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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 FORM 10-Q
 (Mark One)
 þ
    
    QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
 FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2008
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 FOR THE TRANSITION PERIOD FROM     TO
 COMMISSION FILE NUMBER: 1-16493
 SYBASE, INC.
 
  Delaware
    
    94-2951005(State of Incorporation)
    
    (I.R.S. Employer Identification No.)
  
   
  
  þ o
  Large accelerated filer
þ
    
    Accelerated filer
o
    
    Non-accelerated filer o
    
    Smaller reporting company o(Do not check if a smaller reporting company)
 o þ




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##### 



PageForward-Looking Statements
    
    
    2Part I: Financial InformationItem 1: Financial Statements (Unaudited)Condensed Consolidated Balance Sheets as of March 31, 2008 and December 31, 2007
    
    
    3Condensed Consolidated Statements of Operations for the three months ended March 31, 2008 and 2007
    
    
    4Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2008 and 2007
    
    
    5Notes to Condensed Consolidated Financial Statements
    
    
    6Item 2: Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    15Item 3: Quantitative and Qualitative Disclosures of Market Risk
    
    
    26Item 4: Controls and Procedures
    
    
    26Part II: Other InformationItem 1: Legal Proceedings
    
    
    27Item 1 (A) : Risk Factors
    
    
    27Item 2: Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    35Item 4: Submission of Matters to a Vote of Security Holders
    
    
    36Item 5: Other Information
    
    
    36Item 6: Exhibits
    
    
    36Signatures
    
    
    37Exhibit IndexEXHIBIT 10.1EXHIBIT 10.2EXHIBIT 10.3EXHIBIT 12EXHIBIT 31.1EXHIBIT 31.2EXHIBIT 32
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www.sec.gov
 www.sybase.com
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PART I: FINANCIAL INFORMATION
 
 ITEM 1: FINANCIAL STATEMENTS
  
  March 31,2008
    
    
    December 31,(In thousands, except share and per share data)
    
    (Unaudited)
    
    
    2007Current assets:Cash and cash equivalents
    
    $
    804,402
    
    
    $
    604,808Short-term cash investments
    
    
    9,292
    
    
    
    93,462Total cash, cash equivalents and short-term cash investments
    
    
    813,694
    
    
    
    698,270Restricted cash
    
    
    3,682
    
    
    
    3,424Accounts receivable, net
    
    
    220,689
    
    
    
    245,267Deferred income taxes
    
    
    37,971
    
    
    
    37,979Prepaid income taxes
    
    
    2,837
    
    
    
    17,604Prepaid expenses and other current assets
    
    
    33,135
    
    
    
    25,182Total current assets
    
    
    1,112,008
    
    
    
    1,027,726Long-term cash investments
    
    
    23,947
    
    
    
    36,637Property, equipment and improvements, net
    
    
    63,861
    
    
    
    64,841Deferred income taxes
    
    
    11,338
    
    
    
    10,038Capitalized software, net
    
    
    77,292
    
    
    
    74,278Goodwill
    
    
    534,374
    
    
    
    533,339Other purchased intangibles, net
    
    
    127,018
    
    
    
    130,608Other assets
    
    
    35,431
    
    
    
    36,016Total assets
    
    $
    1,985,269
    
    
    $
    1,913,483Current liabilities:Accounts payable
    
    $
    34,109
    
    
    $
    30,290Accrued compensation and related expenses
    
    
    48,757
    
    
    
    63,852Accrued income taxes
    
    
    
    
    
    
    273Other accrued liabilities
    
    
    108,375
    
    
    
    124,849Deferred revenue
    
    
    246,395
    
    
    
    203,734Total current liabilities
    
    
    437,636
    
    
    
    422,998Other liabilities
    
    
    44,061
    
    
    
    44,669Deferred income taxes
    
    
    14,598
    
    
    
    14,115Long-term tax liability
    
    
    30,807
    
    
    
    30,807Long-term deferred revenue
    
    
    4,110
    
    
    
    4,937Minority interest
    
    
    5,156
    
    
    
    5,147Convertible subordinated notes
    
    
    460,000
    
    
    
    460,000Commitments and contingent liabilitiesStockholders equity:Preferred stock, $0.001 par value, 8,000,000 shares authorized; none issued or outstanding
    
    
    
    
    
    
    Common stock, $0.001 par value, 200,000,000 shares authorized; 105,337,362 shares issued
and 88,339,321 outstanding (2007-105,337,362 shares issued and 87,210,339 outstanding)
    
    
    105
    
    
    
    105Additional paid-in capital
    
    
    1,025,641
    
    
    
    1,019,930Accumulated earnings
    
    
    252,991
    
    
    
    241,329Accumulated other comprehensive income
    
    
    86,659
    
    
    
    66,954Cost of 16,998,041 shares of treasury stock (2007-18,127,023 shares)
    
