SY Sybase, Inc.

Mobile and Wireless Business Increases 19% Year Over Year Pro Forma EPS of $0.40 Exceeds First Call Consensus Estimates DUBLIN, Calif., Oct. 19 /PRNewswire-FirstCall/ -- Sybase, Inc. (NYSE:SY), a leading provider of enterprise infrastructure and mobile software, today reported financial results for the third quarter ended September 30, 2006. For the 2006 third quarter, total license revenue increased 9% to $76.3 million from $69.7 million in the third quarter of 2005. Total revenue for the 2006 third quarter increased 5% to $209.1 million from $199.3 million in the third quarter of 2005. Pro forma operating income for the 2006 third quarter increased 13% to $40.9 million, compared with pro forma operating income of $36.2 million in the 2005 third quarter. Pro forma net income for the 2006 third quarter increased 20% to $36.3 million, or earnings per diluted share of $0.40. Included in the third quarter pro forma EPS is a tax benefit of approximately $0.04. This compares with pro forma net income of $30.1 million, or earnings per diluted share (EPS) of $0.33 for the third quarter of 2005. Operating income calculated in accordance with generally accepted accounting principles (GAAP) for the third quarter of 2006 increased 7% to $32.2 million, compared with GAAP operating income of $30.2 million for the year-ago quarter. The GAAP results for the 2006 third quarter include the impact of $3.1 million associated with implementation of FAS 123R. The company reported GAAP net income of $25.1 million, or GAAP EPS of $0.27, for the 2006 third quarter. This compares with GAAP net income of $28.0 million, or GAAP EPS of $0.30, for the 2005 third quarter. Included in third quarter 2006 GAAP EPS is an increase in the company's tax provision of $9.0 million compared with the third quarter of 2005 and the previously stated impact associated with the implementation of FAS 123R. Pro forma amounts exclude the amortization of certain purchased intangibles, stock-based compensation, and restructuring costs. Accompanying this release is a reconciliation of pro forma and GAAP amounts for the 2006 third quarter. "We're pleased with our operating results this quarter," said John Chen, chairman, CEO, and president of Sybase. "We generated strong cash flow from operations, exceeded EPS consensus estimates, and delivered our ninth consecutive quarter of revenue growth. "Our strongest vertical segments in the quarter were financial services, technology and computer services," added Mr. Chen. "We experienced steady demand for our core database platforms, combined with robust growth from our mobile device management solutions and IQ analytics server. "During the quarter, we entered into a definitive agreement to acquire Mobile 365, the largest provider of mobile messaging and content delivery services. With this acquisition, which is expected to close in the fourth quarter, we will extend our reach to approximately 700 mobile operators, plus global brands and mobile content developers throughout the world. This strategic acquisition will position Sybase as the world's largest mobile enterprise software and services provider," concluded Mr. Chen. Balance Sheet and Other Data At September 30, 2006, Sybase reported $979.5 million in cash and cash investments, including restricted cash of $5.6 million. The company generated $38.9 million in cash flow from operations in the third quarter. Days sales outstanding for the 2006 third quarter was 57. Forward Guidance For the fourth quarter ending December 31, 2006, management anticipates revenues in the range of $245 million to $250 million, assuming the acquisition of Mobile 365 closes in mid-November and contributes $10 million to $12 million in revenue in the fourth quarter. Pro forma fully diluted EPS for the fourth quarter is expected to be approximately $0.46. The impact of the acquisition is expected to be immaterial to pro forma EPS in the fourth quarter. GAAP EPS for the fourth quarter is estimated to be approximately $0.34, which includes the impact of expensing options under FAS 123R and a preliminary estimate of $4.0 million for amortization of intangibles related to the acquisition of Mobile 365. Management is raising its most recent full-year 2006 estimate for fully diluted pro forma EPS to approximately $1.46 from $1.38. Management is also revising full-year 2006 GAAP EPS guidance to approximately $1.09 from $1.12, which includes the impact of expensing options under FAS 123R and a preliminary estimate of $4.0 million for amortization of intangibles related to the acquisition of Mobile 365. Management is raising its full-year 2006 cash flow target from $170 million to a range of $185 million to $190 million. The impact of the Mobile 365 acquisition is expected to be immaterial to full-year 2006 pro forma EPS and