##### 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 MARCH 31, 2010
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 FOR THE TRANSITION PERIOD FROM      TO
 COMMISSION FILE NUMBER: 1-16493
 SYBASE, INC.
 
  Delaware
    
    94-2951005(State of Incorporation)
    
    (I.R.S. Employer Identification No.)
 
  
 
 þ o
 o 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




---



##### 



PageForward-Looking Statements
    
    
    2Part I: Financial InformationItem 1: Financial Statements (Unaudited)Condensed Consolidated Balance Sheets as of March 31, 2010 and December 31, 2009
    
    
    3Condensed Consolidated Statements of Operations for the three months ended March 31, 2010 and 2009
    
    
    4Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2010 and 2009
    
    
    5Notes to Condensed Consolidated Financial Statements
    
    
    6Item 2: Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    18Item 3: Quantitative and Qualitative Disclosures of Market Risk
    
    
    29Item 4: Controls and Procedures
    
    
    29Part II: Other InformationItem 1: Legal Proceedings
    
    
    30Item 1 (A): Risk Factors
    
    
    30Item 2: Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    40Item 3: Defaults Upon Senior Securities
    
    
    41Item 4: Submission of Matters to a Vote of Security Holders
    
    
    41Item 5: Other Information
    
    
    41Item 6: Exhibits
    
    
    41Signatures
    
    
    42Exhibit Index
    
    
    43EX-31.1EX-31.2EX-32
  1




---



##### Table of Contents



www.sec.gov
 www.sybase.com
  2




---



##### Table of Contents



PART I: FINANCIAL INFORMATION
 
 ITEM 1:
    
    FINANCIAL STATEMENTS
  
  March 31,2010
    
    
    December 31,(In thousands, except share and per share data)
    
    (Unaudited)
    
    
    2009Current assets:Cash and cash equivalents
    
    $
    1,022,719
    
    
    $
    947,152Short-term investments
    
    
    244,058
    
    
    
    239,232Total cash, cash equivalents and short-term investments
    
    
    1,266,777
    
    
    
    1,186,384Restricted cash
    
    
    3,813
    
    
    
    17,983Accounts receivable, net
    
    
    235,185
    
    
    
    273,457Deferred income taxes
    
    
    48,815
    
    
    
    58,494Prepaid income taxes
    
    
    6,113
    
    
    
    5,754Prepaid expenses and other current assets
    
    
    21,420
    
    
    
    18,685Total current assets
    
    
    1,582,123
    
    
    
    1,560,757Long-term investments
    
    
    49,335
    
    
    
    86,091Property, equipment and improvements, net
    
    
    65,799
    
    
    
    67,863Deferred income taxes
    
    
    6,751
    
    
    
    7,188Capitalized software, net
    
    
    89,292
    
    
    
    86,866Goodwill
    
    
    530,071
    
    
    
    532,375Other purchased intangibles, net
    
    
    81,216
    
    
    
    88,012Other assets
    
    
    36,486
    
    
    
    38,732Total assets
    
    $
    2,441,073
    
    
    $
    2,467,884Current liabilities:Accounts payable
    
    $
    26,082
    
    
    $
    20,202Accrued compensation and related expenses
    
    
    63,513
    
    
    
    84,426Accrued income taxes
    
    
    5,118
    
    
    
    24,484Other accrued liabilities
    
    
    95,271
    
    
    
    138,931Deferred revenue
    
    
    267,709
    
    
    
    234,761Convertible subordinated notes
    
    
    389,721
    
    
    
    417,321Total current liabilities
    
    
    847,414
    
    
    
    920,125Other liabilities
    
    
    41,612
    
    
    
    42,628Deferred income taxes
    
    
    54,624
    
    
    
    49,611Long-term tax liability
    
    
    63,058
    
    
    
    58,350Long-term deferred revenue
    
    
    5,728
    
    
    
    5,855Convertible senior notes
    
    
    332,743
    
    
    
    329,565Temporary equity  convertible subordinated notes
    
    
    
    
    
    
    2,547Commitments 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 81,653,801 outstanding (2009-105,337,362 shares issued and 80,426,337 outstanding)
    
    
    105
    
    
    
    105Additional paid-in capital
    
    
    1,171,449
    
    
    
    1,175,206Accumulated earnings
    
    
    532,187
    
    
    
    497,728Accumulated other comprehensive income
    
    
    29,249
    
    
    
    49,302Cost of 23,683,561 shares of treasury stock (2009-24,911,025 shares)
    
    
    (642,250
    )
    
    
    (668,275
    )Total Sybase, Inc. stockholders equity
    
    
    1,090,740
    
    
    
    1,054,066Noncontrolling interest
    
    
    5,154
    
    
    
    5,137Total equity
    
    
    1,095,894
    
    
    
    1,059,203Total liabilities and stockholders equity
    
    $
    2,441,073
    
    
    $
    2,467,884
  3




---



##### Table of Contents



Three Months EndedMarch 31,(Dollars in thousands, except per share data)
    