    
    (376,495
    )
    
    
    (397,508
    )Total stockholders equity
    
    
    988,901
    
    
    
    930,810Total liabilities and stockholders equity
    
    $
    1,985,269
    
    
    $
    1,913,483
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Three Months EndedMarch 31,(Dollars in thousands, except per share data)
    
    2008
    
    
    2007Revenues:License fees
    
    $
    78,124
    
    
    $
    69,365Services
    
    
    139,397
    
    
    
    129,651Messaging
    
    
    42,627
    
    
    
    31,021Total revenues
    
    
    260,148
    
    
    
    230,037Costs and expenses:Cost of license fees
    
    
    14,537
    
    
    
    12,753Cost of services
    
    
    40,880
    
    
    
    38,742Cost of messaging
    
    
    25,108
    
    
    
    18,889Sales and marketing
    
    
    68,293
    
    
    
    64,575Product development and engineering
    
    
    35,562
    
    
    
    38,753General and administrative
    
    
    36,061
    
    
    
    31,496Amortization of other purchased intangibles
    
    
    3,516
    
    
    
    3,410Cost of restructure
    
    
    27
    
    
    
    4Total costs and expenses
    
    
    223,984
    
    
    
    208,622Operating income
    
    
    36,164
    
    
    
    21,415Interest income
    
    
    7,913
    
    
    
    7,383Interest expense and other, net
    
    
    (4,398
    )
    
    
    (2,378
    )Minority interest
    
    
    (9
    )
    
    
    (20
    )Income before income taxes
    
    
    39,670
    
    
    
    26,400Provision for income taxes
    
    
    15,480
    
    
    
    11,252Net income
    
    $
    24,190
    
    
    $
    15,148Basic net income per share
    
    $
    0.28
    
    
    $
    0.17Shares used in computing basic net income per share
    
    
    87,672
    
    
    
    91,149Diluted net income per share
    
    $
    0.27
    
    
    $
    0.16Shares used in computing diluted net income per share
    
    
    90,778
    
    
    
    93,609
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Three Months EndedMarch 31,(Dollars in thousands)
    
    2008
    
    
    2007Cash flows from operating activities:Net income
    
    $
    24,190
    
    
    $
    15,148Adjustments to reconcile net income to net cash provided by operating activities:Depreciation and amortization
    
    
    24,289
    
    
    
    21,810Minority interest in income of subsidiaries
    
    
    9
    
    
    
    20Gain on disposal of assets
    
    
    (28
    )
    
    
    (11
    )Impairment of investment in auction rate securities
    
    
    3,270
    
    
    
    Deferred income taxes
    
    
    (809
    )
    
    
    (1,682
    )Stock-based compensation
    
    
    5,712
    
    
    
    5,750Excess tax benefit from stock-based compensation plans
    
    
    (3,296
    )
    
    
    (2,201
    )Amortization of note issuance costs
    
    
    492
    
    
    
    492Changes in assets and liabilities:Accounts receivable
    
    
    19,611
    
    
    
    24,331Prepaid income taxes
    
    
    14,767
    
    
    
    Other current assets
    
    
    (7,950
    )
    
    
    (7,700
    )Other assets  operating
    
    
    50
    
    
    
    (919
    )Accounts payable
    
    
    3,819
    
    
    
    1,212Accrued compensation and related expenses
    
    
    (15,094
    )
    
    
    (15,033
    )Accrued income taxes
    
    
    (158
    )
    
    
    2,183Other accrued liabilities
    
    
    (16,049
    )
    
    
    (12,007
    )Deferred revenues
    
    
    41,834
    
    
    
    38,799Other liabilities
    
    
    (90
    )
    
    
    (551
    )Net cash provided by operating activities
    
    
    94,569
    
    
    
    69,641Cash flows from investing activities:(Increase) Decrease in restricted cash
    
    
    (258
    )
    
    
    56Purchases of available-for-sale cash investments
    
    
    (9,455
    )
    
    
    (120,761
    )Maturities of available-for-sale cash investments
    
    
    22,238
    
    
    
    48,400Sales of available-for-sale cash investments
    
    
    80,982
    
    
    
    75,894Business combinations, net of cash acquired
    
    
    
    
    
    
    (1,501
    )Purchases of property, equipment and improvements
    
    
    (6,414
    )
    
    
    (4,466
    )Proceeds from sale of property, equipment, and improvements
    
    
    7
    
    
    
    34Capitalized software development costs
    
    
    (12,877
    )
    
    
    (8,438
    )(Increase) Decrease in other assets  investing
    
    
    32
    
    
    
    (18
    )Net cash provided by (used for) investing activities
    
    
    74,255
    
    
    
    (10,800
    )Cash flows from financing activities:Repayments of long-term obligations
    
    
    (276
    )
    