cash flow. Accompanying this release is a reconciliation of projected pro forma and GAAP amounts for the 2006 fourth quarter and full year. 2006 Third Quarter Company Highlights * Launched Sybase(R) Data Integration Suite, a flexible and scalable solution that combines key data integration techniques including replication, data federation, ETL (extract, transform, and load), real-time events, and data search with integrated development and administration. * Delivered Sybase(R) Unwired Accelerator 8.0, an innovative mobile solution that enables users to access their enterprise applications, data, and business processes from mobile devices. * Delivered the next generation of the AvantGo(R) mobile Internet service, featuring a fully enhanced wireless experience that enables users to have always-available access to Web content, automatically synchronized to their mobile device for Research in Motion (RIM) BlackBerry(TM) handsets. * Delivered Sybase IQ(R) version 12.7, a highly optimized analytics server that adds enhanced query performance, improved data privacy, and features that support compliance with regulations such as Sarbanes-Oxley. * Delivered SQL Anywhere(R) 10, a market-leading database and data exchange solution for frontline environments. * For the fifth consecutive year, Sybase iAnywhere was recognized by IDC as the leader in the mobile device management enterprise software market in its annual Worldwide Mobile Device Management Enterprise 2006-2010 Forecast and 2005 Vendor Shares report. * Announced Gartner Inc. positioned Sybase(R) IQ as a challenger in its 2006 Data Warehouse DBMS Magic Quadrant report. Conference Call and Webcast Information The Sybase 2006 third quarter conference call and simultaneous Webcast is scheduled to begin at 7:30 a.m., Pacific Time/10:30 a.m. Eastern Time on Thursday, October 19, 2006. To access the live Webcast, please visit http://www.fulldisclosure.com/ or Sybase's Website at http://www.sybase.com/ at least 20 minutes prior to the call to download any necessary audio or plug-in software. A telephone replay will be available approximately two hours after the conference call ends and will be available until 10:00 p.m. Pacific Time on October 26, 2006. To access the replay, please dial (888) 203-1112 for domestic access and (719) 457-0820 for international callers; the access code for the telephone replay is #3437992. Additionally, the archived Webcast will be available through October 26, 2006 at http://www.sybase.com/about_sybase/investorrelations . About Sybase, Inc. Sybase is the largest global enterprise software company exclusively focused on managing and mobilizing information from the data center to the point of action. Sybase provides open, cross-platform solutions that securely deliver information anytime, anywhere, enabling customers to create an information edge. The world's most critical data in commerce, finance, government, healthcare, and defense runs on Sybase. For more information, visit the Sybase Website at http://www.sybase.com/ . Forward-Looking Statements Certain statements in this release concerning Sybase, Inc. and its prospects and future growth are forward-looking and involve a number of uncertainties and risks. Factors that could cause actual events or results to differ materially from those suggested by these forward-looking statements include, but are not limited to, the performance of the global economy and growth in software industry sales; market acceptance of the company's products and services; customer and industry analyst perception of the company and its technology vision and future prospects; the success of certain business combinations engaged in by the company or by competitors; political unrest or acts of war; possible disruptive effects of organizational or personnel changes; and other factors described in Sybase, Inc.'s reports filed with the U.S. Securities and Exchange Commission, including its annual report on Form 10-K for the year ended December 31, 2005 and Form 10-Q for the quarters ended March 31, 2006 and June 30, 2006. NOTE: Sybase, Adaptive Server Enterprise (ASE), Information Anywhere Suite, Sybase IQ, Sybase Data Integration Suite, Sybase Unwired Accelerator, AvantGo, and SQL Anywhere are trademarks of Sybase, Inc. or its subsidiaries. All other names may be trademarks of the companies with which they are associated. SYBASE, INC. RECONCILIATION TO PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (1) (UNAUDITED) (In thousands, Three Months Ended Three Months Ended except per September 30, 2006 September 30, 2005 share data) GAAP Pro forma Pro GAAP Pro forma Pro Adjust- forma Adjust- forma ments (2) ments (2) Revenues: License fees $76,338 - $76,338 $69,739 - $69,739 Services 132,794 - 132,794 129,588 - 129,588 ------- ------- ------- -------- ------- ------- Total