##### Table of Contents



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 Quarter Ended June 30, 2005
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF
1934
 For
the transition period from ____________ to ______________
 Commission
File number 1-16493
 SYBASE, INC.
  Delaware
    
    94-2951005(State or Other Jurisdiction of
    
    (I.R.S. Employer Identification No.)Incorporation or Organization)
 
   þ o
 þ o
 90,460,685




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##### Table of Contents



PageForward-Looking Statements
    
    
    1Part I: Financial Information
    
    
    2Item 1: Financial Statements (Unaudited)
    
    
    2Condensed Consolidated Balance Sheets as of June 30, 2005 and December 31, 2004
    
    
    2Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2005 and 2004
    
    
    3Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2005 and 2004
    
    
    4Notes to Condensed Consolidated Financial Statements
    
    
    5Item 2: Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    14Item 3: Quantitative and Qualitative Disclosures of Market Risk
    
    
    30Item 4: Controls and Procedures
    
    
    31Part II: Other Information
    
    
    32Item 1: Legal Proceedings
    
    
    32Item 2: Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    32Item 4: Submission of Matters to a Vote of Security Holders
    
    
    32Item 6: Exhibits
    
    
    32Signatures
    
    
    33Exhibit IndexEXHIBIT 2.4EXHIBIT 12EXHIBIT 31.1EXHIBIT 31.2EXHIBIT 32




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1




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##### Table of Contents



PART I: FINANCIAL INFORMATION
 
 ITEM 1: FINANCIAL STATEMENTS
  
  June 30,2005
    
    December 31,(Dollars in thousands, except share and per share data)
    
    (Unaudited)
    
    2004Current assets:Cash and cash equivalents
    
    $
    417,436
    
    
    $
    321,417Short-term cash investments
    
    
    468,264
    
    
    
    158,217Total cash, cash equivalents and short-term cash investments
    
    
    885,700
    
    
    
    479,634Restricted cash
    
    
    5,098
    
    
    
    5,356Accounts receivable, net
    
    
    104,592
    
    
    
    157,897Deferred income taxes
    
    
    11,179
    
    
    
    11,205Prepaid expenses and other current assets
    
    
    19,999
    
    
    
    14,790Total current assets
    
    
    1,026,568
    
    
    
    668,882Long-term cash investments
    
    
    20,022
    
    
    
    33,998Restricted long-term cash investments
    
    
    2,600
    
    
    
    2,600Property, equipment and improvements, net
    
    
    58,543
    
    
    
    64,371Deferred income taxes
    
    
    40,822
    
    
    
    39,440Capitalized software, net
    
    
    65,629
    
    
    
    61,771Goodwill, net
    
    
    215,062
    
    
    
    214,110Other purchased intangibles, net
    
    
    64,455
    
    
    
    67,208Other assets
    
    
    39,166
    
    
    
    31,142Total assets
    
    $
    1,532,867
    
    
    $
    1,183,522Current liabilities:Accounts payable
    
    $
    10,010
    
    
    $
    11,962Accrued compensation and related expenses
    
    
    39,893
    
    
    
    43,632Accrued income taxes
    
    
    58,042
    
    
    
    32,595Other accrued liabilities
    
    
    71,706
    
    
    
    81,715Deferred revenue
    
    
    203,314
    
    
    
    208,741Total current liabilities
    
    
    382,965
    
    
    
    378,645Other liabilities
    
    
    34,330
    
    
    
    33,121Long-term deferred revenue
    
    
    5,899
    
    
    
    10,170Minority interest
    
    
    5,030
    
    
    
    5,030Long-term convertible debt
    
    
    460,000
    
    
    
    Commitments and contingent liabilitiesStockholders equity:Preferred stock, $0.001 par value, 8,000,000 shares authorized; none issued or outstanding
    
    
    
    
    
    
    Common stock, $0.001 par value, 200,000,000 shares authorized; 105,337,362 shares issued and
89,895,025 outstanding (2004-105,337,362 shares issued and 95,518,977 outstanding)
    
    
    105
    
    
    
    105Additional paid-in capital
    
    
    952,577
    
    
    
    940,806Accumulated deficit
    
    
    (39,075
    )
    
    
    (66,690
    )Accumulated other comprehensive income
    
    
    21,355
    
    
    
    49,356Cost of 15,442,337 shares of treasury stock (2004-9,818,385 shares)
    
    
    (274,497
    )
    
    
    (159,617
    )Unearned compensation
    
    
    (15,822
    )
    
    
    (7,404
    )Total stockholders equity
    
    
    644,643
    
    
    
    756,556Total liabilities and stockholders equity
    
    $
    1,532,867
    
    
    $
    1,183,522
  2




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Three Months Ended
    
    Six Months EndedJune 30,
    
    June 30,(Dollars in thousands, per share data)
    
    2005
    
    2004
    
    2005
    
    2004Revenues:License fees
    
    $
    67,915
    
    
    $
    60,427
    
    
    $
    130,623
    
    
    $
    118,332Services
    
    
    136,493
    
    
    
    127,603
    
    
    
    265,696
    
    
    
    252,857Total revenues
    
    
    204,408
    
    
    
    188,030
    
    
    
    396,319
    
    
    
    371,189Costs and expenses:Cost of license fees
    
    
    11,721
    
    
    
    15,558
    
    
    
    25,979
    
    
    
    29,138Cost of services
    
    
    39,928
    
    
    
    41,517
    
    
    
    80,268
    
    
    
    83,146Sales and marketing
    
    
    65,360
    
    
    
    62,194
    
    
    
    124,938
    
    
    
    120,434Product development and engineering
    
    
    34,305
    
    
    
    29,141
    
    
    
    67,832
    
    
    
    59,808General and administrative
    
    
    23,077
    
    
    
    22,634
    
    
    
    45,310
    
    
    
    43,577Amortization of other purchased intangibles
    
    
    1,677
    
    
    
    1,285
    
    
    
    3,354
    
    
    
    1,785Cost (Reversal) of restructure
    
    
    289
    
    
    
    (253
    )
    
    
    281
    
    
    
    (128
    )Total costs and expenses
    
    
    176,357
    
    
    
    172,076
    
    
    
    347,962
    
    
    
