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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 June 30, 2003



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                                             |  | 98-0355777                          
|-------------------------------------------------------------- |  | ------------------------------------
|(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)



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



Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act).  Yes  x  No ̈



As of July 31, 2003, the number of outstanding shares of our
common stock was 64,309,693 Ordinary Shares of euro 0.10 nominal value (including 21,599,519 American depositary shares each corresponding to one Ordinary Share and 1,067,675 treasury shares).



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Business Objects S.A.

Index



|                              |  | Page                                                                                                     
|----------------------------- |  | ---------------------------------------------------------------------------------------------------------
|PART I. FINANCIAL INFORMATION |  |                                                                                                          
|                              |  |                                                                                                          
|Item 1.                       |  | Unaudited Condensed Consolidated Financial Statements:                                                   
|                              |  |                                                                                                          
|                              |  | Condensed Consolidated Balance Sheets as of June 30, 2003 and December 31, 2002                          
|                              |  |                                                                                                          
|                              |  | Condensed Consolidated Statements of Income for the three and six months ended June 30, 2003 and 2002    
|                              |  |                                                                                                          
|                              |  | Condensed Consolidated Statements of Cash Flows for the three and six months ended June 30, 2003 and 2002
|                              |  |                                                                                                          
|                              |  | Notes to Condensed Consolidated Financial Statements                                                     
|                              |  |                                                                                                          
|Item 2.                       |  | Managements Discussion and Analysis of Financial Condition and Results of Operations                    
|                              |  |                                                                                                          
|Item 3.                       |  | Quantitative and Qualitative Disclosures about Market Risk                                               
|                              |  |                                                                                                          
|Item 4.                       |  | Controls and Procedures                                                                                  
|                              | 
|PART II. OTHER INFORMATION    |  | 40                                                                                                       
|                              |  |                                                                                                          
|Item 1.                       |  | Legal Proceedings                                                                                        
|                              |  |                                                                                                          
|Item 4.                       |  | Submissions of Matters                                                                                   
|                              |  |                                                                                                          
|Item 6.                       |  | Exhibits and Current Reports on Form 8-K                                                                 
|                              | 
|SIGNATURES                    |  | 43                                                                                                       



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BUSINESS OBJECTS S.A.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands of US dollars, except per share and ADS data)



|                                                                                                                                                   |  | June 30, 2003 |         |   | December 31,2002 |  
|-------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------- | ------- | - | ---------------- | -
|                                                                                                                                                   |  | (unaudited)   |         |   |                  |  
|ASSETS                                                                                                                                             |  |               |         |   |                  |  
|Current assets:                                                                                                                                    |  |               |         |   |                  |  
|Cash and cash equivalents                                                                                                                          |  | $             | 286,854 |   |                  | $
|Short-term investments                                                                                                                             |  |               | 76,129  |   |                  |  
|Restricted cash, current                                                                                                                           |  |               | 18,073  |   |                  |  
|Accounts receivable, net                                                                                                                           |  |               | 81,575  |   |                  |  
|Deferred taxes, net                                                                                                                                |  |               | 11,707  |   |                  |  
|Other current assets                                                                                                                               |  |               | 18,460  |   |                  |  
|                                                                                                                                                   |  |               |         |   |                  |  
|Total current assets                                                                                                                               |  |               | 492,798 |   |                  |  
|                                                                                                                                                   |  |              
|Goodwill                                                                                                                                           |  |               | 75,682  |   |                  |  
|Other intangible assets, net                                                                                                                       |  |               | 9,405   |   |                  |  
|Property and equipment, net                                                                                                                        |  |               | 35,735  |   |                  |  
|Restricted cashlong term                                                                                                                          |  |               |        |   |                  |  
|Deposits and other assets                                                                                                                          |  |               | 3,517   |   |                  |  
|                                                                                                                                                   |  |               |         |   |                  |  
|Total assets                                                                                                                                       |  | $             | 617,137 |   |                  | $
|                                                                                                                                                   |  |               |         |   |                  |  
|LIABILITIES AND SHAREHOLDERS EQUITY                                                                                                               |  |               |         |   |                  |  
|Current liabilities:                                                                                                                               |  |               |         |   |                  |  
|Accounts payable                                                                                                                                   |  | $             | 18,476  |   |                  | $
|Accrued payroll and related expenses                                                                                                               |  |               | 46,957  |   |                  |  
|Deferred revenue                                                                                                                                   |  |               | 102,709 |   |                  |  
|Income taxes payable                                                                                                                               |  |               | 4,315   |   |                  |  
|Other current liabilities                                                                                                                          |  |               | 32,004  |   |                  |  
|Notes payablecurrent portion                                                                                                                      |  |               | 10,612  |   |                  |  
|                                                                                                                                                   |  |               |         |   |                  |  
|Total current liabilities                                                                                                                          |  |               | 215,073 |   |                  |  
|                                                                                                                                                   |  |              
|Notes and escrow payable                                                                                                                           |  |               |        |   |                  |  
|Long-term accrued rent                                                                                                                             |  |               | 7,456   |   |                  |  
|                                                                                                                                                   |  |              
|Shareholders equity                                                                                                                               |  |               |         |   |                  |  
|Ordinary shares, euro 0.10 nominal value ($0.12 as of June 30, 2003 and $0.11 U.S. as of December 31, 2002):                                       |  |               |         |   |                  |  
|Authorized 81,758 at June 30, 2003 and 81,378 at December 31, 2002; Issued and outstanding64,255 at June 30, 2003 and 63,463 at December 31, 2002 |  |               | 6,818   |   |                  |  
|Additional paid-in capital                                                                                                                         |  |               | 175,150 |   |                  |  
|Treasury stock, 1,068 shares at June 30, 2003 and December 31, 2002.                                                                               |  |               | (13,104 | ) |                  |  
|Retained earnings                                                                                                                                  |  |               | 200,375 |   |                  |  
|Accumulated other comprehensive income                                                                                                             |  |               | 25,369  |   |                  |  
|                                                                                                                                                   |  |               |         |   |                  |  
|Total shareholders equity                                                                                                                         |  |               | 394,608 |   |                  |  
|                                                                                                                                                   |  |               |         |   |                  |  
|Total liabilities and shareholders equity                                                                                                         |  | $             | 617,137 |   |                  | $
|                                                                                                                                                   |  |               |         |   |                  |  

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Note: The balance sheet at December 31, 2002 has been
derived from the audited financial statements at that date.



See accompanying
notes to Condensed Consolidated Financial Statements.



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BUSINESS OBJECTS S.A.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(In thousands of US dollars, except per share and ADS data)



|                                                                                                   |  | Three Months Ended June 30, |         |   | Six Months Ended June 30, |  
|-------------------------------------------------------------------------------------------------- |  | --------------------------- | ------- | - | ------------------------- | -
|                                                                                                   |  | 2003                        |         |   | 2002                      |  
|                                                                                                   |  | (unaudited)                 |        
|Revenues:                                                                                          |  |                             |        
|Net license fees                                                                                   |  | $                           | 62,695  |   |                           | $
|Services                                                                                           |  |                             | 66,292  |   |                           |  
|                                                                                                   |  |                             |         |   |                           |  
|Total revenues                                                                                     |  |                             | 128,987 |   |                           |  
|Cost of revenues:                                                                                  |  |                             |         |   |                           |  
|Net license fees                                                                                   |  |                             | 863     |   |                           |  
|Services                                                                                           |  |                             | 20,701  |   |                           |  
|                                                                                                   |  |                             |         |   |                           |  
|Total cost of revenues                                                                             |  |                             | 21,564  |   |                           |  
|                                                                                                   |  |                             |         |   |                           |  
|Gross margin                                                                                       |  |                             | 107,423 |   |                           |  
|Operating expenses:                                                                                |  |                             |         |   |                           |  
|Sales and marketing                                                                                |  |                             | 58,297  |   |                           |  
|Research and development                                                                           |  |                             | 23,540  |   |                           |  
|General and administrative                                                                         |  |                             | 10,602  |   |                           |  
|Restructuring                                                                                      |  |                             |        |   |                           |  
|                                                                                                   |  |                             |         |   |                           |  
|Total operating expenses                                                                           |  |                             | 92,439  |   |                           |  
|                                                                                                   |  |                             |         |   |                           |  
|Income from operations                                                                             |  |                             | 14,984  |   |                           |  
|Interest and other income, net                                                                     |  |                             | 3,608   |   |                           |  
|                                                                                                   |  |                             |         |   |                           |  
|Income before provision for income taxes                                                           |  |                             | 18,592  |   |                           |  
|Provision for income taxes                                                                         |  |                             | (7,065  | ) |                           |  
|                                                                                                   |  |                             |         |   |                           |  
|Net income                                                                                         |  | $                           | 11,527  |   |                           | $
|                                                                                                   |  |                             |         |   |                           |  
|Net income per share and ADSbasic                                                                 |  | $                           | 0.18    |   |                           | $
|                                                                                                   |  |                             |         |   |                           |  
|ADS and shares used in computing net income per share and ADSbasic                                |  |                             | 63,052  |   |                           |  
|                                                                                                   |  |                             |         |   |                           |  
|Net income per share and ADSdiluted                                                               |  | $                           | 0.18    |   |                           | $
|                                                                                                   |  |                             |         |   |                           |  
|ADS and shares and common share equivalents used in computing net income per share and ADSdiluted |  |                             | 64,458  |   |                           |  
|                                                                                                   |  |                             |         |   |                           |  



See accompanying notes to Condensed
Consolidated Financial Statements.



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BUSINESS OBJECTS S.A.

