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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549





FORM 10-Q







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

For the quarterly period ended March 31, 2008

OR



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

For the transition period from  to

Commission File Number 000-26933





LIONBRIDGE TECHNOLOGIES, INC.

(Exact name of registrant as specified in its
charter)







|                         |  |                                     
|------------------------ |  | ------------------------------------
|Delaware                 |  | 04-3398462                          
|(State of Incorporation) |  | (I.R.S. Employer Identification No.)

1050 Winter Street, Waltham, MA 02451

(Address of Principal Executive Offices)

Registrants Telephone Number, Including Area Code: 781-434-6000





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

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of
accelerated filer and large accelerated filer in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated
filer   ̈    Accelerated filer  x    Non-accelerated filer   ̈

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

The number of shares outstanding of the registrants common stock, par value $0.01 per share, as of April 30, 2008 was 57,655,737.









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LIONBRIDGE TECHNOLOGIES, INC.

FORM 10-Q

FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2008

TABLE OF CONTENTS



|                              |  |                                                                                                                |  |     
|----------------------------- |  | -------------------------------------------------------------------------------------------------------------- |  | ----
|                              |  |                                                                                                                |  | Page
|PART I: FINANCIAL INFORMATION |  |                                                                                                               
|                              |  |                                                                                                               
|ITEM 1                        |  | Condensed Consolidated Financial Statements:                                                                   |  |     
|                              |  |                                                                                                               
|                              |  | Condensed Consolidated Balance Sheets as of March 31, 2008 (unaudited) and December 31, 2007                   |  | 3   
|                              |  |                                                                                                               
|                              |  | Condensed Consolidated Statements of Operations (unaudited) for the three months ended March 31, 2008 and 2007 |  | 4   
|                              |  |                                                                                                               
|                              |  | Condensed Consolidated Statements of Cash Flows (unaudited) for the three months ended March 31, 2008 and 2007 |  | 5   
|                              |  |                                                                                                               
|                              |  | Notes to Condensed Consolidated Financial Statements (unaudited)                                               |  | 6   
|                              |  |                                                                                                               
|ITEM 2                        |  | Managements Discussion and Analysis of Financial Condition and Results of Operations                          |  | 14  
|                              |  |                                                                                                               
|ITEM 3                        |  | Quantitative and Qualitative Disclosures About Market Risk                                                     |  | 24  
|                              |  |                                                                                                               
|ITEM 4                        |  | Controls and Procedures                                                                                        |  | 24  
|                              | 
|PART II: OTHER INFORMATION    |  |                                                                                                               
|                              |  |                                                                                                               
|ITEM 1                        |  | Legal Proceedings                                                                                              |  | 25  
|                              |  |                                                                                                               
|ITEM 1A                       |  | Risk Factors                                                                                                   |  | 26  
|                              |  |                                                                                                               
|ITEM 2                        |  | Unregistered Sales of Equity Securities and Use of Proceeds                                                    |  | 26  
|                              |  |                                                                                                               
|ITEM 6                        |  | Exhibits                                                                                                       |  | 26  
|                              | 
|SIGNATURE                     |  | 27                                                                                                            
|                              | 
|EXHIBIT INDEX                 |  | 27                                                                                                            



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PART I. FINANCIAL INFORMATION



|Item 1. | Consolidated Financial Statements
|------- | ---------------------------------

LIONBRIDGE TECHNOLOGIES, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Amounts in thousands, except share data)



|                                                                                                                                                                            |  |               |          |   |                  |   |          |  
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------- | -------- | - | ---------------- | - | -------- | -
|                                                                                                                                                                            |  | March 31,2008 |          |   | December 31,2007 |  
|                                                                                                                                                                            |  | (unaudited)   |          |   |                  |  
|ASSETS                                                                                                                                                                      |  |               |          |   |                  |   |          |  
|Current assets:                                                                                                                                                             |  |               |          |   |                  |   |          |  
|Cash and cash equivalents                                                                                                                                                   |  | $             | 26,034   |   |                  | $ | 32,248   |  
|Accounts receivable, net of allowance of $689 at March 31, 2008 and December 31, 2007                                                                                       |  |               | 77,538   |   |                  |   | 83,611   |  
|Work in process                                                                                                                                                             |  |               | 31,196   |   |                  |   | 23,335   |  
|Other current assets                                                                                                                                                        |  |               | 16,160   |   |                  |   | 12,329   |  
|                                                                                                                                                                            |  |               |          |   |                  |   |          |  
|Total current assets                                                                                                                                                        |  |               | 150,928  |   |                  |   | 151,523  |  
|Property and equipment, net                                                                                                                                                 |  |               | 15,860   |   |                  |   | 13,449   |  
|Goodwill                                                                                                                                                                    |  |               | 131,213  |   |                  |   | 131,213  |  
|Other intangible assets, net                                                                                                                                                |  |               | 26,328   |   |                  |   | 28,441   |  
|Other assets                                                                                                                                                                |  |               | 8,437    |   |                  |   | 8,437    |  
|                                                                                                                                                                            |  |               |          |   |                  |   |          |  
|Total assets                                                                                                                                                                |  | $             | 332,766  |   |                  | $ | 333,063  |  
|                                                                                                                                                                            |  |               |          |   |                  |   |          |  
|                                                                                                                                                                            |  |              
|LIABILITIES AND STOCKHOLDERS EQUITY                                                                                                                                        |  |               |          |   |                  |   |          |  
|Current liabilities:                                                                                                                                                        |  |               |          |   |                  |   |          |  
|Short-term debt and current portion of long-term debt                                                                                                                       |  | $             | 274      |   |                  | $ | 304      |  
|Accounts payable                                                                                                                                                            |  |               | 19,209   |   |                  |   | 20,217   |  
|Accrued compensation and benefits                                                                                                                                           |  |               | 20,404   |   |                  |   | 21,164   |  
|Accrued outsourcing                                                                                                                                                         |  |               | 13,804   |   |                  |   | 12,150   |  
|Accrued merger and restructuring                                                                                                                                            |  |               | 1,434    |   |                  |   | 1,878    |  
|Income taxes payable                                                                                                                                                        |  |               | 1,999    |   |                  |   | 3,042    |  
|Accrued expenses and other current liabilities                                                                                                                              |  |               | 13,658   |   |                  |   | 12,294   |  
|Deferred revenue                                                                                                                                                            |  |               | 12,078   |   |                  |   | 16,014   |  
|                                                                                                                                                                            |  |               |          |   |                  |   |          |  
|Total current liabilities                                                                                                                                                   |  |               | 82,860   |   |                  |   | 87,063   |  
|                                                                                                                                                                            |  |               |          |   |                  |   |          |  
|                                                                                                                                                                            |  |              
|Long-term debt, less current portion                                                                                                                                        |  |               | 71,722   |   |                  |   | 71,751   |  
|Deferred income taxes, long-term                                                                                                                                            |  |               | 7,620    |   |                  |   | 7,504    |  
|Other long-term liabilities                                                                                                                                                 |  |               | 11,831   |   |                  |   | 10,591   |  
|Contingencies (Note 10)                                                                                                                                                     |  |               |          |   |                  |   |          |  
|Stockholders equity:                                                                                                                                                       |  |               |          |   |                  |   |          |  
|Preferred stock, $0.01 par value; 5,000,000 shares authorized; no shares issued and outstanding                                                                             |  |               |         |   |                  |   |         |  
|Common stock, $0.01 par value; 100,000,000 shares authorized; 57,654,771 and 57,592,936 shares issued and outstanding at March 31, 2008
and December 31, 2007, respectively |  |               | 577      |   |                  |   | 576      |  
|Additional paid-in capital                                                                                                                                                  |  |               | 253,038  |   |                  |   | 253,924  |  
|Accumulated deficit                                                                                                                                                         |  |               | (116,536 | ) |                  |   | (112,101 | )
|Accumulated other comprehensive income                                                                                                                                      |  |               | 21,654   |   |                  |   | 13,755   |  
|                                                                                                                                                                            |  |               |          |   |                  |   |          |  
|Total stockholders equity                                                                                                                                                  |  |               | 158,733  |   |                  |   | 156,154  |  
|                                                                                                                                                                            |  |               |          |   |                  |   |          |  
|Total liabilities and stockholders equity                                                                                                                                  |  | $             | 332,766  |   |                  | $ | 333,063  |  
|                                                                                                                                                                            |  |               |          |   |                  |   |          |  

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



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LIONBRIDGE TECHNOLOGIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

(Amounts in thousands,
except per share data)



|                                                                                    |  |                             |         |   |      |   |        
|----------------------------------------------------------------------------------- |  | --------------------------- | ------- | - | ---- | - | -------
|                                                                                    |  | Three Months EndedMarch 31,
|                                                                                    |  | 2008                        |         |   | 2007
|Revenue                                                                             |  | $                           | 117,048 |   |      | $ | 108,616
|Operating expenses:                                                                 |  |                             |         |   |      |   |        
|Cost of revenue (exclusive of depreciation and amortization shown separately below) |  |                             | 80,875  |   |      |   | 72,218 
|Sales and marketing                                                                 |  |                             | 8,817   |   |      |   | 7,951  
|General and administrative                                                          |  |                             | 23,175  |   |      |   | 20,582 
|Research and development                                                            |  |                             | 1,112   |   |      |   | 717    
|Depreciation and amortization                                                       |  |                             | 1,139   |   |      |   | 1,294  
|Amortization of acquisition-related intangible assets                               |  |                             | 2,113   |   |      |   | 2,114  
|Merger, restructuring and other charges                                             |  |                             | 206     |   |      |   | 278    
|                                                                                    |  |                             |         |   |      |   |        
|Total operating expenses                                                            |  |                             | 117,437 |   |      |   | 105,154
|                                                                                    |  |                             |         |   |      |   |        
|                                                                                    |  |                            
|Income (loss) from operations                                                       |  |                             | (389    | ) |      |   | 3,462  
|Interest expense:                                                                   |  |                             |         |   |      |   |        
|Interest on outstanding debt                                                        |  |                             | 1,122   |   |      |   | 1,418  
|Amortization of deferred financing costs                                            |  |                             | 44      |   |      |   | 46     
|Interest income                                                                     |  |                             | 147     |   |      |   | 206    
|Other expense, net                                                                  |  |                             | 2,411   |   |      |   | 491    
|                                                                                    |  |                             |         |   |      |   |        
|Income (loss) before income taxes                                                   |  |                             | (3,819  | ) |      |   | 1,713  
|Provision for income taxes                                                          |  |                             | 616     |   |      |   | 1,481  
|                                                                                    |  |                             |         |   |      |   |        
|Net income (loss)                                                                   |  | $                           | (4,435  | ) |      | $ | 232    
|                                                                                    |  |                             |         |   |      |   |        
|Net income (loss) per share of common stock:                                        |  |                             |         |   |      |   |        
|Basic                                                                               |  | $                           | (0.08   | ) |      | $ | 0.00   
|Diluted                                                                             |  | $                           | (0.08   | ) |      | $ | 0.00   
|                                                                                    |  |                            
|Weighted average number of common shares outstanding:                               |  |                             |         |   |      |   |        
|Basic                                                                               |  |                             | 56,147  |   |      |   | 59,320 
|Diluted                                                                             |  |                             | 56,147  |   |      |   | 60,791 

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



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LIONBRIDGE TECHNOLOGIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(Amounts in thousands)



