The following contains forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended (the "Securities Act") and
Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). Forward-looking statements relate to expectations concerning matters that are not historical facts. Words such as "projects," "believes," "anticipates," "plans," "expects," "intends," "strategy," "continue," "will," "estimate," "forecast," and similar words and expressions are intended to identify forward-looking statements. Although we believe that the expectations reflected in the forward-looking statements contained herein are reasonable, these expectations or any of the forward-looking statements could prove to be incorrect, and actual results could differ materially from those projected or assumed in the forward-looking statements. Our future financial condition and results of operations, as well as any forward-looking statements, are subject to risks and uncertainties, including, but not limited to, the factors set forth in Part II, Item 1A. "Risk Factors." All forward-looking statements and reasons why results may differ included in this Quarterly Report on Form 10-Q are made as of the date hereof, and we assume no obligation to update any such forward-looking statements or reasons why actual results may differ.

Executive Overview

Our products are currently licensed by companies worldwide in diverse industries such as financial services, telecommunications, retail, healthcare, manufacturing, energy, transportation, logistics, government and insurance. We sell our products through a direct sales force and through alliances with leading software vendors and system integrators.

Our revenue consists primarily of license and maintenance fees from our customers and distributors. In addition, we receive fees from our customers for providing consulting services. We also receive revenue from our strategic relationships with business partners who embed our products in their hardware and networking systems as well as from systems integrators who resell our products.

Our revenue is generally derived from a diverse customer base. No single customer represented greater than 10% of total revenue for the first six months of fiscal year 2009. As of May 31, 2009, no single customer had a balance in excess of 10% of our net accounts receivable. We establish allowances for doubtful accounts based on our evaluation of collectability and an allowance for returns and discounts based on specifically identified credits and historical experience.

For the second quarter of fiscal year 2009, we recorded total revenue of $142.7 million, a decrease of 5% from the second quarter of fiscal year 2008. License revenue was $50.5 million, a decrease of 13% from the previous year. In addition, we generated cash flow from operations of $71.6 million. Earnings per share was $0.06 in the second quarter of fiscal year 2009 as compared to $0.02 for the second quarter of fiscal year 2008. We ended the quarter with $329.6 million in cash, cash equivalents and short-term investments.

Critical Accounting Policies, Judgments and Estimates

The discussion and analysis of our financial condition and results of operations is based upon our Condensed Consolidated Financial Statements, which have been prepared in accordance with generally accepted accounting principles in the United States of America. The preparation of these financial statements requires us to make estimates, assumptions and judgments that can have significant impact on the reported amounts of assets and liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities at the date of our financial statements. We base our estimates, assumptions and judgments on historical experience and various other factors that we believe to be reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions. On a regular basis we evaluate our estimates, assumptions and judgments and make changes accordingly. We also discuss our critical accounting estimates with the Audit Committee of our Board of Directors.

We believe that the estimates, assumptions and judgments involved in revenue recognition, allowances for doubtful accounts, returns and discounts; stock-based compensation, valuation and impairment of investments, impairment of goodwill, intangible assets and long-lived assets, restructuring and integration costs, and accounting for income taxes have the greatest potential impact on our Condensed Consolidated Financial Statements, so we consider these to be our critical accounting policies. Historically, our estimates, assumptions and judgments relative to our critical accounting policies have not differed materially from actual results. The critical accounting estimates associated with these policies are described in Part II, Item 7 "Management's Discussion and Analysis of Financial Condition and Results of Operation" of our 2008 Annual Report on Form 10-K for the fiscal year ended November 30, 2008.

Recent Accounting Pronouncements

Recent accounting pronouncements are detailed in Note 2 to our Condensed Consolidated Financial Statements.

Results of Operations

The second quarter of fiscal year 2009 ended on May 31, 2009. For purposes of presentation, we have indicated the second quarter of fiscal year 2008 as ended on May 31, 2008; whereas in fact, the second quarter of fiscal year 2008 actually ended on June 1, 2008. There were 91 days in the second quarter of each of fiscal years 2009 and 2008. All amounts presented in the tables in the following sections on our Results of Operations are stated in thousand of dollars, except for percentages and unless otherwise stated.

