---




UNITED
STATES


SECURITIES AND EXCHANGE COMMISSION


Washington, D.C. 20549





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FORM 10-Q





|x |  | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
|- |  | ---------------------------------------------------------------------------------------




For the quarterly period ended March 31, 2002





or





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




For the transition period from _________ to ________





Commission
File Number 0-24720





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Business Objects S.A.


(Exact name of registrant as specified in its charter)





Republic of France

None(State or other jurisdiction of incorporation or
organization)

(I.R.S. Employer Identification No.)





157-159 Rue Anatole France, 92300 Levallois-Perret, France


(Address of principal executive offices)





(408) 953-6000


(Registrants telephone number, including area code)





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  ̈





The number of outstanding shares of each of the
issuers classes of capital or common stock as of April 30, 2002 was 62,970,364 Ordinary Shares of Euro 0.10 nominal value, including 22,563,534 American Depositary Shares (as evidenced by American Depositary Receipts), each corresponding to
one Ordinary Share.





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---




BUSINESS OBJECTS S.A.





INDEX





PagePART I.    FINANCIAL INFORMATIONItem 1.

Unaudited Condensed Consolidated Financial Statements:Condensed Consolidated Balance Sheets at March 31, 2002 and December 31, 2001

3Condensed Consolidated Statements of Income for the three months ended March 31, 2002 and 2001

4Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2002 and 2001

5Notes to Condensed Consolidated Financial Statements

6Item 2.

Managements Discussion and Analysis of Financial Condition and Results of Operations

11Item 3.

Quantitative and Qualitative Disclosures about Market Risk

25PART II.    OTHER INFORMATION

26SIGNATURES

27






















2




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BUSINESS OBJECTS S.A.





CONDENSED CONSOLIDATED BALANCE SHEETS


(In thousands, except per ordinary share amounts)





March 31, 2002


December 31, 2001(unaudited)ASSETSCurrent assets:Cash and cash equivalents

$
261,436


$
240,421Restricted cash current


8,103



8,103Accounts receivable, net


81,747



87,523Deferred taxes


9,893



9,900Other current assets


17,989



12,832Total current assets


379,168



358,779Goodwill, net


13,648



13,648Other intangible assets, net


6,450



6,973Property and equipment, net


35,991



36,046Restricted cash, long term


1,149



1,149Deposits and other assets


4,798



4,874Total assets

$
441,204


$
421,469LIABILITIES AND SHAREHOLDERS' EQUITYCurrent liabilities:Accounts payable

$
18,347


$
19,972Accrued payroll and related expenses


34,752



37,417Deferred revenue


69,617



59,741Other current liabilities


42,668



48,499Total current liabilities


165,384



165,629Long-term liabilities


3,339



3,174Commitments and ContingenciesShareholders equityOrdinary shares, Euro 0.10 nominal value ($0.09 U.S. as of March 31, 2002):Authorized 86,006 at March 31, 2002 and 86,011 at December 31, 2001; Issued and outstanding62,869 at March 31, 2002 and 61,928
at December 31, 2001


6,670



6,589Additional paid-in capital


160,700



149,889Treasury shares, 818 shares at March 31, 2002 and December 31, 2001


(9,049
)


(9,049
)Retained earnings


150,476



139,455Accumulated other comprehensive income


(36,316
)


(34,218
)Total shareholders' equity


272,481



252,666Total liabilities and shareholders' equity

$
441,204


$
421,469


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|Note: |  | The balance sheet at December 31, 2001 has been derived from the audited financial statements at that date.
|----- |  | -----------------------------------------------------------------------------------------------------------




See accompanying notes to Condensed Consolidated Financial Statements.




3




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BUSINESS OBJECTS S.A.





CONDENSED CONSOLIDATED STATEMENTS OF INCOME


(In thousands, except per ADS and per ordinary share data)





Three Months Ended March 31,2002


2001(unaudited)Revenues:License fees

$
63,151


$
60,601Services


44,387



37,677Total revenues


107,538



98,278Cost of revenues:License fees


543



602Services


17,055



15,428Total cost of revenues


17,598



16,030Gross margin


89,940



82,248Operating expenses:Sales and marketing


52,183



47,987Research and development


15,499



12,993General and administrative


6,162



5,773Goodwill amortization






1,132Other intangible asset amortization


332



Total operating expenses


74,176



67,885Income from operations


15,764



14,363Interest and other income, net


2,012



2,843Income before provision for income taxes


17,776



17,206Provision for income taxes


(6,755
)


(6,710
)Net income

$
11,021


$
10,496Net income per ADS and per sharebasic

$
0.18


$
0.17ADS and shares used in computing net income per ADS and per sharebasic


61,473



60,815Net income per ADS and per sharediluted

$
0.17


$
0.16ADS and shares and common share equivalents used in computing net income per ADS and per sharediluted


65,390



64,884





See accompanying notes to Condensed Consolidated Financial Statements.




4




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BUSINESS OBJECTS S.A.





CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS


(In thousands)





Three Months Ended March 31,2002


2001(unaudited)Cash flows from operating activities:Net income

$
11,021


$
10,496Adjustments to reconcile net income to net cash provided by operating activities:Depreciation


3,749



2,448Amortization of goodwill and other intangible assets


713



2,078Deferred income taxes


71



(19
)Changes in operating assets and liabilities:Accounts receivable, net


5,181



15,224Current and other assets


(5,159
)


279Accounts payable


(1,492
)


(2,684
)Accrued payroll and related expenses


(2,522
)


(3,607
)Deferred revenue


10,226



5,247Other current liabilities


(5,464
)


4,652Net cash provided by operating activities


16,324



34,114Cash flows from investing activities:Purchases of property and equipment


(4,017
)


(10,372
)Net cash used for investing activities


(4,017
)


(10,372
)Cash flows from financing activities:Issuance of shares


10,892



4,631Release of restricted cash






350Repayment of notes payable






(240
)Net cash provided by financing activities


10,892



4,741Effect of foreign exchange rate changes on cash and cash equivalents


(2,184
)


(8,543
)Net increase in cash and cash equivalents


21,015



19,940Cash and cash equivalents at the beginning of the period


240,421



199,581Cash and cash equivalents at the end of the period

$
261,436


$
219,521





See accompanying notes to Condensed Consolidated Financial Statements.




5




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BUSINESS OBJECTS S.A.





NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


March 31, 2002





1.    Basis of Presentation





The accompanying unaudited condensed
consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States, applied on a consistent basis. As permitted by Form 10-Q, certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted. In the opinion of management, all adjustments, consisting only of normal recurring adjustments necessary for a fair
presentation of our financial position, results of operations, and cash flows for the interim periods presented have been made. Operating results for the three month period ended March 31, 2002 are not necessarily indicative of the results that may
be expected for the year ending December 31, 2002. These financial statements should be read in conjunction with our audited consolidated financial statements and footnotes as included in our Annual Report or Form 10-K for the year ended December
31, 2001.





2.    Use of Estimates





The preparation of the consolidated financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Estimates are used for, but not limited to allowances for uncollectible accounts receivable, product warranty, useful
lives for property and equipment and intangibles, employee benefits and taxes. Actual results could differ from those estimates.





3.    Accounts Receivable





Accounts receivable are stated net of allowances for doubtful
accounts of $3,538,000 at March 31, 2002 and $3,861,000 at December 31, 2001.





4.    Revenue Recognition





We enter into arrangements for the sale of 1) licenses of software products and related maintenance contracts; 2) bundled license,
maintenance, and services; and 3) services on a time and material basis. In instances where maintenance is bundled with a license of software products, such maintenance terms are typically one year.





For each arrangement, we determine whether evidence of an arrangement exists, delivery has occurred, the fee is fixed or determinable, and collection is
probable. If any of these criteria are not met, revenue recognition is deferred until such time as all of the criteria are met. In software arrangements that include rights to multiple software products and/or services, we use the residual method,
under which revenue is allocated to the undelivered elements based on vendor specific objective evidence of fair value of such undelivered elements and the residual amount of revenue is allocated to the delivered elements.




6




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BUSINESS OBJECTS S.A.





NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)







For those contracts that consist solely of license and maintenance we recognize
license revenues based upon the residual method after all licensed software product has been delivered as prescribed by the Statement of Position 98-9 Modification of SOP No. 97-2 with Respect to Certain Transactions. We recognize
maintenance revenues over the term of the maintenance contract as vendor specific objective evidence of fair value for maintenance exists. There is no right of return or price protection for sales to domestic and international distributors or
value-added resellers (collectively, resellers). In situations where the reseller has a purchase order from the end-user that is immediately deliverable, we recognize revenue on shipment to the reseller, if other criteria in SOP 97-2 are
met, since we have no risk of concessions.





Services can consist of maintenance, training and/or consulting services. In all
cases, we assess whether the service element of the arrangement is essential to the functionality of the other elements of the arrangement. When software services are considered essential or the arrangement involves customization or modification of
the software, both the license and service revenue under the arrangement are recognized under the percentage of completion method of contract accounting. For those arrangements for which we have concluded that the service element is not essential to
the other elements of the arrangement we determine whether the services are available from other vendors, do not involve a significant degree of risk or unique acceptance criteria, and whether we have sufficient experience in providing the service
to be able to separately account for the service. When the service qualifies for separate accounting, we use vendor specific objective evidence of fair value for the services and the maintenance to account for the arrangement using the residual
method, regardless of any separate prices stated within the contract for each element. Revenue allocable to services is recognized as the services are performed.





Vendor-specific objective evidence of fair value of services is based upon hourly rates. As previously noted, we enter into contracts for services alone and such contracts are based upon
time and material basis. Such hourly rates are used to assess the vendor specific objective evidence of fair value in multiple element arrangements.





5.    Comprehensive Income





Comprehensive income includes foreign currency translation gains
and losses that have been excluded from net income and reflected instead in stockholders equity. The following table sets forth the calculation of comprehensive income (in
thousands):





Three Months Ended March 31,2002


2001Net income

$
11,021


$
10,496Change in cumulative translation adjustment


(2,098
)


(9,069
)Total comprehensive income

$
8,923


$
1,427




7




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BUSINESS OBJECTS S.A.





NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)







6.    Net Income per ADS and per Share





The following table sets forth the computation of basic and diluted net income per American Depositary Share (ADS) and per share (in thousands, except
per ADS and per share amounts):





Three Months Ended March 31,2002

2001Numerator:Net income

$
11,021

$
10,496Denominator:Basic weighted average ADSs and shares outstanding


61,473


60,815Incremental ordinary shares attributable to shares issuable under employee stock plans and warrants


3,917


4,069Diluted weighted average ADS and shares outstanding


65,390


64,884Net income per ADS and per sharebasic

$
0.18

$
0.17Net income per ADS and per sharediluted

$
0.17

$
0.16




8




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BUSINESS OBJECTS S.A.





NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)







7.    Adjusted Net Income per ADS and per Share





The following table sets forth net income per share and per ADS adjusted to exclude goodwill amortization recognized prior to the adoption of FAS 142 on
January 1, 2002 (in thousands, except for per ADS and per share amounts):





Three Months Ended March 31,2002

2001Reported net income

$
11,021

$
10,496Add back: goodwill amortization





1,132Adjusted net income

$
11,021

$
11,628Net income per share and per ADSbasic:Reported net income

$
0.18

$
0.17Goodwill amortization





0.02Adjusted net income

$
0.18

$
0.19Net income per share and per ADSdiluted:Reported net income

$
0.17

$
0.16Goodwill amortization





0.02Adjusted net income

$
0.17

$
0.18





8.    Segment Information





The Company has one reportable segmentbusiness intelligence software products.





9.    Legal Proceedings





On October 17, 2001, we filed a lawsuit in the United States
District Court for the Northern District of California against MicroStrategy Incorporated (Microstrategy) for alleged patent infringement. The lawsuit alleges that MicroStrategy infringes on our United States Patent No. 5,555,403 and 6,247,008 by
making, using, offering to sell and selling its product currently known as MicroStrategy Version 7.0. Our complaint requests that the defendant be enjoined from further infringing the patent and seeks an as yet undetermined amount of damages.





