##### 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 MARCH 31,
2007
 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.
 (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
 Delaware
    
    94-2951005(State of Incorporation)
    
    (I.R.S. Employer Identification No.)
 (Address of principal executive offices)(Zip Code)
 (Registrants telephone number, including area code)
 (Former name, former address and former fiscal year, if changed since last report)
 þ o
  þ o o
 o þ




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##### 



PageForward-Looking Statements
    
    2Part I: Financial InformationItem 1: Financial Statements (Unaudited)Condensed Consolidated Balance Sheets as of March 31, 2007 and December 31, 2006
    
    3Condensed Consolidated Statements of Operations for the three months ended March 31, 2007 and 2006
    
    4Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2007 and 2006
    
    5Notes to Condensed Consolidated Financial Statements
    
    6Item 2: Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    13Item 3: Quantitative and Qualitative Disclosures of Market Risk
    
    24Item 4: Controls and Procedures
    
    24Part II: Other InformationItem 1: Legal Proceedings
    
    25Item 1 (A) : Risk Factors
    
    25Item 2: Unregistered Sales of Equity Securities and Use of Proceeds
    
    34Item 4: Submission of Matters to a Vote of Security Holders
    
    35Item 5:
Other Information
    
    35


Item 6: Exhibits
    
    35Signatures
    
    36Exhibit IndexEXHIBIT 12EXHIBIT 31.1EXHIBIT 31.2EXHIBIT 32
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www.sec.gov
 www.sybase.com
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PART I: FINANCIAL INFORMATION
 
 ITEM 1: FINANCIAL STATEMENTS
  
  March 31,2007
    
    
    December 31,(In thousands, except share and per share data)
    
    (Unaudited)
    
    
    2006Current assets:Cash and cash equivalents
    
    $
    413,664
    
    
    $
    355,303Short-term cash investments
    
    
    247,768
    
    
    
    269,612Total cash, cash equivalents and short-term cash investments
    
    
    661,432
    
    
    
    624,915Restricted cash
    
    
    5,958
    
    
    
    6,014Accounts receivable, net
    
    
    191,145
    
    
    
    218,016Deferred income taxes
    
    
    6,231
    
    
    
    6,224Prepaid expenses and other current assets
    
    
    24,828
    
    
    
    16,392Total current assets
    
    
    889,594
    
    
    
    871,561Long-term cash investments
    
    
    31,338
    
    
    
    12,781Property, equipment and improvements, net
    
    
    64,143
    
    
    
    66,458Deferred income taxes
    
    
    37,865
    
    
    
    36,069Capitalized software, net
    
    
    71,394
    
    
    
    71,179Goodwill
    
    
    539,680
    
    
    
    540,303Other purchased intangibles, net
    
    
    144,820
    
    
    
    149,648Other assets
    
    
    39,995
    
    
    
    39,551Total assets
    
    $
    1,818,829
    
    
    $
    1,787,550Current liabilities:Accounts payable
    
    $
    24,651
    
    
    $
    23,439Accrued compensation and related expenses
    
    
    44,730
    
    
    
    59,748Accrued income taxes
    
    
    7,846
    
    
    
    31,364Other accrued liabilities
    
    
    94,714
    
    
    
    108,436Deferred revenue
    
    
    230,751
    
    
    
    193,431Total current liabilities
    
    
    402,692
    
    
    
    416,418Other liabilities
    
    
    43,769
    
    
    
    44,428Deferred income taxes
    
    
    14,569
    
    
    
    14,448Long-term tax liability
    
    
    25,797
    
    
    
    Long-term deferred revenue
    
    
    5,444
    
    
    
    3,965Minority interest
    
    
    5,179
    
    
    
    5,160Convertible 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
91,370,664 outstanding (2006-105,337,362 shares issued and 91,281,805 outstanding)
    
    
    105
    
    
    
    105Additional paid-in capital
    
    
    983,422
    
    
    
