Forward-Looking Statements

In addition to historical information, this Quarterly Report on Form 10-Q contains forward-looking statements. The forward-looking statements are made in reliance upon the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. The words "believe," "expect," "anticipate," "intend," "estimate," "forecast," "project," "should" and similar expressions are intended to identify "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include, among others, statements about our future performance, the continuation of historical trends, the sufficiency of our sources of capital for future needs, the effects of acquisitions and the expected impact of recently issued accounting pronouncements. The forward-looking statements are subject to certain risks and uncertainties that could cause our actual results to differ materially from those anticipated in the forward-looking statements. Factors that might cause such a difference include, but are not limited to, those discussed in Part I, Item 1A, Risk Factors, in our Annual Report on Form 10-K filed with the Securities and Exchange Commission (SEC) for our fiscal year ended May 31, 2009. Readers are cautioned not to place undue reliance on these forward-looking statements, which reflect management's opinions only as of the date hereof. Lawson undertakes no obligation to revise or publicly release the results of any revision to these forward-looking statements. Readers should carefully review the risk factors described in our Annual Report on Form 10-K and in other documents we file from time to time with the SEC including our Quarterly Reports on Form 10-Q.

Management Overview

Lawson Software, Inc. is a global provider of enterprise software. We provide business application software, consulting and maintenance to customers primarily in specific services, trade and manufacturing/distribution industries. We specialize in and target specific industries including equipment service management & rental, fashion, food & beverage, healthcare, manufacturing & distribution, public sector (U.S.), and service industries as well as the horizontal market for our strategic human capital management product line. Our software includes enterprise financial management, human capital management, business intelligence, asset management, enterprise performance management, supply chain management, service management, manufacturing operations, business project management and industry-tailored applications. Our applications help automate and integrate critical business processes, which enables our customers to collaborate with their partners, suppliers and employees. We support our customers' use of our applications through consulting services which primarily help our customers implement their Lawson applications, and through our maintenance programs that provide on-going support and product updates for our customers' continued use of our applications.

Our enterprise software solutions focus on providing competitive advantages and business flexibility to our customers. Lawson's solutions fall within three main product lines and include related maintenance and consulting services. Our product lines are referred to as Lawson S3 Enterprise Management System, Lawson M3 Enterprise Management System, and Lawson Strategic Human Capital Management with many of the solutions in each product line having broad, cross-industry application. Our S3 solutions consist of business applications designed for services oriented industries. Our M3 solutions consist of applications that are geared for manufacturing, distribution and trade businesses who face resource constraints and whose processes are often complex and industry-specific. Our Strategic Human Capital Management applications provide solutions for customers to strategically manage their workforce.

During fiscal 2009 and prior years, we operated as one business segment, the development and marketing of computer software and related services including consulting, maintenance and customer support. Beginning in the first quarter of fiscal 2010, we reorganized our operations to provide greater focus on and better serve our targeted vertical markets. With this strategic organizational change, including a workforce realignment, we determined that we have three reportable segments that align with our three industries groups: S3 Strategic Industries, M3 Strategic Industries and General Industries. The S3 Strategic Industries group targets customers in the healthcare and public sector industries. The M3 Strategic Industries group targets customers in the equipment service management & rental, food & beverage and fashion industries. Our General Industries group includes our services industries customers (S3) and manufacturing & distribution industries (M3) customers which are in industries not included in our other two Industries Groups. See Note 14, Segment and Geographic Information, in Notes to Condensed Consolidated Financial Statements of this Form 10-Q for additional information and applicable disclosures.

Revenues for the first quarter of fiscal 2010 were $169.0 million, down 11.5% compared to $190.9 million in the first quarter of fiscal 2009. Consulting revenues accounted for the largest decrease in the first quarter of fiscal 2010 as

