##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 FORM 10-Q
  þ
    
    QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER
30, 2005
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD
FROM          
TO
 COMMISSION FILE NUMBER: 1-16493
 SYBASE, INC.
  Delaware
    
    94-2951005(State of Incorporation)
    
    (I.R.S. Employer Identification No.)
 
  
  
 þ o
 þ o
 o þ
 
 o o




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PageForward-Looking Statements
    
    
    1Part I: Financial InformationItem 1: Financial Statements (Unaudited)Condensed Consolidated Balance Sheets as of September 30, 2005 and December 31, 2004
    
    
    2Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2005 and 2004
    
    
    3Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2005 and 2004
    
    
    4Notes to Condensed Consolidated Financial Statements
    
    
    5Item 2: Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    15Item 3: Quantitative and Qualitative Disclosures of Market Risk
    
    
    31Item 4: Controls and Procedures
    
    
    31Part II: Other Information
    
    
    32Item 1: Legal Proceedings
    
    
    32Item 2: Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    32Item 6: Exhibits
    
    
    32Signatures
    
    
    33Exhibit IndexEXHIBIT 12EXHIBIT 31.1EXHIBIT 31.2EXHIBIT 32




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1




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##### Table of Contents



PART I: FINANCIAL INFORMATION
 
 ITEM 1: FINANCIAL STATEMENTS
  
  September 30,2005
    
    
    December 31,(Dollars in thousands, except share and per share data)
    
    (Unaudited)
    
    2004Current assets:Cash and cash equivalents
    
    $
    412,463
    
    
    $
    321,417Short-term cash investments
    
    
    371,261
    
    
    
    158,217Total cash, cash equivalents and short-term cash investments
    
    
    783,724
    
    
    
    479,634Restricted cash
    
    
    5,073
    
    
    
    5,356Accounts receivable, net
    
    
    116,189
    
    
    
    157,897Deferred income taxes
    
    
    8,697
    
    
    
    11,205Prepaid expenses and other current assets
    
    
    18,762
    
    
    
    14,790Total current assets
    
    
    932,445
    
    
    
    668,882Long-term cash investments
    
    
    135,125
    
    
    
    33,998Restricted long-term cash investments
    
    
    2,600
    
    
    
    2,600Property, equipment and improvements, net
    
    
    56,787
    
    
    
    64,371Deferred income taxes
    
    
    44,660
    
    
    
    39,440Capitalized software, net
    
    
    66,909
    
    
    
    61,771Goodwill, net
    
    
    208,412
    
    
    
    214,110Other purchased intangibles, net
    
    
    60,660
    
    
    
    67,208Other assets
    
    
    37,698
    
    
    
    31,142Total assets
    
    $
    1,545,296
    
    
    $
    1,183,522Current liabilities:Accounts payable
    
    $
    9,750
    
    
    $
    11,962Accrued compensation and related expenses
    
    
    43,882
    
    
    
    43,632Accrued income taxes
    
    
    49,966
    
    
    
    32,595Other accrued liabilities
    
    
    69,270
    
    
    
    81,715Deferred revenue
    
    
    181,244
    
    
    
    208,741Total current liabilities
    
    
    354,112
    
    
    
    378,645Other liabilities
    
    
    34,874
    
    
    
    33,121Long-term deferred revenue
    
    
    4,959
    
    
    
    10,170Minority interest
    
    
    5,030
    
    
    
    5,030Long-term convertible debt
    
    
    460,000
    
    
    
    Commitments and contingent liabilitiesStockholders equity:Preferred stock, $0.001 par value, 8,000,000 shares authorized; none issued or outstanding
    
    
    
    
    
    
    Common stock, $0.001 par value, 200,000,000 shares authorized; 105,337,362 shares issued and
91,104,724 outstanding (2004-105,337,362 shares issued and 95,518,977 outstanding)
    
    
    105
    
    
    
    105Additional paid-in capital
    
    
    955,421
    
    
    
    940,806Accumulated deficit
    
    
    (10,873
    )
    
    
    (66,690
    )Accumulated other comprehensive income
    
    
    20,469
    
    
    
    49,356Cost of 14,232,638 shares of treasury stock (2004-9,818,385 shares)
    
    
    (262,551
    )
    
    
    (159,617
    )Unearned compensation
    
    
    (16,250
    )
    
    
    (7,404
    )Total stockholders equity
    
    
    686,321
    
    
    
    756,556Total liabilities and stockholders equity
    
    $
    1,545,296
    
    
    $
    1,183,522
  2




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Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,(Dollars in thousands, per share data)
    
    2005
    
    
    2004
    
    
    2005
    
    
    2004Revenues:License fees
    
    $
    69,739
    
    
    $
    70,380
    
    
    $
    200,362
    
    
    $
    188,713Services
    
    
    129,588
    
    
    
    128,338
    
    
    
    395,284
    
    
    
    381,195Total revenues
    
    
    199,327
    
    
    
    198,718
    
    
    
    595,646
    
    
    
    569,908Costs and expenses:Cost of license fees
    
    
    10,993
    
    
    
    15,566
    
    
    
    36,973
    
    
    
    44,704Cost of services
    
    
    37,980
    
    
    
    39,757
    
    
    
    118,248
    
    
    
    122,903Sales and marketing
    
    
    59,655
    
    
    
    59,254
    
    
    
    184,593
    
    
    
    179,688Product development and engineering
    
    
    34,932
    
    
    
    29,114
    
    
    
    102,764
    
    
    
    88,922General and administrative
    
    
    23,873
    
    
    
    24,034
    
    
    
    69,183
    
    
    
    67,612Amortization of other purchased intangibles
    
    
    1,677
    
    
    
    1,677
    
    
    
    5,031
    
    
    
    3,462Reversal of purchase accounting accrual
    
    
    
    
    
    
    (2,677
    )
    
    
    
    
    
    
    (2,677
    )Cost of restructure
    
    
    21
    
    
    
    10,479
    
    
    
    302
    
    
    
    10,351Total costs and expenses
    
    
    169,131
    
    
    
    177,204
    
    
    
    517,094
    
    
    
    514,965Operating income
    
    
    30,196
    
    
    
    21,514
    
    
    
    78,552
    
    
    
    54,943Interest income
    
    
    6,838
    
    
    
    2,562
    
    
    
    18,500
    
    
    
    8,108Interest expense and other, net
    
    
    (2,957
    )
    
    
    (44
    )
    
    
    (7,880
    )
    
    
    387Income before income taxes
    
    
    34,077
    
    
    