CONDENSED CONSOLIDATED CASH FLOW STATEMENT

(In thousands of US dollars)



|                                                                        |  | Six Months Ended June 30, |        
|----------------------------------------------------------------------- |  | ------------------------- | -------
|                                                                        |  | 2003                      |        
|                                                                        |  | (unaudited)               |        
|Net cash provided by (used in) operating activities:                    |  |                           |        
|Net income                                                              |  | $                         | 20,340 
|Depreciation and amortization                                           |  |                           | 8,048  
|Amortization of intangibles                                             |  |                           | 1,405  
|Deferred income taxes                                                   |  |                           | 1,223  
|Changes in operating assets and liabilities:                            |  |                           |        
|Decrease in accounts receivable                                         |  |                           | 21,651 
|Decrease (increase) in current and other assets                         |  |                           | (3,321 
|Decrease in accounts payable                                            |  |                           | (2,874 
|Decrease in accrued payroll and related expenses                        |  |                           | (4,472 
|Decrease in income taxes payable                                        |  |                           | (2,454 
|Increase in deferred revenue                                            |  |                           | 23,279 
|Increase (decrease) in other current liabilities                        |  |                           | (6,193 
|                                                                        |  |                           |        
|Net cash provided by operating activities                               |  |                           | 56,632 
|                                                                        |  |                           |        
|Cash flows from investing activities:                                   |  |                           |        
|Purchase of property and equipment                                      |  |                           | (4,673 
|Purchase of short-term investments                                      |  |                           | (25,321
|                                                                        |  |                           |        
|Net cash used for investing activities                                  |  |                           | (29,994
|                                                                        |  |                           |        
|Cash flows from financing activities:                                   |  |                           |        
|Issuance of shares                                                      |  |                           | 6,299  
|Transfer of cash from restricted cash accounts                          |  |                           | 793    
|Principal payments on notes payable                                     |  |                           | (793   
|                                                                        |  |                           |        
|Net cash provided by financing activities                               |  |                           | 6,299  
|                                                                        |  |                           |        
|Effect of foreign exchange rate changes on cash and cash equivalents    |  |                           | 19,976 
|                                                                        |  |                           |        
|Net increase in cash and cash equivalents                               |  |                           | 52,913 
|Cash and cash equivalents at the beginning of the period                |  |                           | 233,941
|                                                                        |  |                           |        
|Cash and cash equivalents, end of the period                            |  |                           | 286,854
|Short-term investments, end of period                                   |  |                           | 76,129 
|                                                                        |  |                           |        
|Cash and cash equivalents and short term investments, end of the period |  | $                         | 362,983
|                                                                        |  |                           |        



See accompanying notes to Condensed
Consolidated Financial Statements.



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Business Objects S.A.

Notes to Condensed Consolidated Financial Statements

June 30, 2003



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 note 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 the Companys financial position, results of operations, and cash flows for the interim periods presented have
been made. Operating results for the three and six month periods ended June 30, 2003 are not necessarily indicative of the results that may be expected for the year ending December 31, 2003. These financial statements should be read in conjunction
with the Companys audited consolidated financial statements and notes as included in its Annual Report on Form 10-K for the year ended December 31, 2002.



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, useful lives for property
and equipment and intangibles, employee benefits, taxes, expense accruals, accrued restructuring charges, contingent liabilities, purchase price allocation for business combinations, impairment of long lived assets, including intangible assets and
goodwill, and the deferred tax valuation allowance. Actual results could differ from those estimates.



3. Accounts Receivable



Accounts
receivable are stated net of allowances for doubtful accounts of $2,437,000 at June 30, 2003 and $2,891,000 at December 31, 2002.



4. Revenue Recognition



The Company enters 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, the Company determines 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, the Company uses 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.



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For those contracts that consist solely of license and maintenance the Company recognizes net license revenues based upon
the residual method after all licensed software products have been delivered as prescribed by the Statement of Position 98-9 Modification of SOP No. 97-2 with Respect to Certain Transactions. The Company recognizes maintenance revenues
over the term of the maintenance contract. The maintenance rates for both license agreements with and without stated renewal rates are based upon the Companys price list. Vendor specific objective evidence of the fair value of maintenance for
license agreements that do not include stated renewal rates is determined by reference to the price paid by the Companys customers when maintenance is sold separately (that is, the renewal rate). Past history has shown that the rate the
Company charges for maintenance on license agreements with a stated renewal rate is similar to the rate the Company charges for maintenance on license agreements without a stated renewal rate.



Services can consist of maintenance, training and/or consulting services. The Company
assesses 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 net license and service revenues under the arrangement are recognized under the percentage of completion method of contract accounting, based on input measures of hours. For those arrangements for which the Company has concluded
that the service element is not essential to the other elements of the arrangement the Company determines whether the services are available from other vendors, do not involve a significant degree of risk or unique acceptance criteria and whether
the Company has sufficient experience in providing the service to be able to separately account for the service. When the service qualifies for separate accounting, the Company uses 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 consulting services is based upon average daily rates. As previously noted, the Company enters into contracts for services alone and such contracts are based upon time and material basis.



There is no right of return or price protection for sales to domestic and international
distributors or value-added resellers (collectively, resellers). The Company does not accept orders from resellers when the Company is aware that a reseller does not have a purchase order from an end-user.



5. Other Current Liabilities



Other current liabilities include accruals for sales, use and value added taxes, accrued
rent, audit, tax and legal fees, deferred compensation under the Companys United States deferred compensation plan, and other accruals, none of which individually account for more than five percent of total current liabilities.



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6. Comprehensive Income



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



|                                            |  | Three Months EndedJune 30, |        | Six Months Ended June 30,
|------------------------------------------- |  | -------------------------- | ------ | -------------------------
|                                            |  | 2003                       |        | 2002                     
|Net income                                  |  | $                          | 11,527 |                          
|Change in cumulative translation adjustment |  |                            | 16,544 |                          
|                                            |  |                            |        |                          
|Total comprehensive income                  |  | $                          | 28,071 |                          
|                                            |  |                            |        |                          



7. Net Income per Share and ADS



The components of basic and diluted earnings per share and American
Depositary Share (ADS) were as follows (in thousands, except per share and ADS):



|                                                                                                    |  | Three Months EndedJune 30, |        | Six Months EndedJune 30,
|--------------------------------------------------------------------------------------------------- |  | -------------------------- | ------ | ------------------------
|                                                                                                    |  | 2003                       |        | 2002                    
|Numerator:                                                                                          |  |                            |        |                         
|Net income                                                                                          |  | $                          | 11,527 |                         
|                                                                                                    |  |                            |        |                         
|Denominator:                                                                                        |  |                            |        |                         
|Basic weighted average ADSs and shares outstanding                                                  |  |                            | 63,052 |                         
|                                                                                                    |  |                            |        |                         
|Incremental ordinary shares attributable to shares issuable under employee stock plans and warrants |  |                            | 1,406  |                         
|                                                                                                    |  |                            |        |                         
|Diluted weighted average ADS and shares outstanding                                                 |  |                            | 64,458 |                         
|                                                                                                    |  |                            |        |                         
|Net income per ADS and per sharebasic                                                              |  | $                          | 0.18   |                         
|                                                                                                    |  |                            |        |                         
|Net income per ADS and per sharediluted                                                            |  | $                          | 0.18   |                         
|                                                                                                    |  |                            |        |                         



For the three months ended June 30,
2003 and 2002, stock option rights totaling 4,540,000 shares and 6,232,000 shares, respectively, have been excluded from the diluted EPS calculation because the options exercise price was greater than the average market price of common shares
and their effect would have been antidilutive. For the six months ended June 30, 2003 and 2002, stock option rights totaling 4,706,000 shares and 3,366,000 shares, respectively, have been excluded from the diluted EPS calculation because the
options exercise price was greater than the average market price of common shares and their effect would have been antidilutive.



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8. Segment and Geographic Information



The Company has one reportable segment: business intelligence software products. The Company recognizes its net software license revenue
from three product families: business intelligence platform, enterprise analytic applications and data integration. The following summarizes net license revenue recognized from each product family (in thousands):



|                                 |  | Three Months Ended June 30, |        | Six Months Ended June 30,
|-------------------------------- |  | --------------------------- | ------ | -------------------------
|                                 |  | 2003                        |        | 2002                     
|Business intelligence platform   |  | $                           | 54,099 |                          
|Enterprise analytic applications |  |                             | 5,466  |                          
|Data integration                 |  |                             | 3,130  |                          
|                                 |  |                             |        |                          
|Total net license revenue        |  | $                           | 62,695 |                          
|                                 |  |                             |        |                          



The following is a summary of our
revenue by geographic region (in thousands):



|              |  | Three Months Ended June 30, |         | Six Months Ended June 30,
|------------- |  | --------------------------- | ------- | -------------------------
|              |  | 2003                        |         | 2002                     
|Europe        |  | $                           | 62,999  |                          
|Americas      |  |                             | 56,559  |                          
|Rest of world |  |                             | 9,429   |                          
|              |  |                             |         |                          
|Total revenue |  | $                           | 128,987 |                          
|              |  |                             |         |                          



9. Legal Proceedings



On July 15, 2002, Informatica Corporation (Informatica) filed
an action for alleged patent infringement in the United States District Court for the Northern District of California against Acta Technology, Inc. (Acta Technology or Acta). The Company became a party to this action when the
Company acquired Acta Technology in August 2002. The complaint alleges that the Acta Technology software products infringe Informaticas United States Patent No. 6,014,670 and 6,339,775 both entitled Apparatus and Method for Performing
Data Transformations in Data Warehousing and United States Patent No. 6,208,990 entitled Method and Architecture for Automated Optimization of ETL throughput in Data Warehousing Applications. On July 17, 2002, Informatica filed an
amended complaint alleging that the Acta Technology software products also infringe United States Patent No. 6,044,374 entitled Method and Apparatus for Sharing Metadata Between Multiple Data Marts Through Object References. The
complaint seeks relief in the form of an injunction, unspecified damages and an award of treble damages. The Company believes that it has meritorious defenses to the claims against it and intends to defend itself vigorously. The potential costs
associated with an adverse outcome of this matter cannot be reasonably estimated at this time. This case is set to proceed to trial on August 16, 2004.



On October 17, 2001, the Company 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 the Companys United States Patent No. 5,555,403 by making, using, offering to sell and selling its product currently known as
MicroStrategy Version 7.0. The Companys complaint requests that the defendant be



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enjoined from further infringing the patent and seeks an as-yet undetermined amount of damages. On June 27, 2003, MicroStrategy filed a motion for summary
judgment that the accused products do not infringe the Companys patent. On July 23, 2003 the Company filed its opposition to MicroStrategys motion. The Court is schedule to hear the motion on August 19, 2003. This case is set to proceed
to trial on November 10, 2003.



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 the Company and its subsidiary, Business Objects Americas, by MicroStrategy. The complaint alleges that the Companys software
products, BusinessObjects Broadcast Agent, BusinessObjects Infoview and BusinessObjects Broadcast Agent Publisher, 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. MicroStrategy amended its complaint to
add claims for violations of the Computer Fraud and Abuse Act, misappropriation of trade secrets, tortious interference with contractual relations and conspiracy in violation of the Virginia Code. The complaint seeks injunctive relief and damages.
On April 5, 2002 and March 27, 2002 the United States Patent and Trademark Office (USPTO) granted the Companys requests for reexamination of MicroStrategys United States Patent No. 6,279,033 (the 033 patent)
and United States Patent No. 6,260,050 (the 050 patent) respectively. On June 13, 2002 the District Judge granted the Companys motion to stay the proceedings on the patent claims pending the completion of the reexaminations
by the USPTO. On December 30, 2002 the District Judge granted the Companys motion for summary judgment and rejected MicroStrategys claims for damages as to the causes of action for misappropriation of trade secrets, Computer Fraud and
Abuse Act and conspiracy in violation of the Virginia Code. Trial of the trade secret claim for injunctive relief and the sole remaining damages claim for tortious interference with contractual relations is scheduled to proceed on October 20, 2003.



