##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 FORM 10-Q
  þ
    
    QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER
30, 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.
 (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
 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 September 30, 2008 and December 31, 2007
    
    
    3Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2008 and 2007
    
    
    4Condensed Consolidated Statements of Cash Flows for the nine months ended September 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
    
    
    30Item 4: Controls and Procedures
    
    
    30Part II: Other InformationItem 1: Legal Proceedings
    
    
    31Item 1 (A) : Risk Factors
    
    
    31Item 2: Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    40Item 4: Submission of Matters to a Vote of Security Holders
    
    
    41Item 5: Other Information
    
    
    41Item 6: Exhibits
    
    
    41Signatures
    
    
    42Exhibit Index
    
    
    43EX-12EX-31.1EX-31.2EX-32
  1




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##### Table of Contents



www.sec.gov
 www.sybase.com
  2




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PART I: FINANCIAL INFORMATION
 
 ITEM 1: FINANCIAL STATEMENTS
  
  September 30,2008
    
    
    December 31,(In thousands, except share and per share data)
    
    (Unaudited)
    
    
    2007Current assets:Cash and cash equivalents
    
    $
    558,699
    
    
    $
    604,808Short-term cash investments
    
    
    2,537
    
    
    
    93,462Total cash, cash equivalents and short-term cash investments
    
    
    561,236
    
    
    
    698,270Restricted cash
    
    
    3,341
    
    
    
    3,424Accounts receivable, net
    
    
    234,298
    
    
    
    245,267Deferred income taxes
    
    
    41,778
    
    
    
    37,979Prepaid income taxes
    
    
    
    
    
    
    17,604Prepaid expenses and other current assets
    
    
    33,061
    
    
    
    25,182Total current assets
    
    
    873,714
    
    
    
    1,027,726Long-term cash investments
    
    
    19,348
    
    
    
    36,637Property, equipment and improvements, net
    
    
    67,123
    
    
    
    64,841Deferred income taxes
    
    
    2,558
    
    
    
    10,038Capitalized software, net
    
    
    81,210
    
    
    
    74,278Goodwill
    
    
    541,548
    
    
    
    533,339Other purchased intangibles, net
    
    
    120,866
    
    
    
    130,608Other assets
    
    
    33,638
    
    
    
    36,016Total assets
    
    $
    1,740,005
    
    
    $
    1,913,483Current liabilities:Accounts payable
    
    $
    31,273
    
    
    $
    30,290Accrued compensation and related expenses
    
    
    63,640
    
    
    
    63,852Accrued income taxes
    
    
    14,166
    
    
    
    273Other accrued liabilities
    
    
    114,170
    
    
    
    124,849Deferred revenue
    
    
    199,051
    
    
    
    203,734Total current liabilities
    
    
    422,300
    
    
    
    422,998Other liabilities
    
    
    45,506
    
    
    
    44,669Deferred income taxes
    
    
    11,863
    
    
    
    14,115Long-term tax liability
    
    
    30,807
    
    
    
    30,807Long-term deferred revenue
    
    
    3,344
    
    
    
    4,937Minority interest
    
    
    5,140
    
    
    
    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 79,678,527 outstanding (2007-105,337,362 shares issued and 87,210,339 outstanding)
    
    
    105
    
    
    
    105Additional paid-in capital
    
    
    1,037,368
    
    
    
    1,019,930Accumulated earnings
    
    
    320,082
    
    
    
    241,329Accumulated other comprehensive income
    
    
    42,090
    
    
    
    66,954Cost of 25,658,835 shares of treasury stock (2007-18,127,023 shares)
    
    
    (638,600
    )
    
    
    (397,508
    )Total stockholders equity
    
    
    761,045
    
    
    
    930,810Total liabilities and stockholders equity
    
    $
    1,740,005
    
    
    $
    1,913,483
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Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,(Dollars in thousands, except per share data)
    
    2008
    
    
    2007
    
    
    2008
    
    
    2007Revenues:License fees
    
    $
    92,939
    
    
    $
    85,141
    
    
    $
    261,578
    
    
    $
    231,941Services
    
    
    146,295
    
    
    
    135,838
    
    
    
    432,286
    
    
    
    400,719Messaging
    
    
    44,744
    
    
    
    34,287
    
    
    
    132,975
    
    
    
    97,666Total revenues
    
    
    283,978
    
    
    
    255,266
    
    
    
    826,839
    
    
    
    730,326Costs and expenses:Cost of license fees
    
    
    18,151
    
    
    
    12,667
    
    
    
    47,818
    
    
    
    38,503Cost of services
    
    
    40,225
    
    
    
    38,684
    
    
    
    122,185
    
    
    
    116,965Cost of messaging
    
    
    28,107
    
    
    
    21,428
    
    
    
    80,618
    
    
    
    59,223Sales and marketing
    
    
    70,347
    
    
    
    64,415
    
    
    
    212,912
    
    
    
    193,906Product development and engineering
    
    
    37,451
    
    
    
    38,739
    
    
    
    109,059
    
    
    
    114,412General and administrative
    
    
    32,831
    
    
    
    31,231
    
    
    
    102,969
    
    
    
    95,407Amortization of other purchased intangibles
    
    
    3,920
    
    
    
    3,445
    
    
    
    11,009
    
    
    
    10,291Cost (Reversal) of restructure
    
    
    39
    
    
    
    17
    
    
    
    58
    
    
    
    (30
    )Total costs and expenses
    
    
    231,071
    
    
    
    210,626
    
    
    
    686,628
    
    
    
    628,677Operating income
    
    
    52,907
    
    
    