    24,032
    
    
    
    89,172
    
    
    
    63,438Provision for income taxes
    
    
    6,090
    
    
    
    6,201
    
    
    
    31,984
    
    
    
    19,599Net income
    
    $
    27,987
    
    
    $
    17,831
    
    
    $
    57,188
    
    
    $
    43,839Basic net income per share
    
    $
    0.31
    
    
    $
    0.19
    
    
    $
    0.63
    
    
    $
    0.46Shares used in computing basic net income per share
    
    
    89,634
    
    
    
    94,500
    
    
    
    90,403
    
    
    
    95,973Diluted net income per share
    
    $
    0.30
    
    
    $
    0.19
    
    
    $
    0.62
    
    
    $
    0.44Shares used in computing diluted net income per share
    
    
    92,431
    
    
    
    95,961
    
    
    
    92,961
    
    
    
    98,522
  3




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Nine Months EndedSeptember 30,(Dollars in thousands)
    
    2005
    
    
    2004Cash and cash equivalents, beginning of year
    
    $
    321,417
    
    
    $
    315,404Cash flows from operating activities:Net income
    
    
    57,188
    
    
    
    43,839Adjustments to reconcile net income to net cash provided by operating activities:Depreciation and amortization
    
    
    54,847
    
    
    
    63,340Write-off of assets in restructuring
    
    
    
    
    
    
    6,908Loss on disposal of assets
    
    
    703
    
    
    
    575Reversal of purchase accounting accrual
    
    
    
    
    
    
    (2,677
    )Deferred income taxes
    
    
    (4,603
    )
    
    
    (4,208
    )Amortization of deferred stock-based compensation
    
    
    5,667
    
    
    
    3,472Amortization of note issuance costs
    
    
    1,180
    
    
    
    Changes in assets and liabilities:Accounts receivable
    
    
    39,628
    
    
    
    24,308Other current assets
    
    
    (3,968
    )
    
    
    1,117Other assets  operating
    
    
    2,050
    
    
    
    3,441Accounts payable
    
    
    (2,215
    )
    
    
    3,707Accrued compensation and related expenses
    
    
    253
    
    
    
    (5,041
    )Accrued income taxes
    
    
    24,636
    
    
    
    (150
    )Other accrued liabilities
    
    
    (12,635
    )
    
    
    (27,984
    )Deferred revenues
    
    
    (32,917
    )
    
    
    (9,036
    )Other liabilities
    
    
    1,664
    
    
    
    6,481Net cash provided by operating activities
    
    
    131,478
    
    
    
    108,092Cash flows from investing activities:(Increase) Decrease in restricted cash
    
    
    284
    
    
    
    (65
    )Purchases of available-for-sale cash investments
    
    
    (704,001
    )
    
    
    (161,095
    )Maturities of available-for-sale cash investments
    
    
    307,524
    
    
    
    107,822Sales of available-for-sale cash investments
    
    
    81,381
    
    
    
    108,738Business combinations, net of cash acquired
    
    
    (6,928
    )
    
    
    (81,272
    )Purchases of property, equipment and improvements
    
    
    (12,007
    )
    
    
    (20,106
    )Proceeds from sale of fixed assets
    
    
    25
    
    
    
    193Capitalized software development costs
    
    
    (26,336
    )
    
    
    (27,918
    )(Increase) Decrease in other assets  investing
    
    
    (5
    )
    
    
    2Net cash used for investing activities
    
    
    (360,063
    )
    
    
    (73,701
    )Cash flows from financing activities:Proceeds from the issuance of convertible subordinated notes, net of issuance costs
    
    
    450,238
    
    
    
    Repayments of long-term obligations
    
    
    (997
    )
    
    
    (22,173
    )Payments on capital lease
    
    
    (201
    )
    
    
    Net proceeds from the issuance of common stock and reissuance of treasury stock
    
    
    40,326
    
    
    
    26,761Purchases of treasury stock
    
    
    (144,529
    )
    
    
    (109,491
    )Net cash provided by (used for) financing activities
    
    
    344,837
    
    
    
    (104,903
    )Effect of exchange rate changes on cash
    
    
    (25,206
    )
    
    
    (1,338
    )Net increase (decrease) in cash and cash equivalents
    
    
    91,046
    
    
    
    (71,850
    )Cash and cash equivalents, end of period
    
    
    412,463
    
    
    
    243,554Cash investments, end of period
    
    
    506,386
    
    
    
    201,946Total cash, cash equivalents and cash investments, end of period
    
    $
    918,849
    
    
    $
    445,500Supplemental disclosures:Interest paid
    
    $
    4,898
    
    
    $
    87Income taxes paid, net of refunds
    
    $
    10,458
    
    
    $
    21,917
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Notes to Condensed Consolidated Financial Statements
 Basis of Presentation .
   Stock-Based Compensation .
  Three
    
    
    Three
    
    
    Nine
    
    
    NineMonths
    
    
    Months
    
    
    Months
    
    
    MonthsEnded
    
    
    Ended
    
    
    Ended
    
    
    Ended(Dollars in thousands, except per share data)
    
    9/30/05
    
    
    9/30/04
    
    
    9/30/05
    
    
    9/30/04As reported net income  stock-based
employee compensation determined using the
intrinsic value method
    
    $
    27,987
    
    
    $
    17,831
    
    
    $
    57,188
    
    
    $
    43,839Add: Stock-based employee compensation cost, net
of tax, included in net income as reported
    
    $
    2,270
    
    
    $
    626
    
    
    $
    5,667
    
    
    $
    3,472Less: Pro-forma stock-based employee
compensation cost, net of tax, determined under
the fair value method
    
    $
    (3,820
    )
    
    $
    (5,734
    )
    
    $
    (12,600
    )
    
    $
    (19,697
    )Pro-forma net income  stock-based
employee compensation determined under the fair
value method
    
    $
    26,437
    
    
    $
    12,723
    
    
    $
    50,255
    
    
    $
    27,614Basic net income per shareAs reported
    
    $
    0.31
    
    
    $
    0.19
    
    
    $
    0.63
    
    
    $
    0.46Pro forma
    
    
    0.29
    
    
    
    0.13
    
    
    
    0.56
    
    
    
    0.29Diluted net income per shareAs reported
    
    $
    0.30
    
    
    $
    0.19
    
    
    $
    0.62
    
    
    $
    0.44Pro forma
    
    
    0.28
    
    
    
    0.13
    
    
    
    0.54
    
    
    