It is the Companys current assessment that its products do not infringe
MicroStrategys patents and that the Company has not committed any of the wrongful acts alleged by MicroStrategy that could result in any material damages. As a result of the stay of the proceedings in the patent claims, the absence of
discovery as to damages and of any demand by MicroStrategy, the Company cannot reasonably estimate the potential costs associated with an adverse outcome of these claims at this time. The Company believes that the likelihood that the tort claims
will be material is remote.



See note 18, Subsequent Events, for a description
of events after June 30, 2003 related to MicroStrategy litigation and the termination of a building lease in connection with a condemnation action.



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The Company is also involved in various other legal proceedings in the ordinary course of business and none are believed
to be material to its financial condition and results of operations.



10.
Business Restructuring Charge



During the quarter ended June 30, 2002 the
Company implemented a restructuring plan to eliminate 50 positions in the Companys European field operations in order to better align its revenues and costs structure in Europe in response to the regions overall weak IT spending
environment. In addition, the Company eliminated excess office space in France, Italy, Spain and Switzerland. Implementation of the plan resulted in restructuring charges to earnings totaling $3,756,000 for severance and other employee termination
benefits and costs associated with exiting facilities, representing the excess of lease costs over anticipated sublease income.



During the quarter ended December 31, 2002 the Company adopted an additional restructuring plan to eliminate an additional 4 positions as part of its ongoing measures to
better align operating expenses with revenues. Implementation of this plan resulted in restructuring charges to earnings totaling $725,000 for severance and other employee termination benefits.



The Company had completed the implementation of both restructuring plans as of June 30, 2003.
The remaining $517,000 restructuring accrual relates to remaining payments to terminated employees and is expected to be paid in 2003.



The following table summarizes the Companys accrued restructuring costs at June 30, 2003 (in thousands):



|                                                                                    |  | Severanceand OtherEmployeeTerminationBenefits |        |   | EstimatedCost ofExcessOfficeSpace |   |      | Total | 
|----------------------------------------------------------------------------------- |  | --------------------------------------------- | ------ | - | --------------------------------- | - | ---- | ----- | 
|Original charge accrued during 2002 included in operating expenses                  |  | $                                             | 3,036  |   |                                   | $ | 720  |       | 
|Adjustments to original plan                                                        |  |                                               | (532   | ) |                                   |   | (78  | )     | 
|Additional restructuring charges accrued during 2002 included in operating expenses |  |                                               | 725    |   |                                   |   |     |       | 
|Cash payments during 2002                                                           |  |                                               | (2,268 | ) |                                   |   | (564 | )     | 
|Impact of foreign currency exchange rates on translation of accrual                 |  |                                               | 259    |   |                                   |   | 75   |       | 
|                                                                                    |  |                                               |        |   |                                   |   |      |       | 
|Balance at December 31, 2002                                                        |  |                                               | 1,220  |   |                                   |   | 153  |       | 
|Adjustments to the Original Plan                                                    |  |                                               | (26    | ) |                                   |   |     |       | 
|Cash payments during the first quarter of 2003                                      |  |                                               | (756   | ) |                                   |   | (74  | )     | 
|Impact of foreign currency exchange rates on translation of accrual                 |  |                                               | 145    |   |                                   |   | 6    |       | 
|                                                                                    |  |                                               |        |   |                                   |   |      |       | 
|Balance at March 31, 2003                                                           |  | $                                             | 583    |   |                                   | $ | 85   |       | 
|                                                                                    |  |                                               |        |   |                                   |   |      |       | 
|Adjustments to the Original Plan                                                    |  |                                               | (37    | ) |                                   |   |     |       | 
|Cash payments during the second quarter of 2003                                     |  |                                               | (59    | ) |                                   |   | (93  | )     | 
|Impact of foreign currency exchange rates on translation of accrual                 |  |                                               | 30     |   |                                   |   | 8    |       | 
|                                                                                    |  |                                               |        |   |                                   |   |      |       | 
|Balance at June 30, 2003                                                            |  |                                               | 517    |   |                                   |   | 0    |       | 
|                                                                                    |  |                                               |        |   |                                   |   |      |       | 



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Immediately prior to the Companys acquisition of Acta Technology, Inc (Acta), Actas management
initiated and approved plans to restructure Actas operations. The restructuring plan reduced Actas cost structure and better aligned product and operating expenses with existing general economic conditions. Acta recorded approximately
$13,527,000 of restructuring costs in connection with restructuring the pre-acquisition Acta organization. Costs to restructure Acta prior to the acquisition were accounted for under EITF Issue No. 95-3, Recognition of Liabilities in
Connection with Purchase Business Combinations. These costs were recorded as liabilities assumed as part of the purchase price allocation.



This restructuring liability consisted primarily of severance, other employee benefits and costs of vacating duplicate facilities. The severance and other employee
benefits related to the planned termination of approximately 50 employees worldwide. Other related restructuring charges consisted primarily of the cost of vacating duplicate facilities and the write-down of excess equipment. The charge for the
write-down of excess equipment was $1,220,000. The charge for lease abandonment was $7,926,000, representing total future minimum lease payments due through 2007, net of projected sublease income of $4,188,000 for Actas Mountain View,
California headquarters and other smaller European offices.



See note 18,
Subsequent Events, for a description of a tentative agreement to terminate the lease for Actas Mountain View, California facility.



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##### Table of Contents

The balance of the accrued restructuring charges was capitalized as a cost of acquisition and at June 30, 2003 was as
follows (in thousands):



|                                                           |  | EmployeeSeveranceand OtherRelatedBenefits |        |   | LeaseholdAbandonmentand Write-offof Propertyand Equipment |   |        | Total | 
|---------------------------------------------------------- |  | ----------------------------------------- | ------ | - | --------------------------------------------------------- | - | ------ | ----- | 
|Restructuring costs capitalized as a cost of acquisition   |  | $                                         | 4,381  |   |                                                           | $ | 9,146  |       | 
|Cash payments during 2002                                  |  |                                           | (4,381 | ) |                                                           |   | (1,108 | )     | 
|Non-cash charges during 2002                               |  |                                           |       |   |                                                           |   | (1,220 | )     | 
|                                                           |  |                                           |        |   |                                                           |   |        |       | 
|Balance at December 31, 2002                               |  | $                                         |       |   |                                                           | $ | 6,818  |       | 
|                                                           |  |                                           |        |   |                                                           |   |        |       | 
|Cash payments during the first quarter of 2003             |  |                                           |       |   |                                                           |   | (603   | )     | 
|                                                           |  |                                           |        |   |                                                           |   |        |       | 
|Balance at March 31, 2003                                  |  | $                                         |       |   |                                                           | $ | 6,215  |       | 
|                                                           |  |                                           |        |   |                                                           |   |        |       | 
|Cash payments during the second quarter of 2003            |  |                                           |       |   |                                                           |   | (754   | )     | 
|                                                           |  |                                           |        |   |                                                           |   |        |       | 
|Balance at June 30, 2003                                   |  | $                                         |       |   |                                                           | $ | 5,461  |       | 
|                                                           |  |                                           |        |   |                                                           |   |        |       | 
|Less current portion included in other current liabilities |  |                                           |       |   |                                                           |   | (1,723 | )     | 
|                                                           |  |                                           |        |   |                                                           |   |        |       | 
|Long-term                                                  |  | $                                         |       |   |                                                           | $ | 3,738  |       | 
|                                                           |  |                                           |        |   |                                                           |   |        |       | 



11. Classification of Notes and
Escrows Payable and Restricted Cash



During the six months ended June 30,
2003, $9,728,000 in notes payable were classified as current, from long-term, as they are due in the first quarter of 2004 subject to indemnification obligations. The related restricted cash, plus $526,000 in cash on deposit for bonuses to be paid
to Acta employees was also classified as current from long-term during the six months ended June 30, 2003. In April, 2003, the Company paid $833,000 in notes issued in connection with the purchase of OLAP@Work in April, 2000 and released a
corresponding amount from restricted cash.



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12. Goodwill and Other Intangible Assets



In June 2003, the Company performed the required annual impairment tests of goodwill and concluded that no impairment to goodwill existed.
This test consisted of a comparison of the fair value of the Consolidated Company with its carrying amount, including the goodwill. The fair value of the reporting unit was determined based on the income approach, which estimates the fair value
based on the future discounted cash flows. Under the income approach, the Company assumed a cash flow period of five years, long-term annual growth rates of 8% to 10%, a discount rate of 35% and terminal value growth rates of 1.5%. Based on the
analysis, the Company determined that the fair value was in excess of the carrying amount of the consolidated Company.



The change in the carrying amount of net goodwill was as follows (in thousands):



|                                                    |  | For the SixMonths EndedJune 30,
|--------------------------------------------------- |  | -------------------------------
|                                                    |  | 2003                           
|Beginning balance                                   |  | $                              
|Impact of foreign currency fluctuations on goodwill |  |                                
|                                                    |  |                                
|Ending balance                                      |  | $                              
|                                                    |  |                                



Other intangible assets, at cost,
consisted of the following at June 30, 2003 (in thousands):



|                              |  | June 30, 2003 |         |   | December 31,2002 |  
|----------------------------- |  | ------------- | ------- | - | ---------------- | -
|Employment contracts          |  | $             | 7,434   |   |                  | $
|Developed technology          |  |               | 9,591   |   |                  |  
|Maintenance contracts         |  |               | 2,700   |   |                  |  
|                              |  |               |         |   |                  |  
|Total other intangible assets |  |               | 19,725  |   |                  |  
|Accumulated amortization      |  |               | (10,320 | ) |                  |  
|                              |  |               |         |   |                  |  
|Other intangible assets, net  |  | $             | 9,405   |   |                  | $
|                              |  |               |         |   |                  |  



The aggregate intangible amortization
expense was $1,405,000 and $1,239,000 for the six months ended June 30, 2003 and 2002. Employment contracts are amortized over periods ranging from one to three years. Developed technology and maintenance contracts are amortized over five years.
Intangible assets are amortized on a straight-line basis over their respective estimated useful lives.



