This discussion and analysis should be read in conjunction with the Company's financial statements and accompanying notes included in this report and the audited financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the fiscal year ended October 31, 2008 filed with the SEC on January 14, 2009. Our historic operating results are not necessarily indicative of results that may occur in future periods.

The following discussion and analysis contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934 and
Section 27A of the Securities Act of 1933. These forward-looking statements include, among other things, statements regarding the Company's expected future financial performance, assets, liquidity and trends anticipated for the Company's business. These statements are based on the Company's current expectations, assumptions, estimates and projections about the Company's business, the Company's industry and the market for the Company's goods and services, which are based on information that is reasonably available to the Company as of the date of this report. Forward-looking statements may include words such as "believes," "anticipates," "expects," "intends," "plans," "will," "may," "should," "estimates," "predicts," "forecasts," "guidance," "potential," "continue" or the negative of such terms or other similar expressions. We caution readers that these forward-looking statements are not assurances of our future performance or financial condition and are subject to and involve significant known and unknown risks, uncertainties and other factors that may cause the Company's actual operating results, financial condition, levels of activity, performance or achievement to be materially different from any future operating results, financial condition, levels of activity, performance or achievements that are expressed, forecasted, projected, implied in, anticipated or contemplated by the forward-looking statements. These known and unknown risks, uncertainties and other factors include, but are not limited to, those risks, uncertainties and factors discussed in this report, in the Company's other SEC filings and in Part I, Item 1A ("Risk Factors") and in Part II, Item 7 ("Management's Discussion and Analysis of Financial Condition and Results of Operations") of the Company's report on Form 10-K for the fiscal year ended October 31, 2008. Versant undertakes no obligation to revise or update any forward-looking statement in order to reflect events or circumstances that may arise or occur after the date of this report.

Background and Overview

We design, develop, market and support high performance object-oriented database management systems and provide related maintenance and professional services. Our products and services address the complex data management needs of enterprises and providers of products requiring data management functions. Our products and services collectively comprise our single operating segment, which we call "Data Management."

Our end-user customers typically use our products to manage data for business systems and to enable these systems to access and integrate data necessary for the customers' data management applications. Our data management products and services offer customers the ability to manage real-time, XML and other types of hierarchical and navigational data. We believe that by using our data management solutions, customers cut their hardware costs, accelerate and simplify their development efforts, significantly reduce administration costs and deliver products with a significant competitive edge.

Our Data Management business is currently comprised of the following key products:

† Versant Object Database or "VOD", previously known as VDS, a seventh generation object database management system that is used in high-performance, large-scale, real-time applications. We also offer several optional ancillary products for use with Versant Object Database to extend Versant Object Database's capabilities, provide compatibility and additional protection of stored data.

† FastObjects, an object-oriented database management system that can be embedded as a high performance component into customers' applications and systems.

† db4o, an open source object database software solution targeted towards the embedded device market.

Our Versant Object Database product offerings are used primarily by larger organizations, such as technology providers, telecommunications carriers, government defense agencies, defense contractors, healthcare companies and companies in the financial services and transportation industries, each of which have significant large-scale data management requirements. With the incorporation of Poet's FastObjects solution into our product line following our March 2004 merger with Poet, we expanded the scope of our solutions to also address the data management needs of smaller business systems. With the recent acquisition of db4o in December 2008, we further expanded the scope of our solutions to include the embedded device market.

Our customers' data management needs can involve many business functions, ranging from management of the use and sharing of a company's internal enterprise data to the processing of externally originated information such as customer enrollment, billing and payment transaction data. Our solutions have also been used to solve complex data management issues such as fraud detection, risk analysis and yield management.

In addition to our product offerings, to assist users in developing and deploying applications based on Versant Object Database, FastObjects and db4o, we offer a variety of services, including consulting, training and technical support services.

We license our products and sell associated maintenance, training and consulting services to end-users through our direct sales force and through value-added resellers, systems integrators and distributors.

In addition to these products and services, we resell related software developed by third parties. To date, substantially all of our revenues have been derived from the following data management products and related services:

† Sales of licenses for Versant Object Database and FastObjects;

† Maintenance and technical support services for our products;

† Consulting and training services;

† Nonrecurring engineering fees received in connection with providing services associated with Versant Object Database;

† The resale of licenses, and maintenance, training and consulting services for third-party products that complement Versant Object Database;

† Reimbursements received for out-of-pocket expenses, which we incurred and are recorded as revenues in our statements of income.

Deteriorating Global Economic Conditions Are Adversely Impacting Our Business

Global economic conditions and financial markets have become increasingly negative, and national and global economies and financial markets have experienced a severe downturn stemming from a multitude of factors, including adverse credit conditions, slower economic activity, concerns about inflation and deflation, reduced corporate profits and capital spending, adverse business conditions and liquidity concerns and other factors. Economic growth in the U.S. and many other countries has slowed and may slow further in 2009. The severity or length of time these economic and financial market conditions may persist is unknown.