    0.28
 5




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Three
    
    
    Three
    
    
    Nine
    
    
    NineMonths
    
    
    Months
    
    
    Months
    
    
    MonthsEnded
    
    
    Ended
    
    
    Ended
    
    
    Ended9/30/05
    
    
    9/30/04
    
    
    9/30/05
    
    
    9/30/04Expected volatility
    
    
    28.00
    %
    
    
    53.85
    %
    
    
    37.31
    %
    
    
    54.53
    %Risk-free interest rates
    
    
    4.01
    %
    
    
    3.21
    %
    
    
    3.79
    %
    
    
    3.07
    %Expected lives (years)
    
    
    4.25
    
    
    
    4.25
    
    
    
    4.25
    
    
    
    4.25Expected dividend yield
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
  Accounting for Stock
Issued to Employees Statement of Cash Flows
   Business Combinations.
   6




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Net income per share .
 Three
    
    
    Three
    
    
    Nine
    
    
    NineMonths
    
    
    Months
    
    
    Months
    
    
    MonthsEnded
    
    
    Ended
    
    
    Ended
    
    
    Ended(In thousands, except per share data)
    
    9/30/05
    
    
    9/30/04
    
    
    9/30/05
    
    
    9/30/04Net income
    
    $
    27,987
    
    
    $
    17,831
    
    
    $
    57,188
    
    
    $
    43,839Basic net income per share
    
    $
    0.31
    
    
    $
    0.19
    
    
    $
    0.63
    
    
    $
    0.46Shares used in computing basic net income per share
    
    
    89,634
    
    
    
    94,500
    
    
    
    90,403
    
    
    
    95,973Diluted net income per share
    
    $
    0.30
    
    
    $
    0.19
    
    
    $
    0.62
    
    
    $
    0.44Shares used in computing basic net income per share
    
    
    89,634
    
    
    
    94,500
    
    
    
    90,403
    
    
    
    95,973Dilutive effect of stock options
    
    
    2,797
    
    
    
    1,461
    
    
    
    2,558
    
    
    
    2,549Shares used in computing diluted net income per share
    
    
    92,431
    
    
    
    95,961
    
    
    
    92,961
    
    
    
    98,522
   Comprehensive Income
 Three
    
    
    Three
    
    
    Nine
    
    
    NineMonths
    
    
    Months
    
    
    Months
    
    
    MonthsEnded
    
    
    Ended
    
    
    Ended
    
    
    Ended(In thousands)
    
    9/30/05
    
    
    9/30/04
    
    
    9/30/05
    
    
    9/30/04Net income
    
    $
    27,987
    
    
    $
    17,831
    
    
    $
    57,188
    
    
    $
    43,839Foreign currency translation gains/(losses)
    
    
    (945
    )
    
    
    6,437
    
    
    
    (28,716
    )
    
    
    (507
    )Unrealized gains/(losses) on marketable securities
    
    
    59
    
    
    
    229
    
    
    
    (171
    )
    
    
    (601
    )Comprehensive income (loss)
    
    $
    27,101
    
    
    $
    24,497
    
    
    $
    28,301
    
    
    $
    42,731
  Guarantees
 7




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Segment Information
   8




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##### Table of Contents



Consolidated(In thousands)
    
    IPG
    
    
    iAS
    
    
    Elimination
    
    
    TotalRevenues:License feesInfrastructure
    
    $
    49,126
    
    
    $
    21
    
    
    
    
    
    
    $
    49,147Mobile and Embedded
    
    
    9,869
    
    
    
    9,849
    
    
    
    
    
    
    
    19,718Financial Fusion products
    
    
    874
    
    
    
    
    
    
    
    
    
    
    
    874Subtotal license fees
    
    
    59,869
    
    
    
    9,870
    
    
    
    
    
    
    
    69,739Intersegment license revenues
    
    
    21
    
    
    
    8,225
    
    
    
    (8,246
    )
    
    
    Total license fees
    
    
    59,890
    
    
    
    18,095
    
    
    
    (8,246
    )
    
    
    69,739ServicesDirect service revenue
    
    
    114,547
    
    
    
    8,963
    
    
    
    
    
    
    
    123,510Financial Fusion services
    
    
    6,078
    
    
    
    
    
    
    
    
    
    
    
    6,078Intersegment service revenues
    
    
    7
    
    
    
    6,981
    
    
    
    (6,988
    )
    
    
    Total services
    
    
    120,632
    
    
    
    15,944
    
    
    
    (6,988
    )
    
    
    129,588Total revenues
    
    
    180,522
    
    
    
    34,039
    
    
    
    (15,234
    )
    
    
    199,327Total allocated costs and expenses before cost of restructure
and amortization of customer lists and purchased technology
    
    
    153,844
    
    
    
    26,846
    
    
    
    (15,234
    )
    
    
    165,456Operating income before cost of restructure and amortization of
customer lists and purchased technology
    
    
    26,678
    
    
    
    7,193
    
    
    
    
    
    
    
    33,871Amortization of other purchased intangibles
    
    
    500
    
    
    
    1,177
    
    
    
    
    
    
    
    1,677Amortization of purchased technology
    
    
    1,067
    
    
    
    979
    
    
    
    
    
    
    
    2,046Operating income before unallocated costs and cost of restructure
    
    
    25,111
    
    
    
    5,037
    
    
    
    
    
    
    
    30,148Cost of restructure  2005 Activity
    
    
    21
    
    
    
    
    
    
    
    
    
    
    
    21Operating income before unallocated costs
    
    
    25,090
    
    
    
    5,037
    
    
    
    
    
    
    
    30,127Unallocated cost savings
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (69
    )Operating income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    30,196Interest income, interest expense and other, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,881Income before income taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    34,077
  Consolidated(In thousands)
    
    IPG
    
    
    iAS
    
    
    Elimination
    
    
    TotalRevenues:License feesInfrastructure
    
    $
    51,844
    
    
    $
    10
    
    
    
    
    
    
    $
    51,854Mobile and Embedded
    
    
    6,226
    
    
    
    11,641
    
    
    
    
    
    
    
    17,867Financial Fusion products
    
    
    659
    
    
    
    
    
    
    
    
    
    
    
    659Subtotal license fees
    
    
    58,729
    
    
    
    11,651
    
    
    
    
    
    
    
    70,380Intersegment license revenues
    
    
    22
    
    
    
    5,163
    
    
    
    (5,185
    )
    
    
    Total license fees
    
    
    58,751
    
    
    
    16,814
    
    
    
    (5,185
    )
    