    2010
    
    
    2009Revenues:License fees
    
    $
    98,551
    
    
    $
    89,276Services
    
    
    142,387
    
    
    
    134,974Messaging
    
    
    53,014
    
    
    
    43,263Total revenues
    
    
    293,952
    
    
    
    267,513Costs and expenses:Cost of license fees
    
    
    13,155
    
    
    
    12,281Cost of services
    
    
    36,458
    
    
    
    36,829Cost of messaging
    
    
    36,573
    
    
    
    26,973Sales and marketing
    
    
    61,353
    
    
    
    64,214Product development and engineering
    
    
    36,457
    
    
    
    34,744General and administrative
    
    
    32,182
    
    
    
    31,862Amortization of other purchased intangibles
    
    
    3,698
    
    
    
    3,723Cost (Reversal) of restructure
    
    
    4
    
    
    
    (10
    )Total costs and expenses
    
    
    219,880
    
    
    
    210,616Operating income
    
    
    74,072
    
    
    
    56,897Interest income
    
    
    1,515
    
    
    
    2,176Interest expense and other, net
    
    
    (11,081
    )
    
    
    (9,279
    )Total other-than-temporary impairment losses
    
    
    (366
    )
    
    
    (1,798
    )Losses recognized in other comprehensive income
    
    
    347
    
    
    
    Total other-than-temporary impairment losses recognized in earnings
    
    
    (19
    )
    
    
    (1,798
    )Income before income taxes
    
    
    64,487
    
    
    
    47,996Provision for income taxes
    
    
    24,614
    
    
    
    19,895Net income
    
    $
    39,873
    
    
    $
    28,101Less: Net income attributable to the noncontrolling interest
    
    
    17
    
    
    
    16Net income attributable to Sybase, Inc.
    
    $
    39,856
    
    
    $
    28,085Basic net income per share attributable to Sybase, Inc. common stockholders
    
    $
    0.49
    
    
    $
    0.35Shares used in computing basic net income per share attributable to Sybase, Inc. common stockholders
    
    
    80,726
    
    
    
    79,809Diluted net income per share attributable to Sybase, Inc. common stockholders
    
    $
    0.45
    
    
    $
    0.33Shares used in computing diluted net income per share attributable to Sybase, Inc. common stockholders
    
    
    86,522
    
    
    
    84,451
  4




---



##### Table of Contents



SYBASE, INC.
 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
 Three Months EndedMarch 31,(Dollars in thousands)
    
    2010
    
    
    2009Cash flows from operating activities:Net income
    
    $
    39,873
    
    
    $
    28,101Adjustments to reconcile net income to net cash provided by operating activities:Depreciation and amortization
    
    
    23,393
    
    
    
    22,491Loss on disposal of assets
    
    
    18
    
    
    
    19Impairment of investment in auction rate securities
    
    
    19
    
    
    
    1,799Deferred income taxes
    
    
    15,145
    
    
    
    2,587Stock-based compensation  restricted stock
    
    
    3,730
    
    
    
    2,718Stock-based compensation  all other
    
    
    3,040
    
    
    
    3,032Tax benefit from stock-based compensation plans
    
    
    6,871
    
    
    
    2,368Excess tax benefit from stock-based compensation plans
    
    
    (6,523
    )
    
    
    (2,453
    )Imputed interest expense for convertible notes
    
    
    5,673
    
    
    
    4,519Amortization of note issuance costs
    
    
    637
    
    
    
    396Changes in assets and liabilities:Accounts receivable
    
    
    35,877
    
    
    
    41,832Prepaid income taxes
    
    
    (359
    )
    
    
    (1,824
    )Other current assets
    
    
    (2,735
    )
    
    
    (1,730
    )Other assets  operating
    
    
    1,615
    
    
    
    1,054Accounts payable
    
    
    5,880
    
    
    
    (4,941
    )Accrued compensation and related expenses
    
    
    (21,156
    )
    
    
    (20,610
    )Accrued income taxes
    
    
    (14,658
    )
    
    
    7,412Other accrued liabilities
    
    
    (28,243
    )
    
    
    (18,285
    )Deferred revenues
    
    
    32,324
    
    
    
    29,589Other liabilities
    
    
    (1,129
    )
    
    
    (693
    )Net cash provided by operating activities
    
    
    99,292
    
    
    
    97,381Cash flows from investing activities:(Increase) Decrease in restricted cash
    
    
    (830
    )
    
    
    118Purchases of investments
    
    
    (37,877
    )
    
    
    (8,273
    )Maturities of investments
    
    
    64,428
    
    
    
    Sales of investments
    
    
    5,272
    
    
    
    807Business combinations, net of cash acquired
    
    
    (1,980
    )
    
    
    Purchases of property, equipment and improvements
    
    
    (5,111
    )
    