On October 30, 2001, an action for alleged patent infringement was filed in the United States District Court for the Eastern
District of Virginia against us and our subsidiary, Business Objects Americas Inc., by MicroStrategy. The complaint alleges that our software products, BUSINESS OBJECTS BROADCAST
AGENT TM , BUSINESS OBJECTS
INFOVIEW TM and BUSINESS OBJECTS
BROADCAST AGENT PUBLISHER TM ,
infringe MicroStrategys United States Patent No. 6,279,033 entitled System and Method for Asynchronous Control of Report Generation Using a Network Interface and United States Patent No. 6,260,050 entitled System and Method
of Adapting Automatic Output of Service Related OLAP Reports to Disparate Output Devices. On February 21, 2002 MicroStrategy amended its complaint to add claims for violations of the Computer Fraud and Abuse Act, misappropriation of trade
secrets, and tortious interference with contractual




9




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BUSINESS OBJECTS S.A.





NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)







relations with employees. The complaint seeks relief in the form of an injunction against us and unspecified
damages. Our current assessment is that our products do not infringe and that we have not committed any of the alleged wrongful acts. If successful, a claim of infringement against us and our inability to license the infringed or similar technology
on commercially reasonable terms could have a material adverse effect on our business, operating results, and financial condition. This case is currently expected to proceed to trial on October 8, 2002. On April 5, 2002 and March 27, 2002 the United
States Patent and Trademark Office granted our requests for reexamination of MicroStrategys United States Patent No. 6,279,033 and United States Patent No. 6,260,050 respectively.





On May 5, 2000, we filed a lawsuit in the United States District Court for the Northern District of California against Cognos Incorporated and Cognos Corporation (collectively Cognos)
for alleged patent infringement. The lawsuit alleges that Cognos infringes on our United States Patent No. 5,555,403 by making, using, offering to sell and selling its product known as Impromptu. Our complaint requests that the defendants be
enjoined from further infringing the patent and seeks damages. On September 7, 2001, the United States District Court denied Cognos motion for a partial summary judgment where Cognos was seeking to invalidate our United States Patent No.
5,555,403. The Court determined that the case should proceed to trial and set a date of May 20, 2002.





10.    Recent
Pronouncements





In June 2001, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards
No. 142, Goodwill and Other Intangible Assets (FAS 142). Under FAS 142, goodwill and indefinite lived intangible assets will no be longer amortized but will be reviewed annually for impairment (or more frequently if impairment indicators
arise). Separable intangible assets that are not deemed to have an indefinite life will continue to be amortized over their useful lives. FAS 142 is effective for fiscal years beginning after December 15, 2001, and we adopted FAS 142 on January 1,
2002 when our new fiscal year began. With our adoption of FAS 142 we no longer amortize goodwill but are required to perform an impairment analysis of goodwill annually and initially by June 30, 2002, six months from our adoption of FAS 142. We are
investigating what impact, if any, the adoption of FAS 142 will have on our financial position and results of operations as a result of the requirement to perform this impairment analysis. Net goodwill was $13,648,000 at March 31, 2002 and December
31, 2001.





In October 2001, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 144,
Impairment of Long-Lived Assets (FAS 144). FAS 144 supercedes Statement of Financial Accounting Standards No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of (FAS 121). FAS
144 retains the requirements of FAS 121 to (a) recognize an impairment loss only if the carrying amount of a long-lived asset is not recoverable from its undiscounted cash flows and (b) measure an impairment loss as the difference between the
carrying amount and the fair value of the asset. FAS 144 removes goodwill from its scope. FAS 144 is applicable to financial statements issued for fiscal years beginning after December 15, 2001, and we adopted FAS 144 on January 1, 2002 when our new
fiscal year began. Our adoption of FAS 144 did not have a material adverse impact on our financial position or results of operations.




10




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





The following discussion and analysis should be read together with our Condensed Consolidated Financial Statements and the Notes to those statements included elsewhere in this Form 10-Q. This discussion contains
forward-looking statements based on our current expectations, assumptions, estimates, and projections about Business Objects and our industry. These forward-looking statements involve risks and uncertainties. Business Objects actual results
could differ materially from those indicated in these forward-looking statements as a result of certain factors, as more fully described in the Risk Factors section and elsewhere in this Form 10-Q. Business Objects undertakes no
obligation to update publicly any forward-looking statements for any reason, even if new information becomes available or other events occur in the future.





Overview





General





Business Objects develops, markets, and supports business intelligence software for client/server environments, intranets, extranets, and the internet. Business intelligence lets
organizations access, analyze, and share information internally with employees and externally with customers, suppliers, and partners, helping organizations improve operational efficiency, build customer relationships, and develop differentiated
product offerings.





In view of our significant growth in recent years, we believe that periodtoperiod comparisons of
our financial results are not necessarily meaningful and you should not rely upon them as an indication of future performance.





Critical Accounting Policies





The preparation of financial statements in conformity with generally accepted
accounting principles requires us to utilize accounting policies and make estimates and assumptions that affect our reported amounts of assets, liabilities, revenue and expenses. We believe the following accounting policies and estimates are the
most critical to our business operations and understanding our results of operations. The following should be read in conjunction with our consolidated financial statements.





We record provisions for allowances for doubtful accounts against general and administrative expenses. The provisions, which are netted against our accounts receivable on our
consolidated balance sheets, totaled $3,538,000 and $3,861,000 at March 31, 2002 and December 31, 2001, respectively. These estimates are based on bad debt write-offs, analysis of credit memo data, specific identification of probable bad debts based
on collection efforts, aging of accounts receivable and other known factors. Actual results could differ from those estimates.





We evaluate long-lived assets, including goodwill and acquired intangible assets, for impairment whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable based on expected undiscounted
cash flows attributable to that asset. The amount




11




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of any impairment is measured as the difference between the carrying value and the fair value of the impaired asset.





We record a valuation allowance to reduce our deferred tax assets to the amount that is more likely than not to be realized. We
have considered future taxable income and prudent and feasible tax planning strategies in determining the need for a valuation allowance. In the event that we determine that we would not be able to realize all or part of our net deferred tax assets,
an adjustment to the deferred tax assets would be charged to earnings in the period such determination is made. Likewise, if we later determine that it is more likely than not that the net deferred tax assets would be realized, then the previously
provided valuation allowance would be reversed. Our current valuation allowance covers the tax benefit from the exercise of employee stock options. When these tax benefits are realized the valuation allowance will be reversed and credited to capital
in excess of par value.





We enter into arrangements for the sale of 1) licenses of software products and related maintenance
contracts; 2) bundled license, maintenance, and services; and 3) services on a time and material basis. In instances where maintenance is bundled with a license of software products, such maintenance terms are typically one year.





