Cautionary Note Regarding Forward-Looking Statements

The Private Securities Litigation Reform Act of 1995 contains certain safe harbor provisions regarding forward-looking statements. This Form 10-Q, and other information provided by us or statements made by our directors, officers or employees from time to time, may contain "forward-looking" statements and information, which involve risks and uncertainties. Actual future results may differ materially. Statements indicating that we "expect," "estimate," "believe," "are planning" or "plan to" are forward-looking, as are other statements concerning future financial results, product offerings or other events that have not yet occurred. There are various factors that could cause actual results or events to differ materially from those anticipated by the forward-looking statements, including but not limited to the following: the receipt and shipment of new orders; the timely release and market acceptance of new products and/or enhancements to our existing products; the growth rates of certain market segments; the positioning of our products in those market segments; the customer demand and acceptance of any new product initiative; variations in the demand for professional services and technical support; pricing pressures and the competitive environment in the software industry; the continued uncertainty in the U.S. and international economies, which could result in fewer sales of our products and may otherwise harm our business; business and consumer use of the Internet; our ability to complete and integrate acquisitions; our ability to realize the expected benefits and anticipated synergies from acquired businesses; our ability to penetrate international markets and manage our international operations; our ability to execute on the strategic and operational initiatives we are currently undertaking, including any resulting disruption to our business, employees, customers and the manner in which we finance our operations; our ability to execute and complete divestitures in accordance with our divestiture plan; and those factors discussed in Part II, Item 1A (Risk Factors) in this Quarterly Report on Form 10-Q and in Part I, Item 1A (Risk Factors) in our Annual Report on Form 10-K for the fiscal year ended November 30, 2011. Although we have sought to identify the most significant risks to our business, we cannot predict whether, or to what extent, any of such risks may be realized. We also cannot assure you that we have identified all possible issues which we might face. We undertake no obligation to update any forward-looking statements that we make.

Use of Constant Currency

Revenue from our international operations has historically represented more than half of our total revenue. As a result, our revenue results have been impacted, and we expect will continue to be impacted, by fluctuations in foreign currency exchange rates. For example, if the local currencies of our foreign subsidiaries weaken, our consolidated results stated in U.S. dollars are negatively impacted.

As exchange rates are an important factor in understanding period to period comparisons, we believe the presentation of revenue growth rates on a constant currency basis helps improve the ability to understand our revenue results and evaluate our performance in comparison to prior periods. The constant currency information presented is calculated by translating current period results using prior period weighted average foreign currency exchange rates. These results should be considered in addition to, not as a substitute for, results reported in accordance with accounting principles generally accepted in the United States of America (GAAP).

Overview

We are a global software company that simplifies and enables the development, deployment and management of business applications on-premise or on any Cloud, on any platform and on any device with minimal IT complexity and low total cost of ownership. We are currently taking steps to implement the strategic plan (the "Plan") we announced during the second quarter of fiscal 2012. Under the Plan, we will become a leading provider of next-generation, context-aware application development and deployment platform in the Cloud for the Application Platform-as-a-Service (aPaas) market by investing in our OpenEdge, DataDirect Connect and Decision Analytics product lines ("Core" product lines) and integrating them into a single, cohesive offering.

We intend to execute on our Plan in two phases. In the first phase, which is currently underway, we are investing in our Core product lines and making them more Cloud-ready. We are also divesting ten non-core product lines: Actional, Artix, DataXtend, FuseSource, ObjectStore, Orbacus, Orbix, Savvion, Shadow and Sonic ("non-Core" product lines). In the second phase, by unifying the product capabilities of our Core product lines, we will refine and enhance our next generation, feature-rich application development and deployment solution targeting the new market category of aPaaS.

In addition to the initiatives above, in the first phase of our Plan, we will also execute on cost reductions, including a net $40.0 million reduction in budgeted 2012 expense run rate by consolidating facilities, implementing a simplified organizational

structure and reducing the global workforce by approximately 10% to 15%. We will also repurchase at least $350.0 million of our common stock through fiscal 2013.