    
    (4,428
    )Capitalized software development costs
    
    
    (11,864
    )
    
    
    (12,816
    )Increase in other assets  investing
    
    
    (6
    )
    
    
    (19
    )Net cash provided by (used for) investing activities
    
    
    12,032
    
    
    
    (24,611
    )Cash flows from financing activities:Extinguishment and conversion of convertible subordinated notes
    
    
    (50,077
    )
    
    
    Repayments of long-term obligations
    
    
    (139
    )
    
    
    (696
    )Net proceeds from the issuance of common stock and reissuance of treasury stock
    
    
    20,628
    
    
    
    16,761Purchases of treasury stock
    
    
    
    
    
    
    (15,049
    )Excess tax benefit from stock-based compensation plans
    
    
    6,523
    
    
    
    2,453Net cash provided by (used for) financing activities
    
    
    (23,065
    )
    
    
    3,469Effect of exchange rate changes on cash
    
    
    (12,692
    )
    
    
    (11,664
    )Net increase in cash and cash equivalents
    
    
    75,567
    
    
    
    64,575Cash and cash equivalents, beginning of year
    
    
    947,152
    
    
    
    611,364Cash and cash equivalents, end of period
    
    $
    1,022,719
    
    
    $
    675,939
  5




---



##### Table of Contents



Notes to Condensed Consolidated Financial Statements
 Basis of Presentation .
   Net Income Per Share Attributable to Sybase, Inc Common Stockholders.
   1.
    
    Assume vesting of restricted stock using the treasury stock method.2.
    
    Assume unvested restricted stock awards are not vested, and allocate earnings to common
shares and unvested restricted stock awards using the two-class method.
  6




---



##### Table of Contents



Three Months EndedMarch 31,(In thousands, except per share data)
    
    2010
    
    
    2009Basic:Net income attributable to Sybase, Inc.
    
    $
    39,856
    
    
    $
    28,085Less: Net income allocated to participating securities
    
    
    (645
    )
    
    
    (455
    )Net income attributable to Sybase, Inc. common stockholders  basic
    
    $
    39,211
    
    
    $
    27.630Basic net income per share attributable to Sybase, Inc. common stockholders
    
    $
    0.49
    
    
    $
    0.35Shares used
in computing basic net income per share attributable to Sybase, Inc. common stockholders
    
    
    80,726
    
    
    
    79,809Diluted:Net income attributable to Sybase, Inc.
    
    $
    39,856
    
    
    $
    28,085Less: Net income allocated to participating securities
    
    
    (602
    )
    
    
    Net income attributable to Sybase, Inc. common stockholders  diluted
    
    $
    39,254
    
    
    $
    28,085Diluted net income per share attributable to Sybase, Inc. common stockholders
    
    $
    0.45
    
    
    $
    0.33Shares used
in computing basic net income per share attributable to Sybase, Inc. common stockholders
    
    
    80,726
    
    
    
    79,809Dilutive effect of stock options, restricted stock and stock appreciation rights
    
    
    3,070
    
    
    
    2,008Dilutive effect of 2005 Notes
    
    
    3,606
    
    
    
    2,634Shares used
in computing diluted net income per share attributable to Sybase, Inc. common stockholders under treasury stock method
    
    
    87,402
    
    
    
    84,451Participating securities excluded under two-class method
    
    
    (880
    )
    
    
    N/AShares used in computing diluted net income per share attributable to Sybase,
Inc. common stockholders under two-class method
    
    
    86,522
    
    
    
    N/A
  Comprehensive Income
 Three Months EndedMarch 31,(In thousands)
    
    2010
    
    
    2009Net income
    
    $
    39,873
    
    
    $
    28,101Foreign currency translation losses
    
    
    (19,961
    )
    
    
    (14,756
    )Losses recognized in (reclassified from) other comprehensive income
    
    
    (347
    )
    
    
    Change in unrealized gains (losses) on all other marketable securities
    
    
    255
    
    
    
    (5
    )Comprehensive income
    
    
    19,820
    
    
    
    13,340Less: Comprehensive income attributable to noncontrolling interest
    
    
    17
    
    
    
    16Comprehensive income attributable to Sybase, Inc.
    
    $
    19,803
    
    
    $
    13,324
   March 31,
    
    
    December 31,(In thousands)
    
    2010
    
    
    2009Foreign currency translation
    
    $
    32,882
    
    
    $
    52,843Noncredit other-than-temporary impairment, net of income taxes
    
    
    (3,296
    )
    
    
    (2,949
    )Net unrealized gains on other marketable securities, net of income taxes
    
    
    317
    
    
    
    62Pension liability adjustments
    
    
    (654
    )
    
    
    (654
    )$
    29,249
    
    
    $
    49,302
 Recent Accounting Pronouncements
  7




---



##### Table of Contents



Cash, Cash Equivalents, and Short and Long-term Investments.
 Cash and Cash Equivalents
  Short and Long-Term Investments
     (1)
    
    Temporary;(2)
    
    Credit related other-than-temporary impairments (OTTI); or(3)
    
    Noncredit related OTTI.
  Temporary Changes in Fair Value
  Credit and Noncredit OTTI
  
    
    If a debt securitys market value is below amortized cost and the Company either intends
to sell the security or it is more likely than not that the Company will be required to
sell the security before its anticipated recovery, the Company records an OTTI charge to
earnings for the entire amount of the impairment.
    