The following table sets forth the components of our Results of Operations as percentages of total revenue for the periods indicated:

                                                  Three Months Ended             Six Months Ended
                                                       May 31,                        May 31,
                                                2009             2008           2009           2008
Revenue:
License                                             35 %             38 %          35 %           39 %
Service and maintenance                             65               62            65             61

Total revenue                                      100              100           100            100

Cost of revenue:
License                                              5                5             5              5
Service and maintenance                             23               25            23             25

Total cost of revenue                               28               30            28             30

Gross profit                                        72               70            72             70
Operating expenses:
Research and development                            18               18            19             18
Sales and marketing                                 33               38            34             37
General and administrative                           8                9             8              9
Amortization of acquired intangible assets           3                3             3              3

Total operating expenses                            62               68            64             67

Income from operations                              10                2             8              3
Interest income                                      1                1             1              2
Interest expense                                    (1 )             -             -              -
Other income (expense), net                         -                -             -              -

Income before provision for income taxes
and minority interest                               10                3             9              5
Provision for income taxes                           3                1             3              2
Minority interest, net of tax                       -                -             -              -

Net income                                           7 %              2 %           6 %            3 %

Using constant currency, earnings growth for the second quarter of fiscal year 2009 was not significantly impacted by currency movements.

Total Revenue

Our total revenue consisted primarily of license, consulting and maintenance
fees from our customers and partners.



                           Three Months Ended                    Six Months Ended
                                May 31,                              May 31,
                       2009        2008      Change         2009        2008      Change

Total revenue in the second quarter of fiscal year 2009 decreased by $7.4 million or 5% compared to the same quarter last year; on a constant currency basis, total revenue growth was approximately 1%. The decrease was primarily comprised of

a $7.2 million or a 13% decrease in license revenue, while service and maintenance revenue remained relatively constant. Total revenue in the first six months of fiscal year 2009 decreased by $21.0 million or 7% compared to the same period last year; on a constant currency basis, total revenue decreased by approximately 2%.

For the six months ended May 31, 2009, we experienced a reduction in total revenue in all geographic regions compared to the same period last year. See Note 16 to our Condensed Consolidated Financial Statements for total revenue by region. The percentages of total revenue from the geographic regions are summarized as follows:

                           Three Months Ended           Six Months Ended
                                 May 31,                    May 31,
                          2009            2008         2009          2008
              Americas        53 %            47 %        53 %          49 %
              EMEA            39              43          39            41
              APJ              8              10           8            10

                             100 %           100 %       100 %         100 %

License Revenue and Cost



                                               Three Months Ended                        Six Months Ended
                                                    May 31,                                   May 31,
                                         2009          2008        Change         2009          2008         Change
License revenue                        $ 50,457      $ 57,696         (13 )%    $ 95,306      $ 115,449         (17 )%
As percent of total revenue                  35 %          38 %                       35 %           39 %
Cost of license revenue                $  7,493      $  7,484          -  %     $ 14,303      $  14,764          (3 )%
As percent of total revenue                   5 %           5 %                        5 %            5 %
As percent of license revenue                15 %          13 %                       15 %           13 %

License revenue in the second quarter of fiscal year 2009 decreased by $7.2 million or 13% compared to the same quarter last year; on a constant currency basis, license revenue decreased by approximately 5%. License revenue in the first six months of fiscal year 2009 decreased by $20.1 million or 17% compared to the same period last year; on a constant currency basis, license revenue decreased by approximately 11%.

Our license revenue in the first six months of fiscal years 2009 and 2008 was derived from the following three product lines: service oriented architecture ("SOA"), business optimization and business process management ("BPM"). The percentages of license revenue from the three product lines are summarized as follows:

                                  Three Months Ended           Six Months Ended
                                        May 31,                    May 31,
                                 2009            2008         2009          2008
        SOA                          58 %            51 %        60 %          56 %
        Business optimization        30              31          26            29
        BPM                          12              18          14            15

                                    100 %           100 %       100 %         100 %

Our license revenue in any particular period is dependent upon the timing and number of license transactions and their relative size. Selected data about our license revenue transactions recognized for the respective periods is summarized as follows:

                                                       Three Months Ended         Six Months Ended
                                                            May 31,                   May 31,
                                                       2009         2008         2009         2008
Number of license deals of $1.0 million or more             11            7           22           21
Number of license deals over $0.1 million                   88           91          154          178
Average size of license deals over $0.1 million

Cost of license revenue mainly consisted of royalty costs and amortization of developed technology acquired through corporate acquisitions. Cost of license revenue was relatively constant in the second quarter of fiscal year 2009 compared to the same quarter last year. Amortization expenses associated with acquired technologies decreased by $0.4 million, which was offset by a $0.4 million increase in royalty costs.

