PROGRESS SOFTWARE REPORTS FOURTH QUARTER RESULTS

Revenue up 17%; Operating Income and EPS up Sharply

BEDFORD, Mass., December 21, 2004 - Progress Software Corporation (PSC) (Nasdaq: PRGS), a leading supplier of technology to develop, deploy, integrate and manage business applications, today announced results for its fourth quarter ended November 30, 2004. Revenue for the quarter was a record $96.2 million, up 17 percent (12 percent at constant currency) from $82.0 million in the fourth quarter of fiscal 2003. Software license revenue increased 23 percent (19 percent at constant currency) to $36.8 million from $29.9 million in the same quarter last year.

On a generally accepted accounting principles (GAAP) basis, operating income increased 29 percent to $15.9 million from $12.3 million in the fourth quarter of fiscal 2003. Net income increased 23 percent to $10.9 million from $8.8 million in the same quarter last year. Diluted earnings per share increased 22 percent to 28 cents from 23 cents in the fourth quarter of fiscal 2003. These results include after-tax charges for amortization of acquired intangibles of $1.3 million in the fourth quarter of fiscal 2004 and $0.4 million in the fourth quarter of fiscal 2003.

On a pro forma basis, excluding the charges for amortization of acquired intangibles, operating income increased 38 percent to $17.7 million from $12.9 million in the fourth quarter of fiscal 2003. Pro forma net income increased 31 percent to $12.1 million from $9.2 million in the same quarter last year. Pro forma diluted earnings per share increased 29 percent to 31 cents from 24 cents in the fourth quarter of fiscal 2003.

For the twelve months ended November 30, 2004, revenue increased 17 percent (11 percent at constant currency) to $363 million from $309 million in fiscal 2003. On a GAAP basis, operating income increased 26 percent to $46.4 million from $36.8 million in fiscal 2003. Net income increased 19 percent to $32.1 million from $27.1 million in fiscal 2003 and diluted earnings per share increased 14 percent to 82 cents from 72 cents in fiscal 2003. The fiscal 2004 results include after-tax charges for amortization of acquired intangibles of $4.8 million and in-process research and development of $1.8 million. The fiscal 2003 results include after-tax charges for amortization of acquired intangibles of $1.6 million and in-process research and development of $0.1 million.

On a pro forma basis, excluding the charges for amortization of acquired intangibles and in-process research and development, operating income increased 43 percent to $56.0 million from $39.2 million in fiscal 2003. Pro forma net income increased 34 percent to $38.7 million from $28.8 million in fiscal 2003. Pro forma diluted earnings per share increased 29 percent to 99 cents from 77 cents in fiscal 2003.

The company’s cash and short-term investments at the end of the quarter totaled $191 million. During the fourth quarter, the company purchased 46,500 shares of its stock at a cost of $0.9 million. The company’s existing repurchase authorization, under which

approximately 10 million shares remain available for repurchase, expires on September 30, 2005.

“During fiscal 2004, initiatives to broaden the markets we serve and accelerate our growth began to pay off in substantial revenue to PSC,” stated Joseph Alsop, co-founder and chief executive officer of PSC.” Our newer companies, DataDirect, ObjectStore and Sonic Software, now account for 30 percent of our software license revenue. We expect total revenue from these newer companies to continue to grow at double-digit rates in fiscal 2005. At the same time, revenue from our OpenEdge™ product line continues to grow, even after factoring in the impact of favorable foreign exchange rates. The latest release of the OpenEdge platform, OpenEdge 10, is being well received and adopted by Progress customers and Application Partners (APs).”

Highlights

Progress Software Corporation acquired Persistence Software, Inc. (Nasdaq: PRSW), the technology and market leader in distributed data access and caching software, in an all-cash transaction for a purchase price of $5.70 per share or approximately $16 million in the aggregate. The agreement was announced in September and closed on November 5th. Persistence is now part of ObjectStore, an operating company of PSC that provides products for real-time data management. http://www.progress.com/company_info/news_views/pressrelease_364540/pritem.ssp?

A number of new and existing customers purchased Sonic ESB (enterprise service bus) and related suite products as the basis of their enterprise service oriented architecture (SOA). BAA Ltd., the operating authority for seven UK airports, including Heathrow, Gatwick and Stansted, selected Sonic ESB as its SOA infrastructure linking operational systems at Heathrow’s Terminal Five. Sonic also closed significant deals with SAIC, Pacific Capital Bancorp, Lexicon Marketing, Bendit GmbH and Northrop Grumman. http://www.sonicsoftware.com/news_events/pressitem/pressrelease_374849/index.ssp?

