UNITED
      STATES


SECURITIES
      AND EXCHANGE COMMISSION


WASHINGTON,
      D.C. 20549





**FORM
      10-K**





x
            ANNUAL
                REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
                ACT OF
                1934


For
      the
      Fiscal Year Ended June 30, 2007





OR





o
            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 0-9993





**MICROS
      SYSTEMS, INC.**





(Exact
      name of registrant as specified in its charter)





**Maryland**
            **52-1101488**(State
                of Incorporation)
            (I.R.S.
                Employer Identification No.)




**7031
      Columbia Gateway Drive, Columbia, Maryland 21046-2289**


(Address
      of Principal Executive Offices, Including Zip Code)





**443-285-6000**


(Registrant’s
      telephone number, including area code)





Securities
      registered pursuant to Section 12(b) of the Act:





Title
                of Each Class
            
            Name
                of ExchangeCommon
                Stock, par value $0.0125 per share
            
            The
                NASDAQ Stock Market LLC





Securities
      registered pursuant to Section 12(g) of the Act: None





Indicate
      by check mark if the registrant is a well-known seasoned issuer, as defined
      in
      Rule 405 of the Securities Act.





YES þ  NO o





Indicate
      by check mark if the registrant is not required to file reports pursuant to
      Section 13 or Section 15(d) of the Act.





YES o  NO þ





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 report(s)), and (2) has been subject to such filing requirements
      for the past 90 days.





YES þ  NO o





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





Indicate
      by check mark whether the Registrant is a large accelerated filer, an
      accelerated filer, or a non-accelerated filer (as defined in Rule 12b-2 of
      the
      Exchange Act).





Large
                accelerated filer þ
            Accelerated
                filer o
            Non-accelerated
                filer o





Indicate
      by check mark whether the registrant is a shell company (as defined in Rule
      12b-2 of the Act).





YES o NO þ








The
      aggregate market value of the common equity (all of which is voting) held by
      non-affiliates computed by reference to the price at which the common equity
      was
      last sold as of December 30, 2006 was $2,100,898,728.





At
      the
      close of business on July 31, 2007, there were issued and outstanding 40,747,966
      shares of Registrant’s Common Stock at $0.0125 par value.




**DOCUMENTS
      INCORPORATED BY REFERENCE**





Portions
      of the definitive Proxy Statement for the 2007 Annual Meeting of Shareholders,
      to be filed with the Commission no later than 120 days after the end of the
      fiscal year covered by this report on Form 10-K, are incorporated by reference
      into Part III of this Form 10-K.





**TABLE
      OF CONTENTS**




**Page
                No.****PART
                I**Item
                1.
            Business
            4Item
                1A.
            Risk
                Factors
            15Item
                1B.
            Unresolved
                Staff Comments
            18Item
                2.
            Properties
            18Item
                3.
            Legal
                Proceedings
            20Item
                4.
            Submission
                of Matters to a Vote of Security Holders
            20**PART
                II**Item
                5.
            Market
                for the Registrant’s Common Equity, Related Stockholder Matters, and
                Issuer Purchases of Equity Securities
            21Item
                6.
            Selected
                Consolidated Financial Data
            22Item
                7.
            Management’s
                Discussion and Analysis of Financial Condition and Results of
                Operations
            22Item
                7A.
            Quantitative
                and Qualitative Disclosures about Market Risk
            36Item
                8.
            Financial
                Statements and Supplementary Data
            36Item
                9.
            Changes
                in and Disagreements with Accountants on Accounting and Financial
                Disclosure
            37Item
                9A.
            Controls
                and Procedures
            37Item
                9B.
            Other
                Information
            37**PART
                III**Item
                10.
            Directors
                and Executive Officers of the Registrant
            38Item
                11.
            Executive
                Compensation
            38Item
                12.
            Security
                Ownership of Certain Beneficial Owners and Management and Related
                Stockholder Matters
            38Item
                13.
            Certain
                Relationships and Related Transactions
            38Item
                14.
            Principal
                Accounting Fees and Services
            38**PART
                IV**Item
                15.
            Exhibits
                and Financial Statement Schedules
            39Signatures
            71Exhibit
                Index
            72




3


**PART
      I**





**ITEM
              1.**
            **BUSINESS**





**INTRODUCTION**


MICROS
      Systems, Inc. is a leading worldwide designer, manufacturer, marketer, and
      servicer of enterprise information solutions for the global hospitality and
      specialty retail industries. MICROS Systems, Inc. was incorporated in the State
      of Maryland in 1977 as Picos Manufacturing, Inc. and, in 1978, changed its
      name
      to MICROS Systems, Inc.


References
      to “MICROS,” the “Company,” “we,” “us,” and “our” herein include the operations
      of MICROS Systems, Inc. and also our subsidiaries on a consolidated basis.
      Also,
      our fiscal year runs from July 1 through June 30, and so throughout this report
      on Form 10-K, references to a fiscal year mean the 12-month period ending June
      30 of that year; i.e., fiscal year 2007 means the 12-month period ending June
      30, 2007.


We
      operate in two reportable segments for financial reporting purposes: U.S. and
      international. You can find financial information for each reportable segment,
      as well as certain financial information about geographic areas, in Note
      17 ,
      “Segment Information” in our Notes to Consolidated Financial Statements included
      in this Annual Report on Form 10-K. In each of these two reportable segments,
      we
      have developed an infrastructure through which we license and sell all of our
      products and services. While the products and services that are sold must be
      customized for each segment to address local issues, laws, tax requirements
      and
      customer preferences, the products and services are substantively similar
      worldwide.


The
      hospitality industry comprises numerous defined market areas, including lodging
      (e.g., individual hotel sites, hotel chains and franchise groups, and centrally
      deployed systems, such as hotel central reservation systems), table service
      restaurants, quick service restaurants, entertainment venues (e.g., stadiums
      and
      arenas), business foodservice operations, casinos, transportation foodservice,
      government operations, and cruise ships. The specialty retail industry consists
      of retail operations selling directly to consumers, including retailers of
      clothing, shoes, food, hardware, jewelry, and other specialty
      items.


Our
      enterprise solutions comprise three major areas: (1) hotel information systems;
      (2) restaurant information systems; and (3) specialty retail information
      systems. In addition to our software enterprise solutions and hardware products,
      we offer an extensive array of services and other products for our hotel,
      restaurant and retail information systems. The hotel information systems consist
      mainly of software, encompassing property based management systems (“PMS”),
      related property-specific modules and applications, and central systems,
      including central reservation systems (“CRS”). The restaurant information
      systems consist of hardware and software for point-of-sale (“POS”) and
      operational applications, a suite of back office applications, including
      inventory, labor, and financial management, and certain centrally hosted
      enterprise applications. The specialty retail systems consist of software
      encompassing POS, loss prevention, business analytics, customer gift cards,
      and
      enterprise applications.


Our
      hotel
      PMS applications are installed worldwide in leading hotel chains, including
      Accor (France), Best Western, Camino Real (Mexico), Carlson Hotels, Dusit Thani
      (Thailand), Extended Stay America, Fairmont, Federal (Malaysia), Four Seasons,
      Hilton International, Hyatt Global, InterContinental Hotels Group, Kempinski
      (Germany), MGM Mirage, Marriott International, Mövenpick (Switzerland),
      Peninsula (Hong Kong), Shangri-La International (Hong Kong), Société du Louvre
      (France), Solare (Japan), Starwood International, Steigenberger, Thistle (United
      Kingdom), Wyndham Worldwide, and Wynn Resorts. Globally, there are approximately
      21,000 MICROS PMS applications installed (most of which are accompanied by
      other
      property-specific modules and applications.)


The
      MICROS CRS is installed in numerous hotel chains, including Boscolo (Italy),
      Constellation (Australia), Equatorial (Malaysia), Fairmont, Four Seasons, Great
      Wolf Resorts, Loews Hotels, MacDonalds (United Kingdom), MGM Mirage, Oberoi
      (India), Pan Pacific (Singapore), Red Lion, Rydges (Australia), Shangri-La,
      Société du Louvre, Sokos (Finland), Starhotels (Italy), Sun International (South
      Africa), Thistle, Westmark, Wyndham Worldwide, and Wynn Resorts. Globally,
      over
      65 hotel chains have installed MICROS CRS applications.


Our
      restaurant POS systems are installed worldwide. Major table service restaurant
      chain customers include Bertucci’s, Chevy’s, Corporación Mexicana de
      Restaurantes (Mexico), Cracker Barrel, Denny’s, Eat ‘n Park, El Torito, ESPN
      Zone, Fazer Amica (Finland), Friendly’s, Groupe Le Duff (France), Hard Rock
      Café, HMS Host, Hooters, International House of Pancakes, Johnny Carinos, La
      Madeleine, Lone Star, Marie Callender’s, Metromedia Restaurant Group, Mitchells
      and Butlers (U.K.), Perkins, Rainforest Cafe, Ruby Tuesday’s, T.G.I. Friday’s,
      VIPS (Spain), and Whitbread PLC (United Kingdom). Major quick service chain
      restaurant (“QSR”) customers include numerous franchisees of Atlanta Bread,
      Arby’s, Baja Fresh, Ben & Jerry’s, Burger King, Checkers, El Pollo Loco,
      Fazoli’s, Fuddruckers, Grandy’s, Krispy Kreme, Pollo Campero (Guatemala), Panera
      Bread, Popeye’s, Red Rooster (Australia), Retail Brand Group, Starbucks (mainly
      international sites), Subway, Tropical Smoothie Café, Wendy’s, and various
      franchisees of Yum! Brands (Pizza Hut, KFC International, and Taco
      Bell).


Our
      restaurant POS systems are also installed in hotel restaurants in chains,
      including Boyd Gaming, Camino Real, Fairmont, Four Seasons, Hilton
      International, Hilton, Hyatt, InterContinental Hotels, Kempinski, Mandarin
      Oriental, Marriott International, Omni, Pan Pacific, Radisson, Starwood, and
      Wyndham International. Additional significant markets for our POS systems
      include complex foodservice environments, such as casinos, cruise ships, sports
      arenas, airport concourses, theme parks, recreational centers, institutional
      food service organizations, and specialty retail shops. Users include Aramark,
      Anton’s, Compass, Delaware North, HMS Host, and various government entities. We
      have installed large POS systems in the Foxwoods Hotel and Casino (Ledyard,
      CT),
      Grand Casino (Australia), Atlantis (Bahamas), Mandalay Resorts Group, Sun City
      (South Africa), Harrah’s Casinos, Luxor Hotel and Casino, The Venetian and Wynn
      Resorts. We supply and service POS systems for users in the complex foodservice
      environments identified above both directly and through distribution channels,
      including through specialty reseller relationships with Blackboard Inc. and
      The
      CBORD Group Inc.


4


We
      also
      market restaurant POS systems through our Hospitality Solutions International
      (“HSI”) division. The HSI restaurant POS product is a Windows ® based
      software product. Additionally, we market a POS product through our Indatec
      GmbH
      (“Indatec”) subsidiary. The Indatec product is a proprietary POS hardware system
      with embedded software. The Indatec product is sold exclusively in Europe and
      is
      targeted to small restaurants.


Through
      our JTECH Communications, Inc. (“JTECH”) subsidiary, we market a range of
      on-premises paging and alert solutions for restaurants, retail, and medical
      environments.


Our
      specialty retail solutions are provided through our subsidiaries Datavantage Corporation
      (“Datavantage”), CommercialWare
      Inc. (“CommercialWare), and RedSky (discussed below). In our marketing, we
      sometimes refer to this group of subsidiaries as the “MICROS Retail”
group.


Datavantage is a
      software application developer and system integrator specializing in the
      specialty and apparel retail market, and has
      over
      225 retail company customers. The Datavantage software solutions include retail
      POS, loss prevention, business analytics, and enterprise applications. Its
      customers include Abercrombie & Fitch, Adidas AG (Germany and Adidas USA,
      Armani Exchange, Barney’s New York, Books-A-Million, Blue Spirit (Italy), Brazin
      Ltd. (Australia), CSK Auto, Guitar Center, Hugo Boss AG (Germany), Jos. A.
      Banks
      Clothiers, Limited Too, Michael’s Arts and Crafts, Polo Ralph Lauren, Reebok
      Retail, Ritz Camera, Roots Canada Ltd., S & K Famous Brands, Se ñ or
      Frogs
      (Mexico), Shaw’s Markets, Steve Madden Retail, Talbots, Urban Brands, and Zales.


CommercialWare
      offers cross-channel retail solutions (described more fully below), consisting
      of software and services that support retailers with a variety of field
      management solutions, including store systems, business analytics, marketing
      applications and order processing via phone, mail order and the internet.
      CommercialWare has over 90 customers including the following: Abercrombie &
Fitch, Garnet Hill, Home Depot Canada, J. Jill Group, Jos. A. Banks Clothiers,
      Ritz Camera, Starbucks and the US Mint. CommercialWare and Datavantage share
      several common customers.


In
      January 2007, we acquired certain subsidiaries of RedSky IT of the United
      Kingdom (collectively, “RedSky”). We paid a total of approximately $29.8
      million, net of cash acquired, for the stock of the acquired companies. These
      companies provide software products and services for the hotel and travel
      industries and for the food and retail marketplace. Each of the acquired
      companies has been integrated with the appropriate MICROS business and
      geographical units.


In
      June
      2007, MICROS purchased a majority interest in eOneGroup of Omaha, Nebraska.
      eOneGroup is a developer and marketer of web site and portal services for
      retailers. eOneGroup operates as a majority owned subsidiary under the “MICROS
      Retail” group. It has over 30 customers including Lord & Taylor, Omaha
      Steaks, Electrolux, Paragon Sporting Goods, and Tommy Hilfiger.





**PRODUCTS
      AND SERVICES**





**Summary
      of Product Solutions (Software and Hardware):**





**Hotel
                Products**
            **Description****Software**Fidelio
                Versions 7 and 8 PMS
            PMS
                software products for hotel reservationsOPERA
                PMS
            PMS
                software product for hotel reservations, targeted to full service
                hotelsOPERA
                Xpress PMS
            PMS
                software product for hotels, targeted to limited service
                hotelsOPERA
                Revenue Management System
            Software
                that helps hotels develop and manage pricing strategiesOPERA
                Customer Information System
            Software
                that manages customer information and loyalty programsOPERA
                Vacation Ownership System
            Software
                that manages reservations for hotel condominiums and related condominium
                managementOPERA
                Web Booking Suite System
            Software
                that enables OPERA PMS to receive Internet reservationsSales
                and Catering
            Software
                that helps hotels manage meeting needs (food, hotel rooms, meeting
                space,
                and other customer needs)Opera
                Sales Force Automation (SFA)
            Software
                that manages leads, meeting agendas, and contracting, and provides
                other
                support to the national and regional sales teams for hotel
                chainsMICROS-Fidelio
                Financials
            Software
                that manages the accounting and financial reporting for
                hotelsOPERA
                Activities System
            Software
                that manages the scheduling and billing for hotel resort recreational
                activities, such as golf, tennis, spas, etc.Opera
                Kiosk
            Enables
                guest check-in and check-out at stand-alone kiosk, and other interactive
                featuresmyfidelio.net
            An
                Internet based hotel reservation service and networkFidelio
                Cruise Systems
            A
                suite of software products that manages reservations, POS and other
                activities for the cruise industryMaterials
                Management
            Software
                that provides inventory control and costing for food production,
                mainly
                marketed to hotel restaurantsRedSky
                ImagInn
            PMS
                software products for hotels, targeted at limited-service, independent,
                and economy hotels.




5





**Restaurant
                Products**
            **Description****Software**9700
                HMS
            POS
                software for large foodservice, leisure and entertainment
                venuesSimphony
            Centrally-hosted
                POS for large foodservice, leisure and entertainment
                venues3700
                POS
            POS
                software for table service and quick service
                restaurantsRestaurant
                Enterprise Series 3000
            Suite
                of software products for 3700 POSKitchen
                Display System
            Component
                of RES 3000, additional reporting capabilities and
                informationRES
                Kiosk
            Component
                of RES 3000, for self-ordering and customer info via kiosk or other
                hardwareHSI
                Profit Series POS
            POS
                software for table service restaurants, marketed by HSI
                divisionIndatec
            POS
                software for small restaurants, marketed only in Europemymicros.net
            Suite
                of web based software products for MICROS and other restaurant POS
                productsmyhsi.net
            Suite
                of web based software products for HSI Profit Seriese7
                POS
            POS
                product for small restaurants, marketed in the AmericasTangent
                POS
            POS
                software for stadiums, arenas, and similar venues**Hardware**Workstation
                4 Terminal
            Windows
                CE POS terminal for restaurantsWorkstation
                4-LX Terminal;
            Windows
                CE POS terminal for restaurants-enhanced version of Workstation
                42010
                PC Workstation
            PC
                based POS terminal for restaurantsKeyboard
                Workstation Terminal
            Windows
                CE POS terminal used in large complex foodservice, leisure and
                entertainment venuesIndatec
                POS Terminal
            POS
                terminal that operates the Indatec POS softwareJTECH
                Paging Products
            Suite
                of paging products





**Retail
                Products**
            **Description****Software**Store
                21 Store Management System
            POS
                retail software product targeted for specialty retailersTradewinds
                Store Management System
            POS
                retail software product targeted for stores with high volume
                transactionsXstore
                Management System
            Java
                based POS retail software productProact
                Home Office Business Intelligence Suite
            Suite
                of software products that analyzes, manages and reports on business
                activities at the store levelGift
                Cards Software
            Software
                product that manages a retailer’s gift card programCWDirect
                Cross Channel Order Management System
            Software
                that manages orders across multiple methods of ordering (phone, kiosk,
                Internet, etc.)CWLocate
                Merchandise Location System
            Software
                that enables a retailer to locate inventory across multiple
                locationsCWCollaborate
            Software
                that connects retailers with suppliers to efficiently manage inventory
                and
                reorder levelsCreations
            Software
                that manages and tracks a product’s lifecycle and its supply
                chaineOneCommerce
            Web
                site development and portal management services for business to business
                order management, customer list management and sales promotion
                support




**Hotel
      Information Systems**


For
      the
      hotel and resort industry, we develop, distribute, and support a complete line
      of hotel software products and services. The hotel information systems include
      PMS, sales and catering systems (“S&C”), CRS, customer information systems
      (“CIS”), revenue management systems (“RMS”), and an Internet/Global Distribution
      System based hotel reservation service called myfidelio.net. We also provide
      installation and end-user training services, and support services (including
      help desk) for our various software products.


Globally,
      there are approximately 21,000 active MICROS PMS installations, which includes
      some sites using PMS products for which MICROS has ceased ongoing development
      (although in many instances we continue to provide limited support services
      to
      those sites). Most of the hotels with MICROS PMS have also installed other
      property-specific modules and applications; additionally, there are over 2,000
      hotels running various MICROS property-specific modules and applications without
      a MICROS PMS.


6


The
      PMS
      software provides for check-in and check out, reservations, guest accounting,
      travel agent accounting, engineering management, and interfaces to central
      reservation systems, to on-line travel services (a/k/a alternative distribution
      services, e.g., Expedia), and to global distribution systems (e.g., Sabre,
      Galileo, Amadeus and WorldSpan). The S&C software enables hotel sales staff
      to evaluate, reserve and invoice meetings, banquets and related events for
      a
      property. The CRS software enables hotels to coordinate, process, track, and
      analyze hotel room reservations at a central facility for electronic
      distribution to the appropriate lodging site. The CIS software enables hotels
      to
      efficiently capture and track relevant guest information. The RMS software
      enables hotels to manage room rates, occupancy, and the mix of business between
      corporate and transient customers. We also offer an Internet-based hotel
      reservation service via our myfidelio.net service. This service enables
      corporations, tourist representation services, and consumers to reserve rooms
      and manage reservations directly with designated hotels. This service also
      enables those hotel properties without internal reservation capabilities to
      outsource to us the maintenance of their connectivity to the global distribution
      systems, and to certain alternative distribution systems.


We
      market
      a comprehensive suite of hotel software products under the OPERA brand name.
      OPERA includes modules for property management, central reservations, customer
      information systems, sales and catering, revenue management, sales support,
      data
      mining, financial statements, condominium reservations and accounting, golf
      reservations, spa management, and quality management. We also offer a module
      that enables guest check in and check out, and other interactive features,
      via
      kiosk.


In
      addition to industry standard PCs, the OPERA platform will also run on large
      PC
      servers. OPERA can be run on two operating systems: Microsoft
      Windows ® (Server
      and XP) and IBM AIX ® ,
      and
      uses an Oracle ® database.


The
      OPERA
      software suite is deemed an important product line for our continued growth
      in
      the hotel information systems market, because we believe it reflects the future
      direction of PMS technology for us and the industry, and is a material driver
      of
      revenue growth for our business with the hotel industry. Over 60 hotel chains
      have implemented OPERA, many of which are in the midst of multi-year rollouts.


We
      also
      offer a version of the OPERA property management system called OPERAXpress.
      This
      product enables smaller properties to deploy the OPERA PMS at a lower price
      with
      a limited number of product features. As of June 30, 2007, over 7,300 hotel
      sites have installed either Opera or OPERAXpress PMS.


OPERA’s
      software architecture enables the product to be deployed either on-premises
      or
      hosted in an off-site location. We offer hosting services for hotel customers
      in
      various data centers around the world (Ashburn and Manassas, Virginia; Buenos
      Aires, Argentina; Frankfurt, Germany, and Singapore) with the application
      accessed via Internet or similar high speed connections. Currently, there are
      approximately 1,400 hotels running Opera PMS or Opera Xpress PMS in a hosted
      environment.


In
      addition, we market a suite of hotel software products (PMS and other modules)
      under the Fidelio Version 7.0 brand name. Fidelio Version 7.0 uses the Microsoft
      Windows ® graphical user interface and runs on an Oracle ® database. There are over 4,600 hotels using Version 7.0, as of June 30, 2007.


Through RedSky,
      we offer a comprehensive portfolio of integrated, highly functional hotel PMS
      software solutions under the tradename ImagInn, which is targeted toward the
      limited-service, independent and economy hotel market. There are more than
      3,000
      sites using ImagInn.


Furthermore,
      in Europe we market a PMS product under the brand name Fidelio Version 8. This
      product contains certain Internet-based features and uses the
      Windows ® operating system with an Oracle ® database. The product is designed to meet the needs of independent hotel
      operators and smaller chains based in Europe. The product is installed in over
      1,300 hotel sites as of June 30, 2007.


Additionally,
      we market a specialized version of our PMS product to the cruise industry via
      our Fidelio Cruise subsidiary. The Fidelio Cruise PMS enables cruise ships
      to
      manage their reservations and on-board operational needs including check-in
      and
      check-out, point-of-sale, passenger and crew administration, invoicing,
      maintenance tracking and passport document management. Fidelio Cruise software
      is installed in over 170 cruise ships. Customers include Carnival Cruise Lines,
      Cunard Line, Holland America, Norwegian Cruise Lines, P. & O. Cruises,
      Princess Cruises, Radisson Seven Seas Cruises, Star Cruises, Royal Caribbean
      International, and the U.S. Navy, among many others.


We
      also
      have a marketing alliance with Systems Union Group Plc, headquartered in London.
      This alliance involves the joint product development and marketing of
      application software based on Systems Union’s back office accounting and
      business intelligence applications. This alliance enables us to offer a hotel
      customer a complete suite of integrated software solutions that addresses
      operational needs, business intelligence and analysis, and provides back office
      accounting and reporting. As part of this alliance, we serve as a preferred
      reseller of Systems Union’s software and business solutions to the hospitality
      industry.





**Restaurant
      Information Systems**


Our
      restaurant systems include full-featured point of sale applications, hardware,
      and support services. Most of the products are designed to operate on industry
      standard PCs, with the order entry terminals being either industry standard
      PCs
      or proprietary terminals with additional functionality and design appropriate
      for foodservice environments, including two types of proprietary intelligent
      terminals developed and designed by us.





**Hardware**


The
      workstations we have designed, and that we currently market and sell, are the
      Workstation 4, Workstation 4-LX and the Workstation 2010. We also integrate
      other hardware devices (e.g., printers, cash drawers, handheld order entry
      terminals, and pole displays) into our complete product offerings.


The
      Workstation 4 is a thin-client POS terminal, using Microsoft’s
      Windows ® CE
      operating system, with standalone resiliency. This capability means that even
      if
      the system server malfunctions, the POS terminal can continue to function and
      store data until the server is operational. The Workstation 4 is manufactured
      by
      GES Singapore Pte. Ltd. of Singapore (“GES”), a third party contract
      manufacturing company. Workstation 4-LX is a newer version of Workstation 4.
      The
      product has a faster microprocessor and other improvements in memory management
      and data recovery. The product is scheduled for release in early fiscal year
      2008.


7


The
      2010
      Workstation is a high-performance POS terminal designed to run our restaurant
      applications and other third party PC-based software applications. The product
      uses an Intel ® Pentium
      chip architecture. It can be configured to accommodate various memory and
      storage requirements. The product supports various Microsoft operating systems
      and Linux. The 2010 Workstation is manufactured by GES.


We
      also
      distribute a product named the Keyboard Workstation, which GES also manufactures
      for us. This product enables orders to be entered into the MICROS 9700 HMS
      (a
      software product that is described below) via a lower cost, durable workstation
      with a keyboard interface in lieu of a touchscreen. The Keyboard Workstation
      is
      primarily used in institutional foodservice environments, convention centers,
      and sports complexes.


Through
      our JTECH subsidiary, we offer pagers, wireless systems, alert software, and
      related products (all manufactured for us by third party contract manufacturers)
      for use in restaurants, retail, medical, and other environments.


Additionally,
      we resell various other hardware products, including personal computers,
      servers, printers, network cards, and other related computer equipment. We
      maintain a global, non-exclusive preferred provider agreement with Hewlett
      Packard Corporation. This relationship enables us to resell Hewlett Packard
      personal computers, printers, and networking equipment on a global
      basis.





**Software**


Our
      main
      restaurant POS software systems are the 9700 Hospitality Management System
      (“HMS”), the 3700 POS system, HSI POS, Indatec, the e7 Series, and Tangent POS.
      We have also recently introduced Simphony, a centrally hosted POS product.
      These
      systems provide transaction control for table service, quick service and large
      foodservice and entertainment venues.





**Leisure
      and Entertainment Restaurants**


The
      9700
      HMS is designed for larger leisure and entertainment venues, which include
      resorts, casinos, airport and other travel-related food service concessions,
      stadiums/arenas, theme parks, table service and quick service restaurants in
      hotels, and larger stand-alone restaurants. The 9700 HMS product has an open
      systems architecture running on Microsoft’s Windows ® 2000
      operating system. The product can be deployed on site in a client-server
      configuration or on a multi-property configuration where a remote server can
      run
      multiple restaurants. The product uses either an Oracle database or a
      proprietary database.


We
      also
      recently released Simphony, a centrally-hosted POS product designed for leisure
      and entertainment venues. Simphony runs on either Microsoft SQL Server or Oracle
      databases.


The
      Tangent POS includes POS and related functions, and is designed for sport and
      entertainment facilities. Tangent POS is currently installed in more than 200
      stadiums, arenas, and other large facilities in North America.





**Table
      Service and Quick Service Restaurants**


The
      3700
      POS is designed for table service and quick service restaurants. It has an
      open
      systems architecture using Microsoft’s Windows ® 2000
      operating system, a Sybase ®  relational
      database, and can run on standard PCs or proprietary workstations. It uses
      a
      color touch screen with a Microsoft Windows ® based
      graphical user interface.


We
      have
      developed and we market a suite of back office and operation focused software
      solutions that extend beyond POS. The suite is called the Restaurant Enterprise
      Series (“RES”). The software solutions include point-of-sale transaction
      control, restaurant operations, data analysis, and communications. The POS
      software comprises the front-end application for the RES system. The restaurant
      operations modules include inventory, product forecasting, labor management,
      financial management, gift cards, and enterprise data management. One of those
      modules is the Kitchen Display System (“KDS”), which displays food orders and
      offers additional reporting capabilities on restaurant service. Another recently
      released component is RES Kiosk, which enables customer information and
      self-ordering on third-party kiosks or other hardware. These modules are
      designed to operate at a restaurant site.


For
      management of multiple restaurants, RES includes a suite of software products
      called Enterprise Management. This suite enables data to be transmitted to
      a
      remote site (e.g., the headquarters of a restaurant chain) for data collection
      and analysis. Additionally, pricing and menu changes can be made from a remote
      site and downloaded to specified restaurant locations. RES is an important
      component of our strategy to fully integrate point-of-sale transaction
      processing with other restaurant operational and management
      functions.


We
      market
      a POS system called e7 for smaller restaurants. This product runs on the
      Workstation 4 and uses the Microsoft Windows ® CE Operating system.


Through
      our HSI division, we market the HSI POS product primarily to table service
      restaurant customers in North America. The product contains a wide array of
      POS
      features.


The
      Indatec POS product is marketed only in Europe and primarily to smaller table
      service restaurants and small hotels with restaurants that do not require the
      higher-level functionality of other MICROS POS products. The Indatec POS is
      designed to serve smaller restaurants seeking a lower cost product in terms
      of
      purchase and installation expense.





**Ancillary
      Applications**


Our
      design architecture enables existing users of many MICROS POS products to access
      new technologies and third party software applications in conjunction with
      their
      existing MICROS POS systems. In addition, many MICROS products interface with
      various back office accounting and property management systems, including our
      hotel PMS products.


8


We
      also
      have developed and market an Internet-based portal product called
“mymicros.net.” Mymicros.net posts store transaction POS detail to a centralized
      data warehouse in near real time. This product enables the customer to view
      reports and charts for a single store, a group, or the entire enterprise from
      any location that has an Internet connection. The mymicros.net software product
      can either be purchased via a perpetual use license or by an annual or
      multi-year “software as a service” subscription contract. The HSI division also
      markets a portal called “myhsi.net.” The product’s functionality is similar to
      the mymicros.net portal, but is designed for use with the HSI POS
      product.


We
      currently operate a data center in our Columbia, Maryland headquarters to host
      the mymicros.net and myhsi.net software for customers; during fiscal year 2008
      we plan to relocate this hosting facility to a third party data center to
      improve operations and security capabilities and to enhance capacity. As of
      June
      30, 2007, we are hosting our various applications for over 500 customers,
      representing over 3,600 sites.





**Retail
      Information Systems**


Through
      our retail subsidiaries Datavantage and CommercialWare we market retail store
      software automation systems and business intelligence applications. The
      Datavantage retail store systems are called Store21 Store Management System
      (“Store21”), Tradewind Store Management System (“Tradewind”) and Xstore Store
      Management System (“Xstore”). Store21 is a POS product designed for smaller
      retail operations, while Tradewind is a POS product targeted at larger format
      stores and at high transaction volume stores. The products operate on
      Microsoft’s Windows ® NT and
      2000 operating systems and use Sybase ® as the
      database. Both products can be integrated with the retailer’s back office
      systems, and Datavantage also offers additional certain back office,
      communications, and reporting modules for use with Tradewind and
      Store21.


Xstore
      is
      Datavantage’s next generation POS software system. It runs on the Sun
      Microsystems ® Java ® operating system, and its architecture enables it to be integrated to both
      Windows and Linux-based back office systems. Like Store21 and Tradewind, its
      predecessor products, Xstore is a front-end POS software system that may be
      integrated with the retailer’s back office systems. Xstore is highly
      customizable by the customer, and is designed to respond to the trend among
      large retailers to move to Linux-based systems. Xstore is designed to be able
      to
      be run in a Windows or a Linux environment, while Store21 and Tradewind, as
      currently designed, can only operate in a Windows ® environment.


Datavantage
      also offers the Proact Home Office Business Intelligence Suite (“Proact”) for
      retail stores, which includes loss prevention, customer relationship management,
      gift cards, and audit control.


All
      of
      Datavantage’s software systems run on both industry standard PCs and specially
      designed PC-based POS terminals manufactured by IBM, MICROS, Dell, and
      NCR.


CommercialWare’s
      offerings consist of software and services that enable a retailer to manage
      customer purchase transactions across multiple touch-points. Specifically,
      CommercialWare’s software enables a merchant to efficiently handle customer
      transactions from a store, the Internet, catalog phone-in orders, call centers,
      kiosk, and wireless devices. The solutions enable the merchant to provide the
      customer with full transparency through the purchasing process, from research
      from one channel, purchasing from a second channel and implementing a return
      or
      exchange through a third channel.


RedSky’s
      food and retail software, called Creations, is a fully integrated lifecycle
      management and supply chain traceability product. Lifecycle management refers
      to
      the ability to track and manage inventory from the manufacturer through the
      point of distribution. Creations is currently licensed to the four largest
      grocers located in the United Kingdom.


The
      eOneGroup offers web site development and portal management for retail
      customers. These solutions allow a retailer to have eOneGroup develop and manage
      a customer’s web site for ordering, sales promotion, and marketing.





**Services**


We
      provide a wide range of services to our customers. Our services include system
      installation, operator and manager training, on-site hardware maintenance,
      customized software development, application software support, credit card
      software support, systems configuration, network support and professional
      consulting. We also offer software-hosting capabilities, which enable customers
      to use the software without investing in hardware and a network.


We
      provide field hardware and software maintenance via a combination of direct
      and
      indirect channels - authorized U.S. dealers and international distributors.
      The
      field hardware maintenance is provided mainly to customers using MICROS POS
      hardware and software systems. Depot field maintenance is also provided. We
      sometimes contract with PC manufacturers to provide either first or second
      line
      support for PC servers for both hotel and restaurant customers.


We
      operate several help desks around the world. There is a 24 hours per day, seven
      days a week (24/7) help desk in our Columbia, Maryland headquarters. We also
      maintain other 24/7 regional and product specific help desks in the following
      locations:


Galway,
      Ireland –
      primarily for customers in Europe, Africa, and the Middle East


Buenos
      Aires, Argentina – primarily for customers in Latin America


Singapore
      – primarily for customers in the Asia-Pacific region


Cleveland,
      Ohio – for Datavantage products


Scottsdale,
      Arizona – for HSI products


We
      also
      operate other more limited help desk operations, including the myfidelio.net
      and
      Fidelio Cruise support desks in Hamburg, Germany, the Fidelio Cruise support
      desk in Fort Lauderdale, Florida, the JTECH help desk in Boca Raton, Florida,
      casino software related support in Las Vegas, the CommercialWare help desk
      in
      Westborough, Massachusetts and eOneGroup web site service support in Omaha,
      Nebraska.


9


These
      central support operations receive support calls from customers and either
      address them telephonically or on-line, or, where appropriate, dispatch a
      service call to the appropriate local service provider. Internationally,
      in-country support is provided by the local sales entity, which may be a MICROS
      subsidiary or an authorized independent distributor. Our corporate customer
      service provides back-up support for our regional centers in Buenos Aires,
      Singapore, and Galway, and our research and development operation in Naples,
      Florida, provides higher-level support for the hotel software products. The
      regional support centers also provide back-up support and guidance for local
      and
      in-country support providers.


We
      have
      implemented data centers in Frankfurt; Ashburn and Manassas, Virginia; Buenos
      Aires, and Singapore in conjunction with Verizon Business (formerly MCI) to
      serve as hosting centers for customers deploying our various hosted and
      application service products. This relationship enables us to more efficiently
      deploy our hosted solutions globally.


Services
      are a critical component of our business. Service
      revenue, which comprises programming, installation, training, in-field support,
      help desk, and maintenance, constituted approximately 53.3% ($419.1 million)
      of
      our total revenue in fiscal year 2007 compared to approximately 50.6% ($343.3
      million) in fiscal year 2006 and approximately 50.1% ($299.1 million) in fiscal
      year 2005.


Maintenance
      service contracts, which include field service, depot hardware maintenance,
      and
      software support, are a large component of our service offerings. Most service
      maintenance contracts are annual contracts that automatically renew, unless
      either party tenders timely notice of non-renewal. Revenues for service
      maintenance contracts were approximately $233.7 million for fiscal year 2007,
      approximately $190.0 million for fiscal year 2006, and approximately $164.9
      million in fiscal year 2005. Service maintenance contract revenue is included
      in
      our service revenue (described above).





**SALES,
      MARKETING AND DISTRIBUTION**


We
      consider our direct and indirect global distribution network to be a major
      strength and competitive advantage. This network has been built over the past
      30
      years. We (including our various subsidiaries), our U.S.-based dealers, and
      our
      international distributors work closely together in seeking to identify new
      customers, products, services and markets, as well as to serve our existing
      customer base with enhanced products and services. In fiscal year 2007, MICROS
      acquired international distributors in Canada, Denmark, Austria and Morocco
      to
      expand its direct sales and service in these respective countries. The purchase
      of the Austrian distributor included majority interests in or complete ownership
      of distributors in Poland, the Czech Republic, Croatia, and Hungary. In the
      United States we acquired two of our dealers, one in New Orleans and one in
      Denver.


