10-Q

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended March 31, 2005

OR

o 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: 0-27876

JDA SOFTWARE GROUP, INC.

(Exact name of registrant as specified in its charter)

Delaware	86-0787377
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification No.)

14400 North 87^th Street
Scottsdale, Arizona 85260
(480) 308-3000
(Address and telephone number of principal executive offices)

     Indicate by check mark whether 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) had been subject to such filing requirements for the past 90 days. Yes þ No o

     Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2). Yes þ No o

     The number of shares outstanding of the Registrant’s Common Stock, $0.01 par value, was 29,070,733 as of April 30, 2005.

JDA SOFTWARE GROUP, INC.

FORM 10-Q

TABLE OF CONTENTS

	Page No.
PART I: INTERIM FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets as of March 31, 2005 and December 31, 2004		3
Consolidated Statements of Operations for the Three Months Ended March 31, 2005 and March 31, 2004		4
Consolidated Statements of Comprehensive Operations for the Three Months Ended March 31, 2005 and March 31, 2004		5
Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2005 and March 31, 2004		6
Notes to Consolidated Financial Statements		8
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		18
Item 3. Quantitative and Qualitative Disclosures About Market Risk		47
Item 4. Controls and Procedures		48
PART II: OTHER INFORMATION
Item 1. Legal Proceedings		49
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		49
Item 3. Defaults Upon Senior Securities		49
Item 4. Submission of Matters to a Vote of Security Holders		49
Item 5. Other Information		49
Item 6. Exhibits		49
Signature		50
EX-10.27
EX-31.1
EX-31.2
EX-32.1

2

PART I: FINANCIAL INFORMATION

Item 1. Financial Statements

JDA SOFTWARE GROUP, INC.

CONSOLIDATED BALANCE SHEETS

(in thousands, except share amounts)

	March 31,			December 31,
	2005			2004
	(Unaudited)
ASSETS
Current Assets:
Cash and cash equivalents	$	64,033		$	61,344
Marketable securities		36,212			35,778
Total cash and marketable securities		100,245			97,122
Accounts receivable, net		36,330			39,524
Income tax receivable		609			—
Deferred tax asset		3,527			3,578
Prepaid expenses and other current assets		9,599			8,242
Promissory note receivable		1,684			2,736
Total current assets		151,994			151,202
Property and Equipment, net		46,924			48,324
Goodwill		69,901			69,901
Other Intangibles, net:
Customer lists		27,498			28,347
Acquired software technology		19,450			20,749
Trademarks		2,591			2,591
		49,539			51,687
Deferred Tax Asset		11,827			11,453
Total assets	$	330,185		$	332,567
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities:
Accounts payable	$	1,932		$	3,104
Accrued expenses and other liabilities		18,845			24,645
Income tax payable		—			215
Deferred revenue		34,481			28,418
Total current liabilities		55,258			56,382
Stockholders’ Equity:
Preferred stock, $.01 par value; authorized 2,000,000 shares; none issued or outstanding		—			—
Common stock, $.01 par value; authorized, 50,000,000 shares; issued 29,659,435 and 29,596,697 shares, respectively		297			296
Additional paid-in capital		249,342			248,633
Retained earnings		32,715			32,012
Accumulated other comprehensive loss		(724	)		(204	)
		281,630			280,737
Less treasury stock, at cost, 571,702 and 414,702 shares, respectively		(6,703	)		(4,552	)
Total stockholders’ equity		274,927			276,185
Total liabilities and stockholders’ equity	$	330,185		$	332,567

See notes to consolidated financial statements.

3

JDA SOFTWARE GROUP, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except earnings per share data)

(unaudited)

	Three Months
	Ended March 31,
	2005			2004
REVENUES:
Software licenses	$	10,217		$	14,579
Maintenance services		21,706			19,307
Product revenues		31,923			33,866
Consulting services		16,914			20,014
Reimbursed expenses		1,414			1,279
Service revenues		18,328			21,293
Total revenues		50,251			55,179
COST OF REVENUES:
Cost of software licenses		225			678
Amortization of acquired software technology		1,299			1,261
Cost of maintenance services		5,613			4,968
Cost of product revenues		7,137			6,907
Cost of consulting services		12,951			14,345
Reimbursed expenses		1,414			1,279
Cost of service revenues		14,365			15,624
Total cost of revenues		21,502			22,531
GROSS PROFIT		28,749			32,648
OPERATING EXPENSES:
Product development		11,676			13,770
Sales and marketing		9,402			10,922
General and administrative		5,529			6,217
Amortization of intangibles		849			841
Restructuring charge and adjustments to acquisition-related reserves		1,559			2,824
Total operating expenses		29,015			34,574
OPERATING LOSS		(266	)		(1,926	)
Other income, net		516			748
INCOME (LOSS) BEFORE INCOME TAX BENEFIT		250			(1,178	)
Income tax benefit		(453	)		(741	)
NET INCOME (LOSS)	$	703		$	(437	)
BASIC EARNINGS (LOSS) PER SHARE	$	02		$	(.02	)
DILUTED EARNINGS (LOSS) PER SHARE	$	02		$	(.02	)
SHARES USED TO COMPUTE:
Basic earnings (loss) per share		29,152			29,037
Diluted earnings (loss) per share		29,526			29,037

See notes to consolidated financial statements.