The estimated amortization expense for the next five fiscal years is as follows (in thousands):



|Remainder of 2003 |  | $ | 1,335
|----------------- |  | - | -----
|2004              |  |   | 2,386
|2005              |  |   | 2,386
|2006              |  |   | 2,386
|2007              |  |   | 912  
|                  |  |   |      
|                  |  | $ | 9,405
|                  |  |   |      



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13. Stock Based Compensation Plans



The Company issues stock options or share warrants to its employees and outside directors and provides employees the right to purchase its
stock pursuant to shareholder approved stock option and employee stock purchase programs. The Company accounts for its stock-based compensation plans under the intrinsic value method of accounting as defined by Accounting Principles Board Opinion
No. 25, Accounting for Stock Issued to Employees and related interpretations. No stock-based employee compensation cost is reflected in net income for the three and six months ended June 30, 2003 and 2002 as all options granted under
these plans had an exercise price equal to the fair market value of the underlying common stock on the date of grant. The following table sets forth the effect on net income and earnings per share if the Company had accounted for its stock option
and stock purchase plans under the fair value method of accounting under Statement 123, as amended by Statement 148 (in thousands, except per share and ADS data):



|                                                                                                                                                                                                                                                                                                |  | Three Months Ended June 30, |        |   | Six Months Ended June 30, |  
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | --------------------------- | ------ | - | ------------------------- | -
|                                                                                                                                                                                                                                                                                                |  | 2003                        |        |   | 2002                      |  
|Net income, as reported                                                                                                                                                                                                                                                                         |  | $                           | 11,527 |   |                           | $
|Less: Total stock-based employee compensation expense determined by the fair value method, net of related tax benefits of $4,178 and $4,779 for the three months ended June 30, 2003
and 2002, respectively and $7,282 and $9,255 for the six months ended June 30, 2003 and 2002, respectively |  |                             | (6,817 | ) |                           |  
|                                                                                                                                                                                                                                                                                                |  |                             |        |   |                           |  
|Pro forma net income                                                                                                                                                                                                                                                                            |  | $                           | 4,710  |   |                           | $
|                                                                                                                                                                                                                                                                                                |  |                             |        |  
|Earnings per share and ADS:                                                                                                                                                                                                                                                                     |  |                             |        |   |                           |  
|Basic-as reported                                                                                                                                                                                                                                                                               |  | $                           | 0.18   |   |                           | $
|                                                                                                                                                                                                                                                                                                |  |                             |        |   |                           |  
|Basic-pro forma                                                                                                                                                                                                                                                                                 |  | $                           | 0.08   |   |                           | $
|                                                                                                                                                                                                                                                                                                |  |                             |        |   |                           |  
|Diluted-as reported                                                                                                                                                                                                                                                                             |  | $                           | 0.18   |   |                           | $
|                                                                                                                                                                                                                                                                                                |  |                             |        |   |                           |  
|Dilued-proforma                                                                                                                                                                                                                                                                                 |  | $                           | 0.07   |   |                           | $
|                                                                                                                                                                                                                                                                                                |  |                             |        |   |                           |  



Pro forma information regarding net
income and net income per share is required by FAS 123 and has been determined as if the Company had accounted for its employee stock options under the fair value method of FAS 123. The fair value for these options was estimated at the date of grant
using a Black-Scholes option pricing model assuming no dividends, risk-free weighted average interest rates of 1.75% and 3.80% for the second quarter of 2003 and 2002, respectively, and 1.98% and 3.56% for the first quarter of 2003 and 2002,
respectively and a weighted average expected option life of 6 months and 3 years for options granted under Employee Stock Purchase Plans and Stock



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##### Table of Contents

Options Plans, respectively. The volatility factor of the expected market price of the Companys ordinary shares was assumed to be 75.40% and 70.58% for
the second quarter of 2003, and 2002, respectively and 77.77% and 70.58% for the first quarter of 2003, and 2002, respectively. The tax benefit was calculated on the total pro forma stock-based employee compensation expense at the Companys
effective tax rate of 38% for the second quarter and first half of 2003 and 2002. As this calculation is based on certain assumptions about the deductibility of the expense, the timing of the deduction and the ability to use it, the actual tax
benefit could vary materially from this estimate. If the Company were to receive no tax benefit, pro forma basic earnings per share would have been $0.01 and $(0.01) for the second quarter of 2003 and 2002, respectively, and $0.02 and $(0.02) for
the first half of 2003 and 2002, respectively. Pro forma diluted earnings per share would have been $0.01 and $(0.01) for the second quarter of 2003 and 2002, respectively and $0.01 and $(0.01) for the first half of 2003 and 2002, respectively.



For purposes of required pro forma disclosures, the estimated fair value of
the options is amortized to expense over the options vesting period. The weighted average fair value calculated under FAS 123 for stock options granted during the second quarter of 2003 and 2002 was $9.99 and $19.81 per share, respectively.
The weighted-average fair value of shares purchased under employee stock purchase plans during the first quarter of 2003 and 2002 was $4.32 and $4.59, respectively.



The Black-Scholes option valuation model was developed for use in estimating the fair value of traded options that have no vesting
restrictions, are fully transferable and do not have employment or trading restrictions. The Black-Scholes model requires the input of highly subjective assumptions including the expected stock price volatility. Because the Companys employee
stock options have characteristics significantly different from those of traded options and because the changes in the subjective input assumptions can materially affect the fair value estimate, in managements opinion, the existing models do
not necessarily provide a reliable single measure of the fair value of its employee stock options.



14. Stock Option Exchange Program



On
October 11, 2002, the Company announced a voluntary stock option exchange program for its eligible employees. This program included two separate offers: one to eligible France based employees (the French offer) and the other to eligible
international employees including employees in the United States (the International offer). Pursuant to the terms and conditions of each offer, as amended, eligible employees were given the opportunity to renounce the right to the
benefit of all outstanding stock options having an exercise price of 30 Euros or higher granted under the Business Objects S.A. 1999 and 2001 Stock Option Plans, as amended. In exchange, new options were granted on May 22, 2003, equal to the amount
obtained by multiplying the number of shares to which a benefit has been renounced by the applicable exchange percentage. If an eligible employee renounced the right to the benefit of any one option, the employee was required to renounce the right
to the benefit of all options granted to the employee during the six-month period prior to the commencement of the offer regardless of its exercise price.



Both offers expired on November 19, 2002. In total, the Company accepted for cancellation options to subscribe to 2,773,279 ordinary shares. On May 22, 2003, the Company
granted 1,034,126 new options. Pursuant to the International offer, the Company accepted for cancellation options to subscribe to 2,464,537 ordinary shares. On May 22, 2003, the Company granted 912,610 new options with an exercise price of 17.30
euros, except for Italian-based employees who received new options with an exercise price of 19.32 euros in accordance with



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##### Table of Contents

the terms of the exchange agreement. In addition, pursuant to the French offer, the Company accepted for cancellation options to subscribe to 308,742
ordinary shares. On May 22, 2003, the Company granted 121,516 new options with an exercise price of 18.39 euro.



The new options granted under the International offer retained the vesting schedule of the old options they replaced. The new options granted under the French offer
retained substantially the vesting schedule of the old options, except that the new options will not become exercisable until one year following the date of grant of the new options.



The programs were not available to: (i) the Companys officers who are also members of the Companys board of directors; (ii)
former employees and (iii) any of the Companys employees who are resident in Sweden and Switzerland.



15. Accounting for and Disclosure of Guarantees



Guarantors Accounting for Guarantees. The Company from time-to-time enters into certain types of contracts that contingently require the Company to indemnify parties against third party claims. These contracts primarily relate to: (i)
certain real estate leases, under which the Company may be required to indemnify property owners for environmental and other liabilities, and other claims arising from the Companys use of the applicable premises; (ii) certain agreements with
the Companys officers, directors and employees and third parties, under which the Company may be required to indemnify such persons for liabilities arising out of their duties to the Company and (iii) and agreements under which the Company
indemnifies customers and partners for claims arising from intellectual property infringement.



The terms of such obligations vary. Generally, a maximum obligation is not explicitly stated. Because the obligated amounts of these types of agreements often are not explicitly stated, the overall maximum amount of
the obligations cannot be reasonably estimated. Historically, the Company has not been obligated to make significant payments for these obligations, and no liabilities have been recorded for these obligations on its balance sheet as of June 30,
2003.



The Company warrants that its software products will operate
substantially in conformity with product documentation and that the physical media will be free from defect. The specific terms and conditions of the warranties are generally 30 days but may vary depending upon the country in which the software is
sold. For those customers purchasing maintenance contracts, the above warranty is extended for the period during which the software remains under maintenance. The Company accrues for known warranty issues if a loss is probable and can be reasonably
estimated, and accrues for estimated incurred but unidentified warranty issues based on historical activity. To date the Company has had no material warranty claims. Due to thorough product testing, the short time between product shipments and the
detection and correction of product failures, no history of material warranty claims, and the fact that no significant warranty issues have been identified, the Company has not recorded a warranty accrual to date.



We have entered into certain real estate leases that require us to indemnify property owners
against certain environmental and other liabilities and other claims.



| |  |  | Environmental Liabilities. The Company only engages in the development, marketing and distribution of software, and it has never had any environment related claim, therefore, the
likelihood of incurring a loss related to these environmental indemnifications is remote and thus we are unable to reasonably estimate the amount. Therefore, we have not recorded a related liability in accordance with the recognition and measurement
provisions of SFAS 143.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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| |  |  | Other Liabilities and Other Claims. The Company is responsible for certain costs of restoring leased premises to their original condition, and in accordance with the recognition and
measurement provisions of SFAS 143, the Company measured the fair value of these obligations and determined them to be immaterial.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



16. Income Taxes



The Companys effective tax rate was 38% for the three and six months ended 2003 and 2002. The Company provides for income taxes for each interim period based on the estimated annual effective tax rate for the
year.



17. Recent Pronouncements



Amendment of Statement 133 on Derivative Instruments and Hedging Activities



In April, 2003, the FASB issued Statement No. 149, Amendment of
Statement 133 on Derivative Instruments and Hedging Activities. Statement 149 is intended to result in more consistent reporting of contracts as either freestanding derivative instruments subject to Statement 133 in its entirety, or as hybrid
instruments with debt host contracts and embedded derivative features. In addition, Statement 149 clarifies the definition of a derivative by providing guidance on the meaning of initial net investments related to derivatives. Statement 149 is
effective for contracts entered into or modified after June 30, 2003. The Company does not believe that the adoption of Statement 149 will have a material effect on its financial position, results of operations or cash flows.



Financial Instruments with Characteristics of Both Liabilities and Equity



In May 2003, the FASB issued SFAS No. 150, Accounting for Certain Financial
Instruments with Characteristics of both Liabilities and Equity, which is effective for all financial instruments created or modified after May 31, 2003 and otherwise effective at the beginning of the first interim period beginning after June
15, 2003. Statement 150 establishes standards for classifying and measuring as liabilities certain financial instruments that embody obligations of the issuer and have characteristics of both liabilities and equity. The Company does not believe that
its adoption of Statement 150 will have a material impact on its financial position, results of operations or cash flows.



