##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 FORM 10-Q
 (Mark One)
 þ
    
    QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2008
 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
  Large accelerated filer
þ   
    Accelerated filer
o
    Non-accelerated filer o
    Smaller reporting company o(Do not check if a smaller reporting company)
 o þ




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##### 



PageForward-Looking Statements
    
    2Part I: Financial InformationItem 1: Financial Statements (Unaudited)Condensed Consolidated Balance Sheets as of June 30, 2008 and December 31, 2007
    
    3Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2008 and 2007
    
    4Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2008 and 2007
    
    5Notes to Condensed Consolidated Financial Statements
    
    6Item 2: Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    17Item 3: Quantitative and Qualitative Disclosures of Market Risk
    
    29Item 4: Controls and Procedures
    
    29Part II: Other InformationItem 1: Legal Proceedings
    
    30Item 1 (A) : Risk Factors
    
    30Item 2: Unregistered Sales of Equity Securities and Use of Proceeds
    
    39Item 4: Submission of Matters to a Vote of Security Holders
    
    40Item 5: Other Information
    
    40Item 6: Exhibits
    
    40Signatures
    
    41Exhibit Index
    
    42EXHIBIT 12EXHIBIT 31.1EXHBIIT 31.2EXHIBIT 32
  1




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www.sec.gov
 www.sybase.com
  2




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##### Table of Contents



PART I: FINANCIAL INFORMATION
 
 ITEM 1: FINANCIAL STATEMENTS
  
  June 30,2008
    
    
    December 31,(In thousands, except share and per share data)
    
    (Unaudited)
    
    
    2007Current assets:Cash and cash equivalents
    
    $
    575,148
    
    
    $
    604,808Short-term cash investments
    
    
    4,815
    
    
    
    93,462Total cash, cash equivalents and short-term cash investments
    
    
    579,963
    
    
    
    698,270Restricted cash
    
    
    3,733
    
    
    
    3,424Accounts receivable, net
    
    
    234,447
    
    
    
    245,267Deferred income taxes
    
    
    42,088
    
    
    
    37,979Prepaid income taxes
    
    
    
    
    
    
    17,604Prepaid expenses and other current assets
    
    
    32,145
    
    
    
    25,182Total current assets
    
    
    892,376
    
    
    
    1,027,726Long-term cash investments
    
    
    22,674
    
    
    
    36,637Property, equipment and improvements, net
    
    
    66,186
    
    
    
    64,841Deferred income taxes
    
    
    5,475
    
    
    
    10,038Capitalized software, net
    
    
    81,496
    
    
    
    74,278Goodwill
    
    
    534,110
    
    
    
    533,339Other purchased intangibles, net
    
    
    119,606
    
    
    
    130,608Other assets
    
    
    35,648
    
    
    
    36,016Total assets
    
    $
    1,757,571
    
    
    $
    1,913,483Current liabilities:Accounts payable
    
    $
    33,947
    
    
    $
    30,290Accrued compensation and related expenses
    
    
    58,338
    
    
    
    63,852Accrued income taxes
    
    
    7,284
    
    
    
    273Other accrued liabilities
    
    
    118,654
    
    
    
    124,849Deferred revenue
    
    
    225,944
    
    
    
    203,734Total current liabilities
    
    
    444,167
    
    
    
    422,998Other liabilities
    
    
    46,471
    
    
    
    44,669Deferred income taxes
    
    
    13,920
    
    
    
    14,115Long-term tax liability
    
    
    30,807
    
    
    
    30,807Long-term deferred revenue
    
    
    4,716
    
    
    
    4,937Minority interest
    
    
    5,119
    
    
    
    5,147Convertible subordinated notes
    
    
    460,000
    
    
    
    460,000Commitments 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 78,931,870 outstanding (2007-105,337,362 shares issued and 87,210,339 outstanding)
    
    
    105
    
    
    
    105Additional paid-in capital
    
    
    1,031,132
    
    
    
    1,019,930Accumulated earnings
    
    
    285,346
    
    
    
    241,329Accumulated other comprehensive income
    
    
    88,199
    
    
    
    66,954Cost of 26,405,492 shares of treasury stock (2007-18,127,023 shares)
    
    
    (652,411
    )
    
    
    (397,508
    )Total stockholders equity
    
    
    752,371
    
    
    
    930,810Total liabilities and stockholders equity
    
    $
    1,757,571
    
    
    $
    1,913,483
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Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,(Dollars in thousands, except per share data)
    
    2008
    
    
    2007
    
    
    2008
    
    
    2007Revenues:License fees
    
    $
    90,515
    
    
    $
    77,435
    
    
    $
    168,639
    
    
    $
    146,800Services
    
    
    146,594
    
    
    
    135,230
    
    
    
    285,991
    
    
    
    264,881Messaging
    
    
    45,604
    
    
    
    32,358
    
    
    
    88,231
    
    
    
    63,379Total revenues
    
    
    282,713
    
    
    
    245,023
    
    
    
    542,861
    
    
    
    475,060Costs and expenses:Cost of license fees
    
    
    15,129
    
    
    
    13,083
    
    
    
    29,666
    
    
    
    25,836Cost of services
    
    
    41,080
    
    
    
    39,539
    
    
    
    81,960
    
    
    
    78,281Cost of messaging
    
    
    27,403
    
    
    
    18,906
    
    
    
    52,511
    
    
    
    37,795Sales and marketing
    
    
    74,272
    
    
    
    64,916
    
    
    
    142,565
    
    
    
    129,491Product development and engineering
    
    
    36,046
    
    
    
    36,920
    
    
    
    71,608
    
    
    
    75,673General and administrative
    
    
    34,077
    
    
    
    32,680
    
    
    
    70,138
    
    
    
    64,176Amortization of other purchased intangibles
    
    
    3,573
    
    
    
    3,436
    
    
    
    7,089
    
    
    
    6,846Cost (Reversal) of restructure
    
    
    (8
    )
    
    
    (51
    )
    
    
    19
    
    
    
    (47
    )Total costs and expenses
    
    
    231,572
    
    
    
    209,429
    
    
    
    455,556
    
    
    
    418,051Operating income
    
    
    51,141
    
    
    
    35,594
    
    
    
    87,305
    
    
    
    57,009Interest income
    
    
    6,165
    
    
    
    8,526
    
    
    
    14,077
    
    
    
