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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549





FORM 10-K

FOR ANNUAL AND TRANSITION REPORTS

PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934.

(Mark One)

|x | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ------------------------------------------------------------------------------------

For the fiscal year ended January 31, 2008

OR



| ̈ | TRANSITION REPORT UNDER TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | -------------------------------------------------------------------------------------

Commission File Number: 0-22369





BEA SYSTEMS, INC.

(Exact Name of Registrant as Specified in Its Charter)



|                                                               |  |                                       
|-------------------------------------------------------------- |  | --------------------------------------
|Delaware                                                       |  | 77-0394711                            
|(State or Other Jurisdiction of Incorporation or Organization) |  | (I. R. S. Employer Identification No.)

2315 North First Street

San Jose, California 95131

(Address of Principal Executive Offices)

(408) 570-8000

(Registrants telephone number, including area code)





Securities registered under
Section 12(b) of the Act:



|                                                              |  |                                                              
|------------------------------------------------------------- |  | -------------------------------------------------------------
|Title of Each Class                                           |  | Name of Each Exchange on Which Registered                    
|Common Stock, $.001 Par Value Preferred Share Purchase Rights |  | The NASDAQ Stock Market LLC (The Nasdaq Global Select Market)

Securities registered under Section 12(g) of the Act: None





Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities
Act.    Yes   ̈    No  x

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.    Yes   ̈    No  x

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 if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrants knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.   ̈

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.
See the definitions of large accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act. (Check one):

Large Accelerated Filer  x        Accelerated Filer   ̈        Non-Accelerated Filer   ̈        Smaller Reporting Company   ̈

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange
Act).    Yes   ̈    No  x

The aggregate market value of the voting common stock held by non-affiliates of the registrant, computed by reference to the closing price at which the common stock was sold on July 31, 2007, as reported on The
Nasdaq National Market, was approximately $4.9 billion. Shares of common stock held by each officer and director have been excluded in that such persons may be deemed to be affiliates. This determination of affiliate status does not reflect a
determination that such persons are affiliates for any other purposes.

As of February 29, 2008, there were approximately 414,309,564
shares of the registrants common stock outstanding.





DOCUMENTS INCORPORATED BY
REFERENCE

Certain information is incorporated into Part III of this report by reference to the proxy statement for the
Registrants 2008 annual meeting of stockholders, if held, to be filed with the Securities and Exchange Commission pursuant to Regulation 14A not later than 120 days after the end of the fiscal year covered by this Form 10-K.









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BEA SYSTEMS, INC.

FORM 10-K

FOR THE FISCAL YEAR ENDED JANUARY 31, 2008

INDEX



|           |  |                                                                                                       |  |     
|---------- |  | ----------------------------------------------------------------------------------------------------- |  | ----
|           |  |                                                                                                       |  | Page
|           |  | PART I                                                                                                |  |     
|           |  |                                                                                                      
|Item 1.    |  | Business                                                                                              |  | 6   
|           |  |                                                                                                      
|Item 1A.   |  | Risk Factors                                                                                          |  | 21  
|           |  |                                                                                                      
|Item 1B.   |  | Unresolved Staff Comments                                                                             |  | 34  
|           |  |                                                                                                      
|Item 2.    |  | Properties                                                                                            |  | 34  
|           |  |                                                                                                      
|Item 3.    |  | Legal Proceedings                                                                                     |  | 34  
|           |  |                                                                                                      
|Item 4.    |  | Submission of Matters to a Vote of Security Holders                                                   |  | 37  
|           |  |                                                                                                      
|           |  | PART II                                                                                               |  |     
|           |  |                                                                                                      
|Item 5.    |  | Market for Registrants Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities |  | 38  
|           |  |                                                                                                      
|Item 6.    |  | Selected Financial Data                                                                               |  | 40  
|           |  |                                                                                                      
|Item 7.    |  | Managements Discussion and Analysis of Financial Condition and Results of Operations                 |  | 41  
|           |  |                                                                                                      
|Item 7A.   |  | Quantitative and Qualitative Disclosure about Market Risk                                             |  | 67  
|           |  |                                                                                                      
|Item 8.    |  | Financial Statements and Supplementary Data                                                           |  | 71  
|           |  |                                                                                                      
|Item 9.    |  | Changes in and Disagreements with Accountants on Accounting and Financial Disclosures                 |  | 126 
|           |  |                                                                                                      
|Item 9A.   |  | Controls and Procedures                                                                               |  | 126 
|           |  |                                                                                                      
|Item 9B.   |  | Other Information                                                                                     |  | 128 
|           |  |                                                                                                      
|           |  | PART III                                                                                              |  |     
|           |  |                                                                                                      
|Item 10.   |  | Directors, Executive Officers and Corporate Governance                                                |  | 128 
|           |  |                                                                                                      
|Item 11.   |  | Executive Compensation                                                                                |  | 128 
|           |  |                                                                                                      
|Item 12.   |  | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters        |  | 128 
|           |  |                                                                                                      
|Item 13.   |  | Certain Relationships and Related Transactions, and Director Independence                             |  | 128 
|           |  |                                                                                                      
|Item 14.   |  | Principal Accounting Fees and Services                                                                |  | 128 
|           |  |                                                                                                      
|           |  | PART IV                                                                                               |  |     
|           |  |                                                                                                      
|Item 15.   |  | Exhibits and Financial Statement Schedules                                                            |  | 129 
|           | 
|Signatures |  | 130                                                                                                  



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PART I

FORWARD-LOOKING INFORMATION

This Annual Report on Form 10-K (this Annual Report or
2008 Form 10-K) includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 (the Securities Act) and Section 21E of the Securities Exchange Act of 1934 (the
Exchange Act). All statements in this Annual Report other than statements of historical fact are forward-looking statements for purposes of these provisions, including any statements of the plans and objectives for future
operations and any statement of assumptions underlying any of the foregoing. Statements that include the use of terminology such as may, will, expects, plans, anticipates,
estimates, potential, or continue, or the negative thereof or other comparable terminology are forward-looking statements. Forward-looking statements include, without limitation, statements related to:



| |  |  | the timing and success of the pending acquisition of BEA by Oracle under the definitive merger agreement, and any uncertainty of our future if the transaction is
not successful for any reason, especially with respect to any of the factors listed below;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the effect of the announcement of the merger on BEAs business relationships, operating results and business generally;
| | - |  | -----------------------------------------------------------------------------------------------------------------------



| |  |  | the retention of certain key employees at BEA;
| | - |  | ----------------------------------------------



| |  |  | the occurrence of any event, change or other circumstances that could give rise to the termination of the merger agreement and the payment of any termination fees;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the outcome of any legal proceedings instituted against BEA or Oracle and others related to the merger agreement;
| | - |  | -----------------------------------------------------------------------------------------------------------------



| |  |  | differing interests between our officers and directors and our stockholders in connection with the merger;
| | - |  | ----------------------------------------------------------------------------------------------------------



| |  |  | regulatory approvals, stockholder approval or other conditions necessary to the completion of the transaction;
| | - |  | --------------------------------------------------------------------------------------------------------------



| |  |  | the amount of the costs, fees, expenses and charges related to the merger and the execution of certain financings that will be obtained to consummate the merger;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the effect of fluctuations in revenues and operating results on the ability to meet securities analysts or investors expectations;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------



| |  |  | fluctuation of revenues and operating results, including as a result of seasonality;
| | - |  | ------------------------------------------------------------------------------------



| |  |  | the effect of volatility of licensing revenues on our ability to accurately forecast revenues, expenses and operating results;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------



| |  |  | the effect of the length of our sales cycle on our revenues;
| | - |  | ------------------------------------------------------------



| |  |  | the restructuring of our sales force;
| | - |  | -------------------------------------



| |  |  | the ability to maintain on-going sales through distribution channels and the effect on license revenues;
| | - |  | --------------------------------------------------------------------------------------------------------



| |  |  | our competition and technology, market and industry conditions and our need to adapt to such conditions;
| | - |  | --------------------------------------------------------------------------------------------------------



| |  |  | the dependence of our growth on the implementation and introduction of our new product initiatives;
| | - |  | ---------------------------------------------------------------------------------------------------



| |  |  | protection of our intellectual property rights;
| | - |  | -----------------------------------------------



| |  |  | defense against potential intellectual property claims against us and our exposure to litigation if our products contain software defects;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------



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| |  |  | the effect of our relationships with third-party vendors on the supply of our products;
| | - |  | ---------------------------------------------------------------------------------------



| |  |  | risks attendant to conducting international operations;
| | - |  | -------------------------------------------------------



| |  |  | the effect of changes in accounting regulations on our revenue and profits;
| | - |  | ---------------------------------------------------------------------------



| |  |  | the integration of our past and future acquisitions;
| | - |  | ----------------------------------------------------



| |  |  | risks in connection with Plumtrees government contracts and their effect on our results of operations;
| | - |  | -------------------------------------------------------------------------------------------------------



| |  |  | the effect of U.S. military activity and terrorism on our revenues and operations;
| | - |  | ----------------------------------------------------------------------------------



| |  |  | the effect of government review of our income and payroll tax returns or changes in our effective tax rates on our operating results;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------



| |  |  | effective internal controls over financial reporting;
| | - |  | -----------------------------------------------------



| |  |  | compliance with corporate governance requirements;
| | - |  | --------------------------------------------------



| |  |  | the continuing impact of the matters relating to the review of certain historical stock option grants;
| | - |  | ------------------------------------------------------------------------------------------------------



| |  |  | litigation relating to our historical stock option grant practices;
| | - |  | -------------------------------------------------------------------



| |  |  | non-compliance with SEC reporting and Nasdaq listing requirements;
| | - |  | ------------------------------------------------------------------



| |  |  | future amortization of acquired intangible assets;
| | - |  | --------------------------------------------------



| |  |  | facilities consolidation charges, for estimated future lease commitments on excess facilities;
| | - |  | ----------------------------------------------------------------------------------------------



| |  |  | future stock repurchases under our stock repurchase program;
| | - |  | ------------------------------------------------------------



| |  |  | the development of an expanded product set for SOA service infrastructure through expansion in our messaging, portal infrastructure, data integration, security, Web
services management and other technologies;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | our ability to attract Chief Information Officers to choose our products as the architectural foundation of SOA projects to be implemented over a sustained period
of time;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the trend toward increased high dollar transactions;
| | - |  | ----------------------------------------------------



| |  |  | the expectation that future payments of facilities consolidation charges will not significantly impact our liquidity due to our strong cash position;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the realizability of deferred tax assets;
| | - |  | -----------------------------------------



| |  |  | that we do not anticipate paying any cash dividends in the foreseeable future;
| | - |  | ------------------------------------------------------------------------------



| |  |  | unrecognized compensation costs related to stock options, restricted stock and the ESPP;
| | - |  | ----------------------------------------------------------------------------------------



| |  |  | our belief that the amount of liability associated with our current legal proceedings will not materially affect the Companys financial position;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | our acquisition strategy to use cash or stock or purchase development teams or technologies to add features or products that complement or expand our products;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the requirement that we must maintain certain covenants, including liquidity, leverage and profitability ratios associated with our long term debt facility;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | sufficiency of existing cash;
| | - |  | -----------------------------



| |  |  | the dependence on continued expansion of international operations;
| | - |  | ------------------------------------------------------------------



| |  |  | our initiative to recruit and train a large number of consultants employed by SIs and to embed our technology in products that our ISV customers offer;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the need to expand our relationships with third parties in order to support license revenue growth;
| | - |  | ---------------------------------------------------------------------------------------------------



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| |  |  | the dependence on our ability to attract and retain qualified sales, technical and support personnel;
| | - |  | -----------------------------------------------------------------------------------------------------



| |  |  | the intention to expand our global organization;
| | - |  | ------------------------------------------------



| |  |  | continued adoption of Java technologies;
| | - |  | ----------------------------------------



| |  |  | the dependence on continued growth in the use of the Web to run software applications;
| | - |  | --------------------------------------------------------------------------------------



| |  |  | significant accounting charges as a result of expensing stock option grants and awards or otherwise;
| | - |  | ----------------------------------------------------------------------------------------------------



| |  |  | the dependence on our proprietary technology;
| | - |  | ---------------------------------------------



| |  |  | the need to continue to improve our operational, financial, disclosure and management controls, reporting systems and procedures and information technology
infrastructure;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the update of our management information systems to integrate financial and other reporting;
| | - |  | --------------------------------------------------------------------------------------------



| |  |  | the development and roll out of information technology initiatives;
| | - |  | -------------------------------------------------------------------



| |  |  | the requirement of substantial amounts of cash to fund our indebtedness, future capital expenditures, payments on our operating leases and any increased working
capital requirements;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | our focus to expand our product set by expanding our existing application infrastructure products and service infrastructure products and broadening our application
infrastructure products into targeted emerging use cases;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the inherent volatility of transactions greater than $1 million; and
| | - |  | --------------------------------------------------------------------



| |  |  | our initiative to further establish and expand relationships with our distributors.
| | - |  | -----------------------------------------------------------------------------------

These forward-looking statements involve risks and uncertainties, and it is important to note that our actual results could differ materially from those
projected or assumed in such forward-looking statements. Our actual results could differ materially from those discussed in this Annual Report. Important factors that could cause or contribute to such differences include the timing and success of
the pending acquisition of us by Oracle; difficulties in developing new technologies; unanticipated delays in bringing our products to the market; product defects in the development phase that could cause delays; unanticipated shortages of cash
available to invest in building relationships and expanding distribution channels; an unanticipated lack of resources to invest in increasing direct sales and support organizations; political instability; the inability to establish customer and
product development relationships; difficulties of our services organization in providing a consistent level of support; unanticipated changes in key personnel; the possibility that customers will switch to competitors products; unanticipated
shortages of cash to invest in product development; unanticipated growth resulting in a shortage of space in existing facilities; uncertainty of the ultimate outcome of litigation; inherent uncertainty surrounding the litigation process and our
inability to accurately predict the determination of complex issues of fact and law; the inability to generate cash for operations to support our business; the risk that we may be required to expend more cash in the future than anticipated and may
be unable to support our operations; difficulty in predicting size and timing of customer orders; unanticipated changes in our incentive structure; economic downturns; the risk that we may not be successful in obtaining orders from our customers;
inability to predict the level of future sales of our products; unanticipated fluctuations in interest and foreign currency exchange rates; a downturn in our sales or defaults on payments by customers; uncertainties as to the assumptions underlying
our calculations regarding estimated annual amortization expenses for purchased intangible assets; unanticipated difficulties in development of products with third parties; unanticipated costs and expenses arising from the leased facilities;
unanticipated changes in tax regulations; unanticipated shortages of cash; uncertainties as to the effects of certain accounting policies; a lack of the required resources to invest in the development of existing and new products; substantial
technological changes in the software industry; significant changes in customer preferences; risks and uncertainties associated with international operations, including economic downturns, trade balance issues, fluctuations in interest and foreign
currency exchange rates; cash generated from operations; unanticipated difficulties in integration of our products with other ISVs products; our inability to successfully retain or recruit executive officers and key personnel; a change in the
level of importance



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of stock options to employee recruitment; delays in bringing new products or enhancements to market due to development problems; the risk that we may not be
successful in obtaining new orders from major customers; uncertainty of suitable companies, divisions or products available for acquisition; unanticipated difficulties affecting management of growth; uncertainties as to the prospect of future orders
and sales levels; uncertainties as to the future level of sales and revenues; unanticipated operating and business expenses preventing us from meeting debt obligations; unanticipated interest changes and defaults on payments owed to us;
miscalculations with respect to stock compensation expenses; and other factors that could cause actual results to differ materially such as those detailed under the headings Managements Discussion and Analysis of Financial Condition and
Results of Operations and Risk Factors. All forward-looking statements and risk factors included in this document are made as of the filing date hereof, based on information available to us as of the filing date hereof, and we
assume no obligation to update any forward-looking statement or risk factor. You should also consult the risk factors listed from time to time in our Reports on Form 10-Q and our other SEC filings.



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|ITEM 1. | BUSINESS.
|------- | ---------

Merger with Oracle Corporation

On January 16, 2008, the Company entered into an Agreement and Plan of Merger (the Merger Agreement) with Oracle Corporation
(Oracle) and Bronco Acquisition Corporation, a wholly-owned subsidiary of Oracle (Merger Sub). The Merger Agreement provides that, subject to the terms and conditions of the Merger Agreement, Merger Sub will merge with and
into the Company (the Merger) and, as a result of the Merger, the separate corporate existence of Merger Sub will cease and the Company will continue as the surviving corporation and become a wholly-owned subsidiary of Oracle. Upon the
closing of the Merger, each share of common stock of the Company issued and outstanding immediately prior to consummation of the Merger (other than shares owned by the Company, Oracle or Merger Sub) will be converted into the right to receive
$19.375 in cash, without interest. In addition, options to acquire Company common stock, restricted stock unit awards, restricted stock awards and other equity-based awards denominated in shares of Company common stock outstanding immediately prior
to the consummation of the Merger will be converted into options, restricted stock unit awards, restricted stock awards or other equity-based awards, as the case may be, denominated in shares of Oracle common stock based on formulas contained in the
Merger Agreement, except for equity-based awards held by a person who is not an employee of, or a consultant to, the Company or any of its subsidiaries at the time of the consummation of the Merger, which equity-based awards shall be converted into
the right to receive cash based on formulas contained in the Merger Agreement.

The Merger is subject to the approval of the Companys
stockholders representing a majority of the outstanding shares of Company common stock. A special meeting of the Companys stockholders to consider and vote on the proposal to adopt the Merger Agreement will be held on April 4, 2008.
Stockholders of record as of the close of business on February 28, 2008 will be entitled to vote at the special meeting. In addition, the Merger is subject to antitrust clearance or approvals in both the United States and the European Union, as
well as other customary closing conditions. On February 27, 2008, the U.S. Department of Justice and the Federal Trade Commission granted early termination of the Hart-Scott-Rodino (HSR) review period. BEA and Oracle are working toward
obtaining all required clearances as soon as possible.

Under the terms of the Merger Agreement, the Company is required to pay Oracle a
termination fee in the amount of $250 million in cash in the following circumstances:



| |  |  | the Merger Agreement is terminated by Oracle because either (1) the Companys Board of Directors fails to make or withdraws (or has publicly proposes to
do either) its recommendation to the Companys stockholders to adopt and approve the Merger Agreement or modifies or publicly proposes to modify its recommendation in a manner adverse to Oracle or Merger Sub, (2) the Company enters into,
or publicly announces its intention to enter into, a written agreement relating to an acquisition proposal from a third party, or (3) the Company or any of its representatives willfully and materially breach any of it obligations under the
non-solicitation provisions in the Merger Agreement;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the Merger Agreement is terminated by the Company because, prior to the receipt of the approval of the Companys stockholders to adopt the Merger Agreement,
the Companys Board of Directors authorizes the Company to enter into, and the Company substantially concurrently enters into, a binding definitive agreement with a third party for a transaction constituting a superior proposal; or
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the Merger Agreement is terminated by either the Company or Oracle because (A) either (1) the Merger is not consummated before October 16, 2008 (the
End Date) (the End Date may be extended to July 16, 2009 in order to obtain all necessary antitrust approvals), unless the failure to complete the Merger by such date is due to the actions of the party seeking to terminate the
Merger Agreement, or (2) the Companys stockholders fail to adopt the Merger Agreement, (B) prior to either the termination of the Merger Agreement or the date of the special meeting of the Companys stockholders, as the case may
be, an acquisition proposal by a third party has been publicly announced and not publicly
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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| | withdrawn, and (C) within 12 months following the date of such termination, the Company either enters into a definitive agreement with respect to, or
consummates, an acquisition proposal from a third party.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

In addition, if the Company has not breached its
non-solicitation and antitrust obligations under the Merger Agreement (except for such breaches that are unintentional and immaterial), Oracle is required to pay the Company a termination fee in the amount of $500 million in cash in the following
circumstances:



| |  |  | the Merger Agreement is terminated by either the Company or Oracle because the Merger is not consummated before the End Date and either (A) the antitrust
closing conditions have not been satisfied or waived, or (B) a governmental entity has issued an order, rule or regulation relating to antitrust matters that restrains, enjoins or prohibits the consummation of the Merger; or
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the Merger Agreement is terminated by either the Company or Oracle because either (A) a governmental entity of competent jurisdiction has issued a final and
non-appealable order, decree, ruling or other action permanently enjoining, restraining or otherwise prohibiting the consummation of the Merger or (B) any law or regulation is adopted that makes the consummation of the Merger illegal or
otherwise prohibited, and, in either instance, all other closing conditions of Oracle and Merger Sub have been met or waived.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Furthermore, if either the Company or Oracle terminates the Merger Agreement because of a failure to obtain the requisite approval of the Companys stockholders upon a final vote taken at a special meeting of the Companys
stockholders (or any adjournment or postponement thereof), BEA is required to reimburse Oracle for all of its documented reasonable out-of-pocket fees and expenses (including reasonable legal and other third party advisors fees and expenses)
actually incurred by Oracle and its affiliates on or prior to the termination of the Merger Agreement in an amount not to exceed $25 million. Any such required payments will be credited against any obligation that the Company may have to pay the
termination fee described above.

In addition, on November 7, 2007, the Board adopted the Change in Control Severance Plan, which
covers substantially all regular, full-time employees and part-time employees who are scheduled to work at least twenty hours per week, and who are not covered by individual change in control employment agreements. Under the terms of the plan, if,
during the one year period following a change in control of the Company, a participants employment is terminated by the Company without cause or by the participant for good reason, the participant will receive
(i) lump sum severance benefits, (ii) continued payment of the cost of the participants premiums for health continuation coverage under COBRA for a period equal to the number of months of severance pay, and (iii) immediate
vesting of fifty percent of the unvested portion of each grant of the participants stock options, restricted stock, restricted stock units that is outstanding and unvested as of the date of termination.

Overview

BEA® Systems, Inc. (referred to as we, us, BEA or the Company) is a world leader in enterprise application
and service infrastructure software. Application infrastructure provides an important part of the foundational software necessary for enterprise applications to run reliably and securely, to serve large numbers of users and to process large numbers
of transactions. Application infrastructure is deployed on top of the operating system and database in an enterprise server and serves as a platform technology for either custom or packaged enterprise applications. Two of our three primary product
families address this market. Specifically, our BEA Tuxedo® product family, which is an application infrastructure platform for large transactional processing systems for C, C++ and COBOL
systems, and BEA WebLogic® product family, which consists of application infrastructure software for Java applications, perform functions such as transaction processing, clustering,
caching, load balancing, failover, security, integration and management features, all of which provide high levels of reliability, availability, scalability and performance for enterprise applications. To meet a broader set of customers
application infrastructure needs, BEA has leveraged its success in the application server market by



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expanding into adjacent product categories that take advantage of the performance and features provided by the underlying application server. The application
infrastructure market consist of the application server market and products, as well as related integration, portal, security, development, operations, administration and management markets and product categories. New use cases for application
infrastructure are beginning to emerge, such as applications with near real time performance requirements; virtualized applications; edge devices such as embedded sensors, control devices, and radio frequency identification (RFID)
devices; and next generation telephony applications such as voice, video and data services over internet protocol. BEA is introducing application infrastructure products specialized for these customer uses.

More and more customers are migrating away from systems where users directly interface with a
specific application and towards systems where users interface with Web-based portals and composite applications, which in turn interface with several enterprise applications. This information technology (IT) strategy is often referred
to as Service-Oriented Architecture (SOA). This migration has created the need for a new category of software, called service infrastructure, residing on top of enterprise applications and serving as the platform for portals,
automated business processes and composite applications. Service infrastructure provides a flexible SOA platform for deploying, integrating, securing, governing and managing services, regardless of the platform on which they were created. Service
infrastructure also provides a platform for leveraging these services in the creation and management of automated business processes, portals, collaborative communities, and composite applications. In June 2005, BEA launched BEA AquaLogic®, a new family of products designed to address a variety of needs in the service infrastructure category. This product family includes products and capabilities in the areas of user interaction,
business process management, enterprise service bus, Web services management, data integration services, service registry, enterprise repository, and security policy management. In September 2007, BEA announced a new development initiative, Project
Genesis, to provide infrastructure for the next generation of SOA applications. Genesis converges SOA, business process management, enterprise social computing and other technologies to provide customers with a fast, simplified way to assemble and
modify business applications. BEA has developed and acquired significant features or product lines to address these markets and is in the process of developing and adding additional features and products.

BEAs product focus today has three main elements: (1) selling a broad application infrastructure platform, with the individual elements
tightly integrated into a single product, but also available for purchase as individual units; (2) extending application infrastructure into emerging use cases; and (3) selling a broad service infrastructure platform, with the individual
elements tightly integrated into a single platform, but available for purchase as individual units. Our modular but tightly integrated approach allows us to service the application and service infrastructure markets by enabling customers to buy just
the modules needed for a specific project, then to easily unify and extend those modules into a platform as they deploy subsequent projects, or to buy the entire platform at once.

Our products have been adopted in a wide variety of industries, including telecommunications,
commercial and investment banking, securities trading, government, manufacturing, retail, airlines, pharmaceuticals, package delivery and insurance. Our products serve as a platform for systems such as billing, provisioning, customer service,
electronic funds transfer, ATM networks, securities trading and settlement, online banking, Internet sales, inventory management, supply chain management, enterprise resource planning, scheduling, logistics and hotel, airline and car rental
reservations. In addition, we offer associated customer support, training and consulting services. Our products have garnered several awards and distinctions. In 2007, BEA received the Product Innovation Award for Web/SOA Infrastructure and
Integration Software from VARBusiness Magazine. In both 2006 and 2007, BEA Workshop won Best Commercial Eclipse-based developer tool in the Eclipse Community Awards. In 2006, BEA AquaLogic®
Service Bus won Network Computings Editors Choice Award for Best Enterprise Service Bus, and the 6thAnnual eWeek Excellence Award.

Licenses for our products are typically priced on a per-central processing unit (CPU) basis, but we also offer licenses priced
on other bases. Our products are marketed and sold worldwide directly through a network of sales offices and the Companys Web site, as well as indirectly through distributors, value added resellers



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(VARs) and partnerships with independent software vendors (ISVs), application service providers (ASPs), hardware original
equipment manufacturers (OEMs) and systems integrators (SIs).

Products

BEA Tuxedo® Family of Products

BEA Tuxedo® is an application
infrastructure platform for applications written in the C, C++, and COBOL programming languages. BEA Tuxedo serves as the platform for large, mission-critical transaction processing systems such as interbank transfers, ATMs, credit card
transactions, telecommunication billing applications and enterprise financial systems. BEA Tuxedo® provides the rugged platform required to run these high-volume applications across
distributed, heterogeneous computing environments. In this way, Tuxedo® enables transactions that stretch from customer-facing, business-critical applications to back-office processes,
across disparate systems and across the world. Applications written on BEA Tuxedo can be made available as Web services, enabling those applications to be accessed in a service-oriented architecture.

The WebLogic® Family of Products

BEA WebLogic® Platform

The BEA WebLogic® Platformwhich
includes BEA WebLogic® Server, BEA WebLogic® Portal, BEA WebLogic®
Integration and BEA Workshopis a leading application platform suite for Java developers building enterprise applications, SOA services and portals, as well as enterprise application integration.

BEA WebLogic® Server

BEA WebLogic® Server is an enterprise-grade application server, based on Java standards and supporting applications written in the Java programming language. It provides the core functions necessary for Java applications and also
provides clustering of multiple servers, load balancing, caching, server migration and failover capabilities. These capabilities help meet enterprise applications reliability, availability, scalability and performance needs. BEA WebLogic® Server also provides features such as advanced administration tools, reliable messaging and support for popular development frameworks derived from open source communities, such as Spring and
Apache Struts. In standard industry benchmarks and private tests conducted by customers, results achieved on BEA WebLogic® Server demonstrate that applications built on BEA WebLogic® Server need significantly less hardware to process a given number of transactions when compared to competitive products. This performance advantage, along with ease of use features aimed at
developers and system administrators, collectively reduce the cost of building, operating and maintaining enterprise applications running on WebLogic® Server and allow us to maintain
premium price points.

BEA WebLogic® Portal

BEA WebLogic® Portal provides a flexible and robust foundation for customized enterprise portals. Based on BEA WebLogic® Server, BEA WebLogic® Portal provides core functions necessary for scalable, reliable portals supporting large numbers of transactions. In addition, BEA WebLogic® Portal supports standards-based integration of content and application functionality into portals, and provides tools to facilitate the creation and management of portals. BEA WebLogic® Portal includes pre-integrated business services, such as content management, search, collaboration and commerce.

BEA WebLogic® Integration

BEA WebLogic® Integration delivers a standards-based ability to connect existing, disparate enterprise applications to produce a set of shared business services. Based on BEA WebLogic® Server, BEA



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WebLogic® Integration provides the core functions necessary for scalable, reliable connections
between enterprise applications, supporting large numbers of transactions. By delivering shared business services independently from the underlying applications, enterprises can facilitate information access to multiple constituencies, such as
employees, customers and partners. BEA WebLogic® Integration also provides functionality such as modeling, automation and analysis of business processes, integration of internal
applications, integration with trading partners, event-driven data flow inside the enterprise and with trading partners, data transformation between different formats, the ability to publish business processes as Web services for service-oriented
architecture, and administration tools to monitor and manage system performance.

BEA Workshop

BEA Workshop provides professional tools for the development of service-oriented enterprise applications. BEA Workshop also enables
development of portals, application integration and business process flows. BEA Workshop supports popular development environments and frameworks, such as Eclipse, Spring, Hibernate, Struts, Tiles and Java Server Frameworks.

BEA WebLogic Server, Virtual Edition

BEA WebLogic
Server Virtual Edition is a Java environment optimized for virtualized hardware environments. Through a highly tuned Java virtual machine and operating system compression, it streamlines the software supporting enterprise applications. This allows
more applications per server, significantly reducing hardware and operations cost, and greatly simplifying deployment. BEA WebLogic Server Virtual Edition also improves system agility, by making it easier to provision new applications or SOA
services. BEA WebLogic Server Virtual Edition enables rapid development of services, while providing a runtime platform for reliability, availability, scalability, high performance and management of those services.

BEA WebLogic Operations Control

BEA WebLogic
Operations Control is an enterprise application virtualization solutions that allows for centralized governance and control over Java applications, including dynamic activation and scale-out to meet fluctuating hardware needs for enterprise
applications. With WebLogic Operations Control, operations teams are able to define policies, based on application-level service level agreements that govern allocation of hardware and software resources designed to ensure that quality of service
goals are met across both virtual and non-virtualized platforms. When pre-defined conditions occur, the controller can automatically allocate or deallocate resources to the applications or services. Applications and services can be deployed on
virtual and non-virtual resources, and can be dynamically extended or re-configured to meet runtime requirements, without constant monitoring by system operators.

BEA WebLogic® Communications Platform

Historically, BEAs primary role in the telecommunications industry has been to provide the platform for back-office and
operational systems, such as billing and provisioning applications, call centers and online customer self-service. Next-generation telecommunications services based on internet protocol are beginning to emerge, such as voice and video over internet
protocol and data services. These services are specialized applications running on the internet. BEA believes the emergence of these next-generation services will create an opportunity to provide infrastructure to enable these services to run
reliably, support large numbers of users and support large volumes of data flow.

To
service this emerging opportunity, BEA introduced the BEA WebLogic® Communications Platform, which includes the BEA WebLogic SIP Server® and the BEA WebLogic Network Gatekeeper®. BEA WebLogic Communications Platform is the first converged information technology and telecommunications platform, and



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provides core infrastructure capabilities in a carrier-grade environment. The platform enables telecommunications carriers to deploy a wide variety of
digital content and video services over wireless and wireline networks, including multimedia, real-time conferencing, multi-player gaming (with voice), real-time/interactive voting, click-to-call and unified messaging.

BEA WebLogic® SIP Server

BEA WebLogic® SIP Server is a high-performance application server, which provides an integrated environment to support Java standards, internet standards such as HTTP, and emerging standards such as session initiation protocol
(SIP) and internet protocol multimedia subsystems (IMS). BEA WebLogic® SIP Server enables rapid development and delivery of next-generation, multimedia communication
services. Through very strong technical integration with BEA WebLogic Server, the BEA WebLogic® SIP Server offers the following key features:



| |  |  | Integrated Java EE and SIP application container
| | - |  | ------------------------------------------------



| |  |  | IMS support
| | - |  | -----------



| |  |  | Industry standards support
| | - |  | --------------------------



| |  |  | Carrier-grade performance
| | - |  | -------------------------



| |  |  | High availability, reliability and scalability
| | - |  | ----------------------------------------------



| |  |  | Multi-network interoperability
| | - |  | ------------------------------



| |  |  | Rapid creation of innovative services
| | - |  | -------------------------------------



| |  |  | Mission critical manageability
| | - |  | ------------------------------

BEA WebLogic® Network Gatekeeper

Next-generation systems enable telecommunications carriers to
open their networks to third-party providers, for content and services such as news, sports scores, online banking, video streaming and interactive gaming. While opening their networks to third party providers, the telecommunications carriers remain
responsible for managing network performance to ensure network availability, network reliability and prioritization of network traffic (such as 911 calls). BEA WebLogic® Network Gatekeeper
provides a carrier-grade, industry standards-based platform for policy-based network protection and application access control, to manage network performance. BEA WebLogic® Network
Gatekeeper also enables automated partner management and flexible billing management, to ease the process of deploying third party services into the network and billing for those services. Operators can utilize its dynamic traffic throttling,
policy-based application access control, and network protection features to enhance performance of application and partner platforms, improve network stability and capacity, and increase revenues through prioritizing premium traffic.

BEA WebLogic Event Server

An emerging market
opportunity is infrastructure to support event-driven applications. Enterprises are creating more, larger and more complex streams of data as their IT systems broaden. Enterprises now have available to them streams of complex data, such as stock
quotes, and real-time personnel, vehicle and inventory location. Enterprises are beginning to build new IT systems that take advantage of this data, act on it, and use it to predict future events. Event-driven applications use these data streams as
inputs, rather then relying solely on human input data. Event-driven applications then use these data streams to discern complex event patterns, correlations across different event sources, and potentially to trigger other activities. Use cases
include arbitrage systems in financial services, and tracking and routing in transportation, supply chain and logistics. BEA WebLogic Event Server is a Java server to provide infrastructure for high-performance event-driven applications.



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BEA WebLogic Event Server provides customers with the capability of handling thousands of events and rules per second at extremely low latency. It includes a
complex event processing engine that aggregates information from distributed systems, applies rules to that information to discern patterns, and provides the ability to correlate events or trigger actions based on those inputs and rules.

BEA WebLogic® Real Time

BEA WebLogic® Real Time is a
lightweight, low-latency Java-based server that provides response times in the microseconds for performance-critical real-time applications, and contains latency analysis tools for monitoring and tuning these applications. BEA WebLogic Real Time is
an underpinning of BEAs event-driven SOA and extreme transaction processing strategy.

BEA
WebLogic® RFID Product Family

Customer usage of application infrastructure is also beginning to broaden into the usage of radio frequency identification (RFID) for tracking of inventory, reusable assets, baggage and packages. RFID involves tagging items to
be tracked with a small radio device, installation of readers in various locations to track the items, and creation of applications and computer systems to capture, analyze and use data provided by the tracking system. BEAs WebLogic® RFID edge and enterprise products deliver a standards-based RFID infrastructure platform designed to automate new RFID-enabled business processes. The combination of BEAs RFID
infrastructure technology and BEAs application and service infrastructure products allow customers to capture RFID data and use that information in core applications.

BEA WebLogic® RFID Edge Server

BEA WebLogic® RFID Edge Server delivers a software infrastructure for developing, deploying, and managing robust RFID solutions. It allows customers to make RFID technology an integral part of their enterprise and realize the benefits that RFID offers,
including improving supply chain visibility, automating business transactions and protecting inventory and assets.

BEA WebLogic® RFID Enterprise Server

BEA WebLogic® RFID
Enterprise Server provides the standards-based infrastructure for centrally managing RFID data collected at the edge of an enterprise. It allows users to get a view of product movement data as well as enabling the central provisioning of RFID data
in distributed tagging operations.

BEA JRockit®

The Java Virtual Machine (JVM) is a
key foundation technology of the Java platformthe technology responsible for Javas hardware and operating-system independence. BEA JRockit® JVM delivers a number of unique,
industry-leading technological advances that improve system performance, application debugging and memory leak control.

BEA JRockit® includes an automatic
memory-management technique, the Deterministic Garbage Collector, designed to enable predictable, minimal transaction latency. This new capability helps enable the use of Java technology in highly time-sensitive applications such as financial
trading, where Java was previously impractical due to unacceptable transaction latency.

BEA JRockit®s Mission Control suite of non-intrusive monitoring and debugging tools is designed to deliver a rich set of operational information with minimal overhead,
helping enable application profiling, debugging and tuning in production environments.



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In addition, BEA JRockit® delivers high performance with record-setting published benchmarks, a small memory footprint, quick start-up times, adaptive self-healing memory management, solid core processing and other
features that help bring systems closer to zero downtime.

BEA AquaLogic® Family of Products

Rather than requiring users to log on serially to one
application after another in order to accomplish various tasks, businesses are more and more offering users robust portals that draw data and application functionality from many sources. However, the flow of information across these different
sources is hindered by the heterogeneous nature of the typical large enterprise. An enterprise might want to connect systems based on multiple platforms and technologies (mainframe, client/server, packaged applications, Web-based systems, J2EE,
..NET, etc.). Connecting these disparate systems required building and maintaining multiple point-to-point connections. This process is difficult and expensive to build and maintain. As a result, enterprises are seeking more efficient ways to deliver
new business services that implement new ideas and business models.

Service-Oriented Architecture (SOA) has emerged as the
leading information technology (IT) strategy for streamlining delivery of new business services. SOA is an approach to building enterprise systems that enables the discrete business functions contained in enterprise applications to be
organized into interoperable, standards-based services that can quickly be combined and reused in composite applications and processes. Service infrastructure is a new class of software products designed for managing SOAs in environments using
disparate technologies.

The BEA AquaLogic® family delivers a broad line of service infrastructure products to help enable and manage successful SOA deployment. The BEA AquaLogic® family delivers a
unified set of products that handles user interaction, business process management, service integration, service management, data unification, and security needs. BEA AquaLogic® consists of
the following products:

BEA AquaLogic® User Interaction

BEA AquaLogic® User Interaction is an integrated family of products used to create enterprise portals, collaborative communities and composite applications, all built on a service infrastructure.

BEA AquaLogic® BPM Suite

BEA AquaLogic® BPM Suite bridges human
workflow technology and enterprise application integration in a single suite to support todays complex, collaborative business processes.

BEA AquaLogic® Service Bus

BEA AquaLogic® Service Bus provides a
market-leading enterprise service bus combining intelligent, high-performance service integration and mediation with operational service management and support for service life-cycle governance.

BEA AquaLogic® Data Services Platform

BEA AquaLogic® Data
Services Platform is the industry-leading data services platform that delivers live, integrated and reusable information as a service.

BEA AquaLogic® Enterprise Security

BEA AquaLogic® Enterprise Security
combines centralized security policy management with distributed policy decision-making and enforcement to simplify adaptation to changing business requirements.



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BEA AquaLogic® Enterprise Repository

BEA AquaLogic® Enterprise Repository provides visibility, traceability and governance of the enterprise software asset portfolio to ensure architectural alignment.

BEA AquaLogic® Service Registry

BEA AquaLogic® Service Registry is a
comprehensive, proven registry that serves as the index-of-record for deployed Web services and the business policies that affect their runtime behavior.

BEA AquaLogic® Commerce Services

BEA AquaLogic® Commerce Services can
increase online sales by attracting and converting customers profitably, with the flexibility to quickly adapt sales tactics.

BEA AquaLogic Pages

BEA AquaLogic Pages is a Web page authoring system and applications builder that helps system users simply and quickly create Web pages and
Web applications. BEA AquaLogic Pages features a palette of drag-and-drop components that help users who are not necessarily trained software developers create simple Web pages, blogs and wikis, as well as more powerful data-driven Web applications.

BEA AquaLogic Ensemble

BEA AquaLogic
Ensemble is a powerful system for managing Web resourcessuch as applications, components or programmable functionsand for blending those resources together in new and existing Web applications. For information technology managers and
systems administrators, BEA AquaLogic Ensemble provides a simple framework for managing the resources that the company Web is made from, and offers perimeter security, role-based provisioning and usage tracking for Web applications. For
developers, BEA AquaLogic Ensemble provides a platform to share componentsregardless of how they were built, what code they were written in, and where they are hostedand blend those components into new or existing Web applications.

BEA AquaLogic Pathways

BEA AquaLogic
Pathways helps users discover information and expertise by extracting information about how information is actually used. BEA AquaLogic Pathways combines search, content tagging, bookmarking and activity analytics to deliver an efficient way to
discover information and people.

Customers

The total number of customers and end users of our products and solutions is greater than 18,000 worldwide. For a breakdown of our revenues by geographical region, see Managements Discussion and Analysis of Financial Condition
and Results of OperationsRevenues by Geographic Region. Our target end-user customers are organizations with sophisticated, high-end information systems with numerous, often geographically-dispersed users and diverse computing
environments. Typical customers are mainframe-reliant, have large-scale client/server implementations that handle very high volumes of business transactions, or have Web-based applications with large and unpredictable usage volumes. No customer
accounted for more than 10 percent of total revenues in any of the fiscal years 2008, 2007, or 2006.

A representative list of BEA
customers includes:

Telecommunications

AT&T, British Telecom, BT Global Services, Cablecom, China Telecom, ChungHwa Telecom, Comcast, Covad, Cox Communications, Dacom, Deutsche Telekom, Dish Networks, France Telecom, KDDI Corporation,



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mm02, Nextel, NTT, NTT DoCoMo, Orange, OZ, T-Mobile, Telecom Personal, Telicom Italia, Telecom Italia Mobile, Telenor Mobile, Telstra, TIM Peru, Verizon
Wireless, Virgin Mobile USA, Visage Mobile, Vodafone, and WilTel Communications.

Banking and Financial Services

Abbey National, ABN AMRO, Accredited Home Lenders, Allstate, AXA, Bank of America, Bank of China, Bank of New York, Bank of Shanghai, Barclays, Bear
Stearns, BNP Paribas, China Construction Bank, Citigroup, Credit Suisse, E*Trade, Emirates Bank, Erste Bank, First Franklin, HVB Systems, JPMorgan Chase, Korea Exchange, Lehman Brothers, Merrill Lynch, Metlife, New York Board of Trade, Nordea,
Northern Trust, OppenheimerFunds, Prudential UK, Robeco Direct, SanPaolo IMI, Samsung Securities, SBAB, Spar Nord Bank, SunTrust, S.W.I.F.T., Swiss Life Belgium, TeleCash, TrueCredit, TrueLink, Unicredit Group, United Overseas Bank and Wells Fargo.

Government and Public Sector

American
Diabetes Association, Basque Government, Chilean Treasury Department, China Post, Chongqing Municipal Bureau of Finance, City of Chicago, Finland Post, Grants.gov, Hong Kong Government, Jefferson County, Le Forem, Modus Operandi, National Education
Association, Poste Italiane, Swedish Customs Service, UK Companies House, UK Driving Vehicle Licensing Agency, UK HM Customs & Excise, UK Inland Revenue, US Army, US Bureau of Labor & Statistics, US Defense Information Systems
Agency, US Defense Logistics Agency, US Department of Agriculture, US Department of Commerce, US Department of Defense, US Federal Bureau of Investigation, US Federal Communications Commission, US General Services Administration, US Navy, and US
Veterans Benefits Association.

Retail and Consumer Packaged Goods

Amazon.com, Anheuser-Busch, Applebees, Archer Daniels Midland, AutoNation, Barnes & Noble, Beer.com, Best Buy, Bestfoods, BonusPrint, Caprabo, Circuit City Group, Coca-Cola, Dell, eBay, Fuji PhotoFilm,
Hampton, Hijos de Rivera, Interbrew, J Sainsbury, Japan Tobacco, Kellogg, Kohls, LOreal, Nestle, Nike, Office Depot, OfficeMax, PepsiCo, Philip Morris, Priceline.com, Procter & Gamble, Rubric, R.J. Reynolds Tobacco, Saks,
Staples, Suntory, Target Corporation, Ticketmaster Online-CitySearch, Tricon Global Restaurants, Tyson Foods, Unilever, Walgreens, Welchs and Winn-Dixie Stores.

Manufacturing

Amcor Australasia, Babcock & Wilcox, BMW Group, Boeing, DaimlerChrysler,
Daewoong Pharmaceutical, Hewlett-Packard, Network Appliance, Oncology Therapeutics Network, Pfizer, Pirelli Group, Sun Chemical, Sun Microsystems, Toshiba American Business Solutions, Toyota Australia, and Unilever.

Transportation, Travel and Logistics

Airnet,
Amadeus, APL, Asiana Airlines, Avis Budget Group, British Airways, DF Young, DHL Deutsche Post World Net, Envirotainer, FedEx, Hotelzon, Jeppessen, Lufthansa Technik, Marriott, National Car Rentals, Northwest Airlines, Schiphol Airport, SNCF, Star
Alliance, Starwood Hotels & Resorts, Toll Holdings, Turkish Airlines, Union Pacific, United Airlines, UPS, and USF.

Sales, Services and
Marketing

Our sales strategy is to pursue opportunities worldwide, within large organizations and organizations that are automating
business processes or adopting service-oriented architectures, primarily through our direct sales, services and technical support organizations. This direct sales strategy is complemented by indirect sales



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channels such as distributors, value-added resellers (VARs), hardware original equipment manufacturers (OEMs), independent software
vendors (ISVs), application service providers (ASPs) and systems integrators (SIs).

Direct Sales
Organization. We market our software and services primarily through our direct sales organization. As of January 31, 2008, we had 2,503 employees in consulting, training, sales, support and marketing, including 566 quota-bearing sales
representatives, located in 90 offices in 38 countries. We typically use a consultative sales model that involves the collaboration of technical and sales personnel to formulate proposals to address specific customer requirements, often in
conjunction with hardware, software and services providers. Our products are typically used as a platform for initiatives and applications that are critical to a customers business. As such, we focus our initial sales efforts on senior
executives and information technology department personnel who are responsible for such initiatives and applications.

Targeting
Developers. We also market our software directly to system, application and integration developers. We make developer copies of our tools and products available for free download at our Web site. In addition, we periodically provide
developer training and trial licenses through technical seminars in various locations worldwide, including on-site at our larger customers. These licenses are restricted use and include limited technical support options. We also maintain a
Developers Website, which is designed to create a community among developers who use our products. The Developers Website provides a forum to exchange technical information and sample code, as well as feedback to us on our products and
industry directions that we should pursue.

Strategic Relations. An important element of our sales and marketing strategy is to
expand our relationships with third parties and strategic partners to increase the market awareness, demand and acceptance of BEA and our solutions. Partners have often generated and qualified sales leads, made initial customer contacts, assessed
needs, recommended use of our solutions prior to our introduction to the customer, and introduced us at high levels within the customer organization. In many cases, BEA and one or more partners coordinate to make a joint proposal to potential
customers. In some cases, we engage in joint account planning with our strategic partners. A strategic partner can provide customers with additional resources and expertise, especially in vertical or geographic markets in which the partner has
expertise, to help meet customers system definition and application development requirements. Types of strategic partnerships include:

System platform companies. Customers use our software on a wide variety of hardware and operating systems. We certify our product on many different systems, and in some cases we work jointly with our
partners to optimize our products on the partners technology. In some cases, our system platform partners act as resellers of our products, either under the BEA product name or integrated with the platform vendors own products. In some
cases, our system platform partners co-sell BEA products and recommend our products to their customers and prospects. In particular, since July 2001, BEA and Intel have been jointly working to optimize our technology on Intel chip sets and jointly
working on sales opportunities, both directly to Intels customers and with Intels system platform partners. Other system platform partners include HP and Sun Microsystems.

Packaged software vendors. We license our software to packaged software vendors. These vendors build on our software as an
infrastructure for the applications they supply, or build complementary technologies, such as systems management, content management and security software, designed to connect easily to systems built on our software. Using our products as an
infrastructure helps improve these applications reliability, scalability and portability across hardware operating systems and databases on which our platform runs. In addition, by using our infrastructure, it is easier for these vendors
customers to integrate their packaged software with other packaged or custom applications built using our solutions. In some cases, these vendors bundle our infrastructure with their applications, and in other cases their software is simply
certified to run on our infrastructure. In some cases, these vendors buy and maintain the necessary hardware, infrastructure software and application software, and rent access to these systems to their customers. Examples of packaged software
partners include Amdocs, EMC Documentum, Motive,



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AmberPoint, Ceon, COMARCH, CA, Convergys, Fundtech, Intec Billing, Interwoven, iRise, iWay, RSA Security, SAS, SunGard Business Integration, SunGard Data
Systems, and Sungard Investor Accounting Systems.

Services partners. In many cases, customers use our software
as the platform for custom applications. Often, these customers hire systems integrators or other consultants to help them design, write and implement custom systems. In some cases, our services partners have sufficient training and expertise to
serve the customers needs without our involvement. In many cases, our sales, technical and consulting teams work with our services partners to accomplish custom projects. Examples of services partners include Accenture, Bearing Point,
Capgemini, CSC, Deloitte, EDS, Infosys, Tata Consultancy Services, and Wipro.

Distributors and Resellers. To
supplement the efforts of our direct sales force, we use software distributors and resellers to market, distribute, resell and support our products and services. Distributors sell directly to customers, and also cultivate, manage, supply and support
a network of value-added resellers. We primarily use distributors and resellers to supplement the efforts of our direct sales force in territories where we have little direct presence, in territories where it is customary for customers to do
business with a local entity and in market segments where we believe partners can expand our opportunities. Examples of distributor and reseller partners include African Legend Indigo, Arrow ECS, Arsena Solusindo, Avnet Technology Solutions, Bejing
Beida Jadebird Business Information Systems, BSI, China National Software & Service, Digital China Technology Limited, ECS International Trading Shanghai, Itochu Techno-Science Corp CTC, Karin Electronics Supplies, Liam, Magirus
International, Melia Komputindo, NEC, Nihon Unisys, Oki Electric Industry, Redington India, and SYNNEX Information Technology (China).

Services. We believe that our services organization plays an important role in facilitating initial license sales and enabling customers to architect, design, develop, deploy and manage systems and applications successfully. Our
services revenue comes from customer support and maintenance fees, as well as fees for consulting and training services.

Customer Support. BEA offers support via telephone, Web, e-mail and fax. Our support is available 24 hours per day, with support centers located around the world. We offer enhanced, mission-critical support, which may include
features such as priority-call-response, personalized case monitoring and escalation management, release/patch management planning and training on best practices. Fees for customer support are generally charged on an annual basis and vary by the
level of support the customer chooses. In addition, customer support fees entitle the customer to unspecified product upgrades and maintenance updates on a when and if-available basis.

Consulting Services. Our services organization works directly with end user customers and also with our services partners, to
provide a variety of consulting services. Consulting services that we offer include application development, application migration, integration, architectural assessment and architectural validation. Consulting services generally do not involve
customization of the core software products licensed and are not essential to the functionality of the software. Fees for consulting services are generally charged on a time and materials basis and vary depending upon the nature and extent of
services to be performed.

Education Services. We offer introductory and advanced classes and training programs
on the use of BEA products which are designed for end user customers, SIs and packaged application developers. We also offer a certification program, and we are a sponsor member of jCert. The jCert initiative was created to establish and promote
industry standards for certification of enterprise developers using Java technology. Our training and certification programs are offered at our offices, customer sites and training centers worldwide, as well as over the Internet. In addition, we
offer a mentoring program as a follow-on to our training programs or as an approach to customized training. Fees for education services are generally charged on a per-class or per-engagement basis.



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Marketing. Our marketing efforts are directed at broadening the demand for BEA products and
solutions by increasing awareness of the benefits of using our products to build mission-critical distributed and Web-based applications. Marketing efforts are also aimed at supporting our worldwide direct and indirect sales channels. Marketing
personnel engage in a variety of activities including conducting public relations and product seminars, issuing newsletters, sending direct mailings, preparing sales collateral and other marketing materials, coordinating our participation in
industry trade shows, programs and forums, and establishing and maintaining relationships with recognized industry analysts and press. Our senior executives are frequent speakers at industry forums in many of the major markets we serve.

Competition

The market for application server,
integration and SOA software, and related software infrastructure, and specialty applications in communications, time and event driven, real-time and virtualization products and services is highly competitive. Our competitors are diverse and offer a
variety of solutions directed at various segments of this marketplace.

Our competitors include several companies, such as IBM, Oracle
Corporation (which is in the process of acquiring us), SAP AG and Microsoft, which compete in a number of our product lines. All of these competitors have longer operating histories; significantly greater financial, technical, marketing and other
resources; significantly greater name recognition; a broader product offering; a larger installed base of customers than we do; and are able to bundle competing products with their other software offerings at a discounted price. In addition, many
competitors have well-established relationships with our current and potential customers. As a result, these competitors may be able to respond more quickly to new or emerging technologies and changes in customer requirements or to devote greater
resources to the development, promotion and sale of their products than we can.

In addition, current and potential competitors may make
strategic acquisitions or establish cooperative relationships among themselves or with third parties, thereby increasing the ability of their products to address the needs of their current and prospective customers. Further, new competitors, or
alliances among current and new competitors, may emerge and rapidly gain significant market share. Such competition could materially adversely affect our ability to sell additional software licenses and maintenance, consulting and support services
on terms favorable to us.

Further, competitive pressures and open source availability of functionally competitive software could require
us to reduce the price of our products and related services, which could harm our business. We may not be able to compete successfully against current and future competitors, and any failure to do so would harm our business.

Product Development

Our total research and
development expenses were approximately $240.1 million, $233.0 million, and $182.2 million in fiscal 2008, 2007, and 2006, respectively. Research and development expenses consist primarily of salaries and benefits for software engineers, contract
development fees, costs of computer equipment used in software development, information technology and facilities expenses. The 3.1% increase in research and development expenses from fiscal 2007 to fiscal 2008 was due to an increase in compensation
expense, which was negatively impacted by exchange rates and a decline of in third party funding of $3.1 million for development of a product of mutual interest. We believe that a significant level of research and development is required to remain
competitive, and we expect to continue to commit substantial resources to product development and engineering in future periods.

Intellectual Property
and Licenses

Our success depends upon our proprietary technology. We rely on a combination of patent, copyright, trademark and trade
secret rights, confidentiality procedures and licensing arrangements to establish and protect



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our proprietary rights. It is possible that other companies could successfully challenge the validity or scope of our patents and that our patents may not
provide a competitive advantage to us. As part of our confidentiality procedures, we generally enter into non-disclosure agreements with our employees, distributors and corporate partners and into license agreements with respect to our software,
documentation and other proprietary information. Despite these precautions, third parties could copy or otherwise obtain and use our products or technology without authorization, or develop similar technology independently. In particular, we have,
in the past, provided certain hardware OEMs with access to our source code, and any unauthorized publication or proliferation of our source code could materially adversely affect our business, operating results and financial condition. It is
difficult for us to police unauthorized use of our products, and although we are unable to determine the extent to which piracy of our software products exists, software piracy is a persistent problem. In addition, effective protection of
intellectual property rights is unavailable or limited in certain foreign countries. The protection of our proprietary rights may not be adequate, and our competitors could independently develop similar technology, duplicate the functionality of our
products, or design around patents and other intellectual property rights that we hold.

Seasonality

Our first fiscal quarter license revenues are typically lower than license revenues in the immediately preceding fourth fiscal quarter because our
commission plans and other sales incentives are structured for annual performance and contain bonus provisions based on annual quotas that typically are triggered in the later quarters in a fiscal year. In addition, many of our customers begin a new
fiscal year on January 1 and it is common for capital expenditures to be lower in an organizations first quarter than in its fourth quarter. We anticipate that the negative impact of seasonality on our first fiscal quarter results will
continue. Our cash flows and deferred revenue balances also tend to fluctuate seasonally based in-part on the seasonality of our license business.

Due to the seasonality of license revenue, a greater than proportional amount of our customer support contracts are renewed in the fourth quarter, which leads to a significant increase in deferred customer support revenue in the fourth
quarter. The recognition of this deferred revenue occurs over the following four quarters and consequently deferred support revenue generally declines in the first three quarters of the next fiscal year. Due to the significant increase in deferred
customer support revenue balance in the fourth quarter, there is a greater than proportional cash collection of the respective receivables that occurs in the fourth quarter and the first quarter of the following fiscal year. Consequently operating
cash flow is seasonally strong in the fourth quarter and first quarter and weaker in the second and third quarters of a fiscal year.

Backlog

Our aggregate backlog at January 31, 2008 was $558 million of which $477 million is included on our balance sheet as deferred
revenue. Deferred revenue, as of January 31, 2008, was comprised of (1) unexpired customer support contracts of $448 million, (2) undelivered consulting and education orders of $24 million and (3) license orders that have shipped
but have not met revenue recognition requirements of $5 million. Off balance sheet backlog was comprised of services orders received and not delivered of $46 million and license orders received but not shipped of $35 million.

Our aggregate backlog at January 31, 2007 was $500 million of which $449 million is included on our balance sheet as deferred revenue. Deferred
revenue, as of January 31, 2007, was comprised of (1) unexpired customer support contracts of $412 million, (2) undelivered consulting and education orders of $23 million and (3) license orders that have shipped but have not met
revenue recognition requirements of $14 million. Off balance sheet backlog was comprised of services orders received and not delivered of $41 million and license orders received but not shipped of $10 million.