    977,672Accumulated earnings
    
    
    107,628
    
    
    
    92,817Accumulated other comprehensive income
    
    
    44,071
    
    
    
    40,850Cost of 13,966,698 shares of treasury stock (2006-14,055,557 shares)
    
    
    (273,847
    )
    
    
    (268,313
    )Total stockholders equity
    
    
    861,379
    
    
    
    843,131Total liabilities and stockholders equity
    
    $
    1,818,829
    
    
    $
    1,787,550
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Three Months EndedMarch 31,(In
thousands, except per share data)
    
    2007
    
    
    2006Revenues:License fees
    
    $
    69,365
    
    
    $
    66,888Services
    
    
    129,651
    
    
    
    128,120Messaging
    
    
    31,021
    
    
    
    Total revenues
    
    
    230,037
    
    
    
    195,008Costs and expenses:Cost of license fees
    
    
    12,753
    
    
    
    12,792Cost of services
    
    
    38,742
    
    
    
    38,352Cost of messaging
    
    
    18,889
    
    
    
    Sales and marketing
    
    
    64,575
    
    
    
    61,355Product development and engineering
    
    
    38,753
    
    
    
    36,997General and administrative
    
    
    31,496
    
    
    
    24,987Amortization of other purchased intangibles
    
    
    3,410
    
    
    
    1,546Cost of restructure
    
    
    4
    
    
    
    34Total costs and expenses
    
    
    208,622
    
    
    
    176,063Operating income
    
    
    21,415
    
    
    
    18,945Interest income
    
    
    7,383
    
    
    
    8,602Interest expense and other, net
    
    
    (2,378
    )
    
    
    (2,544
    )Minority interest
    
    
    (20
    )
    
    
    Income before income taxes
    
    
    26,400
    
    
    
    25,003Provision for income taxes
    
    
    11,252
    
    
    
    7,751Net income
    
    $
    15,148
    
    
    $
    17,252Basic net income per share
    
    $
    0.17
    
    
    $
    0.19Shares used in computing basic net income per share
    
    
    91,149
    
    
    
    89,637Diluted net income per share
    
    $
    0.16
    
    
    $
    0.19Shares used in computing diluted net income per share
    
    
    93,609
    
    
    
    92,041
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Three Months EndedMarch 31,(In thousands)
    
    2007
    
    
    2006Cash and cash equivalents, beginning of year
    
    $
    355,303
    
    
    $
    398,741Cash flows from operating activities:Net income
    
    
    15,148
    
    
    
    17,252Adjustments to reconcile net income to net cash provided by operating activities:Depreciation and amortization
    
    
    21,810
    
    
    
    18,012Minority interest in income of subsidiaries
    
    
    20
    
    
    
    Gain on disposal of assets
    
    
    (11
    )
    
    
    (381
    )Deferred income taxes
    
    
    (1,682
    )
    
    
    (1,329
    )Stock-based compensation  restricted stock
    
    
    2,103
    
    
    
    1,956Stock-based compensation  all other
    
    
    3,647
    
    
    
    3,469Excess tax benefit from stock-based compensation plans
    
    
    (2,201
    )
    
    
    Amortization of note issuance costs
    
    
    492
    
    
    
    492Changes in assets and liabilities:Accounts receivable
    
    
    24,331
    
    
    
    31,048Other current assets
    
    
    (7,700
    )
    
    
    (6,273
    )Other assets  operating
    
    
    (919
    )
    
    
    (1,589
    )Accounts payable
    
    
    1,212
    
    
    
    4Accrued compensation and related expenses
    
    
    (15,033
    )
    
    
    (14,427
    )Accrued income taxes
    
    
    2,183
    
    
    
    (3,678
    )Other accrued liabilities
    
    
    (12,007
    )
    
    
    (8,851
    )Deferred revenues
    
    
    38,799
    
    
    
    37,083Other liabilities
    
    
    (551
    )
    
