Item 5.Market for Registrants Common Equity and Related Stockholder Matters

Price Range of Common Stock

Our common stock is listed on the Nasdaq National Market under the symbol
INFA. Our initial public offering was April 29, 1999 at $4.00 per share. The
price range per share in the table below reflects the highest and lowest sale
prices for our stock as reported by the NASDAQ stock market during the last two
fiscal years. This information has been restated to reflect two-for-one stocks
splits that were effected in the form of stock dividends to each stockholder of
record as of February 18, 2000 and November 29, 2000.

|      |                |  |      |       |     |  |   |       | 
|----- | -------------- |  | ---- | ----- | --- |  | - | ----- | 
|      |                |  | High |       | Low
|      |                |  |      |       |    
|2000: |                |  |      |       |     |  |   |      
|      | First Quarter  |  | $    | 50.32 |     |  | $ | 21.00 | 
|      | Second Quarter |  | $    | 40.97 |     |  | $ | 17.19 | 
|      | Third Quarter  |  | $    | 52.10 |     |  | $ | 35.53 | 
|      | Fourth Quarter |  | $    | 57.44 |     |  | $ | 34.94 | 
|2001: |                |  |      |       |     |  |   |      
|      | First Quarter  |  | $    | 36.50 |     |  | $ | 13.31 | 
|      | Second Quarter |  | $    | 28.68 |     |  | $ | 12.13 | 
|      | Third Quarter  |  | $    | 16.30 |     |  | $ | 3.95  | 
|      | Fourth Quarter |  | $    | 15.00 |     |  | $ | 3.62  | 

Holders of Common Stock

As of December 31, 2001, there were approximately 235 stockholders of
record of our common stock, and the closing price per share of our common stock
was $14.51. Because many of our shares of common stock are held by brokers and
other institutions on behalf of stockholders, we are unable to estimate the
total number of stockholders represented by these record holders.

Dividends

We have never declared or paid cash dividends on our common stock. Since
we currently intend to retain all future earnings to finance future growth, we
do not anticipate paying any cash dividends in the near future.

12



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##### Table of Contents






Item 6.Selected Consolidated Financial Data

|                                               |                                                                       |                                                      |                          |         |                                       |         |      |         |         |         |      |        |        |        |   |        |        |        |   |        |        |        | 
|---------------------------------------------- | --------------------------------------------------------------------- | ---------------------------------------------------- | ------------------------ | ------- | ------------------------------------- | ------- | ---- | ------- | ------- | ------- | ---- | ------ | ------ | ------ | - | ------ | ------ | ------ | - | ------ | ------ | ------ | 
|                                               |                                                                       |                                                      |                          |         | Year Ended December 31,              
|                                               |                                                                       |                                                      |                          |         |                                      
|                                               |                                                                       |                                                      |                          |         | 2001                                  |         | 2000 |         | 1999    |         | 1998 |        | 1997  
|                                               |                                                                       |                                                      |                          |         |                                       |         |      |         |         |         |      |        |       
|                                               |                                                                       |                                                      |                          |         | (in thousands, except per share data)
|Consolidated Statements of Operations Data(1): |                                                                       |                                                      |                          |         |                                       |         |      |         |         |         |      |        |        |        |   |        |        |        |   |       
|                                               | Revenues:                                                             |                                                      |                          |         |                                       |         |      |         |         |         |      |        |        |        |   |        |        |        |   |        |       
|                                               |                                                                       | License                                              |                          | $       | 119,937                               |         |      | $       | 101,649 |         |      | $      | 41,184 |        |   | $      | 21,582 |        |   | $      | 10,242 |       
|                                               |                                                                       | Service                                              |                          |         | 77,415                                |         |      |         | 52,409  |         |      |        | 21,195 |        |   |        | 8,764  |        |   |        | 2,499  |       
|                                               |                                                                       |                                                      |                          |         |                                       |         |      |         |         |         |      |        |        |        |   |        |        |        |   |       
|                                               |                                                                       |                                                      | Total revenues           |         |                                       | 197,352 |      |         |         | 154,058 |      |        |        | 62,379 |   |        |        | 30,346 |   |        |        | 12,741 | 
|                                               | Cost of revenues:                                                     |                                                      |                          |         |                                       |         |      |         |         |         |      |        |        |        |   |        |        |        |   |        |       
|                                               |                                                                       | License                                              |                          |         | 4,500                                 |         |      |         | 2,034   |         |      |        | 686    |        |   |        | 376    |        |   |        | 190    |       
|                                               |                                                                       | Service                                              |                          |         | 39,746                                |         |      |         | 28,465  |         |      |        | 10,310 |        |   |        | 5,013  |        |   |        | 2,392  |       
|                                               |                                                                       |                                                      |                          |         |                                       |         |      |         |         |         |      |        |        |        |   |        |        |        |   |       
|                                               |                                                                       |                                                      | Total cost of revenues   |         |                                       | 44,246  |      |         |         | 30,499  |      |        |        | 10,996 |   |        |        | 5,389  |   |        |        | 2,582  | 
|                                               |                                                                       |                                                      |                          |         |                                       |         |      |         |         |         |      |        |        |        |   |        |        |        |   |       
|                                               | Gross profit                                                          |                                                      |                          | 153,106 |                                       |         |      | 123,559 |         |         |      | 51,383 |        |        |   | 24,957 |        |        |   | 10,159 |       
|                                               | Operating expenses:                                                   |                                                      |                          |         |                                       |         |      |         |         |         |      |        |        |        |   |        |        |        |   |        |       
|                                               |                                                                       | Research and development                             |                          |         | 46,271                                |         |      |         | 26,493  |         |      |        | 11,843 |        |   |        | 8,385  |        |   |        | 4,747  |       
|                                               |                                                                       | Sales and marketing                                  |                          |         | 99,334                                |         |      |         | 75,034  |         |      |        | 33,613 |        |   |        | 22,733 |        |   |        | 11,219 |       
|                                               |                                                                       | General and administrative                           |                          |         | 19,629                                |         |      |         | 11,726  |         |      |        | 5,012  |        |   |        | 3,132  |        |   |        | 2,408  |       
|                                               |                                                                       | Merger-related costs                                 |                          |         |                                      |         |      |         |        |         |      |        | 2,082  |        |   |        |       |        |   |        |       |       
|                                               |                                                                       | Amortization of stock-based compensation             |                          |         | 1,036                                 |         |      |         | 1,514   |         |      |        | 742    |        |   |        | 98     |        |   |        | 2      |       
|                                               |                                                                       | Amortization of goodwill and other intangible assets |                          |         | 27,376                                |         |      |         | 14,163  |         |      |        |       |        |   |        |       |        |   |        |       |       
|                                               |                                                                       | Purchased in-process research and development        |                          |         |                                      |         |      |         | 8,648   |         |      |        |       |        |   |        |       |        |   |        |       |       
|                                               |                                                                       | Restructuring charges                                |                          |         | 12,096                                |         |      |         |        |         |      |        |       |        |   |        |       |        |   |        |       |       
|                                               |                                                                       |                                                      |                          |         |                                       |         |      |         |         |         |      |        |        |        |   |        |        |        |   |       
|                                               |                                                                       |                                                      | Total operating expenses |         |                                       | 205,742 |      |         |         | 137,578 |      |        |        | 53,292 |   |        |        | 34,348 |   |        |        | 18,376 | 
|                                               |                                                                       |                                                      |                          |         |                                       |         |      |         |         |         |      |        |        |        |   |        |        |        |   |       
|                                               | Loss from operations                                                  |                                                      |                          | (52,636 | )                                     |         |      | (14,019 | )       |         |      | (1,909 | )      |        |   | (9,391 | )      |        |   | (8,217 | )     
|                                               | Interest income and other, net                                        |                                                      |                          | 8,971   |                                       |         |      | 4,306   |         |         |      | 1,557  |        |        |   | 297    |        |        |   | 329    |       
|                                               | Interest expense                                                      |                                                      |                          | (11     | )                                     |         |      | (458    | )       |         |      | (319   | )      |        |   | (191   | )      |        |   | (130   | )     
|                                               |                                                                       |                                                      |                          |         |                                       |         |      |         |         |         |      |        |        |        |   |        |        |        |   |       
|                                               | Loss before income taxes                                              |                                                      |                          | (43,676 | )                                     |         |      | (10,171 | )       |         |      | (671   | )      |        |   | (9,285 | )      |        |   | (8,018 | )     
|                                               | Income tax provision                                                  |                                                      |                          | 1,304   |                                       |         |      | 3,345   |         |         |      | 824    |        |        |   |       |        |        |   |       |       
|                                               |                                                                       |                                                      |                          |         |                                       |         |      |         |         |         |      |        |        |        |   |        |        |        |   |       
|                                               | Net loss                                                              |                                                      | $                        | (44,980 | )                                     |         | $    | (13,516 | )       |         | $    | (1,495 | )      |        | $ | (9,285 | )      |        | $ | (8,018 | )     
|                                               | Basic and diluted net loss per share(2)                               |                                                      | $                        | (0.58   | )                                     |         | $    | (0.19   | )       |         | $    | (0.03  | )      |        | $ | (0.61  | )      |        | $ | (0.59  | )     
|                                               |                                                                       |                                                      |                          |         |                                       |         |      |         |         |         |      |        |        |        |   |        |        |        |   |       
|                                               | Shares used in calculation of basic and diluted net loss per share(2) |                                                      |                          | 77,599  |                                       |         |      | 69,758  |         |         |      | 47,565 |        |        |   | 15,305 |        |        |   | 13,554 |       
|                                               |                                                                       |                                                      |                          |         |                                       |         |      |         |         |         |      |        |        |        |   |        |        |        |   |       

|                                    |                                             |  |                |         |      |  |      |         |      |  |      |        |  |  |   |         |   |  |   |         |  
|----------------------------------- | ------------------------------------------- |  | -------------- | ------- | ---- |  | ---- | ------- | ---- |  | ---- | ------ |  |  | - | ------- | - |  | - | ------- | -
|                                    |                                             |  | December 31,  
|                                    |                                             |  |               
|                                    |                                             |  | 2001           |         | 2000 |  | 1999 |         | 1998 |  | 1997
|                                    |                                             |  |                |         |      |  |      |         |      |  |     
|                                    |                                             |  | (in thousands)
|Consolidated Balance Sheet Data(1): |                                             |  |                |         |      |  |      |         |      |  |      |        |  |  |   |         |   |  |   |        
|                                    | Cash and cash equivalents                   |  | $              | 131,264 |      |  | $    | 217,713 |      |  | $    | 57,521 |  |  | $ | 7,167   |   |  | $ | 8,888   |  
|                                    | Restricted cash                             |  |                | 12,166  |      |  |      | 20,282  |      |  |      |       |  |  |   |        |   |  |   |        |  
|                                    | Investments                                 |  |                | 77,955  |      |  |      |        |      |  |      |       |  |  |   |        |   |  |   |        |  
|                                    | Working capital (deficit)                   |  |                | 106,214 |      |  |      | 190,179 |      |  |      | 39,951 |  |  |   | (3,242  | ) |  |   | 5,376   |  
|                                    | Total assets                                |  |                | 342,903 |      |  |      | 350,983 |      |  |      | 68,523 |  |  |   | 12,165  |   |  |   | 13,356  |  
|                                    | Long-term obligations, less current portion |  |                |        |      |  |      |        |      |  |      | 1,438  |  |  |   | 1,480   |   |  |   | 1,428   |  
|                                    | Redeemable convertible preferred stock      |  |                |        |      |  |      |        |      |  |      |       |  |  |   | 17,586  |   |  |   | 17,586  |  
|                                    | Total stockholders equity (deficit)        |  |                | 260,408 |      |  |      | 290,497 |      |  |      | 40,124 |  |  |   | (21,580 | ) |  |   | (12,587 | )



---

|    |  | See Note 1 of Notes to Consolidated Financial Statements for an
explanation of the determination of the number of shares used to compute basic
and diluted net loss per share.                                                                      
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|   
|   
|   
|(1) |  | Amounts and per share data for periods prior to December 31, 1999 have
been restated to reflect the merger of Influence in a
pooling-of-interests transaction effective December 15, 1999. See Note 2
of Notes to Consolidated Financial Statements.
|   
|   
|   
|   
|(2) |  | Amounts prior to the year ended December 31, 2000 have been restated to
reflect two-for-one stock splits, effected in the form of stock dividends,
to each stockholder of record as of February 18, 2000 and November 29,
2000.                     

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Item 7.Managements Discussion and Analysis of Financial Condition and Results of Operations

The following discussion should be read in conjunction with our consolidated
financial statements and notes thereto appearing elsewhere in this report.

Overview

We are a leading provider of enterprise analytics software that enables
our customers to automate the integration, analysis and delivery of critical
corporate information. Using our products, managers and executives gain
valuable business insight they can use to help improve operational performance
and enhance competitive advantage.

We sell our products through direct sales forces in the United States as
well as Belgium, Canada, France, Germany, the Netherlands, Switzerland and the
United Kingdom, and also through distributors throughout Asia-Pacific,
Australia, Europe, Japan and Latin America. As a percent of our total
consolidated revenue, international revenues from both our direct sales force
and foreign indirect strategic partners were 28% in 2001, 21% in 2000 and 18%
in 1999. Substantially all of our international sales have been in Europe.
Sales outside of North America and Europe to date have been less than 2% of
total consolidated revenues during the last three fiscal years, although we
anticipate further expansion outside of these two regions in the future.

Business Combinations

Purchase Acquisitions

In January 2001, we acquired syn-T-sys B.V. and syn-T-sys N.V.
(syn-T-sys), distributors of Informatica products in the Netherlands and
Belgium, respectively. The agreement was structured as a share purchase and
accounted for as a purchase transaction. Under the terms of the agreement, we
issued 44,161 shares of our common stock, valued at approximately $1.5 million,
and paid cash consideration of approximately $5.8 million in exchange for the
outstanding shares of capital stock of syn-T-sys. The purchase price of the
transaction, including related expenses, was approximately $7.5 million, which
was allocated to the acquired assets and liabilities based on the estimated
fair values as of the date of the acquisition. The results of operations of
syn-T-sys have been included in our results of operations since the acquisition
date. Pro forma results of operations have not been presented since the effects
of the acquisition were not material to our consolidated financial position,
results of operations or cash flows for the periods presented.

In June 2001, we acquired Informatica Partners, a distributor of
Informatica products in France. The agreement was structured as a share
purchase and accounted for as a purchase transaction. Under the terms of the
agreement, we issued 49,543 shares of our common stock, valued at approximately
$0.9 million, and paid cash consideration of approximately $4.0 million in
exchange for the outstanding shares of capital stock of Informatica Partners.
As part of the agreement, 6,907 of the shares issued pursuant to the
acquisition were placed in escrow contingent on the continued employment of
certain employees and were not included in the purchase price. The purchase price of the transaction,
including related expenses, was approximately $5.0 million, which was allocated
to the acquired assets and liabilities based on the estimated fair values as of
the date of the acquisition. The results of operations of Informatica Partners
have been included in our results of operations since the acquisition date.

Source of Revenues and Revenue Recognition Policy

We generate revenues from sales of software licenses and services. Our
license revenues are derived from our enterprise analytic software, which
consists of data integration, analytics delivery and, to a lesser
extent, analytic applications
products. We receive software license revenues from licensing our products
directly to end-users and indirectly through resellers, distributors and
original equipment manufacturers (OEMs). We receive service revenues from
maintenance contracts and training and consulting services that we perform for
customers that license our products either directly from us or indirectly
through resellers, distributors and OEMs.

We recognize revenue in accordance with AICPA Statement of Position (SOP)
97-2, as amended by SOP 98-4, Software Revenue Recognition. We recognize
license revenues when a noncancelable license agreement has been signed, the
product has been shipped, the fees are fixed and determinable, collectibility
is probable and vendor-specific objective evidence of fair value exists to
allocate the total fee to elements of the arrangement. Vendor-specific
objective evidence is based on the price charged when an element is sold
separately. In the case of an element not yet sold separately, the price is
established by our authorized management. If an acceptance period is required,
we recognize revenue upon customer acceptance or the expiration of the
acceptance period. For the data integration and analytics delivery products to
end users, we recognize revenue upon shipment and when collectibility is
probable.

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For our analytic applications, we recognize the bundled license and
maintenance revenue ratably over the maintenance period, generally one year.
Support for the analytic applications for the first year is never sold
separately and in consideration of the complexities of the implementation the
customer is entitled to receive support services that are different than the
standard annual support services. We also enter into reseller and distributor
arrangements that typically provide for sublicense or end-user license fees
based on a percentage of list prices. Based on limited credit history, for
sales to OEMs, specific resellers, distributors and specific international
customers, we recognize revenue at the time payment is received for our
products, rather than at the time of sale. Our standard agreements do not
contain product return rights.

We recognize maintenance revenues, which consist of fees for ongoing
support and product updates, ratably over the term of the contract, typically
one year. Consulting revenues are primarily related to implementation services
and product enhancements performed on a time-and-materials basis or a fixed fee
arrangement under separate service arrangements related to the installation and
implementation of our software products. Training revenues are generated from
classes offered at our headquarters, sales offices and customer locations.
Revenues from consulting and training services are recognized as the services
are performed. When a contract includes both license and service elements, the
license fee is recognized on delivery of the software or cash collections,
provided services do not include significant customization or modification of
the base product, and are not otherwise essential to the functionality of the
software and the payment terms for licenses are not dependent on additional
acceptance criteria.

Deferred revenue includes deferred license and maintenance revenue and
prepaid training and consulting fees. Deferred revenue amounts do not include
items which are both deferred and unbilled. Our practice is to net unpaid
deferred items against the related receivables balances from those OEMs,
specific resellers, distributors and specific international customers for which
we defer revenue until payment is received.

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The following table presents certain financial data as a percentage of
total revenues:

|                                                              |                                |                                                      |                          |     |                         |     |      |    |      |     |    |    |    |     | 
|------------------------------------------------------------- | ------------------------------ | ---------------------------------------------------- | ------------------------ | --- | ----------------------- | --- | ---- | -- | ---- | --- | -- | -- | -- | --- | 
|                                                              |                                |                                                      |                          |     | Year Ended December 31,
|                                                              |                                |                                                      |                          |     |                        
|                                                              |                                |                                                      |                          |     | 2001                    |     | 2000 |    | 1999
|                                                              |                                |                                                      |                          |     |                         |     |      |    |     
|Consolidated Statements of Operations Data:                   |                                |                                                      |                          |     |                         |     |      |    |      |     |    |   
|                                                              | Revenues:                      |                                                      |                          |     |                         |     |      |    |      |     |    |    |   
|                                                              |                                | License                                              |                          |     | 61                      | %   |      |    | 66   | %   |    |    | 66 | %  
|                                                              |                                | Service                                              |                          |     | 39                      |     |      |    | 34   |     |    |    | 34 |    
|                                                              |                                |                                                      |                          |     |                         |     |      |    |      |     |    |   
|                                                              |                                |                                                      | Total revenues           |     |                         | 100 |      |    |      | 100 |    |    |    | 100 | 
|                                                              | Cost of revenues:              |                                                      |                          |     |                         |     |      |    |      |     |    |    |   
|                                                              |                                | License                                              |                          |     | 2                       |     |      |    | 1    |     |    |    | 1  |    
|                                                              |                                | Service                                              |                          |     | 20                      |     |      |    | 19   |     |    |    | 17 |    
|                                                              |                                |                                                      |                          |     |                         |     |      |    |      |     |    |   
|                                                              |                                |                                                      | Total cost of revenues   |     |                         | 22  |      |    |      | 20  |    |    |    | 18  | 
|                                                              |                                |                                                      |                          |     |                         |     |      |    |      |     |    |   
|                                                              | Gross profit                   |                                                      |                          | 78  |                         |     |      | 80 |      |     |    | 82 |   
|                                                              | Operating expenses:            |                                                      |                          |     |                         |     |      |    |      |     |    |    |   
|                                                              |                                | Research and development                             |                          |     | 23                      |     |      |    | 17   |     |    |    | 19 |    
|                                                              |                                | Sales and marketing                                  |                          |     | 50                      |     |      |    | 49   |     |    |    | 54 |    
|                                                              |                                | General and administrative                           |                          |     | 10                      |     |      |    | 8    |     |    |    | 8  |    
|                                                              |                                | Merger-related costs                                 |                          |     |                        |     |      |    |     |     |    |    | 3  |    
|                                                              |                                | Amortization of stock-based compensation             |                          |     |                        |     |      |    | 1    |     |    |    | 1  |    
|                                                              |                                | Amortization of goodwill and other intangible assets |                          |     | 14                      |     |      |    | 9    |     |    |    |   |    
|                                                              |                                | Purchased in-process research and development        |                          |     |                        |     |      |    | 5    |     |    |    |   |    
|                                                              |                                | Restructuring charges                                |                          |     | 6                       |     |      |    |     |     |    |    |   |    
|                                                              |                                |                                                      |                          |     |                         |     |      |    |      |     |    |   
|                                                              |                                |                                                      | Total operating expenses |     |                         | 104 |      |    |      | 89  |    |    |    | 85  | 
|                                                              |                                |                                                      |                          |     |                         |     |      |    |      |     |    |   
|                                                              | Loss from operations           |                                                      |                          | (27 | )                       |     |      | (9 | )    |     |    | (3 | ) 
|                                                              | Interest income and other, net |                                                      |                          | 5   |                         |     |      | 3  |      |     |    | 3  |   
|                                                              | Interest expense               |                                                      |                          |    |                         |     |      | (1 | )    |     |    | (1 | ) 
|                                                              |                                |                                                      |                          |     |                         |     |      |    |      |     |    |   
|                                                              | Loss before income taxes       |                                                      |                          | (22 | )                       |     |      | (7 | )    |     |    | (1 | ) 
|                                                              | Income tax provision           |                                                      |                          | 1   |                         |     |      | 2  |      |     |    | 1  |   
|                                                              |                                |                                                      |                          |     |                         |     |      |    |      |     |    |   
|                                                              | Net loss                       |                                                      |                          | (23 | )%                      |     |      | (9 | )%   |     |    | (2 | )%
|                                                              |                                |                                                      |                          |     |                         |     |      |    |      |     |    |   
|Cost of license revenues, as a percentage of license revenues |                                |                                                      | 4                        | %   |                         |     | 2    | %  |      |     | 2  | % 
|Cost of service revenues, as a percentage of service revenues |                                |                                                      | 51                       | %   |                         |     | 54   | %  |      |     | 49 | % 

Years Ended December 31, 2001, 2000 and 1999

Revenues

Our total revenues increased to $197.4 million in 2001, from $154.1
million in 2000 and $62.4 million in 1999, representing growth of 28% from 2000
to 2001 and 147% from 1999 to 2000. Our license revenues increased to $119.9
million in 2001 from $101.6 million in 2000 and $41.2 million in 1999,
representing growth of 18% from 2000 to 2001 and 147% from 1999 to 2000. These
increases were due primarily to increases in the number of licenses sold and
the average transaction size, primarily reflecting increased acceptance of our data
integration products and, to a lesser extent, our analytic application products as well as expansion
of our direct sales organization and reseller channels. Service revenues
increased to $77.4 million in 2001 from $52.4 million in 2000 and $21.2 million
in 1999, representing growth of 48% from 2000 to 2001 and 147% from 1999 to
2000. These increases were due primarily to an increase in consulting, training
and maintenance fees associated with both the increased number of licenses sold
and the increased average transaction size, along with a larger installed
license base in each successive year.

Our future prospects
and rate of growth, if any, will be directly affected by our ability
to successfully license our data integration products and our analytic
application products. In particular, we recently released our new
analytic delivery platform and new versions of our analytic
applications, and the degree of market acceptance for these products
is currently uncertain. If we are not able to successfully license our
products and, in particular, our analytic applications, our net
revenues and operating results would be adversely affected. See
Risk Factors  Because we sell a limited number of products,
if these products do not achieve broad market acceptance, our
revenues will be adversely affected.

Our quarterly
operating results have fluctuated in the past and are likely to do so
in the future. In particular, our product revenues are not predictable
with any significant degree of certainty. In addition, we have
historically recognized a substantial portion of our revenues in the
last month of each quarter. These factors particularly affect the
first quarter of our fiscal year. See Risk Factors  The
expected fluctuation of our quarterly results could cause our stock
price to experience significant fluctuations or declines.

Our international revenues increased to $56.0 million in 2001, from $31.7
million in 2000 and $11.2 million in 1999, representing 77% growth from 2000 to
2001 and 183% from 1999 to 2000. The increase in 2001 was due primarily to
expansion throughout Europe, Asia-Pacific and Japan with increased sales being
generated by direct sales, increased volume through existing distributors and
new distributors added during the year. Growth in 2000 was primarily driven by
increased sales activities in the United Kingdom and Germany. See
Note 14 of
Notes to Consolidated Financial Statements for additional information about
revenues in geographic areas.

