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 (File No. 000-28540). 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 and services 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-oriented 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-oriented 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 the FastObjects solution into our product line following our March 2004 merger with Poet Holdings, Inc., we expanded the scope of our solutions to also address the data management needs of smaller business systems. By our 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 and can be adapted for use with many different applications.

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.

Continued Adverse Global Economic Conditions Are Negatively Impacting Our Business

The national and global economies and financial markets have continued to experience a severe downturn stemming from a multitude of factors, including adverse credit conditions, slower economic activity, concerns about failures or the instability of major financial institutions and other businesses, inflation and deflation, reduced corporate profits and capital spending, adverse business conditions, liquidity concerns and other factors. As a result of these conditions, the United States and global economies are in a significant recession, which is expected to continue. The severity or length of time these economic and financial market conditions may persist is unknown.

Our business has been negatively affected by the ongoing worldwide economic conditions. It is unclear when the macroeconomic environment may improve. During the third quarter of 2009, our selling environment remained very challenging, causing customers to delay or reduce technology purchases or to make smaller investments in our solutions. 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 deferring purchases of our products. The difficult and uncertain economic conditions caused some of our customers to face financial challenges during the first three 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, particularly our license 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 that involve substantial risk. 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 nine months ended July 31, 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 and analysis 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 statements of income to total revenues:

                                       Three Months Ended       Nine Months Ended
                                      July 31,    July 31,    July 31,    July 31,
                                        2009        2008        2009        2008

Revenues:
License                                      46 %        63 %        52 %        64 %
Maintenance                                  53          36          47          35
Professional services                         1           1           1           1
Total revenues                              100         100         100         100

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

Gross profit                                 87          92          88          91

Operating expenses:
Sales and marketing                          24          14          22          14
Research and development                     23          16          21          16
General and administrative                   18          19          20          22
Total operating expenses                     65          49          63          52

Income from operations                       22          43          25          39
Interest and other income
(expenses), net                              (1 )         4           1           3
Income from continuing operations
before taxes                                 21          47          26          42
Provision for income taxes                    1           5           3           5
Net income from continuing
operations                                   20          42          23          37
Net income from discontinued
operations, net of income taxes               -           -           -           1
Net income                                   20 %        42 %        23 %        38 %

Revenues



The following table summarizes license, maintenance and professional services
revenues for the three and nine months ended July 31, 2009 and July 31, 2008 (in
thousands, except percentages):



                                   Three Months Ended                                 Nine Months Ended
                      July 31,     July 31,           Change            July 31,    July 31,           Change
                        2009         2008       Amount    Percentage      2009        2008       Amount    Percentage
                           (unaudited)                                       (unaudited)
Revenues:
License revenues     $    2,025   $    3,943   $ (1,918 )        (49 )% $   7,198   $  12,330   $ (5,132 )        (42 )%
Maintenance
revenues                  2,345        2,305         40            2        6,617       6,764       (147 )         (2 )
Professional
services revenues            63           52         11           21          196         211        (15 )         (7 )
Total                $    4,433   $    6,300   $ (1,867 )        (30 )% $  14,011   $  19,305   $ (5,294 )        (27 )%

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 and general economic conditions, 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, license 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 nine months ended July 31, 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 nine months ended July 31, 2008 report former WebSphere activities as "net income from discontinued operations, net of income taxes." Our results for the three and nine months ended July 31, 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 (UNAUDITED) " in Item 1 of
this Quarterly Report on Form 10-Q.

Our total revenues decreased by $1.9 million (or 30%) for the three months ended July 31, 2009 compared to the corresponding period in fiscal 2008. This decrease resulted primarily from an approximate $1.9 million (or 49%) decrease in license revenues for the three months ended July 31, 2009 from the corresponding period in fiscal 2008, and includes an approximate $376,000 decrease in revenues (or 20% of the decrease in total revenues) resulting from unfavorable foreign currency exchange rate fluctuations. Maintenance and professional services revenues remained relatively stable, increasing $40,000 (or 2%) and $11,000 (or 21%), respectively, for the three months ended July 31, 2009 over the corresponding period in fiscal 2008.

Our total revenues decreased by $5.3million (or 27%) for the nine months ended July 31, 2009 compared to the corresponding period in fiscal 2008. This decrease resulted primarily from an approximate $5.1 million (or 42%) decrease in license revenues for the nine months ended July 31, 2009 from the corresponding period in fiscal 2008, and includes an approximate $1.2 million (or 23% of the decrease in total revenues) from unfavorable foreign currency exchange rate fluctuations. Maintenance and professional services revenues remained relatively stable decreasing $147,000 (or 2%) and $15,000 (or 7%), respectively, for the nine months ended July 31, 2009 over the corresponding period in fiscal 2008.

No customer accounted for more than 10% of our total revenues for the three and nine months ended July 31, 2009 as we continued to experience fewer larger license transactions in these periods. By contrast, in the corresponding periods in fiscal 2008, significant customers who contributed 10% or more of our total revenues included two telecommunications customers who together contributed approximately 33% of total revenues in the third quarter of fiscal 2008, and one such telecommunications customer who also accounted for approximately 12% of our total revenues for the nine months ended July 31, 2008.

The inherently unpredictable business cycle of an enterprise software company makes discernment of continued and meaningful business trends difficult, particularly in the current recessionary economic environment. 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, the deterioration in general economic conditions has further lengthened our sales cycle and created increased pricing pressure. License revenues are a critical 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 over future fiscal periods.