    
    582Net cash provided by operating activities
    
    
    69,641
    
    
    
    73,370Cash flows from investing activities:Decrease in restricted cash
    
    
    56
    
    
    
    66Purchases of available-for-sale cash investments
    
    
    (120,761
    )
    
    
    (171,467
    )Maturities of available-for-sale cash investments
    
    
    48,400
    
    
    
    101,297Sales of available-for-sale cash investments
    
    
    75,894
    
    
    
    134,618Business combinations, net of cash acquired
    
    
    (1,501
    )
    
    
    (23
    )Purchases of property, equipment and improvements
    
    
    (4,466
    )
    
    
    (4,622
    )Proceeds from sale of property, equipment, and improvements
    
    
    34
    
    
    
    2Capitalized software development costs
    
    
    (8,438
    )
    
    
    (8,542
    )(Increase) Decrease in other assets  investing
    
    
    (18
    )
    
    
    1Net cash provided by (used for) investing activities
    
    
    (10,800
    )
    
    
    51,330Cash flows from financing activities:Repayments of long-term obligations
    
    
    (15
    )
    
    
    (14
    )Payments on capital lease
    
    
    (392
    )
    
    
    (77
    )Net proceeds from the issuance of common stock and reissuance of treasury stock
    
    
    12,716
    
    
    
    5,699Purchases of treasury stock
    
    
    (18,588
    )
    
    
    (24,665
    )Excess tax benefit from stock-based compensation plans
    
    
    2,201
    
    
    
    Net cash used for financing activities
    
    
    (4,078
    )
    
    
    (19,057
    )Effect of exchange rate changes on cash
    
    
    3,598
    
    
    
    1,519Net increase in cash and cash equivalents
    
    
    58,361
    
    
    
    107,162Cash and cash equivalents, end of period
    
    
    413,664
    
    
    
    505,903Cash investments, end of period
    
    
    279,106
    
    
    
    396,562Total cash, cash equivalents and cash investments, end of period
    
    $
    692,770
    
    
    $
    902,465Supplemental disclosures:Interest paid
    
    $
    4,394
    
    
    $
    5,544Income taxes paid, net of refunds
    
    $
    11,294
    
    
    $
    9,900
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Notes to Condensed Consolidated Financial Statements
 Basis of Presentation .
   Stock-Based Compensation .
 Stock-Based Compensation Expense
  Three Months EndedMarch 31,(Dollars in thousands, except per share data)
    
    2007
    
    
    2006Cost of services
    
    $
    339
    
    
    $
    680Cost of messaging
    
    
    186
    
    
    
    Sales and marketing
    
    
    1,266
    
    
    
    996Product development and engineering
    
    
    686
    
    
    
    593General and administrative
    
    
    3,273
    
    
    
    3,156Stock-based compensation expense included in total costs and expenses
    
    
    5,750
    
    
    
    5,425Tax benefit related to stock-based compensation expense
    
    
    (1,415
    )
    
    
    (1,595
    )Stock-based compensation expense included in net income
    
    $
    4,335
    
    
    $
    3,830Reduction of net income per share:Basic
    
    $
    0.05
    
    
    $
    0.04Diluted
    
    $
    0.05
    
    
    $
    0.04
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Net income per share .
 Three Months EndedMarch 31,(In thousands, except per share data)
    
    2007
    
    
    2006Net income
    
    $
    15,148
    
    
    $
    17,252Basic net income per share
    
    $
    0.17
    
    
    $
    0.19Shares used in computing basic net income per share
    
    
    91,149
    
    
    
    89,637Diluted net income per share
    
    $
    0.16
    
    
    $
    0.19Shares used in computing basic net income per share
    
    
    91,149
    
    
    
    89,637Dilutive effect of stock options, restricted stock and stock appreciation rights
    
    
    2,460
    
    
    
    2,404Shares used in computing diluted net income per share
    
    
    93,609
    
    
    