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Cost of Revenues

Cost of License Revenues

Our cost of license revenues consists primarily of software royalties,
product packaging, documentation, and production costs. Cost of license
revenues was $4.5 million in 2001, $2.0 million in 2000 and $0.7 million in
1999 and was approximately 4% of license revenues in 2001 and 2% of license
revenues in 2000 and 1999. The increase in absolute dollar amount in 2001 was due
primarily to increases in our percentage mix of royalty-bearing products.
For 2002, we expect the cost of license revenues as a percentage of
license revenues to remain at or slightly above the 2001 level.

Cost of Service Revenues

Our cost of service revenues is a combination of costs of maintenance,
training and consulting revenues. Our cost of maintenance revenues consists
primarily of costs associated with software upgrades, telephone and on-line
support services and on-site visits. Cost of training revenues consists
primarily of the costs of providing training classes and materials at our
headquarters, sales and training offices and customer locations. Cost of
consulting revenues consists primarily of personnel costs and expenses incurred
in providing consulting services at customers facilities. Because we believe
that providing a high level of support to customers is a strategic advantage,
we have invested significantly in personnel and infrastructure. Cost of service
revenues was $39.8 million in 2001, $28.5 million in 2000 and $10.3 million in
1999, representing 51%, 54% and 49% of service revenues, respectively. Cost of
service revenues as a percentage of service revenues decreased in 2001 due
primarily to economies of scale achieved as our revenues and operations grew.
Cost of service revenues as a percentage of service revenues increased in 2000
compared to 1999 due primarily to an increase in personnel associated with our
consulting business. For 2002, we expect our cost of service revenues as a
percentage of service revenues to remain at or slightly below the 2001 level.

Operating Expenses

Research and Development

Our research and development expenses consist primarily of salaries and
other personnel-related expenses associated with the development of new
products, the enhancement and localization of existing products, quality
assurance and development of documentation for our products. Research and
development expenses increased to $46.3 million in 2001 from $26.5 million in
2000 and from $11.8 million in 1999. The increase in each of these periods was
due primarily to an increase in personnel costs in each such period for
development of future products and enhancement of existing products. As a
percentage of total revenues, research and development expenses were 23% in
2001, 17% in 2000 and 19% in 1999. The increase from 2000 to 2001 as a
percentage of total revenues was due primarily to our continued investment in
product development to expand our product portfolio and increased facilities
costs. The decrease from 1999 to 2000 was primarily due to faster
growth in total revenues compared to research and development expenses. To date, all software and development costs have been expensed in the
period incurred because costs incurred subsequent to the establishment of
technological feasibility have not been significant. We believe that continued
investment in research and development is critical to attaining our strategic
objectives, and, as a result, we expect research and development expenses to
increase in absolute dollars in future periods. For 2002, we expect research
and development expense as a percentage of total revenues will remain at or
slightly below the 2001 level.

Sales and Marketing

Our sales and marketing expenses consist primarily of personnel costs,
including commissions, as well as costs of public relations, seminars,
marketing programs, lead generation, travel and trade shows. Sales and
marketing expenses increased to $99.3 million in 2001 from $75.0 million in
2000 and from $33.6 million in 1999. The sequential increases reflect the
hiring of additional sales and marketing personnel in connection with building
our direct, reseller, distributor and OEM channels, higher sales commissions
associated with increased sales volume, and increased spending associated with
trade shows, user conference and other marketing programs. As a percentage of
total revenues, sales and marketing expenses were 50% in 2001, 49% in 2000 and
54% in 1999. The increase as a percentage of total revenue from 2000 to 2001
was due primarily to increased sales and marketing personnel costs and
increased commission expense associated with increased revenue growth. The
decrease as a percentage of total revenue from 1999 to 2000 was due primarily
to faster growth in total revenues compared to sales and marketing expenses.
For 2002, we expect sales and marketing expense as a percentage of total
revenues to be slightly below the 2001 level.

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General and Administrative

Our general and administrative expenses consist primarily of personnel
costs for finance, human resources, legal and general management, as well as
professional services expense associated with recruiting, legal and accounting.
General and administrative expenses increased to $19.6 million in 2001 from
$11.7 million in 2000 and from $5.0 million in 1999, representing 10% of our
total revenues in 2001 and 8% of our total revenues in 2000 and 1999. Expenses
increased in each period due primarily to increased staffing in finance, human
resources, legal, information technology and administration to manage and
support our growth as well as increased costs paid to outside professional
service providers and increased facilities costs. The decrease as a percentage
of our total revenues was due primarily to the faster growth in total revenues
compared to general and administrative expenses. We expect that for 2002, our
general and administrative expenses as a percentage of total revenues will
remain at or slightly below our level for 2001.

Bad debt expense charged to operations was $0.5 million in 2001 and $0.2
million in each of 2000 and 1999, representing less than 1% of total revenues
in each of these years.

Merger-Related Costs

In 1999, we recorded estimated merger-related costs of $2.1 million
related to the December 1999 acquisition of Influence Software, Inc.
(Influence), which was accounted for as a pooling-of-interests. These costs
consisted primarily of investment banking and professional fees and other
direct costs associated with the merger. As of December 31, 1999, there was a
balance of $1.8 million remaining in accrued liabilities, which was used for
final settlement expenditures in January 2000.

Amortization of Stock-Based Compensation

In connection with the grant of certain stock options to employees, we
recorded deferred stock-based compensation of $0.8 million in 1999 prior to our
initial public offering and $2.8 million in 2000, representing the difference
between the deemed fair value of our common stock and the option exercise price
at the date of grant. This deferred stock-based compensation is being amortized
to operations over a four-year vesting period using the graded vesting method.
We also recorded deferred stock-based compensation of $0.3 million in 2000
related to the issuance of options to consultants. This amount was computed
using the Black-Scholes option valuation model and the related amortization is
being charged to operations over the related term of these consulting
agreements. In 1999 and 2000, we recorded $1.9 million of deferred stock-based
compensation in conjunction with the assumption of certain stock options in the
acquisition of Influence and Zimba, which is being amortized over four years
from the date of acquisition. In 2001, we recorded a reduction for deferred
stock-based compensation of $1.9 million in connection with a cancelled bonus
agreement related to cancelled stock options. Deferred stock-based compensation
is presented as a reduction of stockholders equity. Amortization of
stock-based compensation amounted to $1.0 million in 2001, $1.5 million in 2000
and $0.7 million in 1999. We expect to record amortization of
stock-based compensation of approximately $0.2 million in 2002.

Amortization of Goodwill and Other Intangible Assets

Goodwill represents the excess of the aggregate purchase price over the
fair value of the tangible and identifiable intangible assets we have acquired.
Intangible assets include core technology, acquired workforce and patents.
Amortization of goodwill and other intangibles associated with our business
combinations and strategic alliance has been amortized on a straight-line basis
over their expected useful lives ranging from two years to three years.

In January 2001, we acquired syn-T-sys, distributors of Informatica products in the Netherlands and
Belgium, respectively. The agreement was structured as a share purchase and
accounted for as a purchase transaction. Under the terms of the agreement, we
issued 44,161 shares of our common stock, valued at approximately $1.5 million,
and paid cash consideration of approximately $5.8 million in exchange for the
outstanding shares of capital stock of syn-T-sys. Amounts allocated to goodwill
of $6.8 million are being amortized on a straight-line basis over a two-year
period. Amortization expense associated with this acquisition was $3.4 million
in 2001.

In June 2001, we acquired Informatica Partners, a distributor of
Informatica products in France. The agreement was structured as a share
purchase and accounted for as a purchase transaction. Under the terms of the
agreement, we issued 49,543 shares of the Companys common stock, valued at
approximately $0.9 million, and paid cash consideration of approximately $4.0
million in exchange for the outstanding shares of capital stock of Informatica
Partners. Amounts allocated to goodwill are being amortized on a straight-line
basis over a two-year period. Amortization expense associated with this
acquisition was $1.4 million in 2001.

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In February 2000, we acquired Delphi Solutions AG (Delphi), a
distributor of Informatica products in Switzerland. The agreement was
structured as a share purchase and accounted for as a purchase transaction.
Amounts allocated to goodwill of $9.0 million are being amortized on a
straight-line basis over a two-year period. In 2001, we paid the final payment
under the share purchase agreement related to the acquisition and, as a result,
the purchase price and related goodwill were reduced by $0.6 million.
Amortization expense associated with this acquisition was $4.1 million in 2001
and $3.8 million in 2000.

In April 2000, we announced a strategic alliance with PricewaterhouseCoopers (PwC) to jointly
develop, sell and support end-to-end analytic solutions for the
business-to-business e-commerce market worldwide. In connection with the
agreement, PwC received 818,276 shares of our common stock. We recorded
goodwill and other intangible assets totaling $31.8 million, which are being
amortized on a straight-line basis over two to three years. Amortization
expense associated with this acquisition was $10.7 million in 2001 and $8.0
million in 2000.

In August 2000, we completed the acquisition of Zimba, a leading provider
of e-business analytic solutions that provide mobile professionals with
real-time access to corporate and external information via wireless devices,
voice recognition and the Web. The agreement was structured as a share purchase
and accounted for as a purchase transaction. Amounts allocated to goodwill and
other intangible assets are being amortized on a straight-line basis over two
to three years. Amortization expense associated with this acquisition was $6.8
million in 2001 and $2.3 million in 2000.

In November 2000, we completed an intellectual property transfer agreement
with certain individuals, QRB Developers. The acquisition was accounted for as
a purchase transaction. Amounts allocated to goodwill and other intangible
assets are being amortized on a straight-line basis over two to three years.
Amortization expense associated with this acquisition was $0.9 million in 2001
and $0.1 million in 2000.

In June 2001, the FASB issued Statements of Financial Accounting Standards
No. 141 (SFAS 141), Business Combinations, and No. 142 (SFAS 142),
Goodwill and Other Intangible Assets, effective for fiscal years beginning
after December 15, 2001. SFAS 141 and SFAS 142 establish new standards for
accounting for goodwill and intangible assets acquired in a business
combination. SFAS 141 requires recognition of goodwill as an asset, but SFAS
142 mandates that goodwill and other intangible assets with indefinite lives
will no longer be amortized after December 2001. Under the new standards, these
assets will be subject to annual impairment tests using a fair-value-based
approach in accordance with SFAS 142. The change from an amortization approach
to an impairment approach would apply to previously recorded goodwill and other
intangible assets as well as goodwill and other intangible assets arising from
acquisitions completed after June 30, 2001. Intangible assets with finite lives
will continue to be amortized over their useful lives.

We will apply the new rules on accounting for goodwill and other
intangible assets beginning in the first quarter of 2002. Application of the
nonamortization provisions of SFAS 142 is expected to result in a decrease in
amortization of goodwill of $21.8 million in 2002. We performed the first of
the required impairment tests as of January 1, 2002. Based on current market
conditions, we believe the adoption of SFAS 142 on January 1, 2002 will not
result in a material write down of our goodwill and other intangible assets.
The application of the provisions of SFAS 141 will result in a reclassification
of $0.8 million of intangible assets as goodwill in the first quarter of 2002.

For the other intangible assets that we will continue to amortize, we
expect amortization expense to be approximately $1.1 million for 2002. It is
likely that we will continue to expand our business both through acquisitions
and internal development. Any additional acquisitions or impairment of goodwill
and other purchased intangibles could result in additional merger and
acquisition related expenses.

Purchased In-Process Research and Development

In connection with our strategic alliance with PwC and the acquisitions of
Zimba and QRB Developers, we recorded charges to operations of $2.2 million,
$5.1 million and $1.3 million, respectively, for purchased in-process research
and development in 2000. The in-process technologies had not reached
technological feasibility and had no alternative uses. The value of the
purchased in-process research and development in each transaction was computed
using a discounted cash flow analysis based on managements estimates of future
revenues, cost of revenues and operating expenses related to the products and
technologies acquired and determined by an independent third party.

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Restructuring Charges

In July 2001, we announced our plan to consolidate our four San Francisco
Bay Area locations into the new facility in Redwood City. As a result of the
consolidation of these facilities, we recorded total restructuring charges of
approximately $12.1 million during the third quarter of 2001 for excess leased
facilities in the San Francisco Bay Area and Texas and the related write-offs
of property and equipment.

We recorded a restructuring charge in 2001 of approximately $10.6 million
related to the excess leased facilities. These costs include remaining lease
liabilities and brokerage fees reduced by estimated sublease income over the
estimated sublease period or the remaining lease terms through 2007. The
estimated costs of excess leased facilities, including estimated costs to
sublease, were based on market information and trend analyses provided by a
commercial real estate brokerage firm. Actual future cash requirements will
differ from the restructuring liability balances at December 31, 2001, if we
are unable to sublease the excess leased facilities or actual sublease income
is different from estimates. Property and equipment from these facilities that
was removed from operations resulted in a charge of $1.5 million in 2001 and
consisted primarily of leasehold improvements and furniture and fixtures.

Interest Income and Other, Net; Interest Expense

Interest income and other, net represents primarily interest income earned
on our cash, cash equivalents, investments and restricted cash. Interest income
and other, net increased to $9.0 million in 2001, from $4.3 million in 2000 and
$1.6 million in 1999. The increase in 2001 was primarily due to an increased
average cash balance as a result of the completion of our follow-on public
offering of our common stock with net proceeds of $191.0 million in October
2000. The 2000 increase was primarily due to an increased average cash balance
as a result of the completion of the initial public offering of our common
stock in April 1999, with net proceeds of $43.5 million. Interest expense was
$0.01 million, $0.5 million and $0.3 million in 2001, 2000 and 1999,
respectively, and represents interest expense on capital equipment leases and
stockholder loans.

Income Tax Provision

We recorded an income tax provision of $1.3 million in 2001, $3.3 million
in 2000 and $0.8 million in 1999, due primarily to federal alternative minimum
taxes and foreign income taxes. The income tax provision decreased in 2001 from
2000 because of the ability of the increased losses to absorb non-deductible
expenses and deferred tax items that effected the alternative minimum tax
calculation. The income tax provision primarily increased in 2000 from 1999
due to the impact to the federal alternative minimum tax calculation for
non-deductible expenses and deferred tax items, for which a valuation allowance
was recorded, and increased foreign taxes.

As of December 31, 2001, we had federal and state net operating loss
carryforwards of approximately $76.9 million and $14.8 million, respectively.
We also had federal and state research and development tax credit carryforwards
of approximately $2.9 million and $2.5 million, respectively, and foreign tax
credits of $0.6 million. Our net operating loss and tax credit carryforwards
will expire at various dates beginning in 2002, if not utilized.

As of December 31, 2001 and 2000, we had deferred tax assets of
approximately $50.0 million and $38.4 million, respectively. Our deferred tax
assets have been fully offset by a valuation allowance.

Critical Accounting Policies

Our financial statements are based on the selection and application of
significant accounting policies, which requires our management to make
significant estimates and assumptions. We believe that the following areas are
some of the more critical judgments areas in the application of our accounting
policies that currently affect our financial condition and results of
operations.

Revenue recognition

We recognize revenues in accordance with SOP 97-2. We recognize license
revenues when a noncancelable license agreement has been signed, the product
has been shipped, the fees are fixed and determinable, collectibility is
probable and vendor-specific objective evidence of fair value exists to
allocate the total fee to elements of the arrangement. The determination
regarding the probability of collection is based on managements judgment. If
changes in conditions cause management to determine that this criteria is not
met for certain future transactions, revenue recognized for any reporting
period could be adversely affected.

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Allowance for Sales Returns and Doubtful Accounts

We maintain allowances for sales returns on revenue in the same period as
the related revenues are recorded. These estimates require management judgment
and are based on historical sales returns and other known factors. If these
estimates do not adequately reflect future sales returns, revenue could be
overstated.

We maintain allowances for doubtful accounts for estimated losses
resulting from the inability of our customers to make required payments. If the
financial condition of our customers was to deteriorate, resulting in an
impairment of their ability to make payments, additional allowances may be
required.

Goodwill and intangible assets

We have significant intangible assets related to goodwill and other
acquired intangibles. The determination of related estimated useful lives and
whether or not these assets are impaired involves significant judgment.
Changes in strategy and/or market conditions could significantly impact these
judgments and require adjustments to recorded asset balances. We performed the
first of the required impairment tests of goodwill as of January 1, 2002. Based
on current market conditions, we believe the adoption of SFAS 142 on January 1,
2002 will not result in a material write down of our goodwill and other
intangible assets.

Restructuring

During 2001, we recorded significant liabilities in connection with our
restructuring program. These liabilities include managements estimates
pertaining to sublease activities. We will continue to evaluate the commercial
real estate market conditions quarterly to determine if our estimates of the
amount and timing of future sublease income are reasonable based on current and
expected commercial real estate market conditions. If we determined that our
estimates for sublease activities has significantly changed, an adjustment to
the restructuring liability would be charged to income in the period in which
such determination was made.

Deferred Taxes

We record a valuation allowance to reduce our deferred tax assets to the
amount that is likely to be realized. We have considered future taxable income
and ongoing tax planning strategies in assessing the need for the valuation
allowance; however, if it were determined that we would be able to realize all
or part of our deferred tax assets in the future, an adjustment to the deferred
tax asset would increase income in the period in which such determination was
made. Likewise, if we determined that we would not be able to realize all or
part of our net deferred tax asset in the future, an adjustment to the deferred
tax asset would be charged to income in the period in which such determination
was made.

Recent Accounting Pronouncements

In addition to SFAS 141 and SFAS 142 discussed above, other recent
accounting pronouncements include SFAS 133 (SFAS 133), Accounting for
Derivative Instruments and Hedging Activities, as amended, which we adopted on
January 1, 2001. SFAS 133 establishes accounting and reporting standards for
derivative financial instruments and hedging activities related to those
instruments, as well as other hedging activities. Because we do not currently
hold any derivative instruments and do not engage in hedging activities, the
adoption of SFAS 133 did not have an impact on our financial position or
results of operations.

In October 2001, the FASB issued SFAS No. 144 (SFAS 144), Accounting
for the Impairment or Disposal of Long-Lived Assets, which applies to
financial statements issued for fiscal years beginning after December 15, 2001.
SFAS 144 supersedes FASB Statement 121, Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of, and portions of
Accounting Principles Board Opinion 30, Reporting the Results of Operations.
SFAS 144 provides a single accounting model for long-lived assets, other than
goodwill and other intangibles, to be disposed of and addresses significant
implementation issues. We will adopt SFAS 144 in the first quarter of 2002. The
adoption of SFAS 144 is not expected to have a material impact on our
consolidated financial statements.

Liquidity and Capital Resources

We have funded our operations primarily through cash flows from operations
and public offerings of our common stock. In the past, we also funded our
operations through private sales of preferred equity securities and capital
equipment leases. As of December

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31, 2001, we had $209.2 million in available cash and cash equivalents,
short-term investments and long-term investments. We also had $12.2 million of
cash restricted under the terms of our Pacific Shores property leases.

Our operating activities resulted in net cash inflows of $15.9 million for
2001. The operating cash inflows were primarily due to a decrease in accounts
receivable and increases in accrued compensation and related expenses,
restructuring charges and deferred revenue and were partially offset by the net
loss (offset by non-cash charges for depreciation and amortization, and
amortization of goodwill and other intangible assets) and increases in prepaid
expenses and other current assets and income taxes payable. Our operating
activities resulted in net cash inflows of $15.6 million for 2000 and $7.2
million for 1999. The sources of cash in both periods resulted principally from
increases in accounts payable and accrued liabilities, accrued compensation and
related expenses, and deferred revenue. The uses of cash in 2000 resulted
principally from increases in accounts receivable, prepaid expenses and other
current assets, and other assets and were partially offset by the net loss
(offset by non-cash charges for sales and return allowances, amortization of
goodwill and other intangible assets, and purchased in-process research and
development). The uses of cash in 1999 resulted principally from increases in
accounts receivable and prepaid expenses and other current assets and were
partially offset by the net loss (offset by non-cash charges for depreciation
and amortization, and amortization of goodwill and other intangible assets).

Investing activities used cash of $113.4 million in 2001, $57.5 million in 2000
and $1.4 million in 1999. Of the $113.4 million used in investing activities in
2001, $264.3 million was associated with purchases of investments,
and $186.8 million was associated with the proceeds from the
sale of investments.
Long-term investments represent investments in AAA rated corporate and AAA
rated U.S. Government bonds with durations of one to two years in accordance
with our investment policy. Investing activities in 2001 also included $5.7
million, net of cash acquired, associated with the acquisition of syn-T-sys,
$3.5 million, net of cash acquired, associated with the acquisition of
Informatica Partners, $4.5 million for the second and final installment
payments in January and June 2001 associated with the acquisition of Delphi,
our distributor in Switzerland and $30.2 million used for the purchase of
property and equipment. Investing activities provided cash of $8.1 million from
restricted cash, which was no longer required after July 2001, associated with
the acquisition of Delphi. Of the $57.5 million used in investing activities in
2000, $20.3 was associated with requirements for restricted cash, $6.3 million
was primarily associated with the acquisition of Delphi and QRB and $30.9
million was used for the purchase of property and equipment. The $1.4 million
used in investing activities in 1999 resulted entirely from purchases of
property and equipment.

Financing activities provided cash of $11.0 million for 2001, consisting
principally of proceeds from the issuance of common stock. Cash provided by
financing activities was $201.7 million for 2000, primarily from the net
proceeds of our secondary offering of $191.0 million as well as proceeds from
the issuance of common stock partially offset by final payments on notes
payable to stockholders associated with the acquisition of Influence in
December 1999. The source of cash of $44.7 million for 1999 was primarily from
the net proceeds of our initial public offering of $43.5 million.

As of December 31, 2001, our principal commitments consisted of
obligations under operating leases. Our future minimum lease payments under
noncancelable operating leases as of December 31, 2001 were as follows: $16.0
million in 2002; $16.5 million in 2003; $17.0 million in 2004; $17.6 million in
2005; $17.7 million in 2006; and $109.6 million thereafter.

In February 2000, we entered into two lease agreements for new corporate
headquarters in Redwood City, California. We began occupying the new corporate
headquarters in August 2001. The lease expires in twelve years, or August 2013.
We paid for tenant improvements, primarily related to the exercise of
build-to-suit options under the facility lease agreement. The total estimated
cost of leasehold improvements for this facility through its completion is
approximately $34.2 million, which is subject to change. Total expenditures for
furniture, fixtures and equipment for this facility are expected to be
approximately $10.3 million. Approximately $41.9 million has been expended on
these activities through December 31, 2001 with the balance expected to be
incurred by June 2002. As part of these agreements, we have purchased
certificates of deposit totaling $12.2 million as a security deposit for the
first years lease payments until certain financial covenants are met. These
certificates of deposit are classified as long-term restricted cash on the
consolidated balance sheet.

In February 2001, we entered into a fourteen-month lease agreement in Palo
Alto, California covering approximately 14,000 square feet of space at
approximately $88,000 per month to meet our space requirements until the new
facility in Redwood City, California was completed in August 2001. The
remaining obligations under this lease agreement were included in the
restructuring charges related to the consolidation of the four San Francisco
Bay Area locations into the Redwood City facility.

Deferred revenue includes deferred license and maintenance revenue and
prepaid training and consulting fees. Deferred license revenue amounts do not
include items which are both deferred and unbilled. Our practice is to net
unpaid deferred items against the related receivables balances from those OEMs,
specific resellers, distributors and specific international customers for which
we defer

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revenue until payment is received. As of December 31, 2001, we had $16.0
million of sales related to shipments to specific international customers,
specific resellers and OEMs, based on limited credit history, for which revenue
had not been recognized.

We believe that our cash balances and the cash flows generated by
operations will be sufficient to satisfy our anticipated cash needs for working
capital and capital expenditures for at least the next twelve months. However,
because our operating results may fluctuate significantly as a result of a
decrease in customer demand or the acceptance of our products, our ability to
generate positive cash flows from operations may be jeopardized. As a result,
we may require additional funds to support our working capital requirements, or
for other purposes, and may seek to raise such additional funds through public
or private equity financings or from other sources. We may not be able to
obtain adequate or favorable financing at that time. Any financing we obtain
may dilute your ownership interests.

A portion of our cash may be used to acquire or invest in complementary
businesses or products or to obtain the right to use complementary
technologies. From time to time, in the ordinary course of business, we may
evaluate potential acquisitions of such businesses, products or technologies.

RISK FACTORS

In addition to the other information contained in this Form 10-K, we have
identified the following risks and uncertainties that may have a material
adverse affect on our business, financial condition or results of operation.
Investors should carefully consider the risks described below before making an
investment decision. The risks described below are not the only ones we face.
Additional risks not presently known to us or that we currently believe are
immaterial may also impair our business operations. Our business could be
harmed by any of these risks. The trading price of our common stock could
decline due to any of these risks and investors may lose all or part of their
investment. This section should be read in conjunction with the audited
Consolidated Financial Statements and Notes thereto, and Managements
Discussion and Analysis of Financial Condition and Results of Operations
contained in this Form 10-K.