revenues 209,132 - 209,132 199,327 - 199,327 Costs and expenses: Cost of license fees 12,160 (2,395)a 9,765 10,993 (2,046)a 8,947 Cost of services 37,681 141 b 37,822 37,980 (126)b 37,854 Sales and marketing 62,019 (1,111)b 60,908 59,655 17 b 59,672 Product development and engineering 37,327 (693)b 36,634 34,932 (10)b 34,922 General and administrative 26,103 (3,031)b 23,072 23,873 (2,152)b 21,721 Amortization of other purchased intangibles 1,573 (1,573)a - 1,677 (1,677)a - Cost of restructure 39 (39)c - 21 (21)c - ------- ------- ------- -------- ------- ------- Total costs and expenses 176,902 (8,701) 168,201 169,131 (6,015) 163,116 ------- ------- ------- -------- ------- ------- Operating income 32,230 8,701 40,931 30,196 6,015 36,211 Interest income and expense and other, net 7,936 - 7,936 3,881 - 3,881 ------- ------- ------- -------- ------- ------- Income before income taxes 40,166 8,701 48,867 34,077 6,015 40,092 Provision for income taxes 15,081 (2,534)d 12,547 6,090 3,856 d 9,946 ------- ------- ------- -------- ------- ------- Net income $25,085 $11,235 $36,320 $27,987 $2,159 $30,146 ======= ======= ======= ======== ======= ======= Basic net income per share $0.28 $0.13 $0.41 $0.31 $0.03 $0.34 ======= ======= ======= ======== ======= ======= Shares used in computing basic net income per share 89,056 89,056 89,056 89,634 89,634 89,634 ======= ======= ======= ======== ======= ======= Diluted net income per share $0.27 $0.13 $0.40 $0.30 $0.03 $0.33 ======= ======= ======= ======== ======= ======= Shares used in computing diluted net income per share 91,498 91,498 91,498 92,431 92,431 92,431 ======= ======= ======= ======== ======= ======= (1) Use of Pro Forma Financial Information To supplement our consolidated financial statements presented in accordance with generally accepted accounting principles (GAAP), Sybase uses pro forma measures of operating results, net income and earnings per share, which are adjusted from GAAP-based results to exclude certain costs and expenses. These pro forma adjustments are provided to enhance an overall understanding of our current financial performance and our prospects for the future, and are one of the primary indicators management uses for planning and forecasting future periods. We have excluded such items, including purchase accounting adjustments in connection with acquisitions, and the cost of restructuring because we do not believe they are indicative of our core business. Even though such items have recurred in the past and may recur in future periods, they are driven by events (such as acquisitions and restructurings) that occur sporadically and are not directly related to our ongoing core business operations. Pro forma financial information is never intended to be considered in isolation from, or as a substitute for, financial results prepared in accordance with GAAP. (2) Proforma adjustments Proforma adjustments include the following: (a) amortization of purchased intangibles; (b) stock-based compensation expense; (c) cost of restructuring charges; (d) income tax effect of proforma adjustments. SYBASE, INC. RECONCILIATION TO PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (1) (UNAUDITED) (In thousands, Nine Months Ended Nine Months Ended except per September 30, 2006 September 30, 2005 share data) GAAP Pro forma Pro GAAP Pro forma Pro Adjust- forma Adjust- forma ments (2) ments (2) Revenues: License fees $226,367 - $226,367 $200,362 - $200,362 Services 393,332 - 393,332 395,284 - 395,284 ------- ------- ------- -------- ------- ------- Total revenues 619,699 - 619,699 595,646 - 595,646 Costs and expenses: Cost of license fees 36,882 (7,145)a 29,737 36,973 (9,097)a 27,876 Cost of services 114,371 (1,220)b 113,151 118,248 (292)b 117,956 Sales and marketing 191,207 (3,158)b 188,049 184,593 (207)b 184,386 Product development and engineering 111,867 (1,965)b 109,902 102,764 (26)b 102,738 General and administrative 77,037 (9,338)b 67,699 69,183 (5,143)b 64,040 Amortization of other purchased intangibles 4,671 (4,671)a - 5,031 (5,031)a - Cost of restructure 139 (139)c - 302 (302)c - ------- ------- ------- -------- ------- ------- Total costs and expenses 536,174 (27,636) 508,538 517,094 (20,098) 496,996 ------- ------- ------- -------- ------- ------- Operating income 83,525 27,636 111,161 78,552 20,098 98,650 Interest income and expense and other, net 21,211 - 21,211 10,620 - 10,620 ------- ------- ------- -------- ------- ------- Income before income taxes 104,736 27,636 132,372 89,172 20,098 109,270 Provision for income taxes 36,066 4,455 d 40,521 31,984 1,483 d 33,467 ------- ------- ------- -------- ------- ------- Net income $68,670 $23,181 $91,851 $57,188 $18,615 $75,803 ======= ======= ======= ======== ======= ======= Basic net income per share $0.77 $0.26 $1.03 $0.63 $0.21 $0.84 ======= ======= ======= ======== ======= ======= Shares used in computing basic net income per share 89,269 89,269 89,269 90,403 90,403 90,403 ======= ======= ======= ======== ======= ======= Diluted net income per share $0.75 $0.25 $1.00 $0.62 $0.20 $0.82 ======= ======= ======= ======== ======= ======= Shares used in computing diluted net income per share 91,636 91,636 91,636 92,961 92,961 92,961 ======= ======= ======= ======== ======= ======= (1) Use of Pro Forma Financial Information To supplement our consolidated financial statements presented in accordance with generally accepted accounting principles (GAAP), Sybase uses pro forma measures of operating results, net income and earnings per share, which are adjusted from GAAP-based results to exclude certain costs and expenses. These pro forma adjustments are provided to enhance an overall understanding of our current financial performance and our prospects for the future, and are one of the primary indicators management uses for planning and forecasting future periods. We have excluded such items, including purchase accounting adjustments in connection with acquisitions, and the cost of restructuring because we do not believe they are indicative of our core business. Even though such items have recurred in the past and may recur in future periods, they are driven by events (such as acquisitions and restructurings) that occur sporadically and are not directly related to our ongoing core business operations. Pro forma financial information is never intended to be considered in isolation from, or as a substitute for, financial results prepared in accordance with GAAP. (2) Proforma adjustments Proforma adjustments include the following: (a) amortization of purchased intangibles; (b) stock-based compensation expense; (c) cost of restructuring charges; (d) income tax effect of proforma adjustments. SYBASE, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands, except share and September 30, December 31, per share data) 2006 2005 (Unaudited) Current assets: Cash and cash equivalents $590,617 $398,741 Short-term investments 343,338 342,247 --------- --------- Total cash, cash equivalents and short-term cash investments 933,955 740,988 Restricted cash 5,566 2,773 Accounts receivable, net 131,833 167,790 Deferred income taxes 4,668 5,523 Other current assets 18,936 16,876 --------- --------- Total current assets 1,094,958 933,950 Long-term cash investments 40,011 118,948 Restricted long-term cash investments - 2,600 Property, equipment and improvements, net 55,050 59,178 Deferred income taxes 36,103 24,879 Capitalized software, net 70,867 65,911 Goodwill, net 242,318 238,864 Other purchased intangibles, net 78,580 87,562 Other assets 39,776 38,722 --------- --------- Total assets $1,657,663 $1,570,614 ========= ========= Current liabilities: Accounts payable $14,164 $10,353 Accrued compensation and related expenses 50,793 51,983 Accrued income taxes 51,584 31,398 Other accrued liabilities 58,079 78,040 Deferred revenue 186,848 188,929 --------- --------- Total current liabilities 361,468 360,703 Other liabilities 43,233 40,339 Long-term deferred revenue 4,662 5,663 Minority interest 5,079 5,079 Convertible subordinated notes 460,000 460,000 Stockholders' equity: Preferred stock, $0.001 par value, 8,000,000 shares authorized; none issued or outstanding - - Common stock, $0.001 par value, 200,000,000 shares authorized; 105,337,362 shares issued (2005 - 105,337,362) 105 105 Additional paid-in capital 956,491 953,771 Accumulated earnings 68,075 16,195 Other comprehensive income 31,874 19,231 Less: Cost of treasury stock (14,602,317 shares and 2005 - 14,806,217) (273,324) (277,510) Unearned compensation - (12,962) --------- --------- Total stockholders' equity 783,221 698,830 --------- --------- Total liabilities and stockholders' equity $1,657,663 $1,570,614 ========= ========= SYBASE, INC. CONDENSED CONSOLIDATED STATEMENTS OF INCOME PROFORMA WITHOUT PURCHASE ACCOUNTING, COST OF RESTRUCTURE, AND STOCK COMPENSATION EXPENSE (UNAUDITED) Three Months Ended Nine Months Ended September 30, September 30, (In thousands, 2006 2005 2006 2005 except per share data) Revenues: License fees $76,338 $69,739 $226,367 $200,362 Services 132,794 129,588 393,332 395,284 ------- ------- ------- ------- Total revenues 209,132 199,327 619,699 595,646 Costs and expenses: Cost of license fees 9,765 8,947 29,737 27,876 Cost of services 37,822 37,854 113,151 117,956 Sales and marketing 60,908 59,672 188,049 184,386 Product development and engineering 36,634 34,922 109,902 102,738 General and administrative 23,072 21,721 67,699 64,040 ------- ------- ------- ------- Total costs and expenses 168,201 163,116 508,538 496,996 ------- ------- ------- ------- Operating income 40,931 36,211 111,161 98,650 Interest income and expense and other, net 7,936 