|                                                                                         |  |                             |        |   |      |   |         |  
|---------------------------------------------------------------------------------------- |  | --------------------------- | ------ | - | ---- | - | ------- | -
|                                                                                         |  | Three Months EndedMarch 31, |       
|                                                                                         |  | 2008                        |        |   | 2007 |  
|Cash flows from operating activities:                                                    |  |                             |        |   |      |   |         |  
|Net income (loss)                                                                        |  | $                           | (4,435 | ) |      | $ | 232     |  
|Adjustments to reconcile net income (loss) to net cash provided by operating activities: |  |                             |        |   |      |   |         |  
|Stock-based compensation                                                                 |  |                             | 1,603  |   |      |   | 1,737   |  
|Amortization of deferred financing charges                                               |  |                             | 44     |   |      |   | 46      |  
|Depreciation and amortization                                                            |  |                             | 1,139  |   |      |   | 1,294   |  
|Amortization of acquisition-related intangible assets                                    |  |                             | 2,113  |   |      |   | 2,114   |  
|Deferred income taxes                                                                    |  |                             | 117    |   |      |   | 116     |  
|Net realized and unrealized foreign currency (gain)/loss on forward contracts            |  |                             | (3,386 | ) |      |   | 151     |  
|Other                                                                                    |  |                             | 16     |   |      |   | 8       |  
|Changes in operating assets and liabilities, net of effects of acquisitions:             |  |                             |        |   |      |   |         |  
|Accounts receivable                                                                      |  |                             | 10,400 |   |      |   | (2,437  | )
|Work in process                                                                          |  |                             | (6,384 | ) |      |   | (8,808  | )
|Other current assets                                                                     |  |                             | (3,090 | ) |      |   | (3,941  | )
|Other assets                                                                             |  |                             | 468    |   |      |   | (4,221  | )
|Accounts payable                                                                         |  |                             | 1,235  |   |      |   | 2,022   |  
|Income tax payable                                                                       |  |                             | (1,184 | ) |      |   | (1,274  | )
|Accrued compensation and benefits                                                        |  |                             | (2,808 | ) |      |   | (476    | )
|Accrued outsourcing                                                                      |  |                             | 855    |   |      |   | 1,819   |  
|Accrued merger and restructuring                                                         |  |                             | (539   | ) |      |   | (493    | )
|Accrued expenses and other liabilities                                                   |  |                             | 1,394  |   |      |   | 4,256   |  
|Deferred revenue                                                                         |  |                             | (4,501 | ) |      |   | 427     |  
|                                                                                         |  |                             |        |   |      |   |         |  
|Net cash used in operating activities                                                    |  |                             | (6,943 | ) |      |   | (7,428  | )
|                                                                                         |  |                             |        |   |      |   |         |  
|                                                                                         |  |                            
|Cash flows from investing activities:                                                    |  |                             |        |   |      |   |         |  
|Purchases of property and equipment                                                      |  |                             | (2,646 | ) |      |   | (1,407  | )
|Net proceeds from (payment of) foreign currency forward contracts                        |  |                             | 3,720  |   |      |   | (46     | )
|                                                                                         |  |                             |        |   |      |   |         |  
|Net cash provided by (used in) investing activities                                      |  |                             | 1,074  |   |      |   | (1,453  | )
|                                                                                         |  |                             |        |   |      |   |         |  
|                                                                                         |  |                            
|Cash flows from financing activities:                                                    |  |                             |        |   |      |   |         |  
|Proceeds from issuance of short-term debt                                                |  |                             | 7,400  |   |      |   | 300     |  
|Payments of short-term debt                                                              |  |                             | (7,400 | ) |      |   | (300    | )
|Payments of long-term debt                                                               |  |                             | (32    | ) |      |   | (2,026  | )
|Proceeds from issuance of common stock under stock option plans                          |  |                             | 12     |   |      |   | 249     |  
|Shares repurchased                                                                       |  |                             | (2,329 | ) |      |   |        |  
|Proceeds from issuance of capital lease obligations                                      |  |                             |       |   |      |   | 255     |  
|Payments of capital lease obligations                                                    |  |                             | (51    | ) |      |   | (134    | )
|                                                                                         |  |                             |        |   |      |   |         |  
|Net cash used in financing activities                                                    |  |                             | (2,400 | ) |      |   | (1,656  | )
|                                                                                         |  |                             |        |   |      |   |         |  
|Net decrease in cash and cash equivalents                                                |  |                             | (8,269 | ) |      |   | (10,537 | )
|Effects of exchange rate changes on cash and cash equivalents                            |  |                             | 2,055  |   |      |   | 108     |  
|Cash and cash equivalents at beginning of period                                         |  |                             | 32,248 |   |      |   | 27,354  |  
|                                                                                         |  |                             |        |   |      |   |         |  
|Cash and cash equivalents at end of period                                               |  | $                           | 26,034 |   |      | $ | 16,925  |  
|                                                                                         |  |                             |        |   |      |   |         |  

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



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LIONBRIDGE TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. BASIS OF PRESENTATION

The accompanying condensed consolidated financial statements include the accounts of Lionbridge Technologies, Inc. and its wholly owned
subsidiaries (collectively, Lionbridge or the Company). These financial statements are unaudited. However, in the opinion of management, the consolidated financial statements include all adjustments, all of a normal nature,
necessary for their fair presentation. Interim results are not necessarily indicative of results expected for a full year. The accompanying unaudited consolidated financial statements have been prepared in accordance with the instructions for Form
10-Q and, therefore, do not include all information and footnotes necessary for a complete presentation of the operations, financial position and cash flows of the Company in conformity with U.S. generally accepted accounting principles. These
statements should be read in conjunction with the Companys Annual Report on Form 10-K for the year ended December 31, 2007.

The
Companys preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of
contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenues and expenses during the reported periods. Estimates are used when accounting for collectibility of receivables, calculating service
revenue using a percentage-of-completion assessment and valuing intangible assets, deferred tax assets and net assets of businesses acquired. Actual results could differ from these estimates.

2. STOCKHOLDERS EQUITY AND STOCK-BASED COMPENSATION

Stock
Option Plans

The Company has stock-based compensation plans for salaried employees and non-employee members of the Board of Directors.
The plans provide for discretionary grants of stock options, restricted stock and stock units, and other stock-based awards. The plans are administered by the Nominating and Compensation Committee of the Board of Directors, which consists of
non-employee directors.

In November 2005, the stockholders of Lionbridge Technologies, Inc. approved the Lionbridge 2005 Incentive Plan
(the 2005 Plan), which had been previously adopted by the Lionbridge Board of Directors on October 7, 2005, for officers, employees, non-employee directors and other key persons of Lionbridge and its subsidiaries. The 2005 Plan was
amended on May 21, 2007, to adjust the vesting schedule of future automatic equity grants to non-employee directors of the Company from four years to two years. The maximum number of shares of common stock available for issuance under the 2005
Plan is 4,000,000 shares. At March 31, 2008, there were 473,978 options available for future grant under the 2005 Plan. Options to purchase common stock are granted at the discretion of the Board of Directors and the Nominating and Compensation
Committee. Generally, stock options vest over a four-year period: 25% of the option shares vest one year from the date of grant and the remaining option shares vest at the rate of 12.5% each six month period thereafter. Stock options generally
expire five years from the date of grant under the 2005 Plan. Under the terms of the 2005 Plan, the exercise price of incentive and non-qualified stock option grants must not be less than 100% of the fair market value of the common stock on the date
of grant. Options are amortized using a straight line basis over the option vesting period. In the three months ended March 31, 2008, Lionbridge awarded 12,272 stock option grants under the 2005 Plan.

Lionbridges 1998 Stock Plan (the Plan) provides for the issuance of incentive and nonqualified stock options. The maximum number of
shares of common stock available for issuance under the Plan is 11,722,032 shares and the Plan expired on January 26, 2008. Accordingly, at March 31, 2008 there were no options available for future grant under the Plan. Options to purchase
common stock are granted at the discretion of the Board of Directors and the Nominating and Compensation Committee. Generally, stock options vest over a four-year period: 25% of the option shares vest one year from the date of grant and the
remaining option shares vest at the rate of 12.5% each six month period thereafter. Stock options generally expire ten years (five years in certain cases) from the date of grant under the Plan. Under the terms of the Plan, the exercise price of
incentive stock options granted must not be less than 100% (110% in certain cases) of the fair market value of the common stock on the date of grant, as determined by the Board of Directors. The exercise price of nonqualified stock options may be
less than the fair market value of the common stock on the date of grant, as determined by the Board of Directors, but in no case may the exercise price be less than the statutory minimum, the par value per share of Lionbridges common stock.
In the three months ended March 31, 2008, Lionbridge awarded 297,728 stock option grants under the 1998 Plan.



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Restricted Stock Awards

Lionbridge issued 14,500 and 948,500 shares of restricted common stock and restricted stock units under the Companys 2005 Incentive Plan and the 1998 Stock Plan, respectively, in the three-month period ended
March 31, 2008 with a fair market value of $3.0 million for which restrictions on disposition lapse over four years from the date on each anniversary date.

The Company recognizes expense for stock options, market-based restricted stock awards and time-based restricted stock awards pursuant to the guidance of Financial Accounting Standards Board (FASB)
Statement of Financial Accounting Standards (SFAS) No. 123, Share-Based Payment (SFAS 123R). Total compensation expense related to stock options, market-based restricted stock awards and time-based restricted
stock awards was $1.6 million and $1.7 million for the three-month periods ended March 31, 2008 and 2007, respectively, classified in the statement of operations line items as follows:



|                                       |  |                             |           |      |   |          
|-------------------------------------- |  | --------------------------- | --------- | ---- | - | ---------
|                                       |  | Three Months EndedMarch 31,
|                                       |  | 2008                        |           | 2007
|Cost of revenue                        |  | $                           | 36,000    |      | $ | 25,000   
|Sales and marketing                    |  |                             | 230,000   |      |   | 267,000  
|General and administrative             |  |                             | 1,299,000 |      |   | 1,414,000
|Research and development               |  |                             | 38,000    |      |   | 31,000   
|                                       |  |                             |           |      |   |          
|Total stock-based compensation expense |  | $                           | 1,603,000 |      | $ | 1,737,000
|                                       |  |                             |           |      |   |          

3. DEBT

On December 21, 2006, the Company entered into a revolving credit facility (the Credit Agreement) with HSBC Bank USA, National Association. The Credit Agreement was subsequently amended on
January 22, 2007 to add certain additional non-U.S. subsidiaries of the Company as Borrowers or Guarantors. The Credit Agreement replaced the Companys Term Loan B and Revolving Credit Facility with Wachovia Bank, National Association that
had been in place since September 1, 2005. The Credit Agreement provides for a five-year $100.0 million revolving credit facility. At March 31, 2008, $71.7 million was outstanding with an interest rate of 4.2%.

4. COMPREHENSIVE INCOME

Total comprehensive income
consists of net income (loss) and the net change in foreign currency translation adjustment, which is the primary component of accumulated other comprehensive income. Total comprehensive income was $3.4 million and $810,000 for the three-month
periods ended March 31, 2008 and 2007, respectively.

5. NET INCOME (LOSS) PER SHARE

Basic earnings per share is computed by dividing net income (loss) by the weighted average number of shares of common stock outstanding. For the purposes
of calculating diluted earnings per share, the denominator includes both the weighted average number of shares of common stock outstanding and the number of dilutive common stock equivalents such as stock options, unvested restricted stock and
warrants, as determined using the treasury stock method.

Shares used in calculating basic and diluted earnings per share for the
three-month periods ended March 31, 2008 and 2007, respectively, are as follows:



|                                                                                     |  |                             |  |           
|------------------------------------------------------------------------------------ |  | --------------------------- |  | ----------
|                                                                                     |  | Three Months EndedMarch 31,
|                                                                                     |  | 2008                        |  | 2007      
|Weighted average number of shares of common stock outstandingbasic                  |  | 56,147,000                  |  | 59,320,000
|Dilutive common stock equivalents relating to options, restricted stock and warrants |  |                            |  | 1,471,000 
|                                                                                     |  |                             |  |           
|Weighted average number of shares of common stock outstandingdiluted                |  | 56,147,000                  |  | 60,791,000
|                                                                                     |  |                             |  |           

Options, unvested restricted stock and warrants to purchase 8,330,000 and 4,540,000 shares of
common stock for the three-month periods ended March 31, 2008 and 2007, respectively, were not included in the calculation of diluted net income per share, as their effect would be anti-dilutive.



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6. MERGER, RESTRUCTURING AND OTHER CHARGES

During the three-month period ended March 31, 2008 Lionbridge recorded $206,000 of restructuring and other charges. The $206,000 of restructuring and
other charges recorded in the three-month period ended March 31, 2008 included $53,000 for workforce reductions in Europe consisting of two technical staff, $101,000 recorded for vacated facilities, $52,000 of additional costs recorded for a
previously vacated facility in order to reflect a new sublease arrangement, recorded pursuant to the guidance in FASB Statement of Financial Accounting Standards No. 146, Accounting for Costs associated with Exit or Disposal
Activities (SFAS No. 146), and related literature. Of these charges, $164,000 related to the Companys Global Language and Content (GLC) segment and $42,000 related to the Global Development and Testing
(GDT) segment. The Company made $639,000 of cash payments in the three-month period ended March 31, 2008, $634,000 and $5,000 related to the GLC and GDT segments, respectively.

During the three-month period ended March 31, 2007 Lionbridge recorded $278,000 of restructuring and other charges. The $278,000 of restructuring
and other charges recorded in the three-month period ended March 31, 2007 included $167,000 for workforce reductions in Europe consisting of one technical and two administrative staff and $111,000 of additional costs recorded for a previously
vacated facility in order to reflect a new sublease arrangement, recorded pursuant to the guidance in SFAS 146.The $278,000 of restructuring and other charges recorded during the three-month period ended March 31, 2007 related to the
Companys GLC segment. The Company made $383,000 of cash payments in the three-month period ended March 31, 2007, $303,000 and $80,000 related to the GLC and GDT segments, respectively.

The following table summarizes the accrual activity for the three months ended March 31, 2008 and 2007, respectively, by initiative:



|                                                                                   |  |      |           |   |      |   |           |  
|---------------------------------------------------------------------------------- |  | ---- | --------- | - | ---- | - | --------- | -
|                                                                                   |  | 2008 |           |   | 2007 |  
|Beginning balance, January 1                                                       |  | $    | 2,365,000 |   |      | $ | 2,388,000 |  
|Employee severance:                                                                |  |      |           |   |      |   |           |  
|Merger and restructuring charges recorded (1)                                      |  |      | 53,000    |   |      |   | 167,000   |  
|Cash payments related to liabilities assumed and recorded on business combinations |  |      |          |   |      |   | (3,000    | )
|Cash payments related to liabilities recorded on exit or disposal activities       |  |      | (350,000  | ) |      |   | (27,000   | )
|                                                                                   |  |      |           |   |      |   |           |  
|                                                                                   |  |      | (297,000  | ) |      |   | 137,000   |  
|                                                                                   |  |      |           |   |      |   |           |  
|Vacated facility/Lease termination:                                                |  |      |           |   |      |   |           |  
|Merger and restructuring charges recorded (1)                                      |  |      | 125,000   |   |      |   | 111,000   |  
|Cash payments related to liabilities assumed and recorded on business combinations |  |      | (208,000  | ) |      |   | (56,000   | )
|Cash payments related to liabilities recorded on exit or disposal activities       |  |      | (81,000   | ) |      |   | (297,000  | )
|                                                                                   |  |      |           |   |      |   |           |  
|                                                                                   |  |      | (164,000  | ) |      |   | (242,000  | )
|                                                                                   |  |      |           |   |      |   |           |  
|Ending balance, March 31                                                           |  | $    | 1,904,000 |   |      | $ | 2,283,000 |  
|                                                                                   |  |      |           |   |      |   |           |  



|(1) | Charges recorded pursuant to the guidance in SFAS No. 146 and related literature.
|--- | ---------------------------------------------------------------------------------

At March 31, 2008, the Companys consolidated balance sheet includes accruals totaling $1.9 million primarily related to employee termination costs and vacated facilities. Lionbridge currently anticipates
that $1.4 million of these will be fully utilized within twelve months. The remaining $470,000 relates to lease obligations on unused facilities expiring through 2011 and is included in long-term liabilities.