    For the remaining debt securities, if an OTTI exists, the Company separates the OTTI
into two portions:
 o
    
    Credit Loss Portion: The credit loss portion is the amount that the
Companys best estimate of the present value of cash flows expected to be collected
from the security falls below the amortized cost of the security. The credit loss
portion is recorded as a charge to earnings.o
    
    NonCredit Loss Portion: The noncredit loss portion is the residual amount
of the OTTI, and is recorded as a separate component of other comprehensive income
(loss).
 8




---



##### Table of Contents



Amortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    OTTI
    
    
    Fair Market(In thousands)
    
    Cost
    
    
    Gains
    
    
    Losses
    
    
    In OCI
    
    
    ValueMarch 31, 2010:Cash and cash equivalents
    
    $
    1,022,719
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    1,022,719Short-term bank deposits
(maturities of one year or less)
    
    
    41,035
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    41,035Short-term corporate notes and bonds
(maturities of one year or less)
    
    
    55,727
    
    
    
    32
    
    
    
    (16
    )
    
    
    
    
    
    
    55,743Short-term U.S. government obligations
(maturities of one year or less)
    
    
    134,075
    
    
    
    199
    
    
    
    
    
    
    
    
    
    
    
    134,274Trading securities
    
    
    13,006
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    13,006Long-term corporate notes and bonds
(maturities over one year)
    
    
    52,427
    
    
    
    113
    
    
    
    (12
    )
    
    
    (3,296
    )
    
    
    49,232Long-term equity security
    
    
    103
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    103$
    1,319,092
    
    
    $
    344
    
    
    $
    (28
    )
    
    $
    (3,296
    )
    
    $
    1,316,112December 31, 2009:Cash and cash equivalents
    
    $
    947,155
    
    
    $
    2
    
    
    $
    (5
    )
    
    $
    
    
    
    $
    947,152Short-term bank deposits
(maturities of one year or less)
    
    
    43,512
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    43,512Short-term corporate notes and bonds
(maturities of one year or less)
    
    
    119,616
    
    
    
    82
    
    
    
    (29
    )
    
    
    
    
    
    
    119,669Short-term U.S. government obligations
(maturities of one year or less)
    
    
    64,071
    
    
    
    43
    
    
    
    (7
    )
    
    
    
    
    
    
    64,107Trading securities
    
    
    11,944
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    11,944Long-term corporate notes and bonds
(maturities over one year)
    
    
    18,783
    
    
    
    
    
    
    
    (5
    )
    
    
    (2,949
    )
    
    
    15,829Long-term U.S. government obligations
(maturities over one year)
    
    
    70,179
    
    
    
    11
    
    
    
    (31
    )
    
    
    
    
    
    
    70,159Long-term equity security
    
    
    103
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    103$
    1,275,363
    
    
    $
    138
    
    
    $
    (77
    )
    
    $
    (2,949
    )
    
    $
    1,272,475
  In a Loss Position for
    
    In a Loss Position forLess Than 12 Months
    
    Greater Than 12 MonthsGross Unrealized
    
    
    
    
    
    Gross Unrealized(In thousands)
    
    Fair Value
    
    Losses
    
    Fair Value
    
    LossesCorporate notes and bonds
    
    $
    25,103
    
    
    $
    (28
    )
    
    $
    12,844
    
    
    $
    (3,296
    )
  9




---



##### Table of Contents



In a Loss Position for
    
    
    In a Loss Position forLess Than 12 Months
    
    
    Greater Than 12 MonthsGross Unrealized
    
    
    
    
    
    
    Gross Unrealized(In thousands)
    
    Fair Value
    
    
    Losses
    
    
    Fair Value
    
    
    LossesCorporate notes and bonds
    
    $
    65,951
    
    
    $
    (39
    )
    
    $
    13,210
    
    
    $
    (2,949
    )U.S government
obligations
    
    
    70,538
    
    
    
    (38
    )
    
    
    
    
    
    
    Totals
    
    $
    136,489
    
    
    $
    (77
    )
    
    $
    13,210
    
    
    $
    (2,949
    )
    Cumulative
    
    
    
    
    
    
    
    
    
    
    
    TotalAmortized
    
    
    OTTI in
    
    
    
    Unrealized
    
    
    OTTI Loss
    
    
    Accumulated(In thousands)
    