Our
      restaurant products and services are sold primarily through three channels:
      (i)
      the Direct Sales Channel, comprised of our sales distribution network consisting
      of approximately 70 wholly or majority-owned subsidiaries and branch offices;
      (ii) the MICROS Major Accounts program directed to designated regional,
      national, and international customers; and (iii) the Indirect Sales Channel,
      an
      independent sales distribution network consisting of approximately
      59 domestic dealers **** and
      approximately 42 international distributors.


Our
      hotel
      and retail products and services, including those provided by our recently
      acquired subsidiary, RedSky, are sold through direct sales forces, and through
      some independent distributors who sell hotel products outside of the
      U.S.


Foreign
      sales, including export sales from the United States, accounted for approximately
      53.7% (approximately $421.6 million) of our total revenue in fiscal year 2007,
      47.7% (approximately $323.8 million) in fiscal year 2006, and 46.0%
      (approximately $273.9 million) in
      fiscal year 2005.


We
      also
      sell products used in the provision of maintenance services, including
      miscellaneous spare parts, printer ribbons, paper, printer cartridges, other
      consumable media supplies, network products, and printers. We offer these
      supplies through our direct sales offices, our dealers and distributors, and,
      in
      North America, through a telephone and on-line service called POS
      Depot.





**RESEARCH
      AND DEVELOPMENT**


Our
      products are subject to technological change. Accordingly, we must continually
      devote our efforts toward upgrading our existing products and developing
      innovative systems incorporating new technologies. Our products, as well as
      those from our competitors, have offered an increasingly wider range of features
      and capabilities.





**Locations**


We
      conduct our core restaurant POS product software and hardware development,
      and
      also development of our Internet-based restaurant software products, at our
      Columbia, Maryland corporate headquarters. To facilitate rapid responses for
      various regional application needs, we also conduct restaurant POS software
      development in regional offices located in Sydney,
      Australia; Neuss, Germany; and Singapore .
      Our
      Indatec subsidiary and our HSI division conduct restaurant POS product research
      and development in their facilities in Bernau
      am
      Chiemsee, Germany, and Scottsdale, Arizona,
      respectively. In
      addition, we monitor and evaluate software and hardware products and designs
      created by third parties, and we have acquired and may in the future acquire
      ownership, licensing, or distribution rights to some of those products and
      designs.


We
      contract the manufacturing of our POS terminals to GES Singapore Pte Ltd. GES
      also provides certain hardware design services to us. Our internal hardware
      design team participates in the design and development of these units. This
      team
      also provides oversight of the manufacturing process as a means of insuring
      adherence to quality standards. See also “Manufacturing” in this Part I of Form
      10-K.


10


Our
      hotel
      PMS, S&C, and CRS development, and development for myfidelio.net, are
      primarily conducted in Naples, Florida. Additional development on the Fidelio
      Version 8.0 suite of hotel products is conducted in Neuss, Germany. We maintain
      close relationships with major software operating and database companies like
      Oracle, IBM, Novell, Sybase, Sun Microsystems ® and
      Microsoft. These relationships are important to us so we can readily incorporate
      software changes from these companies into our products. Our international
      offices may also conduct specific product enhancement activities to meet
      specific interface needs, local requirements, and specific customer
      requests.


Product
      development for Datavantage’s POS products is conducted in Cleveland, Ohio;
      Datavantage’s other products and the CommercialWare products are developed in an
      office located in Westborough, Massachusetts. JTECH
      conducts its development at its Boca Raton, Florida location. RedSky
      product development is conducted in its UK offices. The eOneGroup development
      is
      conducted in Omaha, Nebraska.





**Summary
      of R&D facilities**





Location
            
            ProductsColumbia,
                Maryland
            
            Restaurant
                POS software and hardware, Internet-based restaurant
                applicationsSydney
                Australia
            
            Additional
                restaurant POS software developmentNeuss
                Germany
            
            Additional
                restaurant POS software development; Fidelio version 8.Singapore
            
            Additional
                restaurant POS software developmentBernau
                am Chiemsee, Germany
            
            Restaurant
                POS software and hardware (Indatec only)Scottsdale
                Arizona
            
            Restaurant
                POS software (HSI only)Naples,
                Florida
            
            Hotel
                PMS software and other modules, also Internet-based hotel
                applicationsCleveland
                Ohio
            
            Retail
                POS software developmentWestborough,
                Massachusetts
            
            Retail
                Loss Prevention software development, Commercialware cross-channel
                software developmentOmaha,
                Nebraska
            
            Retail
                web site development and management servicesBoca
                Raton, Florida
            
            Paging
                software and hardware developmentHounslow
                UK
            
            RedSky
                hotel and retail product
                development





**Expenses**


Research
      and development (“R&D”) expenses consist primarily of labor costs less
      capitalized software development costs. A summary of R&D activities for the
      past three fiscal years ended June 30 is as follows:





(in
                thousands)
            
            **2007**
            
            **2006**
            
            **2005**Total
                R&D incurred
            
            **$**
            **35,859**
            
            $
            30,643
            
            $
            33,144Capitalized
                software development costs
            
            
            **(1,974**
            **)**
            
            (3,523
            )
            
            (5,745
            )Total
                R&D expenses
            
            **$**
            **33,885**
            
            $
            27,120
            
            $
            27,399




**COMPETITION**


The
      markets in which we operate are highly competitive. There are at least 20
      significant competitors worldwide that offer some form of sophisticated
      restaurant POS system, over 15 significant hotel systems competitors, and over
      10 significant retail systems competitors. We compete on various bases,
      including product functionality, service capabilities, price, and geography.
      We
      believe that our competitive strengths include our established global
      distribution and service network, our ability to offer a broad array of
      hardware, software and service products to the hospitality and retail industry,
      and our corporate focus on providing specialized information systems
      solutions.


Competitors
      in the restaurant POS marketplace include: (i) full service providers (hardware,
      software and services), such as NCR, Panasonic, Par Technology, Radiant Systems,
      Sharp and Torex Retail (recently acquired by Cerberus Capital); (ii) suppliers
      that mainly provide software, such as Agilysys (through its InfoGenesis
      division), Positouch, and Xpient Solutions; and (iii) providers that mainly
      provide hardware, such as Casio, Dell, IBM and Wincor-Nixdorf. There are also
      numerous other companies that license their POS-oriented software with PC-based
      systems in regional markets around the world.


Many
      of
      our competitors in the hotel systems market are companies with software designed
      to run on industry standard PCs. These companies may have several hotel related
      software products, or simply one product for a particular niche. These
      competitors include Agilysys, Softbrands (through its MAI Systems division),
      Multi-Systems, Northwind, Newmarket (Sales and Catering product only), Amadeus
      Hospitality (f/k/a Optims), Par Technology (through its SMS division) and
      Protel. Our products also compete with property management systems developed
      and
      marketed by major hotel chains for their corporate-owned operations and
      franchisees. Internationally, we generally face smaller, regionally-oriented
      competitors.


The
      CRS
      market is highly fragmented. Many hotel chains and allied reservation groups
      use
      their own customized central reservation systems. In addition to these
      internally developed products, our CRS products compete with those offered
      by
      some of our PMS competitors, e.g., Northwind and Par Technology, and with those
      offered by specialized central reservation providers, e.g., Amadeus, Pegasus,
      Vantis Corp., and Trust International/TravelPort. The market for central
      reservation systems is highly competitive.


11


The
      specialty retail market in which Datavantage operates is highly competitive.
      Competitors include Epicor (through its CRS Retail Systems division), Escalate
      Retail, JDA Software, NSB, Oracle (through its 360 Commerce division), and
      SAP
      (through its Triversity division) among many others. Internationally,
      Datavantage generally competes with smaller, regionally-oriented competitors.
      CommercialWare’s competitors include Escalate Retail, Oracle, and
      SAP.


JTECH’s
      competitors include Long Range Systems, NTN Communications, and certain
      distributors of Motorola paging products.





**MANUFACTURING
      AND SUPPLIES**


Our
      manufacturing program seeks to maintain flexibility and reduce costs by
      outsourcing key products and subassemblies. Our primary POS platforms, the
      Workstation 4, Workstation 4 LX and the 2010 Workstation, are manufactured
      by
      GES Singapore Pte Ltd. located in Singapore.


Our
      Indatec operation provides some basic assembly of its POS systems in a facility
      in Bernau am Chiemsee, Germany, and contracts with a third party manufacturer
      in
      Germany for additional production capacity.


GES
      performs certain warranty and post-warranty repairs on equipment that it
      manufactures for MICROS at its facilities in Singapore and in Lowell,
      Massachusetts. In addition, we maintain a repair capability for certain products
      in our distribution facility in Hanover, Maryland. We also perform repairs
      at
      certain of our direct and subsidiary offices worldwide, and, additionally,
      we
      contract with third parties to provide cost-effective repair services.


JTECH’s
      paging and related products are largely manufactured by several contract
      manufacturers in China. JTECH conducts final assembly of its paging and related
      products in its Boca Raton, Florida facility. The core pagers and components
      are
      purchased and assembled into finished products by JTECH personnel in Boca Raton
      with the appropriate software installed.


Material
      sourcing is based on availability, service, cost, delivery and quality of the
      purchased items from domestic and international suppliers. Some items are custom
      manufactured to our design specifications. We believe that the loss of our
      current sources for components would not have a material adverse effect on
      our
      business since other sources of supply are generally available. We believe
      that
      we maintain good relationships with our suppliers.





**EMPLOYEES**


As
      of
      June 30, 2007, we employed 4,360 full-time employees. The table below presents
      employees by geographical region, expressed both as a headcount and as a
      percentage of total employees:





**By
                Geographical Region**
            
            **NorthAmerica**
            
            **Europe/Africa**
              **Middle East**
            
            **Asia/**
              **Pacific**
            
            **LatinAmerica**
            
            **Total**Employees
            
            
            2,227
            
            
            1,379
            
            
            548
            
            
            206
            
            
            4,360As
                % of total
            
            
            51.1
            %
            
            31.6
            %
            
            12.6
            %
            
            4.7
            %
            
            100.0
            %





Approximately
      37% of the North America-based employees work out of our two Maryland locations:
      our headquarters building in Columbia, Maryland and our Hanover, Maryland
      distribution center.





The
      table
      below presents information, as of June 30, 2007, regarding employees organized
      by functional skills:





**By
                Functional Skills**
            
            **Sales &Implementation**
            
            **Customer**
              **Support**
            
            **Product**
              **Development**
            
            **Admin./**
              **Finance**
            
            **Operations**
            
            **Total**Employees
            
            
            2,343
            
            
            1,088
            
            
            523
            
            
            268
            
            
            138
            
            
            4,360As
                % of total
            
            
            53.7
            %
            
            25.0
            %
            
            12.0
            %
            
            6.1
            %
            
            3.2
            %
            
            100.0
            %





We
      are
      not a party to any collective bargaining agreements. None of our employees
      are
      represented by a labor union, except in those countries as mandated by law,
      such
      as France, Germany and Spain. We use certain suppliers whose employees may
      be
      represented by labor unions. We believe that we maintain good relations with
      our
      employees.





**EXECUTIVE
      OFFICERS OF THE REGISTRANT**





**Name**
            **Position**T.
                Paul Armstrong
            Executive
                Vice President, Chief Technology OfficerA.
                L. Giannopoulos
            Chairman,
                President and Chief Executive OfficerDaniel
                G. Interlandi*
            Executive
                Vice President, North American SalesBernard
                Jammet
            Executive
                Vice President, Latin American SalesGary
                C. Kaufman
            Executive
                Vice President, Finance and Administration and Chief Financial
                OfficerJennifer
                Kurdle
            Executive
                Vice President, Leisure & EntertainmentThomas
                L. Patz
            Executive
                Vice President, Strategic Initiatives, and General
                CounselCynthia
                A. Russo
            Vice
                President and Corporate Controller




12





*Mr.
      Interlandi retired from the Company on August 15, 2007, which is after the
      end
      of the fiscal year that this report on Form 10-K covers.





**T.
      Paul Armstrong** ,
      49, is
      currently the Company’s Executive Vice President, Chief Technology Officer, and
      has held that position since April 2006. From June 2000 through April 2006,
      he
      was Executive Vice President, New Technologies. Before that, Mr. Armstrong
      served the Company in various capacities. He first joined the Company in July
      1981. Mr. Armstrong holds a masters degree from Cambridge University,
      England.


**A.
      L. Giannopoulos** ,
      67, is
      currently a Director, a position he has held since March 1992, President and
      Chief Executive Officer of the Company, a position he has held since May 1993,
      and Chairman of the Board, a position he has held since April 2001. Before
      1992,
      Mr. Giannopoulos served in a variety of positions for Westinghouse, most
      recently as General Manager of the Westinghouse Information and Security Systems
      Divisions. Mr. Giannopoulos is a graduate of Lamar University with a Bachelor
      of
      Science degree in Electrical Engineering.


**Daniel
      G. Interlandi** ,
      54, has
      been the Company’s Executive Vice President, North American Sales, since January
      2001. From 1980, when he first joined the Company, until January 2001, he held
      key sales and management positions with the Company involving districts
      operations, distributors, major accounts, customer service, research and
      development, and marketing.


**Bernard
      Jammet** ,
      49, is
      currently the Company’s Executive Vice President, Latin American Group, and has
      held that position since January 2001. From October 1998 through January 2001,
      he served as Executive Vice President, Product Development. Before that, Mr.
      Jammet served the Company in various capacities. He first joined the Company
      in
      July 1984. Before joining the Company, Mr. Jammet was employed with the former
      MICROS distributor for France. Mr. Jammet is a graduate of the Hotel School
      of
      Lausanne, Switzerland, with a Masters degree in Hotel
      Administration.


**Gary
      C. Kaufman** ,
      57, is
      currently the Company’s Executive Vice President, Finance and Administration and
      Chief Financial Officer, and has held that position since September 1999. Mr.
      Kaufman served as a Director of the Company from January 1991 until May 1994
      when he was appointed to Vice President, Finance and Administration and Chief
      Financial Officer. From June 1996 until September 1999, he served as Senior
      Vice
      President, Finance and Administration and Chief Financial Officer. Before 1991,
      Mr. Kaufman was Division Controller for Westinghouse Security and Network
      Services Divisions, having been with Westinghouse for 20 years in various
      financial positions. Mr. Kaufman is a graduate of the University of Dayton
      with
      a Bachelor of Science degree in Accounting and is also a Certified Public
      Accountant.


**Jennifer
      Kurdle** ,
      40, is
      currently the Company’s Executive Vice President, Leisure & Entertainment,
      and has held that position since November 2005. Previously, she served the
      Company in various capacities. Ms. Kurdle first joined the Company in 1990.
      Ms.
      Kurdle graduated from Fairmont State University in 1989.


**Thomas
      L. Patz** ,
      47, is
      currently the Company’s Executive Vice President, Strategic Initiatives, and
      General Counsel, and has held that position since January 2000. Previously,
      Mr.
      Patz served the Company in various legal capacities. Mr. Patz first joined
      the
      Company in August 1995. Mr. Patz is a 1982 graduate of Brown University, and
      a
      1985 graduate of the University of Virginia School of Law with a degree of
      Juris
      Doctor. Mr. Patz is a member of the Maryland State Bar.


**Cynthia
      A. Russo** ,
      37, is
      currently a Vice President and the Corporate Controller for the Company, a
      position she has held since May 2001. Ms. Russo previously served the Company
      in
      various capacities, and she first joined the Company in January 1996. Ms. Russo
      holds a Bachelor of Science degree in Accounting from James Madison University.
      She is a Certified Public Accountant and a Certified Internal
      Auditor.





**FOREIGN
      SALES AND FOREIGN MARKET RISK**


We
      recorded foreign sales, including exports from the United States, of
      approximately $421.6
      million **** during
      fiscal year 2007 to customers located primarily in Europe, Asia and Latin
      America. Comparable sales in fiscal years 2006 and 2005 were approximately
      $323.8 million and $273.9 million, respectively. See Note 17, “Segment
      Information” in the Notes to Consolidated Financial Statements as well as Item 7
      (Management’s discussion and analysis of financial condition and results of
      operations) for additional geographic data.


Our
      international business and presence expose us to certain risks, such as
      currency, interest rate and political risks. With respect to currency risk,
      we
      transact business in different currencies primarily through our foreign
      subsidiaries. The fluctuation of currencies impacts sales and profitability.
      Frequently, sales and the costs associated with those sales are not denominated
      in the same currency.


13


We
      transacted business in approximately thirty-six currencies in fiscal year 2007
      compared to twenty-eight currencies in fiscal year 2006 and twenty-seven
      currencies in fiscal year 2005. The relative currency mix over the past three
      fiscal years was as follows:





**Fiscal Year Ended June 30,****% of Reported Revenues**
            
            **Exchange Rates****Revenues
                by currency****(1)****:**
            
            **2007**
            
            **2006**
            
            **2005**
            
            **2007**
            
            **2006**
            
            **2005**United
                States Dollar
            
            
            **53**
            **%**
            
            59
            %
            
            59
            %
            
            **1.0000**
            
            
            1.0000
            
            
            1.0000European
                Euro
            
            
            **25**
            **%**
            
            21
            %
            
            21
            %
            
            **1.3535**
            
            
            1.2792
            
            
            1.2102British
                Pound Sterling
            
            
            **6**
            **%**
            
            5
            %
            
            6
            %
            
            **2.0081**
            
            
            1.8493
            
            
            1.7917Australian
                Dollar
            
            
            **2**
            **%**
            
            2
            %
            
            2
            %
            
            **0.8478**
            
            
            0.7432
            
            
            0.7613Mexican
                Peso
            
            
            **2**
            **%**
            
            2
            %
            
            1
            %
            
            **0.0926**
            
            
            0.0882
            
            
            0.0931Japanese
                Yen
            
            
            **1**
            **%**
            
            1
            %
            
            2
            %
            
            **0.0081**
            
            
            0.0087
            
            
            0.0090All
                Other Currencies(2), (3)
            
            
            **11**
            **%**
            
            10
            %
            
            9
            %
            
            **0.2412**
            
            
            0.2682
            
            
            0.2644Total
            
            
            **100**
            **%**
            
            100
            %
            
            100
            %




(1)
              Calculated
                  using weighted average exchange rates for the fiscal
                  year.
 (2)
              The
                  “% of Reported Revenue” for ‘All Other Currencies’ is calculated based on
                  the weighted average twelve month exchange rates for all other
                  currencies.
 (3)
              The
                  “Exchange Rates as of June 30” for ‘All Other Currencies’ represents the
                  weighted average June 30 exchange rates for all other currencies.
                  Weighting is based on the twelve month fiscal year revenue for
                  each
                  country or region.




A
      10%
      increase or decrease in the value of the Euro in relation to the U.S. dollar
      in
      fiscal year 2007, would have affected total revenues by approximately $19.3
      million or 2.5%. This sensitivity analysis assumes a weighted average 10% change
      in the exchange rate during the year with all other variables being held
      constant. This sensitivity analysis does not consider the effect of exchange
      rate changes on either cost of sales, operating expenses, or income taxes,
      and
      accordingly, is not necessarily an indicator of the effect of potential exchange
      rate changes on our net income.


We
      are
      also subject to interest rate fluctuations in foreign countries to the extent
      that we elect to borrow in the local foreign currency. In the past, this has
      not
      been an issue of concern as we have the capacity to elect to borrow in other
      currencies with more favorable interest rates. We will continue to evaluate
      the
      need to invest in financial instruments designed to protect against interest
      rate fluctuations.


Finally,
      we are subject to, among others, those environmental and geopolitical risks,
      and
      those economic, pricing and financial risks delineated in Item 1A, titled “Risk
      Factors”.





**PATENTS
      AND TRADEMARKS**


We
      hold
      six patents through our JTECH subsidiary. In general, we believe that,
      historically, our competitive position has not been materially dependent upon
      patent protection. The technology used in the design and manufacture of most
      of
      our hardware products is largely licensed or purchased from third parties.
      With
      respect to our software products, we have historically relied on nondisclosure
      agreements and applicable U.S. and foreign copyright and trademark laws for
      protection. In the U.S. and in most other countries, we believe that applicable
      law has provided and will continue to provide us with sufficient protection.


There
      are
      risks that third party entities, including competitors, could attempt to
      misappropriate our intellectual property. Given these potential risks, we have
      implemented procedures to monitor misappropriation of its intellectual property.
      If a misappropriation is detected, we will pursue appropriate legal action,
      and
      we have done so in the past when appropriate.


“MICROS”,
      “Fidelio”, “Datavantage”, “CommercialWare”, “JTECH”, “Go2Team”, “InStorePlus”,
“Ovation”, “OPERA”, “e7”, “Store21”, “Tradewind”, “Xstore”, “XBR”, “Premise
      Pager System”, “TableAlert”, “ServAlert”, “GuestAlert”, “HostAlert”, “CommPass”,
“CWDirect”, “CWCollaborate”, “CWStore”, “CWLocate”, “CWAnalytics”, “CWData”, and
“CWIntegrate” are
      trademarks or servicemarks of the Company or its subsidiaries. We also own
      numerous other trademarks and servicemarks. This Annual Report on Form 10-K
      also
      contains trademarks, trade names and servicemarks of other companies that are
      the property of their respective owners.





**FLUCTUATIONS
      AND CUSTOMERS**


Our
      quarterly operating results have varied in the past and may vary in the future
      depending upon various factors, including the timing of new product
      introductions, changes in our pricing and promotion policies and those of our
      competitors, market acceptance of new products and enhanced versions of existing
      products and the capital expenditure budgets of our customers. Political
      uncertainty and world turmoil, created by unpredictable factors, e.g., terrorist
      attacks, natural disasters, and the volatile and unpredictable political climate
      in the Middle East, will continue to adversely impact travel and tourism and
      therefore our quarterly operating results.


Historically,
      our business has been affected by seasonal trends. For example, the European
      summer holidays tend to lower our sales volume in the European countries during
      our first fiscal quarter, as compared to other quarters. We also experience
      a
      stronger than average sales volume for the retail products and services in
      our
      second fiscal quarter due to the holiday season. Additionally, with the relative
      slowdown in corporate buying at the beginning of the calendar year, which is
      our
      third fiscal quarter, seasonal weakness for the third quarter ending March
      31
      has been experienced. Therefore, we believe that sequential quarter-to-quarter
      historic comparisons of our results are not necessarily meaningful or indicative
      of future performance.




14




No
      single
      customer accounts for 10% or more of our consolidated revenues, nor is any
      material portion of our business subject to renegotiation of profits at the
      election of the U.S. Federal Government. During the three fiscal years ended
      June 30, 2007, we have been a party, directly and indirectly, to certain
      contracts with the U.S. Federal Government, which contracts contained standard
      termination for convenience clauses. Our U.S. Government related revenue was
      approximately 0.4%, 0.9% and 1.7% of our total consolidated revenue for the
      three fiscal years ended June 30, 2007, 2006, and 2005, respectively. We do
      not
      anticipate any material adverse financial impact if the U.S. Government elected
      to exercise its rights under a termination for convenience clause.





**ENVIRONMENTAL
      MATTERS**


We
      believe that we are in compliance in all material respects with applicable
      environmental laws and do not anticipate that environmental compliance will
      have
      a material effect on our future capital expenditures, earnings or competitive
      position with respect to any of our operations.





**BACKLOG**


We
      generally have a backlog of approximately two months’ revenue, substantially all
      of which is cancelable at any time before shipment of hardware and software
      or
      rendering of services. As of June 30, 2007, 2006 and 2005, the backlog totaled approximately
      $174.6 million, $134.1 million and $98.8 million ,
      respectively. Historically, only an immaterial portion of the backlog existing
      as of the first day of the fiscal year is not recognized in that fiscal year.





**AVAILABLE
      INFORMATION**


We
      file
      with the U.S. Securities and Exchange Commission (“SEC”) annual reports on Form
      10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, proxy
      statements, and other documents as required by applicable law and regulations.
      The public may read and copy any materials that we file with the SEC at the
      SEC’s Public Reference Room at 100 F Street, N. E., Washington, DC 20549. The
      public may obtain information on the operation of the Public Reference Room
      by
      calling the SEC at 1-800-SEC-0330 (1-800-732-0330). The SEC maintains an
      Internet site ( http://www.sec.gov )
      that
      contains reports, proxy and information statements, and other information
      regarding issuers that file electronically with the SEC. We maintain an Internet
      site ( http://www.micros.com ).
      We
      make available free of charge on or through our Internet website our annual
      reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form
      8-K, and amendments to these reports, as soon as reasonably practicable after
      electronically filing those documents with or furnishing them to the SEC. The
      information on our website is not incorporated into and is not a part of this
      Annual Report. The references to our and the SEC’s websites are intended to be
      inactive textual references only.




**ITEM
              1A.**
            **RISK
                FACTORS**





There
      are
      a number of risks to which we are subject. These risks fall roughly into one
      of
      5 different categories, as follows:





1. **ENVIRONMENTAL
      AND GEOPOLITICAL RISKS.** While
      we
      do not sell our products and services directly to consumers, changes in consumer
      habits in response to environmental or geopolitical risks affect demand for
      our
      products and services by the hospitality and tourism industries.


·
            **Our
                business is very sensitive to the threat of terrorism and political
                uncertainty.**As
                the hospitality and tourism industries we serve are highly sensitive
                to
                consumer sentiments caused by world events, we are very vulnerable
                to
                downturns in customer buying habits associated with the ever-present
                threat of terrorist attacks and the uncertain political climates,
                such as
                in the Middle East and parts of
                Asia.


·
            **Our
                business is very sensitive to environmental and health
                disasters.**Actual
                or anticipated environmental disasters and epidemics, including for
                example, hurricanes, tsunamis, and disease, will deter and delay
                our
                customers from buying our products, as concerns about potential or
                anticipated instances of environmental or health disasters tend to
                suppress travel and tourism. Environmental disasters can
                also adversely affect our operations in the affected
                areas.


·
            **Higher
                oil and gas prices worldwide could have a material adverse impact
                on the
                travel and tourism industries.**Consumers reduce discretionary spending, such as on travel and dining,
                when there is a material increase in non-discretionary expenses caused
                by
                a rise in oil and gas prices.


·
            **We
                maintain offices in certain parts of the world that are subject to
                economic instability, political unrest and terrorism, such as Argentina,
                Brazil and Israel.**The performance of our offices in these areas will be adversely impacted
                if these regions become subject to economic declines, political strife
                or
                episodes of terrorism.





**2.
      ECONOMIC, PRICING AND FINANCIAL RISKS.**


·
            **We
                are subject to the variability of world economies.**Since
                a substantial portion of our business is conducted in foreign countries,
                a
                downturn in the economies of foreign countries could adversely affect
                our
                financial results. While, under certain circumstances, reliance on
                foreign
                operations can have a moderating impact (as one region’s improving
                conditions can offset another region’s declining conditions), our foreign
                businesses nonetheless add a degree of uncertainty to the planning
                and
                forecasting process.






15




·
            **Our****quarterly
                financial results are dependent upon the timing and size of customer
                orders and the shipment of products for large orders.**Large
                software orders from customers may account for more than an insignificant
                portion of earnings in any quarter. We expect the customers with
                whom we
                do the largest amount of business to vary from year to year as a
                result of
                the timing of the rollout of each customer’s system. Further, if a
                customer delays or accelerates its delivery requirements, or if a
                product’s completion is delayed or accelerated, revenues that we may have
                expected in a given quarter could be deferred or accelerated into
                subsequent or earlier quarters, respectively. These events could
                have a
                meaningful effect on our quarterly
                results.


·
            **Our
                ability to establish pricing is subject to rapidly changing market
                and
                competitive conditions.**To
                be competitive and to avoid losing business on the basis of price,
                we must
                evaluate our pricing routinely. There are instances where we may
                have to
                reduce our pricing to win business. These market forces have and
                will
                continue to place pressure on our gross margins and overall profitability.


·
            **Our
                gross margins will vary from quarter to quarter based upon product
                mix.**Product mix can affect our operating results. For example, as we
                enjoy a
                higher gross margin on software than on hardware, our overall gross
                margin
                will vary depending upon the percentage of software licensed and
                the
                percentage of hardware sold each quarter. Given the fact that the
                actual
                product mix is difficult to predict each quarter with accuracy, there
                is
                uncertainty and variability as to the projected gross margin on a
                quarter
                to quarter basis.


·
            **Our
                non-major account business is difficult to predict.**Our major account customers (generally those customers who operate
                50 or
                more locations) have longer sales cycles and deployments; our non-major
                account sales have much shorter sales cycles and shorter deployments.
                As a
                significant portion of our business is non-major account business,
                there
                is inherent difficulty in accurately predicting buying patterns and,
                accordingly, it is much harder to appropriately staff and prepare
                for
                fluctuations in buying demand. This can result in inefficiencies
                that
                adversely affect our operating
                results.


·
            **Some
                of the advanced systems we sell are very complex and require a high
                level
                of technical sophistication, which may result in increased costs
                that
                adversely affect our operating results.**The costs of the implementation and operation of an effective service
                structure capable of servicing increasingly complex software systems
                in
                more remote locations is high and may require us to engage contractors,
                who generally have a higher cost structure than employees. The additional
                costs are also driven by the complexity of open systems, which generally
                incorporate third party software products (the support and service
                of
                which may be more difficult and costly), and difficulty in implementing,
                operating, and maintaining and supporting centrally hosted systems,
                such
                as central reservation systems, and centrally-hosted property management
                systems and reporting systems.


·
            **We
                are subject to certain material cost increases that could become
                out of
                our control.**While we attempt to control third party costs, we have little or
                no
                control over certain material expenses, such as health care costs
                (which
                are experience-based), compliance with new legislation, and rising
                oil and
                gas prices. Significant increases in any of these expenses could
                adversely
                affect our operating results.


·
            **We
                are subject to fluctuations in foreign currencies and exchange
                rates.**As
                we conduct significant portions of our business in foreign currencies,
                we
                experience both sequential and year to year deviations in exchange
                rates
                that can have a significant impact on our reported results. For example,
                as much of our European business is transacted in Euros, our revenue
                on a
                consolidated basis will decline if the Euro weakens relative to the
                U.S.
                Dollar and increase if the Euro strengthens relative to the U.S.
                Dollar.


·
            **As
                a publicly traded company, our stock price is subject to certain
                market
                gyrations that are out of our control and that have nothing to do
                with our
                actual operating performance.**We
                can experience short-term surges and declines in our stock price
                due to
                factors other than those specific to our business, such as economic
                news
                or other events generally affecting the trading
                markets.





**3.
      TECHNOLOGY RISKS.**


·
            **Our
                customers’ requirements are increasingly sophisticated.**For
                us to be able to continue to offer competitive products and to meet
                our
                customers’ requirements, we must continually develop and update our
                products. Unexpected costs and delays in development and implementation,
                and balancing our commitments to various customers, could adversely
                affect
                our financial results.


·
            **The
                development of software is an inherently difficult process that may
                result
                in software bugs that adversely impact a customer’s
                business.**While we have a testing and beta program and protocol that we implement
                before the general release of any product, such processes cannot
                guarantee
                that the released software will not have any bugs. Our business could
                be
                adversely affected if these problems are
                significant.


·
            **The
                manufacturing of our hardware platform is performed primarily by
                GES, a
                company in Singapore.**While we believe we have a very good relationship with GES, and while
                we
                have not experienced any material manufacturing problems with GES,
                there
                are no guarantees that GES will not experience labor or manufacturing
                challenges in the future. Additionally, GES procures many of its
                components from other third parties who could experience manufacturing
                or
                labor issues. Such difficulties could interrupt GES’s supply of products
                to us, which would adversely affect our
                business.


·
            **Large
                customized deployments may be difficult and may result in cost overruns
                that are not recoverable.**We
                have certain contracts under which we are required to provide systems
                and
                services at a fixed price. We may be contractually required to absorb
                costs that may not be recoverable if we underestimate the amount
                of work
                required or if we encounter unanticipated technical issues. This
                is always
                a risk given the complexity of some of the systems we install and
                the
                ever-increasing size and scope of some of the deployments. These
                unanticipated costs could adversely affect our
                operations.






16




·
            **Changes
                in technology may result in our investing in certain technologies
                that
                become obsolete, or may result in our delaying investing in technologies
                to our detriment.**As
                we invest significantly in research and development, there is an
                ever-present risk that we will pursue technology that we ultimately
                determine is not marketable or does not achieve the desired solution.
                In
                such an event, we may be required to write off our investment which
                would
                have an adverse impact on our operating
                income.


·
            **Actual
                or perceived security vulnerabilities in our software products may
                result
                in reduced sales or liabilities.**As
                our software is used in connecting with processing sensitive data
                (e.g.,
                credit card numbers), and is sometimes used to store such data, it
                may be
                possible for the data to be compromised if our customer does not
                maintain
                appropriate security procedures. In those instances, the customer
                may
                attempt to seek damages from us. While we believe that all of our
                current
                software complies with applicable industry security requirements,
                and
                while we believe we use appropriate security measures to reduce the
                possibility of breach through our support and other systems, we cannot
                assure that our customer’s systems cannot be breached, nor that all
                unauthorized access can be prevented. If a customer, or other person,
                seeks redress from us as a result of a security breach, our business
                could
                be adversely affected.





**4.
      RESOURCE AND PERSONNEL RISKS.**


·
            **We
                could be adversely affected by vendor labor
                difficulties.**As
                some of our vendors have employees who are protected by certain labor
                laws
                or who may be members of unions, we could experience unanticipated
                manufacturing or supply shortages if any of our key vendors are impacted
                by labor difficulties or work slow-downs or
                stoppages.


·
            **Our
                inability to hire or our delay in hiring qualified personnel could
                adversely impact our ability to satisfy customers’ needs and our ability
                to maintain appropriate internal controls.**Finding qualified technical personnel where our research and development
                facilities are located is an ongoing challenge. If we cannot find
                appropriate personnel, we risk delays in satisfying customer demands,
                or
                may even lose the opportunity to provide software to the customer.
                If we
                are required to retain a consultant because we do not have available
                personnel, the costs of providing development would increase. Further,
                any
                delays we may experience in recruiting and retaining qualified accounting
                and auditing staff could result in additional third party accounting
                and
                auditing costs and expenses. In general, our inability to recruit
                and
                retain appropriate personnel would adversely affect our
                business.





**5.
      LEGAL AND ACCOUNTING RISKS.**


·
            **Although
                we attempt to protect our proprietary technology, these protections
                will
                not preclude competitors from developing products with features similar
                to
                our products.**We
                cannot guarantee that we can effectively preserve the uniqueness
                and
                proprietary nature of our products, despite our efforts to do so
                through a
                combination of trade secrets, copyright, trademark law, non-disclosure
                agreements, and technical measures, others could attempt to copy
                what we
                have developed, either through legal or illegal means. Moreover,
                others
                have been able to develop competitive products and services that
                do not
                violate our proprietary rights.


·
            **We
                are subject to litigation, which may be costly.**As
                a company that does business with many customers, employees and vendors
                throughout the world, we are subject to legal and administrative
                claims,
                cases, proceedings, settlements, and investigations, including claims
                made
                by or against us relating to intellectual property rights and intellectual
                property licenses. While we continue to police these matters, and
                take
                steps to reduce the likelihood that these matters will arise, litigation
                is very commonplace and could have an adverse effect on our
                business.


·
            **We
                are subject to claims by others that we are infringing their intellectual
                property rights.**From
                time to time we receive unsolicited letters from entities which
                suggest or assert that we may be infringing a patent. In those instances,
                we will assess the validity of the claims and the purported patent,
                and
                determine whether a license is appropriate or necessary. If we conclude
                that a license is not necessary, there is a risk that we will be
                sued; we
                also face indirect liability as a result of infringement claims brought
                against our customers. There is at least one action pending in which
                some
                of our customers have been sued on such a claim and with respect
                to which
                some of our customers are or may be seeking indemnification from
                us. While
                we have no reason to believe that any of our products and services
                infringe any patents, there can be no guarantees that we will not
                become
                involved in infringement matters, and we could as a result incur
                significant legal expenses and, if we are liable, significant
                damages.


·
            **Credit
                card issuers have promulgated credit card security guidelines as
                part of
                their ongoing effort to battle identity theft and credit card
                fraud.**We
                continue to work with credit card issuers to assure that our products
                and
                services comply with the credit card associations’ security regulations
                and best practices applicable to our products and services. There
                can be
                no assurances, however, that our products and services are invulnerable
                to
                unauthorized access or hacking. Additionally, there can be no guarantee
                that our customers will implement all of the credit card security
                features
                that we introduce, or all of the protections and procedures required
                by
                the credit card issuers, or that our customers will establish and
                maintain
                appropriate levels of firewall protection and other security measures.
                When there is unauthorized access to credit card data that results
                in
                financial loss, there is a potential that parties could seek damages
                from
                us. Additionally, changes in the security guidelines could require
                significant and unanticipated development
                efforts.






