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SECURITIES AND EXCHANGE
COMMISSIONWashington, D.C. 20549

FORM 10-Q

|                                                                                               
|-----------------------------------------------------------------------------------------------
|[X] QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE
ACT OF 1934         
|                                                                                               
|For the Quarter Ended March 31, 2003                                                           
|                                                                                               
|[   ] 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 0-19395

SYBASE, INC.(Exact Name of Registrant as Specified in Its Charter)

|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|Delaware                                                       |  | 94-2951005                          
|(State or Other Jurisdiction of
Incorporation or Organization) |  | (I.R.S. Employer Identification No.)

One Sybase Drive, Dublin, California 94568
(Address of Principal Executive Offices)

Registrants Telephone Number, Including Area Code: (925) 236-5000

Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.   Yes [X]           No [   ]

Indicate by check mark whether the
registrant is an accelerated filer (as defined in Rule 12b-2 of the
Exchange Act).   Yes [X]           No [   ]

On April 30, 2003, 94,315,757 shares of the Registrants Common Stock, $.001 par
value were outstanding.





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TABLE OF CONTENTS



|                                                                     |                                                                                               |  |  |  |  |  |  | 
|-------------------------------------------------------------------- | --------------------------------------------------------------------------------------------- |  |  |  |  |  |  | 
|FORWARD LOOKING STATEMENTS                                          
|PART I: FINANCIAL INFORMATION                                       
|                                                                     | ITEM 1: FINANCIAL STATEMENTS                                                                 
|                                                                     | CONDENSED CONSOLIDATED BALANCE SHEETS                                                        
|                                                                     | CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS                                              
|                                                                     | CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS                                              
|                                                                     | NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS                                         
|                                                                     | ITEM 2: MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|                                                                     | ITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURES OF MARKET RISK                              
|                                                                     | ITEM 4: CONTROLS AND PROCEDURES                                                              
|PART II: OTHER INFORMATION                                          
|                                                                     | ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K                                                     
|SIGNATURES                                                          
|CERTIFICATION OF CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER
|Exhibit 99.1                                                        
|Exhibit 99.2                                                        
|Exhibit 99.3                                                        



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SYBASE, INC.
FORM 10-Q

QUARTER ENDED MARCH 31, 2003

INDEX

|                                                                                                                                                                              |                                                                                                    |  |      |    | 
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | -------------------------------------------------------------------------------------------------- |  | ---- | -- | 
|                                                                                                                                                                              |                                                                                                    |  | Page
|                                                                                                                                                                              |                                                                                                    |  |     
|Forward Looking Statements                                                                                                                                                    |                                                                                                    |  | 3    |   
|Part I: Financial Information                                                                                                                                                 |                                                                                                    |  |      |   
|                                                                                                                                                                              | Item 1: Financial Statements (Unaudited)                                                           |  |      |    | 
|                                                                                                                                                                              | Condensed Consolidated Balance Sheets as of March 31, 2003 and
December 31, 2002                   |  |      | 4  | 
|                                                                                                                                                                              | Condensed Consolidated Statements of Operations for the three
months ended March 31, 2003 and 2002 |  |      | 5  | 
|                                                                                                                                                                              | Condensed Consolidated Statements of Cash Flows for the three months
ended March 31, 2003 and 2002 |  |      | 6  | 
|                                                                                                                                                                              | Notes to Condensed Consolidated Financial Statements                                               |  |      | 7  | 
|                                                                                                                                                                              | Item 2: Managements Discussion and Analysis of Financial Condition
and Results of Operations      |  |      | 18 | 
|                                                                                                                                                                              | Item 3: Quantitative and Qualitative Disclosures of Market Risk                                    |  |      | 37 | 
|                                                                                                                                                                              | Item 4: Controls and Procedures                                                                    |  |      | 38 | 
|Part II: Other Information                                                                                                                                                    |                                                                                                    |  |      |   
|                                                                                                                                                                              | Item 6: Exhibits and Reports on Form 8-K                                                           |  |      | 39 | 
|Signatures                                                                                                                                                                    |                                                                                                    |  | 40   |   
|                                                                                                                                                                             
|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 |                                                                                                    |  | 41   |   
|                                                                                                                                                                             
|Certification
of Chief Executive Officer pursuant to Securities Exchange Act Rule
13a-14 or15d-14, as adopted pursuant to Section 302(a) of the
Sarbanes-Oxley Act of 2002    |                                                                                                    |  | 42   |   
|                                                                                                                                                                             
|Certification
of Chief Financial Officer pursuant to Securities Exchange Act Rule
13a-14 or15d-14, as adopted pursuant to Section 302(a) of the
Sarbanes-Oxley Act of 2002    |                                                                                                    |  | 43   |   
|                                                                                                                                                                             
|Exhibit
Index                                                                                                                                                                 |                                                                                                    |  | 44   |   

2



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FORWARD LOOKING STATEMENTS

This document contains forward looking statements that involve risk and
uncertainties that could cause the actual results of Sybase, Inc. and its
consolidated subsidiaries (Sybase, the Company, we or us) to differ
materially from those expressed or implied by such forward looking statements.
These risks include continued weakness in the U.S. and global economies; global
political unrest, including acts of terrorism and war in the Middle East; sales
productivity; possible disruptive effects of
organizational changes; shifts in customer or market demand for our products
and services; public perception of Sybase, our technology vision and future
prospects; rapid technological changes; competitive factors; delays in
scheduled product availability dates (which could result from various
occurrences including development or testing difficulties, software errors,
shortages in appropriately skilled software engineers and project management
problems); interoperability of our products with other software products, risks
inherent in completing the acquisition of other companies, the ability to
integrate acquired companies into our business, and other risks detailed from
time to time in our Securities and Exchange Commission filings,
including those discussed in Managements Discussion and
Analysis of Financial Condition and Results of OperationsFuture
Operating Results, Part I, Item 2 of this Quarterly
Report on Form 10-Q.

Expectations, forecasts, and projections that may be contained in this report
are by nature forward looking statements, and future results cannot be
guaranteed. The words anticipate, believe, estimate, expect, intend,
will, and similar expressions in this document, as they relate to Sybase and
our management, may identify forward looking statements. Such statements
reflect the current views of our management with respect to future events and
are subject to risks, uncertainties and assumptions. Forward looking statements
that were true at the time made may ultimately prove to be incorrect or false,
or may vary materially from those described as anticipated, believed,
estimated, intended or expected. We do not intend to update these forward
looking statements.

3



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PART I: FINANCIAL INFORMATION




ITEM 1: FINANCIAL STATEMENTS




SYBASE, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

|                                                |                                                                                                                                                                                 |                                                              |                                            |          |             |           |              |          |         |         | 
|----------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------ | ------------------------------------------ | -------- | ----------- | --------- | ------------ | -------- | ------- | ------- | 
|                                                |                                                                                                                                                                                 |                                                              |                                            |          | March 31,   |           | December 31,
|(In thousands, except share and per share data) |                                                                                                                                                                                 | 2003                                                         |                                            | 2002    
|                                                |                                                                                                                                                                                 |                                                              |                                            |         
|                                                |                                                                                                                                                                                 |                                                              |                                            |          | (Unaudited) |           |              |          |        
|Current assets:                                 |                                                                                                                                                                                 |                                                              |                                            |          |             |           |              |         
|                                                | Cash and cash equivalents                                                                                                                                                       |                                                              | $                                          | 319,105  |             |           | $            | 231,267  |        
|                                                | Short-term cash investments                                                                                                                                                     |                                                              |                                            | 64,086   |             |           |              | 63,740   |        
|                                                |                                                                                                                                                                                 |                                                              |                                            |          |             |           |              |         
|                                                |                                                                                                                                                                                 | Total cash, cash equivalents and short-term cash investments |                                            |          | 383,191     |           |              |          | 295,007 |        
|                                                | Restricted cash                                                                                                                                                                 |                                                              |                                            | 5,569    |             |           |              | 5,653    |        
|                                                | Accounts receivable, net                                                                                                                                                        |                                                              |                                            | 121,347  |             |           |              | 169,193  |        
|                                                | Deferred income taxes                                                                                                                                                           |                                                              |                                            | 20,077   |             |           |              | 20,097   |        
|                                                | Other current assets                                                                                                                                                            |                                                              |                                            | 15,228   |             |           |              | 14,669   |        
|                                                |                                                                                                                                                                                 |                                                              |                                            |          |             |           |              |         
|                                                |                                                                                                                                                                                 | Total current assets                                         |                                            |          | 545,412     |           |              |          | 504,619 |        
|Long-term cash investments                      |                                                                                                                                                                                 |                                                              | 72,297                                     |          |             |           | 92,173       |         
|Restricted long-term cash investments           |                                                                                                                                                                                 |                                                              | 3,400                                      |          |             |           |             |         
|Property, equipment and improvements, net       |                                                                                                                                                                                 |                                                              | 73,952                                     |          |             |           | 70,402       |         
|Deferred income taxes                           |                                                                                                                                                                                 |                                                              | 46,547                                     |          |             |           | 46,295       |         
|Capitalized software, net                       |                                                                                                                                                                                 |                                                              | 62,283                                     |          |             |           | 62,266       |         
|Goodwill, net                                   |                                                                                                                                                                                 |                                                              | 151,502                                    |          |             |           | 136,826      |         
|Other purchased intangibles, net                |                                                                                                                                                                                 |                                                              | 51,709                                     |          |             |           | 50,473       |         
|Other assets                                    |                                                                                                                                                                                 |                                                              | 32,215                                     |          |             |           | 29,695       |         
|                                                |                                                                                                                                                                                 |                                                              |                                            |          |             |           |              |         
|                                                |                                                                                                                                                                                 | Total assets                                                 |                                            | $        | 1,039,317   |           |              | $        | 992,749 |        
|                                                |                                                                                                                                                                                 |                                                              |                                            |          |             |           |              |         
|Current liabilities:                            |                                                                                                                                                                                 |                                                              |                                            |          |             |           |              |         
|                                                | Accounts payable                                                                                                                                                                |                                                              | $                                          | 17,697   |             |           | $            | 13,085   |        
|                                                | Accrued compensation and related expenses                                                                                                                                       |                                                              |                                            | 29,648   |             |           |              | 36,671   |        
|                                                | Accrued income taxes                                                                                                                                                            |                                                              |                                            | 33,318   |             |           |              | 34,023   |        
|                                                | Other accrued liabilities                                                                                                                                                       |                                                              |                                            | 115,567  |             |           |              | 112,468  |        
|                                                | Deferred revenue                                                                                                                                                                |                                                              |                                            | 230,829  |             |           |              | 200,458  |        
|                                                |                                                                                                                                                                                 |                                                              |                                            |          |             |           |              |         
|                                                |                                                                                                                                                                                 | Total current liabilities                                    |                                            |          | 427,059     |           |              |          | 396,705 |        
|Other liabilities                               |                                                                                                                                                                                 |                                                              | 11,717                                     |          |             |           | 10,641       |         
|Minority interest                               |                                                                                                                                                                                 |                                                              | 5,029                                      |          |             |           | 5,029        |         
|Commitments and contingent liabilities          |                                                                                                                                                                                 |                                                              |                                            |          |             |           |              |         
|Stockholders 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 94,661,829
outstanding (2002-105,337,362 shares issued and 94,660,056
outstanding) |                                                              |                                            | 105      |             |           |              | 105      |        
|                                                | Additional paid-in capital                                                                                                                                                      |                                                              |                                            | 934,073  |             |           |              | 929,064  |        
|                                                | Accumulated deficit                                                                                                                                                             |                                                              |                                            | (184,913 | )           |           |              | (189,936 | )      
|                                                | Accumulated other comprehensive loss                                                                                                                                            |                                                              |                                            | (2,301   | )           |           |              | (8,673   | )      
|                                                | Cost of 10,675,533 shares of treasury stock (2002-10,677,306 shares)                                                                                                            |                                                              |                                            | (143,731 | )           |           |              | (146,816 | )      
|                                                | Unearned compensation                                                                                                                                                           |                                                              |                                            | (7,721   | )           |           |              | (3,370   | )      
|                                                |                                                                                                                                                                                 |                                                              |                                            |          |             |           |              |         
|                                                |                                                                                                                                                                                 |                                                              | Total stockholders equity                 |          |             | 595,512   |              |          |         | 580,374 | 
|                                                |                                                                                                                                                                                 |                                                              |                                            |          |             |           |              |         
|                                                |                                                                                                                                                                                 |                                                              | Total liabilities and stockholders equity |          | $           | 1,039,317 |              |          | $       | 992,749 | 
|                                                |                                                                                                                                                                                 |                                                              |                                            |          |             |           |              |         

See accompanying notes.

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SYBASE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)

|                                                                         |                                             |      |                    |         |   |   |          |          |  
|------------------------------------------------------------------------ | ------------------------------------------- | ---- | ------------------ | ------- | - | - | -------- | -------- | -
|                                                                         |                                             |      | Three Months Ended
|                                                                         |                                             |      | March 31,         
|                                                                         |                                             |      |                   
|(In thousands, except per share data)                                    |                                             | 2003 |                    | 2002   
|                                                                         |                                             |      |                    |        
|Revenues:                                                                |                                             |      |                    |         |   |   |          |         
|                                                                         | License fees                                |      | $                  | 60,875  |   |   | $        | 83,848   |  
|                                                                         | Services                                    |      |                    | 120,672 |   |   |          | 127,188  |  
|                                                                         |                                             |      |                    |         |   |   |          |         
|                                                                         | Total revenues                              |      |                    | 181,547 |   |   |          | 211,036  |  
|Costs and expenses:                                                      |                                             |      |                    |         |   |   |          |         
|                                                                         | Cost of license fees                        |      |                    | 13,928  |   |   |          | 11,464   |  
|                                                                         | Cost of services                            |      |                    | 39,232  |   |   |          | 52,085   |  
|                                                                         | Sales and marketing                         |      |                    | 58,496  |   |   |          | 70,888   |  
|                                                                         | Product development and engineering         |      |                    | 29,918  |   |   |          | 30,939   |  
|                                                                         | General and administrative                  |      |                    | 22,100  |   |   |          | 22,262   |  
|                                                                         | Amortization of other purchased intangibles |      |                    | 500     |   |   |          | 500      |  
|                                                                         | Stock compensation expense                  |      |                    | 661     |   |   |          | 497      |  
|                                                                         | Reversal of restructure                     |      |                    | (209    | ) |   |          | (115     | )
|                                                                         |                                             |      |                    |         |   |   |          |         
|                                                                         | Total costs and expenses                    |      |                    | 164,626 |   |   |          | 188,520  |  
|                                                                         |                                             |      |                    |         |   |   |          |         
|Operating income                                                         |                                             |      | 16,921             |         |   |   | 22,516   |         
|Interest income                                                          |                                             |      | 2,827              |         |   |   | 2,828    |         
|Interest expense and other, net                                          |                                             |      | (384               | )       |   |   | 134      |         
|                                                                         |                                             |      |                    |         |   |   |          |         
|Income before income taxes and cumulative effect of an
accounting change |                                             |      | 19,364             |         |   |   | 25,478   |         
|Provision for income taxes                                               |                                             |      | 6,390              |         |   |   | 9,427    |         
|                                                                         |                                             |      |                    |         |   |   |          |         
|Income before cumulative effect of an accounting change                  |                                             |      | 12,974             |         |   |   | 16,051   |         
|Cumulative effect of an accounting change to adopt SFAS 142              |                                             |      |                   |         |   |   | (132,450 | )       
|                                                                         |                                             |      |                    |         |   |   |          |         
|                                                                         | Net income (loss)                           |      | $                  | 12,974  |   |   | $        | (116,399 | )
|                                                                         |                                             |      |                    |         |   |   |          |         
|Income per share before cumulative effect of an accounting change        |                                             | $    | 0.14               |         |   | $ | 0.16     |         
|Cumulative effect of an accounting change                                |                                             |      |                   |         |   |   | (1.34    | )       
|                                                                         |                                             |      |                    |         |   |   |          |         
|Basic net income (loss) per share                                        |                                             | $    | 0.14               |         |   | $ | (1.18    | )       
|                                                                         |                                             |      |                    |         |   |   |          |         
|Shares used in computing basic net income (loss) per share               |                                             |      | 94,357             |         |   |   | 98,352   |         
|                                                                         |                                             |      |                    |         |   |   |          |         
|Income per share before cumulative effect of an accounting change        |                                             | $    | 0.13               |         |   | $ | 0.16     |         
|Cumulative effect of an accounting change                                |                                             |      |                   |         |   |   | (1.30    | )       
|                                                                         |                                             |      |                    |         |   |   |          |         
|Diluted net income (loss) per share                                      |                                             | $    | 0.13               |         |   | $ | (1.14    | )       
|                                                                         |                                             |      |                    |         |   |   |          |         
|Shares used in computing diluted net income (loss) per share             |                                             |      | 97,275             |         |   |   | 102,155  |         
|                                                                         |                                             |      |                    |         |   |   |          |         

See accompanying notes.