    Cost
    
    
    Earnings
    


    
    (Gain) Loss
    
    
    in OCI
    
    
    OCIBalance at December 31, 2009
    
    $
    16,159
    
    
    $
    7,741
    
    
    
    
    ($1,410
    )
    
    $
    4,359
    
    
    $
    2,949OTTI recognized
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    366
    
    
    
    366Reclassification to earnings
    
    
    (19
    )
    
    
    19
    
    
    
    
    
    
    
    
    (19
    )
    
    
    (19
    )Balance at March 31, 2010
    
    $
    16,140
    
    
    $
    7,760
    
    
    
    
    ($1,410
    )
    
    $
    4,706
    
    
    $
    3,296
 Fair Value Measurements
  
    
    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.
 10




---



##### Table of Contents



(In thousands)
    
    Level 1
    
    
    Level 2
    
    
    Level 3
    
    
    TotalMoney market funds
    
    $
    726,991
    
    
    
    
    
    
    
    
    
    
    $
    726,991Trading securities
    
    
    13,006
    
    
    
    
    
    
    
    
    
    
    
    13,006Available-for-sale investments
    
    
    294,076
    
    
    
    
    
    
    $
    12,947
    
    
    
    307,023Total
    
    $
    1,034,073
    
    
    
    
    
    
    $
    12,947
    
    
    $
    1,047,020
   
  Level 3Financial(In thousands)
    
    AssetsBalance at December 31, 2009
    
    $
    13,313Impairment loss included in net impairment losses recognized in earnings
    
    
    (19
    )Change in total other-than-temporary impairment recognized in
accumulated other comprehensive income
    
    
    (347
    )Balance at March 31, 2010
    
    $
    12,947
   Goodwill and Intangible Assets .
  Software License
    
    
    Messaging and
    
    
    Consolidated(In thousands)
    
    and Services
    
    
    Hosted Software
    
    
    TotalBalance at January 1, 2010
    
    $
    177,270
    
    
    $
    355,105
    
    
    $
    532,375Foreign currency translation adjustments & other
    
    
    (478
    )
    
    
    (1,826
    )
    
    
    (2,304
    )Balance at March 31, 2010
    
    $
    176,792
    
    
    $
    353,279
    
    
    $
    530,071
 11




---



##### Table of Contents



March 31, 2010
    
    
    December 31, 2009Gross
    
    
    
    
    
    
    Net
    
    
    Gross
    
    
    
    
    
    
    NetCarrying
    
    
    Accumulated
    
    
    Carrying
    
    
    Carrying
    
    
    Accumulated
    
    
    Carrying(In thousands)
    
    Amount
    
    
    Amortization
    
    
    Amount
    
    
    Amount
    
    
    Amortization
    
    
    AmountPurchased technology
    
    $
    172,326
    
    
    $
    (142,273
    )
    
    $
    30,053
    
    
    $
    172,511
    
    
    $
    (139,522
    )
    
    $
    32,989Customer lists and other
    
    
    122,082
    
    
    
    (70,919
    )
    
    
    51,163
    
    
    
    123,148
    
    
    
    (68,125
    )
    
    
    55,023Totals
    
    $
    294,408
    
    
    $
    (213,192
    )
    
    $
    81,216
    
    
    $
    295,659
    
    
    $
    (207,647
    )
    
    $
    88,012
  (In thousands)2010
    
    $
    27,3512011
    
    
    21,9622012
    
    
    15,3552013
    
    
    12,3362014
    
    
    2,236
 Convertible Notes
 Convertible Senior Notes Issued in 2009
    Conversion Events and Conversion Value
   12




---



##### Table of Contents



March 31,2010(In millions)Gross equity component of 2009 Notes
    
    $
    75.5Deferred tax asset reduction
    
    
    (29.0
    )Equity issuance costs
    
    
    (2.0
    )Equity component of 2009 Notes
    
    $
    44.5Principal amount of 2009 Notes
    
    $
    400.0Unamortized discount of 2009 Notes
    
    
    (67.3
    )Long term liability component of 2009 Notes
    
    $
    332.7
 Convertible Subordinated Notes Issued in 2005
    13




---



##### Table of Contents



March 31,
    
    
    December 31,2010
    
    
    2009(In millions)Gross equity component of 2005 Notes
    
    $
    85.0
    
    
    $
    85.0Early extinguishment
    
    
    (31.6
    )
    
    
    (15.8
    )Conversion
    
    
    (7.5
    )
    
    
    (3.2
    )Temporary equity
    
    
    0.0
    
    
    
    (2.5
    )Deferred tax asset reduction
    
    
    (33.6
    )
    
    
    (33.7
    )Equity issuance costs
    
    
    (1.8
    )
    
    
    (1.8
    )Equity component of Notes
    
    $
    10.5
    
    
    $
    28.0Principal amount of 2005 Notes
    
    $
    389.7
    
    
    $
    419.8Unamortized discount of 2005 Notes
    
    
    0.0
    
    
    