    
    70,380ServicesDirect service revenue
    
    
    116,247
    
    
    
    6,925
    
    
    
    
    
    
    
    123,172Financial Fusion services
    
    
    5,166
    
    
    
    
    
    
    
    
    
    
    
    5,166Intersegment service revenues
    
    
    
    
    
    
    6,743
    
    
    
    (6,743
    )
    
    
    Total services
    
    
    121,413
    
    
    
    13,668
    
    
    
    (6,743
    )
    
    
    128,338Total revenues
    
    
    180,164
    
    
    
    30,482
    
    
    
    (11,928
    )
    
    
    198,718Total allocated costs and expenses before cost of restructure
and amortization of customer lists and purchased technology
    
    
    147,683
    
    
    
    26,825
    
    
    
    (11,928
    )
    
    
    162,580Operating income before cost of restructure and amortization of
customer lists and purchased technology
    
    
    32,481
    
    
    
    3,657
    
    
    
    
    
    
    
    36,138Amortization of other purchased intangibles
    
    
    500
    
    
    
    1,177
    
    
    
    
    
    
    
    1,677Amortization of purchased technology
    
    
    3,731
    
    
    
    979
    
    
    
    
    
    
    
    4,710Operating income before unallocated costs and cost of restructure
    
    
    28,250
    
    
    
    1,501
    
    
    
    
    
    
    
    29,751Cost of restructure  2004 Activity
    
    
    10,477
    
    
    
    143
    
    
    
    
    
    
    
    10,620Operating income before unallocated costs
    
    
    17,773
    
    
    
    1,358
    
    
    
    
    
    
    
    19,131Unallocated cost savings
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,383
    )Operating income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    21,514Interest income, interest expense and other, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,518Income before income taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    24,032
 9




---



##### Table of Contents



Consolidated(In thousands)
    
    IPG
    
    
    iAS
    
    
    Elimination
    
    
    TotalRevenues:License feesInfrastructure
    
    $
    142,598
    
    
    $
    69
    
    
    
    
    
    
    $
    142,667Mobile and Embedded
    
    
    22,448
    
    
    
    32,736
    
    
    
    
    
    
    
    55,184Financial Fusion products
    
    
    2,511
    
    
    
    
    
    
    
    
    
    
    
    2,511Subtotal license fees
    
    
    167,557
    
    
    
    32,805
    
    
    
    
    
    
    
    200,362Intersegment license revenues
    
    
    64
    
    
    
    18,691
    
    
    
    (18,755
    )
    
    
    Total license fees
    
    
    167,621
    
    
    
    51,496
    
    
    
    (18,755
    )
    
    
    200,362ServicesDirect service revenue
    
    
    347,426
    
    
    
    27,402
    
    
    
    
    
    
    
    374,828Financial Fusion services
    
    
    20,456
    
    
    
    
    
    
    
    
    
    
    
    20,456Intersegment service revenues
    
    
    13
    
    
    
    20,269
    
    
    
    (20,282
    )
    
    
    Total services
    
    
    367,895
    
    
    
    47,671
    
    
    
    (20,282
    )
    
    
    395,284Total revenues
    
    
    535,516
    
    
    
    99,167
    
    
    
    (39,037
    )
    
    
    595,646Total allocated costs and expenses before cost of restructure
and amortization of customer lists and purchased technology
    
    
    458,893
    
    
    
    82,403
    
    
    
    (39,037
    )
    
    
    502,259Operating income before cost of restructure and amortization of
customer lists and purchased technology
    
    
    76,623
    
    
    
    16,764
    
    
    
    
    
    
    
    93,387Amortization of other purchased intangibles
    
    
    1,500
    
    
    
    3,531
    
    
    
    
    
    
    
    5,031Amortization of purchased technology
    
    
    6,160
    
    
    
    2,937
    
    
    
    
    
    
    
    9,097Operating income before unallocated costs and cost of restructure
    
    
    68,963
    
    
    
    10,296
    
    
    
    
    
    
    
    79,259Cost of restructure  2005 Activity
    
    
    302
    
    
    
    
    
    
    
    
    
    
    
    302Operating income before unallocated costs
    
    
    68,661
    
    
    
    10,296
    
    
    
    
    
    
    
    78,957Unallocated costs
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    405Operating income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    78,552Interest income, interest expense and other, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10,620Income before income taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    89,172
  Consolidated(In thousands)
    
    IPG
    
    
    iAS
    
    
    Elimination
    
    
    TotalRevenues:License feesInfrastructure
    
    $
    133,967
    
    
    $
    56
    
    
    
    
    
    
    $
    134,023Mobile and Embedded
    
    
    19,225
    
    
    
    31,310
    
    
    
    
    
    
    
    50,535Financial Fusion products
    
    
    4,155
    
    
    
    
    
    
    
    
    
    
    
    4,155Subtotal license fees
    
    
    157,347
    
    
    
    31,366
    
    
    
    
    
    
    
    188,713Intersegment license revenues
    
    
    96
    
    
    
    16,134
    
    
    
    (16,230
    )
    
    
    Total license fees
    
    
    157,443
    
    
    
    47,500
    
    
    
    (16,230
    )
    
    
    188,713ServicesDirect service revenue
    
    
    351,785
    
    
    
    13,809
    
    
    
    
    
    
    
    365,594Financial Fusion services
    
    
    15,601
    
    
    
    
    
    
    
    
    
    
    
    15,601Intersegment service revenues
    
    
    11
    
    
    
    19,933
    
    
    
    (19,944
    )
    
    
    Total services
    
    
    367,397
    
    
    
    33,742
    
    
    
    (19,944
    )
    
    
    381,195Total revenues
    
    
    524,840
    
    
    
    81,242
    
    
    
    (36,174
    )
    
    
    569,908Total allocated costs and expenses before cost of restructure
and amortization of customer lists and purchased technology
    
    
    455,225
    
    
    
    73,026
    
    
    
    (36,174
    )
    
    
    492,077Operating income before cost of restructure and amortization of
customer lists and purchased technology
    
    
    69,615
    
    
    
    8,216
    
    
    
    
    
    
    
    77,831Amortization of other purchased intangibles
    
    
    1,500
    
    
    
    1,962
    
    
    
    
    
    
    
    3,462Amortization of purchased technology
    
    
    11,193
    
    
    
    1,915
    
    
    
    
    
    
    
    13,108Operating income before unallocated costs and cost of restructure
    
    
    56,922
    
    
    
    4,339
    
    
    
    
    
    
    