Through the filing of this quarterly report, we achieved a number of the steps needed to execute on our initiatives under the Plan.

• We entered into a definitive purchase and sale agreement to divest our FuseSource product line to Red Hat, Inc. We expect this transaction to close in the third quarter of fiscal 2012, subject to customary closing conditions. The process of identifying buyers and working with interested parties continues for the remainder of our non-Core product lines.

• We recorded $8.5 million in restructuring expenses in furtherance of our cost reduction plans. This charge includes $7.0 million in severance and other employee benefits associated with the reduction of 8% of our workforce. Further cost reduction measures are expected to be recorded through the remainder of fiscal 2012 and the first half of fiscal 2013 to achieve our cost reduction goals.

• We still intend to execute the repurchase of up to $150.0 million of our common stock before November 30, 2012, and an additional $200.0 million in fiscal 2013.

• We began the process of reorganizing our management structure and investing in our sales, marketing and strategic product development initiatives.

Our financial results for the first half of fiscal 2012 were adversely impacted by factors connected to the planning, announcement and execution of our new strategic plan, including the undertaking of large restructuring efforts and the marketing for divestiture of non-Core products. These factors contributed to a very uncertain environment for our company, our partners, customers and employees in the quarter. In particular, during the second quarter of fiscal 2012, purchasing decisions were delayed, causing deal slippage at a greater rate than usual. This was caused both by uncertainty surrounding our strategic plan and generally deteriorating macroeconomic conditions, primarily in Europe.

Investments to improve the Core business were also initiated late during the second quarter, and will require time to impact performance. Until these investments bear fruit, our operating margins will be adversely impacted. In addition, the new business focus and new strategy has required us to restructure our organization and the way we go to market, how we think about and implement product roadmaps and how we operate and report our financial results, all of which caused additional disruption.

With respect to our non-Core products, although we continue to focus our efforts on selling these products, revenue from these product lines dropped significantly during the first half of fiscal 2012 and we expect future declines in subsequent quarters until we divest these products. Any such declines will adversely impact our results and we cannot give any assurance as to the timing of the completion of the divestitures, if at all. Furthermore, our operating performance will be adversely impacted by a temporarily higher expense need as we transition away from the non-Core portfolio.

We expect these disruptions to continue during the remainder of fiscal 2012.

Through the second quarter of fiscal 2012, we operated our business in three segments: Application Development Platforms, Enterprise Business Solutions and Enterprise Data Solutions. However, our organization was managed primarily on a functional basis. We assigned dedicated costs and expenses, primarily costs of revenue and product development, directly to each segment and utilized an allocation methodology to assign all other costs and expenses, primarily sales and marketing and general and administrative, to each segment. A significant portion of the total costs and expenses assigned to each segment were allocated. As part of the Plan, we intend to operate and report our business on a go forward basis as Core and non-Core. Core will consist of OpenEdge, DataDirect Connect, Apama, Corticon and the Progress Control Tower.

The U.S. and many foreign economies continue to experience uncertainty driven by varying macroeconomic conditions and recovery remains uneven. Uncertainty in the macroeconomic environment and associated global economic conditions have resulted in extreme volatility in credit, equity, and foreign currency markets, including the European sovereign debt markets and volatility in various markets including the financial services sector. We have been adversely impacted by these conditions as some customers have delayed software investments in response to this macroeconomic uncertainty. The continuation of this climate could cause our customers to further delay, forego or reduce the amount of their investments in our products or delay payments of amounts due to us. We expect these macroeconomic conditions to continue in the remainder of fiscal 2012, most particularly in Europe, the Middle East and Africa (EMEA).

We derive a significant portion of our revenue from international operations, which are primarily conducted in foreign currencies. As a result, changes in the value of these foreign currencies relative to the U.S. dollar have significantly impacted our results of operations and may impact our future results of operations. We expect to be negatively impacted by weaker currencies in EMEA during the third quarter and remainder of fiscal 2012.