    337,760Operating income
    
    
    28,051
    
    
    
    15,954
    
    
    
    48,357
    
    
    
    33,429Interest income
    
    
    6,666
    
    
    
    2,648
    
    
    
    11,661
    
    
    
    5,546Interest expense and other, net
    
    
    (3,035
    )
    
    
    (261
    )
    
    
    (4,922
    )
    
    
    431Income before income taxes
    
    
    31,682
    
    
    
    18,341
    
    
    
    55,096
    
    
    
    39,406Provision for income taxes
    
    
    15,827
    
    
    
    5,519
    
    
    
    25,895
    
    
    
    13,398Net income
    
    $
    15,855
    
    
    $
    12,822
    
    
    $
    29,201
    
    
    $
    26,008Basic net income per share
    
    $
    0.18
    
    
    $
    0.13
    
    
    $
    0.32
    
    
    $
    0.27Shares used in computing basic net income per share
    
    
    88,905
    
    
    
    96,130
    
    
    
    90,787
    
    
    
    96,710Diluted net income per share
    
    $
    0.17
    
    
    $
    0.13
    
    
    $
    0.31
    
    
    $
    0.26Shares used in computing diluted net income per share
    
    
    91,323
    
    
    
    98,612
    
    
    
    93,231
    
    
    
    99,826
  3




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Six Months EndedJune 30,(Dollars in thousands)
    
    2005
    
    2004Cash and cash equivalents, beginning of year
    
    $
    321,417
    
    
    $
    315,404Cash flows from operating activities:Net income
    
    
    29,201
    
    
    
    26,008Adjustments to reconcile net income to net cash provided by operating activities:Depreciation and amortization
    
    
    38,097
    
    
    
    41,325Write-off of assets in restructuring
    
    
    
    
    
    
    427Loss on disposal of assets
    
    
    254
    
    
    
    224Deferred income taxes
    
    
    (3,247
    )
    
    
    (2,130
    )Amortization of deferred stock-based compensation
    
    
    3,397
    
    
    
    2,845Amortization of note issuance costs
    
    
    691
    
    
    
    Changes in assets and liabilities:Accounts receivable
    
    
    51,031
    
    
    
    28,868Other current assets
    
    
    (5,206
    )
    
    
    (580
    )Other assets  operating
    
    
    1,057
    
    
    
    1,322Accounts payable
    
    
    (1,955
    )
    
    
    3,793Accrued compensation and related expenses
    
    
    (3,736
    )
    
    
    (4,113
    )Accrued income taxes
    
    
    25,549
    
    
    
    (1,299
    )Other accrued liabilities
    
    
    (9,810
    )
    
    
    (25,814
    )Deferred revenues
    
    
    (9,907
    )
    
    
    10,175Other liabilities
    
    
    1,376
    
    
    
    3,221Net cash provided by operating activities
    
    
    116,792
    
    
    
    84,272Cash flows from investing activities:(Increase) Decrease in restricted cash
    
    
    258
    
    
    
    (95
    )Purchases of available-for-sale cash investments
    
    
    (520,887
    )
    
    
    (101,307
    )Maturities of available-for-sale cash investments
    
    
    193,384
    
    
    
    88,134Sales of available-for-sale cash investments
    
    
    30,958
    
    
    
    71,673Business combinations, net of cash acquired
    
    
    (6,754
    )
    
    
    (81,270
    )Purchases of property, equipment and improvements
    
    
    (8,230
    )
    
    
    (14,553
    )Proceeds from sale of fixed assets
    
    
    9
    
    
    
    110Capitalized software development costs
    
    
    (18,108
    )
    
    
    (17,772
    )(Increase) Decrease in other assets  investing
    
    
    (15
    )
    
    
    1Net cash used for investing activities
    
    
    (329,385
    )
    
    
    (55,079
    )Cash flows from financing activities:Proceeds from the issuance of convertible subordinated notes, net of issuance costs
    
    
    450,251
    
    
    
    Repayments of long-term obligations
    
    
    (959
    )
    
    
    (22,173
    )Payments on capital lease
    
    
    (158
    )
    
    
    Net proceeds from the issuance of common stock and reissuance of treasury stock
    
    
    18,442
    
    
    
    20,408Purchases of treasury stock
    
    
    (134,952
    )
    
    
    (84,417
    )Net cash provided by (used for) financing activities
    
    
    332,624
    
    
    
    (86,182
    )Effect of exchange rate changes on cash
    
    
    (24,012
    )
    
    
    (5,626
    )Net increase (decrease) in cash and cash equivalents
    
    
    96,019
    

    
    
    (62,615
    )Cash and cash equivalents, end of period
    
    
    417,436
    
    
    
    252,789Cash investments, end of period
    
    
    488,286
    
    
    
    198,681Total cash, cash equivalents and cash investments, end of period
    
    $
    905,722
    
    
    $
    451,470Supplemental disclosures:Interest paid
    
    $
    551
    
    
    $
    61Income taxes paid
    
    $
    14,388
    
    
    $
    18,918
  4




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Notes to Condensed Consolidated Financial Statements
 Basis of Presentation .
   Stock-Based Compensation .
  Three
    
    Three
    
    Six
    
    SixMonths
    
    Months
    
    Months
    
    MonthsEnded
    
    Ended
    
    Ended
    
    Ended(Dollars in thousands, except per share data)
    
    6/30/05
    
    6/30/04
    
    6/30/05
    
    6/30/04As reported net income  stock-based
employee compensation determined using the
intrinsic value method
    
    $
    15,855
    
    
    $
    12,822
    
    
    $
    29,201
    
    
    $
    26,008Add: Stock-based employee compensation cost, net
of tax, included in net income as reported
    
    $
    1,940
    
    
    $
    1,544
    
    
    $
    3,397
    
    
    $
    2,846Less: Pro-forma stock-based employee
compensation cost, net of tax, determined under
the fair value method
    
    $
    (4,329
    )
    
    $
    (7,110
    )
    
    $
    (8,780
    )
    
    $
    (13,963
    )Pro-forma net income  stock-based
employee compensation determined under the fair
value method
    