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

License revenues were $2.0 million for the three months ended July 31, 2009, a decrease of $1.9 million (or 49%) from $3.9 million reported for the comparable period in fiscal 2008. The decrease in license revenues for the three months ended July 31, 2009 compared to the same three month period in 2008 resulted primarily from fewer license transactions and the relative absence of larger license transactions and includes an approximate $192,000 decrease in revenues (or 10% of the decrease in total revenues) resulting from unfavorable foreign currency exchange rate fluctuations. By way of illustration, during the three months ended July 31, 2008 we derived approximately $1.9 million in revenues from two significant license agreements with telecommunications customers but had no such comparable license transactions in the three months ended July 31, 2009.

License revenues were $7.2 million for the nine months ended July 31, 2009, a decrease of $5.1 million (or 42%) from $12.3 million reported for the comparable period in fiscal 2008. The decrease in license revenues for the nine months ended July 31, 2009 compared to the same nine month period in 2008 primarily resulted from fewer license transactions and fewer larger license transactions and includes an approximate $677,000 decrease in revenue (or 13% of the decrease in total revenues) due to unfavorable foreign currency exchange rate fluctuations. During the nine months ended July 31, 2009 we derived approximately $5.3 million of revenues from several significant license transactions with four telecommunications customers, whereas we did not have comparable license transactions of this scale in the nine months ended July 31, 2009.

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 $2.3 million for the three months ended July 31, 2009, remaining stable from $2.3 million reported for the comparable period in fiscal 2008. Maintenance revenues for the quarter ended July 31, 2009 included an increase of $219,000 of back maintenance for one European telecommunications customer that was offset by a decrease of approximately $177,000 resulting from unfavorable foreign currency exchange rate fluctuations during the quarter compared to the corresponding period in fiscal 2008.

Maintenance revenues were $6.6 million for the nine months ended July 31, 2009, a decrease of $147,000 (or 2%) from $6.8 million reported for the comparable period in fiscal 2008. The decrease was primarily due to approximately $544,000 of unfavorable foreign currency exchange rate fluctuations as well as approximately $200,000 of back maintenance for one European customer recognized in the second quarter of fiscal 2008, and was partially offset by approximately $559,000 of back maintenance revenue from two European customers that was recognized in the first and third quarters of fiscal 2009.

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 $63,000 for the three months ended July 31, 2009, an increase of $11,000 (or 21%) from $52,000 reported for the comparable period in fiscal 2008. Professional services revenues were $196,000 for the nine months ended July 31, 2009, a decrease of $15,000 (or 7%) from $211,000 reported for the comparable period in fiscal 2008.

International Revenues. The following table summarizes our revenues by geographic area for the three and nine months ended July 31, 2009 and July 31, 2008 (in thousands, except percentages):

                                      Three Months Ended July 31,                                                   Nine Months Ended July 31,
                           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   $  1,560            35 %  $ 1,470            23 %  $     90            6 %   $  5,219            37 %  $  6,250            32 %  $ (1,031 )        (16 )%
Europe             2,821            64      4,341            69      (1,520 )        (35 )      8,351            60      10,379            54      (2,028 )        (20 )
Asia                  52             1        489             8        (437 )        (89 )        441             3       2,676            14      (2,235 )        (84 )
                $  4,433           100 %  $ 6,300           100 %  $ (1,867 )        (30 )%  $ 14,011           100 %  $ 19,305           100 %  $ (5,294 )        (27 )%

International revenues (revenues from the European and Asian regions) represented approximately 65% of our total revenues for the three months ended July 31, 2009, as compared to 77% for the comparable period in fiscal 2008.

International revenues represented approximately 63% of our total revenues for the nine months ended July 31, 2009, as compared to 68% for the comparable period in fiscal 2008.

For the three months ended July 31, 2009, the decrease in international revenues included approximately $376,000 of unfavorable foreign currency exchange rate fluctuations as well as an absence of larger international license transactions compared with the three months ended July 31, 2008, during which two significant license transactions with two European telecommunications customers totaling approximately $1.9 million were recognized.

For the nine months ended July 31, 2009, the decrease in international revenues resulted from fewer license transactions; a situation we believe is primarily attributable to the weakness in the overall world economy. We experienced a decrease in revenues of approximately $2.2 million (or 84%) from the Asia Pacific region, due primarily to the absence of significant license transactions in that period, unlike the nine months ended July 31, 2008, when we had recognized $1.9 million in revenue from two Asian telecommunications customers. In the nine months ended July 31, 2009 we also experienced a decrease in revenues of approximately $2.0 million (or 20%) from our European operations, which includes an approximate $1.2 million decrease resulting from unfavorable foreign currency exchange rate fluctuations. The decrease in revenues from Europe was primarily due to license transactions with one European telecommunications customer that totaled $2.0 million recognized in fiscal 2008 but which was not repeated in 2009. We also experienced a decrease of $1.0 million (or 16%) in revenues from North America primarily due to our

recognition in the nine months ended July 31, 2008 of $1.2 million in royalty revenues from one telecommunications customer which was not repeated in the comparable period in 2009.

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 continue to experience a somewhat stronger demand for our products in Europe as compared to our other geographic markets.

A variety of factors may impact Versant's future revenues, including the potential strengthening of the U.S. dollar (which would have the effect of reducing portions of our revenue that resulted from favorable currency exchange fluctuations) and the generally more difficult economic environment currently being experienced in the U.S. and Europe, which may impact demand for our products and services.

Cost of Revenues



The following table summarizes total cost of revenues for the three and nine
months ended July 31, 2009 and July 31, 2008 (in thousands, except percentages):



. . .