Our off balance sheet backlog is not subject to our normal accounting controls for information that is either reported in or derived from our basic
financial statements. Management does not believe that backlog, as of any particular date, is a reliable indicator of future performance. The concept of backlog is not defined in the accounting literature, making comparisons with other companies
difficult and potentially misleading. BEA



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typically receives and fulfills most of the orders within the quarter and a substantial portion of the orders, particularly the larger transactions, are
usually received in the last month of each fiscal quarter, with a concentration of such orders in the final week of the quarter. Although it is generally our practice to promptly ship product upon receipt of properly finalized purchase orders, BEA
frequently has license orders that have not shipped or have otherwise not met all the required criteria for revenue recognition. In some of these cases, BEA exercises discretion over the timing of product shipments, which affects the timing of
revenue recognition for software license orders. In those cases, BEA considers a number of factors, including: the effect of the related license revenue on our business plan; the delivery dates requested by customers and resellers; the amount of
software license orders received in the quarter; the amount of software license orders shipped in the quarter; the degree to which software license orders received are concentrated at the end of the quarter; and our operational capacity to fulfill
software license orders at the end of the quarter. Although the amount of such license orders may vary, management generally does not believe that the amount, if any, of such license product orders at the end of a particular quarter is a reliable
indicator of future performance because, as noted above, such a large portion of the revenue is concentrated at the end of the quarter.

Employees

As of January 31, 2008, we had 4,117 full-time employees, including 1,204 in research and development, 2,503 in sales, support,
consulting, training and marketing, and 410 in administration. Except as provided below, none of our employees are represented by a collective bargaining agreement.Of our employees, 136 in France are represented by a Works
Council and Union Delegates, with whom we actively consult and agree on certain organizational and work environment matters, such as wages, hours, vacation and leave, in accordance with local law and the collective industry
agreement (both of which set the minimum standards of employment regulations). In addition, 227 employees in the UK and 92 employees in Germany are represented by Employee Forums with which we actively inform and consult regarding
matters such as those described above. We generally consider our relations with our employees to be good and we have never experienced a work stoppage.

Foreign Operations and Geographic Information

For a breakdown of our revenues by geographical region, see
Managements Discussion and Analysis of Financial Condition and Results of Operations-Revenues by Geographic Region in Part II, Item 7 of this Form 10-K, the Foreign Exchange discussion in Item 7A, and the
Notes to Consolidated Financial Statements at Note 16, Geographic Information and Revenue by Type of Product or Service in Part II, Item 8.

Availability of this Report

We are a Delaware corporation incorporated in January 1995. Our Internet address is
www.bea.com. On our Investor Information page on this web site we post the following filings as soon as reasonably practicable after they are electronically filed with or furnished to the Securities and Exchange Commission: our annual report on Form
10-K, our quarterly reports on Form 10-Q, our current reports on Form 8-K and any amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended. All such filings on our
Investor Information web page are available to be viewed on this page free of charge. Information contained on our web site is not part of this Annual Report on Form 10-K or our other filings with the Securities and Exchange Commission. We assume no
obligation to update or revise any forward-looking statements in this Annual Report on Form 10-K, whether as a result of new information, future events or otherwise, unless we are required to do so by law. A copy of this Annual Report on Form 10-K
is available without charge upon written request to: Investor Relations, BEA Systems, Inc., 2315 North First Street, San Jose, California 95131. All such filings are also available at the Securities and Exchange Commission Public Reference Room at
100 F Street, NE, Washington, DC 20549. Information regarding the Public Reference Room may be obtained by calling the Securities Exchange Commission at 1-800-SEC-0330.

The Securities and Exchange Commission also maintains an Internet site that contains reports, proxy and information statements and other information regarding issuers that file electronically with the Securities and
Exchange Commission which can be found at www.sec.gov.



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|ITEM 1A. | RISK FACTORS.
|-------- | -------------

We operate in a rapidly changing
environment that involves numerous risks and uncertainties. Set forth below are some, but not all, of these risks and uncertainties, which may have a material adverse effect on our business, financial condition or results of operations, and which
could cause our actual results to differ materially from the results contemplated by the forward-looking statements contained in this report. Prospective and existing investors should carefully consider the following risk factors, and other risks
and cautionary statements set forth in this report, in evaluating an investment in our common stock.

Risks related to the Pending Acquisition of us by
Oracle

Failure to complete the merger with Oracle Corporation could materially and adversely affect our results of operations and our stock
price.

On January 16, 2008, we entered into a definitive merger agreement with Oracle Corporation (Oracle).
Consummation of the merger is subject to customary closing conditions, regulatory approvals, including antitrust approvals, and approval by our stockholders. We cannot assure you that these conditions will be met or waived, that the necessary
approvals will be obtained, or that we will be able to successfully consummate the merger as currently contemplated under the merger agreement or at all. As a result of the pending merger or if the merger is not consummated:



| |  |  | our investors may not receive $19.375 in cash per share of our common stock which Oracle has agreed to pay in the merger, and our stock price would likely decline;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | we are liable for significant transaction costs, including legal, accounting, financial advisory and other costs relating to the merger;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------



| |  |  | under some circumstances, we may have to pay a termination fee to Oracle in the amount of $250 million;
| | - |  | -------------------------------------------------------------------------------------------------------



| |  |  | the attention of our management and our employees may be diverted from day-to-day operations as they focus on the merger;
| | - |  | -------------------------------------------------------------------------------------------------------------------------



| |  |  | our customers may seek to modify or terminate existing agreements, or prospective customers may delay entering into new agreements or purchasing our products as a
result of the announcement of the merger, which could cause our revenues to materially decline or any anticipated increases in revenue to be lower than expected; and
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | our ability to attract new employees and retain our existing employees may be harmed by uncertainties associated with the merger, and we may be required to incur
substantial costs to recruit replacements for lost personnel.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The occurrence of any of these events individually or in
combination could have a material adverse affect on our results of operations and our stock price.

Our officers and directors have certain interests
in the merger that are different from, or in addition to, interests of our stockholders.

Our officers and directors have certain
interests in the merger that are different from, or in addition to, interests of our stockholders. Our executive officers are parties to employment agreements with BEA, each of which provide severance and other benefits in the case of qualifying
terminations of employment in connection with a change of control of BEA, including consummation of the merger. Executive officers and directors of BEA have rights to indemnification and directors and officers liability insurance that
will survive consummation of the merger. Our stockholders should be aware of these interests when considering our Board of Directors recommendation to adopt the merger agreement. Stockholders are encouraged to review the section



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The MergerInterests of BEAs Directors and Executive Officers in the Merger in the definitive proxy statement filed on March 3,
2008 for more information.

We and Oracle may not be able to obtain, or may be delayed in obtaining, the regulatory approvals required to consummate
the merger.

Completion of the merger is conditioned upon the receipt of all required governmental consents and authorizations,
including by the applicable governmental authorities of the European Commission. Complying with requests from such governmental agencies, including requests for additional information and documents, could delay consummation of the merger. In
connection with granting these consents and authorizations, governmental authorities may require divestitures of assets or seek to impose conditions on the merger. Such divestitures or conditions may jeopardize or delay completion of the merger.

In certain instances, the merger agreement requires us to pay a termination fee of $250 million to Oracle. This payment could affect the decisions
of a third party considering making an alternative acquisition proposal to the merger.

Under the terms of the merger agreement, we
will be required to pay to Oracle a termination fee of $250 million if the merger agreement is terminated under certain circumstances. This payment could affect the structure, pricing and terms proposed by a third party seeking to acquire or merge
with us and could deter such third party from making a competing acquisition proposal.

Purported stockholder class action lawsuits have been filed
against us and members of our Board of Directors challenging the merger and an unfavorable judgment or ruling in these lawsuits could prevent or delay the consummation of the merger, result in substantive costs, or both.

We are actively defending against several stockholder lawsuits filed in Delaware and California related to the merger agreement with Oracle, all of which
require the Company to incur substantial legal fees and expenses. In the Delaware cases, we are defending against plaintiffs motion for a preliminary injunction enjoining the Special Stockholders Meeting scheduled for April 4, 2008 which
will be heard March 26, 2008, and which, if granted, could delay or prevent the merger. At the March 26, 2008 hearing, the plaintiffs motion was denied by the court. As these actions are in their preliminary stages, it is impossible to
predict their outcomes.

Risks that May Impact Future Operating Results Pending Completion of the Merger or if the Merger is not Consummated

We have experienced in the past, and may experience in the future, significant fluctuations in our actual or anticipated revenues and operating
results, which have prevented us in the past, and may prevent us in the future from meeting securities analysts or investors expectations and result in a decline in our stock price.

Our revenues have fluctuated significantly in the past and are likely to fluctuate significantly in the future, which may include declines in quarterly
revenues as compared to the previous fiscal quarter and as compared to the same quarterly period in the prior fiscal year, as well as declines in annual revenues as compared to the previous fiscal year. If our revenues, operating results, earnings
or future projections are below the levels expected by investors or securities analysts, our stock price is likely to decline. Moreover, even if our total revenues meet investors and securities analysts expectations, if a component of
our total revenues does not meet these expectations, our stock price may decline.

We expect to experience significant fluctuations in our
future revenues and operating results as a result of many factors, including:



| |  |  | changes, anticipated or not, in the size and timing of customer orders, including the rate of conversion of our forecasted sales pipeline into
contracts, particularly as we have become more reliant on larger transactions;
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| |  |  | our ability to develop, introduce and market, on a timely basis, new products and initiatives, such as our WebLogic Server and WebLogic Platform products, WebLogic
Communications Platform products, WebLogic Time & Event Driven, Real-Time and Virtualization products, and our BEA AquaLogic, business process management (BPM) and service oriented architecture (SOA) products;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the rate of customer acceptance of our new products and products to be introduced in the future, and any order delays caused by customer evaluations of these new
products;
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| |  |  | periodic difficulties or changes in the domestic or international economic, business or political environment, particularly affecting the technology industry or
industries from which we derive a significant portion of our revenues, such as the telecommunications industry, including but not limited to corporate or consumer confidence in the economy, uncertainties arising out of possible future terrorist
activities, military and security actions in Iraq and the Middle East in general, and geopolitical instability such as in parts of Asia, all of which could increase the likelihood that customers will unexpectedly delay, cancel or reduce the size of
orders;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the structure, timing and integration of acquisitions of businesses, products and technologies and possible disruption of our current business;
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| |  |  | costs associated with acquisitions, including expenses charged for any impaired acquired intangible assets and goodwill;
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| |  |  | fluctuations in foreign currency exchange rates, which could have an adverse impact on our international revenue, particularly in EMEA, if the Euro or British Pound
were to weaken significantly against the U.S. dollar;
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| |  |  | the performance of our international business, which accounts for approximately one-half of our consolidated revenues;
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| |  |  | changes in the mix of products and services that we sell or the channels through which they are distributed;
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| |  |  | changes in our competitors product offerings, marketing programs and pricing policies, and customer order deferrals in anticipation of new products and
product enhancements from us or our competitors;
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| |  |  | any increased price sensitivity by our customers, particularly in the face of periodic uneven economic conditions and increased competition, including open source
or free competitive software;
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| |  |  | the lengthy sales cycle for our products, particularly with regard to WebLogic Communications Platform, WebLogic Platform, and Aqualogic sales, which typically
involve more comprehensive solutions that may require us to provide a significant level of education to prospective customers regarding the use and benefits of our products and may result in more detailed customer evaluations, and the discretionary
nature of our customers purchase and budget cycles;
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| |  |  | our ability to control costs and expenses, particularly in the face of periodic difficult economic conditions;
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| |  |  | loss of key personnel or inability to recruit and hire qualified additional or replacement key personnel;
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| |  |  | the degree of success, if any, of our strategy to further establish and expand our relationships with distributors;
| | - |  | -------------------------------------------------------------------------------------------------------------------



| |  |  | the terms and timing of financing activities;
| | - |  | ---------------------------------------------



| |  |  | potential fluctuations in demand or prices of our products and services;
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| |  |  | technological changes in computer systems and environments, which could render our products less competitive or obsolete;
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| |  |  | our ability to meet our customers service requirements; and
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| |  |  | the seasonality of our sales, particularly license orders, which typically significantly adversely affects our revenue in our first quarter.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------

In addition to fluctuations in our operating results, our stock price is also subject to many factors outside of our
control, including the substantial volatility generally associated with Internet, software and technology stocks, and broader market trends unrelated to our performance, such as the substantial declines in the prices of many such stocks from 2000
through 2003, as well as market declines related to terrorist activities and military actions.

Our quarterly revenues, expenses and operating
results are difficult to forecast because of the volatility of our license revenues.

A substantial portion of our license revenues
has been derived from large orders. Reliance on large license transactions increases the risk of fluctuation in quarterly results because the unexpected loss of a small number of larger orders can cause a significant revenue shortfall. If we cannot
generate a sufficient number of large customer orders, convert a sufficient number of development orders into orders for large deployments, or if customers delay or cancel such orders in a particular quarter, it may have a material adverse effect on
our revenues and, more significantly on a percentage basis, our net income or loss in that quarter.

We use a pipeline system,
a common industry practice, to forecast sales and trends in our business. Our sales personnel monitor the status of all potential transactions, including the estimated closing date and estimated dollar amount of each transaction. We aggregate these
estimates periodically to generate a sales pipeline and then evaluate the pipeline to forecast sales and identify trends in our business. This pipeline analysis and related estimates of revenue have in recent periods and may in future periods differ
significantly from actual revenues in a particular reporting period.

Moreover, we typically receive and fulfill most of our orders within
the same quarter, and a substantial number of our orders, particularly our larger transactions, are typically received in the last month of each quarter, with a concentration of such orders at the end of the quarter. As a result, even though we may
have substantial backlog at the end of a prior quarter and positive business indicators such as sales pipeline reports about customer demand during a quarter, we may not learn of revenue shortfalls until the final days of the quarter.
Not only could such shortfalls significantly harm our revenues, they could substantially harm our earnings because we may not become aware of such shortfalls in time to adjust our cost structure to respond to a variation in the conversion of the
pipeline into contracts. Our inability to respond to a variation in the pipeline or in the conversion of the pipeline into contracts in a timely manner, or at all, could cause us to plan or budget inaccurately and thereby harm our business,
financial condition or results of operations.

Further, periodic adverse economic conditions, particularly those related to the technology
industry, as well as the economic and political uncertainties arising out of the ongoing U.S. military activity in Iraq, recent and possible future terrorist activities, other potential military and security actions in the Middle East, and
instability in markets in other parts of the world, may increase the likelihood that customers will unexpectedly delay, cancel or reduce orders, resulting in revenue shortfalls.

The seasonality of our sales typically has a significant adverse effect on our revenues in our first fiscal quarter.

Our first quarter revenues, particularly our license revenues, are typically lower than revenues in the immediately preceding fourth quarter. We believe this is because our commission plans and other sales incentives
are structured for annual performance and contain bonus provisions based on annual quotas that typically are triggered in the later quarters in a year. In addition, most of our customers begin a new fiscal year on January 1 and it is common for
capital expenditures to be lower in an organizations first quarter than in its fourth quarter. We anticipate that the negative impact of seasonality on our first quarter will continue. Moreover,



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because of this seasonality, even if we have a very strong fourth quarter in a particular year, the initial quarter in the next year could nevertheless still
be weak on a year-over-year comparative basis, as well as on a sequential basis. This risk remains even if the amount of our deferred revenue and backlog is substantial at the close of the immediately preceding fourth quarter. This seasonality may
harm our revenues and other operating results in our first quarter and possibly subsequent quarters as well, particularly if the seasonal impact is more pronounced than we expect.

The lengthy sales cycle for our products makes our revenues susceptible to substantial fluctuations.

Many of our customers use our products to implement large, sophisticated applications that are critical to their business, and their purchases are often part of their implementation of a Web-based computing environment, or SOA. Customers
evaluating our software products face complex decisions regarding alternative approaches to the integration of enterprise applications, competitive product offerings, implementation of SOA, rapidly changing software technologies and standards, and
limited internal resources due to other information systems demands. For these and other reasons, the sales cycle for our products is lengthy and unpredictable, and potential orders are subject to delays or cancellation for reasons over which we
have little or no control. In addition, we continue to rely on a significant number of million and multimillion dollar license transactions. In some cases, the larger size of the transactions has resulted in more extended customer evaluation and
procurement processes, which in turn have lengthened the overall sales cycle for our products. Periodic economic difficulties in our key markets have also contributed to increasing the length of our sales cycle.

Finally, the introduction of AquaLogic and other products and implementation of our products for SOA have contributed to a longer sales cycle due to the
fact that they offer a more comprehensive solution that may require us to provide a significant level of education to prospective customers regarding the use and benefits of our products, and may result in lengthier customer evaluations. Delays or
failures to complete large orders and sales in a particular quarter could significantly reduce revenue that quarter, as well as subsequent quarters over which revenue for the sale would otherwise be recognized.

We have restructured, and may in the future restructure, our sales force, which can be disruptive.

We continue to rely heavily on our direct sales force. In recent years, we have restructured or made other adjustments to our sales force in response to
factors such as conditions in the information technology industry, our expenses related to revenues, management changes, product changes and other external and internal considerations. Changes in the structure of the sales force and sales force
management have resulted in a temporary lack of focus and reduced productivity that may have affected revenues in one or more quarters. If we continue to restructure our sales force, then the transition issues associated with restructuring the sales
force may recur. Such restructuring or associated transition issues can be disruptive and adversely impact our business and operating results.

Any
failure to maintain on-going sales through distribution channels could result in lower revenues, and increasing sales through distribution channels could result in lower margins on our license revenues.

To date, we have sold our products principally through our direct sales force, as well as through indirect sales channels, such as computer hardware
companies, packaged application software developers, independent software vendors (ISVs), systems integrators (SIs), original equipment manufacturers (OEMs), consultants, software tool vendors and distributors.
Our ability to achieve revenue growth in the future will depend in large part on our success in maintaining existing relationships and further establishing and expanding relationships with our indirect sales channels. We need to carefully monitor
the development and scope of our indirect sales channels and create appropriate pricing, sales force compensation and other distribution parameters to help ensure these indirect channels do not conflict with or curtail our direct sales. If we invest
resources in these types of expansion and our overall revenues do not correspondingly increase, our business, results of operations and financial condition will be materially and adversely affected. In addition, we already rely on



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formal and informal relationships with a number of SIs and consulting firms to enhance our sales, support, service and marketing efforts, particularly with
respect to implementation and support of our products as well as lead generation and assistance in the sales process. Many such firms have similar, and often more established, relationships with our principal competitors. It is possible that these
and other third parties will not provide the level and quality of service required to meet the needs of our customers, or that we will not be able to maintain an effective, long-term relationship with these third parties. However, because we achieve
lower margins on license revenue sales through distribution channels, an increase in our sales through distribution channels could result in lower margins on our license revenues.

If we do not compete effectively, our revenues and operating margins will decline.

The market
for application server, integration and SOA software, and related software infrastructure, and specialty applications in communications, time and event driven, real-time and virtualization products and services is highly competitive. Our competitors
are diverse and offer a variety of solutions directed at various segments of this marketplace.

Our competitors include several companies,
such as IBM, Oracle Corporation (which is in the process of acquiring us), SAP AG and Microsoft, which compete in a number of our product lines. All of these competitors have longer operating histories; significantly greater financial, technical,
marketing and other resources; significantly greater name recognition; a broader product offering; a larger installed base of customers than we do; and well-established relationships with our current and potential customers. In addition, many
competitors are able to bundle competing products with their other software offerings at a discounted price. As a result, these competitors may be able to respond more quickly to new or emerging technologies and changes in customer requirements or
to devote greater resources to the development, promotion and sale of their products than we can.

In addition, current and potential
competitors may make strategic acquisitions or establish cooperative relationships among themselves or with third parties, thereby increasing the ability of their products to address the needs of their current and prospective customers. Further, new
competitors, or alliances among current and new competitors, may emerge and rapidly gain significant market share. Such competition could harm our ability to sell additional software licenses and maintenance, consulting and support services on terms
favorable to us.

Further, competitive pressures and open source availability of functionally competitive software could require us to
reduce the price of our products and related services, which could harm our business. We may not be able to compete successfully, and any failure to do so would harm our business.

Because the technological, market and industry conditions in our business can change very rapidly, if we do not successfully adapt our products to these changes, our revenue and profits will be harmed.

The market for our products and services is highly fragmented, competitive with alternative computing architectures, and characterized by
continuing technological developments, evolving and competing industry standards, and changing customer requirements. The introduction of products based upon new technologies, the emergence of new industry standards, or changes in customer
requirements could result in a decline in the markets for our existing products or render them obsolete and unmarketable. As a result, our success depends upon our ability to timely and effectively enhance existing products, respond to changing
customer requirements, and develop and introduce in a timely manner new products and initiatives that keep pace with technological and market developments and emerging industry standards, as well as our ability to educate and train our sales force
and indirect sales channels on our new or enhanced products, initiatives and technologies. It is possible that our products will not adequately address the changing needs of the marketplace and that we will not be successful in developing and
marketing enhancements to our existing products or new products on a timely basis. Failure to develop, acquire and introduce new products, or enhancements to existing products, in a timely manner in response to changing market conditions or customer
requirements, or lack of customer acceptance of our



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products, will harm our business, results of operations and financial condition. In addition, our success is increasingly dependent on our strategic
partners ability to successfully develop and integrate their software with those of our products with which their software interoperates or is bundled, integrated or marketed. If their software performs poorly, contains errors or defects or is
otherwise unreliable, or does not provide the features and benefits expected or required, it could lower the demand for our products and services, result in negative publicity or loss of our reputation, and adversely affect our revenues and other
operating results.

If the markets for application servers, application platforms, application integration, portal, BPM, SOA and related application
infrastructure software and Web services decline or do not grow as quickly as we expect, our revenues will be harmed.

We sell our
products and services in the application server, application platform, application integration, portal, BPM, SOA and related application and service infrastructure markets. These markets are characterized by continuing technological developments,
evolving industry standards and changing customer requirements. Our success is dependent in large part on acceptance of our products by large customers with substantial legacy mainframe systems, customers establishing or building out their presence
on the Web for commerce, and developers of Web-based commerce applications and SOA. Our future financial performance will depend in large part on the continued growth in the use of the Web to run software applications and continued growth in the
number of companies extending their mainframe-based, mission-critical applications to an enterprise-wide distributed computing environment and to the Internet through the use of application server and integration technology and SOA. The markets for
application server, application platform, portal, application integration, web services, BPM and SOA and related services and technologies may not grow and could decline. Even if they do grow, they may grow more slowly than we anticipate,
particularly in view of periodic economic difficulties affecting the technology sector in the United States, Asia and Europe. If these markets fail to grow, grow more slowly than we currently anticipate, or decline, our business, results of
operations and financial condition will be adversely affected.

Our revenues are derived primarily from a single group of similar and related
products and services, and a decline in demand or prices for these products or services could harm our operating results.

We
currently derive the majority of our license and service revenues from BEA WebLogic Server, Tuxedo and our AquaLogic products, and from related products and services. We expect these products and services to continue to account for the majority of
our revenues in the immediate future. As a result, factors adversely affecting the pricing of or demand for BEA WebLogic Server, Tuxedo, AquaLogic products or related services, such as periodic difficult economic conditions, future terrorist
activities or military actions, any decline in overall market demand, competition, product performance or technological change, could have a material adverse effect on our business and consolidated results of operations and financial condition. In
fiscal 2007, with regard to Tuxedo, we experienced a decline in the percentage of our license revenue generated by Tuxedo, as well as a decline in the absolute dollar amount of revenue generated by Tuxedo. In fiscal 2008, we experienced a decline in
the percentage of our license revenue generated by WebLogic, as well as a decline in absolute dollar amount of revenue generated by WebLogic. If this trend were to continue or worsen, it would have an adverse impact on our revenue, profit and other
operating results.

Our future growth, if any, is expected to be achieved through the implementation and introduction of our new product
initiatives in SOA, AquaLogic, time and event-driven architectures, real-time applications, virtualization, and WebLogic Communications Platform. Many of these new product initiatives have substantial, entrenched competitors with greater resources
and experience in these product areas. Other product initiatives are in nascent markets, and it is unclear when or if these markets will develop into substantial markets or whether we will serve those markets well. There can be no assurances that
all or any of these new products will be successful and contribute to profitability or growth.



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If we fail to adequately protect our intellectual property rights, competitors may use our technology and
trademarks, which could weaken our competitive position, reduce our revenues and increase our costs.

Our success depends upon our
proprietary technology. We rely on a combination of patent, copyright, trademark and trade secret rights, confidentiality procedures and licensing arrangements to establish and protect our proprietary rights. It is possible that other companies
could successfully challenge the validity or scope of our patents and that our patents may not provide a competitive advantage to us.

As
part of our confidentiality procedures, we generally enter into non-disclosure agreements with our employees, distributors and corporate partners and into license agreements with respect to our software, documentation and other proprietary
information. Despite these precautions, third parties could copy or otherwise obtain and use our products or technology without authorization, or develop similar technology independently. In particular, we have in the past provided certain hardware
OEMs with access to our source code, and any unauthorized publication or proliferation of our source code could materially adversely affect our business, operating results and financial condition. It is difficult for us to police unauthorized use of
our products, and although we are unable to determine the extent to which piracy of our software products exists, software piracy is a persistent problem. In addition, effective protection of intellectual property rights is unavailable or limited in
certain foreign countries. The protection of our proprietary rights may not be adequate, and our competitors could independently develop similar technology, duplicate our products, or design around patents and other intellectual property rights that
we hold.

Third parties could assert that our software products and services infringe their intellectual property rights, which could expose us to
increased costs and litigation.

We have been and continue to be subject to legal proceedings and claims that arise in the ordinary
course of our business, including claims currently being asserted that our products infringe certain patent rights. It is possible that third parties, including competitors, technology partners and other technology companies, could successfully
claim that our current or future products, whether developed internally or acquired, infringe their rights, including their trade secret, copyright and patent rights. These types of claims, with or without merit, can cause costly litigation that
requires significant management time, as well as impede our sales efforts due to any uncertainty as to the outcome, all of which could materially adversely affect our business, operating results and financial condition. These types of claims, with
or without merit, could also cause us to pay substantial damages or settlement amounts, cease offering any subject technology or products altogether, require us to enter into royalty or license agreements, compel us to license software under
unfavorable terms, and damage our ability to sell products due to any uncertainty generated as to intellectual property ownership. If required, we may not be able to obtain such royalty or license agreements, or obtain them on terms acceptable to
us, which could have a material adverse effect upon our business, operating results and financial condition, particularly if we are unable to ship key products.

If our products contain software defects, it could harm our revenues and expose us to litigation.

The software
products we offer are internally complex and, despite extensive testing and quality control, may contain errors or defects, especially when we first introduce them. We may need to issue corrective releases of our software products to fix any defects
or errors. Any defects or errors could also cause damage to our reputation and result in loss of revenues, product returns or order cancellations, lack of market acceptance of our products, or increased service and warranty costs. Accordingly, any
defects or errors could have a material and adverse effect on our business, results of operations and financial condition.

Our license
agreements with our customers typically contain provisions designed to limit our exposure to potential product liability claims. It is possible, however, that the limitation of liability provisions contained in our license agreements may not be
effective as a result of existing or future federal, state or local laws or ordinances or unfavorable judicial decisions. Although we have not experienced any product liability claims to

date, sale and support of our products entails the risk of such claims, which could be substantial in light of our



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customers use of such products in mission-critical applications. If a claimant brings a product liability claim against us, it could have a material
adverse effect on our business, results of operations and financial condition. Our products interoperate with many parts of complicated computer systems, such as mainframes, servers, personal computers, application software, databases, operating
systems and data transformation software. Failure of any one of these parts could cause all or large parts of computer systems to fail. In such circumstances, it may be difficult to determine which part failed, and it is likely that customers will
bring a lawsuit against several suppliers. Even if our software is not at fault, we could suffer material expense and material diversion of management time in defending any such lawsuits.

If we do not maintain our relationships with third-party vendors, interruptions in the supply of our products may result.

Portions of our products incorporate software that was developed and is maintained by third-party software vendors. We may not be able to replace the
functionality provided by the third-party software currently offered with our products if that software becomes obsolete or incompatible with future versions of our products or is not adequately maintained or updated. Any significant interruption in
the supply of these products could adversely impact our sales unless and until we can secure another source at costs which are acceptable to us. We depend in part on these third parties abilities to enhance their current products, to develop
new products on a timely and cost-effective basis and to respond to emerging industry standards and other technological changes. The inability to replace, or any significant delay in the replacement of, functionality provided by third-party software
in our products could materially and adversely affect our business, financial condition or results of operations.

Our international operations
expose us to greater management, collections, currency, export licensing, intellectual property, tax, regulatory and other risks.

Revenues from markets outside of the Americas has accounted for approximately one-half of our total revenues over the past several years, and we expect these markets to continue to account for a significant portion of our total revenues. We
sell our products and services through a network of branches and subsidiaries located in 38 countries worldwide. In addition, we also market our products through distributors. We believe that our success depends upon continued expansion of our
international operations. Our international business is subject to a number of risks, including greater difficulties in maintaining and enforcing U.S. accounting and public reporting standards, greater difficulties in staffing and managing foreign
operations with personnel sufficiently experienced in U.S. accounting and public reporting standards, unexpected changes in regulatory practices and tariffs, longer collection cycles, seasonality, potential changes in export licensing and tax laws,
and greater difficulty in protecting intellectual property rights. Also, the impact of fluctuating exchange rates between the U.S. dollar and foreign currencies in markets where we do business can significantly impact our revenues. The EMEA region
has historically accounted for, and we expect in the future will continue to account for, a significant portion of our revenues. If the value of the U.S. dollar relative to European currencies were to significantly increase, it would have an adverse
impact on our revenues, profits and other operating results. Also, we are periodically subject to tax audits by government agencies in foreign jurisdictions. To date, the outcomes of these audits have not had a material impact on us. It is possible,
however, that future audits could result in significant assessments against us or our employees for transfer taxes, payroll taxes, income taxes, or other taxes as well as related employee and other claims which could adversely effect our operating
results. General economic and political conditions in these foreign markets, including the military action in the Middle East, geopolitical instabilities in other parts of the world and a backlash against U.S. based companies may also impact our
international revenues, as such conditions may cause decreases in demand or impact our ability to collect payment from our customers. There can be no assurances that these factors and other factors will not have a material adverse effect on our
future international revenues and consequently on our business and consolidated financial condition and results of operations.



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Changes in accounting regulations and related interpretations and policies, could cause us to recognize lower
revenue and profits or to defer recognition of revenue.

The methods, estimates, and judgments we use in applying our accounting
policies have a significant impact on our results of operations. Such methods, estimates, and judgments are, by their nature, subject to substantial risks, uncertainties, and assumptions, and factors may arise over time that lead us to change our
methods, estimates, and judgments. Changes in those methods, estimates, and judgments could significantly affect our results of operations. Moreover, policies, guidelines and interpretations related to revenue recognition, accounting for
acquisitions, income taxes, facilities consolidation charges, allowances for doubtful accounts, stock-based compensation and other financial reporting matters require us to make difficult judgments on complex matters that are often subject to
multiple sources of authoritative guidance. To the extent that our judgment is incorrect, it could result in an adverse impact on the Companys financial statements. Some of these matters are also among topics currently under re-examination by
accounting standard setters and regulators. These standard setters and regulators could promulgate interpretations and guidance that could result in material and potentially adverse changes to our accounting policies.

Although we use standardized license agreements designed to meet current revenue recognition criteria under generally accepted accounting principles, we
must often negotiate and revise terms and conditions of these standardized agreements, particularly in larger license transactions. Negotiation of mutually acceptable terms and conditions can extend the sales cycle and, in certain situations, may
require us to defer recognition of revenue on the license. While we believe that we are in compliance with Statement of Position 97-2, Software Revenue Recognition, as amended, the American Institute of Certified Public Accountants continues
to issue implementation guidelines for these standards and the accounting profession continues to discuss a wide range of potential interpretations. Additional implementation guidelines, and changes in interpretations of such guidelines, could lead
to unanticipated changes in our current revenue accounting practices that could cause us to defer the recognition of revenue to future periods or to recognize lower revenue and profits.

If we cannot successfully integrate our past and future acquisitions, our revenues may decline and expenses may increase.

From our inception in January 1994, we have made a substantial number of strategic acquisitions. From June 2005 to August 2006, we acquired Plumtree Software, Inc., a publicly traded software company, as well as six
smaller companies in targeted cash acquisitions, each of which has presented an integration challenge to our business operations. In addition, integration of acquired companies, divisions and products involves the assimilation of potentially
conflicting products and operations, including the maintenance of effective internal controls, which diverts the attention of our management team and may have a material adverse effect on our operating results in future quarters. It is possible that
we may not achieve any of the intended financial or strategic benefits of these transactions. Further, while we may desire to make additional acquisitions in the future, there may not be suitable companies, divisions or products available for
acquisition. Our acquisitions entail numerous risks, including the risk that we will not successfully assimilate the acquired operations and products, retain key employees of the acquired companies, or execute successfully the strategy driving the
acquisition. There are also risks relating to the diversion of our managements attention, and difficulties and uncertainties in our ability to maintain the key business relationships that we or the acquired companies have established. In
addition, we may have product liability or intellectual property liability associated with the sale of the acquired companys products.

Acquisitions also expose us to the risk of claims by terminated employees, shareholders of the acquired companies or other third parties related to the transaction. Finally, if we undertake future acquisitions, we may issue dilutive
securities, assume or incur additional debt obligations, incur large one-time expenses, utilize substantial portions of our cash, and acquire intangible assets that would result in significant future amortization expense. Any of these events could
have a material adverse effect on our business, operating results and financial condition.



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On June 29, 2001, the FASB pronounced under Statement of Financial Accounting Standards
No. 142, Goodwill and Other Intangible Assets (FAS 142), that purchased goodwill should not be amortized, but rather, should be periodically reviewed for impairment. Such impairment could be caused by
internal factors as well as external factors beyond our control. The FASB has further determined that at the time goodwill is considered impaired, an amount equal to the impairment loss should be charged as an operating expense in the statement of
income. The timing of such an impairment (if any) of goodwill acquired in past and future transactions is uncertain and difficult to predict. If future events cause additional impairment of any intangible assets acquired in our past or future
acquisitions, we may have to record additional charges relating to such assets sooner than we expect which would cause our profits to decline. We are required to determine whether goodwill and any assets acquired in past acquisitions have been
impaired in accordance with FAS 142 and, if so, charge such impairment as an expense. For example, in the quarter ended October 31, 2001, we took an asset impairment charge of $80.1 million related to past acquisitions. At January 31,
2008, we had remaining net goodwill and net acquired intangible assets of approximately $265.7 million. In the quarter ended April 30, 2007, we took an additional charge of approximately $3.8 million in connection with impairment of intangibles
and goodwill related to our acquisition of Connectera. If we are required to take such additional impairment charges, the amounts could have a material adverse effect on our results of operations.

We face risks in connection with Plumtrees government contracts which may adversely affect our results of operations.

We face risks associated with the businesses and operations of Plumtree, which we acquired on October 20, 2005. Plumtree derived a significant
portion of its software license and service revenue from government customers. We have assumed Plumtrees business with the United States government and other domestic and international public entities, including the risks associated with such
business, such as the susceptibility to unpredictable governmental budgetary and policy changes. Sales to government entities can be adversely affected by budgetary cycles, changes in policy and other political events outside of our control, such as
the outbreak of hostilities overseas and domestic terrorism. Governments often retain the ability to cancel contracts at their convenience in times of emergency or under other circumstances. Some of Plumtrees government customers have
experienced budgetary constraints due to decreased federal funding to state and local governments. Additionally, the government may require special intellectual property rights and other license terms generally more favorable to the customer than
those typical in non-government contracts. These requirements involve more licensing cost and increased contract risk for us. The government procurement process in general can be long and complex and being a government vendor subjects us to
additional regulations.

The ongoing U.S. military activity in Iraq and any terrorist activities could adversely affect our revenues and operations.

The U.S. military activity in Iraq, terrorist activities and related military and security operations have in the past disrupted
economic activity throughout the United States and much of the world. This significantly adversely impacted our operations and our ability to generate revenues in the past and may again in the future. An unfavorable course of events in the future
related to the ongoing U.S. military activity in Iraq; any other military or security operations, particularly with regard to the Middle East; any future terrorist activities; or geopolitical tension in other parts of the world could have a similar
or worse effect on our operating results, particularly if such attacks or operations occur in the last month or weeks of our quarter or are significant enough to further weaken the U.S. or global economy. In particular, such activities and
operations could result in reductions in information technology spending, order deferrals, and reductions or cancellations of customer orders for our products and services.



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An unfavorable government review of our income and payroll tax returns or changes in our effective tax rates could
adversely affect our operating results.

Our operations are subject to income, payroll and indirect taxes in the United States and
in multiple foreign jurisdictions. We exercise judgment in determining our worldwide provision for these taxes, and in the ordinary course of our business there may be transactions and calculations where the ultimate tax determination is uncertain.
Our provision for income taxes is based on jurisdictional mix of earnings, statutory rates, and enacted tax rules, including transfer pricing. Significant judgment is required in determining our provision for income taxes and in evaluating our tax
positions on a worldwide basis. It is possible that these positions may be challenged which may have a significant impact on our effective tax rate.

In addition, our U.S. federal income tax returns for 2005 through 2006 fiscal years are currently under examination by the IRS. In addition, certain of our U.S. payroll tax returns (primarily related to taxes
associated with stock option exercises), and various state and foreign tax returns are under examination by the applicable taxing authorities. While we believe that we have made adequate provisions related to the audits of these tax returns, the
final determination of our obligations may exceed the amounts provided for by us in the accompanying consolidated financial statements.

Our cash
investments in money market, government and corporate debt securities are subject to risks, which may cause losses and affect the liquidity of these investments.

At January 31, 2008, we had $993.7 million in cash and cash equivalents, $3.4 million in restricted cash and $525.5 million in short and long-term investments. We have invested these amounts in U.S. government
securities, U.S. agency securities, asset-backed securities, corporate notes and bonds, commercial paper and money market funds meeting certain criteria. Certain of these investments are subject to credit, liquidity and interest rate risks, which
may be exacerbated by stresses and disruptions in the financial markets stemming from U.S. sub-prime mortgage defaults and their follow-on effects. These market risks associated with our investment portfolio may have adverse impacts on our results
of operations, liquidity and financial condition.

Risk Factors Related to Corporate Governance Matters and our Stock Option Review

If we fail to maintain effective internal controls or remediate any future material weaknesses in our internal control over financial reporting, we may be unable to
accurately report our financial results or prevent fraud which could have an adverse effect on our business and operating results and our stock price.

The SEC, as directed by Section 404 of the Sarbanes-Oxley Act of 2002, adopted rules requiring public companies to include a report of management on internal control over financial reporting in their annual
reports on Form 10-K that contain an assessment by management of the effectiveness of the Companys internal control over financial reporting. Effective internal control over financial reporting is essential for us to produce reliable financial
reports and prevent fraud. As a result of the Audit Committees review into our historical stock option grant practices and related matters, we identified past material weaknesses in our internal controls and procedures. A material weakness is
a control deficiency, or combination of them, that results in more than a remote likelihood that a material misstatement in our financial statements will not be prevented or detected. Any future failure to maintain effective internal control over
financial reporting could harm our operating results, result in a material misstatement of our financial statements, cause us to fail to meet our financial reporting obligations or prevent us from providing reliable and accurate financial reports or
avoiding or detecting fraud.

Failure to comply with applicable corporate governance requirements may cause us to delay filing our periodic reports
with the SEC, affect our Nasdaq listing, and adversely affect our stock price.

Federal securities laws, rules and regulations, as
well as Nasdaq rules and regulations, require companies to maintain extensive corporate governance measures, impose comprehensive reporting and disclosure requirements, set strict independence and financial expertise standards for audit and other
committee members



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and impose civil and criminal penalties for companies and their chief executive officers, chief financial officers and directors for securities law
violations. These laws, rules and regulations have increased and will continue to increase the scope, complexity and cost of our corporate governance, reporting and disclosure practices, which could harm our results of operations and divert
managements attention from business operations.

The matters relating to the review of certain historical stock option grants could continue to
have an adverse effect on our financial results.

In 2006 and 2007, the Audit Committee conducted a review that concluded that,
primarily from fiscal 1998 through fiscal 2006, a large number of stock options were not accounted for correctly in our financial statements. We have and could continue to incur substantial charges in future periods in connection with the results of
the review that are not compensation charges. Such charges could include, but are not limited to, payments to employees or taxing authorities arising from potential income tax liabilities pursuant to the U.S. Internal Revenue Code Section 409A.
The review diverted the attention of our Board and management team from the operation of our business and has proven to be a significant distraction. In addition, we have incurred substantial expenses in connection with the review, which have had
and could continue to have a negative effect on our financial results.

In addition, the inquiries by the United States Securities and
Exchange Commission (SEC) into our historical stock option grant practices are ongoing. We have fully cooperated with the SEC and intend to continue to do so. The period of time necessary to resolve these inquiries is uncertain, and we
cannot predict the outcome of these inquiries or whether we will face additional government inquiries, investigations or other actions related to our historical stock option grant practices. These inquiries will likely require us to continue to
expend significant management time and incur significant legal and other expenses, and could result in actions seeking, among other things, injunctions against the Company and the payment of significant fines and penalties by the Company, which may
have a material adverse effect on our business and earnings.

We have been named as a party to a number of shareholder derivative lawsuits relating
to our historical stock option grant practices, and we may be named in additional lawsuits in the future. This litigation could become time consuming and expensive and could have a material adverse effect on our business.

In connection with our historical stock option grant practices and resulting restatements, a number of derivative actions were filed against certain of
our current and former directors and officers purporting to assert claims on the Companys behalf. There may be additional lawsuits of this nature filed in the future. We cannot predict the outcome of these lawsuits, nor can we predict the
amount of time and expense that will be required to resolve these lawsuits. If these lawsuits become time consuming and expensive, or if there are unfavorable outcomes in any of these cases, there could be a material adverse effect on our business,
financial condition and results of operations.

Our insurance coverage will not cover our total liabilities and expenses in these lawsuits,
in part because we have a significant deductible on certain aspects of the coverage. In addition, subject to certain limitations, we are obligated to indemnify our current and former directors, officers and employees in connection with the review of
our historical stock option grant practices and the related litigation and government inquiries. We currently hold insurance policies for the benefit of our directors and officers, although our insurance coverage may not be sufficient in some or all
of these matters. Furthermore, the insurers may seek to deny or limit coverage in some or all of these matters, in which case we may have to self-fund all or a substantial portion of our indemnification obligations.

In addition to the possibilities that there may be additional governmental actions and shareholder lawsuits against us, we may be sued or taken to
arbitration by former officers and employees in connection with their stock options, employment terminations and other matters. These lawsuits may be time consuming and expensive, and cause further distraction from the operation of our business. The
adverse resolution of any specific lawsuit could have a material adverse effect on our business, financial condition and results of operations.



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|ITEM 1B. | UNRESOLVED STAFF COMMENTS.
|-------- | --------------------------

None.



|ITEM 2. | PROPERTIES.
|------- | -----------

Our corporate headquarters, totaling
approximately 236,000 square feet, are located in San Jose, California under leases expiring in October 2008. We also lease office space in various locations throughout the United States for sales, support, marketing and product development
personnel, and our foreign subsidiaries lease space for their respective operations. We own substantially all of the equipment used in our facilities.

In October 2003, we purchased an approximately 40-acre parcel of land located on North First Street, San Jose, California adjacent to our corporate headquarters (the San Jose Land), on which the Company
planned to develop and build a new corporate headquarters, adjacent to our San Jose, California leased offices. In the first quarter of fiscal 2008, after evaluation of our facilities options and strategy with respect to our corporate headquarters
in San Jose, California, we sold the San Jose Land for $105.5 million, net of transaction costs. Thereafter, we purchased a 17-story building with parking facilities in downtown San Jose (the San Jose Building), which the Company intends
to make its corporate headquarters. We recorded the sale of the San Jose Land and the purchase of the San Jose Building in the first quarter of fiscal 2008, and we recorded the new building as a capital asset at cost. In March 2008, we suspended
efforts to ready the building for occupancy in contemplation of the Oracle acquisition. As of January 31, 2008, BEA had capitalized approximately $6.2 million of improvements to ready the building for occupancy in mid 2008.



|ITEM 3. | LEGAL PROCEEDINGS.
|------- | ------------------

The Company and its subsidiary
Plumtree Software, Inc. (Plumtree) are involved in a patent infringement lawsuit against Datamize, LLC (Datamize) in the U.S. District Court for the Northern District of California. In July 2004, Plumtree sued Datamize for
declaratory judgment that certain U.S. patents are invalid and not infringed. In January 2007, Datamize answered Plumtrees complaint and counterclaimed for infringement. In July 2007 the parties were realigned so that Datamize is the
plaintiff, and BEA was added to the case as a defendant. The Court issued its claim construction order on August 7, 2007. On February 5, 2008 the Court granted Plumtrees and BEAs motion to disqualify Datamizes lead
counsel based on a conflict. In response, Datamize filed on March 6, 2008 a petition for a writ of mandamus in the Federal Circuit Court of Appeals seeking review of the disqualification order. On March 10, 2008, the district
court entered the parties stipulation to vacate the current schedule and stay the case while Datamizes petition for a writ of mandamus is considered. Plumtree and the Company intend to vigorously defend against Datamizes
allegations of infringement and vigorously pursue their claim for declaratory relief. It is not known when or on what basis this action will be resolved.

On August 23, 2005, a class action lawsuit titled Globis Partners, L.P. v. Plumtree Software, Inc. et al. was filed in the Court of Chancery in the State of Delaware in and for New Castle County (the Globis
Action). The complaint names Plumtree, all members of Plumtrees board of directors and the Company as defendants. The suit alleges, among other claims, that the consideration to be paid in the proposed acquisition of Plumtree by the
Company is unfair and inadequate. The complaint seeks an injunction barring consummation of the merger and, in the event that the merger is consummated, a rescission of the merger and an unspecified amount of damages. The Company is defending the
case vigorously. There can be no assurance, however, that we will be successful in our defense of this action. On November 30, 2007, the court dismissed this lawsuit.

In addition, on August 24, 2005, a class action lawsuit titled Keitel v. Plumtree Software, Inc., et al. was filed in the Superior Court of the
State of California for the County of San Francisco (the Keitel Action). The complaint names Plumtree and all member of Plumtrees board of directors as defendants alleging similar complaints and seeking similar damages as the class
action brought by Globis Partners, L.P. The Keitel Action



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has been stayed pending the outcome of the Globis Action. The Company is defending the case vigorously. There can be no assurance, however, that we will be
successful in our defense of this action. It is not known when or on what basis this action will be resolved. On March 26, 2008, the plaintiffs filed for dismissal of the lawsuit with the court.

In the Keitel Action, plaintiffs sought an injunction against completion of the merger. That motion was denied and the case has now been stayed. In the
Globis Action, plaintiff filed an amended complaint on October 22, 2005, which the Company moved to dismiss on October 6, 2006. Plumtree and the individual defendants moved to dismiss the amended complaint on the same date. On
December 8, 2006, plaintiff moved for leave to file a second amended complaint. On January 4, 2007, parties stipulated to permit plaintiff to file the second amended complaint. It was filed on January 16, 2007. Defendants moved to
dismiss the second amended complaint on February 5, 2007. The briefing on the motions has been completed. Currently, the parties are waiting for the Court to set a date for the hearing. There can be no assurance that we will be able to achieve
a favorable resolution. An unfavorable resolution of the pending litigation could result in the payment of substantial damages which could have a material adverse effect on our business, financial condition and results of operations. In addition, as
a result of the merger, we have assumed all liabilities of Plumtree resulting from the litigation. On March 26, 2008, the plaintiffs filed for dismissal of the lawsuit with the court.

On July 20, 2006, the first of several derivative lawsuits was filed by a purported Company shareholder in the United States District Court for the
Northern District of California. The cases were subsequently consolidated and plaintiffs current complaint names certain of the Companys present and former officers and directors as defendants and names the Company as a nominal
defendant. The complaint alleges that the individual defendants violated the federal securities laws and breached their duties to the Company in connection with our historical stock option grant activities. In addition, the current complaint
includes a claim purportedly on behalf of a class of BEA shareholders arising out of Oracles October 10, 2007 unsolicited acquisition proposal, claiming that members of our Board of Directors breached their fiduciary duties in response to
the proposal. It is not known when or on what basis the action will be resolved.

In addition, on August 25, 2006, another shareholder
derivative action was filed in the Superior Court for the County of Santa Clara. The court granted a motion to stay that action in deference to the actions filed previously in federal court. It is not known when or on what basis the action will be
resolved.

On July 20, 2006, the first of several derivative lawsuits was filed by a purported Company shareholder in the United
States District Court for the Northern District of California. The cases were subsequently consolidated and plaintiffs current complaint names certain of the Companys present and former officers and directors as defendants and names the
Company as a nominal defendant. The complaint alleges that the individual defendants violated the federal securities laws and breached their duties to the Company in connection with our historical stock option grant activities. On October 25,
2007, the complaint was amended to assert a purported class action claim alleging that the Companys directors breached their fiduciary duties by failing to fully inform themselves of the Companys true value prior to rejecting
Oracles October 10, 2007 unsolicited proposal to acquire the Company for $17.00 per share. Plaintiffs seek an order requiring the director defendants to implement a procedure or process to determine the Companys true value and
obtain the highest possible price for shareholders. The Company is defending the case vigorously. There can be no assurance, however, that we will be successful in our defense of this action. It is not known when or on what basis this action will be
resolved.

On October 12, 2007, two putative class action lawsuits, titled Freedman v. BEA Systems, Inc. et al. (the Freedman
Action) and Blaz v. BEA Systems, Inc. et al. (the Blaz Action) were filed in the Court of Chancery of the State of Delaware. Both complaints named the Company and its directors as defendants, asserting that the directors breached
their fiduciary duties by failing to give proper consideration to Oracles October 10, 2007 unsolicited proposal to acquire the Company for $17.00 per share. The complaints sought injunctive relief, including the implementation of a
process or procedure to obtain the highest possible price for the Companys shareholders through negotiations with Oracle or other means. By order dated October 29, 2007, the Court of Chancery ordered the Freedman Action and the Blaz
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same subject matter filed in or transferred to the Court of Chancery, consolidated under the caption In re BEA Systems, Inc. Shareholders Litigation (the
Consolidated Delaware Action). On October 31, 2007, a purported class action lawsuit titled Fonte v. BEA Systems, Inc. et al. was filed in the Court of Chancery (the Fonte Action). The Fonte Action named the same
parties, contained substantially similar allegations, and sought substantially similar relief as the Freedman Action and the Blaz Action, and was subsequently consolidated into the Consolidated Delaware Action. It is not known when or on what basis
this action will be resolved.

On February 20, 2008, plaintiffs in the Consolidated Delaware Action filed a Verified Consolidated
Class Action Complaint (the Consolidated Complaint). The Consolidated Complaint alleges that the directors breached their fiduciary duty of disclosure by including purportedly misleading and incomplete disclosures in BEAs
preliminary proxy statement regarding the Companys proposed merger with Oracle. The Consolidated Complaint also alleges that the directors breached their fiduciary duties of loyalty, care, and good faith by purportedly failing to obtain the
highest merger price reasonably available and purportedly delegating their duty to negotiate the merger consideration to Carl Icahn. The Consolidated Complaint further alleges that in addition to its annual meeting on March 18, 2008, the
Company is required to hold a second annual meeting on or before June 23, 2008. The Consolidated Complaint seeks injunctive relief and damages. On February 29, 2008, plaintiffs in the Consolidated Delaware Action moved for expedited
proceedings and for a preliminary injunction enjoining a stockholder vote on, or consummation of, the merger with Oracle. On March 5, 2008, the Court of Chancery granted plaintiffs motion for expedited proceedings and scheduled a
preliminary injunction hearing for March 26, 2008. At the March 26, 2008 hearing, the plaintiffs motion was denied by the court. The Company is defending the Consolidated Delaware Action vigorously. There can be no assurance,
however, that we will be successful in our defense of this action. It is not known when or on what basis this action will be resolved.

On
October 12, 2007, a putative class action lawsuit titled Gross v. BEA Systems, Inc. et al. was filed in the Superior Court of the State of California for the County of Santa Clara (the Gross Action). The complaint names the Company,
eight of its directors, and certain unnamed John Doe parties as defendants, alleging that the directors breached their fiduciary duties by failing to give proper consideration to Oracles October 10, 2007 unsolicited proposal
to acquire the Company for $17.00 per share. The complaint seeks injunctive relief, including an order requiring the defendants to cooperate with any party expressing a bona fide interest in making an offer that maximizes the value of the
Companys shares and the formation of a stockholders committee to ensure the fairness of any transaction involving the Companys shares. The complaint also seeks compensatory damages in an unspecified amount. It is not known when or
on what basis this action will be resolved.

On October 16, 2007, a putative class action lawsuit titled Ellman v. Chuang et al. was
filed in the Superior Court of the State of California for the County of Santa Clara (the Ellman Action). The complaint names nine of the Companys directors as defendants and the Company as a nominal defendant, alleging that the
directors breached their fiduciary duties by failing to adequately consider Oracles October 10, 2007 unsolicited proposal to acquire the Company for $17.00 per share. In addition, the complaint asserts a derivative cause of action against
the director defendants, ostensibly on behalf of and for the benefit of the Company, again alleging that the director defendants breached their fiduciary duties by failing to adequately consider Oracles $17.00 proposal. The complaint seeks
injunctive relief, including an order requiring the Companys directors to respond reasonably to offers that are in the best interests of shareholders, a prohibition on entry into any contractual provisions designed to impede the maximization
of shareholder value, and an order restraining the defendants from adopting or using any defensive measures against a potential acquiror. It is not known when or on what basis this action will be resolved.

On October 26, 2007 a putative class action lawsuit titled Zwick v. BEA Systems, Inc. et al. was filed in the Superior Court of the State of
California for the County of Santa Clara (the Zwick Action). The complaint names the Company, eight of its current directors, and certain unnamed John Doe parties as defendants. The complaint alleges that the director
defendants breached their fiduciary duties by failing to give proper consideration to Oracles October 10, 2007 unsolicited proposal to acquire the Company for $17.00 per share. The complaint seeks injunctive relief, including an order
requiring the defendants to cooperate with any party



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expressing a bona fide interest in making an offer that maximizes the value of the Companys shares and the formation of a stockholders committee
to ensure the fairness of any transaction involving the Companys shares. The complaint also seeks compensatory damages in an unspecified amount.

By Order dated February 13, 2008, the Superior Court for the Country of Santa Clara consolidated the Gross Action and the Zwick Action. At a hearing on February 14, 2008, the Superior Court for the County of
Santa Clara stated that it would consolidate the Gross Action, Zwick Action, and Ellman Action (the Consolidated California Action) pending submission of a proposed order from the parties. The Company is defending the Consolidated
California Action vigorously. There can be no assurance, however, that we will be successful in our defense of this action. It is not known when or on what basis this action will be resolved.

On October 26, 2007, a lawsuit titled High River Ltd. PShip et al. v. BEA Systems, Inc. et al. was filed in the Court of Chancery of the State
of Delaware (the High River Action). The action was brought by High River Ltd. Partnership and certain affiliated parties who purport to collectively beneficially own almost 14 percent of the Companys stock. The complaint sought,
pursuant to Del. C. § 211, to compel the Company to hold an annual meeting on or before November 30, 2007, and to enjoin the Company from taking certain actions pending the next annual meeting. The parties subsequently agreed to settle the
High River Action. Pursuant to the settlement, the Company will hold its 2007 annual meeting on March 18, 2008. The settlement was approved by the Court of Chancery on December 20, 2007.

The Company is subject to legal proceedings and other claims that arise in the ordinary course of business, such as those arising from domestic and
foreign tax authorities, intellectual property matters and employee related matters, in the ordinary course of its business. While management currently believes the amount of ultimate liability, if any, with respect to these actions will not
materially affect the Companys financial position, results of operations or liquidity, the ultimate outcome could be material to the Company. It is not known when or on what basis this action will be resolved.



|ITEM 4. | SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
|------- | ----------------------------------------------------

No matters were submitted to a vote of security holders during the fourth quarter of fiscal year 2008.



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PART II



|ITEM 5. | MARKET FOR REGISTRANTS EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.
|------- | ------------------------------------------------------------------------------------------------------

Since our initial public offering on April 11, 1997, our common stock has traded on the NASDAQ National Market under the symbol BEAS.
According to our transfer agent, we had approximately 708 stockholders of record as of January 31, 2008.