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SYBASE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)

|                                                                 |                                                                                          |                                                             |                                           |         |                    |         |         |          |         |         |  
|---------------------------------------------------------------- | ---------------------------------------------------------------------------------------- | ----------------------------------------------------------- | ----------------------------------------- | ------- | ------------------ | ------- | ------- | -------- | ------- | ------- | -
|                                                                 |                                                                                          |                                                             |                                           |         | Three Months Ended
|                                                                 |                                                                                          |                                                             |                                           |         | March 31,         
|                                                                 |                                                                                          |                                                             |                                           |         |                   
|(Dollars in thousands)                                           |                                                                                          | 2003                                                        |                                           | 2002   
|                                                                 |                                                                                          |                                                             |                                           |        
|Cash and cash equivalents, beginning of year                     |                                                                                          | $                                                           | 231,267                                   |         |                    | $       | 222,793 |         
|Cash flows from operating activities:                            |                                                                                          |                                                             |                                           |         |                    |         |         |         
|                                                                 | Net income (loss)                                                                        |                                                             |                                           | 12,974  |                    |         |         | (116,399 | )      
|                                                                 | Adjustments to reconcile net income (loss) to net cash provided by
operating activities: |                                                             |                                           |         |                    |         |         |          |        
|                                                                 |                                                                                          | Depreciation and amortization                               |                                           |         | 20,409             |         |         |          | 20,660  |        
|                                                                 |                                                                                          | Gain on disposal of assets                                  |                                           |         | (267               | )       |         |          | (163    | )      
|                                                                 |                                                                                          | Cumulative
effect of an accounting change to adopt SFAS 142 |                                           |         |                   |         |         |          | 132,450 |        
|                                                                 |                                                                                          | Deferred income taxes                                       |                                           |         | (1,216             | )       |         |          | (1,222  | )      
|                                                                 |                                                                                          | Amortization of deferred stock-based compensation           |                                           |         | 661                |         |         |          | 497     |        
|                                                                 |                                                                                          | Changes in assets and liabilities:                          |                                           |         |                    |         |         |          |         |        
|                                                                 |                                                                                          |                                                             | Accounts receivable                       |         |                    | 52,519  |         |          |         | 38,584  |  
|                                                                 |                                                                                          |                                                             | Other current assets                      |         |                    | (412    | )       |          |         | 2,044   |  
|                                                                 |                                                                                          |                                                             | Accounts payable                          |         |                    | 3,959   |         |          |         | (168    | )
|                                                                 |                                                                                          |                                                             | Accrued compensation and related expenses |         |                    | (7,980  | )       |          |         | (6,289  | )
|                                                                 |                                                                                          |                                                             | Accrued income taxes                      |         |                    | (714    | )       |          |         | 5,500   |  
|                                                                 |                                                                                          |                                                             | Other accrued liabilities                 |         |                    | (15,110 | )       |          |         | (22,531 | )
|                                                                 |                                                                                          |                                                             | Deferred revenues                         |         |                    | 29,570  |         |          |         | 19,792  |  
|                                                                 |                                                                                          |                                                             | Other liabilities                         |         |                    | 1,116   |         |          |         | 1,006   |  
|                                                                 |                                                                                          |                                                             |                                           |         |                    |         |         |         
|Net cash provided by operating activities                        |                                                                                          |                                                             | 95,509                                    |         |                    |         | 73,761  |         
|Cash flows from investing activities:                            |                                                                                          |                                                             |                                           |         |                    |         |         |         
|                                                                 | Decrease in restricted cash                                                              |                                                             |                                           | 84      |                    |         |         | 943      |        
|                                                                 | Purchases of available-for-sale cash investments                                         |                                                             |                                           | (17,637 | )                  |         |         | (90,281  | )      
|                                                                 | Maturities of available-for-sale cash investments                                        |                                                             |                                           | 1,267   |                    |         |         | 15,567   |        
|                                                                 | Sales of available-for-sale cash investments                                             |                                                             |                                           | 36,014  |                    |         |         | 16,749   |        
|                                                                 | Business combinations, net of cash acquired                                              |                                                             |                                           | (13,903 | )                  |         |         |         |        
|                                                                 | Purchases of property, equipment and improvements                                        |                                                             |                                           | (10,482 | )                  |         |         | (12,712  | )      
|                                                                 | Proceeds from sale of fixed assets                                                       |                                                             |                                           | 9       |                    |         |         | 67       |        
|                                                                 | Capitalized software development costs                                                   |                                                             |                                           | (6,562  | )                  |         |         | (7,625   | )      
|                                                                 | Increase in other assets                                                                 |                                                             |                                           | (2,541  | )                  |         |         | (729     | )      
|                                                                 |                                                                                          |                                                             |                                           |         |                    |         |         |         
|Net cash used for investing activities                           |                                                                                          |                                                             | (13,751                                   | )       |                    |         | (78,021 | )       
|Cash flows from financing activities:                            |                                                                                          |                                                             |                                           |         |                    |         |         |         
|                                                                 | Net proceeds from the issuance of common stock and
reissuance of treasury stock          |                                                             |                                           | 10,077  |                    |         |         | 12,367   |        
|                                                                 | Purchases of treasury stock                                                              |                                                             |                                           | (9,535  | )                  |         |         | (15,601  | )      
|                                                                 |                                                                                          |                                                             |                                           |         |                    |         |         |         
|Net cash provided by (used for) financing activities             |                                                                                          |                                                             | 542                                       |         |                    |         | (3,234  | )       
|Effect of exchange rate changes on cash                          |                                                                                          |                                                             | 5,538                                     |         |                    |         | (2,708  | )       
|                                                                 |                                                                                          |                                                             |                                           |         |                    |         |         |         
|Net increase (decrease) in cash and cash equivalents             |                                                                                          |                                                             | 87,838                                    |         |                    |         | (10,202 | )       
|                                                                 |                                                                                          |                                                             |                                           |         |                    |         |         |         
|Cash and cash equivalents, end of period                         |                                                                                          |                                                             | 319,105                                   |         |                    |         | 212,591 |         
|Cash investments, end of period                                  |                                                                                          |                                                             | 136,383                                   |         |                    |         | 177,191 |         
|                                                                 |                                                                                          |                                                             |                                           |         |                    |         |         |         
|Total cash, cash equivalents and cash investments, end of period |                                                                                          | $                                                           | 455,488                                   |         |                    | $       | 389,782 |         
|                                                                 |                                                                                          |                                                             |                                           |         |                    |         |         |         
|Supplemental disclosures:                                        |                                                                                          |                                                             |                                           |         |                    |         |         |         
|                                                                 | Interest paid                                                                            |                                                             | $                                         | 13      |                    |         | $       | 46       |        
|                                                                 | Income taxes paid                                                                        |                                                             | $                                         | 7,804   |                    |         | $       | 3,879    |        

See accompanying notes.

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SYBASE INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

1.     Basis of Presentation. The accompanying unaudited condensed consolidated
financial statements include the accounts of Sybase, Inc. and its subsidiaries,
and, in the opinion of management, reflect all adjustments (consisting only of
normal recurring adjustments) necessary to fairly state the
Companys consolidated
financial position, results of operations, and cash flows as of and for the
dates and periods presented. The condensed consolidated balance sheet as of
December 31, 2002 has been prepared from the Companys audited consolidated
financial statements.

Certain information and footnote disclosures normally included in the annual
financial statements have been condensed or omitted. These unaudited condensed
consolidated financial statements should be read in conjunction with our
audited consolidated financial statements included in the Companys Annual
Report on Form 10-K for the year ended December 31, 2002. The results of
operations for the three months ended March 31, 2003 are not necessarily
indicative of results for the entire fiscal year ending December 31, 2003.

2.     Stock-Based
Compensation. SFAS 123, Accounting for Stock-Based
Compensation, encourages, but does not require, companies to record
compensation cost for stock-based employee compensation plans at fair value.
Sybase has chosen to continue to account for stock-based employee compensation
using the intrinsic value method. Accordingly, compensation cost for stock
options granted to employees is measured as the excess, if any, of the quoted
market price of the Companys stock at the date of the grant over the amount an
employee must pay to acquire the stock.

Had compensation cost been charged to expense for grants to employees under the
Companys fixed stock option plans (including the Financial
Fusion, Inc. (FFI) and iAnywhere Solutions, Inc. (iAS) stock plans) and the
Companys employee stock purchase plan based on the fair value at the grant
dates for awards under those plans, consistent with the method encouraged by
SFAS 123, the Companys net income/(loss) and net income/(loss) per share would
have been adjusted to the pro forma amounts indicated below:

|                                                                                                              |             |             |         |        |      |        |          |       |       |  
|------------------------------------------------------------------------------------------------------------- | ----------- | ----------- | ------- | ------ | ---- | ------ | -------- | ----- | ----- | -
|                                                                                                              |             |             |         | Three  |      | Three 
|                                                                                                              |             |             |         | Months |      | Months
|                                                                                                              |             |             |         | Ended  |      | Ended 
|(Dollars in thousands, except per share data)                                                                 |             |             | 3/31/03 |        |      |        | 3/31/02  |      
|                                                                                                              |             |             |         |        |      |       
|As reported net income/(loss)  stock-based employee
compensation determined using the intrinsic value method |             | $           | 12,974  |        |      | $      | (116,399 | )    
|Add: Stock-based employee compensation cost, net of tax,
included in net income as reported                   |             | $           | 661     |        |      |        | 497      |      
|Less: Pro-forma stock-based employee compensation cost,
net of tax, determined under the fair value method    |             | $           | (8,126  | )      |      | $      | (9,059   | )    
|                                                                                                              |             |             |         |        |      |        |          |      
|Pro-forma net income/(loss)  stock-based employee
compensation determined under the fair value method        |             | $           | 5,509   |        |      | $      | (124,961 | )    
|Basic net income/(loss) per share                                                                             |             |             |         |        |      |        |          |      
|                                                                                                              |             | As reported |         | $      | 0.14 |        |          | $     | (1.18 | )
|                                                                                                              |             | Pro forma   |         |        | 0.06 |        |          |       | (1.27 | )
|Diluted net income/(loss) per share                                                                           |             |             |         |        |      |        |          |      
|                                                                                                              | As reported |             | $       | 0.13   |      |        | $        | (1.14 | )    
|                                                                                                              | Pro forma   |             |         | 0.06   |      |        |          | (1.22 | )    

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SYBASE INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

The fair value employee compensation cost was determined using the
Black-Scholes option pricing model using the following weighted-average
assumptions:

|                         |  |         |       |         |  |  |       |  
|------------------------ |  | ------- | ----- | ------- |  |  | ----- | -
|                         |  | Three   |       | Three  
|                         |  | Months  |       | Months 
|                         |  | Ended   |       | Ended  
|                         |  | 3/31/03 |       | 3/31/02
|                         |  |         |       |        
|Expected volatility      |  |         | 65.87 | %       |  |  | 67.65 | %
|Risk-free interest rates |  |         | 2.49  | %       |  |  | 3.46  | %
|Expected lives (years)   |  |         | 4.25  |         |  |  | 4.25  |  
|Expected dividend yield  |  |         |      |         |  |  |      |  

3.     Business
Combinations. On December 20, 2002, Sybase agreed to acquire all
the outstanding capital stock of AvantGo, Inc. (AvantGo) a publicly-traded
provider of mobile enterprise software, for approximately $40.5 million in cash
including $1.4 million in merger-related transaction expenses. On February 25,
2003, the AvantGo shareholders approved the transaction. As a result of the
acquisition, Sybase expects to strengthen its position in the mobile middleware
market and provide a more complete m-Business platform to its customers. The
results of AvantGo will be included in the Companys iAS reporting segment. The excess of the purchase price over the fair value of the
net assets acquired is approximately $20.2 million. This amount is subject to
change pending the final analysis of the fair values of the assets acquired and
the liabilities assumed, including the valuation of certain tax assets acquired
that are dependent upon the filing of AvantGos final federal and state income
tax returns. Included in the liabilities acquired is $4.7 million related to
estimated facility and severance exit costs in accordance with Emerging Task
Force Issue Number 95-3 Recognition of Liabilities in Connection with a
Purchase Business Combination.

Of the estimated $20.2 million excess, $2.4 was allocated to developed
technology, $3.1 million was allocated to the AvantGo family of
tradenames, and $14.7 million was
allocated to goodwill. The developed technology was assigned a useful life of
six years, while an indefinite life was assigned to the tradenames. The
allocation and assignment of useful lives was based on a valuation prepared by
an independent third-party appraiser. Included in the goodwill is
approximately $1.0 million that was allocated to goodwill with an offsetting amount allocated to long-term
deferred tax liability for the tax effect of the amortization of the developed
technology, which is not deductible for tax purposes.

