SEC Info - Tibco Software Inc - 10-Q

SEC Info

Home

My Interests

Help

Please Sign In

Tibco Software Inc · 10-Q · For 6/1/08

Filed On 7/10/08 2:43pm ET · SEC File 0-26579 · Accession Number 1193125-8-149238

  As Of               Filer                 Filing     As/For/On Docs:Pgs              Issuer               Agent

 7/10/08  Tibco Software Inc                10-Q        6/01/08    7:110                                    RR Donnelley/FA

Quarterly Report · Form 10-Q
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: 10-Q        Quarterly Report                                    HTML    649K 
 2: EX-10.4     Form of Stock Option Agreement                      HTML     33K 
 3: EX-10.5     Form of Restricted Stock Agreement                  HTML     32K 
 4: EX-31.1     Rule 13a-14(A) / 15d-14(A) Certification by Chief   HTML     11K 
                          Executive Officer                                      
 5: EX-31.2     Rule 13a-14(A) / 15d-14(A) Certification by Chief   HTML     11K 
                          Financial Officer                                      
 6: EX-32.1     Section 1350 Certification by Chief Executive       HTML      7K 
                          Officer                                                
 7: EX-32.2     Section 1350 Certification by Chief Financial       HTML      7K 
                          Officer

10-Q · Quarterly Report
Document Table of Contents

Page	(sequential)	\|	(alphabetic)	Top
			Alternative Formats (Word, et al.) Condensed Consolidated Balance Sheets as of May 31, 2008 and November 30, 2007 Condensed Consolidated Statements of Cash Flows for the six months ended May 31, 2008 and May 31, 2007 Condensed Consolidated Statements of Operations for the three months and six months ended May 31, 2008 and May 31, 2007 Controls and Procedures Exhibits Legal Proceedings Management s Discussion and Analysis of Financial Condition and Results of Operations Notes to Condensed Consolidated Financial Statements Quantitative and Qualitative Disclosures About Market Risk Risk Factors Signatures Submission of Matters to a Vote of Security Holders Table of Contents Unregistered Sales of Equity Securities and Use of Proceeds
1	1st Page - Filing Submission
"	Table of Contents
"	Condensed Consolidated Balance Sheets as of May 31, 2008 and November 30, 2007
"	Condensed Consolidated Statements of Operations for the three months and six months ended May 31, 2008 and May 31, 2007
"	Condensed Consolidated Statements of Cash Flows for the six months ended May 31, 2008 and May 31, 2007
"	Notes to Condensed Consolidated Financial Statements
"	Management s Discussion and Analysis of Financial Condition and Results of Operations
"	Quantitative and Qualitative Disclosures About Market Risk
"	Controls and Procedures
"	Legal Proceedings
"	Risk Factors
"	Unregistered Sales of Equity Securities and Use of Proceeds
"	Submission of Matters to a Vote of Security Holders
"	Exhibits
"	Signatures

This is an EDGAR HTML document rendered as filed. [ Alternative Formats ]

Sponsored Ads...

Form 10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 1, 2008

¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 000-26579

TIBCO SOFTWARE INC.

(Exact name of registrant as specified in its charter)

Delaware

77-0449727

(State or other jurisdiction

of incorporation or organization)

(I.R.S. Employer

Identification No.)

3303 Hillview Avenue

Palo Alto, California 94304-1213

(Address of principal executive offices) (Zip code)

Registrant’s telephone number, including area code: (650) 846-1000

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):


Large accelerated filer x	Accelerated filer ¨	Non-accelerated filer ¨	Smaller reporting company ¨
		(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x

The number of shares outstanding of the registrant’s Common Stock, $0.001 par value, as of July 3, 2008 was 183,123,392 shares.

TIBCO SOFTWARE INC.

INDEX


Item		Page No.
	PART I—FINANCIAL INFORMATION

Item 1	Financial Statements (Unaudited):

	Condensed Consolidated Balance Sheets as of May 31, 2008 and November 30, 2007	3

	Condensed Consolidated Statements of Operations for the three months and six months ended May 31, 2008 and May 31, 2007	4

	Condensed Consolidated Statements of Cash Flows for the six months ended May 31, 2008 and May 31, 2007	5

	Notes to Condensed Consolidated Financial Statements	6

Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	21

Item 3	Quantitative and Qualitative Disclosures About Market Risk	33

Item 4	Controls and Procedures	34
	PART II—OTHER INFORMATION

Item 1	Legal Proceedings	35

Item 1A	Risk Factors	35

Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	41

Item 4	Submission of Matters to a Vote of Security Holders	41

Item 6	Exhibits	42

	Signatures	43

TIBCO SOFTWARE INC.

PART I—FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

(in thousands, except par value per share)


	May 31, 2008		November 30, 2007
Assets
Current assets:
Cash and cash equivalents	$	244,918	$	170,237
Short-term investments		33,230		95,534
Accounts receivable, net of allowances of $3,854 and $4,259		113,668		161,730
Prepaid expenses and other current assets		45,243		53,540

Total current assets		437,059		481,041
Property and equipment, net		108,084		111,390
Goodwill		411,004		412,256
Acquired intangible assets, net		97,778		110,930
Long-term deferred income tax assets		42,262		35,307
Other assets		44,074		47,535

Total assets	$	1,140,261	$	1,198,459

Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	14,739	$	12,076
Accrued liabilities		76,335		95,526
Accrued excess facilities costs		4,445		5,421
Deferred revenue		142,853		127,200
Current portion of long-term debt		1,978		1,924

Total current liabilities		240,350		242,147
Accrued excess facilities costs, less current portion		8,278		10,811
Long-term deferred revenue		10,824		14,319
Long-term deferred income tax liabilities		15,353		25,821
Long-term income tax liabilities		12,143		—
Long-term debt, less current portion		43,555		44,558
Other long-term liabilities		4,663		5,006

Total liabilities		335,166		342,662

Commitments and contingencies (Note 8)
Minority interest		468		401
Stockholders’ equity:
Common stock, $0.001 par value; 1,200,000 shares authorized; 183,104 and 191,150 shares issued and outstanding		183		191
Additional paid-in capital		767,112		794,568
Accumulated other comprehensive income		37,332		32,993
Retained earnings		—		27,644

Total stockholders’ equity		804,627		855,396

Total liabilities and stockholders’ equity	$	1,140,261	$	1,198,459

See accompanying Notes to Condensed Consolidated Financial Statements.

TIBCO SOFTWARE INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

(in thousands, except per share data)


	Three Months Ended May 31,						Six Months Ended May 31,
	2008			2007			2008			2007
Revenue:
License revenue	$	57,696		$	54,926		$	115,449		$	107,111
Service and maintenance revenue:
Service and maintenance		90,050			73,686			176,908			145,625
Reimbursable expenses		2,286			1,905			4,253			3,435

Total service and maintenance revenue		92,336			75,591			181,161			149,060

Total revenue		150,032			130,517			296,610			256,171

Cost of revenue:
License		7,484			4,730			14,764			8,801
Service and maintenance		38,088			31,756			73,858			62,584

Total cost of revenue		45,572			36,486			88,622			71,385

Gross profit		104,460			94,031			207,988			184,786
Operating expenses:
Research and development		26,756			21,997			52,210			43,012
Sales and marketing		56,454			46,433			110,842			89,382
General and administrative		12,991			12,113			26,789			24,865
Amortization of acquired intangible assets		4,235			2,472			8,375			4,942

Total operating expenses		100,436			83,015			198,216			162,201

Income from operations		4,024			11,016			9,772			22,585
Interest income		2,244			5,716			5,502			12,106
Interest expense		(876	)		(645	)		(1,718	)		(1,013	)
Other income (expense), net		(206	)		(302	)		32			(1,567	)

Income before provision for income taxes and minority interest		5,186			15,785			13,588			32,111
Provision for income taxes		1,641			6,561			4,474			12,484
Minority interest, net of tax		52			6			107			18

Net income	$	3,493		$	9,218		$	9,007		$	19,609

Net income per share:
Basic	$	0.02		$	0.05		$	0.05		$	0.09

Diluted	$	0.02		$	0.04		$	0.05		$	0.09

Shares used in computing net income per share:
Basic		182,078			204,575			184,197			206,487

Diluted		185,990			211,885			188,028			214,097

See accompanying Notes to Condensed Consolidated Financial Statements.

TIBCO SOFTWARE INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(in thousands)


	Six Months Ended May 31,
	2008			2007
Operating activities:
Net income	$	9,007		$	19,609
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation of property and equipment		8,016			8,179
Amortization of acquired intangible assets		16,174			7,753
Stock-based compensation		10,361			7,697
Deferred income tax		(10,229	)		(1,769	)
Tax benefits related to stock option plans		4,679			6,852
Excess tax benefits from stock-based compensation		(4,580	)		(6,918	)
Minority interest, net of tax		107			18
Other non-cash adjustments, net		139			57
Changes in assets and liabilities:
Accounts receivable		47,132			33,430
Prepaid expenses and other assets		6,819			(5,496	)
Accounts payable		2,642			(2,942	)
Accrued liabilities and excess facilities costs		(9,738	)		(15,054	)
Deferred revenue		11,749			1,177

Net cash provided by operating activities		92,278			52,593

Investing activities:
Purchases of short-term investments		(37,046	)		(131,265	)
Maturities and sales of short-term investments		99,384			353,513
Purchases of private equity investments		(25	)		(31	)
Proceeds from private equity investments		222			618
Purchases of property and equipment		(4,780	)		(6,586	)
Restricted cash pledged as security		(148	)		(37	)

Net cash provided by investing activities		57,607			216,212

Financing activities:
Proceeds from exercise of stock options		5,049			15,615
Proceeds from employee stock purchase program		1,528			898
Withholding taxes related to restricted stock net share settlement		(692	)		—
Repurchases of the Company’s common stock		(85,645	)		(142,777	)
Excess tax benefits from stock-based compensation		4,580			6,918
Principal payments on long-term debt		(949	)		(934	)
Proceeds from minority investors		—			189

Net cash used in financing activities		(76,129	)		(120,091	)

Effect of foreign exchange rate changes on cash and cash equivalents		925			903
Net increase in cash and cash equivalents		74,681			149,617
Cash and cash equivalents at beginning of period		170,237			138,912

Cash and cash equivalents at end of period	$	244,918		$	288,529

Supplemental disclosures:
Income taxes paid	$	7,602		$	5,727

Interest paid	$	1,267		$	1,221

Supplemental disclosures of non-cash financing activities:
Non-cash contributions from minority investors	$	—		$	85

See accompanying Notes to Condensed Consolidated Financial Statements.