    92,041
  Comprehensive Income
 Three Months EndedMarch 31,(In thousands)
    
    2007
    
    
    2006Net income
    
    $
    15,148
    
    
    $
    17,252Foreign currency translation gains
    
    
    3,077
    
    
    
    1,982Unrealized gains/(losses) on marketable securities
    
    
    144
    
    
    
    (373
    )Comprehensive income
    
    $
    18,369
    
    
    $
    18,861
  Segment Information
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Consolidated(In thousands)
    
    IPG
    
    
    iAS
    
    
    SY365
    
    
    Elimination
    
    
    TotalRevenues:License feesInfrastructure
    
    $
    48,315
    
    
    $
    21
    
    
    $
    14
    
    
    
    
    
    
    $
    48,350Mobile and Embedded
    
    
    6,639
    
    
    
    14,376
    
    
    
    
    
    
    
    
    
    
    
    21,015Subtotal license fees
    
    
    54,954
    
    
    
    14,397
    
    
    
    14
    
    
    
    
    
    
    
    69,365Intersegment license revenues
    
    
    32
    
    
    
    5,536
    
    
    
    
    
    
    
    (5,568
    )
    
    
    Total license fees
    
    
    54,986
    
    
    
    19,933
    
    
    
    14
    
    
    
    (5,568
    )
    
    
    69,365ServicesDirect service revenue
    
    
    118,383
    
    
    
    11,268
    
    
    
    
    
    
    
    
    
    
    
    129,651Intersegment service revenues
    
    
    27
    
    
    
    6,783
    
    
    
    
    
    
    
    (6,810
    )
    
    
    Total services
    
    
    118,410
    
    
    
    18,051
    
    
    
    
    
    
    
    (6,810
    )
    
    
    129,651Messaging
    
    
    
    
    
    
    
    
    
    
    31,021
    
    
    
    
    
    
    
    31,021Total revenues
    
    
    173,396
    
    
    
    37,984
    
    
    
    31,035
    
    
    
    (12,378
    )
    
    
    230,037Total allocated costs and expenses before amortization of other
purchased intangibles, purchased technology, cost of restructure and
unallocated costs
    
    
    144,118
    
    
    
    34,110
    
    
    
    29,977
    
    
    
    (12,378
    )
    
    
    195,827Operating income before amortization of other purchased intangibles,
purchased technology, cost of restructure and unallocated costs
    
    
    29,278
    
    
    
    3,874
    
    
    
    1,058
    
    
    
    
    
    
    
    34,210Amortization of other purchased intangibles
    
    
    527
    
    
    
    1,046
    
    
    
    1,837
    
    
    
    
    
    
    
    3,410Amortization of purchased technology
    
    
    402
    
    
    
    2,003
    
    
    
    916
    
    
    
    
    
    
    
    3,321Operating income (loss) before cost of restructure and unallocated costs
    
    
    28,349
    
    
    
    825
    
    
    
    (1,695
    )
    
    
    
    
    
    
    27,479Cost of restructure  2007 Activity
    
    
    4
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4Operating income (loss) before unallocated costs
    
    
    28,345
    
    
    
    825
    
    
    
    (1,695
    )
    
    
    
    
    
    
    27,475Unallocated costs
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,060Operating income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    21,415Interest income, interest expense and other, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,005Minority interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (20
    )Income before income taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    26,400
  Consolidated(In thousands)
    
    IPG
    
    
    iAS
    
    
    Elimination
    
    
    TotalRevenues:License feesInfrastructure
    
    $
    44,175
    
    
    $
    39
    
    
    
    
    
    
    $
    44,214Mobile and Embedded
    
    
    5,253
    
    
    
    17,421
    
    
    
    
    
    
    
    22,674Subtotal license fees
    
    
    49,428
    
    
    
    17,460
    
    
    
    
    
    
    