    
    (15
    )Payments on capital lease
    
    
    (113
    )
    
    
    (392
    )Net proceeds from the issuance of common stock and reissuance of treasury stock
    
    
    8,758
    
    
    
    12,716Purchases of treasury stock
    
    
    (273
    )
    
    
    (18,588
    )Excess tax benefit from stock-based compensation plans
    
    
    3,296
    
    
    
    2,201Net cash provided by (used for) financing activities
    
    
    11,392
    
    
    
    (4,078
    )Effect of exchange rate changes on cash
    
    
    19,378
    
    
    
    3,598Net increase in cash and cash equivalents
    
    
    199,594
    
    
    
    58,361Cash and cash equivalents, beginning of year
    
    
    604,808
    
    
    
    355,303Cash and cash equivalents, end of period
    
    $
    804,402
    
    
    $
    413,664
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Notes to Condensed Consolidated Financial Statements
 Basis of Presentation .
   
    
    Level 1  Quoted prices in active markets for identical assets or liabilities.
    
    Level 2  Inputs other than Level 1 that are observable, either
directly or indirectly, such as quoted prices for similar assets or
liabilities; quoted prices in markets that are not active; or other
inputs that are observable or can be corroborated by observable market
data for substantially the full term of the assets or liabilities.
    
    Level 3  Unobservable inputs that are supported by little or no
market activity and that are significant to the fair value of the
assets or liabilities.
   Stock-Based Compensation .
  6




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Three Months EndedMarch 31,(In thousands, except per share data)
    
    2008
    
    
    2007Cost of services
    
    $
    359
    
    
    $
    339Cost of messaging
    
    
    91
    
    
    
    186Sales and marketing
    
    
    1,356
    
    
    
    1,266Product development and engineering
    
    
    664
    
    
    
    686General and administrative
    
    
    3,241
    
    
    
    3,273Stock-based compensation expense included in total costs and expenses
    
    
    5,711
    
    
    
    5,750Tax benefit related to stock-based compensation expense
    
    
    (1,625
    )
    
    
    (1,415
    )Stock-based compensation expense included in net income
    
    $
    4,086
    
    
    $
    4,335Reduction of net income per share:Basic
    
    $
    0.05
    
    
    $
    0.05Diluted
    
    $
    0.05
    
    
    $
    0.05
  Net income per share .
 Three Months EndedMarch 31,(In thousands, except per share data)
    
    2008
    
    
    2007Net income
    
    $
    24,190
    
    
    $
    15,148Basic net income per share
    
    $
    0.28
    
    
    $
    0.17Shares used in computing basic net income per share
    
    
    87,672
    
    
    
    91,149Diluted net income per share
    
    $
    0.27
    
    
    $
    0.16Shares used in computing basic net income per share
    
    
    87,672
    
    
    
    91,149Dilutive effect of stock options, restricted stock and stock appreciation rights
    
    
    2,156
    
    
    
    2,460Dilutive effect of convertible subordinated debt
    
    
    950
    
    
    
    Shares used in computing diluted net income per share
    
    
    90,778
    
    
    
    93,609
  Comprehensive Income
 Three Months EndedMarch 31,(In thousands)
    
    2008
    
    
    2007Net income
    
    $
    24,190
    
    
    $
    15,148Foreign currency translation gains
    
    
    19,881
    
    
    
    3,077Unrealized gains/(losses) on marketable securities
    
    
    (176
    )
    
    
    144Comprehensive income
    
    $
    43,895
    
    
    $
    18,369
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Segment Information
    8




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Consolidated(In thousands)
    
    IPG
    
    
    iAS
    
    
    SY365
    
    
    Elimination
    
    
    TotalRevenues:License feesInfrastructure
    
    $
    56,379
    
    
    $
    59
    
    
    $
    12
    
    
    
    
    
    
    $
    56,450Mobile and Embedded
    
    
    6,237
    
    
    
    15,437
    
    
    
    
    
    
    
    
    
    
    
    21,674Subtotal license fees
    
    
    62,616
    
    
    
    15,496
    
    
    
    12
    
    
    
    
    
    
    
    78,124Intersegment license revenues
    
    
    62
    
    
    
    5,198
    
    
    
    
    
    
    $
    (5,260
    )
    
    
    Total license fees
    
    
    62,678
    
    
    
    20,694
    
    
    
    12
    
    
    
    (5,260
    )
    
    
    78,124ServicesDirect service revenue
    
    
    128,134
    
    
    
    10,692
    
    
    
    571
    
    
    
    
    
    
    
    139,397Intersegment service revenues
    
    
    5
    
    
    
    8,125
    
    
    
    
    
    
    
    (8,130
    )
    
    
    Total services
    
    
    128,139
    
    
    
    18,817
    
    
    
    571
    
    
    
    (8,130
    )
    
    
    139,397Messaging
    
    
    8
    
    
    