    61,261Cost of restructure  2004 Activity
    
    
    11,031
    
    
    
    140
    
    
    
    
    
    
    
    11,171Operating income before unallocated costs
    
    
    45,891
    
    
    
    4,199
    
    
    
    
    
    
    
    50,090Unallocated cost savings
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,853
    )Operating income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    54,943Interest income, interest expense and other, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,495Income before income taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    63,438
 10




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##### Table of Contents



Accounting for Goodwill .
  Consolidated(In thousands)
    
    IPG
    
    
    iAS
    
    
    TotalBalance at January 1, 2005
    
    $
    130,869
    
    
    $
    83,241
    
    
    $
    214,110Reduction in goodwill recorded on XcelleNet acquisition
    
    
    
    
    
    
    (388
    )
    
    
    (388
    )Goodwill recorded on ISDD acquisition
    
    
    2,024
    
    
    
    
    
    
    
    2,024Goodwill recorded on Avaki acquisition
    
    
    2
    
    
    
    
    
    
    
    2Goodwill recorded for Extended Systems acquisition related expenses
    
    
    
    
    
    
    526
    
    
    
    526Reduction for utilization of acquired tax assets
    
    
    (5,655
    )
    
    
    (1,458
    )
    
    
    (7,113
    )Foreign currency translation adjustments
    
    
    (749
    )
    
    
    
    
    
    
    (749
    )Balance at September 30, 2005
    
    $
    126,491
    
    
    $
    81,921
    
    
    $
    208,412
  Gross
    
    
    
    
    
    
    
    
    
    
    Gross
    
    
    
    
    
    
    NetCarrying
    
    
    Accumulated
    
    
    Net
    
    
    Carrying
    
    
    Accumulated
    
    
    CarryingAmount
    
    
    Amortization
    
    
    Carrying Amount
    
    
    Amount
    
    
    Amortization
    
    
    Amount(In thousands)
    
    9/30/05
    
    
    9/30/05
    
    
    9/30/05
    
    
    12/31/04
    
    
    12/31/04
    
    
    12/31/04Purchased technology
    
    $
    111,421
    
    
    $
    (82,501
    )
    
    $
    28,920
    
    
    $
    103,850
    
    
    $
    (73,414
    )
    
    $
    30,436AvantGo tradenames
    
    
    3,100
    
    
    
    
    
    
    
    3,100
    
    
    
    3,100
    
    
    
    
    
    
    
    3,100XcelleNet tradenames
    
    
    4,000
    
    
    
    
    
    
    
    4,000
    
    
    
    4,000
    
    
    
    
    
    
    
    4,000Covenant not to compete
    
    
    2,800
    
    
    
    (2,644
    )
    
    
    156
    
    
    
    2,800
    
    
    
    (1,244
    )
    
    
    1,556Customer lists
    
    
    39,900
    
    
    
    (15,416
    )
    
    
    24,484
    
    
    
    39,900
    
    
    
    (11,784
    )
    
    
    28,116Totals
    
    $
    161,221
    
    
    $
    (100,561
    )
    
    $
    60,660
    
    
    $
    153,650
    
    
    $
    (86,442
    )
    
    $
    67,208
  2005
    
    $
    17,5502006
    
    
    10,2312007
    
    
    10,0642008
    
    
    10,0642009
    
    
    9,731
  Litigation.
 11




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##### Table of Contents



. Stock Repurchase Plan .
  11.
    
    Restructuring.
    Terminationpayments toLease cancellations
    
    
    employees and other(Dollars in millions)
    
    and commitments
    
    
    related costs
    
    
    TOTALAccrued liabilities at December 31, 2004
    
    $
    7.2
    
    
    $
    0.3
    
    
    $
    7.5Amounts paid
    
    
    0.6
    
    
    
    0.3
    
    
    
    0.9Accrued liabilities at March 31, 2005
    
    $
    6.6
    
    
    $
    
    
    
    $
    6.6Amounts paid
    
    
    0.6
    
    
    
    
    
    
    
    0.6Accrued liabilities at June 30, 2005
    
    $
    6.0
    
    
    $
    
    
    
    $
    6.0Amounts paid
    
    
    0.5
    
    
    
    
    
    
    
    0.5Accrued liabilities at September 30, 2005
    
    $
    5.5
    
    
    $
    
    
    
    $
    5.5
 12




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##### Table of Contents



Lease cancellations and(Dollars in millions)
    
    commitmentsAccrued liabilities at December 31, 2004
    
    $
    0.2Amounts paid
    
    
    Accrued liabilities at March 31, 2005
    
    $
    0.2Amounts paid
    
    
    0.1Amounts accrued
    
    
    0.3Accrued liabilities at June 30, 2005
    
    $
    0.4Amounts paid
    
    
    Accrued liabilities at September 30, 2005
    
    $
    0.4
   Lease cancellations(Dollars in millions)
    
    and commitments
    
    
    Other
    
    
    TOTALAccrued liabilities at December 31, 2004
    
    $
    12.7
    
    
    $
    0.2
    
    
    $
    12.9Amounts paid
    
    
    0.8
    
    
    
    
    
    
    
    0.8Accrued liabilities at March 31, 2005
    
    $
    11.9
    
    
    $
    0.2
    
    
    $
    12.1Amounts paid
    
    
    0.4
    
    
    
    
    
    
    
    0.4Accrued liabilities at June 30, 2005
    
    $
    11.5
    
    
    $
    0.2
    
    
    $
    11.7Amounts paid
    
    
    0.7
    
    
    
    
    
    
    
    0.7Accrued liabilities at September 30, 2005
    
    $
    10.8
    
    
    $
    0.2
    
    
    $
    11.0
   Lease cancellations and(Dollars in millions)
    
    commitmentsAccrued liabilities at December 31, 2004
    
    $
    7.3Amounts paid
    
    
    0.8Accrued liabilities at March 31, 2005
    
    $
    6.5Amounts paid
    
    
    0.6Accrued liabilities at June 30, 2005
    
    $
    5.9Amounts paid
    
    
    0.7Accrued liabilities at September 30, 2005
    
    $
    5.2
 13




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##### Table of Contents



Lease cancellations and(Dollars in millions)
    
    commitmentsAccrued liabilities at December 31, 2004
    
    $
    3.4Amounts paid
    
    
    0.3Accrued liabilities at March 31, 2005
    
    $
    3.1Amounts paid
    
    
    0.3Accrued liabilities at June 30, 2005
    
    $
    2.8Amounts paid
    
    
    0.4Accrued liabilities at September 30, 2005
    
    $
    2.4
 Convertible Subordinated Notes
     Subsequent Events
 14




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##### Table of Contents



ITEM 2: MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 Overview
 
    
    Our Business
   th
  
    
    Our Results
     15




---



##### Table of Contents




    
    Business Trends
       Critical Accounting Policies and Estimates
  
    
    Revenue Recognition
  16




---



##### Table of Contents



Residual Method Accounting
 Percentage of Completion Accounting
 Sublicense Revenues
 Service Revenues
 