In connection with the acquisition of AvantGo, the Company assumed certain
liabilities associated with AvantGos 2001 and 2002 restructuring programs.
These accrued restructure liabilities primarily related to excess space at
AvantGos Hayward, California and Chicago, Illinois facilities. The following table summarizes the
restructuring liabilities acquired and post-acquisition activity related to
AvantGos restructuring actions:

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SYBASE INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

|                                                          |  |                     |     |         |  |                  |     |         |  |    |   |  |  |                     |     | 
|--------------------------------------------------------- |  | ------------------- | --- | ------- |  | ---------------- | --- | ------- |  | -- | - |  |  | ------------------- | --- | 
|                                                          |  |                     |     |         |  |                  |     |         |  |    |   |  |  | Accrued liabilities
|                                                          |  | Accrued liabilities |     | Amounts |  |                  |     |         |  | at
|(Dollars in millions)                                     |  | Assumed             |     | Paid    |  | Amounts reversed |     | 3/31/03
|                                                          |  |                     |     |         |  |                  |     |        
|Termination payments to employees
and other related costs |  | $                   | 0.3 |         |  | $                |    |         |  |    |  |  |  | $                   | 0.3 | 
|Lease cancellations and commitments                       |  |                     | 4.0 |         |  |                  | 0.1 |         |  |    |  |  |  |                     | 3.9 | 
|                                                          |  |                     |     |         |  |                  |     |         |  |    |   |  |  |                     |     | 
|                                                          |  | $                   | 4.3 |         |  | $                | 0.1 |         |  | $  |  |  |  | $                   | 4.2 | 
|                                                          |  |                     |     |         |  |                  |     |         |  |    |   |  |  |                     |     | 

The following unaudited pro forma quarterly financial information presents the
combined results of operations of Sybase and AvantGo as if the acquisition of
AvantGo had occurred as of the beginning of 2003 and 2002,
respectively. The pro forma
quarterly financial information gives effect to certain preliminary
adjustments, including the amortization of developed technology and the
elimination of AvantGos amortization of stock-based compensation. The pro
forma financial information does not necessarily reflect the results of
operations that would have occurred had the two companies constituted a single
entity during such periods.

|                                                                  |  |         |         |         |  |   |          |  
|----------------------------------------------------------------- |  | ------- | ------- | ------- |  | - | -------- | -
|                                                                  |  | Three   |         | Three  
|                                                                  |  | Months  |         | Months 
|                                                                  |  | Ended   |         | Ended  
|(In thousands, except per share data)                             |  | 3/31/03 |         | 3/31/02
|                                                                  |  |         |         |        
|Revenue                                                           |  | $       | 183,563 |         |  | $ | 215,818  |  
|Net income before the cumulative effect of an accounting change   |  |         | 1,200   |         |  |   | 10,977   |  
|Net Income                                                        |  | $       | 1,200   |         |  | $ | (121,473 | )
|Income per share before cumulative effect of an accounting change |  | $       | 0.01    |         |  | $ | 0.11     |  
|Cumulative effect of an accounting change                         |  |         |        |         |  |   | (1.34    | )
|                                                                  |  |         |         |         |  |   |          |  
|Basic net income (loss per share)                                 |  | $       | 0.01    |         |  | $ | (1.23    | )
|                                                                  |  |         |         |         |  |   |          |  
|Income per share before cumulative effect of an accounting change |  | $       | 0.01    |         |  | $ | 0.11     |  
|Cumulative effect of an accounting change                         |  |         |        |         |  |   | (1.30    | )
|                                                                  |  |         |         |         |  |   |          |  
|Diluted net income per share                                      |  | $       | 0.01    |         |  | $ | (1.19    | )
|                                                                  |  |         |         |         |  |   |          |  

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SYBASE INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

4.     Net
income per share. Shares used in computing basic and diluted net income
(loss) per share are based on the weighted average shares outstanding in each
period, excluding treasury stock. Basic net income (loss) per share excludes
any dilutive effects of stock options. Diluted net income (loss) per share
includes the dilutive effect of the assumed exercise of stock options, warrants
and restricted stock using the treasury stock method. The following table
shows the computation of basic and diluted net income (loss) per share:

|                                                                  |  |         |        |         |  |   |          |  
|----------------------------------------------------------------- |  | ------- | ------ | ------- |  | - | -------- | -
|                                                                  |  | Three   |        | Three  
|                                                                  |  | Months  |        | Months 
|                                                                  |  | Ended   |        | Ended  
|(In thousands, except per share data)                             |  | 3/31/03 |        | 3/31/02
|                                                                  |  |         |        |        
|Income before cumulative effect of an accounting change           |  | $       | 12,974 |         |  | $ | 16,051   |  
|Cumulative effect of an accounting change to adopt SFAS 142       |  |         |       |         |  |   | (132,450 | )
|                                                                  |  |         |        |         |  |   |          |  
|Net income (loss)                                                 |  | $       | 12,974 |         |  | $ | (116,399 | )
|                                                                  |  |         |        |         |  |   |          |  
|Income per share before cumulative effect of an accounting change |  | $       | 0.14   |         |  | $ | 0.16     |  
|Cumulative effect of an accounting change                         |  |         |       |         |  |   | (1.34    | )
|                                                                  |  |         |        |         |  |   |          |  
|Basic net income (loss) per share                                 |  | $       | 0.14   |         |  | $ | (1.18    | )
|                                                                  |  |         |        |         |  |   |          |  
|Shares used in computing basic net income (loss) per share        |  |         | 94,357 |         |  |   | 98,352   |  
|                                                                  |  |         |        |         |  |   |          |  
|Income per share before cumulative effect of an accounting change |  | $       | 0.13   |         |  | $ | 0.16     |  
|Cumulative effect of an accounting change                         |  |         |       |         |  |   | (1.30    | )
|                                                                  |  |         |        |         |  |   |          |  
|Diluted net income (loss) per share                               |  | $       | 0.13   |         |  | $ | (1.14    | )
|                                                                  |  |         |        |         |  |   |          |  
|Shares used in computing diluted net income (loss) per share      |  |         | 97,275 |         |  |   | 102,155  |  
|                                                                  |  |         |        |         |  |   |          |  

5.     Comprehensive
Income (Loss). The following table sets forth the calculation
of comprehensive income for all periods presented:

|                                            |  |         |        |         |  |   |          |  
|------------------------------------------- |  | ------- | ------ | ------- |  | - | -------- | -
|                                            |  | Three   |        | Three  
|                                            |  | Months  |        | Months 
|                                            |  | Ended   |        | Ended  
|(In thousands)                              |  | 3/31/03 |        | 3/31/02
|                                            |  |         |        |        
|Net income (loss)                           |  | $       | 12,974 |         |  | $ | (116,399 | )
|Foreign currency translation gains (losses) |  |         | 6,490  |         |  |   | (3,059   | )
|Unrealized losses on marketable securities  |  |         | (118   | )       |  |   | (940     | )
|                                            |  |         |        |         |  |   |          |  
|Comprehensive income (loss)                 |  | $       | 19,346 |         |  | $ | (120,398 | )
|                                            |  |         |        |         |  |   |          |  

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SYBASE INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

6.     Effects
of New Accounting Pronouncements. In December 2002, the FASB issued
SFAS No. 148, Accounting for Stock-Based Compensation  Transition and
Disclosure (SFAS 148), effective for fiscal years ending after December 15,
2002. SFAS 148 amends SFAS No. 123, Accounting for Stock-Based Compensation
(SFAS 123), to provide alternative methods of transition to the voluntary fair
value method of accounting for stock-based employee compensation. SFAS 148
also amends the disclosure provisions of SFAS 123 to require that disclosure of
the pro forma effect of using the fair value method of accounting for
stock-based employee compensation be displayed in tabular format within our
financial statements. See Note Two above.

In November 2002, the FASB issued FIN 45, Guarantors Accounting and Disclosure
Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of
Others. FIN 45 requires that the Company recognize the fair value for guarantee
and indemnification arrangements issued or modified by the Company after
December 31, 2002, if these arrangements are within the scope of the
Interpretation. In addition, the Company must continue to monitor the
conditions that are subject to the guarantees and indemnifications, as required
under previously existing generally accepted accounting principles, in order to
identify if a loss has occurred. If the Company determines it is probable that
a loss has occurred then any such estimable loss would be recognized under
those guarantees and indemnifications. Under its standard software
license agreement (SWLA), the Company agrees to indemnify, defend and
hold harmless its licensees from and against all losses, damages and
costs arising from claims alleging the licensees use of Company
software infringes the intellectual property rights of a third party.
Historically, the Company has not been required to pay material
amounts in connection with claims asserted under these provisions
and, accordingly, the Company has not recorded a liability relating
to such provisions. Under the SWLA, the Company also represents and
warrants to licensees that its software products operate
substantially in accordance with published specifications.
Historically, only minimal costs have been incurred relating to the
satisfaction of product warranty claims and, as such, no accruals for
warranty claims have been made. Other guarantees include promises to
indemnify, defend and hold harmless each of the Companys
executive officers, non-employee directors and certain key employees
from and against losses, damages and costs incurred by each such
individual in administrative, legal or investigative proceedings
arising from alleged wrongdoing by the individual while acting in
good faith within the scope of his or her job duties on behalf of the
Company. Historically minimal costs have been incurred relating to
such indemnifications and, as such, no accruals for these guarantees
have been made. The Company implemented the provisions of FIN 45
as of January 1, 2003. The implementation of FIN 45 did not
have a material impact on Sybases financial position, results
of operations or cash flows.

In June 2002, the FASB issued SFAS No. 146, Accounting for Costs Associated
with Exit or Disposal Activities (SFAS 146) effective for calendar years
beginning after December 31, 2002. Under SFAS 146 a liability for the cost
associated with an exit or disposal activity is recognized when the liability
is incurred. Under prior guidance, a liability for such costs could be
recognized at the date of commitment to an exit plan. SFAS No. 146 also
requires that the liability be measured and recorded at fair value.
Accordingly, the adoption of this standard may affect the timing of recognizing
future restructuring costs as well as the amounts recognized. We will apply the
provisions of SFAS 146 for restructuring activities initiated after December
31, 2002.

11



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SYBASE INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

7.     Accounting
for Goodwill. In June 2001, the FASB issued Statement of
Financial Accounting Standards No. 142, Goodwill and Other Intangible Assets,
(SFAS 142) effective for fiscal years beginning after December 15, 2001. Under
SFAS 142, goodwill and intangible assets deemed to have indefinite lives are to
be separately disclosed on the balance sheet, and no longer amortized but
subject to annual impairment tests. With the adoption of SFAS 142, we ceased
amortization of goodwill as of January 1, 2002. Prior to this point, goodwill
was amortized using the straight-line method over its estimated useful life.

SFAS 142 requires that goodwill be tested for impairment at the reporting unit
level (i.e., our business segments) upon adoption and at least annually
thereafter using a two-step impairment analysis. In accordance with SFAS 142,
the Company performed the first of the required two-step impairment tests of
goodwill and indefinite-lived assets as of January 1, 2002. In performing the
first step of this analysis, the Company first assigned its assets and
liabilities, including existing goodwill and other intangible assets, to its
identified reporting units to determine their carrying value. For this
purpose, the Companys reporting units equated to its five business segments
then in place. The Companys reporting units equate to its business segments
since this is the lowest level of the Company at which operating plans are
prepared and operating profitability is measured for assessing management
performance. A consolidation of the Companys business segments, such as
occurred in the first quarter of 2003, will impact the business units tested
under SFAS 142. See Note Eight for more information regarding the Companys
current and prior business segments. Based on an analysis of an independent
third party appraiser, the Company then estimated the fair value of each
reporting unit utilizing various valuation techniques including discounted cash
flow and comparative market analysis. Step one of this analysis was then
completed by comparing the carrying value of each reporting unit to its fair
value. This comparison indicated a possible goodwill impairment within the FFI
and the then-existing eBD reporting unit.

In step two of the analysis, the Company allocated the fair value of FFI and eBD
to their respective assets and then compared the implied value of their
goodwill to such goodwills carrying value. Based on the completed analysis,
the Company recognized an impairment loss of $132.5 million in the first
quarter of 2002. Of this impairment loss, $39.0 million related to the FFI
reporting unit and $93.5 million related to the then-existing eBD reporting
unit. This loss was recognized as a cumulative effect of an accounting change
in the quarter ended March 31, 2002. The impairment loss had no income tax
effect.

The following table reflects the changes in the carrying amount of goodwill
(including assembled workforce) by reporting unit.

|                                         |  |     |         |     |  |     |        |                    |  |   |        |  |  |   |         | 
|---------------------------------------- |  | --- | ------- | --- |  | --- | ------ | ------------------ |  | - | ------ |  |  | - | ------- | 
|(In thousands)                           |  | IPG |         | FFI |  | iAS |        | Consolidated Total
|                                         |  |     |         |     |  |     |        |                   
|Balance at January 1, 2003               |  | $   | 107,456 |     |  | $   | 29,281 |                    |  | $ | 89     |  |  | $ | 136,826 | 
|Goodwill recorded on AvantGo acquisition |  |     |        |     |  |     |       |                    |  |   | 14,612 |  |  |   | 14,612  | 
|Foreign currency translation adjustments |  |     | 64      |     |  |     |       |                    |  |   |       |  |  |   | 64      | 
|                                         |  |     |         |     |  |     |        |                    |  |   |        |  |  |   |         | 
|Balance at March 31, 2003                |  | $   | 107,520 |     |  | $   | 29,281 |                    |  | $ | 14,701 |  |  | $ | 151,502 | 
|                                         |  |     |         |     |  |     |        |                    |  |   |        |  |  |   |         | 

12



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SYBASE INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

The following table reflects intangible assets as of
March 31, 2003 and December 31, 2002:

|                     |  |                |         |              |  |              |         |                |  |              |        |              |  |   |        |  |  |   |         |   |  |   |        | 
|-------------------- |  | -------------- | ------- | ------------ |  | ------------ | ------- | -------------- |  | ------------ | ------ | ------------ |  | - | ------ |  |  | - | ------- | - |  | - | ------ | 
|                     |  | Gross Carrying |         | Accumulated  |  | Net
Carrying |         | Gross Carrying |  | Accumulated  |        | Net Carrying
|                     |  | Amount         |         | Amortization |  | Amount       |         | Amount         |  | Amortization |        | Amount      
|(In thousands)       |  | 3/31/03        |         | 3/31/03      |  | 3/31/03      |         | 12/31/02       |  | 12/31/02     |        | 12/31/02    
|                     |  |                |         |              |  |              |         |                |  |              |        |             
|Purchased technology |  | $              | 79,100  |              |  | $            | (44,102 | )              |  | $            | 34,998 |              |  | $ | 76,700 |  |  | $ | (40,338 | ) |  | $ | 36,362 | 
|AvantGo
tradenames   |  |                | 3,100   |              |  |              |        |                |  |              | 3,100  |              |  |   |       |  |  |   |        |   |  |   |       | 
|Customer lists       |  |                | 20,000  |              |  |              | (6,389  | )              |  |              | 13,611 |              |  |   | 20,000 |  |  |   | (5,889  | ) |  |   | 14,111 | 
|                     |  |                |         |              |  |              |         |                |  |              |        |              |  |   |        |  |  |   |         |   |  |   |        | 
|Totals               |  | $              | 102,200 |              |  | $            | (50,491 | )              |  | $            | 51,709 |              |  | $ | 96,700 |  |  | $ | (46,227 | ) |  | $ | 50,473 | 
|                     |  |                |         |              |  |              |         |                |  |              |        |              |  |   |        |  |  |   |         |   |  |   |        | 

The amortization expense on these intangible assets for the three months ended
March 31, 2003 was $4.3 million. Estimated amortization expense for each of
the next five years ending December 31, is as follows (dollars in thousands):

|     |  |   |        | 
|---- |  | - | ------ | 
|2003 |  | $ | 17,258 | 
|2004 |  |   | 17,325 | 
|2005 |  |   | 8,746  | 
|2006 |  |   | 2,567  | 
|2007 |  |   | 2,400  | 

The AvantoGo tradenames were assigned an indefinite life and will not be
amortized but instead tested for impairment in the same manner as goodwill.

8.     Segment
Information. During 2002, the Company was organized into five
separate business segments, including two majority-owned subsidiaries, each of
which focused on one of five key market segments  Enterprise Solutions
Division (ESD), e-Business Division (eBD), Business Intelligence Division
(BID), iAnywhere Solutions, Inc. (iAS) and Financial Fusion, Inc. (FFI).

Beginning in 2003, the Company created a new Infrastructure Platform Group
(IPG). This segment includes under one umbrella organization the former
operations of the ESD, eBD, and BID segments. IPG is focused on integrating
and providing synergies between the Companys
application infrastructure and solutions with an emphasis on delivering leading
edge, open and modular technology and solutions. Both iAS and FFI continue as
separate segments.