    66,888Intersegment license revenues
    
    
    22
    
    
    
    4,348
    
    
    
    (4,370
    )
    
    
    Total license fees
    
    
    49,450
    
    
    
    21,808
    
    
    
    (4,370
    )
    
    
    66,888ServicesDirect service revenue
    
    
    116,837
    
    
    
    11,283
    
    
    
    
    
    
    
    128,120Intersegment service revenues
    
    
    49
    
    
    
    6,137
    
    
    
    (6,186
    )
    
    
    Total services
    
    
    116,886
    
    
    
    17,420
    
    
    
    (6,186
    )
    
    
    128,120Total revenues
    
    
    166,336
    
    
    
    39,228
    
    
    
    (10,556
    )
    
    
    195,008Total allocated costs and expenses before amortization of other
purchased intangibles, purchased technology, cost of restructure
and unallocated costs
    
    
    143,712
    
    
    
    34,135
    
    
    
    (10,556
    )
    
    
    167,291Operating income before amortization of other purchased
intangibles, purchased technology, cost of restructure and
unallocated costs
    
    
    22,624
    
    
    
    5,093
    
    
    
    
    
    
    
    27,717Amortization of other purchased intangibles
    
    
    500
    
    
    
    1,046
    
    
    
    
    
    
    
    1,546Amortization of purchased technology
    
    
    483
    
    
    
    1,964
    
    
    
    
    
    
    
    2,447Operating income before cost of restructure and unallocated costs
    
    
    21,641
    
    
    
    2,083
    
    
    
    
    
    
    
    23,724Cost of restructure  2006 Activity
    
    
    34
    
    
    
    
    
    
    
    
    
    
    
    34Operating income before unallocated costs
    
    
    21,607
    
    
    
    2,083
    
    
    
    
    
    
    
    23,690Unallocated costs
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,745Operating income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    18,945Interest income, interest expense and other, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,058Income before income taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    25,003
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Goodwill and Intangible Assets .
  Consolidated(In thousands)
    
    IPG
    
    
    iAS
    
    
    SY365
    
    
    TotalBalance at January 1, 2007
    
    $
    96,186
    
    
    $
    110,408
    
    
    $
    333,709
    
    
    $
    540,303Reduction in goodwill recorded on Mobile 365 acquisition
    
    
    
    
    
    
    
    
    
    
    (767
    )
    
    
    (767
    )Foreign currency translation adjustments & other
    
    
    139
    
    
    
    5
    
    
    
    
    
    
    
    144Balance at March 31,2007
    
    $
    96,325
    
    
    $
    110,413
    
    
    $
    332,942
    
    
    $
    539,680
    March 31, 2007
    
    
    December 31, 2006Gross
    
    
    
    
    
    
    Net
    
    
    Gross
    
    
    
    
    
    
    NetCarrying
    
    
    Accumulated
    
    
    Carrying
    
    
    Carrying
    
    
    Accumulated
    
    
    Carrying(In thousands)
    
    Amount
    
    
    Amortization
    
    
    Amount
    
    
    Amount
    
    
    Amortization
    
    
    AmountPurchased technology
    
    $
    164,064
    
    
    $
    (98,528
    )
    
    $
    65,536
    
    
    $
    163,333
    
    
    $
    (95,193
    )
    
    $
    68,140AvantGo tradenames
    
    
    3,100
    
    
    
    
    
    
    
    3,100
    
    
    
    3,100
    
    
    
    
    
    
    
    3,100XcelleNet tradenames
    
    
    4,000
    
    
    
    
    
    
    
    4,000
    
    
    
    4,000
    
    
    
    
    
    
    
    4,000Covenant not to compete
    
    
    319
    
    
    
    (85
    )
    
    
    234
    
    
    
    319
    
    
    
    (59
    )
    
    
    260Customer lists
    
    
    99,495
    
    
    
    (27,545
    )
    
    
    71,950
    
    
    