The following table sets
forth the high and low sales prices reported on the NASDAQ National Market for our common stock for the periods indicated:



|                                    |  |     |       |      |   |      
|----------------------------------- |  | --- | ----- | ---- | - | -----
|                                    |  | Low |       | High
|Fiscal year ended January 31, 2008: |  |     |       |      |   |      
|Fourth Quarter                      |  | $   | 14.39 |      | $ | 18.74
|Third Quarter                       |  |     | 11.02 |      |   | 18.94
|Second Quarter                      |  |     | 10.50 |      |   | 14.32
|First Quarter                       |  |     | 10.80 |      |   | 13.34
|                                    |  |    
|Fiscal year ended January 31, 2007: |  |     |       |      |   |      
|Fourth Quarter                      |  | $   | 12.00 |      | $ | 16.28
|Third Quarter                       |  |     | 10.81 |      |   | 16.77
|Second Quarter                      |  |     | 11.05 |      |   | 13.77
|First Quarter                       |  |     | 10.20 |      |   | 14.29
|                                    |  |    
|Fiscal year ended January 31, 2006: |  |     |       |      |   |      
|Fourth Quarter                      |  | $   | 8.75  |      | $ | 10.85
|Third Quarter                       |  |     | 8.09  |      |   | 9.67 
|Second Quarter                      |  |     | 6.86  |      |   | 9.41 
|First Quarter                       |  |     | 6.78  |      |   | 8.94 

We have never declared or paid any cash dividends on our common stock. We currently intend to
invest cash generated from operations, if any, to support the development of our business and do not anticipate paying cash dividends for the foreseeable future. Payment of future dividends, if any, will be as determined by of our Board of
Directors.

Issuer Purchases of Equity Securities

Stock Repurchases:

In September 2001, the Board of Directors approved a share repurchase program for the Company to
repurchase up to $100.0 million of its common stock (the Share Repurchase Program). In March 2003, the Board of Directors approved a repurchase of up to an additional $100.0 million of our common stock under the Share Repurchase Program.
In May 2004 and March 2005, the Board of Directors approved repurchases of up to an additional $200.0 million (an aggregate of $600.0 million) of our common stock under the Share Repurchase Program. At January 31, 2008, $121.8 million of the
aggregate $600.0 million remained available for future purchases. In May 2007 the Board of Directors approved repurchases of up to an additional $500.0 million (an aggregate of $1.1 billion) of our common stock under the Share Repurchase Program.
The Share Repurchase Program does not have an expiration date. No purchases were made in fiscal 2008 in part due to the stock option restatement and no purchases were made through the date of this filing.



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PERFORMANCE GRAPH

LOGO



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|ITEM 6. | SELECTED FINANCIAL DATA.
|------- | ------------------------

The following selected
consolidated financial data should be read in conjunction with the Consolidated Financial Statements and Notes thereto and Managements Discussion and Analysis of Financial Condition and Results of Operations appearing elsewhere in
this Annual Report on Form 10-K.



|                         |  |                                       |           |   |             |   |           |         |  |   |           |   |  |      |           |   |  |   |           |  
|------------------------ |  | ------------------------------------- | --------- | - | ----------- | - | --------- | ------- |  | - | --------- | - |  | ---- | --------- | - |  | - | --------- | -
|                         |  | For the fiscal year ended January 31, |          
|                         |  | 2008(a)                               |           |   | 2007(b)     |   |           | 2006(c) |  |   | 2005(d)   |   |  | 2004 |          
|                         |  | (in thousands, except per share data) |           |   | (unaudited) |  
|Total revenues           |  | $                                     | 1,535,780 |   |             | $ | 1,402,349 |         |  | $ | 1,199,845 |   |  | $    | 1,080,094 |   |  | $ | 1,012,492 |  
|Cost of revenues         |  |                                       | 358,690   |   |             |   | 333,326   |         |  |   | 257,212   |   |  |      | 224,873   |   |  |   | 239,166   |  
|Gross profit             |  |                                       | 1,177,090 |   |             |   | 1,069,023 |         |  |   | 942,633   |   |  |      | 855,221   |   |  |   | 773,326   |  
|Operating expenses       |  |                                       | 945,838   |   |             |   | 1,102,654 |         |  |   | 734,035   |   |  |      | 649,690   |   |  |   | 641,330   |  
|Operating income (loss)  |  |                                       | 231,252   |   |             |   | (33,631   | )       |  |   | 208,598   |   |  |      | 205,531   |   |  |   | 131,996   |  
|Other income and expense |  |                                       | 57,231    |   |             |   | 44,317    |         |  |   | 9,589     |   |  |      | (7,646    | ) |  |   | (5,163    | )
|Income before tax        |  |                                       | 288,483   |   |             |   | 10,686    |         |  |   | 218,187   |   |  |      | 197,885   |   |  |   | 126,833   |  
|Income tax provision     |  |                                       | (80,302   | ) |             |   | (6,186    | )       |  |   | (75,017   | ) |  |      | (52,188   | ) |  |   | (18,797   | )
|Net income               |  |                                       | 208,181   |   |             |   | 4,500     |         |  |   | 143,170   |   |  |      | 145,697   |   |  |   | 108,036   |  
|Net income per share:    |  |                                       |           |   |             |   |           |         |  |   |           |   |  |      |           |   |  |   |           |  
|Basic                    |  | $                                     | 0.52      |   |             | $ | 0.01      |         |  | $ | 0.37      |   |  | $    | 0.36      |   |  | $ | 0.27      |  
|Diluted                  |  | $                                     | 0.50      |   |             | $ | 0.01      |         |  | $ | 0.36      |   |  | $    | 0.35      |   |  | $ | 0.26      |  



|(a) | Includes the following significant pre-tax item: additional facilities consolidation expense of $1.8 million. Also, includes $1.1 million of net gains on minority interest in equity
investments.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(b) | Includes the following significant pre-tax items: land impairment charge of $201.6 million, additional facilities consolidation expense $0.5 million, acquisition related in-process
research and development of $4.4 million. Also includes $11.1 million of net gains on minority interest in equity investments and $0.8 million of net gains on retirement of the 2006 convertible subordinated notes in Other income and expense.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(c) | Includes the following significant pre-tax items: additional facilities consolidation expense $0.8 million, acquisition related in-process research & development
(IPR&D) of $4.6 million. Also includes $0.7 million of net gains on retirement of the 2006 convertible subordinated notes in Other income and expense.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(d) | Includes the following significant pre-tax items: facilities consolidation expense of $8.2 million, acquired intangible asset impairment charge of $1.1 million.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------

Consolidated Balance Sheet Data (in thousands):



|                                     |  |                                       |           |             |   |             |  |      |           |      |   |           |  |   |          
|------------------------------------ |  | ------------------------------------- | --------- | ----------- | - | ----------- |  | ---- | --------- | ---- | - | --------- |  | - | ---------
|                                     |  | As of January 31,                    
|                                     |  | 2008                                  |           | 2007        |   | 2006        |  | 2005 |           | 2004
|                                     |  | (in thousands, except per share data) |           | (unaudited) |   | (unaudited)
|Cash and cash equivalents            |  | $                                     | 993,685   |             | $ | 867,294     |  | $    | 1,017,772 |      | $ | 777,754   |  | $ | 683,729  
|Short-term and long-term investments |  |                                       | 525,545   |             |   | 407,469     |  |      | 435,185   |      |   | 830,063   |  |   | 783,288  
|Goodwill                             |  |                                       | 227,536   |             |   | 233,998     |  |      | 138,235   |      |   | 52,791    |  |   | 46,481   
|Total assets                         |  |                                       | 2,672,648 |             |   | 2,398,842   |  |      | 2,468,243 |      |   | 2,338,335 |  |   | 2,205,567
|Deferred revenue                     |  |                                       | 476,985   |             |   | 449,282     |  |      | 379,123   |      |   | 312,310   |  |   | 273,879  
|Long-term obligations                |  |                                       | 173,744   |             |   | 228,790     |  |      | 227,388   |      |   | 780,194   |  |   | 745,672  
|Total stockholders equity           |  |                                       | 1,758,110 |             |   | 1,364,610   |  |      | 1,096,199 |      |   | 1,002,150 |  |   | 909,304  



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|ITEM 7. | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
|------- | --------------------------------------------------------------------------------------

Merger with Oracle Corporation

On January 16, 2008, the Company entered into an Agreement and
Plan of Merger (the Merger Agreement) with Oracle Corporation (Oracle) and Bronco Acquisition Corporation, a wholly-owned subsidiary of Oracle (Merger Sub). The Merger Agreement provides that, subject to the terms
and conditions of the Merger Agreement, Merger Sub will merge with and into the Company (the Merger) and, as a result of the Merger, the separate corporate existence of Merger Sub will cease and the Company will continue as the surviving
corporation and become a wholly-owned subsidiary of Oracle. Upon the closing of the Merger, each share of common stock of the Company issued and outstanding immediately prior to consummation of the Merger (other than shares owned by the Company,
Oracle or Merger Sub) will be converted into the right to receive $19.375 in cash, without interest. In addition, options to acquire Company common stock, restricted stock unit awards, restricted stock awards and other equity-based awards
denominated in shares of Company common stock outstanding immediately prior to the consummation of the Merger will be converted into options, restricted stock unit awards, restricted stock awards or other equity-based awards, as the case may be,
denominated in shares of Oracle common stock based on formulas contained in the Merger Agreement, except for equity-based awards held by a person who is not an employee of, or a consultant to, the Company or any of its subsidiaries at the time of
the consummation of the Merger, which equity-based awards shall be converted into the right to receive cash based on formulas contained in the Merger Agreement.

The Merger is subject to the approval of the Companys stockholders representing a majority of the outstanding shares of Company common stock. A special meeting of the Companys stockholders to consider and
vote on the proposal to adopt the Merger Agreement will be held on April 4, 2008. Stockholders of record as of the close of business on February 28, 2008 will be entitled to vote at the special meeting. In addition, the Merger is subject
to antitrust clearance or approvals in both the United States and the European Union, as well as other customary closing conditions. On February 27, 2008, the U.S. Department of Justice and the Federal Trade Commission granted early termination
of the Hart-Scott-Rodino (HSR) review period. BEA and Oracle are working toward obtaining all required clearances as soon as possible.

Under the terms of the Merger Agreement, the Company is required to pay Oracle a termination fee in the amount of $250 million in cash in the following circumstances:



| |  |  | the Merger Agreement is terminated by Oracle because either (1) the Companys Board of Directors fails to make or withdraws (or has publicly proposes to
do either) its recommendation to the Companys stockholders to adopt and approve the Merger Agreement or modifies or publicly proposes to modify its recommendation in a manner adverse to Oracle or Merger Sub, (2) the Company enters into,
or publicly announces its intention to enter into, a written agreement relating to an acquisition proposal from a third party, or (3) the Company or any of its representatives willfully and materially breach any of it obligations under the
non-solicitation provisions in the Merger Agreement;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the Merger Agreement is terminated by the Company because, prior to the receipt of the approval of the Companys stockholders to adopt the Merger Agreement,
the Companys Board of Directors authorizes the Company to enter into, and the Company substantially concurrently enters into, a binding definitive agreement with a third party for a transaction constituting a superior proposal; or
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the Merger Agreement is terminated by either the Company or Oracle because (A) either (1) the Merger is not consummated before October 16, 2008 (the
End Date) (the End Date may be extended to July 16, 2009 in order to obtain all necessary antitrust approvals), unless the failure to complete the Merger by such date is due to the actions of the party seeking to terminate the
Merger Agreement, or (2) the Companys stockholders fail to adopt the Merger Agreement, (B) prior to either the termination of the Merger Agreement or the date of the special meeting of the Companys stockholders, as the case may
be, an acquisition proposal by a third party has been publicly announced and not publicly
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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| | withdrawn, and (C) within 12 months following the date of such termination, the Company either enters into a definitive agreement with respect to, or
consummates, an acquisition proposal from a third party.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

In addition, if the Company has not breached its
non-solicitation and antitrust obligations under the Merger Agreement (except for such breaches that are unintentional and immaterial), Oracle is required to pay the Company a termination fee in the amount of $500 million in cash in the following
circumstances:



| |  |  | the Merger Agreement is terminated by either the Company or Oracle because the Merger is not consummated before the End Date and either (A) the antitrust
closing conditions have not been satisfied or waived, or (B) a governmental entity has issued an order, rule or regulation relating to antitrust matters that restrains, enjoins or prohibits the consummation of the Merger; or
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the Merger Agreement is terminated by either the Company or Oracle because either (A) a governmental entity of competent jurisdiction has issued a final and
non-appealable order, decree, ruling or other action permanently enjoining, restraining or otherwise prohibiting the consummation of the Merger or (B) any law or regulation is adopted that makes the consummation of the Merger illegal or
otherwise prohibited, and, in either instance, all other closing conditions of Oracle and Merger Sub have been met or waived.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Furthermore, if either the Company or Oracle terminates the Merger Agreement because of a failure to obtain the requisite approval of the Companys stockholders upon a final vote taken at a special meeting of the Companys
stockholders (or any adjournment or postponement thereof), BEA is required to reimburse Oracle for all of its documented reasonable out-of-pocket fees and expenses (including reasonable legal and other third party advisors fees and expenses)
actually incurred by Oracle and its affiliates on or prior to the termination of the Merger Agreement in an amount not to exceed $25 million. Any such required payments will be credited against any obligation that the Company may have to pay the
termination fee described above.

In addition, on November 7, 2007, the Board adopted the Change in Control Severance Plan, which
covers substantially all regular, full-time employees and part-time employees who are scheduled to work at least twenty hours per week, and who are not covered by individual change in control employment agreements. Under the terms of the plan, if,
during the one year period following a change in control of the Company, a participants employment is terminated by the Company without cause or by the participant for good reason, the participant will receive
(i) lump sum severance benefits, (ii) continued payment of the cost of the participants premiums for health continuation coverage under COBRA for a period equal to the number of months of severance pay, and (iii) immediate
vesting of fifty percent of the unvested portion of each grant of the participants stock options, restricted stock, restricted stock units that is outstanding and unvested as of the date of termination.

Executive Summary of Financial Results

We recently
completed an independent review of our equity award practices. The independent review, which commenced in August 2006, covered all grants of options and other equity awards made from January 1996 through June 2006, excluding stock options assumed as
part of business combinations. The independent review was directed by the Audit Committee of our Board of Directors. Based on the results of the independent review, the Audit Committee concluded that, pursuant to APB 25 and related
interpretations, the accounting measurement dates for most of the stock option grants awarded between April 11, 1997 and May 31, 2006, covering options to purchase 169.7 million shares of our common stock, differed from the
measurement dates previously used for such awards. The independent review also identified situations of extended vesting and exercise privileges without requiring the grantee to provide any substantive future service, which constituted a
modification of the original agreement which required remeasurement and the Company failed to remeasure and record the additional compensation costs. As a result of the revised measurement dates and extended vesting and exercise rights, BEA recorded
a total of $424.0 million in additional stock-based compensation expense for the



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fiscal years 1998 through 2006 with related tax adjustments of $92.3 million, the restatement resulted in total net adjustments of $331.7 million
for the years 1998 through 2006. This amount was net of forfeitures related to employee terminations. The additional stock-based compensation expense related to stock option grant dates was amortized over the service period relating to each option,
typically four years. The extended vesting and exercise privileges were recorded at termination.

As a consequence of these adjustments,
two of the three years of our audited consolidated financial statements and related disclosures for the three years ended January 31, 2007 and our consolidated statements of operations and consolidated balance sheet data for four of the five
years ended January 31, 2007, included in our 2007 Form 10-K were restated. We also restated the stock-based compensation expense footnote information calculated under SFAS 123 and SFAS No. 148, Accounting for Stock-Based
CompensationTransition and Disclosure, under the disclosure-only alternatives of those pronouncements for the fiscal years 2006 and 2005.

The adjustments did not affect BEAs previously-reported revenue, cash, cash equivalents or marketable securities balances in any of the restated periods.

Financial information included in the reports on Form 10-K, Form 10-Q and Form 8-K previously filed by BEA, and the related opinions of our independent registered public accounting firm, and all
earnings press releases and similar communications issued by us, for all periods ended on or before July 31, 2006, should not be relied upon and have been superseded in their entirety by the information contained in our 2007 Form 10-K and
Form 10-Q for the six and nine month periods ended July 31, 2006 and October 31, 2006, respectively.

Fiscal 2008

During fiscal 2008, total revenues increased 9.5 percent from 2007 due to an increase in services revenues (customer support and maintenance, consulting
and education) of 18.7 percent offset by a decline in license revenues of 3.7 percent. The decline in license growth was due to a drop in the WebLogic product family offset by growth in the AquaLogic product family. The AquaLogic product family is
comprised of products that were organically developed (e.g., AquaLogic Service Bus was introduced in August 2005) and products acquired through the purchase of Plumtree Software Inc. (Plumtree) in October 2005 and Fuego Inc.
(Fuego) in February 2006. The increase in services revenue was primarily due to an increase in the customer support and maintenance revenues. Geographically, the Americas (U.S., Canada, Mexico and Latin America), Europe, Middle East and
Africa (EMEA) and Asia/Pacific (APAC), all reported revenue growth year over year. Additionally in fiscal 2008, our international revenues benefited approximately 4 percent due to exchange rate fluctuations year on year.

In fiscal 2008, most expenses increased in absolute dollars, however declined as a percentage of revenues. In fiscal 2008, amortization
expense associated with acquired intangibles declined from $38.4 million to $30.5 million due to certain intangibles becoming fully amortized during fiscal 2008. Stock-based compensation (FAS123(R)) expenses declined by $22.9 million to
$45.5 million in total due to amortization declining related to lower stock prices which resulted in a lower fair value in fiscal 2005 compared to fiscal 2004 and less modification expense in fiscal 2008 compared to fiscal 2007. The increase in
R&D was due in part to the exchange rate impact on international expenses and the decrease in third party funding associated with product development agreements. G&A increased primarily due to stock option review expenses, strategic advisor
expenses associated with the impending Oracle acquisition and certain legal expenses associated with intellectual property. All other expenses primarily increased due to volume and/or the negative impact of exchange rates. Our international expenses
increased by approximately 3 percent due to exchange rate fluctuations year on year.

In fiscal 2008, after BEA became current with its
reporting obligations under the Securities and Exchange Act of 1934, the Company filed a Tender Offer Statement on Schedule TO with the SEC. The tender offer extended an offer by BEA to holders of certain outstanding stock options granted under the
Companys Stock Plans to amend the exercise price on their outstanding options impacted by the change in measurement date. The



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purpose of the tender offer was to amend the exercise price on options to have the same price as the fair market value on revised measurement dates that were
identified during the Companys independent review. As part of the tender offer, the Company paid cash of $10.8 million, including payroll taxes, in January 2008 to reimburse employees for any increase in the exercise price of their options
resulting from the amendment. The impact of this payment, which was recorded during the fourth quarter of fiscal 2008, resulted in a decrease to additional paid-in capital of $7.4 million, an increase in stock-based compensation expense of $2.4
million and an increase in payroll tax expenses of $1.0 million.

In the second quarter of fiscal 2008, the Company paid off the $215.0
million outstanding balance on the $500.0 million unsecured revolving credit facility (the credit facility). The Company is compliant in its debt covenant disclosures.

The San Jose Land was sold in the first quarter of fiscal 2008, after evaluation of our facilities options and strategies, for $105.5 million, net of
transaction costs which resulted in an insignificant gain reflected in other income and expense. The San Jose Building was purchased for $135.3 million. We recorded the sale of the San Jose Land and the purchase of the San Jose Building in the first
quarter of fiscal 2008.

In fiscal 2008, the effective tax rate was 27.8 percent compared to 57.9 percent in fiscal 2007. The decline in
the effective tax rate was primarily due to the fact the rate in FY07 was abnormally high due to the increase in valuation allowance. Additionally, fiscal 2008 had a greater benefit than fiscal 2007 for lower taxed earnings in foreign jurisdictions.

On January 16, 2008, BEA entered into a definitive merger agreement with Oracle Corporation. The Company plans to seek the
approval of its stockholders for the proposed merger at a special meeting of stockholders to be held on April 4, 2008, and the Company has filed a preliminary proxy statement with the SEC in connection with the proposed merger.

Fiscal 2007

During fiscal 2007, revenues increased
17 percent from 2006 due to an increase of both license and services revenues. This revenue growth was due in large part to the AquaLogic product family which is comprised of products that were organically developed and products acquired through the
purchase of Plumtree and Fuego. Fiscal 2007 revenues increased 17 percent compared to fiscal 2006 due to a 12 percent increase for license revenues and a 20 percent increase for services revenue (customer support and maintenance, consulting and
education). The increase in services revenue was primarily due to an increase in the customer support and maintenance revenues. Geographically, the Americas (U.S., Canada, Mexico and Latin America), Europe, Middle East and Africa (EMEA)
and Asia/Pacific (APAC), all reported revenue growth year over year. Additionally in fiscal 2007, our international revenues benefited approximately 1 percent due to exchange rate fluctuations year over year.

In fiscal 2007, most expenses increased in absolute dollars, as well as a percentage of revenues. In fiscal 2007, stock-based compensation expense
increased significantly due to FAS 123(R) expense of $68.4 million or an increase of $47.7 million. Stock-based compensation expenses impacted all functional lines of the business. The Company also integrated the Plumtree and Fuego operations into
BEA, which also impacted all functional lines of the business. In addition to the stock-based compensation expense and the integration of multiple acquisitions, sales and marketing, research and development (R&D), and general and administrative
(G&A) expenses increased year over year. The increase in sales and marketing was primarily attributable to compensation and sales related expenses. The increase in R&D was due in part to the integration of acquisitions completed in the
second half of fiscal 2006 and their comparison to a full year of expenses in fiscal 2007. The increase was driven by a decline in third party funding associated with product development agreements and continued investment in research and
development, specifically related to the international telecommunications



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technology centers. G&A increased primarily due to stock option review expenses, certain legal expenses and compensation related expenses. Our
international expenses, were negatively impacted by approximately 1 percent due to exchange rate fluctuations year over year.

During the
fourth quarter of fiscal 2007, we evaluated our facilities options and strategy with respect to our leased corporate headquarters in San Jose, California, whose leases expire in July 2008. Based on the results of this evaluation, we concluded that
it was unlikely that we would occupy the land, and therefore we evaluated it for impairment.

As of January 31, 2007, we determined
that there was a more likely than not chance that the San Jose Land would be disposed of within the next 12 months. We completed an impairment review in accordance with Statement of Financial Accounting Standards No. 144, Accounting for the
Impairment or Disposal of Long-Lived Assets, and we concluded that a $201.6 million write-down of the San Jose Land was required, reducing the value of the San Jose land to a new carrying value of $105.0 million.

In fiscal 2006 we acquired five software companies, one of which was Plumtree, a public company that had established license and services revenues. We
purchased Plumtree in the third quarter of fiscal 2006 for approximately $211.1 million. We reflected 10 days of total revenue and expenses related to Plumtree in the third quarter of fiscal 2006 and a full quarter of revenue and expenses in the
fourth quarter of fiscal 2006. Consequently, comparisons between fiscal 2007 and fiscal 2006 are impacted by this acquisition.

In February
2006 we purchased Fuego Inc. for approximately $88.4 million. In August 2006, the Company acquired Flashline, Inc. for approximately $43.6 million. Neither Fuego or Flashline had significant pre-existing revenue streams.

In fiscal 2007, the effective tax rate was 57.9 percent compared to 34.4 percent in fiscal 2006. The increase in the effective tax rate was primarily due
to the increase in non-deductible stock based compensation and the increase in the valuation allowance which was partially offset by higher benefits of low taxed foreign earnings and research credits.

Seasonality

Our first fiscal quarter license
revenues are typically lower than license revenues in the immediately preceding fourth fiscal quarter because our commission plans and other sales incentives are structured for annual performance and contain bonus provisions based on annual quotas
that typically are triggered in the later quarters in a fiscal year. In addition, many of our customers begin a new fiscal year on January 1 and it is common for capital expenditures to be lower in an organizations first quarter than in
its fourth quarter. We anticipate that the negative impact of seasonality on our first fiscal quarter results will continue. Our cash flows and deferred revenue balances also tend to fluctuate based in-part by the seasonality of our license
business.

Due to the seasonality of license revenue, a greater than proportional amount of our customer support contracts are renewed in
the fourth quarter, which leads to a significant increase in deferred customer support revenue in that quarter. The recognition of this deferred revenue occurs over the following four quarters and consequently deferred support revenue generally
declines in the first three quarters of the next fiscal year. Due to the significant increase in deferred customer support revenue balance in the fourth quarter, there is a greater than proportional cash collection of the respective receivables that
occurs in the fourth quarter and the first quarter of the following fiscal year. Consequently operating cash flow is seasonally strong in the fourth quarter and first quarter and weaker in the second and third quarters of a fiscal year.



45



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Results of Operations

The following table sets forth certain line items in BEAs consolidated statements of income as a percentage of total revenues for the fiscal years ended January 31, 2008, 2007, and 2006.



|                                                        |  |                               |   |  |       |   |  |       |  
|------------------------------------------------------- |  | ----------------------------- | - |  | ----- | - |  | ----- | -
|                                                        |  | Fiscal year ended January 31, |  
|                                                        |  | 2008                          |   |  | 2007  |   |  | 2006  |  
|Revenues:                                               |  |                               |   |  |       |   |  |       |  
|License fees                                            |  | 35.9                          | % |  | 40.9  | % |  | 42.6  | %
|Services                                                |  | 64.1                          |   |  | 59.1  |   |  | 57.4  |  
|                                                        |  |                               |   |  |       |   |  |       |  
|Total revenues                                          |  | 100.0                         |   |  | 100.0 |   |  | 100.0 |  
|Cost of revenues:                                       |  |                               |   |  |       |   |  |       |  
|Cost of license fees(1)                                 |  | 11.0                          |   |  | 11.2  |   |  | 7.6   |  
|Cost of services(1)                                     |  | 30.3                          |   |  | 32.5  |   |  | 31.7  |  
|                                                        |  |                               |   |  |       |   |  |       |  
|Total cost of revenues                                  |  | 23.4                          |   |  | 23.8  |   |  | 21.4  |  
|                                                        |  |                               |   |  |       |   |  |       |  
|Gross margin                                            |  | 76.6                          |   |  | 76.2  |   |  | 78.6  |  
|Operating expenses:                                     |  |                               |   |  |       |   |  |       |  
|Sales and marketing                                     |  | 35.3                          |   |  | 37.4  |   |  | 36.5  |  
|Research and development                                |  | 15.6                          |   |  | 16.6  |   |  | 15.2  |  
|General and administrative                              |  | 10.5                          |   |  | 9.9   |   |  | 9.1   |  
|Restructuring charges                                   |  | 0.1                           |   |  |      |   |  | 0.1   |  
|Acquisition-related in-process research and development |  |                              |   |  | 0.3   |   |  | 0.3   |  
|Impairment of land                                      |  |                              |   |  | 14.4  |   |  |      |  
|                                                        |  |                               |   |  |       |   |  |       |  
|Total operating expenses                                |  | 61.5                          |   |  | 78.6  |   |  | 61.2  |  
|                                                        |  |                               |   |  |       |   |  |       |  
|Income from operations                                  |  | 15.1                          |   |  | (2.4  | ) |  | 17.4  |  
|Interest and other, net                                 |  | 3.7                           |   |  | 3.2   |   |  | 0.8   |  
|                                                        |  |                               |   |  |       |   |  |       |  
|Income before provision for income taxes                |  | 18.8                          |   |  | 0.8   |   |  | 18.2  |  
|Provision for income taxes                              |  | 5.2                           |   |  | 0.5   |   |  | 6.3   |  
|                                                        |  |                               |   |  |       |   |  |       |  
|Net income                                              |  | 13.6                          | % |  | 0.3   | % |  | 11.9  | %
|                                                        |  |                               |   |  |       |   |  |       |  



|(1) | Cost of license fees and cost of services are stated as a percentage of license fees and services revenue, respectively.
|--- | ------------------------------------------------------------------------------------------------------------------------

Revenues (in thousands):



|               |  |                               |           |                                           |   |           |                                           |   |           |  |     |   |  |      |  
|-------------- |  | ----------------------------- | --------- | ----------------------------------------- | - | --------- | ----------------------------------------- | - | --------- |  | --- | - |  | ---- | -
|               |  | Fiscal year ended January 31, |           | Percentagechangefiscal 2008vs.fiscal 2007 |   |           | Percentagechangefiscal 2007vs.fiscal 2006 |  
|               |  | 2008                          |           | 2007                                      |   | 2006      |                                           |  
|Total revenues |  | $                             | 1,535,780 |                                           | $ | 1,402,349 |                                           | $ | 1,199,845 |  | 9.5 | % |  | 16.9 | %

Our revenues are derived from fees for software licenses and services. Services revenues are
comprised of customer support and maintenance, education and consulting. Total revenue growth from fiscal 2007 to fiscal 2008 was 9.5 percent. This was comprised of an 18.7 percent increase in services revenue and a 3.7 percent decrease in licenses
due to a decline in demand for the WebLogic product family offset by an increase in demand for the AquaLogic product family. The increase in services revenues was primarily due to customer support and maintenance revenues. Additionally, our
international revenues benefited approximately 4 percent due to exchange rate fluctuations year over year.

Revenue growth from fiscal 2006
to fiscal 2007 was 16.9 percent, which was comprised of a 20.4 percent increase in services and a 12.1 percent increase in licenses. The increase in services revenues was primarily due



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to customer support and maintenance revenues. Additionally, our international revenues benefited approximately 1 percent due to exchange rate fluctuations
year over year.

In fiscal 2006 and fiscal 2007 we acquired seven software companies, one of which was Plumtree, a public company that had
established license and services revenues. We reflected 10 days of total revenue related to Plumtree in the third quarter of fiscal 2006 of approximately $1.0 million and a full quarter of revenue in the fourth quarter of fiscal 2006. Consequently,
comparisons between fiscal 2007 and fiscal 2006 are impacted by this acquisition.

Geographically, the contribution of the Americas (U.S.,
Canada, Mexico and Latin America) to total revenues decreased to 49.3 percent in fiscal 2008 compared to 53.6 percent in fiscal 2007. The Europe, Middle East and Africa (EMEA) contribution increased slightly to 34.2 percent in fiscal
2008 compared to 31.8 percent in fiscal 2007, and the Asia/Pacific (APAC) contribution increased to 16.5 percent in fiscal 2008 compared to 14.6 percent in fiscal 2007. Exchange rates positively impacted total revenues for fiscal 2008
compared to fiscal 2007. Total revenues when translated at constant exchange rates from the same period in the prior year would have been approximately $1.481 billion, which represents a 5.6 percent increase over total revenues for the same period
in the prior year versus a 9.5 percent absolute increase.

Geographically, the Americas contribution to total revenues increased to 53.6
percent in fiscal 2007 compared to 51.9 percent in fiscal 2006. The EMEA contribution declined slightly to 31.8 percent in fiscal 2007 compared to 33.1 percent in fiscal 2006 and the APAC contribution decreased to 14.6 percent in fiscal 2006
compared to 15.0 percent in fiscal 2006. Management believes the revenue acquired with the Plumtree acquisition impacted the geographic results because the majority of the revenue acquired with Plumtree was generated in the United States. Exchange
rates positively impacted total revenues for fiscal 2007 compared to fiscal 2006. Total revenues when translated at constant exchange rates from the same period in the prior year would have been approximately $1.391 billion, which represents a 16.0
percent increase over total revenues for the same period in the prior year versus a 16.9 percent absolute increase

License fees (in
thousands):



|             |  |             |         |             |   |             |  |                                           |         |  |                                           |    |  |      |  
|------------ |  | ----------- | ------- | ----------- | - | ----------- |  | ----------------------------------------- | ------- |  | ----------------------------------------- | -- |  | ---- | -
|             |  | Fiscal 2008 |         | Fiscal 2007 |   | Fiscal 2006 |  | Percentagechangefiscal 2008vs.fiscal 2007 |         |  | Percentagechangefiscal 2007vs.fiscal 2006 |   
|License fees |  | $           | 552,022 |             | $ | 573,470     |  | $                                         | 511,549 |  | (3.7                                      | %) |  | 12.1 | %

Management believes license revenue declined from fiscal 2007 to fiscal 2008 due to less demand
for the WebLogic family of products offset by an increase in demand for AquaLogic. The AquaLogic product family is comprised of products that were organically developed and products acquired from Plumtree and Fuego. The AquaLogic product family
contributed approximately 26 percent of revenues for fiscal 2008 compared to approximately 20 percent for fiscal 2007. Due primarily to the structure of our multi-product enterprise license agreements, our break down of product family license
revenue is based on estimated demand at the time the order is placed, not necessarily on actual deployment. Exchange rates positively impacted license revenues for fiscal 2008 compared to fiscal 2007. In fiscal 2008, license revenues when translated
at constant exchange rates from the same period in the prior year would have been approximately $531.6 million, which represents a 7.3 percent decline over license revenues for the same period in the prior year, versus a 3.7 percent absolute
decline.

Quarterly revenue contribution from transactions with license fees greater than $1 million has ranged from approximately 19
percent to 39 percent for fiscal 2008. Transactions greater than $1 million constitute a significant portion of total license revenues and management believes these transactions have an inherent volatility related to their timing and size, which
increases the risk that reported results may differ from expected results.



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Management believes the increase in license revenues from fiscal 2006 to fiscal 2007 was due to improved
demand for our core WebLogic product family and market acceptance of the new AquaLogic product family. Quarterly revenue contribution from transactions with license fees greater than $1 million was within the range of 23 percent to 39 percent for
fiscal 2007. In fiscal 2007, license revenues when translated at constant exchange rates from the same period in the prior year would have been approximately $567.9 million, which represents an 11.0 percent increase over license revenues for the
same period in the prior year, versus a 12.1 percent absolute increase.

In addition to the transactions with license fees greater than $1
million, we have a significant number of small and midsize transactions. Our business model generally begins with smaller transactions being seeded into our customers with a goal that these customers will enter into larger, more significant
transactions over time.

Services revenue

The following table provides a summary of services revenue (in thousands):



|                                          |  |             |         |             |   |             |  |                                           |         |  |                                           |   |  |      |  
|----------------------------------------- |  | ----------- | ------- | ----------- | - | ----------- |  | ----------------------------------------- | ------- |  | ----------------------------------------- | - |  | ---- | -
|                                          |  | Fiscal 2008 |         | Fiscal 2007 |   | Fiscal 2006 |  | Percentagechangefiscal 2008vs.fiscal 2007 |         |  | Percentagechangefiscal 2007vs.fiscal 2006 |  
|Consulting and education revenues         |  | $           | 210,030 |             | $ | 175,665     |  | $                                         | 145,572 |  | 19.6                                      | % |  | 20.7 | %
|Customer support and maintenance revenues |  |             | 773,728 |             |   | 653,214     |  |                                           | 542,724 |  | 18.4                                      |   |  | 20.4 |  
|                                          |  |             |         |             |   |             |  |                                           |         |  |                                           |   |  |      |  
|Total services revenue                    |  | $           | 983,758 |             | $ | 828,879     |  | $                                         | 688,296 |  | 18.7                                      | % |  | 20.4 | %
|                                          |  |             |         |             |   |             |  |                                           |         |  |                                           |   |  |      |  

Consulting and education revenues consist of professional services related to the deployment and
use of our software products. These arrangements are generally structured on a time and materials basis and revenues are recognized as services are performed. Customer support and maintenance revenues consist of fees for annual maintenance
contracts, typically priced as a percentage of the license fee, and recognized ratably over the term of the agreement (generally one year). Total services revenues for fiscal 2008 and fiscal 2007 were positively impacted by the fluctuation in
exchange rates. Total services revenues for fiscal 2008, when translated at a constant exchange rate from the same period in the prior year, would have been $949.5 million, an increase of 14.6 percent over the same period in fiscal 2007 versus an
absolute increase of 18.7 percent. Total services revenues for fiscal 2007, when translated at a constant exchange rate from the same period in the prior year, would have been $823.3 million, an increase of 19.6 percent over the same period in
fiscal 2006 versus an absolute increase of 20.4 percent.

The $120.5 million and $110.5 million increase in customer support and
maintenance revenues for fiscal 2008 and fiscal 2007 was driven primarily by maintenance renewals on our existing installed base of software licenses, including in fiscal 2008 the Plumtree installed base renewals that were written down as part of
acquisition accounting and are now being recognized at their gross value, as well as maintenance contracts sold together with sales of software licenses.

The increase in consulting and education revenues for fiscal 2008 compared to fiscal 2007 was primarily due to BEAs core product families, WebLogic and Tuxedo. The increase in consulting and education revenues
for fiscal 2007 compared to fiscal 2006 was due to a 25.4 percent increase in consulting services primarily related to providing services associated with products acquired from Plumtree and Fuego.



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Revenues by Geographic Region

The following tables provide a summary of revenues by geographic region (in thousands):



|               |  |             |           |                                                     |       |   |             |   |                                                     |  |       |             |  |                                                     |           |  |       |  
|-------------- |  | ----------- | --------- | --------------------------------------------------- | ----- | - | ----------- | - | --------------------------------------------------- |  | ----- | ----------- |  | --------------------------------------------------- | --------- |  | ----- | -
|               |  | Fiscal 2008 |           | Fiscal 2008(percentage ofconsolidatedtotalrevenues) |       |   | Fiscal 2007 |   | Fiscal 2007(percentage ofconsolidatedtotalrevenues) |  |       | Fiscal 2006 |  | Fiscal 2006(percentage ofconsolidatedtotalrevenues) |          
|Americas       |  | $           | 756,834   |                                                     | 49.3  | % |             | $ | 752,082                                             |  | 53.6  | %           |  | $                                                   | 622,624   |  | 51.9  | %
|EMEA           |  |             | 525,377   |                                                     | 34.2  |   |             |   | 446,464                                             |  | 31.8  |             |  |                                                     | 397,815   |  | 33.1  |  
|APAC           |  |             | 253,569   |                                                     | 16.5  |   |             |   | 203,803                                             |  | 14.6  |             |  |                                                     | 179,406   |  | 15.0  |  
|               |  |             |           |                                                     |       |   |             |   |                                                     |  |       |             |  |                                                     |           |  |       |  
|Total revenues |  | $           | 1,535,780 |                                                     | 100.0 | % |             | $ | 1,402,349                                           |  | 100.0 | %           |  | $                                                   | 1,199,845 |  | 100.0 | %
|               |  |             |           |                                                     |       |   |             |   |                                                     |  |       |             |  |                                                     |           |  |       |  

For each of the twelve fiscal quarters included in the three fiscal years ended January 31,
2008, international revenues as a percentage of total revenues have ranged between 30 percent to 36 percent for EMEA and 14 percent to 18 percent for APAC. These ranges are expected to continue to fluctuate in the future depending upon regional
economic conditions, foreign currency exchange rates, and other factors.

In fiscal 2008, the percentage of total revenue contribution from
the Americas declined to 49.3 percent from 53.6 percent when compared to the prior year. The decrease in the Americas revenue for fiscal 2008 compared to fiscal 2007 was comprised of a 21.0 percent decrease in license revenue offset by a 14.9
percent increase in services revenue. The increase in Americas services revenue was due to increases in customer support and maintenance revenues and consulting and education revenues of 16.5 percent and 9.7 percent, respectively. In fiscal 2007,
the percentage of total revenue contribution from the Americas increased to 53.6 percent from 51.9 percent when compared to the prior year. The Americas revenue contribution was positively impacted by the Plumtree acquisition since the revenues from
the products were generated primarily in the United States. The increase in the Americas revenue for fiscal 2007 compared to fiscal 2006 was comprised of a 14.9 percent increase in license revenue and a 25.1 percent increase in services revenue. The
increase in Americas services revenue was due to increases in customer support and maintenance revenues and consulting and education revenues of 22.4 percent and 34.4 percent, respectively.

In fiscal 2008, the percentage of total revenue contribution from EMEA increased to 34.2 percent from 31.8 percent when compared to the prior year.
EMEAs revenues increased by $78.9 million from fiscal 2007 to fiscal 2008 due to growth in license revenues of 7.4 percent and growth in the services business of 24.3 percent. Customer support and maintenance revenues increased 20.5 percent
year over year across the region. Consulting and education increased 39.2 percent for the region; with one country increasing significantly due to a non-recurring project recognized primarily in fiscal 2008. Total EMEA revenues for fiscal 2008, when
translated at a constant exchange rate from the same period in the prior year, would have been $482.8 million. This represents a constant currency increase of 8.1 percent over the same period in fiscal 2007 versus an absolute increase of 17.7
percent.

In fiscal 2007, the percentage of total revenue contribution from EMEA declined to 31.8 percent from 33.1 percent when compared
to the prior year. The percentage decline in EMEAs contribution was primarily impacted by the products acquired from Plumtree whose revenues were generated in the United States. EMEAs revenues increased by $48.6 million from fiscal 2006
to fiscal 2007 due to growth in license revenues of 11.5 percent and growth in the services business of 12.7 percent. Customer support and maintenance revenues increased 15.9 percent year over year across the region. Consulting and education
increased slightly for the region, however there was one country where it declined significantly due to a non-recurring project recognized in fiscal 2006. Our revenues in EMEA in fiscal 2007 were positively impacted by a fluctuation in exchange
rates. Total EMEA revenues for fiscal 2007, when translated at a constant exchange rate from the same period in the prior year, would have been $436.9 million. This represents a constant currency increase of 9.8 percent over the same period in
fiscal 2006 versus an absolute increase of 12.2 percent.



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In fiscal 2008, the percentage of total revenue contribution from APAC increased to 16.5 percent from
14.6 percent when compared to the prior year. APACs revenues increased by $49.8 million when comparing fiscal 2008 to fiscal 2007 and the increase was due to growth in all revenue streams. License revenues increased 28.8 percent and services
revenue increased 20.3 percent, which also included a 21.0 percent increase in the customer support and maintenance revenues across the region. Total revenues increased in all countries. Total APAC revenues for fiscal 2008, when translated at a
constant exchange rate from the same period in the prior year, would have been $246.9 million, a increase of 21.1 percent over the same period in fiscal 2007 versus an absolute increase of 24.4 percent.

In fiscal 2007, the percentage of total revenue contribution from APAC declined to 14.6 percent from 15.0 percent when compared to the prior year. The
percentage decline in APACs revenue contribution was primarily impacted by the products acquired from Plumtree whose revenues were generated in the United States. APACs revenues increased by $24.4 million when comparing fiscal 2007 to
fiscal 2006 and the increase was due to growth in all revenue streams. License revenues increased 5.4 percent and services revenue increased 22.6 percent, which also included a 23.7 percent increase in the customer support and maintenance revenues
across the region. Total revenues increased in all countries with the exception of Japan, which declined 6.7 percent. Our revenues in APAC in fiscal 2007 were negatively impacted by a fluctuation in exchange rates mostly due to the Japanese yen.
Total APAC revenues for fiscal 2007, when translated at a constant exchange rate from the same period in the prior year, would have been $206.4 million, a increase of 15.1 percent over the same period in fiscal 2006 versus an absolute increase of
13.6 percent.

Deferred revenue and backlog

The following table sets forth the components of deferred revenue (in thousands):



|                       |  |            |         |      |   |        
|---------------------- |  | ---------- | ------- | ---- | - | -------
|                       |  | January 31
|                       |  | 2008       |         | 2007
|License fees           |  | $          | 4,878   |      | $ | 13,797 
|Services               |  |            | 472,107 |      |   | 435,485
|                       |  |            |         |      |   |        
|Total deferred revenue |  | $          | 476,985 |      | $ | 449,282
|                       |  |            |         |      |   |        

Management does not believe that backlog as of any particular date is a reliable indicator of
future performance. The concept of backlog is not defined in the accounting literature, making comparisons with other companies difficult and potentially misleading. BEA typically receives and fulfills most of the orders within the quarter and a
substantial portion of the orders, particularly the larger transactions, are usually received in the last month of each fiscal quarter, with a concentration of such orders in the final week of the quarter. Although it is generally our practice to
promptly ship product upon receipt of properly finalized orders, BEA frequently has license orders that have not shipped or have otherwise not met all the required criteria for revenue recognition. In some of these cases, BEA exercises discretion
over the timing of product shipments, which affects the timing of revenue recognition for software license orders. In those cases, BEA considers a number of factors, including: the effect of the related license revenue on our business plan; the
delivery dates requested by customers and resellers; the amount of software license orders received in the quarter; the amount of software license orders shipped in the quarter; the degree to which software license orders received are concentrated
at the end of the quarter; and our operational capacity to fulfill software license orders at the end of the quarter. Although the amount of such license orders may vary, management generally does not believe that the amount, if any, of such license
product orders at the end of a particular quarter is a reliable indicator of future performance because, as noted above, such a large portion of the revenue is concentrated at the end of the quarter. The discretion noted above is primarily applied
to license orders received in the U.S.

Deferred revenue, as of January 31, 2008, was comprised of (1) unexpired customer support
contracts of $448 million, (2) undelivered consulting and education orders of $24 million and (3) license orders that have



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shipped but have not met revenue recognition requirements of $5 million. Off balance sheet backlog was comprised of services orders received and not
delivered of $46 million and license orders received but not shipped of $35 million. At January 31, 2008, our aggregate backlog (deferred revenue and off balance sheet backlog) was $558 million of which $477 million is included on our balance
sheet as deferred revenue.

Deferred revenue, as of January 31, 2007, was comprised of (1) unexpired customer support contracts
of $412 million, (2) undelivered consulting and education orders of $23 million and (3) license orders that have shipped but have not met revenue recognition requirements of $14 million. Off balance sheet backlog was comprised of services
orders received and not delivered of $41 million and license orders received but not shipped of $10 million. At January 31, 2007, our aggregate backlog (deferred revenue and off balance sheet backlog) was $500 million of which $449 million is
included on our balance sheet as deferred revenue.

Cost of Revenues

The following table provides a summary of cost of revenues (in thousands):



|                       |  |             |         |             |   |             |  |                                            |         |  |                                            |    |  |      |  
|---------------------- |  | ----------- | ------- | ----------- | - | ----------- |  | ------------------------------------------ | ------- |  | ------------------------------------------ | -- |  | ---- | -
|                       |  | Fiscal 2008 |         | Fiscal 2007 |   | Fiscal 2006 |  | Percentagechangefiscal 2008vs. fiscal 2007 |         |  | Percentagechangefiscal 2007vs. fiscal 2006 |   
|Cost of license fees   |  | $           | 60,969  |             | $ | 64,221      |  | $                                          | 38,778  |  | (5.1                                       | )% |  | 65.6 | %
|Cost of services       |  |             | 297,721 |             |   | 269,105     |  |                                            | 218,434 |  | 10.6                                       | %  |  | 23.2 |  
|                       |  |             |         |             |   |             |  |                                            |         |  |                                            |    |  |      |  
|Total cost of revenues |  | $           | 358,690 |             | $ | 333,326     |  | $                                          | 257,212 |  | 7.6                                        | %  |  | 29.6 | %
|                       |  |             |         |             |   |             |  |                                            |         |  |                                            |    |  |      |  

Cost of License Fees. Cost of license fees, as referenced in the table above, includes:



| |  |  | the amortization of certain acquired intangible assets including amortization of purchased technology, non-compete agreements, patents, trademarks and distribution
rights;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | direct costs and fees paid to third-party contractors in connection with our customer license compliance program;
| | - |  | -----------------------------------------------------------------------------------------------------------------



| |  |  | royalties and license fees paid to third parties based on a per copy fee or a prepaid fee amortized straight-line over the contractual period; and
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | costs associated with transferring our software to electronic media; the printing of user manuals; and packaging, distribution and localization costs.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------

Cost of license fees were 11.0 percent, 11.2 percent and 7.6 percent of license revenues for fiscal 2008, 2007 and 2006,
respectively. The decrease in the cost of license fees as a percentage of license revenues for fiscal 2008 compared to fiscal 2007 was due primarily to a decrease of approximately $8.1 million in amortization expense associated with acquired
intangibles offset by an increase of $3.5 million in royalties and license fees paid to third parties. Management believes that cost of license fees may continue to increase in absolute dollars in fiscal 2009 due to expansion of the customer license
compliance program as well as royalty expenses associated with our new product lines and the respective mix of products sold quarterly.

Amortization expense of $30.5 million was recorded for fiscal 2008 associated with intangible assets. The decrease in amortization expense in fiscal 2008 as compared to fiscal 2007 is mainly due to certain acquisitions becoming fully
amortized in fiscal 2008.

Amortization expense of $38.4 million was recorded for fiscal 2007. The increase in fiscal 2007 versus fiscal
2006 amortization expense resulted from the completion of five acquisitions in the second half of fiscal 2006 and early fiscal 2007. The increase in amortization expense is mainly due to the amortization of the Plumtree, Fuego and Flashline
acquisitions.



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Future amortization expense over each of the next five years is currently expected to total approximately
$16.8 million, $12.0 million, $7.6 million, $1.8 million and zero for year five. We periodically review the estimated remaining useful lives of our intangible assets. A reduction in our estimate of remaining useful lives, if any, could result in
increased amortization expense in future periods.

Cost of Services. Cost of services, consists primarily of salaries and benefits
for consulting, education, and product support personnel; cost of third party delivered education and consulting revenues; amortization expense associated with acquired intangibles; and infrastructure expenses in information technology and
facilities for the operation of the services organization. Cost of services was 30.3 percent of services revenues in fiscal 2008 compared to 32.5 percent of services revenues in fiscal 2007. The 2.2 percent decrease in cost of services as a percent
of services revenues was due to improved margins on customer support and maintenance as well as consulting and education services and a decline in share-based compensation expense associated with of FAS 123(R).

Cost of services in fiscal 2008 was impacted by a fluctuation in exchange rates. Total cost of services for fiscal 2008, when translated at a constant
exchange rate from the same period in the prior year, would have been $288.0 million, an increase of 7.0 percent over the same period in fiscal 2007 versus an absolute increase of 10.6 percent.

Cost of services was 32.5 percent of services revenues in fiscal 2007 compared to 31.7 percent of services revenues in fiscal 2006. The 0.8 percent
increase in cost of services as a percent of services revenues was primarily due to share-based compensation expense associated with the implementation of FAS 123(R) and an increase in amortization expense related to acquired intangibles. These
increases were offset by improved margins associated with the acquired services business of Plumtree and Fuego. Total headcount at the end of the period increased 62 people year over year.

Cost of services in fiscal 2007 was impacted by a fluctuation in exchange rates. Total cost of services for fiscal 2007, when translated at a constant
exchange rate from the same period in the prior year, would have been $263.1 million, an increase of 20.8 percent over the same period in fiscal 2006 versus an absolute increase of 23.2 percent.

Operating Expenses

Sales
and Marketing (in thousands):



|                             |  |             |         |             |   |             |  |                                           |         |  |                                           |   |  |      |  
|---------------------------- |  | ----------- | ------- | ----------- | - | ----------- |  | ----------------------------------------- | ------- |  | ----------------------------------------- | - |  | ---- | -
|                             |  | Fiscal 2008 |         | Fiscal 2007 |   | Fiscal 2006 |  | Percentagechangefiscal 2008vs.fiscal 2007 |         |  | Percentagechangefiscal 2007vs.fiscal 2006 |  
|Sales and marketing expenses |  | $           | 542,124 |             | $ | 524,970     |  | $                                         | 437,769 |  | 3.3                                       | % |  | 19.9 | %

Sales and marketing expenses include salaries, benefits, sales commissions, travel, certain
information technology and facility costs for our sales and marketing personnel. These expenses also include programs aimed at increasing revenues, such as advertising, public relations, trade shows and user conferences. The increase in expenses
from fiscal 2008 compared to fiscal 2007 was due to compensation and sales related expenses. Sales and marketing expenses increased $17.2 million due to an increase of 21.3 million for salary and benefits and an increase of $4.9 million in
sales-related expenses offset by a reduction of $9.9 million in FAS 123(R) share-based compensation expense. Sales and marketing expenses in fiscal 2008 were adversely impacted by a fluctuation in exchange rates. Sales and marketing expenses for
fiscal 2008, when translated at a constant exchange rate from the same period in the prior year, would have been $524.1 million, virtually flat when compared to the same period in fiscal 2007 versus an absolute increase of 3.3 percent.

The increase in expenses from fiscal 2007 compared to fiscal 2006 was primarily due to compensation-related expenses. Compensation-related expenses
increased $63.7 million due to an increase of $46.3 million for



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salary and benefits related to an increase of 154 headcount and an increase of $17.4 million in share based compensation related to the implementation of FAS
123(R) and incremental share-based compensation related to modifications. In fiscal 2007, sales and marketing expenses were adversely impacted by foreign exchange rates. In the fiscal year ended January 31, 2007, sales and marketing expenses of
$525.0 million when translated at constant exchange rates from the same period in the prior year would have been approximately $520.0 million. This represents an 18.8 percent increase over costs of services of $437.8 million for the same period in
the prior year.

Research and Development (in thousands):



|                                  |  |             |         |             |   |             |  |                                           |         |  |                                           |   |  |      |  
|--------------------------------- |  | ----------- | ------- | ----------- | - | ----------- |  | ----------------------------------------- | ------- |  | ----------------------------------------- | - |  | ---- | -
|                                  |  | Fiscal 2008 |         | Fiscal 2007 |   | Fiscal 2006 |  | Percentagechangefiscal 2008vs.fiscal 2007 |         |  | Percentagechangefiscal 2007vs.fiscal 2006 |  
|Research and development expenses |  | $           | 240,130 |             | $ | 232,960     |  | $                                         | 182,234 |  | 3.1                                       | % |  | 27.8 | %

Research and development expenses consist primarily of salaries and benefits for software
engineers, contract development fees, costs of computer equipment used in software development, certain information technology and facilities expenses. All costs incurred in the research and development of software products and enhancements to
existing products have been expensed as incurred. Research and development expenses as a percentage of total revenues was 15.6 percent, 16.6 percent and 15.2 percent in fiscal 2008, fiscal 2007 and fiscal 2006, respectively. The decrease as a
percentage of total revenues for fiscal 2008 compared to fiscal 2007 was due the fact that total revenues increased more than total research and development expenses. In fiscal 2007 research and development expenses increased 1.4 percent from 15.2
percent in fiscal 2006. The increase in research and development expenses was due in part to the integration of acquisitions completed in the second half of fiscal 2006 and the related full year of expenses, a decline in third party funding
associated with product development agreements and continued investment in research and development, specifically related to the international telecommunications technology centers.

Research and development expenses increased by $7.2 million in fiscal 2008 as compared to fiscal 2007. As of January 31, 2008, research and
development was comprised of 1,204 employees, 685 were located in the United States and 519 were located outside of the United States. The $7.2 million increase in research and development expenses in fiscal 2008 compared to fiscal 2007 was
primarily composed of salary and benefits and a reduction in third party funding related to development agreements which offsets research and development expense on a quarterly basis as discussed below. Salary and benefits expense increased $12.8
million offset by declines in stock-based compensation of $6.1 million and acquisition related deferred compensation of $3.3 million. Third party funding declined $3.1 million from fiscal 2007 due to the renegotiation of the main contract in early
fiscal 2007. Research and development expenses in fiscal 2008 were adversely impacted by a fluctuation in exchange rates. Research and development expenses for fiscal 2008, when translated at a constant exchange rate from the same period in the
prior year, would have been $237.2 million, an increase of 1.8 percent compared to the same period in fiscal 2007 versus an absolute increase of 3.1 percent.

Research and development expenses increased by $50.7 million in fiscal 2007 as compared to fiscal 2006. This increase was driven by both organic new product development as well as acquired product development teams
from six acquisitions over the past 18 months ( M7, ConnecTerra, Plumtree, SolarMetric, Fuego and Flashline). As of January 31, 2007, research and development was comprised of 1,248 employees, 175 of whom were obtained through the 6
acquisitions during the course of the fiscal 2006 and fiscal 2007. Of the 1,248 employees, 790 were located in the United States and 458 were located outside of the United States. The $50.7 million increase in research and development expenses in
fiscal 2007 compared to fiscal 2006 was primarily composed of; (1) salary and benefits expense of $26.4 million related to the increase of 170 people (through acquisition and organic growth), (2) share-based compensation expense associated
with the implementation of FAS 123(R) of $12.1 million, (3) acquisition related deferred compensation of $3.3 million, and (4) a reduction



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of $5.3 million of third party funding related to development agreements, which offsets research and development expense on a quarterly basis as discussed
below. Research and development expenses were not significantly impacted by foreign exchange rates in fiscal 2007.

We have entered into
product development agreements with third parties to develop ports and integration tools, for which the third parties provide expense reimbursement. In addition, we have one product development arrangement with a third party to co-develop a product
of mutual interest, for which the third party has historically provided expense reimbursement for certain product development and marketing expenses. This product development arrangement expired at the end of fiscal 2008. Historically, the funding
received from these arrangements was non-refundable and was recorded as a reduction of certain research and development and marketing expenses. In fiscal 2008, we received $1.4 million of third party reimbursement, $0.2 million of which is related
to the development of ports and integration tools, $1.1 million related to product development expenses and $0.1 million related to certain marketing expenses. In fiscal 2007, we received $4.4 million of third party reimbursement, $1.6 million of
which related to the development of ports and integration tools and $2.8 million related to product development expenses. In fiscal 2006, we received $10.3 million of third party reimbursement, of which $1.6 million related to the development of
ports and integration tools, $8.1 million related to product development expenses and $0.6 million related to certain marketing expenses. For fiscal 2009, we do not expect to receive significant funding for product development since the
arrangement expired.