7. INCOME TAXES

On January 1, 2007, Lionbridge
adopted Financial Accounting Standards Board Interpretation No. 48, Accounting for Uncertainty in Income Taxes (FIN 48), and recognized a $185,000 increase in the liability for unrecognized tax benefits, which was
accounted for as a reduction to retained earnings. The balance of unrecognized tax benefits at March 31, 2008, including interest and penalties, was $2.9 million, of which $1.3 million would affect earnings if recognized. Lionbridge recognizes
interest accrued related to unrecognized tax benefits in tax expense. As a result, in the three months ended March 31, 2008, Lionbridge recorded $26,000 of gross interest expense, or $17,000 net of the federal tax benefit, in tax expense.
Penalties, if incurred, would also be recognized as a component of tax expense. At March 31, 2008, Lionbridge had approximately $96,000 of interest accrued related to unrecognized tax benefits, which, net of the federal tax benefit, was
approximately $63,000. The net increase in the liability during the three months ended March 31, 2008 was as follows:



|                                          |  |   |          
|----------------------------------------- |  | - | ---------
|Balance at December 31, 2007              |  | $ | 2,498,000
|Addition based on prior year tax position |  |   | 371,000  
|                                          |  |   |          
|Balance at March 31, 2008                 |  | $ | 2,869,000
|                                          |  |   |          



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In connection with the acquisition of Bowne Global Solutions (BGS), Bowne & Co.,
Inc. (Bowne) agreed to indemnify the Company for any tax liabilities accruing on or prior to the acquisition date of September 1, 2005. The Company determined that its gross unrecognized tax affected benefits related to the
acquisition of BGS and subject to indemnification were approximately $4.0 million. Accordingly, the Company adjusted its balance sheet by recording a long-term Indemnification Receivable and related FIN 48 liability as of January 1, 2007 for
this amount. A change in interest rate and penalties assumptions in 2007 resulted in a net reduction to the FIN 48 liability and Indemnification Receivable of $428,000 to $3.5 million. At March 31, 2008 the gross unrecognized tax affected
benefits are $3.6 million.

The components of the provision for income taxes are as follows for the three-month periods ended March 31, 2008 and 2007:



|                                 |  |                             |         |      |   |          
|-------------------------------- |  | --------------------------- | ------- | ---- | - | ---------
|                                 |  | Three Months EndedMarch 31,
|                                 |  | 2008                        |         | 2007
|Current:                         |  |                             |         |      |   |          
|Federal                          |  | $                           |        |      | $ |         
|State                            |  |                             | 6,000   |      |   | 26,000   
|Foreign                          |  |                             | 493,000 |      |   | 1,339,000
|                                 |  |                             |         |      |   |          
|Total current provision          |  |                             | 499,000 |      |   | 1,365,000
|Deferred:                        |  |                             |         |      |   |          
|Federal                          |  | $                           | 117,000 |      | $ | 116,000  
|                                 |  |                             |         |      |   |          
|Total provision for income taxes |  | $                           | 616,000 |      | $ | 1,481,000
|                                 |  |                             |         |      |   |          

The tax provision for the three-month periods ended March 31, 2008 and 2007 consists
primarily of taxes on income in foreign jurisdictions, a deferred tax provision of $117,000 and $116,000, respectively, related to tax-deductible goodwill from the BGS acquisition and interest and penalties assumed in relation to the Companys
uncertain tax positions. The Company reasonably anticipates that the unrecognized tax benefit relative to FIN 48 will not change significantly within the next twelve months. The tax provision for the three-month period ended March 31, 2007
consists primarily of taxes on income in foreign jurisdictions and deferred taxes related to tax deductible goodwill acquired from the BGS acquisition.

The tax provisions for both periods include non-cash tax expense that will be offset by pre-acquisition foreign net operating loss carryforwards. The tax benefits from utilization of pre-acquisition losses do not
reduce the foreign element of the tax provision, but instead reduce goodwill. The effective rate does not reflect a benefit of U.S. operating loss carryforward amounts due to a full valuation reserve against the U.S. deferred asset.

At March 31, 2008, no provision for U.S. income and foreign withholding taxes has been made for unrepatriated foreign earnings because it is
expected that such earnings will be reinvested indefinitely or the distribution of any remaining amount would be principally offset by foreign tax credits.

Under the provisions of the Internal Revenue Code, certain substantial changes in Lionbridges ownership may limit in the future the amount of net operating loss carryforwards that could be used annually to
offset future taxable income and income tax liability.

The Company conducts business globally and in the normal course of business is
subject to examination by local, state and federal jurisdictions in the United States as well as in multiple foreign jurisdictions. Currently, no Internal Revenue Service audits are underway and audits in foreign jurisdictions are in varying stages
of completion. Open audit years are dependent upon the tax jurisdiction and range from 1997 to 2006.

8. SEGMENT INFORMATION

Lionbridge has determined that its operating segments are those that are based on its method of internal reporting, which separately presents its business
based on the service performed. The Company is reporting its results among the following three business segments:

Global Language and
Content (GLC)this segment includes Lionbridges globalization, translation and localization services, as well as content development and technical documentation. The GLC segment includes product and content globalization
services. Globalization is the process of adapting content and products to meet the language and cultural requirements of users throughout



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the world. Lionbridge GLC solutions enable the translation, adaptation and worldwide multilingual release of clients products, content and
related technical support, training materials, and sales and marketing information. Lionbridge GLC solutions also include the development of eLearning content and technical documentation.

Global Development and Testing (GDT)this segment includes Lionbridges development, engineering and testing services for software,
hardware, websites, search engines and content. Specifically, GDT includes the development and maintenance of applications as well as testing to ensure the quality, interoperability, usability and performance of clients software, hardware,
consumer technology products, web sites and content. Lionbridges testing services also include product certification and competitive analysis. Lionbridge offers its testing services under the VeriTest brand.

Interpretationthis segment includes interpretation services provided by Lionbridge to government organizations and businesses that require human
interpreters.

Lionbridge has determined its operating segments based on the service performed. While the Company allocates revenue
and costs according to these operating segments to the best of its ability, in some cases, customers may select Lionbridge to provide multiple services that span the Companys operating segments. During 2007 a large client expanded an
existing program with the Company. While this program had historically been managed by the Companys GLC segment due to the nature of the work the Company had previously performed for this client, in 2008 the Company determined the nature
of this new, expanded program with the client more accurately reflects the nature of work performed in its GDT segment and moved the management of the program to its GDT segment. As a result, the Company has reclassified $1.9
million of revenue and $451,000 of net income associated with this client program from its GLC segment into its GDT segment for the quarter ended March 31, 2007.

The table below presents information about the reported net income of the Company for the three-month periods ended March 31, 2008 and 2007. Asset
information by reportable segment is not reported, since the Company does not produce such information internally.



|                                   |  |                             |             |   |      |   |             |  
|---------------------------------- |  | --------------------------- | ----------- | - | ---- | - | ----------- | -
|                                   |  | Three Months EndedMarch 31, |            
|                                   |  | 2008                        |             |   | 2007 |  
|External revenue:                  |  |                             |             |   |      |   |             |  
|Global Language and Content        |  | $                           | 87,362,000  |   |      | $ | 85,049,000  |  
|Global Development and Testing     |  |                             | 22,824,000  |   |      |   | 17,867,000  |  
|Interpretation                     |  |                             | 6,862,000   |   |      |   | 5,700,000   |  
|                                   |  |                             |             |   |      |   |             |  
|                                   |  | $                           | 117,048,000 |   |      | $ | 108,616,000 |  
|                                   |  |                             |             |   |      |   |             |  
|Net income:                        |  |                             |             |   |      |   |             |  
|Global Language and Content        |  | $                           | 5,178,000   |   |      | $ | 9,536,000   |  
|Global Development and Testing     |  |                             | 4,029,000   |   |      |   | 3,029,000   |  
|Interpretation                     |  |                             | 722,000     |   |      |   | 714,000     |  
|                                   |  |                             |             |   |      |   |             |  
|Less: corporate and other expenses |  |                             | (14,364,000 | ) |      |   | (13,047,000 | )
|                                   |  |                             |             |   |      |   |             |  
|                                   |  | $                           | (4,435,000  | ) |      | $ | 232,000     |  
|                                   |  |                             |             |   |      |   |             |  

9. GOODWILL AND OTHER INTANGIBLE ASSETS

In connection with the September 1, 2005 acquisition of BGS, Lionbridge recorded $96.1 million of goodwill. Additionally, in connection with the
acquisition of BGS, Lionbridge recorded $48.3 million of amortizable intangible assets, including customer contracts, technology and customer relationships. The estimated useful life of acquired customer contracts ranges from 3.3 to 5.3 years and is
being amortized on a straight-line basis. The estimated useful life of acquired technology ranges from 1 to 4 years and is being amortized on a straight-line basis. The estimated useful life of acquired customer relationships is 12 years and is
being amortized using the economic consumption method to reflect diminishing cash flows from these relationships in the future. In determining the fair value of the acquired customer relationships, Lionbridge used a discounted cash flow model based
upon the estimated future income streams associated with the customer relationships considering their estimated remaining period of benefit. As part of this model, Lionbridge relied on historical attrition rates combined with a premium factor
related to the inherent risk of attrition in the newly acquired BGS customer base.

Lionbridge assesses the impairment of goodwill and
other intangible assets on an annual basis or whenever events or changes in circumstances indicate that the carrying value may not be recoverable. Such events or conditions could include an



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economic downturn in the industries to which Lionbridge provides services; increased competition; an increase in operating or other costs; additional
volatility in international currencies; the pace of technological improvements; or other information regarding Lionbridges market value, such as a reduction in stock price to a price at or near the book value of the Company for an extended
period of time. When Lionbridge determines that the carrying value of intangibles or goodwill may not be recoverable based upon one or more of these indicators of impairment, the Company initially assesses any impairment using fair value
measurements based on projected discounted cash flow valuation models. In addition, in accordance with SFAS No. 142, Goodwill and Other Intangible Assets, goodwill is reviewed for impairment on an annual basis. At December 31,
2007, the Company performed its annual test of goodwill to determine if an impairment existed. This test determined that each reporting units fair value exceeded the carrying value of the net assets of each respective reporting unit, using
projected discounted cash flow modeling. As a result, no impairment was required. Estimating future cash flows requires management to make projections that can differ materially from actual results.

The Company evaluates whether there has been an impairment in the carrying value of its intangible assets, in accordance with SFAS No. 144,
Accounting for Impairment of Long-Lived Assets, if circumstances indicate that a possible impairment may exist. An impairment in the carrying value of an asset is assessed when the undiscounted expected future operating cash flows
derived from the asset are less than its carrying value. If it is determined that the asset is impaired then it is written down to its estimated fair value. Factors that could lead to an impairment of acquired customer relationships (recorded with
the BGS acquisition) include a worsening in customer attrition rates compared to historical attrition rates, or lower than initially anticipated cash flows associated with customer relationships.

The following table summarizes other intangible assets at March 31, 2008 and December 31, 2007, respectively.



|                                    |  |                    |            |                         |   |            |  |                    |            |                         |   |            |  |   |            |  |   |           
|----------------------------------- |  | ------------------ | ---------- | ----------------------- | - | ---------- |  | ------------------ | ---------- | ----------------------- | - | ---------- |  | - | ---------- |  | - | ----------
|                                    |  | March 31, 2008     |            | December 31, 2007      
|                                    |  | GrossCarryingValue |            | AccumulatedAmortization |   | Balance    |  | GrossCarryingValue |            | AccumulatedAmortization |   | Balance   
|BGS acquired customer relationships |  | $                  | 32,000,000 |                         | $ | 12,274,000 |  | $                  | 19,726,000 |                         | $ | 32,000,000 |  | $ | 11,071,000 |  | $ | 20,929,000
|BGS acquired customer contracts     |  |                    | 14,000,000 |                         |   | 7,653,000  |  |                    | 6,347,000  |                         |   | 14,000,000 |  |   | 6,912,000  |  |   | 7,088,000 
|BGS acquired technology             |  |                    | 2,317,000  |                         |   | 2,062,000  |  |                    | 255,000    |                         |   | 2,317,000  |  |   | 1,893,000  |  |   | 424,000   
|                                    |  |                    |            |                         |   |            |  |                    |            |                         |   |            |  |   |            |  |   |           
|                                    |  | $                  | 48,317,000 |                         | $ | 21,989,000 |  | $                  | 26,328,000 |                         | $ | 48,317,000 |  | $ | 19,876,000 |  | $ | 28,441,000
|                                    |  |                    |            |                         |   |            |  |                    |            |                         |   |            |  |   |            |  |   |           

Lionbridge currently expects to amortize the following remaining amounts of intangible assets held
at March 31, 2008 in the fiscal periods as follows:



|                         |  |   |           
|------------------------ |  | - | ----------
|Year ending December 31, |  |  
|2008                     |  | $ | 6,328,000 
|2009                     |  |   | 5,520,000 
|2010                     |  |   | 4,893,000 
|2011                     |  |   | 2,332,000 
|2012                     |  |   | 1,921,000 
|Thereafter               |  |   | 5,334,000 
|                         |  |   |           
|                         |  | $ | 26,328,000
|                         |  |   |           

10. CONTINGENCIES

On or about July 24, 2001, a purported securities class action lawsuit captioned Samet v. Lionbridge Technologies, Inc. et al. (01-CV-6770) was filed in the United States District Court for the
Southern District of New York (the Court) against the Company, certain of its officers and directors, and certain underwriters involved in the Companys initial public offering. The complaint in this action asserted, among other
things, that omissions regarding the underwriters alleged conduct in allocating shares in Lionbridges initial public offering to the underwriters customers. In March 2002, the United States District Court for the Southern District
of New York entered an order dismissing without prejudice the claims against Lionbridge and its officers and directors (the case remained pending against the underwriter defendants).