    (2.5
    )Liability component of 2005 Notes
    
    $
    389.7
    
    
    $
    417.3
 . Stock and Convertible Debt Repurchases .
 Stock-Based Compensation .
  Three Months EndedMarch 31,(In thousands, except per share data)
    
    2010
    
    
    2009Cost of services
    
    $
    366
    
    
    $
    342Cost of messaging
    
    
    142
    
    
    
    138Sales and marketing
    
    
    1,412
    
    
    
    1,400Product development and engineering
    
    
    829
    
    
    
    718General and administrative
    
    
    4,021
    
    
    
    3,152Total stock-based compensation expense included in costs and expenses
    
    
    6,770
    
    
    
    5,750Tax benefit related to stock-based compensation expense
    
    
    (2,019
    )
    
    
    (1,605
    )Stock-based compensation expense included in net income
    
    $
    4,751
    
    
    $
    4,145Reduction of net income per share attributable to Sybase, Inc.
common stockholders:Basic
    
    $
    0.06
    
    
    $
    0.05Diluted
    
    $
    0.05
    
    
    $
    0.05
 14




---



##### Table of Contents



Income Taxes
     Segment Information
  15




---



##### Table of Contents



,
  Three Months EndedMarch 31,(In thousands)
    
    2010
    
    
    2009Software License and Services:Software license and services revenueLicense fees
    
    $
    97,836
    
    
    $
    88,882Software license updates and product support
    
    
    116,156
    
    
    
    109,607Other services
    
    
    25,280
    
    
    
    25,000Total software license and services revenue
    
    
    239,272
    
    
    
    223,489Cost of software license and servicesCost of license fees
    
    
    11,090
    
    
    
    10,159Cost of services
    
    
    35,948
    
    
    
    36,484Sales expense
    
    
    42,044
    
    
    
    46,574Total cost of software license and services
    
    
    89,082
    
    
    
    93,217Segment income before unallocated expenses
    
    $
    150,190
    
    
    $
    130,272Messaging and Hosted Software:Messaging and hosted software revenueMessaging
    
    $
    53,014
    
    
    $
    43,263Hosted license and services
    
    
    1,666
    
    
    
    761Total messaging and hosted software revenue
    
    
    54,680
    
    
    
    44,024Cost of messaging and hosted softwareCost of messaging and hosted software
    
    
    35,357
    
    
    
    25,759Sales expense
    
    
    6,455
    
    
    
    7,300Total cost of messaging and hosted software
    
    
    41,812
    
    
    
    33,059Segment income before unallocated expenses
    
    $
    12,868
    
    
    $
    10,965Total segment revenues
    
    $
    293,952
    
    
    $
    267,513Total segment expenses
    
    
    130,894
    
    
    
    126,276Total segment income before unallocated expenses
    
    
    163,058
    
    
    
    141,237Unallocated expenses:Marketing
    
    
    (11,205
    )
    
    
    (9,234
    )Product development and engineering
    
    
    (35,368
    )
    
    
    (34,348
    )General and administrative
    
    
    (28,093
    )
    
    
    (28,794
    )Amortization of intangible assets
    
    
    (6,981
    )
    
    
    (6,924
    )Restructuring
    
    
    (4
    )
    
    
    10Stock-based compensation
    
    
    (6,770
    )
    
    
    (5,750
    )Change in value of assets in deferred compensation plan
    
    
    (565
    )
    
    
    700Interest income and expense and other, net
    
    
    (9,585
    )
    
    
    (8,901
    )Income before provision for income taxes
    
    $
    64,487
    
    
    $
    47,996
 16




---



##### Table of Contents



Litigation .
    Subsequent Events
  17




---



##### 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
  ®
 18




---



##### Table of Contents



Business Trends
     19




---



##### Table of Contents



Critical Accounting Policies and Estimates
   Recent Accounting Pronouncements
  Results of Operations
 Revenues
 Three Months ended March 31,Percent(Dollars in millions)
    
    2010
    
    2009
    
    ChangeLicense fees by segment:Software license and services
    
    $
    97.8
    
    
    $
    88.9
    
    
    
    10
    %Messaging and hosted software
    
    
    0.8
    
    
    
    0.4
    
    
    
    100
    %Total license fees
    
    $
    98.6
    
    
    $
    89.3
    
    
    
    10
    %Percentage of total revenues
    
    
    34
    %
    
    
    33
    %Services by segment:Software license and services
    
    $
    141.4
    
    
    $
    134.6
    
    
    
    5
    %Messaging and hosted software
    
    
    1.0
    
    
    
    0.4
    
    
    
    150
    %Total services
    
    $
    142.4
    
    
    $
    135.0
    
    
    
    5
    %Percentage of total revenues
    
    
    48
    %
    
    
    51
    %Messaging and Hosted Software messaging revenue
    
    $
    53.0
    
    
    $
    43.2
    
    
    
    23
    %Messaging and Hosted Software messaging
revenue as percentage of total revenues
    