ESD, which is now part of the IPG division, provided products and solutions
that let enterprises integrate, move and manage very large amounts of data and
applications across diverse computing environments. eBD, which is also now
part of the IPG division, provided solutions to enterprises for the integration
of their core technologies and information. BID, which is the final former
segment combined into the IPG division, provided products and solutions that
let businesses consolidate and analyze large amounts of information.

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SYBASE INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

iAS continues to provide mobile and embedded solutions to empower businesses
with always-available access to enterprise information while FFI delivers
e-Finance solutions to leading financial institutions, fusing applications and
middleware on a single integrated platform.

We report iAS, FFI, IPG as reportable segments in accordance with Statement of
Financial Accounting Standards No. 131, Disclosures about Segments of an
Enterprise and Related Information.As ESD, eBD and BID have been combined
into IPG and are no longer reported as separate segments, we have restated all
earlier periods reported to reflect the segment changes made in the first
quarter of 2003.

Our Chief Operating Decision Maker (CODM), which is the President and Chief
Executive Officer, evaluates performance based upon a measure of segment
operating profit or loss that includes an allocation of common expenses, but
excludes certain unallocated expenses. Segment revenue includes transactions
between the segments. These revenues are transferred to the applicable
segments less amounts retained, which are intended to reflect the costs
incurred by the transferring segment. Allocated common costs and expenses are
allocated based on measurable drivers of expense. Unallocated expenses
represent corporate expenditures or cost savings that are not specifically
allocated to the segments. Our CODM does not view segment results below
operating profit (loss) before unallocated costs, and therefore unallocated
expenses, interest income, interest expense and other, net, the provision
for income taxes, and the cumulative effect of an accounting change are not broken out by segment. We do not account for, or
report to the CODM, our assets or capital expenditures by segment.

A summary of the segment financial information reported to the CODM for the
three months ended March 31, 2003 is presented below:

|                                                                                                  |              |     |         |         |  |     |        |             |  |                    |        |       |  |  |         |   |  |   |         |         | 
|------------------------------------------------------------------------------------------------- | ------------ | --- | ------- | ------- |  | --- | ------ | ----------- |  | ------------------ | ------ | ----- |  |  | ------- | - |  | - | ------- | ------- | 
|(In thousands)                                                                                    |              | IPG |         | iAS     |  | FFI |        | Elimination |  | Consolidated Total
|                                                                                                  |              |     |         |         |  |     |        |             |  |                   
|Revenues:                                                                                         |              |     |         |         |  |     |        |             |  |                    |        |       |  |  |         |   |  |   |         |        
|                                                                                                  | License fees |     | $       | 53,335  |  |     | $      | 7,398       |  |                    | $      | 142   |  |  |         |  |  |   | $       | 60,875  | 
|                                                                                                  | Services     |     |         | 116,402 |  |     |        | 2,037       |  |                    |        | 2,233 |  |  |         |  |  |   |         | 120,672 | 
|                                                                                                  |              |     |         |         |  |     |        |             |  |                    |        |       |  |  |         |   |  |   |         |         | 
|Direct revenues from external customers                                                           |              |     | 169,737 |         |  |     | 9,435  |             |  |                    | 2,375  |       |  |  |        |   |  |   | 181,547 |        
|Intersegment revenues                                                                             |              |     | 25      |         |  |     | 9,987  |             |  |                    | 1,244  |       |  |  | (11,256 | ) |  |   |        |        
|                                                                                                  |              |     |         |         |  |     |        |             |  |                    |        |       |  |  |         |   |  |   |         |         | 
|Total revenues                                                                                    |              |     | 169,762 |         |  |     | 19,422 |             |  |                    | 3,619  |       |  |  | (11,256 | ) |  |   | 181,547 |        
|                                                                                                  |              |     |         |         |  |     |        |             |  |                    |        |       |  |  |         |   |  |   |         |         | 
|Total allocated costs and expenses before
amortization of customer lists and purchased
technology |              |     | 152,499 |         |  |     | 15,963 |             |  |                    | 5,547  |       |  |  | (11,256 | ) |  |   | 162,753 |        
|                                                                                                  |              |     |         |         |  |     |        |             |  |                    |        |       |  |  |         |   |  |   |         |         | 
|Operating income (loss) before amortization of
customer lists and purchased technology            |              |     | 17,263  |         |  |     | 3,459  |             |  |                    | (1,928 | )     |  |  |        |   |  |   | 18,794  |        
|Amortization of other purchased intangibles                                                       |              |     |        |         |  |     |       |             |  |                    | 500    |       |  |  |        |   |  |   | 500     |        
|Amortization of purchased technology                                                              |              |     | 2,920   |         |  |     | 33     |             |  |                    | 811    |       |  |  |        |   |  |   | 3,764   |        
|                                                                                                  |              |     |         |         |  |     |        |             |  |                    |        |       |  |  |         |   |  |   |         |         | 
|Operating income (loss) before unallocated costs                                                  |              |     | 14,343  |         |  |     | 3,426  |             |  |                    | (3,239 | )     |  |  |        |   |  |   | 14,530  |        
|Unallocated expense                                                                               |              |     |         |         |  |     |        |             |  |                    |        |       |  |  |         |   |  |   | (2,391  | )      
|                                                                                                  |              |     |         |         |  |     |        |             |  |                    |        |       |  |  |         |   |  |   |         |        
|Operating income                                                                                  |              |     |         |         |  |     |        |             |  |                    |        |       |  |  |         |   |  |   | 16,921  |        
|Interest income, interest expense and other, net                                                  |              |     |         |         |  |     |        |             |  |                    |        |       |  |  |         |   |  |   | 2,443   |        
|                                                                                                  |              |     |         |         |  |     |        |             |  |                    |        |       |  |  |         |   |  |   |         |        
|Income before income taxes                                                                        |              |     |         |         |  |     |        |             |  |                    |        |       |  |  |         |   |  | $ | 19,364  |        

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SYBASE INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

A summary of the segment financial information reported to the CODM for the
three months ended March 31, 2002 is presented below:

|                                                                                                  |              |     |         |         |  |     |        |             |  |                    |        |       |  |  |         |   |  |   |         |         | 
|------------------------------------------------------------------------------------------------- | ------------ | --- | ------- | ------- |  | --- | ------ | ----------- |  | ------------------ | ------ | ----- |  |  | ------- | - |  | - | ------- | ------- | 
|(In thousands)                                                                                    |              | IPG |         | iAS     |  | FFI |        | Elimination |  | Consolidated Total
|                                                                                                  |              |     |         |         |  |     |        |             |  |                   
|Revenues:                                                                                         |              |     |         |         |  |     |        |             |  |                    |        |       |  |  |         |   |  |   |         |        
|                                                                                                  | License fees |     | $       | 75,256  |  |     | $      | 7,796       |  |                    | $      | 796   |  |  |         |  |  |   | $       | 83,848  | 
|                                                                                                  | Services     |     |         | 123,401 |  |     |        | 690         |  |                    |        | 3,097 |  |  |         |  |  |   |         | 127,188 | 
|                                                                                                  |              |     |         |         |  |     |        |             |  |                    |        |       |  |  |         |   |  |   |         |         | 
|Direct revenues from external customers                                                           |              |     | 198,657 |         |  |     | 8,486  |             |  |                    | 3,893  |       |  |  |        |   |  |   | 211,036 |        
|Intersegment revenues                                                                             |              |     | 22      |         |  |     | 10,461 |             |  |                    | 1,692  |       |  |  | (12,175 | ) |  |   |        |        
|                                                                                                  |              |     |         |         |  |     |        |             |  |                    |        |       |  |  |         |   |  |   |         |         | 
|Total revenues                                                                                    |              |     | 198,679 |         |  |     | 18,947 |             |  |                    | 5,585  |       |  |  | (12,175 | ) |  |   | 211,036 |        
|                                                                                                  |              |     |         |         |  |     |        |             |  |                    |        |       |  |  |         |   |  |   |         |         | 
|Total allocated costs and expenses before
amortization of customer lists and purchased
technology |              |     | 176,392 |         |  |     | 14,521 |             |  |                    | 6,086  |       |  |  | (12,175 | ) |  |   | 184,824 |        
|                                                                                                  |              |     |         |         |  |     |        |             |  |                    |        |       |  |  |         |   |  |   |         |         | 
|Operating income (loss) before amortization of
customer lists and purchased technology            |              |     | 22,287  |         |  |     | 4,426  |             |  |                    | (501   | )     |  |  |        |   |  |   | 26,212  |        
|Amortization of other purchased intangibles                                                       |              |     |        |         |  |     |       |             |  |                    | 500    |       |  |  |        |   |  |   | 500     |        
|Amortization of purchased technology                                                              |              |     | 2,920   |         |  |     |       |             |  |                    | 811    |       |  |  |        |   |  |   | 3,731   |        
|                                                                                                  |              |     |         |         |  |     |        |             |  |                    |        |       |  |  |         |   |  |   |         |         | 
|Operating income (loss) before unallocated costs                                                  |              |     | 19,367  |         |  |     | 4,426  |             |  |                    | (1,812 | )     |  |  |        |   |  |   | 21,981  |        
|Unallocated expense                                                                               |              |     |         |         |  |     |        |             |  |                    |        |       |  |  |         |   |  |   | (535    | )      
|                                                                                                  |              |     |         |         |  |     |        |             |  |                    |        |       |  |  |         |   |  |   |         |        
|Operating income                                                                                  |              |     |         |         |  |     |        |             |  |                    |        |       |  |  |         |   |  |   | 22,516  |        
|Interest income, interest expense and other, net                                                  |              |     |         |         |  |     |        |             |  |                    |        |       |  |  |         |   |  |   | 2,962   |        
|                                                                                                  |              |     |         |         |  |     |        |             |  |                    |        |       |  |  |         |   |  |   |         |        
|Income before income taxes and cumulative
effect of an accounting change                          |              |     |         |         |  |     |        |             |  |                    |        |       |  |  |         |   |  | $ | 25,478  |        

9.     Litigation. Sybase is a party to various legal disputes and
proceedings arising in the ordinary course of business. In the opinion of
management, resolution of those matters is not expected to have a material
adverse effect on our results of operations or consolidated financial position.
However, depending on the amount and timing of such resolution, an unfavorable
resolution of some or all of these matters could materially affect our future
results of operations or cash flows in a particular period.

10.     Future
Commitments. Beginning in 1998, the Board of Directors authorized
Sybase to repurchase its outstanding common stock from time to time,
subject to price and other conditions. During the first quarter of
2003,
the Company repurchased approximately 0.7 million shares of its outstanding
common stock at a cost of approximately $9.5 million. Through March 31, 2003,
the Company has used an aggregate total of $364.8 million under the stock repurchase
program (of the total $400 million
authorized) to repurchase an aggregate total of 23.6 million shares.

11.     Restructuring.

2002 Restructuring Activities

In response to the continued economic slowdown, the Company embarked on certain
restructuring actions during the third and fourth quarters of 2002 (2002
Plan) aimed at reducing the Companys annual payroll and
facilities-related
expenses by approximately $24.0

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SYBASE INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

million. These activities included the
termination of approximately 400 employees worldwide, the closure or
consolidation of approximately 18 facilities worldwide, and the liquidation of
approximately 9 foreign subsidiaries.

The following table summarizes the activity related to the 2002 Plan at March
31, 2003:

|                                                          |  |                     |      |         |  |                  |     |         |  |    |     |  |  |                     |      | 
|--------------------------------------------------------- |  | ------------------- | ---- | ------- |  | ---------------- | --- | ------- |  | -- | --- |  |  | ------------------- | ---- | 
|                                                          |  |                     |      |         |  |                  |     |         |  |    |     |  |  | Accrued liabilities
|                                                          |  | Accrued liabilities |      | Amounts |  |                  |     |         |  | at
|(Dollars in millions)                                     |  | at 12/31/02         |      | Paid    |  | Amounts reversed |     | 3/31/03
|                                                          |  |                     |      |         |  |                  |     |        
|Termination payments to employees
and other related costs |  | $                   | 2.7  |         |  | $                | 2.0 |         |  |    | 0.1 |  |  | $                   | 0.6  | 
|Lease cancellations and commitments                       |  |                     | 23.3 |         |  |                  | 2.3 |         |  |    | 0.1 |  |  |                     | 20.9 | 
|Other                                                     |  |                     | 0.2  |         |  |                  |     |         |  |    |    |  |  |                     | 0.2  | 
|                                                          |  |                     |      |         |  |                  |     |         |  |    |     |  |  |                     |      | 
|                                                          |  | $                   | 26.2 |         |  | $                | 4.3 |         |  | $  | 0.2 |  |  | $                   | 21.7 | 
|                                                          |  |                     |      |         |  |                  |     |         |  |    |     |  |  |                     |      | 

The remaining restructuring accrual
primarily relates to certain lease costs the Company is contractually
required to pay on certain closed facilities, net
of estimated associated sublease amounts, and certain remaining termination
benefits payable to employees terminated as part of the 2002 Plan.
Substantially all remaining severance payments are expected to be made by the
end of the second quarter of 2003. Sybases payments toward the accruals relating to
lease cancellations and commitments are dependent upon market conditions and
the Companys ability to negotiate acceptable lease buy-outs or
to locate suitable
subtenants. These payments will be made over a
period not to exceed 7.5 years.

During the three months ended
March 31, 2003, approximately $0.2 million in restructuring
accruals were
reversed by a corresponding credit to restructuring expense. The credit to the
severance accrual primarily related to the retention of three U.S.
employees previously slated for termination under the 2002 Plan to
replace certain employees who left the Company for reasons unrelated
to the 2002 Plan. The other restructuring credits were related
primarily to facility-related exit
activities.

2001 Restructuring Activities

In connection with the Companys
acquisition of New Era of Networks, Inc. (NEN), and
following the Companys announcement that its first quarter and 2001 revenues would be below
expectations, the Company began to implement a restructuring plan designed to eliminate
certain personnel, assets and facilities, and align its cost structure with
anticipated revenues (2001 Plan). The Company recorded restructuring charges
of $54.2 million to reflect these activities. The 2001 Plan called for the
termination of approximately 880 employees worldwide, as well as the
consolidation or closure of approximately 30 facilities worldwide and the
write-off of certain assets abandoned as a result of such closures
and consolidation.

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SYBASE INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

The following table summarizes the activity related to the 2001 Plan at March
31, 2003:

|                                                          |  |                     |      |         |  |                  |     |         |  |    |   |  |  |                     |      | 
|--------------------------------------------------------- |  | ------------------- | ---- | ------- |  | ---------------- | --- | ------- |  | -- | - |  |  | ------------------- | ---- | 
|                                                          |  |                     |      |         |  |                  |     |         |  |    |   |  |  | Accrued liabilities
|                                                          |  | Accrued liabilities |      | Amounts |  |                  |     |         |  | at
|(Dollars in millions)                                     |  | at 12/31/02         |      | paid    |  | Amounts reversed |     | 3/31/03
|                                                          |  |                     |      |         |  |                  |     |        
|Termination payments to employees
and other related costs |  | $                   | 0.8  |         |  | $                | 0.1 |         |  |    |   |  |  | $                   | 0.7  | 
|Lease cancellations and commitments                       |  |                     | 19.5 |         |  |                  | 2.2 |         |  |    |   |  |  |                     | 17.3 | 
|                                                          |  |                     |      |         |  |                  |     |         |  |    |   |  |  |                     |      | 
|                                                          |  | $                   | 20.3 |         |  | $                | 2.3 |         |  | $  |  |  |  | $                   | 18.0 | 
|                                                          |  |                     |      |         |  |                  |     |         |  |    |   |  |  |                     |      | 

The remaining restructuring accrual primarily relates to certain lease payments
the Company is contractually required to make on certain closed facilities, net
of estimated associated sublease amounts, and certain remaining termination
benefits payable to employees terminated as part of the 2001 Plan. The payments
of accruals related to lease cancellations and commitments which are dependent
upon market conditions and the Companys ability to negotiate acceptable lease
buy-outs or locate suitable sublease tenants, will be paid over a period not to
exceed eight years. All the remaining termination payments are expected to be
paid during 2003.