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On April 19, 2002, the plaintiffs filed an amended complaint naming as defendants not only the
underwriter defendants but also Lionbridge and certain of its officers and directors. The amended complaint asserts claims under both the registration and antifraud provisions of the federal securities laws relating to, among other allegations, the
underwriters alleged conduct in allocating shares in the Companys initial public offering and the disclosures contained in the Companys registration statement. On July 15, 2002, the Company, together with the other
issuers named as defendants in these coordinated proceedings, filed a collective motion to dismiss the complaint on various legal grounds common to all or most of the issuer defendants. In October 2002, the claims against officers and directors were
dismissed without prejudice. In February 2003, the Court issued its ruling on the motion to dismiss, ruling that the claims under the antifraud provisions of the securities laws could proceed against the Company and a majority of the other issuer
defendants.

In June 2003, Lionbridge elected to participate in a proposed settlement agreement with the plaintiffs in this litigation. If
the proposed settlement had been approved by the Court, it would have resulted in the dismissal, with prejudice, of all claims in the litigation against Lionbridge and against any other of the issuer defendants who elected to participate in the
proposed settlement, together with the current or former officers and directors of participating issuers who were named as individual defendants. This proposed settlement was conditioned on, among other things, a ruling by the District Court that
the claims against Lionbridge and against the other issuers who had agreed to the settlement would be certified for class action treatment for purposes of the proposed settlement, such that all investors included in the proposed classes in these
cases would be bound by the terms of the settlement unless an investor opted to be excluded from the settlement.

On December 5, 2006,
the U.S. Court of Appeals for the Second Circuit issued a decision in In re Initial Public Offering Securities Litigation that six purported class action lawsuits containing allegations substantially similar to those asserted against the
Company may not be certified as class actions due, in part, to the Appeals Courts determination that individual issues of reliance and knowledge would predominate over issues common to the proposed classes. On January 8, 2007, the
plaintiffs filed a petition seeking rehearing en banc of the Second Circuit Court of Appeals decision. On April 6, 2007 the Court of Appeals denied the plaintiffs petition for rehearing of the Courts December 5,
2006 ruling but noted that the plaintiffs remained free to ask the District Court to certify classes different from the ones originally proposed which might meet the standards for class certification that the Court of Appeals articulated in its
December 5, 2006 decision. The plaintiffs have since moved for certification of different classes in the District Court.

In light of
the Court of Appeals December 5, 2006 decision regarding certification of the plaintiffs claims, the District Court entered an order on June 25, 2007 terminating the proposed settlement between the plaintiffs and the issuers,
including Lionbridge. Because any possible future settlement with the plaintiffs, if such a settlement were ever to be agreed to, would involve the certification of a class action for settlement purposes, the impact of the Court of Appeals
class certification-related rulings on the possible future settlement of the claims against Lionbridge cannot now be predicted.

On
August 14, 2007, the plaintiffs filed amended complaints in the six focus cases. The issuer defendants and the underwriter defendants separately moved to dismiss the claims against them in the amended complaints in the six focus cases. On
March 26, 2008, the District Court issued an order in which it denied in substantial part the motions to dismiss the amended complaints in the six focus cases. In addition, on October 1, 2007, the plaintiffs submitted their briefing in
support of their motions to certify different classes in the six focus cases. The issuer defendants and the underwriter defendants have separately opposed those motions. The motions to certify classes in the six focus cases remain pending.

We intend to continue to defend the litigation vigorously. The litigation process is inherently uncertain and unpredictable, however, and
there can be no guarantee as to the ultimate outcome of this pending lawsuit. The Company believes that the underwriters may have an obligation to indemnify Lionbridge for the legal fees and other costs of defending this suit. While Lionbridge
cannot guarantee the outcome of these proceedings, the Company believes that the final result of this lawsuit will have no material effect on its consolidated financial condition, results of operations, or cash flows.

11. FAIR VALUE MEASUREMENTS

On January 1, 2008,
Lionbridge adopted SFAS No. 157, Fair Value Measurements (SFAS No. 157), for the Companys financial assets and liabilities. The adoption of SFAS No. 157 did not materially impact Lionbridges
financial position, results of operations or liquidity. In accordance with FASB Staff Position No. FAS 157-2, Effective Date of FASB Statement No. 157 (FSP FAS 157-2), Lionbridge elected to defer until January 1,
2009 the adoption of SFAS No. 157 for all nonfinancial assets and nonfinancial liabilities that are not recognized or disclosed at fair value in the financial statements on a recurring basis. The adoption of SFAS No. 157 for those assets
and liabilities within the scope of FSP FAS 157-2 is not expected to have a material impact on Lionbridges financial position, results of operations or liquidity. Lionbridge did not have any nonfinancial assets or nonfinancial liabilities that
would be recognized or disclosed on a recurring basis as of March 31, 2008.



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SFAS No. 157 provides a framework for measuring fair value and requires expanded disclosures
regarding fair value measurements. SFAS No. 157 defines fair value as the price that would be received for an asset or the exit price that would be paid to transfer a liability in the principal or most advantageous market in an orderly
transaction between market participants on the measurement date. SFAS No. 157 also establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs, where available. The following summarizes the three levels
of inputs required by the standard that Lionbridge uses to measure fair value, as well as the assets and liabilities that the Company values using those levels of inputs.



|         |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|-------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Level 1: |  | Quoted prices in active markets for identical assets or liabilities. Lionbridge does not have any financial assets or liabilities as of March 31, 2008 designated as Level
1.                                                                                                                                                                                                                                                                                                                                           
|         | 
|Level 2: |  | Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can
be corroborated by observable market data for substantially the full term of the related assets or liabilities. Lionbridges Level 2 assets and liabilities are an interest rate swap and foreign exchange forward contracts whose fair value we
determine using pricing models predicated upon observable market inputs.
|         | 
|Level 3: |  | Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. Lionbridge does not have any financial assets
and liabilities as of March 31, 2008 designated as Level 3.                                                                                                                                                                                                                                                               

The following table sets forth the financial assets and liabilities as of March 31, 2008 that Lionbridge
measured at fair value on a recurring basis by level within the fair value hierarchy. As required by SFAS No. 157, assets and liabilities measured at fair value are classified in their entirety based on the lowest level of input that is
significant to their fair value measurement.



|                                   |  |         |   |         |   |         |  |                             |   |  |   |        
|---------------------------------- |  | ------- | - | ------- | - | ------- |  | --------------------------- | - |  | - | -------
|                                   |  | Level 1 |   | Level 2 |   | Level 3 |  | Balance as ofMarch 31, 2008
|Assets:                            |  |         |   |         |   |         |  |                             |   |  |   |        
|Foreign exchange forward contracts |  | $       |  |         | $ | 58,000  |  | $                           |  |  | $ | 58,000 
|Liabilities:                       |  |         |   |         |   |         |  |                             |   |  |   |        
|Interest rate swap                 |  | $       |  |         | $ | 901,000 |  | $                           |  |  | $ | 901,000
|Foreign exchange forward contracts |  |         |  |         |   | 94,000  |  |                             |  |  |   | 94,000 

12. RECENT ACCOUNTING PRONOUNCEMENTS

In March 2008, the Financial Accounting Standards Board (FASB) issued Statement of Accounting Standards (SFAS) No. 161,
Disclosures about Derivative Instruments and Hedging Activities,an amendment of FASB Statement No. 133 (SFAS No. 161). SFAS No. 161 requires enhanced disclosures regarding an entitys derivative and hedging
activities. These enhanced disclosures include information regarding how and why an entity uses derivative instruments; how derivative instruments and related hedge items are accounted for under SFAS No. 133, Accounting for Derivative
Instruments and Hedging Activities, and its related interpretations; and how derivative instruments and related hedge items affect an entitys financial position, financial performance and cash flows. SFAS No. 161 is effective
for financial statements issued for fiscal years and interim periods beginning after November 15, 2008. The adoption of SFAS No. 161 will not have a material impact on our financial position, results of operations or liquidity.

In September 2006, the FASB issued SFAS No. 157, which establishes a framework for measuring fair value and requires expanded disclosures
regarding fair value measurements. In February 2008, the FASB issued FASB Staff Position No. FAS 157-2 (FSP FAS 157-2), Effective Date of FASB Statement No. 157, which allows for the deferral of the adoption date of SFAS
No. 157 for all nonfinancial assets and nonfinancial liabilities, except those that are recognized or disclosed at fair value in the financial statements on a recurring basis. We have elected to defer the adoption of SFAS No. 157 for the
assets and liabilities within the scope of FSP FAS 157-2. Refer to Note 11, Fair Value Measurements, of this Form 10-Q, for our disclosures pursuant to the effective portion of SFAS No. 157. The adoption of SFAS No. 157 for those assets
and liabilities within the scope of FSP FAS 157-2 is not expected to have a material impact on our financial position, results of operations or liquidity.



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

The matters discussed in this Form 10-Q include forward-looking statements that involve risks or uncertainties. These statements are neither promises nor
guarantees, but are based on various assumptions by management regarding future circumstances many of which Lionbridge has little or no control over. A number of important risks and uncertainties, including those identified under the caption
Risk Factors in Lionbridges Annual Report on Form 10-K, filed March 14, 2008 (SEC File No. 000-26933) and subsequent filings as well as risks and uncertainties discussed elsewhere in this Form 10-Q could cause
Lionbridges actual results to differ materially from those in the forward-looking statements. Should one or more of these risks or uncertainties materialize or should underlying assumptions prove incorrect, actual results may vary materially
from those anticipated, estimated or projected. The forward-looking statements in this Form 10-Q are made as of the date of this filing only, and Lionbridge does not undertake to update or supplement these statements due to changes in circumstances
or otherwise.

Introduction

Lionbridge is a leading provider of globalization, development and testing services that enable clients to develop, release, manage and maintain their enterprise content and technology applications globally. The Company reports financial
performance in the following three segments: Global Language and Content (GLC), Global Development and Testing (GDT) and Interpretation.

Lionbridge Global Language and Content (GLC) solutions enable the globalization and worldwide multilingual release of clients products, content and related technical support, training
materials, and sales and marketing information. Globalization is the process of adapting content and products to meet the language and cultural requirements of users throughout the world. Lionbridge GLC solutions are based on the Companys
internet technology platform and global service delivery model which make the translation process more efficient for Lionbridge clients and translators. As part of its GLC solutions, Lionbridge also develops eLearning content and technical
documentation.

Lionbridges interpretation business (Interpretation) pertains to the Companys interpretation
services for government organizations and businesses that require human interpreters for non-English speaking individuals.

Through its
Global Development and Testing (GDT) solutions, Lionbridge develops, re-engineers and optimizes IT applications and performs testing to ensure the quality, interoperability, usability and performance of clients software, consumer
technology products, web sites, search engines and content. Lionbridges testing services, which are offered under the VeriTest brand, also include product certification and competitive analysis. Lionbridge has deep domain experience
developing, testing and maintaining applications in a cost-efficient, blended on-site and offshore model.

Lionbridge provides a full suite
of globalization, testing and development outsourcing services to businesses, particularly in the technology, consumer products, life sciences, publishing, financial services, manufacturing, government automotive and retail industries.
Lionbridges solutions include product and content globalization; content and eLearning courseware development; application development and maintenance; software and hardware testing; product certification and competitive analysis.
Lionbridges services enable global organizations to increase market penetration and speed adoption of global content and products, enhance return on enterprise application investments, increase workforce productivity and reduce costs.

For the three-month period ended March 31, 2008, Lionbridges loss from operations was $389,000, with a net loss of $4.4
million. For the year ended December 31, 2007, the Companys income from operations was $9.0 million with a net loss of $4.2 million. As of March 31, 2008, the Company had an accumulated deficit of $116.5 million.

Certain segments of Lionbridges business, its GLC segment in particular, are sensitive to fluctuations in the value of the U.S. Dollar
relative to the Euro, as a large portion of its cost of sales and general and administrative expenses are payable in Euro, while the majority of its revenues are recorded in Euro. Over the past year, there has been a decline in the value of the
U.S. Dollar relative to the Euro. During the quarter ended March 31, 2008, there was a 5% decline in the value of the U.S. Dollar relative to the Euro from the quarter ended December 31, 2007 and a 16% decline from the quarter
ended March 31, 2007. The impact of this significant decline in the value of the U.S. Dollar relative to the Euro in the reported periods is reflected in the Companys financial results for the period ended March 31, 2008. While
the depreciation in the U.S. Dollar has contributed to increased revenue for the quarter ended March 31, 2008, particularly in the GLC segment, the Companys operating income and net income were negatively impacted due to higher costs
related to Euro-denominated payment obligations to third party outsourcers, lease obligations and compensation. The higher costs associated with the depreciation of the U.S. dollar during the quarter ended March 31, 2008 offset the benefits of
the incremental revenue and of cost reduction initiatives undertaken by the Company during the period.