    $
    13,466
    
    
    $
    7,256
    
    
    $
    23,818
    
    
    $
    14,891Basic net income per shareAs reported
    
    $
    0.18
    
    
    $
    0.13
    
    
    $
    0.32
    
    
    $
    0.27Pro forma
    
    
    0.15
    
    
    
    0.08
    
    
    
    0.26
    
    
    

    0.15Diluted net income per shareAs reported
    
    $
    0.17
    
    
    $
    0.13
    
    
    $
    0.31
    
    
    $
    0.26Pro forma
    
    
    0.15
    
    
    
    0.07
    
    
    
    0.25
    
    
    
    0.15
 5




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Three
    
    Three
    
    Six
    
    SixMonths
    
    Months
    
    Months
    
    MonthsEnded
    
    Ended
    
    Ended
    
    Ended6/30/05
    
    6/30/04
    
    6/30/05
    
    6/30/04Expected volatility
    
    
    28.23
    %
    
    
    54.32
    %
    
    
    37.72
    %
    
    
    54.80
    %Risk-free interest rates
    
    
    3.80
    %
    
    
    3.35
    %
    
    
    3.78
    %
    
    
    3.02
    %Expected lives (years)
    
    
    4.25
    
    
    
    4.25
    
    
    
    4.25
    
    
    
    4.25Expected dividend yield
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
  Accounting for Stock
Issued to Employees Statement of Cash Flows
   Business Combinations.
  6




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##### Table of Contents



Net income per share .
 Three
    
    Three
    
    Six
    
    SixMonths
    
    Months
    
    Months
    
    MonthsEnded
    
    Ended
    
    Ended
    
    Ended(In thousands, except per share data)
    
    6/30/05
    
    6/30/04
    
    6/30/05
    
    6/30/04Net income
    
    $
    15,855
    
    
    $
    12,822
    
    
    $
    29,201
    
    
    $
    26,008Basic net income per share
    
    $
    0.18
    
    
    $
    0.13
    
    
    $
    0.32
    
    
    $
    0.27Shares used in computing basic net income per share
    
    
    88,905
    
    
    
    96,130
    
    
    
    90,787
    
    
    
    96,710Diluted net income per share
    
    $
    0.17
    
    
    $
    0.13
    
    
    $
    0.31
    
    
    $
    0.26Shares used in computing basic net income per share
    
    
    88,905
    
    
    
    96,130
    
    
    
    90,787
    
    
    
    96,710Dilutive effect of stock options
    
    
    2,418
    
    
    
    2,482
    
    
    
    2,444
    
    
    
    3,116Shares used in computing diluted net income per share
    
    
    91,323
    
    
    
    98,612
    
    
    
    93,231
    
    
    
    99,826
   Comprehensive Income (Loss)
 Three
    
    Three
    
    Six
    
    SixMonths
    
    Months
    
    Months
    
    MonthsEnded
    
    Ended
    
    Ended
    
    Ended(In thousands)
    
    6/30/05
    
    6/30/04
    
    6/30/05
    
    6/30/04Net income
    
    $
    15,855
    
    
    $
    12,822
    
    
    $
    29,201
    
    
    $
    26,008Foreign currency translation gains/(losses)
    
    
    (16,798
    )
    
    
    (4,622
    )
    
    
    (27,771
    )
    
    
    (6,944
    )Unrealized gains/(losses) on marketable securities
    
    
    20
    
    
    
    (1,028
    )
    
    
    (230
    )
    
    
    (830
    )Comprehensive income (loss)
    
    $
    (923
    )
    
    $
    7,172
    
    
    $
    1,200
    
    
    $
    18,234
  Guarantees
 Segment Information
 7




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8




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##### Table of Contents



Consolidated(In thousands)
    
    IPG
    
    iAS
    
    Elimination
    
    TotalRevenues:License feesInfrastructure
    
    $
    46,611
    
    
    $
    36
    
    
    
    
    
    
    $
    46,647Mobile and Embedded
    
    
    7,158
    
    
    
    12,766
    
    
    
    
    
    
    
    19,924Financial Fusion products
    
    
    1,344
    
    
    
    
    
    
    
    
    
    
    
    1,344Subtotal license fees
    
    
    55,113
    
    
    
    12,802
    
    
    
    
    
    
    
    67,915Intersegment license revenues
    
    
    21
    
    
    
    5,957
    
    
    
    (5,978
    )
    
    
    Total license fees
    
    
    55,134
    
    
    
    18,759
    
    
    
    (5,978
    )
    
    
    67,915ServicesDirect service revenue
    
    
    119,486
    
    
    
    9,500
    
    
    
    
    
    
    
    128,986Financial Fusion services
    
    
    7,507
    
    
    
    
    
    
    
    
    
    
    
    7,507Intersegment service revenues
    
    
    
    
    
    
    6,789
    
    
    
    (6,789
    )
    
    
    Total services
    
    
    126,993
    
    
    
    16,289
    
    
    
    (6,789
    )
    
    
    136,493Total revenues
    
    
    182,127
    
    
    
    35,048
    
    
    
    (12,767
    )
    
    
    204,408Total allocated costs and expenses before cost of restructure
and amortization of customer lists and purchased technology
    
    
    156,187
    
    
    
    28,098
    
    
    
    (12,767
    )
    
    
    171,518Operating income before cost of restructure and amortization of
customer lists and purchased technology
    
    
    25,940
    
    
    
    6,950
    
    
    
    
    
    
    
    32,890Amortization of other purchased intangibles
    
    
    500
    
    
    
    1,177
    
    
    
    
    
    
    
    1,677Amortization of purchased technology
    
    
    1,362
    
    
    
    979
    
    
    
    
    
    
    
    2,341Operating income before unallocated costs and cost of restructure
    
    
    24,078
    
    
    
    4,794
    
    
    
    
    
    
    
    28,872Cost of restructure  2005 Activity
    
    
    289
    
    
    
    
    
    
    
    
    
    
    
    289Operating income before unallocated costs
    
    
    23,789
    
    
    
    4,794
    
    
    
    
    
    
    
    28,583Unallocated costs
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    532Operating income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    28,051Interest income, interest expense and other, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,631Income before income taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    31,682
  Consolidated(In thousands)
    