18. Subsequent Event



Merger Agreement



On July 18, 2003, the
Company entered into an Agreement and Plan of Merger with Seagate Software (Cayman) Holdings (Holdings), Crystal Decisions, Inc. (Crystal Decisions), and certain subsidiaries of the Company, pursuant to which, subject to
satisfaction or waiver of the conditions therein, the Company will acquire Crystal Decisions.



Under the terms of the Merger Agreement, Crystal Decisions and Holdings will be merged with subsidiaries of the Company (the Mergers). Upon consummation of the Mergers, holders of common stock of Holdings
and holders of common stock of Crystal Decisions (other than Holdings and other than Crystal Decisions stockholders who exercise appraisal rights under Delaware law), in each case issued and outstanding immediately prior to the consummation of the
Mergers, will receive, subject to certain adjustments, (i) a number of newly issued American depositary shares (ADSs) of the Company, each ADS representing one ordinary share of the Company (or, at the election of any such stockholder,
ordinary shares of the Company) calculated in accordance with the provisions of the Merger Agreement based on the number of shares of Crystal Decisions common stock issued and outstanding immediately prior to the consummation of the Mergers, and
(ii) a proportionate share of $300,000,000 in cash, without interest. The number of ordinary shares (whether initially in the form or ordinary shares or ADSs) that the Company will issue at the closing of the Mergers in respect of outstanding shares
of Holdings common stock and Crystal Decisions common stock will be approximately 26.5 million less the number of ordinary shares equal to the value of unexercised Crystal Decisions stock options (and subject to certain other adjustments defined in
the merger agreement). In addition, certain options to acquire Crystal Decisions common stock outstanding immediately prior to the consummation of the Mergers will, upon consummation of the Mergers, be converted into options to acquire the
Companys ADSs.



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##### Table of Contents

The Mergers are conditioned upon, among other things, (i) the approval of the stockholders of the Company and Crystal
Decisions, (ii) clearance under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 and the receipt of any other material approvals under applicable foreign antitrust laws, and (iii) other customary conditions. In lieu of a meeting of the
stockholders of Crystal Decisions, on July 18, 2003, Holdings, which held approximately 98.6% of the outstanding shares of Crystal Decisions common stock on such date, executed an action by written consent approving and adopting the Merger Agreement
and approving the mergers involving Crystal Decisions.



The parties currently
expect the Mergers to close in the fourth calendar quarter of 2003; although, there can be no assurances that the Mergers will close in that time period.



Agreement to Terminate Lease



On July 15, 2002 the Santa Clara Valley Transportation Authority (VTA) initiated an action against John A. Sobrato (Landlord) et al. in the Santa
Clara County Superior Court Case No. CV 809425 seeking to take by eminent domain property in which the Company owns a leasehold interest as a result of its acquisition of Acta Technology. The Company subsequently became a party to this condemnation
action. The relevant disputed issue is when the Company may exercise its right to terminate its lease on account of the VTAs condemnation property. On August 6, 2003, the parties tentatively agreed to settle this matter pursuant to an
agreement to be executed by the parties during the third quarter of 2003. Under the terms of this tentative agreement, the effective termination of the lease will be August 31, 2003 and the Company expects to pay the VTA the sum of $1.7 million. On
June 30, 2003, the Company had recorded a liability of $4.8 million related to the abandonment of this lease that was included in the remaining $5.5 million balance of the accrued restructuring charges on June 30, 2003 that were capitalized as a
cost of acquisition of Acta Technology (see Note 10, Business Restructuring Charge). The Company expects that once a final agreement is reached, any remaining liability related to this lease will be adjusted through goodwill.



MicroStrategy Litigation



In connection with MicroStrategy Litigation (see Note 9, Legal Proceedings), on July 3,
2003, the USPTO issued a Notice of Intent to Issue a Reexamination Certificate in connection with the reexamination of the 050 patent, indicating that the claims of this patent are patentable as originally issued. MicroStrategy has since
requested that the Court continue the trial date so that its claim for infringement of the 050 patent may be tried with its business tort claims. The Company opposes the consolidation of these claims and has requested that the business tort
trial proceed on October 20, 2003, with the patent claim to be tried at a later date. The Court has not determined which, if either, of these procedures it will follow. MicroStrategy has indicated it will abandon its claim against the Company under
the 033 patent.



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##### Table of Contents

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 S.A. is a leading worldwide provider of business intelligence (BI) solutions. We develop, market and distribute software that enables organizations to
track, understand and manage enterprise performance within and beyond the enterprise to make better, more informed business decisions. Users can view and interact with key performance indicators in a dashboard, create new queries or reports, access
catalogs of reports and do simple or complex analysis of the data. Instead of struggling with complex and technical database terminology, users interact with data using business representations of information, or business objects, with
which they are familiar. This patented technology is commonly referred to as our semantic layer. Our products are designed to be easy to use and architected to be secure, scalable and extensible.



Recent Developments



On July 18, 2003, we entered into an Agreement and Plan of Merger with Seagate Software (Cayman) Holdings (Holdings), Crystal
Decisions, Inc. (Crystal Decisions) and certain subsidiaries of the Company (the Merger Agreement), pursuant to which, subject to satisfaction or waiver of the conditions therein, we will acquire Crystal Decisions, a
privately-held business intelligence software company. Under the terms of the Merger Agreement, Crystal Decisions and Holdings will be merged with subsidiaries of the Company and the surviving entity will be a wholly owned subsidiary of the Company
(the Mergers). Upon consummation of the Mergers, holders of common stock of Holdings and holders of common stock of Crystal Decisions (other than Holdings and other than Crystal Decisions stockholders who exercise appraisal rights under
Delaware law) will receive, subject to certain adjustments, (i) newly issued American depositary shares (ADSs), each ADS representing one ordinary share of the Company (or, at the election of any such stockholder, ordinary shares of the
Company) calculated in accordance with the provisions of the Merger Agreement, and (ii) a proportionate share of $300,000,000 in cash, without interest. In addition, certain options to acquire Crystal Decisions common stock will be converted into
options to acquire our ADSs. Based on the shares of Crystal Decisions common stock outstanding on a fully diluted basis (calculated using the treasury share method) as of the close of business on July 18, 2003 and the market price of our American
depositary shares as of such date, as a result of the Mergers, we would issue approximately 26.5 million ordinary shares (either in the form of ordinary shares or ADSs). See also, Note 18, Subsequent Event.



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##### Table of Contents

Results of Operations



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



|                                         |  | Three Months Ended June 30 |    |  | Six Months Ended June 30 |   
|---------------------------------------- |  | -------------------------- | -- |  | ------------------------ | --
|                                         |  | 2003                       |    |  | 2002                     |   
|Revenues:                                |  |                            |    |  |                          |   
|Net license fees                         |  | 48.6                       | %  |  | 54.8                     | % 
|Services                                 |  | 51.4                       | %  |  | 45.2                     | % 
|                                         |  |                            |    |  |                          |   
|Total revenues                           |  | 100.0                      | %  |  | 100.0                    | % 
|Cost of revenues:                        |  |                            |    |  |                          |   
|Net license fees                         |  | 0.7                        | %  |  | 0.5                      | % 
|Services                                 |  | 16.0                       | %  |  | 15.8                     | % 
|                                         |  |                            |    |  |                          |   
|Total cost of revenues                   |  | 16.7                       | %  |  | 16.3                     | % 
|                                         |  |                            |    |  |                          |   
|Gross margin                             |  | 83.3                       | %  |  | 83.7                     | % 
|Operating expenses:                      |  |                            |    |  |                          |   
|Sales and marketing                      |  | 45.3                       | %  |  | 49.1                     | % 
|Research and development                 |  | 18.2                       | %  |  | 15.3                     | % 
|General and administrative               |  | 8.2                        | %  |  | 6.5                      | % 
|Restructuring                            |  | 0.0                        | %  |  | 3.5                      | % 
|                                         |  |                            |    |  |                          |   
|Total operating expenses                 |  | 71.7                       | %  |  | 74.4                     | % 
|                                         |  |                            |    |  |                          |   
|Income from operations                   |  | 11.6                       | %  |  | 9.3                      | % 
|Interest and other income, net           |  | 2.8                        | %  |  | 7.9                      | % 
|                                         |  |                            |    |  |                          |   
|Income before provision for income taxes |  | 14.4                       | %  |  | 17.2                     | % 
|Provision for income taxes               |  | (5.5                       | )% |  | (6.5                     | )%
|                                         |  |                            |    |  |                          |   
|Net income                               |  | 8.9                        | %  |  | 10.7                     | % 
|                                         |  |                            |    |  |                          |   
|Gross margin net license fees            |  | 98.6                       | %  |  | 99.1                     | % 
|Gross margin services                    |  | 68.8                       | %  |  | 64.9                     | % 



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



Revenue



Total Revenues. Total revenues increased 16% to $129.0 million in
the second quarter of 2003, up from $111.2 million in the second quarter of 2002. Total revenues increased 13% to $247.5 million for the first half of 2003, up from $218.7 million from the first half of 2002. The growth in both periods was primarily
driven by favorable fluctuations in exchange rates relative to the U.S. dollar and local currency increases in maintenance and consulting revenues.



Net license fees represented 49% of total revenue in the second quarter of 2003, a decline from 55% of total revenue a year ago. Net license fees represented 48% of total
revenue in the first half of 2003, a decline from 57% a year ago. The decline was primarily because license revenues have grown slower than service revenues year-over-year. Gross margin dollars increased by $14.4 million or 15% year-over-year for
the second quarter of 2003 and increased by $22.1 million or 12% year-over-year for the first half of 2003. However, gross margin percentage decreased by 0.4 and 0.8 percentage points, respectively, because service revenues have a lower gross margin
percentage than net license revenues.



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Geographic Revenues. The geographic mix of our revenues was as follows:



|              |  | Three Months Ended June 30, |   |  | Six Months Ended June 30, |  
|------------- |  | --------------------------- | - |  | ------------------------- | -
|              |  | 2003                        |   |  | 2002                      |  
|Europe        |  | 49                          | % |  | 42                        | %
|Americas      |  | 44                          |   |  | 52                        |  
|Rest of world |  | 7                           |   |  | 6                         |  
|              |  |                             |   |  |                           |  
|Total revenue |  | 100                         | % |  | 100                       | %
|              |  |                             |   |  |                           |  



Net Software License Fees.Revenues from net license fees increased 3% to $62.7 million during the second quarter of 2003 from $60.1 million for the second quarter of 2002. The increase was primarily due to favorable fluctuations in foreign exchange rates relative to the
U.S. dollar and sales of our data integration products which were acquired through our acquisition of Acta Technologies, Inc. (Acta) in the third quarter of 2002, partially offset by softening demand for our business intelligence
platform products.



Revenues from net license fees decreased 4% to $118.9
million during the first half of 2003 from $124.1 million for the first half of 2002. The decrease was primarily caused by weak economies in the United States and Europe, and offset partially by favorable fluctuations in foreign exchange rates
relative to the U.S. dollar.