    
    
    
    
    42,619
    
    
    
    
    
    
    
    42,627Total revenues
    
    
    190,825
    
    
    
    39,511
    
    
    
    43,202
    
    
    
    (13,390
    )
    
    
    260,148Total allocated costs and expenses before amortization of other
purchased intangibles, purchased technology, cost of restructure
and unallocated costs
    
    
    150,864
    
    
    
    34,646
    
    
    
    39,063
    
    
    
    (13,390
    )
    
    
    211,183Operating income before amortization of other purchased
intangibles, purchased technology, cost of restructure and
unallocated costs
    
    
    39,961
    
    
    
    4,865
    
    
    
    4,139
    
    
    
    
    
    
    
    48,965Amortization of other purchased intangibles
    
    
    527
    
    
    
    1,023
    
    
    
    1,966
    
    
    
    
    
    
    
    3,516Amortization of purchased technology
    
    
    403
    
    
    
    2,151
    
    
    
    993
    
    
    
    
    
    
    
    3,547Operating income before cost of restructure and unallocated costs
    
    
    39,031
    
    
    
    1,691
    
    
    
    1,180
    
    
    
    
    
    
    
    41,902Cost of restructure - 2008 Activity
    
    
    27
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    27Operating income before unallocated costs
    
    
    39,004
    
    
    
    1,691
    
    
    
    1,180
    
    
    
    
    
    
    
    41,875Unallocated costs
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,711Operating income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    36,164Interest income, interest expense and other, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,515Minority interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (9
    )Income before income taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    39,670
  Consolidated(In thousands)
    
    IPG
    
    
    iAS
    
    
    SY365
    
    
    Elimination
    
    
    TotalRevenues:License feesInfrastructure
    
    $
    48,315
    
    
    $
    21
    
    
    $
    14
    
    
    
    
    
    
    $
    48,350Mobile and Embedded
    
    
    6,639
    
    
    
    14,376
    
    
    
    
    
    
    
    
    
    
    
    21,015Subtotal license fees
    
    
    54,954
    
    
    
    14,397
    
    
    
    14
    
    
    
    
    
    
    
    69,365Intersegment license revenues
    
    
    32
    
    
    
    5,536
    
    
    
    
    
    
    $
    (5,568
    )
    
    
    Total license fees
    
    
    54,986
    
    
    
    19,933
    
    
    
    14
    
    
    
    (5,568
    )
    
    
    69,365ServicesDirect service revenue
    
    
    118,383
    
    
    
    9,919
    
    
    
    1,349
    
    
    
    
    
    
    
    129,651Intersegment service revenues
    
    
    27
    
    
    
    6,783
    
    
    
    
    
    
    
    (6,810
    )
    
    
    Total services
    
    
    118,410
    
    
    
    16,702
    
    
    
    1,349
    
    
    
    (6,810
    )
    
    
    129,651Messaging
    
    
    
    
    
    
    
    
    
    
    31,021
    
    
    
    
    
    
    
    31,021Total revenues
    
    
    173,396
    
    
    
    36,635
    
    
    
    32,384
    
    
    
    (12,378
    )
    
    
    230,037Total allocated costs and expenses before amortization of other
purchased intangibles, purchased technology, cost of restructure and
unallocated costs
    
    
    144,118
    
    
    
    32,540
    
    
    
    31,547
    
    
    
    (12,378
    )
    
    
    195,827Operating income before amortization of other purchased intangibles,
purchased technology, cost of restructure and unallocated costs
    
    
    29,278
    
    
    
    4,095
    
    
    
    837
    
    
    
    
    
    
    
    34,210Amortization of other purchased intangibles
    
    
    527
    
    
    
    1,046
    
    
    
    1,837
    
    
    
    
    
    
    
    3,410Amortization of purchased technology
    
    
    402
    
    
    
    2,003
    
    
    
    916
    
    
    
    
    
    
    
    3,321Operating income (loss) before cost of restructure and unallocated costs
    
    
    28,349
    
    
    
    1,046
    
    
    
    (1,916
    )
    
    
    
    
    
    
    27,479Cost of restructure - 2007 Activity
    
    
    4
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4Operating income (loss) before unallocated costs
    
    
    28,345
    
    
    
    1,046
    
    
    
    (1,916
    )
    
    
    
    
    
    
    27,475Unallocated costs
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,060Operating income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    21,415Interest income, interest expense and other, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,005Minority interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (20
    )Income before income taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    26,400
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Goodwill and Intangible Assets .
  Consolidated(In thousands)
    
    IPG
    
    
    iAS
    
    
    SY365
    
    
    TotalBalance at January 1, 2008
    
    $
    92,192
    
    
    $
    110,392
    
    
    $
    330,755
    
    
    $
    533,339Reduction in goodwill recorded on Mobile 365 acquisition
    
    
    