For each arrangement, we determine whether evidence of an arrangement exists, delivery has occurred, the fee is fixed or determinable, and
collection is probable. If any of these criteria are not met, revenue recognition is deferred until such time as all of the criteria are met. In software arrangements that include rights to multiple software products and/or services, we use the
residual method, under which revenue is allocated to the undelivered elements based on vendor specific objective evidence of fair value of such undelivered elements and the residual amount of revenue is allocated to the delivered elements.





For those contracts that consist solely of license and maintenance we recognize license revenues based upon the residual method
after all licensed software product has been delivered as prescribed by the Statement of Position 98-9 Modification of SOP No. 97-2 with Respect to Certain Transactions. We recognize maintenance revenues over the term of the maintenance
contract as vendor specific objective evidence of fair value for maintenance exists. There is no right of return or price protection for sales to domestic and international distributors or value-added resellers (collectively, resellers).
In situations where the reseller has a purchase order from the end-user that is immediately deliverable, we recognize revenue on shipment to the reseller, if other criteria in SOP 97-2 are met, since we have no risk of concessions.





Services can consist of maintenance, training and/or consulting services. In all cases, we assess whether the service element of the
arrangement is essential to the functionality of the other elements of the arrangement. When software services are considered essential or the arrangement involves customization or modification of the software, both the license and service revenue
under the arrangement are recognized under the percentage of completion method of contract accounting. For those arrangements for which we have concluded that the service element is not essential to the other elements of the arrangement we determine
whether the services are available from other vendors, do not involve a significant degree of risk or unique acceptance criteria, and whether we have sufficient experience in providing the service to be able to separately account for the service.
When the service qualifies for separate accounting, we use vendor specific objective evidence of fair value for the services and the maintenance to account




12




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for the arrangement using the residual method, regardless of any separate prices stated within the contract for each
element. Revenue allocable to services is recognized as the services are performed.





Vendor-specific objective evidence of fair
value of services is based upon hourly rates. As previously noted, we enter into contracts for services alone and such contracts are based upon time and material basis. Such hourly rates are used to assess the vendor specific objective evidence of
fair value in multiple element arrangements.




13




---

Results of Operations





The
following table sets forth certain items from our condensed consolidated statements of income as a percentage of total revenues for the periods indicated:





Three Months Ended March 31,2002


2001Revenues:License fees

58.7
%

61.7
%Services

41.3


38.3Total revenues

100.0


100.0Cost of revenues:License fees

0.5


0.6Services

15.9


15.7Total cost of revenues

16.4


16.3Gross margin

83.6


83.7Operating expenses:Sales and marketing

48.6


48.8Research and development

14.4


13.2General and administrative

5.7


5.9Goodwill amortization




1.2Other intangible asset amortization

0.3


Total operating expenses

69.0


69.1Income from operations

14.6


14.6Interest and other income, net

1.9


2.9Income before provision for income taxes

16.5


17.5Provision for income taxes

(6.3
)

(6.8
)Net income

10.2
%

10.7
%Gross margin license

99.1
%

99.0
%Gross margin services

61.6
%

59.1
%





The following table sets forth the geographic source of our revenues:





Three Months Ended March 31,2002


2001Americas

47
%

35
%Europe

46


56Rest of World

7


9Total

100
%

100
%





Prior year amounts have been reclassified to conform to current year
presentation.




14




---




Total Revenue.    Total revenues increased $9.3 million, or 9%
during the three months ended March 31, 2002 to $107.5 million from $98.3 million for the three months ended March 31, 2001. A majority of our total revenues was derived from license fees for the BUSINESS OBJECTS
product line for all periods presented. Our services revenues were comprised of revenues from maintenance, consulting and training activities. Our success in the extranet market continued to be a key growth driver, as license and allocated related
service revenues from extranet products grew 39% to $23.5 million in the three months ended March 31, 2002 from $16.9 million for the three months ended March 31, 2001. Also contributing to our growth to a lesser extent was an increase in license
revenues from our analytic applications products, which increased 165% to $3.5 million for the quarter ended March 31, 2002, from $1.3 million for the quarter ended March 31, 2001. There can be no assurance that increases in revenues related to
extranets and analytic applications will continue to occur, or occur to the same extent to which they have historically occurred.





We operate internationally, with a substantial portion of our business conducted in foreign currencies. As such, our results are affected by year-over-year exchange rate fluctuations of the United States dollar relative to the euro, the
British pound sterling and to a lesser extent, the Japanese yen and other foreign currencies.





License
Fees.Revenues from license fees increased $2.6 million, or 4% during the three months ended March 31, 2002 to $63.2 million from $60.6 million for the three months ended March 31, 2001. Geographically, the increase in
revenues from license fees was attributable to growth in the Americas partially offset by a decline in revenues from license fees in Europe and Japan mainly due to slowdowns in these regions economic environments.





We anticipate that license fees, which represented approximately 59% of our total revenues for the three months ended March 31, 2002 and 62%
for the three months ended March 31, 2001, will continue to represent a majority of our revenue for the foreseeable future. It is expected, however, that the percentage of total revenues derived from license fees may continue to decrease in the
future if the growth in service revenues continues to exceed the growth in license revenues. In addition, as the number of our competitors and the market penetration by our competitors increases, or if regional economic environments worsen, the
growth rate of our license fees in the future may not be as high as the growth rate achieved in the past.





Services.    Revenues from services consist of maintenance, consulting, and training revenues. Revenues from services increased $6.7 million, or 17.8% during the three months ended March 31, 2002 to $44.4 million
from $37.7 million for the three months ended March 31, 2001. The increase in revenues from services was primarily due to increases in maintenance revenues resulting from the expansion of our installed customer base and concentration on the renewal
of existing support contracts partially offset by a decline in consulting and education revenues in Europe. In addition, as the number of our competitors and the market penetration by our competitors increases, or if regional economic environments
worsen, the growth rate of our services revenues may not be as high as the growth rate achieved in the past.





Cost of
License Fees.Cost of license fees consists primarily of materials, packaging, freight and third-party royalties. Cost of license fees remained constant at approximately 1% of license fee revenues for the three month
periods ending March 31, 2002 and 2001.