    44,640
    
    
    
    140,211
    
    
    
    101,649Interest income
    
    
    5,779
    
    
    
    9,041
    
    
    
    19,856
    
    
    
    24,951Interest expense and other, net
    
    
    (6,064
    )
    
    
    (3,331
    )
    
    
    (17,502
    )
    
    
    (9,094
    )Minority interest
    
    
    (21
    )
    
    
    
    
    
    
    7
    
    
    
    (20
    )Income before income taxes
    
    
    52,601
    
    
    
    50,350
    
    
    
    142,572
    
    
    
    117,486Provision for income taxes
    
    
    17,864
    
    
    
    16,220
    
    
    
    51,291
    
    
    
    42,180Net income
    
    $
    34,737
    
    
    $
    34,130
    
    
    $
    91,281
    
    
    $
    75,306Basic net income per share
    
    $
    0.44
    
    
    $
    0.38
    
    
    $
    1.10
    
    
    $
    0.83Shares used in computing basic net income per share
    
    
    79,245
    
    
    
    89,655
    
    
    
    82,868
    
    
    
    90,565Diluted net income per share
    
    $
    0.40
    
    
    $
    0.37
    
    
    $
    1.01
    
    
    $
    0.81Shares used in computing diluted net income per share
    
    
    86,488
    
    
    
    91,714
    
    
    
    89,972
    
    
    
    92,749
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Nine Months EndedSeptember 30,(Dollars in thousands)
    
    2008
    
    
    2007Cash flows from operating activities:Net income
    
    $
    91,281
    
    
    $
    75,306Adjustments to reconcile net income to net cash provided by operating activities:Depreciation and amortization
    
    
    77,341
    
    
    
    64,802Minority interest in income of subsidiaries
    
    
    (7
    )
    
    
    20Loss on disposal of assets
    
    
    5
    
    
    
    20Impairment of investment in auction rate securities
    
    
    9,552
    
    
    
    Deferred income taxes
    
    
    1,429
    
    
    
    (3,541
    )Stock-based compensation  restricted stock
    
    
    7,583
    
    
    
    6,554Stock-based compensation  all other
    
    
    9,262
    
    
    
    10,467Excess tax benefit from stock-based compensation plans
    
    
    (8,970
    )
    
    
    (3,171
    )Amortization of note issuance costs
    
    
    1,477
    
    
    
    1,477Changes in assets and liabilities:Accounts receivable
    
    
    11,003
    
    
    
    11,956Prepaid income taxes
    
    
    17,604
    
    
    
    Other current assets
    
    
    (3,814
    )
    
    
    (3,846
    )Other assets  operating
    
    
    805
    
    
    
    2,635Accounts payable
    
    
    983
    
    
    
    6,573Accrued compensation and related expenses
    
    
    (212
    )
    
    
    (301
    )Accrued income taxes
    
    
    13,335
    
    
    
    13,313Other accrued liabilities
    
    
    (13,290
    )
    
    
    (13,027
    )Deferred revenues
    
    
    (6,276
    )
    
    
    1,857Other liabilities
    
    
    1,899
    
    
    
    (541
    )Net cash provided by operating activities
    
    
    210,990
    
    
    
    170,553Cash flows from investing activities:(Increase) Decrease in restricted cash
    
    
    83
    
    
    
    (95
    )Purchases of available-for-sale cash investments
    
    
    (16,332
    )
    
    
    (231,304
    )Maturities of available-for-sale cash investments
    
    
    35,870
    
    
    
    136,462Sales of available-for-sale cash investments
    
    
    80,982
    
    
    
    119,735Business combinations, net of cash acquired
    
    
    (27,372
    )
    
    
    (6,502
    )Purchases of property, equipment and improvements
    
    
    (26,013
    )
    
    
    (16,533
    )Proceeds from sale of property, equipment, and improvements
    
    
    22
    
    
    
    44Capitalized software development costs
    
    
    (38,885
    )
    
    
    (27,474
    )(Increase) Decrease in other assets  investing
    
    
    91
    
    
    
    (184
    )Net cash provided by (used for) investing activities
    
    
    8,446
    
    
    
    (25,851
    )Cash flows from financing activities:Repayments of long-term obligations
    
    
    (397
    )
    
    
    (136
    )Payments on capital lease
    
    
    (394
    )
    
    
    (1,276
    )Net proceeds from the issuance of common stock and reissuance of treasury stock
    
    
    47,711
    
    
    
    23,096Purchases of treasury stock
    
    
    (300,737
    )
    
    
    (91,421
    )Excess tax benefit from stock-based compensation plans
    
    
    8,970
    
    
    
    3,171Net cash used for financing activities
    
    
    (244,847
    )
    
    
    (66,566
    )Effect of exchange rate changes on cash
    
    
    (20,698
    )
    
    
    19,655Net increase (decrease) in cash and cash equivalents
    
    
    (46,109
    )
    
    
    97,791Cash and cash equivalents, beginning of year
    
    
    604,808
    
    
    
    355,303Cash and cash equivalents, end of period
    
    $
    558,699
    
    
    $
    453,094
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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 .
  6




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Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,(In thousands, except per share data)
    
    2008
    
    
    2007
    
    
    2008
    
    
    2007Cost of services
    
    $
    347
    
    
    $
    400
    
    
    $
    1,012
    
    
    $
    1,115Cost of messaging
    
    
    132
    
    
    
    121
    
    
    
    350
    
    
    
    431Sales and marketing
    
    
    1,429
    
    
    
    1,346
    
    
    
    4,145
    
    
    