Net license fees consist of licenses of three
software product families: (1) enterprise analytic applications; (2) data integration; and (3) business intelligence platform. See note 8 of the notes to the condensed consolidated financial statements in this Form 10-Q for revenue by product
family. Our enterprise analytic applications product line grew 22% year-over-year for the second quarter of 2003 and 57% year-over-year for the first half of 2003 as we launched new products and targeted the growing market for Enterprise Performance
Management (EPM) software. Our new data integration product line, acquired through our acquisition of Acta in the third quarter of 2002, contributed $3.1 million and $4.7 million in the second quarter and first half of 2003, respectively, while
there was no data integration revenue for the same periods in 2002. Business intelligence platform license fees decreased by 4% year-over-year for the second quarter of 2003 and decreased 12% year-over-year for the first half of 2003. The decrease
was primarily due to a softening of demand for our business intelligence platform products primarily caused by an aging product line and weak economies in the United States and Europe. In the second quarter of 2003 we announced a new release of our
business intelligence platform products. However, due to the weak global economy, we expect the demand for our Business Intelligence Platform to remain weak through at least the end of 2003.



Services.Service revenues consist of software license updates and support
(maintenance) and professional services (consulting, education and other) revenues. Revenues from services increased 32% during the second quarter of 2003 to $66.3 million or 51% of total revenues from $50.3 million or 45% of total revenues during
the second quarter of 2002. Revenues from services increased 36% during the first half of 2003 to $128.6 million or 52% of total revenues from $94.6 million or 43% of total revenues during the first half of 2002. The increase was primarily due to
year-over-year increases in maintenance and consulting revenues.



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Maintenance revenue increased 37% year-over-year to $48.4 million during the second quarter of 2003 as compared to $35.4
million during the second quarter of 2002 and 42% year-over-year to $94.4 million during the first half of 2003 from $66.4 million during the first half of 2002. The increase in maintenance revenues was primarily due to the expansion of our
installed customer base, a greater percentage of customers renewing maintenance contracts and favorable fluctuations in foreign exchange rates. If our license revenue continues to decline, our installed customer base may not grow at the same rates
as achieved in the past which could cause a slowdown in the rate of maintenance revenue growth. This could negatively impact our results of operations, financial condition and liquidity.



Professional services revenues increased 38% to $12.2 million during the second quarter of 2003 as compared to $8.8 million during the
second quarter of 2002 and increased 44% year-over-year to $23.3 million for the first half of 2003 from $16.2 million for the first half of 2002. The increase was primarily due to increases in consulting revenues, partially offset by decreases in
education revenues.



Cost of Revenues



Cost of Net Software license fees.Cost of net software license fees increased 66% to
$0.9 million or 1% of net license fees in the second quarter of 2003 from $0.5 million or 1% of net license fees in the second quarter of 2002. Cost of net software license fees increased 65% to $1.8 million or 1% of net license fees in the first
half of 2003 from $1.1 million or 1% of net license fees in the first half of 2002. The increase was primarily due to the amortization of Acta developed technology in the first two quarters of 2003 which was acquired in the purchase of Acta during
the third quarter of 2002.



Cost of Services.Cost of services consists
of the cost of providing maintenance, consulting and education services. Cost of services increased 17% in absolute dollars in the second quarter and first half of 2003 primarily due to higher service revenues, but decreased to 31% and 32% of
service revenues for the second quarter and first half of 2003, respectively, from 35% and 37% for the second quarter and first half of 2002, respectively. The decrease as a percentage of services revenues was primarily due to improved productivity
in providing maintenance services and a greater percentage of service revenues coming from higher margin maintenance revenue relative to lower margin consulting and education revenues. We may experience higher cost of maintenance revenues in coming
quarters to support the launch of BusinessObjects Enterprise 6, the new version of our suite of integrated business intelligence products released in the second quarter of 2003.



Operating Expenses



Sales and Marketing.Sales and marketing expenses increased 7% year-over-year to $58.3 million for the second quarter of 2003 but decreased as a percentage of
total revenues to 45% for the second quarter of 2003 from 49% for the second quarter of 2002. Sales and marketing expenses increased 7% year-over-year to $114.7 million for the first half of 2003 but decreased as a percentage of total revenues to
46% for the first half of 2003 from 49% for the first half of 2002. The year-over-year increase in absolute dollars for both periods was primarily due to unfavorable fluctuations in foreign exchange rates as a significant portion of our sales and
marketing expenses are denominated in foreign currencies. The year-over-year decrease as a percentage of revenues for the second quarter and first half of 2003 was primarily because total revenues increased more in absolute dollars due to changes in
foreign exchange rates than sales and marketing expenses.



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Research and Development.Research and development expenses increased 37% year-over-year to $23.5 million or 18%
of total revenues for the second quarter of 2003 from $17.1 million or 15% of total revenues for the second quarter of 2002. Research and development expenses increased 40% year-over-year to $46.1 million or 19% of total revenues for the first half
of 2003 from $33.0 million or 15% of revenues for the first half of 2002. The increase was primarily due to unfavorable fluctuations in foreign exchange rates as the majority or our research and development expenses were incurred in euros, and
increased research and development expenses associated with increased headcount due to our acquisition of Acta Technology in the third quarter of 2002.



General and Administrative.General and administrative expenses increased 48% year-over-year to $10.6 million or 8% of total revenues for the second quarter of
2003 from $7.2 million or 6% of total revenues for the second quarter of 2002. General and administrative expenses increased 41% year-over-year to $18.8 million or 8% of total revenues for the first half of 2003 from $13.3 million or 6% of revenues
for the first half of 2002. The increase for both periods was primarily due to increases in employee-related expenses and fluctuations in foreign exchange rates as a significant portion of our general and administrative expenses are denominated in
foreign currencies. To a lesser extent, higher legal and other professional services expenses also contributed to the increase



Interest and Other Income, Net



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



|                                                                 |  | Three MonthsEnded June30, |      |   | Six MonthsEnded June30, |  
|---------------------------------------------------------------- |  | ------------------------- | ---- | - | ----------------------- | -
|                                                                 |  | 2003                      |      |   | 2002                    |  
|Net interest income                                              |  | $                         | 2.2  |   |                         | $
|Patent infringement settlement income net of litigation expenses |  |                           | 1.7  |   |                         |  
|Net foreign exchange gains (losses)                              |  |                           | (0.3 | ) |                         |  
|                                                                 |  |                           |      |   |                         |  
|Total interest and other income, net                             |  | $                         | 3.6  |   |                         | $
|                                                                 |  |                           |      |   |                         |  



Patent infringement settlement income
relates to the settlement of our lawsuits against Cognos, Inc. and Cognos Corporation (collectively Cognos) in May 2002 and Brio Software Inc. (Brio) in September 1999.



Under the terms of the agreement with Cognos, Cognos licensed the rights to our technology under patent number 5,555,403 in exchange for
payments totaling $24 million. The license covers both past and future use of our technology. A $10 million first installment representing past use was received during June 2002 and classified as other income for the quarter ending June 30, 2002,
net of $3.1 million of related legal expense. The remaining balance represents Cognos future use of our patented technology and is due in eight quarterly installments of $1.75 million commencing the quarter ended September 30, 2002. Due to
inherent uncertainties regarding performance on the part of Cognos in making the future payments over the next four quarters, consistent with the cost recovery method and with other literature on extended payment



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terms including SOP 97-2, we are recognizing the remaining settlement as other income once the amounts become due. As of June 30, 2003 $7.0 million remained
to be paid under the agreement, payable in four quarterly installments of $1.75 million. We also recognized $0.5 million per quarter in other income for the first three quarters of 2002 related to the settlement of our patent infringement lawsuit
against Brio in September 1999. As of December 31, 2002 the settlement was paid in full.



Total interest and other income, net decreased $5.3 million year-over-year for the second quarter of 2003 and decreased $3.5 million year-over-year for the first half of 2003. The year-over-year decrease in the second
quarter of 2003 was primarily due to the recognition of the $10 million payment from Cognos for past use of our technology in the second quarter of 2002 compared to the recognition of $1.75 million under the settlement agreement in the second
quarter of 2003. The year-over-year decrease for the first half of 2003 was also due to $1.0 million in income recognized under the Brio settlement for the first half of 2002 compared to no related income in the first half of 2003 as the remaining
amounts due under the agreement were paid in 2002, partially offset by the recognition of $1.75 million under the Cognos settlement agreement in the first quarter of 2003 compared to no settlement income from Cognos in the first quarter of 2002 and
$1.0 million in income recognized under the Brio settlement for the first half of 2002 compared to no related income in the first half of 2003 as the remaining amounts due under the agreement were paid in 2002.



Income Taxes



Our effective tax rate was 38% for the first quarter and first half of 2003 and 2002. We provide for income taxes for each interim period
based on the estimated annual effective tax rate for the year.



Foreign
Exchange Rate Effects



Total revenues and expenses for the second quarter
of 2003, including cost of revenues and operating expenses, were approximately $11.4 million greater and approximately $10.7 million greater, respectively, than if they had been translated at the weighted average foreign currency exchange rates in
effect in the second quarter of 2002. Because non-U.S. denominated revenues and expenses were approximately equal, this exchange rate effect was an approximately $0.7 million increase in income from operations.



Total revenues and expenses for the first two quarters of 2003, including cost of revenues
and operating expenses, were approximately $21.3 million greater and approximately $21.0 million greater, respectively, than if they had been translated at the weighted average foreign currency exchange rates in effect in the first two quarters of
2002. Because non-U.S. denominated revenues and expenses were approximately equal, this exchange rate effect was an approximate $0.3 million increase in income from operations.



Liquidity and Capital Resources



Cash, cash equivalents and short-term investments totaled $363.0 million at June 30, 2003. Cash flow from operations provided $56.6 million for the first half of
2003, an increase of $5.4 million compared to the first half of 2002. The increase reflects strong growth in deferred revenue under maintenance contracts and improved collections of accounts receivable.



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Deferred revenue represents the balance of maintenance billed but not yet recognized, as we generally invoice first year
and renewal maintenance services in advance for the 12 month maintenance period. Because a high percentage of our customers renew maintenance each year, the increase in the balance of deferred revenue is primarily due to a growing cumulative
customer base and a corresponding increase in maintenance billed but not yet recognized. In addition, the balance is subject to fluctuations from changes in the value of the U.S. dollar in relation to other foreign currencies, principally the euro
and British pound sterling, because a high percentage of our deferred revenue is foreign currency denominated. Fluctuations in foreign exchange rates also contributed, to a lesser extent, to the increase in deferred revenue as of June 30, 2003. A
decline in the rate at which we renew maintenance contracts could negatively impact our results of operations because maintenance revenue comprises a significant portion of our service revenues.