17




·
            **We
                may have additional tax liabilities.**We
                are subject to income and sales taxes in the United States and all
                of the
                other countries in which we conduct business. Additionally, we may
                be
                subject to certain tariffs imposed by the World Trade Organization
                and
                other governing bodies designed to tax U.S. imports. Significant
                judgment
                is required in determining our worldwide provision for income taxes.
                This
                determination is highly complex and requires detailed analysis of
                the
                available information and applicable statutes and regulatory materials.
                In
                the ordinary course of our business, there are many transactions
                and
                calculations where the ultimate tax determination is uncertain. We
                are
                regularly under audit by tax authorities. Although we believe our
                tax
                estimates are reasonable, the final determination of tax audits and
                any
                related litigation could be materially different from our historical
                income tax provisions and accruals. If we receive an adverse ruling
                during
                an audit, or we unilaterally determine that we have misinterpreted
                provisions of the myriad tax regulations to which we are subject,
                there
                could be a material effect on our income tax provision, net income
                or cash
                flows in the period or periods for which that determination is
                made.


·
            **If
                our goodwill or amortizable intangible assets become impaired we
                may be
                required to record a charge to earnings.**Under generally accepted accounting principles, we review our amortizable
                intangible assets for impairment when events or changes in circumstances
                indicate the carrying value may not be recoverable. Goodwill is required
                to be tested for impairment at least annually. Factors that may be
                considered a change in circumstances indicating that the carrying
                value of
                our goodwill or amortizable intangible assets may not be recoverable
                and
                therefore need to be reduced or written off altogether include a
                decline
                in stock price and market capitalization, reduced future cash flow
                or
                growth estimates, and reduction in use or discontinuation of the
                purchased
                products. If we determine that there is an impairment, we are required
                to
                record a charge to earnings in our financial statements during the
                period
                in which any impairment of our goodwill or amortizable intangible
                assets
                is determined. This charge will correspondingly reduce our results
                of
                operations, perhaps materially.




**ITEM
              1B.**
            **UNRESOLVED
                STAFF COMMENTS**





Not
      applicable.




**ITEM
              2.**
            **PROPERTIES**





Our
      worldwide corporate headquarters, including our executive offices, are located
      in Columbia, Maryland. We also conduct sales, marketing, customer support,
      and
      product development activities at this location. We lease the entire five-story
      structure, consisting of 247,624 square feet, from Columbia
      Gateway Office Corporation, under a lease that, as amended, terminates on February
      29, 2016. We sublease one of the five floors, consisting of approximately 49,524
      square feet, to Motorola, Inc. The sublease expires March 1, 2010, and Motorola
      has the option to terminate the agreement after October 31, 2008.





In
      addition to over 50 smaller offices, we lease the following larger
      facilities:





**Location**
            
            **ApproximateSize**
              (Square Feet)
            
            **Use**
            
            **Expiration Date**
            
            **Additional
                Comments**Columbia,
                Maryland
            
            247,624
            
            Headquarters
                and other functions (see above)
            
            February
                29, 2016
            
            See
                aboveHanover,
                Maryland
            
            75,600
            
            Warehouse,
                distribution, light assembly, configuration, manufacturing,
                repair
            
            July
                31, 2009Cleveland,
                Ohio
            
            69,200
            
            Sales,
                marketing, support, product development
            
            February
                28, 2014(with an early termination right in 2010)
            
            Cleveland
                is the headquarters for the Datavantage subsidiaryNeuss,
                Germany
            
            42,000
            
            Sales,
                marketing, product development, and customer support
            
            December
                31, 2015
            
            Also
                serves as the regional headquarters for Europe, Africa, and the Middle
                East




18




Westborough,
                Massachusetts
            
            27,234
            
            Sales,
                marketing, customer support, product development and product
                support
            
            November
                30, 2013
            
            Datavantage
                maintains this office for its Proact/XBR loss prevention products
                and the
                headquarters for CommercialWare subsidiary.Boca
                Raton, Florida
            
            19,755
            
            Sales,
                marketing, product development, customer support and light
                assembly
            
            February
                29, 2012
            
            Boca
                Raton is the headquarters for the JTECH subsidiaryNaples,
                Florida
            
            18,180
            
            Software
                development
            
            December
                31, 2011
            
            Naples
                is the main site for the development of the Company’s hotel
                productsGalway,
                Ireland
            
            18,025
            
            Customer
                support, sales and marketing
            
            May
                31, 2022 (early termination rights in 2012, and 2017)
            
            Support
                mainly for Europe, Africa, and Middle East customersBuffalo,
                NY
            
            16,821
            
            Sales,
                marketing, support
            
            September
                15, 2015
            
            We
                have subleased a portion of this property to another
                company.Scottsdale,
                Arizona
            
            15,000
            
            Sales,
                marketing, support, product development
            
            November
                30, 2008
            
            Scottsdale
                is the headquarters for the HSI divisionSydney,
                Australia
            
            13,500
            
            Sales,
                marketing, support, product development
            
            December
                14, 2009South
                Plainfield, New Jersey
            
            12,846
            
            Sales,
                marketing, support
            
            April
                30, 2011
            
            Principal
                site for RedSky sales, marketing, and development in the
                USLas
                Vegas, Nevada
            
            11,930
            
            Sales,
                marketing, support
            
            July
                31, 2010Nanterre,
                France
            
            11,748
            
            Sales,
                marketing, support
            
            October
                14, 2008Huntington
                Beach, California
            
            10,970
            
            Sales,
                marketing, support
            
            January
                31, 2010Bernau,
                Germany
            
            10,000
            
            Sales,
                marketing, support, light assembly
            
            June
                30, 2010Slough,
                England
            
            10,000
            
            Sales,
                marketing, support
            
            January
                31, 2014Singapore
            
            9,367
            
            Sales,
                marketing, support
            
            August
                31, 2008





To
      satisfy other sales, service and support, and product development needs, we
      and
      our subsidiaries lease space in multiple cities domestically, including Boston,
      Chicago, Dallas, Denver, Hartford, Houston, Nashville, New Orleans, Pittsburgh,
      Portland, San Diego, San Francisco, and Seattle, and in numerous cities
      internationally, including Buenos Aires, Argentina; Hounslow, England; Hamburg,
      Germany; Helsinki, Finland; Madrid, Spain; Mexico City, Mexico; Paris, France;
      Rome, Italy; São Paulo, Brazil; Stockholm, Sweden; Tokyo, Japan; Toronto,
      Canada; Vancouver, Canada; Vienna, Austria; and Zurich, Switzerland. In general,
      we believe that additional space will be available as needed.




19




**ITEM
              3.**
            **LEGAL
                PROCEEDINGS**





We
      are
      and have been involved in legal proceedings arising in the normal course of
      business. In addition, the holder of an expired patent has commenced litigation
      against approximately
      107 individual retailers, 13 of whom are our customers for retail point-of-sale
      software.   The case is styled Ware
      v. Abercrombie & Fitch Stores, Inc., et al. ,
      Civil
      Action No. 4:07-CV-122-RLV, and was filed in the United States District Court
      for the Northern District of Georgia on June 19, 2007.  The patent alleged
      to have been infringed is U.S. Patent No. 4,707,592.  Although the
      complaint has not yet been served on the defendants, some of the defendants
      who
      are our customers have advised that they will seek indemnification from us
      under
      contract provisions for the defense of that action . 
      Currently, there are two active separate requests for reconsideration of the
      patent which have been filed with the US Patent and Trademark Office. 
Should the case
      proceed, and if it is determined that we are obligated to indemnify any of
      our
      customers who are defendants in the action, then we will vigorously defend
      the
      action and assert all defenses and arguments available to us.  In any
      event, based on currently available information and analysis by patent counsel,
      we do not believe that our products infringe the patent.





Subject
      to the foregoing, we are of the opinion, based upon presently available
      information and the advice of litigation counsel concerning pertinent legal
      matters, that any resulting liability should not have a material adverse effect
      on our results of operations, financial position or cash flows.




**ITEM
              4.**
            **SUBMISSION
                OF MATTERS TO A VOTE OF SECURITY
                HOLDERS**





Not
      applicable.




20


**PART
      II**




**ITEM
                  5.**
                **MARKET
                    FOR THE REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS, AND
                    ISSUER PURCHASES OF EQUITY
                    SECURITIES**





**PRICE
      RANGE OF COMMON STOCK**


The
      Company’s common stock (symbol “MCRS”) is traded on the NASDAQ Global Select
      Market of the NASDAQ Stock Market LLC exchange. As of August 6, 2007, there
      were
      31,297 record holders of the Company’s common stock, $.0125 par
      value.


The
      following table shows the range of sales prices for the periods indicated,
      as
      reported by NASDAQ. On July 31, 2007, the closing price for the stock was
      $53.28.





**1****st****Quarter**
            
            **2****nd****Quarter**
            
            **3****rd****Quarter**
            
            **4****th****Quarter**Fiscal
                Year Ended June 30, 2007High
            
            **$**
            **51.25**
            
            **$**
            **53.57**
            
            **$**
            **57.69**
            
            **$**
            **56.75**Low
            
            **$**
            **36.07**
            
            **$**
            **48.10**
            
            **$**
            **50.80**
            
            **$**
            **50.25**Fiscal
                Year Ended June 30, 2006High
            
            $
            47.41
            
            $
            51.44
            
            $
            55.35
            
            $
            46.75Low
            
            $
            38.21
            
            $
            40.62
            
            $
            41.20
            
            $
            37.86





The
      Company has never paid a cash dividend and has no current intention to pay
      any
      cash dividends. Its current policy is to retain earnings and to use those funds
      for the operation and expansion of its business as well as the repurchase of
      the
      Company’s stock. The Company is a party to two credit agreements expiring on
      July 31, 2009, which restrict the payment of dividends other than stock
      dividends ( see Item
      7,
“Management’s Discussion and Analysis of Financial Condition and Results of
      Operations – Liquidity and Capital Resources” and Note 7 “Line
      of Credit” in the Notes to Consolidated Financial Statements).





**PURCHASES
      OF COMPANY STOCK**


In
      fiscal
      year 2005, the Board of Directors authorized the purchase of up to two million
      shares of the Company’s common stock (the “2005 Plan”). As of July 31, 2007, the
      Company has purchased 1,766,599 shares under the 2005 Plan. During the fourth
      quarter of fiscal year 2007, the Company’s stock purchases under the 2005 Plan
      were as follows:





**Issuer
      Purchases of Equity Securities**




**Total Numberof Shares**
              **Purchased**
            
            **AveragePricePaid perShare**
            
            **Total Number of**
              **Shares Purchasedas Part of PubliclyAnnounced Plan orProgram**
            
            **Maximum Numberof Shares that MayYet be PurchasedUnder the Plan orProgram**04/01/07
                –
                04/30/07
            
            
            118,300
            
            $
            54.23
            
            
            118,300
            
            
            401,60105/01/07
                – 05/31/07
            
            
            116,400
            
            $
            54.33
            
            
            116,400
            
            
            285,20106/01/07
                – 06/30/07
            
            
            51,800
            
            $
            52.82
            
            
            51,800
            
            
            233,401286,500
            
            $
            54.02
            
            
            286,500
            
            
            233,401





**RECENT
      SALES OF UNREGISTERED SECURITIES**





None.




21


**ITEM 6.**
            **SELECTED
                CONSOLIDATED FINANCIAL
                DATA**





**Fiscal
                Year Ended June 30,**(in
                thousands, except per share data)
            
            **2007**(1)
            
            **2006**(1)
            
            **2005**
            
            **2004**
            
            **2003**Statement
                of Operations Data:Revenue
            
            **$**
            **785,727**
            
            $
            678,953
            
            $
            597,264
            
            $
            487,443
            
            $
            405,857Income
                from operations
            
            **$**
            **110,588**
            
            $
            91,277
            
            $
            78,875
            
            $
            56,834
            
            $
            38,322Net
                income
            
            **$**
            **79,988**
            
            $
            63,528
            
            $
            53,660
            
            $
            33,279
            
            $
            21,782Net
                income per Share:Basic
            
            **$**
            **2.00**
            
            $
            1.64
            
            $
            1.43
            
            $
            0.91
            
            $
            0.62Diluted
            
            **$**
            **1.94**
            
            $
            1.56
            
            $
            1.35
            
            $
            0.87
            
            $
            0.61Balance
                Sheet Data:Working
                capital(2)
            
            **$**
            **344,566**
            
            $
            253,121
            
            $
            190,436
            
            $
            118,617
            
            $
            73,779Total
                assets
            
            **$**
            **846,756**
            
            $
            647,857
            
            $
            547,228
            
            $
            419,587
            
            $
            370,710Capital
                leases(3)
            
            **$**
            **915**
            
            $
            513
            
            $
            413
            
            $
            305
            
            $
            667Shareholders’
                equity(4)
            
            **$**
            **551,133**
            
            $
            417,116
            
            $
            345,171
            
            $
            262,973
            
            $
            221,228Book
                value per share(4),
                (5)
            
            **$**
            **13.59**
            
            $
            10.70
            
            $
            8.93
            
            $
            7.17
            
            $
            6.14Additional
                Data:Weighted
                average number of common shares outstanding:Basic
            
            
            **39,989**
            
            
            38,692
            
            
            37,514
            
            
            36,489
            
            
            35,005Diluted
            
            
            **41,290**
            
            
            40,624
            
            
            39,803
            
            
            38,453
            
            
            35,677





(1)
            Fiscal
                years ended June 30, 2007 and 2006 include approximately $14.0 million
                ($11.1 million net of tax or $0.27 per diluted share) and $9.1 million
                ($7.1 million net of tax or $0.18 per diluted share), respectively,
                in
                non-cash share-based compensation expense. See Note 2, “Share-based
                Compensation” in the Notes to Consolidated Financial Statements and
                Management’s Discussion and Analysis of Financial Condition and Results of
                Operations.


(2)
            Current
                assets less current liabilities.


(3)
            Including
                current portion. The Company does not have any long-term
                debt.


(4)
            Includes
                the impact of adoption of SFAS 158. See note 16, “Employee Benefit
                Plans.”


(5)
            Calculated
                as shareholder’s equity divided by common stock outstanding at June
                30.




**ITEM
              7.**
            **MANAGEMENT’S
                DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
                OPERATIONS**





**OVERVIEW**




We
      are a
      leading worldwide designer, manufacturer, marketer, and servicer of enterprise
      information solutions for the global hospitality and specialty retail
      industries. As detailed elsewhere in this report on Form 10-K, our enterprise
      solutions comprise three major areas: hotel information systems, restaurant
      information systems, and specialty retail information systems. We also offer
      a
      wide range of related services. We distribute our products and services directly
      and through a network of independent dealers and distributors.


The
      markets in which we operate are highly competitive. We compete on various bases,
      including product functionality, service capabilities, price, and geography.
      We
      believe that our competitive strengths include our established global
      distribution and service network, our ability to offer a broad array of
      hardware, software and service products to the hospitality and retail industry
      and our corporate focus on providing specialized information systems solutions.


We
      are
      organized and operate in four operating segments: U.S., Europe, the Pacific
      Rim
      and Latin America regions. As the products and services for all new business
      acquisitions are all similar to those ours, the new business acquisitions have
      been incorporated into the existing four operating segments based on their
      respective geographical locations, and operated and managed as a part of that
      operating segment.


For
      the
      purposes of applying SFAS No. 131, we have identified U.S. as a separate
      reportable segment and has aggregated our three international operating segments
      into one reportable segment, international, as the three international operating
      segments share many similar economical characteristics. The management views
      the
      U.S. and international segments separately in operating its business, although
      the products and services are similar for each segment.


We
      continue to see overall growth in the hospitality and retail industries; slower
      growth in some sectors has historically tended to be offset by faster growth
      in
      other areas.  We have seen particular growth in our quick service
      restaurant business, including that generated by sales to various quick service
      restaurant chains with whom we have announced alliances.




22


**CRITICAL
      ACCOUNTING ESTIMATES**


Our
      discussion and analysis of our financial condition and results of operations
      are
      based on the consolidated financial statements, which have been prepared in
      accordance with accounting principles generally accepted in the United States
      of
      America. The preparation of these financial statements requires us to make
      estimates and judgments that affect the reported amounts of assets, liabilities,
      revenues and expenses. On an ongoing basis, we evaluate our estimates, including
      those that impact revenue recognition, share-based compensation, capitalized
      software, intangible assets, allowance for doubtful accounts, allowance for
      obsolescence, income taxes, contingencies and litigation. We base our estimates
      on historical experience and on various other assumptions that are believed
      to
      be reasonable under the circumstances, the results of which form the basis
      for
      making judgments about the carrying values of assets and liabilities that are
      not readily apparent from other sources. Actual results may differ from these
      estimates under different assumptions or conditions.


The
      following comprise the critical accounting estimates that we used in the
      preparation of the consolidated financial statements.





**Revenue
      recognition**


Revenue
      is generated from software licenses, hardware and service and support. Revenue
      is recognized in accordance with American Institute of Certified Public
      Accountants Statement of Position 97-2 (“SOP 97-2”), “Software Revenue
      Recognition,” as modified by SOP 98-9, “Modification of SOP 97-2, Software
      Revenue Recognition with Respect to Certain Transactions and the Securities
      and
      Exchange Commission Staff Accounting bulletin No. 104, “Revenue Recognition in
      Financial Statements. Revenue under multiple element arrangements, which
      typically include hardware, software licenses, and maintenance agreements sold
      together, are allocated to each element in the arrangement using the residual
      method prescribed by SOP 98-9, based on vendor specific objective evidence
      (“VSOE”) of the fair value of any undelivered elements of the arrangement, i.e.,
      an allocated portion of revenue is deferred from the arrangement, equivalent
      to
      the fair value of undelivered elements.


Revenue
      from software license, hardware and service and support are generally recognized
      when the four basic criteria of SOP 97-2 are met as follows:


·
            Persuasive
                evidence of an arrangement exists: We require a contract signed by
                both
                parties to the agreement or a purchase order received from the customer
                as
                persuasive evidence of an arrangement.


·
            Delivery
                has occurred or services have been rendered: Delivery occurs at FOB
                shipping point when provided to a common carrier, if the risk of
                ownership
                has passed to the buyer or in the case of electronic delivery, delivery
                occurs when the customer is given access to the licensed programs.
                If the
                risk of ownership has not passed to the buyer when provided to the
                common
                carrier, delivery occurs when the risk has passed to the
                buyer.


·
            Fixed
                or determinable fee: We consider the license fee to be fixed or
                determinable if the fee is not subject to refund or adjustment and
                is
                payable within twelve months of delivery with generally no more than
                20%
                of the contract price due at the end of the payment term. If the
                arrangement fee is not fixed or determinable, we recognize the revenue
                as
                amounts become due and payable. We consider service fees to be fixed
                or
                determinable if the service fee or rates for time and material contracts
                are not subject to refund or
                adjustment.


·
            Collection
                is probable: We perform a credit review for significant transactions
                at
                the time the arrangement is executed to determine the credit-worthiness
                of
                the customer. Collection is deemed probable if we expect that the
                customer
                will be able to pay amounts under the arrangement as they become
                due. If
                we determine from the outset of an arrangement that collection is
                not
                probable, revenue is recognized as collection
                occurs.


Costs
      related to shipping and handling and billable travel expenses are included
      in
      cost of sales. The revenue is reduced for estimated customer returns and
      allowances.





Since
      our
      revenue deferral for undelivered elements under multiple element arrangements
      is
      based on VSOE of the fair value of any undelivered elements of the arrangement,
      our financial results for current fiscal year and future periods could be
      significantly different if our estimates of the VSOE of the fair values of
      undelivered elements change. Additionally, significant differences in the actual
      customer returns and allowances to our estimates could also significantly affect
      our financial results.





**Share-based
      compensation**


We
      account for our option awards granted under the stock option program in
      accordance with Statement of Financial Accounting Standard (“SFAS”) No. 123(R),
“Share-Based Payment,” which became effective July 1, 2005 for us. We adopted
      the “Modified Prospective Application” transition method, which did not result
      in restatement of previously issued financial statements. In accordance with
      SFAS No. 123(R), the estimated fair value of awards granted after the effective
      date of SFAS No. 123(R) are measured, and non-cash share-based compensation
      expense adjusted for expected pre-vesting forfeitures are recognized ratably
      over the requisite service period of options in the consolidated statement
      of
      operations. In addition, non-cash share-based compensation expense adjusted
      for
      expected pre-vesting forfeitures is recognized for the non-vested portion of
      awards that were granted before the effective date of SFAS No. 123(R) as those
      options become incrementally vested.





As
      we
      value stock options using the Black-Scholes option pricing model, which was
      developed for use in estimating the fair value of traded options that are fully
      transferable and have no vesting restrictions, we are required to input highly
      subjective assumptions about volatility rates, expected term of options, and
      applicable interest rates in the option pricing model. Expected volatility
      is
      based on historical stock prices. The expected term of options granted is based
      on historical option activities, adjusted for the remaining option life cycle
      by
      assuming ratable exercise of any unexercised vested options over the remaining
      term. For this, we separate groups of employees that have historically exhibited
      similar behavior with regard to option exercises and post-vesting cancellations.
      The risk-free interest rate is based on the U.S. Treasury yield curve in effect
      at the time of grant. Total expense recorded in any period can be significantly
      different depending on several variables, including any changes to these
      assumptions, especially the number of share-based awards that vest, pre-vesting
      cancellations, and the estimated fair value of those vested awards.




23




**Inventory**


Inventory
      is stated at the lower of standard cost, which approximates cost, or market.
      Standard cost is determined principally by the first-in, first-out pricing
      method. We maintain
      a reserve for obsolescence for inventory in the amount of approximately $9.9
      million as of June 30, 2007 and 2006.





**Allowance
      for doubtful accounts**


We
      maintain allowance for doubtful accounts for estimated losses that may result
      from the inability of our customers to make required payments and for limited
      circumstances when the customer disputes the amounts due to us. Our methodology
      for determining this allowance requires estimates and is based on the age of
      the
      receivable, customer payment practices and history, inquiries, credit reports
      from third parties and other financial information. If the financial condition
      of our customers were to deteriorate, resulting in an impairment of their
      ability to make payments, additional allowance may be required which could
      affect our financial results in future periods. As of June 30, 2007 and 2006,
      accounts receivable totaled approximately $180.2 million and $141.2 million,
      net
      of an allowance for doubtful accounts of approximately $23.1 million and $20.3
      million, respectively. Additionally, bad debt expenses for the fiscal years
      2007, 2006 and 2005 were approximately $3.4 million, $5.4 million and $5.7
      million, respectively.





**Capitalized
      software development costs**


Costs
      incurred in the research and development of new software products to be licensed
      to others, costs primarily consisting of salaries, employee benefits and
      administrative costs, are expensed as incurred and included in research and
      development expenses until technological feasibility is established. The
      capitalization of software development costs on a product-by-product basis
      starts when a product’s technological feasibility has been established and the
      capitalization stops when the product is available for general release to
      customers, at which time amortization begins. Technological feasibility is
      established when the product reaches the working model stage. The cost of
      purchased software is also capitalized.


Annual
      amortization of capitalized software development costs are charged to software
      cost of sales, and is the greater of (1) the amount computed using the ratio
      that each capitalized software product’s current fiscal year gross revenue is to
      the total of current fiscal year and anticipated future gross revenues for
      that
      product, or (2) the amortization based on straight-line method over the
      remaining estimated economic life of the product. If we incorrectly estimate
      the
      remaining economic life of a product or the anticipated future gross revenues
      of
      a product, our future financial results could be materially affected if the
      unamortized costs are written off or if the amortization is accelerated.
      Amortization expense for the fiscal years 2007, 2006 and 2005 were approximately
      $8.4 million, $7.0 million and $7.5 million, respectively. Additionally, during
      the fiscal year 2006, we wrote off approximately $1.6 million in capitalized
      software costs related to products for which no future revenue was
      projected.




**Long-lived
      assets including finite-lived purchased intangible assets**


We
      evaluate long-lived assets, including finite-lived purchased intangible assets,
      for impairment whenever events and changes in circumstances indicate that the
      carrying amount of an asset may not be fully recoverable in accordance with
      SFAS
      No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets.” When
      indicators of impairment are present, we compare the fair value of the assets,
      based on the undiscounted cash flows the assets are expected to generate, to
      the
      book value of the assets. If the fair value is less than book value, the asset
      is impaired and we recognize an impairment loss. The impairment loss represents
      the excess of book value over fair value based on a discounted cash flow
      approach or market values, if available.




The
      process of evaluating the potential impairment of long-lived assets including
      finite-lived purchased intangible assets is highly subjective and requires
      significant judgment at many points during the analysis. In estimating the
      fair
      value of the assets for the purposes of our analyses, we make estimates and
      judgments about the future cash flows of these assets. The cash flow forecasts
      are based on assumptions that are consistent with the plans and estimates used
      to manage the Company. A determination that assets are impaired could result
      in
      a significant charge in future periods.




**Goodwill
      and indefinite-lived purchased intangible assets**




SFAS
      No.
      142, “Goodwill and Other Intangible Assets,” prohibits the amortization of
      goodwill and indefinite-lived purchased intangible assets. We assess whether
      goodwill and our only indefinite-lived purchased intangible assets, trademarks,
      are impaired in accordance with SFAS No. 142 on an annual basis, during the
      first quarter of each fiscal year.  Goodwill is evaluated for impairment by
      comparing the fair value of each reporting unit (the Company’s four operating
      segments consisting of U.S., Europe, the Pacific Rim and Latin America) to
      its
      book value. The fair value of each reporting unit is determined based on a
      weighting of the income approach (i.e., discounted future income flow) and
      market approach (i.e., evaluating against the purchase and sale of comparable
      assets in the relevant industry) to value. If the fair value of the reporting
      unit exceeds the book value of the net assets assigned to that unit, goodwill
      is
      not impaired. If goodwill is impaired, we recognize an impairment loss based
      on
      the amount by which the book value of goodwill exceeds its implied fair value.
       The implied fair value of goodwill is determined by deducting the fair
      value of a reporting unit’s identifiable assets and liabilities from the fair
      value of the reporting unit as a whole, as if that reporting unit had just
      been
      acquired and the purchase price were being initially allocated.




24




Trademarks
      are evaluated for impairment by comparing their fair value to book value. We
      estimate the fair value of trademarks using an income approach to value, and
      recognize an impairment loss if the estimated fair value of a trademark is
      less
      than its book value.


Additional
      impairment assessments may be performed on an interim basis if we encounter
      events or changes in circumstances that would indicate that, more likely than
      not, the book value of goodwill and/or trademarks has been impaired.


The
      process of evaluating the potential impairment of goodwill and/or trademarks
      is
      highly subjective and requires significant judgment at many points during the
      analysis. In estimating the fair value of the reporting units with recognized
      goodwill for the purposes of our annual or periodic analyses, we make estimates
      and judgments about the future cash flows of these businesses. The cash flow
      forecasts are based on assumptions that are consistent with the plans and
      estimates used to manage the underlying reporting units. We also consider our
      market capitalization on the date the analysis is performed. A determination
      that goodwill or intangible assets are impaired could result in a significant
      charge in future periods.




**Income
      taxes**


Income
      taxes are accounted for under the asset and liability method. Deferred tax
      assets and liabilities are recognized for the expected future tax consequences
      attributable to the differences between the financial statement carrying amounts
      and the tax basis of assets and liabilities. Deferred tax assets and liabilities
      are measured using the enacted tax rates in effect for the year in which those
      temporary differences are expected to be recovered or settled. The effect on
      the
      deferred tax assets and liabilities of a change in tax rate is recognized in
      income in the period that includes the enactment date. Valuation allowances
      are
      established when necessary to reduce deferred tax assets to the amounts more
      likely than not to be realized. If we determine that we
      will
      not be able to realize all or part of our net deferred tax asset in the future,
      an adjustment to the deferred tax asset would be charged to income in the period
      in which the determination is made.





**RESULTS
      OF OPERATIONS**


During
      the three fiscal years ending June 30, 2007, we acquired several companies
      and accordingly,
      our results include activities from these acquisitions since their respective
      acquisition dates. See Note
      3, “Acquisitions” in the Notes to Consolidated Financial Statements for further
      detail on acquisitions.





**Comparison
      of Fiscal Year 2007 to Fiscal Year 2006**





**Revenue**


An
      analysis of the sales mix by reportable segments is as follows (amounts are
      net
      of intersegment eliminations, based on location of the selling entity, and
      include export sales):





**Fiscal
                Year Ended June 30,****U.S.**
            
            **International**
            
            **Total**(in
                thousands)
            
            **2007**
            
            **2006**
            
            **2007**
            
            **2006**
            
            **2007**
            
            **2006**Hardware
            
            **$**
            **126,596**
            
            $
            127,485
            
            **$**
            **107,242**
            
            $
            88,076
            
            **$**
            **233,838**
            
            $
            215,561Software
            
            
            **50,745**
            
            
            54,355
            
            
            **82,075**
            
            
            65,738
            
            
            **132,820**
            
            
            120,093Service
            
            
            **186,798**
            
            
            173,315
            
            
            **232,271**
            
            
            169,984
            
            
            **419,069**
            
            
            343,299Total
                Revenue
            
            **$**
            **364,139**
            
            $
            355,155
            
            **$**
            **421,588**
            
            $
            323,798
            
            **$**
            **785,727**
            
            $
            678,953





An
      analysis of the total sales mix as a percent of total revenue is as
      follows:





**Fiscal
                Year Ended June 30,**(in
                thousands)
            
            **2007**
            
            **2006**Hardware
            
            
            **29.8**
            **%**
            
            31.7
            %Software
            
            
            **16.9**
            **%**
            
            17.7
            %Service
            
            
            **53.3**
            **%**
            
            50.6
            %Total
            
            
            **100.0**
            **%**
            
            100.0
            %





Revenue
      increased approximately $106.8 million, or 15.7% to approximately $785.7 million
      for fiscal year 2007 compared to fiscal year 2006 primarily
      due to the following:


·
            An
                approximately $75.8 million or 22.1% increase in services revenue
                is
                primarily due to additional revenue generated as a result of various
                acquisitions and the continued expansion of our customer base coupled
                with
                increased support revenue from existing customers (primarily through
                additional services). We acquired the RedSky IT Hospitality, Travel
                and
                Retail subsidiaries of RedSky IT in January 2007 and we acquired
                various
                MICROS distributors during fiscal year 2007. Additionally, we acquired
                CommercialWare, Inc. in February
                2006;






25




·
            An
                approximately $18.3 million or 8.5% increase in hardware revenue
                is
                primarily due to the foreign currency translation mainly between
                the Euro
                and U.S. dollar and additional revenue generated as a result of the
                acquisitions, as discussed above;
                and,


·
            An
                approximately $12.7 million or 10.6% increase in software revenue
                is
                primarily due to additional revenue generated as a result of the
                acquisitions and foreign currency translation, both as discussed
                above. In
                total, the recurring support revenue contributed approximately 54.4%
                and
                the installation revenue contributed approximately 22.5% of the service
                revenue increase in fiscal year 2007 compared to fiscal year
                2006.


The
      international segment revenue for fiscal year 2007 increased approximately
      $97.8
      million which was a result of the following:


·
            An
                approximately $62.3 million or 36.6% increase in services revenue
                is due
                to the continued expansion of our customer base coupled with increased
                recurring support revenue from existing customers (primarily through
                additional services), additional revenue generated through the
                acquisitions and foreign currency translation, as discussed
                above;


·
            An
                approximately $19.2 million or 21.8% increase in hardware revenue
                is
                primarily due to increased sales volume and the foreign currency
                translation, as discussed above;
                and,


·
            An
                approximately $16.3 million or 24.9% increase in software revenue
                is due
                to foreign currency translation, increased sales volume and additional
                revenue generated from the acquisitions, as discussed
                above.


The
      U.S.
      segment revenue increased approximately $9.0 million for fiscal year 2007
      primarily resulting from additional revenue generated through the acquisitions,
      as discussed above, and an increase in services revenue due to the continued
      expansion of our customer base coupled with increased recurring support revenue
      from existing customers (primarily through additional services).





**Cost
      of Sales**


An
      analysis of the cost of sales is as follows:


**Fiscal
                Year Ended June 30,****2007**
            
            **2006**(in
                thousands)
            
            **Cost**
              **of Sales**
            
            **% of RelatedRevenue**
            
            **Cost**
              **of Sales**
            
            **% of RelatedRevenue**Hardware
            
            **$**
            **149,085**
            
            
            **63.8**
            **%**
            $
            144,061
            
            
            66.8
            %Software
            
            
            **29,531**
            
            
            **22.2**
            **%**
            
            23,488
            
            
            19.6
            %Service
            
            
            **195,600**
            
            
            **46.7**
            **%**
            
            165,721
            
            
            48.3
            %Total
                Cost of Sales
            
            **$**
            **374,216**
            
            
            **47.6**
            **%**
            $
            333,270
            
            
            49.1
            %





For
      fiscal year 2007, cost of sales as a percent of revenue decreased 1.5% to 47.6%
      compared to fiscal year 2006. Hardware cost of sales as a percent of related
      revenue decreased primarily as a result of an improvement in Workstation 4
      margin percentage, coupled with an increase in Workstation 4 revenue compared
      to
      fiscal year 2006. Workstation 4 generates higher margin than other hardware
      products. Software cost of sales as a percent of related revenue increased
      primarily due to a decrease in the third party software margin percentage
      compared to fiscal year 2006. Additionally, the revenue from the OPERA suite
      of
      products was comparable to fiscal year 2006, but represented a lower percentage
      of total software revenue. Because the OPERA suite of products generates much
      higher margins than our third party software, this product mix change had the
      impact of increasing the overall software cost of sales as a percent of related
      revenue.


Service
      cost of sales as a percent of related revenue decreased primarily due to a
      decrease in travel expenses and maintenance service part costs. The decreases
      in
      travel expenses and parts costs were partially offset by an increase in overall
      service labor costs resulting mainly from higher than average service labor
      costs associated with some of our newly acquired subsidiaries.





**Selling,
      General and Administrative (“SG&A”) Expenses**


SG&A
      expenses, as a percent of revenue, increased 0.5% to 32.4% compared to 31.9%
      in
      fiscal year 2006. This increase is primarily due to the following:


·
            Higher
                SG&A expenses as a percent of related revenue for the newly acquired
                subsidiaries described under Revenue;
                and,


·
            Increase
                in non-cash share-based compensation expense of approximately $4.4
                million
                recorded as a component of SG&A expenses for the fiscal year 2007
                compared to the fiscal year 2006. The non-cash share-based compensation
                expenses for fiscal year 2007 include a one-time charge of approximately
                $0.7 million resulting from accelerated vesting of unvested options
                due to
                the death of an officer of the Company. See “Share-Based Compensation
                Expense” below for further
                discussion.


·
            The
                above increases in SG&A expenses were partially offset by overall
                decreases in remaining SG&A expenses as a percent of total revenue,
                primarily due to our ability to leverage our costs with the increase
                in
                total revenue.




26


**Research
      and Development (“R&D”)**


R&D
      incurred consists primarily of labor costs less capitalized software development
      costs. An analysis of R&D activities is as follows:


**Fiscal Year Ended June 30,**(in
                thousands)
            
            **2007**
            
            **2006**Total
                R&D incurred
            
            **$**
            **35,859**
            
            $
            30,643Capitalized
                software development costs
            
            
            **(1,974**
            **)**
            
            (3,523
            )Total
                R&D expenses
            
            **$**
            **33,885**
            
            $
            27,120%
                of Revenue
            
            
            **4.3**
            **%**
            
            4.0
            %





The
      increases in total R&D incurred of approximately $5.2 million and total
      R&D expenses of approximately $6.8 million are primarily due to additional
      expenses incurred by some of our newly acquired subsidiaries, an increase in
      R&D labor costs due to an increase in the number of R&D employees and an
      approximately $0.5 million increase in non-cash share-based compensation
      expenses allocated to R&D. The decrease in total capitalized software
      development costs is primarily due to the release of our capitalized retail
      software product in December of 2005.





For
      fiscal year 2007, non-cash share-based compensation expenses allocated to
      R&D were not capitalized because stock options were not granted to employees
      whose labor costs were capitalized as software development costs. For fiscal
      year 2006, less than $0.1 million in non-cash share-based compensation expenses
      allocated to R&D had been capitalized because stock options were granted to
      employees whose labor is capitalized.