TIBCO SOFTWARE INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1.	BASIS OF PRESENTATION

The accompanying unaudited Condensed Consolidated Financial Statements have been prepared by TIBCO Software Inc. (“TIBCO,” the “Company,” “we” or “us”) in accordance with the rules and regulations of the Securities and Exchange Commission (“SEC”). Certain information and footnote disclosures normally included in Consolidated Financial Statements prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) have been condensed or omitted in accordance with such rules and regulations. The condensed consolidated balance sheet data as of November 30, 2007, was derived from audited financial statements, but does not include all disclosures required by GAAP. In the opinion of management, the accompanying unaudited Condensed Consolidated Financial Statements reflect all adjustments, consisting only of normal recurring adjustments, necessary to state fairly the financial position of the Company, and its results of operations and cash flows. These Condensed Consolidated Financial Statements should be read in conjunction with the audited Consolidated Financial Statements and notes thereto for the fiscal year ended November 30, 2007, included in the Company’s Annual Report on Form 10-K filed with the SEC on January 25, 2008.

Our fiscal year ends on November 30^th of each year. For purposes of presentation, we have indicated the second quarter of fiscal years 2008 and 2007 as ended on May 31, 2008 and 2007, respectively; whereas in fact, the second quarter of fiscal years 2008 and 2007 actually ended on June 1, 2008 and June 3, 2007, respectively. There were 91 days in the second quarter of both fiscal year 2008 and 2007.

The Condensed Consolidated Financial Statements include the accounts of the Company and its wholly-owned and majority-owned subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation. For majority owned subsidiaries, we reflect the minority interest of the portion we do not own on our Condensed Consolidated Balance Sheets between Total Liabilities and Stockholders’ Equity.

The results of operations for the three and six months ended May 31, 2008, are not necessarily indicative of the results that may be expected for the year ending November 30, 2008, or any other future period, and we make no representations related thereto.

2.	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Our significant accounting policies were described in Note 2 to our audited Consolidated Financial Statements for the fiscal year ended November 30, 2007, included in our Annual Report on Form 10-K. These accounting policies have not significantly changed with the exception of those discussed below.

Recent Accounting Pronouncements

In May 2008, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards (“SFAS”) No. 162, The Hierarchy of Generally Accepted Accounting Principles (“SFAS No. 162”). SFAS No. 162 identifies the sources of accounting principles and the framework for selecting the principles used in the preparation of financial statements of nongovernmental entities that are presented in conformity with generally accepted accounting principles (the GAAP hierarchy). SFAS No. 162 will become effective 60 days following the SEC’s approval of the Public Company Accounting Oversight Board amendments to AU Section 411, The Meaning of Present Fairly in Conformity With Generally Accepted Accounting Principles. We do not expect the adoption of SFAS No. 162 to have a material effect on our consolidated results of operations and financial condition.

In March 2008, the FASB issued SFAS No. 161, Disclosures about Derivative Instruments and Hedging Activities, an amendment of FASB Statement No. 133 (“SFAS No. 161”). SFAS No. 161 applies to all derivative instruments and related hedged items accounted for under SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities. SFAS No. 161 requires entities to provide greater transparency about (a) how and why an entity uses derivative instruments, (b) how derivative instruments and related hedged items are accounted for under SFAS No. 133 and its related interpretations, and (c) how derivative instruments and related hedged items affect an entity’s financial position, results of operations and cash flows. SFAS No. 161 is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008, and will be adopted by us in the first quarter of fiscal 2009. We do not expect the adoption of SFAS No. 161 to have a material effect on our consolidated results of operations and financial condition.

TIBCO SOFTWARE INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(Unaudited)

In December 2007, the FASB issued SFAS No. 141 (revised 2007), Business Combinations (“SFAS No. 141(R)”). SFAS No. 141(R) establishes principles and requirements for how an acquirer recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, any noncontrolling interest in the acquiree and the goodwill acquired. SFAS No. 141(R) also establishes disclosure requirements to enable the evaluation of the nature and financial effects of the business combination. SFAS No. 141(R) is effective for fiscal years beginning after December 15, 2008, and will be adopted by us in the first quarter of fiscal 2010. We are currently evaluating the potential impact of the adoption of SFAS No. 141(R) on our consolidated results of operations and financial condition.

In December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statements (“SFAS No. 160”). SFAS No. 160 amends Accounting Research Bulletin No. 51 to establish accounting and reporting standards for the noncontrolling interest in a subsidiary. SFAS No. 160 also establishes accounting and reporting standards for the amount of consolidated net income attributable to the parent and to the noncontrolling interest, changes in a parent’s ownership interest, and the valuation of retained noncontrolling equity investments when a subsidiary is deconsolidated. SFAS No. 160 also establishes disclosure requirements that identify and distinguish between the interests of the parent and the interests of the noncontrolling owners. SFAS No. 160 is effective for fiscal years beginning after December 15, 2008, and will be adopted by us in the first quarter of fiscal 2010. We are currently evaluating the potential impact of the adoption of SFAS No. 160 on our consolidated results of operations and financial condition.

In June 2007, the FASB ratified Emerging Issues Task Force (“EITF”) Issue No. 07-3, Accounting for Nonrefundable Advance Payments for Goods or Services Received for Use in Future Research and Development Activities (“EITF No. 07-3”). EITF No. 07-3 requires that nonrefundable advance payments for goods or services that will be used or rendered for future research and development activities be deferred and capitalized and recognized as an expense as the goods are delivered or the related services are performed. EITF No. 07-3 is effective, on a prospective basis, for fiscal years beginning after December 15, 2007. We are currently evaluating the effect that the adoption of EITF No. 07-3 will have on our consolidated results of operations and financial condition.

In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities—Including an amendment of FASB Statement No. 115 (“SFAS No. 159”). SFAS No. 159 expands the use of fair value accounting but does not affect existing standards which require assets or liabilities to be carried at fair value. The objective of SFAS No. 159 is to improve financial reporting by providing companies with the opportunity to mitigate volatility in reported earnings caused by measuring related assets and liabilities differently without having to apply complex hedge accounting provisions. Under SFAS No. 159, a company may elect to use fair value to measure eligible items at specified election dates and report unrealized gains and losses on items for which the fair value option has been elected in earnings at each subsequent reporting date. Eligible items include, but are not limited to, accounts and loans receivable, available-for-sale and held-to-maturity securities, equity method investments, accounts payable, guarantees, issued debt and firm commitments. If elected, SFAS No. 159 is effective for fiscal years beginning after November 15, 2007. Currently, we have not expanded our eligible items subject to the fair value option under SFAS No.159.

In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements (“SFAS No. 157”). SFAS No. 157 defines fair value, establishes a framework and gives guidance regarding the methods used for measuring fair value, and expands disclosures about fair value measurements. SFAS No. 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007, and interim periods of those fiscal years. In February 2008, the FASB released a FASB Staff Position No. 157, Effective Date of FASB Statement No. 157, which delays the effective date of SFAS No. 157 for all nonfinancial assets and nonfinancial liabilities, except those that are recognized or disclosed at fair value in the financial statements on a recurring basis (at least annually) to fiscal years beginning after November 15, 2008. The partial adoption of SFAS No. 157 for financial assets and liabilities did not have a material impact on our condensed consolidated financial position, results of operations or cash flows. See Note 4. Investments and Fair Value Measurements.

On December 1, 2007, we adopted FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes—an interpretation of FASB Statement No. 109 (“FIN 48”). FIN 48 clarifies the accounting for uncertainty in income taxes by prescribing the recognition threshold a tax position is required to meet before being recognized in the financial statements. FIN 48 also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. See Note 13. Provision for Income Taxes.

TIBCO SOFTWARE INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(Unaudited)

3.	BUSINESS COMBINATION

On June 5, 2007, we acquired Spotfire Holdings, Inc. (“Spotfire”), a privately held company headquartered in Massachusetts and a leading provider of next generation business intelligence software with approximately 200 employees worldwide. Pursuant to an Agreement and Plan of Merger (the “Spotfire Merger Agreement”), we acquired all the outstanding equity excluding the unvested options of Spotfire for approximately $190.4 million in cash plus transaction costs. In addition, pursuant to the Spotfire Merger Agreement, each unvested option of Spotfire was canceled and substituted with an option to purchase our common stock (each, a “Substitute Option”). We granted approximately 887,000 shares of Substitute Options on the closing date of the acquisition. Substitute Options were valued using the Black-Scholes model on the day of the acquisition with a fair value of $5.4 million and will be expensed as stock-based compensation on a straight-line basis over the remaining vesting period of the underlying awards.