15




---




Cost of Services.Cost of services, which consists of the cost of
providing consulting, training and maintenance, increased $1.6 million, or 10.5% during the three months ended March 31, 2002 to $17.0 million from $15.4 million for the three months ended March 31, 2001. Cost of services as a percentage of service
revenue was 38% and 41% for the three months ended March 31, 2002 and 2001, respectively. The decrease as a percentage of service revenues was primarily due to improved productivity in providing maintenance support, partially offset by higher costs
of providing consulting and education services, relative to the percentage of revenues derived from these services, as costs remained relatively flat while revenues declined compared to the three months ended March 31, 2001. The increase in expenses
in absolute dollars resulted primarily from increased staffing necessary to support our maintenance support activities and increased facilities costs related to the relocation to our new facility in San Jose in April, 2001.





Operating Expenses





Sales and
Marketing.Sales and marketing expenses consist primarily of salaries and commissions, together with amounts paid for advertising and product promotion activities, and related facilities costs. Sales and marketing expenses
increased $4.2 million, or 9% during the three months ended March 31, 2002 to $52.2 million from $48.0 million for the three months ended March 31, 2001. Sales and marketing expenses as a percentage of total revenues were 49% for the quarters ended
March 31, 2002 and 2001. The increase in sales and marketing expenses in absolute dollars was attributable to increased staffing and increased facilities expenses related to the relocation to our new facility in San Jose in April, 2001 offset
partially by lower expenditures on tradeshows and other marketing. Sales and marketing expenses are expected to continue to increase in absolute dollars but may vary as a percentage of revenues in the future.





Research and Development.Research and development expenses consist primarily of salaries, related benefits, third party
consultant fees, related facilities expenses and amortization of intangible assets allocated to employment contingencies resulting from the acquisitions of Blue Edge Software in December 2001, Olap@Work, Inc. in April 2000 and Next Action
Technology, Ltd. in October 1999. Research and development expenses increased $2.5 million, or 19% during the three months ended March 31, 2002 to $15.5 million from $13.0 million for the three months ended March 31, 2001. Research and development
expenses as a percentage of total revenues were 14% and 13% for the quarters ended March 31, 2002 and 2001, respectively. The increase in research and development expenses both as a percentage of total revenues and in absolute dollars is due to
increased staffing and associated support for software engineers as part of our ongoing operations and our continued expansion of the analytical applications product line offset partially by lower amortization of intangible assets. As of March 31,
2002 and 2001, we have not capitalized any software development costs and all research and development costs have been expensed as incurred. Research and development expenses are expected to continue to increase in absolute dollars but may vary as a
percentage of revenues in the future.





General and Administrative.General and
administrative expenses consist primarily of salaries, related benefits, fees for professional services including legal and accounting services, and allowances for doubtful accounts. General and administrative expenses increased $0.4 million, or 7%
during the three months ended March 31, 2002 to $6.2 million from $5.8 million for the three months ended March 31, 2001. General and administrative expenses were 6% of total revenues for




16




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the quarters ended March 31, 2002 and 2001. General and administrative expenses increased in absolute dollars in the
quarter ended March 31, 2002 due to increased staffing to support our growth, and to a lesser extent higher legal expenses related to litigation involving MicroStratgy and Cognos, offset partially by lower allowances for doubtful accounts resulting
from better collections. General and administrative expenses are expected to continue to increase in absolute dollars but may vary as a percentage of revenues in the future.





Goodwill Amortization and Other Intangible Asset Amortization





Goodwill amortization and
other intangible asset amortization was comprised of the following (in thousands):





Three months ended March 31,2002

2001Goodwill amortization

$


$
1,132Other intangible asset amortization

$
332

$






The decrease in goodwill amortization was due to our adoption of FAS 142 on
January 1, 2002 whereby we no longer amortize goodwill. The increase in other intangible asset amortization was from the amortization of developed technology acquired in the purchase of Blue Edge Software in December 2001. $5,091,000 was allocated
to developed technology and is being amortized over the greater of ratable revenues or its five year estimated useful life.





Interest and Other
Income, Net





Interest and other income, net was comprised of the following (in thousands):





Three months ended March 31,2002

2001Net interest income

$
1,655

$
2,232Other income


357


611Total interest and other income, net

$
2,012

$
2,843





Interest and other income, net primarily represents net interest income, net
gains and losses resulting from foreign currency exchange rate changes, and other income net of litigation expenses from the settlement of a patent infringement action.





Net interest income decreased during the quarter ended March 31, 2002 due to a decrease in average interest rates for the same period year over year partially offset by a 19% increase in
cash and cash equivalents at March 31, 2002 as compared to March 31, 2001. Cash and cash equivalents totaled $261.4 million at March 31, 2002.





During September 1999, we executed a Memorandum of Understanding with Brio Software Inc. (Brio) in settlement of pending patent litigation. As part of the settlement, we dismissed our pending lawsuit against Brio
involving our U.S. patent number 5,555,403 and Brio dismissed its




17




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pending lawsuit against us involving patent number 5,915,257 and agreed to pay us $10.0 million payable quarterly in $1.0 million payments beginning September
30, 1999. We received and recognized in other income $500,000 from Brio under the settlement during the three months ended March 31, 2002 compared to $1 million received and recognized during the three months ended March 31, 2001. As at March 31,
2002, $1.0 million remained due under the settlement. Due to the inherent uncertainties with respect to Brio making the remaining quarterly payments on the settlement, we are recognizing the gain on settlement as payments are received.





Income Taxes





Our effective tax rate
was 38% for the quarter ended March 31, 2002 and 39% for the quarter ended March 31, 2001. The 2002 effective rate is lower due primarily to a reduction in the French statutory rate. We provide for income taxes for each interim period based on the
estimated annual effective tax rate for the year.





Liquidity and Capital Resources





As of March 31, 2002, we had cash and cash equivalents of $261.4 million, an increase of $21.0 million from December 31, 2001. Cash generated from operations totaled $16.3 million for
the three months ended March 31, 2002, as compared to $34.1 million for the comparable period in 2001. Net cash provided by operating activities for the three months ended March 31, 2002 was generated primarily by an increase in net income plus non
cash charges for depreciation and amortization, an increase in deferred revenue and a decrease in accounts receivable, partially offset by increases in current and other assets and decreases in other current liabilities, accrued payroll and related
expenses and accounts payable.