    
    
    
    
    
    
    
    (155
    )
    
    
    (155
    )Foreign currency translation adjustments & other
    
    
    695
    
    
    
    495
    
    
    
    
    
    
    
    1,190Balance at March 31, 2008
    
    $
    92,887
    
    
    $
    110,887
    
    
    $
    330,600
    
    
    $
    534,374
  March 31, 2008
    
    
    December 31, 2007Gross
    
    
    
    
    
    
    Net
    
    
    Gross
    
    
    
    
    
    
    NetCarrying
    
    
    Accumulated
    
    
    Carrying
    
    
    Carrying
    
    
    Accumulated
    
    
    Carrying(In thousands)
    
    Amount
    
    
    Amortization
    
    
    Amount
    
    
    Amount
    
    
    Amortization
    
    
    AmountPurchased technology
    
    $
    170,274
    
    
    $
    (113,401
    )
    
    $
    56,873
    
    
    $
    168,436
    
    
    $
    (108,997
    )
    
    $
    59,439AvantGo tradenames
    
    
    3,100
    
    
    
    
    
    
    
    3,100
    
    
    
    3,100
    
    
    
    
    
    
    
    3,100XcelleNet tradenames
    
    
    4,000
    
    
    
    
    
    
    
    4,000
    
    
    
    4,000
    
    
    
    
    
    
    
    4,000Covenant not to compete
    
    
    319
    
    
    
    (192
    )
    
    
    127
    
    
    
    319
    
    
    
    (165
    )
    
    
    154Customer lists
    
    
    104,488
    
    
    
    (41,570
    )
    
    
    62,918
    
    
    
    102,064
    
    
    
    (38,149
    )
    
    
    63,915Totals
    
    $
    282,181
    
    
    $
    (155,163
    )
    
    $
    127,018
    
    
    $
    277,919
    
    
    $
    (147,311
    )
    
    $
    130,608
  2008
    
    $
    27,4662009
    
    
    26,8122010
    
    
    24,3772011
    
    
    18,8672012
    
    
    11,691
  Litigation
  10




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##### Table of Contents



. Stock Repurchase Plan .
 11




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##### Table of Contents



Restructuring
   
 2004
    
    
    2002
    
    
    2001
    
    
    Mobile 365Accrued liabilities at December 31, 2007
    
    $
    3,069
    
    
    $
    5,972
    
    
    $
    1,313
    
    
    $
    837Amounts paid
    
    
    (282
    )
    
    
    (708
    )
    
    
    (117
    )
    
    
    (327
    )Amounts added/(reversed)
    
    
    27
    
    
    
    
    
    
    
    
    
    
    
    (106
    )Accrued liabilities at March 31, 2008
    
    $
    2,814
    
    
    $
    5,264
    
    
    $
    1,196
    
    
    $
    404
 Convertible Subordinated Notes
     Income Taxes
  12




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##### Table of Contents



12. Recent Accounting Pronouncements
 SFAS 159, The Fair Value Option for Financial Assets and Financial Liabilities
 The Fair Value Option for Financial Assets and
Financial Liabilities Fair Value Measurements, Disclosures about Fair Value of Financial Instruments.
 SFAS 160, NonControlling Interests in Consolidated Financial Statements
 NonControlling Interests in Consolidated Financial
Statements
 Disclosures about Derivative Instruments and Hedging Activities
 Disclosures about Derivative Instruments and Hedging
Activities.
 Fair Value Measurements
 
 Level 1
    
    
    Level 2
    
    
    Level 3
    
    
    TotalMoney market funds
    
    $
    401,449
    
    
    
    
    
    
    
    
    
    
    $
    401,449Available-for-sale cash investments
    
    
    311,600
    
    
    
    
    
    
    $
    23,947
    
    
    
    335,547Total
    
    $
    713,049
    
    
    
    
    
    
    $
    23,947
    
    
    $
    736,996
  13




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##### Table of Contents



Auction RateSecuritiesBalance at December 31, 2007
    
    $
    27,364Unrealized loss included in accumulated other comprehensive
income
    
    
    (147
    )Impairment loss included in interest expense and other, net
    
    
    (3,270
    )Balance at March 31, 2008
    
    $
    23,947
 Subsequent Events
  14




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##### Table of Contents



ITEM 2: MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
  
    
    Executive Overview that discusses at a high level our operating results and some of the trends that affect our business.
    
    Significant changes since our most recent Annual Report on Form 10-K in the Critical Accounting Policies and Estimates
as we believe it is important to understanding the assumptions and judgments underlying our financial statements.
    
    Results of Operations that begins with an overview followed by a more detailed discussion of our revenue and expenses.
    