The results of Spotfire’s operations have been included in the Condensed Consolidated Financial Statements since the acquisition date. The following unaudited pro forma adjusted summary reflects the Company’s condensed results of operations for the respective periods, assuming Spotfire had been acquired at the beginning of the fiscal year 2007, and includes the acquired in-process research and development (“IPR&D”) charge of $1.6 million (in thousands, except per share data):


	Three Months Ended May 31, 2007		Six Months Ended May 31, 2007
Pro forma adjusted total revenue	$	142,916	$	279,772

Pro forma adjusted net income	$	2,644	$	7,753

Pro forma adjusted net income per share:
Basic	$	0.01	$	0.04

Diluted	$	0.01	$	0.04

The unaudited pro forma adjusted summary is not intended to be indicative of future results.

4.	INVESTMENTS AND FAIR VALUE MEASUREMENTS

Marketable securities, which are classified as available-for-sale, are summarized below as of May 31, 2008 and November 30, 2007 (in thousands):


										Classified on Balance Sheet
	Purchased/ Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Aggregate Fair Value		Cash and Cash Equivalents		Short-term Investments
As of May 31, 2008:
U.S. government debt securities	$	21,256	$	78	$	(1	)	$	21,333	$	—	$	21,333
Corporate debt securities		4,768		57		—			4,825		—		4,825
Asset-backed securities		5,202		33		—			5,235		—		5,235
Mortgage-backed securities		1,837		—		—			1,837		—		1,837
Money market funds		111,056		—		—			111,056		111,056		—

	$	144,119	$	168	$	(1	)	$	144,286	$	111,056	$	33,230

As of November 30, 2007:
U.S. government debt securities	$	21,162	$	373	$	—		$	21,535	$	—	$	21,535
Corporate debt securities		36,585		130		(153	)		36,562		—		36,562
Asset-backed securities		20,189		87		(47	)		20,229		—		20,229
Mortgage-backed securities		17,241		68		(101	)		17,208		—		17,208
Money market funds		46,019		—		—			46,019		46,019		—

	$	141,196	$	658	$	(301	)	$	141,553	$	46,019	$	95,534

TIBCO SOFTWARE INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(Unaudited)

Fixed income securities included in short-term investments above are summarized by their contractual maturities as follows (in thousands):


	May 31, 2008		November 30, 2007
Contractual maturities:
Less than one year	$	20,751	$	12,682
One to three years		12,479		82,852

	$	33,230	$	95,534

The maturities of asset-backed and mortgage-backed securities are primarily based upon assumed prepayment forecasts utilizing interest rate scenarios and mortgage loan characteristics.

The following table summarizes the net realized gains (losses) on short-term investments for the periods presented (in thousands):


	Three Months Ended May 31,						Six Months Ended May 31,
	2008			2007			2008			2007
Realized gains	$	550		$	178		$	1,225		$	260
Realized losses		(550	)		(377	)		(947	)		(388	)

Net realized gains (losses)	$	—		$	(199	)	$	278		$	(128	)

The following table summarizes the fair value and gross unrealized losses related to available-for-sale securities, aggregated by investment category and the length of time that individual securities have been in a continuous unrealized loss position, as of May 31, 2008 (in thousands):


	Less than 12 months					More than 12 months				Total
	Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses
U.S. government debt securities	$	3,037	$	(1	)	$	—	$	—	$	3,037	$	(1	)

The unrealized losses on our investments were primarily due to changes in interest rates and market and credit conditions of the underlying securities. As of May 31, 2008, we do not consider these investments to be other-than-temporarily impaired because we have the ability to hold these investments until a recovery of fair value, which may be at maturity.

We periodically assess whether significant facts and circumstances have arisen to indicate an adverse effect on the fair value of the underlying investment that might indicate material deterioration in the creditworthiness of our issuers. During our quarter end assessment, we determined a decline in value of an investment associated with mortgage-backed securities to be other-than-temporary. Accordingly, we recorded an impairment of approximately $0.2 and $0.4 million for three and six months ended May 31, 2008, respectively. We include this impairment in Other Income (Expense) in the Consolidated Statements of Operations. Depending on market conditions, we may record additional impairments on our investment portfolio in the future.

We have invested in privately held companies; such investments are classified as equity investments that are generally carried on a cost basis and are included in Other Assets. The carrying value of our equity investments is $0.8 and $0.9 million as of May 31, 2008 and November 30, 2007, respectively. No impairment losses were incurred in the periods presented.

Fair Value Measurements

SFAS No. 157 clarifies that fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. As a basis for considering such assumptions, SFAS No. 157 establishes a three-tier value hierarchy, which prioritizes the inputs used in measuring fair value as follows: (Level 1) observable inputs such as quoted prices in active

TIBCO SOFTWARE INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(Unaudited)

markets; (Level 2) inputs other than the quoted prices in active markets that are observable either directly or indirectly; and (Level 3) unobservable inputs in which there is little or no market data, which require us to develop our own assumptions. This hierarchy requires us to use observable market data, when available, and to minimize the use of unobservable inputs when determining fair value. On a recurring basis, we measure certain financial assets and liabilities at fair value, including our marketable securities and foreign currency contracts.

Our cash equivalents and investment instruments are classified within Level 1 or Level 2 of the fair value hierarchy because they are valued using quoted market prices, broker or dealer quotations, or alternative pricing sources with reasonable levels of price transparency. The types of instruments valued based on quoted market prices in active markets include most U.S. government and agency securities, sovereign government obligations, and money market securities. Such instruments are generally classified within Level 1 of the fair value hierarchy.

The types of instruments valued based on other observable inputs include investment-grade corporate bonds, mortgage-backed and asset-backed products, state, municipal and provincial obligations. Such instruments are generally classified within Level 2 of the fair value hierarchy.

The principal market where we execute our foreign currency contracts is the retail market in an over-the-counter environment with a relatively high level of price transparency. The market participants usually are large money center banks and regional banks. Our foreign currency contracts valuation inputs are based on quoted prices and quoted pricing intervals from public data sources and do not involve management judgment. These contracts are typically classified within level 2 of the fair value hierarchy.

Fair value hierarchy of our marketable securities and foreign currency contracts at fair value in connection with our adoption of SFAS No. 157 (in thousands):


			Fair Value Measurements at Reporting Date using
Description	May 31, 2008		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant other Observable Inputs (Level 2)
Assets:
Money market fund	$	111,056	$	111,056	$	—
U.S. government debt securities		21,256		21,256		—
Corporate debt securities		4,768		—		4,768
Asset-backed securities		5,202		—		5,202
Mortgage-backed securities		1,837		—		1,837
Foreign currency forward contracts		353		—		353
Liabilities:
Foreign currency forward contracts	$	42	$	—	$	42

5.	GOODWILL AND ACQUIRED INTANGIBLE ASSETS

The change in the carrying amount of goodwill for the six months ended May 31, 2008, is as follows (in thousands):


Balance as of November 30, 2007	$	412,256
Spotfire subsequent goodwill adjustment		(1,173	)
Foreign currency translation		(79	)

Balance as of May 31, 2008	$	411,004

After the end of the second quarter of fiscal year 2008, certain accrued liabilities related to the acquisition of Spotfire were settled. As a result, we recorded a decrease in goodwill of $1.2 million net of tax and a reduction of accrued acquisition costs related to the acquisition of Spotfire in the second quarter of fiscal year 2008.

TIBCO SOFTWARE INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(Unaudited)

Certain of our intangibles assets were recorded in foreign currencies, and therefore, the gross carrying amount and accumulated amortization are subject to foreign currency translation adjustments. The carrying values of our amortized acquired intangible assets as of May 31, 2008 and November 30, 2007, are as follows (in thousands):


	As of May 31, 2008							As of November 30, 2007
	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount
Developed technologies	$	89,689	$	(53,082	)	$	36,607	$	88,171	$	(45,460	)	$	42,711
Customer base		43,964		(22,549	)		21,415		43,112		(19,228	)		23,884
Patents/core technologies		22,920		(10,080	)		12,840		23,143		(8,412	)		14,731
Trademarks		7,107		(4,993	)		2,114		7,170		(4,530	)		2,640
Non-compete agreements		1,480		(1,080	)		400		1,480		(863	)		617
OEM customer royalty agreements		1,000		(1,000	)		—		1,000		(1,000	)		—
Maintenance agreements		38,409		(14,007	)		24,402		37,892		(11,545	)		26,347

	$	204,569	$	(106,791	)	$	97,778	$	201,968	$	(91,038	)	$	110,930

Amortization of developed technologies is recorded in cost of revenue, while the amortization of other acquired intangible assets is included in operating expenses. The following summarizes the amortization expense of acquired intangible assets for the periods indicated (in thousands):


	Three Months Ended May 31,				Six Months Ended May 31,
	2008		2007		2008		2007
Amortization of acquired intangible assets:
In cost of revenue	$	3,982	$	1,409	$	7,799	$	2,811
In operating expense		4,235		2,472		8,375		4,942

Total	$	8,217	$	3,881	$	16,174	$	7,753

6.	ACCRUED EXCESS FACILITIES COSTS

The following is a summary of activities in accrued facilities restructuring costs for the six months ended May 31, 2008 (in thousands):


	Accrued Excess Facilities
	Headquarter Facilities			Staffware Integration			Total
As of November 30, 2007	$	15,596		$	634		$	16,230
Cash utilized		(2,900	)		(606	)		(3,506	)

As of May 31, 2008	$	12,696		$	28		$	12,724

The remaining accrued facilities restructuring costs represent the estimated loss on abandoned excess facilities, net of estimated sublease income, which is expected to be paid over the next three years. As of May 31, 2008, $8.3 million of the $12.7 million accrued excess facilities costs were classified as long-term liabilities based on our current expectation that we will pay the remaining lease payments over the remaining term of the related leases.