**Depreciation
      and Amortization Expenses**


Depreciation
      and amortization expenses for fiscal year 2007 increased approximately $2.3
      million to approximately $12.7 million compared to fiscal year 2006. The
      increase is primarily due to additional expense incurred as a result of the
      newly acquired subsidiaries as discussed above. Additionally, foreign currency
      fluctuation increased depreciation and amortization expenses for the fiscal
      year
      2007 by approximately $0.5 million.





**Share-Based
      Compensation Expenses**


We
      account for our option awards granted under the stock option program in
      accordance with SFAS No. 123(R), “Share-Based Payment.” The estimated fair value
      of awards granted after the effective date of SFAS 123(R) are measured and
      non-cash share-based compensation expenses adjusted for expected pre-vesting
      forfeitures are recognized ratably over the requisite service period of options
      in the consolidated statements of operations. In addition, non-cash share-based
      compensation expense adjusted for expected pre-vesting forfeitures is recognized
      for the non-vested portion of awards that were granted before the effective
      date
      of SFAS No. 123(R) as those options become incrementally vested.


For
      fiscal year 2007, we recognized non-cash share-based compensation expenses
      adjusted for expected pre-vesting forfeitures of approximately $14.0 million
      based on the estimated fair values of the vested portions of (1) approximately
      0.7 million shares of underlying options granted during the fiscal year; (2)
      approximately 0.9 million shares granted during fiscal year 2006; and, (3)
      approximately 0.7 million shares of underlying options granted before the
      effective date of SFAS No. 123(R) that were unvested as of the effective date.
      For fiscal year 2006, the non-cash share-based compensation expenses of
      approximately $9.1 million was based on the estimated fair values of the vested
      portions of (1) approximately 0.9 million shares of underlying options granted
      during fiscal year 2006 and (2) approximately 1.5 million shares of underlying
      options granted before the effective date of SFAS No. 123(R) that were unvested
      as of the effective date. The cost of sales, SG&A expenses and R&D
      expenses discussed above include the following allocations of non-cash
      share-based compensation expense:





**Fiscal Year Ended June 30,**(in
                thousands)
            
            **2007**
            
            **2006**Cost
                of sales
            
            **$**
            **—**
            
            $
            35SG&A
            
            
            **13,243**
            
            
            8,851R&D
            
            
            **753**
            
            
            249Total
                non-cash share-based compensation expense
            
            
            **13,996**
            
            
            9,135Income
                tax benefit
            
            
            **(2,884**
            **)**
            
            (2,026
            )Total
                non-cash share-based compensation expense, net of tax
                benefit
            
            **$**
            **11,112**
            
            $
            7,109Impact
                on diluted net income per share
            
            **$**
            **0.27**
            
            $
            0.18





The
      non-cash share-based compensation expenses allocated to SG&A for fiscal year
      ended June 30, 2007 include a one-time charge of approximately $0.7 million
      resulting from an accelerated vesting of unvested options due to the death
      of an
      officer of the Company. Under our stock option plan, options immediately vest
      upon death.


As
      of
      June 30, 2007, there was approximately $21.9 million in non-cash share-based
      compensation cost related to non-vested awards not yet recognized in our
      consolidated statements of operations. This cost is expected to be recognized
      over a weighted-average period of 2.0 years.




27




**Income
      from Operations**


Income
      from operations for fiscal year 2007 increased
      approximately $19.3 million, or 21.2%, to approximately $110.6 million, compared
      to fiscal year 2006. The increase is mainly due to an overall increase in sales
      volume coupled with lower cost of sales as a percent of revenue. This increase
      was partially offset by an increase in expenses as a percent of revenue and
      approximately $4.9 million increase in non-cash share-based compensation expense all
      of
      which are explained above in more detail.





**Non-operating
      Income (Expense)**


Net
      non-operating income for fiscal year 2007 was approximately $11.1 million
      compared to approximately $4.4 million for fiscal year 2006. The increase of
      approximately $6.7 million is primarily due to:


·
            An
                increase in interest income of approximately $5.3 million due to
                overall
                higher cash and cash equivalents and short-term investment balances
                and
                overall higher interest rates earned on these
                balances;


·
            Approximately
                $1.3 million in one-time income due to a death benefit received on
                corporate owned life insurance policy following the death of a covered
                officer of the Company; and,


·
            A
                decrease in the foreign exchange transaction losses of approximately
                $0.5
                million to a loss of approximately $0.4 million for fiscal year 2007
                compared to a loss of approximately $0.9 million for fiscal year
                2006.





**Income
      Tax Expense**


The
      effective tax rates for fiscal year 2007 and 2006 were 33.5% and 32.9%,
      respectively. The increase in tax rate was primarily attributable to the
      negative impact of the changes in legislation related to extra-territorial
      income exclusions as well as the non-deductible nature of certain non-cash
      share-based compensation items and other non-deductible compensation items.
      These negative factors were partially offset by the benefit recognized from
      certain activities where the mix of earnings were subject to a lower statutory
      tax rate than that recognized in the U.S., renewal of research and development
      tax credit and the phase-in of the deduction for domestic production
      activities.





**Net
      Income and Diluted Net Income per Common Share**


Net
      income for fiscal year 2007 increased
      approximately $16.5 million, or 25.9%, to approximately $80.0 million, compared
      to fiscal year 2006. The increase is mainly due to an overall increase in sales
      volume coupled with lower cost of sales as a percent of revenue and an increase
      in interest income of approximately $5.3 million. These increases were partially
      offset by an increase in operating expenses as a percent of revenue and
      approximately $4.9 million increase in non-cash share-based compensation
      expense, all
      of
      which are explained above in more detail.


Diluted
      net income per share for fiscal year 2007 increased
      $0.38 per share, or 24.4%, to $1.94 per share, compared to fiscal year 2006.
      Diluted net income for fiscal year 2007 was negatively impacted by $0.27 per
      diluted share for non-cash share-based compensation expense compared to $0.18
      per diluted share for fiscal year 2006.





**Comparison
      of Fiscal Year 2006 to Fiscal Year 2005**





**Revenue**


An
      analysis of the sales mix by reportable segments is as follows (amounts are
      net
      of intersegment eliminations, based on location of the selling entity, and
      include export sales):





**Fiscal Year Ended June 30,****U.S.**
            
            **International**
            
            **Total**(in
                thousands)
            
            **2006**
            
            **2005**
            
            **2006**
            
            **2005**
            
            **2006**
            
            **2005**Hardware
            
            $
            127,485
            
            $
            117,705
            
            $
            88,076
            
            $
            74,080
            
            $
            215,561
            
            $
            191,785Software
            
            
            54,355
            
            
            52,966
            
            
            65,738
            
            
            53,404
            
            
            120,093
            
            
            106,370Service
            
            
            173,315
            
            
            152,645
            
            
            169,984
            
            
            146,464
            
            
            343,299
            
            
            299,109Total
                Revenue
            
            $
            355,155
            
            $
            323,316
            
            $
            323,798
            
            $
            273,948
            
            $
            678,953
            
            $
            597,264





An
      analysis of the total sales mix as a percent of total revenue is as
      follows:





**Fiscal Year Ended June 30,**(in
                thousands)
            
            **2006**
            
            **2005**Hardware
            
            
            31.7
            %
            
            32.1
            %Software
            
            
            17.7
            %
            
            17.8
            %Service
            
            
            50.6
            %
            
            50.1
            %Total
            
            
            100.0
            %
            
            100.0
            %





Revenue
      increased approximately $81.7 million, or 13.7% to approximately $679.0 million
      for fiscal year 2006 compared to fiscal year 2005.


Hardware
      revenue increased approximately $23.8 million primarily due to the
      following:


·
            An
                approximately $10.0 million increase in the sale of third party hardware
                products;






28




·
            An
                approximately $9.3 million of additional revenue generated in fiscal
                year
                2006 as a result of January 2005 acquisition of
                JTECH;


·
            An
                approximately $7.9 million increase in the sale of Workstation 4;
                and,


·
            An
                approximately $6.2 million of additional revenue generated in fiscal
                year
                2006 due to the sale of 2010 Workstation which was released in fiscal
                year
                2006.


·
            The
                above increases were partially offset by a decrease in the sale of
                PC
                Workstations of approximately $10.0 million. The decrease in PC
                Workstations is due to their replacement with the newer and less
                expensive
                Workstation 4 and Workstation 2010.


Software
      revenue increased primarily as a result of an increase in sale of the OPERA
      suite of products of approximately $11.7 million, which contributed
      approximately 85.3% of the total software revenue increase in fiscal year 2006
      compared to fiscal year 2005. Service revenue increased mainly due to increased
      support revenues and increased installation revenue from the continued expansion
      of our customer base as well as additional recurring support revenue from
      existing customers. The recurring support revenue contributed approximately
      55.7% and the installation revenue contributed approximately 28.4% of the total
      service revenue increase in fiscal year 2006 compared to fiscal year 2005.
      The
      increase in service revenue was also due to approximately $3.6 million of
      additional service revenue generated as a result of February 2006 acquisition
      of
      CommercialWare.


Of
      the
      increase in total revenue, the international reportable segment accounted for
      approximately $49.9 million, or 61.0% of the total increase, while the U.S.
      reportable segment accounted for approximately $31.8 million, or 39.0% of the
      total increase. The international revenue increase was mainly due to two large
      contracts for hardware, software and service of approximately $6.0 million,
      an
      increase in revenue to international dealers of approximately $4.8 million
      and a
      large hardware rollout to major customers of approximately $5.0 million. The
      service revenue increased mainly due to increased support revenues and increased
      installation revenue from the continued expansion of our customer base as well
      as additional recurring support revenue from existing customers. The increase
      was also affected by the exchange rate fluctuation, mainly between the Euro
      and
      the U.S. dollar, of approximately $2.2 million.


The
      increase in the U.S. reportable segment was mainly due to increased sales volume
      from various roll out programs, approximately $9.4 million of additional revenue
      generated in fiscal year 2006 as a result of January 2005 acquisition of JTECH
      compared to fiscal year 2005 and approximately $4.8 million of additional
      revenue generated as a result of February 2006 acquisition of CommercialWare.
      The service revenue increased mainly due to increased support revenues and
      increased installation revenue from the continued expansion of our customer
      base
      as well as additional recurring support revenue from existing
      customers.





**Cost
      of Sales**


An
      analysis of the cost of sales is as follows:


**Fiscal
                Year Ended June 30,****2006**
            
            **2005**(in
                thousands)
            
            **Cost**
              **of Sales**
            
            **% of RelatedRevenue**
            
            **Cost**
              **of Sales**
            
            **% of RelatedRevenue**Hardware
            
            $
            144,061
            
            
            66.8
            %
            $
            127,349
            
            
            66.4
            %Software
            
            
            23,488
            
            
            19.6
            %
            
            22,822
            
            
            21.5
            %Service
            
            
            165,721
            
            
            48.3
            %
            
            145,309
            
            
            48.6
            %Total
                Cost of Sales
            
            $
            333,270
            
            
            49.1
            %
            $
            295,480
            
            
            49.5
            %





For
      fiscal year 2006, cost of sales as a percent of revenue decreased 0.4% to 49.1%
      compared to fiscal year 2005. The increase in hardware cost of sales as a
      percent of related revenue compared to fiscal year 2005 was primarily due to
      a
      significant increase in freight costs. This increase was partially offset by
      JTECH sales of hardware, which generate higher margins. The decrease in software
      cost of sales as a percent of related revenue compared to fiscal year 2005
      was
      primarily due to a significant increase in sales of our OPERA suite of products,
      which generate higher margins than our third party software, and an improvement
      in our third party software margins compared to fiscal year 2005. These
      decreases were partially offset by approximately $1.6 million in capitalized
      software write-offs included in software cost of sales in fiscal year 2006.
      The
      write-offs are related to products for which no future revenue was projected.
      The decrease in service cost of sales as a percent of related revenue compared
      to fiscal year 2005 was primarily due to decrease in labor costs. Fiscal year
      2005 labor costs included significant utilization of third party labor due
      to
      large roll out programs in the U.S., and we did not require the use of as much
      third party labor in fiscal year 2006.





**Selling,
      General and Administrative (“SG&A”) Expenses**


SG&A
      expenses, as a percent of revenue, increased 0.9% to 31.9% compared to 31.0%
      in
      fiscal year 2005. This increase was primarily due to the following:


·
            Approximately
                $8.9 million (or 1.3% of total revenue) of non-cash share-based
                compensation expense recorded as a component of SG&A expenses (see
                “Share-Based Compensation Expense” below for further discussion);
                and


·
            Increase
                of approximately $4.6 million (or 0.7% of total revenue) in performance
                based compensation.


·
            The
                above increases in SG&A expenses were partially offset by overall
                decreases in SG&A expenses as a percent of total revenue, primarily
                due to our ability to leverage our costs with the increase in total
                revenue.




29




**Research
      and Development (“R&D”)**


R&D
      expenses consisted primarily of labor costs less capitalized software
      development costs.




An
      analysis of R&D activities is as follows:


**Fiscal Year Ended June 30,**(in
                thousands)
            
            **2006**
            
            **2005**Total
                R&D incurred
            
            $
            30,643
            
            $
            33,144Capitalized
                software development costs
            
            
            (3,523
            )
            
            (5,745
            )Total
                R&D expenses
            
            $
            27,120
            
            $
            27,399%
                of Revenue
            
            
            4.0
            %
            
            4.6
            %





The
      decreases in total R&D incurred and total capitalized software development
      costs were primarily due to the release of Datavantage Corporation’s
      (“Datavantage”) two capitalized software products in June and December of 2005
      and also due to certain R&D staff being reassigned to perform billable
      professional services. These decreases were partially offset by approximately
      $0.2 million for the non-cash share-based compensation expense allocated to
      R&D for fiscal year 2006 of
      which
      less than $0.1 million had been capitalized because stock options have been
      granted to employees whose labor is capitalized.





**Depreciation
      and Amortization Expenses**


Depreciation
      and amortization expenses for fiscal year 2006 increased approximately $0.3
      million to approximately $10.5 million, compared to fiscal year
      2005.





**Share-Based
      Compensation Expenses**


We
      account for our option awards granted under the stock option program in
      accordance with SFAS No. 123(R), “Share-Based Payment” which became effective
      July 1, 2005 for us. For detailed fiscal year 2006 discussion, see “Shared-Based
      Compensation Expenses” under the “Comparison of Fiscal Year 2007 to Fiscal Year
      2006” section above.





**Income
      from Operations**


Income
      from operations for fiscal year 2006 increased
      approximately $12.4 million, or 15.7%, to approximately $91.3 million, compared
      to fiscal year 2005. The increase was mainly due to an overall increase in
      sales
      volume coupled with lower cost of sales as a percent of revenue. In addition,
      the increase was attributable to a favorable decrease in expenses as a percent
      of revenue, partially offset by approximately $9.1 million in non-cash
      share-based compensation expense all of
      which are explained above in more detail.





**Non-operating
      Income (Expense)**


Net
      non-operating income for fiscal year 2006 was approximately $4.4 million
      compared to approximately $2.2 million for fiscal year 2005. The increase of
      approximately $2.2 million was primarily due to:


·
            An
                increase in interest income of approximately $2.6 million was due
                to
                overall higher cash and cash equivalents balances and overall higher
                interest rates received on investments;
                and


·
            A
                decrease in interest expense of approximately $1.0 million because
                the
                interest expense for fiscal year 2005 included additional interest
                expense
                associated with prior years’ amended federal income tax
                returns.


·
            The
                above increases in net non-operating income were partially offset
                by
                foreign exchange losses of approximately $0.9 million for fiscal
                year 2006
                compared to a gain of approximately $0.7 million for fiscal year
                2005 due
                to the weakening of U.S. dollar against the value of the Euro for
                fiscal
                year 2006 as compared to fiscal year
                2005.





**Income
      Tax Expense**


The
      effective tax rates for fiscal year 2006 and 2005 were 32.9% and 33.0%,
      respectively. The decrease was due to the relative mix of earnings and the
      consolidation of functions in lower taxing jurisdictions and other
      adjustments.





**Net
      Income and Diluted Net Income per Common Share**


Net
      income for fiscal year 2006 increased
      approximately $9.9 million, or 18.4%, to approximately $63.5 million, compared
      to fiscal year 2005 due to the various items discussed above. The increase
      was
      mainly due to an overall increase in sales volume coupled with lower cost of
      sales as a percent of revenue. In addition, the increase was attributable to
      a
      favorable decrease in expenses as a percent of revenue, partially offset by
      approximately $9.1 million or $7.1 million, net of tax, in non-cash share-based
      compensation expense all of
      which are explained above in more detail.


Diluted
      net income per share for fiscal year 2006 increased
      $0.21 per share, or 15.6%, to $1.56 per share, compared to fiscal year 2005.
      Diluted net income for fiscal year 2006 was negatively impacted by $0.18 per
      share for non-cash share-based compensation expense, net of tax.




30


**RECENT
      ACCOUNTING STANDARDS**





***SFAS
      No. 159***


In
      February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for
      Financial Assets and Financial Liabilities” (“SFAS No. 159”), which allows
      entities to choose to measure eligible financial instruments at fair value
      as of
      specified dates. Such election, which may be applied on an instrument by
      instrument basis, is typically irrevocable once elected. SFAS 159 is effective
      for fiscal years beginning after November 15, 2007. We are currently reviewing
      the impact of the adoption of the SFAS 159 on our consolidated financial
      position, results of operations and cash flows.





***SFAS
      No. 157***


In
      September 2006, the FASB issued SFAS No. 157 “Fair Value Measurements”
(“SFAS No. 157”) to establish a framework for measuring fair value under
      generally accepted accounting principles and to expand disclosures on fair
      value
      measurements. The statement applies to previously established valuation
      pronouncements, but is to be applied prospectively, so that it does not require
      the changing of any fair value measurements. SFAS No. 157 may cause some
      valuation procedures that we use to change after its adoption. Under SFAS
      No. 157, fair value is established by the price that would be received to
      sell the item or the amount to be paid to transfer the liability or the asset
      (an exit price), as opposed to the price to be paid for the asset or received
      to
      assume the liability (an entry price). SFAS No. 157 is effective for all assets
      valued in financial statements for fiscal years beginning after
      November 15, 2007. We are currently reviewing the impact of the adoption of
      the SFAS 157 on our consolidated financial position, results of operations
      and
      cash flows.





***SAB
      No. 108***


In
      September 2006, the SEC issued SAB No. 108, which provides interpretive guidance
      on the process of quantifying financial statement misstatements. The application
      of SAB No. 108 has not had a material impact on our consolidated financial
      position, results of operations and cash flows.





***FIN
      48***


In
      June
      2006, the FASB issued Interpretation No. 48, “Accounting for Uncertainty in
      Income Taxes, an interpretation of FAS 109, ‘Accounting for Income Taxes’” (“FIN
      48”), to create a single model to address accounting for uncertainty in tax
      positions.  FIN 48 clarifies the accounting for income taxes by prescribing
      a minimum recognition threshold a tax position is required to meet before being
      recognized in the financial statements.  FIN 48 also provides guidance on
      derecognition, measurement, classification, interest and penalties, accounting
      in interim periods, disclosure and transition.  FIN 48 is effective for
      fiscal years beginning after December 15, 2006.   As required, the Company
      will adopt FIN 48 in the first quarter of our fiscal year 2008.  The
      cumulative effect of adopting FIN 48 will be recorded in retained earnings
      and
      other accounts as applicable.  We are currently reviewing the impact of the
      adoption of FIN 48 on our consolidated financial position, results of operations
      and cash flows.





**PURCHASES
      OF COMMON STOCK**


In
      fiscal
      year 2002, the Board of Directors authorized the purchase of up to two million
      shares of our common stock. During fiscal year 2005, we purchased all remaining
      shares authorized under that plan. In fiscal year 2005, the Board of Directors
      authorized the purchase of up to an additional two million shares of our common
      stock. Since the inception of the repurchase programs, we have incurred
      approximately $0.1 million in fees related to the programs. A summary of the
      cumulative number of shares purchased and retired is as follows:





**Number ofShares**
            
            **Average PurchasePrice Per Share**
            
            **Total PurchaseValue**
              (in thousands)Fiscal
                year:2002
                –
                2004
            
            
            1,599,462
            
            $
            16.51
            
            $
            26,4032005
            
            
            897,200
            
            $
            29.85
            
            
            26,7772006
            
            
            921,337
            
            $
            43.67
            
            
            40,234**2007**
            
            
            **348,600**
            
            **$**
            **51.26**
            
            
            **17,870**Total
                as of June 30, 2007
            
            
            **3,766,599**
            
            **$**
            **29.55**
            
            **$**
            **111,284**




31


**LIQUIDITY
      AND CAPITAL RESOURCES**





**Sources
      and Uses of Cash**


The
      Company’s consolidated statements of cash flows summary for fiscal years is as
      follows:





**Fiscal Year Ended June 30,**(in
                thousands)
            
            **2007**
            
            **2006**
            
            **2005**Net
                cash provided by (used in):Operating
                activities
            
            **$**
            **114,766**
            
            $
            121,681
            
            $
            90,294Investing
                activities
            
            
            **(141,184**
            **)**
            
            (29,320
            )
            
            (26,528
            )Financing
                activities
            
            
            **31,146**
            
            
            (9,029
            )
            
            6,147





***Operating
      activities:***


As
      discussed above, under “Share-Based Compensation Expenses,” SFAS No. 123(R)
      became effective July 1, 2005, and requires the tax benefits realized from
      stock
      option exercises to be classified as cash inflows from financing activities,
      and
      also requires us to expense the fair value of grants made under the stock option
      program. As a result, net cash flows provided by operating activities for fiscal
      years 2007 and 2006 of approximately $114.8 million and approximately $121.7
      million, respectively, are not comparable to net cash flows provided by
      operating activities for fiscal year 2005 of approximately $90.3 million,
      because approximately $16.8 million and approximately $13.3 million in tax
      benefits realized from stock option exercises for fiscal years 2007 and 2006,
      respectively, are classified as cash inflows from financing activities, compared
      to fiscal year 2005 for which the tax benefits from stock option exercises
      are
      classified as a component of cash provided by operations.


Net
      cash
      provided by operating activities for fiscal year 2007 decreased approximately
      $6.9 million compared to fiscal year 2006 primarily due to approximately $39.1
      million increase in cash utilized by accounts receivable and prepaid and other
      current assets, substantially reduced by approximately $16.5 million increase
      in
      cash provided by net income and approximately $13.8 million provided by accrued
      expenses and other current liabilities.


Net
      cash
      provided by operating activities for fiscal year 2006 increased approximately
      $31.4 million primarily due to approximately $46.1 million decrease in cash
      utilized by accounts receivable and prepaid expenses and other assets,
      approximately $14.7 million in cash provided by an increase in income taxes
      payable and approximately $9.9 million increase in cash provided by net income.
      These increases were partially offset by tax benefit realized from stock option
      exercises of approximately $22.1 million (as discussed above, classified as
      cash
      inflow in fiscal year 2005) and approximately $10.7 million increase in cash
      utilized by accounts payable.





***Investing
      activities:***


In
      fiscal
      years 2007 and 2005, we had invested in auction rate securities which are
      classified as short-term investments on the consolidated balance sheet. As
      a
      result, net cash flows provided by investing activities for fiscal year 2007,
      which includes approximately $87.0 million in net investments in auction rate
      securities, and fiscal year 2005, which includes approximately $8.0 million
      in
      net proceeds from the sale of auction rate securities, are not comparable to
      fiscal year 2006 as we did not invest in auction rate securities.


Net
      cash
      used by investing activities for fiscal year 2007 was approximately $141.1
      million, primarily as a result of our net investment in auction rate securities
      of approximately $87.0 million, as discussed above. We also utilized
      approximately $40.5 million related to various acquisitions, the most
      significant of which was the acquisition of RedSky for which we utilized
      approximately $29.8 million. Additionally, approximately $13.3 million was
      also
      utilized to purchase property, plant and equipment and to internally develop
      software to be licensed to others.


Net
      cash
      used by investing activities for fiscal year 2006 was approximately $29.3
      million, primarily as a result of approximately $14.3 million utilized to
      purchase property, plant and equipment and to internally develop software to
      be
      licensed to others and approximately $14.1 million utilized for the acquisition
      of CommercialWare.


Net
      cash
      used by investing activities for fiscal year 2005 was approximately $26.5
      million, primarily as a result of approximately $18.5 million utilized for
      the
      acquisition of JTech and approximately $16.0 million utilized to purchase
      property, plant and equipment and to internally develop software to be licensed
      to others. We also had net proceeds of approximately $8.0 million from the
      sale
      of auction rate securities.





***Financing
      activities:***


Net
      cash
      provided by financing activities for fiscal year 2007 was approximately $31.1
      million, primarily due to proceeds from stock option exercises of approximately
      $35.0 million and realized tax benefits from stock option exercises of
      approximately $16.8 million, partially offset by approximately $17.9 million
      utilized to repurchase our stock.


Net
      cash
      utilized by financing activities for fiscal year 2006 was approximately $9.0
      million, primarily due to approximately $40.2 million utilized to repurchase
      our
      stock, partially offset by approximately $18.5 million in proceeds from stock
      option exercises and approximately $13.3 million in realized tax benefits from
      stock option exercises.


Net
      cash
      provided by financing activities for fiscal year 2005 was approximately $6.1
      million, primarily due to proceeds from stock option exercises of approximately
      $33.2 million, substantially offset by approximately $26.8 million utilized
      to
      repurchase our stock.





All
      cash
      and cash equivalents are being retained for the operation and expansion of
      the
      business and the repurchase of our stock.




32




**Capital
      Resources**


We
      have
      two credit agreements (the “Credit Agreements”) that in the aggregate, provide a
      $65.0 million multi-currency committed line of credit which expires on July
      31,
      2009.  The lenders under the Credit Agreements are Bank of America, N.A.,
      Wachovia Bank, N.A., and US Bank.  The international facility is secured by
      65% of the capital stock of our main operating Ireland subsidiary and 100%
      of
      all of the remaining major foreign subsidiaries. The U.S. facility is secured
      by 100% of the capital stock of our major U.S. subsidiaries as
      well as all inventory and receivables located in the U.S.


For
      borrowings in U.S. currency, the interest rate under the Credit Agreements
      is
      equal to the higher of the federal funds rate plus 50 basis points or the prime
      rate. For borrowings in foreign currencies, the interest rate is determined
      by a
      LIBOR-based formula, plus an additional margin of 125 to 200 basis points,
      depending upon our consolidated earnings before interest, taxes, depreciation
      and amortization (“EBITDA”) for the immediately preceding four calendar
      quarters. Under the terms of the Credit Agreements, we are required to pay
      insignificant commitment fees on the unused portion of the line of credit to
      the
      Lenders. The Credit Agreements also contain certain financial covenants and
      restrictions on our ability to assume additional debt, repurchase stock, sell
      subsidiaries or acquire companies. In case
      of an event of default, as defined in the Credit Agreements, that is not cured
      within the applicable cure period (with respect to those defaults for which
      the
      Credit Agreements provide a cure period), the Lenders’ remedies include their
      ability to declare all outstanding loans, plus interest and other related
      amounts owed, to be immediately due and payable in full, and to pursue all
      rights and remedies available to them under the Credit Agreements or under
      applicable law.


As
      of
      June 30, 2007, we had approximately $2.3 million outstanding on the lines of
      credit mentioned above and had approximately $62.7 million available for future
      borrowings. The total outstanding balance consisted of the
      following:


·
            JPY
                (Japanese Yen) 165.0 million (approximately $1.3 million at the June
                30,
                2007 exchange rate);


·
            SEK
                (Swedish Krona) 4.0 million (approximately $0.6 million at the June
                30,
                2007 exchange rate), and


·
            NZD
                (New Zealand Dollar) 0.5 million (approximately $0.4 million at the
                June
                30, 2007 exchange rate).


We
      also
      have a credit relationship with a European bank in the amount of EUR 1.0 million
      (approximately $1.4 million at the June 30, 2007 exchange rate). Under the
      terms
      of this facility, we may borrow in the form of either a line of credit or term
      debt. As of June 30, 2007, there were no balances outstanding on this credit
      facility, but approximately EUR 0.2 million (approximately $0.2 million at
      the
      June 30, 2007 exchange rate) of the credit facility had been utilized for
      guarantees. As we have significant international operations, our
      Euro-denominated borrowings do not represent a significant foreign exchange
      risk. On an overall basis, we monitor our cash and debt positions in each
      currency in an effort to reduce our foreign exchange risk.


As
      of
      June 30, 2007, we had approximately $63.8 million borrowing capacity under
      all
      of the credit facilities described above. The weighted-average interest rate
      on
      the outstanding balances under the lines of credit as of June 30, 2007 was
      3.9%.
      As of July 31, 2007, the total outstanding balance on the lines of credit was
      approximately $2.4 million and we had approximately $63.8 million borrowing
      capacity under all of the credit facilities at that time.


We
      do not
      currently invest in financial instruments designed to protect against interest
      rate fluctuations, although we will continue to evaluate the need to do so
      in
      the future.





We
      believe that our cash and cash equivalents, short-term investments, cash
      generated from operations and our available lines of credit are sufficient
      to
      provide our working capital needs for the foreseeable future. Nevertheless,
      if
      we need to raise additional funds, we believe we will be able to raise the
      necessary amounts either by entering into additional financing agreements or
      through the issuance of our common stock. We currently anticipate that our
      property, plant and equipment expenditures for fiscal year 2008 will be
      approximately $13 million.





Financial
      indicators of our liquidity and capital resources as of June 30 were as
      follows:





(in
                thousands, except ratios)
            
            **2007**
            
            **2006**Cash,
                cash equivalents and marketable securities
            
            **$**
            **329,652**
            
            $
            237,222Available
                credit facilities
            
            **$**
            **66,353**
            
            $
            66,279Outstanding
                credit facilities
            
            
            **(2,308**
            **)**
            
            (2,134
            )Outstanding
                guarantees
            
            
            **(248**
            **)**
            
            (293
            )Unused
                credit facilities
            
            **$**
            **63,797**
            
            $
            63,852Working
                capital(1)
            
            **$**
            **344,566**
            
            $
            253,121Capital
                lease obligations(2):Current
            
            **$**
            **655**
            
            $
            89Non-current
            
            
            **260**
            
            
            424Total
            
            **$**
            **915**
            
            $
            513Shareholders’
                equity
            
            **$**
            **551,133**
            
            $
            417,116Current
                ratio(3)
            
            
            **2.34**
            
            
            2.24


(1)  Current
      assets less current liabilities.


(2)  The
      Company does not have any long-term debt.


(3)  Current
      assets divided by current liabilities.




33




**Inflation**


We
      have
      not experienced any significant impact as a result of inflation.




34


**Contractual
      Obligations**


The
      following table summarizes our contractual arrangements at June 30,
      2007:




**Payments
                    due by period**(in
                    thousands)
                
                **Total**
                
                **Less than**
                  **1 year**
                
                **1-3 years**
                
                **3-5 years**
                
                **More than**
                  **5 years**Net
                    operating lease obligations
                
                $
                102,114
                
                $
                20,845
                
                $
                30,563
                
                $
                21,530
                
                $
                29,176Capital
                    lease obligations
                
                
                915
                
                
                655
                
                
                258
                
                
                2
                
                
                —Purchase
                    obligations
                
                
                972
                
                
                —
                
                
                972
                
                
                —
                
                
                —Total
                
                $
                104,001
                
                $
                21,500
                
                $
                31,793
                
                $
                21,532
                
                $
                29,176




**FORWARD-LOOKING
      STATEMENTS**


The
      preceding management’s discussion and analysis of financial condition and
      results of operations should be read in conjunction with the consolidated
      financial statements and the related notes and other financial information
      included elsewhere in this Annual Report on Form 10-K. Certain statements
      contained in this Annual Report on Form 10-K, and, in particular, in the
      preceding management’s discussion and analysis, that are not historical facts
      are forward looking statements within
      the meaning of Section 27A of the Securities Act of 1933, as amended (the
“Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as
      amended (the “Exchange Act”), that
      involve risks and uncertainties. Our actual results may differ materially from
      those anticipated in these forward-looking statements.


E xamples
      of such forward-looking statements in this Annual Report on Form 10-K include
      the following:


·
            Item
                1, “Business,” statements regarding the future direction of PMS technology
                and the growth of the OPERA suite of products, the Company’s strategy for
                product growth in restaurant software, trends in retail software,
                trends
                in retailers’ use of Linux-based systems, our plan to transition from our
                own data center to third party centers, our global distribution network,
                acquisition of rights in third party products and designs, the
                appropriateness of reliance on statutory and common law protections
                for
                our intellectual property, the risks associated with third party
                misappropriation of our intellectual property, competition, labor
                relations, quarterly results, our belief that a loss of component
                sources
                would not materially adversely affect our business, the anticipated
                impact
                of fluctuations in interest rates and in currency exchange rates,
                the
                evaluation of the need to use financial instruments to hedge against
                currency risk, the anticipated effect of the US Government exercising
                a
                termination for convenience under one or more contracts that we have
                with
                the US Government, and our belief that compliance with environmental
                laws
                and regulations will not have a material effect on expenditures,
                earnings,
                or our competitive position;


·
            Item
                1A, “Risk Factors,” regarding the anticipated or potential impact on our
                business, financial results, or competitive position of the various
                risks
                described in that section;


·
            Item
                2, “Properties,” regarding the anticipated availability of additional
                space;


·
            Item
                3, “Legal Proceedings,” regarding the likely effect of litigation on our
                results of operations or financial position;
                and


·
            Item
                7A, “Quantitative and Qualitative Disclosures about Market
                Risk.”





Additional
      forward-looking statements will be found in the preceeding discussion and
      analysis by management of the Company’s financial condition and results of
      operations, including:


(i)
            our
                statements about the growth and direction of the hospitality and
                retail
                industries generally, and our analysis of the growth and direction
                of
                various sectors within those
                industries;


(ii)
            our
                expectation that product and service margins may decline in response
                to
                the competitive nature of our
                market;


(iii)
            our
                statements regarding the effects of currency fluctuations (in particular,
                Euro fluctuations) on our financial
                performance;


(iv)
            our
                expectations that the customers with whom we do the largest amount
                of
                business will fluctuate from year to year, and our statements about
                the
                effects of large customer orders on our quarterly earnings, revenues,
                and
                total revenues;


(v)
            our
                statements regarding the impact on financial results in future periods
                if
                we determine that the financial condition of customers has
                deteriorated;


(vi)
            our
                statements regarding the impact on financial results in future periods
                if
                we misjudge the remaining economic life of a
                product;


(vii)
            our
                statements concerning the fluctuations in the market price of our
                common
                stock, whether as a result of variations in our quarterly operating
                results or other factors;


(viii)
            our
                belief that any existing legal claims or proceedings will not have
                a
                material adverse effect on our results of operations or financial
                position;


(ix)
            our
                beliefs about our competitive
                strengths;


(x)
            our
                expectations regarding effective tax rates in future periods;


(xi)
            our
                expectations regarding the impact or lack of impact on our financial
                position and results of operations of the application of recent accounting
                standards;






35




(xii)
            our
                expectations about the adequacy of our cash flows and our available
                lines
                of credit to meet our working capital needs, and our ability to raise
                additional funds if and when needed;


(xiii)
            our
                expectations about the increases in our capital expenditures for
                future
                periods;


(xiv)
            our
                expectations that our exposure to interest rate risk will not materially
                change in the future;


(xv)
            our
                expectation that we will evaluate our need to invest in instruments
                to
                protect against interest rate fluctuations and our exposure to such
                interest rate risk;


(xvi)
            our
                statements about the effects on our revenue recognition as a result
                of
                changes to a customers’ delivery requirements or a products’ completion;


(xvii)
            our
                statements regarding our ability to increase sales of our higher
                margin
                products; and


(xviii)
            our
                expected costs associated with modifying our products to comply with
                applicable legal rules, regulations, and guidelines, including the
                credit
                card associations’ security and data protection
                rules.


There
      are
      other important factors that could cause actual results to differ materially
      from those in the forward looking statements. These may include: changes in
      applicable laws and regulations, other activities of governments, governmental
      agencies, or other regulatory bodies that affect our products, services, or
      business operations, changes in accounting and auditing rules (and changes
      in
      the interpretations of those rules), as well as those matters described in
      Item
      1A “Risk Factors.”