    IPG
    
    iAS
    
    Elimination
    
    TotalRevenues:License feesInfrastructure
    
    $
    38,742
    
    
    $
    6
    
    
    
    
    
    
    $
    38,748Mobile and Embedded
    
    
    7,947
    
    
    
    11,330
    
    
    
    
    
    
    
    19,277Financial Fusion products
    
    
    2,402
    
    
    
    
    
    
    
    
    
    
    
    2,402Subtotal license fees
    
    
    49,091
    
    
    
    11,336
    
    
    
    
    
    
    
    60,427Intersegment license revenues
    
    
    21
    
    
    
    6,748
    
    
    
    (6,769
    )
    
    
    Total license fees
    
    
    49,112
    
    
    
    18,084
    
    
    
    (6,769
    )
    
    
    60,427ServicesDirect service revenue
    
    
    118,013
    
    
    
    4,258
    
    
    
    
    
    
    
    122,271Financial Fusion services
    
    
    5,332
    
    
    
    
    
    
    
    
    
    
    
    5,332Intersegment service revenues
    
    
    11
    
    
    
    6,656
    
    
    
    (6,667
    )
    
    
    Total services
    
    
    123,356
    
    
    
    10,914
    
    
    
    (6,667
    )
    
    
    127,603Total revenues
    
    
    172,468
    
    
    
    28,998
    
    
    
    (13,436
    )
    
    
    188,030Total allocated costs and expenses before cost of restructure
and amortization of customer lists and purchased technology
    
    
    155,953
    
    
    
    25,814
    
    
    
    (13,436
    )
    
    
    168,331Operating income before cost of restructure and amortization of
customer lists and purchased technology
    
    
    16,515
    
    
    
    3,184
    
    
    
    
    
    
    
    19,699Amortization of other purchased intangibles
    
    
    500
    
    
    
    785
    
    
    
    
    
    
    
    1,285Amortization of purchased technology
    
    
    3,731
    
    
    
    836
    
    
    
    
    
    
    
    4,567Operating income before unallocated costs and cost of restructure
    
    
    12,284
    
    
    
    1,563
    
    
    
    
    
    
    
    13,847Cost of restructure  2004 Activity
    
    
    429
    
    
    
    (2
    )
    
    
    
    
    
    
    427Operating income before unallocated costs
    
    
    11,855
    
    
    
    1,565
    
    
    
    
    
    
    
    13,420Unallocated cost savings
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,534
    )Operating income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    15,954Interest income, interest expense and other, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,387Income before income taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    18,341
 9




---



##### Table of Contents



Consolidated(In thousands)
    
    IPG
    
    iAS
    
    Elimination
    
    TotalRevenues:License feesInfrastructure
    
    $
    93,472
    
    
    $
    48
    
    
    
    
    
    
    $
    93,520Mobile and Embedded
    
    
    12,580
    
    
    
    22,886
    
    
    
    
    
    
    
    35,466Financial Fusion products
    
    
    1,637
    
    
    
    
    
    
    
    
    
    
    
    1,637Subtotal license fees
    
    
    107,689
    
    
    
    22,934
    
    
    
    
    
    
    
    130,623Intersegment license revenues
    
    
    43
    
    
    
    10,466
    
    
    
    (10,509
    )
    
    
    Total license fees
    
    
    107,732
    
    
    
    33,400
    
    
    
    (10,509
    )
    
    
    130,623ServicesDirect service revenue
    
    
    232,878
    
    
    
    18,440
    
    
    
    
    
    
    
    251,318Financial Fusion services
    
    
    14,378
    
    
    
    
    
    
    
    
    
    
    
    14,378Intersegment service revenues
    
    
    6
    
    
    
    13,288
    
    
    
    (13,294
    )
    
    
    Total services
    
    
    247,262
    
    
    
    31,728
    
    
    
    (13,294
    )
    
    
    265,696Total revenues
    
    
    354,994
    
    
    
    65,128
    
    
    
    (23,803
    )
    
    
    396,319Total allocated costs and expenses before cost of restructure
and amortization of customer lists and purchased technology
    
    
    305,049
    
    
    
    55,556
    
    
    
    (23,803
    )
    
    
    336,802Operating income before cost of restructure and amortization of
customer lists and purchased technology
    
    
    49,945
    
    
    
    9,572
    
    
    
    
    
    
    
    59,517Amortization of other purchased intangibles
    
    
    1,000
    
    
    
    2,354
    
    
    
    
    
    
    
    3,354Amortization of purchased technology
    
    
    5,093
    
    
    
    1,958
    
    
    
    
    
    
    
    7,051Operating income before unallocated costs and cost of restructure
    
    
    43,852
    
    
    
    5,260
    
    
    
    
    
    
    
    49,112Cost of restructure  2005 Activity
    
    
    281
    
    
    
    
    
    
    
    
    
    
    
    281Operating income before unallocated costs
    
    
    43,571
    
    
    
    5,260
    
    
    
    
    
    
    
    48,831Unallocated costs
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    474Operating income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    48,357Interest income, interest expense and other, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,739Income before income taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    55,096
  Consolidated(In thousands)
    
    IPG
    
    iAS
    
    Elimination
    
    TotalRevenues:License feesInfrastructure
    
    $
    82,122
    
    
    $
    46
    
    
    
    
    
    
    $
    82,168Mobile and Embedded
    
    
    13,000
    
    
    
    19,669
    
    
    
    
    
    
    
    32,669Financial Fusion products
    
    
    3,495
    
    
    
    
    
    
    
    
    
    
    
    3,495Subtotal license fees
    
    
    98,617
    
    
    
    19,715
    
    
    
    
    
    
    
    118,332Intersegment license revenues
    
    
    74
    
    
    
    10,971
    
    
    
    (11,045
    )
    
    
    Total license fees
    
    
    98,691
    
    
    
    30,686
    
    
    
    (11,045
    )
    
    
    118,332ServicesDirect service revenue
    
    
    235,538
    
    
    
    6,885
    
    
    
    
    
    
    
    242,423Financial Fusion services
    
    
    10,434
    
    
    
    
    
    
    
    
    
    
    
    10,434Intersegment service revenues
    
    
    11
    
    
    
    13,189
    
    
    