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Revenue Recognition

Lionbridge recognizes revenue as services are performed and amounts are earned in accordance with the Securities and Exchange Staff Accounting Bulletin (SAB) No. 101, Revenue Recognition in
Financial Statements, as amended by SAB No. 104, Revenue Recognition. Lionbridge considers amounts to be earned when (1) persuasive evidence of an arrangement has been obtained; (2) services are delivered;
(3) the fee is fixed or determinable; and (4) collectibility is reasonably assured. Determination of criteria (3) and (4) are based on managements judgments regarding the fixed nature of the fee charged for services
rendered and products delivered and the collectibility of those fees.

Lionbridges revenue is recorded from the provision of services
to customers for GLC, GDT and Interpretation services which include content development, product and content globalization, interpretation, software and hardware testing, product certification and application development and maintenance.

Content development, software and hardware testing, interpretations and application development and maintenance projects are normally time and expense
priced contracts, and revenue is recognized using a time and expense basis over the period of performance, primarily based on labor costs incurred to date.

Product and content globalization and product certification projects are fixed price contracts and revenue is recognized as services are delivered. Depending on specific contractual provisions and nature of the
deliverable, revenue is recognized on (1) a proportional performance model based on level of effort, (2) as milestones are achieved or (3) when final deliverables have been met. Amounts billed in excess of revenue recognized are
recorded as deferred revenue.

The delivery of Lionbridges GLC services involves and is dependent on the translation of content by
subcontractors and in-house employees. As the time and cost to translate each word of content within a project is relatively uniform, labor input is reflective of the delivery of the contracted service and an appropriate metric for the measurement
of proportional performance in delivering such services. The use of a proportional performance assessment of service delivery requires significant judgment relative to estimating total contract costs, including assumptions relative to the length of
time to complete the project, the nature and complexity of the work to be performed, anticipated increases in employee wages and prices for subcontractor services, and the availability of subcontractor services. When adjustments in estimated project
costs are identified, anticipated losses, if any, are recognized in the period in which they are determined.

Lionbridges GLC
agreements with its customers may provide the customer with a fixed and limited time period following delivery during which Lionbridge will attempt to address any non-conformity to previously agreed upon objective specifications relating to the
work, either in the form of a limited acceptance period or a post-delivery warranty period. Management believes recognition of revenue at the time the services are delivered is appropriate, because its obligations under such provisions are limited
in time, limited in scope, and historically have not involved significant costs. In the future, if the post delivery acceptance or warranty provisions become more complex or include subjective acceptance criteria, Lionbridge may have to revise its
revenue recognition policy appropriately, which could affect the timing of revenue recognition.

Lionbridge provides integrated
full-service offerings throughout a clients product and content lifecycle, including GLC and GDT services. Such multiple-element service offerings are governed by the Emerging Issues Task Force Issue 00-21, Accounting for Revenue
Arrangements with Multiple Deliverables. For these arrangements where the GLC and GDT services have independent value to the customer, and there is evidence of fair value for each service, the combined service arrangement is bifurcated into
separate units for accounting treatment. In instances where it is not possible to bifurcate a project, direct and incremental costs attributable to each component are deferred and recognized together with the service revenue upon delivery. The
determination of fair value requires the use of significant judgment. Lionbridge determines the fair value of service revenues based upon its recent pricing for those services when sold separately and/or prevailing market rates for similar services.

Revenue includes reimbursement of travel and out-of-pocket expenses with equivalent amounts of expense recorded in cost of revenue.

Valuation of Goodwill and Other Intangible Assets

Lionbridge assesses the impairment of goodwill and other intangible assets on an annual basis or whenever events or changes in circumstances indicate that the carrying value may not be recoverable. Such events or
conditions could include an economic downturn in the industries to which Lionbridge provides services; increased competition; an increase in operating or other costs; additional volatility in international currencies; the pace of technological
improvements; or other information regarding Lionbridges market value, such as a reduction in stock price to a price at or near the book value of the Company for an extended period of time. When Lionbridge determines that the carrying value of
intangibles or goodwill may not be recoverable based upon one or



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more of these indicators of impairment, the Company initially assesses any impairment using fair value measurements based on projected discounted cash flow
valuation models. In addition, in accordance with SFAS No. 142, Goodwill and Other Intangible Assets, goodwill is reviewed for impairment on an annual basis. At December 31, 2007, the Company performed its annual test of
goodwill to determine if an impairment existed. This test determined that each reporting units fair value exceeded the carrying value of the net assets of each respective reporting unit, using projected discounted cash flow modeling. As a
result, no impairment was required. Estimating future cash flows requires management to make projections that can differ materially from actual results.

The Company evaluates whether there has been an impairment in the carrying value of its other intangibles assets in accordance with SFAS No. 144, Accounting for Impairment of Long-Lived Assets, if
circumstances indicate that a possible impairment may exist. An impairment in the carrying value of an asset is assessed when the undiscounted expected future operating cash flows derived from the asset are less than its carrying value. If it is
determined that the asset is impaired then it is written down to its estimated fair value. Factors that could lead to an impairment of acquired customer relationships (recorded with the BGS acquisition) include a worsening in customer attrition
rates compared to historical attrition rates, or lower than initially anticipated cash flows associated with customer relationships.

Merger, Restructuring and Other Charges

During the three-month period ended March 31, 2008 Lionbridge recorded
$206,000 of restructuring and other charges. The $206,000 of restructuring and other charges recorded in the three-month period ended March 31, 2008 included $53,000 for workforce reductions in Europe consisting of two technical staff, $101,000
recorded for vacated facilities, $52,000 of additional costs recorded for a previously vacated facility in order to reflect a new sublease arrangement, recorded pursuant to the guidance in FASB Statement of Financial Accounting Standards
No. 146, Accounting for Costs associated with Exit or Disposal Activities (SFAS No. 146), and related literature. Of these charges, $164,000 related to the Companys Global Language and Content
(GLC) segment and $42,000 related to the Global Development and Testing (GDT) segment. The Company made $639,000 of cash payments in the three-month period ended March 31, 2008, $634,000 and $5,000 related to the GLC and
GDT segments, respectively.

During the three-month period ended March 31, 2007 Lionbridge recorded $278,000 of restructuring and
other charges. The $278,000 of restructuring and other charges recorded in the three-month period ended March 31, 2007 included $167,000 for workforce reductions in Europe consisting of one technical and two administrative staff and $111,000 of
additional costs recorded for a previously vacated facility in order to reflect a new sublease arrangement, recorded pursuant to the guidance in SFAS 146.The $278,000 of restructuring and other charges recorded during the three-month period
ended March 31, 2007 related to the Companys GLC segment. The Company made $383,000 of cash payments in the three-month period ended March 31, 2007, $303,000 and $80,000 related to the GLC and GDT segments, respectively.

Stock-based Compensation

Stock Option Plans

The Company has stock-based compensation plans for salaried employees and non-employee members of the Board of Directors. The plans
provide for discretionary grants of stock options, restricted stock and stock units, and other stock-based awards. The plans are administered by the Nominating and Compensation Committee of the Board of Directors, which consists of non-employee
directors.

In November 2005, the stockholders of Lionbridge Technologies, Inc. approved the Lionbridge 2005 Incentive Plan (the 2005
Plan), which had been previously adopted by the Lionbridge Board of Directors on October 7, 2005, for officers, employees, non-employee directors and other key persons of Lionbridge and its subsidiaries. The 2005 Plan was amended on
May 21, 2007, to adjust the vesting schedule of future automatic equity grants to non-employee directors of the Company from four years to two years. The maximum number of shares of common stock available for issuance under the 2005 Plan is
4,000,000 shares. At March 31, 2008, there were 473,978 options available for future grant under the 2005 Plan. Options to purchase common stock are granted at the discretion of the Board of Directors and the Nominating and Compensation
Committee. Generally, stock options vest over a four-year period: 25% of the option shares vest one year from the date of grant and the remaining option shares vest at the rate of 12.5% each six month period thereafter. Stock options generally
expire five years from the date of grant under the 2005 Plan. Under the terms of the 2005 Plan, the exercise price of incentive and non-qualified stock option grants must not be less than 100% of the fair market value of the common stock on the date
of grant. Options are amortized using a straight line basis over the option vesting period. In the three months ended March 31, 2008, Lionbridge awarded 12,272 stock option grants under the 2005 Plan.

Lionbridges 1998 Stock Plan (the Plan) provides for the issuance of incentive and nonqualified stock options. The maximum number of
shares of common stock available for issuance under the Plan is 11,722,032 shares and the Plan expired on January 26, 2008. Accordingly, at March 31, 2008 there were no options available for future grant under the Plan. Options to purchase
common



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stock are granted at the discretion of the Board of Directors and the Nominating and Compensation Committee. Generally, stock options vest over a four-year
period: 25% of the option shares vest one year from the date of grant and the remaining option shares vest at the rate of 12.5% each six month period thereafter. Stock options generally expire ten years (five years in certain cases) from the date of
grant under the Plan. Under the terms of the Plan, the exercise price of incentive stock options granted must not be less than 100% (110% in certain cases) of the fair market value of the common stock on the date of grant, as determined by the Board
of Directors. The exercise price of nonqualified stock options may be less than the fair market value of the common stock on the date of grant, as determined by the Board of Directors, but in no case may the exercise price be less than the statutory
minimum, the par value per share of Lionbridges common stock. In the three months ended March 31, 2008, Lionbridge awarded 297,728 stock option grants under the 1998 Plan.

Restricted Stock Awards

Lionbridge issued 14,500 and 948,500 shares of restricted common stock and
restricted stock units under the Companys 2005 Incentive Plan and the 1998 Stock Plan, respectively, in the three-month period ended March 31, 2008 with a fair market value of $2.7 million for which restrictions on disposition lapse over
four years from the date on each anniversary date.

The Company recognizes expense for stock options, market-based restricted stock awards
and time-based restricted stock awards pursuant to the guidance of Financial Accounting Standards Board (FASB) Statement of Financial Accounting Standards (SFAS) No. 123, Share-Based Payment (SFAS
123R). Total compensation expense related to stock options, market-based restricted stock awards and time-based restricted stock awards was $1.6 million and $1.7 million for the three-month periods ended March 31, 2008 and 2007,
respectively, classified in the statement of operations line items as follows:



|                                       |  |                             |           |      |   |          
|-------------------------------------- |  | --------------------------- | --------- | ---- | - | ---------
|                                       |  | Three Months EndedMarch 31,
|                                       |  | 2008                        |           | 2007
|Cost of revenue                        |  | $                           | 36,000    |      | $ | 25,000   
|Sales and marketing                    |  |                             | 230,000   |      |   | 267,000  
|General and administrative             |  |                             | 1,299,000 |      |   | 1,414,000
|Research and development               |  |                             | 38,000    |      |   | 31,000   
|                                       |  |                             |           |      |   |          
|Total stock-based compensation expense |  | $                           | 1,603,000 |      | $ | 1,737,000
|                                       |  |                             |           |      |   |          

Results of Operations

The following table sets forth for the periods indicated certain unaudited consolidated financial data as a percentage of total revenue.



|                                                                                    |  |                             |    |  |       |  
|----------------------------------------------------------------------------------- |  | --------------------------- | -- |  | ----- | -
|                                                                                    |  | Three Months EndedMarch 31, |   
|                                                                                    |  | 2008                        |    |  | 2007  |  
|Revenue                                                                             |  | 100.0                       | %  |  | 100.0 | %
|Operating expenses:                                                                 |  |                             |    |  |       |  
|Cost of revenue (exclusive of depreciation and amortization shown separately below) |  | 69.1                        |    |  | 66.5  |  
|Sales and marketing                                                                 |  | 7.5                         |    |  | 7.3   |  
|General and administrative                                                          |  | 19.8                        |    |  | 18.9  |  
|Research and development                                                            |  | 0.9                         |    |  | 0.7   |  
|Depreciation and amortization                                                       |  | 1.0                         |    |  | 1.2   |  
|Amortization of acquisition-related intangible assets                               |  | 1.8                         |    |  | 1.9   |  
|Merger, restructuring and other charges                                             |  | 0.2                         |    |  | 0.3   |  
|                                                                                    |  |                             |    |  |       |  
|Total operating expenses                                                            |  | 100.3                       |    |  | 96.8  |  
|                                                                                    |  |                             |    |  |       |  
|                                                                                    |  |                            
|Income (loss) from operations                                                       |  | (0.3                        | )  |  | 3.2   |  
|Interest expense:                                                                   |  |                             |    |  |       |  
|Interest in outstanding debt                                                        |  | 1.0                         |    |  | 1.3   |  
|Amortization of deferred financing costs                                            |  |                            |    |  |      |  
|Interest income                                                                     |  | 0.1                         |    |  | 0.2   |  
|Other expense, net                                                                  |  | 2.1                         |    |  | 0.5   |  
|                                                                                    |  |                             |    |  |       |  
|                                                                                    |  |                            
|Income (loss) before income taxes                                                   |  | (3.3                        | )  |  | 1.6   |  
|Provision for income taxes                                                          |  | 0.5                         |    |  | 1.4   |  
|                                                                                    |  |                             |    |  |       |  
|Net income (loss)                                                                   |  | (3.8                        | )% |  | 0.2   | %
|                                                                                    |  |                             |    |  |       |  