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ITEM 2: MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS

Critical Accounting Policies and
Estimates

We prepare our financial statements in conformity with U.S. generally accepted
accounting principles (GAAP). These accounting principles require us to make
estimates and assumptions that affect the reported amounts of assets and
liabilities, and the disclosure of contingent assets and liabilities at the
date of our financial statements. We are also required to make certain
judgments that affect the reported amounts of revenues and expenses during each
reporting period. We periodically evaluate our estimates including those
relating to revenue recognition, impairment of goodwill and intangible assets,
the allowance for doubtful accounts, capitalized software, restructuring,
income taxes, stock-based compensation and contingencies, and litigation. We
base our estimates on historical experience and various other assumptions that
we believe to be reasonable based on specific circumstances. Our management
has reviewed the development, selection, and disclosure of these estimates with
the Audit Committee of our Board of Directors. These estimates and assumptions
form the basis for our judgments about the carrying value of certain assets and
liabilities that are not readily apparent from other sources. Actual results
could differ from these estimates. See also Future Operating Results 
Financial Accounting Related Matters, below.

We believe the following critical accounting policies impact the most
significant judgments and estimates used in the preparation of our consolidated
financial statements:



| |  |  | Revenue Recognition                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |   |  | Revenue recognition rules for software companies are very complex. We
follow very specific and detailed guidance in measuring revenue. Certain
judgments, however, affect the application of our revenue policy.                                                                                                                                                                                                                                                                 
|
| |   |  | We recognize revenue in accordance with Statement of Position (SOP) 97-2,
Software Revenue Recognition, as amended by SOP 98-4 and SOP 98-9, and
in certain instances in accordance with SOP 81-1, Accounting for
Performance of Construction-Type and Certain Production-Type Contracts.                                                                                                                                                                                    
|
| |   |  | We license software under non-cancelable license agreements. License fees
revenues are recognized when a non-cancelable license agreement is in
force, the product has been shipped, the license fee is fixed or
determinable, and collection is reasonably assured. If the fee is not
fixed or determinable, revenue is recognized as payments become due from
the customer.                                                                                                    
|
| |   |  | Residual Method Accounting. In software arrangements that include
multiple elements (such as license rights and technical support
services), we allocate the total arrangement fee among each of the
elements using the residual method of accounting. Under this method,
revenue allocated to undelivered elements is based on vendor-specific
objective evidence of fair value of such undelivered elements, and the
residual revenue is allocated to the delivered elements.

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| |   |  | Percentage of Completion
Accounting. Fees from licenses sold
together with consulting services are generally recognized upon
shipment of the licenses,
provided (i) the above criteria are met, (ii) payment of the license fees
are not dependent upon the performance of the services, and (iii) the
consulting services are not essential to the functionality of the
licensed software. If the services are essential to the functionality of
the software, or payment of license fees is dependent on performance of
services, both the software license and consulting fees are recognized
under the percentage of completion method of contract accounting.
Under this method, management is required to estimate the number of total
hours needed to complete a particular project, and revenues and profits
are recognized based on the percentage of total contract hours completed.
As a result, recognized revenues and profits are subject to revisions as
the contract phases are actually completed.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |   |  | Sublicense Revenues. We recognize sublicense fees as reported to us
by our licensees. License fees revenue for certain application
development and data access tools are recognized upon direct shipment to
the end user or direct shipment to the reseller for resale to the end
user. If collection is not reasonably assured in advance, revenue is
recognized only when the fee is actually collected.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|
| |   |  | Technical
Support Revenues. Technical support revenues are
recognized ratably over the term of the related agreements, which in most
cases is one year. Revenues from consulting services under time and
materials contracts and for education are recognized as services are
performed. Revenues from other contract services are generally recognized
under the percentage of completion method of contract accounting
described above.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|
| |  |  | Impairment of Goodwill and Intangible Assets                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|
| |   |  | Goodwill and intangible assets have generally resulted from our business
combinations accounted for as purchases. Prior to 2002, these assets
were generally recorded at amortized cost. The carrying values of these
intangible assets were reviewed on a periodic basis, under the accounting
rules then in effect, and our testing indicated no impairment of the
assets carrying value.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|
| |   |  | Beginning in 2002, new accounting rules issued by the Financial
Accounting Standards Board (FASB) provided that goodwill could no longer
be amortized, and had to be tested for impairment at least annually.
For a further discussion of goodwill impairment, see Note Seven to
Condensed Consolidated Financial Statements, Part I,
Item 1, incorporated here by reference. These rules further changed the method of evaluating goodwill from a
recoverability test based upon undiscounted cash flows to a fair value
approach. The application of these new rules resulted in a cumulative
effect of an accounting change of $132.5 million in the first quarter of
2002 and a goodwill impairment of $12.3 million in the fourth quarter of
2002.                                                                                                                                                                                                                                                              
|
| |   |  | As of March 31, 2003, we had recorded $151.5 million of goodwill. The
review of goodwill for potential impairment is highly subjective and
requires us to make numerous estimates to determine both the fair values
and the carrying values of our reporting units to which goodwill is
assigned. For these purposes, our reporting units equate to our reported
segments (see Note Eight to Condensed Consolidated Financial Statements,
Part I, Item 1, incorporated here by reference). If the
estimated fair value of a reporting                                                                                                                                                                                                                                                                                                                                                                                                                                                                                

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| |   |  | unit is determined to be less than
its carrying value, we are required to perform an
analysis similar to a purchase price allocation for an acquired business
in order to determine the amount of goodwill impairment, if any. This
analysis requires a valuation of certain other intangible assets
including in-process research and development, and developed technology.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |   |  | Changes in our internal business structure, changes in our future revenue
and expense forecasts, and certain other factors that directly impact the
valuation of our reporting units could result in a future goodwill
impairment.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|
| |   |  | We continue to review our other intangible assets (purchased technology
and customer lists) for indications of impairment whenever events or
changes in circumstances indicate the carrying amount of such an asset
may not be recoverable. For these purposes, recoverability of these
assets is measured by comparing their carrying values to the future
undiscounted cash flows the assets are expected to generate. This
methodology requires us to estimate future cash flows associated with
certain assets or groups of assets. Changes in these estimates could
result in impairment losses associated with other intangible assets.                                                                                                                                                                                                                                                                                                                                  
|
| |  |  | Allowance for Doubtful Accounts                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|
| |   |  | We maintain an allowance for doubtful accounts to reflect the expected
non-collection of accounts receivable based on past collection history
and specific risks identified in our portfolio of receivables. Additional
allowances might be required if deteriorating economic conditions or
other factors affect
our customers ability to make timely payments.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|
| |  |  | Capitalized Software                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|
| |   |  | We capitalize certain software development costs after a product becomes
technologically feasible and before its general release to customers.
Subjective judgment is required in determining when a product becomes
technologically feasible. Capitalized development costs are then
amortized over the products estimated life beginning upon general
release. Periodically, we compare a products unamortized capitalized
cost to the products net realizable value. To the extent unamortized
capitalized cost exceeds net realizable value, based on the products
estimated future gross revenues (reduced by the estimated future costs of
completing and disposing of the product), the excess is written off.
This analysis requires us to estimate future gross revenues associated
with certain products, and the future costs of completing and disposing
of certain products. If these estimates change, write-offs of
capitalized software costs could result.
|
| |  |  | Restructuring                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|
| |   |  | During 2002 and 2001, we recorded significant accruals in connection with
various restructuring activities. These accruals included estimated net
costs to settle certain lease obligations, based on the analysis of
independent real estate consultants. While we do not anticipate
significant changes to these estimates in the future, the actual costs
may differ from the estimates. If we are unable to negotiate affordable
termination fees or if
rental                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             

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| |   |  | rates continue to decrease in the markets where the properties are
located, or if it takes us longer then expected to find suitable sublease
tenants, the actual costs could exceed our estimates.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | Income Taxes                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|
| |   |  | We use the asset and liability approach to account for income taxes.
This methodology recognizes deferred tax assets and liabilities for the
expected future tax consequences of temporary differences between the
carrying amounts and the tax bases of assets and liabilities. We then
record a valuation allowance to reduce deferred tax assets to an amount
that likely will be realized. We consider future taxable income and
ongoing prudent and feasible tax planning strategies in assessing the
need for the valuation allowance. If we determine during any period that
we could realize a larger net deferred tax asset than the recorded
amount, we would adjust the deferred tax asset to increase income for the
period. Conversely, if we determine that we would be unable to realize a
portion of our recorded deferred tax asset, we would adjust the deferred
tax asset to record a charge to income for the period. Subjective
judgment is required in assessing the future tax consequences of events
that have been recognized in the Companys financial statements or tax
returns. Fluctuations in the actual outcome of these future tax
consequences could materially impact our financial position or results of
operations.
|
| |  |  | Stock-Based Compensation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|
| |   |  | SFAS 123, Accounting for
Stock-Based Compensation, encourages, but does
not require, companies to record compensation cost for stock-based
employee compensation plans at fair value. We have chosen to continue to
account for stock-based employee compensation using the intrinsic value
method. Accordingly, compensation cost for stock options granted to
employees is measured as the excess, if any, of the quoted market price
of the Company stock at the date of the grant over the amount an employee
must pay to acquire the stock. See also Note Two to Condensed
Consolidated Financial Statements, Part I, Item 1,
incorporated here by reference.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|
| |  |  | Contingencies and Litigation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|
| |   |  | We are involved from time to time in various proceedings, lawsuits and
claims involving our customers, products, intellectual property,
stockholders and employees, among other things. When we reasonably
determine that a liability has been or will be incurred, and can
reasonably estimate the range of potential losses in these matters,
we are required to adequately provide for these loss contingencies. Even
if we are not able to estimate the amount of potential loss in these
matters, in the case of a potential material matter, we are required to
disclose the fact that there is a reasonable possibility that a loss has
been incurred. Our financial position or results of operations could be
materially and adversely affected if we have grossly
underestimated the scope of potential liability and/or the range of a
potential loss in any matter.                                                                                                                                                                                                                                                                                                                                                                          

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##### Table of Contents



Results of Operations
Revenues
(Dollars in millions)

|               |                              |   |         |    |         |   |         |    |   |  |     |    | 
|-------------- | ---------------------------- | - | ------- | -- | ------- | - | ------- | -- | - |  | --- | -- | 
|               |                              |   | Three   |    | Three   |   |         |    |  
|               |                              |   | Months  |    | Months  |   |         |    |  
|               |                              |   | Ended   |    | Ended   |   | Percent
|               |                              |   | 3/31/03 |    | 3/31/02 |   | Change 
|               |                              |   |         |    |         |   |        
|License fees   |                              | $ | 60.9    |    |         | $ | 83.8    |    |   |  | (27 | %)
|               | Percentage of total revenues |   |         | 34 | %       |   |         | 40 | % |  |     |    | 
|Services       |                              | $ | 120.7   |    |         | $ | 127.2   |    |   |  | (5  | %)
|               | Percentage of total revenues |   |         | 66 | %       |   |         | 60 | % |  |     |    | 
|Total revenues |                              | $ | 181.5   |    |         | $ | 211.0   |    |   |  | (14 | %)

Total revenues for the three months ended March 31, 2003 decreased 14 percent
as compared to $211.0 million for the three months ended March 31, 2002.

License fees revenues decreased 27 percent for the three months ended March 31,
2003 compared to the three months ended March 31, 2002. The decrease in
license fees revenues during the quarter is primarily due to a decline in
license revenues from enterprise database and enterprise application products
included in the IPG division and iAS revenues (primarily mobile database
products). Demand for these products continued to be affected by sluggish
economic growth and a significant decrease in overall IT spending, especially
for larger enterprise systems. We also experienced significantly less demand
from the expansion of our existing customers internally deployed applications.

Services revenues (derived from technical support, education, and professional
services) decreased 5 percent for the three months ended March 31, 2003
compared to the three months ended March 31, 2002. The decrease in services
revenue is primarily due to a 28 percent decrease in professional services
revenues and education revenues as a result of the economic factors discussed
above. The decrease was partially offset by a 4 percent increase in technical
support revenues.

Services revenues as a percentage of total revenues increased to 66 percent for
the three months ended March 31, 2003 compared to 60 percent for the three
months ended March 31, 2002.

AvantGo contributed approximately
$1.3 million to total revenues reported above.

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##### Table of Contents



Geographical Revenues
(Dollars in millions)

|                    |                              |                              |       |         |    |         |       |         |    |   |     |     |    | 
|------------------- | ---------------------------- | ---------------------------- | ----- | ------- | -- | ------- | ----- | ------- | -- | - | --- | --- | -- | 
|                    |                              |                              |       | Three   |    | Three   |       |         |    |  
|                    |                              |                              |       | Months  |    | Months  |       |         |    |  
|                    |                              |                              |       | Ended   |    | Ended   |       | Percent
|                    |                              |                              |       | 3/31/03 |    | 3/31/02 |       | Change 
|                    |                              |                              |       |         |    |         |       |        
|North American      |                              | $                            | 105.9 |         |    | $       | 126.1 |         |    |   | (16 | %) 
|                    | Percentage of total revenues |                              |       | 58      | %  |         |       | 60      | %  |   |     |     |   
|International       |                              |                              |       |         |    |         |       |         |    |   |     |    
|                    | European                     |                              | $     | 50.9    |    |         | $     | 54.4    |    |   |     | (6  | %)
|                    |                              | Percentage of total revenues |       |         | 28 | %       |       |         | 26 | % |     |     |    | 
|                    | Intercontinental             |                              | $     | 24.7    |    |         | $     | 30.5    |    |   |     | (19 | %)
|                    |                              | Percentage of total revenues |       |         | 14 | %       |       |         | 14 | % |     |     |    | 
|Total International |                              | $                            | 75.6  |         |    | $       | 84.9  |         |    |   | (11 | %) 
|                    |                              | Percentage of total revenues |       |         | 42 | %       |       |         | 40 | % |     |     |    | 
|Total revenues      |                              | $                            | 181.5 |         |    | $       | 211.0 |         |    |   | (14 | %) 

North American revenues (United States, Canada and Mexico) decreased 16 percent
for the three months ended March 31, 2003 compared to the three months
ended March 31, 2002. The decrease in North American revenues was primarily
attributable to a 38 percent decline in license fees revenues and a 16 percent
decline in education and professional services revenues, and was largely the result of the economic factors discussed under
Revenues, above.

International revenues decreased 11 percent for the three months ended March
31, 2003 compared to the three months ended March 31, 2002. European
revenues decreased 6 percent for the three months ended March 31, 2003 compared to revenues for the three months ended March 31, 2002.
Intercontinental revenues (principally Asia Pacific and South America)
decreased 19 percent for the three months ended March 31,
2003 compared to revenues for the
three month period ended March 31, 2002.