We believe that existing cash balances, together with funds generated from operations, amounts available under our revolving credit line and consideration received from the divestiture of non-Core product lines will be sufficient to finance our operations and meet our foreseeable cash requirements through at least the next twelve months, including our plans to repurchase shares of our common stock.

Critical Accounting Policies

Our consolidated financial statements are prepared in accordance with GAAP. These accounting principles require us to make certain estimates, judgments and assumptions. We believe that the estimates, judgments and assumptions upon which we rely are reasonable based upon information available to us at the time that these estimates, judgments and assumptions are made. These estimates, judgments and assumptions can affect the reported amounts of assets and liabilities as of the date of the financial statements as well as the reported amounts of revenues and expenses during the periods presented. To the extent there are material differences between these estimates, judgments or assumptions and actual results, our financial statements will be affected. The accounting policies that reflect our more significant estimates, judgments and assumptions and which we believe are the most critical to aid in fully understanding and evaluating our reported financial results include the following:

• Revenue recognition

• Allowance for doubtful accounts

• Goodwill and intangible asset impairment

• Income tax accounting

• Stock-based compensation

• Investments in debt securities

• Restructuring charges

• Business combinations

In many cases, the accounting treatment of a particular transaction is specifically dictated by GAAP and does not require management's judgment in its application. There are also areas in which management's judgment in selecting among available alternatives would not produce a materially different result. Our senior management has reviewed these critical accounting policies and related disclosures with the Audit Committee of the Board of Directors.

During the second quarter of fiscal 2012, there were no significant changes to our critical accounting policies and estimates, except as described below. See Management's Discussion and Analysis of Financial Condition and Results of Operations in Item 7 of our Annual Report on Form 10-K for the fiscal year ended November 30, 2011 for a more complete discussion of our critical accounting policies and estimates.

Goodwill Impairment

We have goodwill of $257.6 million at May 31, 2012. We assess the impairment of goodwill on an annual basis and whenever events or changes in circumstances indicate that the carrying value of the asset may not be recoverable. We would record an impairment charge if such an assessment were to indicate that the fair value of the asset was less than the carrying value. When we evaluate potential impairments outside of our annual measurement date, judgment is required in determining whether an event has occurred that may impair the value of goodwill. Factors that could indicate that an impairment may exist include significant underperformance relative to plan or long-term projections, significant changes in business strategy, significant negative industry or economic trends or a significant decline in our stock price or in the value of one of our reporting units for a sustained period of time.

We utilize either discounted cash flow models or other valuation models, such as comparative transactions and market multiples, to determine the fair value of our reporting units. We must make assumptions about future cash flows, future operating plans, discount rates, comparable companies, market multiples, purchase price premiums and other factors in those models. Different assumptions and judgment determinations could yield different conclusions that would result in an impairment charge to income in the period that such change or determination was made. The determination of reporting units also requires management judgment. We consider whether a reporting unit exists within a reportable segment based on the availability of discrete financial information that is regularly reviewed by segment management.

During the second quarter of fiscal 2012, as a result of continued declines in certain reporting units and in connection with the announcement of the Plan, we determined an impairment triggering event occurred that required us to perform an interim goodwill impairment test. The test indicated that our reporting units had an estimated fair value that was in excess of their carrying values, and thus, no impairment was present. However, the difference between the carrying value and fair value of our Enterprise Business Solutions reporting unit has decreased since the annual test as a result of updates to our internal forecasts and projected cash flows. The amount of goodwill allocated to the Enterprise Business Solutions segment is $96.3 million.