compared to the last year's first quarter, down $23.1 million, or 28.6%, the result of both our maintaining fewer billable consultants and lower bookings for our consulting and implementation services. Maintenance services revenues were also down $3.7 million, or 4.1%, year-over-year primarily related to the impact of fluctuations in foreign currency exchange rates. These decreases were partially offset by a $4.8 million, or 22.8%, increase in our license fees revenues which was primarily due to the recognition of a larger amount of deferred license fees revenues in the first quarter of fiscal 2010 as compared to the similar period last year as well as several significant deals signed and recognized in the current quarter. From a segment perspective, revenues in our S3 Strategic Industries group were up $1.9 million in the first quarter of fiscal 2010 as compared to the similar period last year with increased license fees and maintenance services revenues more than offsetting a decrease in this segment's consulting revenues. Our M3 Strategic Industries' revenues were down $8.6 million for the quarter as compared to last year primarily as a result of decreased consulting revenues. First quarter revenues in our General Industries group decreased $15.2 million as compared to the first quarter last year as a result of a significant decrease in consulting revenues as well as lower maintenance services revenues. Geographically, the quarter-over-quarter decrease was primarily related to our EMEA region where revenues declined $23.1 million, or 29.4%. Our APAC region revenues were down $0.3 million. These decreases were only somewhat offset by a $1.4 million, or 1.3%, increase in quarter-over-quarter revenues in our Americas region. The Americas region continues to represent the majority of our total revenues at 62.8% for the fiscal quarter, up from 54.9% in the first quarter last year. The EMEA region accounted for 32.8% of total revenues in the quarter as compared to 41.1% last year. The remaining 4.4% of our revenues were generated in our APAC region.

Total gross margin as a percent of revenues for the first quarter increased to 57.2% compared to 50.4% in the first quarter of last year primarily due to a favorable mix of software revenues as compared to consulting revenues. In the first quarter of fiscal 2010, software revenues accounted for 65.9% of our total revenues as compared to 57.7% in the first quarter last year. We anticipate an improved software revenue mix for full year fiscal 2010. Operating expenses decreased by $12.4 million, or 13.8%, from the first quarter of last year primarily related to a decrease in our sales and marketing costs. As a percent of revenues, operating expenses improved to 46.0% compared to 47.2% in the first quarter of last year.

A significant portion of our business is in currencies other than the U.S. Dollar, particularly the Swedish Krona (SEK) and the Euro. Our revenues and operating expenses are affected by fluctuations in applicable foreign currency exchange rates. During fiscal 2009, mainly the second quarter, foreign currency exchange rates were extremely volatile and the U.S. Dollar strengthened significantly against most major currencies. In the first quarter of fiscal 2010 the U.S. Dollar to SEK exchange rate improved 9.8% as compared to the first quarter of fiscal 2009 while the U.S. Dollar to Euro exchange rate improved 2.6% over the same period. These fluctuations in the exchange rates affected our first quarter fiscal 2010 results as improvements in the U.S. Dollar to SEK and Euro exchange rates have the effect of reducing our revenues but also reducing our operating expenses denominated in currencies other than the U.S. Dollar.

For financial results denominated in a currency other than the U.S. Dollar, we calculate constant currency by converting the prior period financial results at the exchange rates applicable to current periods. We believe these constant currency comparisons provide additional insight into our business performance during the applicable reporting periods exclusive of the effects of foreign currency exchange rate fluctuations, and should be considered in addition to, and not as a substitute for the actual changes in revenues, expenses, income or other financial measures presented in this Quarterly Report on Form 10-Q.

The strengthening of the U.S. Dollar during the first quarter of fiscal 2010 had a negative impact on our revenues accounting for approximately $10.7 million, or 5.3%, of the decline in revenues, as compared to the first quarter of fiscal 2009. This primarily affected our EMEA region resulting in a negative impact on license fees, maintenance services and consulting revenues of 5.4%, 5.0% and 5.2%; respectively, as compared to the first quarter last year. Excluding the effect of currency fluctuations, our total revenues for the first quarter were down approximately $11.2 million, or 6.2%, as compared to fiscal 2009. On a constant currency basis, license fees and maintenance services revenues increased $5.7 million and $0.7 million, or 28.2% and 0.9%, respectively, compared to the first quarter of last year while consulting revenues decreased $17.6 million or 23.4%. Together, these resulted in a net decrease in total revenues during the first quarter of fiscal 2010 of $21.9 million as compared to the similar period last year. The currency fluctuations also had the effect of decreasing our total costs and operating expenses, as reported in U.S. Dollars, by approximately $13.0 million which when combined with a decrease in total expenses of $21.8 million on a constant currency basis resulted in a $34.7 million decrease in total expenses for the first quarter of fiscal 2010 as compared to the first quarter of fiscal 2009. Foreign currency exchange rates had a favorable impact on our first quarter net income of approximately $0.01 per share.