Our business has also been adversely affected by the ongoing credit crises and deteriorating worldwide economic conditions. It is unclear when the macroeconomic environment may improve. During the second quarter of 2009, the selling environment remained very challenging, causing customers to delay or reduce technology purchases. We are seeing increasing pressures on our customers' budgets, and while facing uncertainty and cost pressures in their own businesses, some of our customers are waiting to purchase our products. The difficult and uncertain economic conditions caused some of our customers to face financial challenges during the first and second quarters of fiscal 2009 and they may continue to face such challenges during the remainder of fiscal 2009. The current economic downturn in our customers' industries has contributed to the recent substantial reduction in our revenue and could continue to harm our business, operating results and financial condition. This situation will likely cause us to cautiously monitor and reduce our spending in the remainder of fiscal 2009 and thereafter if these economic conditions persist.

Critical Accounting Policies and Estimates

The preparation of our consolidated financial statements requires us to make estimates and judgments that affect the reported amount of our assets and liabilities at the date of our financial statements and the amount of our revenues and expenses during the reporting period covered by our financial statements. We base these estimates and judgments on information reasonably available to us, such as our historical experience and industry trends, economic and seasonal fluctuations and on our own internal projections that we derive from that information. Although we believe our estimates to be reasonable under the circumstances, there can be no assurances that such estimates will be accurate given that the application of these accounting policies necessarily involves the exercise of subjective judgment and the making of assumptions regarding many future variables and uncertainties. We consider "critical" those accounting policies that require our most difficult, subjective or complex judgments, and that are the most important to the portrayal of our financial condition and results of operations. These critical accounting policies relate to revenue recognition, goodwill and acquired intangible assets, and income taxes.

During the three and six months ended April 30, 2009, there were no significant changes in our critical accounting policies and estimates. Please refer to Management's Discussion and Analysis of Financial Condition and Results of Operations contained in Part II, Item 7 of our Annual Report on Form 10-K for our fiscal year ended October 31, 2008, filed with the SEC on January 14, 2009 (File No. 000-28540) for a more complete discussion of our critical accounting policies and estimates.

Results of Operations

The following table sets forth, for the periods indicated, the percentage relationship of certain items from our condensed consolidated statement of income to total revenues:

                                            Three Months Ended       Six Months Ended
                                           April 30,   April 30,   April 30,   April 30,
                                             2009        2008        2009        2008

Revenues:
License                                           49 %        66 %        54 %        65 %
Maintenance                                       49          33          45          34
Professional services                              2           1           1           1
Total revenues                                   100         100         100         100

Cost of revenues:
License                                            1           1           1           1
Amortization of intangible assets                  3           1           2           1
Maintenance                                        8           6           8           6
Professional services                              1           0           1           1
Total cost of revenues                            13           8          12           9

Gross profit                                      87          92          88          91

Operating expenses:
Sales and marketing                               20          14          21          14
Research and development                          25          17          20          16
General and administrative                        21          29          21          24
Total operating expenses                          66          60          62          54

Income from operations                            21          32          26          37
Interest and other income, net                     2           2           2           3
Income from continuing operations before
taxes                                             23          34          28          40
Provision for income taxes                         3           4           4           5
Net income from continuing operations             20          30          24          35
Net income from discontinued operations,
net of income taxes                                -           0           -           0
Net income                                        20 %        30 %        24 %        35 %

Revenues



The following table summarizes license, maintenance and professional services
revenues for the three and six months ended April 30, 2009 and April 30, 2008
(in thousands, except percentages):



                                   Three Months Ended                                     Six Months Ended
                     April 30,     April 30,           Change              April 30,     April 30,           Change
                       2009          2008        Amount    Percentage        2009          2008        Amount    Percentage
                           (unaudited)                                           (unaudited)
Revenues:
License revenues    $     1,931   $     4,425   $ (2,494 )        (56 )%  $     5,173   $     8,387   $ (3,214 )        (38 )%
Maintenance
revenues                  1,957         2,229       (272 )        (12 )         4,272         4,459       (187 )         (4 )
Professional
services revenues            71            67          4            6             133           159        (26 )        (16 )
Total               $     3,959   $     6,721   $ (2,762 )        (41 )%  $     9,578   $    13,005   $ (3,427 )        (26 )%

Total Revenues. Total revenues are comprised of license fees, and revenues from maintenance, consulting, training and other support services. Fluctuations in total revenues are generally attributable to changes in product and customer mix, competition and general trends in information technology spending, as well as to changes in geographic mix and the corresponding impact of changes in foreign exchange rates. Further, product life cycles impact revenues periodically as old contracts end and new products are released. In 2009, revenues have been negatively impacted by the weakened global economy.