**ITEM
              7A.**
            **QUANTITATIVE
                AND QUALITATIVE DISCLOSURES ABOUT MARKET
                RISK**





The
      Company is exposed to interest rate risk and to foreign currency exchange rate
      risk.  See
      Part
      I, Item I, Foreign Sales and Foreign Market Risks, and Part II, Item 7 for
      information regarding foreign currency exchange risks. The Company’s committed lines of credit bear interest at a floating rate, which exposes the
      Company to interest rate risks. The Company manages its exposure to this risk
      by
      minimizing, to the extent feasible, overall borrowing and monitoring available
      financing alternatives. The Company’s interest rate risk has not changed
      materially from June 30, 2006, and the Company does not foresee any significant
      changes in exposure or in how it manages this exposure in the near future.
      At
      June 30, 2007, the Company had total borrowings of approximately $2.3 million,
      and had not entered into any instruments to hedge the resulting exposure to
      interest-rate risk. Management believes that the fair value of the debt equals
      its carrying value at June 30, 2007 and June 30, 2006. The Company’s exposure to
      fluctuations in interest rates will increase or decrease in the future with
      increases or decreases in the outstanding amount under the line of credit.
      As
      the Company’s total borrowing as of June 30, 2007 was approximately $2.3
      million, a 1% change in interest rate would have resulted in an immaterial
      impact on the Company’s consolidated financial position, results of operations
      and cash flows.


To
      minimize the Company’s exposure to credit risk associated with financial
      instruments, the Company places its temporary cash investments with
      high-credit-quality institutions, generally with bond rating of “A” and
      above.




**ITEM
              8.**
            **FINANCIAL
                STATEMENTS AND SUPPLEMENTARY
                DATA**





See
      Part
      IV, Item 15(a) 1.





**MANAGEMENT’S
      ANNUAL REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING**  M anagement
      of MICROS Systems, Inc. (the “Company”) is responsible for establishing and
      maintaining adequate internal control over financial reporting. Internal control
      over financial reporting is a process designed to provide reasonable assurance
      regarding the reliability of financial reporting and the preparation of
      financial statements for external purposes in accordance with generally accepted
      accounting principles. A company’s internal control over financial reporting
      includes those policies and procedures that pertain to the maintenance of
      records that, in reasonable detail, accurately and fairly reflect the
      transactions and dispositions of the assets of the company; provide reasonable
      assurance that transactions are recorded as necessary to permit preparation
      of
      financial statements in accordance with generally accepted accounting
      principles, and that receipts and expenditures of the company are being made
      only in accordance with authorizations of management and directors of the
      company; and provide reasonable assurance regarding prevention or timely
      detection of unauthorized acquisition, use, or disposition of the company’s
      assets that could have a material effect on the financial statements.


Because
      of its inherent limitations, internal control over financial reporting may
      not
      prevent or detect misstatements. Also, projections of any evaluation of
      effectiveness to future periods are subject to the risk that controls may become
      inadequate because of changes in conditions, or that the degree of compliance
      with the policies or procedures may deteriorate.


Management
      evaluated the Company’s internal control over financial reporting as of June 30,
      2007. In making this assessment, management used the framework established
      in
      Internal Control-Integrated Framework issued by the Committee of Sponsoring
      Organizations of the Treadway Commission (“COSO”). As a result of this
      assessment and based on the criteria in the COSO framework, management has
      concluded that, as of June 30, 2007, the Company’s internal control over
      financial reporting was effective.


Management
      has excluded ten companies (seven of which were wholly-owned), acquired in
      purchase business combinations during the fiscal year ended June 30, 2007,
      from
      its assessment of internal control over financial reporting at June 30, 2007.
      The combined total assets and combined total revenues represent approximately
      $94.7 million and $51.5 million, respectively, of the related consolidated
      financial statement amounts as of and for the year ended June 30, 2007. The
      most
      significant of these companies was RedSky, which represented $53.2 million
      of
      consolidated total assets and $13.4 million of consolidated total
      revenues.




36




The
      Company’s independent auditors, PricewaterhouseCoopers LLP, have audited the
      Company’s internal control over financial reporting. Their opinion on the
      effectiveness of the Company’s internal control over financial reporting and on
      the Company’s financial statements is included in this Annual Report on Form
      10 -K.




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





None




**ITEM
              9A.**
            **CONTROLS
                AND PROCEDURES**





**EVALUATION
      OF DISCLOSURE CONTROLS AND PROCEDURES**


Our
      management, with the participation of our Chief Executive Officer and Chief
      Financial Officer, evaluated the effectiveness of our disclosure controls and
      procedures as of the end of the period covered by this report. Based on that
      evaluation, the Chief Executive Officer and Chief Financial Officer concluded
      that our disclosure controls and procedures as of the end of the period covered
      by this report are functioning effectively to provide reasonable assurance
      that
      the information required to be disclosed by us in reports filed under the
      Securities Exchange Act of 1934 is (i)  recorded,
      processed, summarized and reported within the time periods specified in the
      SEC's rules and forms and
      (ii) accumulated and communicated to our management, including the Chief
      Executive Officer and Chief Financial Officer, as appropriate to allow timely
      decisions regarding disclosure. A
      controls system cannot provide absolute assurance, however, that the objectives
      of the controls system are met, and no evaluation of controls can provide
      absolute assurance that all control issues and instances of fraud, if any,
      within a company have been detected.





**MANAGEMENT’S
      REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING**


Our
      management’s report on internal control over financial reporting is set forth in
      Item 8 of this annual report on Form 10-K and is incorporated by reference
      herein.





**CHANGE
      IN INTERNAL CONTROL OVER FINANCIAL REPORTING**


No
      change
      in our internal control over financial reporting occurred during the Company’s
      most recent fiscal quarter that has materially affected, or is reasonably likely
      to materially affect, our internal control over financial
      reporting.




**ITEM
              9B.**
            **OTHER
                INFORMATION**





None




37


**PART
      III**




**ITEM
              10.**
            **DIRECTORS
                AND EXECUTIVE OFFICERS OF THE
                REGISTRANT**





The
      Company has adopted a Code of Ethics and Business Practices, which applies
      to
      all directors, officers, and U.S-based employees of the Company (there are
      certain variations with respect to certain international locations so as to
      comply with local law). It is posted on the Company’s website at www.micros.com ,
      and is
      available in print free of charge to anyone who requests a copy. Requests must
      be in writing and mailed to the Company’s Corporate Secretary.


See
      Part
      I, Item 1 for information regarding the Company’s Executive Officers. Other
      information required by this Item 10 will be set forth in the Company’s Proxy
      Statement under the captions “Information as to Nominees”, ‘Section 16(a)
      Beneficial Ownership Reporting Compliance”, and “Audit Committee” and that
      information is incorporated herein by reference.




**ITEM
              11.**
            **EXECUTIVE
                COMPENSATION**





The
      information required by Item 11 will be set forth in the Company’s Proxy
      Statement under the caption “Executive Compensation,” and that information is
      incorporated herein by reference.




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





Except
      for the information set forth below, the information required by Item 12 will
      be
      set forth in the Company’s Proxy Statement under the caption “Security Ownership
      of Certain Beneficial Owners and Management,” and that information is
      incorporated herein by reference.





**EQUITY
      COMPENSATION PLAN INFORMATION**





**As
                of June 30, 2007****Plan
                category**
            
            **Number ofsecurities to beissued uponexercise ofoutstandingoptions, warrants**
            
            **Weighted-Averageexercise price of**
              **outstandingoptions, warrantsand rights**
            
            **Number of securitiesremaining available forfuture issuance underequity compensationplans (excludingsecurities reflected incolumn
                (a))**(a)
            
            (b)
            
            (c)Equity
                compensation plans approved by security holders
            
            
            3,560,464
            
            $
            34.34
            
            
            1,564,095Equity
                compensation plans not approved by security holders
            
            
            N/A
            
            
            N/A
            
            
            N/ATotal
            
            
            3,560,464
            
            $
            34.34
            
            
            1,564,095




**ITEM
              13.**
            **CERTAIN
                RELATIONSHIPS AND RELATED
                TRANSACTIONS**





Effective
      June 30, 1995, the Company and Louis
      M.
      Brown, Jr., Vice-Chairman of the Board, entered
      into a Consulting Agreement that, as amended, terminates on June 30, 2008.
      Under
      the Consulting Agreement, Mr. Brown is to provide during each fiscal year on
      the
      average 20 hours per week of consulting services to the Company in exchange
      for
      a base consulting fee of approximately $0.3 million per year plus an annual
      target bonus. During each of the three fiscal years ended June 30, 2007, the
      Company compensated Mr. Brown approximately $0.4 million for consulting fees
      and
      annual target b onuses
      that were
      accrued during the fiscal year that they were earned and paid in the following
      fiscal year.




**ITEM
              14.**
            **PRINCIPAL
                ACCOUNTING FEES AND
                SERVICES**





The
      information required by Item
      14
      will be set forth in the Company’s Proxy Statement under the section heading
“Independent Registered Public Accounting Firm,” and that information is
      incorporated herein by reference.





38




**PART
      IV**








**ITEM
              15.**
            **EXHIBITS
                AND FINANCIAL STATEMENT
                SCHEDULES**




PageNo.**(a)
                The following documents are filed as a part of this
                report:**(1)
                Financial Statements:Report
                of Independent Registered Public Accounting Firm
            42Consolidated
                balance sheets as of June 30, 2007 and 2006
            43Consolidated
                statements of operations for the fiscal years ended June 30, 2007,
                2006
                and 2005
            44Consolidated
                statements of cash flows for the fiscal years ended June 30, 2007,
                2006
                and 2005
            45Consolidated
                statements of shareholders’ equity and comprehensive income for the fiscal
                years ended June 30, 2007, 2006 and 2005
            46Notes
                to consolidated financial statements
            47 -
                69(2)
                Financial Statement Schedules:Schedule
                II –
                Valuation and qualifying accounts and reserves
            70




All
      other
      schedules are omitted because they are not applicable, not required, or the
      required information is included in the financial statements or notes
      thereto.




(3)  Exhibits:


3(i)
            Articles
                of Incorporation of the Company are incorporated herein by reference
                to
                Exhibit 3 to the Annual Report on Form 10-K of the Company for the
                Fiscal
                Year ended June 30, 1990.3(i)(a)
            Articles
                of Amendment to Articles of Incorporation are incorporated herein
                by
                reference to Exhibit 3(i) to the Quarterly Report on Form 10-Q of
                the
                Company for the period ended December 31, 1997.3(i)(b)
            Articles
                of Amendment to Articles of Incorporation are incorporated herein
                by
                reference to Exhibit 3(i) to the Quarterly Report on Form 10-Q of
                the
                Company for the period ended December 31, 1998.3(ii)(a)
            By-laws
                of the Company are incorporated herein by reference to Exhibit 3
                to the
                Annual Report on Form 10-K of the Company for the Fiscal Year ended
                June
                30, 1990.3(ii)(b)
            By-laws
                of the Company, as amended, are incorporated herein by reference
                to
                Exhibit 3(ii) to the Form 8-K filed on August 30, 2004.10(a)(1)*
            Amendment
                and Restatement of MICROS Systems, Inc. Stock Option Plan is incorporated
                herein by reference to Exhibit 4.1 to the Registration Statement
                on Form
                S-8 of the Company filed on February 16, 1990.10(a)(2)*
            First
                Amendment to the Amendment and Restatement of MICROS Systems, Inc.
                Stock
                Option Plan is incorporated herein by reference to Exhibit 4.2 to
                the
                Registration Statement on Form S-8 of the Company filed on February
                16,
                1990.10(a)(3)*
            MICROS
                Systems, Inc. 1991 Stock Option Plan as amended, is incorporated
                herein by
                reference to Exhibit A to the Proxy Statement of the Company for
                the 2006
                Annual Meeting of Shareholders10(b)*
            Employment
                Agreement dated June 1, 1995 between MICROS Systems, Inc. and A.
                L.
                Giannopoulos is incorporated herein by reference to Exhibit 10e to
                the
                Annual Report on Form 10-K of the Company for the Fiscal Year ended
                June
                30, 1995.10(b)(1)*
            First
                Amendment to Employment Agreement dated February 6, 1997 between
                MICROS
                Systems, Inc. and A. L. Giannopoulos is incorporated herein by reference
                to Exhibit 10 to the Quarterly Report on Form 10-Q of the Company
                for the
                period ended December 31, 1996.10(b)(2)*
            Second
                Amendment to Employment Agreement dated February 1, 1998 between
                MICROS
                Systems, Inc. and A. L. Giannopoulos is incorporated herein by reference
                to Exhibit 10 to the Quarterly Report on Form 10-Q of the Company
                for the
                period ended December 31, 1997.10(b)(3)*
            Third
                Amendment to Employment Agreement dated September 8, 1999 between
                MICROS
                Systems, Inc. and A. L. Giannopoulos is incorporated herein by reference
                to Exhibit 10g to the Annual Report on Form 10-K of the Company for
                the
                Fiscal Year ended June 30, 1999.10(b)(4)*
            Fourth
                Amendment to Employment Agreement dated November 19, 2001 between
                MICROS
                Systems, Inc. and A. L. Giannopoulos is incorporated herein by reference
                to Exhibit 10 to the Quarterly Report on Form 10-Q of the Company
                for the
                period ended December 31, 2001.10(b)(5)*
            Fifth
                Amendment to Employment Agreement dated November 15, 2002 between
                MICROS
                Systems, Inc. and A. L. Giannopoulos is incorporated herein by reference
                to Exhibit 10 to the Quarterly Report on Form 10-Q of the Company
                for the
                period ended December 31, 2002.10(b)(6)*
            Sixth
                Amendment to Employment Agreement dated January 28, 2004 between
                MICROS
                Systems, Inc. and A. L. Giannopoulos is incorporated herein by reference
                to Exhibit 10 to the Quarterly Report on Form 10-Q of the Company
                for the
                period ended December 31, 2003.10(b)(7)*
            Seventh
                Amendment to Employment Agreement dated August 9, 2005 between MICROS
                Systems, Inc. and A. L. Giannopoulos is incorporated herein by reference
                to Exhibit 10 to the Current Report on Form 8-K filed on August 11,
                2005.




39




10(b)(8)*
            Eighth
                Amendment to Employment Agreement dated June 6, 2006, between MICROS
                Systems, Inc. and A.L. Giannopoulos is incorporated herein by reference
                to
                Exhibit 10 to the Current Report on Form 8-K filed on June 8,
                2006.10(b)(9)*
            Ninth
                Amendment to Employment Agreement dated June 6, 2006, between MICROS
                Systems, Inc. and A.L. Giannopoulos is incorporated herein by reference
                to
                Exhibit 10 to the Current Report on Form 8-K filed on November 17,
                2006.10(c)*
            Consulting
                Agreement dated June 30, 1995 between MICROS Systems, Inc. and Louis
                M.
                Brown, Jr. is incorporated herein by reference to Exhibit 10 to the
                Annual
                Report on Form 10-K of the Company for the Fiscal Year ended June
                30,
                1995.10(c)(1)*
            First
                Amendment to Consulting Agreement dated February 1, 1999 between
                MICROS
                Systems, Inc. and Louis M. Brown, Jr. is incorporated herein by reference
                to Exhibit 10 to the Quarterly Report on Form 10-Q of the Company
                for the
                period ended December 31, 1998.10(c)(2)*
            Second
                Amendment to Consulting Agreement dated April 26, 2001 between MICROS
                Systems, Inc. and Louis M. Brown, Jr. is incorporated herein by reference
                to Exhibit 10 to the Quarterly Report on Form 10-Q of the Company
                for the
                period ended March 31, 2001.10(c)(3)*
            Third
                Amendment to Consulting Agreement dated September 4, 2003 between
                MICROS
                Systems, Inc. and Louis M. Brown, Jr. is incorporated herein by reference
                to Exhibit 10 to the Annual Report on Form 10-K of the Company for
                the
                Fiscal Year ended June 30, 2003.10(c)(4)*
            Fourth
                Amendment to Consulting Agreement dated September 4, 2003 between
                MICROS
                Systems, Inc. and Louis M. Brown, Jr. is incorporated herein by reference
                to Exhibit 10 to the Current Report on Form 8-K filed on June 12,
                2007.10(d)*
            Employment
                Agreement dated May 28, 1997 between MICROS Systems, Inc. and Gary
                C.
                Kaufman is incorporated herein by reference to Exhibit 10 to the
                Annual
                Report on Form 10-K of the Company for the Fiscal Year ended June
                30,
                1997.10(d)(1)*
            First
                Amendment to Employment Agreement dated October 1, 1998 between MICROS
                Systems, Inc. and Gary C. Kaufman is incorporated herein by reference
                to
                Exhibit 10 to the Quarterly Report on Form 10-Q of the Company for
                the
                period ended December 31, 1998.10(d)(2)*
            Second
                Amendment to Employment Agreement dated October 1, 1998 between MICROS
                Systems, Inc. and Gary C. Kaufman is incorporated herein by reference
                to
                Exhibit 10 to the Current Report on Form 8-K filed on November 17,
                2006.10(e)*
            Employment
                Agreement dated May 28, 1997 between MICROS Systems, Inc. and Thomas
                L.
                Patz is incorporated herein by reference to Exhibit 10 to the Annual
                Report on Form 10-K of the Company for the Fiscal Year ended June
                30,
                1997.10(e)(1)*
            First
                Amendment to Employment Agreement dated October 1, 1998 between MICROS
                Systems, Inc. and Thomas L. Patz is incorporated herein by reference
                to
                Exhibit 10 to the Quarterly Report on Form 10-Q of the Company for
                the
                period ended December 31, 1998 (see 10(d)(1) above, as Mr. Patz’ amendment
                is an amendment identical (except for the identity of the executive
                and
                the economic terms) to that entered into by the Company with Mr.
                Kaufman).10(e)(2)*
            Second
                Amendment to Employment Agreement dated October 1, 1998 between MICROS
                Systems, Inc. and Thomas L. Patz is incorporated herein by reference
                to
                Exhibit 10 to the Current Report on Form 8-K filed on November 17,
                2006
                (see 10(d)(2) above, as Mr. Patz’ amendment is an amendment identical
                (except for the identity of the executive and the economic terms)
                to that
                entered into by the Company with Mr. Kaufman).10(f)*
            Restated
                Supplemental Executive Retirement Plan, as approved by the Board
                of
                Directors onApril
                27, 2005, incorporated herein by reference to Exhibit 10 to the Annual
                Report on Form 10-K for the fiscal year ended June 30,
                2006.10(g)
            Amended
                and Restated Credit Agreement, effective as of July 29, 2005, among
                MICROS
                Systems, Inc., DV Technology Holdings Corporation, Datavantage
                Corporation, MICROS Fidelio Nevada, LLC, MSI Delaware, LLC, Micros-Fidelio
                Worldwide, Inc., and JTECH Communications, Inc. as Borrower, Bank
                of
                America, N.A., as administrative agent, swing line lender and L/C
                issuer,
                and Wachovia Bank, N.A., and US Bank, N.A., and Banc of America Securities
                LLC, as sole lead arranger and book manager, is incorporated herein
                by
                reference to Exhibit 10 to the Annual Report on Form 10-K for the
                period
                ended June 30, 2005.10(g)(1)
            Amended
                and Restated Credit Agreement, effective as of July 29, 2005, among
                Micros-Fidelio (Ireland) Ltd., Micros-Fidelio Systems (UK) Ltd.,
                Micros-Fidelio España S.L., MICROS Fidelio (Canada), Ltd., Micros-Fidelio
                Brazil, Ltda., Micros-Fidelio France S.A.S., Hospitality Technologies,
                S.A., Micros-Fidelio Mexico S.A. de C.V., MICROS Systems Holding
                GmbH,
                Micros-Fidelio GmbH, Micros-Fidelio Software Portugal Unipessoal
                Lda,
                Micros-Fidelio (Thailand) Co., Ltd., Micros-Fidelio Singapore Pte
                Ltd.,
                Micros-Fidelio Software (Philippines), Inc., Micros-Fidelio Japan
                Ltd.,
                Micros-Fidelio Australia Pty. Ltd., Micros-Fidelio Hong Kong, Ltd.,
                Fidelio Nordic Norway A/S, Fidelio Nordic Oy, Fidelio Nordic Sverige,
                A.B., Hotelbk, A.B., as Borrower, Bank Of America, N.A., as Administrative
                Agent, swing line lender, and L/C issuer, and Wachovia Bank N.A.
                and US
                Bank N.A., and Banc of America Securities LLC, as sole lead arranger
                and
                book manager is incorporated herein by reference to Exhibit 10 to
                the
                Annual Report on Form 10-K for the Fiscal Year ended June 30,
                2005.14
            Code
                of Ethics and Business Practices is incorporated herein by reference
                to
                Exhibit 14 to the Annual Report on Form 10-K of the Company for the
                Fiscal
                Year ended June 30, 2004.21
            Subsidiaries
                of the Company (filed herewith)23
            Consent
                of Independent Registered Public Accounting Firm (filed
                herewith)31(a)
            Certification
                of Principal Executive Officer pursuant to Rule 13a-14(a) under the
                Securities Exchange Act of 1934 (filed
                herewith)




40




31(b)
            Certification
                of Principal Financial Officer pursuant to Rule 13a-14(a) under the
                Securities Exchange Act of 1934 (filed herewith)32(a)
            Certification
                of Principal Executive Officer pursuant to Rule 13a-14(b) under the
                Securities Exchange Act of 1934 and 18 U.S.C. 1350 (furnished
                herewith)32(b)
            Certification
                of Principal Financial Officer pursuant to Rule 13a-14(b) under the
                Securities Exchange Act of 1934 and 18 U.S.C. 1350 (furnished
                herewith)




*  Management
      contract or compensatory plan or arrangement.





41




**REPORT
      OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**




**To
      the Board of Directors and Shareholders of MICROS Systems,
      Inc:**




In
      our
      opinion, the consolidated financial statements listed in the index appearing
      under Item 15(a)(1) present fairly, in all material respects, the financial
      position of MICROS Systems, Inc. and its subsidiaries at June 30, 2007 and
      June
      30, 2006, and the results of their operations and their cash flows for each
      of
      the three years in the period ended June 30, 2007 in conformity with accounting
      principles generally accepted in the United States of America. In addition,
      in
      our opinion, the financial statement schedule listed in the index appearing
      under Item 15(a)(2) presents fairly, in all material respects, the information
      set forth therein when read in conjunction with the related consolidated
      financial statements. Also in our opinion, the Company maintained, in all
      material respects, effective internal control over financial reporting as of
      June 30, 2007, based on criteria established in Internal Control - Integrated
      Framework issued by the Committee of Sponsoring Organizations of the Treadway
      Commission (COSO). The Company's management is responsible for these financial
      statements and financial statement schedule, for maintaining effective internal
      control over financial reporting and for its assessment of the effectiveness
      of
      internal control over financial reporting, included in Management's Annual
      Report on Internal Control under Item 8. Our responsibility is to express
      opinions on these financial statements, on the financial statement schedule,
      and
      on the Company's internal control over financial reporting based on our
      integrated audits. We conducted our audits in accordance with the standards
      of
      the Public Company Accounting Oversight Board (United States). Those standards
      require that we plan and perform the audits to obtain reasonable assurance
      about
      whether the financial statements are free of material misstatement and whether
      effective internal control over financial reporting was maintained in all
      material respects. Our audits of the financial statements included examining,
      on
      a test basis, evidence supporting the amounts and disclosures in the financial
      statements, assessing the accounting principles used and significant estimates
      made by management, and evaluating the overall financial statement presentation.
      Our audit of internal control over financial reporting included obtaining an
      understanding of internal control over financial reporting, assessing the risk
      that a material weakness exists, and testing and evaluating the design and
      operating effectiveness of internal control based on the assessed risk. Our
      audits also included performing such other procedures as we considered necessary
      in the circumstances. We believe that our audits provide a reasonable basis
      for
      our opinions.





As
      discussed in Note 1 to the consolidated financial statements, the Company
      changed the manner in which it accounts for share-based compensation in fiscal
      year 2006 and the manner in which it accounts for defined benefit pension and
      other post retirement plans effective June 30, 2007.





A
      company’s internal control over financial reporting is a process designed to
      provide reasonable assurance regarding the reliability of financial reporting
      and the preparation of financial statements for external purposes in accordance
      with generally accepted accounting principles. A company’s internal control over
      financial reporting includes those policies and procedures that (i) pertain
      to the maintenance of records that, in reasonable detail, accurately and fairly
      reflect the transactions and dispositions of the assets of the company;
      (ii) provide reasonable assurance that transactions are recorded as
      necessary to permit preparation of financial statements in accordance with
      generally accepted accounting principles, and that receipts and expenditures
      of
      the company are being made only in accordance with authorizations of management
      and directors of the company; and (iii) provide reasonable assurance
      regarding prevention or timely detection of unauthorized acquisition, use,
      or
      disposition of the company’s assets that
      could have a material effect on the financial statements.





Because
      of its inherent limitations, internal control over financial reporting may
      not
      prevent or detect misstatements. Also, projections of any evaluation of
      effectiveness to future periods are subject to the risk that controls may become
      inadequate because of changes in conditions, or that the degree of compliance
      with the policies or procedures may deteriorate.





As
      described in Management's Annual Report on Internal Control over Financial
      Reporting, management has excluded ten companies (seven of which were
      wholly-owned), acquired in purchase business combinations during the fiscal
      year
      ended June 30, 2007, from its assessment of internal control over financial
      reporting at June 30, 2007. We have also excluded these companies from our
      audit
      of internal control over financial reporting. The combined total assets and
      combined total revenues represent approximately $94.7 million and $51.5 million,
      respectively, of the related consolidated financial statement amounts as of
      and
      for the year ended June 30, 2007. The most significant of these companies was
      RedSky, which represented $53.2 million of consolidated total assets and $13.4
      million of consolidated total revenues.





/s/
      PricewaterhouseCoopers LLP


Baltimore,
      Maryland


August
      29, 2007


42


**MICROS
      SYSTEMS, INC. AND SUBSIDIARIES**


**CONSOLIDATED
      BALANCE SHEETS**


**June
                    30,**(in
                    thousands, except par value data)
                
                **2007**
                
                **2006**ASSETSCurrent
                    Assets:Cash
                    and cash equivalents
                
                **$**
                **242,702**
                
                $
                237,222Short-term
                    investments
                
                
                **86,950**
                
                
                —Accounts
                    receivable, net of allowance for doubtful accounts of $23,110
                    at June 30,
                    2007 and $20,335 at June 30, 2006
                
                
                **180,203**
                
                
                141,159Inventory,
                    net
                
                
                **47,790**
                
                
                46,637Deferred
                    income taxes
                
                
                **16,683**
                
                
                16,649Prepaid
                    expenses and other current assets
                
                
                **27,650**
                
                
                15,485Total
                    current assets
                
                
                **601,978**
                
                
                457,152Property,
                    plant and equipment, net
                
                
                **27,955**
                
                
                23,794Deferred
                    income taxes, non-current
                
                
                **23,145**
                
                
                16,192Goodwill
                
                
                **138,332**
                
                
                98,581Intangible
                    assets, net
                
                
                **14,509**
                
                
                10,427Purchased
                    and internally developed software costs, net of accumulated amortization
                    of $54,708 at June 30, 2007 and $45,797 at June 30, 2006
                
                
                **36,296**
                
                
                38,328Other
                    assets
                
                
                **4,541**
                
                
                3,383Total
                    assets
                
                **$**
                **846,756**
                
                $
                647,857LIABILITIES
                    AND SHAREHOLDERS' EQUITYCurrent
                    Liabilities:Bank
                    lines of credit
                
                **$**
                **2,308**
                
                $
                2,134Accounts
                    payable
                
                
                **43,126**
                
                
                36,022Accrued
                    expenses and other current liabilities
                
                
                **116,327**
                
                
                84,897Current
                    portion of capital lease obligations
                
                
                **655**
                
                
                89Income
                    taxes payable
                
                
                **8,094**
                
                
                12,416Deferred
                    income taxes
                
                
                **160**
                
                
                227Deferred
                    service revenue
                
                
                **86,742**
                
                
                68,246Total
                    current liabilities
                
                
                **257,412**
                
                
                204,031Capital
                    lease obligations, net of current portion
                
                
                **260**
                
                
                424Deferred
                    income taxes, non-current
                
                
                **15,934**
                
                
                14,998Other
                    non-current liabilities
                
                
                **17,294**
                
                
                8,146Total
                    liabilities
                
                
                **290,900**
                
                
                227,599Minority
                    interests and minority ownership put arrangement
                
                
                **4,723**
                
                
                3,142Commitments
                    and contingencies (Note 11)Shareholders'
                    Equity:Common
                    stock, $0.0125 par value; authorized 50,000 shares; issued and
                    outstanding
                    40,548 at June 30, 2007 and 38,980 at June 30, 2006
                
                
                **507**
                
                
                487Capital
                    in excess of par
                
                
                **149,089**
                
                
                100,723Retained
                    earnings
                
                
                **382,785**
                
                
                302,848Accumulated
                    other comprehensive income
                
                
                **18,752**
                
                
                13,058Total
                    shareholders' equity
                
                
                **551,133**
                
                
                417,116Total
                    liabilities and shareholders' equity
                
                **$**
                **846,756**
                
                $
                647,857




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


43


**MICROS
      SYSTEMS, INC. AND SUBSIDIARIES**


**CONSOLIDATED
      STATEMENTS OF OPERATIONS**


**Fiscal
                  Year Ended June 30,**(in
                  thousands, except per share data)
              
              **2007**
              
              **2006**
              
              **2005**Revenue:Hardware
              
              **$**
              **233,838**
              
              $
              215,561
              
              $
              191,785Software
              
              
              **132,820**
              
              
              120,093
              
              
              106,370Service
              
              
              **419,069**
              
              
              343,299
              
              
              299,109Total
                  revenue
              
              
              **785,727**
              
              
              678,953
              
              
              597,264Cost
                  of sales:Hardware
              
              
              **149,085**
              
              
              144,061
              
              
              127,349Software
              
              
              **29,531**
              
              
              23,488
              
              
              22,822Service
              
              
              **195,600**
              
              
              165,721
              
              
              145,309Total
                  cost of sales
              
              
              **374,216**
              
              
              333,270
              
              
              295,480Gross
                  margin
              
              
              **411,511**
              
              
              345,683
              
              
              301,784Selling,
                  general and administrative expenses
              
              
              **254,317**
              
              
              216,827
              
              
              185,398Research
                  and development expenses
              
              
              **33,885**
              
              
              27,120
              
              
              27,399Depreciation
                  and amortization
              
              
              **12,721**
              
              
              10,459
              
              
              10,112Total
                  operating expenses
              
              
              **300,923**
              
              
              254,406
              
              
              222,909Income
                  from operations
              
              
              **110,588**
              
              
              91,277
              
              
              78,875Non-operating
                  income (expense):Interest
                  income
              
              
              **10,319**
              
              
              5,066
              
              
              2,461Interest
                  expense
              
              
              **(371**
              **)**
              
              (210
              )
              
              (1,235
              )Other
                  (expense) income, net
              
              
              **1,118**
              
              
              (468
              )
              
              993Total
                  non-operating income, net
              
              
              **11,066**
              
              
              4,388
              
              
              2,219Income
                  before taxes, minority interests and equity in net earnings of
                  affiliates
              
              
              **121,654**
              
              
              95,665
              
              
              81,094Income
                  tax provision
              
              
              **40,754**
              
              
              31,455
              
              
              26,761Income
                  before minority interests and equity in net earnings of
                  affiliates
              
              
              **80,900**
              
              
              64,210
              
              
              54,333Minority
                  interests and equity in net earnings of affiliates
              
              
              **(912**
              **)**
              
              (682
              )
              
              (673
              )Net
                  income(1)
              
              **$**
              **79,988**
              
              $
              63,528
              
              $
              53,660Net
                  income per common share(1):Basic
              
              **$**
              **2.00**
              
              $
              1.64
              
              $
              1.43Diluted
              
              **$**
              **1.94**
              
              $
              1.56
              
              $
              1.35Weighted-average
                  number of shares outstanding:Basic
              
              
              **39,989**
              
              
              38,692
              
              
              37,514Diluted
              
              
              **41,290**
              
              
              40,624
              
              
              39,803




(1) See
      Note
      2, "Share-based Compensation" in Notes to Consolidated Financial
      Statements.