    
    18
    %
    
    
    16
    %Total revenues
    
    $
    294.0
    
    
    $
    267.5
    
    
    
    10
    %
 
 *
    
    Not meaningful ®
 20




---



##### Table of Contents



Geographical Revenues
 Three Months ended March 31,Percent(Dollars in millions)
    
    2010
    
    2009
    
    ChangeNorth American
    
    $
    146.8
    
    
    $
    139.8
    
    
    
    5
    %Percentage of total revenues
    
    
    50
    %
    
    
    52
    %Total Outside North America
    
    $
    147.2
    
    
    $
    127.7
    
    
    
    15
    %Percentage of total revenues
    
    
    50
    %
    
    
    48
    %International: EMEA (Europe, Middle East and Africa)
    
    $
    111.9
    
    
    $
    89.1
    
    
    
    26
    %Percentage of total revenues
    
    
    38
    %
    
    
    33
    %Intercontinental: (Asia Pacific and Latin America)
    
    $
    35.3
    
    
    $
    38.6
    
    
    
    (9
    %)Percentage of total revenues
    
    
    12
    %
    
    
    15
    %Total revenues
    
    $
    294.0
    
    
    $
    267.5
    
    
    
    10
    %
 
 *
    
    Not meaningful     21




---



##### Table of Contents



22




---



##### Table of Contents



Costs and Expenses
 Three Months ended March 31,(Dollars in millions)
    
    
    
    
    
    
    
    
    
    Percent2010
    
    2009
    
    ChangeCost of license fees
    
    $
    13.2
    
    
    $
    12.3
    
    
    
    7
    %Percentage of license fees revenues
    
    
    13
    %
    
    
    14
    %Cost of services
    
    $
    36.5
    
    
    $
    36.8
    
    
    
    (1
    %)Percentage of services revenues
    
    
    26
    %
    
    
    27
    %Cost of messaging
    
    $
    36.6
    
    
    $
    27.0
    
    
    
    36
    %Percentage of messaging revenues
    
    
    69
    %
    
    
    62
    %Sales and marketing
    
    $
    61.4
    
    
    $
    64.2
    
    
    
    (4
    %)Percentage of total revenues
    
    
    21
    %
    
    
    24
    %Product development and engineering
    
    $
    36.5
    
    
    $
    34.7
    
    
    
    5
    %Percentage of total revenues
    
    
    12
    %
    
    
    13
    %General and administrative
    
    $
    32.2
    
    
    $
    31.9
    
    
    
    1
    %Percentage of total revenues
    
    
    11
    %
    
    
    12
    %Amortization of other purchased intangibles
    
    $
    3.7
    
    
    $
    3.7
    
    
    
    *Percentage of total revenues
    
    
    1
    %
    
    
    1
    %
 
 *
    
    Not meaningful Cost of License Fees.
 Cost of Services.
 Cost of Messaging
 Sales and Marketing.
 Product Development and Engineering.
  23




---



##### Table of Contents



General and Administrative.
 Amortization of Other Purchased Intangibles.
 Segment Income Before Unallocated Expenses
 Three Months ended March 31,Percent(Dollars in millions)
    
    2010
    
    
    2009
    
    
    ChangeSoftware License and Services
    
    $
    150.2
    
    
    $
    130.3
    
    
    
    15
    %Messaging and Hosted Software
    
    
    12.9
    
    
    
    11.0
    
    
    
    17
    %Total Segment Income Before Unallocated Expenses
    
    $
    163.1
    
    
    $
    141.3
    
    
    
    15
    %
    Other Income (Expense), Net
 Three Months ended March 31,Percent(Dollars in millions)
    
    2010
    
    2009
    
    ChangeInterest income
    
    $
    1.5
    
    
    $
    2.2
    
    
    
    (32
    %)Percentage of total revenues
    
    
    1
    %
    
    
    1
    %Interest expense and other, net
    
    $
    (11.1
    )
    
    $
    (9.3
    )
    
    
    19
    %Percentage of total revenues
    
    
    (4
    %)
    
    
    (3
    %)Impairment losses recognized in earnings
    
    
    *
    
    
    $
    (1.8
    )
    
    
    *Percentage of total revenues
    
    
    *
    
    
    
    (1
    %)
 
 *
    
    Not meaningful  24




---



##### Table of Contents



Provision for Income Taxes
 Three Months ended March 31,Percent(Dollars in millions)
    
    2010
    
    2009
    
    ChangeProvision for income taxes
    
    $
    24.6
    
    
    $
    19.9
    
    
    
    24
    %
    Net Income Per Share Attributable to Sybase, Inc. Common Stockholders
 Three Months ended March 31,Percent(Dollars and shares in millions, except per share data)
    
    2010
    
    2009
    
    ChangeNet income attributable to Sybase, Inc.
    