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Revenue. The following table shows Global Language and Content (GLC), Global
Development and Testing (GDT), and Interpretation revenues in dollars and as a percentage of total revenue for the three months ended March 31, 2008 and 2007, respectively:



|               |  |                             |             |  |      |   |  |   |             |  |     |  
|-------------- |  | --------------------------- | ----------- |  | ---- | - |  | - | ----------- |  | --- | -
|               |  | Three Months EndedMarch 31, |            
|               |  | 2008                        |             |  | 2007 |  
|GLC            |  | $                           | 87,362,000  |  | 75   | % |  | $ | 85,049,000  |  | 79  | %
|GDT            |  |                             | 22,824,000  |  | 19   | % |  |   | 17,867,000  |  | 16  | %
|Interpretation |  |                             | 6,862,000   |  | 6    | % |  |   | 5,700,000   |  | 5   | %
|               |  |                             |             |  |      |   |  |   |             |  |     |  
|Total revenue  |  | $                           | 117,048,000 |  | 100  | % |  | $ | 108,616,000 |  | 100 | %
|               |  |                             |             |  |      |   |  |   |             |  |     |  

Revenue for the quarter ended March 31, 2008 was $117.0 million, an increase of $8.4 million,
or 7.8%, from $108.6 million for the quarter ended March 31, 2007. Revenue growth during the first quarter of 2008 in each of the GLC, GDT and Interpretation segments was $2.3 million, $5.0 million and $1.2 million, respectively, as compared to
the quarter ended March 31, 2007. Lionbridge conducts a large portion of its business in international markets. Approximately 46.6% of its revenue is denominated in foreign currencies for the quarter ended March 31, 2008. The principal
foreign currency applicable to Lionbridges business is the Euro. Approximately 33.6% of revenue was denominated in Euro for the quarter ended March 31, 2008, and a majority of this revenue is concentrated in the GLC business. During the
quarter ended March 31, 2008, the U.S. dollar declined significantly against most foreign currencies, in particular the Euro. A fluctuation in foreign currency exchange rates primarily affects the GLC business. The Companys revenue
increased approximately $1.7 million as the result of organic growth and approximately $6.7 million due to the significant decline in the exchange rate of the U.S. dollar against most foreign currencies period-over-period. This increase in revenue
related to a decline in the U.S dollars exchange rates was partially offset by a $1.6 million increase in deferred revenue which negatively impacted comparative recognized revenue in the GLC business.

Revenue from the Companys GLC business for the quarter ended March 31, 2008 increased $2.3 million, or 2.7%, to $87.4 million from $85.0
million for the quarter ended March 31, 2007. As compared to the quarter ended March 31, 2007, revenues increased approximately $6.4 million due to the decline in the U.S. dollars exchange rates, in particular the Euro, while organic
growth declined approximately $4.3 million during the quarter ended March 31, 2008, which was partially the result of an increase of $1.6 million in deferred revenue in the GLC business; additionally GLC was negatively impacted by a slower
release cycle from a major customer in the first quarter of 2008 as compared to the first quarter of 2007.

Revenue from the Companys
GDT business was $22.8 million for the quarter ended March 31, 2008, an increase of $5.0 million, or 27.7%, from $17.9 million for the quarter ended March 31, 2007. The period-over-period increase in GDT revenue was primarily due to
increased revenue from large programs for existing customers. Revenue in the GDT business is not materially impacted by fluctuations in foreign currency exchange rates.

Revenue from the Companys Interpretation business for the quarter ended March 31, 2008 was $6.9 million, an increase of $1.2 million, or 20.4% from $5.7 million for the quarter ended March 31, 2007
primarily due to increased volume from a large existing program and a new customer. The Interpretation business is not materially impacted by fluctuations in foreign currency exchange rates.

Cost of Revenue. Cost of revenue, excluding depreciation and amortization, consists primarily of expenses incurred for translation services
provided by third parties as well as salaries and associated employee benefits for personnel related to client projects. The following table shows GLC, GDT and Interpretation cost of revenues, the percentage change from the three-month period of the
prior year and as a percentage of revenue for the three months ended March 31, 2008 and 2007, respectively:



|                      |  |                                  |            |   |                        |      |   |                                  |   |            |  
|--------------------- |  | -------------------------------- | ---------- | - | ---------------------- | ---- | - | -------------------------------- | - | ---------- | -
|                      |  | Three Months EndedMarch 31, 2008 |            |   | % ChangeQ1 07 to Q1 08 |      |   | Three Months EndedMarch 31,
2007 |  
|GLC:                  |  |                                  |            |   |                        |      |   |                                  |   |            |  
|Cost of revenue       |  | $                                | 60,947,000 |   |                        | 8.0  | % |                                  | $ | 56,429,000 |  
|Percentage of revenue |  |                                  | 69.8       | % |                        |      |   |                                  |   | 66.3       | %
|                      |  |                                  |           
|GDT:                  |  |                                  |            |   |                        |      |   |                                  |   |            |  
|Cost of revenue       |  |                                  | 14,563,000 |   |                        | 27.4 | % |                                  |   | 11,435,000 |  
|Percentage of revenue |  |                                  | 63.8       | % |                        |      |   |                                  |   | 64.0       | %
|                      |  |                                  |           
|Interpretation:       |  |                                  |            |   |                        |      |   |                                  |   |            |  
|Cost of revenue       |  |                                  | 5,365,000  |   |                        | 23.2 | % |                                  |   | 4,354,000  |  
|Percentage of revenue |  |                                  | 78.2       | % |                        |      |   |                                  |   | 76.4       | %
|                      |  |                                  |            |   |                        |      |   |                                  |   |            |  
|Total cost of revenue |  | $                                | 80,875,000 |   |                        |      |   |                                  | $ | 72,218,000 |  
|                      |  |                                  |            |   |                        |      |   |                                  |   |            |  
|Percentage of revenue |  |                                  | 69.1       | % |                        |      |   |                                  |   | 66.5       | %



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##### Table of Contents

For the quarter ended March 31, 2008, as a percentage of revenue, cost of revenue increased to 69.1%
as compared to 66.5% for the three months ended March 31, 2007 primarily due to the negative impact of the decline in the exchange rate of the U.S. dollar against most foreign currencies and changes in the revenue and service mix. The Company
estimates that the decline of the U.S. dollar negatively impacted cost of revenue by over 270 basis points, period-over-period, essentially offsetting the benefits realized from the deployment and use of Lionbridges language
management technology platform, and lower internal operating costs resulting from certain restructuring and cost reduction actions initiated over the past few years.

Each segment provides distinctive services with different gross margins. For the quarter ended March 31, 2008, GLC, GDT and Interpretation accounted for approximately 74.6%, 19.5% and 5.9% of the total revenue.
For the quarter ended March 31, 2007 GLC, GDT and Interpretation accounted for approximately 78.3%, 16.4% and 5.2% of the total revenue.

For the quarter ended March 31, 2008, cost of revenue increased $8.7 million, or 12.0%, to $80.9 million as compared to $72.2 million for the corresponding period of the prior year. The increase was primarily in support of $8.4
million of incremental revenue as compared to the corresponding period of the prior year. The increase also includes approximately $7.6 million due to the depreciation of the U.S. dollar against foreign currencies as noted above, with the balance
due to changes in the revenue and service mix period-over-period.

For the quarter ended March 31, 2008, cost of revenue as a
percentage of revenue in the Companys GLC business increased to 69.8% as compared to 66.3% for the quarter ended March 31, 2007. Cost of revenue increased $4.5 million to $60.9 million compared to $56.4 million for the same quarter of the
prior year. This increase reflects higher costs for translation services, mainly due the negative impact of the decline in the exchange rate of the U.S. dollar against most foreign currencies, and variations in work mix. As noted above, the negative
impact of the decline in the exchange rate of the U.S. dollar against most foreign currencies significantly impacted the cost of revenue ratios in the GLC business. The Company estimates that the decline of the U.S. dollar impacted cost of revenue
by over 270 basis points, period-over-period, essentially offsetting the benefits realized from the deployment and use of Lionbridges language management technology platform, and lower internal operating costs resulting from certain
restructuring and cost reduction actions initiated over the past few years.

Cost of revenue as a percentage of revenue in the
Companys GDT business decreased slightly to 63.8% for the quarter ended March 31, 2008 as compared to 64.0% for the quarter ended March 31, 2007. This decrease was primarily due to work mix variation in services provided consisting
of a higher proportion of variable costs, partially offset by the U.S. dollars decline against the Indian Rupee and the Euro in the quarter ended March 31, 2008 as compared to the same period of the prior year. For the quarter ended
March 31, 2008, GDT cost of revenue increased $3.1 million, or 27.4%, to $14.6 million as compared to $11.4 million for the corresponding quarter of the prior year. This increase was primarily associated with the $5.2 million increase in
revenue period-over-period, and to a lesser degree work mix variation in services as compared to the corresponding quarter of the prior year. The increase includes approximately $940,000 due to the depreciation of the U.S. dollar against foreign
currencies as noted above.

Cost of revenue as a percentage of revenue in the Companys Interpretation business increased to 78.2% for
the quarter ended March 31, 2008 as compared to 76.4% for the quarter ended March 31, 2007. This increase is primarily due to pricing and work mix variations in services, including the sourcing and engagement of higher cost interpreters to
support increased demand for certain languages that are difficult to procure, and higher travel costs as compared to the corresponding quarter of the prior year. The Companys Interpretation business is not materially impacted by foreign
currency exchange rate fluctuations.



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Sales and Marketing.Sales and marketing expenses consist primarily of salaries, commissions and
associated employee benefits, travel expenses of sales and marketing personnel, promotional expenses, sales force automation/CRM system expense, training, and the costs of programs aimed at increasing revenue, such as advertising, trade shows,
public relations and other market development programs. The following table shows sales and marketing expenses in dollars, the dollar change from the three-month period of the prior year and as a percentage of revenue for the three months ended
March 31, 2008 and 2007, respectively:



|                                   |  |                             |           |   |      |   |           |  
|---------------------------------- |  | --------------------------- | --------- | - | ---- | - | --------- | -
|                                   |  | Three Months EndedMarch 31, |          
|                                   |  | 2008                        |           |   | 2007 |  
|Total sales and marketing expenses |  | $                           | 8,817,000 |   |      | $ | 7,951,000 |  
|Increase from prior year           |  |                             | 866,000   |   |      |   |           |  
|Percentage of revenue              |  |                             | 7.5       | % |      |   | 7.3       | %

Sales and marketing expenses increased $866,000, or 10.9%, to $8.8 million for the quarter ended
March 31, 2008 as compared to $8.0 million for the quarter ended March 31, 2007. As a percentage of revenue, sales and marketing expenses increased to 7.5% as compared to 7.3% for the quarter ended March 31, 2007. This increase is
primarily attributable to increased compensation and travel expense to support increased revenue levels from period to period as well as projected revenue growth in the future. Additionally, the increase reflects increased spending on marketing
initiatives period-over-period. Approximately $340,000 of the increase for the quarter ended March 31, 2008, as compared to the quarter ended March 31, 2007, is due to the depreciation of the U.S. dollar against foreign currencies.

General and Administrative. General and administrative expenses consist of salaries of the management, purchasing, process and
technology, finance and administrative groups, and associated employee benefits and travel; facilities costs; information systems costs; professional fees; business reconfiguration costs and all other site and corporate costs. The following table
shows general and administrative expenses in dollars, the dollar change from the three-month period of the prior year and as a percentage of revenue for the three months ended March 31, 2008 and 2007, respectively:



|                                          |  |                             |            |   |      |   |            |  
|----------------------------------------- |  | --------------------------- | ---------- | - | ---- | - | ---------- | -
|                                          |  | Three Months EndedMarch 31, |           
|                                          |  | 2008                        |            |   | 2007 |  
|Total general and administrative expenses |  | $                           | 23,175,000 |   |      | $ | 20,582,000 |  
|Increase from prior year                  |  |                             | 2,593,000  |   |      |   |            |  
|Percentage of revenue                     |  |                             | 19.8       | % |      |   | 18.9       | %

General and administrative expenses increased $2.6 million, or 12.6%, to $23.2 million for the
quarter ended March 31, 2008 as compared to $20.6 million for the quarter ended March 31, 2007. Approximately $1.7 million of the increase is attributable to the decline in the U.S. dollars exchange rate against most foreign
currencies, in particular the Euro and Indian Rupee. Approximately 62.0% of general and administrative expenses are denominated in non-U.S. dollars, primarily the Euro and Indian Rupee, and of that amount a majority of these expenses relate to rent
and compensation expense in the quarter ended March 31, 2008, as compared to the quarter ended March 31, 2007. As a percentage of revenue, general and administrative expenses increased to 19.8% for the quarter ended March 31, 2008, as
compared to 18.9%, for the same period of the prior year, due primarily to the items noted above, as well as the impact of supporting the increase in revenue from period to period.