Investing activities for the three months ended March 31, 2002 consisted of the purchase of $4.0
million of property and equipment. Financing activities for the three months ended March 31, 2002 consisted of the issuance of ordinary shares for $10.9 million under employee stock plans.





Our principal source of liquidity is our operating cash flow. There is a risk that a decrease in demand for our products could reduce the availability of operating cash flow; however, we
believe that cash from operations together with existing cash and cash equivalents will be sufficient to meet our cash requirements for at least the next twelve months.





RISK FACTORS





You should carefully consider the risks and uncertainties described
below before making an investment decision. Additional risks and uncertainties that we are unaware of or that we currently deem immaterial also may become important factors that may adversely affect our company.





Risks related to our business





We target our
products to one market and if sales of our products in this market decline, our operating results will be seriously harmed.




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We generate substantially all of our revenues from licensing and service fees generated from
the sale of our products in the business intelligence software market, and we expect to continue to do so in the future. Accordingly, our future revenues and profits will depend significantly on our ability to further penetrate the business
intelligence software market. If we are not successful in selling our products in our targeted market due to competitive pressures, technological advances by others or otherwise, our operating results would suffer. The United States and Europe are
two of the largest geographic markets for our products and services. A softening of demand for business intelligence software caused by a weakening of the economy in Europe has resulted in decreased revenues and has resulted and may continue to
result in lower revenue growth rates and operating margins during the quarter ended March 31, 2002.





Our quarterly operating
results are subject to fluctuations, which may affect our stock price.





Historically, our quarterly operating results have
varied substantially from quarter to quarter, and we anticipate this pattern to continue. This is principally because our license fees are variable from quarter to quarter, while a high percentage of our operating expenses are relatively fixed, and
are based on anticipated levels of revenues. In addition, we expect our expenses to increase as our business grows. If revenues earned in any particular quarter fall short of anticipated revenue levels, our quarterly operating results and our stock
price would be significantly harmed.





While the variability of our license fees is partially due to factors that would influence
the quarterly results of any company, our business is particularly susceptible to quarterly variations because:





| |  |  | We typically receive a substantial amount of our revenues in the last weeks of the last month of a quarter, rather then evenly throughout the quarter;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------




| |  |  | Our strongest quarter each year is typically our fourth quarter, as our customers often wait for the end of their annual budget cycle before deciding whether to purchase new
software. Consequently, our revenues are generally lower in our first quarter. In addition, our third quarter is a relatively slow quarter due to lower economic activity throughout Europe during the summer months;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




| |  |  | Customers may delay purchasing decisions in anticipation of our new products or product enhancements or platforms or announced pricing changes by us or our competitors;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------




| |  |  | We partly depend on large orders which may take several months to finalize. A delay in closing a large order may result in the realization of license fees being postponed from
one quarter to the next; and
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




| |  |  | Our revenues are also sensitive to the timing of our competitors offers of new products that successfully compete with ours on the basis of functionality, price or
otherwise.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




As a result of the above, quarter to quarter comparisons of our revenues and operating results
may not be meaningful and you should not rely on them as indicative of our future performance.




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Our stock price is susceptible to our operating results and to stock market fluctuations.





In future quarters, our operating results may be below the expectations of public market analysts and investors, and the
price of our shares may fall. In addition, the stock markets in the United States and France have experienced significant price and volume fluctuations, which have particularly affected the market prices of many software companies and which have
often been unrelated to the operating performance of these companies. These market fluctuations have affected our stock price and could affect our stock price in the future.





Our software may have defects and errors, which may lead to a loss of revenue or product liability claims.





Our products and platforms are internally complex and occasionally contain defects or errors, especially when first introduced or when new versions or enhancements are released. Despite
extensive testing, we may not detect errors in our new products, platforms or product enhancements until after we have commenced commercial shipments. If defects and errors are discovered in our products, platforms or product enhancements after
commercial release:





| |  |  | potential customers may delay or forego purchases;
| | - |  | --------------------------------------------------




| |  |  | our reputation in the marketplace may be damaged;
| | - |  | -------------------------------------------------




| |  |  | we may incur additional service and warranty costs; and
| | - |  | -------------------------------------------------------




| |  |  | we may have to divert additional development resources to correct the defects and errors.
| | - |  | -----------------------------------------------------------------------------------------




If any or all of the foregoing occur, we may lose revenues or incur higher operating expenses and lose market share, any of which could severely harm our financial condition and
operating results.





We may have difficulties providing and managing the increased technical stability, performance and
support requirements of an evolving market, which could cause a decline in our revenues and an increase in our expenses.





We
are increasingly focusing our selling efforts on larger, enterprise-wide deployments of our products. We may have difficulty providing and managing these increased technical requirements. These potential difficulties could cause us to lose existing
customers, limit us to smaller deployments and cause us to expand our research and development and technical support costs which could cause a decline in our revenues and an increase in our expenses.





The protection of our intellectual property is crucial to our business, and if third parties use our intellectual property without our consent, it
could damage our business.





Our success depends in part on our ability to protect our proprietary rights in our intellectual
property. Despite precautions we take to protect these rights, unauthorized third parties could copy aspects of our current or future software and platforms or obtain and use information that we regard




20




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as proprietary. Policing unauthorized use of software is difficult and some foreign laws do not protect our proprietary rights to the same extent as in the
United States or France.





In addition, although our name, together with our logo, is registered as a trademark in France, the
United States, and a number of other countries, we may have difficulty asserting our ownership rights in the name Business Objects as some jurisdictions consider the name Business Objects to be generic or descriptive in
nature. As a result, we may be unable to effectively police unauthorized use of our name or otherwise prevent the name of our software products from becoming a part of the public domain.





To protect our proprietary rights, we may become involved in litigation, which could be costly and negatively impact our operating results. For example, we successfully settled a patent
infringement claim against Brio Software, Inc. in 1999, and are currently involved with patent infringement claims against Cognos, Inc. and MicroStrategy Inc. Litigating claims related to our proprietary rights can be very expensive in terms of
management time and resources, which could cause our financial condition and operating results to suffer.





Third parties
could assert that our technology infringes their proprietary rights, which could adversely affect our ability to distribute our products and result in costly litigation.