    3,818Product development and engineering
    
    
    746
    
    
    
    763
    
    
    
    2,143
    
    
    
    2,105General and administrative
    
    
    3,098
    
    
    
    3,158
    
    
    
    9,195
    
    
    
    9,552Stock-based compensation expense included in total costs and expenses
    
    
    5,752
    
    
    
    5,788
    
    
    
    16,845
    
    
    
    17,021Tax benefit related to stock-based compensation expense
    
    
    (1,554
    )
    
    
    (1,675
    )
    
    
    (4,659
    )
    
    
    (4,712
    )Stock-based compensation expense included in net income
    
    $
    4,198
    
    
    $
    4,113
    
    
    $
    12,186
    
    
    $
    12,309Reduction of net income per share:Basic
    
    $
    0.05
    
    
    $
    0.05
    
    
    $
    0.15
    
    
    $
    0.14Diluted
    
    $
    0.05
    
    
    $
    0.04
    
    
    $
    0.14
    
    
    $
    0.13
  Net income per share .
 Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,(In thousands, except per share data)
    
    2008
    
    
    2007
    
    
    2008
    
    
    2007Net income
    
    $
    34,737
    
    
    $
    34,130
    
    
    $
    91,281
    
    
    $
    75,306Basic net income per share
    
    $
    0.44
    
    
    $
    0.38
    
    
    $
    1.10
    
    
    $
    0.83Shares used in computing basic net income per share
    
    
    79,245
    
    
    
    89,655
    
    
    
    82,868
    
    
    
    90,565Diluted net income per share
    
    $
    0.40
    
    
    $
    0.37
    
    
    $
    1.01
    
    
    $
    0.81Shares used in computing basic net income per share
    
    
    79,245
    
    
    
    89,655
    
    
    
    82,868
    
    
    
    90,565Dilutive effect of stock options, restricted stock and stock appreciation rights
    
    
    2,500
    
    
    
    2,059
    
    
    
    2,361
    
    
    
    2,184Dilutive effect of convertible subordinated debt
    
    
    4,743
    
    
    
    
    
    
    
    4,743
    
    
    
    Shares used in computing diluted net income per share
    
    
    86,488
    
    
    
    91,714
    
    
    
    89,972
    
    
    
    92,749
  Comprehensive Income/(Loss)
 Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,(In thousands)
    
    2008
    
    
    2007
    
    
    2008
    
    
    2007Net income
    
    $
    34,737
    
    
    $
    34,130
    
    
    $
    91,281
    
    
    $
    75,306Foreign currency translation gains/(losses)
    
    
    (46,074
    )
    
    
    17,719
    
    
    
    (25,699
    )
    
    
    30,168Change in unrealized gains/(losses) on marketable securities
    
    
    (35
    )
    
    
    194
    
    
    
    835
    
    
    
    312Comprehensive income/(loss)
    
    $
    (11,372
    )
    
    $
    52,043
    
    
    $
    66,417
    
    
    $
    105,786
 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
    
    $
    67,432
    
    
    $
    165
    
    
    $
    5
    
    
    
    
    
    
    $
    67,602Mobile and Embedded
    
    
    9,501
    
    
    
    15,836
    
    
    
    
    
    
    
    
    
    
    
    25,337Subtotal license fees
    
    
    76,933
    
    
    
    16,001
    
    
    
    5
    
    
    
    
    
    
    
    92,939Intersegment license revenues
    
    
    154
    
    
    
    7,904
    
    
    
    
    
    
    $
    (8,058
    )
    
    
    Total license fees
    
    
    77,087
    
    
    
    23,905
    
    
    
    5
    
    
    
    (8,058
    )
    
    
    92,939ServicesDirect service revenue
    
    
    135,115
    
    
    
    10,873
    
    
    
    307
    
    
    
    
    
    
    
    146,295Intersegment service revenues
    
    
    121
    
    
    
    8,435
    
    
    
    
    
    
    
    (8,556
    )
    
    
    Total services
    
    
    135,236
    
    
    
    19,308
    
    
    
    307
    
    
    
    (8,556
    )
    
    
    146,295MessagingDirect messaging revenue
    
    
    8
    
    
    
    
    
    
    
    44,736
    
    
    
    
    
    
    
    44,744Intersegment messaging revenues
    
    
    
    
    
    
    
    
    
    
    7
    
    
    
    (7
    )
    
    
    Total messaging
    
    
    8
    
    
    
    
    
    
    
    44,743
    
    
    
    (7
    )
    
    
    44,744Total revenues
    
    
    212,331
    
    
    
    43,213
    
    
    
    45,055
    
    
    
    (16,621
    )
    
    
    283,978Total allocated costs and expenses before amortization of other
purchased intangibles, purchased technology, cost of restructure
and unallocated costs
    
    
    158,548
    
    
    
    33,876
    
    
    
    40,498
    
    
    
    (16,621
    )
    
    
    216,301Operating income before amortization of other purchased
intangibles, purchased technology, cost of restructure and
unallocated costs
    
    
    53,783
    
    
    
    9,337
    
    
    
    4,557
    
    
    
    
    
    
    
    67,677Amortization of other purchased intangibles
    
    
    527
    
    
    
    1,023
    
    
    
    2,370
    
    
    
    
    
    
    
    3,920Amortization of purchased technology
    
    
    403
    
    
    
    3,594
    
    
    
    1,062
    
    
    
    
    
    
    
    5,059Operating income before cost of restructure and unallocated costs
    
    
    52,853
    
    
    
    4,720
    
    
    
    1,125
    
    
    
    
    
    
    