    15,909Interest expense and other, net
    
    
    (7,041
    )
    
    
    (3,384
    )
    
    
    (11,438
    )
    
    
    (5,763
    )Minority interest
    
    
    37
    
    
    
    
    
    
    
    28
    
    
    
    (20
    )Income before income taxes
    
    
    50,302
    
    
    
    40,736
    
    
    
    89,972
    
    
    
    67,135Provision for income taxes
    
    
    17,948
    
    
    
    14,708
    
    
    
    33,427
    
    
    
    25,959Net income
    
    $
    32,354
    
    
    $
    26,028
    
    
    $
    56,545
    
    
    $
    41,176Basic net income per share
    
    $
    0.40
    
    
    $
    0.29
    
    
    $
    0.67
    
    
    $
    0.45Shares used in computing basic net income per share
    
    
    81,688
    
    
    
    90,891
    
    
    
    84,680
    
    
    
    91,020Diluted net income per share
    
    $
    0.37
    
    
    $
    0.28
    
    
    $
    0.62
    
    
    $
    0.44Shares used in computing diluted net income per share
    
    
    88,033
    
    
    
    92,972
    
    
    
    90,977
    
    
    
    93,294
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Six Months EndedJune 30,(Dollars in thousands)
    
    2008
    
    
    2007Cash flows from operating activities:Net income
    
    $
    56,545
    
    
    $
    41,176Adjustments to reconcile net income to net cash provided by operating activities:Depreciation and amortization
    
    
    48,859
    
    
    
    43,238Minority interest in income of subsidiaries
    
    
    (28
    )
    
    
    20(Gain) Loss on disposal of assets
    
    
    (18
    )
    
    
    45Impairment of investment in auction rate securities
    
    
    6,285
    
    
    
    Deferred income taxes
    
    
    259
    
    
    
    (2,262
    )Stock-based
compensation  restricted stock
    
    
    4,835
    
    
    
    4,185Stock-based
compensation  all other
    
    
    6,258
    
    
    
    7,048Excess tax benefit from stock-based compensation plans
    
    
    (6,233
    )
    
    
    (2,855
    )Amortization of note issuance costs
    
    
    985
    
    
    
    985Changes in assets and liabilities:Accounts receivable
    
    
    6,315
    
    
    
    22,522Prepaid income taxes
    
    
    17,604
    
    
    
    Other current assets
    
    
    (6,960
    )
    
    
    (5,258
    )Other assets  operating
    
    
    (696
    )
    
    
    2,572Accounts payable
    
    
    3,657
    
    
    
    (669
    )Accrued compensation and related expenses
    
    
    (5,514
    )
    
    
    (9,360
    )Accrued income taxes
    
    
    6,429
    
    
    
    8,510Other accrued liabilities
    
    
    (5,704
    )
    
    
    (7,786
    )Deferred revenues
    
    
    21,989
    
    
    
    21,902Other liabilities
    
    
    2,385
    
    
    
    (552
    )Net cash provided by operating activities
    
    
    157,252
    
    
    
    123,461Cash flows from investing activities:Increase in restricted cash
    
    
    (309
    )
    
    
    (10
    )Purchases of available-for-sale cash investments
    
    
    (14,767
    )
    
    
    (165,136
    )Maturities of available-for-sale cash investments
    
    
    32,027
    
    
    
    99,487Sales of available-for-sale cash investments
    
    
    80,982
    
    
    
    81,984Business combinations, net of cash acquired
    
    
    
    
    
    
    (1,531
    )Purchases of property, equipment and improvements
    
    
    (16,123
    )
    
    
    (11,225
    )Proceeds from sale of property, equipment, and improvements
    
    
    7
    
    
    
    40Capitalized software development costs
    
    
    (27,219
    )
    
    
    (17,228
    )(Increase) Decrease in other assets  investing
    
    
    75
    
    
    
    (61
    )Net cash provided by (used for) investing activities
    
    
    54,673
    
    
    
    (13,680
    )Cash flows from financing activities:Repayments of long-term obligations
    
    
    (378
    )
    
    
    (33
    )Payments on capital lease
    
    
    (220
    )
    
    
    (879
    )Net proceeds from the issuance of common stock and reissuance of treasury stock
    
    
    33,279
    
    
    
    19,221Purchases of treasury stock
    
    
    (300,601
    )
    
    
    (58,600
    )Excess tax benefit from stock-based compensation plans
    
    
    6,233
    
    
    
    2,855Net cash used for financing activities
    
    
    (261,687
    )
    
    
    (37,436
    )Effect of exchange rate changes on cash
    
    
    20,102
    
    
    
    9,155Net increase (decrease) in cash and cash equivalents
    
    
    (29,660
    )
    
    
    81,500Cash and cash equivalents, beginning of year
    
    
    604,808
    
    
    
    355,303Cash and cash equivalents, end of period
    
    $
    575,148
    
    
    $
    436,803
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Notes to Condensed Consolidated Financial Statements
 Basis of Presentation .
   
    
    Level 1  Quoted prices in active markets for identical assets or liabilities.
    
    Level 2  Inputs other than Level 1 that are observable, either
directly or indirectly, 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 assets or liabilities.
    
    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.
   Stock-Based Compensation .
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Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,(In thousands, except per share data)
    
    2008
    
    
    2007
    
    
    2008
    
    
    2007Cost of services
    
    $
    306
    
    
    $
    376
    
    
    $
    665
    
    
    $
    715Cost of messaging
    
    
    127
    
    
    
    124
    
    
    
    218
    
    
    
    310Sales and marketing
    
    
    1,360
    
    
    
    1,206
    
    
    
    2,716
    
    
    
    2,472Product development and engineering
    
    
    733
    
    
    
    656
    
    
    
    1,397
    
    
    
    1,342General and administrative
    
    
    2,856
    
    
    
    3,121
    
    
    
    6,097
    
    
    
    6,394Stock-based compensation expense included in total costs and expenses
    
    
    5,382
    
    
    
    5,483
    
    
    
    11,093
    
    
    
    11,233Tax benefit related to stock-based compensation expense
    
    
    (1,480
    )
    
    
    (1,572
    )
    
    
    (3,105
    )
    