General and Administrative (in thousands):



|                                    |  |             |         |             |   |             |  |                                           |         |  |                                           |   |  |      |  
|----------------------------------- |  | ----------- | ------- | ----------- | - | ----------- |  | ----------------------------------------- | ------- |  | ----------------------------------------- | - |  | ---- | -
|                                    |  | Fiscal 2008 |         | Fiscal 2007 |   | Fiscal 2006 |  | Percentagechangefiscal 2008vs.fiscal 2007 |         |  | Percentagechangefiscal 2007vs.fiscal 2006 |  
|General and administrative expenses |  | $           | 161,814 |             | $ | 138,255     |  | $                                         | 108,660 |  | 17.0                                      | % |  | 27.2 | %

General and administrative expenses increased $23.6 million for fiscal 2008 compared to fiscal
2007 due to $7.9 million of expenses associated with the Companys internal stock option review (i.e., legal, consulting expenses and stock option modification expenses), $11.8 million related to strategic advisors for the pending Oracle
acquisition and $2.8 million of legal expenses associated with intellectual property. General and administrative expenses in fiscal 2008 were adversely impacted by a fluctuation in exchange rates. General and administrative expenses for fiscal 2008,
when translated at a constant exchange rate from the same period in the prior year, would have been $159.4 million, an increase of 15.3 percent compared to the same period in fiscal 2007 versus an absolute increase of 17.0 percent.

General and administrative expenses increased $29.6 million for fiscal 2007 compared to fiscal 2006 due to $10.8 million of share-based compensation
expense associated with the implementation of FAS 123(R), $2.8 million of acquisition-related deferred compensation, $14.5 million in labor expenses due in part to the Plumtree and Fuego acquisitions, $7.3 million of expenses associated with the
Companys internal stock option review (i.e., legal, consulting and stock option modification expenses) and offset by a $4.5 million decline in legal expenses related to intellectual property litigation. General and administrative expenses were
not significantly impacted by foreign exchange rates in fiscal 2007.

Other Charges

Facilities Consolidation. During fiscal 2002, we approved a plan to consolidate certain facilities in regions including the United States, Canada
and Germany. A facilities consolidation charge of $20.0 million was recorded using managements best estimates and was based upon the remaining future lease commitments and brokerage fees for vacant facilities from the date of facility
consolidation, net of estimated future sublease income. In fiscal 2006, fiscal 2007 and fiscal 2008, an additional $0.8 million, $0.5 million and $0.7 million was accrued due to a reassessment of original estimates of costs of abandoning the leased
facilities compared to the actual results and future estimates.



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During fiscal 2005, due to a decline in employee and contractor hiring and headcount we identified the
opportunity to reduce our facilities requirements. We approved a plan to consolidate six sites in the United States and Canada. A facilities consolidation charge of $7.7 million was recorded and was comprised of $6.9 million related to future lease
commitments and $0.8 million of leasehold improvement write-offs. The $6.9 million of future lease commitments was calculated based on managements estimates and the present value of the remaining future lease commitments for vacant facilities,
net of present value of the estimated future sublease income.

In fiscal 2008, the company occupied new office space in San Francisco and
vacated the three existing San Francisco offices locations and incurred a facilities consolidation charge of $2.5 million related to future lease commitments. Two of the three existing office leases expired in fiscal 2008 and the remaining one
expires in fiscal 2009.

The estimated costs of abandoning the leased facilities identified above, including estimated costs to sublease,
were based on market information and trend analyses, including information obtained from third-party real estate industry sources. As of January 31, 2008, $6.8 million of lease termination costs, net of anticipated sublease income, remains
accrued and is expected to be fully utilized by fiscal 2012. As of January 31, 2008, $2.9 million is classified as short term and the remaining $3.9 million is classified in other long term obligations. As of January 31, 2007, $2.3 million
is classified as short term and the remaining $5.0 million is classified in other long term obligations. If actual circumstances prove to be materially different than the amounts management has estimated, our total charges for these vacant
facilities could be significantly higher. If we were unable to receive any of our estimated but uncommitted sublease income in the future, the additional charge would be approximately $1.0 million. Adjustments to the facilities consolidation charge
will be made in future periods, if necessary, based upon then current actual events and circumstances.

We do not expect the future
payments to have a significant impact on our liquidity due to our strong cash position ($1.5 billion of cash, cash equivalents and short term investments at January 31, 2008).

The following table provides a summary of the accrued facilities consolidation (in thousands):



|                                                                             |  |                         |        |  
|---------------------------------------------------------------------------- |  | ----------------------- | ------ | -
|                                                                             |  | Facilitiesconsolidation |       
|Accrued at January 31, 2006                                                  |  | $                       | 9,681  |  
|Additional charges accrued during fiscal 2007 included in operating expenses |  |                         | 454    |  
|Cash payments during fiscal 2007                                             |  |                         | (2,011 | )
|                                                                             |  |                         |        |  
|Accrued at January 31, 2007                                                  |  |                         | 8,124  |  
|Additional charges accrued during fiscal 2008 included in operating expenses |  |                         | 2,518  |  
|Change in facility accrual assumptions during fiscal 2008                    |  |                         | (748   | )
|Cash payments during fiscal 2008                                             |  |                         | (3,102 | )
|                                                                             |  |                         |        |  
|Accrued at January 31, 2008                                                  |  | $                       | 6,792  |  
|                                                                             |  |                         |        |  

Acquisition-related in-process research and development. In-process research and
development (IPR&D) represents incomplete research and development projects that had not reached technological feasibility and had no alternative future use at the date the assessment was made in conjunction with the acquisition and
consequently was written off in the fiscal year ended January 31, 2007. The value assigned to IPR&D was determined by considering the importance of the project to the overall development plan, estimating cost to develop the acquisition
related IPR&D into commercially viable products, estimating the resulting net cash flows from the project when completed and discounting the net cash flows to their present value based on the percentage of completion of the IPR&D project.



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Impairment of Land. As of January 31, 2007, we determined that there was a more likely than
not chance that the San Jose Land would be disposed of within the next 12 months. We completed an impairment review in accordance with Statement of Financial Accounting Standards No. 144, Accounting for the Impairment or Disposal of
Long-Lived Assets, and we concluded that a $201.6 million write-down of the San Jose Land was required, reducing the value of that land to a new carrying value of $105.0 million. The San Jose Land was subsequently sold in fiscal 2008 for $105.5
million, net of transaction costs.

Interest and Other, Net

The following table provides a summary of the items included in interest and other, net (in thousands):



|                                                     |  |             |        |   |             |   |         |             |  |   |         |  
|---------------------------------------------------- |  | ----------- | ------ | - | ----------- | - | ------- | ----------- |  | - | ------- | -
|                                                     |  | Fiscal 2008 |        |   | Fiscal 2007 |   |         | Fiscal 2006 | 
|Interest expense                                     |  | $           | (5,325 | ) |             | $ | (22,623 | )           |  | $ | (32,072 | )
|Gain on retirement of convertible subordinated notes |  |             |       |   |             |   | 818     |             |  |   | 667     |  
|Net gains on sale of equity investments              |  |             | 1,132  |   |             |   | 11,074  |             |  |   |        |  
|Foreign exchange gain (loss)                         |  |             | 689    |   |             |   | (171    | )           |  |   | (1,449  | )
|Interest income and other, net                       |  |             | 60,735 |   |             |   | 55,219  |             |  |   | 42,443  |  
|                                                     |  |             |        |   |             |   |         |             |  |   |         |  
|Total interest and other, net                        |  | $           | 57,231 |   |             | $ | 44,317  |             |  | $ | 9,589   |  
|                                                     |  |             |        |   |             |   |         |             |  |   |         |  

Interest expense is a function of the outstanding balance of our convertible debt and the $215.0
million of notes payable (credit facility). The decline in interest expense for fiscal 2008 compared to fiscal 2007 of $17.3 million correlates to the payoff of the convertible debt in late fiscal 2007 and the payoff of the credit
facility in the middle of fiscal 2008. The decline in interest expense for fiscal 2007 compared to fiscal 2006 correlates with the repurchase of approximately $295 million in face value of convertible subordinated notes in fiscal 2006 and fiscal
2007 as well as the full payoff of the convertible notes in December 2006. The reduction of interest expense in fiscal 2007 was partially offset by the increase in the interest rates related to notes payable.

Interest income and other, net increased $5.5 million for fiscal 2008 compared to fiscal 2007. The increase for fiscal 2008 was primarily due to improved
yields on our cash, cash equivalents and short-term investment balances. The increase in interest income and other, net, from fiscal 2006 to fiscal 2007 of $14.8 million was due to improved yields on our cash, cash equivalents and short-term
investment balances throughout the year.

In addition in fiscal 2008, we recorded net gains on the disposition of minority interests in
strategic equity investments of approximately $1.1 million. In fiscal 2007, we recorded net gains on the disposition of minority interests in strategic equity investments of approximately $11.1 million, a net gain on the retirement of the
convertible subordinated notes of $0.8 million and a write-off of debt issuance costs of approximately $0.8 million.

Foreign exchange gain
(loss) fluctuates as a result of changes in foreign currency denominated monetary assets and liabilities net of changes in foreign exchange forward hedge contracts.

Provision for Income Taxes

We have provided for income tax expense of $80.3 million, $6.2
million and $75.0 million for fiscal 2008, 2007 and 2006, respectively. Our effective income tax rates were 27.8, 57.9 and 34.4 percent for fiscal 2008, 2007 and 2006, respectively. Our effective income tax rate for fiscal 2008 differed from the
U.S. federal statutory rate of 35 percent primarily due to the benefits of lower taxed foreign earnings, and benefits from the resolution of certain tax audits and the lapse of the statutes of limitations with respect to certain foreign tax years,
partially offset by the tax impact of FAS 123(R). Our effective income tax rate for fiscal 2007 differed from the U.S. federal statutory rate primarily due to the tax impact of FAS 123(R), the impact of non-deductible in-process research and
development related to the Fuego and Flashline acquisitions, and an increase in the valuation



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allowance, partially offset by benefits of lower taxed foreign earnings. Our effective tax rate for fiscal 2006 differed from the U.S. federal statutory rate
primarily due to the benefits of lower taxed foreign earnings and valuation allowance, partially offset by the expense of the distribution under the Jobs Act.

Under Statement of Financial Accounting Standards No. 109 Accounting for Income Taxes (FAS 109), deferred tax assets and liabilities are determined based on the difference between financial
reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. FAS 109 provides for the recognition of deferred tax assets if realization
of such assets is more likely than not. As a result of recent U.S. operating results, as well as U.S. jurisdictional forecasts of taxable income, we believe that net deferred tax assets in the amount of $211.6 million are realizable based on the
more likely than not standard required for recognition. Accordingly, during fiscal 2008 we reduced the valuation allowance to recognize such net deferred assets. We intend to continue to evaluate the realizability of the deferred tax
assets on a quarterly basis.

In June 2006, the FASB issued Interpretation No. 48, Accounting for Uncertainty in Income
Taxes, an Interpretation of FAS 109, Accounting for Income Taxes (FIN 48), to create a single model to address accounting for uncertainty of tax positions. FIN 48 clarifies the accounting for income taxes by
prescribing a minimum recognition threshold a tax position is required to meet before being recognized in the financial statements. FIN 48 also provides guidance on derecognition, measurement, classification, interest and penalties, accounting
for interim periods, disclosure and transition. FIN 48 is effective for fiscal years beginning after December 15, 2006. We adopted FIN 48 as of February 1, 2007, as required. The cumulative effect of adopting FIN 48 was an
increase in tax liabilities of $9.9 million and a decrease to the opening balance of retained earnings.

As of January 31, 2008, the
total amount of gross unrecognized tax benefits was $149.8 million. Included in this balance were approximately $75.0 million of unrecognized tax benefits that, if recognized, would affect the effective tax rate. The change in the gross unrecognized
tax benefits increased by approximately net $10 million for the twelve months ended January 31, 2008.

The Company is currently under
audit by the Internal Revenue Service, and several states and foreign jurisdictions. It is possible that the amount of the liability for unrecognized tax benefits, including the unrecognized tax benefits related to the audits referenced above, may
change within the next 12 months. However, an estimate of the range of possible changes cannot be made at this time.

Liquidity and Capital Resources

Cash flows

Our primary sources of cash are receipts from our revenues and customer support contract billings. A secondary source of cash is proceeds from the exercise of employee stock options. The primary uses of cash for operating purposes are
payroll (salaries, bonuses, commissions and benefits) and general expenses (facilities, marketing, legal, travel, etc.). The secondary uses of cash are our stock repurchase program and the retirement of our convertible subordinated notes.

Net cash provided by operating activities was $366.7 million for the year ended January 31, 2008. Net cash provided by
operations was $204.4 million for the year ended January 31, 2007. The cash provided by operating activities was due to our net income adjusted by:



| |  |  | Non-cash adjustments of $96.0 million and $222.3 million for the year ended January 31, 2008 and 2007, respectively. The charges were primarily related to land
impairment, the reclassification of excess tax benefits from exercise of stock options, stock based compensation and stock option modification expense, acquired intangibles amortization, depreciation, accretion on investment balances, and write offs
of in-process research and development.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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| |  |  | Non-cash charges for the year ended January 31, 2008 included $53.6 million of depreciation, acquired intangible asset amortization expense and impairment expense
and $46.2 million of stock based compensation and stock modification expense. The impairment expense was 7 percent of the $53.6 million and was associated with a small acquisition made in fiscal 2006 and written off in fiscal 2008. Offsets included
a reclassification to financing activities of $12.8 million from the cumulative excess tax benefits associated with stock option deductions and gains of $1.1 million related to sales of minority interest in equity investments.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Non-cash charges for the year ended January 31, 2007 included $201.6 million of land impairment charges associated with the 40 acres of land located adjacent
to our current headquarters in San Jose, CA., $61.7 million of depreciation and acquired intangible amortization expense, $68.4 million of stock based compensation and $4.4 million of write-offs of in-process research and development costs. Offsets
included a reclassification to financing activities of $106.0 million from the cumulative excess tax benefits associated with stock option deductions in accordance with the implementation of FAS 123(R) and gains of $11.1 million related to gains on
sales of minority interest in equity investments. The reclassification of $106.0 million of excess tax benefits from stock option deductions was primarily the result of releasing valuation allowances on related deferred tax assets in the fourth
quarter of fiscal 2007.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Changes in operating assets and liabilities resulting in a net increase of $62.5 million for the year ended January 31, 2008. Changes in operating assets
and liabilities resulted in a net decrease of $22.5 million for the year ended January 31, 2007. The changes were generated in the normal course of business. These changes are highlighted as follows:
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Net cash increases during the year ended January 31, 2008 are primarily attributable to increases in accounts receivable of $1.1 million, increases in other current
and long-term assets of $65.1 million primarily related to deferred and refundable taxes, increases in accrued liabilities of $40.7 million and $13.4 million change in other working capital components (principally the non-cash effects of exchange
rates on other working capital items). These were offset by increases in deferred revenues of $27.7 million and long-term tax liabilities of $151.8 million.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Net cash decreases during the year ended January 31, 2007 are primarily attributable to increases in accounts receivable of $59.7 million, increases in
deferred tax assets of $65.8 million, and a $16.9 million change in other working capital components (principally the non-cash effects of exchange rates on other working capital items). These were partially offset by increases in deferred revenues
of $68.0 million, increases in accounts payable and accrued liabilities of $47.8 million and a decrease in other current assets of $4.2 million.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Investing Activities

Net cash used in investing activities was $175.6 million for the year ended
January 31, 2008. Net cash used in investing activities was $115.1 million for the year ended January 31, 2007. Investing activities included purchases, sales and maturities of available-for-sale securities, purchase of the San Jose
Building, sale of the San Jose land, capital expenditures, proceeds from the sale of minority equity investments, changes in restricted cash requirements and acquisitions.



| |  |  | Net cash used in investing activities for the year ended January 31, 2008 was primarily comprised of $135.3 million of cash used to purchase the San Jose
Building and $39.1 million of additional capital expenditures offset by $105.6 million associated with the proceeds of the sale of the San Jose Land. In addition, BEA had proceeds from maturities and sales of available-for-sale investments of $452.1
million, offset by purchases of available-for-sale investments of $559.4 million.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Net cash used in investing activities for the year ended January 31, 2007 was primarily comprised of $129.9 million of cash used in payments for acquisitions,
net of cash acquired and $26.4 million used in capital expenditures and proceeds from maturities and sales of available-for-sale investments of $570.9 million, partially offset by purchases of available-for-sale investments of $541.3 million.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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Financing Activities

Net cash used in financing activities for the year ended January 31, 2008 was $85.3 million. Net cash used in financing activities for the year ended January 31, 2007 was $263.1 million. Financing activities
included repurchases and retirement of the convertible subordinated notes, repayment of the credit facility, excess tax benefits from stock-based payment arrangements, and net proceeds received for employee stock purchases.



| |  |  | Net cash used in financing activities for the year ended January 31, 2008 was primarily comprised of the repayment of the credit facility of $215.0 million,
partially offset by $116.9 million in net proceeds from employee stock purchases and $12.8 million in cumulative excess tax benefits from exercise of stock options that were reclassified as a financing activity from operating activities under FAS
123(R).
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Net cash used in financing activities for the year ended January 31, 2007 was primarily comprised of the repurchase and retirement of our convertible
subordinated notes of $463.8 million, partially offset by $94.7 million in net proceeds from employee stock purchases and $106.0 million in cumulative excess tax benefits from exercise of stock options that were reclassified as a financing activity
from operating activities under FAS 123(R), which resulted from the release of valuation allowances on related deferred tax assets in the fourth quarter of fiscal 2007.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Liquidity

Our principal source of
liquidity is our cash, cash equivalents and short and long-term investments, as well as the cash flow that we generate from our operations. Our liquidity could be negatively impacted by any trends that result in a reduction in demand for our
products or services. We believe that our existing cash, cash equivalents, short and long-term investments and cash generated from operations, if any, will be sufficient to satisfy our currently anticipated cash requirements through January 31,
2009. However, we may make acquisitions of license products and technologies complementary to our business and may need to raise additional capital through future debt or equity financing to the extent necessary to fund any such acquisitions or
licenses. There can be no assurance that additional financing will be available at all or on terms favorable to us.



|                                             |  |             |           |             |   |                                           |  |       |  
|-------------------------------------------- |  | ----------- | --------- | ----------- | - | ----------------------------------------- |  | ----- | -
|                                             |  | Fiscal 2008 |           | Fiscal 2007 |   | Percentagechangefiscal 2008vs.fiscal 2007 | 
|Cash and cash equivalents                    |  | $           | 993,685   |             | $ | 867,294                                   |  | 14.6  | %
|Short term investments                       |  |             | 508,070   |             |   | 313,941                                   |  | 61.8  |  
|Long term investments                        |  |             | 17,475    |             |   | 93,528                                    |  | (81.3 | )
|                                             |  |             |           |             |   |                                           |  |       |  
|Total cash, cash equivalents and investments |  |             | 1,519,230 |             |   | 1,274,763                                 |  | 19.2  |  
|                                             |  |             |           |             |   |                                           |  |       |  
|Credit Facility or long term debt facility   |  | $           |          |             | $ | 215,000                                   |  | N/M   | %
|                                             |  |             |           |             |   |                                           |  |       |  

Contractual Obligations

On July 31, 2006, the Company entered into a five-year $500.0 million unsecured revolving credit facility (the Credit Facility). At
closing, the Company borrowed $215.0 to repay in full and terminate the long term debt facility which was scheduled to mature in October 2008. The Credit Facility permits prepayment of outstanding loans at any time without premium or penalty. On
June 29, 2007, the Company repaid the entire $215 million outstanding balance under the credit facility, and the Credit Facility remains in effect.

Loans under the Credit Facility accrue interest at the election of the company at the prime rate or the London Interbank Offering Rate (LIBOR) plus a margin based on our leverage ratio, determined
quarterly. Interest payments are made in cash at intervals ranging from one to three months, as elected by the Company. Principal, together with accrued interest, is due on the maturity date of July 31, 2011. The Credit Facility requires the
Company to comply with interest, leverage and liquidity covenants. It contains other standard affirmative and negative covenants and conditions of default. At January 31, 2008, BEA was in compliance with these covenants.



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As a result of the sale of land, the Company incurred a tax loss for the year ended January 31.
2008. This loss is expected to be carried back for federal income tax purposes resulting in a refund due to the Company of approximately $16.5 million including the recovery of current year overpayments of tax with the filing of the current
year tax return. The loss will be carried forward for state tax purposes. Since the Company has utilized its net operating losses for federal tax purposes, it is expected that the Company will be required to pay federal taxes commensurate
with future US earnings.

Restricted cash represents collateral for our letters of credit. Short term restricted cash correlates with
letters of credit that expire within one year.

The following table of contractual obligations as of January 31, 2008 is as follows
(in thousands):



|                              |  |                  |         |            |   |                    |  |                    |        |                          |   |        |  |   |       
|----------------------------- |  | ---------------- | ------- | ---------- | - | ------------------ |  | ------------------ | ------ | ------------------------ | - | ------ |  | - | ------
|Contractual Obligations       |  | Totalpaymentsdue |         | Fiscal2009 |   | Fiscal2010 and2011 |  | Fiscal2012 and2013 |        | Fiscal2014 andthereafter
|Other obligations*            |  | $                | 23,166  |            | $ | 19,076             |  | $                  | 4,021  |                          | $ | 69     |  | $ |      
|Operating leases              |  |                  | 191,737 |            |   | 54,187             |  |                    | 73,902 |                          |   | 37,757 |  |   | 25,891
|Capital lease                 |  |                  | 1,230   |            |   | 189                |  |                    | 378    |                          |   | 379    |  |   | 284   
|                              |  |                  |         |            |   |                    |  |                    |        |                          |   |        |  |   |       
|Total contractual obligations |  | $                | 216,133 |            | $ | 73,452             |  | $                  | 78,301 |                          | $ | 38,205 |  | $ | 26,175
|                              |  |                  |         |            |   |                    |  |                    |        |                          |   |        |  |   |       



|* | Other obligations in the table above does not include approximately $151.7 million of long-term tax liabilities recorded in accordance with FIN 48 due to the fact that we are unable
to estimate the timing of these future payments.
|- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The above table excludes obligations related to accounts payable, accrued
liabilities incurred in the ordinary course of business.

We do not have significant commitments under lines of credit, standby lines of
credit, guarantees, standby repurchase obligations or other such arrangements.

In September 2001, March 2003, May
2004, March 2005 and May 2007, the Board of Directors approved stock repurchases that in aggregate equaled $1.1 billion of our common stock under a share repurchase program (the Share Repurchase Program). Prior to fiscal 2006, an
aggregate of 35.5 million shares were repurchased at a total cost of $284.6 million. In fiscal 2006, 22.5 million shares were repurchased at a total cost of $193.7 million. There were no shares repurchased in fiscal 2007 or fiscal 2008,
leaving approximately $621.7 million available for repurchase at January 31, 2008 under the Share Repurchase Program.

Off-Balance
Sheet Arrangements

We do not use off-balance-sheet arrangements with unconsolidated entities or related parties, nor do we use other
forms of off-balance-sheet arrangements such as research and development arrangements. Accordingly, our liquidity and capital resources are not subject to off-balance-sheet risks from unconsolidated entities. As of January 31, 2008, we did not
have any off-balance-sheet arrangements, as defined in Item 303(a)(4)(ii) of SEC Regulation S-K.

We have entered into operating
leases for most U.S. and international sales and support offices and certain equipment in the normal course of business. These arrangements are often referred to as a form of off-balance sheet financing. As of January 31, 2008, we leased
facilities and certain equipment under non-cancelable operating leases expiring between 2008 and 2017. Rent expense under operating leases for fiscal 2008, fiscal 2007, and fiscal 2006 was $45.2 million, $44.8 million and $40.4 million,
respectively. Future minimum lease payments under our operating leases as of January 31, 2008 are detailed previously in the minimum contractual obligations table above.



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Critical Accounting Policies and Estimates

Our financial statements have been prepared in accordance with accounting principles generally accepted in the United States, which require us to make
estimates and judgments that significantly affect the reported amounts of assets, liabilities, revenues and expenses and related disclosure of contingent assets and liabilities. We regularly evaluate these estimates, and believe that the following
accounting policies are critical to understanding our historical and future performance, as these policies relate to the more significant areas involving our judgments and estimates: revenue recognition, allowance for doubtful accounts, income
taxes, facilities consolidation charges, intangible assets and goodwill, impairment of long-lived assets and business combinations. We base these estimates and judgments on historical experience and on assumptions that are believed by management to
be reasonable under the circumstances. Actual results may differ from these estimates, which may impact the carrying values of assets and liabilities.

Our management has reviewed our critical accounting policies, our critical accounting estimates, and the related disclosures with our Audit Committee of the Board of Directors. These policies, and our procedures
related to these policies, are described in detail below. In addition, please refer to Note 1 of the Notes to Consolidated Financial Statements for a further description of our accounting policies.

Revenue recognition. The Company recognizes revenues in accordance with the American Institute of Certified Public Accountants
(AICPA) Statement of Position 97-2, Software Revenue Recognition, as amended.

Revenue from software license agreements is
recognized when the basic criteria of software revenue recognition have been met (i.e. persuasive evidence of an agreement exists, delivery of the product has occurred, the fee is fixed or determinable, and collection is probable). The Company
uses the residual method to recognize revenue when a license agreement includes one or more elements to be delivered at a future date and vendor specific objective evidence of the fair value of all undelivered elements exists. Under the residual
method, the fair value of the undelivered elements is deferred and the remaining portion of the arrangement fee is recognized as license revenue. If evidence of the fair value of one or more undelivered elements does not exist, all revenue is
deferred and recognized when delivery of those elements occurs or when fair value can be established.

Vendor specific objective evidence
of the fair value of customer support is determined by the price paid by the Companys customers when customer support is sold separately (i.e. the prices paid by the customers in connection with renewals). Vendor specific objective
evidence of fair value of consulting services and education is based on the price when sold separately.

When licenses are sold together
with consulting services, license fees are recognized upon delivery, provided that (1) the basic criteria of software revenue recognition have been met, (2) payment of the license fees is not dependent upon the performance of the
consulting services, and (3) the consulting services do not provide significant customization of the software products and are not essential to the functionality of the software that was delivered. The Company does not normally provide
significant customization of its software products.

Revenue arrangements with extended payment terms are generally considered not to be
fixed or determinable and, the Company generally does not recognize revenue on these arrangements until the customer payments become due and all other revenue recognition criteria have been met. In certain countries where collection risk is
considered to be high, such as certain Latin American, Asian and Eastern European countries, revenue is generally recognized upon receipt of cash and in some cases, proof of delivery to the end user.

The Company has a number of strategic partnerships that represent the indirect channel including, system platform companies, packaged application
software developers, application service providers, system integrators and independent consultants and distributors. Fundamentally, partners either embed or do not embed our software into their own software products. Partners who embed our software
are referred to as Embedded



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Independent Software Vendors (ISVs), and revenue is recognized upon delivery of our software assuming all other revenue recognition criteria have
been met. Partners who do not embed our software are generally referred to as Resellers. Due to the particular risk of concessions with respect to transactions with resellers, the Company recognizes revenue once persuasive evidence of sell through
to an end user is received and all other criteria have been met. The Companys partner license agreements do not provide for rights of return.

Services revenue includes revenues for consulting services, customer support and education. Consulting services revenue and the related cost of services are generally recognized on a time and materials basis. Revenues from fixed price
consulting contracts are recognized as services are performed on a proportional performance basis. The total amount of revenue recognized under fixed price consulting contracts has been minimal to date. BEAs consulting arrangements do not
include significant customization of the software since the software is essentially a pre-packaged off the shelf platform that applications are built on or attached to. Customer support agreements provide technical support and the right
to unspecified future upgrades on an if-and-when available basis. Customer support and maintenance revenues are recognized ratably over the term of the support period (generally one year). Education services revenue are recognized as the related
training services are delivered. The unrecognized portion of amounts billed in advance of delivery for services is recorded as deferred revenue.

The Company occasionally purchases software products from vendors who are also customers. These transactions have not been frequent. In such transactions involving the exchange of software products, fair value of the software sold and
purchased can not be reasonably estimated. As a result, the Company records such transactions at carryover (i.e. net) basis.

Allowance
for Doubtful Accounts. We make judgments as to our ability to collect outstanding receivables and record allowances when collection becomes doubtful due to liquidity and non-liquidity concerns. The allowance includes both (1) an
estimate for uncollectible receivables due to customers liquidity concerns and (2) an estimate for uncollectible receivables due to non-liquidity types of concerns. These estimates are based on assessing the credit worthiness of our
customers based on multiple sources of information and analysis of such factors as our historical collection experience, collection experience within our industry, industry and geographic concentrations of credit risk, and current economic trends.
The allowance charges associated with non-liquidity concerns are recorded as reductions to revenue and allowance charges associated with liquidity concerns are recorded as general and administrative expenses. This assessment requires significant
judgment. If the financial condition of our customers were to worsen, additional allowances may be required; resulting in future operating losses that are not included in the allowance for doubtful accounts at January 31, 2008. To date, our
actual losses have been within our expectations.

Income Taxes. Realization of our deferred tax assets is primarily dependent
on future U.S. taxable income. FAS 109 provides for the recognition of deferred tax assets if realization of such assets is more likely than not. As a result of recent U.S. operating results, as well as U.S. jurisdictional forecasts of taxable
income, we believe that net deferred tax assets in the amount of $211.6 million are realizable based on the more likely than not standard required for recognition. The amount of deferred tax assets considered realizable is subject to
adjustment in future periods if estimates of future taxable income are reduced.

BEA is a U.S. based multinational company subject to tax
in multiple U.S. and foreign tax jurisdictions. The Companys provision for income taxes is based on jurisdictional mix of earnings, statutory rates, and enacted tax rules, including transfer pricing. Significant judgment is required in
determining the Companys provision for income taxes and in evaluating its tax positions on a worldwide basis. The Company believes its tax positions, including intercompany transfer pricing policies, are consistent with the tax laws in the
jurisdictions in which it conducts its business. It is possible that these positions may be challenged, which may have a significant impact on the Companys effective tax rate.

The Company accounts for uncertain tax positions in accordance with FASB Interpretation No. 48, Accounting for Uncertainty in Income
Taxes (FIN 48). Accordingly, the Company reports liabilities for



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unrecognized tax benefits resulting from uncertain tax positions taken or expected to be taken into account on a tax return. The Company recognizes interest
and penalties, if any, related to unrecognized tax benefits in income tax expense.

Business Combinations. We are required to
allocate the purchase price of acquired companies to the tangible and intangible assets acquired, liabilities assumed, as well as IPR&D based on their estimated fair values. We engage independent third party appraisal firms to assist us in
determining the fair values of certain assets acquired and liabilities assumed for significant acquisitions. This valuation requires management to make significant estimates and assumptions, especially with respect to long-lived and intangible
assets.

Critical estimates in valuing certain of the intangible assets include but are not limited to: future expected cash flows from
license sales, maintenance agreements, consulting contracts, customer contracts and acquired developed technologies and patents; expected costs to develop the IPR&D into commercially viable products and estimating cash flows from the projects
when completed; the acquired companys brand awareness and market position, as well as assumptions about the period of time the brand will continue to be used in the combined companys product portfolio; and discount rates.
Managements estimates of fair value are based upon assumptions believed to be reasonable and based on historical experience and information obtained from the management of the acquired companies, however these assumptions are inherently
uncertain and unpredictable. Assumptions may be incomplete or inaccurate, and unanticipated events and circumstances may occur.

The fair
value of the deferred support obligation is based, in part, on a valuation completed by a third party appraiser using estimates and assumptions provided by management. The estimated fair value of the support obligation is determined utilizing a cost
build-up approach. The cost build-up approach determines fair value by estimating the costs relating to fulfilling the obligation plus a normal profit margin. The sum of the costs and operating profit approximates, in theory, the amount that the
Company would be required to pay a third party to assume the support obligation. The estimated costs to fulfill the support obligation were based on the historical direct costs related to providing the support services and to correct any errors in
the acquired companys software products. We do not include any costs associated with selling efforts or research and development or the related fulfillment margins on these costs. Profit associated with selling effort is excluded because
acquired companies conclude the selling effort on the support contracts prior to the acquisition date. The estimated research and development costs are not included in the fair value determination, as these costs are not deemed to represent a legal
obligation at the time of acquisition.

IPR&D represents incomplete research and development projects that had not reached
technological feasibility and had no alternative future use when a company is acquired. Technological feasibility is established when an enterprise has completed all planning, design, coding and testing activities that are necessary to establish
that a product can be produced to meet its design specifications including functions, features and technical performance requirements.

The
value assigned to IPR&D is determined by considering the importance of the project to the overall development plan, estimating cost to develop the acquisition related IPR&D into commercially viable products, estimating the resulting net cash
flows from the project when completed and discounting the net cash flows to their present value based on the percentage of completion of the IPR&D project.

In addition, other estimates associated with the accounting for these acquisitions may change as additional information becomes available regarding the assets acquired and liabilities assumed. In particular,
liabilities to restructure the pre-acquisition organization, including workforce reductions are subject to change as management completes its assessment of the pre-merger operations and begins to execute the approved plan. These assumptions may be
incomplete or inaccurate, and unanticipated events and circumstances may occur.

Facilities Consolidation Charges.In fiscal 2002,
fiscal 2005 and fiscal 2008, we recorded a facilities consolidation charge for our estimated future lease commitments on excess facilities, net of estimated future



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sublease income. The estimates used in calculating the charge are reviewed on a quarterly basis and would be revised if estimated future vacancy rates and
sublease rates varied from our original estimates. To the extent that our new estimates vary adversely from our original estimates, we may incur additional losses that are not included in the accrued balance at January 31, 2008. Conversely,
unanticipated improvements in vacancy rates or sublease rates, or termination settlements for less than our accrued amounts, may result in a reversal of a portion of the accrued balance and a benefit on our statement of income in a future period.
The maximum future cost associated with these excess facilities, assuming that no future sublease income is realized on these properties, other than for subleases that have been executed prior to January 31, 2008, and assuming that the
landlords are unwilling to negotiate early lease termination arrangements, is estimated to be $7.8 million, which exceeds the accrued balance at January 31, 2008 by $1.0 million.

Intangible Assets and Goodwill. We record intangible assets when we acquire other companies. The cost of an acquisition is allocated to the
assets and liabilities acquired, including identified intangible assets, with the remaining amount being classified as goodwill. Certain intangible assets such as purchased technology and non-compete agreements are amortized over time. Goodwill is
not amortized but rather it is periodically assessed for impairment. The allocation of the acquisition cost to intangible assets and goodwill therefore has a significant impact on our future operating results. The allocation process requires the
extensive use of estimates and assumptions, including estimates of future cash flows expected to be generated by the acquired assets. Further, when impairment indicators are identified with respect to previously recorded intangible assets, the
values of the assets are determined using discounted future cash flow techniques. Significant management judgment is required in the forecasting of future operating results which are used in the preparation of the projected discounted cash flows and
should different conditions prevail, material write-downs of net intangible assets could occur. We periodically review the estimated remaining useful lives of our acquired intangible assets. A reduction in our estimate of remaining useful lives, if
any, could result in increased amortization expense in future periods.

We test goodwill for impairment in accordance with Statement of
Financial Accounting Standards No. 142, Goodwill and Other Intangible Assets(FAS 142).Under FAS 142, goodwill is tested for impairment in a two-step process. First, we determine if the carrying amount of our
Reporting Unit exceeds the fair value of the Reporting Unit, which may initially indicate that goodwill could be impaired. If we determine that such impairment could have occurred, we would compare the implied fair value of
the goodwill as defined by FAS 142 to its carrying amount to determine the impairment loss, if any.

Impairment of Long-Lived
Assets. We are required to test certain of our long-lived assets for impairment under Statement of Financial Accounting Standards No. 144, Accounting for the Impairment and Disposal of Long-Lived Assets(FAS 144),
whenever events or circumstances indicate that the value of the assets may be permanently impaired.

During the fourth quarter of fiscal
2007, we evaluated our facilities options and strategy with respect to our leased corporate headquarters in San Jose, California, whose leases expire in July 2008. Based on the results of this evaluation, we decided not to pursue developing the San
Jose Land for use as our corporate headquarters. Accordingly, we concluded that we should test the San Jose Land for impairment in accordance with the guidance set forth in Statement of Financial Accounting Standards No. 144, Accounting for
the Impairment and Disposal of Long-Lived Assets(FAS 144).

In accordance with FAS 144, if we determine that one or more
impairment indicators are present, indicating that the carrying amount may not be recoverable, the carrying amount of the asset would be compared to net future undiscounted cash flows that the asset is expected to generate. If the carrying amount of
the asset is greater than the net future undiscounted cash flows that the asset is expected to generate, the fair value would be compared to the carrying value of the asset. If the fair value is less than the carrying value, an impairment loss would
be recognized. The impairment loss would be the excess of the carrying amount of the asset over its fair value.



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We performed the aforementioned test and concluded that the San Jose Land, which had previously been held
as a long-lived asset, was impaired. We determined that the fair value of the San Jose Land was $105.0 million at January 31, 2007, therefore triggering a write-down due to impairment in fiscal 2007 of $201.6 million.

Stock-Based Compensation.The Company accounts for stock-based compensation in accordance with FAS No. 123R. Under the provisions of FAS
No. 123R, stock-based compensation cost is estimated at the grant date based on the awards fair value as calculated by the Black-Scholes-Merton (BSM) option pricing model and is recognized as expense ratably over the
requisite service period. The BSM model requires various highly judgmental assumptions including volatility, forfeiture rates, and expected option life. If any of the assumptions used in the BSM model change significantly, stock-based compensation
expense may differ materially in the future from that recorded in the current period.

Contingencies and Litigation. We evaluate
contingent liabilities including threatened or pending litigation in accordance with FAS No. 5, Accounting for Contingencies(FAS 5). We assess the likelihood of any adverse judgments or outcomes to a
potential claim or legal proceeding, as well as potential ranges of probable losses, when the outcomes of the claims or proceedings are probable and reasonably estimable. A determination of the amount of accrued liabilities required, if any, for
these contingencies is made after the analysis of each matter. Because of uncertainties related to these matters, we base our estimates on the information available at the time. As additional information becomes available, we reassess the potential
liability related to its pending claims and litigation and may revise our estimates. Any revisions in the estimates of potential liabilities could have a material impact on our results of operations and financial position.

Related Party Transactions

Common Board Members
or Executive Officers

We occasionally sell software products or services to companies that have board members or executive officers who
are also on our Board of Directors. The total revenues recognized by us from such customers in fiscal 2008, fiscal 2007 and fiscal 2006 were not significant.

Effect of New Accounting Pronouncements

In December 2007, the Financial Accounting Standards Board (FASB)
issued SFAS No. 141 (revised 2007), Business Combinations (SFAS No. 141(R)). SFAS No. 141(R) establishes principles and requirements for how an acquirer recognizes and measures in its financial statements the
identifiable assets acquired, the liabilities assumed, any noncontrolling interest in the acquiree and the goodwill acquired. SFAS No. 141(R) also establishes disclosure requirements to enable the evaluation of the nature and financial effects
of the business combination. SFAS No. 141(R) is effective for fiscal years beginning after December 15, 2008, and will be adopted by us in the first quarter of fiscal 2010. We are currently evaluating the potential impact, if any, of the
adoption of SFAS No. 141(R) on our consolidated results of operations and financial condition.

In December 2007, the FASB issued SFAS
No. 160, Noncontrolling Interests in Consolidated Financial Statementsan amendment of Accounting Research Bulletin No. 51 (SFAS No. 160). SFAS No. 160 establishes accounting and reporting standards for
ownership interests in subsidiaries held by parties other than the parent, the amount of consolidated net income attributable to the parent and to the noncontrolling interest, changes in a parents ownership interest, and the valuation of
retained noncontrolling equity investments when a subsidiary is deconsolidated. SFAS No. 160 also establishes disclosure requirements that clearly identify and distinguish between the interests of the parent and the interests of the
noncontrolling owners. SFAS No. 160 is effective for fiscal years beginning after December 15, 2008, and will be adopted by us in the first quarter of fiscal 2010. We are currently evaluating the potential impact, if any, of the adoption
of SFAS No. 160 on our consolidated results of operations and financial condition.



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In September 2006, the FASB issued FAS No. 157, Fair Value Measurements.
This Statement defines fair value, establishes a framework for measuring fair value in GAAP, and expands disclosures about fair value measurements. This Statement applies under other accounting pronouncements that require or permit fair value
measurements, the Financial Accounting Standards Board having previously concluded in those accounting pronouncements that fair value is the relevant measurement attribute. Accordingly, this Statement does not require any new fair value
measurements. However, for some entities, the application of this Statement will change current practice. This Statement is effective for financial statements issued for fiscal years beginning after November 15, 2007, and interim periods within
those fiscal years. We are currently evaluating the potential impact, if any, of the adoption of SFAS No. 157 on our consolidated results of operations and financial condition.

In February 2007, the FASB issued FAS No. 159, The Fair Value Option for Financial Assets and Financial LiabilitiesIncluding an
amendment of FASB Statement No. 115 (FAS 159). FAS 159 is expected to expand the use of fair value accounting but does not affect existing standards which require certain assets or liabilities to be carried at fair value.
The objective of FAS 159 is to improve financial reporting by providing companies with the opportunity to mitigate volatility in reported earnings caused by measuring related assets and liabilities differently without having to apply complex hedge
accounting provisions. Under FAS 159, a company may choose, at specified election dates, to measure eligible items at fair value and report unrealized gains and losses on items for which the fair value option has been elected in earnings at each
subsequent reporting date. FAS 159 is effective for financial statements issued for fiscal 2009. We are currently assessing the impact that FAS 159 may have on our results of operations and financial position.

In June 2007, the Financial Accounting Standards Board (FASB) ratified EITF 07-3, Accounting for Non-Refundable Advance Payments for Goods
or Services Received for Use in Future Research and Development Activities, (EITF 07-3). EITF 07-3 requires that nonrefundable advance payments for goods or services that will be used or rendered for future research and development
activities be deferred and capitalized and recognized as an expense as the goods are delivered or the related services are performed. EITF 07-3 is effective, on a prospective basis, for fiscal years beginning after December 15, 2007 and will be
adopted by the Company in the first quarter of fiscal 2009. The Company does not expect EITF 07-3 to have a material impact on its consolidated results of operations and financial condition.



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|ITEM 7A. | QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK.
|-------- | ----------------------------------------------------------

Foreign Exchange

Our revenues originating outside the Americas (U.S., Canada, Mexico and Latin America) were 50.7 percent,
46.4 percent and 48.1 percent of total revenues in fiscal 2008, fiscal 2007 and fiscal 2006, respectively. International revenues from each individual country outside of the United States, except one country, were less than 10 percent of total
revenues in fiscal 2008 and fiscal 2006. The exception was the United Kingdom with $156.4 million or 10.2 percent of the total revenues in fiscal 2008 and $130.0 million or 10.8 percent of the total revenues in fiscal 2006. International sales were
made mostly from our foreign sales subsidiaries in the local countries and are typically denominated in the local currency of each country. Fluctuations in the Euro, British Pound and Yen would have the most impact on our future results of
operations. These subsidiaries also incur most of their expenses in the local currency. Accordingly, foreign subsidiaries use the local currency as their functional currency.

Our international operations are subject to risks typical of an international business, including, but not limited to, differing economic conditions,
changes in political climate, differing tax structures, export license restrictions, other regulations and restrictions, and foreign exchange volatility. Accordingly, our future results could be materially adversely impacted by changes in these or
other factors.

Our accounting exposure to foreign exchange rate volatility arises primarily from intercompany accounts between our parent
company in the United States and our foreign subsidiaries. The remaining accounting exposure is a result of certain assets and liabilities denominated in foreign currencies other than their functional currency that require remeasurement. The
intercompany accounts are typically denominated in the functional currency of the foreign subsidiary in order to centralize foreign exchange risk. The income statement exposure to currency fluctuations arises principally from revaluing our
intercompany balances into U.S. dollars, with the resulting gains or losses recorded in other income and expense. The Company hedges its exposure to these profit and loss fluctuations by entering into forward exchange contracts. A forward foreign
exchange contract obligates us to exchange predetermined amounts of specified foreign currencies at specified exchange rates on specified dates or to make an equivalent U.S. dollar payment equal to the value of such exchange. The gains or losses
from the forward contracts are designed to approximately offset the gains or losses from revaluing the intercompany accounts. Based upon recent intercompany balance levels and exchange rate fluctuations, our intercompany gains or losses net of the
associated forward exchange gains or losses, result in quarterly gain or loss fluctuations in other income and expense of up to approximately $0.7 million. At January 31, 2008, our transaction exposures amounted to $123.1 million and were
offset by foreign currency forward contracts with a net notional amount of $223.6 million. Based on exposures at January 31, 2008, a 10 percent movement against our portfolio of transaction exposures and hedge contracts would result in a gain
or loss of approximately $0.5 million. We do not use foreign currency contracts for speculative or trading purposes. All outstanding forward contracts are marked-to-market on a monthly basis with gains and losses included in interest and other, net.
Net gains resulting from foreign currency transactions in fiscal 2008 were approximately $0.7 million. Net losses resulting from foreign currency transactions for fiscal 2007 and fiscal 2006 were approximately $0.2 million and $1.4 million,
respectively.

We are also exposed to foreign exchange rate fluctuations as the financial results of foreign subsidiaries are translated
into U.S. dollars for consolidation purposes. As exchange rates vary, these results, when translated, may vary from expectations and may adversely impact overall financial results.



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Our outstanding forward contracts as of January 31, 2008 are presented in the table below and are
recorded on the balance sheet as part of accrued liabilities. All forward contracts amounts are representative of the expected payments to be made under these instruments. The fair market value of the contracts below represents the difference
between the spot rate at January 31, 2008 and the contracted rate. All of these forward contracts mature within 60 days or less as of January 31, 2008.



|                       |  |                             |   |  |     |  |                |  |     |  |                                          |      |  
|---------------------- |  | --------------------------- | - |  | --- |  | -------------- |  | --- |  | ---------------------------------------- | ---- | -
|                       |  | Localcurrencycontractamount |   |  |     |  | Contractamount |  |     |  | Fair marketvalue atJanuary 31,2008 (USD) |     
|                       |  | (in thousands)              |   |  |     |  | (in thousands) |  |     |  | (in thousands)                           |     
|Contract to Buy US $   |  |                             |   |  |     |  |                |  |     |  |                                          |      |  
|Brazilian reals        |  | (12,800                     | ) |  | BRL |  | 7,302          |  | USD |  |                                          | 91   |  
|British pounds         |  | (1210                       | ) |  | GBP |  | 2,375          |  | USD |  |                                          | 269  |  
|Chinese yuan           |  | (10,200                     | ) |  | CNY |  | 1,422          |  | USD |  |                                          | (10  | )
|Euros                  |  | (40,000                     | ) |  | EUR |  | 59,478         |  | USD |  |                                          | 56   |  
|Indian rupee           |  | (165,000                    | ) |  | INR |  | 4,188          |  | USD |  |                                          | 8    |  
|Israeli shekel         |  | (2,000                      | ) |  | ILS |  | 540            |  | USD |  |                                          | (13  | )
|Japanese yen           |  | (1,330,000                  | ) |  | JPY |  | 12,369         |  | USD |  |                                          | (191 | )
|Korean won             |  | (29,800,000                 | ) |  | KRW |  | 31,818         |  | USD |  |                                          | 218  |  
|Mexican peso           |  | (84,500                     | ) |  | MXN |  | 7,700          |  | USD |  |                                          | (64  | )
|                       |  |                             |   |  |     |  |                |  |     |  |                                          |      |  
|                       |  |                             |   |  |     |  |                |  |     |  |                                          | 364  |  
|                       |  |                             |   |  |     |  |                |  |     |  |                                          |      |  
|Contract to Sell US $  |  |                             |   |  |     |  |                |  |     |  |                                          |      |  
|British Pounds         |  | 9,200                       |   |  | GBP |  | 17,972         |  | USD |  |                                          | (22  | )
|Canadian dollar        |  | 6,900                       |   |  | CAD |  | 6,767          |  | USD |  |                                          | 113  |  
|Chinese yuan           |  | 42,200                      |   |  | CNY |  | 5,921          |  | USD |  |                                          | 34   |  
|Danish kroner          |  | 23,100                      |   |  | DKK |  | 4,616          |  | USD |  |                                          | (12  | )
|Euro                   |  | 8,938                       |   |  | EUR |  | 13,291         |  | USD |  |                                          | (11  | )
|Singapore dollar       |  | 4,100                       |   |  | SGD |  | 2,880          |  | USD |  |                                          | 25   |  
|Swedish krona          |  | 33,500                      |   |  | SEK |  | 5,306          |  | USD |  |                                          | (48  | )
|Swiss franc            |  | 2,300                       |   |  | CHF |  | 2,112          |  | USD |  |                                          | 21   |  
|                       |  |                             |   |  |     |  |                |  |     |  |                                          |      |  
|                       |  |                             |   |  |     |  |                |  |     |  |                                          | 100  |  
|                       |  |                             |   |  |     |  |                |  |     |  |                                          |      |  
|Contract to Buy Euro  |  |                             |   |  |     |  |                |  |     |  |                                          |      |  
|British pounds         |  | (13,400                     | ) |  | GBP |  | 26,170         |  | USD |  |                                          | (398 | )
|Danish kroner          |  | (23,000                     | ) |  | DKK |  | 4,590          |  | USD |  |                                          | 5    |  
|Norwegian krone        |  | (6,500                      | ) |  | NOK |  | 1,230          |  | USD |  |                                          | 31   |  
|Swiss franc            |  | (3,000                      | ) |  | CHF |  | 2,750          |  | USD |  |                                          | (31  | )
|Swedish krona          |  | (18,000                     | ) |  | SEK |  | 2,850          |  | USD |  |                                          | 23   |  
|                       |  |                             |   |  |     |  |                |  |     |  |                                          |      |  
|                       |  |                             |   |  |     |  |                |  |     |  |                                          | (370 | )
|                       |  |                             |   |  |     |  |                |  |     |  |                                          |      |  
|Total                  |  |                             |   |  |     |  |                |  |     |  | $                                        | 94   |  
|                       |  |                             |   |  |     |  |                |  |     |  |                                          |      |  



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Interest Rates

We invest our cash in a variety of financial instruments, consisting principally of investments in commercial paper, interest-bearing demand deposit accounts with financial institutions, money market funds and highly
liquid debt securities of corporations, municipalities and the U.S. Government. These investments are denominated in U.S. dollars. Cash balances in foreign currencies overseas are operating balances and are primarily invested in interest-bearing
bank accounts and money market funds at the local operating banks.

We account for our investment instruments in accordance with Statement
of Financial Accounting Standards No. 115, Accounting for Certain Investments in Debt and Equity Securities(FAS 115). All of the cash equivalents, short-term and long-term investments and short-term and long-term restricted
cash are treated as available-for-sale under FAS 115. Investments in both fixed rate and floating rate interest earning instruments carry a degree of interest rate risk. Fixed rate securities may have their market value adversely
impacted due to a rise in interest rates, while floating rate securities may produce less income than expected if interest rates fall. Due in part to these factors, our future investment income may fall short of expectations due to changes in
interest rates or we may suffer losses in principal if forced to sell securities which have seen a decline in market value due to changes in interest rates. However, we reduce our interest rate risk by investing our cash in instruments with
remaining time to maturity of less than two years. As of January 31, 2008, the average holding period until maturity of our cash equivalents, short and long-term restricted cash and short and long-term investments was approximately 207 days.
The table below presents the principal amount and related weighted average interest rates for our investment portfolio.

The following is a
summary of the maturities of short-term investments as of January 31, 2008 (in thousands, except percentages):



|                         |  |                        |         |   |           |   |         |  
|------------------------ |  | ---------------------- | ------- | - | --------- | - | ------- | -
|                         |  | Expected maturity date |        
|                         |  | 2008                   |         |   | 2009-2013 |  
|U.S. agency securities   |  | $                      | 37,473  |   |           | $ | 131,108 |  
|Weighted average yield   |  |                        | 4.75    | % |           |   | 4.39    | %
|U.S. treasury securities |  | $                      | 1,020   |   |           | $ | 25,848  |  
|Weighted average yield   |  |                        | 3.08    | % |           |   | 3.43    | %
|Corporate notes          |  | $                      | 174,018 |   |           | $ | 66,880  |  
|Weighted average yield   |  |                        | 4.70    | % |           |   | 4.74    | %
|Asset-backed securities  |  | $                      | 13,856  |   |           | $ | 57,867  |  
|Weighted average yield   |  |                        | 4.68    | % |           |   | 4.86    | %

The following is a summary of the maturities of long-term investments as of January 31, 2008
(in thousands, except percentages):



|                         |  |                               |       |  
|------------------------ |  | ----------------------------- | ----- | -
|                         |  | Expectedmaturitydate2009-2013 |      
|U.S. agency securities   |  | $                             | 1,048 |  
|Weighted average yield   |  |                               | 2.99  | %
|U.S. treasury securities |  | $                             | 1,017 |  
|Weighted average yield   |  |                               | 2.12  | %
|Corporate notes          |  | $                             | 7,704 |  
|Weighted average yield   |  |                               | 4.12  | %
|Asset-backed securities  |  | $                             | 7,706 |  
|Weighted average yield   |  |                               | 5.17  | %



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In the above table we have reflected asset backed securities according to their effective maturities
(given expected principal pre-payments). These securities may have final legal maturities of greater than 5 years.

The Company reviewed
its investments to identify and evaluate investments that have indications of possible impairment. At January 31, 2008, the Company held approximately $79 million in AAA rated Asset-backed securities that were valued at reported market prices
and classified as current assets. The underlying assets of the Asset-backed securities are auto and equipment loans and credit card assets We do not believe the carrying values of these Asset-backed securities are impaired. In addition, we believe
that we will be able to liquidate these investments without significant loss.



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|ITEM 8. | FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
|------- | --------------------------------------------

BEA SYSTEMS, INC.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS



|                                                                                                               |  |     
|-------------------------------------------------------------------------------------------------------------- |  | ----
|                                                                                                               |  | Page
|Report of Independent Registered Public Accounting Firm                                                        |  | 72  
|Consolidated Balance Sheets as of January 31, 2008 and 2007                                                    |  | 73  
|Consolidated Statements of Income and Comprehensive Income for the years ended January 31, 2008, 2007 and 2006 |  | 74  
|Consolidated Statement of Stockholders Equity for the years ended January 31, 2008, 2007, and 2006            |  | 75  
|Consolidated Statements of Cash Flows for the years ended January 31, 2008, 2007, and 2006                     |  | 76  
|Notes to Consolidated Financial Statements                                                                     |  | 77  



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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Stockholders of BEA Systems, Inc.

We have audited the accompanying consolidated balance sheets of BEA Systems, Inc. as of January 31, 2008 and 2007, and the related
consolidated statements of income and comprehensive income, stockholders equity and cash flows for each of the three years in the period ended January 31, 2008. Our audits also included the financial statement schedule listed in the Index
at Item 15(a). These financial statements and schedule are the responsibility of the Companys management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that
we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for
our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated
financial position of BEA Systems, Inc. at January 31, 2008 and 2007, and the consolidated results of its operations and its cash flows for each of the three years in the period ended January 31, 2008, in conformity with U.S. generally
accepted accounting principles. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth
therein.

As discussed in Notes 1, 11 and 13 to the consolidated financial statements, BEA Systems, Inc. adopted Financial Accounting
Standards Board Interpretation No. 48, Accounting for Uncertainty in Income Taxes,on February 1, 2007, and Statement of Financial Accounting Standards No. 123R, Share Based Payment,on February 1, 2006.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the effectiveness of BEA
Systems, Inc.s internal control over financial reporting as of January 31, 2008, based on criteria established in Internal ControlIntegrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission
and our report dated March 26, 2008 expressed an unqualified opinion thereon.

/s/ Ernst & Young LLP

San Jose, California

March 26, 2008



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BEA SYSTEMS, INC.