Cost of license revenue in the first six months of fiscal year 2009 decreased by $0.5 million or 3% compared to the same period last year. The decrease in absolute dollars in cost of license revenue was primarily due to a $0.6 million decrease in amortization expenses associated with acquired technologies, which was partially offset by a $0.1 million increase in royalty costs.

Service and Maintenance Revenue and Cost



                                              Three Months Ended                         Six Months Ended
                                                   May 31,                                   May 31,
                                        2009          2008        Change         2009           2008         Change
Service and maintenance revenue       $ 92,213      $ 92,336          -  %     $ 180,260      $ 181,161          (1 )%
As percent of total revenue                 65 %          62 %                        65 %           61 %
Cost of service and maintenance       $ 32,404      $ 38,088         (15 )%    $  63,649      $  73,858         (14 )%
As percent of total revenue                 23 %          25 %                        23 %           25 %
As percent of service and
maintenance revenue                         35 %          41 %                        35 %           41 %

Service and maintenance revenue in the second quarter of fiscal year 2009 was unchanged compared to the same quarter last year; on a constant currency basis, service and maintenance revenue growth was approximately 6%. Service and maintenance revenue in the first six months of fiscal year 2009 decreased by $0.9 million or 1% compared to the same period last year; on a constant currency basis, service and maintenance revenue growth was approximately 4%.

Cost of service and maintenance consists primarily of compensation for professional services, customer support personnel and third-party contractors and associated expenses related to providing consulting services.

Cost of service and maintenance in the second quarter of fiscal year 2009 decreased by $5.7 million or 15% compared to the same quarter last year. The decrease in absolute dollars was primarily due to a $2.5 million decrease in employee-related expenses, a $1.2 million decrease in travel expenses, a $1.0 million decrease in subcontractor costs and a $0.7 million decrease in facilities expenses. The decrease in employee-related expenses was primarily due to a reduction in salaries.

Cost of service and maintenance in the first six months of fiscal year 2009 decreased by $10.2 million or 14% compared to the same period last year. The decrease in absolute dollars was primarily due to a $5.3 million decrease in employee-related expenses, a $1.9 million decrease in travel expenses, a $1.5 million decrease in subcontractor costs and a $1.3 million decrease in facilities expenses. The decrease in employee-related expenses was primarily due to a reduction in salaries.

Operating Expenses

Using constant currency, total operating expenses were favorably impacted by 7% and 6% due to currency movement for the three and six month periods ended May 31, 2009, respectively.

Research and Development Expenses

Research and development expenses consisted primarily of employee-related
expenses, including salary, bonus, benefits, stock-based compensation expenses,
recruiting expense and office support, third-party contractor fees and related
costs associated with the development and enhancement of our products.



                                                Three Months Ended                        Six Months Ended
                                                     May 31,                                  May 31,
                                          2009          2008        Change         2009          2008        Change
Research and development expenses       $ 26,260      $ 26,756          (2 )%    $ 51,394      $ 52,210          (2 )%

Research and development expenses in the second quarter of fiscal year 2009 decreased by $0.5 million or 2% compared to the same quarter last year. The decrease was primarily due to a $0.6 million decrease in facilities expenses, a $0.3 million decrease in travel expenses and a $0.2 million decrease in contractor expenses. The decrease was partially offset by a $0.6 million increase in employee-related expenses.

Research and development expenses in the first six months of fiscal year 2009 decreased by $0.8 million or 2% compared to the same period last year. The decrease was primarily due to a $1.0 million decrease in facilities expenses and a $0.4 million decrease in travel expenses. The decrease was partially offset by a $0.5 million increase in employee-related expenses and a $0.1 million increase in contractor expenses.

Sales and Marketing Expenses

Sales and marketing expenses consisted primarily of employee-related expenses, including sales commissions, salary, bonus, benefits, stock-based compensation expenses, recruiting expense and office support, related costs of our direct sales force and marketing staff, and the costs of marketing programs, including customer conferences, promotional materials, trade shows, advertising and related travel expenses.

                                               Three Months Ended                        Six Months Ended
                                                    May 31,                                   May 31,
                                         2009          2008        Change         2009          2008         Change
Sales and marketing expenses           $ 47,445      $ 56,454         (16 )%    $ 93,571      $ 110,842         (16 )%

Sales and marketing expenses in the second quarter of fiscal year 2009 decreased $9.0 million or 16% compared to the same quarter last year. The decrease was primarily due to a $4.8 million decrease in employee-related expenses, a $1.6 million decrease in travel expenses, a $1.6 million decrease in marketing programs, a $0.5 million decrease in facilities expenses and a $0.5 million decrease in referral fees. The decrease in employee-related expenses was primarily due to a reduction in salaries, benefits and commissions. The decrease in travel expenses and marketing programs was due to cost management efforts.