    (13,200
    )
    
    
    Total services
    
    
    245,983
    
    
    
    20,074
    
    
    
    (13,200
    )
    
    
    252,857Total revenues
    
    
    344,674
    
    
    
    50,760
    
    
    
    (24,245
    )
    
    
    371,189Total allocated costs and expenses before cost of restructure
and amortization of customer lists and purchased technology
    
    
    307,540
    
    
    
    46,199
    
    
    
    (24,245
    )
    
    
    329,494Operating income before cost of restructure and amortization of
customer lists and purchased technology
    
    
    37,134
    
    
    
    4,561
    
    
    
    
    
    
    
    41,695Amortization of other purchased intangibles
    
    
    1,000
    
    
    
    785
    
    
    
    
    
    
    
    1,785Amortization of purchased technology
    
    
    7,462
    
    
    
    936
    
    
    
    
    
    
    
    8,398Operating income before unallocated costs and cost of restructure
    
    
    28,672
    
    
    
    2,840
    
    
    
    
    
    
    
    31,512Cost of restructure  2004 Activity
    
    
    555
    
    
    
    (2
    )
    
    
    
    
    
    
    553Operating income before unallocated costs
    
    
    28,117
    
    
    
    2,842
    
    
    
    
    
    
    
    30,959Unallocated cost savings
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,470
    )Operating income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    33,429Interest income, interest expense and other, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,977Income before income taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    39,406
 10




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##### Table of Contents



Accounting for Goodwill .
  Consolidated(In thousands)
    
    IPG
    
    iAS
    
    TotalBalance at January 1, 2005
    
    $
    130,869
    
    
    $
    83,241
    
    
    $
    214,110Reduction in goodwill recorded on XcelleNet acquisition
    
    
    
    
    
    
    (388
    )
    
    
    (388
    )Goodwill recorded on ISDD acquisition
    
    
    2,025
    
    
    
    
    
    
    
    2,025Foreign currency translation adjustments
    
    
    (685
    )
    
    
    
    
    
    
    (685
    )Balance at June 30, 2005
    
    $
    132,209
    
    
    $
    82,853
    
    
    $
    215,062
  Gross
    
    
    
    
    
    
    
    
    
    Gross
    
    
    
    
    
    NetCarrying
    
    Accumulated
    
    Net
    
    Carrying
    
    Accumulated
    
    CarryingAmount
    
    Amortization
    
    Carrying Amount
    
    Amount
    
    Amortization
    
    Amount(In thousands)
    
    6/30/05
    
    6/30/05
    
    6/30/05
    
    12/31/04
    
    12/31/04
    
    12/31/04Purchased technology
    
    $
    111,497
    
    
    $
    (80,459
    )
    
    $
    31,038
    
    
    $
    103,850
    
    
    $
    (73,414
    )
    
    $
    30,436AvantGo tradenames
    
    
    3,100
    
    
    
    
    
    
    
    3,100
    
    
    
    3,100
    
    
    
    
    
    
    
    3,100XcelleNet tradenames
    
    
    4,000
    
    
    
    
    
    
    
    4,000
    
    
    
    4,000
    
    
    
    
    
    
    
    4,000Covenant not to compete
    
    
    2,800
    
    
    
    (2,178
    )
    
    
    622
    
    
    
    2,800
    
    
    
    (1,244
    )
    
    
    1,556Customer lists
    
    
    39,900
    
    
    
    (14,205
    )
    
    
    25,695
    
    
    
    39,900
    
    
    
    (11,784
    )
    
    
    28,116Totals
    
    $
    161,297
    
    
    $
    (96,842
    )
    
    $
    64,455
    
    
    $
    153,650
    
    
    $
    (86,442
    )
    
    $
    67,208
  2005
    
    $
    17,5772006
    
    
    10,2312007
    
    
    10,0642008
    
    
    10,0642009
    
    
    9,731
  Litigation.
 11




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##### Table of Contents



. Future Commitments
  Restructuring
    Terminationpayments toLease
    
    employees andcancellations and
    
    other related(Dollars in millions)
    
    commitments
    
    costs
    
    TOTALAccrued liabilities at December 31, 2004
    
    $
    7.2
    
    
    $
    0.3
    
    
    $
    7.5Amounts paid
    
    
    0.6
    
    
    
    0.3
    
    
    
    0.9Accrued liabilities at March 31, 2005
    
    $
    6.6
    
    
    $
    
    
    
    $
    6.6Amounts paid
    
    
    0.6
    
    
    
    
    
    
    
    0.6Accrued liabilities at June 30, 2005
    
    $
    6.0
    
    
    $
    
    
    
    $
    6.0
 12




---



##### Table of Contents



Leasecancellationsand(Dollars in millions)
    
    commitmentsAccrued liabilities at December 31, 2005
    
    $
    0.2Amounts paid
    
    
    Accrued liabilities at March 31, 2005
    
    $
    0.2Amounts paid
    
    
    0.1Amounts accrued
    
    
    0.3Accrued liabilities at June 30, 2005
    
    $
    0.4
   Leasecancellations and(Dollars in millions)
    
    commitments
    
    Other
    
    TOTALAccrued liabilities at December 31, 2004
    
    $
    12.7
    
    
    $
    0.2
    
    
    $
    12.9Amounts paid
    
    
    0.8
    
    
    
    
    
    
    
    0.8Accrued liabilities at March 31, 2005
    
    $
    11.9
    
    
    $
    0.2
    
    
    $
    12.1Amounts paid
    
    
    0.4
    
    
    
    
    
    
    
    0.4Accrued liabilities at June 30, 2005
    
    $
    11.5
    
    
    $
    0.2
    
    
    $
    11.7
   Leasecancellationsand(Dollars in millions)
    
    commitmentsAccrued liabilities at December 31, 2004
    
    $
    7.3Amounts paid
    
    
    0.8Accrued liabilities at March 31, 2005
    
    $
    6.5Amounts paid
    
    
    0.6Accrued liabilities at June 30, 2005
    
    $
    5.9
   Leasecancellationsand(Dollars in millions)
    
    commitmentsAccrued liabilities at December 31, 2004
    
    $
    3.4Amounts paid
    
    
    0.3Accrued liabilities at March 31, 2005
    
    $
    3.1Amounts paid
    
    
    0.3Accrued liabilities at June 30, 2005
    
    $
    2.8
 13




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##### Table of Contents



Convertible Subordinated Notes
       
 ITEM 2: MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 Overview
 
    
    Our Business
    14




---



##### Table of Contents




    
    Our Results
      
    
    Business Trends
     15




---



##### Table of Contents



Critical Accounting Policies and Estimates
  
    
    Revenue Recognition
   Residual Method Accounting
 Percentage of Completion Accounting
 Sublicense Revenues
 16