CONSOLIDATED BALANCE SHEETS

(in thousands, except par value)



|                                                                                                                                                                                                                  |  |             |           |   |      |   |           |  
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----------- | --------- | - | ---- | - | --------- | -
|                                                                                                                                                                                                                  |  | January 31, |          
|                                                                                                                                                                                                                  |  | 2008        |           |   | 2007 |  
|ASSETS                                                                                                                                                                                                            |  |             |           |   |      |   |           |  
|Current Assets:                                                                                                                                                                                                   |  |             |           |   |      |   |           |  
|Cash and cash equivalents                                                                                                                                                                                         |  | $           | 993,685   |   |      | $ | 867,294   |  
|Restricted cash                                                                                                                                                                                                   |  |             | 837       |   |      |   | 1,413     |  
|Short-term investments                                                                                                                                                                                            |  |             | 508,070   |   |      |   | 313,941   |  
|Accounts receivable, net of allowance for doubtful accounts of $12,045 and $11,413 at January 31, 2008 and 2007,
respectively                                                                                     |  |             | 395,890   |   |      |   | 394,799   |  
|Deferred tax assets, net                                                                                                                                                                                          |  |             | 81,991    |   |      |   | 56,767    |  
|Prepaid expenses and other current assets                                                                                                                                                                         |  |             | 72,548    |   |      |   | 46,126    |  
|                                                                                                                                                                                                                  |  |             |           |   |      |   |           |  
|Total current assets                                                                                                                                                                                              |  |             | 2,053,021 |   |      |   | 1,680,340 |  
|Long-term investments                                                                                                                                                                                             |  |             | 17,475    |   |      |   | 93,528    |  
|Property and equipment, net                                                                                                                                                                                       |  |             | 194,867   |   |      |   | 144,471   |  
|Goodwill, net                                                                                                                                                                                                     |  |             | 227,536   |   |      |   | 233,998   |  
|Acquired intangible assets, net                                                                                                                                                                                   |  |             | 38,173    |   |      |   | 67,959    |  
|Long-term restricted cash                                                                                                                                                                                         |  |             | 2,597     |   |      |   | 2,372     |  
|Long-term deferred tax assets, net                                                                                                                                                                                |  |             | 129,620   |   |      |   | 166,027   |  
|Other long-term assets                                                                                                                                                                                            |  |             | 9,359     |   |      |   | 10,147    |  
|                                                                                                                                                                                                                  |  |             |           |   |      |   |           |  
|Total assets                                                                                                                                                                                                      |  | $           | 2,672,648 |   |      | $ | 2,398,842 |  
|                                                                                                                                                                                                                  |  |             |           |   |      |   |           |  
|LIABILITIES AND STOCKHOLDERS EQUITY                                                                                                                                                                              |  |             |           |   |      |   |           |  
|Current liabilities:                                                                                                                                                                                              |  |             |           |   |      |   |           |  
|Accounts payable                                                                                                                                                                                                  |  | $           | 30,631    |   |      | $ | 27,521    |  
|Accrued liabilities                                                                                                                                                                                               |  |             | 107,277   |   |      |   | 93,507    |  
|Restructuring obligations                                                                                                                                                                                         |  |             | 2,846     |   |      |   | 3,089     |  
|Accrued payroll and related liabilities                                                                                                                                                                           |  |             | 112,187   |   |      |   | 105,797   |  
|Accrued income taxes                                                                                                                                                                                              |  |             | 9,880     |   |      |   | 120,156   |  
|Deferred revenue                                                                                                                                                                                                  |  |             | 476,985   |   |      |   | 449,282   |  
|Deferred tax liabilities                                                                                                                                                                                          |  |             |          |   |      |   | 4,788     |  
|Current portion of notes payable and other obligations                                                                                                                                                            |  |             | 988       |   |      |   | 1,302     |  
|                                                                                                                                                                                                                  |  |             |           |   |      |   |           |  
|Total current liabilities                                                                                                                                                                                         |  |             | 740,794   |   |      |   | 805,442   |  
|Long-term tax liabilities                                                                                                                                                                                         |  |             | 151,767   |   |      |   |          |  
|Notes payable and other long-term obligations                                                                                                                                                                     |  |             | 21,977    |   |      |   | 228,790   |  
|Commitments and contingencies                                                                                                                                                                                     |  |             |           |   |      |   |           |  
|Stockholders equity:                                                                                                                                                                                             |  |             |           |   |      |   |           |  
|Preferred stock$0.001 par value; 5,000 shares authorized; none issued and outstanding                                                                                                                            |  |             |          |   |      |   |          |  
|Common stock$0.001 par value; 1,035,000 shares authorized; 470,960 shares issued and 413,032 shares outstanding at January 31, 2008
and 456,238 shares issued and 398,295 shares outstanding at January 31, 2007 |  |             | 471       |   |      |   | 456       |  
|Additional paid-in capital                                                                                                                                                                                        |  |             | 2,079,967 |   |      |   | 1,902,657 |  
|Treasury stock, at cost57,943 shares at January 31, 2008 and 2007                                                                                                                                                |  |             | (478,249  | ) |      |   | (478,249  | )
|Retained earnings (Accumulated deficit)                                                                                                                                                                           |  |             | 125,899   |   |      |   | (72,416   | )
|Accumulated other comprehensive income                                                                                                                                                                            |  |             | 30,022    |   |      |   | 12,162    |  
|                                                                                                                                                                                                                  |  |             |           |   |      |   |           |  
|Total stockholders equity                                                                                                                                                                                        |  |             | 1,758,110 |   |      |   | 1,364,610 |  
|                                                                                                                                                                                                                  |  |             |           |   |      |   |           |  
|Total liabilities and stockholders equity                                                                                                                                                                        |  | $           | 2,672,648 |   |      | $ | 2,398,842 |  
|                                                                                                                                                                                                                  |  |             |           |   |      |   |           |  

See accompanying notes



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BEA SYSTEMS, INC.

CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

(in thousands, except per share data)



|                                                                       |  |                               |           |   |      |   |           |      |  |   |           |  
|---------------------------------------------------------------------- |  | ----------------------------- | --------- | - | ---- | - | --------- | ---- |  | - | --------- | -
|                                                                       |  | Fiscal year ended January 31, |          
|                                                                       |  | 2008                          |           |   | 2007 |   |           | 2006 | 
|Revenues:                                                              |  |                               |           |   |      |   |           |      |  |   |           |  
|License fees                                                           |  | $                             | 552,022   |   |      | $ | 573,470   |      |  | $ | 511,549   |  
|Services                                                               |  |                               | 983,758   |   |      |   | 828,879   |      |  |   | 688,296   |  
|                                                                       |  |                               |           |   |      |   |           |      |  |   |           |  
|Total revenues                                                         |  |                               | 1,535,780 |   |      |   | 1,402,349 |      |  |   | 1,199,845 |  
|Cost of revenues:                                                      |  |                               |           |   |      |   |           |      |  |   |           |  
|Cost of license fees                                                   |  |                               | 60,969    |   |      |   | 64,221    |      |  |   | 38,778    |  
|Cost of services                                                       |  |                               | 297,721   |   |      |   | 269,105   |      |  |   | 218,434   |  
|                                                                       |  |                               |           |   |      |   |           |      |  |   |           |  
|Total cost of revenues                                                 |  |                               | 358,690   |   |      |   | 333,326   |      |  |   | 257,212   |  
|                                                                       |  |                               |           |   |      |   |           |      |  |   |           |  
|Gross profit                                                           |  |                               | 1,177,090 |   |      |   | 1,069,023 |      |  |   | 942,633   |  
|Operating expenses:                                                    |  |                               |           |   |      |   |           |      |  |   |           |  
|Sales and marketing                                                    |  |                               | 542,124   |   |      |   | 524,970   |      |  |   | 437,769   |  
|Research and development                                               |  |                               | 240,130   |   |      |   | 232,960   |      |  |   | 182,234   |  
|General and administrative                                             |  |                               | 161,814   |   |      |   | 138,255   |      |  |   | 108,660   |  
|Facilities consolidation                                               |  |                               | 1,770     |   |      |   | 454       |      |  |   | 772       |  
|Acquisition-related in-process research and development                |  |                               |          |   |      |   | 4,400     |      |  |   | 4,600     |  
|Impairment of land                                                     |  |                               |          |   |      |   | 201,615   |      |  |   |          |  
|                                                                       |  |                               |           |   |      |   |           |      |  |   |           |  
|Total operating expenses                                               |  |                               | 945,838   |   |      |   | 1,102,654 |      |  |   | 734,035   |  
|                                                                       |  |                               |           |   |      |   |           |      |  |   |           |  
|Income (loss) from operations                                          |  |                               | 231,252   |   |      |   | (33,631   | )    |  |   | 208,598   |  
|Interest and other, net:                                               |  |                               |           |   |      |   |           |      |  |   |           |  
|Interest expense                                                       |  |                               | (5,325    | ) |      |   | (22,623   | )    |  |   | (32,072   | )
|Net gain on retirement of convertible subordinated notes               |  |                               |          |   |      |   | 818       |      |  |   | 667       |  
|Net gains on sale of equity investments                                |  |                               | 1,132     |   |      |   | 11,074    |      |  |   |          |  
|Interest income and other                                              |  |                               | 61,424    |   |      |   | 55,048    |      |  |   | 40,994    |  
|                                                                       |  |                               |           |   |      |   |           |      |  |   |           |  
|Total interest and other, net                                          |  |                               | 57,231    |   |      |   | 44,317    |      |  |   | 9,589     |  
|                                                                       |  |                               |           |   |      |   |           |      |  |   |           |  
|Income before provision for income taxes                               |  |                               | 288,483   |   |      |   | 10,686    |      |  |   | 218,187   |  
|Provision for income taxes                                             |  |                               | 80,302    |   |      |   | 6,186     |      |  |   | 75,017    |  
|                                                                       |  |                               |           |   |      |   |           |      |  |   |           |  
|Net income                                                             |  |                               | 208,181   |   |      |   | 4,500     |      |  |   | 143,170   |  
|Other comprehensive income:                                            |  |                               |           |   |      |   |           |      |  |   |           |  
|Foreign currency translation adjustments                               |  |                               | 10,310    |   |      |   | 7,104     |      |  |   | (10,960   | )
|Unrealized gain on available-for-sale investments, net of income taxes |  |                               | 7,550     |   |      |   | 1,930     |      |  |   | 1,675     |  
|                                                                       |  |                               |           |   |      |   |           |      |  |   |           |  
|Comprehensive income                                                   |  | $                             | 226,041   |   |      | $ | 13,534    |      |  | $ | 133,885   |  
|                                                                       |  |                               |           |   |      |   |           |      |  |   |           |  
|Net income per share:                                                  |  |                               |           |   |      |   |           |      |  |   |           |  
|Basic                                                                  |  | $                             | 0.52      |   |      | $ | 0.01      |      |  | $ | 0.37      |  
|                                                                       |  |                               |           |   |      |   |           |      |  |   |           |  
|Diluted                                                                |  | $                             | 0.50      |   |      | $ | 0.01      |      |  | $ | 0.36      |  
|                                                                       |  |                               |           |   |      |   |           |      |  |   |           |  
|Shares used in computing net income per share:                         |  |                               |           |   |      |   |           |      |  |   |           |  
|Basic                                                                  |  |                               | 400,340   |   |      |   | 394,100   |      |  |   | 389,050   |  
|                                                                       |  |                               |           |   |      |   |           |      |  |   |           |  
|Diluted                                                                |  |                               | 416,540   |   |      |   | 410,120   |      |  |   | 397,390   |  
|                                                                       |  |                               |           |   |      |   |           |      |  |   |           |  

See accompanying notes



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BEA SYSTEMS, INC.

CONSOLIDATED STATEMENT OF STOCKHOLDERS EQUITY

(in thousands)



|                                                                               |  |             |     |   |                          |   |           |                       |  |   |                                      |   |  |                      |          |   |                                     |   |         |                          |  |   |         |   |  |   |           |  
|------------------------------------------------------------------------------ |  | ----------- | --- | - | ------------------------ | - | --------- | --------------------- |  | - | ------------------------------------ | - |  | -------------------- | -------- | - | ----------------------------------- | - | ------- | ------------------------ |  | - | ------- | - |  | - | --------- | -
|                                                                               |  | Commonstock |     |   | Additionalpaid-incapital |   |           | Treasurystock, atcost |  |   | Retainedearnings(Accumulateddeficit) |   |  | Deferredcompensation |          |   | Accumulatedothercomprehensiveincome |   |         | Totalstockholdersequity | 
|Balance at January 31, 2005                                                    |  |             | 397 |   |                          |   | 1,518,448 |                       |  |   | (284,551                             | ) |  |                      | (220,086 | ) |                                     |   | (24,471 | )                        |  |   | 12,413  |   |  |   | 1,002,150 |  
|Common stock issued under stock option and stock purchase plans                |  |             | 11  |   |                          |   | 60,688    |                       |  |   |                                     |   |  |                      |         |   |                                     |   |         |                          |  |   |        |   |  |   | 60,699    |  
|Stock repurchases                                                              |  |             | (14 | ) |                          |   |          |                       |  |   | (193,648                             | ) |  |                      |         |   |                                     |   |        |                          |  |   |        |   |  |   | (193,662  | )
|Reclassification of par value for purchases of treasury stock                  |  |             | 50  |   |                          |   |          |                       |  |   | (50                                  | ) |  |                      |         |   |                                     |   |        |                          |  |   |        |   |  |   |          |  
|Stock-based compensation                                                       |  |             |    |   |                          |   | 7,873     |                       |  |   |                                     |   |  |                      |         |   |                                     |   | 11,739  |                          |  |   |        |   |  |   | 19,612    |  
|Deferred compensation in connection with the grant of discounted stock options |  |             |    |   |                          |   | 7,053     |                       |  |   |                                     |   |  |                      |         |   |                                     |   | (7,053  | )                        |  |   |        |   |  |   |          |  
|Tax benefit on stock options                                                   |  |             |    |   |                          |   | 67,889    |                       |  |   |                                     |   |  |                      |         |   |                                     |   |        |                          |  |   |        |   |  |   | 67,889    |  
|Tax benefit on business acquisitions                                           |  |             |    |   |                          |   | 3,267     |                       |  |   |                                     |   |  |                      |         |   |                                     |   |        |                          |  |   |        |   |  |   | 3,267     |  
|Fair value of assumed stock options in business acquisitions                   |  |             |    |   |                          |   | 2,359     |                       |  |   |                                     |   |  |                      |         |   |                                     |   |        |                          |  |   |        |   |  |   | 2,359     |  
|Net income                                                                     |  |             |    |   |                          |   |          |                       |  |   |                                     |   |  |                      | 143,170  |   |                                     |   |        |                          |  |   |        |   |  |   | 143,170   |  
|Foreign currency translation adjustment                                        |  |             |    |   |                          |   |          |                       |  |   |                                     |   |  |                      |         |   |                                     |   |        |                          |  |   | (10,960 | ) |  |   | (10,960   | )
|Unrealized gains on available-for-sale investments, net of income taxes        |  |             |    |   |                          |   |          |                       |  |   |                                     |   |  |                      |         |   |                                     |   |        |                          |  |   | 1,675   |   |  |   | 1,675     |  
|                                                                               |  |             |     |   |                          |   |           |                       |  |   |                                      |   |  |                      |          |   |                                     |   |         |                          |  |   |         |   |  |   |           |  
|Balance at January 31, 2006                                                    |  |             | 444 |   |                          |   | 1,667,577 |                       |  |   | (478,249                             | ) |  |                      | (76,916  | ) |                                     |   | (19,785 | )                        |  |   | 3,128   |   |  |   | 1,096,199 |  
|Common stock issued under stock option and stock purchase plans                |  |             | 12  |   |                          |   | 94,346    |                       |  |   |                                     |   |  |                      |         |   |                                     |   |        |                          |  |   |        |   |  |   | 94,358    |  
|Reclassification due to FAS 123(R) implementation                              |  |             |    |   |                          |   | (19,785   | )                     |  |   |                                     |   |  |                      |         |   |                                     |   | 19,785  |                          |  |   |        |   |  |   |          |  
|Tax benefit on stock options                                                   |  |             |    |   |                          |   | 94,285    |                       |  |   |                                     |   |  |                      |         |   |                                     |   |        |                          |  |   |        |   |  |   | 94,285    |  
|Stock-based compensation                                                       |  |             |    |   |                          |   | 66,234    |                       |  |   |                                     |   |  |                      |         |   |                                     |   |        |                          |  |   |        |   |  |   | 66,234    |  
|Net income                                                                     |  |             |    |   |                          |   |          |                       |  |   |                                     |   |  |                      | 4,500    |   |                                     |   |        |                          |  |   |        |   |  |   | 4,500     |  
|Foreign currency translation adjustment                                        |  |             |    |   |                          |   |          |                       |  |   |                                     |   |  |                      |         |   |                                     |   |        |                          |  |   | 7,104   |   |  |   | 7,104     |  
|Unrealized gains on available-for-sale investments, net of income taxes        |  |             |    |   |                          |   |          |                       |  |   |                                     |   |  |                      |         |   |                                     |   |        |                          |  |   | 1,930   |   |  |   | 1,930     |  
|                                                                               |  |             |     |   |                          |   |           |                       |  |   |                                      |   |  |                      |          |   |                                     |   |         |                          |  |   |         |   |  |   |           |  
|Balance at January 31, 2007                                                    |  |             | 456 |   |                          |   | 1,902,657 |                       |  |   | (478,249                             | ) |  |                      | (72,416  | ) |                                     |   |        |                          |  |   | 12,162  |   |  |   | 1,364,610 |  
|Common stock issued under stock option and stock purchase plans                |  |             | 15  |   |                          |   | 110,573   |                       |  |   |                                     |   |  |                      |         |   |                                     |   |        |                          |  |   |        |   |  |   | 110,588   |  
|Stock-based compensation                                                       |  |             |    |   |                          |   | 46,977    |                       |  |   |                                     |   |  |                      |         |   |                                     |   |        |                          |  |   |        |   |  |   | 46,977    |  
|Tax benefit on stock-based compensation                                        |  |             |    |   |                          |   | 19,760    |                       |  |   |                                     |   |  |                      |         |   |                                     |   |        |                          |  |   |        |   |  |   | 19,760    |  
|Net Income                                                                     |  |             |    |   |                          |   |          |                       |  |   |                                     |   |  |                      | 208,181  |   |                                     |   |        |                          |  |   |        |   |  |   | 208,181   |  
|Cumulative effect from the adoption of FIN 48                                  |  |             |    |   |                          |   |          |                       |  |   |                                     |   |  |                      | (9,866   | ) |                                     |   |        |                          |  |   |        |   |  |   | (9,866    | )
|Foreign currency translation adjustment                                        |  |             |    |   |                          |   |          |                       |  |   |                                     |   |  |                      |         |   |                                     |   |        |                          |  |   | 10,310  |   |  |   | 10,310    |  
|Unrealized gains on available-for-sale investments, net of income taxes        |  |             |    |   |                          |   |          |                       |  |   |                                     |   |  |                      |         |   |                                     |   |        |                          |  |   | 7,550   |   |  |   | 7,550     |  
|                                                                               |  |             |     |   |                          |   |           |                       |  |   |                                      |   |  |                      |          |   |                                     |   |         |                          |  |   |         |   |  |   |           |  
|Balance at January 31, 2008                                                    |  | $           | 471 |   |                          | $ | 2,079,967 |                       |  | $ | (478,249                             | ) |  | $                    | 125,899  |   |                                     | $ |        |                          |  | $ | 30,022  |   |  | $ | 1,758,110 |  
|                                                                               |  |             |     |   |                          |   |           |                       |  |   |                                      |   |  |                      |          |   |                                     |   |         |                          |  |   |         |   |  |   |           |  

See accompanying notes



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BEA SYSTEMS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)



|                                                                                             |  |                               |          |   |      |   |           |      |  |   |           |  
|-------------------------------------------------------------------------------------------- |  | ----------------------------- | -------- | - | ---- | - | --------- | ---- |  | - | --------- | -
|                                                                                             |  | Fiscal year ended January 31, |         
|                                                                                             |  | 2008                          |          |   | 2007 |   |           | 2006 | 
|Operating activities:                                                                        |  |                               |          |   |      |   |           |      |  |   |           |  
|Net income                                                                                   |  | $                             | 208,181  |   |      | $ | 4,500     |      |  | $ | 143,170   |  
|Adjustments to reconcile net income to net cash provided by operating activities:            |  |                               |          |   |      |   |           |      |  |   |           |  
|Depreciation                                                                                 |  |                               | 23,108   |   |      |   | 23,351    |      |  |   | 24,477    |  
|Loss on disposal of property and equipment                                                   |  |                               | 64       |   |      |   | 386       |      |  |   | 987       |  
|Gain on sales of minority investments                                                        |  |                               | (1,132   | ) |      |   | (11,074   | )    |  |   |          |  
|Amortization of stock based compensation                                                     |  |                               | 46,218   |   |      |   | 68,421    |      |  |   | 20,697    |  
|Amortization and impairment charges related to acquired intangible assets                    |  |                               | 30,527   |   |      |   | 38,350    |      |  |   | 13,627    |  
|Impairment of land                                                                           |  |                               |         |   |      |   | 201,615   |      |  |   |          |  
|Excess tax benefit from exercise of stock options                                            |  |                               | (12,802  | ) |      |   | (106,002  | )    |  |   |          |  
|Facilities consolidation                                                                     |  |                               | 1,770    |   |      |   | 454       |      |  |   | 772       |  
|Net gain on retirement of convertible subordinated notes                                     |  |                               |         |   |      |   | (818      | )    |  |   | (667      | )
|Other                                                                                        |  |                               | 8,207    |   |      |   | 7,643     |      |  |   | 16,833    |  
|Changes in operating assets and liabilities, net of those acquired in business combinations: |  |                               |          |   |      |   |           |      |  |   |           |  
|Accounts receivable                                                                          |  |                               | (1,091   | ) |      |   | (59,655   | )    |  |   | (54,081   | )
|Other current assets                                                                         |  |                               | (22,609  | ) |      |   | 4,185     |      |  |   | (6,998    | )
|Other long-term assets                                                                       |  |                               | (42,485  | ) |      |   | (65,811   | )    |  |   | (40,355   | )
|Accounts payable                                                                             |  |                               | 3,272    |   |      |   | 4,639     |      |  |   | 1,790     |  
|Accrued liabilities                                                                          |  |                               | (40,663  | ) |      |   | 43,131    |      |  |   | 101,734   |  
|Deferred revenue                                                                             |  |                               | 27,703   |   |      |   | 67,987    |      |  |   | 55,512    |  
|Long-term tax liabilities                                                                    |  |                               | 151,767  |   |      |   |          |      |  |   |          |  
|Other                                                                                        |  |                               | (13,355  | ) |      |   | (16,934   | )    |  |   | 7,120     |  
|                                                                                             |  |                               |          |   |      |   |           |      |  |   |           |  
|Net cash provided by operating activities                                                    |  |                               | 366,680  |   |      |   | 204,368   |      |  |   | 284,618   |  
|                                                                                             |  |                               |         
|Investing activities:                                                                        |  |                               |          |   |      |   |           |      |  |   |           |  
|Purchases of land, building, property and equipment                                          |  |                               | (174,381 | ) |      |   | (26,384   | )    |  |   | (20,679   | )
|Proceeds from land sale                                                                      |  |                               | 105,547  |   |      |   |          |      |  |   |          |  
|Payments for acquisitions, net of cash acquired                                              |  |                               | (580     | ) |      |   | (129,872  | )    |  |   | (211,500  | )
|Proceeds received from sale of minority investment                                           |  |                               | 1,132    |   |      |   | 11,610    |      |  |   |          |  
|Repayment of note from Executives and Officers                                               |  |                               |         |   |      |   |          |      |  |   | 907       |  
|Purchases of available-for-sale short-term investments                                       |  |                               | (559,412 | ) |      |   | (541,346  | )    |  |   | (542,435  | )
|Proceeds from maturities of available-for-sale short-term investments                        |  |                               | 151,396  |   |      |   | 194,695   |      |  |   | 522,801   |  
|Proceeds from sales of available-for-sale short-term investments                             |  |                               | 300,658  |   |      |   | 376,226   |      |  |   | 441,345   |  
|Other                                                                                        |  |                               |         |   |      |   |          |      |  |   | 1,015     |  
|                                                                                             |  |                               |          |   |      |   |           |      |  |   |           |  
|Net cash provided by (used in) investing activities                                          |  |                               | (175,640 | ) |      |   | (115,071  | )    |  |   | 191,454   |  
|                                                                                             |  |                               |         
|Financing activities:                                                                        |  |                               |          |   |      |   |           |      |  |   |           |  
|Payment and repurchase of convertible subordinated notes                                     |  |                               |         |   |      |   | (463,812  | )    |  |   | (83,791   | )
|Excess tax benefit from exercise of stock                                                    |  |                               | 12,802   |   |      |   | 106,002   |      |  |   |          |  
|Repayment of credit facility                                                                 |  |                               | (215,000 | ) |      |   |          |      |  |   |          |  
|Proceeds from issuance of common stock, net of issuance costs                                |  |                               | 116,904  |   |      |   | 94,692    |      |  |   | 60,520    |  
|Purchases of treasury stock                                                                  |  |                               |         |   |      |   |          |      |  |   | (193,663  | )
|                                                                                             |  |                               |          |   |      |   |           |      |  |   |           |  
|Net cash used in financing activities                                                        |  |                               | (85,294  | ) |      |   | (263,118  | )    |  |   | (216,934  | )
|                                                                                             |  |                               |          |   |      |   |           |      |  |   |           |  
|Net increase (decrease) in cash and cash equivalents                                         |  |                               | 105,746  |   |      |   | (173,821  | )    |  |   | 259,138   |  
|Effect of foreign exchange rate changes on cash                                              |  |                               | 20,645   |   |      |   | 23,343    |      |  |   | (19,120   | )
|Cash and cash equivalents at beginning of year                                               |  |                               | 867,294  |   |      |   | 1,017,772 |      |  |   | 777,754   |  
|                                                                                             |  |                               |          |   |      |   |           |      |  |   |           |  
|Cash and cash equivalents at end of year                                                     |  | $                             | 993,685  |   |      | $ | 867,294   |      |  | $ | 1,017,772 |  
|                                                                                             |  |                               |          |   |      |   |           |      |  |   |           |  

See accompanying notes



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BEA SYSTEMS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Organization and Significant Accounting Policies

Description of business

BEA Systems, Inc. (referred herein as we, us, BEA or the
Company) is a provider of application infrastructure software and related services that help companies of all sizes build distributed systems that extend investments in existing computer systems and provide the foundation for running an
integrated business. BEAs customers use BEA products as a deployment platform for Internet-based applications, including packaged applications, and as a means for robust enterprise application integration among mainframe, client/server and
Internet-based applications. Our revenues are derived from a single group of similar and related products and services.

Principles of
consolidation

The consolidated financial statements include the accounts of the Company and all subsidiaries. Intercompany accounts and
transactions have been eliminated. The operating results of businesses acquired and accounted for as a purchase are included from the date of their acquisition.

Reclassifications

Certain prior year amounts have been reclassified to conform to the current year
presentation.

Use of estimates

The preparation of the financial statements in accordance with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and the
accompanying notes. Actual results could differ materially from those estimates.

Foreign currencies

We transact business in various foreign currencies. Generally, the functional currency of a foreign operation is the local countrys currency.
Accordingly, the assets and liabilities of foreign subsidiaries are translated from their respective functional currencies at the rates in effect at the end of each reporting period while revenue and expense accounts are translated at weighted
average rates during the period and equity is translated at historical rates. Foreign currency translation adjustments are reflected as a separate component of accumulated other comprehensive income.

We have an accounting exposure to foreign exchange rate volatility primarily from intercompany accounts between our parent company in the United States
and our foreign subsidiaries. The remaining accounting exposure is a result of certain assets and liabilities denominated in foreign currencies other than their functional currency that require remeasurement. The intercompany accounts are typically
denominated in the functional currency of the foreign subsidiary in order to centralize foreign exchange risk. The income statement exposure to currency fluctuations arises principally from revaluing our intercompany balances into U.S. dollars, with
the resulting gains or losses recorded in other income and expense. The Company hedges its exposure to these profit and loss fluctuations by entering into forward exchange contracts, which are recorded at fair value based on current exchange rates
each month. Gains and losses resulting from exchange rate fluctuations on forward foreign exchange contracts are recorded in interest income and other, net and generally offset the corresponding foreign exchange gains and losses from the foreign
currency denominated assets and liabilities. These foreign



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currency transactions resulted in a net gain of $0.7 million for the year ended January 31, 2008 and $0.2 million and $1.4 million net loss in the
fiscal years ended January 31, 2007 and 2006, respectively.

Fair value of financial instruments

The following methods are used to estimate the fair value of the Companys financial instruments:

a) the carrying value of cash and cash equivalents, accounts receivables, accounts payable and accrued liabilities approximates their fair
value due to the short-term nature of these instruments;

b) available for sale securities and forward foreign exchange
contracts are recorded based on quoted market prices;

c) notes payable and other long term obligations are recorded at
their fair value which approximates their carrying value at the balance sheet date.

Cash equivalents and investments

Cash equivalents consist of highly liquid investments, including corporate debt securities and money market funds with maturities of 90 days or less from
the date of purchase.

Short-term and long-term investments consist principally of U.S. agency securities, U.S. treasury securities,
corporate notes and asset-backed securities with remaining time to maturity of 37 months or less. The Company considers investments with remaining time to maturity greater than one year and in a loss position at the balance sheet date to be
classified as long-term as it expects to hold them to recovery which may be at maturity. The Company considers all other investments with remaining time to maturity greater than one year to be short-term investments. The short-term investments are
classified in the balance sheet as current assets because they can be readily converted into cash or into securities with a shorter remaining time to maturity and because the Company is not committed to holding the investments until maturity. The
Company determines the appropriate classification of its investments at the time of purchase and re-evaluates such designations as of each balance sheet date. All investments and cash equivalents in the portfolio are classified as
available-for-sale and are stated at fair market value, with all the associated unrealized gains and losses, net of deferred taxes, reported as a component of accumulated other comprehensive income. The amortized cost of debt securities
is adjusted for amortization of premiums and accretion of discounts to maturity. Such amortization and accretion are included in interest income and other, net.

Realized gains and losses and declines in value judged to be other-than-temporary on available-for-sale securities are included in interest income and other, net. The cost of securities sold is based on the specific
identification method.

Accounts Receivable and the Allowance for Doubtful Accounts

Accounts receivable are stated at cost, net of allowances for doubtful accounts. The Company makes judgments as to its ability to collect outstanding
receivables and records allowances when collection becomes doubtful due to liquidity and non-liquidity concerns. The allowance includes both (1) an estimate for uncollectible receivables due to customers liquidity concerns and (2) an
estimate for uncollectible receivables due to non-liquidity types of concerns. The allowance charges associated with non-liquidity concerns are recorded as reductions to revenue, and the allowance charges associated with liquidity concerns are
recorded as general and administrative expenses. These estimates are based on multiple sources of information including: assessing the credit worthiness of the Companys customers, the Companys historical collection experience, collection
experience within the Companys industry, industry and geographic concentrations of credit risk, and current economic trends.



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The accounts receivable aging is reviewed on a regular basis and write-offs occur on a case by case basis
net of any amounts that may be collected.

Concentration of credit risk

Financial instruments that potentially subject the Company to significant concentrations of credit risk consist principally of investments in debt
securities and trade receivables. In accordance with the Companys Investment Policy, we invest the cash, cash equivalents and short and long-term investments in corporate bonds rated A- or higher and money market instruments rated A-1/P-1. In
addition, the Company limits the amount invested with any one type of security and issuer.

The Company sells its products to customers,
typically large corporations, in a variety of industries in the Americas, Europe and Asia/Pacific. The Company performs credit evaluations of its customers financial condition on a case by case basis and limits the amount of credit extended as
deemed appropriate; generally no collateral is required. The Company maintains allowances for estimated credit losses and, to date, such losses have been within managements expectations. Future credit losses may differ from the Companys
estimates, particularly if the financial conditions of its customers were to deteriorate, and could have a material impact on the Companys future results of operations.

No customer accounted for more than 10 percent of total revenues in fiscal 2008, fiscal 2007 or fiscal 2006. There were no customers that accounted for
more than 10 percent of accounts receivable as of January 31, 2008, or 2007. The only individual country outside of the United States with revenues greater than 10 percent of total revenues in fiscal 2008 and fiscal 2006 was the United Kingdom
with 10.2 percent or $156.4 million and 10.8 percent or $130.0 million, respectively. No individual country outside of the United States had revenues greater than 10 percent of total revenues in fiscal 2007.

Property and equipment

Property and
equipment are stated at cost. Land includes development costs to prepare the property for use. Depreciation on property and equipment is computed using the straight-line method over the following estimated useful lives of the assets:



|                               |  |          
|------------------------------ |  | ---------
|Computer hardware and software |  | 2-5 years
|Furniture and equipment        |  | 2-5 years

Land is not depreciated as it is considered to have an indefinite useful life. Leasehold
improvements are amortized over the shorter of 5 years, the useful lives of the assets, or the remaining lease term. Furniture and equipment under capital lease are amortized consistent with the policy outlined above.

The San Jose building was not placed in service at January 31, 2008 and therefore no depreciation was recorded for the year ended January 31,
2008. Once the building is placed in service it will be amortized over 40 years.

Acquired intangible assets

Acquired intangible assets consist of purchased technology, patents and trademarks, non-compete agreements, distribution rights and customer base related
to the Companys acquisitions accounted for using the purchase method. Amortization of these acquired intangible assets is calculated on a straight-line basis over the following estimated useful lives of the assets:



|                       |  |          
|---------------------- |  | ---------
|Purchased technology   |  | 2-5 years
|Non-compete agreements |  | 1-2 years
|Customer base          |  | 1-6 years



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Amortization of purchased technology, patents and trademarks, non-compete agreements, distribution rights
and customer base is included as a component of cost of license fees and costs of services.

Impairment of Long Lived Assets

The Company periodically assesses, in accordance with the provisions of Statement of Financial Accounting Standards No. 144
(FAS 144), Accounting for the Impairment and Disposal of Long-Lived Assets, potential impairment of its long-lived assets with estimable useful lives. An impairment review is performed whenever events or changes in circumstances
indicate that the carrying value may not be recoverable.

Factors the Company considers important that could trigger an impairment review
include, but are not limited to, significant under-performance relative to historical or projected future operating results, significant changes in the manner of use of the assets or the strategy for the Companys overall business, and
significant industry or economic trends. If the Company determines that the carrying value of the long-lived assets may not be recoverable based upon the existence of one or more of the above indicators, the Company determines the recoverability by
comparing the carrying amount of the asset to net future undiscounted cash flows that the asset is expected to generate. The impairment recognized is the amount by which the carrying amount exceeds the fair market value of the asset.

Goodwill

Goodwill represents the
excess of the purchase price over the fair value of net tangible and identified intangible assets acquired in business combinations. Goodwill is not amortized but is evaluated at least annually for impairment or when a change in facts and
circumstances indicate that the fair value of the goodwill may be below its carrying value.

The Company tests goodwill for impairment in
accordance with Statement of Financial Accounting Standards No. 142, Goodwill and Other Intangible Assets(FAS 142).Under FAS 142, goodwill is tested for impairment in a two-step process. First, the Company determines
if the carrying amount of its Reporting Unit exceeds the fair value of the Reporting Unit, which may initially indicate that goodwill could be impaired. If the Company determines that such impairment could have occurred, it would compare
the implied fair value of the goodwill as defined by FAS 142 to its carrying amount to determine the impairment loss, if any. The Company completed the first step under FAS 142 in the fourth quarters of fiscal 2008, 2007 and 2006 and
determined goodwill was not impaired.

Software development costs

Statement of Financial Accounting Standards No. 86, Accounting for the Costs of Computer Software to be Sold, Leased or Otherwise Marketed,
requires the capitalization of certain software development costs subsequent to the establishment of technological feasibility. Based on the Companys product development process, technological feasibility is established upon the completion of
a working model. Costs incurred by the Company between the completion of the working model and the point at which the product is ready for general release have been insignificant. Accordingly, the Company has charged all such costs to research and
development expense in the period incurred.

Revenue recognition

The Company recognizes revenues in accordance with the American Institute of Certified Public Accountants (AICPA) Statement of Position 97-2,
Software Revenue Recognition, as amended.

Revenue from software license agreements is recognized when the basic criteria of software
revenue recognition have been met: (1) persuasive evidence of an agreement exists, (2) delivery of the product has



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occurred, (3) the fee is fixed or determinable, and (4) collection is probable. The Company uses the residual method to recognize revenue when a
license agreement includes one or more elements to be delivered at a future date and vendor specific objective evidence of the fair value of all undelivered elements exists. Under the residual method, the fair value of the undelivered elements is
deferred and the remaining portion of the arrangement fee is recognized as license revenue. If evidence of the fair value of one or more undelivered elements does not exist, all revenue is deferred and recognized when delivery of those elements has
occurred or when fair value is established.

Vendor specific objective evidence of the fair value of maintenance is determined by the price
paid by the Companys customers when maintenance is sold separately (i.e., the prices paid by the customers in connection with renewals). Vendor specific objective evidence of fair value of consulting services and education is based on the
price when sold separately.

When licenses are sold together with consulting services, license fees are recognized upon delivery, provided
that (1) the basic criteria of software revenue recognition have been met, (2) payment of the license fees is not dependent upon the performance of the consulting services, and (3) the consulting services do not provide significant
customization of the software products and are not essential to the functionality of the software that was delivered. The Company does not normally provide significant customization of its software products.

Revenue arrangements with extended payment terms are generally considered not to be fixed or determinable and, the Company generally does not recognize
revenue on these arrangements until the customer payments become due and all other revenue recognition criteria have been met. In certain countries where collection risk is considered to be high, such as certain Latin American, Asian and Eastern
European countries, revenue is generally recognized upon receipt of cash, and in some cases, evidence of delivery to the end user when the sale is made through a distributor.

In addition to our direct sales force, the Company has a number of partnerships that represent an indirect channel for license revenues, including system
platform companies, packaged application software developers, application service providers, system integrators and independent consultants and distributors. Fundamentally, partners who resell our products either embed or do not embed (i.e.,
bundle) our software into their own software products. Partners who embed our software are referred to as embedded Independent Software Vendors (ISVs), and revenue is recognized upon delivery of our software to the partner
assuming all other revenue recognition criteria have been met. Partners who do not embed our software are generally referred to as Resellers. Due to the risk of concessions regarding transactions with Resellers, the Company recognizes revenue once
persuasive evidence of sell through to an end user is received and all other revenue recognition criteria have been met. The Companys partner license agreements do not provide for rights of return.

Services revenue includes revenues for consulting services, education and customer support and maintenance. Consulting services revenue and the related
cost of services are generally recognized on a time and materials basis. BEAs consulting arrangements do not include significant customization of the software since the software is essentially a pre-packaged off the shelf platform
that applications are built on or attached to. Customer support and maintenance agreements provide technical support and the right to unspecified future upgrades on an if-and-when available basis. Customer support and maintenance revenues are
recognized ratably over the term of the support period (generally one year). Education services revenue are recognized as the related training services are delivered.

The Company occasionally purchases software products from vendors who are also customers. These transactions have not been frequent. In such transactions involving the exchange of software products, fair value of the
software sold and purchased generally cannot be reasonably estimated. As a result, in most cases the Company records such transactions at carryover (i.e. net) basis.



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Deferred revenue

The following table sets forth the components of deferred revenue (in thousands):



|                       |  |            |         |      |   |        
|---------------------- |  | ---------- | ------- | ---- | - | -------
|                       |  | January 31
|                       |  | 2008       |         | 2007
|License fees           |  | $          | 4,878   |      | $ | 13,797 
|Services               |  |            | 472,107 |      |   | 435,485
|                       |  |            |         |      |   |        
|Total deferred revenue |  | $          | 476,985 |      | $ | 449,282
|                       |  |            |         |      |   |        

Deferred services revenue includes customer support, consulting and education. The balance of
deferred services revenue is predominantly comprised of deferred customer support revenues. Deferred customer support revenues are recognized ratably over the term of the contract. Deferred license and consulting revenues are normally a result of
revenue recognition requirements and are recognized upon satisfaction of the revenue recognition criteria.

Cost of revenues

Cost of licenses primarily includes amortization of acquired intangible assets, costs associated with our customer license compliance
program, third party royalties, physical media and documentation, product packaging and shipping, and other production costs. Cost of services consists primarily of salaries and benefits and allocated overhead costs for our consulting, education and
support personnel as well as the cost of third party delivered consulting and education arrangements and amortization associated with acquired intangibles.

Stock-based compensation

The Company adopted Statement of Financial Accounting Standards
No. 123 (revised 2004), Share-Based Payment, (FAS 123(R)) using the modified prospective transition method, which requires the application of the accounting standard as of February 1, 2006, the first day of the
Companys fiscal year 2007. The Companys Consolidated Financial Statements as of and for the year ended January 31, 2008 and 2007 reflect the impact of FAS 123(R). In accordance with the modified prospective transition method, the
Companys consolidated financial statements for fiscal 2006 have not been restated to reflect, and do not include, the impact of FAS 123(R).

FAS 123(R) requires companies to estimate the fair value of stock-based awards on the date of grant using an option-pricing model. The Company uses the Black-Scholes-Merton option pricing model to determine the fair value of stock options
under FAS 123(R), consistent with that used for pro forma disclosures under FAS 123. The fair value of a restricted stock unit award is equivalent to the market price of the Companys common stock on the grant date. The value of the portion of
the stock-based award that is ultimately expected to vest is recognized as expense over the requisite service periods, or in the period of grant if the requisite service period has been provided, in the Companys consolidated statement of
income.

Stock-based compensation expense recognized in the Companys consolidated statement of income for the year ended
January 31, 2008 included (i) compensation expense for stock-based awards granted prior to, but not yet vested as of, January 31, 2006 based on the grant date fair value estimated in accordance with the provisions of FAS 123 and
(ii) compensation expense for the stock-based awards granted subsequent to January 31, 2006 based on the grant date fair value estimated in accordance with the provisions of FAS 123(R). The straight-line single option approach is the
Companys accounting policy for amortizing the fair value of stock-based compensation. Compensation expense for all expected-to-vest stock-based awards is recognized on a straight-line basis provided that the amount of compensation cost
recognized at any date is no less than the portion of the grant-date value of the award that is vested at that date. FAS 123(R) requires forfeitures to be estimated at the time of grant and revised, if necessary, in subsequent periods if actual
forfeitures differ from those estimates. In



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the Companys stock-based compensation expense required under APB 25 and the pro forma information required under FAS 123 for fiscal 2006, the Company
accounted for forfeitures as they occurred.

Prior to the adoption of FAS 123(R), stock-based compensation expense was recognized in the
Companys consolidated statement of income under the provisions of APB 25. In accordance with APB 25, no compensation expense was required for the employee stock purchases under the Companys Employee Stock Purchase Plan. Pre-tax
stock-based compensation expense of $20.7million for the fiscal year ended 2006, was related to employee stock-based awards and stock options assumed from acquisitions.

In accordance with FAS 123(R), the Company has presented as financing cash flows the tax benefits resulting from tax deductions in excess of the
compensation cost recognized for those options for fiscal 2008 and 2007. Tax benefits from employee stock plans of $12.8 million and $106.0 million, which related to tax deductions in excess of the compensation cost recognized, were presented
as financing cash flows for fiscal 2008 and 2007, respectively. In fiscal 2006, prior to the adoption of FAS 123(R), tax benefits from employee stock plans were presented as operating cash flows. Additionally, In accordance with FAS 123(R), FAS
No. 109, Accounting for Income Taxes (FAS 109), and EITF Topic D-32, Intra-period Tax Allocation of the Effect of Pretax Income from Continuing Operations, the Company has elected to recognize
excess income tax benefits from stock option exercises in additional paid-in capital only if an incremental income tax benefit would be realized after considering all other tax attributes presently available to the Company.

The following table summarizes the fiscal 2006 pro forma net income and earnings per share, net of related tax effect, had the Company applied the fair
value recognition provisions of FAS 123 to employee stock benefits (in thousands, except per share amounts):



|                                                                                                                               |  |                      |         |  
|------------------------------------------------------------------------------------------------------------------------------ |  | -------------------- | ------- | -
|                                                                                                                               |  | As ofJanuary 31,2006 |        
|                                                                                                                              
|Net income                                                                                                                     |  |                      |         |  
|Net income, as reported                                                                                                        |  | $                    | 143,170 |  
|Add: Share-based employee compensation expense included in reported net income, net of income taxes                            |  |                      | 15,833  |  
|Deduct: Total share-based employee compensation expense determined under fair value method for all awards, net of income taxes |  |                      | (85,881 | )
|                                                                                                                               |  |                      |         |  
|Net income, including share-based employee compensation                                                                        |  | $                    | 73,122  |  
|                                                                                                                               |  |                      |         |  
|Pro forma net income per share                                                                                                 |  |                      |         |  
|Basicnet income per share as reported                                                                                         |  | $                    | 0.37    |  
|                                                                                                                               |  |                      |         |  
|Dilutednet income per share as reported                                                                                       |  | $                    | 0.36    |  
|                                                                                                                               |  |                      |         |  
|Pro forma basis net income per share                                                                                           |  | $                    | 0.19    |  
|                                                                                                                               |  |                      |         |  
|Pro forma diluted net income per share                                                                                         |  | $                    | 0.18    |  
|                                                                                                                               |  |                      |         |  

Segment information

The Company has aggregated two operating segments to form our application infrastructure software and related services reportable segment. The
Companys chief executive officer and chief financial officer evaluate the performance of the Company based upon total revenues by geographic region as disclosed in Note 16Geographic Information and Revenue by Type of Product or Service,
as well as, based on our consolidated statement of income which includes revenues and gross margins for license and services revenue and operating expenses by functional area.



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Advertising costs

The Company expenses advertising costs as incurred. Total advertising expenses were approximately $1.2 million, $4.7 million and $2.2 million in fiscal 2008, 2007 and 2006, respectively.

Facilities Consolidation Charges

In
fiscal 2002 and fiscal 2005, we recorded a facilities consolidation charge for our estimated future lease commitments on excess facilities, net of estimated future sublease income. The estimates used in calculating the charge are reviewed on a
quarterly basis and will be revised if estimated future vacancy rates and sublease rates vary from our original estimates. To the extent that our new estimates vary adversely from our original estimates, we may incur additional losses that are not
included in the accrued balance at January 31, 2008. Conversely, unanticipated improvements in vacancy rates or sublease rates, or termination settlements for less than our accrued amounts, may result in a reversal of a portion of the accrued
balance and a benefit on our statement of income in a future period. The maximum future cost associated with these excess facilities, assuming that no future sublease income is realized on these properties, other than for subleases that have been
executed prior to January 31, 2008, and assuming that the landlords are unwilling to negotiate early lease termination arrangements, is estimated to be $7.8 million, which exceeds the accrued balance at January 31, 2008 by
$1.0 million.

Income taxes

Realization of our deferred tax assets is primarily dependent on future U.S. taxable income. FAS 109 provides for the recognition of deferred tax assets if realization of such assets is more likely than not. As a
result of recent U.S. operating results, as well as U.S. jurisdictional forecasts of taxable income, we believe that net deferred tax assets in the amount of $211.6 million are realizable based on the more likely than not standard
required for recognition. The amount of deferred tax assets considered realizable is subject to adjustment in future periods if estimates of future taxable income are reduced.

BEA is a U.S. based multinational company subject to tax in multiple U.S. and foreign tax jurisdictions. The Companys provision for income taxes is
based on jurisdictional mix of earnings, statutory rates, and enacted tax rules, including transfer pricing. Significant judgment is required in determining the Companys provision for income taxes and in evaluating its tax positions on a
worldwide basis. The Company believes its tax positions, including intercompany transfer pricing policies, are consistent with the tax laws in the jurisdictions in which it conducts its business. It is possible that these positions may be
challenged, which may have a significant impact on the Companys effective tax rate.

The Company accounts for uncertain tax positions
in accordance with FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes (FIN 48). Accordingly, the Company reports liabilities for unrecognized tax benefits resulting from uncertain tax positions
taken or expected to be taken into account on a tax return. The Company recognizes interest and penalties, if any, related to unrecognized tax benefits in income tax expense.

Projects funded by third parties

The
Company has entered into product development agreements with third parties to develop ports and integration tools and to co-develop products. The Company has one agreement with a third party that provides us with partial reimbursement for research
and development and marketing expenses associated with a product of mutual interest. The funding we receive is intended to offset certain of our research and development costs and is non-refundable. Such amounts are recorded as a reduction in
BEAs operating expenses. During fiscal 2008 and 2007, BEA received approximately $1.3 million and $4.4 million of third party funding which was used to offset research and development expense. During fiscal 2006, BEA received approximately
$10.3 million of third party



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funding, which was used to offset $9.7 million of research and development expenses and $0.6 million of marketing expenses.

Business Combinations

We are
required to allocate the purchase price of acquired companies to the tangible and intangible assets acquired, liabilities assumed, as well as in-process research and development (IPR&D) based on their estimated fair values. We engage
independent third party appraisal firms to assist us in determining the fair values of certain assets acquired and liabilities assumed for significant acquisitions. This valuation requires management to make significant estimates and assumptions,
especially with respect to long-lived and intangible assets. Intangible assets are amortized using the straight-line method.

Critical
estimates in valuing certain of the intangible assets include but are not limited to: future expected cash flows from license sales, maintenance agreements, consulting contracts, customer contracts and acquired developed technologies and patents;
expected costs to develop the IPR&D into commercially viable products and estimating cash flows from the projects when completed; the acquired companys brand awareness and market position, as well as assumptions about the period of time
the brand will continue to be used in the combined companys product portfolio; and discount rates. Managements estimates of fair value are based upon assumptions believed to be reasonable and based on historical experience and
information obtained from the management of the acquired companies; however, these assumptions are inherently uncertain and unpredictable. Assumptions may be incomplete or inaccurate, and unanticipated events and circumstances may occur.

The fair value of the deferred support obligation is based, in part, on a valuation completed by a third party appraiser using estimates and
assumptions provided by management. The estimated fair value of the support obligation is determined utilizing a cost build-up approach. The cost build-up approach determines fair value by estimating the costs relating to fulfilling the obligation
plus a normal profit margin. The sum of the costs and operating profit approximates, in theory, the amount that the Company would be required to pay a third party to assume the support obligation. The estimated costs to fulfill the support
obligation were based on the historical direct costs related to providing the support services and to correct any errors in the acquired companys software products. We do not include any costs associated with selling efforts or research and
development or the related fulfillment margins on these costs. Profit associated with selling effort is excluded because acquired companies conclude the selling effort on the support contracts prior to the acquisition date. The estimated research
and development costs are not included in the fair value determination, as these costs are not deemed to represent a legal obligation at the time of acquisition.

IPR&D represents incomplete research and development projects that had not reached technological feasibility and had no alternative future use when a company is acquired. Technological feasibility is established
when an enterprise has completed all planning, design, coding and testing activities that are necessary to establish that a product can be produced to meet its design specifications including functions, features and technical performance
requirements.

The value assigned to IPR&D is determined by considering the importance of the project to the overall development plan,
estimating cost to develop the acquisition related IPR&D into commercially viable products, estimating the resulting net cash flows from the project when completed and discounting the net cash flows to their present value based on the percentage
of completion of the IPR&D project.

In addition, other estimates associated with the accounting for these acquisitions may change as
additional information becomes available regarding the assets acquired and liabilities assumed. In particular, deferred compensation and liabilities to restructure the pre-acquisition organization, including workforce reductions are subject to
change as management completes its assessment of the pre-merger operations and begins to execute the approved plan. These assumptions may be incomplete or inaccurate, and unanticipated events and circumstances may occur.



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Effect of new accounting pronouncements

In December 2007, the Financial Accounting Standards Board (FASB) issued SFAS No. 141 (revised 2007), Business Combinations
(SFAS No. 141(R)). SFAS No. 141(R) establishes principles and requirements for how an acquirer recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, any noncontrolling
interest in the acquiree and the goodwill acquired. SFAS No. 141(R) also establishes disclosure requirements to enable the evaluation of the nature and financial effects of the business combination. SFAS No. 141(R) is effective for fiscal
years beginning after December 15, 2008, and will be adopted by us in the first quarter of fiscal 2010. We are currently evaluating the potential impact, if any, of the adoption of SFAS No. 141(R) on our consolidated results of operations
and financial condition.

In December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in Consolidated Financial
Statementsan amendment of Accounting Research Bulletin No. 51(SFAS No. 160). SFAS No. 160 establishes accounting and reporting standards for ownership interests in subsidiaries held by parties other than the
parent, the amount of consolidated net income attributable to the parent and to the noncontrolling interest, changes in a parents ownership interest, and the valuation of retained noncontrolling equity investments when a subsidiary is
deconsolidated. SFAS No. 160 also establishes disclosure requirements that clearly identify and distinguish between the interests of the parent and the interests of the noncontrolling owners. SFAS No. 160 is effective for fiscal years
beginning after December 15, 2008, and will be adopted by us in the first quarter of fiscal 2010. We are currently evaluating the potential impact, if any, of the adoption of SFAS No. 160 on our consolidated results of operations and
financial condition.

In September 2006, the FASB issued FAS No. 157, Fair Value Measurements. This Statement
defines fair value, establishes a framework for measuring fair value in GAAP, and expands disclosures about fair value measurements. This Statement applies under other accounting pronouncements that require or permit fair value measurements, the
Financial Accounting Standards Board having previously concluded in those accounting pronouncements that fair value is the relevant measurement attribute. Accordingly, this Statement does not require any new fair value measurements. However, for
some entities, the application of this Statement will change current practice. This Statement is effective for financial statements issued for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. We are
currently evaluating the potential impact, if any, of the adoption of SFAS No. 157 on our consolidated results of operations and financial condition.

In February 2007, the FASB issued FAS No. 159, The Fair Value Option for Financial Assets and Financial LiabilitiesIncluding an amendment of FASB Statement No. 115 (FAS
159). FAS 159 is expected to expand the use of fair value accounting but does not affect existing standards which require certain assets or liabilities to be carried at fair value. The objective of FAS 159 is to improve financial reporting by
providing companies with the opportunity to mitigate volatility in reported earnings caused by measuring related assets and liabilities differently without having to apply complex hedge accounting provisions. Under FAS 159, a company may choose, at
specified election dates, to measure eligible items at fair value and report unrealized gains and losses on items for which the fair value option has been elected in earnings at each subsequent reporting date. FAS 159 is effective for financial
statements issued for fiscal 2009. We are currently assessing the impact that FAS 159 may have on our results of operations and financial position.

In June 2007, the Financial Accounting Standards Board (FASB) ratified EITF 07-3, Accounting for Non-Refundable Advance Payments for Goods or Services Received for Use in Future Research and Development Activities,
(EITF 07-3). EITF 07-3 requires that nonrefundable advance payments for goods or services that will be used or rendered for future research and development activities be deferred and capitalized and recognized as an expense as the goods
are delivered or the related services are performed. EITF 07-3 is effective, on a prospective basis, for fiscal years beginning after December 15, 2007 and will be adopted by the Company in the first quarter of fiscal 2009. The Company does not
expect EITF 07-3 to have a material impact on its consolidated results of operations and financial condition.



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2. Merger with Oracle Corporation

On January 16, 2008, the Company entered into an Agreement and Plan of Merger (the Merger Agreement) with Oracle Corporation (Oracle) and Bronco Acquisition Corporation, a wholly-owned
subsidiary of Oracle (Merger Sub). The Merger Agreement provides that, subject to the terms and conditions of the Merger Agreement, Merger Sub will merge with and into the Company (the Merger) and, as a result of the Merger,
the separate corporate existence of Merger Sub will cease and the Company will continue as the surviving corporation and become a wholly-owned subsidiary of Oracle. Upon the closing of the Merger, each share of common stock of the Company issued and
outstanding immediately prior to consummation of the Merger (other than shares owned by the Company, Oracle or Merger Sub) will be converted into the right to receive $19.375 in cash, without interest. In addition, options to acquire Company common
stock, restricted stock unit awards, restricted stock awards and other equity-based awards denominated in shares of Company common stock outstanding immediately prior to the consummation of the Merger will be converted into options, restricted stock
unit awards, restricted stock awards or other equity-based awards, as the case may be, denominated in shares of Oracle common stock based on formulas contained in the Merger Agreement, except for equity-based awards held by a person who is not an
employee of, or a consultant to, the Company or any of its subsidiaries at the time of the consummation of the Merger, which equity-based awards shall be converted into the right to receive cash based on formulas contained in the Merger Agreement.

The Merger is subject to the approval of the Companys stockholders representing a majority of the outstanding shares of Company
common stock. A special meeting of the Companys stockholders to consider and vote on the proposal to adopt the Merger Agreement will be held on April 4, 2008. Stockholders of record as of the close of business on February 28, 2008
will be entitled to vote at the special meeting. In addition, the Merger is subject to antitrust clearance or approvals in both the United States and the European Union, as well as other customary closing conditions. On February 27, 2008, the
U.S. Department of Justice and the Federal Trade Commission granted early termination of the Hart-Scott-Rodino (HSR) review period. BEA and Oracle are working toward obtaining all required clearances as soon as possible.