The decrease in European revenues was primarily related to a 5 percent decrease
in license fees revenues and a 41 percent decrease in education and
professional services revenues, partially offset by a 16 percent increase in
technical support revenues. The decrease in Intercontinental revenues was
primarily attributable to a 25 percent decrease in license fees revenues and a
combined decrease of 13 percent in services revenues. The decrease in
total international revenues was largely the result of the economic factors discussed
under Revenues, above. International revenues comprised 42 percent of total
revenues for the three months ended March 31, 2003, up from 40 percent for the
same period for 2002.

In Europe and the Intercontinental region, most revenues and expenses are
denominated in local currencies. The effect of foreign currency exchange rate changes on revenues was not material for
the three months ended March 31, 2003 and 2002 respectively.
Although we take into account changes in exchange rates over time in
our pricing strategy, our business and results of operations could be
materially and adversely affected by fluctuations in foreign currency exchange
rates. Changes in foreign currency exchange rates, the strength of local
economies, and the general volatility of worldwide software markets may result
in a higher or lower proportion of international revenues as a percentage of
total revenues in the future. For additional risks associated with currency
fluctuations, see Future Operating Results, below, and Quantitative and
Qualitative Disclosures of Market Risk, Part I, Item 3.

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##### Table of Contents



Costs and Expenses
(Dollars in millions)

|                                            |                                     |   |         |    |         |   |         |    |   |  |     |    | 
|------------------------------------------- | ----------------------------------- | - | ------- | -- | ------- | - | ------- | -- | - |  | --- | -- | 
|                                            |                                     |   | Three   |    | Three   |   |         |    |  
|                                            |                                     |   | Months  |    | Months  |   |         |    |  
|                                            |                                     |   | Ended   |    | Ended   |   | Percent
|                                            |                                     |   | 3/31/03 |    | 3/31/02 |   | Change 
|                                            |                                     |   |         |    |         |   |        
|Cost of license fees                        |                                     | $ | 13.9    |    |         | $ | 11.5    |    |   |  | 21  | % 
|                                            | Percentage of license fees revenues |   |         | 23 | %       |   |         | 14 | % |  |     |    | 
|Cost of services                            |                                     | $ | 39.2    |    |         | $ | 52.1    |    |   |  | (25 | %)
|                                            | Percentage of services revenues     |   |         | 32 | %       |   |         | 41 | % |  |     |    | 
|Sales and marketing                         |                                     | $ | 58.5    |    |         | $ | 70.9    |    |   |  | (17 | %)
|                                            | Percentage of total revenues        |   |         | 32 | %       |   |         | 34 | % |  |     |    | 
|Product development and engineering         |                                     | $ | 29.9    |    |         | $ | 30.9    |    |   |  | (3  | %)
|                                            | Percentage of total revenues        |   |         | 16 | %       |   |         | 15 | % |  |     |    | 
|General and administrative                  |                                     | $ | 22.1    |    |         | $ | 22.3    |    |   |  | (1  | %)
|                                            | Percentage of total revenues        |   |         | 12 | %       |   |         | 11 | % |  |     |    | 
|Amortization of other purchased
intangibles |                                     | $ | 0.5     |    |         | $ | 0.5     |    |   |  | *   |   
|                                            | Percentage of total revenues        |   |         | *  |         |   |         | *  |   |  |     |    | 
|Stock compensation expense                  |                                     | $ | 0.7     |    |         | $ | 0.5     |    |   |  | 40  | % 
|                                            | Percentage of total revenues        |   |         | *  |         |   |         | *  |   |  |     |    | 
|Reversal
of restructuring accruals          |                                     | $ | (0.2    | )  |         | $ | (0.1    | )  |   |  | 100 | % 
|                                            | Percentage of total revenues        |   |         | *  |         |   |         | *  |   |  |     |    | 



---

|* |  | Not meaningful
|- |  | --------------

Cost of License Fees.Cost of license fees consists primarily of product costs
(media and documentation), amortization of capitalized software development
costs and purchased technology, and third-party royalty costs. These costs were
$13.9 million for the three months ended March 31, 2003, up from $11.5 million
for the three months ended March 31, 2002. Such costs were 23 percent of
license fees revenue for the three months ended March 31, 2003 compared to
14 percent for the three months ended March 31, 2002. The increase in the cost
of license fees was primarily due to an increase in third-party royalties.
Amortization of capitalized software costs included in cost of license fees was
$6.5 million for the three months ended March 31, 2003 compared to $6.1
million for the three months ended March 31, 2002. The increase in
amortization of capitalized software costs was primarily due to certain eBD
products that we began to amortize after the first quarter of 2002. Amortization
of purchased technology was $3.8 million for the three months ended
March 31, 2003 compared to $3.7 million for the three months ended March 31,
2002.

Cost of Services.Cost of services consists primarily of the cost to provide
technical support, education and professional services and, to a lesser degree,
services-related product costs (media and documentation). These costs were
$39.2 million for the three months ended March 31, 2003 compared to $52.1
million for the three months ended March 31, 2002. These costs were 32 percent
and 41 percent of services revenues for the three months ended March 31, 2003
and 2002, respectively. The decrease in cost of services in absolute dollars
and as a percentage of services revenues is primarily due to a reduction in
consulting personnel as a result of our restructuring activities in the second
half of 2002, and a decrease in costs associated with third-party consultants.

24



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##### Table of Contents



Sales and Marketing.Sales and marketing expenses decreased 17 percent to
$58.5 million for the three months ended March 31, 2003 compared to $70.9
million for the three months ended March 31, 2002. These costs were 32 percent
and 34 percent of total revenues for the three months ended March 31, 2003 and
2002, respectively. The decrease in sales and marketing expenses in absolute
dollars and as a percentage of total revenues was primarily due to a decrease
in sales and marketing personnel as a result of our 2002 restructuring
activities, a reduction in sales commissions (principally due to lower license
fees revenues), a reduction in discretionary spending on marketing programs,
and a decrease in certain allocated common costs. We allocate various common
costs, primarily certain telecommunications and facilities related expenses, to
sales and marketing, product development and engineering, and general and
administrative expenses.

Product Development and Engineering.Product development and engineering
expenses (net of capitalized software development costs) decreased 3 percent to
$29.9 million for the three months ended March 31, 2003 compared to $30.9
million for the three months ended March 31, 2002. These costs as a percentage
of total revenues were 16 percent and 15 percent for the three months ended
March 31, 2003 and 2002, respectively. The decrease in product development and
engineering in absolute dollars is primarily due to a decrease in allocated
common costs and a reduction in product development and engineering personnel
through the further integration of NEN, partially offset by a decrease in
capitalized software development costs.

We capitalized approximately $6.6 million of software development costs for the
three months ended March 31, 2003 compared to $7.6 million for the three
months ended March 31, 2002. For the three months ended March 31, 2003
capitalized software costs included costs incurred for the development of the
Business Process Integrator 3.9, Enterprise Application Server 5.0,
PowerBuilder® 9.0,and PowerDesigner® 10.0.

We believe that product development and engineering expenditures are essential
to technology and product leadership and expect product development and
engineering expenditures to continue to be significant, both in absolute
dollars and as a percentage of total revenues.

General and Administrative.General and administrative expenses were $22.1
million and $22.3 million for the three months ended March 31, 2003 and 2002,
respectively. These costs represented 12 percent and 11 percent of total
revenues for the three months ended March 31, 2003 and 2002, respectively. The
slight decrease in absolute dollars was primarily due to a decrease in
allocated common costs.

Amortization of Other Purchased Intangibles.Amortization of other purchased
intangibles reflects the amortization of the established customer list
associated with the acquisition in 2000 of Home Financial Network,
Inc. (now FFI).

Stock compensation expense.Stock compensation expense reflects non-cash
compensation expense associated with restricted stock purchase rights granted to certain Sybase
executives in the second quarter of 2001 and in the first quarter of 2003, and the
amortization of the value assigned to certain unvested stock options assumed in
the acquisition of NEN.

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##### Table of Contents



Reversal of Restructuring Accruals. Entering 2002, we expected our revenues to increase during the second half of
the year as the U.S. economy shook off recessionary conditions and customers
resumed their investment in enterprise software projects. As we completed our
second quarter, however, it became apparent that general economic conditions
were not improving as anticipated, and that our revenues therefore were likely
to lag below expectations. Faced with this realization, we embarked on certain
restructuring activities during the third and fourth quarters (2002 Plan)
aimed at reducing our annual payroll and facilities-related expenses by
approximately $24 million. These activities included the termination of
approximately 400 employees worldwide, the closure or consolidation of
approximately 18 facilities worldwide, and the planned liquidation of
approximately 9 foreign subsidiaries.

The following table summarizes the activity related to the 2002 Plan at March
31, 2003:

|                                                          |  |                     |      |         |  |                  |     |         |  |    |     |  |  |                     |      | 
|--------------------------------------------------------- |  | ------------------- | ---- | ------- |  | ---------------- | --- | ------- |  | -- | --- |  |  | ------------------- | ---- | 
|                                                          |  |                     |      |         |  |                  |     |         |  |    |     |  |  | Accrued liabilities
|                                                          |  | Accrued liabilities |      | Amounts |  |                  |     |         |  | at
|(Dollars in millions)                                     |  | at 12/31/02         |      | Paid    |  | Amounts reversed |     | 3/31/03
|                                                          |  |                     |      |         |  |                  |     |        
|Termination payments to employees
and other related costs |  | $                   | 2.7  |         |  | $                | 2.0 |         |  |    | 0.1 |  |  | $                   | 0.6  | 
|Lease cancellations and commitments                       |  |                     | 23.3 |         |  |                  | 2.3 |         |  |    | 0.1 |  |  |                     | 20.9 | 
|Other                                                     |  |                     | 0.2  |         |  |                  |     |         |  |    |    |  |  |                     | 0.2  | 
|                                                          |  |                     |      |         |  |                  |     |         |  |    |     |  |  |                     |      | 
|                                                          |  | $                   | 26.2 |         |  | $                | 4.3 |         |  | $  | 0.2 |  |  | $                   | 21.7 | 
|                                                          |  |                     |      |         |  |                  |     |         |  |    |     |  |  |                     |      | 

During the three months ended March 31, 2003, approximately $0.2 million was
reversed by a corresponding credit to restructuring expenses. The credit to the
severance accrual primarily related to the retention of three U.S.
employees previously slated for termination under the 2002 Plan, to
replace certain employees who left the Company for reasons unrelated
to the 2002 Plan. The other restructuring credits primarily related to the
adjustment to certain accruals for lease commitments. Substantially all of the
remaining severance payments are expected to be made by the end of the second quarter of
2003. Our payments toward the accruals relating to lease cancellations and
commitments are dependent upon market conditions and our ability to negotiate
acceptable lease buy-outs or locate suitable subtenants. These payments will
be made over a period not to exceed 7.25 years.

Operating Income
(Dollars in millions)

|                 |                              |   |         |   |         |   |         |    |   |  |     |    | 
|---------------- | ---------------------------- | - | ------- | - | ------- | - | ------- | -- | - |  | --- | -- | 
|                 |                              |   | Three   |   | Three   |   |         |    |  
|                 |                              |   | Months  |   | Months  |   |         |    |  
|                 |                              |   | Ended   |   | Ended   |   | Percent
|                 |                              |   | 3/31/03 |   | 3/30/02 |   | Change 
|                 |                              |   |         |   |         |   |        
|Operating income |                              | $ | 16.9    |   |         | $ | 22.5    |    |   |  | (25 | %)
|                 | Percentage of total revenues |   |         | 9 | %       |   |         | 11 | % |  |     |    | 

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##### Table of Contents



Operating income was $16.9 million for the three months ended March 31, 2003
compared to operating income of $22.5 million for the three months ended March
31, 2002. The decrease in operating income is due primarily to a 14 percent
decline in total revenues, partially offset by a decrease in operating
expenses, primarily resulting from the 2002 Plan.

Other Income (Expense), Net
(Dollars in millions)

|                                |                              |   |         |   |         |   |         |   |   |  |   |  | 
|------------------------------- | ---------------------------- | - | ------- | - | ------- | - | ------- | - | - |  | - |  | 
|                                |                              |   | Three   |   | Three   |   |         |   |  
|                                |                              |   | Months  |   | Months  |   |         |   |  
|                                |                              |   | Ended   |   | Ended   |   | Percent
|                                |                              |   | 3/31/03 |   | 3/31/02 |   | Change 
|                                |                              |   |         |   |         |   |        
|Interest income                 |                              | $ | 2.8     |   |         | $ | 2.8     |   |   |  | * | 
|                                | Percentage of total revenues |   |         | 2 | %       |   |         | 1 | % |  |   |  | 
|Interest expense and other, net |                              | $ | (0.4    | ) |         | $ | 0.1     |   |   |  | * | 
|                                | Percentage of total revenues |   |         | * |         |   |         | * |   |  |   |  | 



---

|* |  | Not meaningful
|- |  | --------------

Interest income was $2.8 million for the three months ended March 31, 2003 and
2002, respectively. Interest income consists primarily of interest earned on
our investments.

Interest expense and other, net was $(0.4) million for the three months ended
March 31, 2003 compared to $0.1 million for the three months ended March 31,
2002. Interest expense and other, net, primarily includes; net gains and
losses resulting from foreign currency transactions and the related hedging
activities; the cost of hedging foreign currency exposures; and bank fees. The
net movement in interest expense and other, net between the two quarters was
primarily the result of an increase in the realized foreign currency losses
incurred in the quarter ended March 31, 2003.

Provision for Income Taxes
(Dollars in millions)

|                           |  |         |     |         |  |         |     |  |  |  |     |   
|-------------------------- |  | ------- | --- | ------- |  | ------- | --- |  |  |  | --- | --
|                           |  | Three   |     | Three   |  |         |     | 
|                           |  | Months  |     | Months  |  |         |     | 
|                           |  | Ended   |     | Ended   |  | Percent
|                           |  | 3/31/03 |     | 3/31/02 |  | Change 
|                           |  |         |     |         |  |        
|Provision for income taxes |  | $       | 6.4 |         |  | $       | 9.4 |  |  |  | (32 | %)

We recorded income tax provisions of $6.4 million for the three months ended
March 31, 2003 compared to $9.4 million for the three months ended March
31, 2002, a decrease of 32 percent. The income tax provisions for these
periods are primarily the result of tax on earnings generated from operations
and withholding taxes on revenues in certain international jurisdictions. For
the three months ended March 31, 2003, the income tax provision was recorded on
pre-tax income at an effective rate of 33 percent. For the three months ended
March 31, 2002, the income tax provision was recorded on income (before the
cumulative effect of the SFAS 142 goodwill asset impairment), at an
effective rate of 37 percent. The reduction in the effective tax
rate is largely the result of the expected utilization of certain foreign tax
credits on which a full valuation allowance has been provided.

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##### Table of Contents



We had net deferred tax assets of $66.6 million at March 31, 2003. The
deferred tax assets were net of a valuation allowance of $48.5 million.
Realization of our net deferred tax assets depends upon the generation of
sufficient taxable income in future years in appropriate tax jurisdictions to
obtain benefit from the reversal of temporary differences, and from tax credit
carryforwards. The amount of deferred tax assets considered realizable is
subject to adjustment in future periods if estimates of future taxable income
are reduced. Any such adjustments could have a material adverse impact on
our effective tax rate and results of operations in future periods.