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


44


**MICROS
      SYSTEMS, INC. AND SUBSIDIARIES**


**CONSOLIDATED
      STATEMENTS OF CASH FLOWS**


**Fiscal
                    Year Ended June 30,**(in
                    thousands)
                
                **2007**
                
                **2006**
                
                **2005**Cash
                    flows from operating activities:Net
                    income
                
                **$**
                **79,988**
                
                $
                63,528
                
                $
                53,660Adjustments
                          to reconcile net income to net cash provided by operating
                          activities:Depreciation
                    and amortization
                
                
                **12,721**
                
                
                10,459
                
                
                10,112Amortization
                    of capitalized software
                
                
                **8,392**
                
                
                6,978
                
                
                7,451Provision
                    for losses on accounts receivable excluding recoveries
                
                
                **3,356**
                
                
                5,454
                
                
                5,859Provision
                    for inventory obsolescence
                
                
                **3,157**
                
                
                3,530
                
                
                2,655Undistributed
                    earnings from equity investment and minority interest
                
                
                **912**
                
                
                682
                
                
                673Provision
                    for deferred income taxes (benefit)
                
                
                **(2,087**
                **)**
                
                (1,950
                )
                
                3,267Net
                    (gain) loss on disposal of property, plant and equipment and
                    equipment
                    capitalized software
                
                
                **(237**
                **)**
                
                1,492
                
                
                —Share-based
                    compensation
                
                
                **13,996**
                
                
                9,135
                
                
                —Income
                    tax benefit from stock options exercised
                
                
                **—**
                
                
                —
                
                
                22,117Changes
                    in assets and liabilities (net of impact of acquisitions):Increase
                    in accounts receivable
                
                
                **(29,278**
                **)**
                
                (12,306
                )
                
                (34,454
                )Increase
                    in inventory
                
                
                **(1,140**
                **)**
                
                (7,182
                )
                
                (6,789
                )(Increase)
                    decrease in prepaid expenses and other assets
                
                
                **(9,142**
                **)**
                
                12,975
                
                
                (10,927
                )Increase
                    (decrease) in accounts payable
                
                
                **5,055**
                
                
                (2,944
                )
                
                7,712Increase
                    in accrued expenses and other current liabilities
                
                
                **28,104**
                
                
                14,282
                
                
                18,723Increase
                    (decrease) in income taxes payable
                
                
                **(694**
                **)**
                
                10,193
                
                
                (4,543
                )Increase
                    in deferred service revenue
                
                
                **1,663**
                
                
                7,355
                
                
                14,778Net
                    cash flows provided by operating activities
                
                
                **114,766**
                
                
                121,681
                
                
                90,294Cash
                    flows from investing activities:Net
                    cash paid for acquisitions
                
                
                **(40,541**
                **)**
                
                (14,094
                )
                
                (18,538
                )Purchases
                    of property, plant and equipment
                
                
                **(11,279**
                **)**
                
                (10,740
                )
                
                (10,245
                )Internally
                    developed software
                
                
                **(1,974**
                **)**
                
                (3,523
                )
                
                (5,745
                )Purchases
                    of other intangible assets
                
                
                **—**
                
                
                (575
                )
                
                —Disposal
                    of property, plant and equipment
                
                
                **398**
                
                
                112
                
                
                —Purchases
                    of short-term investments
                
                
                **(122,400**
                **)**
                
                —
                
                
                (175,200
                )Proceeds
                    from sales of short-term investments
                
                
                **35,450**
                
                
                —
                
                
                183,200Purchases
                    of other investments
                
                
                **(838**
                **)**
                
                (500
                )
                
                —Net
                    cash flows used in investing activities
                
                
                **(141,184**
                **)**
                
                (29,320
                )
                
                (26,528
                )Cash
                    flows from financing activities:Repurchases
                    of stock
                
                
                **(17,870**
                **)**
                
                (40,234
                )
                
                (26,777
                )Proceeds
                    from stock option exercises
                
                
                **34,966**
                
                
                18,532
                
                
                33,150Realized
                    tax benefits from stock option exercises
                
                
                **16,781**
                
                
                13,305
                
                
                —Principal
                    payments on line of credit
                
                
                **(3,717**
                **)**
                
                (628
                )
                
                —Proceeds
                    from lines of credit
                
                
                **1,650**
                
                
                318
                
                
                —Dividends
                    to minority owners
                
                
                **(445**
                **)**
                
                (262
                )
                
                (316
                )Put
                    option arrangement
                
                
                **(51**
                **)**
                
                —
                
                
                —Net
                    (decrease) increase in capital lease obligations
                
                
                **(168**
                **)**
                
                (60
                )
                
                90Net
                    cash flows provided by (used in) financing activities
                
                
                **31,146**
                
                
                (9,029
                )
                
                6,147Effect
                    of exchange rate changes on cash and cash equivalents
                
                
                **752**
                
                
                369
                
                
                157Net
                    increase in cash and cash equivalents
                
                
                **5,480**
                
                
                83,701
                
                
                70,070Cash
                    and cash equivalents at beginning of year
                
                
                **237,222**
                
                
                153,521
                
                
                83,451Cash
                    and cash equivalents at end of year
                
                **$**
                **242,702**
                
                $
                237,222
                
                $
                153,521Supplemental
                    disclosures of cash flow information:Cash
                    paid (received) during the fiscal year for:Interest
                
                **$**
                **89**
                
                $
                213
                
                $
                2,322Income
                    taxes (net refund)
                
                **$**
                **24,561**
                
                $
                (971
                )
                $
                14,922




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


45


**MICROS
      SYSTEMS, INC. AND SUBSIDIARIES**


**CONSOLIDATED
      STATEMENTS OF SHAREHOLDERS’ EQUITY AND COMPREHENSIVE
      INCOME**


**Common
                  Stock**
              
              **Capital**
                **in**
              
              
              
              **Accumulated**
                **Other**(in
                  thousands)
              
              **Shares**
              
              **Amount**
              
              **Excess**
                **of
                  Par**
              
              **Retained**
                **Earnings**
              
              **Comprehensive**
                **Income**
              
              **Total**Balance,
                  June 30, 2004
              
              
              36,670
              
              $
              457
              
              $
              71,525
              
              $
              185,660
              
              $
              5,331
              
              $
              262,973Comprehensive
                  income:Net
                  income
              
              
              —
              
              
              —
              
              
              —
              
              
              53,660
              
              
              —
              
              
              53,660Foreign
                  currency translation adjustments
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              48
              
              
              48Total
                  comprehensive income
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              53,708Stock
                  issued upon exercise of options
              
              
              2,872
              
              
              36
              
              
              33,114
              
              
              —
              
              
              —
              
              
              33,150Repurchases
                  of stock
              
              
              (897
              )
              
              (11
              )
              
              (26,766
              )
              
              —
              
              
              —
              
              
              (26,777
              )Income
                  tax benefit from options exercised
              
              
              —
              
              
              —
              
              
              22,117
              
              
              —
              
              
              —
              
              
              22,117Balance,
                  June 30, 2005
              
              
              38,645
              
              
              482
              
              
              99,990
              
              
              239,320
              
              
              5,379
              
              
              345,171Comprehensive
                  income:Net
                  income
              
              
              —
              
              
              —
              
              
              —
              
              
              63,528
              
              
              —
              
              
              63,528Foreign
                  currency translation adjustments
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              7,679
              
              
              7,679Total
                  comprehensive income
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              71,207Share-based
                  compensation
              
              
              —
              
              
              —
              
              
              9,135
              
              
              —
              
              
              —
              
              
              9,135Stock
                  issued upon exercise of options
              
              
              1,256
              
              
              16
              
              
              18,516
              
              
              —
              
              
              —
              
              
              18,532Repurchases
                  of stock
              
              
              (921
              )
              
              (11
              )
              
              (40,223
              )
              
              —
              
              
              —
              
              
              (40,234
              )Income
                  tax benefit from options exercised
              
              
              —
              
              
              —
              
              
              13,305
              
              
              —
              
              
              —
              
              
              13,305Balance,
                  June 30, 2006
              
              
              38,980
              
              
              487
              
              
              100,723
              
              
              302,848
              
              
              13,058
              
              
              417,116Comprehensive
                  income:Net
                  income
              
              
              **—**
              
              
              **—**
              
              
              **—**
              
              
              **79,988**
              
              
              **—**
              
              
              **79,988**Foreign
                  currency translation adjustments
              
              
              **—**
              
              
              **—**
              
              
              **—**
              
              
              **—**
              
              
              **11,623**
              
              
              **11,623**Total
                  comprehensive income
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              **91,611**Cumulative
                  effect of change in accounting principle
              
              
              **—**
              
              
              **—**
              
              
              **—**
              
              
              **—**
              
              
              **(5,929**
              **)**
              
              **(5,929**
              **)**Minority
                  interest put arrangement
              
              
              **—**
              
              
              **—**
              
              
              **—**
              
              
              **(51**
              **)**
              
              **—**
              
              
              **(51**
              **)**Share-based
                  compensation
              
              
              **—**
              
              
              **—**
              
              
              **13,996**
              
              
              **—**
              
              
              **—**
              
              
              **13,996**Stock
                  issued upon exercise of options
              
              
              **1,917**
              
              
              **24**
              
              
              **34,942**
              
              
              **—**
              
              
              **—**
              
              
              **34,966**Repurchases
                  of stock
              
              
              **(349**
              **)**
              
              **(4**
              **)**
              
              **(17,866**
              **)**
              
              **—**
              
              
              **—**
              
              
              **(17,870**
              **)**Income
                  tax benefit from options exercised
              
              
              **—**
              
              
              **—**
              
              
              **17,294**
              
              
              **—**
              
              
              **—**
              
              
              **17,294**Balance,
                  June 30, 2007
              
              
              **40,548**
              
              **$**
              **507**
              
              **$**
              **149,089**
              
              **$**
              **382,785**
              
              **$**
              **18,752**
              
              **$**
              **551,133**








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


46


**MICROS
      SYSTEMS, INC. AND SUBSIDIARIES**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**





**1.**
            **DESCRIPTION
                OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING
                POLICIES:**





**DESCRIPTION
      OF BUSINESS**


MICROS
      Systems, Inc. is
      a
      leading worldwide designer, manufacturer, marketer and servicer of enterprise
      information solutions for the global hospitality and specialty retail
      industries. The information solutions consist of application specific software
      and hardware systems, supplemented by a wide range of services. The hospitality
      industry includes numerous defined markets such as lodging (including individual
      hotel sites, hotel central reservation systems and customer information
      systems), table service restaurants, quick service restaurants, entertainment
      venues such as stadiums and arenas, business foodservice operations, casinos,
      transportation foodservice, government operations, and cruise ships. The
      specialty retail industry consists of retail operations selling to consumers
      both general and specific products, such as clothing, shoes, food, hardware,
      jewelry, and other specialty items. (References to “MICROS” or the “Company” herein include the operations of MICROS
      Systems, Inc. and its subsidiaries on a consolidated basis.)




**BASIS
      OF PREPARATION AND USE OF ESTIMATES**


The
      preparation of consolidated financial statements in accordance with accounting
      principles generally accepted in the United States of America requires
      management to make estimates and assumptions that affect the amounts reported
      in
      the Company’s consolidated financial statements and accompanying notes. Although
      these estimates are based on management’s knowledge of current events and
      actions that the Company may undertake in the future, actual results may
      ultimately differ from these estimates.





**PRINCIPLES
      OF CONSOLIDATION**


The
      consolidated financial statements include the accounts of the Company and its
      majority-owned subsidiaries. The net income of the Company’s subsidiaries is
      recorded net of minority interests. Investments in 20% through 50% owned
      affiliated companies and any investments in affiliated companies, in which
      the
      Company exercises significant influence over operating and financial affairs,
      are accounted for under the equity method. Otherwise, investments are recorded
      at cost. All significant intercompany accounts and transactions have been
      eliminated.





**FOREIGN
      CURRENCY TRANSLATION**


The
      financial statements of the Company’s non-U.S. operations are translated into
      U.S. dollars for financial reporting purposes. The assets and liabilities of
      non-U.S. operations whose functional currencies are not in U.S. dollars are
      translated at the fiscal year-end exchange rates, while revenues and expenses
      are translated at month end exchange rates during the fiscal year which
      approximate weighted average exchange rates. The cumulative translation effects
      are reflected as a component of the Company’s accumulated other comprehensive
      income within shareholders’ equity. Gains and losses on monetary transactions
      denominated in other than the functional currency of an operation are reflected
      in other income (expense).




**REVENUE
      RECOGNITION**


Revenue
      is generated from software licenses, hardware and service and support. Revenue
      is recognized in accordance with American Institute of Certified Public
      Accountants Statement of Position (“SOP”) 97-2, “Software Revenue Recognition,”
as modified by SOP 98-9, “Modification of SOP 97-2, Software Revenue Recognition
      with Respect to Certain Transactions and the Securities and Exchange Commission
      Staff Accounting Bulletin No. 104, “Revenue Recognition in Financial Statements
      (“SAB NO. 104”).” Revenue under multiple-element arrangements, which typically
      include hardware, software licenses, and maintenance agreements sold together,
      are allocated to each element in the arrangement using the residual method
      prescribed by SOP 98-9, based on vendor specific objective evidence (“VSOE”) of
      the fair value of any undelivered elements of the arrangement, i.e., an
      allocated portion of revenue is deferred from the arrangement, equivalent to
      the
      fair value of undelivered elements.


Revenue
      from software license, hardware and service and support are generally recognized
      when the four basic criteria of SOP 97-2 are met as follows:


·
            Persuasive
                evidence of an arrangement exists: The Company requires a contract
                signed
                by both parties to the agreement or a purchase order received from
                the
                customer as persuasive evidence of an arrangement.


·
            Delivery
                has occurred or services have been rendered: Delivery occurs at FOB
                shipping point when provided to a common carrier, if the risk of
                ownership
                has passed to the buyer or in the case of electronic delivery, delivery
                occurs when the customer is given access to the licensed programs.
                If the
                risk of ownership has not passed to the buyer when provided to the
                common
                carrier, delivery occurs when the risk has passed to the
                buyer.


·
            Fixed
                or determinable fee: The Company considers the license fee to be
                fixed or
                determinable if the fee is not subject to refund or adjustment and
                is
                payable within twelve months of delivery with generally no more than
                20%
                of the contract price due at the end of the payment term. If the
                arrangement fee is not fixed or determinable, the Company recognizes
                the
                revenue as amounts become due and payable. The Company considers
                service
                fees to be fixed or determinable if the services fee or rates for
                time and
                material contracts are not subject to refund or
                adjustment.




47




·
            Collection
                is probable: The Company performs credit review for significant
                transactions at the time the arrangement is executed to determine
                the
                credit-worthiness of the customer. Collection is deemed probable
                if the
                Company expects that the customer will be able to pay amounts under
                the
                arrangement as they become due. If the Company determines from the
                outset
                of an arrangement that collection is not probable, revenue is recognized
                as collection occurs.




Costs
      related to shipping and handling and billable travel expenses are included
      in
      cost of sales. The Company reduces revenue for estimated customer returns and
      allowances.





***Hardware***


The
      Company’s main proprietary hardware is point-of-sale terminals. The Company also
      sells other hardware devices, such as printers, cash drawers, handheld order
      entry terminals and pole displays. The Company also resells various hardware
      products, including personal computers, servers, printers, network cards and
      other related computer equipment.


Hardware
      revenue is recognized, in accordance with SAB No. 104. Hardware revenue is
      recognized at FOB shipping point when the hardware is provided to a common
      carrier if at the time of shipment, the Company has an arrangement, the risk
      of
      ownership has passed to the buyer, there is a fixed and determinable price
      and
      collectibility is reasonably assured. If at the time of shipment, the Company
      hasn’t met the four criteria listed above, recognition of the hardware revenue
      is deferred until all four criteria are determined to have been
      met.


Hardware
      revenue is outside the scope of SOP 97-2 because any system software embedded
      in
      the hardware is used solely in connection with the operation of the hardware
      and
      is incidental to the hardware product as a whole; once installed, the embedded
      system software is not updated for new versions that are subsequently
      developed.





***Software***


The
      Company’s proprietary software consists of hotel software systems, restaurant
      software systems and retail software systems. The Company also resells various
      third party software products. All software products are sold on a stand alone
      basis and can be used with third party hardware products and do not require
      the
      Company’s hardware products.


Revenue
      related to all software products, whether sold stand alone or with the Company’s
      hardware products, is recognized in accordance with SOP 97-2. If a software
      license contains customer acceptance criteria or a cancellation right,
      recognition of the software revenue is deferred until the earlier of customer
      acceptance or the expiration of the acceptance period or cancellation right.
      If
      a third party can install the software, revenue is recognized when shipped,
      with
      an appropriate deferral for any undelivered software contract elements. However,
      if the Company is the sole party that has the proprietary knowledge to install
      the software, such as for OPERA software, revenue is recognized upon
      installation and when ready to go live, with an appropriate deferral for any
      undelivered software contract elements. Fees are allocated to the various
      elements of software license agreements using the residual method prescribed
      by
      SOP 98-9, based on vendor specific objective evidence (“VSOE”) of the fair value
      of any undelivered elements of the arrangement. VSOE of fair value for the
      Company’s services, including maintenance agreements, are based upon separate
      sales of those arrangements, which are consistently applied. Under the residual
      method, the Company defers revenue for the fair value of its undelivered
      elements based on VSOE of fair value, and the remaining portion of the
      arrangement fee is allocated to the delivered elements and recognized as revenue
      when the basic criteria in SOP 97-2 are met.


Typically,
      payments for software licenses are due within twelve months of the agreement
      date. When software license agreements call for escalating payment terms, or
      payment terms of twelve months or more from the delivery date, software revenue
      is recognized as payments become due and only if all other conditions for
      revenue recognition have been satisfied.




***Service***


The
      Company provides maintenance support, installation, customer specific
      development and, more recently, also provides software-hosting services.
      Maintenance support and software-hosting services are initially recorded as
      deferred service revenue and revenue is recognized ratably over the contract
      term. Revenue related to installation services, which include project
      management, systems planning, design and implementation, customer
      configurations, training and assistance activating the Company’s products are
      recognized as the service is rendered.


The
      Company’s software is ready for use by the customer upon receipt. While many of
      the customers may choose to tailor the software to fit their specific needs
      or
      request the Company’s assistance activating the programs, the Company’s
      implementation services do not typically involve significant customization
      to or
      development of the underlying source code.


When
      the
      Company provides services deemed to be essential to the functionality of the
      software products licensed or the licensed software requires significant
      production, modification or customization, the Company recognizes software
      and
      services revenue under the completed contract method in accordance with SOP
      81-1, “Accounting for Performance of Construction Type and Certain Production
      Type Contracts.” Once acceptance occurs, revenue is recognized for all delivered
      elements based on VSOE, and maintenance service revenue is deferred and
      recognized ratably over the contract term. The completed contract method of
      accounting is followed rather than the percentage of completion method as the
      production cycles are usually not long term (less than one
      year).


48




**CASH
      EQUIVALENTS**


The
      Company considers all highly liquid investments with original maturities of
      three months or less to be cash equivalents. The
      Company's cash equivalents are recorded at cost, which approximates fair value,
      and consist primarily of high-grade commercial paper, money market funds, U.S.
      government agency securities and tax-exempt notes and bonds.





**SHORT-TERM
      INVESTMENTS**


The
      Company’s investments in auction rate securities, which are debt instruments
      with long-term scheduled maturities and periodic interest rate reset dates,
      are
      classified as available-for-sale and are recorded at fair value, which
      approximates costs as the interest rates on these securities are reset to market
      prevailing rates every 7 to 35 days. Due to the liquidity provided by the
      interest rate reset mechanism and the short-term nature of the Company’s
      investment in these securities have been classified as current assets in the
      accompanying Consolidated Balance Sheets. As of June 30, 2007, there were no
      unrealized gains or losses on these investments and the Company recognized
      no
      gains or losses related to the sale of its investments in auction rate
      securities during the three fiscal years ended June 30, 2007.





**ALLOWANCE
      FOR DOUBTFUL ACCOUNTS**


The
      Company maintains allowances for doubtful accounts for estimated losses that
      may
      result from the inability of the Company’s customers to make required payments
      and for limited circumstances when the customer disputes the amounts due to
      the
      Company. The Company’s methodology for determining this allowance requires
      estimates and is based on the age of the receivable, customer’s payment
      practices and history, inquiries, credit reports from third parties and other
      financial information. If the financial condition of the Company’s customers
      were to deteriorate, resulting in an impairment of their ability to make
      payments, additional allowances may be required. As of June 30, 2007 and 2006,
      accounts receivable totaled approximately $180.2 million and $141.2 million,
      net
      of an allowance for doubtful accounts of approximately $23.1 million and $20.3
      million, respectively. Additionally, bad debt expenses, net of recoveries,
      for
      the fiscal years 2007, 2006 and 2005 were approximately $3.4 million, $5.4
      million and $5.7 million, respectively.





**INVENTORY**


Inventory
      is stated at the lower of standard cost which approximates cost, or market.
      Standard cost is determined principally by the first-in, first-out basis, or
      market. The Company maintains a reserve for obsolescence for inventory in the
      amount of approximately $9.9 million as of June 30, 2007 and June 30,
      2006.





**PROPERTY,
      PLANT AND EQUIPMENT**


Property,
      plant and equipment are stated at cost and depreciated using the straight-line
      method over their estimated useful lives, ranging from three to ten years.
      Leasehold improvements are amortized over the life of the lease or estimated
      useful lives, whichever is shorter. Maintenance and repairs are charged to
      expense as incurred, and the costs of additions and improvements are
      capitalized. Any gain or loss from the retirement or sale of an asset is
      credited or charged to operations in the current period.





**SOFTWARE
      FOR INTERNAL USE**


Internally
      used computer software is capitalized according to SOP 98-1, “Accounting for the
      Costs of Computer Software Developed or Obtained for Internal Use.” Capitalized
      costs are amortized on a straight-line basis over the estimated life of the
      software ranging up to seven years.





**CAPITALIZED
      SOFTWARE DEVELOPMENT COSTS**


Costs
      incurred in the research and development of new software products to be licensed
      to others, costs primarily consisting of salaries, employee benefits and
      administrative costs, are expensed as incurred and included in research and
      development expenses until technological feasibility is established. The
      capitalization of software development costs on a product-by-product basis
      starts when a product’s technological feasibility has been established and ends
      when the product is available for general release to customers, at which time
      amortization begins. Technological feasibility is reached when the product
      reaches the working model stage. The cost of purchased software is also
      capitalized.


Annual
      amortization of capitalized software development costs are charged to software
      cost of sales and is the greater of: (i) the amount computed using the ratio
      that each capitalized software product’s current fiscal year gross revenue is to
      the total current fiscal year and anticipated future gross revenues for that
      product or (ii) the amortization based on straight-line method over the
      remaining estimated economic life of the product. Amortization expense for
      the
      fiscal years 2007, 2006 and 2005 were approximately $8.4 million, $7.0 million
      and $7.5 million, respectively. Additionally, during the fiscal year 2006,
      the
      Company wrote off approximately $1.6 million in capitalized software costs
      related to products for which no future revenue was projected.


49




**LONG-LIVED
      ASSETS INCLUDING FINITE-LIVED PURCHASED INTANGIBLE
      ASSETS**


The
      Company evaluates long-lived assets, including finite-lived purchased intangible
      assets, for impairment whenever events and changes in circumstances indicate
      that the carrying amount of an asset may not be fully recoverable in accordance
      with SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived
      Assets.” The Company compares the fair value of the assets based on the
      undiscounted cash flows the assets are expected to generate to the book value
      of
      the assets. If the fair value is less than book value, the asset is impaired
      and
      an impairment loss would be recognized by the Company. The impairment loss
      represents the excess of book value over fair value based on a discounted cash
      flow approach or market values if available.


During
      the last three fiscal years ended June 30, 2007, the Company did not recognize
      any impairment losses on long-lived assets, including finite-lived purchased
      intangible assets.





**GOODWILL
      AND INDEFINITE-LIVED PURCHASED INTANGIBLE ASSETS**


SFAS
      No.
      142, “Goodwill and Other Intangible Assets” prohibits the amortization of
      goodwill and indefinite-lived purchased intangible assets. The Company assesses
      whether goodwill and the Company’s only indefinite-lived purchased intangible
      assets, trademarks, are impaired on an annual basis in accordance with SFAS
      No.
      142 during the first quarter of its fiscal year.  Goodwill is evaluated for
      impairment by comparing the fair value of each reporting unit to its book value.
      The fair value of each reporting unit (the Company’s four operating segments
      consisting of U.S., Europe, the Pacific Rim and Latin America), is determined
      based on a weighting of the income approach (i.e., discounted future income
      associated with the item) and market approaches (i.e., as compared to similar
      assets purchased or sold in the same industry) to value. If the fair value
      of
      the reporting unit exceeds the book value of the net assets assigned to that
      unit, goodwill is not impaired. If goodwill is impaired, the Company recognizes
      an impairment loss based on the amount by which the book value of goodwill
      exceeds its fair value.  The implied fair value of goodwill is determined
      by deducting the fair value of a reporting unit’s identifiable assets and
      liabilities from the fair value of the reporting unit as a whole, as if that
      reporting unit had just been acquired and the purchase price were being
      initially allocated.


Trademarks
      are evaluated for impairment by comparing their fair value to book value. The
      Company estimates the fair value of trademarks using an income approach to
      value, and recognizes an impairment loss if the estimated fair value of a
      trademark is less than its book value.


Additional
      impairment assessments may be performed on an interim basis if the Company
      encounters events or changes in circumstances that indicate that, more likely
      than not, the book value of goodwill and/or trademarks has been
      impaired.


The
      process of evaluating the potential impairment of goodwill and/or trademarks
      is
      highly subjective and requires significant judgment at many points during the
      analysis. In estimating the fair value of the reporting units with recognized
      goodwill for the purposes of its annual or periodic analyses, the Company makes
      estimates and judgments about the future cash flows of these businesses. The
      cash flow forecasts are based on assumptions that are consistent with the plans
      and estimates used to manage the underlying reporting units. The Company also
      considers its market capitalization on the date the analysis is
      performed.




**ADVERTISING
      COSTS**


Advertising
      costs are charged to expense as incurred. Advertising expenses for the fiscal
      years 2007, 2006 and 2005 were
      approximately $6.6 million, $4.9 million and $4.6 million, respectively.


**RESEARCH
      AND DEVELOPMENT COSTS**


Research
      and development costs, primarily consisting of salaries, employee benefits
      and
      administrative costs, not capitalized as Capitalized Software Development Costs
      are charged to operations as incurred. Research and development costs for the
      fiscal years ended June 30, 2007, 2006 and 2005 were approximately $33.9
      million, $27.1 million and $27.4 million, respectively.





**SHARE-BASED
      COMPENSATION**


The
      Company accounts for its option awards granted under the stock option program
      in
      accordance with Statement of Financial Accounting Standards (“SFAS”) No. 123(R),
“Share-Based Payment,” which became effective July 1, 2005 for the Company. The
      Company adopted the “Modified Prospective Application” transition method, which
      did not result in restatement of previously issued financial
      statements.





**WARRANTIES**


The
      Company’s products are under warranty for defects in material and workmanship
      for a period ranging from 12 to 36 months. The Company establishes an accrual
      for estimated warranty costs at the time of sale and historically, the Company’s
      warranty expense has not been material.





**INCOME
      TAXES**


Income
      taxes are accounted for under the asset and liability method. Deferred tax
      assets and liabilities are recognized for the expected future tax consequences
      attributable to the differences between the financial statement carrying amounts
      and the tax basis of assets and liabilities. Deferred tax assets and liabilities
      are measured using the enacted tax rates in effect for the year in which those
      temporary differences are expected to be recovered or settled. The effect on
      the
      deferred tax assets and liabilities of a change in tax rate is recognized in
      income in the period that includes the enactment date. Valuation allowances
      are
      established when necessary to reduce deferred tax assets to the amounts more
      likely than not to be realized. If the Company determines that it will not
      be
      able to realize all or part of its net deferred tax asset in the future, an
      adjustment to the deferred tax asset would be charged to the deferred income
      tax
      provision in the period such determination is made.


50


**NET
      INCOME PER SHARE**


Basic
      net
      income per common share is computed by dividing net income available to common
      shareholders by the weighted-average number of shares outstanding. Diluted
      net
      income per share includes the dilutive effect of stock options. A reconciliation
      of the net income available to common shareholders and the weighted-average
      number of common shares outstanding assuming dilution is as
      follows:





**Fiscal
                Year Ended June 30,**(in
                thousands, except per share data)
            
            **2007**
            
            **2006**
            
            **2005**Net
                income
            
            **$**
            **79,988**
            
            $
            63,528
            
            $
            53,660Effect
                of minority put arrangement
            
            
            **(51**
            **)**
            
            —
            
            
            —Net
                income available to common shareholders
            
            **$**
            **79,937**
            
            $
            63,528
            
            $
            53,660Average
                common shares outstanding
            
            
            **39,989**
            
            
            38,692
            
            
            37,514Dilutive
                effect of outstanding stock options
            
            
            **1,301**
            
            
            1,932
            
            
            2,289Average
                common shares outstanding assuming dilution
            
            
            **41,290**
            
            
            40,624
            
            
            39,803Basic
                net income per share
            
            **$**
            **2.00**
            
            $
            1.64
            
            $
            1.43Diluted
                net income per share
            
            **$**
            **1.94**
            
            $
            1.56
            
            $
            1.35Anti-dilutive
                weighted shares excluded from reconciliation
            
            
            **1,264**
            
            
            546
            
            
            437




Fiscal
      years ended June 30, 2007 and 2006 include approximately $14.0 million ($11.1
      million, net of tax) and $9.1 million ($7.1 million, net of tax), in non-cash
      share-based compensation expense. These non-cash share-based compensation
      expenses reduced diluted net income per share by $0.27 and $0.18 for fiscal
      years 2007 and 2006, respectively. See Note 2, “Share-based
      Compensation.”


In
      connection with one of the acquisitions the Company made during fiscal year
      2007, the arrangement provides the minority interest holders the option to
      require the Company to purchase the minority shares from the minority interest
      holders based on a pre-defined formula which includes certain financial results
      of the acquired company. This arrangement reduced the net income available
      to
      common shareholders in the earnings per share calculation. The impact of this
      arrangement was less than $0.01 per diluted share. See Note 3,
“Acquisitions.”





**FAIR
      VALUE OF FINANCIAL INSTRUMENTS**


The
      carrying amounts of the Company’s financial instruments reflected in the
      consolidated balance sheet approximate their fair values.





**DEFINED
      BENEFIT PLAN**


The
      Company’s Supplemental Executive Retirement Plan (the “SERP Plan”) provides
      designated officers and executives of the Company with benefits upon retirement
      or immediate vesting of benefits upon a participant’s pre-retirement death. The
      SERP Plan is accounted for in accordance with SFAS 87, “Employers Accounting for
      Pensions.”


In
      September 2006, the FASB issued SFAS No. 158, “Employers’ Accounting for Defined
      Benefit Pension and Other Postretirement Plans – an amendment of FASB Statements
      87, 88, 106 and 132(R)” (“SFAS No. 158”). SFAS No. 158 required the Company to
      recognize the funded status (the difference between the fair value of plan
      assets and the projected benefit obligations) of SERP Plan in the Company’s
      statement of financial position, with a corresponding adjustment to accumulated
      other comprehensive income, net of tax, to measure the fair value of plan
      benefit obligations as of its fiscal year ending June 30, 2007 and to provide
      additional disclosures. On June 30, 2007, the Company adopted the recognition
      and disclosure provisions of SFAS No. 158 and has included the effect of
      adoption at June 30, 2007 in the accompanying consolidated financial statements.
      SFAS No. 158 did not have an effect on the Company’s consolidated financial
      condition at June 30, 2006 or for any prior periods presented, and it will
      not
      affect the Company’s operating results in future periods. SFAS No. 158’s
      provisions regarding the change in the measurement date of benefit plans is
      not
      applicable as the Company already uses a measurement date of June 30 for its
      SERP Plan. This plan is described more fully in Note 16, “Employee Benefit
      Plans.”





**RECENT
      ACCOUNTING STANDARDS**


***SFAS
      No. 159***


In
      February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for
      Financial Assets and Financial Liabilities” (“SFAS No. 159”), which allows
      entities to choose to measure eligible financial instruments at fair value
      as of
      specified dates. Such election, which may be applied on an instrument by
      instrument basis, is typically irrevocable once elected. SFAS 159 is effective
      for fiscal years beginning after November 15, 2007. The Company is currently
      reviewing the impact of the adoption of the SFAS 159 on the Company’s
      consolidated financial position, results of operations and cash
      flows.




51




***SFAS
      No. 157***


In
      September 2006, the FASB issued SFAS No. 157 “Fair Value Measurements”
(“SFAS No. 157”) to establish a framework for measuring fair value under
      generally accepted accounting principles and to expand disclosures on fair
      value
      measurements. The statement applies to previously established valuation
      pronouncements, but is to be applied prospectively, so that it does not require
      the changing of any previous fair value measurements. SFAS No. 157 may cause
      some valuation procedures used by the Company to change after its adoption.
      Under SFAS No. 157, fair value is established by the price that would be
      received to sell the item or the amount to be paid to transfer the liability
      or
      the asset (an exit price), as opposed to the price to be paid for the asset
      or
      received to assume the liability (an entry price). SFAS No. 157 is effective
      for
      all assets valued in financial statements for fiscal years beginning after
      November 15, 2007. The Company is currently reviewing the impact of the
      adoption of the SFAS 157 on the Company’s consolidated financial position,
      results of operations and cash flows.





***SAB
      No. 108***


In
      September 2006, the SEC issued Staff Accounting Bulletin No. 108 (“SAB No.
      108”), which provides interpretive guidance on the process of quantifying
      financial statement misstatements. The application of SAB No. 108 has not had
      a
      material impact on the Company’s consolidated financial position, results of
      operations and cash flows.





***FIN
      48***


In
      June
      2006, the FASB issued Interpretation No. 48, “Accounting for Uncertainty in
      Income Taxes, an interpretation of FAS 109, ‘Accounting for Income Taxes’” (“FIN
      48”), to create a single model to address accounting for uncertainty in tax
      positions.  FIN 48 clarifies the accounting for income taxes by prescribing
      a minimum recognition threshold a tax position is required to meet before being
      recognized in the financial statements.  FIN 48 also provides guidance on
      derecognition, measurement, classification, interest and penalties, accounting
      in interim periods, disclosure and transition.  FIN 48 is effective for
      fiscal years beginning after December 15, 2006. As required, the Company will
      adopt FIN 48 in the first quarter of fiscal year 2008.  The cumulative
      effect of adopting FIN 48 will be recorded in retained earnings and other
      accounts as applicable.  The Company is currently reviewing the impact of
      the adoption of FIN 48 on the Company’s consolidated financial position, results
      of operations and cash flows.





**2.**
            **SHARE-BASED
                COMPENSATION:**




The
      Company has incentive and non-qualified stock options outstanding that were
      granted to directors, officers, and other employees pursuant to authorization
      by
      the Board of Directors. With respect to directors, the Company’s policy and
      practice during the current fiscal year was that only those directors who are
      also either employees of or consultants to the Company were eligible to receive
      options. The exercise price per share of each option equals the market value
      of
      a share of the Company’s common stock on the date of the grant. Substantially
      all of the options granted are exercisable pursuant to a three-year vesting
      schedule whereby one-third of the options vest upon the first anniversary of
      the
      grant, the second third of the options vest upon the second anniversary of
      the
      grant, and the final third of the options vest upon the third anniversary of
      the
      grant. All outstanding options expire ten years from the date of grant. Since
      its inception in 1991, the Company has authorized approximately 16.4 million
      shares for issuance upon exercise of options, of which approximately 1.6 million
      shares were available for future grants as of June 30, 2007. As of June 30,
      2007, options to purchase approximately 3.6 million shares were outstanding,
      including currently exercisable options to purchase approximately 2.1 million
      shares.





**FISCAL
      YEARS ENDED JUNE 30, 2007 AND 2006**


The
      Company accounts for its option awards granted under the stock option program
      in
      accordance with SFAS No. 123(R), “Share-Based Payment,” which became effective
      July 1, 2005 for the Company. The Company adopted the “Modified Prospective
      Application” transition method, which did not result in restatement of
      previously issued financial statements.


In
      accordance with SFAS No. 123(R), the estimated fair value of awards granted
      after the effective date of SFAS No. 123(R) are measured, and non-cash
      share-based compensation expense adjusted for expected pre-vesting forfeitures
      are recognized ratably over the requisite service period of options in the
      consolidated statements of operations. In addition, non-cash share-based
      compensation expense adjusted for expected pre-vesting forfeitures is recognized
      for the non-vested portion of awards that were granted before the effective
      date
      of SFAS No. 123(R) as those options become incrementally vested.


52


The
      non-cash share-based compensation expenses included in the consolidated
      statements of operations are as follows:





**Fiscal
                Year Ended June 30,**(in
                thousands)
            
            **2007**
            
            **2006**Cost
                of sales
            
            **$**
            **—**
            
            $
            35Selling,
                general and administrative
            
            
            **13,243**
            
            
            8,851Research
                and development
            
            
            **753**
            
            
            249Total
                non-cash share-based compensation expense
            
            **$**
            **13,996**
            
            
            9,135Income
                tax benefit
            
            
            **(2,884**
            **)**
            
            (2,026
            )Total
                non-cash share-based compensation expense, net of tax
                benefit
            
            **$**
            **11,112**
            
            $
            7,109Impact
                on diluted net income per share
            
            **$**
            **0.27**
            
            $
            0.18




The
      non-cash share-based compensation expense for the fiscal year ended June 30,
      2007 include a one-time charge of approximately $0.7 million resulting from
      the
      accelerated vesting of unvested options due to the death of an officer of the
      Company. Under the Company’s stock option plan, options immediately vest upon
      death. No non-cash share-based compensation expense has been capitalized for
      fiscal year 2007 as stock options were not granted to employees whose labor
      were
      capitalized as software development costs or inventory. For fiscal year 2006,
      less than $0.1 million in non-cash share-based compensation expense had been
      capitalized as a result of stock options granted to employees whose labor were
      capitalized as software development costs.


The
      Company values stock options using the Black-Scholes option-pricing model,
      which
      was developed for use in estimating the fair value of traded options that are
      fully transferable and have no vesting restrictions. In determining the expected
      term, the Company separates groups of employees that have historically exhibited
      similar behavior with regard to option exercises and post-vesting cancellations.
      The option-pricing model requires the input of highly subjective assumptions,
      including assumptions about volatility rates, expected term of options, and
      applicable interest rates. Expected volatility rate is based on historical
      stock
      prices. The expected term of options granted is based on historical data,
      adjusted for the remaining option life cycle by assuming ratable exercise of
      any
      unexercised vested options over the remaining term. The risk-free interest
      rate
      is based on the U.S. Treasury yield curve in effect at the time of grant. The
      total expense to be recorded in future periods will depend on several variables,
      including the number of share-based awards that vest, pre-vesting cancellations
      and the estimated fair value of those vested awards.


The
      estimated fair values of options granted during the fiscal years ended June
      30,
      2007 and 2006 were estimated on the date of grant using the following
      assumptions:





**Fiscal Year Ended June 30,****2007**
            
            **2006**Weighted-average
                expected volatility
            
            
            **37**
            **%**
            
            41
            %Expected
                volatility
            
            
            **36% - 38**
            **%**
            
            33% - 46
            %Expected
                term
            
            
            **4.6 - 5.7 years**
            
            
            4.0 - 5.7 yearsExpected
                dividend yield
            
            
            **0**
            **%**
            
            0
            %Risk-free
                interest rate
            
            
            **4.5% - 4.9**
            **%**
            
            3.9% - 5.0
            %




53


The
      following is a summary of option activity:




(in thousands, except per share data and number of years)
            
            **Number
                of**
              **Shares**
            
            **Weighted-**
              **Average**
              **Exercise**
              **Price**
            
            **Weighted-**
              **Average**
              **Remaining
                Contractual**
              **Term**
              (in
                years)
            
            **Aggregate**
              **Intrinsic**
              **Value**Outstanding
                at June 30, 2005
            
            
            5,228
            
            $
            19.28Granted
            
            
            913
            
            $
            45.98Exercised
            
            
            (1,256
            )
            $
            14.75Forfeited
                or expired
            
            
            (75
            )
            $
            31.06Outstanding
                at June 30, 2006
            
            
            4,810
            
            $
            25.34
            
            
            6.3
            
            $
            88,219**Granted**
            
            
            **695**
            
            **$**
            **52.61****Exercised**
            
            
            **(1,917**
            **)**
            **$**
            **18.24****Forfeited
                or expired**
            
            
            **(28**
            **)**
            **$**
            **43.70****Outstanding
                at June 30, 2007**
            
            
            **3,560**
            
            **$**
            **34.34**
            
            
            **6.7**
            
            **$**
            **71,432**Exercisable
                at June 30, 2006
            
            
            3,255
            
            $
            19.00
            
            
            5.1
            
            $
            80,336**Exercisable
                at June 30, 2007**
            
            
            **2,118**
            
            **$**
            **25.56**
            
            
            **5.4**
            
            **$**
            **61,075**




The
      weighted-average grant-date estimated fair value per share of options granted
      during the fiscal years ended June 30, 2007 and 2006 were $21.66 and $20.02,
      respectively. The total intrinsic value, the difference between the exercise
      price and the market price on the date of exercise, of options exercised during
      the fiscal years ended June 30, 2007 and 2006 were approximately $62.2 million
      and $37.5 million, respectively.