    Liquidity and Capital Resources which discusses key aspects of our statements of cash flows, changes in our balance
sheets and our financial commitments.
   Executive Overview
 Our Business
    Our Results
   15




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Business Trends
   ®
    16




---



##### Table of Contents



Critical Accounting Policies and Estimates
   Recent Accounting Pronouncements
 SFAS 159, The Fair Value Option for Financial Assets and Financial Liabilities
 Fair Value Measurements, Disclosures about Fair Value of Financial Instruments.
 SFAS 160, NonControlling Interests in Consolidated Financial Statements
 NonControlling Interests in Consolidated Financial
Statements
 Disclosures about Derivative Instruments and Hedging Activities
 Disclosures about Derivative Instruments and Hedging
Activities.
 Results of Operations
 Revenues
(Dollars in millions)
 Three Months ended March 31,Percent2008
    
    2007
    
    ChangeLicense fees by segment:IPG
    
    $
    62.7
    
    
    $
    55.0
    
    
    
    14
    %IAS
    
    
    20.7
    
    
    
    19.9
    
    
    
    4
    %SY365
    
    
    0.0
    
    
    
    0.0
    
    
    
    *Eliminations
    
    
    (5.3
    )
    
    
    (5.5
    )
    
    
    (4
    %)Total license fees
    
    $
    78.1
    
    
    $
    69.4
    
    
    
    13
    %Percentage of total revenues
    
    
    30
    %
    
    
    30
    %Services by segment:IPG
    
    $
    128.1
    
    
    $
    118.4
    
    
    
    8
    %IAS
    
    
    18.8
    
    
    
    16.7
    
    
    
    13
    %SY365
    
    
    0.6
    
    
    
    1.3
    
    
    
    (54
    %)Eliminations
    
    
    (8.1
    )
    
    
    (6.8
    )
    
    
    19
    %Total services
    
    $
    139.4
    
    
    $
    129.6
    
    
    
    8
    %Percentage of total revenues
    
    
    54
    %
    
    
    56
    %Messaging by segment:SY365
    
    $
    42.6
    
    
    $
    31.0
    
    
    
    37
    %Total messaging
    
    $
    42.6
    
    
    
    31.0
    
    
    
    37
    %Percentage of total revenues
    
    
    16
    %
    
    
    14
    %Total revenues
    
    $
    260.1
    
    
    $
    230.0
    
    
    
    13
    %
 
 *
    
    Not meaningful 17




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##### Table of Contents



Geographical Revenues
(Dollars in millions)
 Three Months ended March 31,Percent2008
    
    2007
    
    ChangeNorth American
    
    $
    132.0
    
    
    $
    124.0
    
    
    
    6
    %Percentage of total revenues
    
    
    51
    %
    
    
    54
    %Total Outside North America
    
    $
    128.1
    
    
    $
    106.0
    
    
    
    21
    %Percentage of total revenues
    
    
    49
    %
    
    
    46
    %International: EMEA (Europe, Middle East and Africa)
    
    $
    91.9
    
    
    $
    71.8
    
    
    
    28
    %Percentage of total revenues
    
    
    35
    %
    
    
    31
    %Intercontinental: (Asia Pacific and Latin America)
    
    $
    36.2
    
    
    $
    34.2
    
    
    
    6
    %Percentage of total revenues
    
    
    14
    %
    
    
    15
    %Total revenues
    
    $
    260.1
    
    
    $
    230.0
    
    
    
    13
    %
 18




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19




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##### Table of Contents



Costs and Expenses
(Dollars in millions)
 Three Months ended March 31,Percent2008
    
    2007
    
    ChangeCost of license fees
    
    $
    14.5
    
    
    $
    12.8
    
    
    
    13
    %Percentage of license fees revenues
    
    
    19
    %
    
    
    18
    %Cost of services
    
    $
    40.9
    
    
    $
    38.7
    
    
    
    6
    %Percentage of services revenues
    
    
    29
    %
    
    
    30
    %Cost of messaging
    
    $
    25.1
    
    
    $
    18.9
    
    
    
    33
    %Percentage of messaging revenues
    
    
    59
    %
    
    
    61
    %Sales and marketing
    
    $
    68.3
    
    
    $
    64.6
    
    
    
    6
    %Percentage of total revenues
    
    
    26
    %
    
    
    28
    %Product development and engineering
    
    $
    35.6
    
    
    $
    38.8
    
    
    
    (8
    %)Percentage of total revenues
    
    
    14
    %
    
    
    17
    %General and administrative
    
    $
    36.1
    
    
    $
    31.5
    
    
    
    15
    %Percentage of total revenues
    
    
    14
    %
    
    
    14
    %Amortization of other purchased intangibles
    
    $
    3.5
    
    
    $
    3.4
    
    
    
    3
    %Percentage of total revenues
    
    
    1
    %
    
    
    1
    %Cost of restructure
    
    $
    *
    
    
    $
    *
    
    
    
    *Percentage of total revenues
    
    
    *
    
    
    