    98,289
    
    
    
    (24,141
    )
    
    
    74,148Totals
    
    $
    270,978
    
    
    $
    (126,158
    )
    
    $
    144,820
    
    
    $
    269,041
    
    
    $
    (119,393
    )
    
    $
    149,648
  2007
    
    $
    26,7802008
    
    
    26,6632009
    
    
    26,2712010
    
    
    23,8362011
    
    
    18,326
  Litigation
  10




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##### Table of Contents



. Stock Repurchase Plan .
 Restructuring
   (Dollars in millions)
    
    Lease Cancellations / Commitments and OtherRestructuring plan
    
    2004
    
    2003
    
    2002
    
    2001
    
    Mobile 365
    
    AvantGoAccrued liabilities at December 31, 2006
    
    $
    4.2
    
    
    $
    0.2
    
    
    $
    8.3
    
    
    $
    2.0
    
    
    $
    1.3
    
    
    $
    0.9Amounts paid
    
    
    (0.3
    )
    
    
    (0.1
    )
    
    
    (0.8
    )
    
    
    (0.3
    )
    
    
    
    
    
    
    (0.2
    )Accrued liabilities at March 31, 2007
    
    $
    3.9
    
    
    $
    0.1
    
    
    $
    7.5
    
    
    $
    1.7
    
    
    $
    1.3
    
    
    $
    0.7
 Convertible Subordinated Notes
   11




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##### Table of Contents



Income Taxes Accounting for Uncertainty in Income
Taxes,
   Recent Accounting Pronouncements
  The Fair Value Option for Financial Assets and
Financial Liabilities Fair Value Measurements, Disclosures about Fair Value of Financial Instruments.
 12




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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
     13




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##### Table of Contents



Our Results
        Business Trends
  ®
  14




---



##### Table of Contents



® ® ®
   Critical Accounting Policies and Estimates
 Accounting for Income Taxes
 
    
    Accounting for Income Taxes
  15




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##### Table of Contents



Recent Accounting Pronouncements
 SFAS 157, Fair Value Measurements
  SFAS 159, The Fair Value Option for Financial Assets and Financial Liabilities
 Fair Value Measurements, Disclosures about Fair Value of Financial Instruments.
 16




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##### Table of Contents



Results of Operations
 Revenues
(Dollars in millions)
 Three Months ended March 31,Percent2007
    
    2006
    
    ChangeLicense fees by segment:IPG
    
    $
    55.0
    
    
    $
    49.5
    
    
    
    11
    %IAS
    
    
    19.9
    
    
    
    21.8
    
    
    
    (9
    %)SY365
    
    
    0.0
    
    
    
    
    
    
    
    *Eliminations
    
    
    (5.5
    )
    
    
    (4.4
    )
    
    
    25
    %Total license fees
    
    $
    69.4
    
    
    $
    66.9
    
    
    
    4
    %Percentage of total revenues
    
    
    30
    %
    
    
    34
    %Services by segment:IPG
    
    $
    118.4
    
    
    $
    116.9
    
    
    
    1
    %IAS
    
    
    18.0
    
    
    
    17.4
    
    
    
    3
    %Eliminations
    
    
    (6.8
    )
    
    
    (6.2
    )
    
    
    10
    %Total services
    
    $
    129.6
    
    
    $
    128.1
    
    
    
    1
    %Percentage of total revenues
    
    
    56
    %
    
    
    66
    %Messaging by segment:SY365
    
    $
    31.0
    
    
    
    
    
    
    
    *Total messaging
    
    $
    31.0
    
    
    
    
    
    
    
    *Percentage of total revenues
    
    
    14
    %
    
    
    
    
    
    
    *Total revenues
    
    $
    230.0
    
    
    $
    195.0
    
    
    
    18
    %
 
 *
    
    Not meaningful ®
      17




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##### Table of Contents



Geographical Revenues
(Dollars in millions)
 Three Months ended March 31,Percent2007
    