THE EXPECTED FLUCTUATION OF OUR QUARTERLY RESULTS COULD CAUSE OUR STOCK PRICE
TO EXPERIENCE SIGNIFICANT FLUCTUATIONS OR DECLINES.

Our quarterly operating results have fluctuated in the past and are likely
to do so in the future. These fluctuations could cause our stock price to also
significantly fluctuate or experience declines. Some of the factors that could
cause our operating results to fluctuate include:



| |  |  | the size and timing of customer orders, which can be affected by
customer order deferrals in anticipation of future new product
introductions or product enhancements and customer budgeting and
purchasing cycles;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | market acceptance of our products;                                                                                                                                                                                 
|
| |  |  | the length and variability of our sales cycle for our products,
particularly our analytic applications and our new analytic delivery
platform;                                                                     
|
| |  |  | general economic and political conditions, which may affect our
customers capital investment and information technology spending
levels; and                                                                      
|
| |  |  | the mix of our products and services sold and the mix of distribution
channels utilized;                                                                                                                           
|
| |  |  | announcement, introduction or enhancement of our products or our
competitors products and changes in our or our competitors pricing
policies;                                                                    
|
| |  |  | our ability to develop, introduce and market new products on a timely basis;                                                                                                                                       
|
| |  |  | our success in expanding our sales and marketing programs;                                                                                                                                                         
|
| |  |  | technological changes in computer systems and environments;                                                                                                                                                        
|
| |  |  | increased competition from partnerships formed by our current and former partners and our competitors.                                                                                                             

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Our product revenues are not predictable with any significant degree of
certainty. Historically, we have recognized a substantial portion of our
revenues in the last month of each quarter. If customers cancel or delay orders
it can have a material adverse impact on our revenues and results of operations
for the quarter. To the extent any such cancellations or delays are for large
orders, this impact will be greater. To the extent that the average size of our
orders increases, customers cancellations or delays of orders will more likely
harm our revenues and results of operations.

Our quarterly product license revenues are difficult to forecast because
we do not have a substantial backlog of orders, and therefore revenues in each
quarter are substantially dependent on orders booked and shipped in that
quarter and cash collections from specific international customers and specific
resellers. Our product license revenues are also difficult to forecast because
the market for our products is rapidly evolving, and our sales cycles, which
may last many months, vary substantially from customer to customer and vary in
general due to a number of factors, some of which we have little or no control,
such as (1) size and timing of individual license transactions, the closing of
which tend to be delayed by customers until the end of a fiscal quarter as a
negotiating tactic, (2) potential for delay or deferral of customer
implementations of our software, (3) changes in customer budgets, (4)
seasonality of technology purchases (5) direct sales force effort to meet or
exceed year-end quotas, (6) lower European sales during the summer months, and
(7) other general economic conditions. Nonetheless, our short-term expense
levels are relatively fixed and based, in part, on our expectations of future
revenues.

The difficulty we have in predicting our quarterly revenue means revenues
shortfalls are likely to occur at some time, and our inability to adequately
reduce short-term expenses means such shortfalls will affect not only our
revenue, but also our overall business, results of operations and financial
condition. Due to the uncertainty surrounding our revenues and expenses, we
believe that quarter-to-quarter comparisons of our operating results are not a
good indication of our future performance. You should not take our quarterly
results to be indicative of our future performance. Moreover, our future
operating results may fall below the expectations of stock analysts and
investors. If this happens, the price of our common stock may fall.

GENERAL ECONOMIC CONDITIONS MAY REDUCE OUR REVENUES AND HARM OUR BUSINESS.

As our business has grown, we have become increasingly subject to the
risks arising from adverse changes in domestic and global economic and
political conditions. Because of the present economic slowdown in the United
States and in Europe, and the terrorist events of September 11, companies in
many industries are delaying or reducing technology purchases. We experienced
the impact of the September 11 events in the third quarter and the economic
slowdown in the past few quarters with reductions in capital expenditures by
our end-user customers, longer sales cycles, deferral or delay of purchase
commitments for our products and increased price competition. In particular,
these factors have negatively impacted the rate of market acceptance of our
analytic applications. As a result, if the current economic conditions in the
U.S. and Europe continue or worsen, or if a wider or global economic slowdown
occurs, we may continue to fall short of our revenue expectations for the first
quarter of 2002 and any given quarter of 2002 or for the entire year. These
conditions would negatively affect our business and results of operations. In
addition, weakness in the end-user market could negatively affect the cash flow
of our reseller customers who could, in turn, delay paying their obligations to
us. This would increase our credit risk exposure, which would harm our
financial condition.

THE LENGTHY SALES CYCLE AND IMPLEMENTATION PROCESS OF OUR PRODUCTS MAKES OUR
REVENUES SUSCEPTIBLE TO FLUCTUATIONS.

Our sales cycle can be lengthy because the expense, complexity, broad
functionality and company-wide deployment of our products, particularly our
analytic applications, typically require executive-level approval
from our customers before they can purchase our products. In addition, to successfully sell our products, we
frequently must educate our potential customers about the full benefits of our
products, which also can require significant time. Due to these factors, the
sales cycle associated with the purchase of our products is subject to a number
of significant risks over which we have little or no control, including:



| |  |  | customers budgetary constraints and internal acceptance review procedures;     
| | - |  | --------------------------------------------------------------------------------
|
| |  |  | the timing of budget cycles;                                                    
|
| |  |  | concerns about the introduction of our products or competitors new products; or
|
| |  |  | potential downturns in general economic or political conditions.                

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Further, our sales cycle may lengthen as we continue to focus our sales
efforts on large corporations and focus on sales of our analytic applications.
The implementation of our products, particularly our analytic applications, can
be a complex and time-consuming process, the length and cost of which may be
difficult to predict. If our sales cycle and implementation process lengthens
unexpectedly, it could adversely affect the timing of our revenues or increase
costs, either of which may independently cause fluctuations in our revenue and
results of operations.

IF THE MARKET IN WHICH WE SELL OUR PRODUCTS AND SERVICES DOES NOT GROW AS WE
ANTICIPATE, IT WILL ADVERSELY AFFECT OUR REVENUES.

The market for software solutions, including enterprise analytic software,
that enable more effective business decision-making by helping companies
aggregate and utilize data stored throughout an organization, is relatively new
and still emerging. Substantially all of our revenues are attributable to the
sale of products and services in this market. If this market does not grow at
the rate we anticipate, we will not be able to sell as much of our software
products and services, and our business, results of operations and financial
condition will be adversely affected. One of the reasons this market might not
grow as we anticipate is that many companies are not yet fully aware of the
benefits of using these software solutions to help make business decisions or
the benefits of our specific product solutions. As a result, we believe that
only a limited number of large companies have deployed these software
solutions. Although we have devoted and intend to continue to devote
significant resources promoting market awareness of the benefits of these
solutions, our efforts may be unsuccessful or insufficient.

The higher fees for, and potentially longer sales cycle of, our analytic
applications could be especially affected by a global economic slowdown, where
larger transaction sizes receive closer scrutiny by our potential customers.

BECAUSE WE SELL A LIMITED NUMBER OF PRODUCTS, IF THESE PRODUCTS DO NOT ACHIEVE
BROAD MARKET ACCEPTANCE, OUR REVENUES WILL BE ADVERSELY AFFECTED.

To date, substantially all of our revenues have been derived from our
PowerCenter, PowerMart, PowerConnect and related services, and to a lesser
extent, our analytic applications and related services. We expect revenues
derived from these products and related services to comprise substantially all
of our revenues for the foreseeable future. Even if the emerging software
market in which these products are sold grows substantially, if any of these
products do not achieve market acceptance, our revenues could decrease. In
particular, we recently released our new analytic delivery platform and new
versions of our analytic applications, and the degree of market acceptance for
these products is currently uncertain. Market acceptance of our products could
be affected if, among other things, competition substantially increases in the
enterprise analytic software marketplace or transactional applications
suppliers integrate their products to such a degree that the utility of the
data integration functionality that our products provide is minimized or
rendered unnecessary.

IF WE ARE UNABLE TO ACCURATELY FORECAST REVENUES, IT MAY HARM OUR BUSINESS OR
RESULTS OF OPERATIONS.

We use a pipeline system, a common industry practice, to forecast sales
and trends in our business. Our sales personnel monitor the status of all
proposals, including the date when they estimate that a customer will make a
purchase decision and the potential dollar amount of the sale. We aggregate
these estimates periodically in order to generate a sales pipeline. We compare
the pipeline at various points in time to look for trends in our business.
While this pipeline analysis may provide us with some guidance in business
planning and budgeting, these pipeline estimates are necessarily speculative
and may not consistently correlate to revenues in a particular quarter or over
a longer period of time. Any change in the conversion of the pipeline into
customer sales or in the pipeline itself could cause us to improperly plan or
budget and thereby adversely affect our business or results of operations. In
particular, a slowdown in the economy may cause customer purchases to be
reduced in amount, deferred or cancelled, which will therefore reduce the
overall license pipeline conversion rates in a particular period of time.

RECENT TERRORIST ACTIVITIES AND RESULTING MILITARY AND OTHER ACTIONS COULD
ADVERSELY AFFECT OUR BUSINESS.

The terrorist attacks in New York and Washington, D.C. on September 11,
2001 disrupted commerce throughout the United States and Europe. In response to
such attacks, the United States is actively using military force to pursue
those behind these attacks and initiating broader actions against global
terrorism. The continued threat of terrorism within the United States and
Europe, the escalation of military action and heightened security measures in
response to such further threats may cause significant disruption to commerce
throughout the world. To the extent that such disruptions result in further
reductions in capital expenditures or spending on

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information technology, longer sales cycles, deferral or delay of customer
orders, or an inability to effectively market our products, our revenues would
decline, which would materially and adversely affect our business and results
of operations.

WE RELY ON THIRD-PARTY TECHNOLOGIES AND IF WE ARE UNABLE TO USE OR INTEGRATE
THESE TECHNOLOGIES, OUR PRODUCT AND SERVICE DEVELOPMENT MAY BE DELAYED.

We intend to continue to license technologies from third parties,
including applications used in our research and development activities and
technologies, which are integrated into our products and services. If we cannot
obtain, integrate or continue to license any of these technologies, we may
experience a delay in product and service development until equivalent
technology can be identified, licensed and integrated. These technologies may
not continue to be available to us on commercially reasonable terms or at all.
We may not be able to successfully integrate any licensed technology into our
products or services, which would harm our business and operating results.
Third-party licenses also expose us to increased risks that include:



| |  |  | risks of product malfunction after new technology is integrated;                                                        
| | - |  | ------------------------------------------------------------------------------------------------------------------------
|
| |  |  | the diversion of resources from the development of our own proprietary technology; and                                  
|
| |  |  | our inability to generate revenue from new technology sufficient to offset associated acquisition and maintenance costs.

THE MARKET IN WHICH WE SELL OUR PRODUCTS IS HIGHLY COMPETITIVE.

The market for our products is highly competitive, quickly evolving and
subject to rapidly changing technology. Many of our competitors or potential
competitors have longer operating histories, substantially greater financial,
technical, marketing or other resources, or greater name recognition than we
do. Our competitors may be able to respond more quickly than we can to new or
emerging technologies and changes in customer requirements. Competition could
seriously impede our ability to sell additional products and services on terms
favorable to us. Our current and potential competitors may develop and market
new technologies that render our existing or future products obsolete,
unmarketable or less competitive. We believe we currently compete more on the
basis of our products functionality than on the basis of price. If our
competitors develop products with similar or superior functionality, we may
have difficulty competing on the basis of price.

Our current and potential competitors may make strategic acquisitions or
establish cooperative relationships among themselves or with other solution
providers, thereby increasing the ability of their products to address the
needs of our prospective customers. Our current and potential competitors may
establish or strengthen cooperative relationships with our current or future
strategic partners, thereby limiting our ability to sell products through these
channels. Competitive pressures could reduce our market share or require us to
reduce our prices, either of which could harm our business, results of
operations or financial condition. We compete principally against providers of
data warehousing and analytic applications. Such competitors include Acta
Technology, Ascential Software Corporation, Broadbase Software, Inc., E.piphany
Inc. and Sagent Technology, Inc.

In addition, we compete against business intelligence vendors, database
vendors and enterprise application vendors that currently offer, or may
develop, products with functionalities that compete with our solutions, such as
Brio Technology, Inc., Business Objects, Cognos Inc., Hyperion Solutions
Corporation and Microstrategy Inc. The products offered by database vendors
typically operate specifically with these competitors proprietary databases.
Such potential competitors include IBM, Microsoft, Oracle, PeopleSoft, SAP and
Siebel Systems.

IF WE DO NOT MAINTAIN AND STRENGTHEN OUR RELATIONSHIPS WITH OUR STRATEGIC
PARTNERS, OUR ABILITY TO GENERATE REVENUE AND CONTROL IMPLEMENTATION COSTS WILL
BE ADVERSELY AFFECTED.

We believe that our ability to increase the sales of our products and our
future success will depend in part upon maintaining and strengthening
successful relationships with our current or future strategic partners. In
addition to our direct sales force, we rely on established relationships with a
variety of strategic partners, such as systems integrators, resellers and
distributors, for marketing, licensing, implementing and supporting our
products in the United States and internationally. We also rely on
relationships with strategic technology partners, such as enterprise resource
planning providers and enterprise application providers, for the promotion and
implementation of our solutions.

In particular, our ability to market our products depends substantially on
our relationships with significant strategic partners, including Accenture, BEA
Systems, Deloitte Consulting, Hewlett-Packard, i2 Technologies, IBM, KPMG
Consulting, Mitsubishi

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Electric, PeopleSoft, PwC Consulting, Siebel Systems and Sybase. In
addition, our strategic partners may offer products of several different
companies, including, in some cases, products that compete with our products.
We have limited control, if any, as to whether these strategic partners devote
adequate resources to promoting, selling and implementing our products.

We may not be able to maintain our strategic partnerships or attract
sufficient additional strategic partners who are able to market our products
effectively, who are qualified to provide timely and cost-effective customer
support and service or who have the technical expertise and personnel resources
necessary to implement our products for our customers. In particular, if our
strategic partners do not devote adequate resources for implementation of our
products, we will incur substantial additional costs associated with hiring and
training additional qualified technical personnel to timely implement solutions
for our customers. Furthermore, our relationships with our strategic partners
may not generate enough revenue to offset the significant resources used to
develop these relationships.

ANY SIGNIFICANT DEFECT IN OUR PRODUCTS COULD CAUSE US TO LOSE REVENUE AND
EXPOSE US TO PRODUCT LIABILITY CLAIMS.

The software products we offer are inherently complex and despite
extensive testing and quality control, have in the past and may in the future
contain errors or defects, especially when first introduced. These defects and
errors could cause damage to our reputation, loss of revenue, product returns,
order cancellations or lack of market acceptance of our products, and as a
result, harm our business, results of operations or financial condition. We
have in the past and may in the future need to issue corrective releases of our
software products to fix these defects or errors. For example, we issued
corrective releases to fix problems with the version of our PowerMart released
in the first quarter of 1998. As a result, we had to allocate significant
customer support resources to address these problems. Our license agreements
with our customers typically contain provisions designed to limit our exposure
to potential product liability claims. The limitation of liability provisions
contained in our license agreements, however, may not be effective as a result
of existing or future national, federal, state or local laws or ordinances or
unfavorable judicial decisions. Although we have not experienced any product
liability claims to date, the sale and support of our products entails the risk
of such claims, which could be substantial in light of the use of our products
in enterprise-wide environments. If a claimant successfully brings a product
liability claim against us, it would likely significantly harm our business,
results of operations or financial condition.

TECHNOLOGICAL ADVANCES AND EVOLVING INDUSTRY STANDARDS COULD ADVERSELY IMPACT
OUR FUTURE PRODUCT SALES.

The market for our products is characterized by continuing technological
development, evolving industry standards and changing customer requirements.
The introduction of products by our direct competitors or others embodying new
technologies, the emergence of new industry standards or changes in customer
requirements could render our existing products obsolete, unmarketable or less
competitive. In particular, an industry-wide adoption of uniform open standards
across heterogeneous applications could minimize the importance of the
integration functionality of our products and materially adversely affect the
competitiveness and market acceptance of our products. Our success depends upon
our ability to enhance existing products, to respond to changing customer
requirements and to develop and introduce in a timely manner new products that
keep pace with technological and competitive developments and emerging industry
standards. We have in the past experienced delays in releasing new products and
product enhancements and may experience similar delays in the future. As a
result, some of our customers deferred purchasing the PowerMart product until
the next upgrade was released. Future delays or problems in the installation or
implementation of our new releases may cause customers to forego purchases of
our products and purchase those of our competitors instead. Failure to develop
and introduce new products, or enhancements to existing products, in a timely
manner in response to changing market conditions or customer requirements, will
materially and adversely affect our business, results of operations and
financial condition.

WE EXPECT SEASONAL TRENDS TO CAUSE OUR QUARTERLY REVENUES TO FLUCTUATE.

In recent years, there has been a relatively greater demand for our
products in the fourth quarter than in each of the first three quarters of the
year, particularly the first quarter. As a result, we historically have
experienced relatively higher bookings in the fourth quarter and relatively
lighter bookings in the first quarter, which is a lighter quarter and often
experiences less growth than other quarters. We believe that these fluctuations
are caused by customer buying patterns (often influenced by year-end budgetary
pressures) and the efforts of our direct sales force to meet or exceed year-end
sales quotas. In addition, European sales tend to be relatively lower during
the summer months than during other periods. Due to the economic slowdown in
2001, our 2001 quarterly revenues may not be indicative of seasonal trends that were
experienced in prior years. With economic recovery, we expect that seasonal
trends may continue in the foreseeable future. This seasonal impact may
increase as we continue to focus our sales efforts on large corporations.

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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.

Based on limited credit history, we recognize revenue from sales to OEMs,
specific resellers, distributors and specific international customers at the
time we receive payment for our products, rather than at the time of sale. If
these customers do not make timely payment for our products, our revenues could
decrease. If our revenues decrease, the price of our common stock may fall.

WE HAVE A LIMITED OPERATING HISTORY AND A HISTORY OF LOSSES, AND WE MAY NOT BE
ABLE TO ACHIEVE PROFITABLE OPERATIONS.

We were incorporated in 1993 and began selling our products in 1996; and
therefore, we have a limited operating history upon which investors can
evaluate our operations, products and prospects. We have incurred significant
net losses since our inception, and we may not achieve profitability. We intend
to increase our operating expenses in the next twelve months; therefore, our
operating results will be harmed if revenues do not increase.

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.

From time to time, in the ordinary course of business, we may evaluate
potential acquisitions of, or investments in, related businesses, products or
technologies. Future acquisitions could result in the issuance of dilutive
equity securities, the incurrence of debt or contingent liabilities. There can
be no assurance that any strategic acquisition or investment will succeed. Any
future acquisition or investment could harm our business, financial condition
and results of operation.

OUR INTERNATIONAL OPERATIONS EXPOSE US TO GREATER INTELLECTUAL PROPERTY,
COLLECTIONS, EXCHANGE RATE FLUCTUATIONS, REGULATORY AND OTHER RISKS, WHICH
COULD LIMIT OUR FUTURE GROWTH.

We intend to continue to expand our international operations, and as a
result, we may face significant additional risks. Our failure to manage our
international operations and the associated risks effectively could limit the
future growth of our business. The expansion of our existing international
operations and entry into additional international markets will require
significant management attention and financial resources.

Our international operations face numerous risks. Our products must be
localized  customized to meet local user needs  in order to be sold in
particular foreign countries. Developing local versions of our products for
foreign markets is difficult and can take longer than we anticipate. We
currently have limited experience in localizing products and in testing whether
these localized products will be accepted in the targeted countries. We cannot
assure you that our localization efforts will be successful. In addition, we
have only a limited history of marketing, selling and supporting our products
and services internationally. As a result, we must hire and train experienced
personnel to staff and manage our foreign operations. However, we may
experience difficulties in recruiting and training an international staff. We
must also be able to enter into strategic relationships with companies in
international markets. If we are not able to maintain successful strategic
relationships internationally or recruit additional companies to enter into
strategic relationships, our future growth could be limited.

Our international business is subject to a number of risks, including the
following:



| |  |  | greater difficulty in protecting intellectual property;          
| | - |  | -----------------------------------------------------------------
|
| |  |  | greater difficulty in staffing and managing foreign operations;  
|
| |  |  | greater risk of uncollectible accounts;                          
|
| |  |  | longer collection cycles;                                        
|
| |  |  | potential unexpected changes in regulatory practices and tariffs;
|
| |  |  | potential unexpected changes in tax laws and treaties;           

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| |  |  | sales seasonality;                                                                                                          
| | - |  | ----------------------------------------------------------------------------------------------------------------------------
|
| |  |  | the impact of fluctuating exchange rates between the U.S. dollar and
foreign currencies in markets where we do business; and
|
| |  |  | general economic and political conditions in these foreign markets.                                                         

We may encounter difficulties predicting the extent of the future impact of
these conditions. These factors and other factors could harm our ability to
gain future international revenues and, consequently, materially impact our
business, results of operations and financial condition.

IF WE ARE NOT ABLE TO ADEQUATELY PROTECT OUR PROPRIETY RIGHTS, OUR BUSINESS
COULD BE HARMED.

Our success depends upon our proprietary technology. We rely on a
combination of patent, copyright, trademark and trade secret rights,
confidentiality procedures and licensing arrangements to establish and protect
our proprietary rights. Our pending patent applications may not be allowed or
our competitors may successfully challenge the validity or scope of any of our
five issued patents or any future issued patents. Our patents alone may not
provide us with any significant competitive advantage. Third parties could copy
or otherwise obtain and use our products or technology without authorization,
or develop similar technology independently. We cannot easily monitor any
unauthorized use of our products, and, although we are unable to determine the
extent to which piracy of our software products exists, software piracy is a
prevalent problem in our industry in general.

Furthermore, effective protection of intellectual property rights is
unavailable or limited in various foreign countries. The protection of our
proprietary rights may be inadequate and our competitors could independently
develop similar technology, duplicate our products or design around any patents
or other intellectual property rights we hold.

WE MAY FACE INTELLECTUAL PROPERTY INFRINGEMENT CLAIMS THAT COULD BE COSTLY TO
DEFEND AND RESULT IN OUR LOSS OF SIGNIFICANT RIGHTS.

As is common in the software industry, we have received and may continue
from time to time to receive notices from third parties claiming infringement
by our products of third-party patent and other proprietary rights. Third
parties could claim that our current or future products infringe their patent
or other proprietary rights. Any claims, with or without merit, could be
time-consuming, result in costly litigation, cause product shipment delays or
require us to enter into royalty or licensing agreements, any of which could
adversely effect our business, financial condition and operating results. Such
royalty or licensing agreements, if required, may not be available on terms
acceptable to us, or at all. Legal action claiming patent infringement could be
commenced against us, and we may not prevail in such litigation given the
complex technical issues and inherent uncertainties in patent litigation.
Moreover, the cost of defending patent litigation could be substantial,
regardless of the outcome. In the event a patent claim against us was
successful and we could not obtain a license on acceptable terms, license a
substitute technology or redesign to avoid infringement, our business,
financial condition and operating results would be significantly harmed.

OUR BUSINESS COULD SUFFER AS A RESULT OF OUR STRATEGIC ACQUISITIONS AND
INVESTMENTS.

In December 1999, we acquired Influence, a developer of analytic
applications. In February 2000, we acquired Delphi, a distributor of our
products in Switzerland. In August 2000, we acquired Zimba, a provider of
applications that enable mobile professionals to have real-time access to
enterprise and external information through wireless devices, voice recognition
technologies and the Internet. In April 2000, we acquired certain PwC
intellectual property rights and personnel. In November 2000, we acquired
certain intellectual property from QRB Developers. In January 2001, we acquired
syn-T-sys, a distributor of our products in the Netherlands and Belgium. In
June 2001, we acquired Informatica Partners, a distributor of our products in
France. We may not be able to effectively integrate these companies,
intellectual property, or personnel, and our attempts to do so will place an
additional burden on our management and infrastructure. These acquisitions will
subject us to a number of risks, including:



| |  |  | the loss of key personnel, customers and business relationships;                                                   
| | - |  | -------------------------------------------------------------------------------------------------------------------
|
| |  |  | difficulties associated with assimilating and integrating the new personnel and operations of the acquired company;
|
| |  |  | the potential disruption of our ongoing business;                                                                  
|
| |  |  | the expense associated with maintenance of uniform standards, controls, procedures, employees and clients;         

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| |  |  | the risk of product malfunction after new technology is integrated;                                                         
| | - |  | ----------------------------------------------------------------------------------------------------------------------------
|
| |  |  | the diversion of resources from the development of our own proprietary technology;                                          
|
| |  |  | our inability to generate revenue from new technology sufficient to offset associated acquisition and maintenance costs; and
|
| |  |  | the risk of impairment write-offs.                                                                                          

There can be no assurance that we will be successful in overcoming these
risks or any other problems encountered in connection with our acquisitions.