    
    (3,037
    )Stock-based compensation expense included in net income
    
    $
    3,902
    
    
    $
    3,911
    
    
    $
    7,988
    
    
    $
    8,196Reduction of net income per share:Basic
    
    $
    0.05
    
    
    $
    0.04
    
    
    $
    0.09
    
    
    $
    0.09Diluted
    
    $
    0.04
    
    
    $
    0.04
    
    
    $
    0.09
    
    
    $
    0.09
  Net income per share .
 Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,(In thousands, except per share data)
    
    2008
    
    
    2007
    
    
    2008
    
    
    2007Net income
    
    $
    32,354
    
    
    $
    26,028
    
    
    $
    56,545
    
    
    $
    41,176Basic net income per share
    
    $
    0.40
    
    
    $
    0.29
    
    
    $
    0.67
    
    
    $
    0.45Shares used in computing basic net income per share
    
    
    81,688
    
    
    
    90,891
    
    
    
    84,680
    
    
    
    91,020Diluted net income per share
    
    $
    0.37
    
    
    $
    0.28
    
    
    $
    0.62
    
    
    $
    0.44Shares used in computing basic net income per share
    
    
    81,688
    
    
    
    90,891
    
    
    
    84,680
    
    
    
    91,020Dilutive effect of stock options, restricted stock and stock appreciation rights
    
    
    2,295
    
    
    
    2,081
    
    
    
    2,247
    
    
    
    2,274Dilutive effect of convertible subordinated debt
    
    
    4,050
    
    
    
    
    
    
    
    4,050
    
    
    
    Shares used in computing diluted net income per share
    
    
    88,033
    
    
    
    92,972
    
    
    
    90,977
    
    
    
    93,294
  Comprehensive Income
 Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,(In thousands)
    
    2008
    
    
    2007
    
    
    2008
    
    
    2007Net income
    
    $
    32,354
    
    
    $
    26,028
    
    
    $
    56,545
    
    
    $
    41,176Foreign currency translation gains
    
    
    494
    
    
    
    9,372
    
    
    
    20,375
    
    
    
    12,449Change in unrealized gains/(losses) on marketable securities
    
    
    1,046
    
    
    
    (26
    )
    
    
    870
    
    
    
    118Comprehensive income
    
    $
    33,894
    
    
    $
    35,374
    
    
    $
    77,790
    
    
    $
    53,743
 7




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Segment Information
    8




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##### Table of Contents



Consolidated(In thousands)
    
    IPG
    
    
    iAS
    
    
    SY365
    
    
    Elimination
    
    
    TotalRevenues:License feesInfrastructure
    
    $
    64,228
    
    
    $
    53
    
    
    $
    54
    
    
    
    
    
    
    $
    64,335Mobile and Embedded
    
    
    7,920
    
    
    
    18,260
    
    
    
    
    
    
    
    
    
    
    
    26,180Subtotal license fees
    
    
    72,148
    
    
    
    18,313
    
    
    
    54
    
    
    
    
    
    
    
    90,515Intersegment license revenues
    
    
    103
    
    
    
    6,600
    
    
    
    
    
    
    $
    (6,703
    )
    
    
    Total license fees
    
    
    72,251
    
    
    
    24,913
    
    
    
    54
    
    
    
    (6,703
    )
    
    
    90,515ServicesDirect service revenue
    
    
    135,469
    
    
    
    10,619
    
    
    
    506
    
    
    
    
    
    
    
    146,594Intersegment service revenues
    
    
    58
    
    
    
    8,600
    
    
    
    
    
    
    
    (8,658
    )
    
    
    Total services
    
    
    135,527
    
    
    
    19,219
    
    
    
    506
    
    
    
    (8,658
    )
    
    
    146,594MessagingDirect messaging revenue
    
    
    6
    
    
    
    
    
    
    
    45,598
    
    
    
    
    
    
    
    45,604Intersegment messaging revenues
    
    
    
    
    
    
    
    
    
    
    12
    
    
    
    (12
    )
    
    
    Total messaging
    
    
    6
    
    
    
    
    
    
    
    45,610
    
    
    
    (12
    )
    
    
    45,604Total revenues
    
    
    207,784
    
    
    
    44,132
    
    
    
    46,170
    
    
    
    (15,373
    )
    
    
    282,713Total allocated costs and expenses before amortization of other
purchased intangibles, purchased technology, cost of restructure
and unallocated costs
    
    
    158,429
    
    
    
    34,634
    
    
    
    41,346
    
    
    
    (15,373
    )
    
    
    219,036Operating income before amortization of other purchased
intangibles, purchased technology, cost of restructure and
unallocated costs
    
    
    49,355
    
    
    
    9,498
    
    
    
    4,824
    
    
    
    
    
    
    
    63,677Amortization of other purchased intangibles
    
    
    527
    
    
    
    1,023
    
    
    
    2,023
    
    
    
    
    
    
    
    3,573Amortization of purchased technology
    
    
    403
    
    
    
    2,159
    
    
    
    1,027
    
    
    
    
    
    
    
    3,589Operating income before cost of restructure and unallocated costs
    
    
    48,425
    
    
    
    6,316
    
    
    
    1,774
    
    
    
    
    
    
    
    56,515Cost of
restructure - 2008 Activity
    
    
    33
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    33Operating income before unallocated costs
    
    
    48,392
    
    
    
    6,316
    
    
    
    1,774
    
    
    
    
    
    
    
    56,482Unallocated costs
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,341Operating income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    51,141Interest income, interest expense and other, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (876
    )Minority interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    37Income before income taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    50,302
  Consolidated(In thousands)
    
    IPG
    
    
    iAS
    
    
    SY365
    
    
    Elimination
    
    
    TotalRevenues:License feesInfrastructure
    
    $
    52,572
    
    
    $
    346
    
    
    $
    3
    
    
    
    
    
    
    $
    52,921Mobile and Embedded
    
    
    7,789
    
    
    
    16,725
    
    
    
    
    
    
    
    
    
    
    
    24,514Subtotal license fees
    
    
    60,361
    
    
    
    17,071
    
    
    
    3
    
    
    
    
    
    
    
    77,435Intersegment license revenues
    
    
    207
    
    
    
    6,495
    
    
    
    
    
    
    $
    (6,702
    )
    
    
    Total license fees
    
    
    60,568
    
    
    
    23,566
    
    
    
    3
    
    
    
    (6,702
    )
    
    
    77,435ServicesDirect service revenue
    
    
    123,446
    
    
    
    10,711
    
    
    
    1,073
    
    
    