    *
 
 *
    
    Not meaningful Cost of License Fees.
 Cost of Services.
 Cost of Messaging
 Sales and Marketing.
 20




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##### Table of Contents



Product Development and Engineering.
   General and Administrative.
 Amortization of Other Purchased Intangibles.
 Cost of Restructure
 Operating Income
(Dollars in millions)
 Three Months ended March 31,Percent2008
    
    2007
    
    ChangeOperating income by segment:IPG
    
    $
    39.0
    
    
    $
    28.3
    
    
    
    38
    %IAS
    
    
    1.7
    
    
    
    1.0
    
    
    
    70
    %SY365
    
    
    1.2
    
    
    
    (1.9
    )
    
    
    *Unallocated costs
    
    
    (5.7
    )
    
    
    (6.0
    )
    
    
    (5
    %)Total operating income:
    
    $
    36.2
    
    
    $
    21.4
    
    
    
    69
    %Percentage of total revenues
    
    
    14
    %
    
    
    9
    %
 
 *
    
    Not meaningful    21




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##### Table of Contents



Other Income (Expense), Net
(Dollars in millions)
 Three Months ended March 31,Percent2008
    
    2007
    
    ChangeInterest income
    
    $
    7.9
    
    
    $
    7.4
    
    
    
    7
    %Percentage of total revenues
    
    
    3
    %
    
    
    3
    %Interest expense and other, net
    
    $
    (4.4
    )
    
    $
    (2.4
    )
    
    
    83
    %Percentage of total revenues
    
    
    (2
    %)
    
    
    (1
    %)Minority interest
    
    
    *
    
    
    
    *
    
    
    
    *Percentage of total revenues
    
    
    *
    
    
    
    *
 
 *
    
    Not meaningful    22




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##### Table of Contents



Provision for Income Taxes
(Dollars in millions)
 Three Months ended March 31,Percent2008
    
    2007
    
    ChangeProvision for income taxes
    
    $
    15.5
    
    
    $
    11.3
    
    
    
    37
    %
  Net Income Per Share
(Dollars and shares in millions, except per share data)
 Three Months ended March 31,Percent2008
    
    2007
    
    ChangeNet income
    
    $
    24.2
    
    
    $
    15.1
    
    
    
    60
    %Percentage of total revenues
    
    
    9
    %
    
    
    7
    %Basic net income per share
    
    $
    0.28
    
    
    $
    0.17
    
    
    
    65
    %Diluted net income per share
    
    $
    0.27
    
    
    $
    0.16
    
    
    
    69
    %Shares used in computing basic net income per share
    
    
    87.7
    
    
    
    91.1
    
    
    
    (4
    %)Shares used in computing diluted net income per share
    
    
    90.8
    
    
    
    93.6
    
    
    
    (3
    %)
 
 *
    
    Not meaningful    .
 23




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##### Table of Contents



Liquidity and Capital Resources
(Dollars in millions)
 Three Months EndedMarch 31,
    
    Percent2008
    
    2007
    
    ChangeWorking capital
    
    $
    674.4
    
    
    $
    486.9
    
    
    
    39
    %Cash and cash equivalents
    
    $
    804.4
    
    
    $
    413.7
    
    
    
    94
    %Net cash provided by operating activities
    
    $
    94.6
    
    
    $
    69.6
    
    
    
    36
    %Net cash provided by (used for) investing activities
    
    $
    74.3
    
    
    $
    (10.8
    )
    
    
    *Net cash provided by (used for) financing activities
    
    $
    11.4
    
    
    $
    (4.1
    )
 
 *
    
    Not meaningful          24




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##### Table of Contents



Short-term and Long-term Cash Investments and Auction-Rate Securities
    25




---



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ITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURES OF MARKET RISK
        
 ITEM 4: CONTROLS AND PROCEDURES
     26




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##### 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.
  27




---



##### Table of Contents



If we fail to maintain or expand our relationships with strategic partners and indirect
distribution channels our license revenues could decline.
   System failures, delays and other problems could harm our reputation and business, cause us to lose
customers and expose us to customer liability.
    Industry consolidation and other competitive pressures could affect prices or demand for our
products and services, and our business may be adversely affected.
   We may encounter difficulties in completing the integration of our Mobile 365 acquisition, other
acquisitions or strategic relationships and we may incur acquisition-related charges that could
adversely affect our operating results.
   28




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##### Table of Contents



The ability to rapidly develop and bring to market advanced products and services that are
successful is crucial to maintaining our competitive position.
  If our existing customers cancel or fail to renew their technical support agreements, our technical
support revenues could be adversely affected.
  29