    58,698Cost of restructure - 2008 Activity
    
    
    39
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    39Operating income before unallocated costs
    
    
    52,814
    
    
    
    4,720
    
    
    
    1,125
    
    
    
    
    
    
    
    58,659Unallocated costs
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,752Operating income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    52,907Interest income, interest expense and other, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (285
    )Minority interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (21
    )Income before income taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    52,601
  Consolidated(In thousands)
    
    IPG
    
    
    iAS
    
    
    SY365
    
    
    Elimination
    
    
    TotalRevenues:License feesInfrastructure
    
    $
    58,096
    
    
    $
    106
    
    
    $
    
    
    
    
    
    
    
    $
    58,202Mobile and Embedded
    
    
    10,451
    
    
    
    16,488
    
    
    
    
    
    
    
    
    
    
    
    26,939Subtotal license fees
    
    
    68,547
    
    
    
    16,594
    
    
    
    
    
    
    
    
    
    
    
    85,141Intersegment license revenues
    
    
    44
    
    
    
    8,709
    
    
    
    
    
    
    $
    (8,753
    )
    
    
    Total license fees
    
    
    68,591
    
    
    
    25,303
    
    
    
    
    
    
    
    (8,753
    )
    
    
    85,141ServicesDirect service revenue
    
    
    123,985
    
    
    
    11,009
    
    
    
    844
    
    
    
    
    
    
    
    135,838Intersegment service revenues
    
    
    44
    
    
    
    7,222
    
    
    
    
    
    
    
    (7,266
    )
    
    
    Total services
    
    
    124,029
    
    
    
    18,231
    
    
    
    844
    
    
    
    (7,266
    )
    
    
    135,838Messaging
    
    
    
    
    
    
    
    
    
    
    34,287
    
    
    
    
    
    
    
    34,287Total revenues
    
    
    192,620
    
    
    
    43,534
    
    
    
    35,131
    
    
    
    (16,019
    )
    
    
    255,266Total allocated costs and expenses before amortization of other
purchased intangibles, purchased technology, cost of restructure
and unallocated costs
    
    
    148,602
    
    
    
    33,385
    
    
    
    31,994
    
    
    
    (16,019
    )
    
    
    197,962Operating income before amortization of other purchased
intangibles, purchased technology, cost of restructure and
unallocated costs
    
    
    44,018
    
    
    
    10,149
    
    
    
    3,137
    
    
    
    
    
    
    
    57,304Amortization of other purchased intangibles
    
    
    527
    
    
    
    1,046
    
    
    
    1,872
    
    
    
    
    
    
    
    3,445Amortization of purchased technology
    
    
    403
    
    
    
    2,074
    
    
    
    937
    
    
    
    
    
    
    
    3,414Operating income before cost of restructure and unallocated costs
    
    
    43,088
    
    
    
    7,029
    
    
    
    328
    
    
    
    
    
    
    
    50,445Cost of restructure - 2007 Activity
    
    
    17
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    17Operating income before unallocated costs
    
    
    43,071
    
    
    
    7,029
    
    
    
    328
    
    
    
    
    
    
    
    50,428Unallocated costs
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,788Operating income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    44,640Interest income, interest expense and other, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,710Income before income taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    50,350
 9




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##### Table of Contents



Consolidated(In thousands)
    
    IPG
    
    
    iAS
    
    
    SY365
    
    
    Elimination
    
    
    TotalRevenues:License feesInfrastructure
    
    $
    188,038
    
    
    $
    276
    
    
    $
    72
    
    
    
    
    
    
    $
    188,386Mobile and Embedded
    
    
    23,659
    
    
    
    49,533
    
    
    
    
    
    
    
    
    
    
    
    73,192Subtotal license fees
    
    
    211,697
    
    
    
    49,809
    
    
    
    72
    
    
    
    
    
    
    
    261,578Intersegment license revenues
    
    
    319
    
    
    
    19,703
    
    
    
    
    
    
    $
    (20,022
    )
    
    
    Total license fees
    
    
    212,016
    
    
    
    69,512
    
    
    
    72
    
    
    
    (20,022
    )
    
    
    261,578ServicesDirect service revenue
    
    
    398,717
    
    
    
    32,185
    
    
    
    1,384
    
    
    
    
    
    
    
    432,286Intersegment service revenues
    
    
    185
    
    
    
    25,160
    
    
    
    
    
    
    
    (25,345
    )
    
    
    Total services
    
    
    398,902
    
    
    
    57,345
    
    
    
    1,384
    
    
    
    (25,345
    )
    
    
    432,286MessagingDirect messaging revenue
    
    
    22
    
    
    
    
    
    
    
    132,953
    
    
    
    
    
    
    
    132,975Intersegment messaging revenues
    
    
    
    
    
    
    
    
    
    
    19
    
    
    
    (19
    )
    
    
    Total messaging
    
    
    22
    
    
    
    
    
    
    
    132,972
    
    
    
    (19
    )
    
    
    132,975Total revenues
    
    
    610,940
    
    
    
    126,857
    
    
    
    134,428
    
    
    
    (45,386
    )
    
    
    826,839Total allocated costs and expenses before amortization of other
purchased intangibles, purchased technology, cost of restructure
and unallocated costs
    
    
    467,841
    
    
    
    103,158
    
    
    
    120,908
    
    
    
    (45,386
    )
    
    
    646,521Operating income before amortization of other purchased
intangibles, purchased technology, cost of restructure and
unallocated costs
    
    
    143,099
    
    
    
    23,699
    
    
    
    13,520
    
    
    