The assumptions used in the discounted cash flow model for the Enterprise Business Solutions segment are dependent on several variables and assume a highest and best use scenario. The assumptions include changes in selling and marketing strategies to increase revenue growth rates and changes in cost structure to improve segment profitability. We also used comparable companies and market transactions in our market approach to value the Enterprise Business Solutions reporting unit. A change in certain of the assumptions used in the discounted cash flow model or market approach could yield a different conclusion that may have resulted in an impairment charge.

In the third quarter of fiscal 2012, we plan to test goodwill for impairment in connection with the reassignment of goodwill to our new segments. Through the filing of this report, we have not commenced this test.

Results of Operations

The following table sets forth certain income and expense items as a percentage
of total revenue, and the percentage change in dollar amounts of such items
compared with the corresponding period in the previous fiscal year:

                                               Percentage of Total Revenue                                  Percentage Change
                                   Three Months Ended                 Six Months Ended
                             May 31, 2012      May 31, 2011    May 31, 2012     May 31, 2011    Three Months Ended      Six Months Ended
Revenue:
Software licenses                  26  %             34 %             30 %               36 %            (35 )%                 (26 )%
Maintenance and services           74                66               70                 64               (5 )                   (3 )
Total revenue                     100               100              100                100              (15 )                  (11 )
Costs of revenue:
Cost of software licenses           2                 2                2                  2               (2 )                   (3 )
Cost of maintenance and
services                           17                15               16                 14                -                      4
Amortization of acquired
intangibles                         3                 3                3                  3               (8 )                   (7 )
Total costs of revenue             22                20               21                 19               (1 )                    2
Gross profit                       78                80               79                 81              (18 )                  (14 )
Operating expenses:
Sales and marketing                36                33               37                 33               (6 )                    -
Product development                20                14               19                 15               13                     10
General and administrative         16                11               14                 10               31                     31
Amortization of acquired
intangibles                         2                 1                2                  2              (11 )                  (16 )
Restructuring expenses              7                 1                4                  1     *                      *
Acquisition-related expenses        -                 -                -                  -     *                      *
Total operating expenses           81                60               76                 61               14                     10
(Loss) income from
operations                         (3 )              20                3                 20             (114 )                  (85 )
Other income (expense)              -                 -                -                  -               19                    205
(Loss) income before income
tax (benefit) provision            (3 )              20                3                 20             (113 )                  (84 )
Income tax (benefit)
provision                          (1 )               7                1                  6             (117 )                  (82 )
Net (loss) income                  (2 )%             13 %              2 %               14 %           (111 )%                 (85 )%

* not meaningful

Revenue

                             Three Months Ended               Percentage Change
                                                                          Constant
(In thousands)         May 31, 2012      May 31, 2011     As Reported     Currency
License               $       29,673    $       45,417        (35 )%         (32 )%
Maintenance                   73,066            75,865         (4 )            -
Professional services         11,857            13,402        (12 )           (9 )
Total revenue         $      114,596    $      134,684        (15 )%         (12 )%



                              Six Months Ended                Percentage Change
                                                                          Constant
(In thousands)         May 31, 2012      May 31, 2011     As Reported     Currency
License               $       71,165    $       96,753        (26 )%         (25 )%
Maintenance                  145,362           146,944         (1 )            1
Professional services         22,495            25,224        (11 )           (9 )
Total revenue         $      239,022    $      268,921        (11 )%          (9 )%

Total revenue decreased $20.1 million, or 12% on a constant currency basis and 15% otherwise, in the second quarter of fiscal 2012 as compared to the same quarter last year and decreased $29.9 million, or 9% on a constant currency basis and 11% otherwise, in the first six months of fiscal 2012 as compared to the same period in the prior year, primarily as a result of decreases in license revenue. The revenue performance in the second quarter of fiscal 2012 reflects the impact of the planning for and announcement of our Plan on our employees, customers and partners. Given the uncertainties and concerns that resulted from the Plan, our go-to-market focus and momentum was disrupted, and our execution suffered as a result. In the field, we saw purchasing decisions delayed and we saw deal slippage at a greater rate than normal, caused both by uncertainty surrounding our Plan and generally deteriorating macroeconomic conditions, primarily in Europe.