ObjectStore announced its RFID Accelerator, an easy-to-use, real-time data management solution for Radio Frequency Identification (RFID) applications. RFID Accelerator delivers a complete RFID application development environment featuring an innovative event query language, persistent database for EPC-related data, support for industry-standard RFID readers to collect RFID data, and open interfaces to communicate RFID events to enterprise applications. The product has already been deployed by DABAC, an independent software vendor serving the forestry industry, to track trees and lumber from Germany’s leading forest products companies through the supply chain to the saw mills. This new RFID application improves inventory management and streamlines the financial reconciliation process.

http://www.progress.com/earnings_q404

Significant New Customer and Partner Wins, New Technology Adoptions, and Major Deployments

Significant new partners and customers adopting technology from PSC operating companies, or deploying solutions using PSC technology, include: AltaGas Ltd., American Society for Microbiology, Ameriquest Mortgage Company, Aspen Technology, Inc., Boxstar Limited, C&T Solutions SA de CV, Charter Communications, CSX World Terminals Asia Ltd., Dataware Solutions, Denki-Tsushin University, Dictaphone Corp., Dynamic Aviation Group, Inc., Esaote SpA, F.L.Smidth A/S, Fafard & Freres Ltee, Federaal Planbureau, Garradin Pty Ltd., Gibsoft Computer Systems GmbH, Gunns Limited, Hays Mechanical Services, Inc., Immo Kirsch, Imon Technology Co. Ltd., InterActive Taxi, Intesa Sistemi e Servizi SpA, IRP Solutions Corporation, Logilec, NetAge Solutions GmbH, Personec Oy, Politiezone Grensleie, Seremban Specialist Hospital, Summer Institute of Linguist, Symbol Technologies Limited, Techniker Krankenkasse, The Midland News Association, Timken Industrial Services, Trac Medical Solutions, Inc., U.S. Army 18th Airborne Division, Wyoming Department of Education and ZP Sud-Luxembourg.

Significant existing partners and customers adopting technology from different PSC operating companies, or making substantial additional deployments of PSC technology, include: Albertson’s Department Stores , ANZ Bank, Bank of America, Bank One, Barclays Capital, Blue Cross Blue Shield (Florida), Capital One, CCH Incorporated, General Mills, Inc., The Goldman Sachs Group, Inc., Home Mart de Mexico, SA de CV, ING Minneapolis, Kaiser Permanente, Kras Stervakanties, Mansfield Oil Company, Morgan Sindall PLC, Starwood Hotels & Resorts Worldwide, Inc., The Thompson Corporation, Treasury Board of Canada Secretaria, Verizon and WearGuard.

Business Outlook

The company is providing the following guidance for the first fiscal quarter ending February 28, 2005:

• Revenue is expected to be in the range of $94 million to $96 million. GAAP operating income is expected to be in the range of $10 million to $11 million, including amortization of acquired intangibles of $2 million.

• GAAP diluted earnings per share are expected to be in the range of 19 cents to 20 cents.

• On a pro forma basis, operating income is expected to be in the range of $12 million to $13 million, excluding amortization of acquired intangibles of $2 million.

• On a pro forma basis, diluted earnings per share are expected to be in the range of 22 cents to 23 cents, excluding approximately 3 cents per share for amortization of acquired intangibles.

The company is providing the following guidance for the fiscal year ending November 30, 2005:

• Revenue is expected to be in the range of $390 million to $400 million. GAAP operating income is expected to be in the range of $57 million to $60 million, including amortization of acquired intangibles of $8 million.

• GAAP diluted earnings per share are expected to be in the range of $1.01 to $1.05.

• On a pro forma basis, operating income is expected to be in the range of $65 million to $68 million, excluding amortization of acquired intangibles of $8 million.

• On a pro forma basis, diluted earnings per share are expected to be in the range of $1.14 to $1.18, excluding approximately 13 cents per share for amortization of acquired intangibles.

The above business outlook does not include any expense associated with stock-based compensation. The company is currently evaluating the impact of the new accounting pronouncement regarding stock-based compensation which is effective in the company’s fourth quarter of fiscal 2005.

Legal Notice Regarding Pro Forma Financial Information

The company provides pro forma operating income, net income and earnings per share as additional information for investors. These measures are not in accordance with, or an alternative to, accounting principles generally accepted in the United States (GAAP). Such measures are intended to supplement GAAP and may be different from pro forma measures used by other companies. The company believes that the pro forma results described in this release are useful for an understanding of its ongoing operations and provide additional detail and an alternative method of assessing its operating results. Management of the company uses these pro forma results to compare the company’s performance to that of prior periods for analysis of trends, and for budget and planning purposes. A reconciliation of pro forma adjustments to the company’s GAAP financial results is included in the tables below.