    
    
    
    
    180,318Amortization of other purchased intangibles
    
    
    1,581
    
    
    
    3,069
    
    
    
    6,359
    
    
    
    
    
    
    
    11,009Amortization of purchased technology
    
    
    1,209
    
    
    
    7,904
    
    
    
    3,082
    
    
    
    
    
    
    
    12,195Operating income before cost of restructure and unallocated costs
    
    
    140,309
    
    
    
    12,726
    
    
    
    4,079
    
    
    
    
    
    
    
    157,114Cost of restructure - 2008 Activity
    
    
    99
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    99Operating income before unallocated costs
    
    
    140,210
    
    
    
    12,726
    
    
    
    4,079
    
    
    
    
    
    
    
    157,015Unallocated costs
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    16,804Operating income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    140,211Interest income, interest expense and other, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,354Minority interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7Income before income taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    142,572
  Consolidated(In thousands)
    
    IPG
    
    
    iAS
    
    
    SY365
    
    
    Elimination
    
    
    TotalRevenues:License feesInfrastructure
    
    $
    158,983
    
    
    $
    473
    
    
    $
    17
    
    
    
    
    
    
    $
    159,473Mobile and Embedded
    
    
    24,879
    
    
    
    47,589
    
    
    
    
    
    
    
    
    
    
    
    72,468Subtotal license fees
    
    
    183,862
    
    
    
    48,062
    
    
    
    17
    
    
    
    
    
    
    
    231,941Intersegment license revenues
    
    
    283
    
    
    
    20,740
    
    
    
    
    
    
    $
    (21,023
    )
    
    
    Total license fees
    
    
    184,145
    
    
    
    68,802
    
    
    
    17
    
    
    
    (21,023
    )
    
    
    231,941ServicesDirect service revenue
    
    
    365,814
    
    
    
    31,639
    
    
    
    3,266
    
    
    
    
    
    
    
    400,719Intersegment service revenues
    
    
    218
    
    
    
    21,280
    
    
    
    
    
    
    
    (21,498
    )
    
    
    Total services
    
    
    366,032
    
    
    
    52,919
    
    
    
    3,266
    
    
    
    (21,498
    )
    
    
    400,719Messaging
    
    
    
    
    
    
    
    
    
    
    97,666
    
    
    
    
    
    
    
    97,666Total revenues
    
    
    550,177
    
    
    
    121,721
    
    
    
    100,949
    
    
    
    (42,521
    )
    
    
    730,326Total allocated costs and expenses before amortization of other
purchased intangibles, purchased technology, cost of restructure and
unallocated costs
    
    
    439,265
    
    
    
    98,577
    
    
    
    95,009
    
    
    
    (42,521
    )
    
    
    590,330Operating income before amortization of other purchased intangibles,
purchased technology, cost of restructure and unallocated costs
    
    
    110,912
    
    
    
    23,144
    
    
    
    5,940
    
    
    
    
    
    
    
    139,996Amortization of other purchased intangibles
    
    
    1,581
    
    
    
    3,138
    
    
    
    5,572
    
    
    
    
    
    
    
    10,291Amortization of purchased technology
    
    
    1,208
    
    
    
    6,080
    
    
    
    2,784
    
    
    
    
    
    
    
    10,072Operating income (loss) before cost of restructure and unallocated costs
    
    
    108,123
    
    
    
    13,926
    
    
    
    (2,416
    )
    
    
    
    
    
    
    119,633
 10




---



##### Table of Contents



Consolidated(In thousands)
    
    IPG
    
    
    iAS
    
    
    SY365
    
    
    Elimination
    
    
    TotalReversal of restructure - 2007 Activity
    
    
    (30
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (30
    )Operating income (loss) before unallocated costs
    
    
    108,153
    
    
    
    13,926
    
    
    
    (2,416
    )
    
    
    
    
    
    
    119,663Unallocated costs
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    18,014Operating income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    101,649Interest income, interest expense and other, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    15,857Minority interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (20
    )Income before income taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    117,486
 Goodwill and Intangible Assets .
  Consolidated(In thousands)
    
    IPG
    
    
    iAS
    
    
    SY365
    
    
    TotalBalance at January 1, 2008
    
    $
    92,192
    
    
    $
    110,392
    
    
    $
    330,755
    
    
    $
    533,339Goodwill recorded on Cable & Wireless acquisition
    
    
    
    
    
    
    
    
    
    
    10,233
    
    
    
    10,233Reduction in goodwill recorded on Mobile 365 acquisition
    
    
    
    
    
    
    
    
    
    
    (155
    )
    
    
    (155
    )Foreign currency translation adjustments & other
    
    
    (576
    )
    
    
    (208
    )
    
    
    (1,085
    )
    
    
    (1,869
    )Balance at September 30, 2008
    
    $
    91,616
    
    
    $
    110,184
    
    
    $
    339,748
    
    
    $
    541,548
  September 30, 2008
    
    
    December 31, 2007Gross
    
    
    
    
    
    
    Net
    
    
    Gross
    
    
    
    
    
    
    NetCarrying
    
    
    Accumulated
    
    
    Carrying
    
    
    Carrying
    
    
    Accumulated
    
    
    Carrying(In thousands)
    
    Amount
    
    
    Amortization
    
    
    Amount
    
    
    Amount
    
    
    Amortization
    
    
    AmountPurchased technology
    
    $
    166,556
    
    
    $
    (119,883
    )
    
    $
    46,673
    
    
    $
    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
    
    
    
    (245
    )
    
    
    74
    
    
    
    319
    
    
    