OUR STOCK PRICE FLUCTUATES AS A RESULT OF FACTORS OTHER THAN OUR OPERATING RESULTS.

The market price for our common stock has experienced significant
fluctuations and may continue to fluctuate significantly. The market price for
our common stock may be affected by a number of factors, including our
operating results and the following:



| |  |  | the announcement of new products or product enhancements by our competitors;                                                                          
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | quarterly variations in our competitors results of operations;                                                                                       
|
| |  |  | changes in earnings estimates by securities analysts;                                                                                                 
|
| |  |  | changes in recommendations by securities analysts;                                                                                                    
|
| |  |  | developments in our industry; and                                                                                                                     
|
| |  |  | general market conditions and other factors, including factors
unrelated to our operating performance or the operating performance of
our competitors.

In addition, stock prices for many companies in the technology and
emerging growth sectors have experienced wide fluctuations that have often been
unrelated to the operating performance of such companies. After periods of
volatility in the market price of a particular companys securities, securities
class action litigation has often been brought against that company. We and
certain of our officers and directors are named as defendants in a purported
class action complaint, which has been filed on behalf of certain persons who
purchased our common stock between April 29, 1999 and December 6, 2000. The
complaint seeks unspecified damages from alleged violations of the Securities
Act of 1933 and the Securities Exchange Act of 1934. See Item 3. Legal
Proceedings. Such factors and fluctuations, as well as general economic,
political and market conditions, may cause the market price of our common stock
to decline, which may impact our operations.

DIFFICULTIES WE MAY ENCOUNTER MANAGING OUR GROWTH COULD HARM OUR RESULTS OF OPERATIONS.

In the past, we have experienced a period of rapid and substantial growth
that has placed a strain on our administrative and operational infrastructure
and, if such growth resumes, will continue to place a strain on our
administrative and operational infrastructure. If we are unable to manage this
growth effectively, our business, results of operations or financial condition
may be significantly harmed. Our ability to manage our operations and growth
effectively requires us to continue to improve our sales, operational,
financial and management controls, reporting systems and procedures and hiring
programs.

We may not be able to successfully implement improvements to our
sales, management information and control systems in an efficient or timely
manner, and we may discover deficiencies in existing systems and controls. We are currently in the process
of implementing improvements to our control systems and have licensed technology from a third party to
accomplish this objective. We may experience difficulties in the implementation process or in connection
with the third party software which could divert our resources, including attention of management.

THE LOSS OF KEY PERSONNEL OR THE INABILITY TO ATTRACT AND RETAIN ADDITIONAL
PERSONNEL, PARTICULARLY IN THE SILICON VALLEY AREA, WHERE WE ARE HEADQUARTERED,
COULD HARM OUR RESULTS OF OPERATIONS.

We believe our success depends upon our ability to attract and retain
highly skilled personnel, including Gaurav S. Dhillon, our Chief Executive
Officer, Diaz H. Nesamoney, our President and Chief Operating Officer, and
other key members of our management

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team. We currently do not have any key-man life insurance relating to our
key personnel, and their employment is at-will and not subject to employment
contracts.

We may not be successful in attracting, assimilating and retaining key
personnel in the future. As we seek to expand our operations, the hiring of
qualified sales and technical personnel will be difficult due to the limited
number of qualified professionals.

Competition for these types of employees, particularly in the Silicon
Valley area, where we are headquartered, is intense. We have in the past
experienced difficulty in recruiting qualified sales and technical personnel.
Failure to attract, assimilate and retain key personnel, particularly sales and
technical personnel, would harm our business, results of operations and
financial condition.

WE MAY NEED TO RAISE ADDITIONAL CAPITAL IN THE FUTURE, WHICH MAY NOT BE
AVAILABLE ON REASONABLE TERMS TO US, IF AT ALL.

We may not generate sufficient revenue from operations to offset our
operating or other expenses. As a result, in the future, we may need to raise
additional funds through public or private debt or equity financings. We may
not be able to borrow money or sell more of our equity securities to meet our
cash needs. Even if we are able to do so, it may not be on terms that are
favorable or reasonable to us. If we are not able to raise additional capital
when we need it in the future, our business could be seriously harmed.

OUR CERTIFICATE OF INCORPORATION AND BYLAWS CONTAIN PROVISIONS THAT COULD
DISCOURAGE A TAKEOVER.

Our basic corporate documents and Delaware law contain provisions that
might enable our management to resist a takeover. These provisions might
discourage, delay or prevent a change in the control of Informatica or a change
in our management. In addition, we have adopted a stockholder rights plan.
Under the plan, we issued a dividend of one right for each outstanding share of
common stock to stockholders of record as of November 12, 2001. Because the
rights may substantially dilute the stock ownership of a person or group
attempting to take us over without the approval of our Board of Directors, the
plan could make it more difficult for a third party to acquire us  or a
significant percentage of our outstanding capital stock  without first
negotiating with our Board of Directors regarding such acquisition.

Our amended and restated certificate of incorporation provides that we
have a classified Board of Directors, with each class of directors subject to
re-election every three years. This classified board has the effect of making
it more difficult for third parties to insert their representatives on our
Board of Directors and gain control of Informatica. These provisions could also
discourage proxy contests and make it more difficult for you and other
stockholders to elect directors and take other corporate actions. The existence
of these provisions could limit the price that investors might be willing to
pay in the future for shares of the common stock.

BUSINESS INTERRUPTIONS COULD ADVERSELY AFFECT OUR BUSINESS.

Our operations are vulnerable to interruption by fire, earthquake, power
loss, telecommunications failure and other events beyond our control. We do not
have a detailed disaster recovery plan. Our facilities in the State of
California are currently subject to electrical blackouts as a consequence of a
shortage of available electrical power which occurred during 2001. In the event
these blackouts are reinstated, they could disrupt the operations of our
affected facilities. In connection with the shortage of available power, prices
for electricity may continue to increase in the foreseeable future. Such price
changes will increase our operating costs, which could in turn hurt our
profitability. In addition, we do not carry sufficient business interruption
insurance to compensate us for losses that may occur, and any losses or damages
incurred by us could have a material adverse effect on our business.




Item 7A.Quantitative and Qualitative Disclosure About Market Risk

The following discusses our exposure to market risk related to changes in
interest rates and foreign currency exchange rates. This discussion contains
forward-looking statements that are subject to risks and uncertainties. Actual
results could vary materially as a result of a number of factors including
those set forth in Risk Factors

Interest Rate Risk

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Our exposure to market risk for changes in interest rates relates
primarily to our investment portfolio. We do not use derivative financial
instruments in our investment portfolio. The primary objective of our
investment activities is to preserve principal while maximizing yields without
significantly increasing risk. Our investment policy specifies credit quality
standards for our investments and limits the amount of credit exposure to any
single issue, issuer or type of investment. Our investments consist primarily
of commercial paper, government notes and bonds, corporate bonds and municipal
securities. Due to the nature of our investments, we believe that there is no
material interest rate risk exposure. All investments are carried at market
value, which approximates cost.

Foreign Currency Risk

We market and sell our software and services through our direct sales
force in the United States as well as Belgium, Canada, France, Germany, the
Netherlands, Switzerland and the United Kingdom. We also have relationships
with distributors in various regions, including Asia-Pacific, Australia,
Europe, Japan and Latin America. As a result, our financial results could be
affected by factors such as changes in foreign currency exchange rates or weak
economic conditions in foreign markets. As our sales are primarily in U.S.
dollars, a strengthening of the dollar could make our products less competitive
in foreign markets. We translate foreign currencies into U.S dollars for
reporting purposes and currency fluctuations may have a quarterly impact on our
financial results. To date, we have not engaged in any foreign currency hedging
activities.




Item 8.Financial Statements and Supplementary Data

The following consolidated financial statements, and the related notes
thereto, of Informatica and the Report of Independent Auditors are filed as a
part of this Form 10-K.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

|                                                                                                     |  |      |    | 
|---------------------------------------------------------------------------------------------------- |  | ---- | -- | 
|                                                                                                     |  | Page
|                                                                                                     |  |     
|Report of Ernst & Young LLP, Independent Auditors                                                    |  |      | 33 | 
|Consolidated Balance Sheets                                                                          |  |      | 34 | 
|Consolidated Statements of Operations                                                                |  |      | 35 | 
|Consolidated Statements of Redeemable Convertible Preferred Stock and Stockholders Equity (Deficit) |  |      | 36 | 
|Consolidated Statements of Cash Flows                                                                |  |      | 37 | 
|Notes to Consolidated Financial Statements                                                           |  |      | 38 | 

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REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS

The Board of Directors and Stockholders
Informatica Corporation

We have audited the accompanying consolidated balance sheets of
Informatica Corporation as of December 31, 2001 and 2000, and the related
consolidated statements of operations, redeemable convertible preferred stock
and stockholders equity (deficit), and cash flows for each of the three years in the
period ended December 31, 2001. Our audits also included the financial
statement schedule listed in the Index at Item 14(a). These consolidated
financial statements and financial statement schedule are the responsibility of
the Companys management. Our responsibility is to express an opinion on these
financial statements and schedule based on our audits.

We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Informatica
Corporation at December 31, 2001 and 2000, and the consolidated results of its
operations and its cash flows for each of the three years in the period ended
December 31, 2001, in conformity with accounting principles generally accepted
in the United States. Also in our opinion, the related financial statement
schedule, when considered in relation to the basic financial statements taken
as a whole, presents fairly in all material respects the information set forth
therein.

/s/ ERNST & YOUNG LLP

Palo Alto, California
January 23, 2002

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INFORMATICA CORPORATION

CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)

ASSETS

|                                                      |                                                                                                                                                                                                                      |  |                                                      |         |              |         |        |         |   |         | 
|----------------------------------------------------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---------------------------------------------------- | ------- | ------------ | ------- | ------ | ------- | - | ------- | 
|                                                      |                                                                                                                                                                                                                      |  |                                                      |         | December 31,
|                                                      |                                                                                                                                                                                                                      |  |                                                      |         |             
|                                                      |                                                                                                                                                                                                                      |  |                                                      |         | 2001         |         | 2000  
|                                                      |                                                                                                                                                                                                                      |  |                                                      |         |              |         |       
|Current
          assets:                             |                                                                                                                                                                                                                      |  |                                                      |         |              |         |        |        
|                                                      | Cash and
          cash equivalents                                                                                                                                                                                  |  | $                                                    | 131,264 |              |         | $      | 217,713 |  
|                                                      | Short-term
          investments                                                                                                                                                                                     |  |                                                      | 16,057  |              |         |        |        |  
|                                                      | Restricted
          cash                                                                                                                                                                                            |  |                                                      |        |              |         |        | 8,116   |  
|                                                      | Accounts
          receivable, net of allowances of $2,295 and $3,858 in 2001 and 2000,
          respectively                                                                                                       |  |                                                      | 29,131  |              |         |        | 30,100  |  
|                                                      | Prepaid
          expenses and other current assets                                                                                                                                                                  |  |                                                      | 7,061   |              |         |        | 2,852   |  
|                                                      |                                                                                                                                                                                                                      |  |                                                      |         |              |         |        |        
|                                                      |                                                                                                                                                                                                                      |  | Total
          current assets                       |         |              | 183,513 |        |         |   | 258,781 | 
|Restricted
          cash, less current portion       |                                                                                                                                                                                                                      |  | 12,166                                               |         |              |         | 12,166 |        
|Property
          and equipment, net                 |                                                                                                                                                                                                                      |  | 53,180                                               |         |              |         | 31,131 |        
|Long-term
          investments                       |                                                                                                                                                                                                                      |  | 61,898                                               |         |              |         |       |        
|Goodwill
          and other intangible assets, net   |                                                                                                                                                                                                                      |  | 31,221                                               |         |              |         | 47,491 |        
|Other
          assets                                |                                                                                                                                                                                                                      |  | 925                                                  |         |              |         | 1,414  |        
|                                                      |                                                                                                                                                                                                                      |  |                                                      |         |              |         |        |        
|                                                      |                                                                                                                                                                                                                      |  | Total
          assets                               |         | $            | 342,903 |        |         | $ | 350,983 | 
|                                                      |                                                                                                                                                                                                                      |  |                                                      |         |              |         |        |        
|LIABILITIES AND STOCKHOLDERS
            EQUITY     
|Current
          liabilities:                        |                                                                                                                                                                                                                      |  |                                                      |         |              |         |        |        
|                                                      | Accounts
          payable                                                                                                                                                                                           |  | $                                                    | 2,934   |              |         | $      | 3,573   |  
|                                                      | Accrued
          liabilities                                                                                                                                                                                        |  |                                                      | 14,953  |              |         |        | 17,932  |  
|                                                      | Accrued
          compensation and related expenses                                                                                                                                                                  |  |                                                      | 15,848  |              |         |        | 11,648  |  
|                                                      | Income
          taxes payable                                                                                                                                                                                       |  |                                                      | 2,874   |              |         |        | 3,910   |  
|                                                      | Restructuring
          charges                                                                                                                                                                                      |  |                                                      | 4,136   |              |         |        |        |  
|                                                      | Capital
          lease obligations                                                                                                                                                                                  |  |                                                      |        |              |         |        | 83      |  
|                                                      | Deferred
          revenue                                                                                                                                                                                           |  |                                                      | 36,554  |              |         |        | 23,340  |  
|                                                      |                                                                                                                                                                                                                      |  |                                                      |         |              |         |        |        
|                                                      |                                                                                                                                                                                                                      |  | Total
          current liabilities                  |         |              | 77,299  |        |         |   | 60,486  | 
|Restructuring
          charges, less current portion |                                                                                                                                                                                                                      |  | 5,196                                                |         |              |         |       |        
|Commitments
          and contingencies               |                                                                                                                                                                                                                      |  |                                                      |         |              |         |        |        
|Stockholders
          equity:                       |                                                                                                                                                                                                                      |  |                                                      |         |              |         |        |        
|                                                      | Preferred stock, no par value; 2,000,000 shares authorized of which 200,000 shares
have been designated as Series A
          preferred stock, $0.001 par value, no shares outstanding at December 31, 2001 and 2000 |  |                                                      |        |              |         |        |        |  
|                                                      | Common
          stock, $0.001 par value; 200,000,000 shares authorized; 78,563,288 and
          75,588,185 shares issued and outstanding at December 31, 2001 and
          2000, respectively                     |  |                                                      | 342,335 |              |         |        | 331,042 |  
|                                                      | Deferred
          stock-based compensation                                                                                                                                                                          |  |                                                      | (299    | )            |         |        | (3,447  | )
|                                                      | Accumulated
          deficit                                                                                                                                                                                        |  |                                                      | (82,380 | )            |         |        | (37,400 | )
|                                                      | Accumulated
          other comprehensive income                                                                                                                                                                     |  |                                                      | 752     |              |         |        | 302     |  
|                                                      |                                                                                                                                                                                                                      |  |                                                      |         |              |         |        |        
|                                                      |                                                                                                                                                                                                                      |  | Total
          stockholders equity                 |         |              | 260,408 |        |         |   | 290,497 | 
|                                                      |                                                                                                                                                                                                                      |  |                                                      |         |              |         |        |        
|                                                      |                                                                                                                                                                                                                      |  | Total
          liabilities and stockholders equity |         | $            | 342,903 |        |         | $ | 350,983 | 
|                                                      |                                                                                                                                                                                                                      |  |                                                      |         |              |         |        |        

See accompanying notes to consolidated financial statements.

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INFORMATICA CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)

|                                                            |                                                                |                                    |         |                                 |         |      |         |         |         |   |        |        |        | 
|----------------------------------------------------------- | -------------------------------------------------------------- | ---------------------------------- | ------- | ------------------------------- | ------- | ---- | ------- | ------- | ------- | - | ------ | ------ | ------ | 
|                                                            |                                                                |                                    |         | Year Ended December
        31,
|                                                            |                                                                |                                    |         |                                
|                                                            |                                                                |                                    |         | 2001                            |         | 2000 |         | 1999   
|                                                            |                                                                |                                    |         |                                 |         |      |         |        
|Revenues:                                                   |                                                                |                                    |         |                                 |         |      |         |         |         |   |        |       
|                                                            | License                                                        |                                    | $       | 119,937                         |         |      | $       | 101,649 |         |   | $      | 41,184 |       
|                                                            | Service                                                        |                                    |         | 77,415                          |         |      |         | 52,409  |         |   |        | 21,195 |       
|                                                            |                                                                |                                    |         |                                 |         |      |         |         |         |   |        |       
|                                                            |                                                                | Total
          revenues           |         |                                 | 197,352 |      |         |         | 154,058 |   |        |        | 62,379 | 
|Cost of
          revenues:                                 |                                                                |                                    |         |                                 |         |      |         |         |         |   |        |       
|                                                            | License                                                        |                                    |         | 4,500                           |         |      |         | 2,034   |         |   |        | 686    |       
|                                                            | Service                                                        |                                    |         | 39,746                          |         |      |         | 28,465  |         |   |        | 10,310 |       
|                                                            |                                                                |                                    |         |                                 |         |      |         |         |         |   |        |       
|                                                            |                                                                | Total
          cost of revenues   |         |                                 | 44,246  |      |         |         | 30,499  |   |        |        | 10,996 | 
|                                                            |                                                                |                                    |         |                                 |         |      |         |         |         |   |        |       
|Gross
          profit                                      |                                                                |                                    | 153,106 |                                 |         |      | 123,559 |         |         |   | 51,383 |       
|Operating
          expenses:                               |                                                                |                                    |         |                                 |         |      |         |         |         |   |        |       
|                                                            | Research
          and development                             |                                    |         | 46,271                          |         |      |         | 26,493  |         |   |        | 11,843 |       
|                                                            | Sales
          and marketing                                  |                                    |         | 99,334                          |         |      |         | 75,034  |         |   |        | 33,613 |       
|                                                            | General
          and administrative                           |                                    |         | 19,629                          |         |      |         | 11,726  |         |   |        | 5,012  |       
|                                                            | Merger-related
          costs                                 |                                    |         |                                |         |      |         |        |         |   |        | 2,082  |       
|                                                            | Amortization
          of stock-based compensation             |                                    |         | 1,036                           |         |      |         | 1,514   |         |   |        | 742    |       
|                                                            | Amortization
          of goodwill and other intangible assets |                                    |         | 27,376                          |         |      |         | 14,163  |         |   |        |       |       
|                                                            | Purchased
          in-process research and development        |                                    |         |                                |         |      |         | 8,648   |         |   |        |       |       
|                                                            | Restructuring
          charges                                |                                    |         | 12,096                          |         |      |         |        |         |   |        |       |       
|                                                            |                                                                |                                    |         |                                 |         |      |         |         |         |   |        |       
|                                                            |                                                                | Total
          operating expenses |         |                                 | 205,742 |      |         |         | 137,578 |   |        |        | 53,292 | 
|                                                            |                                                                |                                    |         |                                 |         |      |         |         |         |   |        |       
|Loss from
          operations                              |                                                                |                                    | (52,636 | )                               |         |      | (14,019 | )       |         |   | (1,909 | )     
|Interest
          income and other, net                    |                                                                |                                    | 8,971   |                                 |         |      | 4,306   |         |         |   | 1,557  |       
|Interest
          expense                                  |                                                                |                                    | (11     | )                               |         |      | (458    | )       |         |   | (319   | )     
|                                                            |                                                                |                                    |         |                                 |         |      |         |         |         |   |        |       
|Loss before
          income taxes                          |                                                                |                                    | (43,676 | )                               |         |      | (10,171 | )       |         |   | (671   | )     
|Income
          tax provision                              |                                                                |                                    | 1,304   |                                 |         |      | 3,345   |         |         |   | 824    |       
|                                                            |                                                                |                                    |         |                                 |         |      |         |         |         |   |        |       
|Net loss                                                    |                                                                | $                                  | (44,980 | )                               |         | $    | (13,516 | )       |         | $ | (1,495 | )     
|                                                            |                                                                |                                    |         |                                 |         |      |         |         |         |   |        |       
|Net loss
          per share:                               |                                                                |                                    |         |                                 |         |      |         |         |         |   |        |       
|                                                            | Basic
          and diluted                                    |                                    | $       | (0.58                           | )       |      | $       | (0.19   | )       |   | $      | (0.03  | )     
|                                                            |                                                                |                                    |         |                                 |         |      |         |         |         |   |        |       
|Shares
          used in calculation of net loss per share: |                                                                |                                    |         |                                 |         |      |         |         |         |   |        |       
|                                                            | Basic
          and diluted                                    |                                    |         | 77,599                          |         |      |         | 69,758  |         |   |        | 47,565 |       
|                                                            |                                                                |                                    |         |                                 |         |      |         |         |         |   |        |       

See accompanying notes to consolidated financial statements.

35



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##### Table of Contents



INFORMATICA CORPORATION

CONSOLIDATED STATEMENTS OF REDEEMABLE CONVERTIBLE PREFERRED STOCK
AND STOCKHOLDERS EQUITY (DEFICIT)
(In thousands, except share data)