Cumulative Effect of an Accounting Change to Adopt SFAS 142
(Dollars in millions)

|                                                            |  |         |  |         |        |         |  |  
|----------------------------------------------------------- |  | ------- |  | ------- | ------ | ------- |  | -
|                                                            |  | Three   |  | Three   |        |        
|                                                            |  | Months  |  | Months  |        |        
|                                                            |  | Ended   |  | Ended   |        | Percent
|                                                            |  | 3/31/03 |  | 3/31/02 |        | Change 
|                                                            |  |         |  |         |        |        
|Cumulative effect of an accounting change to
adopt SFAS 142 |  |        |  | $       | (132.5 | )       |  | *



---

|* |  | Not meaningful
|- |  | --------------

In accordance with SFAS 142, we performed the required two-step impairment
tests of goodwill and indefinite-lived intangible assets as of January 1, 2002
using an independent third-party appraiser. Based on this analysis,
we recognized an impairment loss of $132.5 million in the first
quarter of 2002. See Note Seven to
Condensed Consolidated Financial Statements, Part I,
Item 1, incorporated here by reference.

The fair value of the
eBD and FFI reporting units were determined using the income
approach. The income approach focuses on the income-producing
capability of an asset, measuring the current value of the asset by
calculating the present value of its future economic benefits such as
cash earnings, cost savings, tax deductions, and proceeds from
disposition. Value indications are developed by discounting expected
cash flows to their present value at a rate of return that
incorporates the risk-free rate for the use of funds, the
expected rate of inflation, and risks associated with the particular
investment.

In future periods, a reduction of our
estimated fair values associated with certain reporting units could
result in a further impairment loss associated with various intangible
assets.

28



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##### Table of Contents



Net Income (Loss) Per Share
(Dollars and shares in millions, except per share data)

|                                                             |                              |   |         |   |         |   |         |     |    |  |    |    | 
|------------------------------------------------------------ | ---------------------------- | - | ------- | - | ------- | - | ------- | --- | -- |  | -- | -- | 
|                                                             |                              |   | Three   |   | Three   |   |         |     |   
|                                                             |                              |   | Months  |   | Months  |   |         |     |   
|                                                             |                              |   | Ended   |   | Ended   |   | Percent
|                                                             |                              |   | 3/31/03 |   | 3/31/02 |   | Change 
|                                                             |                              |   |         |   |         |   |        
|Net income (loss)                                            |                              | $ | 13.0    |   |         | $ | (116.4  | )   |    |  | *  |   
|                                                             | Percentage of total revenues |   |         | 7 | %       |   |         | (55 | %) |  |    |    | 
|Basic net income (loss) per share                            |                              | $ | 0.14    |   |         | $ | (1.18   | )   |    |  | *  |   
|Diluted net income (loss) per share                          |                              | $ | 0.13    |   |         | $ | (1.14   | )   |    |  | *  |   
|Shares used in computing basic net income (loss) per
share   |                              |   | 94.4    |   |         |   | 98.4    |     |    |  | (4 | %)
|Shares used in computing diluted net income (loss) per
Share |                              |   | 97.3    |   |         |   | 102.2   |     |    |  | (5 | %)



---

|* |  | Not meaningful
|- |  | --------------

We reported net income of $13.0 million for the three months ended March 31,
2003 compared to a net loss of $116.4 million for the three months ended
March 31, 2002. The increase in net income is primarily related to the $132.5 million goodwill impairment loss recognized as a cumulative effect of an
accounting change in the first quarter of 2002. Basic net income per share was
$0.14 for the three months ended March 31, 2003 compared to basic net loss
per share of $1.18 for the same period in 2002. Diluted net income per share
was $0.13 for the three months ended March 31, 2003 compared to diluted net
loss per share of $1.14 for the same period in 2002. Shares used in computing
basic net income (loss) per share decreased 4 percent for the three months
ended March 31, 2003 compared to the three months ended March 31, 2002 due
primarily to shares repurchased under our stock repurchase program.
See Note Ten to Condensed Consolidated Financial Statements, Part I, Item 1, incorporated here by reference), partially offset
by the exercise of employee stock options. Shares used in computing diluted
net income (loss) per share decreased 5 percent for the three months ended
March 31, 2003 compared to the three months ended March 31, 2002, primarily
for the reasons stated above.

After its acquisition by Sybase,
AvantGo generated a loss of approximately $0.6 million in the
quarter ended March 31, 2003.

Liquidity and Capital Resources
(Dollars in millions)

|                                                     |  |         |       |         |  |         |       |   |  |  |     |   
|---------------------------------------------------- |  | ------- | ----- | ------- |  | ------- | ----- | - |  |  | --- | --
|                                                     |  | Three   |       | Three   |  |         |       |  
|                                                     |  | Months  |       | Months  |  |         |       |  
|                                                     |  | Ended   |       | Ended   |  | Percent
|                                                     |  | 3/31/03 |       | 3/31/02 |  | Change 
|                                                     |  |         |       |         |  |        
|Working capital                                      |  | $       | 118.4 |         |  | $       | 68.0  |   |  |  | 74  | % 
|Cash, cash equivalents and cash investments          |  | $       | 455.5 |         |  | $       | 389.8 |   |  |  | 17  | % 
|Net cash provided by operating activities            |  | $       | 95.5  |         |  | $       | 73.8  |   |  |  | 29  | % 
|Net cash used for investing activities               |  | $       | 13.8  |         |  | $       | 78.0  |   |  |  | (82 | %)
|Net cash provided by (used for) financing activities |  | $       | 0.5   |         |  | $       | (3.2  | ) |  |  | *   |   



---

|* |  | Not meaningful
|- |  | --------------

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Net cash provided by operating activities increased 29 percent for the three
months ended March 31, 2003 compared to the three months ended March 31, 2002.
The increase in net cash provided by operating activities is primarily due to a
decrease in accounts receivable and an increase in deferred revenue.

Net cash used for investing activities was $13.8 million for the three months
ended March 31, 2003 compared to $78.0 million for the three months ended March
31, 2002. The decrease in net cash used for investing activities is primarily
due to net dispositions of cash investments of $19.6 million during the three
months ended March 31, 2003, compared to $58.0 million of cash investment net
purchases during the three months ended March 31, 2002, and the net utilization
of $13.9 million in cash during the three months ended March 31, 2003
associated with the AvantGo transaction.

Net cash provided by financing activities was $0.5 million for the three months
ended March 31, 2003 compared to net cash used of $3.2 million for the three
months ended March 31, 2002. The shift from net cash used for financing
activities to net cash provided by financing activities was primarily the
result of a decrease in the cash used to repurchase our common stock during the
three months ended March 31, 2003, compared to the cash used for
the same purpose during the same period in 2002.

During the three months ended March 31, 2003, we repurchased 0.7 million shares
of our common stock for $9.5 million pursuant to the Board of Directors
authorization. For additional information regarding our stock repurchase program, see
Note Ten to Consolidated Financial Statements, Part I, Item 1, incorporated
here by reference.

We had no significant commitments for capital expenditures at March 31, 2003.
We expect to fund expenditures for future capital requirements, liquidity and
strategic operating programs from a combination of available cash balances and
internally generated funds. We have no outside debt, and do not have any plans
to enter into borrowing arrangements. There have been no significant changes
to the contractual obligations we disclosed in our Annual Report on
Form 10-K for the year ended December 31, 2002.

We engage in global business operations and are therefore exposed to foreign
currency fluctuations. As of March 31, 2003, we had identifiable assets
totaling $261.7 million associated with our European operations and $84.5
million associated with our Asia and Latin American operations. We experience
foreign exchange transaction exposure on our net assets and liabilities
denominated in currencies other than the U.S. dollar. As these assets are
considered by Sybase Inc., the U.S. parent company, to be a permanent
investment in the respective subsidiaries, the related foreign currency
translation gains and losses are reflected in Accumulated other comprehensive
loss under Stockholders equity on the balance sheet. We also experience
foreign exchange translation exposure from certain balances that are
denominated in a currency other than the functional currency of the entity on
whose books the balance resides. We hedge
certain of these short-term exposures under a plan approved by the Board of
Directors (see Qualitative and Quantitative Disclosure of Market Risk, Part
I, Item 3).

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Future Operating Results

Our future operating results may vary substantially from period to period due
to a variety of significant risks, some of which are discussed in this Report
on Form 10-Q. We strongly urge current and prospective investors to carefully
consider the cautionary statements and risks contained in this Report including
those regarding forward looking statements described on Page 3 of this Report.



| |  | Revenue Related Factors
|- |  | -----------------------

The post-9/11 decline of the U.S. and global economies compounded by the war in
the Middle East continued to contribute to
depressed IT spending in the first quarter of 2003. We will continue to pursue
our business strategies, with an increased emphasis on creating successful
strategic and global alliances with key partners  such as Sun Microsystems,
Apple Computer, BearingPoint Consulting, Inc. and PeopleSoft, Inc.  to
provide customers with optimal solutions based on our leading-edge technology
and our partners capabilities in specific markets. However, if we are unable
to achieve these goals, or if we are unable to maintain and provide desirable,
innovative products and services to existing customers, our ability to maintain
or grow revenue may be significantly impaired. This, in turn, could adversely
impact our results of operations, even if we continue to generate a profit and
to maintain positive cash flows.

Furthermore, complex revenue recognition rules for software companies directly
affect our ability to measure revenue for any given accounting period. Such
rules are subject to constant review and revision by various bodies tasked with
the establishment of accounting standards. Therefore, modifications or new
interpretations of existing accounting guidance governing revenue recognition
in the software industry could have a material effect on our business. For a
general discussion of our current revenue recognition rules and other critical
accounting policies, see Critical Accounting Policies and Estimates, above,
and Changing Legal and Accounting Environment, below, incorporated here by
reference.

In addition to the above factors, the timing and amount of our revenues are
subject to a number of factors that make it difficult to accurately estimate
revenues and operating results on a quarterly or annual basis. In our
experience, license fees revenues tend to decline between the fourth quarter of
one year and the first quarter of the next year. This has contributed to lower
total revenues and earnings in the first quarter compared to the prior fourth
quarter. We currently anticipate that this seasonal pattern will continue.

Since we operate with little or no backlog, quarterly revenues depend largely
on orders booked and shipped in that quarter. Historically, we have recorded
approximately 50% to 70% of our quarterly revenues in the last month of each
quarter, particularly during the final two weeks. Our customers include many
large enterprises that make substantial investments in our products and
services. Therefore, the inability to record one or more large
orders, or a significant number of smaller orders, at the very end of a quarter could materially and adversely impact our
results of operations. Our operating expenses are based on projected annual
and quarterly revenue levels, and are generally incurred
ratably throughout each quarter. Since our operating expenses are relatively
fixed in the short

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term, failure to realize projected revenues for a specified
period could impact operating results, causing an operating loss for that
period.

In North America, we currently ship most of our products from our Dublin,
California facility near the site of our corporate headquarters. Because we
tend to record a high percentage of revenues during the last two weeks of each
quarter, disruption of operations at that facility (due to natural calamity or
systems failure, for example) could directly harm our ability to record
revenues for such quarter. This could, in turn, have an adverse impact on
operating results.



| |  | Changing Legal and Accounting Environment
|- |  | -----------------------------------------

During the past several years, various accounting guidance has been issued with
respect to revenue recognition rules in the software industry. However, much
of this guidance addresses software revenue recognition primarily from a
conceptual level, and is silent as to specific implementation requirements. We believe our current
business arrangements and contract terms have been properly reported under the
current rules. However, if final interpretations of these rules necessitate a
change in our current revenue recognition practices, our results of operations,
financial condition and business could be materially and adversely affected.
For further discussion, see Critical Accounting Policies and Estimates,
above.

In addition to the above, the U.S. Congress enacted the Sarbanes-Oxley Act of
2002 (SOA) on July 30, 2002, largely in response to a rash of financial
scandals involving public companies such as Enron. The SOA provides for
sweeping and unprecedented corporate reforms, focusing on public company
financial reporting, corporate ethics, and oversight of the accounting
profession, among other areas, and establishing harsher civil and criminal
penalties for violation of U.S. securities laws. Certain provisions of the SOA
became effective immediately, and others required the SEC and the
national securities exchanges to enact rules and
regulations to carry out the purposes of the act. Many of these new
SEC-mandated rules and procedures (including rules requiring personal
certification of a companys SEC reports by the companys chief executive
officer and senior financial officers, accelerated filing of certain SEC
reports, and changes in the role and functions of a companys audit committee),
became effective during the latter half of 2002 and in early 2003, and many
additional SEC rules and regulations, as well as conforming rules
promulgated by the New York Stock Exchange, where the Companys stock
is traded, subsequently will become effective. We believe our corporate practices and standards currently meet or
exceed the current rules and regulations promulgated under the SOA. However,
new or additional rules or practices that influence significant adjustments to our business
practices and procedures could result in increased administrative expenses,
lengthened sales cycles and other changes that could adversely affect our
results of operations.



| |  | Stock Price Volatility
|- |  | ----------------------

Our ability to exceed, or our failure to achieve, expected operating results
for any period could significantly impact our stock price. Inevitably, some
investors will experience gains while others will experience losses depending
on the timing of their investment. The market for our
stock and for technology stocks in general has been highly volatile, and the
trading price of the Companys common stock has fluctuated widely in recent
years.

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During the past two years, U.S. stock prices in general have experienced a
significant downturn, due, in part, to the collapse of dot.com stocks, the
continued weakening of the U.S. and global economic conditions, acts of
domestic and international terrorism, and the war in the Middle East (see also Revenue Related Factors, above). Our stock price may
continue to fluctuate in the future in response to these and various other
factors, including our financial results, press and industry analyst reports,
market acceptance of our products and pricing policies, activities of
competitors, acquisitions of other businesses and technologies, and other
events. In addition, the stock market has from time to time experienced
extreme price and volume fluctuations that have categorically affected the
market price for high technology companies, but which often have been unrelated
to the operating performance of these companies.



| |  | Competition
|- |  | -----------

The IT industry and the market for our products and services is fast-paced and
extremely competitive, and is marked by dynamic customer demands, short product
life cycles, and the burgeoning e-Business marketplace. We have
numerous competitors, including large companies such as Oracle Corporation,
Microsoft Corporation, and IBM Corporation, and other smaller highly-aggressive
firms. Many of these companies may have greater financial, technical, sales
and marketing resources, and a larger installed customer base than Sybase. In
addition, our competitors advertising and marketing efforts could adversely
influence customer perception of our products and services, and harm our
business and prospects as a result. To remain competitive, we must be able to
develop new products, enhance existing products and retain competitive pricing
policies in a timely manner. Our failure to compete successfully with new or
existing competitors could have a material adverse impact on our business, and
on the market price of our stock.



| |  | Product Development
|- |  | -------------------

Increased widespread use of the Internet and fast-growing market demand for
enterprise portals and mobile and embedded solutions may significantly alter
how we do business in the future. This could affect our ability to timely meet
the demand for new or enhanced products and services at competitive prices,
which could significantly impact our ability to generate future revenues.

We have released the Sybase Enterprise Portal, an industry leading
enterprise-class portal product designed to enable organizations to provide
personalized business interfaces to employees, customers, partners and
suppliers. With our acquisition of NEN in April 2001, we gained the ability to
offer enterprise application integrators that integrate Sybase Enterprise
Portal with other applications. Sybase Enterprise Portal solutions are
intended to enable successful e-Business strategies for organizations
transacting business via the Internet. When we acquired OnePage, Inc. in April
2002, we gained technology designed to further enhance our Sybase Enterprise
Portal offering. The completion of our acquisition of AvantGo in the first
quarter of 2003 allows us to significantly enhance our iAS mobile and embedded
products and solutions. We believe our focus on enterprise portals, mobile and
embedded solutions and services and our other

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strategies will enhance revenues
and profitability. However, if the market does not continue to develop as
anticipated, or if our solutions and services do not successfully compete in
the relevant markets, we may not realize expected revenues and profitability.