3,881 21,211 10,620 ------- ------- ------- ------- Income before income taxes 48,867 40,092 132,372 109,270 Provision for income taxes 12,547 9,946 40,521 33,467 ------- ------- ------- ------- Net income $36,320 $30,146 $91,851 $75,803 ======= ======= ======= ======= Basic net income per share $0.41 $0.34 $1.03 $0.84 ======= ======= ======= ======= Shares used in computing basic net income per share 89,056 89,634 89,269 90,403 ======= ======= ======= ======= Diluted net income per share $0.40 $0.33 $1.00 $0.82 ======= ======= ======= ======= Shares used in computing diluted net income per share 91,498 92,431 91,636 92,961 ======= ======= ======= ======= Note: The pro forma statement of operations is intended to present the Company's operating results excluding purchase accounting adjustments associated with the acquisitions of Home Financial Network, Inc., New Era of Networks, Inc., AvantGo Inc., Dejima, Inc., XcelleNet, Inc., Avaki, Inc., ISDD Ltd., Extended Systems, Inc., and Solonde Solutions AG and other purchased intangibles. Such purchase accounting adjustments would include amortization of developed technology, amortization of intangibles, goodwill impairment loss, in-process research and development costs, and related adjustments for income tax provision. The pro forma statement of operations also excludes stock compensation expense, restructuring costs, and cumulative effect of an accounting change which we do not believe are indicative of our core business. Even though such items have recurred in the past and may recur in future periods, they are driven by events (such as acquisitions and restructurings) that occur sporadically and are not directly related to our ongoing core business operations. Pro forma financial information is never intended to be considered in isolation from, or as a substitute for, financial results prepared in accordance with GAAP. SYBASE, INC. CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) Three Months Ended Nine Months Ended September 30, September 30, (In thousands, except 2006 2005 2006 2005 per share data) Revenues: License fees $76,338 $69,739 $226,367 $200,362 Services 132,794 129,588 393,332 395,284 ------- ------- ------- ------- Total revenues 209,132 199,327 619,699 595,646 Costs and expenses: Cost of license fees 12,160 10,993 36,882 36,973 Cost of services 37,681 37,980 114,371 118,248 Sales and marketing 62,019 59,655 191,207 184,593 Product development and engineering 37,327 34,932 111,867 102,764 General and administrative 26,103 23,873 77,037 69,183 Amortization of other purchased intangibles 1,573 1,677 4,671 5,031 Cost of restructure 39 21 139 302 ------- ------- ------- ------- Total costs and expenses 176,902 169,131 536,174 517,094 ------- ------- ------- ------- Operating income 32,230 30,196 83,525 78,552 Interest income and expense and other, net 7,936 3,881 21,211 10,620 ------- ------- ------- ------- Income before income taxes 40,166 34,077 104,736 89,172 Provision for income taxes 15,081 6,090 36,066 31,984 ------- ------- ------- ------- Net income $25,085 $27,987 $68,670 $57,188 ======= ======= ======= ======= Basic net income per share $0.28 $0.31 $0.77 $0.63 ======= ======= ======= ======= Shares used in computing basic net income per share 89,056 89,634 89,269 90,403 ======= ======= ======= ======= Diluted net income per share $0.27 $0.30 $0.75 $0.62 ======= ======= ======= ======= Shares used in computing diluted net income per share 91,498 92,431 91,636 92,961 ======= ======= ======= ======= SYBASE, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS Nine Months Ended September 30, ------------------- (Dollars in thousands) 2006 2005 ------- ------- Cash and cash equivalents, beginning of year $398,741 $321,417 Cash flows from operating activities: Net income 68,670 57,188 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 52,258 54,847 Loss on disposal of assets 829 703 Deferred income taxes (11,377) (4,603) Stock-based compensation - restricted stock 5,833 5,667 Stock-based compensation - all other 9,849 - Amortization of note issuance costs 1,477 1,180 Changes in assets and liabilities: Accounts receivable 38,481 39,628 Other current assets (2,055) (3,968) Other assets - operating (2,600) 2,050 Accounts payable 3,806 (2,215) Accrued compensation and related expenses (1,203) 253 Accrued income taxes 20,219 24,636 Other accrued liabilities (19,043) (12,635) Deferred revenues (3,125) (32,917) Other liabilities 1,863 1,664 ------- ------- Net cash provided by operating activities 163,882 131,478 Cash flows from investing activities: (Increase) Decrease in restricted cash (193) 284 Purchases of available-for-sale cash investments (364,397) (704,001) Maturities of available-for-sale cash investments 205,807 307,524 Sales of available-for-sale cash investments 237,255 81,381 