Sales and marketing expenses in the first six months of fiscal year 2009 decreased $17.3 million or 16% compared to the same period last year. The decrease was primarily due to a $10.2 million decrease in employee-related expenses, a $3.4 million decrease in travel expenses, a $2.9 million decrease in marketing programs, a $0.7 million decrease in facilities expenses and a $0.1 million decrease in referral fees. The decrease in employee-related expenses was primarily due to a reduction in salaries, benefits and commissions. The decrease in travel expenses and marketing programs was due to cost management efforts.

General and Administrative Expenses

General and administrative expenses consisted primarily of employee-related
expenses, including salary, bonus, benefits, stock-based compensation expenses,
recruiting expense and office support and related costs for general corporate
functions including executive, legal, finance, accounting and human resources,
and also included accounting, tax and legal fees and charges.



                                                Three Months Ended                        Six Months Ended
                                                     May 31,                                  May 31,
                                          2009          2008        Change         2009          2008        Change
General and administrative expenses     $ 11,317      $ 12,991         (13 )%    $ 21,945      $ 26,789         (18 )%

General and administrative expenses in the second quarter of fiscal year 2009 decreased $1.7 million or 13% compared to the same quarter last year. The decrease was primarily due to a $1.1 million decrease in consulting expenses, a $0.3 million decrease in employee-related expenses and a $0.3 million decrease in travel expenses. The decrease in consulting and employee-related expenses was primarily due to a reduction in contractor costs and salaries.

General and administrative expenses in the first six months of fiscal year 2009 decreased $4.8 million or 18% compared to the same period last year. The decrease was primarily due to a $2.0 million decrease in employee-related expenses, a $2.0 million decrease in consulting expenses and a $0.8 million decrease in travel expenses. The decrease in employee-related and consulting expenses was primarily due to a reduction in salaries and contractor costs.

Amortization of Acquired Intangible Assets

Intangible assets acquired through corporate acquisitions are comprised of the expected value of developed technologies, patents, trademarks, established customer bases and non-compete agreements, as well as maintenance and OEM customer royalty agreements. Amortization of developed technologies is recorded as a cost of revenue, and amortization of other acquired intangible assets is included in operating expenses.

                                                Three Months Ended                       Six Months Ended
                                                     May 31,                                 May 31,
                                          2009         2008        Change         2009          2008        Change
Amortization of acquired intangible
assets:
Cost of revenue                          $ 3,572      $ 3,982                   $  7,135      $  7,799
Operating expenses                         3,736        4,235                      7,452         8,375

Total amortization of acquired
intangible assets                        $ 7,308      $ 8,217         (11 )%    $ 14,587      $ 16,174         (10 )%

As percent of total revenue 5 % 5 % 5 % 5 %

Stock-Based Compensation

Stock-based compensation cost is included in our Condensed Consolidated Statements of Operations corresponding to the same functional lines as cash compensation paid to the same employees in the respective departments as follows:

                                                 Three Months Ended                      Six Months Ended
                                                      May 31,                                May 31,
                                           2009         2008        Change        2009          2008        Change
Stock-based compensation:
Cost of license                           $    12      $     9                  $     23      $     17
Cost of service and maintenance               620          723                     1,219         1,310

Total in cost of revenue                      632          732                     1,242         1,327

Research and development                    1,531        1,256                     2,654         2,275
Sales and marketing                         1,706        1,677                     3,412         3,407
General and administrative                  1,949        1,546                     3,872         3,352

Total in operating expenses                 5,186        4,479                     9,938         9,034

Total stock-based compensation            $ 5,818      $ 5,211          12 %    $ 11,180      $ 10,361           8 %

As percent of total revenue 4 % 3 % 4 % 3 %

We utilize the Black-Scholes option pricing model to value equity instruments. The Black-Scholes model was developed for use in estimating the value of traded options that have no vesting or hedging restrictions and are fully transferable. As our employee stock options have certain characteristics that are significantly different from traded options, and as changes in the subjective assumptions can materially affect the estimated value, in management's opinion, the existing valuation model may not provide an accurate measure of the fair value of our employee stock options. Although the fair value of employee stock options is determined in accordance with SFAS No. 123(R) and SEC Staff Accounting Bulletin No. 107 using an option-pricing model, that value may not be indicative of the fair value observed in a willing buyer/willing seller market transaction.

Interest Income


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