Research and Development. Research and development expenses relate primarily to the Companys web-based hosted language management
technology platform used in the globalization process and the research and development of a globalization management system. The cost consists primarily of salaries and associated employee benefits and third-party contractor expenses. The following
table shows research and development expense in dollars, the dollar change from the three-month period of the prior year and as a percentage of revenue for the three months ended March 31, 2008 and 2007, respectively:



|                                       |  |                             |           |   |      |   |         |  
|-------------------------------------- |  | --------------------------- | --------- | - | ---- | - | ------- | -
|                                       |  | Three Months EndedMarch 31, |          
|                                       |  | 2008                        |           |   | 2007 |  
|Total research and development expense |  | $                           | 1,112,000 |   |      | $ | 717,000 |  
|Increase from prior year               |  |                             | 395,000   |   |      |   |         |  
|Percentage of revenue                  |  |                             | 0.9       | % |      |   | 0.7     | %

Research and development expense increased to $1.1 million for the quarter ended March 31,
2008 as compared to $717,000 for the corresponding period of the prior year. Approximately $115,000 of the increase for the quarter ended March 31, 2008 is due to the depreciation of the U.S. dollar against foreign currencies.



20



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Depreciation and Amortization.Depreciation and amortization consist of the expense related to
property and equipment that is being depreciated over the estimated useful lives of the assets using the straight-line method. The following table shows depreciation and amortization expense in dollars, the dollar change from the three-month period
of the prior year and as a percentage of revenue for the three months ended March 31, 2008 and 2007, respectively:



|                                            |  |                             |           |   |      |   |           |  
|------------------------------------------- |  | --------------------------- | --------- | - | ---- | - | --------- | -
|                                            |  | Three Months EndedMarch 31, |          
|                                            |  | 2008                        |           |   | 2007 |  
|Total depreciation and amortization expense |  | $                           | 1,139,000 |   |      | $ | 1,294,000 |  
|Decrease from prior year                    |  |                             | 155,000   |   |      |   |           |  
|Percentage of revenue                       |  |                             | 1.0       | % |      |   | 1.2       | %

Depreciation and amortization expense decreased to $1.1 million for the quarter ended
March 31, 2008 as compared to $1.3 million for the quarter ended March 31, 2007. The decrease for the quarter ended March 31, 2008 as compared to the corresponding period of the prior year is primarily due to the culmination of
depreciable lives of certain assets acquired in prior years. This decrease was partially offset by increases attributable to a decline in foreign currency exchange rates of approximately $110,000 for the quarter ended March 31, 2008 as compared
to the corresponding period of the prior year.

Amortization of Acquisition-related Intangible Assets.Amortization of
acquisition-related intangible assets consists of the amortization of identifiable intangible assets resulting from acquired businesses. Amortization expense for the three months ended March 31, 2008 and 2007 of $2.1 million relates solely to
the amortization of identifiable intangible assets.

Interest Expense.Interest expense primarily represents interest paid or
payable on debt and the amortization of deferred financing costs. Interest expense for the quarter ended March 31, 2008 of $1.2 million decreased $298,000 from $1.5 million for the quarter ended March 31, 2007. The decrease reflects the
impact of $4.0 million of principal debt reduction period-over-period coupled with lower interest rates.

Other Expense, Net.Other
expense, net primarily reflects the foreign currency transaction gains or losses arising from exchange rate fluctuations on transactions denominated in currencies other than the functional currencies of the countries in which the transactions are
recorded. The Company recognized $2.4 million in other expense, net, in the quarter ended March 31, 2008, as compared to $491,000 in other expense, net, in the corresponding quarter of the prior year. This increase was primarily attributable to
the decline in the U.S. dollar versus the Euro. Lionbridge recorded net realized and unrealized foreign currency gains of $3.4 million on forward contracts in the quarter ended March 31, 2008 and net realized and unrealized foreign currency
losses of $151,000 on forward contracts in the quarter ended March 31, 2007.

Provision for Income Taxes. The following
table shows the provision for income taxes expense in dollars, the dollar change from the three-month period of the prior year and as a percentage of revenue for the three months ended March 31, 2008 and 2007, respectively:



|                           |  |                             |         |   |      |   |           |  
|-------------------------- |  | --------------------------- | ------- | - | ---- | - | --------- | -
|                           |  | Three Months EndedMarch 31, |        
|                           |  | 2008                        |         |   | 2007 |  
|Provision for income taxes |  | $                           | 616,000 |   |      | $ | 1,481,000 |  
|Decrease from prior year   |  |                             | 865,000 |   |      |   |           |  
|Percentage of revenue      |  |                             | 0.5     | % |      |   | 1.4       | %

The provision for income taxes consists primarily of taxes resulting from profits in foreign
jurisdictions, transfer pricing and interest and penalties associated with uncertain tax positions, and deferred tax liabilities related to the tax deductible goodwill from the BGS acquisition. The tax provision decreased $865,000 to $616,000 for
the quarter ended March 31, 2008 from $1.5 million in the corresponding quarter of the prior year. This decrease is primarily due to lower foreign profits which are subject to tax by the foreign jurisdictions due to treatment of the foreign
subsidiaries as service providers that earn a profit based on a cost-plus model.

Liquidity and Capital Resources

On December 21, 2006, the Company entered into a revolving credit facility (the Credit Agreement), replacing the Companys Term Loan
B and Revolving Credit Facility that had been in place since September 1, 2005. The Credit Agreement was subsequently amended on January 22, 2007 to add certain additional non-U.S. subsidiaries of the Company as Borrowers or Guarantors.
The Credit Agreement provides for a five-year $100.0 million revolving credit facility. At March 31, 2008, $71.7 million was outstanding with an interest rate of 4.2%.



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The following table shows cash and cash equivalents and working capital at March 31, 2008 and at December 31,
2007:



|                          |  |                |            |                   |   |           
|------------------------- |  | -------------- | ---------- | ----------------- | - | ----------
|                          |  | March 31, 2008 |            | December 31, 2007
|Cash and cash equivalents |  | $              | 26,034,000 |                   | $ | 32,248,000
|Working capital           |  |                | 68,068,000 |                   |   | 64,460,000

Lionbridges working capital increased $3.6 million to $68.1 million at March 31, 2008,
as compared to $64.5 million at December 31, 2007. The increase was driven by the growth of the business during the three months ended March 31, 2008. As of March 31, 2008, cash and cash equivalents totaled $26.0 million, a decrease
of $6.2 million from $32.2 million at December 31, 2007, primarily due to $6.9 million net cash used in operating activities of the business, $2.1 million increase in cash due to exchange rate changes in the period and $1.1 million cash
provided from investing, including $3.7 million net proceeds from foreign currency forward contracts, partially offset by $2.6 million for purchases of property and equipment and $2.4 million of net cash used in financing, including $2.3 million for
the repurchase of shares.

Accounts receivable and work in process totaled $108.7 million, an increase of $1.8 million as compared to
$106.9 million at December 31, 2007. Other current assets increased $3.8 million to $16.2 million as compared to $12.3 million at December 31, 2007. Current liabilities totaled $82.9 million at March 31, 2008, a decrease of $4.2
million as compared to $87.1 million at December 31, 2007.

The following table shows the net cash used in operating activities, net
cash provided by (used in) investing activities, and net cash used in financing activities for the nine months ended March 31, 2008 and 2007, respectively:



|                                                    |  |                             |           |      |   |            |  
|--------------------------------------------------- |  | --------------------------- | --------- | ---- | - | ---------- | -
|                                                    |  | Three Months EndedMarch 31, |          
|                                                    |  | 2008                        |           | 2007 |  
|Net cash used in operating activities               |  | $                           | 6,943,000 |      | $ | 7,428,000  |  
|Net cash provided by (used in) investing activities |  |                             | 1,074,000 |      |   | (1,453,000 | )
|Net cash used in financing activities               |  |                             | 2,400,000 |      |   | 1,656,000  |  

Net cash used in operating activities was $6.9 million for the three months ended March 31,
2008, as compared to $7.4 million for the corresponding period of the prior year. The $6.9 million cash used in operating activities was due to net loss of $4.4 million (inclusive of $1.6 million in depreciation, amortization, stock-based
compensation and other non-cash expenses, net of realized and unrealized foreign currency gains on forward contracts of $3.4 million), a $4.0 million net decrease in accounts receivable and work in process, a $2.6 million increase in other operating
assets, a $1.0 million decrease in accounts payable, accrued expenses and other operating liabilities, and a $4.5 million decrease in deferred revenue.

In the three months ended March 31, 2007, the net cash used in operating activities was $7.4 million. The primary use of cash was due to net income of $232,000 (inclusive of $5.5 million in depreciation,
amortization, stock based compensation and other non-cash expenses, net of realized and unrealized foreign currency losses on forward contract of $151,000), a $2.4 million increase in accounts receivable, a $8.8 million increase in work in process,
a $8.2 million increase in other operating assets, a $5.9 million increase in accounts payable, accrued expenses and other operating liabilities, and a $427,000 increase in deferred revenue.

Lionbridge has not experienced any significant trends in accounts receivable and work in process other than changes relative to the change in revenue, as
previously noted. Fluctuations in accounts receivable from period to period relative to changes in revenue are a result of timing of customer invoicing and receipt of payments from customers.

Net cash provided by investing activities increased $2.5 million to $1.1 million for the three months ended March 31, 2008, as compared to $1.5
million cash used in investing activities for the corresponding period of the prior year. The primary investing activity in the three months ended March 31, 2008 was $3.7 million net proceeds from foreign currency forward contracts partially
offset by $2.6 million for the purchase of property and equipment.

In the three months ended March 31, 2007, the net cash used in
investing activities was $1.4 million primarily for the purchase of property and equipment.

During the quarter ended September 30,
2007, Lionbridge announced that its Board of Directors authorized the repurchase up to $12.0 million of shares of the Companys outstanding common stock. As of January 24, 2008, the Company acquired 3.7 million shares of its common
stock for $12.0 million at a volume weighted average price of $3.25 per share. In February 2008, the Companys Board of Directors authorized an incremental repurchase program of up to $12.0 million of the Companys common stock according
to working capital requirements and management discretion. During the quarter ended March 31, 2008, the Company acquired 146,468 shares of its common stock for $470,000 at a volume weighted average price of $3.21 per share. As of March 31,
2008, under the combined programs the Company has purchased 3.8 million shares of its common stock at a volume weighted average price of $3.25 per share and total cost of $12.5 million.



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Net cash used in financing activities for the three months ended March 31, 2008 was $2.4 million, an
increase of $744,000 as compared to $1.7 million net cash used in financing activities for the corresponding period of 2007. Cash used in financing activities consisted of $2.3 million of payments for the repurchase of shares, $12,000 of proceeds
from the issuance of common stock under option plans, $51,000 for payments of capital lease obligations.

In the three months ended
March 31, 2007, the net cash used in financing activities was $1.7 million. The primary use of cash in financing activities consisted of $2.0 million of payments of long-term debt, $249,000 of proceeds from the issuance of common stock under
option plans, $255,000 in proceeds from the issuance of capital leases and $134,000 for payments of capital lease obligations.

On
February 10, 2005, Lionbridge filed with the Securities and Exchange Commission a shelf registration statement on Form S-3 under the Securities Act of 1933, as amended (SEC File No. 333-122698), covering the registration of common stock
(the Securities), in an aggregate amount of $130.0 million, which was declared effective by the Commission on February 23, 2005. These Securities may be offered from time to time in amounts, at prices and on terms to be determined
at the time of sale. The Company believes the shelf registration provides additional financing flexibility to meet potential future funding requirements and the ability to take advantage of potentially attractive capital market conditions.
Lionbridge anticipates that its present cash and short-term investments position, available financing and access to capital markets should provide adequate cash to fund its currently anticipated cash needs for the next twelve months and foreseeable
future.

Contractual Obligations

As of
March 31, 2008, there are no material changes in Lionbridges contractual obligations as disclosed in the Companys Annual Report on Form 10-K for the year ended December 31, 2007. In January 2007, Lionbridge adopted FIN 48 which
resulted in an increase to the Companys income tax liabilities of approximately $185,000 to $1.5 million from the amount recorded at December 31, 2006. Tax provisions during the three months ended March 31, 2008, primarily related to
accrued interest, have increased these balances by $371,000 to $2.9 million.

Additionally, in connection with the acquisition of BGS, the
Company has recorded a FIN 48 tax liability of approximately $4.0 million related to tax liabilities accruing on or prior to the acquisition date of September 1, 2005 that Bowne & Co., Inc. agreed to indemnify. Accordingly, the
Company adjusted its balance sheet by recording a long-term Indemnification Receivable and related FIN 48 liability for this amount. As of March 31, 2008 the FIN 48 tax liability balance is approximately $3.6 million. The timing of settlement
of these tax liabilities is uncertain at this time.

Off-Balance Sheet Arrangements

The Company does not have any special purpose entities or off-balance sheet financing arrangements.

Recent Accounting Pronouncements

In March 2008, the
Financial Accounting Standards Board (FASB) issued Statement of Accounting Standards (SFAS) No. 161, Disclosures about Derivative Instruments and Hedging Activities,an amendment of FASB Statement
No. 133 (SFAS No. 161). SFAS No. 161 requires enhanced disclosures regarding an entitys derivative and hedging activities. These enhanced disclosures include information regarding how and why an entity uses derivative
instruments; how derivative instruments and related hedge items are accounted for under SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities, and its related interpretations; and how derivative
instruments and related hedge items affect an entitys financial position, financial performance and cash flows. SFAS No. 161 is effective for financial statements issued for fiscal years and interim periods beginning after
November 15, 2008. The adoption of SFAS No. 161 will not have a material impact on our financial position, results of operations or liquidity.