    
    Impairment of Goodwill and Other Intangible Assets
   17




---



##### Table of Contents




    
    Allowance for Doubtful Accounts
  
    
    Capitalized Software
  
    
    Restructuring
  
    
    Income Taxes
   
    
    Stock-Based Compensation
  
    
    Contingencies and Liabilities
  18




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##### Table of Contents



Results of Operations
 Revenues
(Dollars in millions)
 Three
    
    
    Three
    
    
    
    
    
    
    Nine
    
    
    NineMonths
    
    
    Months
    
    
    
    
    
    
    Months
    
    
    MonthsEnded
    
    
    Ended
    
    
    Percent
    
    
    Ended
    
    
    Ended
    
    
    Percent9/30/05
    
    
    9/30/04
    
    
    Change
    
    
    9/30/05
    
    
    9/30/04
    
    
    ChangeLicense fees by segment:IPG
    
    $
    59.9
    
    
    $
    58.8
    
    
    
    2
    %
    
    $
    167.6
    
    
    $
    157.4
    
    
    
    6
    %IAS
    
    
    18.1
    
    
    
    16.8
    
    
    
    8
    %
    
    
    51.5
    
    
    
    47.5
    
    
    
    8
    %Eliminations
    
    
    (8.3
    )
    
    
    (5.2
    )
    
    
    60
    %
    
    
    (18.8
    )
    
    
    (16.2
    )
    
    
    16
    %Total license fees
    
    $
    69.7
    
    
    $
    70.4
    
    
    
    (1
    %)
    
    $
    200.3
    
    
    $
    188.7
    
    
    
    6
    %Percentage of total revenues
    
    
    35
    %
    
    
    35
    %
    
    
    
    
    
    
    34
    %
    
    
    33
    %Services by segment:IPG
    
    $
    120.6
    
    
    $
    121.4
    
    
    
    (1
    %)
    
    $
    367.9
    
    
    $
    367.4
    
    
    
    *IAS
    
    
    15.9
    
    
    
    13.7
    
    
    
    16
    %
    
    
    47.7
    
    
    
    33.7
    
    
    
    42
    %Eliminations
    
    
    (6.9
    )
    
    
    (6.8
    )
    
    
    1
    %
    
    
    (20.3
    )
    
    
    (19.9
    )
    
    
    2
    %Total Services
    
    $
    129.6
    
    
    $
    128.3
    
    
    
    1
    %
    
    $
    395.3
    
    
    $
    381.2
    
    
    
    4
    %Percentage of total revenues
    
    
    65
    %
    
    
    65
    %
    
    
    
    
    
    
    66
    %
    
    
    67
    %Total revenues
    
    $
    199.3
    
    
    $
    198.7
    
    
    
    *
    
    
    $
    595.6
    
    
    $
    569.9
    
    
    
    5
    %
 
 *
    
    Not meaningful    .
   19




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##### Table of Contents



Geographical Revenues
(Dollars in millions)
 Three
    
    
    Three
    
    
    
    
    
    
    Nine
    
    
    NineMonths
    
    
    Months
    
    
    
    
    
    
    Months
    
    
    MonthsEnded
    
    
    Ended
    
    
    Percent
    
    
    Ended
    
    
    Ended
    
    
    Percent9/30/05
    
    
    9/30/04
    
    
    Change
    
    
    9/30/05
    
    
    9/30/04
    
    
    ChangeNorth American
    
    $
    113.4
    
    
    $
    114.2
    
    
    
    (1
    %)
    
    $
    339.2
    
    
    $
    330.7
    
    
    
    3
    %Percentage of total revenues
    
    
    57
    %
    
    
    57
    %
    
    
    
    
    
    
    57
    %
    
    
    58
    %International: EMEA (Europe, Middle East and Africa)
    
    $
    53.7
    
    
    $
    55.5
    
    
    
    (3
    %)
    
    $
    167.3
    
    
    $
    156.0
    
    
    
    7
    %Percentage of total revenues
    
    
    27
    %
    
    
    28
    %
    
    
    
    
    
    
    28
    %
    
    
    27
    %Intercontinental (Asia Pacific and Latin America)
    
    $
    32.2
    
    
    $
    29.0
    
    
    
    11
    %
    
    $
    89.1
    
    
    $
    83.2
    
    
    
    7
    %Percentage of total revenues
    
    
    16
    %
    
    
    15
    %
    
    
    
    
    
    
    15
    %
    
    
    15
    %Total Outside North America
    
    $
    85.9
    
    
    $
    84.5
    
    
    
    2
    %
    
    $
    256.4
    
    
    $
    239.2
    
    
    
    7
    %Percentage of total revenues
    
    
    43
    %
    
    
    43
    %
    
    
    
    
    
    
    43
    %
    
    
    42
    %Total revenues
    
    $
    199.3
    
    
    $
    198.7
    
    
    
    *
    
    
    $
    595.6
    
    
    $
    569.9
    
    
    
    5
    %
 
 *
    
    Not meaningful     20




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##### Table of Contents



Costs and Expenses
(Dollars in millions)
 Three
    
    
    Three
    
    
    
    
    
    
    Nine
    
    
    NineMonths
    
    
    Months
    
    
    
    
    
    
    Months
    
    
    MonthsEnded
    
    
    Ended
    
    
    Percent
    
    
    Ended
    
    
    Ended
    
    
    Percent9/30/05
    
    
    9/30/04
    
    
    Change
    
    
    9/30/05
    
    
    9/30/04
    
    
    ChangeCost of license fees
    
    $
    11.0
    
    
    $
    15.6
    
    
    
    (29
    %)
    
    $
    37.0
    
    
    $
    44.7
    
    
    
    (17
    %)Percentage of license fees revenues
    
    
    16
    %
    
    
    22
    %
    
    
    
    
    
    
    18
    %
    
    
    24
    %Cost of services
    
    $
    38.0
    
    
    $
    39.8
    
    
    
    (5
    %)
    
    $
    118.2
    
    
    $
    122.9
    
    
    