We do not believe that our products infringe the proprietary rights of any third parties. However, on October 30, 2001, an action for alleged patent infringement was filed in the
United States District Court for the Eastern District of Virginia against us and our subsidiary, Business Objects Americas Inc., by MicroStrategy. The complaint alleges that our software products, BUSINESS OBJECTS
BROADCAST AGENT   TM , BUSINESS OBJECTS INFOVIEW   TM AND BUSINESS OBJECTS BROADCAST AGENT
PUBLISHER TM , infringe MicroStrategys United States Patent
No. 6,279,033 entitled System and Method for Asynchronous Control of Report Generation Using a Network Interface and United States Patent No. 6,260,050 entitled System and Method of Adapting Automatic Output of Service Related OLAP
Reports to Disparate Output Devices. On February 21, 2002 MicroStrategy amended its complaint to add claims for violations of the Computer Fraud and Abuse Act, misappropriation of trade secrets, and tortious interference with contractual
relations with employees. The complaint seeks relief in the form of an injunction against us and unspecified damages. Our current assessment is that our products do not infringe and that we have not committed any of the alleged wrongful acts. If
successful, a claim of infringement against us and our inability to license the infringed or similar technology on commercially reasonable terms could have a material adverse effect on our business, operating results, and financial condition. This
case is currently expected to proceed to trial on October 8, 2002. On April 5, 2002 and March 27, 2002 the United States Patent and Trademark Office granted our requests for reexamination of MicroStrategys United States Patent No. 6,279,033
and United States Patent No. 6,260,050 respectively. Also, in July 1999, Brio Software, Inc. (Brio) filed an action alleging that we infringed upon one of its patents by selling our reporting functionality. Brio dismissed this lawsuit as part of a
settlement announced in September 1999. We believe that software products offered in our target markets increasingly will be subject to infringement claims as the number of products and competitors in our industry segment grows and product
functionalities begin to overlap.




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The potential effects on our business operations resulting from any third party infringement
claim that may be filed against us in the future include the following:





| |  |  | we could be forced to cease selling our products;
| | - |  | -------------------------------------------------




| |  |  | we would be forced to commit management resources to resolve the claim;
| | - |  | -----------------------------------------------------------------------




| |  |  | we may incur substantial litigation costs in defense of the claim;
| | - |  | ------------------------------------------------------------------




| |  |  | we may be required to indemnify our customers;
| | - |  | ----------------------------------------------




| |  |  | we may have to expand significant development resources to redesign our products as a result of these claims; and
| | - |  | -----------------------------------------------------------------------------------------------------------------




| |  |  | we may be required to enter into royalty and licensing agreements with a third party bringing an infringement claim against us, and these agreements may contain terms that are
unfavorable to us.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




We depend on strategic relationships and business alliances for continued growth of
our business





Our development, marketing, and distribution strategies rely increasingly on our ability to form long-term
strategic relationships with major vendors, many of who are substantially larger than Business Objects. These business relationships often consist of joint marketing programs or partnerships with original end manufacturer or value added resellers.
Although certain aspects of some of these relationships are contractual in nature, many important aspects of these relationships depend on the continued cooperation of each party with us. Divergence in strategy, change in focus, competitive product
offerings or contract defaults by any of these companies may interfere with our ability to develop, market, sell, or support our products, which in turn could harm our business. In addition, one or more of these companies may use the information
they gain from their relationship with us to develop or market competing products.





The loss of our rights to use software
licensed to us by third parties could harm our business.





In order to provide a complete product suite, we occasionally
license software from third parties, and sub-license this software to our customers. In addition, we license software programs from third parties and incorporate these programs into our own software products. By utilizing third party software in our
business, we incur risks that are not associated with developing software in-house. For example, these third party providers may discontinue or alter their operations, terminate their relationship with us, or generally become unable to fulfill their
obligations to us. If any of these circumstances were to occur, we may be forced to seek alternative technology which may not be available on commercially reasonable terms. In the future, we may be forced to obtain additional third party software
licenses to enhance our product offerings and compete more effectively. We may not be able to obtain and maintain licensing rights to needed technology on commercially reasonable terms, which would harm our business and operating results.




22




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Our executive officers and key personnel are critical to our business; we may not be able to
recruit and retain the personnel we need to succeed.





Our success depends to a significant extent upon a number of key
management and technical personnel, including Bernard Liautaud, our chief executive officer and co-founder, the loss of whom could adversely affect our business. The loss of the services of other key personnel or our inability to attract and retain
highly skilled technical, management, sales and marketing personnel could also harm our business. Competition for such personnel in the computer software industry is intense, and we may be unable to successfully attract and retain such personnel.





We may have difficulty managing our growth.





Our business has grown rapidly in recent years. If we continue to grow at the same pace, this growth may place a significant strain on our management and operations. Our future operating
results depend in part on the ability of our officers and key employees to continue to implement and improve our operational and financial control systems and to hire, expand, train and manage our employees. If we are unable to manage our growth
effectively, our financial condition and operating results could suffer.





We have multinational operations that are subject
to risks inherent in international operations, including currency exchange rate fluctuations.





Because we conduct our
business throughout the world, we are subject to a number of risks inherent in international operations, including their economies, compliance with various foreign laws, regulations and tax structures, and longer accounts receivable payment cycles
outside of the United States.





In addition, we conduct a significant portion of our business in currencies other than the U.S.
dollar, the currency in which we report our financial statements. We expect to generate a significant portion of our revenues and expenses in the Euro in the future. As a result, our operating results expressed in U.S. dollars have been in the past,
and may be in the future, adversely impacted by currency exchange rate fluctuations on the U.S. dollar value of foreign currency-denominated revenues and expenses. As of March 31, 2002, we were not engaged in a foreign currency hedging program to
cover our currency transaction or translation exposure.





Risks related to our industry





Our markets are highly competitive and competition could harm our ability to sell products and services and reduce our market share.





Competition could seriously harm our ability to sell software and services at prices and terms favorable to us. If we cannot compete effectively, we may
lose market share. Some of our competitors have been in business longer than us and have significantly greater financial, technical, sales, marketing and other resources than we do. In addition, some of our competitors enjoy greater name recognition
and a larger installed customer base than we do. Moreover, some of our competitors, particularly companies that offer relational database management software systems, enterprise resource planning software systems and customer relationship management
systems have well-established relationships with some of our existing and targeted customers.