Investing activities used $30.0 million in cash including $25.3 million in from the purchase
of short-term investments and $4.7 million for the purchase of property and equipment. The issuance of shares provided $6.3 million in financing activities. Cash and cash equivalents increased by $20.0 million due to the effects of changes in
foreign exchange rates.



Our principal source of liquidity is our operating
cash flow. While there is a risk that a decrease in demand for our products could reduce our operating cash flow, we believe that cash from operations together with our cash and cash equivalents and short-term investments will be sufficient to meet
our cash requirements for at least the next 12 months.



Under the terms of our
agreement to acquire Crystal Decisions (see Recent Developments in this Managements Discussion and Analysis and Note 18, Subsequent Events, in the notes to the Condensed Consolidated Financial Statements in Item 1 of this Form 10-Q) we
have agreed to pay $300 million in cash (subject to certain adjustments defined in the merger agreement) which will come from our existing cash and cash equivalents and short-term investments. If the proposed acquisition is completed, we will also
acquire Crystal Decisions cash and cash equivalents and short-term investments that totaled $91.7 million at March 28, 2003.



Recently Issued Accounting Standards



See Note 16 in Item 1 of this Form 10-Q.



Critical Accounting Policies



Our consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States (GAAP). These accounting
principles require us to make certain estimates, judgments and assumptions. We believe that the estimates, judgments and assumptions upon which we rely are reasonable based upon information available to us at the time that these estimates, judgments
and assumptions are made. These estimates, judgments and assumptions can affect the reported amounts of assets and liabilities as of the date of the financial statements, as well as the reported amounts of revenues and expenses during the periods
presented. To the extent there are material differences between these estimates, judgments or assumptions and actual results, our financial statements will be affected. We believe the following critical accounting policies reflect our more
significant estimates and assumptions used in the preparation of its consolidated financial statements:



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



| |  | Allowances for Doubtful Accounts
|- |  | --------------------------------



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| |  | Contingencies and Litigation
|- |  | ----------------------------



| |  | Business Combinations
|- |  | ---------------------



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



| |  | Deferred Income Tax Assets
|- |  | --------------------------



In many cases, the accounting treatment of a particular transaction is specifically dictated by GAAP and does not require managements judgment in its application. There are also areas in which managements
judgment in selecting among available alternatives would not produce a materially different result. Our senior management has reviewed these critical accounting policies and related disclosures with our Audit Committee. See Notes to Consolidated
Financial Statements in Item 8 of our 2002 Form 10-K, which contain additional information regarding our accounting policies and other disclosures required by GAAP.



Revenue Recognition



Our revenue recognition policy, as described below, is significant because revenue is a key component of our results from operations. In addition, revenue recognition
determines the timing of certain expenses, such as incentive compensation. We follow very specific and detailed guidelines in measuring revenue; however, certain judgments and estimates affect the application of the revenue policy. Revenue results
are difficult to predict and any shortfall in revenue or delay in recognizing revenue could cause operating results to vary significantly from quarter to quarter and could result in future operating losses.



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 materials 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 net license revenues based upon the residual method after all licensed software products have 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. The maintenance rates for both license agreements with and without stated renewal rates are based upon our price list. Vendor
specific objective evidence of the fair value of maintenance for license agreements that do not include stated renewal rates is determined by reference to the price paid by our customers when maintenance is sold separately (that is, the renewal
rate). Past history has shown that the rate we charge for maintenance on license agreements with a stated renewal rate is similar to the rate we charge for maintenance on license agreements without a stated renewal rate.



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Services can consist of maintenance, training and/or consulting services. 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 net license and service
revenues under the arrangement are recognized under the percentage of completion method of contract accounting, based on input measures of hours. 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 consulting services is based upon average
daily rates. As previously noted, we enter into contracts for services alone and such contracts are based upon time and material basis.



There is no right of return or price protection for sales to domestic and international distributors or value-added resellers (collectively, resellers). We do
not accept orders from resellers when we are aware that a reseller does not have a purchase order from an end-user.



Allowances for Doubtful Accounts



We make judgments as to our ability to collect outstanding receivables and provide allowances for the portion of receivables when collection becomes doubtful. Provisions
are made based upon a specific review of all significant outstanding invoices. For those invoices not specifically reviewed, provisions are provided at differing rates, based upon the age of the receivable. In determining these percentages, we
analyze our historical collection experience and current economic trends. If the historical data we use to calculate the allowance provided for doubtful accounts does not reflect the future ability to collect outstanding receivables, additional
provisions for doubtful accounts may be needed and the future results of operations could be materially affected.



Contingencies and Litigation



We evaluate contingent liabilities including threatened or pending litigation in accordance with SFAS No. 5, Accounting for Contingencies. If the potential loss from any
claim or legal proceeding is considered probable and the amount can be estimated, we accrue a liability for the estimated loss. Because of uncertainties related to these matters, accruals are based on the best information available at the time. As
additional information becomes available, we reassess the potential liability related to our pending claims and litigation and may revise our estimates. Such revisions in the estimates of the potential liabilities could have a material impact on our
results of operations and financial position. In addition, see Part II, Item 1 of this Form 10-Q for a description of our material legal proceedings.



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Business Combinations



We are required to allocate the purchase price of acquired companies to the tangible and intangible assets acquired and liabilities assumed, as well as to in-process
research and development (IPR&D), based on their estimated fair values.



We will perform the purchase price allocation for the acquisition of Crystal Decisions when the transaction closes. We will be required to make significant estimates and assumptions to determine the fair values of assets acquired and
liabilities assumed, especially with respect to intangible assets.



Critical
estimates in valuing certain intangible assets include but are not limited to: future expected cash flows from customer contracts, customer lists, distribution agreements and acquired developed technologies; expected costs to develop IPR&D into
commercially viable products and estimating cash flows from projects when completed and discount rates. Managements estimates of fair value are based upon assumptions believed to be reasonable, but which are inherently uncertain and
unpredictable and, as a result, actual results may differ from estimates.



Other estimates associated with the accounting for acquisitions may change as additional information becomes available regarding the assets acquired and liabilities assumed, as more fully discussed in Note 5 to the Consolidated Financial
Statements in Item 8 of our 2002 Form 10-K. In addition, the Acta acquisition-related restructuring accrual for the shutdown of excess facilities is subject to change as management executes the approved plan. For a description of valuation
assumptions and estimates relating to the Acta acquisition and certain other acquisitions, see Notes 5 and 13 to the Consolidated Financial Statements in Item 8 of our 2002 Form 10-K.



Impairment of Long-Lived Assets



We evaluate our identifiable intangible assets, goodwill and other long-lived assets for
impairment on an annual basis and 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. Future impairment evaluations
could result in impairment charges, which would result in a reduction in the carrying value of these assets.



Deferred Income Tax Assets



We record a
valuation allowance to reduce our deferred tax assets to the amount of future tax benefit 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 estimated tax
benefit from the exercise of employee stock options. When these tax benefits are realized the valuation allowance will be reversed and credited to additional paid in capital.



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Risk Factors



In addition to other information contained in this Form 10-Q, 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 pending acquisition of Crystal Decisions



Failure to complete the mergers could negatively impact our stock price, future business and operations.



Completion of the mergers is subject to the satisfaction or waiver of several closing
conditions and there can be no assurances that those closing conditions will be satisfied or waived. If the mergers are not completed for any reason, we may be subject to a number of material risks, including the following:



| |  |  | benefits that the combined company expects to realize from the mergers, such as the potentially enhanced financial and competitive position of the combined company, would not be
realized;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the price of our shares may decline to the extent that the current market price reflects a market assumption that the mergers will be completed;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | costs related to the mergers, such as legal, accounting and printing fees, as well as a portion of the investment banking fees, must be paid even if the mergers are not completed;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | if the merger agreement is terminated under certain circumstances, we may be required to pay Crystal Decisions a termination fee of $21 million; and
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the diversion of managements attention from the day-to-day business and the associated disruption to our employees and our relationships with customers and suppliers during
the period before consummation of the mergers may make it difficult for us to regain our financial and market position if the mergers do not occur.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



The announcement of the planned mergers could have an adverse effect on our revenues and profitability in the near term if customers
delay, defer or cancel purchases pending resolution of the planned mergers.



In response to the announcement of the mergers, our customers may seek to cancel existing purchases or delay or defer purchasing decisions which could have an adverse effect on our business, regardless of whether the mergers are ultimately
completed. To the extent our announcement of the mergers creates uncertainty among persons and organizations contemplating purchases of products or services such that a significant customer or a significant number of customers cancels existing
purchases or delays purchase decisions pending resolution of the planned mergers, this could have an adverse effect on our results of operations and our quarterly revenues could be substantially below the expectations of market analysts which could
cause a reduction in the price of our shares.



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Uncertainty regarding the mergers and the effects of the mergers could cause our strategic partners or key employees
to make decisions which could adversely effect our business and operations.



Some of our original equipment manufacturers, distributors and other strategic partners could decide to terminate or cancel their existing arrangements, or fail to renew those arrangements as a result of the pending mergers. In addition,
key employees may decide to terminate their employment due to the pending mergers or other employees may experience uncertainty about their future role with the combined company, which could adversely affect our ability to retain key management,
marketing, sales and technical personnel.



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.



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. We expect the softening of demand for business intelligence software caused by a weak economy in Europe and economic
uncertainties in the United States will continue through at least the quarter ending September 30, 2003.



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 net 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 could be significantly harmed.



While the variability of our net 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 than 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 less economic activity throughout Europe during the summer months;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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| |  |  | 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 potentially significant net 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.



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. We began shipment of our new release, Enterprise 6, the update to our suite of business intelligence products in the second quarter of 2003. If defects and errors are discovered after commercial release of either Enterprise 6 or other new
versions or enhancements of our products and platforms:



| |  |  | 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.



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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 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 patent infringement claims against Brio in 1999 and Cognos in May of 2002 and are currently involved with a
patent infringement claim against MicroStrategy Inc. and Informatica (see note 9 of the condensed consolidated financial statements). 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 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.



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
| | - |  | ----------------------------------------------------------------------------------------------------------------



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| |  |  | 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.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



See Note 9 in Item 1 of this Form 10-Q for a
summary of current patent related legal proceedings.



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 whom 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. Although no one of our resellers accounted for a material percent of our total revenue in 2002, in January 2003 one of our largest resellers notified us of their decision to terminate our co-marketing
agreement in April 2003. This termination did not have a material effect on our results of operations for the second quarter of 2003. If one or more of our other largest resellers were to terminate their co-marketing agreement with us it could have
a material adverse effect on our business, financial condition and results of operations. 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 more 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 that 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.