In September 2006, the FASB issued SFAS No. 157, which establishes a framework for measuring fair value and requires expanded disclosures regarding fair value measurements. In February 2008, the FASB issued FASB
Staff Position No. FAS 157-2 (FSP FAS 157-2), Effective Date of FASB Statement No. 157, which allows for the deferral of the adoption date of SFAS No. 157 for all nonfinancial assets and nonfinancial liabilities,
except those that are recognized or disclosed at fair value in the financial statements on a recurring basis. We have elected to defer the adoption of SFAS No. 157 for the assets and liabilities within the scope of FSP FAS 157-2. Refer to Note
10, Fair Value Measurements, of this Form 10-Q, for our disclosures pursuant to the effective portion of SFAS No. 157. The adoption of SFAS No. 157 for those assets and liabilities within the scope of FSP FAS 157-2 is not expected to have
a material impact on our financial position, results of operations or liquidity.



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|Item 3. | Quantitative and Qualitative Disclosures about Market Risk
|------- | ----------------------------------------------------------

Lionbridge conducts its business globally and its earnings and cash flows are exposed to market risk from changes in interest rates and currency exchange rates. The Company manages its risk to foreign currency
transaction exposure and interest rates through risk management programs that includes the use of derivative financial instruments. Lionbridge operates these programs pursuant to documented corporate risk management policies. Lionbridge does not
enter into any derivative transactions for speculative purposes. Gains and losses on derivative financial instruments substantially offset gains and losses on underlying hedged exposures.

Interest Rate Risk. Lionbridge is exposed to market risk from changes in interest rates with respect to its revolving loan facility which
bears interest at Prime or LIBOR (at the Companys discretion) plus an applicable margin based on certain financial covenants. As of March 31, 2008, $71.7 million was outstanding under this facility. A hypothetical 10% increase or decrease
in interest rates would have approximately a $301,000 impact on the Companys interest expense based on the $71.7 million outstanding at March 31, 2008 with an interest rate of 4.2%. On July 20, 2007, the Company entered into a
three-year amortizing interest rate swap with a notional amount of $20.0 million that corresponds to a portion of the Companys floating rate credit facility. The $20.0 million notional amount effectively converted that portion of the
Companys total floating rate credit facility to fixed rate debt. The fair value of the interest rate derivative was a liability of $901,000 at March 31, 2008. A 10% increase in interest rates would increase the derivatives fair
value by approximately $295,000. A 10% decrease in interest rates would decrease the derivatives fair value by approximately $302,000. The interest rate swap is designated as a cash flow hedge under SFAS No. 133, Accounting for
Derivative Instruments and Hedging Activities (SFAS No. 133) and there is no hedge ineffectiveness at March 31, 2008. Additionally, Lionbridge is exposed to market risk through its investing activities. The Companys
portfolio consists primarily of short-term time deposits with investment grade banks and maturities less than 30 days. A hypothetical 10% increase or decrease in interest rates would not have a material impact on the carrying value of
Lionbridges investments due to their immediately available liquidity.

Foreign Currency Exchange Rate Risk. Lionbridge
conducts a large portion of its business in international markets. Although a majority of Lionbridges contracts with clients are denominated in U.S. dollars, 65% of its costs and expenses for the three-month periods ended March 31, 2008
and 2007 were denominated in foreign currencies. In addition, 24% and 15% of the Companys consolidated tangible assets were subject to foreign currency exchange fluctuations as of March 31, 2008 and December 31, 2007, respectively,
while 8% of its consolidated liabilities were exposed to foreign currency exchange fluctuations as of March 31, 2008 and December 31, 2007. In addition, net inter-company balances denominated in currencies other than the functional
currency of the respective entity were approximately $111.0 million and $100.0 million as of March 31, 2008 and December 31, 2007, respectively. The principal foreign currency applicable to our business is the Euro. The Company has
implemented a risk management program that partially mitigates its exposure to assets or liabilities denominated in currencies other than the functional currency of the respective entity which includes the use of derivative financial instruments not
designated as hedges in accordance with SFAS No. 133. The Company had forward contracts outstanding in the notional amount of $73.3 million at March 31, 2008 and recorded a net of $36,000 in liabilities to recognize the fair value of these
forward contracts. A 10% appreciation in the U.S. dollars value relative to the hedge currencies would decrease the forward contracts fair value by approximately $5.0 million at March 31, 2008. A 10% depreciation in the U.S.
dollars value relative to the hedge currencies would increase the forward contracts fair value by approximately $4.4 million. Any increase or decrease in the fair value of the Companys currency exchange rate sensitive forward
contracts would be substantially offset by a corresponding decrease or increase in the fair value of the hedged underlying asset or liability.



|Item 4. | Controls and Procedures
|------- | -----------------------

Evaluation of Disclosure Controls and Procedures. Lionbridge maintains disclosure controls and procedures designed to ensure that information required to be disclosed in the Companys filings under the Securities Exchange
Act of 1934 is recorded, processed, summarized and reported accurately within the time periods specified in the Securities and Exchange Commissions rules and forms and that such information is accumulated and communicated to management as
appropriate, to allow timely decisions regarding required disclosure. As of the end of the period covered by this report, an evaluation was performed under the supervision and with the participation of management, including the Chief Executive
Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Companys disclosure controls and procedures (pursuant to Exchange Act Rule 13a-15). Based upon this evaluation, the CEO and CFO concluded that the
Companys disclosure controls and procedures were effective as of March 31, 2008.

Changes in internal control over financial
reporting. There were no changes in the Companys internal control over financial reporting that occurred during the quarter ended March 31, 2008 that materially affected, or are reasonably likely to materially affect, the
Companys internal control over financial reporting.



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##### Table of Contents

LIONBRIDGE TECHNOLOGIES, INC.

PART IIOTHER INFORMATION



|Item 1. | Legal Proceedings
|------- | -----------------

On or
about July 24, 2001, a purported securities class action lawsuit captioned Samet v. Lionbridge Technologies, Inc. et al. (01-CV-6770) was filed in the United States District Court for the Southern District of New York (the
Court) against the Company, certain of its officers and directors, and certain underwriters involved in the Companys initial public offering. The complaint in this action asserted, among other things, that omissions regarding the
underwriters alleged conduct in allocating shares in Lionbridges initial public offering to the underwriters customers. In March 2002, the United States District Court for the Southern District of New York entered an order
dismissing without prejudice the claims against Lionbridge and its officers and directors (the case remained pending against the underwriter defendants).

On April 19, 2002, the plaintiffs filed an amended complaint naming as defendants not only the underwriter defendants but also Lionbridge and certain of its officers and directors. The amended complaint asserts
claims under both the registration and antifraud provisions of the federal securities laws relating to, among other allegations, the underwriters alleged conduct in allocating shares in the Companys initial public offering and the
disclosures contained in the Companys registration statement. On July 15, 2002, the Company, together with the other issuers named as defendants in these coordinated proceedings, filed a collective motion to dismiss the complaint on
various legal grounds common to all or most of the issuer defendants. In October 2002, the claims against officers and directors were dismissed without prejudice. In February 2003, the Court issued its ruling on the motion to dismiss, ruling that
the claims under the antifraud provisions of the securities laws could proceed against the Company and a majority of the other issuer defendants.

In June 2003, Lionbridge elected to participate in a proposed settlement agreement with the plaintiffs in this litigation. If the proposed settlement had been approved by the Court, it would have resulted in the dismissal, with prejudice,
of all claims in the litigation against Lionbridge and against any other of the issuer defendants who elected to participate in the proposed settlement, together with the current or former officers and directors of participating issuers who were
named as individual defendants. This proposed settlement was conditioned on, among other things, a ruling by the District Court that the claims against Lionbridge and against the other issuers who had agreed to the settlement would be certified for
class action treatment for purposes of the proposed settlement, such that all investors included in the proposed classes in these cases would be bound by the terms of the settlement unless an investor opted to be excluded from the settlement.

On December 5, 2006, the U.S. Court of Appeals for the Second Circuit issued a decision in In re Initial Public Offering
Securities Litigation that six purported class action lawsuits containing allegations substantially similar to those asserted against the Company may not be certified as class actions due, in part, to the Appeals Courts determination that
individual issues of reliance and knowledge would predominate over issues common to the proposed classes. On January 8, 2007, the plaintiffs filed a petition seeking rehearing en banc of the Second Circuit Court of Appeals
decision. On April 6, 2007 the Court of Appeals denied the plaintiffs petition for rehearing of the Courts December 5, 2006 ruling but noted that the plaintiffs remained free to ask the District Court to certify classes
different from the ones originally proposed which might meet the standards for class certification that the Court of Appeals articulated in its December 5, 2006 decision. The plaintiffs have since moved for certification of different classes in
the District Court.

In light of the Court of Appeals December 5, 2006 decision regarding certification of the plaintiffs
claims, the District Court entered an order on June 25, 2007 terminating the proposed settlement between the plaintiffs and the issuers, including Lionbridge. Because any possible future settlement with the plaintiffs, if such a settlement were
ever to be agreed to, would involve the certification of a class action for settlement purposes, the impact of the Court of Appeals class certification-related rulings on the possible future settlement of the claims against Lionbridge cannot
now be predicted.

On August 14, 2007, the plaintiffs filed amended complaints in the six focus cases. The issuer defendants and the
underwriter defendants separately moved to dismiss the claims against them in the amended complaints in the six focus cases. On March 26, 2008, the District Court issued an order in which it denied in substantial part the motions to dismiss the
amended complaints in the six focus cases. In addition, on October 1, 2007, the plaintiffs submitted their briefing in support of their motions to certify different classes in the six focus cases. The issuer defendants and the underwriter
defendants have separately opposed those motions. The motions to certify classes in the six focus cases remain pending.

We intend to
continue to defend the litigation vigorously. The litigation process is inherently uncertain and unpredictable, however, and there can be no guarantee as to the ultimate outcome of this pending lawsuit. The Company believes that the underwriters may
have an obligation to indemnify Lionbridge for the legal fees and other costs of defending this suit. While Lionbridge cannot guarantee the outcome of these proceedings, the Company believes that the final result of this lawsuit will have no
material effect on its consolidated financial condition, results of operations, or cash flows.



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##### Table of Contents

|Item 1A. | Risk Factors
|-------- | ------------

The matters
discussed in this Form 10-Q include forward-looking statements that involve risks or uncertainties. These statements are neither promises nor guarantees, but are based on various assumptions by management regarding future circumstances many of which
Lionbridge has little or no control over. A number of important risks and uncertainties, including those identified under the caption Risk Factors in Lionbridges Annual Report on Form 10-K, filed March 14, 2008 (SEC File No.
000-26933), as well as risks and uncertainties discussed elsewhere in this Form 10-Q, could cause Lionbridges actual results to differ materially from those in the forward-looking statements.



|Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds
|------- | -----------------------------------------------------------

During the quarter ended March 31, 2008, the Company withheld 51,242 restricted shares from certain employees to cover certain withholding taxes due from the employees at the time the shares vested. The following
table provides information about Lionbridges purchases of equity securities for the quarter ended March 31, 2008:



|                                     |  |                                 |  |                             |     
|------------------------------------ |  | ------------------------------- |  | --------------------------- | ----
|Period                               |  | Total Number ofShares Purchased |  | Average PricePaid Per Share
|January 1, 2008  January 31, 2008   |  | 855                             |  | $                           | 3.07
|February 1, 2008  February 29, 2008 |  | 50,387                          |  | $                           | 2.95

In addition, upon the termination of employees during the quarter ended March 31, 2008,
46,500 unvested restricted shares were forfeited. The following table provides information about Lionbridges forfeited restricted shares for the quarter ended March 31, 2008:



|                                     |  |                                
|------------------------------------ |  | -------------------------------
|Period                               |  | Total Number ofShares Forfeited
|February 1, 2008  February 29, 2008 |  | 2,500                          
|March 1, 2008  March 31, 2008       |  | 44,000                         



|Item 6. | Exhibits
|------- | --------

(a) Exhibits.



|       |  |                                                                                                                                                                                                                                                     
|------ |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.1*  |  | Lease dated as of March 6, 2008 between Dominion Corporate Trustees Limited and Lionbridge UK Limited.                                                                                                                                              
|       | 
|31.1 * |  | Certification of Rory J. Cowan, the Companys principal executive officer as required by Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.             
|       | 
|31.2 * |  | Certification of Donald M. Muir, the Companys principal financial officer as required by Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.            
|       | 
|32.1 * |  | Certifications of Rory J. Cowan, the Companys principal executive officer, and Donald M. Muir, the Companys principal financial officer, pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.



|* | Filed herewith.
|- | ---------------



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LIONBRIDGE TECHNOLOGIES, INC.

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.



LIONBRIDGE TECHNOLOGIES, INC.By:

/S/ DONALD M. MUIRDonald M. Muir Chief Financial Officer (Duly Authorized Officer and Principal Financial
Officer)


Dated: May 9, 2008

Exhibit Index



|               |  |                                                                                                                                                                                                                                                     
|-------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit Number |  | Description                                                                                                                                                                                                                                         
|10.1 *         |  | Lease dated as of March 6, 2008 between Dominion Corporate Trustees Limited and Lionbridge UK Limited.                                                                                                                                              
|               | 
|31.1 *         |  | Certification of Rory J. Cowan, the Companys principal executive officer as required by Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.             
|               | 
|31.2 *         |  | Certification of Donald M. Muir, the Companys principal financial officer as required by Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.            
|               | 
|32.1 *         |  | Certifications of Rory J. Cowan, the Companys principal executive officer, and Donald M. Muir, the Companys principal financial officer, pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.



|* | Filed herewith.
|- | ---------------



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