---



##### Table of Contents



Service Revenues
 
    
    Impairment of Goodwill and Other Intangible Assets
   
    
    Allowance for Doubtful Accounts
  
    
    Capitalized Software
  
    
    Restructuring
  17




---



##### Table of Contents




    
    Income Taxes
  
    
    Stock-Based Compensation
  
    
    Contingencies and Liabilities
  18




---



##### Table of Contents



Results of Operations
 Revenues
(Dollars in millions)
 Three
    
    Three
    
    
    
    
    
    Six
    
    SixMonths
    
    Months
    
    
    
    
    
    Months
    
    MonthsEnded
    
    Ended
    
    Percent
    
    Ended
    
    Ended
    
    Percent6/30/05
    
    6/30/04
    
    Change
    
    6/30/05
    
    6/30/04
    
    ChangeLicense fees by segment:IPG
    
    $
    55.1
    
    
    $
    49.1
    
    
    
    12
    %
    
    $
    107.7
    
    
    $
    98.7
    
    
    
    9
    %IAS
    
    
    18.8
    
    
    
    18.1
    
    
    
    4
    %
    
    
    33.4
    
    
    
    30.7
    
    
    
    9
    %Eliminations
    
    
    (6.0
    )
    
    
    (6.8
    )
    
    
    (12
    %)
    
    
    (10.5
    )
    
    
    (11.1
    )
    
    
    (5
    %)Total license fees
    
    $
    67.9
    
    
    $
    60.4
    
    
    
    12
    %
    
    $
    130.6
    
    
    $
    118.3
    
    
    
    10
    %Percentage of total revenues
    
    
    33
    %
    
    
    32
    %
    
    
    
    
    
    
    33
    %
    
    
    32
    %Services by segment:IPG
    
    $
    127.0
    
    
    $
    123.4
    
    
    
    3
    %
    
    $
    247.3
    
    
    $
    246.0
    
    
    
    *IAS
    
    
    16.3
    
    
    
    10.9
    
    
    
    50
    %
    
    
    31.7
    
    
    
    20.1
    
    
    
    58
    %Eliminations
    
    
    (6.8
    )
    
    
    (6.7
    )
    
    
    1
    %
    
    
    (13.3
    )
    
    
    (13.2
    )
    
    
    1
    %Total Services
    
    $
    136.5
    
    
    $
    127.6
    
    
    
    7
    %
    
    $
    265.7
    
    
    $
    252.9
    
    
    
    5
    %Percentage of total revenues
    
    
    67
    %
    
    
    68
    %
    
    
    
    
    
    
    67
    %
    
    
    68
    %Total revenues
    
    $
    204.4
    
    
    $
    188.0
    
    
    
    9
    %
    
    $
    396.3
    
    
    $
    371.2
    
    
    
    7
    %
 
 *
    
    Not meaningful   .
   19




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##### Table of Contents



Geographical Revenues
(Dollars in millions)
 Three
    
    Three
    
    
    
    
    
    Six
    
    SixMonths
    
    Months
    
    
    
    
    
    Months
    
    MonthsEnded
    
    Ended
    
    Percent
    
    Ended
    
    Ended
    
    Percent6/30/05
    
    6/30/04
    
    Change
    
    6/30/05
    
    6/30/04
    
    ChangeNorth American
    
    $
    115.8
    
    
    $
    110.9
    
    
    
    4
    %
    
    $
    225.8
    
    
    $
    216.5
    
    
    
    4
    %Percentage of total revenues
    
    
    57
    %
    
    
    59
    %
    
    
    
    
    
    
    57
    %
    
    
    58
    %International: EMEA (Europe, Middle East and Africa)
    
    $
    59.0
    
    
    $
    49.8
    
    
    
    18
    %
    
    $
    113.5
    
    
    $
    100.5
    
    
    
    13
    %Percentage of total revenues
    
    
    29
    %
    
    
    26
    %
    
    
    
    
    
    
    29
    %
    
    
    27
    %Intercontinental (Asia Pacific and Latin America)
    
    $
    29.6
    
    
    $
    27.3
    
    
    
    8
    %
    
    $
    57.0
    
    
    $
    54.2
    
    
    
    5
    %Percentage of total revenues
    
    
    14
    %
    
    
    15
    %
    
    
    
    
    
    
    14
    %
    
    
    15
    %Total Outside North America
    
    $
    88.6
    
    
    $
    77.1
    
    
    
    15
    %
    
    $
    170.5
    
    
    $
    154.7
    

    
    
    10
    %Percentage of total revenues
    
    
    43
    %
    
    
    41
    %
    
    
    
    
    
    
    43
    %
    
    
    42
    %Total revenues
    
    $
    204.4
    
    
    $
    188.0
    
    
    
    9
    %
    
    $
    396.3
    
    
    $
    371.2
    
    
    
    7
    %
     20




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##### Table of Contents



Costs and Expenses
(Dollars in millions)
 Three
    
    Three
    
    
    
    
    
    Six
    
    SixMonths
    
    Months
    
    
    
    
    
    Months
    
    MonthsEnded
    
    Ended
    
    Percent
    
    Ended
    
    Ended
    
    Percent6/30/05
    
    6/30/04
    
    Change
    
    6/30/05
    
    6/30/04
    
    ChangeCost of license fees
    
    $
    11.7
    
    
    $
    15.6
    
    
    
    (25
    %)
    
    $
    26.0
    
    
    $
    29.1
    
    
    
    (11
    %)Percentage of license fees revenues
    
    
    17
    %
    
    
    26
    %
    
    
    
    
    