Our future results may also be affected if our products cannot interoperate and
perform well with software products of other companies. Certain leading
applications currently are not interoperable with our products, and others may
never be. In addition, many of our principal products are designed for use
with products offered by competitors. In the future, vendors of non-Sybase
products may become less willing to provide us with access to their products,
technical information, and marketing and sales support, which could harm our
business and prospects.



| |  | Changes in Sales Model
|- |  | ----------------------

Our sales model has evolved significantly during the past few years to keep
pace with new and developing business environments, such as the World Wide Web,
and changing customer demands in our targeted markets. If we have misjudged
demand for our products and services in our target markets, or if we are unable
to coordinate our sales efforts in a focused and efficient way, this could
materially and adversely affect our business and prospects.

In January 1999, we realigned our direct sales force, product teams and
professional services capabilities into four divisions. This reorganization was
intended to enhance overall revenues and profitability by providing increased
focus on each of four key markets: Enterprise Solutions, Mobile and Embedded
Computing, Internet Applications and Business Intelligence. In January 2000,
the acquisition of HFN (now FFI) increased our focus on the financial services market. In May 2000,
we announced the launch of iAnywhere Solutions, Inc., a majority-owned
subsidiary formed to continue the business of our former Mobile and
Embedded Computing (MEC) division in mobile and
embedded e-Business products and services. eBD was created in the second
quarter of 2001 when we acquired NEN, and consists of certain operations of NEN
along with certain products previously in the ESD segment and certain products
previously in the former Internet Applications Division. In January 2003, we
further reorganized our sales focus with the creation of the Infrastructure
Platform Group (IPG), which will focus on increasing market presence and
revenue through solution partners (e.g., ISVs, VARs and OEMs) and delivery
partners (e.g., SIs, distributors and resellers). Our worldwide field
organization will continue to focus on end user customers, and will continue to
provide field support to promote growth of our business through partners.
Further reorganization of our sales model could have a direct affect on our
results of operations. See Revenue Related Factors, above.



| |  | International Operations
|- |  | ------------------------

We currently derive a substantial portion of our revenues from our
international operations, and we plan to continue expanding our business in
international markets in the future. In the first quarter of 2003, our revenues
outside North America represented 42% of our total revenues for the quarter.
Because of this, global political unrest, acts of
terrorism and the war in the Middle East and other factors could, individually or in combination,
have a material impact on
our international revenues and operations. See Revenue Related Factors,
above.

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As a global concern, we also face exposure to adverse movements in foreign
currency exchange rates. For a discussion of risks associated with currency
fluctuation, see Financial Risk Management  Foreign
Exchange Risk, above,
incorporated here by reference.

Our revenues outside North America could also fluctuate due to the relative
immaturity of some markets, rapid growth in other markets, and organizational
changes we have made to accommodate these conditions. For example, during 2002,
we centralized our finance functions within specific geographic regions (rather
than maintaining them on a country-by-country basis), closed a subsidiary in
the Czech Republic, and dissolved NEN as well
as several of its majority-owned and wholly-owned subsidiaries. In February 2001, we
acquired our distributor in Denmark and in September 2000, we acquired certain
assets and assumed certain liabilities of our distributor in Mexico. During
1999 and 2000, we closed various subsidiaries including Chile and Peru.
Several significant management and organizational changes also occurred during
the same periods, including the resignation and replacement of regional
management in Europe and Asia.

Other factors that could significantly impact aspects of our international
operations include:



| |  |  | Changes in political, regulatory, or economic conditions
| | - |  | --------------------------------------------------------
|
| |  |  | Changes or limitations in trade protection laws         
|
| |  |  | Changes in tax treaties or laws favorable to Sybase     
|
| |  |  | Natural disasters, including
epidemics                  



| |  | Intellectual Property
|- |  | ---------------------

Our inability to obtain adequate copyright, patent or trade secret protection
for our products in certain countries may have a material adverse impact on
future operating results. In addition, as the number of software products and
associated patents increase, it is possible that software developers will
become subject to more frequent infringement claims.

In the past, third parties have claimed that Sybase products or technologies
violated their patents or other proprietary rights. It is possible that such
claims will be asserted in the future. In addition, to the extent we acquire
other technologies, whether directly from third parties or through acquisitions
of other companies, we face the possibility that such intellectual property
will be found to infringe or violate the proprietary rights of others. For
example, a trademark infringement and dilution case filed in 1999
against NEN, then
a wholly-owned subsidiary, resulted in a multi-million dollar judgment against
NEN and an injunction against NENs use of the trade name NEON. The action
was settled in September 2001 for a lesser amount as well as certain other
concessions. Regardless of whether these claims have merit, they can be time
consuming and expensive to defend or settle, and can harm the Companys
business and reputation. We do not believe our products infringe any third
party patents or proprietary rights, but there is no guarantee that we can
avoid claims or findings of infringement in the future.

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| |  | Changes in Management; Human Resources
|- |  | --------------------------------------

In recent years, we have added to our executive management team. For example,
In January 2003, Thomas Volk joined the Company as Executive Vice President,
Infrastructure Platform Group, and in the second quarter of 2002, Michael
Bealmear joined the Company as Executive Vice President, Worldwide Field
Operations. Richard Moore, who was named President of FFI in August 2002,
joined the Company in July 2001 as Senior Vice President and General Manager of
the v-Business Group. In October 2001, Billy Ho, our Senior Vice President and
General Manager of eBD, replaced George F. (Rick) Adam, former CEO of NEN who
had previously been appointed to the position when we acquired NEN in April
2001. Further changes involving executives and managers resulting from
acquisitions, mergers and other events could increase the current rate of
employee turnover, particularly in consulting, engineering and sales. Changes
in our Board membership could also affect the Companys current strategic
business plans.

Additionally, our inability to hire and retain qualified technical, managerial,
sales and other employees could affect our product development and sales
efforts, other aspects of our operations, and our financial results.
Competition for highly skilled personnel in the software industry is typically
intense. Our financial and stock price performance relative to the companies
with whom we compete for employees, and the high cost of living in the San
Francisco Bay Area, where our headquarters is located, could also impact the
degree of future employee turnover.



| |  | Acquisitions and Strategic Relationships
|- |  | ----------------------------------------

We regularly explore possible acquisitions and other strategic ventures to
expand and enhance our business. We have recently acquired or invested in a
number of companies and formed certain strategic relationships, and will likely
continue to do so in the future. For example, in February 2003 we completed
our acquisition of AvantGo, Inc., a leading provider of mobile enterprise
software, and in April 2002, we acquired all of the issued and outstanding
stock of OnePage, Inc., a leading provider of technology and applications for
building the information components  portlets  of corporate, consumer and
wireless portals. During 2001, we acquired NEN, a developer of enterprise
application integration software, as well as our distributor in Denmark.
During 2000, we acquired certain assets of our distributor in Mexico, and the
stock of Home Financial Network, Inc. (now FFI). In 1999, we acquired Data
Warehouse Network, a provider of industry-specific business intelligence
applications.

We may not achieve the desired benefits of our acquisitions and investments.
For example, we may be unable to successfully assimilate an acquired companys
management team, business infrastructure, company culture, or other important
factors. Also, dedication of additional resources to handle these integration
tasks could temporarily divert attention from other important business. Such
acquisitions could also result in costs, liabilities, or additional expenses
that could harm our results of operations and financial condition. With
respect to our investments in other companies, we may not realize a return on
our investments, or the value of our investments may decline if the businesses
in which we invest are not successful.

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ITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURES
                OF MARKET RISK

The following discussion about our risk management activities includes forward
looking statements that involve risks and uncertainties, as more fully
described on Page 3 of this Report.

Foreign Exchange Risk

As a global concern, we face exposure to adverse movements in foreign currency
exchange rates. These exposures may change over time as business practices
evolve and could have a material adverse impact on our financial position and
results of operations. Historically, our primary exposures have related to non
dollar-denominated sales and expenses in Europe, Asia Pacific, and Latin
America. In order to reduce the effect of foreign currency fluctuations, we
utilize foreign currency forward exchange contracts (forward contracts) to
hedge certain foreign currency transaction exposures outstanding during the
period (approximately 30 days). The gains and losses on the forward contracts
mitigate the gains and losses on our outstanding foreign currency transactions.
We do not enter into forward contracts for trading purposes. All foreign
currency transactions and all outstanding forward contracts are
marked-to-market at the end of the period with unrealized gains and losses
included in interest expense and other, net. The unrealized gain (loss) on the
outstanding forward contracts as of March 31, 2003 was immaterial to our
consolidated financial statements.

Interest Rate Risk

Our exposure to market risk for changes in interest rates relates to our
investment portfolio, which consists of taxable, short-term money market
instruments and debt securities with maturities between 90 days and three
years. We do not use derivative financial instruments in our investment
portfolio. We place our investments with high-credit quality issuers and, by
policy, we limit the amount of credit exposure to any one issuer.

We mitigate default risk by investing
in only the safe and high-credit
quality securities and by monitoring the credit rating of investment issuers.
The portfolio includes only marketable securities with active secondary or
resale markets to ensure portfolio liquidity. These securities are generally
classified as available for sale, and consequently, are recorded on the balance
sheet at fair value with unrealized gains or losses reported, as a separate
component of stockholders equity, net of tax. Unrealized gains and losses at
March 31, 2003 were not material.

We have no cash flow exposure due to rate changes for cash equivalents and cash
investments as all of these investments are at fixed interest rates.

There has been no material change in our interest rate exposure since December
31, 2002.

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ITEM 4: CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

As of March 31, 2003, we carried out an evaluation under the supervision, and
with the participation of our management, including our CEO and CFO, of the
effectiveness of the design and operation of our disclosure controls and
procedures pursuant to Exchange Act Rule 13a-14. Based on this evaluation, our
management, including the CEO and CFO, concluded that our disclosure controls
and procedures were effective in timely alerting them to material information
required to be included in our periodic SEC filings.

Changes in Internal Controls

There have been no significant changes in our internal controls or in other
factors that could significantly affect our disclosure controls and procedures
subsequent to the date of the above evaluation.

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PART II: OTHER INFORMATION




ITEM 6: EXHIBITS AND REPORTS ON
FORM 8-K



|(a) |  | Exhibits
|--- |  | --------



| | 99.1 |  | 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
| | ---- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | 99.2 |  | 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 2002  
|
| | 99.3 |  | 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 2002  



|(b) |  | Reports on Form 8-K: The following reports on Form
8-K were filed during the period covered by this Report on Form 10-Q:
|--- |  | ------------------------------------------------------------------------------------------------------------------------



| | (1) |  | On January 3, 2002, we filed a Report on
Form 8-K in connection with the execution of a definitive
agreement to acquire AvantGo, Inc.
| | --- |  | -------------------------------------------------------------------------------------------------------------------------------------
|
| | (2) |  | On March 12, 2003, we filed a Report on
Form 8-K in connection with the completion of our
acquisition of AvantGo, Inc.               

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.

|             |  |                                                                                                     
|------------ |  | ----------------------------------------------------------------------------------------------------
|May 14, 2003 |  | SYBASE, INC.                                                                                        
|             |  |                                                                                                     
|             |  | By /s/ PIETER VAN DER VORST                                                                         
|             |  |                                                                                                     
|             |  | Pieter Van der Vorst
Senior Vice President and Chief Financial Officer
(Principal Financial Officer)
|             |  |                                                                                                     
|             |  | By /s/ MARTIN J. HEALY                                                                              
|             |  |                                                                                                     
|             |  | Martin J. Healy
Vice President and Corporate Controller
(Principal Accounting Officer)              

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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

I, John S. Chen, certify, pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Quarterly
Report of Sybase, Inc. on Form 10-Q for the quarterly period ended March 31,
2003 fully complies with the requirements of Section 13(a) or 15(d) of the
Securities Exchange Act of 1934 and that information contained in such
Quarterly Report fairly presents in all material respects the financial
condition and results of operations of Sybase, Inc.

| |  |                                                                  
| |  | -----------------------------------------------------------------
| |  | By: /s/ JOHN S. CHEN                                             
| |  |                                                                  
| |  | Name: John S. Chen
Title:   Chief Executive Officer and President

I, Pieter A. Van der Vorst, certify, pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the
Quarterly Report of Sybase, Inc. on Form 10-Q for the quarterly period ended
March 31, 2003 fully complies with the requirements of Section 13(a) or 15(d)
of the Securities Exchange Act of 1934 and that information contained in such
Quarterly Report fairly presents in all material respects the financial
condition and results of operations of Sybase, Inc.

| |  |                                                                                                     
| |  | ----------------------------------------------------------------------------------------------------
| |  | By: /s/ PIETER A. VAN DER VORST                                                                     
| |  |                                                                                                     
| |  | Name: Pieter A. Van der Vorst
Title:   Senior Vice President and
            Chief Financial Officer

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CERTIFICATION

I, John S. Chen, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Sybase, Inc.;

2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;

3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;

4. The registrants other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly
during the period in which this quarterly report is being prepared;

b) evaluated the effectiveness of the registrants disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the Evaluation Date); and

c) presented in this quarterly report our conclusions about the effectiveness
of the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;

5. The registrants other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrants auditors and the audit
committee of registrants board of directors (or persons performing the
equivalent function):

a) all significant deficiencies in the design or operation of internal controls
which could adversely affect the registrants ability to record, process,
summarize and report financial data and have identified for the registrants
auditors any material weaknesses in internal controls; and

b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrants internal controls;
and

6. The registrants other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.

|                   |  |                                                   
|------------------ |  | --------------------------------------------------
|Date: May 14, 2003 |  |                                                   
|                   |  |                                                   
|                   |  | /s/ JOHN S. CHEN                                  
|                   |  |                                                   
|                   |  | John S. Chen
Chief Executive Officer and President

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##### Table of Contents



CERTIFICATION

I, Pieter A Van der Vorst, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Sybase, Inc.;

2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;

3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;

4. The registrants other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly
during the period in which this quarterly report is being prepared;

b) evaluated the effectiveness of the registrants disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the Evaluation Date); and

c) presented in this quarterly report our conclusions about the effectiveness
of the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;

5. The registrants other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrants auditors and the audit
committee of registrants board of directors (or persons performing the
equivalent function):

a) all significant deficiencies in the design or operation of internal controls
which could adversely affect the registrants ability to record, process,
summarize and report financial data and have identified for the registrants
auditors any material weaknesses in internal controls; and

b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrants internal controls;
and

6. The registrants other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.

|                   |  |                                                                          
|------------------ |  | -------------------------------------------------------------------------
|Date: May 14, 2003 |  |                                                                          
|                   |  |                                                                          
|                   |  | /s/ PIETER A. VAN DER VORST                                              
|                   |  |                                                                          
|                   |  | Pieter A. Van der Vorst
Senior Vice President and
Chief Financial Officer

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##### Table of Contents



EXHIBIT INDEX TO SYBASE, INC.
QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTER ENDED MARCH 31, 2003



|            |  |                                                                                                                                                                              
|----------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |  | Description                                                                                                                                                                  
|99.1        |  | 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
|           
|99.2        |  | 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 2002  
|           
|99.3        |  | 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 2002  

44