    (4
    %)Percentage of services revenues
    
    
    29
    %
    
    
    31
    %
    
    
    
    
    
    
    30
    %
    
    
    32
    %Sales and marketing
    
    $
    59.7
    
    
    $
    59.3
    
    
    
    1
    %
    
    $
    184.6
    
    
    $
    179.7
    
    
    
    3
    %Percentage of total revenues
    
    
    30
    %
    
    
    30
    %
    
    
    
    
    
    
    31
    %
    
    
    32
    %Product development and engineering
    
    $
    34.9
    
    
    $
    29.1
    
    
    
    20
    %
    
    $
    102.8
    
    
    $
    88.9
    
    
    
    16
    %Percentage of total revenues
    
    
    18
    %
    
    
    15
    %
    
    
    
    
    
    
    17
    %
    
    
    16
    %General and administrative
    
    $
    23.9
    
    
    $
    24.0
    
    
    
    *
    
    
    $
    69.2
    
    
    $
    67.6
    
    
    
    2
    %Percentage of total revenues
    
    
    12
    %
    
    
    12
    %
    
    
    
    
    
    
    12
    %
    
    
    12
    %Amortization of other purchased intangibles
    
    $
    1.7
    
    
    $
    1.7
    
    
    
    *
    
    
    $
    5.0
    
    
    $
    3.5
    
    
    
    43
    %Percentage of total revenues
    
    
    1
    %
    
    
    1
    %
    
    
    
    
    
    
    1
    %
    
    
    1
    %Reversal of purchase accounting accrual
    
    
    
    
    
    $
    (2.7
    )
    
    
    *
    
    
    
    
    
    
    $
    (2.7
    )
    
    
    *Percentage of total revenues
    
    
    
    
    
    
    (1
    %)
    
    
    
    
    
    
    
    
    
    
    *Cost of restructure
    
    $
    0.0
    
    
    $
    10.5
    
    
    
    (100
    %)
    
    $
    0.3
    
    
    $
    10.4
    
    
    
    (97
    %)Percentage of total revenues
    
    
    *
    
    
    
    5
    %
    
    
    
    
    
    
    *
    
    
    
    2
    %
 
 *
    
    Not meaningful Cost of License Fees. .
 Cost of Services.
 Sales and Marketing.
 Product Development and Engineering.
 21




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##### Table of Contents



General and Administrative.
 Amortization of Other Purchased Intangibles.
 Reversal of Purchase Accounting Accrual.
 Cost/(Reversal) of Restructuring.
 2003 Restructuring Activities.
  Operating Income
(Dollars in millions)
 Three
    
    
    Three
    
    
    
    
    
    
    Nine
    
    
    NineMonths
    
    
    Months
    
    
    
    
    
    
    Months
    
    
    MonthsEnded
    
    
    Ended
    
    
    Percent
    
    Ended
    
    
    Ended
    
    
    Percent9/30/05
    
    
    9/30/04
    
    
    Change
    
    9/30/05
    
    
    9/30/04
    
    
    ChangeOperating income by segment:IPG
    
    $
    25.1
    
    
    $
    17.8
    
    
    
    41
    %
    
    $
    68.7
    
    
    $
    45.9
    
    
    
    50
    %IAS
    
    
    5.0
    
    
    
    1.3
    
    
    
    285
    %
    
    
    10.3
    
    
    
    4.2
    
    
    
    145
    %Unallocated costs
    
    
    0.1
    
    
    
    2.4
    
    
    
    (96
    %)
    
    
    (0.4
    )
    
    
    4.8
    
    
    
    *Total operating income:
    
    $
    30.2
    
    
    $
    21.5
    
    
    
    40
    %
    
    $
    78.6
    
    
    $
    54.9
    
    
    
    43
    %Percentage of total revenues
    
    
    15
    %
    
    
    11
    %
    
    
    
    
    
    
    13
    %
    
    
    10
    %
 
 *
    
    Not meaningful 22




---



##### Table of Contents



Other Income (Expense), Net
(Dollars in millions)
 Three
    
    
    Three
    
    
    
    
    
    
    Nine
    
    
    NineMonths
    
    
    Months
    
    
    
    
    
    
    Months
    
    
    MonthsEnded
    
    
    Ended
    
    
    Percent
    
    
    Ended
    
    
    Ended
    
    
    Percent9/30/05
    
    
    9/30/04
    
    
    Change
    
    
    9/30/05
    
    
    9/30/04
    
    
    ChangeInterest income
    
    $
    6.8
    
    
    $
    2.6
    
    
    
    162
    %
    
    $
    18.5
    
    
    $
    8.1
    
    
    
    128
    %Percentage of total revenues
    
    
    3
    %
    
    
    1
    %
    
    
    
    
    
    
    3
    %
    
    
    1
    %Interest expense and other, net
    
    $
    (3.0
    )
    
    $
    (0.0
    )
    
    
    *
    
    
    $
    (7.9
    )
    
    $
    0.4
    
    
    
    *Percentage of total revenues
    
    
    (1
    %)
    
    
    *
    
    
    
    
    
    
    
    (1
    %)
    
    
    *
 
 *
    
    Not meaningful   Provision for Income Taxes (Dollars in millions)
 Three
    
    
    Three
    
    
    
    
    
    
    Nine
    
    
    NineMonths
    
    
    Months
    
    
    
    
    
    
    Months
    
    
    MonthsEnded
    
    
    Ended
    
    
    Percent
    
    Ended
    
    
    Ended
    
    
    Percent9/30/05
    
    
    9/30/04
    
    
    Change
    
    9/30/05
    
    
    9/30/04
    
    
    ChangeProvision for income taxes
    
    $
    6.1
    
    
    $
    6.2
    
    
    
    (2
    %)
    
    $
    32.0
    
    
    $
    19.6
    
    
    
    63
    %
  23




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##### Table of Contents



Net Income Per Share
(Dollars and shares in millions, except per share data)
 Three
    
    
    Three
    
    
    
    
    
    
    Nine
    
    
    NineMonths
    
    
    Months
    
    
    
    
    
    
    Months
    
    
    MonthsEnded
    
    
    Ended
    
    
    Percent
    
    
    Ended
    
    
    Ended
    
    
    Percent9/30/05
    
    
    9/30/04
    
    
    Change
    
    
    9/30/05
    
    
    9/30/04
    
    
    ChangeNet income
    
    $
    28.0
    
    
    $
    17.8
    
    
    
    57
    %
    
    $
    57.2
    
    
    $
    43.8
    
    
    