Under the terms of the Merger Agreement, the Company is required to pay Oracle a termination fee in the amount of $250 million in cash in the following
circumstances:



| |  |  | the Merger Agreement is terminated by Oracle because either (1) the Companys Board of Directors fails to make or withdraws (or has publicly proposes to
do either) its recommendation to the Companys stockholders to adopt and approve the Merger Agreement or modifies or publicly proposes to modify its recommendation in a manner adverse to Oracle or Merger Sub, (2) the Company enters into,
or publicly announces its intention to enter into, a written agreement relating to an acquisition proposal from a third party, or (3) the Company or any of its representatives willfully and materially breach any of it obligations under the
non-solicitation provisions in the Merger Agreement;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the Merger Agreement is terminated by the Company because, prior to the receipt of the approval of the Companys stockholders to adopt the Merger Agreement,
the Companys Board of Directors authorizes the Company to enter into, and the Company substantially concurrently enters into, a binding definitive agreement with a third party for a transaction constituting a superior proposal; or
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the Merger Agreement is terminated by either the Company or Oracle because (A) either (1) the Merger is not consummated before October 16, 2008 (the
End Date) (the End Date may be extended to July 16, 2009 in order to obtain all necessary antitrust approvals), unless the failure to complete the Merger by such date is due to the actions of the party seeking to terminate the
Merger Agreement, or (2) the Companys stockholders fail to adopt the Merger Agreement, (B) prior to either the termination of the Merger Agreement or the date of the special meeting of the Companys stockholders, as the case may
be, an acquisition proposal by a third party has been publicly announced and not publicly withdrawn, and (C) within 12 months following the date of such termination, the Company either enters into a definitive agreement with respect to, or
consummates, an acquisition proposal from a third party.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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In addition, if the Company has not breached its non-solicitation and antitrust obligations under the
Merger Agreement (except for such breaches that are unintentional and immaterial), Oracle is required to pay the Company a termination fee in the amount of $500 million in cash in the following circumstances:



| |  |  | the Merger Agreement is terminated by either the Company or Oracle because the Merger is not consummated before the End Date and either (A) the antitrust
closing conditions have not been satisfied or waived, or (B) a governmental entity has issued an order, rule or regulation relating to antitrust matters that restrains, enjoins or prohibits the consummation of the Merger; or
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the Merger Agreement is terminated by either the Company or Oracle because either (A) a governmental entity of competent jurisdiction has issued a final and
non-appealable order, decree, ruling or other action permanently enjoining, restraining or otherwise prohibiting the consummation of the Merger or (B) any law or regulation is adopted that makes the consummation of the Merger illegal or
otherwise prohibited, and, in either instance, all other closing conditions of Oracle and Merger Sub have been met or waived.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Furthermore, if either the Company or Oracle terminates the Merger Agreement because of a failure to obtain the requisite approval of the Companys stockholders upon a final vote taken at a special meeting of the Companys
stockholders (or any adjournment or postponement thereof), BEA is required to reimburse Oracle for all of its documented reasonable out-of-pocket fees and expenses (including reasonable legal and other third party advisors fees and expenses)
actually incurred by Oracle and its affiliates on or prior to the termination of the Merger Agreement in an amount not to exceed $25 million. Any such required payments will be credited against any obligation that the Company may have to pay the
termination fee described above.

In addition, on November 7, 2007, the Board adopted the Change in Control Severance Plan, which
covers substantially all regular, full-time employees and part-time employees who are scheduled to work at least twenty hours per week, and who are not covered by individual change in control employment agreements. Under the terms of the plan, if,
during the one year period following a change in control of the Company, a participants employment is terminated by the Company without cause or by the participant for good reason, the participant will receive
(i) lump sum severance benefits, (ii) continued payment of the cost of the participants premiums for health continuation coverage under COBRA for a period equal to the number of months of severance pay, and (iii) immediate
vesting of fifty percent of the unvested portion of each grant of the participants stock options, restricted stock, restricted stock units that is outstanding and unvested as of the date of termination.



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3. Financial Instruments

The carrying amounts and estimated fair value of cash and cash equivalents, restricted cash, and short and long-term investments consisted of the following as of January 31, 2008 and 2007 (in thousands):



|                           |  |                  |         |                          |   |       |                             |  |               |         |                          |   |         |                             |   |      |   |  |   |        
|-------------------------- |  | ---------------- | ------- | ------------------------ | - | ----- | --------------------------- |  | ------------- | ------- | ------------------------ | - | ------- | --------------------------- | - | ---- | - |  | - | -------
|                           |  | January 31, 2008 |         | January 31, 2007        
|                           |  | Amortizedcost    |         | Unrealizedgains (losses) |   |       | Carryingvalue andfair value |  | Amortizedcost |         | Unrealizedgains (losses) |   |         | Carryingvalue andfair value
|Financial assets:          |  |                  |         |                          |   |       |                             |  |               |         |                          |   |         |                             |   |      |   |  |   |        
|Cash and cash equivalents: |  |                  |         |                          |   |       |                             |  |               |         |                          |   |         |                             |   |      |   |  |   |        
|Cash                       |  | $                | 372,688 |                          | $ |      |                             |  | $             | 372,688 |                          | $ | 293,572 |                             | $ |     |   |  | $ | 293,572
|Money market funds         |  |                  | 402,285 |                          |   |      |                             |  |               | 402,285 |                          |   | 405,281 |                             |   |     |   |  |   | 405,281
|Corporate notes            |  |                  | 179,087 |                          |   | 6     |                             |  |               | 179,093 |                          |   | 164,976 |                             |   |     |   |  |   | 164,976
|U.S. agency securities     |  |                  | 39,594  |                          |   | 25    |                             |  |               | 39,619  |                          |   | 3,465   |                             |   |     |   |  |   | 3,465  
|                           |  |                  |         |                          |   |       |                             |  |               |         |                          |   |         |                             |   |      |   |  |   |        
|                           |  | $                | 993,654 |                          | $ | 31    |                             |  | $             | 993,685 |                          | $ | 867,294 |                             | $ |     |   |  | $ | 867,294
|                           |  |                  |         |                          |   |       |                             |  |               |         |                          |   |         |                             |   |      |   |  |   |        
|Restricted cash(1):        |  |                  |         |                          |   |       |                             |  |               |         |                          |   |         |                             |   |      |   |  |   |        
|Short term                 |  | $                | 837     |                          | $ |      |                             |  | $             | 837     |                          | $ | 1,413   |                             | $ |     |   |  | $ | 1,413  
|Long term                  |  |                  | 2,597   |                          |   |      |                             |  |               | 2,597   |                          |   | 2,372   |                             |   |     |   |  |   | 2,372  
|                           |  |                  |         |                          |   |       |                             |  |               |         |                          |   |         |                             |   |      |   |  |   |        
|                           |  | $                | 3,434   |                          | $ |      |                             |  | $             | 3,434   |                          | $ | 3,785   |                             | $ |     |   |  | $ | 3,785  
|                           |  |                  |         |                          |   |       |                             |  |               |         |                          |   |         |                             |   |      |   |  |   |        
|Short-term investments:    |  |                  |         |                          |   |       |                             |  |               |         |                          |   |         |                             |   |      |   |  |   |        
|U.S. agency securities     |  | $                | 164,585 |                          | $ | 3,996 |                             |  | $             | 168,581 |                          | $ | 71,123  |                             | $ | (65  | ) |  | $ | 71,058 
|U.S. treasury securities   |  |                  | 26,291  |                          |   | 577   |                             |  |               | 26,868  |                          |   | 12,794  |                             |   | (22  | ) |  |   | 12,772 
|Corporate notes            |  |                  | 239,543 |                          |   | 1,355 |                             |  |               | 240,898 |                          |   | 205,026 |                             |   | (101 | ) |  |   | 204,925
|Asset-backed securities    |  |                  | 70,327  |                          |   | 1,396 |                             |  |               | 71,723  |                          |   | 25,154  |                             |   | 32   |   |  |   | 25,186 
|                           |  |                  |         |                          |   |       |                             |  |               |         |                          |   |         |                             |   |      |   |  |   |        
|                           |  | $                | 500,746 |                          | $ | 7,324 |                             |  | $             | 508,070 |                          | $ | 314,097 |                             | $ | (156 | ) |  | $ | 313,941
|                           |  |                  |         |                          |   |       |                             |  |               |         |                          |   |         |                             |   |      |   |  |   |        
|Long-term investments:     |  |                  |         |                          |   |       |                             |  |               |         |                          |   |         |                             |   |      |   |  |   |        
|U.S. agency securities     |  | $                | 1,048   |                          | $ |      |                             |  | $             | 1,048   |                          | $ | 19,287  |                             | $ | (35  | ) |  | $ | 19,252 
|U.S. treasury securities   |  |                  | 1,018   |                          |   | (1    | )                           |  |               | 1,017   |                          |   |        |                             |   |     |   |  |   |       
|Corporate notes            |  |                  | 7,749   |                          |   | (45   | )                           |  |               | 7,704   |                          |   | 64,289  |                             |   | (178 | ) |  |   | 64,111 
|Asset-backed securities    |  |                  | 7,835   |                          |   | (129  | )                           |  |               | 7,706   |                          |   | 10,169  |                             |   | (4   | ) |  |   | 10,165 
|                           |  |                  |         |                          |   |       |                             |  |               |         |                          |   |         |                             |   |      |   |  |   |        
|                           |  | $                | 17,650  |                          | $ | (175  | )                           |  | $             | 17,475  |                          | $ | 93,745  |                             | $ | (217 | ) |  | $ | 93,528 
|                           |  |                  |         |                          |   |       |                             |  |               |         |                          |   |         |                             |   |      |   |  |   |        



|                                                                          |  |                  |        |                  |   |               |  |           |         |  |   |        
|------------------------------------------------------------------------- |  | ---------------- | ------ | ---------------- | - | ------------- |  | --------- | ------- |  | - | -------
|                                                                          |  | January 31, 2008 |        | January 31, 2007
|                                                                          |  | CarryingValue    |        | FairValue        |   | CarryingValue |  | FairValue
|Financial liabilities:                                                    |  |                  |        |                  |   |               |  |           |         |  |   |        
|Notes payable and other long-term obligations (including current portion) |  | $                | 22,965 |                  | $ | 22,965        |  | $         | 230,092 |  | $ | 230,092



|(1) | Restricted cash represents collateral for our letters of credit. Short term restricted cash represents letters of credit that expire within one year.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------

The estimated fair value amounts have been determined by the Company using available market information and appropriate valuation methodologies.

For certain of the Companys financial instruments, including cash and cash equivalents, restricted cash, short and long-term
investments, and notes payable, the carrying amounts approximate fair value due to their short maturities. The fair value of forward foreign currency contracts is based on the estimated amount at which these contracts could be settled based on
quoted exchange rates. The fair value of notes payable and other long-term obligations are determined based on the interest rate accompanying the obligations.



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The following table shows the gross unrealized losses and fair value of the Companys investments,
aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position as of January 31, 2008 (in thousands, except number of securities):



|                                             |  |                         |        |                  |                            |      |            |  |                   |       |            |   |                  |  |   |        |  |   |      |  
|-------------------------------------------- |  | ----------------------- | ------ | ---------------- | -------------------------- | ---- | ---------- |  | ----------------- | ----- | ---------- | - | ---------------- |  | - | ------ |  | - | ---- | -
|                                             |  | Less than twelve months |        |                  | Greater than twelve months |      | Total      | 
|                                             |  | Fair value              |        | Unrealizedlosses |                            |      | Fair value |  | Unrealized losses |       | Fair value |   | Unrealizedlosses | 
|U.S. agency securities                       |  | $                       | 1,054  |                  | $                          |     |            |  | $                 |      |            | $ |                 |  | $ | 1,054  |  | $ |     |  
|U.S. treasury securities                     |  |                         | 1,023  |                  |                            | (1   | )          |  |                   |      |            |   |                 |  |   | 1,023  |  |   | (1   | )
|Corporate notes                              |  |                         | 27,009 |                  |                            | (368 | )          |  |                   | 2,579 |            |   |                 |  |   | 29,588 |  |   | (368 | )
|Asset-backed securities                      |  |                         | 7,965  |                  |                            | (162 | )          |  |                   |      |            |   |                 |  |   | 7,965  |  |   | (162 | )
|                                             |  |                         |        |                  |                            |      |            |  |                   |       |            |   |                  |  |   |        |  |   |      |  
|Total                                        |  | $                       | 37,051 |                  | $                          | (531 | )          |  | $                 | 2,579 |            | $ |                 |  | $ | 39,630 |  | $ | (531 | )
|                                             |  |                         |        |                  |                            |      |            |  |                   |       |            |   |                  |  |   |        |  |   |      |  
|Number of securities with an unrealized loss |  |                         |        |                  |                            | 29   |            |  |                   |       |            |   | 2                |  |   |        |  |   |      |  

Each of the securities in the above table have investment grade ratings and are in an unrealized
loss position due solely to interest rate changes, sector credit rating changes or company-specific rating changes. The Company expects to receive the full principal and interest on these securities. The Company considers investments with a
remaining time to maturity greater than one year and in a loss position at the balance sheet date to be classified as long-term as the Company expects and has the ability to hold them to recovery, which may be at maturity.

The following is a summary of the maturities of short-term investments as of January 31, 2008 (in thousands, except percentages):



|                         |  |                        |         |   |           |   |         |  
|------------------------ |  | ---------------------- | ------- | - | --------- | - | ------- | -
|                         |  | Expected maturity date |        
|                         |  | 2008                   |         |   | 2009-2013 |  
|U.S. agency securities   |  | $                      | 37,473  |   |           | $ | 131,108 |  
|Weighted average yield   |  |                        | 4.75    | % |           |   | 4.39    | %
|U.S. treasury securities |  | $                      | 1,020   |   |           | $ | 25,848  |  
|Weighted average yield   |  |                        | 3.08    | % |           |   | 3.43    | %
|Corporate notes          |  | $                      | 174,018 |   |           | $ | 66,880  |  
|Weighted average yield   |  |                        | 4.70    | % |           |   | 4.74    | %
|Asset-backed securities  |  | $                      | 13,856  |   |           | $ | 57,867  |  
|Weighted average yield   |  |                        | 4.68    | % |           |   | 4.86    | %

The following is a summary of the maturities of long-term investments as of January 31, 2008
(in thousands, except percentages):



|                         |  |                                |       |  
|------------------------ |  | ------------------------------ | ----- | -
|                         |  | Expectedmaturity date2009-2013 |      
|U.S. agency securities   |  | $                              | 1,048 |  
|Weighted average yield   |  |                                | 2.99  | %
|U.S. treasury securities |  | $                              | 1,017 |  
|Weighted average yield   |  |                                | 2.12  | %
|Corporate notes          |  | $                              | 7,704 |  
|Weighted average yield   |  |                                | 4.12  | %
|Asset-backed securities  |  | $                              | 7,706 |  
|Weighted average yield   |  |                                | 5.17  | %



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In the above table we have reflected asset backed securities according to their effective maturities
(given expected principal pre-payments). These securities may have final legal maturities of greater than 5 years.

The Company reviewed
its investments to identify and evaluate investments that have indications of possible impairment. At January 31, 2008, the Company held approximately $79 million in AAA rated Asset-backed securities that were valued at reported market prices
and classified as current assets. The underlying assets of the Asset-backed securities are auto and equipment loans and credit card assets. We do not believe the carrying values of these Asset-backed securities are impaired. In addition, we believe
that we will be able to liquidate these investments without significant loss.

Foreign Currency Contracts

The Company enters into forward foreign currency contracts to reduce its exposure to the effect of foreign currency fluctuations on certain foreign
currency denominated monetary assets and liabilities that are not recorded in the functional currency of the entity that has the foreign currency exposure. The contracts are marked-to-market on a monthly basis and are not used for trading or
speculative purposes. At January 31, 2008, these contracts are recorded as part of other assets and liabilities on the balance sheet. At January 31, 2008 and 2007, the Company had outstanding forward foreign currency contracts with
notional amounts of approximately $223.6 million and $458.3 million, respectively. All of the Companys forward foreign currency contracts have original maturities of 60 days or less.



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Our outstanding forward contracts as of January 31, 2008 are presented in the table below. All
forward contracts amounts are representative of the expected payments to be made under these instruments. All of these forward contracts mature within 60 days or less as of January 31, 2008.



|                       |  |                             |   |  |     |  |                |  |     |  |                                          |      |  
|---------------------- |  | --------------------------- | - |  | --- |  | -------------- |  | --- |  | ---------------------------------------- | ---- | -
|                       |  | Localcurrencycontractamount |   |  |     |  | Contractamount |  |     |  | Fair marketvalue atJanuary 31,2008 (USD) |     
|                       |  | (in thousands)              |   |  |     |  | (in thousands) |  |     |  | (in thousands)                           |     
|Contract to Buy US $   |  |                             |   |  |     |  |                |  |     |  |                                          |      |  
|Brazilian reals        |  | (12,800                     | ) |  | BRL |  | 7,302          |  | USD |  |                                          | 91   |  
|British pounds         |  | (1,210                      | ) |  | GBP |  | 2,375          |  | USD |  |                                          | 269  |  
|Chinese yuan           |  | (10,200                     | ) |  | CNY |  | 1,422          |  | USD |  |                                          | (10  | )
|Euros                  |  | (40,000                     | ) |  | EUR |  | 59,478         |  | USD |  |                                          | 56   |  
|Indian rupee           |  | (165,000                    | ) |  | INR |  | 4,188          |  | USD |  |                                          | 8    |  
|Israeli shekel         |  | (2,000                      | ) |  | ILS |  | 540            |  | USD |  |                                          | (13  | )
|Japanese yen           |  | (1,330,000                  | ) |  | JPY |  | 12,369         |  | USD |  |                                          | (191 | )
|Korean won             |  | (29,800,000                 | ) |  | KRW |  | 31,818         |  | USD |  |                                          | 218  |  
|Mexican peso           |  | (84,500                     | ) |  | MXN |  | 7,700          |  | USD |  |                                          | (64  | )
|                       |  |                             |   |  |     |  |                |  |     |  |                                          |      |  
|                       |  |                             |   |  |     |  |                |  |     |  |                                          | 364  |  
|                       |  |                             |   |  |     |  |                |  |     |  |                                          |      |  
|Contract to Sell US $  |  |                             |   |  |     |  |                |  |     |  |                                          |      |  
|British Pounds         |  | 9,200                       |   |  | GBP |  | 17,972         |  | USD |  |                                          | (22  | )
|Canadian dollar        |  | 6,900                       |   |  | CAD |  | 6,767          |  | USD |  |                                          | 113  |  
|Chinese yuan           |  | 42,200                      |   |  | CNY |  | 5,921          |  | USD |  |                                          | 34   |  
|Danish kroner          |  | 23,100                      |   |  | DKK |  | 4,616          |  | USD |  |                                          | (12  | )
|Euro                   |  | 8,938                       |   |  | EUR |  | 13,291         |  | USD |  |                                          | (11  | )
|Singapore dollar       |  | 4,100                       |   |  | SGD |  | 2,880          |  | USD |  |                                          | 25   |  
|Swedish krona          |  | 33,500                      |   |  | SEK |  | 5,306          |  | USD |  |                                          | (48  | )
|Swiss franc            |  | 2,300                       |   |  | CHF |  | 2,112          |  | USD |  |                                          | 21   |  
|                       |  |                             |   |  |     |  |                |  |     |  |                                          |      |  
|                       |  |                             |   |  |     |  |                |  |     |  |                                          | 100  |  
|                       |  |                             |   |  |     |  |                |  |     |  |                                          |      |  
|Contract to Buy Euro  |  |                             |   |  |     |  |                |  |     |  |                                          |      |  
|British pounds         |  | (13,400                     | ) |  | GBP |  | 26,170         |  | USD |  |                                          | (398 | )
|Danish kroner          |  | (23,000                     | ) |  | DKK |  | 4,590          |  | USD |  |                                          | 5    |  
|Norwegian krone        |  | (6,500                      | ) |  | NOK |  | 1,230          |  | USD |  |                                          | 31   |  
|Swiss franc            |  | (3,000                      | ) |  | CHF |  | 2,750          |  | USD |  |                                          | (31  | )
|Swedish krona          |  | (18,000                     | ) |  | SEK |  | 2,850          |  | USD |  |                                          | 23   |  
|                       |  |                             |   |  |     |  |                |  |     |  |                                          |      |  
|                       |  |                             |   |  |     |  |                |  |     |  |                                          | (370 | )
|                       |  |                             |   |  |     |  |                |  |     |  |                                          |      |  
|Total                  |  |                             |   |  |     |  |                |  |     |  | $                                        | 94   |  
|                       |  |                             |   |  |     |  |                |  |     |  |                                          |      |  



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4. Property and Equipment

Property and equipment consist of the following (in thousands):



|                                             |  |             |          |   |      |   |          |  
|-------------------------------------------- |  | ----------- | -------- | - | ---- | - | -------- | -
|                                             |  | January 31, |         
|                                             |  | 2008        |          |   | 2007 |  
|Land                                         |  | $           | 8,034    |   |      | $ | 105,016  |  
|Building                                     |  | $           | 133,254  |   |      |   |         |  
|Computer hardware and software               |  |             | 114,252  |   |      |   | 108,655  |  
|Furniture and equipment                      |  |             | 43,233   |   |      |   | 39,404   |  
|Leasehold improvements                       |  |             | 65,837   |   |      |   | 53,158   |  
|Furniture and equipment under capital leases |  |             | 3,153    |   |      |   | 3,153    |  
|                                             |  |             |          |   |      |   |          |  
|                                             |  |             | 367,763  |   |      |   | 309,386  |  
|Accumulated depreciation and amortization    |  |             | (172,896 | ) |      |   | (164,915 | )
|                                             |  |             |          |   |      |   |          |  
|Total property and equipment, net            |  | $           | 194,867  |   |      | $ | 144,471  |  
|                                             |  |             |          |   |      |   |          |  

An equipment capital lease for $1.6 million was entered into in fiscal 2005 and accumulated
amortization was $1.6 million and $1.2 million at January 31, 2008 and January 31, 2007, respectively.

In the first quarter of
fiscal 2008, the Company entered into a Land Purchase and Sale Agreement (the Land Agreement) with Tishman Speyer Development Corporation (Tishman), pursuant to which the Company agreed to sell the San Jose Land to Tishman
for $108.0 million. After closing costs, the Company recorded a net gain of $0.8 million on the sale of the San Jose Land in the first quarter of fiscal 2008.

Also in the first quarter of fiscal 2008, the Company entered into a Purchase and Sale Agreement (the Building Agreement) with the The Sobrato Family Foundation and Sobrato-Sobrato Investments
(collectively, Sobrato), pursuant to which the Company agreed to purchase a 17-story building and parking facilities located at 488 Almaden Boulevard, San Jose, California from Sobrato for $135.3 million. That facility is intended to be
our new corporate headquarters. The Company delivered a $10.0 million deposit to Sobrato on March 1, 2007 and paid the $125.3 million balance of the purchase price on April 2, 2007. We have allocated the purchase price to the land and
building based on managements judgment which included review of comparable transactions as well as property tax assessments. The building will be depreciated over 40 years once the build-out occurs and the building is occupied. In March 2008,
we suspended efforts to ready the building for occupancy in contemplation of the Oracle acquisition. As of January 31, 2008, BEA had capitalized approximately $6.2 million of improvements to ready the building for occupancy in mid 2008.

As of January 31, 2007, we determined that there was a more likely than not chance that the San Jose Land would be disposed of within
the next 12 months. We completed an impairment review in accordance with Statement of Financial Accounting Standards No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets, and we concluded that a $201.6 million
write-down of the San Jose Land was required, reducing the value of the San Jose land to a new carrying value of $105.0 million. The fair value of $105.0 million was determined based on quoted market prices for a similar asset.



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5. Business Combinations

Fiscal 2007 acquisitions

Flashline, Inc.

On August 22, 2006, the Company paid cash consideration to acquire all the outstanding shares of Flashline, Inc., a privately held software company headquartered in Cleveland, Ohio. Flashline is a metadata
repository that provides enterprise-wide visibility into an organizations software assets to help reduce IT costs and improve business agility. Flashline has been accounted for as a business combination using the purchase method of accounting.
Assets acquired and liabilities assumed have been recorded at their fair values as of August 22, 2006 and adjusted as necessary for changes in estimates through August 22, 2007 (one year from acquisition date) with the exception of
goodwill and deferred tax assets which have been adjusted through January 31, 2008. The total purchase price was $43.6 million, including the acquisition related transaction costs, and is comprised of (in thousands):



|                                                |  |                |       
|----------------------------------------------- |  | -------------- | ------
|                                                |  | Purchase Price
|Acquisition of the outstanding common stock     |  | $              | 43,014
|Estimated acquisition related transaction costs |  |                | 606   
|                                                |  |                |       
|Total purchase price                            |  | $              | 43,620
|                                                |  |                |       

Purchase price allocation

The total purchase price has been allocated to Flashlines net tangible and identifiable intangible assets based on their estimated fair values as of
August 22, 2006, and has been adjusted through August 22, 2007 (one year from acquisition date) with the exception of goodwill and deferred tax asset which were adjusted through January 31, 2008. The excess of the purchase price over
the net tangible and identifiable assets was recorded as goodwill. The following is the purchase price allocation (in thousands):



|                                               |  |                       |        |  
|---------------------------------------------- |  | --------------------- | ------ | -
|                                               |  | As of January 31,2008 |       
|Cash and short-term investments                |  | $                     | 176    |  
|Accounts receivable                            |  |                       | 262    |  
|Deferred Tax Asset                             |  |                       | 7,599  |  
|Intangible assets                              |  |                       | 7,100  |  
|Goodwill                                       |  |                       | 27,686 |  
|Accounts payable and other accrued liabilities |  |                       | (528   | )
|Notes Payable and other long-term liabilities  |  |                       | (120   | )
|Deferred revenue                               |  |                       | (255   | )
|In-process research and development            |  |                       | 1,700  |  
|                                               |  |                       |        |  
|Total purchase price                           |  | $                     | 43,620 |  
|                                               |  |                       |        |  

The acquisition related in-process research and development (IPR&D), which was valued at $1.7
million, related primarily to the Flashline enhancement projects that had not yet reached technological feasibility and had no alternative future use upon acquisition. Consequently, the valuation of IPR&D was written off to the consolidated
statement of income on August 22, 2006.



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Intangible assets

The following table sets forth the components and fair values of the intangible assets associated with the Flashline acquisition (in thousands):



|                        |  |                       |       |                      |        
|----------------------- |  | --------------------- | ----- | -------------------- | -------
|                        |  | PreliminaryFair Value |       | EstimatedUseful Life
|Purchased technology    |  | $                     | 5,500 |                      | 3 years
|Non-compete agreements  |  |                       | 700   |                      | 1 year 
|Customer base           |  |                       | 900   |                      | 4 years
|                        |  |                       |       |                      |        
|Total intangible assets |  | $                     | 7,100 |                      |        
|                        |  |                       |       |                      |        

Purchased technology is comprised of Flashline products that have reached technological
feasibility and the patents affiliated with these products. Non-compete agreements represent the value of such agreements with key Flashline personnel. Customer base represents the underlying customer support contracts and related relationships with
Flashlines existing customers.

Deferred revenue

In allocating the acquisition purchase price, the Company recorded an adjustment to reduce the carrying value of Flashlines August 22, 2006 deferred support revenue by $0.3 million to reflect an ending
balance of $0.3 million, which represents the estimate of the fair value of the support obligation assumed. As a result of the adjustments to record Flashlines support and services obligations assumed at fair value, $0.3 million of customer
support revenues and services revenue that would have been otherwise recorded by Flashline as an independent entity was not recognized in the Companys consolidated results of operations. As former Flashline customers renewed these support
contracts, the Company recognized the full value of the support contracts over the renewal period, the majority of which was one year.

Fuego, Inc.

On February 28, 2006, the Company paid cash consideration to acquire all the outstanding shares of Fuego, Inc. (Fuego), a
privately held software company headquartered in Plano, Texas. Fuego specializes in providing Service Oriented Architecture software to help companies manage business processes. The Fuego acquisition (the Fuego Acquisition) has been
accounted for as a business combination using the purchase method of accounting. Assets acquired and liabilities assumed have been recorded at their fair values as of February 28, 2006, and adjusted as necessary for changes in estimates through
February 28, 2007 (one year from acquisition date) with the exception of goodwill and deferred tax assets which have been adjusted through January 31, 2008.

The total purchase price was $88.4 million, including the acquisition related transaction costs, and comprised of (in thousands):



|                                      |  |                |       
|------------------------------------- |  | -------------- | ------
|                                      |  | Purchase Price
|Acquisition consideration for Fuego   |  | $              | 86,036
|Acquisition related transaction costs |  |                | 2,383 
|                                      |  |                |       
|Total purchase price                  |  | $              | 88,419
|                                      |  |                |       



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Purchase price allocation

The total purchase price was allocated to Fuegos net tangible and identifiable intangible assets based on their estimated fair values as of
February 28, 2006, and adjusted as necessary for changes in estimates through February 28, 2007, (one year from acquisition date) with the exception of goodwill and deferred tax assets which have been adjusted through January 31,
2008. The excess of the purchase price over the net tangible and identifiable assets was recorded as goodwill. The following is the purchase price allocation (in thousands):



|                                               |  |                       |        |  
|---------------------------------------------- |  | --------------------- | ------ | -
|                                               |  | As of January 31,2008 |       
|Cash and short-term investments                |  | $                     | 5,821  |  
|Accounts receivable, net                       |  |                       | 3,481  |  
|Prepaids and other current assets              |  |                       | 212    |  
|Fixed assets                                   |  |                       | 44     |  
|Deferred tax asset                             |  |                       | 10,712 |  
|Intangible assets                              |  |                       | 18,300 |  
|Goodwill                                       |  |                       | 51,442 |  
|Accounts payable and other accrued liabilities |  |                       | (2,400 | )
|Deferred revenue                               |  |                       | (1,893 | )
|In-process research and development            |  |                       | 2,700  |  
|                                               |  |                       |        |  
|Total purchase price                           |  | $                     | 88,419 |  
|                                               |  |                       |        |  

The acquisition related IPR&D, which was valued at $2.7 million, related primarily to the
Fuego enhancement projects and had not yet reached technological feasibility and has no alternative future use upon acquisition. Consequently, the valuation of IPR&D was written off to the consolidated statement of income on February 28,
2006.

Intangible assets

The following table sets forth the components and fair values of the intangible assets associated with the Fuego Acquisition (in thousands):



|                        |  |                       |        |                      |        
|----------------------- |  | --------------------- | ------ | -------------------- | -------
|                        |  | PreliminaryFair Value |        | EstimatedUseful Life
|Purchased technology    |  | $                     | 12,800 |                      | 3 years
|Customer base           |  |                       | 5,500  |                      | 4 years
|                        |  |                       |        |                      |        
|Total intangible assets |  | $                     | 18,300 |                      |        
|                        |  |                       |        |                      |        

Purchased technology is comprised of Fuego products that have reached technological feasibility
and the associated patents related to these products. Customer base represents the underlying customer support contracts and related relationships with Fuegos existing customers.

Deferred revenue

In allocating the
acquisition purchase price, the Company recorded an adjustment to reduce the carrying value of Fuegos February 28, 2006 deferred support revenue by $0.5 million to reflect an ending balance of $1.6 million, which represents the estimate
of the fair value of the support obligation assumed. As a result of the adjustments to record Fuegos support obligations assumed at fair value, $0.5 million of customer support revenues that would have been otherwise recorded by Fuego as an
independent entity was not recognized in the Companys consolidated results of operations. As former Fuego customers renewed these support contracts, the Company recognized the full value of the support contracts over the renewal period, the
majority of which was one year. The Company also recorded deferred consulting revenues of approximately $0.3 million.



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6. Goodwill and Acquired Intangible Assets

On February 1, 2002, the Company adopted Statement of Financial Accounting Standards No. 142, Goodwill and Other Intangible
Assetsand as a result will no longer amortize goodwill. Instead, the Company will test for impairment at least annually or more frequently whenever events or changes in circumstances suggest that the carrying amount may not be
recoverable.

The following table provides a summary of the carrying amount of goodwill which includes amounts originally allocated to
assembled workforce (in thousands):



|                                     |  |                 |          |   |                 |   |          |  
|------------------------------------ |  | --------------- | -------- | - | --------------- | - | -------- | -
|                                     |  | January 31,2008 |          |   | January 31,2007 |  
|Gross carrying amount of goodwill    |  | $               | 360,880  |   |                 | $ | 367,342  |  
|Accumulated amortization of goodwill |  |                 | (133,344 | ) |                 |   | (133,344 | )
|                                     |  |                 |          |   |                 |   |          |  
|Net carrying amount of goodwill      |  | $               | 227,536  |   |                 | $ | 233,998  |  
|                                     |  |                 |          |   |                 |   |          |  

The decrease in goodwill in fiscal 2008 is primarily due to purchase accounting adjustments
related to income taxes.

The following tables provide a summary of the carrying amounts of acquired intangible assets that will continue
to be amortized (in thousands):



|                                                                                 |  |                     |         |                         |   |          |                   |  |   |       
|-------------------------------------------------------------------------------- |  | ------------------- | ------- | ----------------------- | - | -------- | ----------------- |  | - | ------
|                                                                                 |  | January 31, 2008   
|                                                                                 |  | Grosscarryingamount |         | Accumulatedamortization |   |          | Netcarryingamount
|Purchased technology                                                             |  | $                   | 189,212 |                         | $ | (163,360 | )                 |  | $ | 25,852
|Non-compete agreements                                                           |  |                     | 30,946  |                         |   | (30,946  | )                 |  |   |      
|Patents and trademarks                                                           |  |                     | 13,275  |                         |   | (13,275  | )                 |  |   |      
|Other intangible assets (distribution rights, purchased software, customer base) |  |                     | 54,409  |                         |   | (42,088  | )                 |  |   | 12,321
|                                                                                 |  |                     |         |                         |   |          |                   |  |   |       
|Total                                                                            |  | $                   | 287,842 |                         | $ | (249,669 | )                 |  | $ | 38,173
|                                                                                 |  |                     |         |                         |   |          |                   |  |   |       
|                                                                                 | 
|                                                                                 |  | January 31, 2007   
|                                                                                 |  | Grosscarryingamount |         | Accumulatedamortization |   |          | Netcarryingamount
|Purchased technology                                                             |  | $                   | 201,349 |                         | $ | (151,237 | )                 |  | $ | 50,112
|Non-compete agreements                                                           |  |                     | 32,146  |                         |   | (30,588  | )                 |  |   | 1,558 
|Patents and trademarks                                                           |  |                     | 13,275  |                         |   | (13,275  | )                 |  |   |      
|Other intangible assets (distribution rights, purchased software, customer base) |  |                     | 54,409  |                         |   | (38,120  | )                 |  |   | 16,289
|                                                                                 |  |                     |         |                         |   |          |                   |  |   |       
|Total                                                                            |  | $                   | 301,179 |                         | $ | (233,220 | )                 |  | $ | 67,959
|                                                                                 |  |                     |         |                         |   |          |                   |  |   |       



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The total amortization expense related to acquired intangible assets is provided in the table below (in
thousands):



|                              |  |                        |        |      |   |        |  |   |       
|----------------------------- |  | ---------------------- | ------ | ---- | - | ------ |  | - | ------
|                              |  | Year ended January 31,
|                              |  | 2008                   |        | 2007 |   | 2006  
|Purchased technology          |  | $                      | 24,666 |      | $ | 31,446 |  | $ | 10,796
|Non-compete agreements        |  |                        | 1,558  |      |   | 3,184  |  |   | 1,855 
|Patents, Licenses, Trademarks |  |                        |       |      |   |       |  |   |      
|Other intangible assets       |  |                        | 3,967  |      |   | 3,720  |  |   | 976   
|                              |  |                        |        |      |   |        |  |   |       
|Total                         |  | $                      | 30,191 |      | $ | 38,350 |  | $ | 13,627
|                              |  |                        |        |      |   |        |  |   |       

Fiscal 2008 amortization declined compared to fiscal 2007 because some of the small acquisitions
made in fiscal 2006 reached full amortization in fiscal 2008.

Based on our annual 2008 impairment assessment, in accordance with FAS
No. 144, total amortization expense of $30.2 million includes $3.4 million of impairment charges related to acquired intangibles. The total amortization expense of $38.4 million as of January 31, 2007 does not include any impairment
charges related to acquired intangibles.

The total expected future amortization related to acquired intangible assets is provided in the
table below (in thousands):



|           |  |                    |       
|---------- |  | ------------------ | ------
|           |  | Futureamortization
|2009       |  | $                  | 16,774
|2010       |  |                    | 12,032
|2011       |  |                    | 7,593 
|2012       |  |                    | 1,774 
|Thereafter |  |                    |      
|           |  |                    |       
|Total      |  | $                  | 38,173
|           |  |                    |       

The approximate weighted average estimated life of intangible assets acquired during fiscal 2008
and 2007 is provided in the table below:



|                        |  |                          
|----------------------- |  | -------------------------
|                        |  | Year endedJanuary 31,2007
|Purchased technology    |  | 36 months                
|Non-compete agreements  |  | 12 months                
|Other intangible assets |  | 48 months                

7. Prepaids and Other Current Assets

Prepaids and other current assets consist of the following (in thousands):



|                     |  |             |        |      |   |       
|-------------------- |  | ----------- | ------ | ---- | - | ------
|                     |  | January 31,
|                     |  | 2008        |        | 2007
|Prepaids             |  | $           | 23,354 |      | $ | 18,460
|Other current assets |  |             | 27,741 |      |   | 9,973 
|Other receivables    |  |             | 21,453 |      |   | 17,693
|                     |  |             |        |      |   |       
|                     |  | $           | 72,548 |      | $ | 46,126
|                     |  |             |        |      |   |       



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In fiscal 2008 other current assets increased due to refundable income taxes. The Company has a current
year taxable loss due to the San Jose Land sale. The Company intends to carry the federal loss back, which will result in a refund of $6.2 million. Additionally, the Company has tax return overpayments of $10.3 million.

8. Related Party Transactions

The Company
occasionally sells software products or services to companies that have board members or executive officers who are also on the Companys Board of Directors. The total revenues recognized by the Company from such customers in fiscal 2008,
fiscal 2007 and fiscal 2006 were insignificant.

9. Facilities Consolidation

During fiscal 2002, the Company approved a plan to consolidate certain facilities in regions including the United States, Canada, and Germany. A
facilities consolidation charge of $20.0 million was calculated using managements best estimates and was based upon the remaining future lease commitments and brokerage fees for vacant facilities from the date of facility consolidation, net of
estimated future sublease income. In fiscal 2008, a reduction of $0.7 million and in fiscal 2007 and 2006, an additional $0.5 million and $0.8 million, respectively, were accrued due to a reassessment of original estimates of costs of abandoning the
leased facilities compared to the actual results and future estimates.

During fiscal 2005, due to a decline in employee and contractor
hiring and headcount, the Company identified the opportunity to reduce its facilities requirements. The Company approved a plan to consolidate six sites in the United States and Canada. A facilities consolidation charge of $7.7 million was recorded
and was comprised of $6.9 million related to future lease commitments and $0.8 million of leasehold improvement write-offs. The $6.9 million of future lease commitments was calculated based on managements best estimates and the present value
of the remaining future lease commitments for vacant facilities, net of present value of the estimated future sublease income.

In the
second quarter of fiscal 2008, the Company occupied new office space in San Francisco and vacated the three existing San Francisco office locations. Two of the three existing office leases expired in fiscal 2008 and the remaining one expires in
fiscal 2009. In the second quarter of fiscal 2008, the Company incurred a facilities consolidation charge of $2.5 million related to future lease commitments. The Company moved into the new office space in San Francisco in the second quarter of
fiscal 2008. The $2.5 million of future lease commitments was calculated based on managements estimates and the present value of the future lease commitments for the vacant facilities.

The estimated costs of abandoning the leased facilities identified above, including estimated costs to sublease, were based on market information and
trend analyses, including information obtained from third party real estate industry sources at the time the facilities consolidation was recorded. As of January 31, 2008, $6.8 million of lease termination costs, net of anticipated sublease
income, remains accrued and is expected to be fully utilized by fiscal 2012. If actual circumstances prove to be materially different than the amounts management has estimated, the Companys total charges for these vacant facilities could be
significantly higher. Adjustments to the facilities consolidation charge will be made in future periods, if necessary, based upon then current actual events and circumstances. If the Company was unable to receive any of its estimated but uncommitted
sublease income in the future, the total additional charge would be approximately $1.0 million.



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The following table provides a summary of the accrued facilities consolidation (in thousands):



|                                                                             |  |                         |        |  
|---------------------------------------------------------------------------- |  | ----------------------- | ------ | -
|                                                                             |  | Facilitiesconsolidation |       
|Accrued at January 31, 2006                                                  |  | $                       | 9,681  |  
|Additional charges accrued during fiscal 2007 included in operating expenses |  |                         | 454    |  
|Cash payments during fiscal 2007                                             |  |                         | (2,011 | )
|                                                                             |  |                         |        |  
|Accrued at January 31, 2007                                                  |  |                         | 8,124  |  
|Additional charges accrued during fiscal 2008 included in operating expenses |  |                         | 2,518  |  
|Change in facility accrual assumptions during fiscal 2008                    |  |                         | (748   | )
|Cash payments during fiscal 2008                                             |  |                         | (3,102 | )
|                                                                             |  |                         |        |  
|Accrued at January 31, 2008                                                  |  | $                       | 6,792  |  
|                                                                             |  |                         |        |  

10. Notes Payable and Other Long-Term Obligations

Notes payable and other long-term obligations consist of the following (in thousands):



|                                                       |  |             |        |      |   |        
|------------------------------------------------------ |  | ----------- | ------ | ---- | - | -------
|                                                       |  | January 31,
|                                                       |  | 2008        |        | 2007
|Current portion of notes payable and other obligations |  | $           | 988    |      | $ | 1,302  
|                                                       |  |             |        |      |   |        
|Other long-term obligations                            |  |             | 21,036 |      |   | 12,678 
|Capital lease                                          |  |             | 941    |      |   | 1,112  
|Credit facility                                        |  |             |       |      |   | 215,000
|                                                       |  |             |        |      |   |        
|Notes payable and other long-term obligations          |  | $           | 21,977 |      | $ | 228,790
|                                                       |  |             |        |      |   |        

Other long-term obligations include an accrual of $3.9 million and $5.0 million related to the
facilities consolidation for the period ended January 31, 2008 and 2007, respectively.

Notes payable and other obligations consists
of accrued rent and other long-term obligations. Scheduled maturities of current and long-term notes payable and other obligations and the capital lease are as follows (in thousands):



|                                                                               |  |               |       |   |                  |   |       
|------------------------------------------------------------------------------ |  | ------------- | ----- | - | ---------------- | - | ------
|                                                                               |  | Capitalleases |       |   | Otherobligations
|Year ending January 31,                                                        |  |               |       |   |                  |   |       
|2009                                                                           |  | $             | 211   |   |                  | $ | 3,296 
|2010                                                                           |  |               | 211   |   |                  |   | 4,130 
|2011                                                                           |  |               | 211   |   |                  |   | 3,757 
|2012                                                                           |  |               | 211   |   |                  |   | 3,029 
|2013                                                                           |  |               | 211   |   |                  |   | 1,811 
|Thereafter                                                                     |  |               | 314   |   |                  |   | 5,830 
|                                                                               |  |               |       |   |                  |   |       
|Total minimum lease payments and total other obligations                       |  |               | 1,369 |   |                  | $ | 21,853
|                                                                               |  |               |       |   |                  |   |       
|Amounts representing interest on capital lease                                 |  |               | (257  | ) |                  |   |       
|                                                                               |  |               |       |   |                  |   |       
|Present value of minimum lease payments                                        |  |               | 1,112 |   |                  |   |       
|Less: capital lease obligation, current (reflected in other obligations)       |  |               | (171  | ) |                  |   |       
|                                                                               |  |               |       |   |                  |   |       
|Capital lease obligation, long term (reflected in other long-term obligations) |  | $             | 941   |   |                  |   |       
|                                                                               |  |               |       |   |                  |   |       



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Convertible subordinated notes

In December 1999, the Company completed the sale of $550.0 million of Notes due December 15, 2006 (2006 Notes) in an offering to
Qualified Institutional Buyers. The 2006 Notes bore interest at a fixed rate of 4 percent and were subordinated to all existing and future senior indebtedness of the Company. The principal amount of the 2006 Notes was convertible at the option of
the holder at any time into common stock of the Company at a conversion rate of 28.86 shares per $1,000 principal amount of 2006 Notes (equivalent to an approximate conversion price of $34.65 per share). The 2006 Notes were redeemable at the option
of the Company in whole or in part at any time, in cash plus a premium of up to 2.3 percent plus accrued interest, if any, through the redemption date, subject to certain events. Interest was payable semi-annually.

In fiscal 2006, the Company retired $84.8 million in face value of the 2006 Notes. The Company retired the remaining $210.0 million in face value of the
2006 Notes in fiscal 2007. The Company recorded a net gain on the retirement of the 2006 Notes of $0.7 million and $0.7 million in fiscal 2006 and 2007, respectively.

On December 15, 2006, the 2006 Notes matured and the principal and the accrued interest were paid off.

Credit facility

During fiscal 2007, the Company entered into a five-year $500.0 million unsecured revolving credit facility
(the Credit Facility). At closing, the Company borrowed $215.0 million to repay in full and terminate existing debt.

Loans
under the Credit Facility accrue interest at the election of the Company at the prime rate or the London Interbank Offering Rate (LIBOR) plus a margin based on our leverage ratio, determined quarterly. The effective annual interest rate
was approximately 5.8 percent as of January 31, 2007. Interest payments are made in cash at intervals ranging from one to three months, as elected by the Company. Principal, together with accrued interest, is due on the maturity date of
July 31, 2011.

The Credit Facility permits prepayment of outstanding loans at any time without premium or penalty. On June 29,
2007, the Company repaid the entire $215.0 million outstanding balance under the credit facility. At January 31, 2008, the Credit Facility remains in effect and BEA is able to utilize it; however there is no outstanding balance.

On September 11, 2006, the Company provided notice to the Administrative Agent and the lenders under the Credit Facility that a default had occurred
because the Company had not timely furnished certified financial statements which was due to the Companys stock option investigation. The Company was granted various waivers in fiscal 2007 and 2008 for the delivery of financial statements and
compliance certificates. In addition the lenders under the Credit Facility had to determine that once the financial statements were filed the Companys creditworthiness was not negatively impacted.

In November 2007, the Company filed its restated version of the Companys financial statements for its fiscal year ended January 31, 2007 and
fiscal quarters ended July 31, 2006, October 31, 2006, January 31, 2007, April 30, 2007, July 31, 2007 and October 31, 2007. In January 2008 the lenders under the Credit Facility determined that the Company was no
longer in default.



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11. Income Taxes

The components of the provisions for income taxes consist of the following (in thousands):



|                           |  |                                       |        |   |      |   |         |      |  |   |         |  
|-------------------------- |  | ------------------------------------- | ------ | - | ---- | - | ------- | ---- |  | - | ------- | -
|                           |  | For the fiscal year ended January 31, |       
|                           |  | 2008                                  |        |   | 2007 |   |         | 2006 | 
|Federal:                   |  |                                       |        |   |      |   |         |      |  |   |         |  
|Current                    |  | $                                     | 14,623 |   |      | $ | 46,048  |      |  | $ | 71,339  |  
|Deferred                   |  |                                       | 38,941 |   |      |   | (53,092 | )    |  |   | (12,872 | )
|State:                     |  |                                       |        |   |      |   |         |      |  |   |         |  
|Current                    |  |                                       | 5,403  |   |      |   | 7,903   |      |  |   | 7,471   |  
|Deferred                   |  |                                       | (3,680 | ) |      |   | (12,020 | )    |  |   | (6,076  | )
|Foreign:                   |  |                                       |        |   |      |   |         |      |  |   |         |  
|Current                    |  |                                       | 25,293 |   |      |   | 18,155  |      |  |   | 16,183  |  
|Deferred                   |  |                                       | (278   | ) |      |   | (808    | )    |  |   | (1,028  | )
|                           |  |                                       |        |   |      |   |         |      |  |   |         |  
|Provision for income taxes |  | $                                     | 80,302 |   |      | $ | 6,186   |      |  | $ | 75,017  |  
|                           |  |                                       |        |   |      |   |         |      |  |   |         |  

Pretax income from foreign operations was approximately $264.0 million, $183.6 million, and $166.0
million for fiscal 2008, 2007 and 2006, respectively.

The reconciliation of income tax attributable to continuing operations computed at
the U.S. federal statutory tax rate (35 percent) to income tax expense is as follows (in thousands):



|                                                                                        |  |                                       |         |   |      |   |         |      |  |   |         |  
|--------------------------------------------------------------------------------------- |  | ------------------------------------- | ------- | - | ---- | - | ------- | ---- |  | - | ------- | -
|                                                                                        |  | For the fiscal year ended January 31, |        
|                                                                                        |  | 2008                                  |         |   | 2007 |   |         | 2006 | 
|Tax provision- at U.S. statutory rate                                                   |  | $                                     | 100,969 |   |      | $ | 3,740   |      |  | $ | 76,365  |  
|State income taxes, net of federal benefit                                              |  |                                       | 1,246   |   |      |   | (4,346  | )    |  |   | 5,823   |  
|Foreign income and withholding taxes                                                    |  |                                       | (24,624 | ) |      |   | (15,283 | )    |  |   | (10,578 | )
|Jobs Act repatriation, including state taxes                                            |  |                                       |        |   |      |   |        |      |  |   | 10,447  |  
|Change in Valuation Allowance                                                           |  |                                       | (387    | ) |      |   | 18,723  |      |  |   | (8,940  | )
|Benefits from resolution of certain tax audits and expiration of statute of limitations |  |                                       | (6,273  | ) |      |   | (919    | )    |  |   | (1,586  | )
|Purchased in-process product development                                                |  |                                       |        |   |      |   | 1,540   |      |  |   | 1,610   |  
|Stock-based compensation                                                                |  |                                       | 6,766   |   |      |   | 5,851   |      |  |   | 712     |  
|Research and development credits                                                        |  |                                       | (2,526  | ) |      |   | (3,665  | )    |  |   |        |  
|Other                                                                                   |  |                                       | 5,131   |   |      |   | 545     |      |  |   | 1,164   |  
|                                                                                        |  |                                       |         |   |      |   |         |      |  |   |         |  
|Provision for income taxes                                                              |  | $                                     | 80,302  |   |      | $ | 6,186   |      |  | $ | 75,017  |  
|                                                                                        |  |                                       |         |   |      |   |         |      |  |   |         |  



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Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts
of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the deferred tax assets for federal and state income taxes are as follows (in thousands):



|                                                    |  |             |         |   |      |   |         |  
|--------------------------------------------------- |  | ----------- | ------- | - | ---- | - | ------- | -
|                                                    |  | January 31, |        
|                                                    |  | 2008        |         |   | 2007 |  
|Deferred tax assets:                                |  |             |         |   |      |   |         |  
|Deferred revenue                                    |  | $           | 14,586  |   |      | $ | 12,306  |  
|Accruals                                            |  |             | 37,574  |   |      |   | 30,012  |  
|Equity investment write-downs                       |  |             | 8,049   |   |      |   | 8,231   |  
|Net operating loss carry forwards                   |  |             | 52,836  |   |      |   | 42,530  |  
|Capital loss carry forwards                         |  |             | 9,364   |   |      |   | 9,555   |  
|Credit carry forwards                               |  |             | 31,405  |   |      |   | 7,357   |  
|Property and equipment                              |  |             | 20,417  |   |      |   | 18,976  |  
|Stock-based compensation                            |  |             | 31,503  |   |      |   | 28,613  |  
|Unrealized loss on land                             |  |             |        |   |      |   | 79,437  |  
|U.S. deferred taxes for unremitted foreign earnings |  |             | 20,870  |   |      |   | 4,798   |  
|Other                                               |  |             | 2,580   |   |      |   | 1,885   |  
|                                                    |  |             |         |   |      |   |         |  
|Subtotal                                            |  |             | 229,184 |   |      |   | 243,700 |  
|Valuation allowance                                 |  |             | (17,573 | ) |      |   | (18,723 | )
|                                                    |  |             |         |   |      |   |         |  
|Total deferred tax assets                           |  |             | 211,611 |   |      |   | 224,977 |  
|Deferred tax liabilities:                           |  |             |         |   |      |   |         |  
|Intangible assets                                   |  |             |        |   |      |   | (6,971  | )
|                                                    |  |             |         |   |      |   |         |  
|Net deferred tax assets                             |  | $           | 211,611 |   |      | $ | 218,006 |  
|                                                    |  |             |         |   |      |   |         |  
|Reported as:                                        |  |             |         |   |      |   |         |  
|Current deferred tax assets                         |  | $           | 81,991  |   |      | $ | 56,767  |  
|Non-current deferred tax assets                     |  |             | 129,620 |   |      |   | 166,027 |  
|Current deferred tax liabilities                    |  |             |        |   |      |   | (4,788  | )
|                                                    |  |             |         |   |      |   |         |  
|Net deferred taxes                                  |  | $           | 211,611 |   |      | $ | 218,006 |  
|                                                    |  |             |         |   |      |   |         |  

Realization of the Companys net deferred tax assets of $211.6 million is dependent upon the
Company generating future U.S. taxable income in appropriate tax jurisdictions to obtain benefit from the reversal of temporary differences, net operating loss carryforwards and tax credits. The amount of deferred tax assets considered realizable is
subject to adjustment in future periods if estimates of future taxable income are reduced.

As of January 31, 2008, we had federal net
operating loss carry forwards of approximately $118.3 million, which will expire in 2012 through 2026. Utilization of net operating loss carry forwards are subject to substantial limitations due to ownership change and other limitations
provided by the Internal Revenue Code and similar state provisions.

On October 22, 2004, the American Jobs Creation Act (the
Jobs Act) was signed into law. The Jobs Act includes a deduction of 85% for certain foreign earnings that are repatriated, as defined in the Jobs Act. During fiscal 2006, the Companys Chief Executive Officer and Board of Directors
approved a domestic reinvestment plan as required by the Jobs Act to repatriate $169.6 million in foreign earnings in fiscal 2006. The Company repatriated $169.6 million under the Jobs Act in fiscal 2006 and recorded tax expense in fiscal 2006
of $10.4 million related to this repatriation dividend.

We provide for United States income taxes on the earnings of foreign subsidiaries
unless they are considered indefinitely reinvested outside the United States. At January 31, 2008 the cumulative earnings upon which United States income taxes have not been provided for were approximately $193 million. Determination



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of the amount of unrecognized deferred tax liabilities for temporary differences related to earnings of these foreign subsidiaries that are indefinitely
reinvested is not practical.

The Companys income taxes payable has been reduced by the tax benefits from employee stock options. The
Company receives an income tax benefit calculated as the difference between the fair market value of the stock issued at the time of the exercise and the option price, tax effected. The net tax benefits from employee stock option transactions were
$19.8 million, $94.3 million, and $71.2 million in fiscal 2008, 2007 and 2006, respectively, and were reflected as an increase to common stock in the consolidated statements of shareholders equity.

The Company adopted the provisions of FASB Interpretation Number 48, Accounting for Uncertainty in Income Taxes, on February 1, 2007. The
cumulative effect of adopting FIN 48 was a $9.9 million decrease to the opening balance of retained earnings.

The aggregate changes in the
balance of gross unrecognized tax benefits were as follows: (in thousands)



|                                                         |  |                                        |         |  
|-------------------------------------------------------- |  | -------------------------------------- | ------- | -
|                                                         |  | For the fiscal year endJanuary 31,2008 |        
|Beginning balance as of February 1, 2007 (upon adoption) |  | $                                      | 139,786 |  
|Increases related to prior year tax positions            |  |                                        | 5,275   |  
|Decreases related to prior year tax positions            |  |                                        | (1,029  | )
|Increases related to current year tax positions          |  |                                        | 15,723  |  
|Decreases related to settlements with taxing authorities |  |                                        | (4,439  | )
|Decreases related to lapse of statute of limitation.     |  |                                        | (5,479  | )
|                                                         |  |                                        |         |  
|Ending balances at January 31, 2008                      |  | $                                      | 149,837 |  
|                                                         |  |                                        |         |  

If the ending balance of $149.8 million of unrecognized tax benefits at January 31, 2008 were
recognized, approximately $75.0 million would affect the effective tax rate.

The Company is currently under audit by the Internal Revenue
Service and several states and foreign jurisdictions. It is possible that the amount of the liability for unrecognized tax benefits, including the unrecognized tax benefits related to the audits referenced above, may change within the next 12
months. However, an estimate of the range of possible changes cannot be made at this time. In addition, over the next twelve months, the Companys existing tax positions will continue to generate an increase in liabilities for unrecognized tax
benefits.

In accordance with the Companys accounting policy, it recognizes accrued interest and penalties related to unrecognized
tax benefits in the provision for income taxes. This policy did not change as a result of the adoption of FIN 48. The Company had accrued interest and penalties of $15.1 million at January 31, 2008, and $9.0 million as of the date of adoption
of FIN 48.

The Company files income tax returns in the U.S federal jurisdiction, in various states, and in various foreign jurisdictions.
With few exceptions, the Company is no longer subject to U.S. federal, state and local, or non-U.S. income tax examinations by tax authorities for years before January 31, 2001.



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12. Stockholders Equity

Share activity

The following table represents changes in outstanding shares of common stock (in
thousands):



|                                                                                       |  |             |  
|-------------------------------------------------------------------------------------- |  | ----------- | -
|                                                                                       |  | Commonstock |  
|Balance at January 31, 2005                                                            |  | 398,091     |  
|Issuance of common stock and shares issued under stock option and stock purchase plans |  | 10,380      |  
|Purchases of common stock                                                              |  | (22,528     | )
|                                                                                       |  |             |  
|Balance at January 31, 2006                                                            |  | 385,943     |  
|Issuance of common stock and shares issued under stock option and stock purchase plans |  | 12,352      |  
|                                                                                       |  |             |  
|Balance at January 31, 2007                                                            |  | 398,295     |  
|Issuance of common stock and shares issued under stock option and stock purchase plans |  | 14,737      |  
|                                                                                       |  |             |  
|Balance at January 31, 2008                                                            |  | 413,032     |  
|                                                                                       |  |             |  

Common stock

The Company has reserved or registered shares of common stock for future issuance at January 31, 2008, as follows (in thousands):



|                                                              |  |        
|------------------------------------------------------------- |  | -------
|Shares reserved for Incentive Stock Option Plans              |  | 98,161 
|Shares reserved for Employee Stock Purchase Plan              |  | 23,214 
|                                                              |  |        
|Total common stock reserved or registered for future issuance |  | 121,375
|                                                              |  |        

Share Repurchase Program

In September 2001, March 2003, May 2004, March 2005 and May 2007, the Board of Directors approved stock repurchases that in aggregate
equaled $1.1 billion of our common stock under a share repurchase program (the Share Repurchase Program). In fiscal 2006, 22.5 million shares were repurchased at a total cost of $193.7 million. In fiscal 2007 and fiscal 2008, there
were no repurchases, leaving approximately $621.7 million of the approval limit available for share repurchases under the Share Repurchase Program.