    $
    39.9
    
    
    $
    28.1
    
    
    
    42
    %Percentage of total revenues
    
    
    14
    %
    
    
    10
    %Basic net income per share attributable to Sybase, Inc.
common stockholders
    
    $
    0.49
    
    
    $
    0.35
    
    
    
    40
    %Diluted net income per share attributable to Sybase, Inc.
common stockholders
    
    $
    0.45
    
    
    $
    0.33
    
    
    
    36
    %Shares used in computing basic net income per share
attributable to Sybase, Inc. common stockholders
    
    
    80.7
    
    
    
    79.8
    
    
    
    1
    %Shares used in computing diluted net income per share
attributable to Sybase, Inc. common stockholders
    
    
    86.5
    
    
    
    84.5
    
    
    
    2
    %
 25




---



##### Table of Contents



Liquidity and Capital Resources
 Three Months EndedMarch 31,Percent(Dollars in millions)
    
    2010
    
    2009
    
    ChangeWorking capital
    
    $
    734.7
    
    
    $
    116.8
    
    
    
    529
    %Cash and cash equivalents
    
    $
    1,022.7
    
    
    $
    675.9
    
    
    
    51
    %Net cash provided by operating activities
    
    $
    99.3
    
    
    $
    97.4
    
    
    
    2
    %Net cash provided by (used for) investing activities
    
    $
    12.0
    
    
    $
    (24.6
    )
    
    
    *Net cash provided by (used for) financing activities
    
    $
    (23.1
    )
    
    $
    3.5
    
    
    
    *
 
 *
    
    Not meaningful    2009 Note Issuance
  26




---



##### Table of Contents



Liquidity
     Working Capital
  Cash Flow
     27




---



##### Table of Contents



28




---



##### Table of Contents



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




---



##### Table of Contents



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




---



##### Table of Contents



If we fail to maintain or expand our relationships with strategic partners and indirect
distribution channels our license revenues could decline.
   System failures, delays, 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.
  31




---



##### Table of Contents



We may encounter difficulties in completing acquisitions or strategic relationships, and we may
incur acquisition-related charges that could adversely affect our operating results.
        The ability to rapidly develop and bring to market advanced products and services that are
successful is crucial to maintaining our competitive position.
  32




---



##### Table of Contents



If our existing customers cancel or fail to renew their software license updates and product
support agreements, our software license updates and product support revenues could be adversely
affected.
  Pricing pressure in the mobile messaging market could adversely affect our operating results.
  Our mobile messaging customer contracts may not continue to generate revenues and margins at or
near our historical levels of revenues and margins from these customers and we rely on a limited
number of customers for mos t of our messaging revenue.
  Unanticipated delays or accelerations in our sales cycles could result in significant fluctuations
in our quarterly operating results.
  If we do not adapt to rapid technological change in the telecommunications industry, we could lose
customers or market share.
  33




---



##### Table of Contents



Impairments in our investment portfolio may result in temporary and/or realized losses.
    Restructuring activities and reorganizations in our sales model or business units may not succeed
in increasing revenues and operating results.
   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.
  
    
    changes in IT spending;
    
    the imposition of government controls;
    
    changes or limitations in trade protection laws;
 34




---



##### Table of Contents




    
    unfavorable changes in tax treaties or laws;
    
    natural disasters, public health risks, labor unrest, earnings expatriation
restrictions, misappropriation of intellectual property and/or weak intellectual
property protection;
    
    acts of terrorism, continued unrest and war in the Middle East and other factors,
   We may not receive significant revenues from our current research and development efforts for
several years, if at all.
  We might experience significant errors or security flaws in our products and services.
  We are subject to risks related to the terms of our 1.75% Convertible Subordinated Notes and our
3.50% Convertible Senior Notes
    35




---



##### Table of Contents



Unanticipated changes in our tax rates could affect our future financial results.
   We face exposure to adverse movements in foreign currency exchange rates.
    36




---



##### Table of Contents



Growing market acceptance of open source software could cause a decline in our revenues and
operating margins.
  Insufficient protection for our intellectual property rights may have a material adverse 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




---



##### 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.
  We are investing resources in updating and improving our internal information technology
systems. Should our investments not succeed, or if delays or other issues with a new internal
technology system disrupt our operations, our business could be harmed.
  38




---



##### Table of Contents



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.
    39




---



##### Table of Contents



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 2: UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
 (e)
    
    Purchases of Equity Securities by the Issuer and Affiliated Purchasers
  40




---



##### Table of Contents



ITEM 3: DEFAULTS UPON SENIOR SECURITIES
  
 ITEM 5: OTHER INFORMATION
  
 ITEM 6: EXHIBITS
 (a)
    
    Exhibits furnished pursuant to Section 601 of Regulation S-K
  41




---



##### Table of Contents



SIGNATURES
  May 7, 2010
    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




---



##### Table of Contents



EXHIBIT INDEX
 Exhibit No.
    
    Description31.1
    
    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