Subsequent to the end of our first quarter, on September 30, 2009, we approved a plan to restructure our workforce relating to a targeted reduction primarily of consulting positions in our EMEA region. These actions are being undertaken as a further refinement of our new vertical organization, including a resizing of our services business to leverage our partner channel, and in light of current demand for our consulting and implementation services in EMEA. Under this plan, we will

reduce our workforce by approximately 75 employees, or 2.0% percent of our global workforce. We expect that these actions will result in pre-tax charges of approximately $4.0 million for severance pay and related benefits with the majority of the charges recorded in our second quarter of fiscal 2010. We anticipate that the majority of these actions will be completed by the end of the second quarter of fiscal 2010.

Critical Accounting Policies and Estimates

Our critical accounting policies are described in Part II - Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations, in our Annual Report on Form 10-K for the fiscal year ended May 31, 2009. These policies reflect those areas that require more significant judgments, and use of estimates and assumptions in the preparation of our financial statements and include the following:

†          Revenue Recognition

†          Allowance for Doubtful Accounts

†          Sales Returns and Allowances

†          Valuation of Long-Lived and Intangible Assets and Goodwill

†          Income Taxes

†          Contingencies

†          Litigation Reserves

†          Share-Based Compensation

There have been no material changes to our critical accounting policies and estimates as disclosed in our Annual Report on Form 10-K for our fiscal year ended May 31, 2009.

Results of Operations

We generated net income of $6.0 million in the first quarter of fiscal 2010 as compared to a net loss of $3.7 million in the first quarter of fiscal 2009. Net income per diluted share was $0.04 in the first quarter of fiscal 2010 compared to net loss of $0.02 per diluted share in the similar period last year.

The following table sets forth certain line items in our Condensed Consolidated Statements of Operations as a percentage of total revenues for the periods indicated, the period-over-period percent actual increase (decrease) and the period-over-period percent increase (decrease) on a constant currency basis:

                                              Percentage of               Quarterly Change
                                              Total Revenue             Fiscal 2010 vs. 2009
                                            Three Months Ended
                                                August 31,                 Percent Change
                                                                                    Constant
                                          2009           2008          Actual       Currency
                                                     (as adjusted)
Revenues:
License fees                                 15.3 %           11.1 %       22.8 %         28.2 %
Maintenance services                         50.6             46.7         (4.1 )          0.9
Software revenues                            65.9             57.8          1.0            6.1
Consulting                                   34.1             42.2        (28.6 )        (23.4 )
Total revenues                              100.0            100.0        (11.5 )         (6.2 )

Cost of revenues:
Cost of license fees                          2.9              2.8         (7.6 )         (3.2 )
Cost of maintenance services                  9.2              8.8         (7.8 )         (0.6 )
Cost of software revenues                    12.1             11.6        (15.4 )         (1.2 )
Cost of consulting                           30.7             38.0        (28.5 )        (22.3 )
Total cost of revenues                       42.8             49.6        (23.6 )        (17.3 )

Gross profit                                 57.2             50.4          0.4            4.2

Operating expenses:
Research and development                     12.2             11.5         (5.9 )          2.7
Sales and marketing                          21.2             24.3        (22.8 )        (17.8 )
General and administrative                   11.4             10.1         (0.2 )          5.2
Restructuring                                 0.1             (0.1 )        *NM            *NM
Amortization of acquired intangibles          1.1              1.4        (28.4 )        (23.1 )
Total operating expenses                     46.0             47.2        (13.8 )         (7.9 )

Operating income                             11.2              3.2        207.5          126.0
Total other income (expense), net            (2.5 )           (0.4 )        *NM            *NM
Income before income taxes                    8.7              2.8        176.6           95.0
Provision for income taxes                    5.2              4.7         (2.8 )         (1.1 )
Net income                                    3.5 %           (1.9 )%       *NM %          *NM %

The discussion that follows relating to our results of operations for the comparable three months ended August 31, 2009 and August 31, 2008, should be read in conjunction with the accompanying unaudited Condensed Consolidated Financial Statements and related notes and with the information presented in the above table. This analysis addresses the actual changes in our results of operations for the comparable fiscal quarters. For percentage changes excluding the impact of foreign currency fluctuations, see the constant currency percentages in the above table.