|                                                                                                                 |                                                   |  |                 |   |              |   |            |   |             |  |                                        |   |               |   |               |   |        |   |           |   |       |   |             |   |  |   |         |         |   |   |     |      |   |   |         |         |  
|---------------------------------------------------------------------------------------------------------------- | ------------------------------------------------- |  | --------------- | - | ------------ | - | ---------- | - | ----------- |  | -------------------------------------- | - | ------------- | - | ------------- | - | ------ | - | --------- | - | ----- | - | ----------- | - |  | - | ------- | ------- | - | - | --- | ---- | - | - | ------- | ------- | -
|                                                                                                                 |                                                   |  |                 |   |              |   |            |   |             |  | Stockholders' Equity
        (Deficit)
|                                                                                                                 |                                                   |  |                 |   |              |   |            |   |             |  |                                       
|                                                                                                                 |                                                   |  | Redeemable      |   |              |   |            |   |             |  |                                        |   |               |   |               |   |        |   |           |   |       |   | Accumulated |   | 
|                                                                                                                 |                                                   |  | Convertible     |   |              |   |            |   |             |  |                                        |   | Notes         |   |               |   |        |   |           |   | Other |   | Total      
|                                                                                                                 |                                                   |  | Preferred Stock |   | Common Stock |   | Receivable |   | Deferred    |  |                                        |   | Comprehensive |   | Stockholders'
|                                                                                                                 |                                                   |  |                 |   |              |   | From       |   | Stock-Based |  | Accumulated                            |   | Income        |   | Equity       
|                                                                                                                 |                                                   |  | Shares          |   | Amount       |   | Shares     |   | Amount      |  | Stockholders                           |   | Compensation  |   | Deficit       |   | (Loss) |   | (Deficit)
|                                                                                                                 |                                                   |  |                 |   |              |   |            |   |             |  |                                        |   |               |   |               |   |        |   |          
|Balances
          at December 31, 1998                                                                          |                                                   |  | 31,760,000      |   |              | $ | 17,586     |   |             |  | 16,320,696                             |   |               | $ | 1,213         |   |        | $ | (40       | ) |       | $ | (383        | ) |  | $ | (22,389 | )       |   | $ | 19  |      |   | $ | (21,580 | )      
|Components
          of comprehensive loss:                                                                      |                                                   |  |                 |   |              |   |            |   |             |  |                                        |   |               |   |               |   |        |   |           |   |       |   |             |   |  |   |         |         |   |   |     |      |   |   |         |        
|                                                                                                                 | Net loss                                          |  |                 |  |              |   |            |  |             |  |                                        |  |               |   |               |  |        |   |           |  |       |   |             |  |  |   |         | (1,495  | ) |   |     |     |   |   |         | (1,495  | )
|                                                                                                                 | Foreign
          currency translation adjustment |  |                 |  |              |   |            |  |             |  |                                        |  |               |   |               |  |        |   |           |  |       |   |             |  |  |   |         |        |   |   |     | (103 | ) |   |         | (103    | )
|                                                                                                                 |                                                   |  |                 |   |              |   |            |   |             |  |                                        |   |               |   |               |   |        |   |           |   |       |   |             |   |  |   |         |         |   |   |     |      |   |   |         |        
|Comprehensive
          loss                                                                                     |                                                   |  |                 |   |              |   |            |   |             |  |                                        |   |               |   |               |   |        |   |           |   |       |   |             |   |  |   |         |         |   |   |     |      |   |   | (1,598  | )      
|Issuance
          of common stock in connection with initial public offering, net of offering
          costs   |                                                   |  |                |   |              |   |           |   |             |  | 12,000,000                             |   |               |   | 43,514        |   |        |   |          |   |       |   |            |   |  |   |        |         |   |   |    |      |   |   | 43,514  |        
|Conversion
          of redeemable convertible preferred stock into common stock                                 |                                                   |  | (31,760,000     | ) |              |   | (17,586    | ) |             |  | 31,760,000                             |   |               |   | 17,586        |   |        |   |          |   |       |   |            |   |  |   |        |         |   |   |    |      |   |   | 17,586  |        
|Repurchase
          of common stock                                                                             |                                                   |  |                |   |              |   |           |   |             |  | (17,344                                | ) |               |   | (3            | ) |        |   |          |   |       |   |            |   |  |   |        |         |   |   |    |      |   |   | (3      | )      
|Common
          stock options exercised                                                                         |                                                   |  |                |   |              |   |           |   |             |  | 3,138,792                              |   |               |   | 1,251         |   |        |   |          |   |       |   |            |   |  |   |        |         |   |   |    |      |   |   | 1,251   |        
|Exercise
          of warrants                                                                                   |                                                   |  |                |   |              |   |           |   |             |  | 795,092                                |   |               |   | 212           |   |        |   |          |   |       |   |            |   |  |   |        |         |   |   |    |      |   |   | 212     |        
|Deferred
          stock-based compensation                                                                      |                                                   |  |                |   |              |   |           |   |             |  |                                       |   |               |   | 3,247         |   |        |   |          |   |       |   | (3,247      | ) |  |   |        |         |   |   |    |      |   |   |        |        
|Amortization
          of stock-based compensation                                                               |                                                   |  |                |   |              |   |           |   |             |  |                                       |   |               |   |              |   |        |   |          |   |       |   | 742         |   |  |   |        |         |   |   |    |      |   |   | 742     |        
|                                                                                                                 |                                                   |  |                 |   |              |   |            |   |             |  |                                        |   |               |   |               |   |        |   |           |   |       |   |             |   |  |   |         |         |   |   |     |      |   |   |         |        
|Balances
          at December 31, 1999                                                                          |                                                   |  |                |   |              |   |           |   |             |  | 63,997,236                             |   |               |   | 67,020        |   |        |   | (40       | ) |       |   | (2,888      | ) |  |   | (23,884 | )       |   |   | (84 | )    |   |   | 40,124  |        
|Components
          of comprehensive loss:                                                                      |                                                   |  |                 |   |              |   |            |   |             |  |                                        |   |               |   |               |   |        |   |           |   |       |   |             |   |  |   |         |         |   |   |     |      |   |   |         |        
|                                                                                                                 | Net loss                                          |  |                 |  |              |   |            |  |             |  |                                        |  |               |   |               |  |        |   |           |  |       |   |             |  |  |   |         | (13,516 | ) |   |     |     |   |   |         | (13,516 | )
|                                                                                                                 | Foreign
          currency translation adjustment |  |                 |  |              |   |            |  |             |  |                                        |  |               |   |               |  |        |   |           |  |       |   |             |  |  |   |         |        |   |   |     | 386  |   |   |         | 386     |  
|                                                                                                                 |                                                   |  |                 |   |              |   |            |   |             |  |                                        |   |               |   |               |   |        |   |           |   |       |   |             |   |  |   |         |         |   |   |     |      |   |   |         |        
|Comprehensive
          loss                                                                                     |                                                   |  |                 |   |              |   |            |   |             |  |                                        |   |               |   |               |   |        |   |           |   |       |   |             |   |  |   |         |         |   |   |     |      |   |   | (13,130 | )      
|Issuance
          of common stock in connection with secondary public offering, net of
          offering costs |                                                   |  |                |   |              |   |           |   |             |  | 4,750,000                              |   |               |   | 190,961       |   |        |   |          |   |       |   |            |   |  |   |        |         |   |   |    |      |   |   | 190,961 |        
|Issuance
          of common stock in connection with acquisitions                                               |                                                   |  |                |   |              |   |           |   |             |  | 1,325,820                              |   |               |   | 56,508        |   |        |   |          |   |       |   |            |   |  |   |        |         |   |   |    |      |   |   | 56,508  |        
|Repurchase
          of common stock                                                                             |                                                   |  |                |   |              |   |           |   |             |  | (1,600                                 | ) |               |   | (3            | ) |        |   |          |   |       |   |            |   |  |   |        |         |   |   |    |      |   |   | (3      | )      
|Common
          stock options exercised                                                                         |                                                   |  |                |   |              |   |           |   |             |  | 4,549,257                              |   |               |   | 10,575        |   |        |   |          |   |       |   |            |   |  |   |        |         |   |   |    |      |   |   | 10,575  |        
|Common
          stock issued under employee stock purchase plan                                                 |                                                   |  |                |   |              |   |           |   |             |  | 967,472                                |   |               |   | 3,908         |   |        |   |          |   |       |   |            |   |  |   |        |         |   |   |    |      |   |   | 3,908   |        
|Repayment
          of notes receivable from stockholders                                                        |                                                   |  |                |   |              |   |           |   |             |  |                                       |   |               |   |              |   |        |   | 40        |   |       |   |            |   |  |   |        |         |   |   |    |      |   |   | 40      |        
|Deferred
          stock-based compensation                                                                      |                                                   |  |                |   |              |   |           |   |             |  |                                       |   |               |   | 2,073         |   |        |   |          |   |       |   | (2,073      | ) |  |   |        |         |   |   |    |      |   |   |        |        
|Amortization
          of stock-based compensation                                                               |                                                   |  |                |   |              |   |           |   |             |  |                                        |   |               |   |              |   |        |   |          |   |       |   | 1,514       |   |  |   |        |         |   |   |    |      |   |   | 1,514   |        
|                                                                                                                 |                                                   |  |                 |   |              |   |            |   |             |  |                                        |   |               |   |               |   |        |   |           |   |       |   |             |   |  |   |         |         |   |   |     |      |   |   |         |        
|Balances
          at December 31, 2000                                                                          |                                                   |  |                |   |              |   |           |   |             |  | 75,588,185                             |   |               |   | 331,042       |   |        |   |          |   |       |   | (3,447      | ) |  |   | (37,400 | )       |   |   | 302 |      |   |   | 290,497 |        
|Components
          of comprehensive loss:                                                                      |                                                   |  |                 |   |              |   |            |   |             |  |                                        |   |               |   |               |   |        |   |           |   |       |   |             |   |  |   |         |         |   |   |     |      |   |   |         |        
|                                                                                                                 | Net loss                                          |  |                 |  |              |   |            |  |             |  |                                        |  |               |   |               |  |        |   |           |  |       |   |             |  |  |   |         | (44,980 | ) |   |     |     |   |   |         | (44,980 | )
|                                                                                                                 | Foreign
          currency translation adjustment |  |                 |  |              |   |            |  |             |  |                                        |  |               |   |               |  |        |   |           |  |       |   |             |  |  |   |         |        |   |   |     | 32   |   |   |         | 32      |  
|Unrealized
          gains on investments                                                                        |                                                   |  |                 |   |              |   |            |   |             |  |                                        |   |               |   |               |   |        |   |           |   |       |   |             |   |  |   |         |         |   |   | 418 |      |   |   | 418     |        
|                                                                                                                 |                                                   |  |                 |   |              |   |            |   |             |  |                                        |   |               |   |               |   |        |   |           |   |       |   |             |   |  |   |         |         |   |   |     |      |   |   |         |        
|Comprehensive
          loss                                                                                     |                                                   |  |                 |   |              |   |            |   |             |  |                                        |   |               |   |               |   |        |   |           |   |       |   |             |   |  |   |         |         |   |   |     |      |   |   | (44,530 | )      
|Issuance
          of common stock in connection with acquisitions                                               |                                                   |  |                |   |              |   |           |   |             |  | 93,704                                 |   |               |   | 2,359         |   |        |   |          |   |       |   |            |   |  |   |        |         |   |   |    |      |   |   | 2,359   |        
|Common
          stock options exercised                                                                         |                                                   |  |                |   |              |   |           |   |             |  | 1,936,001                              |   |               |   | 5,334         |   |        |   |          |   |       |   |            |   |  |   |        |         |   |   |    |      |   |   | 5,334   |        
|Common
          stock issued under employee stock purchase plan                                                 |                                                   |  |                |   |              |   |           |   |             |  | 945,398                                |   |               |   | 5,712         |   |        |   |          |   |       |   |            |   |  |   |        |         |   |   |    |      |   |   | 5,712   |        
|Deferred
          stock-based compensation adjustments                                                          |                                                   |  |                |   |              |   |           |   |             |  |                                       |   |               |   | (2,112        | ) |        |   |          |   |       |   | 2,112       |   |  |   |        |         |   |   |    |      |   |   |        |        
|Amortization
          of stock-based compensation                                                               |                                                   |  |                |   |              |   |           |   |             |  |                                        |   |               |   |              |   |        |   |          |   |       |   | 1,036       |   |  |   |        |         |   |   |    |      |   |   | 1,036   |        
|                                                                                                                 |                                                   |  |                 |   |              |   |            |   |             |  |                                        |   |               |   |               |   |        |   |           |   |       |   |             |   |  |   |         |         |   |   |     |      |   |   |         |        
|Balances
          at December 31, 2001                                                                          |                                                   |  |                |   |              | $ |           |   |             |  | 78,563,288                             |   |               | $ | 342,335       |   |        | $ |          |   |       | $ | (299        | ) |  | $ | (82,380 | )       |   | $ | 752 |      |   | $ | 260,408 |        
|                                                                                                                 |                                                   |  |                 |   |              |   |            |   |             |  |                                        |   |               |   |               |   |        |   |           |   |       |   |             |   |  |   |         |         |   |   |     |      |   |   |         |        

See accompanying notes to consolidated financial statements.

36



---



##### Table of Contents



INFORMATICA CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)

|                                                                                |                                                                        |                                           |                                           |        |                         |          |         |        |         |         |        |        |        |        |  
|------------------------------------------------------------------------------- | ---------------------------------------------------------------------- | ----------------------------------------- | ----------------------------------------- | ------ | ----------------------- | -------- | ------- | ------ | ------- | ------- | ------ | ------ | ------ | ------ | -
|                                                                                |                                                                        |                                           |                                           |        | Year
Ended December 31,
|                                                                                |                                                                        |                                           |                                           |        |                        
|                                                                                |                                                                        |                                           |                                           |        | 2001                    |          | 2000    |        | 1999   
|                                                                                |                                                                        |                                           |                                           |        |                         |          |         |        |        
|Operating activities                                                            |                                                                        |                                           |                                           |        |                         |          |         |        |         |         |        |       
|Net loss                                                                        |                                                                        | $                                         | (44,980                                   | )      |                         | $        | (13,516 | )      |         | $       | (1,495 | )     
|Adjustments to reconcile net loss to net cash provided by operating activities: |                                                                        |                                           |                                           |        |                         |          |         |        |         |         |        |       
|                                                                                | Depreciation and amortization                                          |                                           |                                           | 5,749  |                         |          |         | 1,660  |         |         |        | 550    |       
|                                                                                | Sales and returns allowances                                           |                                           |                                           | 1,186  |                         |          |         | 2,506  |         |         |        |       |       
|                                                                                | Other receivable allowances                                            |                                           |                                           | 533    |                         |          |         | 242    |         |         |        | 246    |       
|                                                                                | Amortization of stock-based compensation                               |                                           |                                           | 1,036  |                         |          |         | 1,514  |         |         |        | 742    |       
|                                                                                | Amortization of goodwill and other intangible assets                   |                                           |                                           | 27,376 |                         |          |         | 14,163 |         |         |        |       |       
|                                                                                | Purchased in-process research and development                          |                                           |                                           |       |                         |          |         | 8,648  |         |         |        |       |       
|                                                                                | Restructuring charges                                                  |                                           |                                           | 1,497  |                         |          |         |       |         |         |        |       |       
|                                                                                | Loss on disposal of property and equipment                             |                                           |                                           | 1,048  |                         |          |         |       |         |         |        |       |       
|                                                                                | Interest expense related to notes payable                              |                                           |                                           |       |                         |          |         | 125    |         |         |        | 289    |       
|                                                                                | Changes in operating assets and liabilities:                           |                                           |                                           |        |                         |          |         |        |         |         |        |        |       
|                                                                                |                                                                        | Accounts receivable                       |                                           |        | 899                     |          |         |        | (24,739 | )       |        |        | (4,658 | )     
|                                                                                |                                                                        | Prepaid expenses and other current assets |                                           |        | (3,973                  | )        |         |        | (1,545  | )       |        |        | (709   | )     
|                                                                                |                                                                        | Other assets                              |                                           |        | 559                     |          |         |        | (1,236  | )       |        |        | 7      |       
|                                                                                |                                                                        | Accounts payable and accrued liabilities  |                                           |        | 353                     |          |         |        | 6,177   |         |        |        | 3,645  |       
|                                                                                |                                                                        | Accrued compensation and related expenses |                                           |        | 3,803                   |          |         |        | 5,093   |         |        |        | 2,675  |       
|                                                                                |                                                                        | Income taxes payable                      |                                           |        | (1,245                  | )        |         |        | 2,919   |         |        |        | 813    |       
|                                                                                |                                                                        | Restructuring charges                     |                                           |        | 9,332                   |          |         |        |        |         |        |        |       |       
|                                                                                |                                                                        | Deferred revenue                          |                                           |        | 12,748                  |          |         |        | 13,561  |         |        |        | 5,087  |       
|                                                                                |                                                                        |                                           |                                           |        |                         |          |         |        |         |         |        |       
|                                                                                |                                                                        |                                           | Net cash provided by operating activities |        |                         | 15,921   |         |        |         | 15,572  |        |        |        | 7,192  |  
|                                                                                |                                                                        |                                           |                                           |        |                         |          |         |        |         |         |        |       
|Investing activities                                                            |                                                                        |                                           |                                           |        |                         |          |         |        |         |         |        |       
|Purchase of property and equipment, net                                         |                                                                        |                                           | (30,207                                   | )      |                         |          | (30,854 | )      |         |         | (1,440 | )     
|Purchases of investments                                                        |                                                                        |                                           | (264,337                                  | )      |                         |          |        |        |         |         |       |       
|Proceeds
from the sale of investments                                           |                                                                        |                                           | 186,800                                   |        |                         |          |        |        |         |         |       |       
|Proceeds from the sale of investments                                           |                                                                        |                                           |                                          |        |                         |          |        |        |         |         |       |       
|Acquisitions, net of cash acquired                                              |                                                                        |                                           | (13,737                                   | )      |                         |          | (6,318  | )      |         |         |       |       
|Transfer from (to) restricted cash                                              |                                                                        |                                           | 8,116                                     |        |                         |          | (20,282 | )      |         |         |       |       
|                                                                                |                                                                        |                                           |                                           |        |                         |          |         |        |         |         |        |       
|                                                                                |                                                                        |                                           | Net cash used in investing activities     |        |                         | (113,365 | )       |        |         | (57,454 | )      |        |        | (1,440 | )
|                                                                                |                                                                        |                                           |                                           |        |                         |          |         |        |         |         |        |       
|Financing activities                                                            |                                                                        |                                           |                                           |        |                         |          |         |        |         |         |        |       
|Proceeds from secondary public offering of common stock, net                    |                                                                        |                                           |                                          |        |                         |          | 190,961 |        |         |         |       |       
|Proceeds from initial public offering of common stock, net                      |                                                                        |                                           |                                          |        |                         |          |        |        |         |         | 43,514 |       
|Proceeds from issuance of common stock, net of payments for repurchases         |                                                                        |                                           | 11,046                                    |        |                         |          | 14,480  |        |         |         | 1,248  |       
|Proceeds from exercise of warrants                                              |                                                                        |                                           |                                          |        |                         |          |        |        |         |         | 212    |       
|Proceeds from notes payable to stockholders                                     |                                                                        |                                           |                                          |        |                         |          |        |        |         |         | 1,286  |       
|Payments on notes payable to stockholders                                       |                                                                        |                                           |                                          |        |                         |          | (3,572  | )      |         |         | (1,312 | )     
|Payments on capital lease obligations                                           |                                                                        |                                           | (83                                       | )      |                         |          | (221    | )      |         |         | (243   | )     
|Repayment of notes receivable from stockholders                                 |                                                                        |                                           |                                          |        |                         |          | 40      |        |         |         |       |       
|                                                                                |                                                                        |                                           |                                           |        |                         |          |         |        |         |         |        |       
|                                                                                |                                                                        |                                           | Net cash provided by financing activities |        |                         | 10,963   |         |        |         | 201,688 |        |        |        | 44,705 |  
|                                                                                |                                                                        |                                           |                                           |        |                         |          |         |        |         |         |        |       
|Effect of foreign currency translation on cash and cash equivalents             |                                                                        |                                           | 32                                        |        |                         |          | 386     |        |         |         | (103   | )     
|                                                                                |                                                                        |                                           |                                           |        |                         |          |         |        |         |         |        |       
|Increase (decrease) in cash and cash equivalents                                |                                                                        |                                           | (86,449                                   | )      |                         |          | 160,192 |        |         |         | 50,354 |       
|Cash and cash equivalents at beginning of year                                  |                                                                        |                                           | 217,713                                   |        |                         |          | 57,521  |        |         |         | 7,167  |       
|                                                                                |                                                                        |                                           |                                           |        |                         |          |         |        |         |         |        |       
|Cash and cash equivalents at end of year                                        |                                                                        | $                                         | 131,264                                   |        |                         | $        | 217,713 |        |         | $       | 57,521 |       
|                                                                                |                                                                        |                                           |                                           |        |                         |          |         |        |         |         |        |       
|Supplemental disclosures:                                                       |                                                                        |                                           |                                           |        |                         |          |         |        |         |         |        |       
|                                                                                | Interest paid                                                          |                                           | $                                         | 3      |                         |          | $       | 253    |         |         | $      | 29     |       
|                                                                                |                                                                        |                                           |                                           |        |                         |          |         |        |         |         |        |       
|                                                                                | Income taxes paid                                                      |                                           | $                                         | 1,566  |                         |          | $       | 163    |         |         |        | 10     |       
|                                                                                |                                                                        |                                           |                                           |        |                         |          |         |        |         |         |        |       
|Supplemental disclosures of noncash investing and financing activities:         |                                                                        |                                           |                                           |        |                         |          |         |        |         |         |        |       
|                                                                                | Conversion of redeemable convertible preferred stock into common stock |                                           | $                                         |       |                         |          | $       |       |         |         | $      | 17,586 |       
|                                                                                |                                                                        |                                           |                                           |        |                         |          |         |        |         |         |        |       
|                                                                                | Deferred stock-based compensation related to options granted           |                                           | $                                         | (2,112 | )                       |          | $       | 2,073  |         |         | $      | 3,247  |       
|                                                                                |                                                                        |                                           |                                           |        |                         |          |         |        |         |         |        |       
|                                                                                | Common stock issued for acquisitions                                   |                                           | $                                         | 2,359  |                         |          | $       | 56,508 |         |         | $      |       |       
|                                                                                |                                                                        |                                           |                                           |        |                         |          |         |        |         |         |        |       

See accompanying notes to consolidated financial statements.

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INFORMATICA CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Description of the Company and a Summary of its Significant Accounting
Policies

Description of the Company

Informatica Corporation (the Company) was incorporated in California in
February 1993 and reincorporated in Delaware in March 1999. We are a leading
provider of enterprise analytics software that enables our customers to
automate the integration, analysis and delivery of critical corporate
information. Using our products, managers and executives gain valuable business
insight they can use to help improve operational performance and enhance
competitive advantage.

Basis of Presentation

The consolidated financial statements include the accounts of the Company
and its wholly-owned subsidiaries. All significant intercompany accounts and
transactions have been eliminated.

The functional currency of the Companys foreign subsidiaries is the local
currency. The Company translates all assets and liabilities of foreign
subsidiaries to U.S. dollars at the current exchange rates as of the applicable
balance sheet date. Revenue and expenses are translated at the average exchange
rate prevailing during the period. Gains and losses resulting from the
translation of the foreign subsidiaries financial statements are reported as
a separate component of stockholders equity. Net gains and losses resulting
from foreign exchange transactions were not significant during any of the
periods presented.

Use of Estimates

The preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires management to make
estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual amounts could differ significantly
from the those estimates.

Reclassifications

Certain reclassifications have been made to prior year amounts to conform
to the current year presentation.

Cash and Cash Equivalents and Restricted Cash

The Company considers highly liquid investment securities with maturities,
at date of purchase, of 90 days or less to be cash equivalents. Cash and cash
equivalents, which consist of money market funds and government securities with
insignificant interest rate risk, are stated at cost, which approximates fair
value. Restricted cash consists of amounts held in deposits that are required
as collateral under lease agreements.

Investments

Investments are comprised of marketable securities, which consist
primarily of commercial paper, government notes and bonds, corporate bonds and
municipal securities with original maturities beyond three months. All
marketable securities are held in the Companys name and custodied with two
major financial institutions. The Companys marketable securities are
classified as available-for-sale as of the balance sheet date and are reported
at fair value, with unrealized gains and losses, net of tax, recorded in
stockholders equity. Realized gains or losses and permanent declines in value,
if any, on available-for-sale securities will be reported in other income or
expense as incurred.

Property and Equipment

Property and equipment is stated at cost less accumulated depreciation.
Depreciation is provided using the straight-line method over estimated useful
lives of the related assets, generally three years or less. Leasehold
improvements are amortized using the straight-line method over the shorter of
the lease term or the estimated useful life of the related asset.

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Software Development Costs

The Company accounts for software development costs in accordance with
Statement of Financial Accounting Standards (SFAS) No. 86, Accounting for
the Costs of Computer Software to be Sold, Leased, or Otherwise Marketed,
under which certain software development costs incurred subsequent to the
establishment of technological feasibility are capitalized and amortized over
the estimated lives of the related products. Technological feasibility is
established upon completion of a working model. Through December 31, 2001,
costs incurred subsequent to the establishment of technological feasibility
have not been significant and all software development costs have been charged
to research and development expense in the accompanying consolidated statements
of operations.

Pursuant to AICPA Statement of Position (SOP) No. 98-1, Accounting for
Costs of Computer Software Developed or Obtained for Internal Use, the Company
capitalizes certain costs relating to software acquired, developed or modified
solely to meet the Companys internal requirements and for which there are no
substantive plans to market the software. Capitalized costs relating to
software under development to meet internal requirements were $6.0 million for
the year ended December 31, 2001 and are included in property and equipment. No
such costs were capitalized as of December 31, 2000.

Goodwill and Other Intangible Assets

Goodwill represents the excess of the purchase price paid over the fair
value of tangible and identifiable intangible net assets acquired in business
combinations. Identifiable intangible assets primarily include intellectual
property, assembled workforce and developed technology. Under the Companys
accounting policies, goodwill and other intangible assets are amortized on a
straight-line basis over their expected useful lives ranging from two to three
years. Amounts allocated to purchased in-process research and development are
expensed in the period in which the acquisition is consummated.

Impairment of Long-Lived Assets

The Company periodically assesses the impairment of long-lived assets,
including identifiable intangible assets and related goodwill, in accordance
with SFAS No. 121, Accounting for the Impairment of Long-Lived Assets.
Reviews are regularly performed to determine whether facts and circumstances
exist which indicate that the carrying amount of assets may not be recoverable.
Conditions that would trigger an impairment assessment include material adverse
changes in operations or the Companys decision to abandon acquired products,
services or technologies. The Company assesses the recoverability of its assets
by comparing the projected undiscounted net cash flows associated with the
related asset or group of assets over their remaining life against their
respective carrying amounts. Impairment, if any, would be based on the excess
of the carrying amount over the fair value of those assets. To date, no such
impairment has occurred

Concentrations of Credit Risk and Credit Evaluations

Financial instruments, which subject the Company to concentrations of
credit risk, consist primarily of cash and cash equivalents, investments in
marketable securities and trade accounts receivable. The Company maintains its
cash and cash equivalents and investments with high quality financial
institutions. The Company performs ongoing credit evaluations of its customers,
which are primarily located in the U.S., Europe and Canada, and generally does
not require collateral. Allowances for credit risks and for estimated future
returns are provided upon shipment. Returns to date have not been material.
Actual credit losses and returns may differ from the Companys estimates and
such differences could be material to the financial statements.

Revenue Recognition

The Company recognizes revenue in accordance with AICPA SOP 97-2, as
amended by SOP 98-4, Software Revenue Recognition.

The Company generates revenues from sales of software licenses and
services. The Companys license revenues are derived from its enterprise
analytic software, which consists of data integration and analytic applications
products. The Company receives software license revenues from licensing its
products directly to end users and indirectly through resellers, distributors
and original equipment manufacturers (OEMs). Service revenues are derived
from maintenance contracts and training and consulting services performed for
customers that license the Companys products either directly from the Company
or indirectly through resellers, distributors and OEMs.