Business combinations, net of cash acquired (4,334) (6,928) Purchases of property, equipment and improvements (13,162) (12,007) Proceeds from sale of property, equipment and improvements 4 25 Capitalized software development costs (29,171) (26,336) Increase in other assets - investing (7) (5) ------- ------- Net cash provided by (used for) investing activities 31,802 (360,063) Cash flows from financing activities: Proceeds from the issuance of convertible subordinated notes, net of issuance costs - 450,238 Repayments of long-term obligations (45) (997) Payments on capital leases (243) (201) Net proceeds from the issuance of common stock and reissuance of treasury stock 32,675 40,326 Purchases of treasury stock (45,280) (144,529) ------- ------- Net cash provided by (used for) financing activities (12,893) 344,837 ------- ------- Effect of exchange rate changes on cash 9,085 (25,206) ------- ------- Net increase in cash and cash equivalents 191,876 91,046 ------- ------- Cash and cash equivalents, end of period 590,617 412,463 Cash investments, end of period 383,349 506,386 ------- ------- Total cash, cash equivalents and cash investments, end of period $973,966 $918,849 ======= ======= SYBASE, INC. CONSOLIDATED STATEMENT OF OPERATIONS BY SEGMENT PROFORMA WITHOUT PURCHASE ACCOUNTING, COST OF RESTRUCTURE, AND STOCK COMPENSATION EXPENSE FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2006 (UNAUDITED) (In thousands, except per share data) Infra- structure Consoli- Platform iAnywhere dated Group Solutions Eliminations Total -------------- ----------- ------------ --------- Revenues: License fees Infrastructure $53,205 $86 $- $53,291 Mobile and Embedded 8,256 14,791 - 23,047 --------- --------- --------- --------- Subtotal license fees 61,461 14,877 - 76,338 Intersegment license revenues 22 6,880 (6,902) - -------- --------- --------- --------- Total license fees 61,483 21,757 (6,902) 76,338 Services Direct service revenue 120,808 11,986 - 132,794 Intersegment service revenues 109 6,690 (6,799) - --------- --------- --------- --------- Total services 120,917 18,676 (6,799) 132,794 --------- --------- --------- --------- Total revenues 182,400 40,433 (13,701) 209,132 Total allocated costs and expenses 148,209 32,934 (13,701) 167,442 --------- --------- --------- --------- Operating income before unallocated costs $34,191 $7,499 $- $41,690 Other unallocated costs 759 --------- Operating income after unallocated expenses 40,931 Interest income and expense and other, net 7,936 --------- Income before income taxes 48,867 Provision for income taxes 12,547 ---------- Net income $36,320 ========== Basic net income per share $0.41 ========== Shares used in computing basic net income per share 89,056 ========== Diluted net income per share $0.40 ========== Shares used in computing diluted net income per share 91,498 ========== Note: The pro forma statement of operations is intended to present the Company's operating results excluding purchase accounting adjustments associated with the acquisitions of Home Financial Network, Inc., New Era of Networks, Inc., AvantGo Inc., Dejima, Inc., XcelleNet, Inc., Avaki, Inc., ISDD Ltd., Extended Systems, Inc., and Solonde Solutions AG and other purchased intangibles. Such purchase accounting adjustments would include amortization of developed technology, amortization of intangibles, goodwill impairment loss, in-process research and development costs, and related adjustments for income tax provision. The pro forma statement of operations also excludes stock compensation expense, restructuring costs, and cumulative effect of an accounting change which we do not believe are indicative of our core business. Even though such items have recurred in the past and may recur in future periods, they are driven by events (such as acquisitions and restructurings) that occur sporadically and are not directly related to our ongoing core business operations. Pro forma financial information is never intended to be considered in isolation from, or as a substitute for, financial results prepared in accordance with GAAP. SYBASE, INC. CONSOLIDATED STATEMENT OF OPERATIONS BY SEGMENT PROFORMA WITHOUT PURCHASE ACCOUNTING, COST OF RESTRUCTURE, AND STOCK COMPENSATION EXPENSE FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2006 (UNAUDITED) (In thousands, except per share data) Infra- structure Consoli- Platform iAnywhere dated Group Solutions Eliminations Total -------------- ----------- ------------ --------- License fees Infrastructure $156,486 $151 $- $156,637 Mobile and Embedded 21,115 48,615 - 69,730 --------- --------- --------- --------- Subtotal license fees 177,601 48,766 - 226,367 Intersegment license revenues 64 17,567 (17,631) - --------- --------- --------- --------- Total license fees 177,665 66,333 (17,631) 226,367 Services Direct