7.	LONG-TERM DEBT AND LINE OF CREDIT

Mortgage Note Payable

In connection with the purchase of our corporate headquarters in June 2003, we recorded a $54.0 million mortgage note payable to a financial institution collateralized by the commercial real property acquired. The balance on the mortgage note payable was $45.5 and $46.5 million as of May 31, 2008 and November 30, 2007, respectively.

TIBCO SOFTWARE INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(Unaudited)

The mortgage note payable carries a fixed annual interest rate of 5.50% and a 20-year amortization. The $34.4 million principal balance that will be remaining at the end of the ten-year term will be due as a final lump sum payment on July 1, 2013. Under the current applicable terms of the mortgage note agreements, we are prohibited from acquiring another company without prior consent from the lender unless we maintain at least $50.0 million of cash or cash equivalents and comply with other non-financial terms as defined in the agreements. As of May 31, 2008, we were in compliance with all covenants in the mortgage note agreements.

Line of Credit

We have a $20.0 million revolving line of credit that matures on June 19, 2009. The revolving line of credit is available for cash borrowings and for the issuance of letters of credit up to $20.0 million. As of May 31, 2008, no borrowings were outstanding under the facility and a $13.0 million irrevocable letter of credit was outstanding, leaving $7.0 million of available credit for additional letters of credit or cash borrowings. The $13.0 million irrevocable letter of credit outstanding was issued in connection with the mortgage note payable. The letter of credit automatically renews for successive one-year periods, until the mortgage note payable has been satisfied in full. The line of credit requires that we maintain a minimum of $40.0 million in unrestricted cash, cash equivalents and short-term investments, net of total current and long-term indebtedness, as well as comply with other non-financial covenants defined in the agreement. As of May 31, 2008, we were in compliance with all covenants in this revolving line of credit.

8.	COMMITMENTS AND CONTINGENCIES

Letters of Credit and Bank Guarantees

In connection with the mortgage note payable, we entered into an irrevocable letter of credit in the amount of $13.0 million. See Note 7. The letter of credit is collateralized by the line of credit and automatically renews for successive one-year periods until the mortgage note payable has been satisfied in full.

In connection with a facility lease, we have an irrevocable letter of credit in the amount of $4.5 million. The letter of credit automatically renews annually for the duration of the lease term, which expires in December 2010. We are subject to certain financial covenants as defined in the letter of credit agreement. As of May 31, 2008, we were in compliance with all covenants in this letter of credit.

As of May 31, 2008, in connection with bank guarantees issued by some of our international subsidiaries, we had $3.8 million of restricted cash, which is included in Other Assets on our Condensed Consolidated Balance Sheets.

Prepaid Land Lease

In June 2003, we entered into a 51-year lease of the land upon which our corporate headquarters is located. The lease was paid in advance for a total of $28.0 million, but is subject to adjustments every 10 years based upon changes in fair market value. Should it become necessary, we have the option to prepay any rent increases due as a result of a change in fair market value. This prepaid land lease is being amortized using the straight-line method over the life of the lease; the portion to be amortized over the next 12 months is included in Prepaid Expenses and Other Current Assets, and the remainder is included in Other Assets on our Condensed Consolidated Balance Sheets.

Operating Commitments

At various locations worldwide, we lease office space and equipment under non-cancelable operating leases with various expiration dates through April 2015. Rental expense was $2.8 and $2.5 million for the three month periods ended May 31, 2008 and 2007, respectively, and $5.3 and $4.8 million for the six month periods ended May 31, 2008 and 2007, respectively.

TIBCO SOFTWARE INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(Unaudited)

As of May 31, 2008, contractual commitments associated with indebtedness, lease obligations and restructuring were as follows (in thousands):


	Total			Remainder of 2008			2009			2010			2011			2012		Thereafter
Operating commitments:
Debt principal	$	45,533		$	975		$	2,033		$	2,148		$	2,269		$	2,397	$	35,711
Debt interest		11,409			1,241			2,400			2,285			2,164			2,036		1,283
Operating leases and others		32,956			6,167			7,993			6,332			4,653			3,218		4,593

Total operating commitments		89,898			8,383			12,426			10,765			9,086			7,651		41,587

Restructuring-related commitments:
Gross lease obligations		19,054			3,140			7,551			7,720			643			—		—
Estimated sublease income		(7,104	)		(1,330	)		(2,740	)		(2,800	)		(234	)		—		—

Net restructuring-related commitment		11,950			1,810			4,811			4,920			409			—		—

Total commitments	$	101,848		$	10,193		$	17,237		$	15,685		$	9,495		$	7,651	$	41,587

Future minimum lease payments under restructured non-cancelable operating leases are included in Accrued Excess Facilities Costs in our Condensed Consolidated Balance Sheets.

The above commitment table does not include approximately $12.1 million of long-term income tax liabilities recorded in accordance with FIN 48 due to the fact that we are unable to reasonably estimate the timing of these potential future payments.

Derivative Instruments

We conduct business in the Americas; Europe, the Middle East and Africa (“EMEA”) and Asia Pacific and Japan (“APJ”). As a result, our financial results could be affected by factors such as changes in foreign currency exchange rates or changes in economic conditions in foreign markets. Our sales are generally made in U.S. dollars. We enter into forward contracts with financial institutions to manage our currency exposure related to net assets and liabilities denominated in foreign currencies. These forward contracts are generally settled monthly. Our forward contracts reduce, but do not eliminate, the impact of currency exchange rate movements. We do not enter into derivative financial instruments for trading purposes. Gains and losses on forward contracts are included in Other Income (Expense) in our Condensed Consolidated Statements of Operations. As of May 31, 2008, we had seven outstanding forward contracts with total notional amounts of $74.5 million, which resulted in a net gain of $311,000.

Indemnification

Our software license agreements typically provide for indemnification of customers for intellectual property infringement claims. To date, no such claims have been filed against us. We also warrant to customers that software products operate substantially in accordance with the software product’s specifications. Historically, we have incurred minimal costs related to product warranties, and, as such, no accruals for warranty costs have been made. In addition, we indemnify our officers and directors under the terms of indemnity agreements entered into with them, as well as pursuant to our certificate of incorporation, bylaws and applicable Delaware law. To date, we have incurred costs for the payment of legal fees in connection with the legal proceedings detailed in Note 9.

9.	LEGAL PROCEEDINGS

Securities Class Action Suit

In May 2005, three purported shareholder class action complaints were filed against us and several of our officers in the U.S. District Court for the Northern District of California. The plaintiffs in such actions are seeking to represent a class of purchasers of our common stock from September 21, 2004, through March 1, 2005. Plaintiffs generally allege that we made false or misleading statements concerning our operating results, our business and internal controls and the integration of Staffware. The actions were consolidated and in September 2006, the U.S. District Court for the Northern District of California dismissed the litigation with prejudice. Plaintiffs have appealed the dismissal. Plaintiffs seek unspecified monetary damages. We intend to defend ourselves vigorously; however, we expect to incur significant costs in mounting such defense.

TIBCO SOFTWARE INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(Unaudited)

IPO Allocation Suit

We, certain of our directors and officers, and certain investment bank underwriters have been named in a putative class action for violation of the federal securities laws in the U.S. District Court for the Southern District of New York, captioned “In re TIBCO Software Inc. Initial Public Offering Securities Litigation.” This is one of a number of cases challenging underwriting practices in the initial public offerings (each, an “IPO”) of more than 300 companies, which have been coordinated for pretrial proceedings as “In re Initial Public Offering Securities Litigation.” Plaintiffs generally allege that the underwriters engaged in undisclosed and improper underwriting activities, namely the receipt of excessive brokerage commissions and customer agreements regarding post-offering purchases of stock in exchange for allocations of IPO shares. Plaintiffs also allege that various investment bank securities analysts issued false and misleading analyst reports. The complaint against us claims that the purported improper underwriting activities were not disclosed in the registration statements for our IPO and secondary public offering and seeks unspecified damages on behalf of a purported class of persons who purchased our securities or sold put options during the time period from July 13, 1999 to December 6, 2000.

A lawsuit with similar allegations of undisclosed improper underwriting practices, and part of the same coordinated proceedings, is pending against Talarian, which we acquired in 2002. That action is captioned “In re Talarian Corp. Initial Public Offering Securities Litigation.” The complaint against Talarian, certain of its underwriters and certain of its former directors and officers claims that the purported improper underwriting activities were not disclosed in the registration statement for Talarian’s IPO and seeks unspecified damages on behalf of a purported class of persons who purchased Talarian securities during the time period from July 20, 2000, to December 6, 2000.

In 2004, a stipulation of Settlement (the “Settlement”) was submitted to the Court, and in 2005, the Court granted preliminary approval. Under the Settlement, we and our subsidiary Talarian would have been dismissed of all claims in exchange for a contingent payment guarantee by the insurance companies responsible for insuring us and Talarian as issuers. Class certification was a condition of the Settlement. After the Second Circuit Court of Appeals issued a ruling overturning class certification in six test cases for the coordinated proceedings, the Settlement was terminated in June 2007 by stipulation of the parties and order of the Court. On August 14, 2007, plaintiffs filed amended master allegations and amended complaints in the six test cases, and moved for class certification in the six test cases, which the defendants in those cases have opposed. On March 26, 2008, the Court denied the defendants’ motion to dismiss the amended complaints in the six test cases. It is uncertain whether there will be any revised or future settlement. If no settlement is achieved, we believe that we and Talarian have meritorious defenses and intend to defend the actions vigorously. However, the litigation results cannot be predicted at this point.