Changes in prices from fiscal 2011 to 2012 did not have a significant impact on our revenue. Changes in foreign currency exchange rates negatively impacted our reported revenues.

                                                Three Months Ended               Percentage Change
                                                                                             Constant
(In thousands)                             May 31, 2012     May 31, 2011     As Reported     Currency
North America                             $     54,703     $     60,448          (10 )%           (10 )%
As a percentage of total revenue                    48 %             45 %
EMEA                                      $     43,040     $     52,908          (19 )%           (13 )%
As a percentage of total revenue                    38 %             39 %
Latin America                             $      8,324     $      9,415          (12 )%             -  %
As a percentage of total revenue                     7 %              7 %
Asia Pacific                              $      8,529     $     11,913          (28 )%           (27 )%
As a percentage of total revenue                     7 %              9 %

                                                  Six Months Ended                   Percentage Change
                                                                                                  Constant
(In thousands)                             May 31, 2012      May 31, 2011      As Reported        Currency
North America                             $     114,770     $     124,926           (8 )%             (8 )%
As a percentage of total revenue                     48 %              46 %
EMEA                                      $      87,457     $     104,323          (16 )%            (13 )%
As a percentage of total revenue                     37 %              39 %
Latin America                             $      17,653     $      18,574           (5 )%              3  %
As a percentage of total revenue                      7 %               7 %
Asia Pacific                              $      19,142     $      21,098           (9 )%            (10 )%
As a percentage of total revenue                      8 %               8 %

Total revenue generated in North America decreased $5.7 million, or 10% on a constant and actual currency basis, as compared to the same quarter last year and represented 48% and 45% of total revenue in the second quarter of fiscal 2012 and 2011, respectively. Total revenue generated in markets outside North America decreased $14.3 million, or 14% on a constant currency basis and 19% otherwise, in the second quarter of fiscal 2012 as compared to the same quarter last year, and represented 52% and 55% of total revenue in the second quarter of fiscal 2012 and 2011, respectively. If exchange rates had remained constant in the second quarter of fiscal 2012 as compared to the exchange rates in effect in the second quarter of fiscal 2011, total revenue generated in markets outside North America would have represented 54% of total revenue.

Total revenue generated in North America decreased $10.2 million, or 8% on a constant and actual currency basis, as compared to the same period last year and represented 48% and 46% of total revenue in the first six months of fiscal 2012 and 2011, respectively. Total revenue generated in markets outside North America decreased $19.7 million, or 10% on a constant currency basis and 14% otherwise, in the first six months of fiscal 2012 as compared to the same period last year, and represented 52% and 54% of total revenue in the first six months of fiscal 2012 and 2011, respectively. If exchange rates had remained constant in the first six months of fiscal 2012 as compared to the exchange rates in effect in the first six months of fiscal 2011, total revenue generated in markets outside North America would have represented 53% of total revenue.

In the second quarter of fiscal 2012, all regions were negatively impacted by weaker local currencies. In the first six months of fiscal 2012, EMEA and Latin American were negatively impacted by weaker local currencies and Asia Pacific was helped by stronger local currencies.

                                       Three Months Ended                                     Six Months Ended
                                                              Percentage                                            Percentage
(In thousands)           May 31, 2012       May 31, 2011        Change         May 31, 2012       May 31, 2011        Change
Application
Development Platform
segment                $       71,898     $       83,896          (14 )%     $      147,467     $      162,973          (10 )%
Enterprise Business
Solutions segment              29,940             34,162          (12 )              60,834             71,289          (15 )
Enterprise Data
Solutions segment              12,758             16,626          (23 )              30,721             34,659          (11 )
Total revenue          $      114,596     $      134,684          (15 )%     $      239,022     $      268,921          (11 )%

During the second quarter of fiscal 2012 as compared to the same quarter last . . .