Conference Call

PSC’s conference call to discuss its fourth quarter results will be Webcast live today at 9:00 a.m. Eastern via CCBN on the company’s Web site, located at www.progress.com/investors. The call will also be Webcast live via Yahoo (www.yahoo.com), Motley Fool (www.fool.com), Streetevents (www.streetevents.com), TD Waterhouse (www.tdwaterhouse.com) and Fidelity.com (www.fidelity.com). An archived version of the conference call will be available for replay.

About Progress Software Corporation

Progress Software Corporation (Nasdaq: PRGS) is a $300+ million global software industry leader. PSC supplies technologies for all aspects of the development, deployment, integration and management of business applications through its operating

companies: Progress Software, Sonic Software Corporation, DataDirect Technologies, ObjectStore and PeerDirect. Headquartered in Bedford, Mass., PSC can be reached on the Web at http://www.progress.com or by phone at +1-781-280-4000.

Safe Harbor Statement

Except for the historical information and discussions contained herein, statements contained in this release may constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These statements involve a number of risks, uncertainties and other factors that could cause actual results to differ materially, including but not limited to the following: the receipt and shipment of new orders, the timely release of enhancements to the company’s products, the growth rates of certain market segments, the positioning of the company’s products in those market segments, variations in the demand for customer service and technical support, pricing pressures and the competitive environment in the software industry, business and consumer use of the Internet, and the company’s ability to penetrate international markets and manage its international operations. The company undertakes no obligation to update information contained in this release. For further information regarding risks and uncertainties associated with the company’s business, please refer to the company’s filings with the Securities and Exchange Commission.

Progress and OpenEdge are trademarks or registered trademarks of Progress Software Corporation in the U.S. and other countries. Sonic ESB is a registered trademark of Sonic Software Corporation in the U.S. and other countries. Any other trademarks contained herein are the property of their respective owners.

Progress Software Corporation
Condensed Consolidated Statements of Income

	Three Months Ended
	November 30,		November 30,		Percent
(In thousands except per share data)	2004		2003		Change
Revenue:
Software licenses	$	36,798	$	29,947		23	%
Maintenance and services		59,396		52,046		14	%
Total revenue		96,194		81,993		17	%
Costs and expenses:
Cost of software licenses		1,990		2,123
Cost of maintenance and services		12,743		13,604
Sales and marketing		38,581		33,771
Product development		15,580		11,891
General and administrative		9,566		7,736
Amortization of purchased intangibles		1,871		606
In-process research and development		—		—
Total costs and expenses		80,331		69,731		15	%
Income from operations		15,863		12,262		29	%
Other income, net		101		334
Income before provision for income taxes		15,964		12,596		27	%
Provision for income taxes		5,108		3,779
Net income	$	10,856	$	8,817		23	%
Earnings per share:
Basic	$	0.30	$	0.25		20	%
Diluted	$	0.28	$	0.23		22	%
Weighted average shares outstanding:
Basic		36,212		35,010		3	%
Diluted		38,997		38,629		1	%

Pro Forma Condensed Consolidated Statements of Income

	Three Months Ended November 30, 2004							Three Months Ended November 30, 2003
	As		Pro Forma					As		Pro Forma					Percent
(In thousands except per share data)	Reported		Adjustments			Pro Forma		Reported		Adjustments			Pro Forma		Change
Revenue:
Software licenses	$	36,798				$	36,798	$	29,947				$	29,947		23	%
Maintenance and services		59,396					59,396		52,046					52,046		14	%
Total revenue		96,194					96,194		81,993					81,993		17	%
Costs and expenses:
Cost of software licenses		1,990					1,990		2,123					2,123
Cost of maintenance and services		12,743					12,743		13,604					13,604
Sales and marketing		38,581					38,581		33,771					33,771
Product development		15,580					15,580		11,891					11,891
General and administrative		9,566					9,566		7,736					7,736
Amortization of purchased intangibles		1,871	$	(1,871	)		—		606	$	(606	)		—
In-process research and development		—		—			—		—		—			—
Total costs and expenses		80,331		(1,871	)		78,460		69,731		(606	)		69,125		14	%
Income from operations		15,863		1,871			17,734		12,262		606			12,868		38	%
Other income, net		101					101		334					334
Income before provision for income taxes		15,964		1,871			17,835		12,596		606			13,202		35	%
Provision for income taxes		5,108		598			5,706		3,779		182			3,961
Net income	$	10,856	$	1,273		$	12,129	$	8,817	$	424		$	9,241		31	%
Earnings per share:
Basic	$	0.30				$	0.33	$	0.25				$	0.26		27	%
Diluted	$	0.28				$	0.31	$	0.23				$	0.24		29	%
Weighted average shares outstanding:
Basic		36,212					36,212		35,010					35,010		3	%
Diluted		38,997					38,997		38,629					38,629		1	%