---



##### Table of Contents



Pricing pressure in the mobile messaging market could adversely affect our operating results.
  Unanticipated delays or accelerations in our sales cycles could result in significant fluctuations
in our quarterly operating results.
  Our mobile messaging customer contracts may not continue to generate revenues at or near our
historical levels of revenues from these customers.
  If we do not adapt to rapid technological change in the telecommunications industry, we could lose
customers or market share.
  Impairments in our investment portfolio may result in temporary and/or realized losses.
   Restructuring activities and reorganizations in our sales model or business units may not succeed
in increasing revenues and operating results.
  30




---



##### Table of Contents



Our results of operations may depend on the compatibility of our products with other software
developed by third parties.
  We are subject to risks arising from our international operations.
  We may not receive significant revenues from our current research and development efforts for
several years, if at all.
  We might experience significant errors or security flaws in our products and services.
  Unanticipated changes in our tax rates could affect our future financial results.
  31




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##### Table of Contents



We face exposure to adverse movements in foreign currency exchange rates.
    Growing market acceptance of open source software could cause a decline in our revenues and
operating margins.
  Insufficient protection for our intellectual property rights may have a material adverse affect on
our results of operations or our ability to compete.
  32




---



##### Table of Contents



If third parties claim that we are in violation of their intellectual property rights, it could
have a negative impact on our results of operations or ability to compete.
   Laws and regulations affecting our customers and us and future laws and regulations to which they
or we may become subject may harm our business.
  Our key personnel are critical to our business, and we cannot assure that they will remain with us.
  33




---



##### Table of Contents



Our sales to government clients subject us to risks including early termination, audits,
investigations, sanctions and penalties.
   Changes in accounting and legal standards could adversely affect our future operating results.
  
  Accounting for Convertible Debt Instruments That May Be Settled in Cash upon Conversion (Including
Partial Cash Settlement.
 Business Combinations.
 The unfavorable outcome of litigation and other claims against us could have a material adverse
impact on our financial condition and results of operations.
  34




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##### 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
   ISSUER PURCHASES OF EQUITY SECURITIES
 (d) Maximum(c) Total
    
    
    Number (orNumber of
    
    
    ApproximateShares (or
    
    
    Dollar Value)Units)
    
    
    of Shares (or(a) Total
    
    
    
    
    
    
    Purchased as
    
    
    Units) that MayNumber of
    
    
    (b) Average
    
    
    Part of Publicly
    
    
    Yet BeShares (or
    
    
    Price Paid per
    
    
    Announced
    
    
    PurchasedPeriod
    
    Units)
    
    
    Share (or Unit)
    
    
    Plans or
    
    
    Under the Plans(2006)
    
    Purchased (#)
    
    
    ($)
    
    
    Programs (#)
    
    
    or Programs ($)January 1
 31
    
    
    6,000
    
    
    $
    24.02
    
    
    
    6,000
    
    
    $
    82,913,000February 1
 29
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    March 1  31
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    
    6,000
    
    
    $
    24.02
    
    
    
    6,000
    
    
    $
    82,913,000
 35




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##### Table of Contents



ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
  1.
    
    Election of three directors, each to serve a one-year terms expiring
at the 2009 Annual Meeting of Stockholders or until a successor is
duly elected and qualified. John S. Chen, Alan B. Salisbury and
Michael A. Daniels were the only nominees, and each was elected
(76,591,626 votes were cast for the election of Mr. Chen and 1,542,628
were withheld; 75,881,578 votes were cast for the election of Mr.
Salisbury and 2,252,676 were withheld; and 77,488,325 votes were cast
for the election of Mr. Daniels and 645,929 were withheld). There were
no abstentions or broker non-votes. In addition to these directors,
our boards other incumbent directors (Richard C. Alberding, Jack E.
Sum, Linda K. Yates, Cecilia Claudio, L. William Krause and Robert P.
Wayman) had terms that continued after the 2008 Annual Meeting.2.
    
    Ratification of the appointment of Ernst & Young LLP as independent
auditors for the year ending December 31, 2008 (75,753,518 for;
2,325,509 against; 55,226 abstentions and no broker non-votes).
 
 ITEM 5: OTHER INFORMATION
  
 ITEM 6: EXHIBITS
   36




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##### Table of Contents



SIGNATURES
  May 9, 2008
    SYBASE, INC.By
    /s/ JEFFREY G. ROSSJeffrey G. RossSenior Vice President and Chief Financial Officer
(Principal Financial Officer)By
    /s/ KEITH JENSENKeith JensenVice President and Corporate Controller
(Principal Accounting Officer) 37




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##### Table of Contents



EXHIBIT INDEX
 Exhibit No.
    
    Description12
    
    Computation of Ratio of Earnings to Fixed Charges10.1
    
    Form of Notice of Grant and Restricted Stock Agreement10.2
    
    Form of Notice of Stock Option Grant and Agreement10.3
    
    Sybase, Inc. Executive Tax Preparation, Financial Planning and Legal Services Reimbursement Policy31.1
    
    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
 38