service revenue 358,827 34,505 - 393,332 Intersegment service revenues 211 18,882 (19,093) - --------- --------- --------- --------- Total services 359,038 53,387 (19,093) 393,332 --------- --------- --------- --------- Total revenues 536,703 119,720 (36,724) 619,699 Total allocated costs and expenses 443,169 101,514 (36,724) 507,959 --------- --------- --------- --------- Operating income before unallocated costs $93,534 $18,206 $- $111,740 Other unallocated costs 579 --------- Operating income after unallocated expenses 111,161 Interest income and expense and other, net 21,211 --------- Income before income taxes 132,372 Provision for income taxes 40,521 --------- Net income $91,851 ========= Basic net income per share $1.03 ========= Shares used in computing basic net income per share 89,269 ========= Diluted net income per share $1.00 ========= Shares used in computing diluted net income per share 91,636 ========= Note: The pro forma statement of operations is intended to present the Company's operating results excluding purchase accounting adjustments associated with the acquisitions of Home Financial Network, Inc., New Era of Networks, Inc., AvantGo Inc., Dejima, Inc., XcelleNet, Inc., Avaki, Inc., ISDD Ltd., Extended Systems, Inc., and Solonde Solutions AG and other purchased intangibles. Such purchase accounting adjustments would include amortization of developed technology, amortization of intangibles, goodwill impairment loss, in-process research and development costs, and related adjustments for income tax provision. The pro forma statement of operations also excludes stock compensation expense, restructuring costs, and cumulative effect of an accounting change which we do not believe are indicative of our core business. Even though such items have recurred in the past and may recur in future periods, they are driven by events (such as acquisitions and restructurings) that occur sporadically and are not directly related to our ongoing core business operations. Pro forma financial information is never intended to be considered in isolation from, or as a substitute for, financial results prepared in accordance with GAAP. SYBASE, INC. CONSOLIDATED STATEMENT OF OPERATIONS BY SEGMENT FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2006 (UNAUDITED) (In thousands, except per share data) Infrastructure iAnywhere Consolidated Platform Group Solutions Eliminations Total -------------- ----------- ------------ ------------- Revenues: License fees Infrastructure $53,205 $86 $- $53,291 Mobile and Embedded 8,256 14,791 - 23,047 ---------- --------- --------- --------- Subtotal license fees 61,461 14,877 - 76,338 Intersegment license revenues 22 6,880 (6,902) - ---------- --------- --------- --------- Total license fees 61,483 21,757 (6,902) 76,338 Services Direct service revenue 120,808 11,986 - 132,794 Intersegment service revenues 109 6,690 (6,799) - ---------- --------- --------- --------- Total services 120,917 18,676 (6,799) 132,794 ---------- --------- --------- --------- Total revenues 182,400 40,433 (13,701) 209,132 Total allocated costs and expenses before cost of restructure and amortization of customer lists, covenant not to compete and purchased technology 148,209 32,934 (13,701) 167,442 ---------- --------- --------- --------- Operating income before cost of restructure and amortization of customer lists, covenant not to compete, and purchased technology 34,191 7,499 - 41,690 Cost of restructure - 2006 Activity 45 - - 45 Amortization of customer lists 500 1,046 - 1,546 Amortization of covenant not to compete 27 - - 27 Amortization of purchased technology 430 1,965 - 2,395 ---------- --------- --------- --------- Operating income before unallocated costs $33,189 $4,488 $- $37,677 Other unallocated costs 5,447 --------- Operating income after unallocated expenses 32,230 Interest income and expense and other, net 7,936 --------- Income before income taxes 40,166 Provision for income taxes 15,081 --------- Net income $25,085 ========= Basic net income per share $0.28 ========= Shares used in computing basic net income per share 89,056 ========= Diluted net income per share $0.27 ========= Shares used in computing diluted net income per share 91,498 ========= SYBASE, INC. CONSOLIDATED STATEMENT OF OPERATIONS BY SEGMENT FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2006 (UNAUDITED) (In thousands, except per share data) Infrastructure iAnywhere Consolidated Platform Group Solutions Eliminations Total -------------- ----------- ------------ ------------ Revenues: License fees Infrastructure $156,486 $151 $- $156,637 Mobile and Embedded 21,115 48,615 - 69,730 ---------- --------- --------- --------- Subtotal license fees 177,601 48,766 - 226,367 Intersegment license revenues 64 17,567 (17,631) - ---------- --------- --------- --------- Total