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



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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 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 different 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 generate a significant portion of our revenues and expenses in the euro. 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 June 30, 2002, we were not engaged in a foreign currency hedging program to cover our currency
transaction or translation exposure. The impact of foreign currency exchange rate fluctuations on the results of operations for the second quarter and first half of 2003 and 2002 are discussed in the section titled Foreign Exchange Rate
Effects.



We may be required to recognize additional non-cash charges
against earnings if our management were to determine in the future that the remaining balance of goodwill was impaired.



Based upon a valuation of Acta Technologys intangible assets, a significant portion of the purchase price was allocated to goodwill. In accordance with FAS 142,
goodwill recorded as a result of this transaction will not be amortized but will be tested for impairment annually, or more frequently if there are indicators of impairment. If our management were to determine in the future that the goodwill was
impaired, we would be required to recognize a non-cash charge to write down the value of this goodwill which would reduce our earnings.



Business disruptions could seriously harm our future revenue and financial condition and increase our costs and expenses.



A number of factors, including natural disasters, computer viruses or failure to
successfully evolve operational systems to meet evolving business conditions could cause disruption in our business which could seriously harm our revenue or financial condition and increase our costs and expenses.



Some of our offices are in potential earthquake or flood zones which could subject these
offices, product development facilities and associated computer systems to disruption in the event of natural disasters.



Experienced computer programmers and hackers may be able to penetrate our network security and misappropriate our confidential information or temporarily disrupt our
operations. As a result, we could incur significant expenses in addressing problems created by security breaches of our own network. The costs to eliminate computer viruses and alleviate other security problems could be significant. The efforts to
address these problems could result in interruptions, delays or cessation of our operations.



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Further, we are continually working to upgrade and enhance our computer systems, and we anticipate implementing several
system upgrades during the coming years. Failure to smoothly migrate existing systems to newer systems could cause business disruptions.



Even short-term disruptions from any of the above mentioned causes or other causes could result in revenue disruptions, delayed product deliveries or customer service
disruptions, which could result in decreases in revenue or increases in costs of operations.



Risks related to our industry



Our
market is 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.



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 market
that we target is 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.
| | - |  | ----------------------------------------------------



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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.



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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.



We maintain an investment portfolio in a variety of financial instruments, including fixed rate corporate bonds, money market instruments, commercial paper and bank
certificates of deposit. All of our cash, cash equivalents and short-term investments were classified as available-for-sale and recorded on our balance sheet at fair value with unrealized gains or losses reported as a separate component of
shareholders equity at June 30, 2003 and 2002.



As of June 30, 2003, some
of our short-term investments included fixed-rate corporate bonds. These investments carry a degree of interest rate risk, as the fair market values of fixed-rate securities decline if interest rates rise. Additionally, although the principal
portion of our other investments are not subject to interest rate risk, declines in interest rates over time will reduce our interest income. A hypothetical 10% decrease in interest rates would not have had a material effect on our consolidated
financial position, earnings or cash flows.



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 June 30, 2003, we were not engaged in a foreign currency hedging program to cover our currency transaction or translation exposure.



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Item 4. Controls and Procedures



(a) Evaluation of Disclosure Controls and Procedures.



We carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls
and procedures as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures are effective to
provide reasonable assurance that information required to be disclosed in our filings and submissions under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SECs rules and forms.



(b) Changes in internal controls.



There were no changes in our internal control over financial reporting that occurred
during the quarter ended June 30, 2003, that materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.



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##### Table of Contents

Part II. OTHER INFORMATION



Item 1. Legal Proceedings



See Note 9 in Item 1 of this Form 10-Q for a summary of the Companys legal proceedings.



Item 4. Submissions of Matters



Within the authority of the Ordinary General Meeting, the following items were voted on:



|1. |  | To approve the unconsolidated financial statements for the fiscal year ended December 31, 2002.
|-- |  | -----------------------------------------------------------------------------------------------



|For     |  | 34,513,493
|------- |  | ----------
|Against |  | 125,318   



|2. |  | To approve the consolidated financial statements for the fiscal year ended December 31, 2002.
|-- |  | ---------------------------------------------------------------------------------------------



|For     |  | 34,516,621
|------- |  | ----------
|Against |  | 122,190   



|3. |  | To allocate earnings for the fiscal year ended December 31, 2002.
|-- |  | -----------------------------------------------------------------



|For     |  | 34,627,781
|------- |  | ----------
|Against |  | 11,030    



|4. |  | To increase the aggregate amount of authorized directors fees.
|-- |  | ---------------------------------------------------------------



|For     |  | 33,447,333
|------- |  | ----------
|Against |  | 1,191,478 



|5. |  | To renew the term of office of Mr. Bernard Liautaud as Director.
|-- |  | ----------------------------------------------------------------



|For     |  | 34,377,612
|------- |  | ----------
|Against |  | 261,199   



|6. |  | To renew the term of office of Mr. John Olsen as Director.
|-- |  | ----------------------------------------------------------



|For     |  | 34,523,240
|------- |  | ----------
|Against |  | 115,571   



|7. |  | To ratify the nomination of Mr. Gerald Held as Director.
|-- |  | --------------------------------------------------------



|For     |  | 34,520,370
|------- |  | ----------
|Against |  | 118,441   



|8. |  | To appoint Mr. Jean-François Heitz as Director.
|-- |  | -----------------------------------------------



|For     |  | 34,523,833
|------- |  | ----------
|Against |  | 114,978   



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|9. |  | To appoint Mr. David Peterschmidt as Director.
|-- |  | ----------------------------------------------



|For     |  | 34,520,157
|------- |  | ----------
|Against |  | 118,654   



|10. |  | To renew Ernst & Young Audit as statutory auditors and Mr. Alain Vincent as alternate statutory auditor.
|--- |  | --------------------------------------------------------------------------------------------------------



|For     |  | 34,217,101
|------- |  | ----------
|Against |  | 421,710   



|11. |  | To appoint Deloitte Touche Tohmatsu as second statutory auditors and BEAS as second alternate statutory auditors.
|--- |  | -----------------------------------------------------------------------------------------------------------------



|For     |  | 34,512,850
|------- |  | ----------
|Against |  | 125,961   



|12. |  | To authorize the Board of Directors to repurchase shares of the Company.
|--- |  | ------------------------------------------------------------------------



|For     |  | 34,615,067
|------- |  | ----------
|Against |  | 23,744    



Within the authority of the
Extraordinary General Meeting, the following items will be voted on:



|13. |  | To authorize the Board of Directors to reduce the share capital by cancellation of treasury shares.
|--- |  | ---------------------------------------------------------------------------------------------------



|For     |  | 34,625,745
|------- |  | ----------
|Against |  | 13,066    



|14. |  | To authorize the Board of Directors to issue warrants to subscribe to 15,000 shares reserved for Mr. Gerald Held.
|--- |  | -----------------------------------------------------------------------------------------------------------------



|For     |  | 32,658,620
|------- |  | ----------
|Against |  | 1,980,191 



|15. |  | To authorize the Board of Directors to issue warrants to subscribe to 15,000 shares reserved for Mr. Jean-François Heitz.
|--- |  | -------------------------------------------------------------------------------------------------------------------------



|For     |  | 32,659,293
|------- |  | ----------
|Against |  | 1,979,518 



|16. |  | To authorize the Board of Directors to issue warrants to subscribe to 15,000 shares reserved for Mr David Peterschmidt.
|--- |  | -----------------------------------------------------------------------------------------------------------------------



|For     |  | 32,659,374
|------- |  | ----------
|Against |  | 1,979,437 



|17. |  | To authorize the Board of Directors to issue up to 100,000 shares reserved for issuance under the French Employee Savings Plan.
|--- |  | -------------------------------------------------------------------------------------------------------------------------------



|For     |  | 34,579,020
|------- |  | ----------
|Against |  | 59,791    



|18. |  | To re-affirm the price-setting conditions of shares reserved for issuance under the 1995 International Employee Stock Purchase Plan, as authorized by the ordinary and extraordinary
general shareholders meeting of June 5, 2002.
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|For     |  | 34,332,141
|------- |  | ----------
|Against |  | 306,670   



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##### Table of Contents

|19. |  | To authorize the Board of Directors to issue up to 300,000 shares reserved for issuance under the 1995 International Employee Stock Purchase Plan.
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------



|For     |  | 34,581,636
|------- |  | ----------
|Against |  | 57,175    



|20. |  | To amend articles 8, 11.5 and 16 of the articles of association in compliance with French corporate law.
|--- |  | --------------------------------------------------------------------------------------------------------



|For     |  | 34,619,170
|------- |  | ----------
|Against |  | 19,641    



|21. |  | To amend article 10 of the article of association related to the rotation of the Board.
|--- |  | ---------------------------------------------------------------------------------------



|For     |  | 33,975,270
|------- |  | ----------
|Against |  | 663,541   



Within the authority of the
Ordinary General Meeting, the following item will be voted on:



|22. |  | To grant full powers of attorney to carry out registrations and formalities.
|--- |  | ----------------------------------------------------------------------------



|For     |  | 34,621,215
|------- |  | ----------
|Against |  | 17,596    



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



| | a) |  | Exhibits
| | -- |  | --------



| | 31.1 |  | Certification of Chief Executive Officer required by Rule 13a-14(a) or Rule 15d-14(a) of the Exchange Act.
| | ---- |  | ----------------------------------------------------------------------------------------------------------



| | 31.2 |  | Certification of Chief Financial Officer required by Rule 13a-14(a) or Rule 15d-14(a) of the Exchange Act.
| | ---- |  | ----------------------------------------------------------------------------------------------------------



| | 32.1 |  | Certification of Chief Executive Officer furnished pursuant to Rule 13a-14(b) of the Exchange Act and Section 1350 of Chapter 63 of Title 18 of the United States Code (18 U.S.C.
1350).
| | ---- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 32.2 |  | Certification of Chief Financial Officer furnished pursuant to Rule 13a-14(b) of the Exchange Act and Section 1350 of Chapter 63 of Title 18 of the United States Code (18 U.S.C.
1350).
| | ---- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | b) |  | Reports on Form 8-K:
| | -- |  | --------------------



The Company filed a report on Form 8-K on April 23, 2003. The purpose of the Form 8-K was to furnish a press release announcing earnings results for the
first quarter of 2003.





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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.



|Date:  August 14, 2003 |  | By: |  | /s/ Bernard Liautaud                                                    
|---------------------- |  | --- |  | ------------------------------------------------------------------------
|                       |  |     |  | Bernard Liautaud Chairman of the Board and Chief Executive Officer      
|                       |  |    
|Date:  August 14, 2003 |  | By: |  | /s/ James R. Tolonen                                                    
|                       |  |     |  | James R. Tolonen Chief Financial Officer and Senior Group Vice President



43