    2006
    
    ChangeNorth American
    
    $
    124.0
    
    
    $
    113.2
    
    
    
    10
    %Percentage of total revenues
    
    
    54
    %
    
    
    58
    %Total Outside North America
    
    $
    106.0
    
    
    $
    81.8
    
    
    
    30
    %Percentage of total revenues
    
    
    46
    %
    
    
    42
    %International: EMEA (Europe, Middle East and Africa)
    
    $
    71.8
    
    
    $
    55.2
    
    
    
    30
    %Percentage of total revenues
    
    
    31
    %
    
    
    28
    %Intercontinental: (Asia Pacific and Latin America)
    
    $
    34.2
    
    
    $
    26.6
    
    
    
    29
    %Percentage of total revenues
    
    
    15
    %
    
    
    14
    %Total revenues
    
    $
    230.0
    
    
    $
    195.0
    
    
    
    18
    %
       18




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##### Table of Contents



Costs and Expenses
(Dollars in millions)
 Three Months ended March 31,Percent2007
    
    2006
    
    ChangeCost of license fees
    
    $
    12.8
    
    
    $
    12.8
    
    
    
    *Percentage of license fees revenues
    
    
    18
    %
    
    
    19
    %Cost of services
    
    $
    38.7
    
    
    $
    38.4
    
    
    
    1
    %Percentage of services revenues
    
    
    30
    %
    
    
    30
    %Cost of messaging
    
    $
    18.9
    
    
    
    
    
    
    
    *Percentage of messaging revenues
    
    
    61
    %
    
    
    Sales and marketing
    
    $
    64.6
    
    
    $
    61.4
    
    
    
    5
    %Percentage of total revenues
    
    
    28
    %
    
    
    31
    %Product development and engineering
    
    $
    38.8
    
    
    $
    37.0
    
    
    
    5
    %Percentage of total revenues
    
    
    17
    %
    
    
    19
    %General and administrative
    
    $
    31.5
    
    
    $
    25.0
    
    
    
    26
    %Percentage of total revenues
    
    
    14
    %
    
    
    13
    %Amortization of other purchased intangibles
    
    $
    3.4
    
    
    $
    1.5
    
    
    
    127
    %Percentage of total revenues
    
    
    1
    %
    
    
    1
    %Cost of restructure
    
    $
    *
    
    
    $
    *
    
    
    
    *Percentage of total revenues
    
    
    *
    
    
    
    *
 
 *
    
    Not meaningful Cost of License Fees.
 Cost of Services.
 Cost of Messaging
 Sales and Marketing.
 Product Development and Engineering.
  19




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##### Table of Contents



® ®
  General and Administrative.
 Amortization of Other Purchased Intangibles.
 Cost of Restructure
 Operating Income
(Dollars in millions)
 Three Months ended March 31,Percent2007
    
    2006
    
    ChangeOperating income by segment:IPG
    
    $
    28.3
    
    
    $
    21.6
    
    
    
    31
    %IAS
    
    
    0.8
    
    
    
    2.1
    
    
    
    (62
    %)SY365
    
    
    (1.7
    )
    
    
    
    
    
    
    *Unallocated costs
    
    
    (6.0
    )
    
    
    (4.8
    )
    
    
    25
    %Total operating income:
    
    $
    21.4
    
    
    $
    18.9
    
    
    
    13
    %Percentage of total revenues
    
    
    9
    %
    
    
    10
    %
 
 *
    
    Not meaningful    20




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##### Table of Contents



Other Income (Expense), Net
(Dollars in millions)
 Three Months ended March 31,Percent2007
    
    2006
    
    ChangeInterest income
    
    $
    7.4
    
    
    $
    8.6
    
    
    
    (14
    %)Percentage of total revenues
    
    
    3
    %
    
    
    4
    %Interest expense and other, net
    
    $
    (2.4
    )
    