10.

STOCK BENEFIT PLANS AND STOCK-BASED COMPENSATION

Stock Benefit Plans

1996 Stock Option Plan (the “1996 Plan”). As of May 31, 2008, there were 23.9 million shares reserved for grant, 35.4 million shares underlying stock options, 3.5 million shares of restricted stock and 0.8 million shares underlying restricted stock units outstanding under the 1996 Plan. We expect to continue granting a majority of our new equity grants from the reserved shares under this plan until July 31, 2008. On August 1, 2008, the 1996 Plan will be replaced with the 2008 Equity Incentive Plan.

Talarian Stock Option Plans. As of May 31, 2008, there were no shares reserved for grant and approximately 23,000 shares underlying stock options outstanding under the Talarian stock option plans.

2000 Extensibility Stock Option Plan. As of May 31, 2008, no shares were reserved for grant and approximately 23,000 shares underlying stock options outstanding under the 2000 Extensibility Stock Option Plan.

1998 Director Option Plan (the “Director Plan”). As of May 31, 2008, there were 2.0 million shares reserved for grant and 1.3 million shares underlying stock options outstanding under the Director Plan. On August 1, 2008, the Director Plan will be replaced with the 2008 Equity Incentive Plan.

Employee Stock Purchase Program. We issued approximately 0.2 million shares under the Employee Stock Purchase Program (the “ESPP”), representing approximately $1.5 million in employee contributions for the six months ended May 31, 2008. Shares are reserved under the 1996 Plan for future purchases under the ESPP for grants through July 31, 2008. On August 1, 2008, the ESPP will be replaced with the 2008 Employee Stock Purchase Plan.

TIBCO SOFTWARE INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(Unaudited)

2008 Equity Incentive Plan (the “2008 Plan”). Stockholders approved our 2008 Equity Incentive Plan in April 2008. The 2008 Plan will replace the 1996 Plan and the Director Plan on August 1, 2008. The 1996 Plan and the Director Plan will terminate effective August 1, 2008 and shares that are available under the 1996 Plan and the Director Plan will no longer be available for granting new awards. The 2008 Plan provides for the issuance of up to 16.5 million shares of our common stock less awards granted from the 1996 Plan and the Director Plan from April 17, 2008 through July 31, 2008.

2008 Employee Stock Purchase Plan (the “2008 ESPP”). Stockholders approved our 2008 Employee Stock Purchase Plan in April 2008. The 2008 ESPP will replace the ESPP on August 1, 2008, following the completion of our current offering period. The 2008 ESPP provides for the issuance of up to 10.0 million shares of our common stock.

Stock Options Activities

The summary of stock option activity for the six months ended May 31, 2008, is presented below (in thousands, except per share data):


Stock Options	Number of Shares Underlying Stock Options		Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term (years)	Aggregate Intrinsic Value
Outstanding at November 30, 2007	37,638		$	8.27	5.32	$	34,162

Granted	2,758			7.74
Exercised	(1,351	)		3.76
Forfeited or expired	(2,248	)		10.10

Outstanding at May 31, 2008	36,797		$	8.29	5.03	$	26,420

Vested and expected to vest at May 31, 2008	35,216		$	8.30	4.97	$	25,977

Exercisable at May 31, 2008	27,975		$	8.45	4.61	$	22,791

The intrinsic value of exercised stock options is calculated based on the difference between the exercise price and the quoted closing market price of our common stock as of the exercise date. The total intrinsic value of stock options exercised in the six months ended May 31, 2008 and 2007, was $5.1 and $9.7 million, respectively. Upon the exercise of stock options, we issue common stock from our authorized shares. As of May 31, 2008, total unamortized stock-based compensation cost related to unvested stock options was $21.9 million, with the weighted-average recognition period of 2.71 years.

The total realized tax benefits attributable to stock options exercised and vesting of stock awards were $4.7 million in the six months ended May 31, 2008.

Stock Awards Activities

Our nonvested stock awards are comprised of restricted stock and restricted stock units. A summary of the status for nonvested stock awards as of May 31, 2008, and activities during the six months ended May 31, 2008, is presented as follows (in thousands, except per share data):


Nonvested Stock Awards	Restricted Stock		Restricted Stock Units		Total Number of Shares Underlying Stock Awards		Weighted- Average Grant-Date Fair Value
Nonvested at November 30, 2007	2,042		578		2,620		$	8.28
Granted	1,864		377		2,241			7.74
Vested	(233	)	(86	)	(319	)		8.65
Forfeited	(136	)	(37	)	(173	)		8.20

Nonvested at May 31, 2008	3,537		832		4,369			7.98

TIBCO SOFTWARE INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(Unaudited)

We granted approximately 2.2 million shares of nonvested stock awards at no cost to recipients during the six months ended May 31, 2008. As of May 31, 2008, there was $26.2 million of total unrecognized compensation cost related to nonvested stock awards. That cost is expected to be recognized generally on a straight-line basis as the shares vest over three to four years (the weighted-average recognition period of 3.16 years). The total fair value of shares vested pursuant to stock awards during the six months ended May 31, 2008, was $2.8 million.

Stock-Based Compensation

Stock-based compensation cost for the three months ended May 31, 2008 and 2007, was $5.2 and $3.8 million, respectively, and was $10.4 and $7.7 million for the six months ended May 31, 2008 and 2007, respectively, which consisted primarily of stock-based compensation cost related to employee stock options recognized under SFAS No. 123 (revised 2004), Share-Based Payment (“SFAS No. 123(R)”). The deferred tax benefit on stock-based compensation expenses for the three months ended May 31, 2008 and 2007, was $1.3 and $0.7 million, respectively, and was $2.5 and $1.4 million for the six months ended May 31, 2008 and 2007, respectively.

We recognized stock-based compensation cost associated with our ESPP on a straight-line basis over each six-month offering period. Employee stock-based compensation associated with ESPP for the six months ended May 31, 2008 and May 31, 2007, was approximately $0.8 and $0.4 million, respectively.

We started granting restricted stock and restricted stock units to employees during the third quarter of fiscal year 2006. Approximately $3.4 million of employee stock-based compensation for the six months ended May 31, 2008, and $1.3 million of employee stock-based compensation for the six months ended May 31, 2007, was related to restricted stock and restricted stock units.

Assumptions for Estimating Fair Value of Stock-Based Awards

We selected the Black-Scholes option pricing model as the most appropriate model for determining the estimated fair value for stock-based awards. The following table summarizes the assumptions used to value stock options granted in the respective periods:


	Three Months Ended May 31,						Six Months Ended May 31,
	2008			2007			2008			2007
Stock Option Grants:
Expected term of stock options (years)		4.9			4.6			4.6 -4.9			4.4 -4.6
Risk-free interest rate		2.90	%		4.64	%		2.90-3.00	%		4.64-4.68	%
Expected volatility		48	%		39	%		48	%		39	%
Weighted-average grant-date fair value (per share)	$	3.47		$	3.55		$	3.45		$	3.55
ESPP:
Expected term of ESPP (years)		N/A			N/A			0.5			0.5
Risk-free interest rate		N/A			N/A			2.20	%		5.16	%
Expected volatility		N/A			N/A			54	%		34	%
Weighted-average grant-date fair value (per share)		N/A			N/A		$	2.39		$	2.35

11.

COMPREHENSIVE INCOME

Our comprehensive income includes net income and other comprehensive income (loss), which consists of unrealized gains and losses on available-for-sale securities and cumulative translation adjustments. A summary of the comprehensive income for the periods indicated is as follows (in thousands):

TIBCO SOFTWARE INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(Unaudited)


	Three Months Ended May 31,						Six Months Ended May 31,
	2008			2007			2008			2007
Net income, as reported	$	3,493		$	9,218		$	9,007		$	19,609
Other comprehensive income (loss):
Unrealized gain (loss) on investments, net of tax		(934	)		(716	)		(184	)		(364	)
Foreign currency translation adjustment, net of tax		3,654			3,449			4,523			1,301

Comprehensive income	$	6,213		$	11,951		$	13,346		$	20,546

The balances of each component of accumulated other comprehensive income, net of taxes, as of May 31, 2008 and November 30, 2007, consist of the following (in thousands):


	Unrealized Gain (Loss) in Available-for-Sale Securities			Foreign Currency Translation		Accumulated Other Comprehensive Income
Balance as of November 30, 2007	$	357		$	32,636	$	32,993
Net change during six month period		(184	)		4,523		4,339

Balance as of May 31, 2008	$	173		$	37,159	$	37,332

12.

MINORITY INTEREST

In the first quarter of fiscal year 2007, we established a joint venture in South Africa, TS Innovations Limited (“Innovations”), with a local South Africa corporation, to assist with our sales efforts as well as to provide consulting services and training to our customers in the Sub-Saharan Africa region. For the six months ended May 31, 2008, Innovations had total assets of $1.1 million and total revenues of $2.4 million. As of May 31, 2008, we owned a 74.9% interest in the joint venture. Because of our majority interest in Innovations, our Condensed Consolidated Financial Statements include the balance sheets, results of operations and cash flows of Innovations, net of intercompany charges. We therefore eliminated 25.1% of the financial results that pertain to the minority interest of Innovations; this eliminated amount was reported as a separate line in our Condensed Consolidated Statements of Operations and Balance Sheets.

13.