4

JDA SOFTWARE GROUP, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE OPERATIONS
(in thousands, unaudited)

	Three Months
	Ended March 31,
	2005			2004
NET INCOME (LOSS)	$	703		$	(437	)
OTHER COMPREHENSIVE GAIN (LOSS):
Unrealized holding gain (loss) on marketable securities available for sale, net of tax		7			(4	)
Foreign currency translation gain (loss)		(527	)		1,257
COMPREHENSIVE GAIN	$	183		$	816

See notes to consolidated financial statements.

5

JDA SOFTWARE GROUP, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands, unaudited)

	Three Months
	Ended March 31,
	2005			2004
OPERATING ACTIVITIES:
Net income (loss)	$	703		$	(437	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization		4,512			4,384
Provision for doubtful accounts		—			250
Tax benefit – employee stock benefit plans and other		49			53
Deferred income taxes		(323	)		105
Changes in assets and liabilities:
Accounts receivable		3,204			(6,953	)
Income tax receivable		(607	)		(1,402	)
Prepaid expenses and other current assets		(1,353	)		(925	)
Accounts payable		(1,168	)		1,561
Accrued expenses and other liabilities		(5,043	)		2,828
Income tax payable		(214	)		—
Deferred revenue		6,081			7,356
Net cash provided by operating activities		5,841			6,820
INVESTING ACTIVITIES:
Purchase of marketable securities		(5,492	)		(13,718	)
Sales of marketable securities		—			1,504
Maturities of marketable securities		5,065			13,101
Purchase of Timera Texas, Inc		—			(13,574	)
Payment of direct costs related to acquisitions		(142	)		(98	)
Payments received on promissory note receivable		1,052			78
Purchase of corporate office facility		—			(23,767	)
Purchase of other property and equipment		(1,579	)		(3,717	)
Proceeds from disposal of property and equipment		38			107
Net cash used in investing activities		(1,058	)		(40,084	)
FINANCING ACTIVITIES:
Issuance of common stock — stock option plan		649			381
Purchase of treasury stock		(2,151	)		—
Payments on capital lease obligations		(11	)		(49	)
Net cash (used in) provided by financing activities		(1,513	)		332
Effect of exchange rates on cash		(581	)		(67	)
Net increase (decrease) in cash and cash equivalents		2,689			(32,999	)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD		61,344			77,464
CASH AND CASH EQUIVALENTS, END OF PERIOD	$	64,033		$	44,465

6

JDA SOFTWARE GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands, unaudited)

	Three Months
	Ended March 31,
	2005		2004
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for income taxes	$	661	$	1,690
Cash paid for interest	$	23	$	36
Cash received for income tax refunds	$	2	$	933
Supplemental Disclosures of Non-cash Investing Activities:
Acquisition of Timera Texas, Inc.:
Fair value of current assets acquired			$	(1,205	)
Fair value of fixed assets acquired				(250	)
Goodwill				(8,388	)
Software technology				(4,600	)
Customer lists				(1,100	)
Fair value of deferred revenue acquired				1,487
Total acquisition cost of Timera Texas, Inc				(14,056	)
Reserves for direct costs related to the acquisition				482
Total cash expended to acquire Timera Texas, Inc			$	(13,574	)

See notes to consolidated financial statements.

7

JDA SOFTWARE GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except percentages, shares, per share amounts, or as otherwise stated)

(unaudited)

1. Basis of Presentation

          The accompanying unaudited consolidated financial statements of JDA Software Group, Inc. (the “Company”) have been prepared in accordance with accounting principles generally accepted in the United States of America applicable to interim financial statements. Accordingly, they do not include all of the information and notes required for complete financial statements. In the opinion of management, all adjustments and reclassifications considered necessary for a fair and comparable presentation have been included and are of a normal recurring nature. Operating results for the three month period ended March 31, 2005 are not necessarily indicative of the results that may be expected for the year ending December 31, 2005. These consolidated financial statements should be read in conjunction with the audited financial statements and the notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2004.

          The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the reporting periods. Actual results could differ from those estimates.

          Certain reclassifications have been made to the March 31, 2004 interim financial statements and the December 31, 2004 consolidated balance sheet in order to conform to the March 31, 2005 presentation. Auction rate securities, historically classified as cash and cash equivalents, have been reclassified as marketable securities. As a result, cash and cash equivalents at December 31, 2004 decreased by $15.6 million while marketable securities increased by the same amount.