    (165
    )
    
    
    154Customer lists
    
    
    114,556
    
    
    
    (47,537
    )
    
    
    67,019
    
    
    
    102,064
    
    
    
    (38,149
    )
    
    
    63,915Totals
    
    $
    288,531
    
    
    $
    (167,665
    )
    
    $
    120,866
    
    
    $
    277,919
    
    
    $
    (147,311
    )
    
    $
    130,608
  2008
    
    $
    30,3432009
    
    
    28,1622010
    
    
    25,7272011
    
    
    20,2172012
    
    
    13,184
  Litigation
  11




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##### Table of Contents



. Stock Repurchase Plan .
 Restructuring
  12




---



##### Table of Contents



(Dollars in thousands)
    
    2004
    
    2002
    
    2001
    
    Mobile 365Restructuring planAccrued liabilities at December 31, 2007
    
    $
    3,069
    
    
    $
    5,972
    
    
    $
    1,313
    
    
    $
    837Amounts paid
    
    
    (843
    )
    
    
    (1,928
    )
    
    
    (375
    )
    
    
    (613
    )Amounts added/(reversed)
    
    
    100
    
    
    
    (42
    )
    
    
    
    
    
    
    (106
    )Accrued liabilities at September 30, 2008
    
    $
    2,326
    
    
    $
    4,002
    
    
    $
    938
    
    
    $
    118
 Convertible Subordinated Notes
     Income Taxes
 
 13




---



##### Table of Contents



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
 14




---



##### Table of Contents



FSP FAS 157-2, Effective Date of FASB Statement No. 157
  FSP No. 157-3, Determining the Fair Value of a Financial Asset When the Market for That Asset
is Not Active
  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
    
    $
    403,368
    
    
    
    
    
    
    
    
    
    
    $
    403,368Available-for-sale cash investments
    
    
    59,172
    
    
    
    
    
    
    $
    19,348
    
    
    
    78,520Total
    
    $
    462,540
    
    
    
    
    
    
    $
    19,348
    
    
    $
    481,888
   15




---



##### Table of Contents



Auction RateSecuritiesBalance at December 31, 2007
    
    $
    27,364Reversal of unrealized loss in accumulated other comprehensive income
    
    
    1,536Impairment loss included in interest expense and other, net
    
    
    (9,552
    )Balance at September 30, 2008
    
    $
    19,348
 Self-Tender Offer
  Cable & Wireless Acquisition.
 16




---



##### 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
  19




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##### Table of Contents



FSP FAS 157-2, Effective Date of FASB Statement No. 157
  FSP No. 157-3, Determining the Fair Value of a Financial Asset When the Market for That Asset
is Not Active
  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 September 30,
    
    Nine Months ended September 30,Percent
    
    
    
    
    
    
    
    
    
    Percent2008
    
    2007
    
    Change
    
    2008
    
    2007
    
    ChangeLicense fees by segment:IPG
    
    $
    77.1
    
    
    $
    68.6
    
    
    
    12
    %
    
    $
    212.0
    
    
    $
    184.1
    
    
    
    15
    %IAS
    
    
    23.9
    
    
    
    25.3
    
    
    
    (6
    %)
    
    
    69.4
    
    
    
    68.8
    
    
    
    1
    %SY365
    
    
    0.0
    
    
    
    0.0
    *
    
    
    
    
    
    
    0.1
    
    
    
    0.0
    
    
    
    *Eliminations
    
    
    (8.1
    )
    
    
    (8.8
    )
    
    
    (8
    %)
    
    
    (20.0
    )
    
    
    (21.0
    )
    
    
    (5
    %)Total license fees
    
    $
    92.9
    
    
    $
    85.1
    
    
    
    9
    %
    
    $
    261.5
    
    
    $
    231.9
    
    
    
    13
    %Percentage of total revenues
    
    
    33
    %
    
    
    34
    %
    
    
    
    
    
    
    32
    %
    
    
    32
    %Services by segment:IPG
    
    $
    135.2
    
    
    $
    124.0
    
    
    
    9
    %
    
    $
    398.9
    
    
    $
    366.0
    
    
    
    9
    %IAS
    
    
    19.3
    
    
    
    18.3
    
    
    
    5
    %
    
    
    57.3
    
    
    
    52.9
    
    
    
    8
    %SY365
    
    
    0.3
    
    
    
    0.8
    
    
    
    (63
    %)
    
    
    1.4
    
    
    
    3.3
    
    
    
    (58
    %)Eliminations
    
    
    (8.5
    )
    
    
    (7.3
    )
    
    
    16
    %
    
    
    (25.3
    )
    
    
    (21.5
    )
    
    
    18
    %Total services
    
    $
    146.3
    
    
    $
    135.8
    
    
    
    8
    %
    
    $
    432.3
    
    
    $
    400.7
    
    
    
    8
    %Percentage of total revenues
    
    
    51
    %
    
    
    53
    %
    
    
    
    
    
    
    52
    %
    
    
    55
    %Messaging by segment:SY365
    
    $
    44.8
    
    
    $
    34.3
    
    
    
    31
    %
    
    $
    133.0
    
    
    $
    97.7
    
    
    
    36
    %Total messaging
    
    $
    44.8
    
    
    $
    34.3
    
    
    
    31
    %
    
    $
    133.0
    
    
    $
    97.7
    
    
    
    36
    %Percentage of total revenues
    
    
    16
    %
    
    
    13
    %
    
    
    
    
    
    
    16
    %
    
    
    13
    %Total revenues
    
    $
    284.0
    
    
    $
    255.2
    
    
    