As
      of
      June 30, 2007, there was approximately $21.9 million in non-cash share-based
      compensation costs related to non-vested awards not yet recognized in the
      Company’s consolidated statements of operations. This cost is expected to be
      recognized over a weighted-average period of 2.0 years.


Cash
      received from options exercised during the fiscal years ended June 30, 2007
      and
      2006 were approximately $35.0 million and $18.5 million,
      respectively.





**FISCAL
      YEAR ENDED JUNE 30, 2005**


For
      the
      fiscal year ended June 30, 2005, the Company applied the intrinsic value based
      method of accounting prescribed by Accounting Principles Board Opinion No.
      25,
“Accounting for Stock Issued to Employees,” in accounting for the stock option
      awards. The Company had not recognized any related compensation expense in
      the
      consolidated statements of operations because the fair value of the stock
      underlying the options granted did not exceed the exercise price of the options
      on the date of grant. If compensation expense had been determined based on
      the
      weighted-average estimate of the fair value of each option granted consistent
      with the provisions of SFAS No. 123, “Accounting for Stock-Based Compensation,”
as amended by SFAS No. 148, “Accounting for Stock-Based Compensation –
Transition and Disclosure – an Amendment of FASB Statement No. 123,” the
      Company’s net income would be reduced to a pro forma amount as follows (in
      thousands, except per share data):





Net
                income - as reported
            $
                53,660Add:
                  Stock-based compensation expense included in reported net income,
                  net of
                  tax
            —-Deduct:
                Total stock-based employee compensation expense determined under
                the fair
                value method, net of tax
            (5,402)Net
                income - pro forma
            $
                48,258Basic
                net income per shareAs
                reported
            $
                1.43Pro
                forma
            $
                1.29Diluted
                net income per shareAs
                reported
            $
                1.35Pro
                forma
            $
                1.21





The
      Company valued stock options using the Black-Scholes option-pricing model,
      which
      was developed for use in estimating the fair value of traded options that are
      fully transferable and have no vesting restrictions. The option-pricing models
      require the input of highly subjective assumptions such as those listed
      below.


54


The
      estimated fair values of options granted in the fiscal year ended June 30,
      2005
      were estimated on the date of grant using the Black-Scholes option-pricing
      model
      with the following assumptions:








Expected
                volatility
            
            
            43
            %Expected
                term
            
            
            5.2
                yearsExpected
                dividend yield
            
            
            0
            %Risk-free
                interest rate
            
            
            3.6
            %




The
      weighted-average estimated fair value of each option granted in the fiscal
      year
      ended June 30, 2005 was $14.39.





**3.**
            **ACQUISITIONS:**





**FY
      2007:**


**REDSKY**


On
      January 29, 2007, the Company acquired the RedSky IT Hospitality, Travel
      and Retail subsidiaries (together “RedSky”) of RedSky IT for a total cash
      purchase price of approximately $29.8 million, net of cash acquired.
      Approximately $4.8 million of the total purchase price is currently held in
      escrow to satisfy certain claims the Company may have against RedSky IT. Any
      amounts remaining in the escrow account 13 months after closing will be paid
      to
      the sellers. Headquartered in the United Kingdom, the acquired companies provide
      hotel property management software solutions targeted toward the
      limited-service, independent and economy hotel markets, and software solutions
      for the grocery industry. Goodwill of approximately $32.0 million, intangible
      assets of approximately $5.2 million and capitalized software costs of
      approximately $2.7 million were recorded in connection with the
      acquisition.





**OTHERS:**


During
      the fiscal year ended June 30, 2007, the Company also acquired various
      distributors of MICROS products and services and other companies with
      complementary products and services. The aggregate cash purchase price for
      these
      acquisitions was approximately $12.1 million, net of cash acquired, which
      excludes certain amounts that were held back to be released on either an agreed
      upon date or upon the resolution of contractual indemnity obligations of the
      sellers.




Additionally,
      in connection with one of the acquisitions, the arrangement provides the
      minority interest holders the option to require the Company to purchase the
      minority shares from the minority interest holders (“Put Option”) based on a
      pre-defined formula which includes certain financial results of the acquired
      company. The Company has accounted for this arrangement under Emerging Issues
      Task Force (“EITF”) Abstract Topic No. D-98 (“D-98”), as redemption is outside
      of the control of the Company. Under EITF D-98, the carrying value of minority
      interest reflected on the Company’s balance sheet (“Initial Minority Interest”)
      is increased by the value of the Put Option that is greater than the Initial
      Minority Interest, with an offset to Retained Earnings and a similar reduction
      to the net income available to common shareholders in the earnings per share
      calculation. As permitted in EITF D-98, the Company has adopted an accretion
      method which allows the Company to accrete the Put Option value over the period
      from the date of acquisition to the Put Option’s earliest possible redemption
      date. As a result, as of June 30, 2007, the Company has reflected only a
      pro-rata portion of the Put Option value and has increased the Initial Minority
      Interest by less than $0.1 million and a corresponding reduction to Retained
      Earnings and a similar reduction to the net income available to common
      shareholders in the earnings per share calculation. This arrangement had less
      than $0.01 per dilute share impact for the fiscal year ended June 30, 2007.
      The
      Put Option value will be revalued on a quarterly basis based on most recent
      financial results of the acquired company and Put Option value accretion
      adjusted accordingly, with the floor in all cases being the Initial Minority
      Interest.




During
      the fiscal year ended June 30, 2007, the aggregate total assets acquired in
      all
      of the acquisitions as discussed above, included total cash acquired of
      approximately $3.2 million, total goodwill of approximately $45.8 million,
      total
      intangible assets of approximately $7.6 million and total capitalized software
      costs of approximately $2.9 million. The pro forma effect on operating results
      due to these acquisitions was not material to the consolidated financial
      position and results of operations presented herein.





**FY
      2006:**


**COMMERCIALWARE,
      INC.**


On
      February 1, 2006, the Company acquired CommercialWare, Inc. (“CommercialWare”),
      a privately held provider of cross-channel retail solutions, by acquiring all
      of
      the issued and outstanding stock of CommercialWare. The acquisition,
      for a total cash purchase of approximately $14.2 million, net of cash acquired,
      did not include a subsidiary of CommercialWare, which developed and supported
      a
      limited version of certain CommercialWare products targeted toward particular
      retail sectors. Subsequent to June 30, 2007, all of the remaining escrow balance
      had been released to the former shareholders of CommercialWare, with the
      exception of approximately $0.3 million which will be released upon resolution
      of outstanding issues. Headquartered in Westborough, Massachusetts,
      CommercialWare is operating as a subsidiary of Datavantage Corporation
      (“Datavantage”), a wholly-owned subsidiary of the Company.


55




During
      fiscal year 2007, the Company increased its realization of operating loss
      carryforwards related to CommercialWare acquisition which resulted in an
      increase in non-current deferred tax assets by approximately $3.2 million and
      a
      corresponding reduction to goodwill associated with the acquisitions. In
      aggregate, goodwill of approximately
      $7.6 million and intangible assets of approximately $2.8 million were recorded
      in connection with the acquisition. The pro forma operating results due to
      this
      acquisition was not material to the consolidated financial position and results
      of operations presented herein.





**FY
      2005:**


**JTECH
      COMMUNICATIONS, INC.**


On
      January 6, 2005, the Company acquired JTECH Communications, Inc. (“JTECH”), a
      privately held company offering on-premises wireless paging solutions for
      hospitality, retail and other markets, for a total cash purchase price of
      approximately $14.1 million, of which approximately $1.5 million had been placed
      in escrow. During fiscal year 2007, the escrow fund plus interest earned was
      released to MICROS (approximately $0.6 million) and the former shareholders
      of
      JTECH (approximately $1.0 million) as all of the remaining issues have been
      resolved. This resulted in a reduction in total purchase price of approximately
      $0.6 million and a corresponding reduction in goodwill. In aggregate, goodwill
      of approximately $8.8 million and intangible assets of approximately $2.4
      million were recorded in connection with the acquisition. The pro forma
      operating results due to this acquisition was not material to the consolidated
      financial position and results of operations presented herein.





**4.**
            **INVENTORY:**





The
      components of inventory at June 30 are as follows:





(in
                thousands)
            
            **2007**
            
            **2006**Raw
                materials
            
            **$**
            **5,687**
            
            $
            8,290Work-in-process
            
            
            **38**
            
            
            20Finished
                goods
            
            
            **42,065**
            
            
            38,327**$**
            **47,790**
            
            $
            46,637




The
      Company maintains a reserve for obsolescence for inventory in the amount of
      approximately $9.9 million as of June 30, 2007 and 2006. The Company reserved
      approximately $3.2 million and $3.5 million during the fiscal years 2007 and
      2006, respectively, all related to potentially obsolete and slow moving
      products. The foreign currency translation adjustment on inventory balance
      was
      approximately $0.2 million as of June 30, 2007.





**5.**
            **PROPERTY,
                PLANT AND EQUIPMENT:**





The
      components of property, plant and equipment at June 30 are as
      follows:




(in
                thousands)
            
            **2007**
            
            **2006**
            
            **Useful
                Life**Leasehold
                improvements
            
            **$**
            **8,953**
            
            $
            6,871
            
            
            Shorter
                of useful life or lease termMachinery
                and equipment
            
            
            **11,505**
            
            
            9,764
            
            
            5-10
                yearsFurniture
                and fixtures
            
            
            **18,657**
            
            
            15,792
            
            
            7-10
                yearsComputer
                hardware and software
            
            
            **65,192**
            
            
            56,949
            
            
            3-7
                yearsTotal
                property, plant and equipment
            
            
            **104,307**
            
            
            89,376Accumulated
                depreciation and amortization
            
            
            **(76,352**
            **)**
            
            (65,582
            )Net
                property, plant and equipment
            
            **$**
            **27,955**
            
            $
            23,794




Depreciation
      expense for the fiscal years 2007, 2006 and 2005 was
      approximately $10.9 million, $9.4 million and $9.3 million ,
      respectively.


56


**6.**
            **ACCUMULATED
                OTHER COMPREHENSIVE
                INCOME:**





The
      components of comprehensive income, net of tax, for the fiscal years ended
      June
      30, were as follows:





(in
                thousands)
            
            **2007**
            
            **2006**
            
            **2005**Net
                income
            
            **$**
            **79,988**
            
            $
            63,528
            
            $
            53,660Other
                comprehensive income:Foreign
                currency translation adjustments
            
            
            **11,623**
            
            
            7,679
            
            
            48Total
                comprehensive income
            
            **$**
            **91,611**
            
            $
            71,207
            
            $
            53,708








Net
      income for fiscal years 2007 and 2006 includes approximately $14.0 million
      ($11.1 million, net of tax or $0.27 per diluted share) and $9.1 million ($7.1
      million, net of tax or $0.18 per diluted share), respectively in non-cash
      share-based compensation expense. See Note 2, “Share-based
      Compensation.”





**7.**
            **LINE
                OF CREDIT:**





The
      Company has two credit agreements (the “Credit Agreements”) that in the
      aggregate, provide a $65.0 million multi-currency committed line of credit
      which
      expires on July 31, 2009.  The lenders under the Credit Agreements are Bank
      of America, N.A., Wachovia Bank, N.A., and US Bank.  The international
      facility is secured by 65% of the capital stock of our main operating Ireland
      subsidiary and 100% of all of the remaining major foreign subsidiaries. The
      U.S.
      facility is secured by 100% of the capital stock of our major
      U.S. subsidiaries as well as all inventory and receivables located in the
      U.S.


For
      borrowings in U.S. currency, the interest rate under the Credit Agreements
      is
      equal to the higher of the federal funds rate plus 50 basis points or the prime
      rate. For borrowings in foreign currencies, the interest rate is determined
      by a
      LIBOR-based formula, plus an additional margin of 125 to 200 basis points,
      depending upon the Company’s consolidated earnings before interest, taxes,
      depreciation and amortization (“EBITDA”) for the immediately preceding
      four calendar
      quarters. Under the terms of the Credit Agreements, the Company is required
      to
      pay insignificant commitment fees on the unused portion of the line of credit
      to
      the Lenders. The Credit Agreements also contain certain financial covenants
      and
      restrictions on the Company’s ability to assume additional debt, repurchase
      stock, sell subsidiaries or acquire companies. In case
      of an event of default, as defined in the Credit Agreements, that is not cured
      within the applicable cure period (with respect to those defaults for which
      the
      Credit Agreements provide a cure period), the Lenders’ remedies include their
      ability to declare all outstanding loans, plus interest and other related
      amounts owed, to be immediately due and payable in full, and to pursue all
      rights and remedies available to them under the Credit Agreements or under
      applicable law.


As
      of
      June 30, 2007, the Company had approximately $2.3 million outstanding on the
      lines of credit mentioned above and had approximately $62.7 million available
      for future borrowings. The total outstanding balance consisted of the
      following:


·
            JPY
                (Japanese Yen) 165.0 million (approximately $1.3 million at the June
                30,
                2007 exchange rate);


·
            SEK
                (Swedish Krona) 4.0 million (approximately $0.6 million at the June
                30,
                2007 exchange rate), and


·
            NZD
                (New Zealand Dollar) 0.5 million (approximately $0.4 million at the
                June
                30, 2007 exchange rate).


The
      Company also has a credit relationship with a European bank in the amount of
      EUR
      1.0 million (approximately $1.4 million at the June 30, 2007 exchange rate).
      Under the terms of this facility, the Company may borrow in the form of either
      a
      line of credit or term debt. As of June 30, 2007, there were no balances
      outstanding on this credit facility, but approximately EUR 0.2 million
      (approximately $0.2 million at the June 30, 2007 exchange rate) of the credit
      facility has been utilized for guarantees.


As
      of
      June 30, 2007, the Company had approximately $63.8 million borrowing capacity
      under all of the credit facilities described above. The weighted-average
      interest rate on the outstanding balances under the lines of credit as of June
      30, 2007 was 3.9%. As of July 31, 2007, the total outstanding balance on the
      lines of credit was approximately $2.4 million and the Company had approximately
      $63.8 million borrowing capacity under all of the credit facilities at that
      time.




57





**8.**
            **ACCRUED
                EXPENSES AND OTHER CURRENT
                LIABILITIES:**





The
      components of accrued expenses and other current liabilities at June 30 are
      as
      follows:





(in
                thousands)
            
            **2007**
            
            2006Compensation,
                benefits and related taxes
            
            **$**
            **43,307**
            
            $
            32,279Deposits
                received from customers
            
            
            **35,422**
            
            
            26,357VAT
                and sales taxes
            
            
            **10,644**
            
            
            4,259Product
                related
            
            
            **7,487**
            
            
            3,812Professional
                services
            
            
            **4,453**
            
            
            2,436Other
            
            
            **15,014**
            
            
            15,754**$**
            **116,327**
            
            $
            84,897




**9.**
            **GOODWILL:**


Goodwill
      allocated to the Company’s reportable segments as of June 30, 2007 and 2006 and
      changes in the carrying amount of goodwill are as follows:




(in
                thousands)
            
            **United
                States**
            
            **International**
            
            **Total**Balance
                at June 30, 2005
            
            $
            75,903
            
            $
            10,878
            
            $
            86,781Goodwill
                acquired:Goodwill
                adjustment for prior year acquisition – JTECH
            
            
            489
            
            
            —
            
            
            489Goodwill
                acquired – CommercialWare
            
            
            10,831
            
            
            —
            
            
            10,831Foreign
                currency translation
            
            
            —
            
            
            480
            
            
            480Balance
                at June 30, 2006
            
            
            87,223
            
            
            11,358
            
            
            98,581Goodwill
                adjustment for prior years’ acquisitions
            
            
            **(3,788**
            **)**
            
            **(2,732**
            **)**
            
            **(6,520**
            **)**Goodwill
                acquired:RedSky
            
            
            **3,371**
            
            
            **28,592**
            
            
            **31,963**Other
                acquisitions
            
            
            **3,460**
            
            
            **10,345**
            
            
            **13,805**Foreign
                currency translation
            
            
            **—**
            
            
            **503**
            
            
            **503**Balance
                at June 30, 2007
            
            **$**
            **90,266**
            
            **$**
            **48,066**
            
            **$**
            **138,332**




During
      fiscal year 2007, the Company reduced goodwill related to its prior years’
acquisitions by approximately $7.5 million, primarily due to an increased
      realization in operating loss carryforwards due to an acquisition and a purchase
      accounting adjustment related to another acquisition, both of which increased
      net deferred tax assets and corresponding reductions in respective
      goodwill.


Based
      on
      the results of its annual impairment tests, the Company determined that no
      impairment of goodwill existed at June 30, 2007, 2006 and 2005.




58





**10.**
            **INTANGIBLE
                ASSETS:**




Purchased
      intangible assets are amortized over the estimated useful lives of the
      respective asset category unless such lives are deemed indefinite. The Company
      has identified trademarks as an indefinite-lived purchased intangible asset.
      Intangible assets were comprised of the following:




(in
                thousands except number of years)
            
            **Gross**
              **Carrying**
              **Amount**
            
            **Accumulated
                Amortization**
            
            **Net Carrying**
              **Amount**
            
            **Useful**
              **Life**
              (in
                years)At
                June 30, 2007(1):Customer
                lists
            
            **$**
            **16,953**
            
            **$**
            **(4,380**
            **)**
            **$**
            **12,573**
            
            
            3-10Non-compete
                agreement
            
            
            **10**
            
            
            **(2**
            **)**
            
            **8**
            
            
            4Product
                lines
            
            
            **326**
            
            
            **(236**
            **)**
            
            **90**
            
            
            4-5Service
                revenue backlog
            
            
            **1,002**
            
            
            **(108**
            **)**
            
            **894**
            
            
            4-5Finite-lived
                purchased intangible assets
            
            
            **18,291**
            
            
            **(4,726**
            **)**
            
            **13,565**Trademarks
            
            
            **944**
            
            
            **—**
            
            
            **944**Total
            
            **$**
            **19,235**
            
            **$**
            **(4,726**
            **)**
            **$**
            **14,509**At
                June 30, 2006:Customer
                lists
            
            $
            9,086
            
            $
            (2,266
            )
            $
            6,820
            
            
            10Non-compete
                agreement
            
            
            139
            
            
            (97
            )
            
            42
            
            
            1-2Product
                lines
            
            
            326
            
            
            (188
            )
            
            138
            
            
            4-5Service
                revenue backlog
            
            
            100
            
            
            (41
            )
            
            59
            
            
            1Finite-lived
                purchased intangible assets
            
            
            9,651
            
            
            (2,592
            )
            
            7,059Trademarks
            
            
            884
            
            
            —
            
            
            884Total
                purchased intangible assets
            
            
            10,535
            
            
            (2,592
            )
            
            7,943Defined
                benefit pension plan asset
            
            
            2,484
            
            
            —
            
            
            2,484Total
            
            $
            13,019
            
            $
            (2,592
            )
            $
            10,427




(1)
      As a
      result of the adoption of SFAS No. 158 on June 30, 2007, the intangible asset
      related to the SERP Plan (the unfunded status of the SERP Plan) has been
      recorded in “Accumulated other comprehensive income” on the consolidated balance
      sheet as of June 30, 2007. See Note 16, “Employee Benefit Plans.”




Trademarks
      are deemed to have indefinite lives and therefore are not amortized.
      Amortization expense related to finite-lived purchased intangible assets was
      approximately $1.9 million, $1.1 million and $0.8 million in the fiscal years
      2007, 2006 and 2005, respectively. Based on the results of its annual impairment
      tests, the Company determined that no impairment of trademarks existed as of
      June 30, 2007, 2006 and 2005. Additionally, during the three fiscal years ended
      June 30, 2007, the Company did not encounter any events or circumstances that
      indicate that, the carrying amounts of its finite-lived purchased intangible
      assets may not be fully recoverable, thus may have been impaired. Accordingly,
      the Company did not recognize any impairment losses during the last three fiscal
      years ended June 30, 2007.


Estimated
      amortization expense in future fiscal years ending June 30 is as follows (in
      thousands):




2008
            
            $
            2,0922009
            
            
            2,0072010
            
            
            1,8682011
            
            
            1,7462012
            
            
            1,606Later
                years
            
            
            4,246Total
            
            $
            13,565




59




**11.**
            **COMMITMENTS
                AND CONTINGENCIES:**





**LEASES**


The
      Company and its subsidiaries lease office space under operating leases expiring
      at various dates through 2022 and equipment leases under both operating and
      capital leases. The capital leases are primarily international automobile leases
      used for sales and installation. Rent expense under the operating leases for
      each of the last three fiscal years ending June 30 was as
      follows:





(in
                thousands)
            
            **Rent**
              **Expense**
            
            **Sublease**
              **Income**
            
            **Net
                Rent**
              **Expense**2007
            
            **$**
            **23,442**
            
            **$**
            **(934**
            **)**
            **$**
            **22,508**2006
            
            
            19,189
            
            
            (998
            )
            
            18,1912005
            
            
            18,313
            
            
            (639
            )
            
            17,674




As
      of
      June 30, 2007, future minimum lease payments for those leases having an initial
      or remaining non-cancelable lease term in excess of one year are as
      follows:





(in
                thousands)
            
            **Operating**
              **Leases**
            
            **Less**
              **Sublease**
              **Rentals**
            
            **Net**
              **Operating**
              **Leases**
            
            **Capital**
              **Leases**Fiscal
                year ending June 30,2008
            
            $
            21,864
            
            $
            (1,019
            )
            $
            20,845
            
            $
            6552009
            
            
            18,449
            
            
            (1,050
            )
            
            17,399
            
            
            1812010
            
            
            13,960
            
            
            (796
            )
            
            13,164
            
            
            772011
            
            
            11,316
            
            
            —
            
            
            11,316
            
            
            22012
            
            
            10,214
            
            
            —
            
            
            10,214
            
            
            —2013
                and thereafter
            
            
            29,176
            
            
            —
            
            
            29,176
            
            
            —$
            104,979
            
            $
            (2,865
            )
            $
            102,114
            
            
            915Less:
                current portion
            
            
            
            
            
            
            
            
            
            
            
            655Long-term
                obligations under capital lease
            
            
            
            
            
            
            
            
            
            
            $
            260




The
      Company leases its worldwide corporate headquarters located in Columbia,
      Maryland, consisting of 247,624 square feet, pursuant to a lease that expires
      February 29, 2016. The Company subleases one of the five floors, consisting
      of
      approximately 49,524 square feet, to Motorola, Inc., under a sublease that
      expires March 1, 2010 (which Motorola may terminate after October 31,
      2008.)


The
      Company’s Datavantage subsidiary leases approximately 69,200 square feet of
      office and warehouse space in the Cleveland, Ohio area, from which it conducts
      the majority of its sales, marketing, customer support, and product development
      activities, and an additional approximately 27,234 square feet of office space
      in the Boston, Massachusetts area, primarily for customer support and research
      and development activities. The Cleveland lease expires February 28, 2014,
      (with
      a termination right available to the Company in 2010) and the Boston lease
      expires November 30, 2013.


The
      Company has purchase commitments of approximately $1.0 million for non-recurring
      engineering fees for development work. The commitments are currently targeted
      to
      be due to the vendor by the end of fiscal year 2009 if the Company does not
      meet
      the agreed upon sales targets. The costs are being amortized as the units are
      purchased by the Company.





**LEGAL
      PROCEEDINGS**


The
      Company is and has been involved in legal proceedings arising in the normal
      course of business. In addition, the holder of an expired patent has commenced
      litigation against approximately 107 individual retailers, 13 of whom are our customers for retail point-of-sale
      software.   The case is styled Ware
      v. Abercrombie & Fitch Stores, Inc., et al. , Civil
      Action No. 4:07-CV-122-RLV, and was filed in the United States District Court
      for the Northern District of Georgia on June 19, 2007.  The patent alleged
      to have been infringed is U.S. Patent No. 4,707,592.  Although the
      complaint has not yet been served on the defendants, some of the defendants
      who
      are our customers have advised that they will seek indemnification from us
      under
      contract provisions for the defense of that action . 
      Currently, there are two active separate requests for reconsideration of the
      patent which have been filed with the US Patent and Trademark Office. 
Should the case
      proceed, and if it is determined that we are obligated to indemnify any of
      our
      customers who are defendants in the action, then we will vigorously defend
      the
      action and assert all defenses and arguments available to us.  In any
      event, based on currently available information and analysis by patent counsel,
      we do not believe that our products infringe the patent.




60





Subject
      to the foregoing, we are of the opinion, based upon presently available
      information and the advice of litigation counsel concerning pertinent legal
      matters, that any resulting liability should not have a material adverse effect
      on our results of operations, financial position or cash flows.





**12.**
            **SHAREHOLDERS’
                EQUITY:**





In
      fiscal
      year 2002, the Board of Directors authorized the purchase of up to two million
      shares of the Company’s common stock. During fiscal year 2005, the Company
      purchased all remaining shares authorized under that plan. In fiscal year 2005,
      the Board of Directors authorized the purchase of up to an additional two
      million shares of the Company’s common stock. Since the inception of the
      repurchase programs, the Company has incurred approximately $0.1 million in
      fees
      related to the programs.


A
      summary
      of the cumulative number of shares purchased and retired under both plans is
      as
      follows:




**Number
                of**
              **Shares**
            
            **Average**
              **Purchase Priceper Share**
            
            **Total
                Purchase**
              **Value**
              (in
                thousands)Total
                shares purchased as of June 30, 2005
            
            
            2,496,662
            
            $
            21.30
            
            $
            53,180Shares
                purchased during fiscal year 2006
            
            
            921,337
            
            $
            43.67
            
            
            40,234Total
                shares purchased as of June 30, 2006
            
            
            3,417,999
            
            $
            27.33
            
            
            93,414**Shares
                purchased during fiscal year 2007**
            
            
            **348,600**
            
            **$**
            **51.26**
            
            
            **17,870****Total
                shares purchased as of June 30, 2007**
            
            
            **3,766,599**
            
            **$**
            **29.55**
            
            **$**
            **111,284**




**13.**
            **INCOME
                TAXES:**




Income
      before taxes for the fiscal years ended June 30 was taxed under the following
      jurisdictions:





(in
                thousands)
            
            **2007**
            
            **2006**
            
            **2005**United
                States
            
            **$**
            **52,977**
            
            $
            36,202
            
            $
            46,092International
            
            
            **68,677**
            
            
            59,463
            
            
            35,002**$**
            **121,654**
            
            $
            95,665
            
            $
            81,094




The
      components of income tax expense for the fiscal years ended June 30 are as
      follows:





(in
                thousands)
            
            **2007**
            
            2006
            
            2005Current:Federal
            
            **$**
            **23,233**
            
            $
            19,137
            
            $
            14,561State
            
            
            **3,020**
            
            
            3,168
            
            
            2,593Foreign
            
            
            **16,588**
            
            
            11,100
            
            
            6,340**42,841**
            
            
            33,405
            
            
            23,494Deferred:Federal
            
            
            **(1,667**
            **)**
            
            (2,118
            )
            
            870State
            
            
            **(921**
            **)**
            
            (524
            )
            
            (46
            )Foreign
            
            
            **501**
            
            
            692
            
            
            2,443**(2,087**
            **)**
            
            (1,950
            )
            
            3,267**$**
            **40,754**
            
            $
            31,455
            
            $
            26,761




61


The
      total
      tax provision is different from the amount that would have been recorded by
      applying the U.S. statutory federal income tax rate to income before taxes.
      The
      reconciliation of these differences is as follows:





**2007**
            
            **2006**
            
            **2005**Statutory
                rate
            
            
            **35.0**
            **%**
            
            35.0
            %
            
            35.0
            %Increase
                (decrease) resulting from:State
                taxes, net of federal tax benefit
            
            
            **1.3**
            
            
            1.6
            
            
            2.0Effect
                of tax rates in foreign jurisdictions
            
            
            **(7.6**
            **)**
            
            (8.4
            )
            
            (5.0
            )Prior
                years true up
            
            
            **1.0**
            
            
            3.5
            
            
            —Share-based
                compensation
            
            
            **1.8**
            
            
            1.4
            
            
            —Subpart
                F inclusion
            
            
            **1.4**
            
            
            —
            
            
            0.7Domestic
                manufacturing deduction / extraterritorial income exclusion
                benefit
            
            
            **(0.4**
            **)**
            
            (1.0
            )
            
            (1.0
            )Tax
                credits
            
            
            **(0.1**
            **)**
            
            —
            
            
            (0.5
            )Other
                permanent differences
            
            
            **1.1**
            
            
            0.8
            
            
            1.8Effective
                tax rate
            
            
            **33.5**
            **%**
            
            32.9
            %
            
            33.0
            %




The
      Company has not provided U.S deferred income taxes on the cumulative unremitted
      earnings of its non-U.S. affiliates as the Company plans to permanently reinvest
      cumulative unremitted foreign earnings outside the U.S. and it is not
      practicable to determine the unrecognized deferred income taxes. These
      cumulative unremitted foreign earnings relate to ongoing operations in foreign
      jurisdictions and are required to fund foreign operations, capital expenditure
      and expansion requirements.


During
      fiscal year 2007 and 2006, the Company identified and recorded immaterial
      adjustments to income tax expense and the income tax balance sheet accounts
      related to prior fiscal years. These immaterial adjustments are reflected as
      a
      separate item in the reconciliation of the statutory income tax rate to the
      effective tax rate presented above as prior years true up.


The
      following summarizes the significant components of the Company’s deferred tax
      assets and liabilities at June 30:





(in
                thousands)
            
            **2007**
            
            2006Deferred
                tax assets:Net
                operating loss carryforwards
            
            **$**
            **10,713**
            
            $
            10,889Accruals
                not currently deductible for tax
            
            
            **8,709**
            
            
            8,016Bad
                debt reserves
            
            
            **5,336**
            
            
            4,481Benefit
                related accruals not currently deductible for tax
            
            
            **5,200**
            
            
            957Share-based
                compensation (non-qualified stock options)
            
            
            **4,464**
            
            
            1,881Tax
                impact of technology transfer
            
            
            **3,221**
            
            
            4,991Inventory
            
            
            **2,552**
            
            
            2,697Tax
                credit carryforwards
            
            
            **581**
            
            
            3,505Deferred
                revenues and customer deposits currently taxable
            
            
            **781**
            
            
            —Other
                unrealized gains and losses
            
            
            **987**
            
            
            428Other
            
            
            **—**
            
            
            290Total
                deferred tax assets
            
            
            **42,544**
            
            
            38,135Deferred
                tax liabilities:Intangibles
                amortization
            
            
            **(8,137**
            **)**
            
            (5,425
            )Capitalized
                software development costs
            
            
            **(5,880**
            **)**
            
            (6,840
            )Depreciation
            
            
            **(1,917**
            **)**
            
            (2,734
            )Other
            
            
            **(160**
            **)**
            
            (227
            )Total
                deferred tax liabilities
            
            
            **(16,094**
            **)**
            
            (15,226
            )Valuation
                allowance
            
            
            **(2,716**
            **)**
            
            (5,293
            )Net
                deferred tax asset
            
            **$**
            **23,734**
            
            $
            17,616




62


The
      tax
      effected net operating loss carryforwards and related valuation allowance
      components of deferred taxes for the fiscal years ended June 30 are as
      follows:





(in
                thousands)
            
            **2007**
            
            2006Net
                operating loss carryforwards:U.S.
            
            **$**
            **6,298**
            
            $
            6,572International
            
            
            **4,415**
            
            
            4,317**10,713**
            
            
            10,889Net
                operating loss carryforward valuation allowance:U.S.
            
            
            **—**
            
            
            (3,175
            )International
            
            
            **(2,716**
            **)**
            
            (2,118
            )**(2,716**
            **)**
            
            (5,293
            )Net
                operating loss caryforwards, net of valuation
            
            **$**
            **7,997**
            
            $
            5,596




Deferred
      income taxes reflect the net tax effects of temporary differences between the
      carrying amounts of assets and liabilities for financial reporting purposes
      and
      the amounts used for income tax purposes.


The
      Company is profitable on a consolidated basis, however, has incurred losses
      in
      certain foreign jurisdictions. A valuation allowance has been provided at June
      30, 2007 and 2006 to offset the related deferred tax assets due to uncertainty
      of realizing the benefit of the net operating loss
      carryforwards.


The
      Company has reclassified certain of its previously reported components of its
      net deferred tax asset as of June 30, 2006 to conform to the current year
      presentation. The reclassifications primarily affected the operating loss
      carryforwards and the related valuation allowance. The reclassification was
      primarily due to the increased realization of operating loss carryforwards
      related to prior years’ acquisitions and resulted in an increase in non-current
      deferred tax assets by approximately $3.2 million and a corresponding reduction
      to goodwill associated with the acquisitions. Additionally, in fiscal year
      2007,
      the Company identified and recorded a reduction in deferred tax liabilities
      of
      approximately $1.5 million associated with one of its acquisitions from prior
      years and a corresponding reduction to goodwill related to the acquisition.
      These adjustments did not impact the Company’s previously reported consolidated
      statements of operations.




The
      Company’s net operating loss carryforwards and tax credit carryforwards (if not
      used against taxable income) as of June 30, 2007 expire as follows:


**Expires
                    in Fiscal Year**(in
                    thousand)
                
                **2008**
                
                **2009**
                
                **Thereafter**
                
                **No
                    Expiration**
                
                **Total**U.S.:Net
                    operating loss carryforwards
                
                $
                —
                
                $
                —
                
                $
                6,298
                
                $
                —
                
                $
                6,298Valuation
                    allowances
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                ——
                
                
                —
                
                
                6,298
                
                
                —
                
                
                6,298International:Net
                    operating loss carryforwards
                
                
                267
                
                
                —
                
                
                1,470
                
                
                2,678
                
                
                4,415Valuation
                    allowances
                
                
                (267
                )
                
                —
                
                
                (1,303
                )
                
                (1,146
                )
                
                (2,716
                )—
                
                
                —
                
                
                167
                
                
                1,532
                
                
                1,699Net
                    operating loss carryforwards, of valuation allowances
                
                $
                —
                
                $
                —
                
                $
                6,465
                
                $
                1,532
                
                $
                7,997Tax
                    credit carryforwards:U.S.
                
                $
                —
                
                $
                —
                
                $
                —
                
                $
                581
                
                $
                581International
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                —$
                —
                
                $
                —
                
                $
                —
                
                $
                581
                
                $
                581




In
      June
      2006, FASB issued FIN 48, to create a single model to address accounting for
      uncertainty in tax positions.  FIN 48 clarifies the accounting for income
      taxes, by prescribing a minimum recognition threshold a tax position is required
      to meet before being recognized in the financial statements.  FIN 48 also
      provides guidance on derecognition, measurement,
      classification, interest and penalties, accounting in interim periods,
      disclosure and transition.  FIN 48 is effective for fiscal years beginning
      after December 15, 2006.  As required, the Company will adopt FIN 48 in
      first quarter of fiscal year 2008.  The cumulative effect of adopting FIN
      48 will be recorded in retained earnings and other accounts as applicable.
       The Company is currently reviewing the impact of the adoption of the FIN
      48 on the Company’s consolidated financial position, results of operations and
      cash flows.




63




**14.**
            **OTHER
                INCOME (EXPENSE), NET:**





Other
      income (expense) for the fiscal years ended June 30 comprised of the
      following:





(in
                thousands)
            
            **2007**
            
            **2006**
            
            **2005**Foreign
                exchange (loss) gain, net
            
            **$**
            **(403**
            **)**
            $
            (940
            )
            $
            655Life
                insurance settlement
            
            
            **1,325**
            
            
            —
            
            
            —Other,
                net
            
            
            **196**
            
            
            472
            
            
            338Total
                other income (expense), net
            
            **$**
            **1,118**
            
            $
            (468
            )
            $
            993




The
      Company recognized approximately $1.3 million in one-time income due to death
      benefit received on corporate owned life insurance policy following the death
      of
      a covered officer of the Company.





**15.**
            **RELATED
                PARTY TRANSACTIONS:**





The
      Company and Louis
      M.
      Brown, Jr., Vice-Chairman of the Board, are
      parties to a Consulting Agreement terminating June 30, 2008, pursuant to which
      Mr. Brown is to provide each fiscal year on the average 20 hours per week of
      consulting services to the Company in exchange for a base consulting fee of
      approximately $0.3 million per year plus an annual target bonus. During each
      of
      the three fiscal years ended June 30, 2007, the Company compensated Mr. Brown
      approximately $0.4 million for consulting fees and annual target b onuses
      that were
      earned and accrued during the fiscal year and paid in the following fiscal
      year.