    
    20
    %
    
    
    25
    %Cost of services
    
    $
    39.9
    
    
    $
    41.5
    
    
    
    (4
    %)
    
    $
    80.3
    
    
    $
    83.1
    
    
    
    (3
    %)Percentage of services revenues
    
    
    29
    %
    
    
    33
    %
    
    
    
    
    
    
    30
    %
    
    
    33
    %Sales and marketing
    
    $
    65.4
    
    
    $
    62.2
    
    
    
    5
    %
    
    $
    124.9
    
    
    $
    120.4
    
    
    
    4
    %Percentage of total revenues
    
    
    32
    %
    
    
    33
    %
    
    
    
    
    
    
    32
    %
    
    
    32
    %Product development and engineering
    
    $
    34.3
    
    
    $
    29.1
    
    
    
    18
    %
    
    $
    67.8
    
    
    $
    59.8
    
    
    
    13
    %Percentage of total revenues
    
    
    17
    %
    
    
    15
    %
    
    
    
    
    
    
    17
    %
    
    
    16
    %General and administrative
    
    $
    23.1
    
    
    $
    22.6
    
    
    
    2
    %
    
    $
    45.3
    
    
    $
    43.6
    
    
    
    4
    %Percentage of total revenues
    
    
    11
    %
    
    
    12
    %
    
    
    
    
    
    
    11
    %
    
    
    12
    %Amortization of other purchased intangibles
    
    $
    1.7
    
    
    $
    1.3
    
    
    
    31
    %
    
    $
    3.4
    
    
    $
    1.8
    
    
    
    89
    %Percentage of total revenues
    
    
    1
    %
    
    
    1
    %
    
    
    
    
    
    
    1
    %
    
    
    *Cost (Reversal) of restructure
    
    $
    0.3
    
    
    $
    (0.3
    )
    
    
    *
    
    
    $
    0.3
    
    
    $
    (0.1
    )
    
    
    *Percentage of total revenues
    
    
    *
    
    
    
    *
    
    
    
    
    
    
    
    *
    
    
    
    *
 
 *
    
    Not meaningful Cost of License Fees. .
 Cost of Services.
 Sales and Marketing.
 Product Development and Engineering.
 21




---



##### Table of Contents



General and Administrative.
 Amortization of Other Purchased Intangibles.
 Cost/(Reversal) of Restructuring.
 2003 Restructuring Activities.
  Operating Income
(Dollars in millions)
 Three
    
    Three
    
    
    
    
    
    Six
    
    SixMonths
    
    Months
    
    
    
    
    
    Months
    
    MonthsEnded
    
    Ended
    
    Percent
    
    Ended
    
    Ended
    
    Percent6/30/05
    
    6/30/04
    
    Change
    
    6/30/05
    
    6/30/04
    
    ChangeOperating income by segment:IPG
    
    $
    23.8
    
    
    $
    11.9
    
    
    
    100
    %
    
    $
    43.6
    
    
    $
    28.1
    
    
    
    55
    %IAS
    
    
    4.8
    
    
    
    1.6
    
    
    
    200
    %
    
    
    5.3
    
    
    
    2.8
    
    
    
    89
    %Unallocated costs
    
    
    (0.5
    )
    
    
    2.5
    
    
    
    *
    
    
    
    (0.5
    )
    
    
    2.5
    
    
    
    *Total operating income:
    
    $
    28.1
    
    
    $
    16.0
    
    
    
    76
    %
    
    $
    48.4
    
    
    $
    33.4
    
    
    
    45
    %Percentage of total revenues
    
    
    14
    %
    
    
    8
    %
    
    
    
    
    
    
    12
    %
    
    
    9
    %
 
 *
    
    Not meaningful  22




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##### Table of Contents



Other Income (Expense), Net
(Dollars in millions)
 Three
    
    Three
    
    
    
    
    
    Six
    
    SixMonths
    
    Months
    
    
    
    
    
    Months
    
    MonthsEnded
    
    Ended
    
    Percent
    
    Ended
    
    Ended
    
    Percent6/30/05
    
    6/30/04
    
    Change
    
    6/30/05
    
    6/30/04
    
    ChangeInterest income
    
    $
    6.7
    
    
    $
    2.6
    
    
    
    158
    %
    
    $
    11.7
    
    
    $
    5.5
    
    
    
    113
    %Percentage of total revenues
    
    
    3
    %
    
    
    1
    %
    
    
    
    
    
    
    3
    %
    
    
    1
    %Interest expense and other, net
    
    $
    (3.0
    )
    
    $
    (0.3
    )
    
    
    900
    %
    
    $
    (4.9
    )
    
    $
    0.4
    
    
    
    *Percentage of total revenues
    
    
    (1
    %)
    
    
    *
    
    
    
    
    
    
    
    (1
    %)
    
    
    *
 
 *
    
    Not meaningful   Provision for Income Taxes (Dollars in millions)
 Three
    
    Three
    
    
    
    
    
    Six
    
    SixMonths
    
    Months
    
    
    
    
    
    Months
    
    MonthsEnded
    
    Ended
    
    Percent
    
    Ended
    
    Ended
    
    Percent6/30/05
    
    6/30/04
    
    Change
    
    6/30/05
    
    6/30/04
    
    ChangeProvision for income taxes
    
    $
    15.8
    
    
    $
    5.5
    
    
    
    187
    %
    
    $
    25.9
    
    
    $
    13.4
    
    
    
    93
    %
    23




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##### Table of Contents



Net Income Per Share
(Dollars and shares in millions, except per share data)
 Three
    
    Three
    
    
    
    
    
    Six
    
    SixMonths
    
    Months
    
    
    
    
    
    Months
    
    MonthsEnded
    
    Ended
    
    Percent
    
    Ended
    
    Ended
    
    Percent6/30/05
    
    6/30/04
    
    Change
    
    6/30/05
    
    6/30/04
    
    ChangeNet income
    
    $
    15.9
    
    
    $
    12.8
    
    
    
    24
    %
    
    $
    29.2
    
    
    $
    26.0
    
    
    
    12
    %Percentage of total revenues
    
    
    8
    %
    
    
    7
    %
    
    
    
    
    