    11
    %
    
    $
    826.8
    
    
    $
    730.3
    
    
    
    13
    %
 20




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##### Table of Contents



*
    
    Not meaningful        Geographical Revenues
(Dollars in millions)
 Three Months ended September 30,
    
    Nine Months ended September 30,Percent
    
    
    
    
    
    
    
    
    
    Percent2008
    
    2007
    
    Change
    
    2008
    
    2007
    
    ChangeNorth American
    
    $
    142.8
    
    
    $
    131.4
    
    
    
    9
    %
    
    $
    410.6
    
    
    $
    386.3
    
    
    
    6
    %Percentage of total revenues
    
    
    50
    %
    
    
    51
    %
    
    
    
    
    
    
    50
    %
    
    
    53
    %Total Outside North America
    
    $
    141.2
    
    
    $
    123.8
    
    
    
    14
    %
    
    $
    416.2
    
    
    $
    344.0
    
    
    
    21
    %Percentage of total revenues
    
    
    50
    %
    
    
    49
    %
    
    
    
    
    
    
    50
    %
    
    
    47
    %International: EMEA (Europe, Middle East and Africa)
    
    $
    96.8
    
    
    $
    86.4
    
    
    
    12
    %
    
    $
    292.2
    
    
    $
    235.9
    
    
    
    24
    %Percentage of total revenues
    
    
    34
    %
    
    
    34
    %
    
    
    
    
    
    
    35
    %
    
    
    32
    %Intercontinental: (Asia Pacific and Latin America)
    
    $
    44.4
    
    
    $
    37.4
    
    
    
    19
    %
    
    $
    124.0
    
    
    $
    108.1
    
    
    
    15
    %Percentage of total revenues
    
    
    16
    %
    
    
    15
    %
    
    
    
    
    
    
    15
    %
    
    
    15
    %Total revenues
    
    $
    284.0
    
    
    $
    255.2
    
    
    
    11
    %
    
    $
    826.8
    
    
    $
    730.3
    
    
    
    13
    %
 21




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22




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Costs and Expenses
(Dollars in millions)
 Three Months ended September 30,
    
    Nine Months ended September 30,Percent
    
    
    
    
    
    
    
    
    
    Percent2008
    
    2007
    
    Change
    
    2008
    
    2007
    
    ChangeCost of license fees
    
    $
    18.2
    
    
    $
    12.7
    
    
    
    43
    %
    
    $
    47.8
    
    
    $
    38.5
    
    
    
    24
    %Percentage of license fees revenues
    
    
    20
    %
    
    
    15
    %
    
    
    
    
    
    
    18
    %
    
    
    17
    %Cost of services
    
    $
    40.2
    
    
    $
    38.7
    
    
    
    4
    %
    
    $
    122.2
    
    
    $
    117.0
    
    
    
    4
    %Percentage of services revenues
    
    
    27
    %
    
    
    28
    %
    
    
    
    
    
    
    28
    %
    
    
    29
    %Cost of messaging
    
    $
    28.1
    
    
    $
    21.4
    
    
    
    31
    %
    
    $
    80.6
    
    
    $
    59.2
    
    
    
    36
    %Percentage of messaging revenues
    
    
    63
    %
    
    
    62
    %
    
    
    
    
    
    
    61
    %
    
    
    61
    %Sales and marketing
    
    $
    70.3
    
    
    $
    64.4
    
    
    
    9
    %
    
    $
    212.9
    
    
    $
    193.9
    
    
    
    10
    %Percentage of total revenues
    
    
    25
    %
    
    
    25
    %
    
    
    
    
    
    
    26
    %
    
    
    27
    %Product development and engineering
    
    $
    37.5
    
    
    $
    38.7
    
    
    
    (3
    %)
    
    $
    109.1
    
    
    $
    114.4
    
    
    
    (5
    %)Percentage of total revenues
    
    
    13
    %
    
    
    15
    %
    
    
    
    
    
    
    13
    %
    
    
    16
    %General and administrative
    
    $
    32.8
    
    
    $
    31.2
    
    
    
    5
    %
    
    $
    103.0
    
    
    $
    95.4
    
    
    
    8
    %Percentage of total revenues
    
    
    12
    %
    
    
    12
    %
    
    
    
    
    
    
    12
    %
    
    
    13
    %Amortization of other purchased intangibles
    
    $
    3.9
    
    
    $
    3.4
    
    
    
    15
    %
    
    $
    11.0
    
    
    $
    10.3
    
    
    
    7
    %Percentage of total revenues
    
    
    1
    %
    
    
    1
    %
    
    
    
    
    
    
    1
    %
    
    
    1
    %Cost (Reversal) of restructure
    
    $
    0.0
    
    
    $
    0.0
    
    
    
    *
    
    
    $
    0.1
    
    
    $
    (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 September 30,
    
    Nine Months ended September 30,Percent
    
    
    
    
    
    
    
    
    
    Percent2008
    
    2007
    
    Change
    
    2008
    
    2007
    
    ChangeOperating income by segment:IPG
    
    $
    52.8
    
    
    $
    43.1
    
    
    
    23
    %
    
    $
    140.2
    
    
    $
    108.1
    
    
    
    30
    %IAS
    
    
    4.7
    
    
    
    7.0
    
    
    
    (33
    %)
    
    
    12.7
    
    
    
    13.9
    
    
    
    (9
    %)SY365
    
    
    1.1
    
    
    
    0.3
    
    
    
    267
    %
    
    
    4.1
    
    
    
    (2.4
    )
    
    
    *Unallocated costs
    
    
    (5.7
    )
    