    
    
    
    
    135,230Intersegment service revenues
    
    
    147
    
    
    
    7,275
    
    
    
    
    
    
    
    (7,422
    )
    
    
    Total services
    
    
    123,593
    
    
    
    17,986
    
    
    
    1,073
    
    
    
    (7,422
    )
    
    
    135,230Messaging
    
    
    
    
    
    
    
    
    
    
    32,358
    
    
    
    
    
    
    
    32,358Total revenues
    
    
    184,161
    
    
    
    41,552
    
    
    
    33,434
    
    
    
    (14,124
    )
    
    
    245,023Total allocated costs and expenses before amortization of other
purchased intangibles, purchased technology, cost of restructure and
unallocated costs
    
    
    146,545
    
    
    
    32,652
    
    
    
    31,468
    
    
    
    (14,124
    )
    
    
    196,541Operating income before amortization of other purchased intangibles,
purchased technology, cost of restructure and unallocated costs
    
    
    37,616
    
    
    
    8,900
    
    
    
    1,966
    
    
    
    
    
    
    
    48,482Amortization of other purchased intangibles
    
    
    527
    
    
    
    1,046
    
    
    
    1,863
    
    
    
    
    
    
    
    3,436Amortization of purchased technology
    
    
    403
    
    
    
    2,003
    
    
    
    931
    
    
    
    
    
    
    
    3,337Operating income (loss) before cost of restructure and unallocated costs
    
    
    36,686
    
    
    
    5,851
    
    
    
    (828
    )
    
    
    
    
    
    
    41,709Reversal of
restructure - 2007 Activity
    
    
    (51
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (51
    )Operating income (loss) before unallocated costs
    
    
    36,737
    
    
    
    5,851
    
    
    
    (828
    )
    
    
    
    
    
    
    41,760Unallocated costs
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,166Operating income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    35,594Interest income, interest expense and other, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,142Income before income taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    40,736
 9




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##### Table of Contents



Consolidated(In thousands)
    
    IPG
    
    
    iAS
    
    
    SY365
    
    
    Elimination
    
    
    TotalRevenues:License feesInfrastructure
    
    $
    120,606
    
    
    $
    111
    
    
    $
    67
    
    
    
    
    
    
    $
    120,784Mobile and Embedded
    
    
    14,158
    
    
    
    33,697
    
    
    
    
    
    
    
    
    
    
    
    47,855Subtotal license fees
    
    
    134,764
    
    
    
    33,808
    
    
    
    67
    
    
    
    
    
    
    
    168,639Intersegment license revenues
    
    
    165
    
    
    
    11,799
    
    
    
    
    
    
    $
    (11,964
    )
    
    
    Total license fees
    
    
    134,929
    
    
    
    45,607
    
    
    
    67
    
    
    
    (11,964
    )
    
    
    168,639ServicesDirect service revenue
    
    
    263,602
    
    
    
    21,312
    
    
    
    1,077
    
    
    
    
    
    
    
    285,991Intersegment service revenues
    
    
    64
    
    
    
    16,725
    
    
    
    
    
    
    
    (16,789
    )
    
    
    Total services
    
    
    263,666
    
    
    
    38,037
    
    
    
    1,077
    
    
    
    (16,789
    )
    
    
    285,991MessagingDirect messaging revenue
    
    
    14
    
    
    
    
    
    
    
    88,217
    
    
    
    
    
    
    
    88,231Intersegment messaging revenues
    
    
    
    
    
    
    
    
    
    
    12
    
    
    
    (12
    )
    
    
    Total messaging
    
    
    14
    
    
    
    
    
    
    
    88,229
    
    
    
    (12
    )
    
    
    88,231Total revenues
    
    
    398,609
    
    
    
    83,644
    
    
    
    89,373
    
    
    
    (28,765
    )
    
    
    542,861Total allocated costs and expenses before amortization of other
purchased intangibles, purchased technology, cost of restructure
and unallocated costs
    
    
    309,293
    
    
    
    69,281
    
    
    
    80,410
    
    
    
    (28,765
    )
    
    
    430,219Operating income before amortization of other purchased
intangibles, purchased technology, cost of restructure and
unallocated costs
    
    
    89,316
    
    
    
    14,363
    
    
    
    8,963
    
    
    
    
    
    
    
    112,642Amortization of other purchased intangibles
    
    
    1,054
    
    
    
    2,046
    
    
    
    3,989
    
    
    
    
    
    
    
    7,089Amortization of purchased technology
    
    
    806
    
    
    
    4,310
    
    
    
    2,020
    
    
    
    
    
    
    
    7,136Operating income before cost of restructure and unallocated costs
    
    
    87,456
    
    
    
    8,007
    
    
    
    2,954
    
    
    
    
    
    
    
    98,417Cost of
restructure - 2008 Activity
    
    
    60
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    60Operating income before unallocated costs
    
    
    87,396
    
    
    
    8,007
    
    
    
    2,954
    
    
    
    
    
    
    
    98,357Unallocated costs
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    11,052Operating income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    87,305Interest income, interest expense and other, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,639Minority interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    28Income before income taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    89,972
  Consolidated(In thousands)
    
    IPG
    
    
    iAS
    
    
    SY365
    
    
    Elimination
    
    
    TotalRevenues:License feesInfrastructure
    
    $
    100,887
    
    
    $
    367
    
    
    $
    17
    
    
    
    
    
    
    $
    101,271Mobile and Embedded
    
    
    14,428
    
    
    
    31,101
    
    
    
    
    
    
    
    
    
    
    
    45,529Subtotal license fees
    
    
    115,315
    
    
    
    31,468
    
    
    
    17
    
    
    
    
    
    
    
    146,800Intersegment license revenues
    
    
    239
    
    
    
    12,031
    
    
    
    
    
    
    $
    (12,270
    )
    
    
    Total license fees
    
    
    115,554
    
    
    
    43,499
    
    
    
    17
    
    
    
    (12,270
    )
    
    
    146,800ServicesDirect service revenue
    
    
    241,829
    
    
    
    20,630
    
    
    
    2,422
    
    
    
    
    
    
    
    264,881Intersegment service revenues
    
    
    174
    
    
    
    14,058
    
    
    
    
    
    
    
    (14,232
    )
    
    
    Total services
    
    
    242,003
    
    
    
    34,688
    
    
    