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License revenues are recognized when a noncancelable license agreement has
been signed, the product has been shipped, the fees are fixed and determinable,
collectibility is probable and vendor-specific objective evidence exists to
allocate the total fee to elements of the arrangement. Vendor-specific
objective evidence of fair value is based on the price charged when an element
is sold separately. In the case of an element not yet sold separately, the
price is established by the Companys authorized management. If an acceptance
period is required, revenue is recognized upon customer acceptance or the
expiration of the acceptance period. For the data integration products to end
users, revenue is recognized upon shipment and when collectibility is probable.
For the analytic applications, the Company recognizes the bundled license and
maintenance revenue ratably over the maintenance period, generally one year.
Support for the analytic applications for the first year is never sold
separately and in consideration of the complexities of the implementation the
customer is entitled to receive support services that are different than the
standard annual support services. The Company also enters into reseller
arrangements that typically provide for sublicense fees based on a percentage
of list prices. Based on limited credit history, for sales to OEMs, specific
resellers, distributors and specific international customers, the Company
recognizes revenue at the time payment is received for the Companys products,
rather than at the time of sale. The Companys standard agreements do not
contain product return rights.

Maintenance revenues, which consist of fees for ongoing support and
product updates, are recognized ratably over the term of the contract,
typically one year. Consulting revenues are primarily related to implementation
services and product enhancements performed on a time-and-materials basis or a
fixed fee arrangement under separate service arrangements related to the
installation and implementation of the Companys software products. Training
revenues are generated from classes offered at the Companys headquarters,
sales offices and customer locations. Revenues from consulting and training
services are recognized as the services are performed. When a contract includes
both license and service elements, the license fee is recognized on delivery of
the software or cash collections, provided services do not include significant
customization or modification of the base product, and are not otherwise
essential to the functionality of the software and the payment terms for
licenses are not dependent on additional acceptance criteria.

Deferred revenue includes deferred license and maintenance revenue and
prepaid training and consulting fees. Deferred revenue amounts do not include
items which are both deferred and unbilled. The Companys practice is to net
unpaid deferred items against the related receivables balances from those OEMs,
specific resellers, distributors and specific international customers for which
the Company defers revenue until payment is received.

Shipping and Handling Costs

Shipping and handling costs in connection with our packaged software
products are not material and are expensed as incurred and included in cost of
products in our results of operations.

Advertising Expense

Advertising costs are expensed as incurred. Advertising expense was $0.5
million for the year ended December 31, 2001 and $1.5 million and $0 for the
years ended December 31, 2000 and 1999, respectively.

Stock-Based Compensation

The Company accounts for stock issued to employees in accordance with
Accounting Principles Board Opinion No. 25 (APB 25), Accounting for Stock
Issued to Employees and complies with the disclosure provisions of SFAS No.
123 (SFAS 123), Accounting for Stock-Based Compensation. Under APB 25,
compensation expense of fixed stock options is based on the difference, if any,
on the date of the grant between the fair value of the Companys stock and the
exercise price of the option. The Company accounts for stock issued to
non-employees in accordance with the provisions of SFAS 123 and Emerging Issues
Task Force Issue No. 96-18, Accounting for Equity Instruments That are Issued
to Other Than Employees for Acquiring, or in Conjunction with Selling, Goods or
Services.

Net Loss Per Share

Under the provisions of SFAS No. 128, Earnings per Share, basic net loss
per share is computed using the weighted-average number of common shares
outstanding during the period. Diluted earnings per share reflects the
potential dilution of securities by adding other common stock equivalents,
including stock options, warrants and convertible preferred stock, to the
weighted- average number of common shares outstanding during the period, if
dilutive. Potentially dilutive securities have been excluded from the
computation of diluted net loss per share for all periods, as their inclusion
would be antidilutive.

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The calculation of basic and diluted net loss per share is as follows:

|                                                                                                                                    |  |                                       |         |      |  |      |         |   |  |   |        |  
|----------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------------------- | ------- | ---- |  | ---- | ------- | - |  | - | ------ | -
|                                                                                                                                    |  | Year Ended December 31,              
|                                                                                                                                    |  |                                      
|                                                                                                                                    |  | 2001                                  |         | 2000 |  | 1999
|                                                                                                                                    |  |                                       |         |      |  |     
|                                                                                                                                    |  | (in thousands, except per share data)
|Net loss                                                                                                                            |  | $                                     | (44,980 | )    |  | $    | (13,516 | ) |  | $ | (1,495 | )
|                                                                                                                                    |  |                                       |         |      |  |      |         |   |  |   |        |  
|Weighted-average
          shares of common stock outstanding used in calculation of basic
          and diluted net loss per share |  |                                       | 77,599  |      |  |      | 69,758  |   |  |   | 47,565 |  
|                                                                                                                                    |  |                                       |         |      |  |      |         |   |  |   |        |  
|Basic and diluted net loss per share                                                                                                |  | $                                     | (0.58   | )    |  | $    | (0.19   | ) |  | $ | (0.03  | )
|                                                                                                                                    |  |                                       |         |      |  |      |         |   |  |   |        |  

If the Company had reported net income, the calculation of diluted
earnings per share would have included the shares used in the computation of
basic net loss per share as well as an additional 5,121,000, 10,654,000 and
12,289,000 common equivalent shares related to outstanding stock options,
warrants and redeemable convertible preferred stock not included in the
calculations above (determined using the treasury stock method) for 2001, 2000
and 1999, respectively.

Comprehensive Income (Loss)

The Company reports comprehensive income or loss in accordance with the
provisions of SFAS No. 130, Reporting Comprehensive Income, which establishes
standards for reporting comprehensive income and its components in the
financial statements. The components of other comprehensive income (loss)
consist of unrealized gains and losses on available-for-sale securities and
cumulative translation adjustments. Total comprehensive loss and the components
of accumulated other comprehensive income are presented in the accompanying
consolidated statements of redeemable convertible preferred stock and
stockholders equity (deficit). Tax effects of other comprehensive income
(loss) are not material for any period presented.

Income Taxes

The Company accounts for income taxes in accordance with SFAS No. 109
(SFAS 109), Accounting for Income Taxes, which requires the use of the
liability method in accounting for income taxes. Under this method, deferred
tax assets and liabilities are measured using enacted tax rates and laws that
will be in effect when the differences are expected to reverse. Valuation
allowances are established, when necessary, to reduce the deferred tax assets
to the amounts expected to be realized.

Recent Accounting Pronouncements

On January 1, 2001, the Company adopted SFAS No. 133 (SFAS 133),
Accounting for Derivative Instruments and Hedging Activities, as amended.
SFAS 133 establishes accounting and reporting standards for derivative
financial instruments and hedging activities related to those instruments, as
well as other hedging activities. Because the Company does not currently hold
any derivative instruments and does not engage in hedging activities, the
adoption of SFAS 133 did not have an impact on the Companys financial position
or results of operations.

In June 2001, the FASB issued SFAS No. 141 (SFAS 141), Business
Combinations, and No. 142 (SFAS 142), Goodwill and Other Intangible
Assets, effective for fiscal years beginning after December 15, 2001. SFAS 141
and SFAS 142 establish new standards for accounting for goodwill and intangible
assets acquired in a business combination. SFAS 141 requires recognition of
goodwill as an asset, but SFAS 142 mandates that goodwill and other intangible
assets with indefinite lives will no longer be amortized after December 2001.
Under the new standards, these assets will be subject to annual impairment
tests using a fair-value-based approach in accordance with SFAS 142. The change
from an amortization approach to an impairment approach would apply to
previously recorded goodwill and other intangible assets as well as goodwill
and other intangible assets arising from acquisitions completed after June 30,
2001. Intangible assets with finite lives will continue to be amortized over
their useful lives.

The Company will apply the new rules on accounting for goodwill and other
intangible assets beginning in the first quarter of 2002. Application of the
nonamortization provisions of SFAS 142 is expected to result in a decrease in
amortization of goodwill of $21.8 million in 2002. The Company performed the
first of the required impairment tests as of January 1, 2002. Based on current
market conditions, we believe the adoption of SFAS 142 on January 1, 2002 will
not result in a material write down of our goodwill and other intangible
assets. The application of the provisions of SFAS 141 will result in a
reclassification of $0.8 million of intangible assets as goodwill in the first
quarter of 2002.

In October 2001, the FASB issued SFAS No. 144 (SFAS 144), Accounting
for the Impairment or Disposal of Long-Lived Assets, which applies to
financial statements issued for fiscal years beginning after December 15, 2001.
SFAS 144 supersedes SFAS

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No. 121, Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of, and portions of Accounting Principles
Board Opinion 30, Reporting the Results of Operations. SFAS 144 provides a
single accounting model for long-lived assets, other than goodwill and other
intangibles, to be disposed of and addresses significant implementation issues.
The Company will adopt SFAS 144 in the first quarter of 2002. The adoption of
SFAS 144 is not expected to have a material impact on the Companys operating
results or financial condition.

2. Business Combinations

Pooling-of-Interests Acquisition

In December 1999, the Company acquired Influence, a developer of analytic
applications for eBusiness. The merger was accounted for using the
pooling-of-interests method of accounting and as such the Companys historical
financial results for all dates and periods prior to the merger have been
restated to reflect the merger. In connection with the acquisition, the Company
issued 2,598,168 shares of its common stock to Influences shareholders in
exchange for all of Influences outstanding common stock. All outstanding
options to purchase Influences common stock were converted into options to
purchase 574,104 shares of Informatica common stock. In connection with the
business combination, the Company incurred merger related costs of
approximately $2.1 million, which consisted primarily of fees for investment
banking, legal and accounting services incurred in conjunction with the merger.

Purchase Acquisitions

In January 2001, the Company acquired syn-T-sys B.V. and syn-T-sys N.V.
(syn-T-sys), distributors of Informatica products in the Netherlands and
Belgium, respectively. The agreement was structured as a share purchase and
accounted for as a purchase transaction. Under the terms of the agreement, the
Company issued 44,161 shares of the Companys common stock, valued at
approximately $1.5 million, and paid cash consideration of approximately $5.8
million in exchange for the outstanding shares of capital stock of syn-T-sys.
The purchase price of the transaction, including related expenses, was
approximately $7.5 million, which was allocated to the acquired assets and
liabilities based on the estimated fair values as of the date of the
acquisition. Amounts allocated to goodwill of $6.8 million are being amortized
on a straight-line basis over a two-year period. In accordance with SFAS 142,
goodwill will no longer be amortized after December 2001. As of December 31,
2001, accumulated amortization and amortization expense was approximately $3.4
million related to the syn-T-sys acquisition. The results of operations of
syn-T-sys have been included in the Companys results of operations since the
acquisition date. Pro forma results of operations have not been presented since
the effects of the acquisition were not material to the Companys consolidated
financial position, results of operations or cash flows for the periods
presented.

In June 2001, the Company acquired Informatica Partners, a distributor of
Informatica products in France. The agreement was structured as a share
purchase and accounted for as a purchase transaction. Under the terms of the
agreement, the Company issued 49,543 shares of the Companys common stock,
valued at approximately $0.9 million, and paid cash consideration of
approximately $4.0 million in exchange for the outstanding shares of capital
stock of Informatica Partners. As part of the agreement, 6,907 of the shares
issued pursuant to the acquisition were placed in escrow contingent on the
continued employment of certain employees and were not included in the purchase
price. The purchase
price of the transaction, including related expenses, was approximately $5.0
million, which was allocated to the acquired assets and liabilities based on
the estimated fair values as of the date of the acquisition. Amounts allocated
to goodwill of $4.8 million are being amortized on a straight-line basis over a
two-year period. In accordance with SFAS 142, goodwill will no longer be
amortized after December 2001. As of December 31, 2001, accumulated
amortization and amortization expense was approximately $1.4 million related to
the Informatica Partners acquisition. The results of operations of Informatica
Partners have been included in the Companys results of operations since the
acquisition date.

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The following unaudited pro forma adjusted summary reflects the Companys
condensed consolidated results of operations for the year ended December 31,
2001 and 2000, assuming Informatica Partners had been acquired at the beginning
of the pro forma periods presented and is not intended to be indicative of
future results:

|                                                                    |  |                                               |         |      |  |   |         |  
|------------------------------------------------------------------- |  | --------------------------------------------- | ------- | ---- |  | - | ------- | -
|                                                                    |  | Year ended December
        31,              
|                                                                    |  |                                              
|                                                                    |  | 2001                                          |         | 2000
|                                                                    |  |                                               |         |     
|                                                                    |  | (in thousands, except
        per share data)
|Pro forma
          adjusted total revenue                          |  | $                                             | 197,831 |      |  | $ | 156,773 |  
|Pro forma
          adjusted net loss                               |  |                                               | (46,604 | )    |  |   | (15,076 | )
|Pro forma
          adjusted net loss per share  basic and diluted |  | $                                             | (0.60   | )    |  | $ | (0.22   | )

In February 2000, the Company acquired Delphi Solutions AG (Delphi), a
distributor of Informatica products in Switzerland. The agreement was
structured as a share purchase and accounted for as a purchase transaction. The
estimated purchase price of $9.2 million included payments associated with 1999
revenues and projections for 2000 revenues. The first payment of approximately
$3.6 million was paid in February 2000, and the second payment of approximately
$4.3 million was paid in January 2001. In June 2001, we paid the final payment
under the share purchase agreement. As a result, the purchase price and related
goodwill were reduced by $0.6 million. Following the final payment in June
2001, the Company is no longer required to hold a certificate of deposit for
$8.1 million, which was classified as restricted cash on the Companys
consolidated balance sheet until July 2001. The purchase price of the
transaction was allocated to the acquired assets and liabilities based on the
estimated fair values as of the date of the acquisition. Amounts allocated to
goodwill of $8.4 million, net of the $0.6 million reduction, are being amortized on a straight-line basis over a
two-year period. As of December 31, 2001, accumulated amortization was
approximately $7.8 million related to the Delphi acquisition and amortization
expense for the year was $ 4.1 million. As part of this agreement, the Company
is required to hold a certificate of deposit for $8.1 million that was
classified as restricted cash on the Companys balance sheet until July 2001.
The results of operations of Delphi have been included in the Companys results
of operations since the acquisition date. Pro forma results of operations have
not been presented since the effects of the acquisition were not material to
the Companys consolidated financial position, results of operations or cash
flows for the periods presented.

In August 2000, the Company completed the acquisition of Zimba in a
transaction accounted for as a purchase transaction. Zimba is a leading
provider of e-business analytic solutions that enable mobile professionals with
real-time access to corporate and external information through wireless
devices, voice recognition technology and the Internet. Under the terms of the
agreement, the Company issued 507,544 shares of common stock in exchange for
the outstanding shares of common stock of Zimba. In addition, all the
outstanding options to purchase Zimba common stock were automatically converted
into options to purchase the Companys common stock based on the conversion
ratio in the agreement with a corresponding adjustment to their respective
exercise prices. The total purchase price, including assumed liabilities and
related expenses, was $26.0 million, of which $2.1 million was allocated to
identifiable intangible assets, including core technology of $1.4 million,
acquired workforce of $0.4 million and patents of $0.3 million, $0.6 million
was allocated to assumed liabilities and related expenses, and the balance of
$18.2 million was allocated to goodwill. Goodwill and other intangible assets
are being amortized on a straight-line basis over two years for the acquired
workforce and over three years for the core technology, patents and goodwill.
Purchased in-process research and development of $5.1 million was expensed in
the third quarter of 2000 because the in-process technology had not reached
technological feasibility and had no alternative uses. The value of the
purchased in-process research and development was computed using a discounted
cash flow analysis based on managements estimates of future revenues, cost of
revenues and operating expenses related to the products and technologies
acquired from Zimba. All assumed options of Zimba were valued at fair value and
included in the purchase price, net of the intrinsic value of any unvested
options, which were included in deferred stock-based compensation as a
component of stockholders equity and are being amortized over the remaining
vesting period. The results of operations of Zimba have been included in the
Companys results of operations since the acquisition date. As of December 31,
2001, accumulated amortization was approximately $9.1 million related to the
Zimba acquisition and amortization expense for the year was $6.8 million. The
following unaudited pro forma adjusted summary reflects the condensed
consolidated results of operations for the year ended December 31, 2000 and
1999, assuming Zimba had been acquired at the beginning of the pro forma
periods presented and is not intended to be indicative of future results:

|                                                          |  |                                       |         |      |  |   |        |  
|--------------------------------------------------------- |  | ------------------------------------- | ------- | ---- |  | - | ------ | -
|                                                          |  | Year Ended                           
|                                                          |  | December 31,                         
|                                                          |  |                                      
|                                                          |  | 2000                                  |         | 1999
|                                                          |  |                                       |         |     
|                                                          |  | (in thousands, except per share data)
|Pro forma adjusted total revenue                          |  | $                                     | 154,058 |      |  | $ | 62,379 |  
|Pro forma adjusted net loss                               |  | $                                     | (15,322 | )    |  | $ | (9,378 | )
|Pro forma adjusted net loss per share  basic and diluted |  | $                                     | (0.22   | )    |  | $ | (0.20  | )

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3. Asset Acquisitions

In April 2000, the Company announced a strategic alliance with
PricewaterhouseCoopers (PwC) to jointly develop, market, sell and support
analytic application products. In connection with the agreement relating to the
strategic alliance, PwC received 818,276 shares of the Companys common stock.
The total purchase price, including related expenses, was approximately $31.8
million, which was allocated to goodwill and various identifiable intangible
assets, including goodwill of $22.9 million, core technology of $1.7 million
and acquired workforce and consultants of $5.0 million. Goodwill and other
identifiable intangible assets are being amortized on a straight-line basis
over two years for the acquired workforce and consultants and over three years
for the core technology and goodwill. Purchased in-process research and
development of $2.2 million was expensed in the second quarter of 2000 because
the in-process technology had not reached technological feasibility and had no
alternative uses. The value of the purchased in-process research and
development was computed using a discounted cash flow analysis based on
managements estimates of future revenues, cost of revenues and operating
expenses related to the products and technologies acquired from PwC. As of
December 31, 2001, accumulated amortization was approximately $18.7 million
related to the PwC strategic alliance and amortization expense for the year was
$10.7 million.

In November 2000, the Company completed an intellectual property transfer
agreement with certain individuals (QRB Developers). The acquisition was
accounted for as a purchase transaction. The total purchase price, including
related expenses, was approximately $4.1 million, of which $0.1 million was
allocated to the acquired workforce and $2.7 million was allocated to goodwill.
Goodwill and other identifiable intangible assets are being amortized on a
straight-line basis over three years for goodwill and over two years for the
acquired workforce. Purchased in-process research and development of $1.3
million was expensed in the fourth quarter of 2000 because the in-process
technology had not reached technological feasibility and had no alternative
uses. The value of the purchased in-process research and development was
computed using a discounted cash flow analysis based on managements estimates
of future revenues, cost of revenues and operating expenses related to the
technologies acquired from QRB Developers. As of December 31, 2001, accumulated
amortization was approximately $1.1 million related to the QRB Developers
acquisition and amortization expense for the year was $ 0.9 million.

4. Investments

The Companys marketable securities are classified as available-for-sale
as of the balance sheet date and are reported at fair value with unrealized
gains and losses reported as a separate component of accumulated other
comprehensive income in stockholders equity. Realized gains and losses and
permanent declines in value, if any, on available-for-sale securities will be
reported in other income or expense as incurred. No realized gains and losses
were reported for the year ended December 31, 2001.

The
available-for-sale securities consist of the following as of December 31,
2001:

|                                |  |                |         |            |  |            |     |            |  |   |     |   |  |   |         | 
|------------------------------- |  | -------------- | ------- | ---------- |  | ---------- | --- | ---------- |  | - | --- | - |  | - | ------- | 
|                                |  |                |         |            |  | Gross      |     | Gross      |  |   |     |  
|                                |  | Amortized      |         | Unrealized |  | Unrealized |     |            |  |  
|                                |  | Cost           |         | Gains      |  | Losses     |     | Fair Value
|                                |  |                |         |            |  |            |     |           
|                                |  | (in thousands)
|Money market funds              |  | $              | 86,343  |            |  | $          |    |            |  | $ |    |   |  | $ | 86,343  | 
|Corporate notes and bonds       |  |                | 20,086  |            |  |            | 303 |            |  |   | (8  | ) |  |   | 20,381  | 
|Municipal securities            |  |                | 11,600  |            |  |            |    |            |  |   |    |   |  |   | 11,600  | 
|U.S. Government notes and bonds |  |                | 57,451  |            |  |            | 129 |            |  |   | (6  | ) |  |   | 57,573  | 
|                                |  |                |         |            |  |            |     |            |  |   |     |   |  |   |         | 
|                                |  | $              | 175,480 |            |  | $          | 432 |            |  | $ | (14 | ) |  | $ | 175,897 | 
|                                |  |                |         |            |  |            |     |            |  |   |     |   |  |   |         | 

As of December 31, 2001, investments of $98.0 million are classified as cash
and cash equivalents, $16.1 million are classified as short-term investments
due within one year, and $61.9 million are classified as long-term investments
due within two years.

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5. Property and Equipment

Property and equipment consists of the following:

|                                               |  |                |        |      |  |   |        |  
|---------------------------------------------- |  | -------------- | ------ | ---- |  | - | ------ | -
|                                               |  | December 31,  
|                                               |  |               
|                                               |  | 2001           |        | 2000
|                                               |  |                |        |     
|                                               |  | (in thousands)
|Computer and office equipment                  |  | $              | 12,811 |      |  | $ | 7,208  |  
|Furniture and fixtures                         |  |                | 6,675  |      |  |   | 549    |  
|Leasehold improvements                         |  |                | 33,994 |      |  |   | 26,335 |  
|Capital work-in-progress                       |  |                | 6,032  |      |  |   |       |  
|                                               |  |                |        |      |  |   |        |  
|                                               |  |                | 59,512 |      |  |   | 34,092 |  
|Less accumulated depreciation and amortization |  |                | (6,332 | )    |  |   | (2,961 | )
|                                               |  |                |        |      |  |   |        |  
|                                               |  | $              | 53,180 |      |  | $ | 31,131 |  
|                                               |  |                |        |      |  |   |        |  

Included in property and equipment are assets acquired under capital lease
obligations with an original cost of approximately
$0.9 million. Accumulated amortization of
these assets was $0.9 million and $0.8 million at December 31, 2001 and 2000,
respectively. The related amortization is included with depreciation expense.

During the year ended December 31, 2001, the Company recorded a charge of
$1.5 million related to the write-off of leasehold improvements and furniture
and fixtures at excess facilities. See Note 8 of Notes to Consolidated
Financial Statements.
Capital work-in-progress consists of capitalized costs relating to software
acquired, developed or modified solely to meet the Companys internal
requirements, pursuant to SOP No. 98-1. The software is expected to be placed
in service in 2002, at which time amortization over a period of five years will
commence.

6. Goodwill and other intangible assets

Goodwill and other intangible assets (See Note 2) consist of the
following:

|                              |  |                |         |      |  |   |         |  
|----------------------------- |  | -------------- | ------- | ---- |  | - | ------- | -
|                              |  | December 31,  
|                              |  |               
|                              |  | 2001           |         | 2000
|                              |  |                |         |     
|                              |  | (in thousands)
|Goodwill                      |  | $              | 63,841  |      |  | $ | 52,735  |  
|Other intangible assets       |  |                | 8,919   |      |  |   | 8,919   |  
|                              |  |                |         |      |  |   |         |  
|                              |  |                | 72,760  |      |  |   | 61,654  |  
|Less accumulated amortization |  |                | (41,539 | )    |  |   | (14,163 | )
|                              |  |                |         |      |  |   |         |  
|                              |  | $              | 31,221  |      |  | $ | 47,491  |  
|                              |  |                |         |      |  |   |         |  

7. Lease Obligations

In February 1998, the Company entered into an thirty-six month equipment
financing agreement, at an interest rate of 3.19%, that provided up to $1.5
million for the purchase of property and equipment. Total borrowings under
these agreements amounted to $0.9 million. The outstanding principal balance of
$83,000 as of December 31, 2000 and a supplemental interest portion of 20% of
the original purchase price was paid in January 2001.

In February 2000, the Company entered into two lease agreements for new
corporate headquarters in Redwood City, California. The Company occupied the
new corporate headquarters in August 2001. The lease expires twelve years after
occupancy, or August 2013. The Company paid for tenant improvements, primarily
related to the exercise of build-to-suit options under the facility lease
agreement. The total estimated cost of leasehold improvements for this facility
through its completion is approximately $34.2 million, which is subject to
change. Approximately $31.7 million has been expended on these activities
through December 31, 2001 with the balance expected to be incurred by June
2002. As part of these agreements, the Company purchased certificates of
deposit totaling $12.2 million as a security deposit for the first years lease
payments until certain financial covenants are met. These certificates of
deposit are classified as long-term restricted cash on the Companys
consolidated balance sheet.