    
    (5.8
    )
    
    
    (2
    %)
    
    
    (16.8
    )
    
    
    (18.0
    )
    
    
    (7
    %)Total operating income:
    
    $
    52.9
    
    
    $
    44.6
    
    
    
    19
    %
    
    $
    140.2
    
    
    $
    101.6
    
    
    
    38
    %Percentage of total revenues
    
    
    19
    %
    
    
    17
    %
    
    
    
    
    
    
    17
    %
    
    
    14
    %
 
 *
    
    Not meaningful   24




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##### Table of Contents



Other Income (Expense), Net
(Dollars in millions)
 Three Months ended September 30,
    
    Nine Months ended September 30,Percent
    
    
    
    
    
    
    
    
    
    Percent2008
    
    2007
    
    Change
    
    2008
    
    2007
    
    ChangeInterest income
    
    $
    5.8
    
    
    $
    9.0
    
    
    
    (36
    %)
    
    $
    19.9
    
    
    $
    25.0
    
    
    
    (20
    %)Percentage of total revenues
    
    
    2
    %
    
    
    4
    %
    
    
    
    
    
    
    2
    %
    
    
    3
    %Interest expense and other, net
    
    $
    (6.1
    )
    
    $
    (3.3
    )
    
    
    85
    %
    
    $
    (17.5
    )
    
    $
    (9.1
    )
    
    
    92
    %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 September 30,
    
    Nine Months ended September 30,Percent
    
    
    
    
    
    
    
    
    
    Percent2008
    
    2007
    
    Change
    
    2008
    
    2007
    
    ChangeProvision for income taxes
    
    $
    17.9
    
    
    $
    16.2
    
    
    
    10
    %
    
    $
    51.3
    
    
    $
    42.2
    
    
    
    22
    %
     Net Income Per Share
(Dollars and shares in millions, except per share data)
 Three Months ended September 30,
    
    Nine Months ended September 30,Percent
    
    
    
    
    
    
    
    
    
    Percent2008
    
    2007
    
    Change
    
    2008
    
    2007
    
    ChangeNet income
    
    $
    34.7
    
    
    $
    34.1
    
    
    
    2
    %
    
    $
    91.3
    
    
    $
    75.3
    
    
    
    21
    %Percentage of total revenues
    
    
    12
    %
    
    
    13
    %
    
    
    
    
    
    
    11
    %
    
    
    10
    %Basic net income per share
    
    $
    0.44
    
    
    $
    0.38
    
    
    
    16
    %
    
    $
    1.10
    
    
    $
    0.83
    
    
    
    33
    %Diluted net income per share
    
    $
    0.40
    
    
    $
    0.37
    
    
    
    8
    %
    
    $
    1.01
    
    
    $
    0.81
    
    
    
    25
    %
 26




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Three Months ended September 30,
    
    Nine Months ended September 30,Percent
    
    
    
    
    
    
    
    
    
    Percent2008
    
    2007
    
    Change
    
    2008
    
    2007
    
    ChangeShares used in computing basic net income per share
    
    
    79.2
    
    
    
    89.7
    
    
    
    (12
    %)
    
    
    82.9
    
    
    
    90.6
    
    
    
    (8
    %)Shares used in computing diluted net income per share
    
    
    86.5
    
    
    
    91.7
    
    
    
    (6
    %)
    
    
    90.0
    
    
    
    92.7
    
    
    
    (3
    %)
 
 *
    
    Not meaningful    .
 Liquidity and Capital Resources
(Dollars in millions)
 Nine Months EndedSeptember 30,
    


    Percent2008
    
    2007
    
    ChangeWorking capital
    
    $
    451.4
    
    
    $
    537.9
    
    
    
    (16
    %)Cash and cash equivalents
    
    $
    558.7
    
    
    $
    453.1
    
    
    
    23
    %Net cash provided by operating activities
    
    $
    211.0
    
    
    $
    170.6
    
    
    
    24
    %Net cash provided by (used for) investing activities
    
    $
    8.4
    
    
    $
    (25.9
    )
    
    
    *Net cash provided by (used for) financing activities
    
    $
    (244.8
    )
    
    $
    (66.6
    )
    
    
    268
    %
 
 *
    
    Not meaningful     27




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Long-term Cash Investments and Auction-Rate Securities
    28




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29




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ITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURES OF MARKET RISK
        
 ITEM 4: CONTROLS AND PROCEDURES
     30




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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.
    Economic and credit market conditions in the U.S. and worldwide could adversely affect our
revenues.
  31




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If we fail to maintain or expand our relationships with strategic partners and indirect
distribution channels our license revenues could decline.
   System failures, delays, insufficient capacity 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.
  32




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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.
  33




---



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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.
   34




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Restructuring activities and reorganizations in our sales model or business units may not succeed
in increasing revenues and operating results.
   Our results of operations may depend on the compatibility of our products with other software
developed by third parties.
  We are subject to risks arising from our international operations.
  We 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.
  35




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We are subject to risks related to the terms of our 1.75% Convertible Subordinated Notes.
     Unanticipated changes in our tax rates could affect our future financial results.
  We face exposure to adverse movements in foreign currency exchange rates.
    36




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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 effect 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.
   37




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##### 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.
  38




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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.
  39




---



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Provisions of our corporate documents have anti-takeover effects that could prevent a change in
control.
  
 ITEM 2: UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
   40




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ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
  
 ITEM 5: OTHER INFORMATION
  
 ITEM 6: EXHIBITS
   41




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SIGNATURES
  November 7, 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) 42




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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
 43