    2,422
    
    
    
    (14,232
    )
    
    
    264,881Messaging
    
    
    
    
    
    
    
    
    
    
    63,379
    
    
    
    
    
    
    
    63,379Total revenues
    
    
    357,557
    
    
    
    78,187
    
    
    
    65,818
    
    
    
    (26,502
    )
    
    
    475,060Total allocated costs and expenses before amortization of other
purchased intangibles, purchased technology, cost of restructure and
unallocated costs
    
    
    290,663
    
    
    
    65,192
    
    
    
    63,015
    
    
    
    (26,502
    )
    
    
    392,368Operating income before amortization of other purchased intangibles,
purchased technology, cost of restructure and unallocated costs
    
    
    66,894
    
    
    
    12,995
    
    
    
    2,803
    
    
    
    
    
    
    
    82,692Amortization of other purchased intangibles
    
    
    1,054
    
    
    
    2,092
    
    
    
    3,700
    
    
    
    
    
    
    
    6,846Amortization of purchased technology
    
    
    805
    
    
    
    4,006
    
    
    
    1,847
    
    
    
    
    
    
    
    6,658Operating income (loss) before cost of restructure and unallocated costs
    
    
    65,035
    
    
    
    6,897
    
    
    
    (2,744
    )
    
    
    
    
    
    
    69,188Reversal of restructure - 2007 Activity
    
    
    (47
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (47
    )Operating income (loss) before unallocated costs
    
    
    65,082
    
    
    
    6,897
    
    
    
    (2,744
    )
    
    
    
    
    
    
    69,235Unallocated costs
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    12,226Operating income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    57,009Interest income, interest expense and other, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10,146Minority interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (20
    )Income before income taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    67,135
 10




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##### Table of Contents



Goodwill and Intangible Assets .
  Consolidated(In thousands)
    
    IPG
    
    
    iAS
    
    
    SY365
    
    
    TotalBalance at January 1, 2008
    
    $
    92,192
    
    
    $
    110,392
    
    
    $
    330,755
    
    
    $
    533,339Reduction in goodwill recorded on Mobile 365 acquisition
    
    
    
    
    
    
    
    
    
    
    (155
    )
    
    
    (155
    )Foreign currency translation adjustments & other
    
    
    688
    
    
    
    238
    
    
    
    
    
    
    
    926Balance at June 30, 2008
    
    $
    92,880
    
    
    $
    110,630
    
    
    $
    330,600
    
    
    $
    534,110
  June 30, 2008
    
    
    December 31, 2007Gross
    
    
    
    
    
    
    Net
    
    
    Gross
    
    
    
    
    
    
    NetCarrying
    
    
    Accumulated
    
    
    Carrying
    
    
    Carrying
    
    
    Accumulated
    
    
    Carrying(In thousands)
    
    Amount
    
    
    Amortization
    
    
    Amount
    
    
    Amount
    
    
    Amortization
    
    
    AmountPurchased technology
    
    $
    170,051
    
    
    $
    (117,493
    )
    
    $
    52,558
    
    
    $
    168,436
    
    
    $
    (108,997
    )
    
    $
    59,439AvantGo tradenames
    
    
    3,100
    
    
    
    
    
    
    
    3,100
    
    
    
    3,100
    
    
    
    
    
    
    
    3,100XcelleNet tradenames
    
    
    4,000
    
    
    
    
    
    
    
    4,000
    
    
    
    4,000
    
    
    
    
    
    
    
    4,000Covenant not to compete
    
    
    319
    
    
    
    (218
    )
    
    
    101
    
    
    
    319
    
    
    
    (165
    )
    
    
    154Customer lists
    
    
    104,426
    
    
    
    (44,579
    )
    
    
    59,847
    
    
    
    102,064
    
    
    
    (38,149
    )
    
    
    63,915Totals
    
    $
    281,896
    
    
    $
    (162,290
    )
    
    $
    119,606
    
    
    $
    277,919
    
    
    $
    (147,311
    )
    
    $
    130,608
  2008
    
    $
    27,8272009
    
    
    26,8122010
    
    
    24,3772011
    
    
    18,8672012
    
    
    11,691
  Litigation
  11




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##### Table of Contents



. Stock Repurchase Plan .
 12




---



##### Table of Contents



Restructuring
   
 2004
    
    
    2002
    
    
    2001
    
    
    Mobile 365Accrued liabilities at December 31, 2007
    
    $
    3,069
    
    
    $
    5,972
    
    
    $
    1,313
    
    
    $
    837Amounts paid
    
    
    (563
    )
    
    
    (1,253
    )
    
    
    (220
    )
    
    
    (542
    )Amounts added/(reversed)
    
    
    61
    
    
    
    (41
    )
    
    
    
    
    
    
    (106
    )Accrued liabilities at June 30, 2008
    
    $
    2,567
    
    
    $
    4,678
    
    
    $
    1,093
    
    
    $
    189
 Convertible Subordinated Notes
     Income Taxes
  13




---



##### Table of Contents



12. Recent Accounting Pronouncements
 FSP APB 14-1, Accounting for Convertible Debt Instruments That May Be Settled in Cash upon
Conversion
  SFAS 141(R), Business Combinations
  FSP FAS 142-3, Determination of the Useful Life of Intangible Assets
  FSP FAS 157-2, Effective Date of FASB Statement No. 157
  14




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##### Table of Contents



SFAS 160, NonControlling Interests in Consolidated Financial Statements
 NonControlling Interests in Consolidated Financial
Statements
 SFAS
161, Disclosures about Derivative Instruments and Hedging
Activities
 Disclosures about Derivative Instruments and Hedging
Activities.
 Fair Value Measurements
  Level 1
    
    
    Level 2
    
    
    Level 3
    
    
    TotalMoney market funds
    
    $
    306,892
    
    
    
    
    
    
    
    
    
    
    $
    306,892Available-for-sale cash investments
    
    
    150,028
    
    
    
    
    
    
    $
    22,674
    
    
    
    172,702Total
    
    $
    456,920
    
    
    
    
    
    
    $
    22,674
    
    
    $
    479,594
     15




---



##### Table of Contents



Auction RateSecuritiesBalance at December 31, 2007
    
    $
    27,364Reversal of unrealized loss in accumulated other comprehensive income
    
    
    1,595Impairment loss included in interest expense and other, net
    
    
    (6,285
    )Balance at June 30, 2008
    
    $
    22,674
 Self-Tender Offer
  Subsequent Events
 16




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##### Table of Contents



ITEM 2: MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
  
    
    Executive Overview that discusses at a high level our operating results and some of the trends that affect our business.
    