Revenues



                         Three Months Ended        Quarterly Change
                             August 31,          Fiscal 2010 vs. 2009
(in thousands)            2009        2008        Dollars       Percent

Revenues:
License fees           $   25,935   $  21,125   $      4,810       22.8 %
Maintenance services       85,430      89,109         (3,679 )     (4.1 )
Software revenues         111,365     110,234          1,131        1.0
Consulting                 57,627      80,682        (23,055 )    (28.6 )
Total revenues         $  168,992   $ 190,916   $    (21,924 )    (11.5 )%

The following table sets forth revenues by reportable segment:

                             Three Months Ended        Quarterly Change
                                 August 31,          Fiscal 2010 vs. 2009
(in thousands)                2009         2008       Dollars       Percent

S3 Strategic Industries:
License fees               $    11,360   $  8,128   $      3,232       39.8 %
Maintenance services            34,862     31,895          2,967        9.3
Software revenues               46,222     40,023          6,199       15.5
Consulting                      19,146     23,474         (4,328 )    (18.4 )
Total S3 revenues          $    65,368   $ 63,497   $      1,871        2.9 %

M3 Strategic Industries:
License fees               $     9,104   $  7,873   $      1,231       15.6 %
Maintenance services            17,552     20,472         (2,920 )    (14.3 )
Software revenues               26,656     28,345         (1,689 )     (6.0 )
Consulting                      23,122     29,984         (6,862 )    (22.9 )
Total M3 revenues          $    49,778   $ 58,329   $     (8,551 )    (14.7 )%

General Industries:
License fees               $     5,471   $  5,124   $        347        6.8 %
Maintenance services            33,016     36,742         (3,726 )    (10.1 )
Software revenues               38,487     41,866         (3,379 )     (8.1 )
Consulting                      15,359     27,224        (11,865 )    (43.6 )
Total GI revenues          $    53,846   $ 69,090   $    (15,244 )    (22.1 )%

Total Revenues. We generate revenues from licensing software, providing maintenance and support on licensed products and providing consulting services. We generally utilize written contracts as the means to establish the terms and conditions by which our products, maintenance and consulting services are sold to our customers. As our maintenance and consulting services are primarily attributable to our licensed products, growth in our maintenance and consulting services is generally tied to the level of our license contracting activity.

We recognize revenues pursuant to specific and detailed guidelines applicable to the software industry. License fees revenues from end-users are generally recognized when the software product has been shipped and certain conditions are met. Revenues from customer maintenance and support contracts are deferred and recognized ratably over the term of the agreements. Revenues from consulting services (including training and implementation services) are recognized as services are provided to customers. See Part II - Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations- Critical Accounting Policies and Estimates - Revenue Recognition, in our Annual Report on Form 10-K for our fiscal year ended May 31, 2009, for a more complete description of our revenue recognition policy.

First quarter fiscal 2010 total revenues decreased 11.5% to $169.0 million as compared to $190.9 million in the first quarter of fiscal 2009. Software revenues, consisting of license fees revenues and maintenance services, were up 1.0% to $111.4 million compared to $110.2 million in the first quarter last year. The increase included a 22.8% increase in our license fees revenues partially offset by a 4.1% decrease in maintenance services revenues. Offsetting this increase in software revenues was a 28.6% decrease in our consulting revenues.

License Fees. Our license fees primarily consist of fees resulting from products licensed to customers on a perpetual basis. Product license fees result from a customer's licensing of a given software product for the first time or with a customer's licensing of additional users for previously licensed products.