Our revenues as shown in the above table and in the accompanying statement of income for the three and six months ended April 30, 2008 included in this report do not include revenues from our disposed WebSphere consulting practice. Instead, as required by generally accepted accounting principles, our financial statements for the three and six months ended April 30, 2008 report former

WebSphere activities as "net income from discontinued operations, net of income taxes." Our results for the three and six months ended April 30, 2009 do not include any amounts from discontinued operations since our rights to receive revenues from our disposed WebSphere consulting practice terminated in January, 2008. See NOTE 9 of our "NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS"
in Item 1 of this Quarterly Report on Form 10-Q.

Our total revenues decreased by $2.8 million (or 41%) for the three months ended April 30, 2009 from the corresponding period in fiscal 2008. This decrease resulted primarily from an approximate $2.5 million (or 56%) decrease in license revenues for the three months ended April 30, 2009 compared to the corresponding period in fiscal 2008, and included an approximate $444,000 decrease in revenues (accounting for 16% of the $2.8 million decrease in total revenues) resulting from unfavorable foreign currency exchange rate fluctuations.

Our total revenues decreased by $3.4 million (or 26%) for the six months ended April 30, 2009 from the corresponding period in fiscal 2008. This decrease resulted primarily from an approximate $3.2 million (or 38%) decrease in license revenues for the six months ended April 30, 2009 compared to the corresponding period in fiscal 2008, and included an approximate $865,000 decrease in revenues (accounting for 25% of the $3.4 million decrease in total revenues) resulting from unfavorable foreign currency exchange rate fluctuations.

No customer accounted for more than 10% of our total revenues for the three and six months ended April 30, 2009 as we experienced fewer larger license transactions in the quarter. By contrast, in the second quarter of fiscal 2008, two telecommunications customers (who each contributed 10% or more of our total revenues for that quarter) accounted for approximately 29% of total revenues in that quarter. For the six months ended April 30, 2008, two telecommunications customers (one of which was not one of the significant revenue contributors in the second quarter of fiscal 2008) also accounted for approximately 23% of our total revenues for that period.

The inherently unpredictable business cycle of an enterprise software company makes discernment of continued and meaningful business trends difficult. In terms of license revenues, we are still experiencing lengthy sales cycles and customers' preference for licensing our software on an "as needed" basis, versus the historical practice of prepaying license fees in advance of usage, a factor which can adversely affect the amount of our license revenues. In addition, we believe that deteriorating global macroeconomic factors are adversely affecting the budgeting and purchasing behavior of our customers. License revenues also are a factor in driving the amount of our services revenues, as new license customers typically enter into support and maintenance agreements with us, from which our maintenance revenues are derived.

License. License revenues represent license fees received and recognized from our End-Users and Value Added Resellers.

License revenues were $1.9 million for the three months ended April 30, 2009, a decrease of $2.5 million (or 56%) from $4.4 million reported for the comparable period in fiscal 2008. The decrease in license revenues for the three months ended April 30, 2009 compared to the same three-month period in 2008 resulted from fewer license transactions. We believe this reduction in license transactions (particularly in larger transactions) was primarily attributable to the weakness in the overall world economy.

License revenues were $5.2 million for the six months ended April 30, 2009, a decrease of $3.2 million (or 38%) from $8.4 million reported for the comparable period in fiscal 2008. The decrease in license revenues for the six months ended April 30, 2009 compared to the same six month period in 2008 was primarily attributable to the fact that we had three significant license transactions with three telecommunications customers totaling approximately $3.7 million for the six months ended April 30, 2008 whereas there were no comparably sized transactions in the same six month period in 2009, and also to an approximate $486,000 decrease in license revenues resulting from unfavorable foreign currency exchange rate fluctuations. These decreases were partially offset by license transactions closed with three customers for the six months ended April 30, 2009 totaling approximately $1.1 million.

Maintenance. Maintenance and technical support revenues include revenues derived from maintenance agreements, under which we provide customers with internet and telephone access to support personnel and software upgrades, dedicated technical assistance and emergency response support options.

Maintenance revenues were $2.0 million for the three months ended April 30, 2009, a decrease of $272,000 (or 12%) from $2.2 million reported for the comparable period in fiscal 2008. The decrease in maintenance revenues was due primarily to the fact that we recognized approximately $200,000 of back maintenance revenues related to one European customer recognized in the second

quarter of fiscal 2008 but recognized no such back maintenance revenue in the second quarter of fiscal 2009 and to a $199,000 decrease in maintenance revenues in the quarter resulting from unfavorable foreign currency exchange rate fluctuations.

Maintenance revenues were $4.3 million for the six months ended April 30, 2009, a decrease of $187,000 (or 4%) from maintenance revenues of $4.5 million reported for the comparable period in fiscal 2008. The decrease in maintenance revenues was due primarily to $367,000 of unfavorable foreign currency exchange rate fluctuations.