    Significant changes since our most recent Annual Report on Form 10-K in the Critical Accounting Policies and Estimates
as we believe it is important to understanding the assumptions and judgments underlying our financial statements.
    
    Results of Operations that begins with an overview followed by a more detailed discussion of our revenue and expenses.
    
    Liquidity and Capital Resources which discusses key aspects of our statements of cash flows, changes in our balance
sheets and our financial commitments.
   Executive Overview
 Our Business
    Our Results
  ®
  17




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##### Table of Contents



Business Trends
      18




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##### Table of Contents



Critical Accounting Policies and Estimates
   Recent Accounting Pronouncements
 FSP APB 14-1, Accounting for Convertible Debt Instruments That May Be Settled in Cash upon
Conversion
  SFAS 141(R), Business Combinations
  FSP FAS 142-3, Determination of the Useful Life of Intangible Assets
  FSP FAS 157-2, Effective Date of FASB Statement No. 157
  19




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##### Table of Contents



SFAS 160, NonControlling Interests in Consolidated Financial Statements
 NonControlling Interests in Consolidated Financial
Statements
 SFAS 161, Disclosures about Derivative Instruments and Hedging Activities
 Disclosures about Derivative Instruments and Hedging
Activities.
 Results of Operations
 Revenues  (Dollars in millions)
 Three Months ended June 30,
    
    Six Months ended June 30,Percent
    
    
    
    
    
    
    
    
    
    Percent2008
    
    2007
    
    Change
    
    2008
    
    2007
    
    ChangeLicense fees by segment:IPG
    
    $
    72.3
    
    
    $
    60.6
    
    
    
    19
    %
    
    $
    134.9
    
    
    $
    115.6
    
    
    
    17
    %IAS
    
    
    24.9
    
    
    
    23.5
    
    
    
    6
    %
    
    
    45.6
    
    
    
    43.5
    
    
    
    5
    %SY365
    
    
    0.0
    
    
    
    0.0
    
    
    
    *
    
    
    
    0.1
    
    
    
    0.0
    
    
    
    *Eliminations
    
    
    (6.7
    )
    
    
    (6.7)
    
    
    
   *
    
    
    
    (12.0
    )
    
    
    (12.3
    )
    
    
    (2
    %)Total license fees
    
    $
    90.5
    
    
    $
    77.4
    
    
    
    17
    %
    
    $
    168.6
    
    
    $
    146.8
    
    
    
    15
    %Percentage of total revenues
    
    
    32
    %
    
    
    32
    %
    
    
    
    
    
    
    31
    %
    
    
    31
    %Services by segment:IPG
    
    $
    135.5
    
    
    $
    123.6
    
    
    
    10
    %
    
    $
    263.7
    
    
    $
    242.0
    
    
    
    9
    %IAS
    
    
    19.2
    
    
    
    18.0
    
    
    
    7
    %
    
    
    38.0
    
    
    
    34.7
    
    
    
    10
    %SY365
    
    
    0.5
    
    
    
    1.0
    
    
    
    (50
    %)
    
    
    1.1
    
    
    
    2.4
    
    
    
    (54
    %)Eliminations
    
    
    (8.6
    )
    
    
    (7.4
    )
    
    
    16
    %
    
    
    (16.8
    )
    
    
    (14.2
    )
    
    
    18
    %Total services
    
    $
    146.6
    
    
    $
    135.2
    
    
    
    8
    %
    
    $
    286.0
    
    
    $
    264.9
    
    
    
    8
    %Percentage of total revenues
    
    
    52
    %
    
    
    55
    %
    
    
    
    
    
    
    53
    %
    
    
    56
    %Messaging by segment:SY365
    
    $
    45.6
    
    
    $
    32.4
    
    
    
    41
    %
    
    $
    88.2
    
    
    $
    63.4
    
    
    
    39
    %Total messaging
    
    $
    45.6
    
    
    $
    32.4
    
    
    
    41
    %
    
    $
    88.2
    
    
    $
    63.4
    
    
    
    39
    %Percentage of total revenues
    
    
    16
    %
    
    
    13
    %
    
    
    
    
    
    
    16
    %
    
    
    13
    %Total revenues
    
    $
    282.7
    
    
    $
    245.0
    
    
    
    15
    %
    
    $
    542.8
    
    
    $
    475.1
    
    
    
    14
    %
 
 *
    
    Not meaningful   20




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##### Table of Contents



Geographical Revenues  (Dollars in millions)
 Three Months ended June 30,
    
    Six Months ended June 30,2008
    
    2007
    
    Percent
 Change
    
    2008
    
    2007
    
    Percent 
ChangeNorth American
    
    $
    135.8
    
    
    $
    130.8
    
    
    
    4
    %
    
    $
    267.7
    
    
    $
    254.9
    
    
    
    5
    %Percentage of total revenues
    
    
    48
    %
    
    
    53
    %
    
    
    
    
    
    
    49
    %
    
    
    54
    %Total Outside North America
    
    $
    146.9
    
    
    $
    114.2
    
    
    
    29
    %
    
    $
    275.1
    
    
    $
    220.2
    
    
    
    25
    %Percentage of total revenues
    
    
    52
    %
    
    
    47
    %
    
    
    
    
    
    
    51
    %
    
    
    46
    %International: EMEA (Europe, Middle East and Africa)
    
    $
    103.4
    
    
    $
    77.6
    
    
    
    33
    %
    
    $
    195.4
    
    
    $
    149.5
    
    
    
    31
    %Percentage of total revenues
    
    
    37
    %
    
    
    32
    %
    
    
    
    
    
    
    36
    %
    
    
    31
    %Intercontinental: (Asia Pacific and Latin America)
    
    $
    43.5
    
    
    $
    36.6
    
    
    
    19
    %
    
    $
    79.7
    
    
    $
    70.7
    
    
    
    13
    %Percentage of total revenues
    
    
    15
    %
    
    
    15
    %
    
    
    
    
    
    
    15
    %
    
    
    15
    %Total revenues
    
    $
    282.7
    
    
    $
    245.0
    
    
    