In February 2001, the Company entered into a fourteen-month lease
agreement in Palo Alto, California covering approximately 14,000 square feet of
space at approximately $88,000 per month to meet its space requirements until
the new corporate headquarters in Redwood City, California was completed in
August 2001. The remaining obligations under this lease agreement were included
in the restructuring charges related to the consolidation of the four San
Francisco bay area locations into the Redwood City facility. See Note 6 for
information about the restructuring charges.

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The Company leases certain office facilities under various noncancelable
operating leases, including those described above, which expire at various
dates through 2013 and require the Company to pay operating costs, including
property taxes, insurance and maintenance. Rent expense was $15.8 million, $4.8
million and $2.0 million for the years ended December 31, 2001, 2000 and 1999,
respectively. Operating lease payments in the table below include approximately $8.5 million for operating lease commitments for
facilities that are included in restructuring charges (Note 8).

Future minimum lease payments under noncancelable operating leases with
original terms in excess of one year are summarized as follows:

|                             |      |                |           |        | 
|---------------------------- | ---- | -------------- | --------- | ------ | 
|                             |      |                | Operating
|                             |      |                | Leases   
|                             |      |                |          
|Years ending December 31:    |      | (in thousands)
|                             |      |               
|                             | 2002 |                | $         | 16,018 | 
|                             | 2003 |                |           | 16,512 | 
|                             | 2004 |                |           | 17,023 | 
|                             | 2005 |                |           | 17,566 | 
|                             | 2006 |                |           | 17,680 | 
|Thereafter                   |      |                | 109,606   |       
|                             |      |                |           |       
|Total minimum lease payments |      | $              | 194,405   |       
|                             |      |                |           |       

8. Restructuring Charges

In July 2001, the Company announced its plan to consolidate its four San
Francisco Bay Area locations into its new facility in Redwood City. As a result
of the consolidation of its facilities, the Company recorded total restructuring
charges of approximately $12.1 million in 2001, which was classified as an
operating expense.

The Company recorded a restructuring charge of approximately $10.6 million
related to the consolidation of excess leased facilities in the San Francisco
Bay Area and Texas. These costs include remaining lease liabilities and
brokerage fees reduced by estimated sublease income over the estimated sublease
period or the remaining lease terms through 2007. The estimated costs of
consolidating excess leased facilities, including estimated costs to sublease,
were based on market information and trend analyses provided by a commercial
real estate brokerage firm. Property and equipment from these facilities that
was disposed of or removed from operations resulted in a charge of $1.5 million
and consisted primarily of leasehold improvements and furniture and fixtures.
Net cash payments through December 31, 2001 related to the consolidation of
excess facilities amounted to $1.3 million. Actual future cash requirements may
differ from the restructuring liability balances at December 31, 2001, if the
Company is unable to sublease the excess leased facilities or actual sublease
income is different from estimates. As of December 31, 2001, $9.3 million of
lease termination costs, net of anticipated sublease income related to
facilities to be subleased, remains accrued and is expected to be utilized by
2007.

A summary of the restructuring charges along with the remaining reserves
is outlined as follows:

|                                  |  |                |        |          |  |          |       |              |  |   |        |   |  |                |       | 
|--------------------------------- |  | -------------- | ------ | -------- |  | -------- | ----- | ------------ |  | - | ------ | - |  | -------------- | ----- | 
|                                  |  |                |        |          |  |          |       |              |  |   |        |   |  | Restructuring 
|                                  |  |                |        |          |  |          |       |              |  |   |        |   |  | Liabilities at
|                                  |  | Total          |        | Cash     |  | Non-cash |       | December 31,
|                                  |  | Charges        |        | Payments |  | Charges  |       | 2001        
|                                  |  |                |        |          |  |          |       |             
|                                  |  | (in thousands)
|Property and equipment write-offs |  | $              | 1,497  |          |  | $        |      |              |  | $ | (1,497 | ) |  | $              |      | 
|Excess leased facilities          |  |                | 10,599 |          |  |          | 1,267 |              |  |   |       |   |  |                | 9,332 | 
|                                  |  |                |        |          |  |          |       |              |  |   |        |   |  |                |       | 
|                                  |  | $              | 12,096 |          |  | $        | 1,267 |              |  | $ | (1,497 | ) |  | $              | 9,332 | 
|                                  |  |                |        |          |  |          |       |              |  |   |        |   |  |                |       | 

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9. Stockholders Equity

Common Stock

On April 29, 1999, the Company completed an initial public offering in
which it sold 12,000,000 shares of common stock, including 1,000,000 shares in
connection with the exercise of the underwriters over-allotment option, at
$4.00 per share. The Company received $43.5 million in cash, net of
underwriting discounts, commissions and other offering costs.

On October 3, 2000, the Company completed a follow-on public offering in
which it sold 4,750,000 shares of common stock, including 750,000 shares in
connection with the exercise of the underwriters over-allotment option, at
$42.50 per share. The Company received $191.0 million in cash, net of
underwriting discounts, commissions and other offering costs.

Stock Splits

On each of February 18, 2000 and November 29, 2000, the Company effected a
two-for-one split of its common stock to be effected in the form of a stock
dividend. The stock split was effected by distribution of one share of the
Companys common stock for each share of common stock held by each stockholder
of record. All references in the financial statements to number of shares and
per share amounts of the Companys common stock have been restated for the
effect of the stock splits.

Stock Option Plans

1993 and 1996 Flexible Stock Incentive Plans

The Companys 1993 and 1996 Flexible Stock Incentive Plans (the Stock
Plans), in effect through our initial public offering, authorized the granting
of 16,909,000 incentive and non-qualified common stock options to employees,
directors, and consultants at exercise prices no less than 100% and 85%,
respectively, of the fair market value of the common stock on the grant date,
as determined by the Board of Directors. Options granted are exercisable over a
maximum term of ten years and generally vest over a period of up to four years.
In the event option holders cease to be employed by the Company, all unvested
options are forfeited and all vested options may be exercised within a 90 day
period after termination; under the restricted portion of the plans, the
Company also has the right to repurchase at the original purchase price any
unvested shares if the holder is no longer employed by the Company. As of
December 31, 1999, no outstanding common shares were subject to such repurchase
rights. Options that are canceled under the 1996 Stock Plan are available for
future grants under the 1999 Stock Incentive Plan. There were no shares
available for option grants under the 1996 Stock Plan at December 31, 2001.

1999 Stock Incentive Plan

The Companys stockholders approved the 1999 Stock Incentive Plan (the
1999 Incentive Plan) in April 1999 under which 2,600,000 shares have been
reserved for issuance. In addition, any shares not issued under the 1996 Stock
Plan are also available for grant. The number of shares reserved under the
Incentive Plan automatically increases annually beginning on January 1, 2000 by
the lesser of 16,000,000 shares or 5% of the total amount of fully diluted
shares of common stock outstanding as of such date. Under the 1999 Incentive
Plan, eligible employees may purchase stock options, stock appreciation rights,
restricted shares and stock units. The exercise price for incentive stock
options and non-qualified options may not be less than 100% and 85%,
respectively, of the fair value of common stock at the option grant date.
Options granted are exercisable over a maximum term of ten years from the date
of the grant and generally vest over a period of four years. As of December 31,
2001, the Company had 11,505,711 shares available for future issuance under
the 1999 Incentive Plan.

1999 Non-Employee Director Stock Incentive Plan

The Companys stockholders adopted the 1999 Non-Employee Director Stock
Option Incentive Plan (the Directors Plan) in April 1999 under which
1,000,000 shares have been reserved for issuance. Each non-employee joining the
Board of Directors following the completion of the initial public offering will
automatically receive options to purchase 100,000 shares of common stock at an
exercise price per share equal to the fair market value of the common stock.
These options are exercisable over a maximum term of five years and will vest
in four equal annual installments on each yearly anniversary from the date of
the grant. In addition, each non-employee director, who has been a member of
the Board for at least six months prior to each annual stockholders meeting,
will automatically receive options to purchase 20,000 shares of common stock at
each such meeting. Each option will have an exercise price equal to the fair
value of the common stock on the automatic grant date, a maximum term of five
years and will vest on the first

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anniversary of the grant date. As of December 31, 2001, the Company has
720,000 shares available for future issuance under the Directors Plan.

2000 Employee Stock Incentive Plan

In January 2000, the Board of Directors approved the 2000 Employee Stock
Incentive Plan (the 2000 Incentive Plan) under which 1,600,000 shares have
been reserved for issuance. Under the 2000 Incentive Plan, eligible employees
and consultants may purchase stock options, stock appreciation rights,
restricted shares and stock units. The exercise price for non-qualified options
may not be less than 85% of the fair value of common stock at the option grant
date. Options granted are exercisable over a maximum term of ten years from the
date of the grant and generally vest over a period of four years from the date
of the grant. As of December 31, 2001, the Company had 1,502,558 shares
available for future issuance under the 2000 Incentive Plan.

Influence 1996 Incentive Stock Option Plan

In connection with the acquisition of Influence in 1999, as discussed in
Note 2, the Company converted options to purchase shares of Influence common
stock into options to purchase 574,104 shares of the Companys common stock.
The number of shares of the Companys common stock issuable under each option
and the exercise price for each grant were adjusted by an exchange ratio. The
Company assumed the Influence Stock Incentive Plan (Influence Plan) under
which the options had been originally granted, however, no further options will
be granted under the Influence Plan. The converted options continue to be
subject to the terms of the Influence Plan. The Influence Plan provided for the
granting of incentive stock options and non-qualified stock options. The
exercise price of all options granted prior to the acquisition were determined
by the Influence Board of Directors and were not less than the fair market
value on the date of the grant. The options generally expire seven years from
the date of the grant and vest over a period of four years from the date of the
grant.

Zimba 1999 Stock Option Plan

In connection with
the acquisition of Zimba, as discussed in Note 2, the
Company converted options to purchase shares of Zimba common stock into options
to purchase 91,176 shares of the Companys common stock. The number of shares
of the Companys common stock issuable under each option and the exercise price
for each grant were adjusted by an exchange ratio. The Company assumed the
Zimba 1999 Stock Option Plan (Zimba Plan) under which the options had been
originally granted, however, no further options will be granted under the Zimba
Plan. The converted options continue to be subject to the terms of the Zimba
Plan. The Zimba Plan provided for the granting of incentive stock options and
non-qualified stock options. The exercise price of all options granted prior to
the acquisition were determined by the Zimba Board of Directors and were not
less than the fair market value on the date of the grant. Generally, options
granted were immediately exercisable and such resulting shares issued under the
Zimba Plan were subject to certain repurchase rights, also assumed by the
Company. As of December 31, 2001, there were 71 shares of the Companys common
stock issued pursuant to the Zimba Plan that were subject to repurchase by the
Company. These repurchase rights generally lapse over a four-year period from
the date of grant. The options generally expire ten years from the date of the
grant.

Stock Option Plan Activity

A summary of the Companys stock option activity under all plans is set forth
below:

|                                 |           |  |            |            |                |   |          |       | 
|-------------------------------- | --------- |  | ---------- | ---------- | -------------- | - | -------- | ----- | 
|                                 |           |  |            |            |                |   | Weighted
|                                 |           |  |            |            |                |   | Average 
|                                 |           |  | Number of  |            | Exercise Price
|                                 |           |  | Shares     |            | per Share     
|                                 |           |  |            |            |               
|Outstanding at December 31, 1998 |           |  | 12,591,380 |            |                |   | .73      |      
|                                 | Granted   |  |            | 8,334,382  |                |   |          | 10.48 | 
|                                 | Exercised |  |            | (3,138,792 | )              |   |          | .40   | 
|                                 | Canceled  |  |            | (1,373,652 | )              |   |          | 2.63  | 
|                                 |           |  |            |            |                |   |          |      
|Outstanding at December 31, 1999 |           |  | 16,413,318 |            |                |   | 5.60     |      
|                                 | Granted   |  |            | 6,680,460  |                |   |          | 34.34 | 
|                                 | Exercised |  |            | (4,549,257 | )              |   |          | 2.32  | 
|                                 | Canceled  |  |            | (2,725,723 | )              |   |          | 11.15 | 
|                                 |           |  |            |            |                |   |          |      
|Outstanding at December 31, 2000 |           |  | 15,818,798 |            |                |   | 17.73    |      
|                                 | Granted   |  |            | 3,847,350  |                |   |          | 17.75 | 
|                                 | Exercised |  |            | (1,936,001 | )              |   |          | 2.76  | 
|                                 | Canceled  |  |            | (9,995,709 | )              |   |          | 28.19 | 
|                                 |           |  |            |            |                |   |          |      
|Outstanding at December 31, 2001 |           |  | 7,734,438  |            |                | $ | 7.96     |      
|                                 |           |  |            |            |                |   |          |      

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The following table summarizes information concerning currently
outstanding and exercisable options as of December 31, 2001:

|                          |  |                     |           |                     |  |             |      |          |  |           |       |  |  |          |           |  |  |   |       | 
|------------------------- |  | ------------------- | --------- | ------------------- |  | ----------- | ---- | -------- |  | --------- | ----- |  |  | -------- | --------- |  |  | - | ----- | 
|                          |  | Options Outstanding |           | Options Exercisable
|                          |  |                     |           |                    
|                          |  |                     |           |                     |  | Weighted    |      |          |  |           |       | 
|                          |  |                     |           |                     |  | Average     |      | Weighted |  |           |       |  |  | Weighted
|                          |  |                     |           |                     |  | Remaining   |      | Average  |  |           |       |  |  | Average 
|                          |  |                     |           |                     |  | Contractual |      | Exercise |  |           |       |  |  | Exercise
|Range of                  |  |                     |           |                     |  | Life        |      | Price    |  |           |       |  |  | Price   
|Exercise Prices           |  | Number              |           | (Years)             |  | per Share   |      | Number   |  | per Share
|                          |  |                     |           |                     |  |             |      |          |  |          
|$0.03
          - $1.00   |  |                     | 2,294,869 |                     |  |             | 5.67 |          |  | $         | 0.52  |  |  |          | 2,230,014 |  |  | $ | 0.51  | 
|$1.38
          - $2.69   |  |                     | 1,843,392 |                     |  |             | 6.72 |          |  | $         | 2.25  |  |  |          | 1,141,261 |  |  | $ | 2.20  | 
|$3.00
          - $14.04  |  |                     | 1,576,048 |                     |  |             | 8.42 |          |  | $         | 7.93  |  |  |          | 418,114   |  |  | $ | 7.99  | 
|$14.31
          - $23.00 |  |                     | 1,229,318 |                     |  |             | 8.21 |          |  | $         | 17.72 |  |  |          | 246,082   |  |  | $ | 18.80 | 
|$23.18
          - $48.63 |  |                     | 790,811   |                     |  |             | 8.20 |          |  | $         | 27.72 |  |  |          | 355,243   |  |  | $ | 27.53 | 
|                          |  |                     |           |                     |  |             |      |          |  |           |       |  |  |          |           |  |  |   |       | 
|                          |  |                     | 7,734,438 |                     |  |             | 7.14 |          |  | $         | 7.96  |  |  |          | 4,390,714 |  |  | $ | 4.87  | 
|                          |  |                     |           |                     |  |             |      |          |  |           |       |  |  |          |           |  |  |   |       | 

Stock-Based Compensation

In connection with the grant of certain stock options to employees, the
Company recorded deferred stock-based compensation of $0.8 million in 1999
prior to the Companys initial public offering and $2.8 million in 2000,
representing the difference between the deemed fair value of the Companys
common stock and the option exercise price at the date of grant. This deferred
stock-based compensation is being amortized to operations over a four-year
vesting period using the graded vesting method. The Company also recorded
deferred stock-based compensation of $0.3 million in 2000 relating to the
issuance of options to consultants. This amount was computed using the
Black-Scholes option valuation model, and the related amortization is being
charged to operations over the related term of these consulting agreements. In
1999 and 2000, the Company recorded a total of $1.9 million of deferred stock-based
compensation in conjunction with the assumption of certain stock options in the
acquisitions of Influence and Zimba, which is being amortized over four years.
In 2001, we recorded a reduction for deferred stock-based
compensation of $2.1 million of which $1.9
million was in connection with a cancelled bonus agreement related to cancelled
stock options. Deferred stock-based compensation is presented as a reduction of
stockholders equity. Amortization of stock-based compensation amounted to $1.0
million, $1.5 million and $0.7 million in 2001, 2000 and 1999, respectively.

1999 Employee Stock Purchase Plan

The stockholders adopted the 1999 Employee Stock Purchase Plan (the
Purchase Plan) in April 1999 under which 1,600,000 shares have been reserved
for issuance. The number of shares reserved under the Purchase Plan
automatically increases beginning on January 1 of each year by the lesser of
6,400,000 shares or 2% of the total amount of fully diluted common stock shares
outstanding on such date. Under the Purchase Plan, eligible employees may
purchase common stock in an amount not to exceed 10% of the employees cash
compensation. The purchase price per share will be 85% of the lesser of the
common stock fair market value either at the beginning of a rolling two-year
offering period or at the end of each six-month purchase period within the
two-year offering period. During 2001, there were 945,398 shares issued under
the Purchase Plan at a weighted-average price of $6.04 per share. As of
December 31, 2001, the Company has 2,919,777 shares available for future
issuance under the Purchase Plan.

Pro Forma Effect of Stock-based Compensation

Pro forma information regarding results of operations and net loss per
share is required by SFAS 123, which also requires that the information be
determined as if the Company had accounted for its employee stock options under
the fair value method of SFAS 123.

For all grants that were granted prior to the Companys initial public
offering in April 1999, the fair value of these options was estimated at the
date of the grant using a Black-Scholes option pricing model with the following
weighed-average assumptions: a risk-free interest rate of 5.5% and 5.0% for
1999 and 1998, respectively; no dividend yield or volatility factors of the
expected market price of the Companys common stock; and a weighted-average
expected life of the option of five years. The fair value for the options
granted subsequent to the Companys initial public offering was estimated at
the date of grant using a Black-Scholes option pricing model using the
following weighted-average assumptions: a risk-free interest rate of 4.6%, 6.2%
and 5.5% for 2001, 2000 and 1999, respectively; a volatility factor of the
expected market price of the Companys common stock of 127% for 2001 and 100%
for 2000 and 1999; no dividend yield; and a weighted-average expected life of
the option of 4.5 years for 2001 and 5 years for 2000 and 1999, respectively.

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The fair value of the shares granted under the Purchase Plan is estimated
using the Black-Scholes option pricing model with the following
weighted-average assumptions for 2001: a risk-free interest rate of 4.6%; a
volatility factor of the expected market price of the Companys common stock of
127%; no dividend yield; and a weighted-average expected life of approximately
six months.

Had compensation cost for the Companys stock-based compensation plans
been determined using the fair value at the grant dates for awards under those
plans calculated using the minimum value method of SFAS 123, the Companys net
loss and basic and diluted net loss per share would have been increased to the
pro forma amounts indicated below:

|                                                  |  |                                       |         |      |  |      |         |   |  |   |        |  
|------------------------------------------------- |  | ------------------------------------- | ------- | ---- |  | ---- | ------- | - |  | - | ------ | -
|                                                  |  | Year Ended December 31,              
|                                                  |  |                                      
|                                                  |  | 2001                                  |         | 2000 |  | 1999
|                                                  |  |                                       |         |      |  |     
|                                                  |  | (in thousands, except per share data)
|Net loss, as reported                             |  | $                                     | (44,980 | )    |  | $    | (13,516 | ) |  | $ | (1,495 | )
|Net loss, pro forma                               |  | $                                     | (50,570 | )    |  | $    | (78,891 | ) |  | $ | (9,989 | )
|Basic and diluted net loss per share, as reported |  | $                                     | (0.58   | )    |  | $    | (0.19   | ) |  | $ | (0.03  | )
|Basic and diluted net loss per share, pro forma   |  | $                                     | (0.65   | )    |  | $    | (1.13   | ) |  | $ | (0.21  | )

These pro forma amounts may not be representative of the effects on reported
income (loss) for future years as options vest over several years and
additional awards are generally made each year. The weighted average fair value
of options granted, which is the value assigned to the options under SFAS 123,
was $16.23, $23.23 and $9.08 for options granted during 2001, 2000 and 1999,
respectively. The weighted-average fair value of shares granted issued under
the Purchase Plan was $5.63 and $2.44 for 2001 and 2000, respectively.

Stock Option Exchange Program

In July 2001, the Company adopted a voluntary stock option exchange program for
its employees. Under the program, Informatica employees were given the option
to cancel outstanding stock options previously granted in exchange for a new
non-qualified stock option grant for an equal number of shares to be granted at
a future date, at least six months and one day from the cancellation date of
the exchanged options, which was September 14, 2001. Under the exchange
program, options to purchase approximately 7.9 million shares of the Companys
common stock were tendered and cancelled. The exercise price of these new
options will be equal to the fair market value of the Companys common stock on
the date of the grant, which is expected to be on or about March 15, 2002. The
new options will have terms and conditions that are substantially the same as
those of the cancelled options. The exchange program is not expected to result
in any additional compensation charges or variable plan accounting.

Stockholders Rights Plan

In October 2001, the Board of Directors adopted the Stockholder Rights
Plan and declared a dividend distribution of one common stock purchase right
for each outstanding share of common stock held on November 12, 2001. Each
right entitles the holder to purchase 1/1000th of a share of Series A Preferred
Stock of the Company, par value $0.001, at and exercise price of $90 per share.
The rights become exercisable in certain circumstances and are redeemable at
the Companys option, at an exercise price of $0.001 per right. The rights
expire on the earlier of November 12, 2011 or on the date of their redemption
or exchange. The Company may also exchange the rights for shares of common
stock under certain circumstances. The Stockholder Rights Plan was adopted to
protect stockholders from unfair or coercive takeover practices.

10. Notes Receivable from Stockholders

During 1995, certain officers of the Company purchased a total of
1,600,000 shares of the Companys common stock in exchange for promissory
notes. The notes accrued interest at 7.12% per annum, with interest and
principal payable on May 5, 2000. The notes were secured by the common shares
purchased by these officers. The principal and accrued interest on these notes
were repaid in June 2000.

11. Notes Payable to Stockholders

In 1997 and 1998, the Company issued promissory notes to stockholders in
exchange for cash advances and payment for services. These notes accrued
interest at the banks prime interest rate (8.5% at December 31, 1999) plus 2%
per annum, with a maximum rate of 10% per annum. Principal and accrued interest
on these notes at December 31, 1999 and 1998 were $3.4 million and $3.1
million, respectively. The principal and accrued interest on these notes were
repaid in February 2000.

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12. Income Taxes

The federal, state and foreign income tax provision is summarized as
follows:

|         |         |   |                         |       |      |   |       |       |  |   |     |     | 
|-------- | ------- | - | ----------------------- | ----- | ---- | - | ----- | ----- |  | - | --- | --- | 
|         |         |   | Year Ended December 31,
|         |         |   |                        
|         |         |   | 2001                    |       | 2000 |   | 1999 
|         |         |   |                         |       |      |   |      
|         |         |   | (in thousands)         
|Current: |         |   |                         |       |      |   |       |       |  |   |     |    
|         | Federal |   | $                       | 76    |      |   | $     | 2,111 |  |   | $   | 100 | 
|         | State   |   |                         | 55    |      |   |       | 101   |  |   |     | 185 | 
|         | Foreign |   |                         | 1,173 |      |   |       | 1,133 |  |   |     | 539 | 
|         |         |   |                         |       |      |   |       |       |  |   |     |    
|         |         | $ | 1,304                   |       |      | $ | 3,345 |       |  | $ | 824 |    
|         |         |   |                         |       |      |   |       |       |  |   |     |    

Influence elected to be taxed as an S-corporation under Subchapter S of
the Internal Revenue Code through December 15, 1999. Consequently, Influences
stockholders were taxed on their proportionate share of the taxable income and
no provision for income taxes has been provided in the statement of operations
for the period beginning January 1, 1999 through December 15, 1999. Influences
S-corporation status was terminated on December 15, 1999 when it was acquired
by the Company.