**16.**
            **EMPLOYEE
                BENEFIT PLANS:**





**DEFINED
      CONTRIBUTION PLANS**


The
      Company sponsors employee savings plan (the “Plan”), which conforms to the
      provisions of Section 401(k) of the Internal Revenue Code. The Plan covers
      substantially all full-time and part-time employees in the U.S. and allows
      employees to voluntarily defer up to the government maximum per year of their
      income through contributions to the Plan. The
      Plan
      matches 50% of the first 5% of each participating employee’s voluntary
      contributions .


The
      Company also sponsors additional employee savings plans, which cover the
      Company’s employees in certain of its subsidiaries acquired during fiscal years
      2007 and 2006. Similar to the Plan, these plans also conform to the provisions
      of Section 401(k) of the Internal Revenue Code, but may have different terms
      and
      benefits. Typically, these types of plans are temporary and are terminated
      approximately within one year of the acquisitions and thereafter, the employees
      are covered under the Company’s Plan.


Company
      contributions made during the fiscal years ended June 30, 2007, 2006 and 2005
      totaled approximately $1.9 million, $1.9 million and $1.6 million,
      respectively . The
      Company does not have any material obligations to past or present employees
      related to post employment benefits.





**DEFINED
      BENEFIT PLAN**


The
      Company’s Supplemental Executive Retirement Plan (“SERP Plan”) provides
      designated officers and executives of the Company with benefits upon retirement
      or immediate vesting of benefits upon a participant’s pre-retirement death. The
      Company funds the benefits under the plan with corporate owned life insurance
      policies held by a segregated trust (known as a “Rabbi Trust”), whose assets are
      subject to the claims of creditors of the Company. The plan is accounted for
      in
      accordance with SFAS 87, “Employers Accounting for Pensions”.


The
      Board
      of Directors of the Company, in its sole discretion, selects the participants
      in
      the SERP Plan. The Board may remove participants, or modify benefit accrual
      levels for any participant who is not vested. As of June 30, 2007, there were
      14
      participants in the SERP Plan. During the fiscal year ended June 30, 2007,
      an
      officer of the Company who was a participant in the SERP Plan died. The Company
      received approximately $1.3 million in death benefits under the corporate owned
      life insurance policy, which have been recorded as non-operating “Other Income”
in the consolidated statements of operations. Subsequent to June 30, 2007,
      the
      total number of participants was reduced to 13 as a result of a retirement
      of a
      participant.


Under
      the
      terms of the SERP Plan, participants who are vested (or their designated
      beneficiaries upon death) will receive 10 annual payments over nine years
      commencing 6 months after the earlier of death or retirement on or after age
      62. Participants
      become vested after completing eight years of service with the Company and:
      (i)
      the participant attains age 62 (provided the person is employed by the Company
      on his or her 62 nd birthday); or (ii) there is a change in control of the Company (which is defined
      in the SERP Plan to include, generally, the acquisition of 50% or more of the
      outstanding shares of common stock or the combined voting power of the
      securities of the Company entitled to vote generally in the election of
      directors, and other corporate transactions immediately after which persons
      who
      hold 50% of the outstanding voting securities entitled to vote generally in
      the
      election of directors of the surviving entity did not hold common stock of
      the
      Company before the transaction); or (iii) the participant dies before attaining
      age 62. The value of benefits under the SERP Plan is not based on years of
      service, but is determined
      based on the (1) participant’s age at retirement, at a change of control of the
      Company or at death, and (2) the base salary received by the participant during
      the 12 months immediately preceding his or her retirement or death. The annual
      benefit rates are as follows:




64




Benefit
                rate18%
            Participant’s
                retirement between 62ndand 63rdbirthdayParticipant’s
                death or change of control of the Company before 63rdbirthday21%
            Participant’s
                retirement, death or change of control of the Company after 63rdbirthday but before 64thbirthday24%
            Participant’s
                retirement, death or change of control of the Company after 64thbirthday but before 65thbirthday30%
            Participant’s
                retirement, death or change of control of the Company after 65thbirthday




In
      September 2006, the FASB issued SFAS No. 158, “Employers’ Accounting for Defined
      Benefit Pension and Other Postretirement Plans – an amendment of FASB Statements
      87, 88, 106 and 132(R)” (“SFAS No. 158”). SFAS No. 158 requires the Company to
      recognize the funded status (the difference between the fair value of plan
      assets and the projected benefit obligations) of SERP Plan in the Company’s
      statement of financial position, with a corresponding adjustment to accumulated
      other comprehensive income, net of tax, to measure the fair value of plan
      benefit obligations as of its fiscal year ending June 30, 2007 and to provide
      additional disclosures. On June 30, 2007, the Company adopted the recognition
      and disclosure provisions of SFAS No. 158 and has included the effect of
      adoption at June 30, 2007 in the accompanying consolidated financial statements.
      SFAS No. 158 did not have an effect on the Company’s consolidated financial
      condition at June 30, 2006 or for any prior periods presented, and it will
      not
      affect the Company’s operating results in future periods. SFAS No. 158’s
      provisions regarding the change in the measurement date of benefit plans is
      not
      applicable as the Company already uses a measurement date of June 30 for its
      SERP Plan.


The
      disclosure requirements and the incremental effects of adopting the provisions
      of SFAS No. 158 on the Company’s statement of financial position at June 30,
      2007 are presented in the following tables.


(in
                  thousands)
              
              **2007**
              
              **2006**
              
              **2005**Change
                  in Projected Benefit Obligation (“PBO”):PBO
                  at the beginning of year
              
              **$**
              **7,019**
              
              $
              7,060
              
              $
              5,861Service
                  cost
              
              
              **539**
              
              
              377
              
              
              259Interest
                  cost
              
              
              **673**
              
              
              369
              
              
              282Actuarial
                  loss (gain)
              
              
              **5,314**
              
              
              (787
              )
              
              658PBO
                  at the end of year
              
              **$**
              **13,545**
              
              $
              7,019
              
              $
              7,060Fair
                  value of plan assets
              
              
              **N/A**
              
              
              N/A
              
              
              N/AFunded
                  Status of the Plan(Unfunded)
                  status of PBO
              
              **$**
              **(13,545**
              **)**
              $
              (7,019
              )
              $
              (7,060
              )Unrecognized
                  prior service cost(1)
              
              
              **N/A**
              
              
              4,942
              
              
              5,352Unrecognized
                  net actuarial (gain) losses(1)
              
              
              **N/A**
              
              
              (148
              )
              
              658Accrued
                  benefit cost(1)
              
              
              **N/A**
              
              $
              (2,225
              )
              $
              (1,050
              )Accumulated
                  benefit obligation(1)
              
              **$**
              **6,835**
              
              $
              4,709
              
              $
              4,424Amount
                  recognized in the consolidated balance sheet:Accrued
                  benefit liability(2)
              
              **$**
              **(13,545**
              **)**
              $
              (4,709
              )
              $
              (4,424
              )Intangible
                  asset(1)
              
              
              **N/A**
              
              
              2,484
              
              
              3,374Accrued
                  benefit cost
              
              **$**
              **(13,545**
              **)**
              $
              (2,225
              )
              $
              (1,050
              )Accumulated
                  other comprehensive loss:Net
                  unrecognized actuarial losses
              
              **$**
              **4,985**
              
              
              **N/A**
              
              
              **N/A**Unrecognized
                  prior service costs
              
              
              **4,594**
              
              
              **N/A**
              
              
              **N/A****9,579**
              
              
              **N/A**
              
              
              **N/A**Tax
                  benefit
              
              
              **(3,650**
              **)**
              
              **N/A**
              
              
              **N/A**Accumulated
                  other comprehensive loss, net of tax
              
              **$**
              **5,929**
              
              
              **N/A**
              
              
              **N/A**




(1)
      As a
      result of the adoption of SFAS No. 158 on June 30, 2007, these items are no
      longer applicable.


(2)
      Accrued benefit liability is included in Other Non-Current Liabilities on the
      consolidated balance sheet, except for less than $0.1 million included in
      Accrued Expenses and Other Current Liabilities.


65




Assumptions
      used to measure benefit obligations at June 30 were as follows:





**2007**
            
            2006
            
            2005Discount
                rate(1)
            
            
            **6.10**
            **%**
            
            6.14
            %
            
            4.96
            %Expected
                return on plan assets
            
            
            **—**
            
            
            —
            
            
            —Rate
                of compensation increase
            
            
            **9.00**
            **%**
            
            5.00
            %
            
            5.00
            %




(1)
      The
      discount rate assumption is based on the internal rate of return for a portfolio
      of high-quality bonds (Moody’s Aa Corporate bonds) with maturities that are
      consistent with projected future cash flows.





(in
                thousands)
            
            **Pre
                SFAS**
              **No.
                158**
            
            **Incremental**
              **effect
                of**
              **adopting**
              **SFAS
                No. 158**
            
            **Post
                SFAS**
              **No.
                158**Intangible
                assets – pension
            
            $
            2,869
            
            $
            (2,869
            )
            $
            —Accrued
                benefit liability
            
            
            (6,835
            )
            
            (6,710
            )
            
            (13,545
            )Non-current
                deferred income tax asset
            
            
            —
            
            
            3,650
            
            
            3,650Accumulated
                other comprehensive loss, net of tax
            
            
            —
            
            
            5,929
            
            
            5,929$
            (3,966
            )
            $
            —
            
            $
            (3,966
            )




The
      adjustments to accumulated other comprehensive income at June 30, 2007 (at
      adoption) were previously netted against the plan’s funded status in the
      Company’s statement of financial position pursuant to the provisions of SFAS No.
      87. These amounts will be subsequently recognized as net periodic pension cost.
      The actuarial gains and losses that arise in subsequent periods and are not
      recognized as a net periodic pension cost in the same periods will be recognized
      as a component of other comprehensive income and will be subsequently recognized
      as a component of net periodic pension cost on the same basis as the amount
      recognized in accumulated other comprehensive income at adoption of SFAS No.
      158.


The
      components of net periodic pension cost and the assumptions used to determine
      net cost for the fiscal years ended June 30 are as follows:





(in
                thousands)
            
            **2007**
            
            **2006**
            
            **2005**Service
                cost
            
            **$**
            **539**
            
            $
            377
            
            $
            259Interest
                cost
            
            
            **673**
            
            
            369
            
            
            282Amortization
                of prior service cost
            
            
            **529**
            
            
            429
            
            
            509Net
                periodic pension cost
            
            **$**
            **1,741**
            
            $
            1,175
            
            $
            1,050Discount
                rate
            
            
            **6.14**
            **%**
            
            4.96
            %
            
            5.66
            %Expected
                return on plan assets
            
            
            **—**
            
            
            —
            
            
            —Rate
                of compensation increase
            
            
            **8.0**
            **%**
            
            5.0
            %
            
            5.0
            %




The
      amounts included in accumulated other comprehensive income expected to be
      recognized as components of net periodic cost in fiscal year 2008 are as
      follows:





Amortization
                of transition obligation
            
            $
            —Amortization
                of prior service cost
            
            
            348Amortization
                of actuarial loss
            
            
            300Total
            
            $
            648




66


As
      of
      June 30, 2007, the projected benefit payments to be paid from the SERP Plan
      are
      as follows for the fiscal years ending June 30 (in thousands):




2008
            
            $
            452009
            
            
            6082010
            
            
            6082011
            
            
            6082012
            
            
            6082013 –
                2017
            
            
            4,931




**17.**
            **SEGMENT
                INFORMATION:**





SFAS
      No.
      131, “Disclosures about Segments of an Enterprise and Related Information,”
establishes standards for reporting information about operating segments. This
      standard requires segmentation based on the Company’s internal organization and
      reporting of financial results. The Company’s financial reporting systems
      present various data to enable management to run the business. Operating
      segments are defined as components of an enterprise about which separate
      financial information is available that is evaluated regularly by the chief
      operating decision maker, or decision making group, in deciding how to allocate
      resources and in assessing performance. The Company’s chief operating decision
      maker is the Company’s Chief Executive Officer.


The
      Company is organized and operates in four operating segments: U.S., Europe,
      the
      Pacific Rim and Latin America regions. As the products and services for all
      new
      business acquisitions are all similar to those of the Company, the new business
      acquisitions have been incorporated into the existing four operating segments
      based on their respective geographical locations, and operated and managed
      as a
      part of that operating segment.


For
      the
      purposes of applying SFAS No. 131, the Company has identified U.S. as a separate
      reportable segment and has aggregated its three international operating segments
      into one reportable segment, international, as the three international operating
      segments share many similar economical characteristics. The management views
      the
      U.S. and international segments separately in operating its business, although
      the products and services are similar for each segment.


A
      summary
      of the Company’s reportable segments is as follows:


**Fiscal
                    Years Ended June 30,**(in
                    thousands)
                
                **2007**
                
                **2006**
                
                **2005**Revenues(1):United
                    States
                
                **$**
                **379,272**
                
                $
                365,642
                
                $
                334,449International
                
                
                **567,862**
                
                
                433,256
                
                
                333,006Intersegment
                    eliminations(2)
                
                
                **(161,407**
                **)**
                
                (119,945
                )
                
                (70,191
                )Total
                    revenues
                
                **$**
                **785,727**
                
                $
                678,953
                
                $
                597,264Income
                    before taxes, minority interests and equity in net earnings of
                    affiliates(1):United
                    States
                
                **$**
                **43,186**
                
                $
                26,719
                
                $
                39,286International
                
                
                **211,284**
                
                
                165,263
                
                
                97,265Intersegment
                    eliminations(2)
                
                
                **(132,816**
                **)**
                
                (96,317
                )
                
                (55,457
                )Total
                    income before taxes, minority interests and equity in net earnings
                    of
                    affiliates
                
                **$**
                **121,654**
                
                $
                95,665
                
                $
                81,094Capital
                    expenditures(3):United
                    States
                
                **$**
                **5,481**
                
                $
                7,256
                
                $
                5,671International
                
                
                **5,798**
                
                
                3,484
                
                
                4,574Total
                    capital expenditures
                
                **$**
                **11,279**
                
                $
                10,740
                
                $
                10,245Depreciation
                    and amortization(3):United
                    States
                
                **$**
                **7,301**
                
                $
                6,660
                
                $
                5,937International
                
                
                **5,420**
                
                
                3,799
                
                
                4,175Total
                    depreciation and amortization
                
                **$**
                **12,721**
                
                $
                10,459
                
                $
                10,112


67





**As
                of June 30,**(in
                thousands)
            
            **2007**
            
            **2006**Identifiable
                assets(3):United
                States
            
            **$**
            **443,331**
            
            $
            383,663International
            
            
            **403,425**
            
            
            264,194Total
                identifiable assets
            
            **$**
            **846,756**
            
            $
            647,857Goodwill(3):United
                States
            
            **$**
            **90,266**
            
            $
            87,223International
            
            
            **48,066**
            
            
            11,358Total
                goodwill
            
            **$**
            **138,332**
            
            $
            98,581




(1)  Amounts
      based on the location of the selling entity, and include export
      sales.


(2)  Amounts
      primarily represent elimination of Ireland’s intercompany
      business.


(3)  Amounts
      based on the physical location of the asset.





The
      Company’s products are distributed in the U.S. and internationally, primarily in
      Europe, the Pacific Rim, and Latin America through its subsidiaries, independent
      dealers/distributors and Company-owned sales and service offices. The Company’s
      principal customers are lodging, food service-related businesses, specialty
      retail, and entertainment venues. No single customer accounts for 10% or more
      of
      the Company’s consolidated revenues.


Revenues
      from unaffiliated customers by geographic location are as
      follows:





(in
                thousands)
            
            **2007**
            
            **2006**
            
            **2005**United
                States
            
            **$**
            **364,139**
            
            $
            355,155
            
            $
            323,316International
            
            
            **421,588**
            
            
            323,798
            
            
            273,948**$**
            **785,727**
            
            $
            678,953
            
            $
            597,264




Long-lived
      assets (property, plant, and equipment) organized by geographic locations as
      of
      June 30 of each indicated fiscal year, are as follows:





(in
                thousands)
            
            **2007**
            
            **2006**United
                States
            
            **$**
            **16,809**
            
            $
            16,558International
            
            
            **11,146**
            
            
            7,236**$**
            **27,955**
            
            $
            23,794




The
      above
      chart does not include intangible assets.





There
      were no individual foreign countries in which the Company received material
      revenues from unaffiliated customers or in which the Company has material
      long-lived assets.




68





**18.**
            **QUARTERLY
                FINANCIAL INFORMATION
                (UNAUDITED):**




Quarterly
      financial information for the fiscal years ended June 30, 2007 and 2006 is
      presented in the following tables (in thousands, except per share
      data):





**2007****1****st****Quarter**
            
            **2****nd****Quarter**
            
            **3****rd****Quarter**
            
            **4****th****Quarter**Revenue
            
            **$**
            **173,701**
            
            **$**
            **189,875**
            
            **$**
            **200,556**
            
            **$**
            **221,594**Gross
                margin
            
            **$**
            **88,669**
            
            **$**
            **98,854**
            
            **$**
            **105,015**
            
            **$**
            **118,973**Income
                from operations(1)
            
            **$**
            **20,649**
            
            **$**
            **25,096**
            
            **$**
            **27,214**
            
            **$**
            **37,629**Net
                income(1)
            
            **$**
            **15,111**
            
            **$**
            **18,018**
            
            **$**
            **19,450**
            
            **$**
            **27,410**Income
                from operations per common share(1):Basic
            
            **$**
            **0.53**
            
            **$**
            **0.63**
            
            **$**
            **0.67**
            
            **$**
            **0.93**Diluted
            
            **$**
            **0.51**
            
            **$**
            **0.61**
            
            **$**
            **0.65**
            
            **$**
            **0.90**Earnings
                per common share(1), (2), (3):Basic
            
            **$**
            **0.39**
            
            **$**
            **0.45**
            
            **$**
            **0.48**
            
            **$**
            **0.67**Diluted
            
            **$**
            **0.37**
            
            **$**
            **0.44**
            
            **$**
            **0.47**
            
            **$**
            **0.66**Stock
                Prices (range of sales prices):High
            
            **$**
            **51.25**
            
            **$**
            **53.57**
            
            **$**
            **57.69**
            
            **$**
            **56.75**Low
            
            **$**
            **36.07**
            
            **$**
            **48.10**
            
            **$**
            **50.80**
            
            **$**
            **50.25**20061stQuarter
            
            
            2ndQuarter
            
            
            3rdQuarter
            
            
            4thQuarterRevenue
            
            $
            152,004
            
            $
            163,979
            
            $
            171,141
            
            $
            191,829Gross
                margin
            
            $
            78,161
            
            $
            82,072
            
            $
            85,083
            
            $
            100,367Income
                from operations(1)
            
            $
            18,052
            
            $
            20,630
            
            $
            21,922
            
            $
            30,673Net
                income(1)
            
            $
            12,353
            
            $
            14,204
            
            $
            15,594
            
            $
            21,377Income
                from operations per common share(1):Basic
            
            $
            0.47
            
            $
            0.53
            
            $
            0.56
            
            $
            0.79Diluted
            
            $
            0.44
            
            $
            0.51
            
            $
            0.54
            
            $
            0.76Earnings
                per common share(1):Basic
            
            $
            0.32
            
            $
            0.37
            
            $
            0.40
            
            $
            0.55Diluted
            
            $
            0.30
            
            $
            0.35
            
            $
            0.38
            
            $
            0.53Stock
                Prices (range of sales prices):High
            
            $
            47.41
            
            $
            51.44
            
            $
            55.35
            
            $
            46.75Low
            
            $
            38.21
            
            $
            40.62
            
            $
            41.20
            
            $
            37.86




(1)
            Fiscal
                years ended June 30, 2007 and 2006 include approximately $14.0 million
                ($11.1 million, net of tax, or $0.27 per share) and $9.1 million
                ($7.1
                million, net of tax, or $0.18 per share), respectively, in non-cash
                share-based compensation expenses. See Note 2, “Share-based
                Compensation.”


(2)
            Earnings
                available for shareholders for the fourth quarter of fiscal year
                2007 has
                been reduced by less than $0.1 million for the impact of minority
                interest
                put arrangement as discussed in Note 3, “Acquisitions.” This amount
                negatively affected the basic earnings per share for the fourth quarter
                of
                fiscal year 2007 by $0.01 due to the effect of rounding in earnings
                per
                share calculation.


(3)
            Sum
                of quarterly amounts does not equal the sum of as reported amounts
                due to
                rounding differences.





**19.**
            **SUBSEQUENT
                EVENT:**





On
      July
      10, 2007, the Company acquired a majority interest in Check-in-Data, a
      distributor of MICROS products and services headquartered in Switzerland, for
      a
      total cash purchase price of approximately SWF 12.0 million (approximately
      $10.0
      million). Approximately $2.0 million of the total purchase price is to be paid
      12 months and 18 months after closing subject to certain holdback
      rights.


69


**MICROS
      SYSTEMS, INC. AND SUBSIDIARIES**


**SCHEDULE
      II - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES**


(in
      thousands)





**Description**
            
            **Balance
                at**
              **beginning**
              **of
                period**
            
            **Charged**
              **To**
              **expense**
            
            **Deductions**
            
            **Other****(1)**
            
            **Balance**
              **at
                end**
              **of
                period****Year
                ended June 30, 2007:****Allowance
                for doubtful accounts**
            
            **$**
            **20,335**
            
            **$**
            **3,356**
            
            **$**
            **340****(2**
            **)**
            **$**
            **(241**
            **)**
            **$**
            **23,110****Reserve
                for inventory obsolescence**
            
            
            **9,938**
            
            
            **3,156**
            
            
            **2,399****(3**
            **)**
            
            **(802**
            **)**
            
            **9,893****$**
            **30,273**
            
            **$**
            **6,512**
            
            **$**
            **2,739**
            
            **$**
            **(1,043**
            **)**
            **$**
            **33,003**Year
                ended June 30, 2006:Allowance
                for doubtful accounts
            
            $
            16,202
            
            $
            5,409
            
            $
            375(2
            )
            $
            (901
            )
            $
            20,335Reserve
                for inventory obsolescence
            
            
            7,352
            
            
            3,530
            
            
            802(3
            )
            
            (142
            )
            
            9,938$
            23,554
            
            $
            8,939
            
            $
            1,177
            
            $
            (1,043
            )
            $
            30,273Year
                ended June 30, 2005:Allowance
                for doubtful accounts
            
            $
            11,903
            
            $
            5,697
            
            $
            347(2
            )
            $
            (1,051
            )
            $
            16,202Reserve
                for inventory obsolescence
            
            
            6,380
            
            
            2,655
            
            
            1,107(3
            )
            
            (576
            )
            
            7,352$
            18,283
            
            $
            8,352
            
            $
            1,454
            
            $
            (1,627
            )
            $
            23,554




(1)
            Primarily
                related to foreign currency
                translation.


(2)
            Charge
                offs, net of recoveries.


(3)
            Material
                scrapped or otherwise disposed.


70


**SIGNATURES**





Pursuant
      to the requirements of Section 13 or 15(d) of the Securities Exchange Act of
      1934, the Registrant has duly caused this report to be signed on its behalf
      by
      the undersigned, thereunto duly authorized.








MICROS
                SYSTEMS, INC.Date:
            August
                29, 2007
            By:
            /s/Gary
                C. KaufmanGary
                C. KaufmanExecutive
                Vice President, Finance and Administration/Chief Financial
                OfficerDate:
            August
                29, 2007
            By:
            /s/Cynthia
                A. RussoCynthia
                A. RussoVice
                President and Corporate Controller




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





Name
            
            Title/s/A.
                L. Giannopoulos
              A.
                L. Giannopoulos
            
            Chairman,
                President and
              Chief
                Executive Officer
            
            August
                29, 2007/s/Gary
                C. Kaufman
              
              Gary
                C. Kaufman
            
            Executive
                Vice President
              Finance
                and Administration
              Chief
                Financial Officer
            
            August
                29, 2007/s/Louis
                M. Brown, Jr.
              
              Louis
                M. Brown, Jr.
            
            Director
                and
              Vice
                Chairman of the Board
            
            August
                29, 2007/s/B.
                Gary Dando
              
              B.
                Gary Dando
            
            Director
            
            August
                29, 2007/s/John
                G. Puente
              
              John
                G. Puente
            
            Director
            
            August
                29, 2007


/s/Dwight
                S. Taylor
              
              Dwight
                S. Taylor
            
            Director
            
            August
                29, 2007/s/William
                S. Watson
              
              William
                S. Watson
            
            Director
            
            August
                29, 2007


71


**EXHIBIT
      INDEX**


3(i)
              Articles
                  of Incorporation of the Company are incorporated herein by reference
                  to
                  Exhibit 3 to the Annual Report on Form 10-K of the Company for
                  the Fiscal
                  Year ended June 30, 1990.3(i)(a)
              Articles
                  of Amendment to Articles of Incorporation are incorporated herein
                  by
                  reference to Exhibit 3(i) to the Quarterly Report on Form 10-Q
                  of the
                  Company for the period ended December 31, 1997.3(i)(b)
              Articles
                  of Amendment to Articles of Incorporation are incorporated herein
                  by
                  reference to Exhibit 3(i) to the Quarterly Report on Form 10-Q
                  of the
                  Company for the period ended December 31, 1998.3(ii)(a)
              By-laws
                  of the Company are incorporated herein by reference to Exhibit
                  3 to the
                  Annual Report on Form 10-K of the Company for the Fiscal Year ended
                  June
                  30, 1990.3(ii)(b)
              By-laws
                  of the Company, as amended, are incorporated herein by reference
                  to
                  Exhibit 3(ii) to the Form 8-K filed on August 30, 2004.10(a)(1)*
              Amendment
                  and Restatement of MICROS Systems, Inc. Stock Option Plan is incorporated
                  herein by reference to Exhibit 4.1 to the Registration Statement
                  on Form
                  S-8 of the Company filed on February 16, 1990.10(a)(2)*
              First
                  Amendment to the Amendment and Restatement of MICROS Systems, Inc.
                  Stock
                  Option Plan is incorporated herein by reference to Exhibit 4.2
                  to the
                  Registration Statement on Form S-8 of the Company filed on February
                  16,
                  1990.10(a)(3)*
              MICROS
                  Systems, Inc. 1991 Stock Option Plan as amended, is incorporated
                  herein by
                  reference to Exhibit A to the Proxy Statement of the Company for
                  the 2006
                  Annual Meeting of Shareholders10(b)*
              Employment
                  Agreement dated June 1, 1995 between MICROS Systems, Inc. and A.
                  L.
                  Giannopoulos is incorporated herein by reference to Exhibit 10e
                  to the
                  Annual Report on Form 10-K of the Company for the Fiscal Year ended
                  June
                  30, 1995.10(b)(1)*
              First
                  Amendment to Employment Agreement dated February 6, 1997 between
                  MICROS
                  Systems, Inc. and A. L. Giannopoulos is incorporated herein by
                  reference
                  to Exhibit 10 to the Quarterly Report on Form 10-Q of the Company
                  for the
                  period ended December 31, 1996.10(b)(2)*
              Second
                  Amendment to Employment Agreement dated February 1, 1998 between
                  MICROS
                  Systems, Inc. and A. L. Giannopoulos is incorporated herein by
                  reference
                  to Exhibit 10 to the Quarterly Report on Form 10-Q of the Company
                  for the
                  period ended December 31, 1997.10(b)(3)*
              Third
                  Amendment to Employment Agreement dated September 8, 1999 between
                  MICROS
                  Systems, Inc. and A. L. Giannopoulos is incorporated herein by
                  reference
                  to Exhibit 10g to the Annual Report on Form 10-K of the Company
                  for the
                  Fiscal Year ended June 30, 1999.10(b)(4)*
              Fourth
                  Amendment to Employment Agreement dated November 19, 2001 between
                  MICROS
                  Systems, Inc. and A. L. Giannopoulos is incorporated herein by
                  reference
                  to Exhibit 10 to the Quarterly Report on Form 10-Q of the Company
                  for the
                  period ended December 31, 2001.10(b)(5)*
              Fifth
                  Amendment to Employment Agreement dated November 15, 2002 between
                  MICROS
                  Systems, Inc. and A. L. Giannopoulos is incorporated herein by
                  reference
                  to Exhibit 10 to the Quarterly Report on Form 10-Q of the Company
                  for the
                  period ended December 31, 2002.10(b)(6)*
              Sixth
                  Amendment to Employment Agreement dated January 28, 2004 between
                  MICROS
                  Systems, Inc. and A. L. Giannopoulos is incorporated herein by
                  reference
                  to Exhibit 10 to the Quarterly Report on Form 10-Q of the Company
                  for the
                  period ended December 31, 2003.10(b)(7)*
              Seventh
                  Amendment to Employment Agreement dated August 9, 2005 between
                  MICROS
                  Systems, Inc. and A. L. Giannopoulos is incorporated herein by
                  reference
                  to Exhibit 10 to the Current Report on Form 8-K filed on August
                  11,
                  2005.10(b)(8)*
              Eighth
                  Amendment to Employment Agreement dated June 6, 2006, between MICROS
                  Systems, Inc. and A.L. Giannopoulos is incorporated herein by reference
                  to
                  Exhibit 10 to the Current Report on Form 8-K filed on June 8,
                  2006.10(b)(9)*
              Ninth
                  Amendment to Employment Agreement dated June 6, 2006, between MICROS
                  Systems, Inc. and A.L. Giannopoulos is incorporated herein by reference
                  to
                  Exhibit 10 to the Current Report on Form 8-K filed on November
                  17,
                  2006.10(c)*
              Consulting
                  Agreement dated June 30, 1995 between MICROS Systems, Inc. and
                  Louis M.
                  Brown, Jr. is incorporated herein by reference to Exhibit 10 to
                  the Annual
                  Report on Form 10-K of the Company for the Fiscal Year ended June
                  30,
                  1995.10(c)(1)*
              First
                  Amendment to Consulting Agreement dated February 1, 1999 between
                  MICROS
                  Systems, Inc. and Louis M. Brown, Jr. is incorporated herein by
                  reference
                  to Exhibit 10 to the Quarterly Report on Form 10-Q of the Company
                  for the
                  period ended December 31, 1998.10(c)(2)*
              Second
                  Amendment to Consulting Agreement dated April 26, 2001 between
                  MICROS
                  Systems, Inc. and Louis M. Brown, Jr. is incorporated herein by
                  reference
                  to Exhibit 10 to the Quarterly Report on Form 10-Q of the Company
                  for the
                  period ended March 31, 2001.10(c)(3)*
              Third
                  Amendment to Consulting Agreement dated September 4, 2003 between
                  MICROS
                  Systems, Inc. and Louis M. Brown, Jr. is incorporated herein by
                  reference
                  to Exhibit 10 to the Annual Report on Form 10-K of the Company
                  for the
                  Fiscal Year ended June 30, 2003.10(c)(4)*
              Fourth
                  Amendment to Consulting Agreement dated September 4, 2003 between
                  MICROS
                  Systems, Inc. and Louis M. Brown, Jr. is incorporated herein by
                  reference
                  to Exhibit 10 to the Current Report on Form 8-K filed on June 12,
                  2007.




72




10(d)*
              Employment
                  Agreement dated May 28, 1997 between MICROS Systems, Inc. and Gary
                  C.
                  Kaufman is incorporated herein by reference to Exhibit 10 to the
                  Annual
                  Report on Form 10-K of the Company for the Fiscal Year ended June
                  30,
                  1997.10(d)(1)*
              First
                  Amendment to Employment Agreement dated October 1, 1998 between
                  MICROS
                  Systems, Inc. and Gary C. Kaufman is incorporated herein by reference
                  to
                  Exhibit 10 to the Quarterly Report on Form 10-Q of the Company
                  for the
                  period ended December 31, 1998.10(d)(2)*
              Second
                  Amendment to Employment Agreement dated October 1, 1998 between
                  MICROS
                  Systems, Inc. and Gary C. Kaufman is incorporated herein by reference
                  to
                  Exhibit 10 to the Current Report on Form 8-K filed on November
                  17,
                  2006.10(e)*
              Employment
                  Agreement dated May 28, 1997 between MICROS Systems, Inc. and Thomas
                  L.
                  Patz is incorporated herein by reference to Exhibit 10 to the Annual
                  Report on Form 10-K of the Company for the Fiscal Year ended June
                  30,
                  1997.10(e)(1)*
              First
                  Amendment to Employment Agreement dated October 1, 1998 between
                  MICROS
                  Systems, Inc. and Thomas L. Patz is incorporated herein by reference
                  to
                  Exhibit 10 to the Quarterly Report on Form 10-Q of the Company
                  for the
                  period ended December 31, 1998 (see 10(d)(1) above, as Mr. Patz’ amendment
                  is an amendment identical (except for the identity of the executive
                  and
                  the economic terms) to that entered into by the Company with Mr.
                  Kaufman).10(e)(2)*
              Second
                  Amendment to Employment Agreement dated October 1, 1998 between
                  MICROS
                  Systems, Inc. and Thomas L. Patz is incorporated herein by reference
                  to
                  Exhibit 10 to the Current Report on Form 8-K filed on November
                  17, 2006
                  (see 10(d)(2) above, as Mr. Patz’ amendment is an amendment identical
                  (except for the identity of the executive and the economic terms)
                  to that
                  entered into by the Company with Mr. Kaufman).10(f)*
              Restated
                  Supplemental Executive Retirement Plan, as approved by the Board
                  of
                  Directors onApril
                  27, 2005, incorporated herein by reference to Exhibit 10 to the
                  Annual
                  Report on Form 10-K for the fiscal year ended June 30,
                  2006.10(g)
              Amended
                  and Restated Credit Agreement, effective as of July 29, 2005, among
                  MICROS
                  Systems, Inc., DV Technology Holdings Corporation, Datavantage
                  Corporation, MICROS Fidelio Nevada, LLC, MSI Delaware, LLC, Micros-Fidelio
                  Worldwide, Inc., and JTECH Communications, Inc. as Borrower, Bank
                  of
                  America, N.A., as administrative agent, swing line lender and L/C
                  issuer,
                  and Wachovia Bank, N.A., and US Bank, N.A., and Banc of America
                  Securities
                  LLC, as sole lead arranger and book manager, is incorporated herein
                  by
                  reference to Exhibit 10 to the Annual Report on Form 10-K for the
                  period
                  ended June 30, 2005.10(g)(1)
              Amended
                  and Restated Credit Agreement, effective as of July 29, 2005, among
                  Micros-Fidelio (Ireland) Ltd., Micros-Fidelio Systems (UK) Ltd.,
                  Micros-Fidelio España S.L., MICROS Fidelio (Canada), Ltd., Micros-Fidelio
                  Brazil, Ltda., Micros-Fidelio France S.A.S., Hospitality Technologies,
                  S.A., Micros-Fidelio Mexico S.A. de C.V., MICROS Systems Holding
                  GmbH,
                  Micros-Fidelio GmbH, Micros-Fidelio Software Portugal Unipessoal
                  Lda,
                  Micros-Fidelio (Thailand) Co., Ltd., Micros-Fidelio Singapore Pte
                  Ltd.,
                  Micros-Fidelio Software (Philippines), Inc., Micros-Fidelio Japan
                  Ltd.,
                  Micros-Fidelio Australia Pty. Ltd., Micros-Fidelio Hong Kong, Ltd.,
                  Fidelio Nordic Norway A/S, Fidelio Nordic Oy, Fidelio Nordic Sverige,
                  A.B., Hotelbk, A.B., as Borrower, Bank Of America, N.A., as Administrative
                  Agent, swing line lender, and L/C issuer, and Wachovia Bank N.A.
                  and US
                  Bank N.A., and Banc of America Securities LLC, as sole lead arranger
                  and
                  book manager is incorporated herein by reference to Exhibit 10
                  to the
                  Annual Report on Form 10-K for the Fiscal Year ended June 30,
                  2005.14
              Code
                  of Ethics and Business Practices is incorporated herein by reference
                  to
                  Exhibit 14 to the Annual Report on Form 10-K of the Company for
                  the Fiscal
                  Year ended June 30, 2004.21
              Subsidiaries
                  of the Company (filed herewith)23
              Consent
                  of Independent Registered Public Accounting Firm (filed
                  herewith)31(a)
              Certification
                  of Principal Executive Officer pursuant to Rule 13a-14(a) under
                  the
                  Securities Exchange Act of 1934 (filed herewith)31(b)
              Certification
                  of Principal Financial Officer pursuant to Rule 13a-14(a) under
                  the
                  Securities Exchange Act of 1934 (filed herewith)32(a)
              Certification
                  of Principal Executive Officer pursuant to Rule 13a-14(b) under
                  the
                  Securities Exchange Act of 1934 and 18 U.S.C. 1350 (furnished
                  herewith)32(b)
              Certification
                  of Principal Financial Officer pursuant to Rule 13a-14(b) under
                  the
                  Securities Exchange Act of 1934 and 18 U.S.C. 1350 (furnished
                  herewith)
  *
              Management
                  contract or compensatory plan or
                  arrangement.




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