Progress Software Corporation
Condensed Consolidated Statements of Income

	Twelve Months Ended
	November 30,		November 30,		Percent
(In thousands except per share data)	2004		2003		Change
Revenue:
Software licenses	$	140,462	$	109,666		28	%
Maintenance and services		222,200		199,394		11	%
Total revenue		362,662		309,060		17	%
Costs and expenses:
Cost of software licenses		8,973		8,435
Cost of maintenance and services		52,354		52,599
Sales and marketing		146,171		125,650
Product development		60,371		50,054
General and administrative		38,753		33,080
Amortization of purchased intangibles		7,076		2,290
In-process research and development		2,600		200
Total costs and expenses		316,298		272,308		16	%
Income from operations		46,364		36,752		26	%
Other income, net		843		1,925
Income before provision for income taxes		47,207		38,677		22	%
Provision for income taxes		15,106		11,603
Net income	$	32,101	$	27,074		19	%
Earnings per share:
Basic	$	0.89	$	0.79		13	%
Diluted	$	0.82	$	0.72		14	%
Weighted average shares outstanding:
Basic		36,031		34,217		5	%
Diluted		39,010		37,554		4	%

Pro Forma Condensed Consolidated Statements of Income

	Twelve Months Ended November 30, 2004							Twelve Months Ended November 30, 2003
	As		Pro Forma					As		Pro Forma					Percent
(In thousands except per share data)	Reported		Adjustments			Pro Forma		Reported		Adjustments			Pro Forma		Change
Revenue:
Software licenses	$	140,462				$	140,462	$	109,666				$	109,666		28	%
Maintenance and services		222,200					222,200		199,394					199,394		11	%
Total revenue		362,662					362,662		309,060					309,060		17	%
Costs and expenses:
Cost of software licenses		8,973					8,973		8,435					8,435
Cost of maintenance and services		52,354					52,354		52,599					52,599
Sales and marketing		146,171					146,171		125,650					125,650
Product development		60,371					60,371		50,054					50,054
General and administrative		38,753					38,753		33,080					33,080
Amortization of purchased intangibles		7,076	$	(7,076	)		—		2,290	$	(2,290	)		—
In-process research and development		2,600		(2,600	)		—		200		(200	)		—
Total costs and expenses		316,298		(9,676	)		306,622		272,308		(2,490	)		269,818		14	%
Income from operations		46,364		9,676			56,040		36,752		2,490			39,242		43	%
Other income, net		843					843		1,925					1,925
Income before provision for income taxes		47,207		9,676			56,883		38,677		2,490			41,167		38	%
Provision for income taxes		15,106		3,096			18,202		11,603		747			12,350
Net income	$	32,101	$	6,580		$	38,681	$	27,074	$	1,743		$	28,817		34	%
Earnings per share:
Basic	$	0.89				$	1.07	$	0.79				$	0.84		27	%
Diluted	$	0.82				$	0.99	$	0.72				$	0.77		29	%
Weighted average shares outstanding:
Basic		36,031					36,031		34,217					34,217		5	%
Diluted		39,010					39,010		37,554					37,554		4	%

Progress Software Corporation
Condensed Consolidated Balance Sheets

	November 30,		November 30,
(In thousands)	2004		2003
Assets
Cash and short-term investments	$	191,267	$	219,131
Accounts receivable, net		63,503		52,065
Other current assets		23,513		22,534
Total current assets		278,283		293,730
Property and equipment, net		40,658		35,572
Goodwill and intangible assets, net		107,287		21,530
Other assets		20,954		16,938
Total	$	447,182	$	367,770
Liabilities and shareholders’ equity
Accounts payable and other current liabilities	$	71,037	$	63,115
Deferred revenue		106,967		82,614
Total current liabilities		178,004		145,729
Long-term debt		2,200		—
Shareholders’ equity:
Common stock and additional paid-in capital		70,085		53,102
Retained earnings		196,893		168,939
Total shareholders’ equity		266,978		222,041
Total	$	447,182	$	367,770

Condensed Consolidated Statements of Cash Flows

	Twelve Months Ended
	November 30,			November 30,
(In thousands except per share data)	2004			2003
Cash flows from operations:
Net income	$	32,101		$	27,074
Depreciation, amortization and other noncash charges		19,123			11,197
Other changes in operating assets and liabilities		21,086			19,409
Net cash flows from operations		72,310			57,680
Capital expenditures		(10,716	)		(7,134	)
Acquisitions, net of cash acquired		(99,320	)		(24,255	)
Stock issuances, net of buybacks		8,140			14,645
Other		1,722			1,002
Net change in cash and short-term investments		(27,864	)		41,938
Cash and short-term investments, beginning of period		219,131			177,193
Cash and short-term investments, end of period	$	191,267		$	219,131