    15
    %
    
    $
    542.8
    
    
    $
    475.1
    
    
    
    14
    %
    21




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##### Table of Contents



22




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##### Table of Contents



Costs and Expenses  (Dollars in millions)
 Three Months ended June 30,
    
    Six Months ended June 30,Percent
    
    
    
    
    
    
    
    
    
    Percent2008
    
    2007
    
    Change
    
    2008
    
    2007
    
    ChangeCost of license fees
    
    $
    15.1
    
    
    $
    13.1
    
    
    
    15
    %
    
    $
    29.7
    
    
    $
    25.8
    
    
    
    15
    %Percentage of license fees revenues
    
    
    17
    %
    
    
    17
    %
    
    
    
    
    
    
    18
    %
    
    
    18
    %Cost of services
    
    $
    41.1
    
    
    $
    39.5
    
    
    
    4
    %
    
    $
    82.0
    
    
    $
    78.3
    
    
    
    5
    %Percentage of services revenues
    
    
    28
    %
    
    
    29
    %
    
    
    
    
    
    
    29
    %
    
    
    30
    %Cost of messaging
    
    $
    27.4
    
    
    $
    18.9
    
    
    
    45
    %
    
    $
    52.5
    
    
    $
    37.8
    
    
    
    39
    %Percentage of messaging revenues
    
    
    60
    %
    
    
    58
    %
    
    
    
    
    
    
    60
    %
    
    
    60
    %Sales and marketing
    
    $
    74.3
    
    
    $
    64.9
    
    
    
    14
    %
    
    $
    142.6
    
    
    $
    129.5
    
    
    
    10
    %Percentage of total revenues
    
    
    26
    %
    
    
    26
    %
    
    
    
    
    
    
    26
    %
    
    
    27
    %Product development and engineering
    
    $
    36.0
    
    
    $
    36.9
    
    
    
    (2
    %)
    
    $
    71.6
    
    
    $
    75.7
    
    
    
    (5
    %)Percentage of total revenues
    
    
    13
    %
    
    
    15
    %
    
    
    
    
    
    
    13
    %
    
    
    16
    %General and administrative
    
    $
    34.1
    
    
    $
    32.7
    
    
    
    4
    %
    
    $
    70.1
    
    
    $
    64.2
    
    
    
    9
    %Percentage of total revenues
    
    
    12
    %
    
    
    13
    %
    
    
    
    
    
    
    13
    %
    
    
    14
    %Amortization of other purchased intangibles
    
    $
    3.6
    
    
    $
    3.4
    
    
    
    6
    %
    
    $
    7.1
    
    
    $
    6.8
    
    
    
    4
    %Percentage of total revenues
    
    
    1
    %
    
    
    1
    %
    
    
    
    
    
    
    1
    %
    
    
    1
    %Cost (Reversal) of restructure
    
    $
    (0.0
    )
    
    $
    (0.1
    )
    
    
    *
    
    
    $
    0.0
    
    
    $
    (0.0
    )
    
    
    *Percentage of total revenues
    
    
    *
    
    
    
    *
    
    
    
    
    
    
    
    *
    
    
    
    *
 
 *
    
    Not meaningful Cost of License Fees.
 Cost of Services.
 Cost of Messaging
 Sales and Marketing.
 23




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##### Table of Contents



Product Development and Engineering.
   General and Administrative.
 Amortization of Other Purchased Intangibles.
 Cost of Restructure
 Operating Income  (Dollars in millions)
 Three Months ended June 30,
    
    Six Months ended June 30,Percent
    
    
    
    
    
    
    
    
    
    Percent2008
    
    2007
    
    Change
    
    2008
    
    2007
    
    ChangeOperating income by segment:IPG
    
    $
    48.4
    
    
    $
    36.7
    
    
    
    32
    %
    
    $
    87.4
    
    
    $
    65.1
    
    
    
    34
    %IAS
    
    
    6.3
    
    
    
    5.9
    
    
    
    7
    %
    
    
    8.0
    
    
    
    6.9
    
    
    
    16
    %SY365
    
    
    1.8
    
    
    
    (0.8
    )
    
    
    *
    
    
    
    3.0
    
    
    
    (2.8
    )
    
    
    *Unallocated costs
    
    
    (5.4
    )
    
    
    (6.2
    )
    
    
    (13
    %)
    
    
    (11.1
    )
    
    
    (12.2
    )
    
    
    (9
    %)Total operating income:
    
    $
    51.1
    
    
    $
    35.6
    
    
    
    44
    %
    
    $
    87.3
    
    
    $
    57.0
    
    
    
    53
    %Percentage of total revenues
    
    
    18
    %
    
    
    15
    %
    
    
    
    
    
    
    16
    %
    
    
    12
    %
 
 *
    
    Not meaningful    24




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##### Table of Contents



Other Income (Expense), Net  (Dollars in millions)
 Three Months ended June 30,
    
    Six Months ended June 30,Percent
    
    
    
    
    
    
    
    
    
    Percent2008
    
    2007
    
    Change
    
    2008
    
    2007
    
    ChangeInterest income
    
    $
    6.2
    
    
    $
    8.5
    
    
    
    (27
    %)
    
    $
    14.1
    
    
    $
    15.9
    
    
    
    (11
    %)Percentage of total revenues
    
    
    2
    %
    
    
    3
    %
    
    
    
    
    
    
    3
    %
    
    
    3
    %Interest expense and other, net
    
    $
    (7.0
    )
    
    $
    (3.4
    )
    
    
    106
    %
    
    $
    (11.4
    )
    
    $
    (5.8
    )
    
    
    97
    %Percentage of total revenues
    
    
    (2
    %)
    
    
    (1
    %)
    
    
    
    
    
    
    (2
    %)
    
    
    (1
    %)Minority interest
    
    
    *
    
    
    
    *
    
    
    
    *
    
    
    
    *
    
    
    
    *
    
    
    
    *Percentage of total revenues
    
    
    *
    
    
    
    *
    
    
    
    
    
    
    
    *
    
    
    
    *
 
 *
    
    Not meaningful    25




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##### Table of Contents



Provision for Income Taxes  (Dollars in millions)
 Three Months ended June 30,
    
    Six Months ended June 30,Percent
    
    
    
    
    
    
    
    
    
    Percent2008
    
    2007
    
    Change
    
    2008
    
    2007
    
    ChangeProvision for income taxes
    
    $
    17.9
    
    
    $
    14.7
    
    
    