Preferred Stock Rights Plan

In September 2001, the Board of Directors approved a Preferred Stock Rights Plan, which has the
anti-takeover effect of causing substantial dilution to a person or group that attempts to acquire the Company on terms not approved by the Board of Directors. Immediately prior to the execution of the merger agreement with Oracle, on
January 16, 2008, BEA entered into a Second Amendment to the Preferred Stock Rights Plan, dated as of September 14, 2001, as amended as of January 15, 2003, between the Company and Computershare Trust Company, N.A. for the purpose of
amending the Rights Plant to render it inapplicable to the merger agreement and the contemplated merger with Oracle.

13. Employee Benefit Plans and
Stock-Based Compensation

Stock option plans

Under the Companys stock option plans, incentive and nonqualified stock options may be granted to eligible participants to purchase shares of the Companys common stock. Restricted stock awards, including



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restricted stock units and restricted stock, may be granted under the Companys stock option plans as well. Options generally vest over a four-year
period and have a term of seven to ten years, while restricted stock awards generally vest over a two to four year period. In addition, commencing in July 2006, the stock plan requires that restricted stock have vesting conditions with at least a
3-year term. The exercise price of the stock options is determined by the administrator of the plan on the date of grant and is generally equal to the fair market value of the stock on the grant date. The Company also has employee stock purchase
plans that allow qualified employees to purchase Company shares at 85% of the fair market value on specified dates.

Originally, on an
annual basis through fiscal 2007, the number of shares available in the stock option plan was automatically increased by an amount of up to 6 percent of the outstanding shares of common stock on the last day of the immediately preceding fiscal year,
less the number of shares of common stock added to the Employee Stock Purchase Plan, based on a formula, but not to exceed 24 million shares per fiscal year. For fiscal 2007, the Company reduced the annual increase to 3%. Fiscal 2007 and 2008
also included an increase that was consistent with the 2006 Stock Option Plan documents which allows cancelled options from the 1997 Plan to increase the options and awards available for grant in the 2006 Stock Option Plan.

FAS 123(R) Overview

Prior to
February 1, 2006, we accounted for these stock-based employee compensation plans under the measurement and recognition provisions of Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees,
or APB 25, and related Interpretations, as permitted by Statement of Financial Accounting Standards No. 123, Accounting for Stock-Based Compensation, or FAS 123. Certain options assumed in
acquisitions, grants of restricted stock awards and discounted stock options granted primarily in fiscal 2003, and the situations identified through the stock option review resulted in recording stock-based compensation during periods prior to
February 1, 2006. All other stock-based grants had exercise prices equal to the fair market value of our common stock on the date of grant. We elected the straight-line attribution method as our accounting policy for recognizing stock-based
compensation expense for these grants. We also recorded no compensation expense in connection with our employee stock purchase plans as they qualified as non-compensatory plans following the guidance provided by APB 25. In accordance with FAS 123
and Statement of Financial Accounting Standards No. 148, Accounting for Stock-Based CompensationTransition and Disclosure, in footnote 1 we disclose our net income and net income per share for the year ended
January 31, 2006 as if we had applied the fair value-based method in measuring compensation expense for our stock-based compensation plans.

Effective February 1, 2006, we adopted the fair value recognition provisions of Statement of Financial Accounting Standards No. 123(R), Share-Based Paymentor FAS 123(R) using the modified
prospective transition method. Under that transition method, compensation expense that we recognized for the year ended January 31, 2007 included: (a) compensation expense for all share-based payments granted prior to but not yet vested as
of February 1, 2006, based on the grant date fair value estimated in accordance with the original provisions of FAS 123, and (b) compensation expense for all share-based payments granted or modified on or after February 1, 2006, based
on the grant date fair value estimated in accordance with the provisions of FAS 123(R). Compensation expense is recognized only for those awards that are expected to vest, whereas prior to the adoption of FAS 123(R), we recognized forfeitures as
they occurred. In addition, we elected the straight-line attribution method as our accounting policy for recognizing stock-based compensation expense for all awards that are granted on or after February 1, 2006.

In accordance with FAS 123(R), FAS No. 109, Accounting for Income Taxes (FAS 109), and EITF Topic D-32, Intra-Period Tax
Allocation of the Effect of Pretax Income from Continuing Operations, the Company has elected to recognize excess income tax benefits from stock option exercises in additional paid-in capital only if an incremental income tax benefit would be
realized after considering all other tax attributes presently available to the Company.



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During the third quarter of fiscal 2007, the Companys Audit Committee commenced an internal review
of the Companys historical stock option granting practices with the assistance of independent legal counsel. As a result, the filing of the Companys Form 10-Q for the second quarter of fiscal 2007 was indefinitely delayed. Because the
Company was not current in its reporting obligations under the Securities Exchange Act, the Companys Form S-8 was suspended and consequently the Company was unable to issue shares of its common stock. As a result, the Company incurred
additional stock based compensation expense due to modifying certain vested options that could not be exercised due to the suspended Form S-8. During the twelve months ended January 31, 2007, the Company recognized approximately $2.7 million of
additional stock based compensation expense due to (1) modifying the termination exercise period for vested options for employees who terminated prior to September 7, 2006 and employees who terminated subsequent to September 7, 2006
and (2) modifying the expiration date for two employees stock options that were set to expire during the suspension period. These two types of modifications were extended to any individual who met the aforementioned circumstances. Due to
the fact that we modified the termination exercise period for employees who terminated subsequent to September 7, 2006, a liability of $1.3 million was recorded on the balance sheet as of January 31, 2007, and was marked to market on a
quarterly basis until the earlier of the options being exercised or 30 days after the suspension being lifted, which was November 15, 2007, and we were able to issue shares of common stock. In fiscal 2008 we recognized an additional $1.4
million of expense in order to settle this modification.

Tender Offer

On November 15, 2007, after BEA became current with its reporting obligations under the Securities and Exchange Act of 1934, the Company filed a
Tender Offer Statement on Schedule TO with the SEC. The tender offer extended an offer by BEA to holders of certain outstanding stock options granted under the Companys Stock Plans to amend the exercise price on their outstanding options
impacted by the change in measurement date. The purpose of the tender offer was to amend the exercise price on options to have the same price as the fair market value on revised measurement dates that were identified during the Companys
independent review. As part of the tender offer, the Company paid cash of $10.8 million, including payroll taxes, in January 2008 to reimburse employees for any increase in the exercise price of their options resulting from the amendment. The impact
of this payment, which was recorded during the fourth quarter of fiscal 2008, resulted in a decrease to additional paid-in capital of $7.4 million, an increase in stock-based compensation expense of $2.4 million and an increase in payroll tax
expenses of $1.0 million.

Stock-based compensation

The following table summarizes the stock-based compensation expense for stock options, modifications to stock options, restricted stock awards, options assumed in acquisitions and our employee stock purchase plans
included in our results from continuing operations (in thousands):



|                                                   |  |                                   |         |   |      |   |         |      |  |   |        |  
|-------------------------------------------------- |  | --------------------------------- | ------- | - | ---- | - | ------- | ---- |  | - | ------ | -
|                                                   |  | For fiscal year ended January 31, |        
|                                                   |  | 2008                              |         |   | 2007 |   |         | 2006 | 
|Cost of license fees                               |  | $                                 | 145     |   |      | $ | 213     |      |  | $ | 29     |  
|Cost of services                                   |  |                                   | 5,723   |   |      |   | 9,829   |      |  |   | 2,652  |  
|Sales and marketing                                |  |                                   | 14,669  |   |      |   | 24,597  |      |  |   | 7,192  |  
|Research and development                           |  |                                   | 10,068  |   |      |   | 16,140  |      |  |   | 4,026  |  
|General and administrative                         |  |                                   | 14,871  |   |      |   | 17,642  |      |  |   | 6,798  |  
|                                                   |  |                                   |         |   |      |   |         |      |  |   |        |  
|Stock-based compensation before income taxes(1)    |  |                                   | 45,476  |   |      |   | 68,421  |      |  |   | 20,697 |  
|Income tax benefit                                 |  |                                   | (10,789 | ) |      |   | (15,463 | )    |  |   | (4,864 | )
|                                                   |  |                                   |         |   |      |   |         |      |  |   |        |  
|Total stock-based compensation expense after taxes |  | $                                 | 34,687  |   |      | $ | 52,958  |      |  | $ | 15,833 |  
|                                                   |  |                                   |         |   |      |   |         |      |  |   |        |  



|(1) | Amount includes $5.6 million, $8.3 million and $5.0 million of stock-based compensation expense related to restricted stock awards for the twelve months ended January 31,
2008, 2007 and 2006, respectively.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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Valuation Assumptions for Stock Options

FAS 123(R) requires the use of a valuation model to calculate the fair value of stock-based awards. The Company has elected to use the
Black-Scholes-Merton option-pricing model, which incorporates various assumptions including volatility, expected life, and risk-free interest rates. The expected volatility is based on the implied volatility of market traded options on the
Companys common stock. The expected term of an award is based on historical experience of grants, exercises and post-vesting cancellations. Contractual term expirations have not been significant.

During fiscal 2007, the Company began granting stock option awards that have a contractual life of seven years from the date of grant. Prior to
mid-fiscal 2007, stock option awards generally had a ten year contractual life from the date of grant.

Valuation and Amortization
Method.We estimated the fair value of stock options granted before and after the adoption of FAS 123(R) using the Black-Scholes-Merton option valuation model. For options granted prior and subsequent to adoption of FAS 123(R), we estimate
the fair value using a single option approach and amortize the fair value on a straight-line basis for options expected to vest. All options are amortized over the requisite service periods of the awards, which are generally the vesting periods.

Expected Term. The expected term of options granted represents the period of time that they are expected to be outstanding. We
estimate the expected term of options granted based on our historical experience of grants, exercises and post-vesting cancellations in our option database. Contractual term expirations have not been significant.

Expected Volatility.Effective May 1, 2006, we began estimating the volatility of our common stock based on the implied volatility of
our publicity traded options on our common stock consistent with FAS 123(R) and Securities and Exchange Commission Staff Accounting Bulletin No. 107. Prior to that date we estimated the volatility of our stock options using a combination of
historical and implied volatilities. We believe that the use of just the implied volatility of our publicity traded options on our common stock results in a better estimate of fair value of our stock options.

Risk-Free Interest Rate.The risk-free interest rate that we use in the Black-Scholes-Merton option valuation model is the implied yield in
effect at the time of option grant based on U.S. Treasury zero-coupon issues with remaining terms equivalent to the expected term of our option grants.

Dividends.We have never paid any cash dividends on our common stock and we do not anticipate paying any cash dividends in the foreseeable future. Consequently, we use an expected dividend yield of zero in
the Black-Scholes-Merton option valuation model.

Forfeitures.We use historical data to estimate pre-vesting option
forfeitures. As required by FAS 123(R), we record stock-based compensation expense only for those awards that are expected to vest.

The
assumptions used and the resulting estimates of weighted-average fair value per share of options granted during those periods are summarized as follows:



|                        |  |                                       |  |               |  |              
|----------------------- |  | ------------------------------------- |  | ------------- |  | -------------
|                        |  | For the fiscal year ended January 31,
|Employee Stock Option   |  | 2008                                  |  | 2007          |  | 2006         
|Risk-free interest rate |  | 2.7-4.5%                              |  | 4.8-4.9%      |  | 4.35-5.05%   
|Expected volatility     |  | 19-33%                                |  | 30-70%        |  | 41-54%       
|Expected term           |  | 3.7-4.6 years                         |  | 3.6-4.4 years |  | 4.0-5.0 years
|Expected dividends      |  | None                                  |  | None          |  | None         



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In anticipation of adopting FAS 123(R), the Company refined the variables used in the
Black-Scholes-Merton model during fiscal 2006. As a result, the Company refined its methodology of estimating the expected term to be more representative of future exercise patterns. The Company also refined its computation of expected volatility by
considering the volatility of publicly traded options to purchase its common stock. The weighted average estimated fair value of employee stock options granted during fiscal 2008, 2007 and 2006 was $3.86, $4.44 and $3.78 per option, respectively.

Stock Options

Information with respect to option activity under the Companys stock option plans are summarized as follows:



|                                                           |  |                    |   |  |                         |              |                                         |   |      
|---------------------------------------------------------- |  | ------------------ | - |  | ----------------------- | ------------ | --------------------------------------- | - | -----
|(Shares in thousands)                                      |  | Optionsoutstanding |   |  | Exercise priceper share |              | Weighted averageexercise price pershare
|Options outstanding at January 31, 2005                    |  | 77,846             |   |  | $                       | 0.07-$85.56  |                                         | $ | 12.92
|Granted                                                    |  | 13,639             |   |  | $                       | 4.16-$9.35   |                                         | $ | 7.52 
|Exercised                                                  |  | (7,148             | ) |  | $                       | 0.07-$10.14  |                                         | $ | 5.09 
|Canceled                                                   |  | (15,607            | ) |  | $                       | 0.07-$85.56  |                                         | $ | 16.60
|                                                           |  |                    |   |  |                         |              |                                         |   |      
|Options outstanding at January 31, 2006                    |  | 68,730             |   |  | $                       | 0.07-$85.56  |                                         | $ | 11.82
|Granted                                                    |  | 11,769             |   |  | $                       | 8.58-$16.50  |                                         | $ | 12.28
|Exercised                                                  |  | (9,843             | ) |  | $                       | 0.07-$13.81  |                                         | $ | 7.67 
|Canceled                                                   |  | (4,845             | ) |  | $                       | 0.07-$85.56  |                                         | $ | 13.90
|                                                           |  |                    |   |  |                         |              |                                         |   |      
|Options outstanding at January 31, 2007                    |  | 65,811             |   |  | $                       | 0.07-$85.56  |                                         | $ | 12.37
|Granted                                                    |  | 9,580              |   |  | $                       | 10.95-$18.61 |                                         | $ | 12.64
|Exercised                                                  |  | (13,721            | ) |  | $                       | 0.12-$18.04  |                                         | $ | 8.83 
|Canceled                                                   |  | (4,683             | ) |  | $                       | 1.50-$85.56  |                                         | $ | 19.32
|                                                           |  |                    |   |  |                         |              |                                         |   |      
|Options outstanding at January 31, 2008                    |  | 56,987             |   |  | $                       | 0.12-$85.56  |                                         | $ | 13.27
|                                                           |  |                    |   |  |                         |              |                                         |   |      
|Options exercisable at January 31, 2008                    |  | 40,346             |   |  | $                       | 0.12-$85.56  |                                         | $ | 13.85
|                                                           |  |                    |   |  |                         |              |                                         |   |      
|Options exercisable at January 31, 2007                    |  | 47,384             |   |  | $                       | 0.12-$85.56  |                                         | $ | 13.14
|                                                           |  |                    |   |  |                         |              |                                         |   |      
|Options exercisable at January 31, 2006                    |  | 46,569             |   |  | $                       | 0.07-$85.56  |                                         | $ | 13.73
|                                                           |  |                    |   |  |                         |              |                                         |   |      
|Options and awards available for grant at January 31, 2008 |  | 34,806             |   |  |                         |              |                                         |   |      
|                                                           |  |                    |   |  |                         |              |                                         |   |      

The weighted average grant date fair value of stock options, as calculated using the
Black-Scholes-Merton model under FAS 123(R), was as follows:



|                                                                                                     |  |            |      |            |   |            |  |   |     
|---------------------------------------------------------------------------------------------------- |  | ---------- | ---- | ---------- | - | ---------- |  | - | ----
|                                                                                                     |  | Fiscal2008 |      | Fiscal2007 |   | Fiscal2006
|Stock options granted with an exercise price equal to the Companys stock price on date of grant     |  | $          | 3.86 |            | $ | 4.54       |  | $ | na  
|Stock options granted with an exercise price less than the Companys stock price on date of grant    |  | $          | na   |            | $ | 4.48       |  | $ | 4.02
|Stock options granted with an exercise price greater than the Companys stock price on date of grant |  | $          | na   |            | $ | 3.88       |  | $ | 3.30



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The following table summarizes information about outstanding and exercisable stock options at
January 31, 2008:



|                                   |  |                       |  |                                                   |  |                              |       |                |        |                              |   |      
|---------------------------------- |  | --------------------- |  | ------------------------------------------------- |  | ---------------------------- | ----- | -------------- | ------ | ---------------------------- | - | -----
|                                   |  | Outstanding           |  | Exercisable                                      
|                                   |  | Numberofshares        |  | Weightedaverageremainingcontractuallife (inyears) |  | Weightedaverageexerciseprice |       | Numberofshares |        | Weightedaverageexerciseprice
|                                   |  | (Shares in thousands)
|Range of per share exercise prices |  |                       |  |                                                   |  |                              |       |                |        |                              |   |      
|$ 0.12$ 6.82                      |  | 6,251                 |  | 3.44                                              |  | $                            | 5.23  |                | 6,155  |                              | $ | 5.23 
|$ 6.83$ 7.98                      |  | 6,487                 |  | 5.99                                              |  | $                            | 7.48  |                | 4,797  |                              | $ | 7.43 
|$ 8.13$ 8.66                      |  | 7,081                 |  | 6.55                                              |  | $                            | 8.43  |                | 6,360  |                              | $ | 8.44 
|$ 8.67$ 11.29                     |  | 6,060                 |  | 6.22                                              |  | $                            | 10.05 |                | 4,535  |                              | $ | 10.05
|$11.33$12.40                      |  | 10,079                |  | 5.82                                              |  | $                            | 12.10 |                | 3,168  |                              | $ | 11.80
|$12.45$12.96                      |  | 6,491                 |  | 6.74                                              |  | $                            | 12.80 |                | 4,312  |                              | $ | 12.76
|$12.99$15.80                      |  | 5,794                 |  | 7.05                                              |  | $                            | 13.65 |                | 2,845  |                              | $ | 13.67
|$15.85$33.18                      |  | 6,186                 |  | 3.50                                              |  | $                            | 23.45 |                | 5,616  |                              | $ | 24.05
|$33.27$80.94                      |  | 2,538                 |  | 2.52                                              |  | $                            | 48.65 |                | 2,538  |                              | $ | 48.65
|$85.56$85.56                      |  | 20                    |  | 2.73                                              |  | $                            | 85.56 |                | 20     |                              | $ | 85.56
|                                   |  |                       |  |                                                   |  |                              |       |                |        |                              |   |      
|$ 0.12$85.56                      |  | 56,987                |  |                                                   |  |                              |       |                | 40,346 |                              |   |      
|                                   |  |                       |  |                                                   |  |                              |       |                |        |                              |   |      

The Companys vested or expected to vest stock options and exercisable stock options as of
January 31, 2008 are summarized below:



|                                   |  |                 |  |                                |       |                                            |      |                          |   |        
|---------------------------------- |  | --------------- |  | ------------------------------ | ----- | ------------------------------------------ | ---- | ------------------------ | - | -------
|                                   |  | Number ofShares |  | Weighted AverageExercise Price |       | Weighted AverageRemaining Contractual Term |      | Aggregate IntrinsicValue
|                                   |  | (In thousands)  |  | (In dollars)                   |       | (In years)                                 |      | (In thousands)          
|Vested or expected-to-vest options |  | 54,231          |  | $                              | 13.31 |                                            | 5.48 |                          | $ | 401,404
|Exercisable options                |  | 40,346          |  | $                              | 13.85 |                                            | 4.99 |                          | $ | 305,294

Aggregate intrinsic value represents the difference between the Companys closing stock price
on the last trading day of the fiscal period, which was $18.69 as of January 31, 2008, and the exercise price multiplied by the number of related options. There were approximately 50.8 million shares that had exercise prices that were
lower than the market price of our common stock as of January 31, 2008.

The total pre-tax intrinsic value of options exercised during
the twelve months ended January 31, 2008 was $105.1 million. The intrinsic value represents the difference between the fair market value of the Companys common stock on the date of exercise and the exercise price of each option.

Total fair value of options vested during fiscal 2008 was $33.9 million. As of January 31, 2008, approximately $74.9 million of total
unrecognized compensation cost related to stock options is expected to be recognized over a weighted-average period of 2.5 years, which excludes approximately $27.2 million of the total unrecognized compensation cost which is estimated to be
forfeited prior to the vesting of such awards and has been excluded from the preceding cost.

The total cash received from employees as a
result of stock option exercises during the year ended January 31, 2008 was $120.4 million, and a tax benefit of $19.7 million was realized by the Company for the year ended January 31, 2008. The Company settles employee stock option
exercises with newly issued common shares.



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Extension of Stock Option Exercise Periods for Former Employees

The Company could not issue any securities under its registration statements on Form S-8 during the period it was not current in its SEC reporting
obligations for filing its periodic reports under the Securities Exchange Act of 1934. As a result, options vested and held by the Companys former employees could not be exercised until the completion of the Companys stock option review
and the Companys public filings obligations were met (the trading black-out period). During fiscal 2007, approximately 529,939 such options were due to expire. The Company extended the expiration date of these stock options to the
end of a 30-day period subsequent to the Companys filing of its required regulatory reports. As a result of the modification, the fair value of such stock options were reclassified to current liabilities subsequent to the modification and are
subject to mark-to-market provisions at the end of each reporting period until final settlement. The Company measured the fair value of these stock options using the Black-Scholes-Merton option valuation model and recorded an aggregate fair value of
approximately $1.3 million under current liabilities as of January 31, 2007. Changes to the fair values of these options was measured quarterly and reflected in the Companys consolidated statement of income and in the fourth quarter
of fiscal 2008, these options were settled. The Company recognized an additional $1.4 million of expense associated with modifications in fiscal 2008.

Restricted Stock Awards

The Company issues restricted stock units and restricted stock under its
1997 and 2006 Stock Incentive Plan. Restricted stock units are similar to restricted stock in that they are issued for no consideration; however, the holder generally is not entitled to the underlying shares of common stock until the restricted
stock unit vests. Restricted stock and restricted stock units are combined and disclosed as restricted stock awards (RSAs).

Information with respect to restricted stock award activity under the Companys stock option plans are summarized as follows:



|                                       |  |                                   |   |  |                                       |      
|-------------------------------------- |  | --------------------------------- | - |  | ------------------------------------- | -----
|(Shares in thousands)                  |  | RestrictedStock Awardsoutstanding |   |  | Weighted averageFMV at grantper
share
|Awards outstanding at January 31, 2005 |  | 1,085                             |   |  | $                                     | 8.17 
|Granted                                |  | 641                               |   |  | $                                     | 8.15 
|Vested                                 |  | (598                              | ) |  | $                                     | 7.76 
|Cancelled                              |  | (229                              | ) |  | $                                     | 8.63 
|                                       |  |                                   |   |  |                                       |      
|Awards outstanding at January 31, 2006 |  | 899                               |   |  | $                                     | 8.30 
|Granted                                |  | 1,022                             |   |  | $                                     | 12.24
|Vested                                 |  | (222                              | ) |  | $                                     | 8.23 
|Cancelled                              |  | (90                               | ) |  | $                                     | 9.27 
|                                       |  |                                   |   |  |                                       |      
|Awards outstanding at January 31, 2007 |  | 1,609                             |   |  | $                                     | 10.76
|Granted                                |  | 1,763                             |   |  | $                                     | 16.33
|Vested                                 |  | (1,106                            | ) |  | $                                     | 22.19
|Cancelled                              |  | (88                               | ) |  | $                                     | 11.02
|                                       |  |                                   |   |  |                                       |      
|Awards outstanding at January 31, 2008 |  | 2,178                             |   |  | $                                     | 9.45 
|                                       |  |                                   |   |  |                                       |      

In fiscal 2008, the Company issued 1,762,775 of restricted stock awards to certain employees. In
fiscal 2007, the Company issued a total of 1,021,667 restricted stock awards to certain employees. In fiscal 2006, the Company issued a total of 640,500 restricted stock awards to certain of its employees.



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The Companys vested or expected to vest restricted stock awards as of January 31, 2008 are
summarized below:



|                                                    |  |                 |  |                               |   |                                         |      |                          |   |       
|--------------------------------------------------- |  | --------------- |  | ----------------------------- | - | --------------------------------------- | ---- | ------------------------ | - | ------
|                                                    |  | Number ofShares |  | Weighted-AverageExercisePrice |   | WeightedAverageRemainingContractualTerm |      | AggregateIntrinsic Value
|                                                    |  | (In thousands)  |  | (In dollars)                  |   | (In years)                              |      | (In thousands)          
|Outstanding restricted stock awards                 |  | 2,178           |  | $                             |  |                                         | 2.08 |                          | $ | 40,623
|Vested and expected-to-vest restricted stock awards |  | 1,583           |  | $                             |  |                                         | 1.86 |                          | $ | 29,513

None of the restricted stock awards were vested as of January 31, 2008. As of
January 31, 2008, approximately $31.5 million of total unrecognized compensation cost related to restricted stock awards is expected to be recognized over a weighted-average period of 3.4 years. Approximately $10.8 million of the
total unrecognized compensation cost is estimated to be forfeited prior to the vesting of such awards and has been excluded from the preceding cost.

Deferred Compensation

In accordance with the adoption of FAS123(R), the deferred compensation
balance of $19.8 million at January 31, 2006 was eliminated from the balance sheet, with the offset to additional paid in capital.

During fiscal 2006, the total amortization of deferred compensation was $20.7 million of which $9.9 million related to the discounted stock option grants identified as part of the stock option review, $1.5 million related to the discounted
stock options granted during fiscal 2003, $5.2 million was related to restricted stock awards granted in fiscal 2005 and fiscal 2006, $0.8 million related to stock granted in connection with acquisitions during fiscal 2002 and fiscal 2006, $2.5
million related to variable NIC tax expense and $0.8 million related to modifications for terminated and active employees.

Employee
stock purchase plan

In March 1997, the Companys stockholders approved an Employee Stock Purchase Plan (the ESPP Plan)
for all employees meeting certain eligibility criteria. Under the ESPP Plan, employees may purchase shares of the Companys common stock, subject to certain limitations, at 85 percent of the lower of the closing sale price of BEAs Common
Stock reported on the NASDAQ National Market (NASDAQ) at the beginning or the end of each six-month offering period. Additionally, the price paid by the employee will not exceed 85 percent of the closing sale price as reported on NASDAQ
at the beginning of a 24 month period that restarts in December or July of every second year, determined by the employees enrollment date in the plan. Eligible employees may purchase common stock through payroll deductions by electing to have
between one percent and 15 percent of their compensation withheld, subject to certain limitations. Originally, on an annual basis through fiscal 2007, the number of shares available in the ESPP Plan automatically increased by an amount equal to the
lesser of 24 million shares or six percent of the outstanding shares of common stock on the last day of the immediately preceding fiscal year less the number of shares of common stock added to the stock option plan. For fiscal 2008 and fiscal
2007 we reduced the annual increase to 3%. On January 18, 2006, the Board of Directors approved an amendment to the ESPP Plan to change the subscription period to 6 months from 24 months effective with the next offering period beginning
July 1, 2006.



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ESPP awards were valued using the Black-Scholes-Merton option valuation model. During the twelve months
ended January 31, 2008, 2007 and 2006 ESPP awards were valued using the following weighted-average assumptions:



|                             |  |                                       |  |          |  |              
|---------------------------- |  | ------------------------------------- |  | -------- |  | -------------
|                             |  | For the fiscal year ended January 31,
|Employee Stock Purchase Plan |  | 2008                                  |  | 2007     |  | 2006         
|Risk-free interest rate      |  | 2.3%                                  |  | 5.2%     |  | 2.97-5.10%   
|Expected volatility          |  | 35%                                   |  | 37%      |  | 29-40%       
|Expected term                |  | 6 months                              |  | 6 months |  | 0.5-2.0 years
|Expected dividends           |  | None                                  |  | None     |  | None         

The weighted average estimated grant date fair value of the ESPP shares (calculated using the
Black-Scholes-Merton model) was $3.84, $3.37 and $2.91 in fiscal years 2008, 2007 and 2006, respectively.

Approximately 0.3 million,
2.6 million, and 3.4 million shares for total proceeds of approximately $3.2 million, $18.6 million and $23.9 million, respectively, were sold through the ESPP Plan in fiscal 2008, 2007 and 2006. At January 31, 2008, 32.8 million
shares had been issued under the ESPP Plan and 23.2 million shares were reserved for future issuance.

The Company could not issue any
securities under its registration statements on Form S-8 during the period it was not current in its SEC reporting obligations for filing its periodic reports under the Securities Exchange Act of 1934. As a result, a purchase for the ESPP period
commencing July 1, 2006 that was supposed to occur on December 15, 2006 was postponed. This resulted in a modification to the ESPP which resulted in additional compensation expense of $1.7 million and $0.5 million in fiscal 2008 and fiscal
2007.

401(k) Plan

The
Company sponsors the BEA Systems 401(k) Profit Sharing Plan (401(k) Plan). Most employees (Participants) are eligible to participate following the start of their employment, at the beginning of each calendar month. Participants may contribute
up to the lesser of 100% of their current compensation to the 401(k) Plan or an amount up to a statutorily prescribed annual limit. The Company pays the direct expenses of the 401(k) Plan and matches 50% of Participants contributions up to a
maximum of the lesser of $3,000 per year prior to fiscal 2007 and $5,000 for fiscal 2008. The Companys matching contribution vests over one year from employment commencement and was approximately $5.8 million, $6.0 million and $5.1 million for
the years ended January 31, 2008, 2007 and 2006, respectively. Employer contributions not vested upon employee termination are forfeited.

14. Accumulated Other Comprehensive Income

The components of accumulated other comprehensive income are as follows (in
thousands):



|                                                                                                                                                     |  |             |        |      |   |        |      |  |   |        |  
|---------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----------- | ------ | ---- | - | ------ | ---- |  | - | ------ | -
|                                                                                                                                                     |  | January 31, |       
|                                                                                                                                                     |  | 2008        |        | 2007 |   |        | 2006 | 
|Foreign currency translation adjustment                                                                                                              |  | $           | 22,844 |      | $ | 12,534 |      |  | $ | 5,430  |  
|Unrealized gain or loss on available-for-sale investments, net of income taxes of $0, $0 and $0 million in fiscal 2008, 2007, and 2006,
respectively |  |             | 7,178  |      |   | (372   | )    |  |   | (2,302 | )
|                                                                                                                                                     |  |             |        |      |   |        |      |  |   |        |  
|Total accumulated other comprehensive income                                                                                                         |  | $           | 30,022 |      | $ | 12,162 |      |  | $ | 3,128  |  
|                                                                                                                                                     |  |             |        |      |   |        |      |  |   |        |  



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15. Minority Interest in Equity Investments

In fiscal 2008 the Company recorded $1.1 million gain, related to disposals of minority investments. In fiscal 2007, the Company recognized $11.1 million
of net gains on the disposal of two minority interests in equity investments. The first disposal was of shares of a privately held company that went public in February 2006 and resulted in a $2.7 million gain. The second disposal of a minority
interest in equity investment was a privately held company acquired by a third party in March 2006, which resulted in an $8.4 million net gain.

16. Geographic Information and Revenue by Type of Product or Service

Geographic information

Information regarding the Companys operations by geographic area is as follows (in thousands):



|                                              |  |                               |           |      |   |           |  |   |          
|--------------------------------------------- |  | ----------------------------- | --------- | ---- | - | --------- |  | - | ---------
|                                              |  | Fiscal year ended January 31,
|                                              |  | 2008                          |           | 2007 |   | 2006     
|Total revenues:                               |  |                               |           |      |   |           |  |   |          
|Americas                                      |  | $                             | 756,834   |      | $ | 752,082   |  | $ | 622,624  
|Europe, Middle East and Africa (EMEA)         |  |                               | 525,377   |      |   | 446,464   |  |   | 397,815  
|Asia/Pacific (APAC)                           |  |                               | 253,569   |      |   | 203,803   |  |   | 179,406  
|                                              |  |                               |           |      |   |           |  |   |          
|                                              |  | $                             | 1,535,780 |      | $ | 1,402,349 |  | $ | 1,199,845
|                                              |  |                               |           |      |   |           |  |   |          
|Long-lived assets(1) (at end of fiscal year): |  |                               |           |      |   |           |  |   |          
|Americas                                      |  | $                             | 452,905   |      | $ | 438,662   |  | $ | 557,901  
|EMEA                                          |  |                               | 3,918     |      |   | 3,710     |  |   | 3,278    
|APAC                                          |  |                               | 13,112    |      |   | 14,203    |  |   | 8,282    
|                                              |  |                               |           |      |   |           |  |   |          
|                                              |  | $                             | 469,935   |      | $ | 456,575   |  | $ | 569,461  
|                                              |  |                               |           |      |   |           |  |   |          



|(1) | Long-lived assets include all long-term assets except those specifically excluded under the Statement of Financial Accounting Standard No. 131, Disclosure about Segments of
an Enterprise and Related Information, such as deferred income taxes.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The Company generally assigns revenues to
geographic areas based on the location from which the invoice is generated. Certain large revenue transactions with multi-national customers are allocated to multiple geographic areas based on the relative contribution of each geographic area to the
overall sales effort. Two individual countries accounted for more than 10 percent of total revenues in fiscal 2008: the United States with $675.6 million or 44.0 percent and the United Kingdom with $156.4 million or 10.2%. The only individual
country that accounted for more than 10 percent of total revenues in fiscal 2007 was the United States with $684.6 million or 48.9 percent. The only individual countries that accounted for more than 10 percent of total revenues in fiscal 2006 were
the United States with $570.6 million or 47.6 percent and the United Kingdom with $130.0 million or 10.8 percent. The only individual country that accounted for more than 10 percent of total long-lived assets at the end of fiscal 2008 was the United
States with $450.8 million or 95.9 percent. The only individual country that accounted for more than 10 percent of total long-lived assets at the end of fiscal 2007 was the United States with $438.7 million or 96.1 percent. The only individual
country that accounted for more than 10 percent of total long-lived assets at the end of fiscal 2006 was the United States with $557.9 million or 97.9 percent.

Revenue by type of product or service

The Company considers all license revenue derived from its
various software products to be revenue from a group of similar products.



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The following table provides a breakdown of services revenue by similar type (in thousands):



|                                  |  |                               |         |      |   |         |  |   |        
|--------------------------------- |  | ----------------------------- | ------- | ---- | - | ------- |  | - | -------
|                                  |  | Fiscal year ended January 31,
|                                  |  | 2008                          |         | 2007 |   | 2006   
|Consulting and education revenues |  | $                             | 210,030 |      | $ | 175,665 |  | $ | 145,572
|Customer support revenues         |  |                               | 773,728 |      |   | 653,214 |  |   | 542,724
|                                  |  |                               |         |      |   |         |  |   |        
|Total services revenue            |  | $                             | 983,758 |      | $ | 828,879 |  | $ | 688,296
|                                  |  |                               |         |      |   |         |  |   |        

17. Net Income Per Share

Basic net income per share is computed based on the weighted average number of shares of the Companys common stock less the weighted average number of shares subject to repurchase and held in escrow. Diluted net
income per share is computed based on the weighted average number of shares of the Companys common stock and common equivalent shares (using the treasury stock method for stock options and using the if-converted method for convertible notes),
if dilutive.

The following is a reconciliation of the numerators and denominators of the basic and diluted net income per share
computations (in thousands, except per share data):



|                                                                                |  |                               |         |   |      |   |         |      |  |   |         |  
|------------------------------------------------------------------------------- |  | ----------------------------- | ------- | - | ---- | - | ------- | ---- |  | - | ------- | -
|                                                                                |  | Fiscal year ended January 31, |        
|                                                                                |  | 2008                          |         |   | 2007 |   |         | 2006 | 
|Numerator:                                                                      |  |                               |         |   |      |   |         |      |  |   |         |  
|Net income                                                                      |  | $                             | 208,181 |   |      | $ | 4,500   |      |  | $ | 143,170 |  
|                                                                                |  |                               |         |   |      |   |         |      |  |   |         |  
|Denominator:                                                                    |  |                               |         |   |      |   |         |      |  |   |         |  
|Denominator for basic net income per share:                                     |  |                               |         |   |      |   |         |      |  |   |         |  
|Weighted average shares outstanding                                             |  |                               | 400,362 |   |      |   | 394,416 |      |  |   | 389,056 |  
|Weighted average shares subject to repurchase and shares held in escrow         |  |                               | (22     | ) |      |   | (316    | )    |  |   | (6      | )
|                                                                                |  |                               |         |   |      |   |         |      |  |   |         |  
|Denominator for basic net income per share, weighted average shares outstanding |  |                               | 400,340 |   |      |   | 394,100 |      |  |   | 389,050 |  
|Weighted average dilutive potential common shares:                              |  |                               |         |   |      |   |         |      |  |   |         |  
|Options and shares subject to repurchase and shares held in escrow              |  |                               | 16,200  |   |      |   | 16,020  |      |  |   | 8,340   |  
|                                                                                |  |                               |         |   |      |   |         |      |  |   |         |  
|Denominator for diluted net income per share                                    |  |                               | 416,540 |   |      |   | 410,120 |      |  |   | 397,390 |  
|                                                                                |  |                               |         |   |      |   |         |      |  |   |         |  
|Basic net income per share                                                      |  | $                             | 0.52    |   |      | $ | 0.01    |      |  | $ | 0.37    |  
|                                                                                |  |                               |         |   |      |   |         |      |  |   |         |  
|Diluted net income per share                                                    |  | $                             | 0.50    |   |      | $ | 0.01    |      |  | $ | 0.36    |  
|                                                                                |  |                               |         |   |      |   |         |      |  |   |         |  

The computation of diluted net income per share for the fiscal year ended January 31, 2008,
2007, and 2006 excludes the impact of options to purchase 10.1 million, 16.3 million, and 36.3 million shares of common stock, respectively, as such an impact would be anti-dilutive. The computation of diluted net income per share for
the fiscal year ended January 31, 2006, also excludes the conversion of the $465 million 4% Convertible Subordinated Notes due December 15, 2006 (2006 Notes) which were convertible into 13.4 million shares of common stock,
as such impact would be anti-dilutive.

18. Supplemental Cash Flow Disclosures

Cash payments for interest were $5.1 million, $23.1 million, and $32.6 million in fiscal 2008, fiscal 2007 and fiscal 2006, respectively. Cash payments
for income taxes were approximately $42.1 million, $40.8 million



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and $18.6 million for fiscal 2008, fiscal 2007 and fiscal 2006, respectively. The Company recorded net increases in deferred compensation, excluding
amortization during fiscal 2006, of approximately $16.0 million for discounted stock options identified as part of the stock option review, restricted stock awards, stock options granted with an exercise price lower than the fair market value of the
Companys stock on the date of grant, and stock options granted in connection with acquisition. The Company recorded a tax benefit from stock options of $10.8 million, $94.3 million, and $71.2 million in fiscal 2008, fiscal 2007 and fiscal
2006, respectively.

19. Commitments and Contingencies

Merger with Oracle Corporation

On January 16, 2008, the Company entered into an Agreement and
Plan of Merger (the Merger Agreement) with Oracle Corporation (Oracle) and Bronco Acquisition Corporation, a wholly-owned subsidiary of Oracle (Merger Sub). The Merger Agreement provides that, subject to the terms
and conditions of the Merger Agreement, Merger Sub will merge with and into the Company (the Merger) and, as a result of the Merger, the separate corporate existence of Merger Sub will cease and the Company will continue as the surviving
corporation and become a wholly-owned subsidiary of Oracle. Upon the closing of the Merger, each share of common stock of the Company issued and outstanding immediately prior to consummation of the Merger (other than shares owned by the Company,
Oracle or Merger Sub) will be converted into the right to receive $19.375 in cash, without interest. In addition, options to acquire Company common stock, restricted stock unit awards, restricted stock awards and other equity-based awards
denominated in shares of Company common stock outstanding immediately prior to the consummation of the Merger will be converted into options, restricted stock unit awards, restricted stock awards or other equity-based awards, as the case may be,
denominated in shares of Oracle common stock based on formulas contained in the Merger Agreement, except for equity-based awards held by a person who is not an employee of, or a consultant to, the Company or any of its subsidiaries at the time of
the consummation of the Merger, which equity-based awards shall be converted into the right to receive cash based on formulas contained in the Merger Agreement.

The Merger is subject to the approval of the Companys stockholders representing a majority of the outstanding shares of Company common stock. A special meeting of the Companys stockholders to consider and
vote on the proposal to adopt the Merger Agreement will be held on April 4, 2008. Stockholders of record as of the close of business on February 28, 2008 will be entitled to vote at the special meeting. In addition, the Merger is subject
to antitrust clearance or approvals in both the United States and the European Union, as well as other customary closing conditions. On February 27, 2008, the U.S. Department of Justice and the Federal Trade Commission granted early termination
of the Hart-Scott-Rodino (HSR) review period. BEA and Oracle are working toward obtaining all required clearances as soon as possible.

Under the terms of the Merger Agreement, the Company is required to pay Oracle a termination fee in the amount of $250 million in cash in the following circumstances:



| |  |  | the Merger Agreement is terminated by Oracle because either (1) the Companys Board of Directors fails to make or withdraws (or has publicly proposes to
do either) its recommendation to the Companys stockholders to adopt and approve the Merger Agreement or modifies or publicly proposes to modify its recommendation in a manner adverse to Oracle or Merger Sub, (2) the Company enters into,
or publicly announces its intention to enter into, a written agreement relating to an acquisition proposal from a third party, or (3) the Company or any of its representatives willfully and materially breach any of it obligations under the
non-solicitation provisions in the Merger Agreement;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the Merger Agreement is terminated by the Company because, prior to the receipt of the approval of the Companys stockholders to adopt the Merger Agreement,
the Companys Board of Directors authorizes the Company to enter into, and the Company substantially concurrently enters into, a binding definitive agreement with a third party for a transaction constituting a superior proposal; or
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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| |  |  | the Merger Agreement is terminated by either the Company or Oracle because (A) either (1) the Merger is not consummated before October 16, 2008 (the
End Date) (the End Date may be extended to July 16, 2009 in order to obtain all necessary antitrust approvals), unless the failure to complete the Merger by such date is due to the actions of the party seeking to terminate the
Merger Agreement, or (2) the Companys stockholders fail to adopt the Merger Agreement, (B) prior to either the termination of the Merger Agreement or the date of the special meeting of the Companys stockholders, as the case may
be, an acquisition proposal by a third party has been publicly announced and not publicly withdrawn, and (C) within 12 months following the date of such termination, the Company either enters into a definitive agreement with respect to, or
consummates, an acquisition proposal from a third party.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

In addition, if the Company has not breached its
non-solicitation and antitrust obligations under the Merger Agreement (except for such breaches that are unintentional and immaterial), Oracle is required to pay the Company a termination fee in the amount of $500 million in cash in the following
circumstances:



| |  |  | the Merger Agreement is terminated by either the Company or Oracle because the Merger is not consummated before the End Date and either (A) the antitrust
closing conditions have not been satisfied or waived, or (B) a governmental entity has issued an order, rule or regulation relating to antitrust matters that restrains, enjoins or prohibits the consummation of the Merger; or
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the Merger Agreement is terminated by either the Company or Oracle because either (A) a governmental entity of competent jurisdiction has issued a final and
non-appealable order, decree, ruling or other action permanently enjoining, restraining or otherwise prohibiting the consummation of the Merger or (B) any law or regulation is adopted that makes the consummation of the Merger illegal or
otherwise prohibited, and, in either instance, all other closing conditions of Oracle and Merger Sub have been met or waived.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Furthermore, if either the Company or Oracle terminates the Merger Agreement because of a failure to obtain the requisite approval of the Companys stockholders upon a final vote taken at a special meeting of the Companys
stockholders (or any adjournment or postponement thereof), BEA is required to reimburse Oracle for all of its documented reasonable out-of-pocket fees and expenses (including reasonable legal and other third party advisors fees and expenses)
actually incurred by Oracle and its affiliates on or prior to the termination of the Merger Agreement in an amount not to exceed $25 million. Any such required payments will be credited against any obligation that the Company may have to pay the
termination fee described above.

Operating Leases

The Company leases its facilities under operating lease arrangements with remaining terms ranging from less than one year up to eight years. Certain of the leases provide for specified annual rent increases as well as
options to extend the lease beyond the initial term for additional terms ranging from one to fifteen years. The Company has entered into agreements to sublease portions of its leased facilities, the rental income from which is not significant, and,
therefore, is not included as a reduction in the amounts shown in the following table.

Approximate annual minimum operating lease
commitments (in thousands):



|                             |  |                                  |        
|---------------------------- |  | -------------------------------- | -------
|January 31,                  |  | CommitmentsAs of January 31,2008
|Fiscal 2009                  |  | $                                | 54,187 
|Fiscal 2010                  |  |                                  | 42,101 
|Fiscal 2011                  |  |                                  | 31,801 
|Fiscal 2012                  |  |                                  | 24,159 
|Fiscal 2013                  |  |                                  | 13,598 
|Thereafter                   |  |                                  | 25,891 
|                             |  |                                  |        
|Total minimum lease payments |  | $                                | 191,737
|                             |  |                                  |        



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As of January 31, 2008, the Companys expected future sublease rental income was $9.4 million
to be recognized over the next six years.

Total rent expense charged to operations for fiscal 2008, fiscal 2007 and fiscal 2006 was
approximately $45.2 million, $44.8 million and $40.4 million, respectively.

Litigation and Other Claims

The Company and its subsidiary Plumtree Software, Inc. (Plumtree) are involved in a patent infringement lawsuit against Datamize, LLC
(Datamize) in the U.S. District Court for the Northern District of California. In July 2004, Plumtree sued Datamize for declaratory judgment that certain U.S. patents are invalid and not infringed. In January 2007, Datamize answered
Plumtrees complaint and counterclaimed for infringement. In July 2007 the parties were realigned so that Datamize is the plaintiff, and BEA was added to the case as a defendant. The Court issued its claim construction order on August 7,
2007. On February 5, 2008 the Court granted Plumtrees and BEAs motion to disqualify Datamizes lead counsel based on a conflict. In response, Datamize filed on March 6, 2008 a petition for a writ of mandamus in
the Federal Circuit Court of Appeals seeking review of the disqualification order. On March 10, 2008, the district court entered the parties stipulation to vacate the current schedule and stay the case while Datamizes petition
for a writ of mandamus is considered. Plumtree and the Company intend to vigorously defend against Datamizes allegations of infringement and vigorously pursue their claim for declaratory relief. It is not known when or on what basis
this action will be resolved.

On August 23, 2005, a class action lawsuit titled Globis Partners, L.P. v. Plumtree Software, Inc. et
al. was filed in the Court of Chancery in the State of Delaware in and for New Castle County (the Globis Action). The complaint names Plumtree, all members of Plumtrees board of directors and the Company as defendants. The suit
alleges, among other claims, that the consideration to be paid in the proposed acquisition of Plumtree by the Company is unfair and inadequate. The complaint seeks an injunction barring consummation of the merger and, in the event that the merger is
consummated, a rescission of the merger and an unspecified amount of damages. The Company is defending the case vigorously. There can be no assurance, however, that we will be successful in our defense of this action. On November 30, 2007 the
court dismissed this lawsuit.

In addition, on August 24, 2005, a class action lawsuit titled Keitel v. Plumtree Software, Inc., et
al. was filed in the Superior Court of the State of California for the County of San Francisco (the Keitel Action). The complaint names Plumtree and all member of Plumtrees board of directors as defendants alleging similar
complaints and seeking similar damages as the class action brought by Globis Partners, L.P. The Keitel Action has been stayed pending the outcome of the Globis Action. The Company is defending the case vigorously. There can be no assurance, however,
that we will be successful in our defense of this action. It is not known when or on what basis this action will be resolved. On March 26, 2008, the plaintiffs filed for dismissal of the lawsuit with the court.

In the Keitel Action, plaintiffs sought an injunction against completion of the merger. That motion was denied and the case has now been stayed. In the
Globis Action, plaintiff filed an amended complaint on October 22, 2005, which the Company moved to dismiss on October 6, 2006. Plumtree and the individual defendants moved to dismiss the amended complaint on the same date. On
December 8, 2006, plaintiff moved for leave to file a second amended complaint. On January 4, 2007, parties stipulated to permit plaintiff to file the second amended complaint. It was filed on January 16, 2007. Defendants moved to
dismiss the second amended complaint on February 5, 2007. The briefing on the motions has been completed. Currently, the parties are waiting for the Court to set a date for the hearing. There can be no assurance that we will be able to achieve
a favorable resolution. An unfavorable resolution of the pending litigation could result in the payment of substantial damages which could have a material adverse effect on our business, financial condition and results of operations. In addition, as
a result of the merger, we have assumed all liabilities of Plumtree resulting from the litigation. On March 26, 2008, the plaintiffs filed for dismissal of the lawsuit with the court.



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On July 20, 2006, the first of several derivative lawsuits was filed by a purported Company
shareholder in the United States District Court for the Northern District of California. The cases were subsequently consolidated and plaintiffs current complaint names certain of the Companys present and former officers and directors as
defendants and names the Company as a nominal defendant. The complaint alleges that the individual defendants violated the federal securities laws and breached their duties to the Company in connection with our historical stock option grant
activities. In addition, the current complaint includes a claim purportedly on behalf of a class of BEA shareholders arising out of Oracles October 10, 2007 unsolicited acquisition proposal, claiming that members of our Board of Directors
breached their fiduciary duties in response to the proposal. It is not known when or on what basis the action will be resolved.

In
addition, on August 25, 2006, another shareholder derivative action was filed in the Superior Court for the County of Santa Clara. The court granted a motion to stay that action in deference to the actions filed previously in federal court. It
is not known when or on what basis the action will be resolved.

On July 20, 2006, the first of several derivative lawsuits was filed
by a purported Company shareholder in the United States District Court for the Northern District of California. The cases were subsequently consolidated and plaintiffs current complaint names certain of the Companys present and former
officers and directors as defendants and names the Company as a nominal defendant. The complaint alleges that the individual defendants violated the federal securities laws and breached their duties to the Company in connection with our historical
stock option grant activities. On October 25, 2007, the complaint was amended to assert a purported class action claim alleging that the Companys directors breached their fiduciary duties by failing to fully inform themselves of the
Companys true value prior to rejecting Oracles October 10, 2007 unsolicited proposal to acquire the Company for $17.00 per share. Plaintiffs seek an order requiring the director defendants to implement a procedure or process to
determine the Companys true value and obtain the highest possible price for shareholders. The Company is defending the case vigorously. There can be no assurance, however, that we will be successful in our defense of this action. It is not
known when or on what basis this action will be resolved.

On October 12, 2007, two putative class action lawsuits, titled Freedman v.
BEA Systems, Inc. et al. (the Freedman Action) and Blaz v. BEA Systems, Inc. et al. (the Blaz Action) were filed in the Court of Chancery of the State of Delaware. Both complaints named the Company and its directors as
defendants, asserting that the directors breached their fiduciary duties by failing to give proper consideration to Oracles October 10, 2007 unsolicited proposal to acquire the Company for $17.00 per share. The complaints sought
injunctive relief, including the implementation of a process or procedure to obtain the highest possible price for the Companys shareholders through negotiations with Oracle or other means. By order dated October 29, 2007, the Court of
Chancery ordered the Freedman Action and the Blaz Action, and any new case arising out of the same subject matter filed in or transferred to the Court of Chancery, consolidated under the caption In re BEA Systems, Inc. Shareholders Litigation (the
Consolidated Delaware Action). On October 31, 2007, a purported class action lawsuit titled Fonte v. BEA Systems, Inc. et al. was filed in the Court of Chancery (the Fonte Action). The Fonte Action named the same
parties, contained substantially similar allegations, and sought substantially similar relief as the Freedman Action and the Blaz Action, and was subsequently consolidated into the Consolidated Delaware Action. It is not known when or on what basis
this action will be resolved.

On February 20, 2008, plaintiffs in the Consolidated Delaware Action filed a Verified Consolidated
Class Action Complaint (the Consolidated Complaint). The Consolidated Complaint alleges that the directors breached their fiduciary duty of disclosure by including purportedly misleading and incomplete disclosures in BEAs
preliminary proxy statement regarding the Companys proposed merger with Oracle. The Consolidated Complaint also alleges that the directors breached their fiduciary duties of loyalty, care, and good faith by purportedly failing to obtain the
highest merger price reasonably available and purportedly delegating their duty to negotiate the merger consideration to Carl Icahn. The Consolidated Complaint further alleges that in addition to its annual meeting on March 18, 2008, the
Company is required to hold a second annual meeting on or before June 23, 2008. The Consolidated Complaint seeks injunctive relief and damages. On February 29, 2008, plaintiffs in the Consolidated Delaware Action moved for expedited
proceedings and for a preliminary injunction



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enjoining a stockholder vote on, or consummation of, the merger with Oracle. On March 5, 2008, the Court of Chancery granted plaintiffs motion for
expedited proceedings and scheduled a preliminary injunction hearing for March 26, 2008. At the March 26, 2008 hearing, the plaintiffs motion was denied by the court. The Company is defending the Consolidated Delaware Action
vigorously. There can be no assurance, however, that we will be successful in our defense of this action. It is not known when or on what basis this action will be resolved.

On October 12, 2007 a putative class action lawsuit titled Gross v. BEA Systems, Inc. et al. was filed in the Superior Court of the State of
California for the County of Santa Clara (the Gross Action). The complaint names the Company, eight of its directors, and certain unnamed John Doe parties as defendants, alleging that the directors breached their fiduciary
duties by failing to give proper consideration to Oracles October 10, 2007 unsolicited proposal to acquire the Company for $17.00 per share. The complaint seeks injunctive relief, including an order requiring the defendants to cooperate
with any party expressing a bona fide interest in making an offer that maximizes the value of the Companys shares and the formation of a stockholders committee to ensure the fairness of any transaction involving the Companys
shares. The complaint also seeks compensatory damages in an unspecified amount. It is not known when or on what basis this action will be resolved.

On October 16, 2007, a putative class action lawsuit titled Ellman v. Chuang et al. was filed in the Superior Court of the State of California for the County of Santa Clara (the Ellman Action). The complaint names nine of
the Companys directors as defendants and the Company as a nominal defendant, alleging that the directors breached their fiduciary duties by failing to adequately consider Oracles October 10, 2007 unsolicited proposal to acquire the
Company for $17.00 per share. In addition, the complaint asserts a derivative cause of action against the director defendants, ostensibly on behalf of and for the benefit of the Company, again alleging that the director defendants breached their
fiduciary duties by failing to adequately consider Oracles $17.00 proposal. The complaint seeks injunctive relief, including an order requiring the Companys directors to respond reasonably to offers that are in the best interests of
shareholders, a prohibition on entry into any contractual provisions designed to impede the maximization of shareholder value, and an order restraining the defendants from adopting or using any defensive measures against a potential acquiror. It is
not known when or on what basis this action will be resolved.

On October 26, 2007 a putative class action lawsuit titled Zwick v. BEA
Systems, Inc. et al. was filed in the Superior Court of the State of California for the County of Santa Clara (the Zwick Action). The complaint names the Company, eight of its current directors, and certain unnamed John Doe
parties as defendants. The complaint alleges that the director defendants breached their fiduciary duties by failing to give proper consideration to Oracles October 10, 2007 unsolicited proposal to acquire the Company for $17.00 per
share. The complaint seeks injunctive relief, including an order requiring the defendants to cooperate with any party expressing a bona fide interest in making an offer that maximizes the value of the Companys shares and the formation of a
stockholders committee to ensure the fairness of any transaction involving the Companys shares. The complaint also seeks compensatory damages in an unspecified amount.

By Order dated February 13, 2008, the Superior Court for the Country of Santa Clara consolidated the Gross Action and the Zwick Action. At a hearing
on February 14, 2008, the Superior Court for the County of Santa Clara stated that it would consolidate the Gross Action, Zwick Action, and Ellman Action (the Consolidated California Action) pending submission of a proposed order
from the parties. The Company is defending the Consolidated California Action vigorously. There can be no assurance, however, that we will be successful in our defense of this action. It is not known when or on what basis this action will be
resolved.

On October 26, 2007, a lawsuit titled High River Ltd. PShip et al. v. BEA Systems, Inc. et al. was filed in the Court
of Chancery of the State of Delaware (the High River Action). The action was brought by High River Ltd. Partnership and certain affiliated parties who purport to collectively beneficially own almost 14 percent of the Companys
stock. The complaint sought, pursuant to Del. C. § 211, to compel the Company to hold an annual meeting on or before November 30, 2007, and to enjoin the Company from taking certain actions pending the next annual meeting. The parties
subsequently agreed to settle the High River Action. Pursuant to the settlement,



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the Company will hold its 2007 annual meeting on March 18, 2008. The settlement was approved by the Court of Chancery on December 20, 2007.

The Company is subject to legal proceedings and other claims that arise in the ordinary course of business, such as those arising from
domestic and foreign tax authorities, intellectual property matters and employee related matters, in the ordinary course of its business. While management currently believes the amount of ultimate liability, if any, with respect to these actions
will not materially affect the Companys financial position, results of operations or liquidity, the ultimate outcome could be material to the Company. It is not known when or on what basis this action will be resolved.