    
    7
    %
    
    
    7
    %Basic net income per share
    
    $
    0.18
    
    
    $
    0.13
    
    
    
    38
    %
    
    $
    0.32
    
    
    $
    0.27
    
    
    
    19
    %Diluted net income per share
    
    $
    0.17
    
    
    $
    0.13
    
    
    
    31
    %
    
    $
    0.31
    
    
    $
    0.26
    
    
    
    19
    %Shares used in computing basic net income per share
    
    
    88.9
    
    
    
    96.1
    
    
    
    (7
    %)
    
    
    90.8
    
    
    
    96.7
    
    
    
    (6
    %)Shares used in computing diluted net income per share
    
    
    91.3
    
    
    
    98.6
    
    
    
    (7
    %)
    
    
    93.2
    
    
    
    99.8
    
    
    
    (7
    %)
 
 *
    
    Not meaningful    Liquidity and Capital Resources
(Dollars in millions)
 Six
    
    SixMonths
    
    MonthsEnded
    
    Ended
    
    Percent6/30/05
    
    6/30/04
    
    ChangeWorking capital
    
    $
    643.6
    
    
    $
    165.0
    
    
    
    290
    %Cash, cash equivalents and cash investments
    
    $
    905.7
    
    
    $
    451.5
    
    
    
    101
    %Net cash provided by operating activities
    
    $
    116.8
    
    
    $
    84.3
    
    
    
    39
    %Net cash used for investing activities
    
    $
    329.4
    
    
    $
    55.1
    
    
    
    498
    %Net cash provided by (used for) financing activities
    
    $
    332.6
    
    
    $
    (86.2
    )
    
    
    *
 
 *
    
    Not meaningful   24




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##### Table of Contents



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




---



##### Table of Contents



Economic conditions in the U.S. and worldwide could adversely affect our revenues.
  If we fail to maintain or expand our relationships with strategic partners and indirect
distribution channels our license revenues could decline.
   Industry consolidation and other competitive pressures could affect prices or demand for our
products and services, and our business may be adversely affected.
   The ability to rapidly develop and bring to market advanced products and services that are
successful is crucial to maintaining our competitive position.
  26




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##### Table of Contents



If our existing customers cancel or fail to renew their technical support agreements, or if
customers do not license new or additional products on terms favorable to us, our technical support
revenues could be adversely affected.
  Unanticipated delays or accelerations in our sales cycles could result in significant fluctuations
in our quarterly operating results.
  We may encounter difficulties completing or integrating our acquisitions and strategic
relationships and may incur acquisition-related charges that could adversely affect our operating
results.
     Restructuring activities and reorganizations in our sales model or business units may not succeed
in increasing revenues and operating results.
  27




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##### 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 face exposure to adverse movements in foreign currency exchange rates.
   28




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##### Table of Contents



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




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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.
  
 ITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURES OF MARKET RISK
    30




---



##### Table of Contents



ITEM 4: CONTROLS AND PROCEDURES
     31




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##### Table of Contents



PART II: OTHER INFORMATION
 
 ITEM 1: LEGAL PROCEEDINGS
  
 ITEM 2: UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
   ISSUER PURCHASES OF EQUITY SECURITIES
 (d) Maximum(c) Total
    
    Number (orNumber of
    
    ApproximateShares (or
    
    Dollar Value)Units)
    
    of Shares (or(a) Total
    
    
    
    
    
    Purchased as
    
    Units) that MayNumber of
    
    (b) Average
    
    Part of Publicly
    
    Yet BeShares (or
    
    Price Paid per
    
    Announced
    
    PurchasedPeriod
    
    Units)
    
    Share (or Unit)
    
    Plans or
    
    Under the Plans(2005)
    
    Purchased (#)
    
    ($)
    
    Programs (#)
    
    or Programs ($)April 1 30
    
    
    0
    
    
    
    3⁄4
    
    
    
    3⁄4
    
    
    
    3⁄4May 1  31
    
    
    0
    
    
    
    3⁄4
    
    
    
    3⁄4
    
    
    
    3⁄4June 1  30
    
    
    250,000
    
    
    $
    20.04
    
    
    
    250,000
    
    
    $
    93,711,000Total
    
    
    250,000
    
    
    $
    20.04
    
    
    
    250,000
    
    
    $
    93,711,000
 
 ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
  1.
    
    Election of two Class I directors, each to serve a three-year term
expiring at the 2008 Annual Meeting of Stockholders or until a
successor is duly elected and qualified. John S. Chen and Alan B.
Salisbury were the only nominees, and each was elected (79,142,385
votes were cast for the election of Mr. Chen and 2,777,340 were
withheld; and 79,145,696 votes were cast for the election of Mr.
Salisbury and 2,774,029 were withheld). There were no abstentions or
broker non-votes. In addition to these directors, our boards other
incumbent directors (Cecilia Claudio, L. William Krause, Robert P.
Wayman, Richard C. Alberding, Linda K. Yates and Jack E. Sum) had
terms that continued after the 2005 Annual Meeting.2.
    
    Approval of amendments to the Sybase, Inc. Amended and Restated 2003
Stock Plan, including increasing the share reserve by 3,000,000 shares
(44,645,605 votes for; 18,677,665 against; 1,391,329 abstentions and
no broker non-votes).3.
    
    Approval of a 1,600,000 share increase in the share reserve of the
Sybase, Inc. Employee Stock Purchase Plans (60,162,779 for; 3,168,255
against; 1,384,566 abstentions and no broker non-votes).4.
    
    Approval of the Sybase, Inc. Executive Leadership Team Incentive Plan
(77,521,159 for; 2,815,603 against; 1,582,961 abstentions and no
broker non-votes).5.
    
    Ratification of the appointment of Ernst & Young LLP as independent
auditors for the year ending December 31, 2005 (81,060,184 for;
828,562 against; 30,978 abstentions and no broker non-votes).
 
 ITEM 6: EXHIBITS
   32




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##### Table of Contents



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




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##### Table of Contents



EXHIBIT INDEX
 Exhibit No.
    
    Description2.4
    
    Agreement and Plan of Merger by and
among Sybase, Inc., Ernst Acquisition Corporation and Extended
Systems Incorporated, dated as of July 28, 200512
    
    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