license fees 177,665 66,333 (17,631) 226,367 Services Direct service revenue 358,827 34,505 - 393,332 Intersegment service revenues 211 18,882 (19,093) - ---------- --------- ---------- --------- Total services 359,038 53,387 (19,093) 393,332 ---------- --------- --------- --------- Total revenues 536,703 119,720 (36,724) 619,699 Total allocated costs and expenses before cost of restructure and amortization of customer lists, covenant not to compete and purchased technology 443,169 101,514 (36,724) 507,959 ---------- --------- --------- --------- Operating income before cost of restructure and amortization of customer lists, covenant not to compete, and purchased technology 93,534 18,206 - 111,740 Cost of restructure - 2006 Activity 145 - - 145 Amortization of customer lists 1,500 3,138 - 4,638 Amortization of covenant not to compete 33 - - 33 Amortization of purchased technology 1,252 5,893 - 7,145 ---------- --------- --------- --------- Operating income before unallocated costs $90,604 $9,175 $- $99,779 Other unallocated costs 16,254 --------- Operating income after unallocated expenses 83,525 Interest income and expense and other, net 21,211 --------- Income before income taxes 104,736 Provision for income taxes 36,066 --------- Net income $68,670 ========= Basic net income per share $0.77 ========= Shares used in computing basic net income per share 89,269 ========= Diluted net income per share $0.75 ========= Shares used in computing diluted net income per share 91,636 ========= SYBASE, INC. Reconciliation of GAAP-based EPS to pro forma EPS for the three months ended December 31, 2006 (unaudited) Pro forma EPS $0.46 Amortization of purchased intangibles (0.08) Amortization of stock compensation expense (0.06) Income tax effect of above adjustments 0.05 Income tax effect primarily from utilization of tax credits (0.03) --------- GAAP - based EPS $0.34 ========= Use of Pro Forma Financial Information To supplement our consolidated financial statements presented in accordance with generally accepted accounting principles (GAAP), Sybase uses pro forma measures of operating results, net income and earnings per share, which are adjusted from GAAP-based results to exclude certain costs and expenses. These pro forma adjustments are provided to enhance an overall understanding of our current financial performance and our prospects for the future, and are one of the primary indicators management uses for planning and forecasting future periods. We have excluded such items, including purchase accounting adjustments in connection with acquisitions because we do not believe they are indicative of our core business. Even though such items have recurred in the past and may recur in future periods, they are driven by events (such as acquisitions) that occur sporadically and are not directly related to our ongoing core business operations. Pro forma financial information is never intended to be considered in isolation from, or as a substitute for, financial results prepared in accordance with GAAP. SYBASE, INC. Reconciliation of GAAP-based EPS to pro forma EPS for the twelve months ended December 31, 2006 (unaudited) Pro forma EPS $1.46 Amortization of purchased intangibles (0.21) Amortization of stock compensation expense (0.23) Income tax effect of above adjustments 0.15 Income tax effect primarily from utilization of tax credits (0.08) --------- GAAP - based EPS $1.09 ========= Use of Pro Forma Financial Information To supplement our consolidated financial statements presented in accordance with generally accepted accounting principles (GAAP), Sybase uses pro forma measures of operating results, net income and earnings per share, which are adjusted from GAAP-based results to exclude certain costs and expenses. These pro forma adjustments are provided to enhance an overall understanding of our current financial performance and our prospects for the future, and are one of the primary indicators management uses for planning and forecasting future periods. We have excluded such items, including purchase accounting adjustments in connection with acquisitions because we do not believe they are indicative of our core business. Even though such items have recurred in the past and may recur in future periods, they are driven by events (such as acquisitions) that occur sporadically and are not directly related to our ongoing core business operations. Pro forma financial information is never intended to be considered in isolation from, or as a substitute for, financial results prepared in accordance with GAAP. DATASOURCE: Sybase, Inc. CONTACT: investors, Lynne Farris, +1-925-236-8797, or , or Charlie Chen, +1-925-236-6015, or , or media, Lorna Fernandes, +1-925-236-4107, or , all of Sybase Web site: http://www.sybase.com/

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