    22
    %
    
    $
    33.4
    
    
    $
    26.0
    
    
    
    28
    %
   Net Income Per Share  (Dollars and shares in millions, except per share data)
 Three Months ended June 30,
    
    Six Months ended June 30,Percent
    
    
    
    
    
    
    
    
    
    Percent2008
    
    2007
    
    Change
    
    2008
    
    2007
    
    ChangeNet income
    
    $
    32.4
    
    
    $
    26.0
    
    
    
    25
    %
    
    $
    56.5
    
    
    $
    41.2
    
    
    
    37
    %Percentage of total revenues
    
    
    11
    %
    
    
    11
    %
    
    
    
    
    
    
    10
    %
    
    
    9
    %Basic net income per share
    
    $
    0.40
    
    
    $
    0.29
    
    
    
    38
    %
    
    $
    0.67
    
    
    $
    0.45
    
    
    
    49
    %Diluted net income per share
    
    $
    0.37
    
    
    $
    0.28
    
    
    
    32
    %
    
    $
    0.62
    
    
    $
    0.44
    
    
    
    41
    %Shares used in computing basic net income per share
    
    
    81.7
    
    
    
    90.9
    
    
    
    (10
    %)
    
    
    84.7
    
    
    
    91.0
    
    
    
    (7
    %)Shares used in computing diluted net income per share
    
    
    88.0
    
    
    
    93.0
    
    
    
    (5
    %)
    
    
    91.0
    
    
    
    93.3
    
    
    
    (2
    %)
 
 *
    
    Not meaningful    26




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##### Table of Contents



.
 Liquidity and Capital Resources  (Dollars in millions)
 Six Months Ended June 30,Percent2008
    
    2007
    
    ChangeWorking capital
    
    $
    448.2
    
    
    $
    487.6
    
    
    
    (8
    %)Cash and cash equivalents
    
    $
    575.1
    
    
    $
    436.8
    
    
    
    32
    %Net cash provided by operating activities
    
    $
    157.3
    
    
    $
    123.5
    
    
    
    27
    %Net cash provided by (used for) investing activities
    
    $
    54.7
    
    
    $
    (13.7
    )
    
    
    *Net cash used for financing activities
    
    $
    261.7
    
    
    $
    37.4
    
    
    
    600
    %
 
 *
    
    Not meaningful        27




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##### Table of Contents



Short-term and Long-term Cash Investments and Auction-Rate Securities
    
 28




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ITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURES OF MARKET RISK
        
 ITEM 4: CONTROLS AND PROCEDURES
     29




---



##### Table of Contents



PART II: OTHER INFORMATION
 
 ITEM 1: LEGAL PROCEEDINGS
  
 ITEM 1 (A): RISK FACTORS
 Future Operating Results
  Significant variation in the timing and amount of our revenues may cause fluctuations in our
quarterly operating results and an accurate estimation of our revenues is difficult.
    Economic and credit market conditions in the U.S. and worldwide could adversely affect our
revenues.
  30




---



##### Table of Contents



If we fail to maintain or expand our relationships with strategic partners and indirect
distribution channels our license revenues could decline.
   System failures, delays and other problems could harm our reputation and business, cause us to lose
customers and expose us to customer liability.
    Industry consolidation and other competitive pressures could affect prices or demand for our
products and services, and our business may be adversely affected.
   We may encounter difficulties in completing acquisitions or strategic relationships and we may
incur acquisition-related charges that could adversely affect our operating results.
   31




---



##### 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, our technical
support revenues could be adversely affected.
  32




---



##### Table of Contents



Pricing pressure in the mobile messaging market could adversely affect our operating results.
  Unanticipated delays or accelerations in our sales cycles could result in significant fluctuations
in our quarterly operating results.
  Our mobile messaging customer contracts may not continue to generate revenues at or near our
historical levels of revenues from these customers.
  If we do not adapt to rapid technological change in the telecommunications industry, we could lose
customers or market share.
  Impairments in our investment portfolio may result in temporary and/or realized losses.
   Restructuring activities and reorganizations in our sales model or business units may not succeed
in increasing revenues and operating results.
  33




---



##### Table of Contents



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 may not receive significant revenues from our current research and development efforts for
several years, if at all.
  We might experience significant errors or security flaws in our products and services.
  We are subject to risks related to the terms of our 1.75% Convertible Subordinated Notes.
  34




---



##### Table of Contents



Unanticipated changes in our tax rates could affect our future financial results.
  We face exposure to adverse movements in foreign currency exchange rates.
    35




---



##### Table of Contents



Growing market acceptance of open source software could cause a decline in our revenues and
operating margins.
  Insufficient protection for our intellectual property rights may have a material adverse affect on
our results of operations or our ability to compete.
  If third parties claim that we are in violation of their intellectual property rights, it could
have a negative impact on our results of operations or ability to compete.
   36




---



##### Table of Contents



Laws and regulations affecting our customers and us and future laws and regulations to which they
or we may become subject may harm our business.
  Our key personnel are critical to our business, and we cannot assure that they will remain with us.
  Our sales to government clients subject us to risks including early termination, audits,
investigations, sanctions and penalties.
   Changes in accounting and legal standards could adversely affect our future operating results.
   37




---



##### Table of Contents



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.
  38




---



##### Table of Contents



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(2008)
    
    Purchased (#)
    
    
    ($)
    
    
    Programs (#)
    
    
    or Programs ($)April 1  30
    
    
    10,714,285
    
    
    $
    28.04
    
    
    
    
    
    
    $
    82,913,000May 1  31
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    June 1  30
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    
    10,714,285
    
    
    $
    28.04
    
    
    
    
    
    
    $
    82,913,000
 39




---



##### Table of Contents



ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
  
 ITEM 5: OTHER INFORMATION
  
 ITEM 6: EXHIBITS
   40




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##### Table of Contents



SIGNATURES
  August 8, 2008
    SYBASE, INC.By
    /s/ JEFFREY G. ROSSJeffrey G. RossSenior Vice President and Chief Financial Officer
(Principal Financial Officer)By
    /s/ KEITH JENSENKeith JensenVice President and Corporate Controller
(Principal Accounting Officer) 41




---



##### Table of Contents



EXHIBIT INDEX
 Exhibit No.
    Description12
    
    Computation of 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
 42