Warranties and Indemnification

The
Company generally provides a warranty for its software products and services to its customers and accounts for its warranties under Statement of Financial Accounting Standards No. 5, Accounting for Contingencies (FAS 5). The
Companys products are generally warranted to perform substantially as described in the associated product documentation for a period of 90 days. The Companys services are generally warranted to be performed consistent with industry
standards for a period of 90 days from delivery. In the event there is a failure of such warranties, the Company generally is obligated to correct the product or service to conform to the warranty provision or, if the Company is unable to do so, the
customer is entitled to seek a refund of the purchase price of the product or service. The Company has not provided for a warranty accrual as of January 31, 2008 or January 31, 2007. To date, the Companys product warranty expense has
not been significant.

The Company generally agrees to indemnify its customers against legal claims that the Companys software
products infringe certain third-party intellectual property rights and accounts for its indemnification obligations under FAS 5. In the event of such a claim, the Company is generally obligated to defend its customer against the claim and to either
settle the claim at the Companys expense or pay damages that the customer is legally required to pay to the third-party claimant. In addition, in the event of an infringement, the Company agrees to modify or replace the infringing product, or,
if those options are not reasonably possible, to refund the cost of the software, as pro-rated over a period of years. To date, the Company has not been required to make any payment resulting from infringement claims asserted against its customers.
As such, the Company has not recorded a liability for infringement costs as of January 31, 2008.

We have obligations under certain
circumstances to indemnify each of the defendant directors against judgments, fines, settlements and expenses related to claims against such directors and otherwise to the fullest extent permitted under Delaware law and our bylaws and certificate of
incorporation.



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20. Supplementary Data

Supplementary Quarterly Consolidated Financial Data (unaudited):



|                                         |  |                                       |         |   |                 |   |              |  |   |               |   |  |   |         |  
|---------------------------------------- |  | ------------------------------------- | ------- | - | --------------- | - | ------------ |  | - | ------------- | - |  | - | ------- | -
|                                         |  | Quarter Ended                         |        
|                                         |  | January 31,2008                       |         |   | October 31,2007 |   | July 31,2007 |  |   | April 30,2007 |  
|                                         |  | (in thousands, except per share data) |        
|Revenues:                                |  |                                       |         |   |                 |   |              |  |   |               |   |  |   |         |  
|License fees                             |  | $                                     | 179,473 |   |                 | $ | 134,782      |  | $ | 123,120       |   |  | $ | 114,647 |  
|Services                                 |  |                                       | 261,419 |   |                 |   | 249,646      |  |   | 241,495       |   |  |   | 231,198 |  
|                                         |  |                                       |         |   |                 |   |              |  |   |               |   |  |   |         |  
|Total revenues                           |  |                                       | 440,892 |   |                 |   | 384,428      |  |   | 364,615       |   |  |   | 345,845 |  
|Cost of revenues:                        |  |                                       |         |   |                 |   |              |  |   |               |   |  |   |         |  
|Cost of license fees                     |  |                                       | 12,997  |   |                 |   | 14,045       |  |   | 14,182        |   |  |   | 19,745  |  
|Cost of services                         |  |                                       | 78,270  |   |                 |   | 75,021       |  |   | 73,720        |   |  |   | 70,710  |  
|                                         |  |                                       |         |   |                 |   |              |  |   |               |   |  |   |         |  
|Total cost of revenues                   |  |                                       | 91,267  |   |                 |   | 89,066       |  |   | 87,902        |   |  |   | 90,455  |  
|                                         |  |                                       |         |   |                 |   |              |  |   |               |   |  |   |         |  
|Gross profit                             |  |                                       | 349,625 |   |                 |   | 295,362      |  |   | 276,713       |   |  |   | 255,390 |  
|Operating expenses:                      |  |                                       |         |   |                 |   |              |  |   |               |   |  |   |         |  
|Sales and marketing                      |  |                                       | 151,503 |   |                 |   | 133,627      |  |   | 128,109       |   |  |   | 128,885 |  
|Research and development                 |  |                                       | 62,944  |   |                 |   | 57,070       |  |   | 58,902        |   |  |   | 61,214  |  
|General and administrative               |  |                                       | 47,268  |   |                 |   | 40,379       |  |   | 36,013        |   |  |   | 38,154  |  
|Facilities consolidation                 |  |                                       | 165     |   |                 |   |             |  |   | 1,605         |   |  |   |        |  
|                                         |  |                                       |         |   |                 |   |              |  |   |               |   |  |   |         |  
|Total operating expenses                 |  |                                       | 261,880 |   |                 |   | 231,076      |  |   | 224,629       |   |  |   | 228,253 |  
|                                         |  |                                       |         |   |                 |   |              |  |   |               |   |  |   |         |  
|Income from operations                   |  |                                       | 87,745  |   |                 |   | 64,286       |  |   | 52,084        |   |  |   | 27,137  |  
|Interest and other, net:                 |  |                                       |         |   |                 |   |              |  |   |               |   |  |   |         |  
|Interest expense                         |  |                                       | (79     | ) |                 |   |             |  |   | (2,103        | ) |  |   | (3,166  | )
|Net gain on sales of equity investments  |  |                                       |        |   |                 |   |             |  |   | 222           |   |  |   | 910     |  
|Interest income and other                |  |                                       | 15,730  |   |                 |   | 13,670       |  |   | 15,433        |   |  |   | 16,614  |  
|                                         |  |                                       |         |   |                 |   |              |  |   |               |   |  |   |         |  
|Total interest and other, net            |  |                                       | 15,651  |   |                 |   | 13,670       |  |   | 13,552        |   |  |   | 14,358  |  
|                                         |  |                                       |         |   |                 |   |              |  |   |               |   |  |   |         |  
|Income before provision for income taxes |  |                                       | 103,396 |   |                 |   | 77,956       |  |   | 65,636        |   |  |   | 41,495  |  
|Provision for income taxes               |  |                                       | 27,676  |   |                 |   | 21,985       |  |   | 18,584        |   |  |   | 12,057  |  
|                                         |  |                                       |         |   |                 |   |              |  |   |               |   |  |   |         |  
|Net income                               |  | $                                     | 75,720  |   |                 | $ | 55,971       |  | $ | 47,052        |   |  | $ | 29,438  |  
|                                         |  |                                       |         |   |                 |   |              |  |   |               |   |  |   |         |  
|Net income per share:                    |  |                                       |         |   |                 |   |              |  |   |               |   |  |   |         |  
|Basic                                    |  | $                                     | 0.19    |   |                 | $ | 0.14         |  | $ | 0.12          |   |  | $ | 0.07    |  
|Diluted                                  |  | $                                     | 0.18    |   |                 | $ | 0.13         |  | $ | 0.11          |   |  | $ | 0.07    |  



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|                                                          |  |                                       |          |   |                 |   |         |              |  |   |               |   |  |   |         |  
|--------------------------------------------------------- |  | ------------------------------------- | -------- | - | --------------- | - | ------- | ------------ |  | - | ------------- | - |  | - | ------- | -
|                                                          |  | Quarter Ended                         |         
|                                                          |  | January 31,2007                       |          |   | October 31,2006 |   |         | July 31,2006 |  |   | April 30,2006 |  
|                                                          |  | (in thousands, except per share data) |         
|Revenues:                                                 |  |                                       |          |   |                 |   |         |              |  |   |               |   |  |   |         |  
|License fees                                              |  | $                                     | 168,735  |   |                 | $ | 136,365 |              |  | $ | 135,966       |   |  | $ | 132,404 |  
|Services                                                  |  |                                       | 223,091  |   |                 |   | 211,307 |              |  |   | 203,649       |   |  |   | 190,832 |  
|                                                          |  |                                       |          |   |                 |   |         |              |  |   |               |   |  |   |         |  
|Total revenues                                            |  |                                       | 391,826  |   |                 |   | 347,672 |              |  |   | 339,615       |   |  |   | 323,236 |  
|Cost of revenues:                                         |  |                                       |          |   |                 |   |         |              |  |   |               |   |  |   |         |  
|Cost of license fees                                      |  |                                       | 17,242   |   |                 |   | 15,501  |              |  |   | 16,226        |   |  |   | 15,252  |  
|Cost of services                                          |  |                                       | 70,612   |   |                 |   | 67,807  |              |  |   | 67,756        |   |  |   | 62,930  |  
|                                                          |  |                                       |          |   |                 |   |         |              |  |   |               |   |  |   |         |  
|Total cost of revenues                                    |  |                                       | 87,854   |   |                 |   | 83,308  |              |  |   | 83,982        |   |  |   | 78,182  |  
|                                                          |  |                                       |          |   |                 |   |         |              |  |   |               |   |  |   |         |  
|Gross profit                                              |  |                                       | 303,972  |   |                 |   | 264,364 |              |  |   | 255,633       |   |  |   | 245,054 |  
|Operating expenses:                                       |  |                                       |          |   |                 |   |         |              |  |   |               |   |  |   |         |  
|Sales and marketing                                       |  |                                       | 146,525  |   |                 |   | 130,368 |              |  |   | 127,127       |   |  |   | 120,950 |  
|Research and development                                  |  |                                       | 63,392   |   |                 |   | 58,710  |              |  |   | 55,882        |   |  |   | 54,976  |  
|General and administrative                                |  |                                       | 40,251   |   |                 |   | 35,881  |              |  |   | 32,047        |   |  |   | 30,076  |  
|Facilities consolidation                                  |  |                                       | 201,615  |   |                 |   |        |              |  |   |              |   |  |   |        |  
|Restructuring charges                                     |  |                                       | 454      |   |                 |   |        |              |  |   |              |   |  |   |        |  
|Acquisition-related in-process research and development   |  |                                       |         |   |                 |   | 1,700   |              |  |   |              |   |  |   | 2,700   |  
|                                                          |  |                                       |          |   |                 |   |         |              |  |   |               |   |  |   |         |  
|Total operating expenses                                  |  |                                       | 452,237  |   |                 |   | 226,659 |              |  |   | 215,056       |   |  |   | 208,702 |  
|                                                          |  |                                       |          |   |                 |   |         |              |  |   |               |   |  |   |         |  
|Income (loss) from operations                             |  |                                       | (148,265 | ) |                 |   | 37,705  |              |  |   | 40,577        |   |  |   | 36,352  |  
|Interest and other, net:                                  |  |                                       |          |   |                 |   |         |              |  |   |               |   |  |   |         |  
|Interest expense                                          |  |                                       | (4,543   | ) |                 |   | (6,082  | )            |  |   | (5,974        | ) |  |   | (6,024  | )
|Net gain on sales of equity investments                   |  |                                       | 102      |   |                 |   |        |              |  |   |              |   |  |   | 10,972  |  
|Interest income and other                                 |  |                                       | 14,956   |   |                 |   | 15,626  |              |  |   | 14,607        |   |  |   | 10,677  |  
|                                                          |  |                                       |          |   |                 |   |         |              |  |   |               |   |  |   |         |  
|Total interest and other, net                             |  |                                       | 10,515   |   |                 |   | 9,544   |              |  |   | 8,633         |   |  |   | 15,625  |  
|                                                          |  |                                       |          |   |                 |   |         |              |  |   |               |   |  |   |         |  
|Income (loss) before provision (benefit) for income taxes |  |                                       | (137,750 | ) |                 |   | 47,249  |              |  |   | 49,210        |   |  |   | 51,977  |  
|Provision for income taxes                                |  |                                       | (38,019  | ) |                 |   | 12,128  |              |  |   | 15,194        |   |  |   | 16,883  |  
|                                                          |  |                                       |          |   |                 |   |         |              |  |   |               |   |  |   |         |  
|Net income (loss)                                         |  | $                                     | (99,731  | ) |                 | $ | 35,121  |              |  | $ | 34,016        |   |  | $ | 35,094  |  
|                                                          |  |                                       |          |   |                 |   |         |              |  |   |               |   |  |   |         |  
|Net income per share:                                     |  |                                       |          |   |                 |   |         |              |  |   |               |   |  |   |         |  
|Basic                                                     |  | $                                     | (0.25    | ) |                 | $ | 0.09    |              |  | $ | 0.09          |   |  | $ | 0.09    |  
|Diluted                                                   |  | $                                     | (0.25    | ) |                 | $ | 0.08    |              |  | $ | 0.08          |   |  | $ | 0.09    |  



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Consolidated balance sheets for the interim periods of fiscal 2008 and fiscal 2007:



|                                                            |  |                 |           |   |                 |   |           |              |  |   |               |   |  |   |           |  
|----------------------------------------------------------- |  | --------------- | --------- | - | --------------- | - | --------- | ------------ |  | - | ------------- | - |  | - | --------- | -
|                                                            |  | January 31,2008 |           |   | October 31,2007 |   |           | July 31,2007 |  |   | April 30,2007 |  
|                                                            |  | (in thousands)  |          
|ASSETS                                                      |  |                 |           |   |                 |   |           |              |  |   |               |   |  |   |           |  
|Current Assets:                                             |  |                 |           |   |                 |   |           |              |  |   |               |   |  |   |           |  
|Cash and cash equivalents                                   |  | $               | 993,685   |   |                 | $ | 826,602   |              |  | $ | 830,683       |   |  | $ | 942,917   |  
|Restricted cash                                             |  |                 | 837       |   |                 |   | 1,035     |              |  |   | 1,266         |   |  |   | 1,413     |  
|Short-term investments                                      |  |                 | 508,070   |   |                 |   | 416,619   |              |  |   | 290,313       |   |  |   | 342,350   |  
|Accounts receivable, net of allowance for doubtful accounts |  |                 | 395,890   |   |                 |   | 297,013   |              |  |   | 296,213       |   |  |   | 305,380   |  
|Deferred tax assets, net                                    |  |                 | 81,991    |   |                 |   | 98,122    |              |  |   | 118,543       |   |  |   | 128,882   |  
|Prepaid expenses and other current assets                   |  |                 | 72,548    |   |                 |   | 55,956    |              |  |   | 49,855        |   |  |   | 49,818    |  
|                                                            |  |                 |           |   |                 |   |           |              |  |   |               |   |  |   |           |  
|Total current assets                                        |  |                 | 2,053,021 |   |                 |   | 1,695,347 |              |  |   | 1,586,873     |   |  |   | 1,770,760 |  
|Long-term investments                                       |  |                 | 17,475    |   |                 |   | 26,374    |              |  |   | 52,683        |   |  |   | 48,913    |  
|Property and equipment, net                                 |  |                 | 194,867   |   |                 |   | 189,397   |              |  |   | 188,724       |   |  |   | 188,664   |  
|Goodwill, net                                               |  |                 | 227,536   |   |                 |   | 232,527   |              |  |   | 233,213       |   |  |   | 233,226   |  
|Acquired intangible assets, net                             |  |                 | 38,173    |   |                 |   | 42,453    |              |  |   | 48,599        |   |  |   | 55,834    |  
|Long-term restricted cash                                   |  |                 | 2,597     |   |                 |   | 2,399     |              |  |   | 2,371         |   |  |   | 2,371     |  
|Long-term deferred tax assets, net                          |  |                 | 129,620   |   |                 |   | 111,477   |              |  |   | 112,255       |   |  |   | 112,602   |  
|Other long-term assets                                      |  |                 | 9,359     |   |                 |   | 9,931     |              |  |   | 10,185        |   |  |   | 9,858     |  
|                                                            |  |                 |           |   |                 |   |           |              |  |   |               |   |  |   |           |  
|Total assets                                                |  | $               | 2,672,648 |   |                 | $ | 2,309,905 |              |  | $ | 2,234,903     |   |  | $ | 2,422,228 |  
|                                                            |  |                 |           |   |                 |   |           |              |  |   |               |   |  |   |           |  
|LIABILITIES AND STOCKHOLDERS EQUITY                        |  |                 |           |   |                 |   |           |              |  |   |               |   |  |   |           |  
|Current liabilities:                                        |  |                 |           |   |                 |   |           |              |  |   |               |   |  |   |           |  
|Accounts payable                                            |  | $               | 30,631    |   |                 | $ | 29,806    |              |  | $ | 25,597        |   |  | $ | 31,119    |  
|Accrued liabilities                                         |  |                 | 107,277   |   |                 |   | 103,899   |              |  |   | 87,315        |   |  |   | 98,922    |  
|Restructuring obligations                                   |  |                 | 2,846     |   |                 |   | 3,112     |              |  |   | 3,168         |   |  |   | 2,000     |  
|Accrued payroll and related liabilities                     |  |                 | 112,187   |   |                 |   | 82,136    |              |  |   | 82,594        |   |  |   | 71,100    |  
|Accrued income taxes                                        |  |                 | 9,880     |   |                 |   | 5,403     |              |  |   | 14,446        |   |  |   | 18,632    |  
|Deferred revenue                                            |  |                 | 476,985   |   |                 |   | 388,589   |              |  |   | 407,925       |   |  |   | 434,722   |  
|Deferred tax liability                                      |  |                 |          |   |                 |   | 4,788     |              |  |   | 4,788         |   |  |   | 4,788     |  
|Current portion of notes payable and other obligations      |  |                 | 988       |   |                 |   | 657       |              |  |   | 565           |   |  |   | 607       |  
|                                                            |  |                 |           |   |                 |   |           |              |  |   |               |   |  |   |           |  
|Total current liabilities                                   |  |                 | 740,794   |   |                 |   | 618,390   |              |  |   | 626,398       |   |  |   | 661,890   |  
|Long-term tax liabilities                                   |  |                 | 151,767   |   |                 |   | 135,044   |              |  |   | 132,551       |   |  |   | 130,456   |  
|Notes payable and other long-term obligations               |  |                 | 21,977    |   |                 |   | 20,728    |              |  |   | 16,720        |   |  |   | 230,735   |  
|Commitments and contingencies                               |  |                 |           |   |                 |   |           |              |  |   |               |   |  |   |           |  
|Stockholders equity:                                       |  |                 |           |   |                 |   |           |              |  |   |               |   |  |   |           |  
|Common stock                                                |  |                 | 471       |   |                 |   | 456       |              |  |   | 456           |   |  |   | 456       |  
|Additional paid-in capital                                  |  |                 | 2,079,967 |   |                 |   | 1,936,435 |              |  |   | 1,926,244     |   |  |   | 1,915,017 |  
|Treasury stock, at cost                                     |  |                 | (478,249  | ) |                 |   | (478,249  | )            |  |   | (478,249      | ) |  |   | (478,249  | )
|Retained earnings (Accumulated deficit)                     |  |                 | 125,899   |   |                 |   | 50,179    |              |  |   | (5,793        | ) |  |   | (52,844   | )
|Accumulated other comprehensive income                      |  |                 | 30,022    |   |                 |   | 26,922    |              |  |   | 16,576        |   |  |   | 14,767    |  
|                                                            |  |                 |           |   |                 |   |           |              |  |   |               |   |  |   |           |  
|Total stockholders equity                                  |  |                 | 1,758,110 |   |                 |   | 1,535,743 |              |  |   | 1,459,234     |   |  |   | 1,399,147 |  
|                                                            |  |                 |           |   |                 |   |           |              |  |   |               |   |  |   |           |  
|Total liabilities and stockholders equity                  |  | $               | 2,672,648 |   |                 | $ | 2,309,905 |              |  | $ | 2,234,903     |   |  | $ | 2,422,228 |  
|                                                            |  |                 |           |   |                 |   |           |              |  |   |               |   |  |   |           |  



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|                                                            |  |                 |           |   |                 |   |           |              |  |   |               |   |  |   |           |  
|----------------------------------------------------------- |  | --------------- | --------- | - | --------------- | - | --------- | ------------ |  | - | ------------- | - |  | - | --------- | -
|                                                            |  | January 31,2007 |           |   | October 31,2006 |   |           | July 31,2006 |  |   | April 30,2006 |  
|                                                            |  | (in thousands)  |          
|ASSETS                                                      |  |                 |           |   |                 |   |           |              |  |   |               |   |  |   |           |  
|Current Assets:                                             |  |                 |           |   |                 |   |           |              |  |   |               |   |  |   |           |  
|Cash and cash equivalents                                   |  | $               | 867,294   |   |                 | $ | 799,312   |              |  | $ | 1,041,891     |   |  | $ | 971,965   |  
|Restricted cash                                             |  |                 | 1,413     |   |                 |   | 262,168   |              |  |   | 1,813         |   |  |   | 1,666     |  
|Short-term investments                                      |  |                 | 313,941   |   |                 |   | 344,830   |              |  |   | 323,347       |   |  |   | 297,325   |  
|Accounts receivable, net of allowance for doubtful accounts |  |                 | 394,799   |   |                 |   | 273,162   |              |  |   | 255,359       |   |  |   | 242,461   |  
|Deferred tax assets, net                                    |  |                 | 56,767    |   |                 |   |          |              |  |   | 20,604        |   |  |   | 25,500    |  
|Prepaid expenses and other current assets                   |  |                 | 46,126    |   |                 |   | 43,750    |              |  |   | 55,056        |   |  |   | 61,154    |  
|                                                            |  |                 |           |   |                 |   |           |              |  |   |               |   |  |   |           |  
|Total current assets                                        |  |                 | 1,680,340 |   |                 |   | 1,723,222 |              |  |   | 1,698,070     |   |  |   | 1,600,071 |  
|Long-term investments                                       |  |                 | 93,528    |   |                 |   | 31,743    |              |  |   | 46,834        |   |  |   | 45,490    |  
|Property and equipment, net                                 |  |                 | 144,471   |   |                 |   | 344,789   |              |  |   | 341,112       |   |  |   | 341,991   |  
|Goodwill, net                                               |  |                 | 233,998   |   |                 |   | 246,951   |              |  |   | 201,148       |   |  |   | 200,213   |  
|Acquired intangible assets, net                             |  |                 | 67,959    |   |                 |   | 78,323    |              |  |   | 80,726        |   |  |   | 88,540    |  
|Long-term restricted cash                                   |  |                 | 2,372     |   |                 |   | 1,534     |              |  |   | 1,534         |   |  |   | 2,644     |  
|Long-term deferred tax assets, net                          |  |                 | 166,027   |   |                 |   | 38,230    |              |  |   | 35,984        |   |  |   | 28,574    |  
|Other long-term assets                                      |  |                 | 10,147    |   |                 |   | 10,696    |              |  |   | 10,182        |   |  |   | 8,939     |  
|                                                            |  |                 |           |   |                 |   |           |              |  |   |               |   |  |   |           |  
|Total assets                                                |  | $               | 2,398,842 |   |                 | $ | 2,475,488 |              |  | $ | 2,415,590     |   |  | $ | 2,316,462 |  
|                                                            |  |                 |           |   |                 |   |           |              |  |   |               |   |  |   |           |  
|LIABILITIES AND STOCKHOLDERS EQUITY                        |  |                 |           |   |                 |   |           |              |  |   |               |   |  |   |           |  
|Current liabilities:                                        |  |                 |           |   |                 |   |           |              |  |   |               |   |  |   |           |  
|Accounts payable                                            |  | $               | 27,521    |   |                 | $ | 36,059    |              |  | $ | 32,641        |   |  | $ | 24,019    |  
|Accrued liabilities                                         |  |                 | 93,507    |   |                 |   | 92,683    |              |  |   | 88,096        |   |  |   | 96,223    |  
|Restructuring obligations                                   |  |                 | 3,089     |   |                 |   | 2,022     |              |  |   | 2,034         |   |  |   | 3,198     |  
|Accrued payroll and related liabilities                     |  |                 | 105,797   |   |                 |   | 77,178    |              |  |   | 75,854        |   |  |   | 72,742    |  
|Accrued income taxes                                        |  |                 | 120,156   |   |                 |   | 71,357    |              |  |   | 76,628        |   |  |   | 74,983    |  
|Deferred revenue                                            |  |                 | 449,282   |   |                 |   | 337,598   |              |  |   | 355,914       |   |  |   | 365,003   |  
|Convertible subordinated notes                              |  |                 |          |   |                 |   | 255,250   |              |  |   | 255,250       |   |  |   | 255,250   |  
|Deferred tax liability                                      |  |                 | 4,788     |   |                 |   |          |              |  |   | 1,208         |   |  |   |          |  
|Current portion of notes payable and other obligations      |  |                 | 1,302     |   |                 |   | 504       |              |  |   | 421           |   |  |   | 933       |  
|                                                            |  |                 |           |   |                 |   |           |              |  |   |               |   |  |   |           |  
|Total current liabilities                                   |  |                 | 805,442   |   |                 |   | 872,651   |              |  |   | 888,046       |   |  |   | 892,351   |  
|Long-term deferred tax liabilities                          |  |                 |          |   |                 |   | 3,943     |              |  |   | 3,363         |   |  |   | 1,283     |  
|Notes payable and other long-term obligations               |  |                 | 228,790   |   |                 |   | 231,386   |              |  |   | 227,516       |   |  |   | 227,632   |  
|Commitments and contingencies                               |  |                 |           |   |                 |   |           |              |  |   |               |   |  |   |           |  
|Stockholders equity:                                       |  |                 |           |   |                 |   |           |              |  |   |               |   |  |   |           |  
|Common stock                                                |  |                 | 456       |   |                 |   | 456       |              |  |   | 454           |   |  |   | 449       |  
|Additional paid-in capital                                  |  |                 | 1,902,657 |   |                 |   | 1,806,713 |              |  |   | 1,771,368     |   |  |   | 1,708,103 |  
|Treasury stock, at cost                                     |  |                 | (478,249  | ) |                 |   | (478,249  | )            |  |   | (478,249      | ) |  |   | (478,249  | )
|Retained earnings (Accumulated deficit)                     |  |                 | (72,416   | ) |                 |   | 27,317    |              |  |   | (7,805        | ) |  |   | (41,819   | )
|Accumulated other comprehensive income                      |  |                 | 12,162    |   |                 |   | 11,271    |              |  |   | 10,897        |   |  |   | 6,712     |  
|                                                            |  |                 |           |   |                 |   |           |              |  |   |               |   |  |   |           |  
|Total stockholders equity                                  |  |                 | 1,364,610 |   |                 |   | 1,367,508 |              |  |   | 1,296,665     |   |  |   | 1,195,196 |  
|                                                            |  |                 |           |   |                 |   |           |              |  |   |               |   |  |   |           |  
|Total liabilities and stockholders equity                  |  | $               | 2,398,842 |   |                 | $ | 2,475,488 |              |  | $ | 2,415,590     |   |  | $ | 2,316,462 |  
|                                                            |  |                 |           |   |                 |   |           |              |  |   |               |   |  |   |           |  



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|ITEM 9. | CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
|------- | -------------------------------------------------------------------------------------

Not Applicable.



|ITEM 9A. | CONTROLS AND PROCEDURES.
|-------- | ------------------------

Evaluation of Disclosure Controls and
Procedures

Attached as exhibits to this report are certifications of our CEO and CFO, which are required in accordance with Rule 13a-14
of the Securities Exchange Act of 1934, as amended. This Controls and Procedures section includes information concerning the controls and controls evaluation referred to in the certifications and it should be read in conjunction with the
certifications for a more complete understanding of the topics presented.

We carried out an evaluation, under the supervision and with the
participation of our management, including the CEO and CFO, of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as
amended. Based upon that evaluation, the CEO and CFO concluded that, as of the end of the period covered in this report, our disclosure controls and procedures were effective to ensure that information required to be disclosed by the company in
reports that it files under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms, and that material information relating to our
consolidated operations is made known to our management, including the CEO and CFO, particularly during the period when our periodic reports are being prepared.

Managements Report on Internal Control over Financial Reporting

Management is responsible for establishing and
maintaining adequate internal control over our financial reporting. In order to evaluate the effectiveness of internal control over financial reporting, as required by Section 404 of the Sarbanes-Oxley Act, management has conducted an
assessment, including testing, using the criteria in Internal ControlIntegrated Framework, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Our system of internal control over financial
reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Because of its
inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of
changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Based on its assessment,
management has concluded that our internal control over financial reporting was effective at the reasonable assurance level as of January 31, 2008, based on criteria in Internal ControlIntegrated Framework, issued by the COSO. The
effectiveness of our internal control over financial reporting as of January 31, 2008, has been audited by Ernst & Young LLP, an independent registered public accounting firm, as stated in their report which appears below.

Changes in Internal Controls

There was no change
in our internal control over financial reporting that occurred during the fourth quarter of fiscal 2008 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.



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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of BEA Systems, Inc.

We have audited BEA Systems, Inc.s internal control over financial reporting as of January 31, 2008, based on criteria established in Internal ControlIntegrated Framework issued by the Committee of Sponsoring Organizations
of the Treadway Commission (the COSO criteria). BEA Systems, Inc.s management is responsible for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial
reporting in the accompanying Managements Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the effectiveness of the companys internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards
require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control
over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered
necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A companys internal control
over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting
principles. A companys internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and
dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts
and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or
disposition of the companys assets that could have a material effect on the financial statements.

Because of its inherent
limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in
conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, BEA Systems, Inc.
maintained, in all material respects, effective internal control over financial reporting as of January 31, 2008, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets as of January 31, 2008 and 2007, and the related consolidated statements of income
and comprehensive income, stockholders equity and cash flows for each of the three years in the period ended January 31, 2008 of BEA Systems, Inc. and our report dated March 26, 2008 expressed an unqualified opinion thereon.

/s/ Ernst & Young LLP

San Jose, California

March 26, 2008



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|ITEM 9B. | OTHER INFORMATION
|-------- | -----------------

None

PART III



|ITEM 10. | DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
|-------- | ------------------------------------------------------

Information regarding directors, executive officers and corporate governance is incorporated by reference to the proxy statement for the Companys 2008 annual meeting of stockholders, if held, to be filed with the Securities and
Exchange Commission pursuant to Regulation 14A not later than 120 days after the end of the fiscal year covered by this Form 10-K (the Proxy Statement).

We have adopted a code of ethics that is designed to qualify as a code of ethics within the meaning of Section 406 of the Sarbanes-Oxley Act of 2002 and the rules promulgated thereunder. The Financial
Officer Code of Ethics applies to the CEO, CFO, and all members of BEAs Finance Department. The Financial Officer Code of Ethics is an addendum to the BEA Code of Conduct and Ethics and can be found on BEAs website at www.bea.com.
This code of ethics was previously filed and incorporated herein by reference. To the extent required by law, any amendments to, or waivers from, any provision of The Financial Officer Code of Ethics will promptly be disclosed to the public. To the
extent permitted by such legal requirements, we intend to make such public disclosure by posting the relevant material on our website at www.bea.com in accordance with SEC rules.



|ITEM 11. | EXECUTIVE COMPENSATION
|-------- | ----------------------

Information regarding
executive compensation is incorporated by reference to the Proxy Statement.



|ITEM 12. | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
|-------- | ----------------------------------------------------------------------------------------------

Information regarding security ownership of certain beneficial owners and management and related stockholder matters is incorporated by reference to the
Proxy Statement.



|ITEM 13. | CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
|-------- | -------------------------------------------------------------------------

Information regarding certain relationships and related transactions, and director independence, is incorporated by reference to the Proxy Statement.



|ITEM 14. | PRINCIPAL ACCOUNTING FEES AND SERVICES.
|-------- | ---------------------------------------

Information regarding principal accounting fees and services is incorporated by reference to the Proxy Statement.



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PART IV



|ITEM 15. | EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
|-------- | -------------------------------------------

(a)Documents filed as a part of this Report

(1) Index to Consolidated Financial Statements

The index to the financial statements included in Part II, Item 8 of this document is filed as part of this Report.

(2) Financial Statement Schedules

The financial statement schedule included in Part II, Item 8 of this document is filed as part of this Report. All of the other schedules are omitted as the required information is inapplicable or the information is presented in the
consolidated financial statements or related notes.

(3) Exhibits

See Exhibit Index immediately following the signature pages.



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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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.



BEA SYSTEMS, INC.By:

/s/    MARK P. DENTINGERMark P. Dentinger Chief Financial Officer and Principal Accounting Officer


March 28, 2008

POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints, jointly and severally, Alfred S. Chuang and Mark P. Dentinger, and each one of them individually, as his or her attorneys-in-fact, each with the power of substitution, for him or her in any and all capacities, to sign
any and all amendments to this Annual Report on Form 10-K and to file the same, with exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, hereby ratifying and confirming all that each of said
attorney-in-fact, or his substitute or substitutes, may do or cause to be done by virtue hereof.

Pursuant to the requirements of the
Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.



|                                               |  |                                                              |  |               
|---------------------------------------------- |  | ------------------------------------------------------------ |  | --------------
|Signature                                      |  | Title                                                        |  | Date          
|                                               |  |                                                             
|/s/    ALFRED S.
CHUANG Alfred S. Chuang       |  | Chief Executive Officer, President and Chairman of the Board |  | March 28, 2008
|                                               |  |                                                             
|/s/    MARK P.
DENTINGER Mark P. Dentinger     |  | Executive Vice President and Chief Financial Officer         |  | March 28, 2008
|                                               |  |                                                             
|/s/    ROBIN A.
ABRAMS Robin A. Abrams         |  | Director                                                     |  | March 28, 2008
|                                               |  |                                                             
|/s/    L. DALE
CRANDALL L. Dale Crandall       |  | Director                                                     |  | March 28, 2008
|                                               |  |                                                             
|/s/    STEWART K. P.
GROSS Stewart K. P. Gross |  | Director                                                     |  | March 28, 2008
|                                               |  |                                                             
|/s/    WILLIAM H.
JANEWAY William H. Janeway   |  | Director                                                     |  | March 28, 2008
|                                               |  |                                                             
|/s/    DEAN O.
MORTON Dean O. Morton           |  | Director                                                     |  | March 28, 2008



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|                                                             |  |          |  |               
|------------------------------------------------------------ |  | -------- |  | --------------
|Signature                                                    |  | Title    |  | Date          
|                                                             |  |         
|/s/    BRUCE A.
PASTERNACK Bruce A. Pasternack               |  | Director |  | March 28, 2008
|                                                             |  |         
|/s/    KIRAN M.
PATEL Kiran M. Patel                         |  | Director |  | March 28, 2008
|                                                             |  |         
|/s/    GEORGE
REYES George Reyes                             |  | Director |  | March 28, 2008
|                                                             |  |         
|/s/    RICHARD T. SCHLOSBERG,
III Richard T. Schlosberg, III |  | Director |  | March 28, 2008



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|        |  |                                                                                                                                                                                                                                                                                                                                                                                                     
|------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |  | Description                                                                                                                                                                                                                                                                                                                                                                                         
|2.1     |  | Agreement and Plan of Merger, dated January 16, 2008, among the Registrant, Oracle Corporation and Bronco Acquisition Corporation (incorporated herein by reference to Exhibit 2.1 to the
Registrants Form 8-K, filed on January 17, 2008, Commission File No. 000-22369)                                                                                                                          
|        | 
|2.2     |  | Voting Agreement, dated January 16, 2008, by and between Alfred S. Chuang and Oracle Corporation (incorporated herein by reference to Exhibit 2.2 to the Registrants Form 8-K, filed
on January 17, 2008, Commission File No. 000-22369)                                                                                                                                                           
|        | 
|3.1     |  | Form of Registrants Amended and Restated Certificate of Incorporation (incorporated herein by reference to Exhibit 3.3 to the Registrants Annual Report on Form 10-K, filed on
May 1, 2000, Commission File No. 000-22369)                                                                                                                                                                        
|        | 
|3.2     |  | Registrants Amended and Restated Bylaws (incorporated herein by reference to Exhibit 3.1 to the Registrants Quarterly Report on Form 10-Q, filed on December 10, 2007,
CommissionFile No. 000-22369)                                                                                                                                                                                              
|        | 
|4.1     |  | Form of Preferred Stock Rights Agreement between the Registrant and Equiserve Trust Company, N.A., dated September 14, 2001, including the Certificate of Designation, the form of Rights
Certificate and the Summary of Rights (incorporated herein by reference to Exhibit 4.1 to the Registrants Registration Statement on Form 8-A12G, filed on October 1, 2001, Commission File No. 000-22369)
|        | 
|4.2     |  | Amendment No. 1 to the Preferred Stock Rights Agreement, dated January 15, 2003 (incorporated herein by reference to Exhibit 4.1 to the Registrants Registration Statement on Form
8-A12G/A, filed on January 22, 2003, Commission File No. 000-22369)                                                                                                                                             
|        | 
|4.3     |  | Amendment No. 2 to the Preferred Stock Rights Agreement, dated January 16, 2008 (incorporated herein by reference to Exhibit 4.2 to the Registrants Registration Statement on Form
8-A/A, filed on January 16, 2008, Commission File No. 000-22369)                                                                                                                                                
|        | 
|4.4     |  | Investor Rights Agreements by and among the Registrant and the investors and the founders named therein(incorporated herein by reference to Exhibit 10.1 to the Registrants Registration
Statement on Form SB-2, filed on January 31, 1997, Commission File No. 333-20791)                                                                                                                         
|        | 
|10.1    |  | Agreement between the Registrant and Novell, dated January 24, 1996, and Amendments thereto (incorporated herein by reference to Exhibit 10.8 to the Registrants Registration
Statement on Form SB-2, filed on April 3, 1997, Commission File No. 333-20791)                                                                                                                                       
|        | 
|10.2    |  | Lease agreement between the Registrant and Sobrato Interest III for premise located at 2315 North First Street, San Jose, California, dated December 26, 1997 (incorporated herein by
reference to Exhibit 10.13 to the Registrants Annual Report on Form 10-KSB, filed on April 30, 1998, Commission File No. 000-22369)                                                                          
|        | 
|10.3    |  | Lease agreement between the Registrant and Sobrato Interest III for premise located at 2345 North First Street, San Jose, California, dated December 26, 1997 (incorporated herein by
reference to Exhibit 10.14 to the Registrants Annual Report on Form 10-KSB, filed on April 30, 1998, Commission File No. 000-22369)                                                                          
|        | 
|10.4    |  | Lease agreement between the Registrant and Russ Building for premise located at 235 Montgomery Street, San Francisco, California, dated September 24, 1999 (incorporated herein by
reference to Exhibit 10.18 to the Registrants Annual Report on Form 10-K, filed on May 1, 2000, Commission File No. 000-22369)                                                                                  
|        | 
|10.5    |  | First amendment to lease between the Registrant and Russ Building for premise located at 235 Montgomery Street, San Francisco, California, dated March 15, 2000 (incorporated herein by
reference to Exhibit 10.19 to the Registrants Annual Report on Form 10-K, filed on May 1, 2000, Commission File No. 000-22369)                                                                             
|        | 
|10.6    |  | Purchase and Sale Agreement, dated February 22, 2007, among the Registrant, The Sobrato Family Foundation and Sobrato-Sobrato Investments (incorporated herein by reference to Exhibit 10.1 to
the Registrants Quarterly Report on Form 10-Q, filed on November 15, 2007, CommissionFile No. 000-22369)                                                                                            



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|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |  | Description                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|10.7    |  | Land Purchase and Sale Agreement, dated February 26, 2007, between the Registrant and Tishman Speyer Development Corporation (incorporated herein by reference to Exhibit 10.2 to the
Registrants Quarterly Report on Form 10-Q, filed on November 15, 2007, CommissionFile No. 000-22369)                                                                                                                                                                                                          
|        | 
|10.8    |  | Credit Agreement between the Registrant, JPMorgan Chase Bank, National Association, as Administrative Agent, Citicorp USA, Inc., as Syndication Agent, Bank of America, N.A., Comerica Bank and
Deutsche Bank AG New York Branch, as Co-Documentation Agents, and the lenders party thereto, dated July 31, 2006 (incorporated herein by reference to Exhibit 10.1 to the Registrants Quarterly Report on Form 10-Q, filed on
November 15, 2007, Commission File No. 000-22369)                     
|        | 
|10.9    |  | Waiver No. 1 to the Credit Agreement, dated October 6, 2006, among the Registrant, JPMorgan Chase Bank, National Association, as Administrative Agent, Citicorp USA, Inc., as Syndication
Agent, Bank of America, N.A., Comerica Bank and Deutsche Bank AG New York Branch, as Co-Documentation Agents, and the lenders party thereto (incorporated herein by reference to Exhibit 10.1 to the Registrants Quarterly Report on Form 10-Q,
filed on November 15, 2007, Commission File No. 000-22369)
|        | 
|10.10   |  | Waiver No. 2 to the Credit Agreement, dated December 8, 2006, among the Registrant, JPMorgan Chase Bank, National Association, as Administrative Agent, Citicorp USA, Inc., as Syndication
Agent, Bank of America, N.A., Comerica Bank and Deutsche Bank AG New York Branch, as Co-Documentation Agents, and the lenders party thereto (incorporated herein by reference to Exhibit 10.8 to the Registrants Annual Report on Form 10-K,
filed on November 15, 2007, CommissionFile No. 000-22369)   
|        | 
|10.11   |  | Waiver No. 3 to the Credit Agreement, dated March 9, 2007, among the Registrant, JPMorgan Chase Bank, National Association, as Administrative Agent, Citicorp USA, Inc., as Syndication
Agent, Bank of America, N.A., Comerica Bank and Deutsche Bank AG New York Branch, as Co-Documentation Agents, and the lenders party thereto (incorporated herein by reference to Exhibit 10.3 to the Registrants Quarterly Report on Form 10-Q,
filed on November 15, 2007, CommissionFile No. 000-22369)   
|        | 
|10.12   |  | Waiver No. 4 to the Credit Agreement, dated July 9, 2007, among the Registrant, JPMorgan Chase Bank, National Association, as Administrative Agent, Citicorp USA, Inc., as Syndication Agent,
Bank of America, N.A., Comerica Bank and Deutsche Bank AG New York Branch, as Co-Documentation Agents, and the lenders party thereto (incorporated herein by reference to Exhibit 10.1 to the Registrants Quarterly Report on Form 10-Q, filed
on November 15, 2007, CommissionFile No. 000-22369)    
|        | 
|10.13   |  | Waiver No. 5 to the Credit Agreement, dated October 9, 2007, among the Registrant, JPMorgan Chase Bank, National Association, as Administrative Agent, Citicorp USA, Inc., as Syndication
Agent, Bank of America, N.A., Comerica Bank and Deutsche Bank AG New York Branch, as Co-Documentation Agents, and the lenders party thereto (incorporated herein by reference to Exhibit 10.1 to the Registrants Quarterly Report on Form 10-Q,
filed on December 10, 2007, Commission File No. 000-22369)
|        | 
|10.14   |  | Registrants 1995 Flexible Stock Incentive Plan, including forms of agreements thereunder (incorporated herein by reference to Exhibit 10.11 to the Registrants Registration
Statement on Form SB-2, filed on January 31, 1997, Commission File No. 333-20791)*                                                                                                                                                                                                                                     
|        | 
|10.15   |  | Registrants 1997 Stock Incentive Plan, including forms of agreements thereunder (incorporated herein by reference to Exhibit 10.3 to the Registrants Annual Report on Form 10-K,
filed on April 14, 2006, Commission File No. 000-22369)*                                                                                                                                                                                                                                                          
|        | 
|10.16   |  | Registrants 1997 Employee Stock Purchase Plan, as amended (incorporated herein by reference to Exhibit 10.24 to the Registrants Annual Report on Form 10-K, filed on May 1, 2001,
Commission File No. 000-22369)*                                                                                                                                                                                                                                                                                  



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|        |  |                                                                                                                                                                                                                                                                                                                                                             
|------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |  | Description                                                                                                                                                                                                                                                                                                                                                 
|10.17   |  | Forms of agreement under the Registrants 1997 Employee Stock Purchase Plan, as amended (incorporated herein by reference to Exhibit 10.2 to the Registrants Quarterly Report on
Form 10-Q, filed on November 15, 2007, Commission File No. 000-22369)*                                                                                                    
|        | 
|10.18   |  | Registrants 2000 NonQualified Stock Incentive Plan, including forms of agreements thereunder (incorporated herein by reference to Exhibit 10.20 to the Registrants Annual Report on
Form 10-K, filed on May 1, 2000, Commission File No. 000-22369)*                                                                                                      
|        | 
|10.19   |  | Registrants 2006 Stock Incentive Plan (incorporated herein by reference to Exhibit 10.30 to the Registrants Current Report on Form 8-K, filed on July 24, 2006, Commission File No.
000-22369)*                                                                                                                                                           
|        | 
|10.20   |  | Form of Notice of Grant of Stock Options and Option Agreement and form of Non-Qualified Stock Option Agreement under the Registrants 2006 Stock Incentive Plan (incorporated herein by
reference to Exhibit 10.1 to the Registrants Current Report on Form 8-K, filed on May 29, 2007, Commission File No. 000-22369)*                                    
|        | 
|10.21   |  | Form of Notice of Restricted Stock Unit Award and form of Restricted Stock Unit Award Agreement under the Registrants 2006 Stock Incentive Plan
(incorporated herein by reference to Exhibit 10.2 to the Registrants Current Report on Form 8-K, filed on May 29, 2007, Commission File No.
000-22369)*                                                   
|        | 
|10.22   |  | Senior Executive Bonus Plan, effective July 19, 2006 (incorporated herein by reference to Exhibit 10.31 to the Registrants Current Report on Form 8-K, filed on July 24, 2006,
CommissionFile No. 000-22369)*                                                                                                                                              
|        | 
|10.23   |  | Description of bonus compensation paid for fiscal year 2007 under the Senior Executive Bonus Plan (incorporated herein by reference to Item 5.02 of the Registrants Current Report on
Form 8-K,filed on March 20, 2007, Commission File No. 000-22369)*                                                                                                    
|        | 
|10.24   |  | Description of base salaries, target bonuses and equity awards for fiscal year 2008 (incorporated herein by reference to Item 5.02 of the Registrants Current Report on Form 8-K, filed
on April 30, 2007, Commission File No. 000-22369)*                                                                                                                 
|        | 
|10.25   |  | Fiscal Year 2008 Executive Staff Bonus Plan under the Senior Executive Bonus Plan (incorporated herein by reference to Exhibit 10.6 to the Registrants Quarterly Report on Form 10-Q,
filed on November 15, 2007, Commission File No. 000-22369)*                                                                                                          
|        | 
|10.26   |  | Description of the Business Interaction Division Plan established under the Fiscal Year 2008 Executive Staff Bonus Plan and bonus compensation paid under the Business Interaction Division Plan
(incorporated herein by reference to Item 5.02 of the Registrants Current Report on Form 8-K, filed on September 25, 2007, Commission File No. 000-22369)*
|        | 
|10.27   |  | BEA Systems, Inc. Change in Control Severance Plan dated November 7, 2007 (incorporated herein by reference to Exhibit 10.9 to the Registrants Quarterly Report on Form 10-Q,
filed onDecember 10, 2007, Commission File No. 000-22369)*                                                                                                                   
|        | 
|10.28   |  | Form of Amended and Restated Employment Agreement between the Registrant and Alfred S. Chuang, dated November 1, 2003 (incorporated herein by reference to Exhibit 10.24 to the
Registrants Annual Report on Form 10-K, filed on April 15, 2004, Commission File No. 000-22369)*                                                                           
|        | 
|10.29   |  | Compensation Letter effective August 6, 2007 between the Registrant and Alfred S. Chuang (incorporated herein by reference to Exhibit 10.2 to the Registrants Quarterly Report on Form
10-Q, filed on December 10, 2007, Commission File No. 000-22369)*                                                                                                   
|        | 
|10.30   |  | Acknowledgement Agreement dated September 3, 2007 between the Registrant and Alfred S. Chuang (incorporated herein by reference to Exhibit 10.3 to the Registrants Quarterly Report on
Form 10-Q, filed on December 10, 2007, Commission File No. 000-22369)*                                                                                              
|        | 
|10.31   |  | Form of Employment Agreement between the Registrant and Mark P. Dentinger, dated February 24, 2005 (incorporated herein by reference to Exhibit 99.2 to the Registrants Current
Report onForm 8-K, filed on February 24, 2005, Commission File No. 000-22369)*                                                                                             



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##### Table of Contents

|        |  |                                                                                                                                                                                                                                                                                        
|------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |  | Description                                                                                                                                                                                                                                                                            
|10.32   |  | Compensation Letter dated April 25, 2007 between the Registrant and Mark P. Dentinger (incorporated herein by reference to Exhibit 10.7 to the Registrants Quarterly Report on Form 10-Q,
filed on November 15, 2007, Commission File No. 000-22369)*                                 
|        | 
|10.33   |  | Form of Employment Agreement between the Registrant and Wai M. Wong, dated September 1, 2004 (incorporated herein by reference to Exhibit 10.24 to the Registrants Annual Report on
Form 10-K, filed on April 18, 2005, Commission File No. 000-22369)*                               
|        | 
|10.34   |  | Compensation Letter dated April 25, 2007 between the Registrant and Wai M. Wong (incorporated herein by reference to Exhibit 10.8 to the Registrants Quarterly Report on Form 10-Q, filed
on November 15, 2007, Commission File No. 000-22369)*                                       
|        | 
|10.35   |  | Employment Agreement, effective as of May 1, 2007, between the Registrant and Thomas M. Ashburn (incorporated herein by reference to Exhibit 10.6 to the Registrants Quarterly Report on
Form 10-Q, filed on December 10, 2007, Commission File No. 000-22369)*                       
|        | 
|10.36   |  | First Amendment to Employment Agreement, effective as of November 1, 2007, between the Registrant and Thomas M. Ashburn (incorporated herein by reference to Exhibit 10.7 to the
Registrants Quarterly Report on Form 10-Q, filed on December 10, 2007, CommissionFile No. 000-22369)*
|        | 
|10.37   |  | Form of Employment Agreement between the Registrant and Mark T. Carges, dated November 8, 2007 (incorporated herein by reference to Exhibit 10.2 to the Registrants Current Report
onForm 8-K, filed on November 14, 2007, Commission File No. 000-22369)*                            
|        | 
|10.38   |  | Compensation Letter dated April 25, 2007 between the Registrant and Mark T. Carges (incorporated herein by reference to Exhibit 10.9 to the Registrants Quarterly Report on Form 10-Q,
filed on November 15, 2007, Commission File No. 000-22369)*                                    
|        | 
|10.39   |  | Form of Amended and Restated Employment Agreement between the Registrant and Jeanne Wu, dated November 1, 2003 (incorporated herein by reference to Exhibit 10.27 to the Registrants
Annual Report on Form 10-K, filed on April 18, 2005, Commission File No. 000-22369)*             
|        | 
|10.40   |  | Form of Amended and Restated Employment Agreement between the Registrant and William M. Klein, dated November 1, 2003 (incorporated herein by reference to Exhibit 10.24 to the
Registrants Annual Report on Form 10-K, filed on April 15, 2004, Commission File No. 000-22369)*      
|        | 
|10.41   |  | Compensation Letter dated April 25, 2007 between the Registrant and William M. Klein (incorporated herein by reference to Exhibit 10.10 to the Registrants Quarterly Report
onForm 10-Q, filed on November 15, 2007, Commission File No. 000-22369)*                                  
|        | 
|10.42   |  | Form of Employment Agreement between the Registrant and David L. Gai, dated November 8, 2007 (incorporated herein by reference to Exhibit 10.3 to the Registrants Current Report on Form
8-K, filed on November 14, 2007, Commission File No. 000-22369)*                             
|        | 
|10.43   |  | Compensation Letter dated April 25, 2007 between the Registrant and David L. Gai (incorporated herein by reference to Exhibit 10.11 to the Registrants Quarterly Report on
Form 10-Q, filed on November 15, 2007, Commission File No. 000-22369)*                                     
|        | 
|10.44   |  | Form of Employment Agreement between the Registrant and Richard T. Geraffo, Jr., dated November 8, 2007 (incorporated herein by reference to Exhibit 10. to the Registrants Current
Report onForm 8-K, filed on November 14, 2007, Commission File No. 000-22369)*                    
|        | 
|10.45   |  | Compensation Letter dated April 25, 2007 between the Registrant and Richard T. Geraffo, Jr. (incorporated herein by reference to Exhibit 10.13 to the Registrants Quarterly Report
onForm 10-Q, filed on November 15, 2007, Commission File No. 000-22369)*                           
|        | 
|10.46   |  | Offer letter dated October 19, 2007 between the Registrant and Andrew Dahlkemper (incorporated herein by reference to Exhibit 10.4 to the Registrants Quarterly Report on Form 10-Q,
filed on December 10, 2007, Commission File No. 000-22369)*                                      



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##### Table of Contents

|        |  |                                                                                                                                                                                                                                                                                    
|------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |  | Description                                                                                                                                                                                                                                                                        
|10.47   |  | Employment Agreement dated November 14, 2007 between the Registrant and Andrew Dahlkemper (incorporated herein by reference to Exhibit 10.5 to the Registrants Quarterly Report on
Form 10-Q, filed on December 10, 2007, Commission File No. 000-22369)*                         
|        | 
|10.48   |  | Form of Resale Restriction Agreement (incorporated herein by reference to Exhibit 10.1 to the Registrants Current Report on Form 8-K, filed on February 2, 2006, CommissionFile
No. 000-22369)*                                                                                   
|        | 
|10.49   |  | BEA Systems, Inc. Stock Option Exercise Price Increase Election Form (incorporated herein by reference to Exhibit 10.1 to the Registrants Current Report on Form 8-K, filed on January 8,
2007, Commission File No. 000-22369)*                                                   
|        | 
|10.50   |  | BEA Systems, Inc. Stock Option Election Form for Individuals Who Exercised Discount Options in 2006 (incorporated herein by reference to Exhibit 10.2 to the Registrants Current Report
onForm 8-K, filed on January 8, 2007, Commission File No. 000-22369)*                     
|        | 
|10.51   |  | BEA Systems, Inc. Stock Option Fixed Date Exercise Election Form (incorporated herein by reference to Exhibit 10.3 to the Registrants Current Report on Form 8-K, filed on January 8,
2007, Commission File No. 000-22369)*                                                       
|        | 
|10.52   |  | Form of Stock Option Modification Agreement by and between the Registrant and certain executive officers or directors (incorporated herein by reference to Exhibit 10.1 of the
Registrants Current Report on Form 8-K, filed on November 14, 2007, Commission File No. 000-22369)*
|        | 
|10.53   |  | Amendment to stock option agreements between the Registrant and Mark Carges, dated December 12, 2007 (incorporated herein by reference to Exhibit 10.1 of the Registrants
Current Report on Form 8-K, filed on December 18, 2007, Commission File No. 000-22369)*                 
|        | 
|11.1    |  | Statement re: computation of income (loss) per share (included on page 149 of this Annual Report)                                                                                                                                                                                  
|        | 
|14.1    |  | Financial Officer Code of Ethics (incorporated herein by reference to Exhibit 14.1 to the Registrants Annual Report on Form 10-K, filed on April 15, 2004, Commission File No.
000-22369)                                                                                         
|        | 
|21.1    |  | Subsidiaries of the Registrant                                                                                                                                                                                                                                                     
|        | 
|23.1    |  | Consent of Independent Registered Public Accounting Firm                                                                                                                                                                                                                           
|        | 
|24.1    |  | Power of Attorney (see Signature Page)                                                                                                                                                                                                                                             
|        | 
|31.1    |  | Certification of Alfred S. Chuang, Chief Executive Officer, Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of
2002                                                                                                               
|        | 
|31.2    |  | Certification of Mark P. Dentinger, Chief Financial Officer, Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of
2002                                                                                                              
|        | 
|32.1    |  | Certification of Alfred S. Chuang, Chief Executive Officer, Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of
2002                                                                                                               
|        | 
|32.2    |  | Certification of Mark P. Dentinger, Chief Financial Officer, Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of
2002                                                                                                              



|* | Denotes a management contract or compensatory plan or arrangement.
|- | ------------------------------------------------------------------



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##### Table of Contents

BEA SYSTEMS, INC.

SCHEDULE IIVALUATION AND QUALIFYING ACCOUNTS

Fiscal Year Ended January 31, 2008, 2007
and 2006

(in thousands)



|                                |  |                              |        |                                                                      |   |                                                          |  |               |       |  |                        |        |   |  |   |       
|------------------------------- |  | ---------------------------- | ------ | -------------------------------------------------------------------- | - | -------------------------------------------------------- |  | ------------- | ----- |  | ---------------------- | ------ | - |  | - | ------
|                                |  | Balance atbeginningof period |        | Additions tothe allowancerecorded asgeneral andadministrativeexpense |   | Additions tothe allowancerecorded asreductions ofrevenue |  | Deductions(i) |       |  | Balance atend ofperiod
|January 31, 2008                |  |                              |        |                                                                      |   |                                                          |  |               |       |  |                        |        |   |  |   |       
|Allowance for doubtful accounts |  | $                            | 11,413 |                                                                      | $ |                                                         |  | $             | 7,646 |  | $                      | (7,014 | ) |  | $ | 12,045
|January 31, 2007                |  |                              |        |                                                                      |   |                                                          |  |               |       |  |                        |        |   |  |   |       
|Allowance for doubtful accounts |  | $                            | 9,350  |                                                                      | $ |                                                         |  | $             | 8,594 |  | $                      | (6,531 | ) |  | $ | 11,413
|January 31, 2006                |  |                              |        |                                                                      |   |                                                          |  |               |       |  |                        |        |   |  |   |       
|Allowance for doubtful accounts |  | $                            | 9,379  |                                                                      | $ |                                                         |  | $             | 3,618 |  | $                      | (3,647 | ) |  | $ | 9,350 



|(i) | Uncollectible accounts written off, net of recoveries.
|--- | ------------------------------------------------------