    $
    (2.5
    )
    
    
    (4
    %)Percentage of total revenues
    
    
    (1
    %)
    
    
    (1
    %)Minority interest
    
    
    *
    
    
    
    
    
    
    
    *Percentage of total revenues
    
    
    *
    
    
    
    
 
 *
    
    Not meaningful   Provision for Income Taxes
(Dollars in millions)
 Three Months ended March 31,Percent2007
    
    2006
    
    ChangeProvision for income taxes
    
    $
    11.3
    
    
    $
    7.8
    
    
    
    45
    %
   21




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##### Table of Contents



Net Income Per Share
(Dollars and shares in millions, except per share data)
 Three Months ended March 31,Percent2007
    
    2006
    
    ChangeNet income
    
    $
    15.1
    
    
    $
    17.3
    
    
    
    (13
    %)Percentage of total revenues
    
    
    7
    %
    
    
    9
    %Basic net income per share
    
    $
    0.17
    
    
    $
    0.19
    
    
    
    (12
    %)Diluted net income per share
    
    $
    0.16
    
    
    $
    0.19
    
    
    
    (16
    %)Shares used in computing basic net income per share
    
    
    91.1
    
    
    
    89.6
    
    
    
    1
    %Shares used in computing diluted net income per share
    
    
    93.6
    
    
    
    92.0
    
    
    
    2
    %
     Liquidity and Capital Resources
(Dollars in millions)
 Three Months EndedMarch 31,Percent2007
    
    2006
    
    
    ChangeWorking capital
    
    $
    486.9
    
    
    $
    614.3
    
    
    
    
    
    
    
    (21
    %)Cash, cash equivalents and cash investments
    
    $
    692.8
    
    
    $
    902.5
    
    
    
    
    
    
    
    (23
    %)Net cash provided by operating activities
    
    $
    69.6
    
    
    $
    73.4
    
    
    
    
    
    
    
    (5
    %)Net cash provided by (used for) investing activities
    
    $
    (10.8
    )
    
    $
    51.3
    
    
    
    
    
    
    
    *Net cash used for financing activities
    
    $
    4.1
    
    
    $
    19.1
    
    
    
    
    
    
    
    (79
    %)
 
 *
    
    Not meaningful    22




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23




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ITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURES OF MARKET RISK
        
 ITEM 4: CONTROLS AND PROCEDURES
     24




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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.
    We may encounter difficulties in integrating our Mobile 365 acquisition, other acquisitions or
strategic relationships and we may incur acquisition-related charges that could adversely affect
our operating results.
   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.
 26




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##### Table of Contents



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.
   The ability to rapidly develop and bring to market advanced products and services that are
successful is crucial to maintaining our competitive position.
  27




---



##### Table of Contents



If our existing customers cancel or fail to renew their technical support agreements, our technical
support revenues could be adversely affected.
  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.
  Most of 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.
  Restructuring activities and reorganizations in our sales model or business units may not succeed
in increasing revenues and operating results.
 28




---



##### 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.
  29




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##### 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.
    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.
  30




---



##### Table of Contents



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.
   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.
 31




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##### Table of Contents



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.
  ,
   32




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##### 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.
  33




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##### 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(2006)
    
    Purchased (#)
    
    
    ($)
    
    
    Programs (#)
    
    
    or Programs ($)January 1 - 31
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    February 1  28
    
    
    558,336
    
    
    $
    25.61
    
    
    
    558,336
    
    
    $
    235,498,000March 1  31
    
    
    171,300
    
    
    
    25.05
    
    
    
    171,300
    
    
    
    231,207,000Total
    
    
    729,636
    
    
    $
    25.48
    
    
    
    729,636
    
    
    $
    231,207,000
 34




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ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
  
 ITEM 5: OTHER INFORMATION
   
 ITEM 6: EXHIBITS
   35




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SIGNATURES
  May 9, 2007
    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) 36




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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