The components of income (loss) before income tax provision attributable
to domestic and foreign operations are as follows:

|         |  |                         |         |      |  |      |         |   |  |   |        |  
|-------- |  | ----------------------- | ------- | ---- |  | ---- | ------- | - |  | - | ------ | -
|         |  | Year Ended December 31,
|         |  |                        
|         |  | 2001                    |         | 2000 |  | 1999
|         |  |                         |         |      |  |     
|         |  | (in thousands)         
|Domestic |  | $                       | (36,103 | )    |  | $    | (12,745 | ) |  | $ | (1,437 | )
|Foreign  |  |                         | (7,573  | )    |  |      | 2,574   |   |  |   | 766    |  
|         |  |                         |         |      |  |      |         |   |  |   |        |  
|         |  | $                       | (43,676 | )    |  | $    | (10,171 | ) |  | $ | (671   | )
|         |  |                         |         |      |  |      |         |   |  |   |        |  

A reconciliation of the provision computed at the statutory federal income
tax rate to the income tax provision is as follows:

|                                              |  |                         |         |      |  |      |        |   |  |   |      |  
|--------------------------------------------- |  | ----------------------- | ------- | ---- |  | ---- | ------ | - |  | - | ---- | -
|                                              |  | Year Ended December 31,
|                                              |  |                        
|                                              |  | 2001                    |         | 2000 |  | 1999
|                                              |  |                         |         |      |  |     
|                                              |  | (in thousands)         
|Income tax benefit computed at statutory rate |  | $                       | (15,286 | )    |  | $    | (3,560 | ) |  | $ | (235 | )
|Federal alternative minimum taxes             |  |                         | 76      |      |  |      | 2,794  |   |  |   | 100  |  
|State taxes                                   |  |                         | 36      |      |  |      | 65     |   |  |   | 185  |  
|Foreign income tax                            |  |                         | 1,173   |      |  |      | 1,133  |   |  |   | 539  |  
|Non-deductible purchased technology           |  |                         | 5,506   |      |  |      | 1,791  |   |  |   |     |  
|Non-deductible merger costs                   |  |                         |        |      |  |      | 797    |   |  |   |     |  
|Amortization of deferred stock compensation   |  |                         | 363     |      |  |      |       |   |  |   |     |  
|Valuation allowance                           |  |                         | 8,724   |      |  |      |       |   |  |   | 235  |  
|Other                                         |  |                         | 712     |      |  |      | 325    |   |  |   |     |  
|                                              |  |                         |         |      |  |      |        |   |  |   |      |  
|                                              |  | $                       | 1,304   |      |  | $    | 3,345  |   |  | $ | 824  |  
|                                              |  |                         |         |      |  |      |        |   |  |   |      |  

Significant components of the Companys deferred tax assets are as
follows:

|                        |                                                     |                           |         |                |        |      |         |        |        | 
|----------------------- | --------------------------------------------------- | ------------------------- | ------- | -------------- | ------ | ---- | ------- | ------ | ------ | 
|                        |                                                     |                           |         | December 31,  
|                        |                                                     |                           |         |               
|                        |                                                     |                           |         | 2001           |        | 2000
|                        |                                                     |                           |         |                |        |     
|                        |                                                     |                           |         | (in thousands)
|Deferred tax assets:    |                                                     |                           |         |                |        |      |         |       
|                        | Net operating loss carryforwards                    |                           | $       | 27,783         |        |      | $       | 16,085 |       
|                        | Tax credit carryforwards                            |                           |         | 5,180          |        |      |         | 3,003  |       
|                        | Deferred revenue                                    |                           |         | 2,860          |        |      |         | 7,797  |       
|                        | Reserves and accrued costs not currently deductible |                           |         | 12,241         |        |      |         | 5,617  |       
|                        | Amortization of intangibles                         |                           |         | 1,979          |        |      |         | 5,862  |       
|                        |                                                     |                           |         |                |        |      |         |       
|                        |                                                     | Total deferred tax assets |         |                | 50,043 |      |         |        | 38,364 | 
|Valuation allowance     |                                                     |                           | (50,043 | )              |        |      | (38,364 | )     
|                        |                                                     |                           |         |                |        |      |         |       
|Net deferred tax assets |                                                     | $                         |        |                |        | $    |        |       
|                        |                                                     |                           |         |                |        |      |         |       

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SFAS 109 provides for the recognition of deferred tax assets if
realization of such assets is more likely than not. Based upon the weight of
available evidence, which includes the Companys historical operating
performance and the reported cumulative net losses in all prior years, the
Company has provided a full valuation allowance against its net deferred tax
assets. The valuation allowance increased by $11.7 million, $25.8 million and
$4.7 million during the years ended December 31, 2001, 2000 and 1999
respectively.

As of December 31, 2001, approximately $37.0 million of the valuation
allowance reflected above relates to the tax benefits of stock option
deductions, which will be credited to equity when realized.

At December 31, 2001, the Company had net operating loss carryforwards for
federal and state tax purposes of approximately $76.9 million and $14.8
million, respectively. The Company also had federal and state research and
development tax credit carryforwards of approximately $2.9 million and $2.5
million, respectively. The Company also had foreign tax credits of
approximately $0.6 million. The net operating loss and tax credit carryforwards
will expire at various dates beginning in 2002, if not utilized.

Utilization of net operating loss and tax credit carryforwards may be
subject to a substantial annual limitation due to the ownership change
limitations provided by the Internal Revenue Code and similar state provisions.
The annual limitation may result in the expiration of the net operating loss
and credit carryforwards before utilization.

13. Employee 401(K) Plan

The Companys employee savings and retirement plan is qualified under
Section 401 of the Internal Revenue Code. The Plan is available to all regular
employees on the Companys U.S. payroll and provides employees with tax
deferred salary deductions and alternative investment options. Employees may
contribute up to 25% of their salary up to the statutory prescribed annual
limit. The Company matches 50% per dollar contributed by eligible employees who
participate in the plan, up to a maximum of $1,500 per calendar year. The
Company expensed $0.8 million, $0.6 million and $0 in 2001, 2000 and
1999, respectively, for its matching contributions to the Plan. Contributions
made by the Company vest 100% upon contribution. In addition, the Plan provides
for discretionary contributions at the discretion of the Board of Directors.
No discretionary contributions have been made by the Company to date.

14. Segment Information

The Company has adopted SFAS No. 131 (SFAS 131), Disclosure About
Segments of an Enterprise and Related Information. The Company operates solely
in one segment, the development and marketing of enterprise analytics software.

The Company markets its products and services in the United States and in
foreign countries through its direct sales force and indirect distribution
channels. No customer accounted for more than 10% of revenue in 2001, 2000 or
1999. Net revenue from international customers accounted for 28%, 21% and 18%
of total net revenue in 2001, 2000 and 1999, respectively. There were no
significant long-lived assets held outside the United States.

Revenue was derived from customers in the following geographic areas:

|              |  |                         |         |      |  |      |         |  |  |   |        | 
|------------- |  | ----------------------- | ------- | ---- |  | ---- | ------- |  |  | - | ------ | 
|              |  | Year Ended December 31,
|              |  |                        
|              |  | 2001                    |         | 2000 |  | 1999
|              |  |                         |         |      |  |     
|              |  | (in thousands)         
|North America |  | $                       | 141,352 |      |  | $    | 122,367 |  |  | $ | 51,180 | 
|Europe        |  |                         | 51,721  |      |  |      | 30,725  |  |  |   | 11,055 | 
|Other         |  |                         | 4,279   |      |  |      | 966     |  |  |   | 144    | 
|              |  |                         |         |      |  |      |         |  |  |   |        | 
|              |  | $                       | 197,352 |      |  | $    | 154,058 |  |  | $ | 62,379 | 
|              |  |                         |         |      |  |      |         |  |  |   |        | 

15. Litigation

On November 8, 2001, a putative securities class action, captioned Neuman
v. Informatica Corporation et al., Civil Action No. 01-CV-9922, was filed
against us, certain company officers and directors (the individual
defendants), and six underwriters of our initial public
offering of common stock (IPO) on
April 28, 1999 and our follow-on offering of common stock on September 27, 2000, in the United
States District Court for
the Southern District of New York. The complaint alleges violations of
Section 11 of the Securities Act of 1933 (Securities Act)

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against all defendants,a violation of Section 15 of the Securities Act against the
individual defendants, and violations of Section 12(a)(2) of the Securities Act
and Section 10(b) of the Securities Exchange Act (and Rule 10b-5, promulgated
thereunder)against the underwriters. The complaint seeks unspecified damages
on behalf of a purported class of purchasers of common stock between April 28,
1999 and December 6, 2000 (the class period), on the grounds that the
prospectus(es) incorporated in the registration statement(s) for one or both
offerings failed to disclose, among other things, that (i) the underwriters had
solicited and received excessive and undisclosed commissions from certain
investors in exchange for which the underwriters allocated to those investors
material portions of the shares of the common stock the Company sold in the offering(s),
and (ii) the underwriters agreed to allocate shares of the common stock the Company sold
in the offering(s) to those customers in exchange for which the customers
agreed to purchase additional shares of the Companys common stock in the aftermarket
at pre-determined prices. No specific damages are claimed.

We are aware that similar allegations have been made in lawsuits relating
to more than 300 other initial public offerings conducted in 1999 and 2000.
Those cases have been consolidated for pretrial purposes before the Honorable
Judge Shira A. Scheindlin. Defendants time to respond to the complaints has
been stayed pending a plan for further coordination. We believe that we have
meritorious defenses to the claims against us, and we intend to defend
ourselves vigorously.

We are also subject to other various legal proceedings and claims, either
asserted or unasserted, which arise in the ordinary course of business. While
the outcome of these claims cannot be predicted with certainty, we
believe the claims are without merit and intend to defend the
actions vigorously. However, an unfavorable outcome could have a
material adverse effect on our operating results and financial
condition.

16. Subsequent Events (Unaudited)

On March 15, 2002, replacement options were granted to
participating employees under the Stock Option Exchange Program (See Note 9) for approximately 7.7 million
shares of common stock. Each participant received a one-for-one replacement option for each option included
in the exchange at an exercise price of $7.90 per share, which was the fair market value of our common stock
on March 15, 2002. The new options have terms and conditions that are substantially the same as those of the
cancelled options. The exchange program will not result in any additional compensation charges
or variable plan accounting.

17. Selected Quarterly Consolidated Financial Data (Unaudited)

|                                                                         |                         |   |                                               |        |          |   |               |        |              |   |         |        |   |   |         |        |  
|------------------------------------------------------------------------ | ----------------------- | - | --------------------------------------------- | ------ | -------- | - | ------------- | ------ | ------------ | - | ------- | ------ | - | - | ------- | ------ | -
|                                                                         |                         |   | Three Months Ended                           
|                                                                         |                         |   |                                              
|                                                                         |                         |   | March 31,                                     |        | June 30, |   | September 30, |        | December 31,
|                                                                         |                         |   |                                               |        |          |   |               |        |             
|                                                                         |                         |   | (in thousands,
        except per share data)
|2001(1):                                                                 |                         |   |                                               |        |          |   |               |        |              |   |         |        |   |   |         |       
|Total
          revenues                                                 |                         | $ | 54,045                                        |        |          | $ | 47,141        |        |              | $ | 46,518  |        |   | $ | 49,648  |       
|Gross
          profit                                                   |                         |   | 43,323                                        |        |          |   | 36,547        |        |              |   | 34,968  |        |   |   | 38,268  |       
|Amortization
          of stock-based compensation                       |                         |   | 356                                           |        |          |   | 316           |        |              |   | 277     |        |   |   | 87      |       
|Amortization
          of goodwill and other intangible assets           |                         |   | 6,594                                         |        |          |   | 6,795         |        |              |   | 6,994   |        |   |   | 6,993   |       
|Restructuring
          charges                                          |                         |   |                                              |        |          |   |              |        |              |   | 12,096  |        |   |   |        |       
|Loss from
          operations                                           |                         |   | (2,939                                        | )      |          |   | (10,129       | )      |              |   | (29,321 | )      |   |   | (10,247 | )     
|Net loss                                                                 |                         |   | (1,913                                        | )      |          |   | (7,542        | )      |              |   | (26,983 | )      |   |   | (8,542  | )     
|Net loss
          per share (1):                                        |                         |   |                                               |        |          |   |               |        |              |   |         |        |   |   |         |       
|                                                                         | Basic                   |   | $                                             | (0.02  | )        |   | $             | (0.10  | )            |   | $       | (0.35  | ) |   | $       | (0.11  | )
|                                                                         | Diluted                 |   | $                                             | (0.02  | )        |   | $             | (0.10  | )            |   | $       | (0.35  | ) |   | $       | (0.11  | )
|Shares
          used in calculation of net income (loss) per share (1): |                         |   |                                               |        |          |   |               |        |              |   |         |        |   |   |         |       
|                                                                         | Basic                   |   |                                               | 76,628 |          |   |               | 77,307 |              |   |         | 78,038 |   |   |         | 78,400 |  
|                                                                         | Diluted                 |   |                                               | 76,628 |          |   |               | 77,307 |              |   |         | 78,038 |   |   |         | 78,400 |  
|                                                                         |                         |   |                                               |        |          |   |               |        |              |   |         |        |   |   |         |       
|2000(1):                                                                 |                         |   |                                               |        |          |   |               |        |              |   |         |        |   |   |         |       
|Total
          revenues                                                 |                         | $ | 25,933                                        |        |          | $ | 33,905        |        |              | $ | 42,808  |        |   | $ | 51,412  |       
|Gross
          profit                                                   |                         |   | 20,878                                        |        |          |   | 26,960        |        |              |   | 34,346  |        |   |   | 41,375  |       
|Merger-related
          costs                                           |                         |   | 399                                           |        |          |   | 130           |        |              |   | 427     |        |   |   | 558     |       
|Amortization
          of stock-based compensation                       |                         |   | 374                                           |        |          |   | 3,798         |        |              |   | 4,367   |        |   |   | 5,624   |       
|Income
          from operations                                         |                         |   |                                              |        |          |   | 2,199         |        |              |   | 5,117   |        |   |   | 1,332   |       
|Net income
          (loss)                                              |                         |   | 630                                           |        |          |   | (3,980        | )      |              |   | (6,990  | )      |   |   | (3,679  | )     
|Net income
          (loss) per share (1):                               |                         |   | 698                                           |        |          |   | (4,201        | )      |              |   | (7,453  | )      |   |   | (2,560  | )     
|                                                                         | Basic
          Diluted |   | $                                             | 0.01   |          |   | $             | (0.06  | )            |   | $       | (0.11  | ) |   | $       | (0.03  | )
|Shares
          used in calculation of net income (loss) per share (1): |                         | $ | 0.01                                          |        |          | $ | (0.06         | )      |              | $ | (0.11   | )      |   | $ | (0.03   | )     
|                                                                         | Basic                   |   |                                               | 65,643 |          |   |               | 68,423 |              |   |         | 69,608 |   |   |         | 75,300 |  
|                                                                         | Diluted                 |   |                                               | 78,092 |          |   |               | 68,423 |              |   |         | 69,608 |   |   |         | 75,300 |  



---

|(1) |  | Amounts have been restated to reflect two-for-one stock splits, effected
in the form of stock dividends, to each stockholder of record as of
February 18, 2000 and November 29, 2000.
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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Item 9.Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure

Not applicable.




PART III




Item 10.Directors and Executive Officers of the Registrant

Information with respect to Directors is included under the caption
Proposal One-Election of Directors in the Proxy Statement for the 2002 Annual
Meeting to be held on May 28, 2002 (the 2002 Proxy Statement) and is
incorporated herein by reference. Information with respect to Executive
Officers is included under the heading Executive Officers and Directors in
Part I hereof after Item 4.

Information regarding delinquent filers pursuant to Item 405 of Regulation
S-K is included under the heading Section 16(a) Beneficial Ownership Reporting
Compliance in the 2002 Proxy Statement and is incorporated herein by
reference.




Item 11.Executive Compensation

The information required by this item is included under the caption
Proposal One  Election of Directors  Director Compensation and Executive
Officer Compensation in the 2002 Proxy Statement and is incorporated herein by
reference.




Item 12.Security Ownership of Certain Beneficial Owners and Management

The information required by this item is included under the heading
Security Ownership of Principal Stockholders and Management in the 2002 Proxy
Statement and is incorporated herein by reference.




Item 13.Certain Relationships and Related Transactions

The information required by this item is included under the caption
Transactions with Management in the 2002 Proxy Statement and is incorporated
herein by reference.




PART IV




Item 14.Exhibits, Financial Statements, Financial Statement Schedules and
Reports on Form 8-K

(a)  The following documents are filed as part of this Annual Report on
Form 10-K:



| | 1. |  | Financial Statements
| | -- |  | --------------------

Reference is made to the Index to Consolidated Financial Statements of
Informatica Corporation under Item 8 of Part II hereof.



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

The following schedule of the Company is included herein:

Valuation and Qualifying Accounts (Schedule II)

All other schedules are omitted because they are not applicable or the
amounts are immaterial or the required information is presented in the
Consolidated Financial Statements and Notes thereto in Item 8 above.

The following documents are included in Exhibit 23 hereto:

Exhibit 23.2 Consent of Ernst & Young LLP, Independent Auditors

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

See Item 14(c) below.

(b)  Reports on Form 8-K

A current report on Form 8-K was filed with the Securities and Exchange
Commission by Informatica on October 29, 2001 to report the issuance of a press
release on October 26, 2001 announcing that the Board of Directors of
Informatica Corporation approved the adoption of a Stockholder Rights Plan. The
press release was attached as Exhibit 99.1 to the Form 8-K.

(c)  Exhibits

See Exhibit Index.

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SIGNATURES

Pursuant to the requirements of section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Palo Alto, State of California on this 15th day of March 2002.

| |                         |                                                                  
| | ----------------------- | -----------------------------------------------------------------
| | INFORMATICA CORPORATION
| |                         |                                                                  
| | By:                     | /s/     GAURAV S. DHILLON                                        
| |                         | Gaurav S. Dhillon Chief Executive Officer, Secretary and Director
| |                        

Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed by the following persons on behalf of the registrant and
in the capacities and on the dates indicated:

|                                                |  |                                                                                                                    |  |               
|----------------------------------------------- |  | ------------------------------------------------------------------------------------------------------------------ |  | --------------
|Signature                                       |  | Title                                                                                                              |  | Date          
|                                                |  |                                                                                                                    |  |               
|                                                |  |                                                                                                                    |  |               
|/s/ GAURAV S. DHILLON
        Gaurav S. Dhillon |  | Chief Executive Officer, Secretary
          and Director(Principal Executive Officer)                             |  | March 15, 2002
|                                                |  |                                                                                                                    |  |               
|/s/ DIAZ H. NESAMONEY
        Diaz H. Nesamoney |  | President, Chief Operating Officer
          and Director                                                          |  | March 15, 2002
|                                                |  |                                                                                                                    |  |               
|/s/ EARL E. FRY
        Earl E. Fry             |  | Senior Vice President and Chief Financial
          Officer
          (Principal Financial and Accounting Officer) |  | March 15, 2002
|                                                |  |                                                                                                                    |  |               
|David W. Pidwell                                |  | Director                                                                                                           |  | March 15, 2002
|                                                |  |                                                                                                                    |  |               
|/s/ A. BROOKE SEAWELL
        A. Brooke Seawell |  | Director                                                                                                           |  | March 15, 2002
|                                                |  |                                                                                                                    |  |               
|Janice D. Chaffin                               |  | Director                                                                                                           |  | March 15, 2002

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INFORMATICA CORPORATION

SCHEDULE II  VALUATION AND QUALIFYING ACCOUNTS
(In thousands)

|                                |  |             |       |            |  |            |       |        |  |             |        |             |  |   |       | 
|------------------------------- |  | ----------- | ----- | ---------- |  | ---------- | ----- | ------ |  | ----------- | ------ | ----------- |  | - | ----- | 
|                                |  | Balances at |       | Charged to |  |            |       |        |  | Balances at
|                                |  | Beginning   |       | Costs and  |  |            |       |        |  | End of     
|                                |  | of Period   |       | Expenses   |  | Deductions |       | Period
|                                |  |             |       |            |  |            |       |       
|Provision for Doubtful Accounts |  |             |       |            |  |            |       |        |  |             |        |             |  |   |       | 
|Year ended December 31, 2001    |  | $           | 826   |            |  | $          | 533   |        |  | $           | (934   | )           |  | $ | 425   | 
|                                |  |             |       |            |  |            |       |        |  |             |        |             |  |   |       | 
|Year ended December 31, 2000    |  | $           | 937   |            |  | $          | 242   |        |  | $           | (353   | )           |  | $ | 826   | 
|                                |  |             |       |            |  |            |       |        |  |             |        |             |  |   |       | 
|Year ended December 31, 1999    |  | $           | 691   |            |  | $          | 246   |        |  | $           |       |             |  | $ | 937   | 
|                                |  |             |       |            |  |            |       |        |  |             |        |             |  |   |       | 
|                                |  |             |       |            |  |            |       |        | 
|                                |  |             |       |            |  |            |       |        | 
|                                |  | Balances at |       |            |  |            |       |        |  |             |        | Balances at
|                                |  | Beginning   |       | Charged to |  |            |       |        |  | End of     
|                                |  | of Period   |       | Revenue    |  | Deductions |       | Period
|                                |  |             |       |            |  |            |       |       
|Sales and Return Allowances     |  |             |       |            |  |            |       |        |  |             |        |             |  |   |       | 
|Year ended December 31, 2001    |  | $           | 3,032 |            |  | $          | 1,186 |        |  | $           | (2,348 | )           |  | $ | 1,870 | 
|                                |  |             |       |            |  |            |       |        |  |             |        |             |  |   |       | 
|Year ended December 31, 2000    |  | $           | 1,040 |            |  | $          | 2,506 |        |  | $           | (514   | )           |  | $ | 3,032 | 
|                                |  |             |       |            |  |            |       |        |  |             |        |             |  |   |       | 
|Year ended December 31, 1999    |  | $           | 1,040 |            |  | $          |      |        |  | $           |       |             |  | $ | 1,040 | 
|                                |  |             |       |            |  |            |       |        |  |             |        |             |  |   |       | 

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EXHIBIT INDEX

|        |  |                                                                                                                                                                                                                                        
|------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |  |                                                                                                                                                                                                                                        
|Number  |  | Document                                                                                                                                                                                                                               
|        |  |                                                                                                                                                                                                                                        
|3.1     |  | Amended and Restated Certificate of Incorporation of Informatica Corporation.(1)                                                                                                                                                       
|3.2     |  | Bylaws, as amended, of Informatica Corporation.(1)                                                                                                                                                                                     
|3.4     |  | 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.(2)
|3.5     |  | Certificate of Designation of Rights, Preferences and Privileges of Series A Participating Preferred Stock of
Informatica Corporation.(3)                                                                                              
|4.1     |  | Reference is made to Exhibits 3.1 and 3.2.                                                                                                                                                                                             
|4.2     |  | Preferred Stock Rights Agreement, dated as of October 17, 2001, between Informatica Corporation and American
Stock Transfer & Trust Company.(3)                                                                                        
|10.1*   |  | Companys 2000 Stock Incentive Plan, as amended.(5)                                                                                                                                                                                    
|10.6*   |  | Form of Indemnification Agreement between the Company and each of its executive officers and directors.(1)                                                                                                                             
|10.9*   |  | Companys 1993 Flexible Stock Incentive Plan, including forms of agreements thereunder.(4)                                                                                                                                             
|10.10*  |  | Companys 1996 Flexible Stock Incentive Plan, including forms of agreements thereunder.(4)                                                                                                                                             
|10.11*  |  | Companys 1999 Stock Incentive Plan.(1)                                                                                                                                                                                                
|10.12*  |  | Companys 1999 Employee Stock Purchase Plan, including forms of agreements thereunder.(1)                                                                                                                                              
|10.13*  |  | Companys 1999 Non-Employee Director Stock Incentive Plan.(1)                                                                                                                                                                          
|10.14   |  | Lease Agreement regarding Building 1 Lease, dated February 22, 2000, by and among the Company and Pacific
Shores Center LLC.(6)                                                                                                        
|10.15   |  | Lease Agreement regarding Building 2 Lease, dated February 22, 2000, by and among the Company and Pacific
Shores Center LLC.(6)                                                                                                        
|10.16   |  | Offer Letter, dated July 2, 2001, by and among the Company and Kyle L. Bowker.                                                                                                                                                         
|21.1    |  | List of Significant Subsidiaries.(4)                                                                                                                                                                                                   
|23.2    |  | Consent of Ernst & Young LLP, Independent Auditors.                                                                                                                                                                                    



---

|(1) |  | Incorporated by reference to identically numbered Exhibit to Amendment
No. 1 of the Companys Registration Statement on Form S-1/A (Commission
File No. 333-72677), which was filed on April 8, 1999.
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|   
|   
|   
|(2) |  | Incorporated by reference to
the identically numbered Exhibit to
the Companys Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on
August 14, 2000.                   
|   
|   
|   
|   
|(3) |  | Incorporated by reference to identically numbered Exhibit to
the Companys Registration Statement on Form 8-A12G,
which was filed on November 6, 2001.                                               
|   
|   
|   
|   
|(4) |  | Incorporated by reference to identically numbered Exhibit to the
Companys Registration Statement on Form S-1 (Commission File No.
333-72677), which was filed on February 19, 1999.                 
|   
|   
|   
|   
|(5) |  | Incorporated by reference to identically numbered Exhibit to the
Companys Quarterly Report on Form 10-Q filed with the Securities and
Exchange Commission on August 8, 2001.                        
|   
|   
|   
|   
|(6) |  | Incorporated by reference to identically numbered Exhibit to the Annual
Report on Form 10-K filed with the Securities and Exchange Commission on
March 30, 2000.                                     
|   
|   
|   
|   
|*   |  | Indicates management contract or compensatory plan or arrangement.                                                                                                                                   

58