PROVISION FOR INCOME TAXES

The effective tax rate of 31.6% for the three months ended May 31, 2008, differs from the statutory rate of 35% primarily due to the benefits resulting from the reorganization of certain foreign entities, lower foreign taxes and research and development credits which were partially offset by the impact of certain stock compensation charges under SFAS No. 123(R) and state income taxes. The effective tax rate of 41.6% for the three months ended May 31, 2007, differs from the statutory rate of 35% primarily due to the tax impact of certain stock compensation charges under SFAS No. 123(R), state income taxes and additional U.S. taxes on repatriated U.K. earnings which were partially offset by research and development credits.

On December 1, 2007, we adopted FIN 48. FIN 48 requires companies to determine whether it is more likely than not that a tax position will be sustained upon examination by the appropriate taxing authorities before any part of the benefit can be recorded in the financial statements. FIN 48 also provides guidance on de-recognition, classification, accounting in interim periods and disclosure requirements for tax contingencies. In addition, we have applied the standards in FASB Staff Position No. FIN 48-1, Definition of Settlement in FASB Interpretation No. 48 (“FSP FIN 48-1”) as part of our initial adoption of FIN 48. FSP FIN 48-1 is an amendment to FIN 48. It clarifies how an enterprise should determine whether a tax position is effectively settled for the purpose of recognizing previously unrecognized tax benefits.

As a result of the adoption of FIN 48, we reduced the liability for net unrecognized tax benefits by $0.6 million and accounted for this as a cumulative-effect adjustment recorded as an increase to the December 1, 2007, balance of retained earnings. The total amount of gross unrecognized tax benefit as of the date of adoption was $33.8 million, of which $11.5 million would affect the effective tax rate if realized. We historically classified unrecognized tax benefits in current income taxes payable. In implementing FIN 48, we have reclassified $6.8 million from current income taxes payable to long-term income tax liabilities. We have also grossed-up our long-term income tax liabilities by $5.4 million with a corresponding increase to our deferred tax assets.

TIBCO SOFTWARE INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(Unaudited)

During the second quarter of fiscal 2008, the amount of gross unrecognized tax benefits was increased by approximately $1.6 million. The total amount of gross unrecognized tax benefits was $35.7 million as of May 31, 2008, of which $13.1 million would affect the effective tax rate if realized. We do not expect any significant changes to the amount of unrecognized tax benefit within the next twelve months.

Upon adoption of FIN 48, we have elected to include interest expense and penalties accrued on unrecognized tax benefits as a component of our income tax expense. This is consistent with our policy prior to the adoption of FIN 48. As of the date of adoption of FIN 48, we had accrued $1.0 million for interest and penalties. There was no material change to this amount as of May 31, 2008.

We are subject to routine corporate income tax audits in the United States and foreign jurisdictions. The statute of limitations for our fiscal years 1997 through 2007 remains open for U.S. purposes. Most foreign jurisdictions have statute of limitations that range from three to six years.

We make certain estimates and judgments in determining income tax expense for financial statement purposes. These estimates and judgments occur in the calculation of certain tax assets and liabilities, which arise from differences in the timing of recognition of revenue and expense for tax and financial statement purposes.

As part of the process of preparing our Condensed Consolidated Financial Statements, we are required to estimate our income taxes in each of the jurisdictions in which we operate. This process involves estimating our current tax exposure under the most recent tax laws and assessing temporary differences resulting from differing treatment of items for tax and accounting purposes. These differences result in deferred tax assets and liabilities, which are included in our Condensed Consolidated Balance Sheets.

With the exception of our subsidiaries in the United Kingdom, net undistributed earnings of our foreign subsidiaries are generally considered to be indefinitely reinvested, and accordingly, no provision for U.S. income taxes has been provided thereon. Upon distribution of these earnings in the form of dividends or otherwise, we will be subject to U.S. income taxes to the extent that available net operating loss carryovers and foreign tax credits are not sufficient to eliminate the additional tax liability.

14.

NET INCOME PER SHARE

The following table sets forth the computation of basic and diluted net income per share for the periods indicated (in thousands, except per share data):


	Three Months Ended May 31,				Six Months Ended May 31,
	2008		2007		2008		2007
Net income	$	3,493	$	9,218	$	9,007	$	19,609

Weighted-average shares of common stock used to compute basic net income per share (excluding unvested restricted stock)		182,078		204,575		184,197		206,487
Effect of dilutive common stock equivalents:
Stock options to purchase common stock		3,438		6,910		3,466		7,239
Restricted common stock awards		474		400		365		371

Weighted-average shares of common stock used to compute diluted net income per share		185,990		211,885		188,028		214,097

Basic net income per share	$	0.02	$	0.05	$	0.05	$	0.09

Diluted net income per share	$	0.02	$	0.04	$	0.05	$	0.09

TIBCO SOFTWARE INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(Unaudited)

The following potential common stock equivalents are not included in the diluted net income per share calculation above, because their effect was anti-dilutive for the periods indicated (in thousands):


	Three Months Ended May 31,		Six Months Ended May 31,
	2008	2007	2008	2007
Stock options to purchase common stock	21,662	13,080	21,844	12,881
Restricted common stock awards	529	—	266	—

Total anti-diluted common stock equivalents	22,191	13,080	22,110	12,881

15.

SEGMENT INFORMATION

We operate our business in one operating segment: the development and marketing of a suite of infrastructure software. Our chief operating decision maker is our Chief Executive Officer, who reviews financial information presented on a consolidated basis for purposes of making operating decisions and assessing financial performance.

Our revenue by geographic region, based on the location at which each sale originates, is summarized as follows (in thousands):


	Three Months Ended May 31,				Six Months Ended May 31,
	2008		2007		2008		2007
Americas:
United States	$	65,958	$	56,496	$	140,612	$	111,798
Other Americas		4,295		2,758		6,561		5,016

Total Americas		70,253		59,254		147,173		116,814

EMEA:
United Kingdom		16,075		16,549		31,198		35,343
Other EMEA		47,512		34,666		87,894		74,419

Total EMEA		63,587		51,215		119,092		109,762

APJ		16,192		20,048		30,345		29,595

	$	150,032	$	130,517	$	296,610	$	256,171

No customer accounted for more than 10% of total revenue for the three and six months ended May 31, 2008 and 2007, respectively. No customer had a balance in excess of 10% of our net accounts receivable on May 31, 2008, or November 30, 2007.

Our property and equipment by major country are summarized as follows (in thousands):


	May 31, 2008		November 30, 2007
Property and equipment, net:
United States	$	100,124	$	102,044
United Kingdom		2,857		3,435
Other		5,103		5,911

	$	108,084	$	111,390

16.

STOCK REPURCHASE PROGRAMS

In April 2007, our Board of Directors approved a stock repurchase program pursuant to which we may repurchase up to $300.0 million of our outstanding common stock from time to time in the open market or through privately negotiated transactions. In April 2008, our Board of Directors approved a new stock repurchase program pursuant to which we may repurchase up to $300.0 million of our outstanding common stock. In connection with the approval of the April 2008 stock repurchase program, the April 2007 stock repurchase program was terminated and the remaining authorized amount of $69.6 million under the April 2007 stock repurchase program was canceled.

TIBCO SOFTWARE INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(Unaudited)

All repurchased shares of common stock have been retired. The following table summarizes the activities under the stock repurchase programs for the periods indicated (in thousands, except per share data):


	Three Months Ended May 31,				Six Months Ended May 31,
	2008		2007		2008		2007
Cash used for repurchases	$	40,375	$	100,963	$	85,647	$	142,777

Shares repurchased		5,189		11,067		11,355		15,545

Average price per share	$	7.78	$	9.12	$	7.54	$	9.18

In connection with the repurchase activities during the six months ended May 31, 2008, we classified $37.3 million of the excess purchase price over the par value of our common stock to retained earnings and $48.4 million to additional paid-in capital.

17.

SUBSEQUENT EVENTS

Insightful Corporation

On June 19, 2008, we entered into an agreement to acquire Insightful Corporation (“Insightful”), a publicly held company and a provider of statistical data analysis and data mining solutions software. Pursuant to an Agreement and Plan of Merger (the “Insightful Merger Agreement”), we will acquire all the outstanding equity of Insightful and will assume the options granted under Insightful’s 2001 Stock Option and Incentive Plan. This transaction is valued at approximately $25.0 million in which Insightful stockholders will receive cash. Pursuant to the Insightful Merger Agreement, each outstanding and unexercised option under Insightful’s 2001 Stock Option and Incentive Plan will be converted into an option to purchase our common stock based on the option exchange ratio set forth in the Insightful Merger Agreement. In general, the total fair value of the unvested assumed options will be classified as stock-based compensation and expensed over the remaining vesting period of the underlying awards while the fair value of the vested assumed options will be included in the purchase price. Upon successful completion of the acquisition, we will also assume facility leases in and outside of the U.S. and liabilities and commitments of Insightful. Management will evaluate the purchase price allocation following consummation of the transaction.

Syndera Corporation

On July 8, 2008, we acquired certain assets of Syndera Corporation, a provider of real-time business intelligence software. The total purchase price was approximately $1.0 million paid in cash. Management is in the process of finalizing the purchase price allocation.

ITEM 2.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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

We are a leading provider of infrastructure software. We provide a broad range of standards-based software solutions that help organizations achieve the benefits of real-time business. Our infrastructure software gives customers the ability to constantly innovate by connecting applications and data in a service-oriented architecture, streamlining activities through business process management, and giving people the information and intelligence tools they need to make faster and smarter decisions, what we call The Power of Now^®.

As the basis of the real-time movement of data across the enterprise, TIBCO’s software is uniquely capable of correlating information in real-time about an organization’s operations and performance with information about expected behavior and business rules so a company can anticipate and respond to threats and opportunities before they occur. Our software enables our customers to leverage and extend the capabilities of their own information technology applications and assets to move towards a new way of doing business that lets organizations anticipate customer needs, create opportunities and avoid potential problems.