Professional Services. Professional services revenues consist of revenues from consulting, training and technical support as well as billable travel expenses incurred by our professional services organization.

Professional services revenues were $71,000 for the three months ended April 30, 2009, a slight increase of $4,000 (or 6%) from $67,000 reported for the comparable period in fiscal 2008.

Professional services revenues were $133,000 for the six months ended April 30, 2009, a decrease of $26,000 (or 16%) from $159,000 reported for the comparable period in fiscal 2008. The decrease in professional services revenues for the six months ended April 30, 2009 was mainly attributable to a decrease in consulting revenues from our European operations and a decrease of $12,000 related to unfavorable foreign currency exchange rate fluctuations.

International Revenues. The following table summarizes our revenues by geographic area for the three and six months ended April 30, 2009 and April 30, 2008 (in thousands, except percentages):

                                    Three Months Ended April 30,                                                   Six Months Ended April 30,
                          Percentage               Percentage            Change                       Percentage                Percentage             Change
                2009      of revenues     2008     of revenues     Amount    Percentage      2009     of revenues      2008     of revenues     Amount     Percentage
                               (unaudited)                                                                                (unaudited)
Revenues by
Region:
North
America       $  1,563             40 %  $ 2,778            41 %  $ (1,215 )        (44 )%  $ 3,659            38 %  $  4,780            37 %  $ (1,121 )         (23 )%
Europe           2,147             54      3,349            50      (1,202 )        (36 )     5,530            58       6,038            46        (508 )          (8 )
Asia               249              6        594             9        (345 )        (58 )       389             4       2,187            17      (1,798 )         (82 )
              $  3,959            100 %  $ 6,721           100 %  $ (2,762 )        (41 )%  $ 9,578           100 %  $ 13,005           100 %  $ (3,427 )         (26 )%

International revenues (revenues from the European and Asian regions) represented approximately 60% of our total revenues for the three months ended April 30, 2009, as compared to 59% for the comparable period in 2008.

For the three months ended April 30, 2009, we experienced a decrease in revenues of approximately $1.2 million (or 36%) from our European operations due to fewer license transactions, a situation we believe is primarily attributable to the weakness in the overall world economy, and an approximate $444,000 decrease in revenues resulting from unfavorable foreign currency exchange rate fluctuations.

For the six months ended April 30, 2009, we experienced a decrease in revenues of approximately $1.8 million (or 82%) from the Asia Pacific region due primarily to the fact that in the first quarter of fiscal 2008 we recognized approximately $1.4 million in revenue from a significant license transaction with a telecommunications customer in that geographic region but had no such comparable transaction in the first quarter of fiscal 2009. We also experienced a decrease in revenues of approximately $508,000 (or 8%) from our European operations, due primarily to an approximate $865,000 decrease resulting from unfavorable foreign currency exchange rate fluctuations and fewer license transactions. We experienced a decrease of $1.1 million in revenues from North America primarily due to $786,000 in royalties from one telecommunications customer earned in the second quarter of 2008 which was not repeated in the comparable period in 2009, and fewer license transactions.

Since the Company's acquisition of Poet Holdings, Inc. in early 2004, we have generally derived a higher percentage of international revenues due to stronger demand for our products in Europe. We expect in the future to experience a somewhat stronger demand for our products in Europe as compared to our other geographic markets.

Cost of Revenues

The following table summarizes total cost of revenues for the three and six months ended April 30, 2009 and April 30, 2008 (in thousands, except percentages):

                                      Three Months Ended                                     Six Months Ended
                        April 30,     April 30,           Change              April 30,     April 30,           Change
                          2009          2008        Amount    Percentage        2009          2008        Amount    Percentage
                              (unaudited)                                           (unaudited)
Cost of revenues:
Cost of license        $        57   $        79   $    (22 )        (28 )%  $       122   $       159   $    (37 )        (23 )%
Amortization of
intangible assets              108            79         29           37             201           158         43           27
Cost of maintenance            333           366        (33 )         (9 )           716           750        (34 )         (5 )
Cost of professional
services                        34            28          6           21              70            55         15           27
Total                  $       532   $       552   $    (20 )         (4 )%  $     1,109   $     1,122   $    (13 )         (1 )%

Total Cost of Revenues. Total cost of revenues was $532,000 and $1.1 million for the three months and six months ended April 30, 2009, respectively, remaining at a relatively consistent level in absolute dollars compared to $552,000 and $1.1 million for the comparable periods in fiscal 2008.

License. Cost of license revenues consists primarily of royalties, the cost of third party products which we resell to our customers, product media and packaging costs.

Cost of license revenues was $57,000 (or 3% of license revenues) for the three months ended April 30, 2009 compared to $79,000 (or 2% of license revenues) . . .