License fees revenues for the first quarter of fiscal 2010 increased $4.8 million, or 22.8%, compared to the first quarter of fiscal 2009. License fees revenues increased in each of our reportable segments with S3 Strategic Industries, M3 Strategic Industries and General Industries up $3.2 million, $1.2 million and $0.3 million; respectively, as compared to the first quarter last year. The increase in S3 Strategic Industries' first quarter license fees revenues was primarily due to continued strength in our healthcare business unit and a significant license transaction in our public sector business unit recorded in the first quarter of fiscal 2010. The increase in M3 Strategic Industries' license fees revenues was primarily

related to our equipment service management & rental business unit. With the completion of customer implementation project milestones in the first quarter of fiscal 2010, we currently recognized certain deferred revenues on previously contracted deals. The increase in license fees revenues was experienced in our Americas and APAC geographies which were up $5.9 million and $0.3 million, respectively, compared to the first quarter of last year. The Americas region continued to benefit from a targeted sales stimulus campaign we offered our existing S3 customer base during the second half of fiscal 2009, primarily our fourth quarter. This program favorably impacted our healthcare and services industries business units' revenues in the first quarter of fiscal 2010 as we recognized revenue previously deferred as all contract terms related to these transactions were completed in the first quarter of fiscal 2010. Our EMEA region's license fees revenues were down $1.4 million compared to the similar period last year primarily related to decreased sales of our M3 solutions in our manufacturing & distribution business unit. The total number of licensing transactions decreased in the first quarter of fiscal 2010 by 82 to 134 as compared to 216 in the first quarter of fiscal 2009. The number of licensing transactions with new customers decreased to 17 compared to 32 in the first quarter of fiscal year 2009. In the first quarter of fiscal 2010 we entered into three license transactions between $0.5 million and $1.0 million compared to nine in the similar quarter last year. We entered into five licensing transactions greater than $1.0 million in the current quarter compared to one in the first quarter of fiscal 2009.

Maintenance Services. Our maintenance services revenues represent the ratable recognition of fees to enroll and renew licensed products in our maintenance programs. These fees are typically charged annually and are based on the license fees initially paid by our customers. Maintenance services revenues can fluctuate based on the number and timing of new license contracts, renewal rates and price increases.

Maintenance services revenues for the first quarter of fiscal 2010 decreased $3.7 million to $85.4 million, or 4.1%, compared to our fiscal 2009 first quarter. This was primarily driven by decreases in our M3 Strategic Industries and General Industries segments which were down $2.9 million and $3.7 million, respectively, in the comparable first quarters of fiscal 2010 and 2009. These decreases were the result of slightly higher cancellation rates which were primarily offset by maintenance agreements associated with new customers in these segments. Maintenance services revenues in the S3 Strategic Industries segment were up $3.0 million as annual maintenance agreement renewals with associated price increases as well as maintenance agreements associated with new S3 Strategic Industries' customers more than offset cancellations. In the first quarter of fiscal 2010, maintenance services revenues within our EMEA and APAC regions were down $4.8 million and $0.7 million, respectively, as compared to the similar period last year as cancellations outpaced new customer agreements. Our Americas region experienced a $1.8 million increase in maintenance services revenues related to net new maintenance agreements.

Consulting. Our consulting revenues consist of services related to software installations, software implementations, customized development and training services for customers who have licensed our products.

Consulting revenues for the first quarter of fiscal 2010 decreased $23.1 million to $57.6 million, or 28.6%, compared to the first quarter of fiscal 2009. The quarter-over-quarter decrease in consulting revenues was experienced in each of our reportable segments with General Industries reflecting the largest decrease of $11.9 million followed by M3 Strategic Industries down $6.9 million and S3 Strategic Industries down $4.3 million. Within our EMEA and Americas regions, first quarter fiscal 2010 consulting revenues were down $16.8 million and $6.3 million, respectively, as compared to the first quarter of fiscal 2009. APAC consulting revenues were relatively flat for the comparable first quarters. These decreases were the result of a significant reduction in the number of billable consultants in the first quarter of fiscal 2010 as compared to fiscal 2009, primarily in our EMEA region, as well as lower bookings for our consulting and implementation services related to decreased license contracting activity in our current fiscal quarter and the prior year. Third-party consulting revenues also decreased in the current quarter compared to the similar period last year, as we leveraged utilization of our direct consulting resources. We continue to reduce the size of our consulting staff as part of our strategy to move more implementation services to our partner channel as well as in response to the lower consulting bookings. Over the past year, we have reduced our number of billable service consultants by over 30% and will continue to right-size our . . .