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In the future, any of our competitors could introduce products with more features at lower
prices. Some of these companies could also bundle existing or new products, with other more established products that they offer, and compete more effectively against our products. Some of these competitors have already, or may in the future,
provide their products or components of their products to customers at no cost to the customer to gain market share. Because our products are specifically designed and targeted to the business intelligence software market, we may lose sales to
competitors offering a broader range of products. Furthermore, other companies larger than us could enter the market through internal expansion or by strategically aligning themselves with one of our current competitors and provide products that
cost less than our products. We believe that the business intelligence software tools market will continue to grow and develop, and that more and more large companies may find it a desirable market in which to compete. To the extent that we are
unable to effectively compete against our current and future competitors, as a result of some or all of the factors stated above, our financial condition and operating results would suffer.





The software markets that we target are subject to rapid technological change and new product introductions.





The market for business intelligence software tools is characterized by:





| |  |  | rapid technological advances;
| | - |  | -----------------------------




| |  |  | changes in customer requirements; and
| | - |  | -------------------------------------




| |  |  | frequent new product introductions and enhancements.
| | - |  | ----------------------------------------------------




To be successful, we must develop new products, platforms and enhancements to our existing products that keep pace with technological developments, changing industry standards and the increasingly sophisticated
requirements of our customers. If we are unable to respond quickly and successfully to these developments and changes, we may lose our competitive position. In addition, even if we are able to develop new products, platforms or enhancements to our
existing products, these products, platforms and product enhancements may not be accepted in the marketplace. Our customers may defer or forego purchases of our existing products if we do not adequately time the introduction or the announcement of
new products or enhancement to our existing products, or if our competitors introduce or announce new products, platforms and product enhancements. Any of these factors could severely harm our business, financial condition and operating results.




24




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Item 3.Quantitative and Qualitative Disclosures About Market Risk





The following discusses our
exposure to market risk related to changes in interest rates, equity prices 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 the Risk Factors section.





As of March 31, 2002, all of our cash
and cash equivalents were classified as available-for-sale. The principal portion of our investments are not subject to interest rate risk; however, declines in interest rates over time will reduce our interest income. A hypothetical 10% move in
interest rates would have an insignificant effect on our financial position, results of operations and cash flows. We do not have any investments in equity or debt securities traded in the public markets, nor do we currently use derivative financial
instruments. Therefore, we do not currently have any direct equity price risk.





We conduct a significant portion of our business
in currencies other than the U.S. dollar, the currency in which we report our financial statements. Assets and liabilities of our subsidiaries are translated into U.S. dollars at exchange rates in effect as of the applicable balance sheet date, and
any resulting translation adjustments are included as an adjustment to shareholders equity. Revenues and expenses generated from these subsidiaries are translated at average exchange rates during the quarter the transactions occur. Gains and
losses from these currency transactions are included in net earnings. Historically, we have generated a significant portion of our revenues and incurred a significant portion of our expenses in Euro, British pounds sterling, and the Japanese yen. As
a result, our operating results have been in the past, and may be in the future, adversely impacted by currency exchange rate fluctuations on the U.S. dollar value of foreign currency-denominated revenues and expenses. We cannot predict the effect
of exchange rate fluctuations upon our future operating results. As of March 31, 2002, we were not engaged in a foreign currency hedging program to cover our currency transaction or translation exposure.




25




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PART II.    OTHER INFORMATION





Item 1.Legal Proceedings





On October 17, 2001, we filed a lawsuit in the United States District Court for the Northern District of California against
MicroStrategy Incorporated (Microstrategy) for alleged patent infringement. The lawsuit alleges that MicroStrategy infringes on our United States Patent No. 5,555,403 and 6,247,008 by making, using, offering to sell and selling its product currently
known as MicroStrategy Version 7.0. Our complaint requests that the defendant be enjoined from further infringing the patent and seeks an as yet undetermined amount of damages.





On October 30, 2001, an action for alleged patent infringement was filed in the United States District Court for the Eastern District of Virginia against us and our subsidiary, Business
Objects Americas Inc., by MicroStrategy. The complaint alleges that our software products, BUSINESS OBJECTS BROADCAST AGENT TM , BUSINESS OBJECTS INFOVIEW TM and BUSINESS OBJECTS BROADCAST AGENT
PUBLISHER TM , infringe MicroStrategys United States Patent
No. 6,279,033 entitled System and Method for Asynchronous Control of Report Generation Using a Network Interface and United States Patent No. 6,260,050 entitled System and Method of Adapting Automatic Output of Service Related OLAP
Reports to Disparate Output Devices. On February 21, 2002 MicroStrategy amended its complaint to add claims for violations of the Computer Fraud and Abuse Act, misappropriation of trade secrets, and tortious interference with contractual
relations with employees. The complaint seeks relief in the form of an injunction against us and unspecified damages. Our current assessment is that our products do not infringe and that we have not committed any of the alleged wrongful acts. If
successful, a claim of infringement against us and our inability to license the infringed or similar technology on commercially reasonable terms could have a material adverse effect on our business, operating results, and financial condition. This
case is currently expected to proceed to trial on October 8, 2002. On April 5, 2002 and March 27, 2002 the United States Patent and Trademark Office granted our requests for reexamination of MicroStrategys United States Patent No. 6,279,033
and United States Patent No. 6,260,050 respectively.





On May 5, 2000, we filed a lawsuit in the United States District Court for
the Northern District of California against Cognos Incorporated and Cognos Corporation (collectively Cognos) for alleged patent infringement. The lawsuit alleges that Cognos infringes on our United States Patent No. 5,555,403 by making, using,
offering to sell and selling its product known as Impromptu. Our complaint requests that the defendants be enjoined from further infringing the patent and seeks damages. On September 7, 2001, the United States District Court denied Cognos
motion for a partial summary judgment where Cognos was seeking to invalidate our United States Patent No. 5,555,403. The Court determined that the case should proceed to trial and set a date of May 20, 2002.





Item 6.Exhibits and Current Reports on Form 8-K





a)  Reports on Form 8-K





None.




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SIGNATURES





Pursuant to the requirements 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.





BUSINESS OBJECTS S.A.By:

/s/    BERNARD LIAUTAUDBernard LiautaudChairman of the Board and Chief Executive
Officer





Date:    May 14, 2002





By:

/s/    CLIFTON T. WEATHERFORDClifton T. WeatherfordChief Financial Officer and Executive Vice President, Finance and
Administration





Date:    May 14, 2002




27