We are the successor to a portion of the business of Teknekron Software Systems, Inc. (“Teknekron”). Teknekron developed software, known as The Information Bus^® (“TIB”) technology, for the integration and delivery of market data, such as stock quotes, news and other financial information, in trading rooms of large banks and financial services institutions. In 1992, Teknekron expanded its development efforts to include solutions designed to enable complex and disparate manufacturing equipment and software applications, primarily in the semiconductor fabrication market, to communicate within the factory environment. Teknekron was acquired by Reuters Group PLC (“Reuters”), the global information company, in 1994. Following the acquisition, continued development of the TIB^® technology was undertaken to expand its use in the financial services markets.

In January 1997, TIBCO was established as an entity separate from Teknekron. We were formed to create and market software solutions for use in the integration of business information, processes and applications. In connection with our establishment as a separate entity, Reuters transferred to us certain assets and liabilities related to our business and granted to us a royalty-free license to the intellectual property from which some of our messaging software products originated.

We have acquired a range of companies and technologies. Most recently, in June 2007, we acquired Spotfire. The addition of Spotfire’s software is a natural extension of our business strategy that allows us to offer customers next-generation business intelligence solutions for faster data access and analysis. Spotfire enables business users to access the most relevant and timely data, in a responsive and easy to use environment, so they can discover new insights, make better decisions and take action – delivering an information advantage. Our acquisition of Spotfire also increased our distribution capabilities through an expanded customer and partner base.

TIBCO Products and Services

Products

We offer a wide range of software products that can be sold individually to solve specific technical challenges, but the emphasis of our product development and sales efforts is to create products that interoperate and can be sold together as a suite to enable businesses to be more cost-effective, agile and efficient. These products can help organizations achieve success in three areas: service-oriented architecture (“SOA”), Business Optimization and business process management (“BPM”).

•

SOA: Our software enables organizations to migrate to an IT infrastructure made up of services that can be assembled, orchestrated and reused. SOA turns information and functions into discrete and reusable components that can be invoked across the business and aggregated with other such services to create “composite applications.” This helps companies streamline the integration and orchestration of assets across technological, organizational and geographical boundaries. Our software enables the creation, management and virtualization of heterogeneous services and provides a unified environment for policy and service management. It also delivers capabilities in the areas of service mediation, orchestration and communication and the development of rich internet applications. Our products give companies the flexibility to do these things using the standards or technologies that best meet their needs in specific situations (such as HTTP, e-mail, J2EE, EDI, Messaging, .NET, Web Services, etc.) without replacing existing technologies or committing to any one technology across the enterprise.

•

Business Optimization: Our software helps organizations convert and analyze data to create meaningful information and deliver it to employees, customers and partners. Our software also tracks large volumes of real-time events as they occur and applies sophisticated rules in order to identify patterns that signify problems, threats and opportunities, and can automatically initiate appropriate notifications or adaptation of processes. This helps line-level employees perform their jobs, helps managers identify and analyze problems and opportunities, and gives customers the ability to get accurate and consistent information directly or through salespeople, service personnel or customer care representatives.

•

BPM: Our software helps organizations better coordinate the process flows that control how their assets work together. This software can coordinate the human and electronic resources inside a business and its network of customers and partners. Our products not only automate routine tasks and exception handling, but orchestrate long-lived activities and transactions that cut across organizational and geographical boundaries. Our software enables organizations to provide a higher level of customer satisfaction, retain customers, maximize partnerships with other businesses and out-execute their competitors.

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 systems integrators.

Services

Professional Services

Our professional services offerings include a wide range of consulting services such as systems planning and design, installation and systems integration for the rapid deployment of TIBCO products. We offer our professional services with the initial deployment of our products as well as on an ongoing basis to address the continuing needs of our customers. Our professional services staff is located throughout the Americas, EMEA and APJ enabling us to perform installations and respond to customer demands rapidly across our global customer base. Many of our professional services employees have advanced degrees, substantial TIBCO experience and industry expertise in systems architecture and design, as well as domain expertise in financial services, telecommunications, manufacturing, energy, logistics, healthcare and other industries.

We also have relationships with resellers, professional service organizations and system integrators including Accenture, Atos Origin, BearingPoint, Cap Gemini, Deloitte Consulting and Electronic Data Systems, which include their participation in the deployment of our products to customers. These relationships help promote TIBCO products and provide additional technical expertise to enable us to provide the full range of professional services our customers require to deploy our products.

Maintenance and Support

We offer a suite of software support and maintenance options that are designed to meet the needs of our diverse customer base. These support options include 24 hour coverage that is available seven days a week, 365 days a year, to meet the needs of our global customers. To accomplish this level of support we have established a worldwide support organization with major support centers in Palo Alto, California; London and Swindon, England; Woy Woy, Australia; Beijing, China; and Pune, India. These centers, working in conjunction with several smaller support offices located throughout the Americas, EMEA and APJ, provide seamless support using a “follow-the-sun” support model.

In addition to support teams around the globe, we have a customer support website that provides our customers with the ability to submit service requests, receive confirmation that a service request has been opened and obtain current status on these requests. Additionally, the customer support website provides access to our support procedures, escalation numbers and late breaking news. Late breaking news is used to provide updates and new information about our products. It also provides customers with information on generally known problems and suggested solutions or workarounds that may be available.

Training

We provide a comprehensive and global training program for customers and partners. Training is available at our main office in Palo Alto, California and at major training centers in Houston, Texas; Maidenhead, England; Munich, Germany; and Tokyo, Japan. We also deliver training on-site at customer locations. Our Educational Services group has the capability to develop solutions to address the specific needs of individual customers and partners. Our curriculum leads to an industry recognized technical certification in high visibility TIBCO technologies.

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.

First-year maintenance typically is sold with the related software license and renewed on an annual basis thereafter. Maintenance revenue is determined based on vendor-specific objective evidence of fair value and amortized over the term of the maintenance contract, typically 12 months. Consulting and training revenues are typically recognized as the services are performed, usually on a time and materials basis. Such services primarily consist of implementation services related to the installation of our products and generally do not include significant customization to, or development of, the underlying software code.

Our revenue is generally derived from a diverse customer base. No single customer represented greater than 10% of total revenue for the three and six months ended May 31, 2008 or 2007. As of May 31, 2008, 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 collectibility and an allowance for returns and discounts based on historical experience.

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 Annual Report on Form 10-K filed with the SEC on January 25, 2008.

RECENT ACCOUNTING PRONOUNCEMENTS

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

RESULTS OF OPERATIONS

For purposes of presentation, we have indicated the second quarter of fiscal years 2008 and 2007 as ended on May 31, 2008 and 2007, respectively; whereas in fact, the second quarter of fiscal years 2008 and 2007 actually ended on June 1, 2008 and June 3, 2007, respectively. All amounts presented in the tables in the following sections on 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 May 31,				Six Months Ended May 31,
	2008		2007		2008		2007
Revenue:
License revenue	38	%	42	%	39	%	42	%
Service and maintenance revenue:
Service and maintenance	60		57		60		57
Reimbursable expenses	2		1		1		1

Total service and maintenance revenue	62		58		61		58

Total revenue	100		100		100		100

Cost of revenue:
License	5		4		5		3
Service and maintenance	25		24		25		24

Total cost of revenue	30		28		30		27

Gross profit	70		72		70		73
Operating expenses:
Research and development	18		17		18		17
Sales and marketing	38		36		37		35
General and administrative	9		9		9		10
Amortization of acquired intangible assets	3		2		3		2

Total operating expenses	68		64		67		64

Income from operations	2		8		3		9
Interest income	1		4		2		5
Interest expense	—		—		—		—
Other income (expense), net	—		—		—		(1	)

Income before provision for income taxes and minority interest	3		12		5		13
Provision for income taxes	1		5		2		5
Minority interest, net of tax	—		—		—		—

Net income	2	%	7	%	3	%	8	%

In June 2007, we acquired Spotfire, a leading provider of next-generation business intelligence software, which is now part of our Business Optimization product family. Our Consolidated Results of Operations have included incremental revenue and costs related to the Spotfire operations since the date of acquisition.

With the acquisition of Spotfire, TIBCO gained approximately 200 employees, based primarily in the United States and Sweden. In connection with the acquisition, we have incurred additional expenses, including amortization of intangible assets and acquired technology; stock-based compensation; personnel and related costs; facility and infrastructure costs; and other charges.

Total Revenue

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


	Three Months Ended May 31,						Six Months Ended May 31,
	2008		2007		Change		2008		2007		Change
Total revenue	$	150,032	$	130,517	15	%	$	296,610	$	256,171	16	%

Total revenue for the second quarter of fiscal year 2008, compared to the same quarter last year, increased by $19.5 million or 15%. The increase was comprised of a $16.7 million or 22% increase in service and maintenance revenue and a $2.8 million or 5% increase in license revenue. Total revenue for the first half of fiscal year 2008, compared to the same period last year, increased by $40.4 million or 16%.