    31
    %Percentage of total revenues
    
    
    14
    %
    
    
    9
    %
    
    
    
    
    
    
    10
    %
    
    
    8
    %Basic net income per share
    
    $
    0.31
    
    
    $
    0.19
    
    
    
    63
    %
    
    $
    0.63
    
    
    $
    0.46
    
    
    
    37
    %Diluted net income per share
    
    $
    0.30
    
    
    $
    0.19
    
    
    
    58
    %
    
    $
    0.62
    
    
    $
    0.44
    
    
    
    41
    %Shares used in computing basic net income per share
    
    
    89.6
    
    
    
    94.5
    
    
    
    (5
    %)
    
    
    90.4
    
    
    
    96.0
    
    
    
    (6
    %)Shares used in computing diluted net income per share
    
    
    92.4
    
    
    
    96.0
    
    
    
    (4
    %)
    
    
    93.0
    
    
    
    98.5
    
    
    
    (6
    %)
 
 *
    
    Not meaningful    Liquidity and Capital Resources
(Dollars in millions)
 Nine
    
    
    NineMonths
    
    
    MonthsEnded
    
    
    Ended
    
    
    Percent9/30/05
    
    
    9/30/04
    
    
    ChangeWorking capital
    
    $
    578.3
    
    
    $
    197.3
    
    
    
    193
    %Cash, cash equivalents and cash investments
    
    $
    918.8
    
    
    $
    445.5
    
    
    
    106
    %Net cash provided by operating activities
    
    $
    131.5
    
    
    $
    108.1
    
    
    
    22
    %Net cash used for investing activities
    
    $
    360.1
    
    
    $
    73.7
    
    
    
    389
    %Net cash provided by (used for) financing activities
    
    $
    344.8
    
    
    $
    (104.9
    )
    
    
    *
 
 *
    
    Not meaningful  24




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##### Table of Contents



Future Operating Results
  Significant variation in the timing and amount of our revenues may cause fluctuations in our
quarterly operating results and accurate estimation of our revenues is difficult.
  25




---



##### Table of Contents



Economic conditions in the U.S. and worldwide could adversely affect our revenues.
  If we fail to maintain or expand our relationships with strategic partners and indirect
distribution channels our license revenues could decline.
   Industry consolidation and other competitive pressures could affect prices or demand for our
products and services, and our business may be adversely affected.
   26




---



##### Table of Contents



The ability to rapidly develop and bring to market advanced products and services that are
successful is crucial to maintaining our competitive position.
  If our existing customers cancel or fail to renew their technical support agreements, or if
customers do not license new or additional products on terms favorable to us, our technical support
revenues could be adversely affected.
  Unanticipated delays or accelerations in our sales cycles could result in significant fluctuations
in our quarterly operating results.
  We may encounter difficulties completing or integrating our acquisitions and strategic
relationships and may incur acquisition-related charges that could adversely affect our operating
results.
    27




---



##### Table of Contents



Restructuring activities and reorganizations in our sales model or business units may not succeed
in increasing revenues and operating results.
   Our results of operations may depend on the compatibility of our products with other software
developed by third parties.
  We are subject to risks arising from our international operations.
   We face exposure to adverse movements in foreign currency exchange rates.
  28




---



##### Table of Contents



Growing market acceptance of open source software could cause a decline in our revenues and
operating margins.
  If we are unable to protect our intellectual property, or if we infringe or are alleged to infringe
a third partys intellectual property, our operating results may be adversely affected.
    Our key personnel are critical to our business, and we cannot assure that they will remain with us.
  29




---



##### Table of Contents



Changes in accounting and legal standards could adversely affect our future operating results.
    The unfavorable outcome of litigation and other claims against us could have a material adverse
impact on our financial condition and results of operations.
  Our operations and financial results could be severely harmed by certain natural disasters.
  Provisions of our corporate documents have anti-takeover effects that could prevent a change in
control.
  30




---



##### Table of Contents



ITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURES OF MARKET RISK
         
 ITEM 4: CONTROLS AND PROCEDURES
     31




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##### Table of Contents



PART II: OTHER INFORMATION
 
 ITEM 1: LEGAL PROCEEDINGS
  
 ITEM 2: UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
   ISSUER PURCHASES OF EQUITY SECURITIES
 (d) Maximum(c) Total
    
    
    Number (orNumber of
    
    
    ApproximateShares (or
    
    
    Dollar Value)Units)
    
    
    of Shares (or(a) Total
    
    
    
    
    
    
    Purchased as
    
    
    Units) that MayNumber of
    
    
    (b) Average
    
    
    Part of Publicly
    
    
    Yet BeShares (or
    
    
    Price Paid per
    
    
    Announced
    
    
    PurchasedPeriod
    
    Units)
    
    
    Share (or Unit)
    
    
    Plans or
    
    
    Under the Plans(2005)
    
    Purchased (#)
    
    
    ($)
    
    
    Programs (#)
    
    
    or Programs ($)July 1 31
    
    
    0
    
    
    
    3⁄4
    
    
    
    3⁄4
    
    
    
    3⁄4August 1  31
    
    
    442,600
    
    
    $
    21.64
    
    
    
    442,600
    
    
    $
    84,134,000September 1  30
    
    
    0
    
    
    
    3⁄4
    
    
    
    3⁄4
    
    
    
    3⁄4Total
    
    
    442,600
    
    
    $
    21.64
    
    
    
    442,600
    
    
    $
    84,134,000
 
 ITEM 6: EXHIBITS
   32




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##### Table of Contents



SIGNATURES
  November 8, 2005
    
    SYBASE, INC.By
    
    /s/ PIETER VAN DER VORSTPieter Van der VorstSenior Vice President and Chief Financial Officer(Principal Financial Officer)By
    
    /s/ JEFFREY G. ROSSJeffrey G. RossVice President and Corporate Controller(Principal Accounting Officer)
 33




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##### Table of Contents



EXHIBIT INDEX
 Exhibit No.
    
    Description12
    
    Ratio of Earnings to Fixed Charges31.1
    
    Certification of Chief Executive Officer pursuant to
Securities Exchange Act Rule 13a-14 or 15d-14, as adopted
pursuant to Section 302(a) of the Sarbanes-Oxley Act of
200231.2
    
    Certification of Chief Financial Officer pursuant to
Securities Exchange Act Rule 13a-14 or 15d-14, as adopted
pursuant to Section 302(a) of the Sarbanes-Oxley Act of
200232
    
    Certification of Chief Executive Officer and Chief
Financial Officer pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002