For the first half of fiscal year 2008, we experienced growth in total revenue in the Americas and EMEA, compared to the same period last year. See Note 15 to our Condensed Consolidated Financial Statements for amounts of total revenue by region. The percentages of total revenue from the geographic regions are summarized as follows:


	Three Months Ended May 31,				Six Months Ended May 31,
	2008		2007		2008		2007
Americas	47	%	46	%	49	%	46	%
EMEA	43		39		41		43
APJ	10		15		10		11

	100	%	100	%	100	%	100	%

License Revenue and Cost


	Three Months Ended May 31,								Six Months Ended May 31,
	2008			2007			Change		2008			2007			Change
License revenue	$	57,696		$	54,926		5	%	$	115,449		$	107,111		8	%
As percent of total revenue		38	%		42	%				39	%		42	%
Cost of license revenue	$	7,484		$	4,730		58	%	$	14,764		$	8,801		68	%
As percent of total revenue		5	%		4	%				5	%		3	%
As percent of license revenue		13	%		9	%				13	%		8	%

License revenue increased $2.8 million or 5% in the second quarter of fiscal year 2008, compared to the same quarter last year, and increased $8.3 million or 8% in the first half of fiscal year 2008 compared to the same period last year. The increase was primarily due to increased revenue in the Americas and EMEA, as well as revenue attributable to the Spotfire acquisition.

Our license revenue in the second quarter of fiscal years 2008 and 2007, was derived from the following three product lines: SOA, Business Optimization and BPM. The approximate percentages of total license revenue for 2008 were 51% from SOA, 31% from Business Optimization and 18% from BPM. The approximate percentages of total license revenue for 2007 were 71% from SOA, 13% from Business Optimization and 16% from BPM. The fiscal year 2008 increase in the percentage of license revenue derived from Business Optimization was primarily attributable to the Spotfire acquisition.

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


	Three Months Ended May 31,				Six Months Ended May 31,
	2008		2007		2008		2007
Number of license deals of $1.0 million or more		7		12		21		25
Number of license deals over $0.1 million		91		73		178		148
Average size of license deals over $0.1 million (in millions)	$	0.6	$	0.7	$	0.6	$	0.7

We currently expect the number of license transactions over $100,000 to increase for the remainder of fiscal year 2008.

Cost of license revenue mainly consisted of royalty costs and amortization of developed technology acquired through corporate acquisitions. Cost of license revenue increased by $2.8 million or 58% for the second quarter of fiscal year 2008, compared to the same quarter last year. The increase in absolute dollars in cost of license revenue for the second quarter of fiscal year 2008, compared to the same quarter last year, resulted primarily from an increase of $2.6 million in amortization expenses associated with acquired technologies as well as an increase of $0.2 million in royalty costs.

For the first half of fiscal year 2008, compared to the same period last year, cost of license revenue increased by $6.0 million or 68%. The increase in absolute dollars in cost of license revenue for the first half of fiscal year 2008, compared to the same period last year, resulted primarily from an increase of $5.0 million in amortization expenses associated with acquired technologies as well as an increase of $1.0 million in royalty costs. The amount of royalty cost we incur is primarily dependent on the mix of products that we sell and will fluctuate from time to time.

Service and Maintenance Revenue and Cost


	Three Months Ended May 31,								Six Months Ended May 31,
	2008			2007			Change		2008			2007			Change
Service and maintenance revenue	$	92,336		$	75,591		22	%	$	181,161		$	149,060		22	%
As percent of total revenue		62	%		58	%				61	%		58	%
Cost of service and maintenance	$	38,088		$	31,756		20	%	$	73,858		$	62,584		18	%
As percent of total revenue		25	%		24	%				25	%		24	%
As percent of service and maintenance revenue		41	%		42	%				41	%		42	%

Service and maintenance revenue increased $16.7 million or 22% for the second quarter of fiscal year 2008, compared to the same quarter last year. For the first half of fiscal year 2008, service and maintenance revenue increased $32.1 million or 22%, compared to the same period last year. These increases were primarily due to growth in our installed software base and contribution from Spotfire.

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.

The cost of service and maintenance increased by $6.3 million or 20% for the second quarter of fiscal year 2008, compared to the same quarter last year. The increase in absolute dollars for the second quarter of fiscal year 2008, compared to the same quarter last year, resulted primarily from a $4.0 million increase in employee-related expenses, a $1.1 million increase in subcontractors costs, a $0.9 million increase in travel expenses and a $0.3 million increase in facilities expenses. The increases in employee-related expenses and subcontractors costs were primarily due to an increase in services projects.

Cost of service and maintenance increased $11.3 million or 18% for the first half of fiscal year 2008, compared to the same period last year. The increase in absolute dollars for the first half of fiscal year 2008, compared to the same period last year, resulted primarily from a $7.0 million increase in employee-related expenses, a $2.4 million increase in subcontractors costs, a $1.1 million increase in travel expenses and a $0.6 million increase in facilities expenses. The increases in employee-related expenses and subcontractors costs were primarily due to an increase in services projects.

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 May 31,								Six Months Ended May 31,
	2008			2007			Change		2008			2007			Change
Research and development expenses	$	26,756		$	21,997		22	%	$	52,210		$	43,012		21	%
As percent of total revenue		18	%		17	%				18	%		17	%

Research and development expenses for the second quarter of fiscal year 2008 increased by $4.8 million or 22%, compared to the same quarter last year, resulting primarily from a $3.6 million increase in employee-related expenses, a $0.5 million increase in contractor expenses, a $0.3 million increase in facilities expenses and a $0.3 million increase in travel expenses. The increase in employee-related expenses was primarily due to an increase in headcount as a result of the Spotfire acquisition.

For the first half of fiscal year 2008, compared to the same period last year, research and development expenses increased by $9.2 million or 21%, resulting primarily from an increase of $6.8 million in employee-related expenses, a $1.1 million increase in contractor expenses, a $0.7 million increase in facilities expenses and a $0.5 million increase in travel expenses. The increase in employee-related expenses was primarily due to an increase in headcount as a result of the Spotfire acquisition.

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 May 31,								Six Months Ended May 31,
	2008			2007			Change		2008			2007			Change
Sales and marketing expenses	$	56,454		$	46,433		22	%	$	110,842		$	89,382		24	%
As percent of total revenue		38	%		36	%				37	%		35	%

The $10.0 million or 22% increase in sales and marketing expenses for the second quarter of fiscal year 2008, compared to the same quarter last year, was primarily due to a $7.3 million increase in employee-related expenses, a $1.0 million increase in referral fees, a $0.6 million increase in marketing programs and a $0.4 million increase in travel expenses. The increase in employee-related expenses was due mainly to an increase in headcount as well as an increase in sales commissions associated with an increase in revenue. A significant portion of the additional headcount is related to the Spotfire acquisition.

The $21.5 million or 24% increase in sales and marketing expenses for the first half of fiscal year 2008, compared to the same period last year, was primarily due to a $15.9 million increase in employee-related expenses, a $2.3 million increase in marketing programs, a $1.2 million increase in travel expenses and a $1.1 million increase in referral fees. The increase in employee-related expenses was mainly due to an increase in headcount as well as an increase in sales commissions associated with an increase in revenue. A significant portion of the additional headcount is related to the acquisition of Spotfire.

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 May 31,								Six Months Ended May 31,
	2008			2007			Change		2008			2007			Change
General and administrative expenses	$	12,991		$	12,113		7	%	$	26,789		$	24,865		8	%
As percent of total revenue		9	%		9	%				9	%		10	%

General and administrative expenses increased by $0.9 million or 7% for the second quarter of fiscal year 2008, compared to the same quarter last year, primarily due to a $0.9 million increase in employee-related expenses. The increase in employee-related expenses was primarily due to a $0.5 million increase in benefits and a $0.4 million increase in stock-based compensation.

The $1.9 million or 8% increase in general and administrative expenses for the first half of fiscal year 2008, compared to the same period last year, was primarily due to a $2.3 million increase in employee-related expenses, which was partially offset by a $0.4 million decrease in fees and charges. The increase in employee-related expenses was mainly due to a $1.0 million increase in benefits and a $0.9 million increase in stock-based compensation.

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 May 31,								Six Months Ended May 31,
	2008			2007			Change		2008			2007			Change
Amortization of acquired intangible assets:
Cost of revenue	$	3,982		$	1,409				$	7,799		$	2,811
Operating expenses		4,235			2,472					8,375			4,942

Total amortization of acquired intangible assets	$	8,217		$	3,881		112	%	$	16,174		$	7,753		109	%

As percent of total revenue		5	%		3	%				5	%		3	%

The increases in amortization expenses for the second quarter and the first half of fiscal year 2008, compared to the same quarter and the same period last year, were primarily due to the additional amortization related to intangible assets acquired in the acquisition of Spotfire in the third quarter of fiscal year 2007.

Stock-Based Compensation

The stock-based compensation cost is included in the Condensed Consolidated Statements of Operations corresponding to the same functional lines as cash compensation paid to the same employees, as follows:


	Three Months Ended May 31,								Six Months Ended May 31,
	2008			2007			Change		2008			2007			Change
Stock-based compensation, included in:
Cost of license	$	9		$	11				$	17		$	19
Cost of service and maintenance		723			566					1,310			1,039

Total in cost of revenue		732			577					1,327			1,058

Research and development		1,256			925					2,275			1,793
Sales and marketing		1,677			1,150					3,407			2,370
General and administrative		1,546			1,109					3,352			2,476

Total in operating expenses		4,479			3,184					9,034			6,639

Total stock-based compensation	$	5,211		$	3,761		39	%	$	10,361		$	7,697		35	%

As percent of total revenue		3	%		3	%				3	%		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 SF

Tibco Software Inc · 10-Q · For 6/1/08

Filed On 7/10/08 2:43pm ET · SEC File 0-26579 · Accession Number 1193125-8-149238

Quarterly Report · Form 10-QFiling Table of Contents

10-Q · Quarterly ReportDocument Table of Contents

This is an EDGAR HTML document rendered as filed. [ Alternative Formats ]

Quarterly Report · Form 10-Q
Filing Table of Contents

10-Q · Quarterly Report
Document Table of Contents