2. Derivative Instruments and Hedging Activities

          We use derivative financial instruments, primarily forward exchange contracts, to manage a majority of the foreign currency exchange exposure associated with net short-term foreign denominated assets and liabilities which exist as part of our ongoing business operations. The exposures relate primarily to the gain or loss recognized in earnings from the revaluation or settlement of current foreign denominated assets and liabilities. We do not enter into derivative financial instruments for trading or speculative purposes. The forward exchange contracts generally have maturities of less than 90 days and are not designated as hedging instruments under Financial Accounting Standard No. 133, Accounting for Derivative Instruments and Hedging Activities (“SFAS No. 133”). Forward exchange contracts are marked-to-market at the end of each reporting period, with gains and losses recognized in other income, net, offset by the gains or losses resulting from the settlement of the underlying foreign denominated assets and liabilities.

          At March 31, 2005, we had forward exchange contracts with a notional value of $7.3 million and an associated net forward contract receivable of $43,500. At December 31, 2004, we had forward exchange contracts with a notional value of $5.8 million and an associated net forward contract liability of $219,000. The net forward contract liabilities are included in accrued expenses and other liabilities. The notional value represents the amount of foreign currencies to be purchased or sold at maturity and does not represent our exposure on these contracts. We recorded foreign currency exchange gains of $5,000 and $213,000 in the three months ended March 31, 2005 and 2004, respectively.

3. Promissory Note Receivable

          In May 2001, we entered into a secured promissory note agreement under which we agreed to loan Silvon Software, Inc. (“Silvon”) $3.5 million. We license certain applications from Silvon for use in the IDEAS product. The loan was collateralized by a first priority security interest in all of Silvon’s intellectual property, accounts receivable and all other assets. The promissory note provided for interest at prime, plus 1.5%, payable monthly, and for periodic payments towards the principal balance through the retention of a portion of the royalties we owe Silvon from sales of the IDEAS product, with any remaining accrued and unpaid interest and principal due and payable on May 8, 2004.

8

          On May 7, 2004, Silvon notified the Company that it would not make the final May 8, 2004 payment due under the note and advised that an arbitration claim had been filed against the Company. We subsequently filed a counterclaim for the remaining balance on the note plus interest and attorney fees. On November 30, 2004, the Company entered into a Settlement Agreement and Release with Silvon that included: (i) an Amended and Restated Secured Promissory Note that provided for repayment of the outstanding principal and interest due on the note (at the default rate of 18%) on or before March 30, 2005, (ii) an Amended Distribution License Agreement that provided for the retention and application of 100% of the royalty and maintenance fees due Silvon against the outstanding principal and interest due on the note until the note is fully repaid, (iii) the automatic release of the source code from escrow if Silvon had not paid the full amount of the outstanding principal and interest due on the note by March 30, 2005, or if Silvon files for bankruptcy or similar protection before the outstanding principal has been paid, and (iv) Silvon’s waiver of any and all rights including limitation defenses to our remedies as a secured creditor, and their dismissal with prejudice of all claims made against the Company in their arbitration claim.

          On March 30, 2005, Silvon remitted $1.0 million of the outstanding principal balance and entered into a Second Amended and Restated Secured Promissory Note with the Company that provides for (i) repayment of the remaining principal balance and interest due on the note (at the default rate of 18%) on or before March 30, 2006 and (ii) prohibits Silvon from entering into any indebtedness for borrowed money, other than the incurrence of up to $1.0 million of indebtedness under certain subordinated note agreements executed concurrent with this amendment. All other terms and conditions from the November 30, 2004 Settlement Agreement and Release remain in effect.

          No adjustments have been made to the restated carrying amount of the note as we believe the value of the underlying collateral is sufficient to recover the remaining balance on the note if we are required to exercise our legal remedies.

4. Goodwill and Other Intangibles, net

          Goodwill and other intangible assets consist of the following:

	March 31, 2005					December 31, 2004
	Gross Carrying		Accumulated			Gross Carrying		Accumulated
	Amount		Amortization			Amount		Amortization
Goodwill	$	69,901	$	—		$	69,901	$	—
Other intangibles:
Amortized intangible assets
Customer Lists		40,698		(13,200	)		40,698		(12,351	)
Software technology		39,661		(20,211	)		39,661		(18,912	)
Unamortized intangible assets
Trademarks		2,591		—			2,591		—
		82,950		(33,411	)		82,950		(31,263	)
	$	152,851	$	(33,411	)	$	152,851	$	(31,263	)

          We found no indication of impairment of our goodwill balances during the three months ended March 31, 2005 and, absent future indicators of impairment, the next annual impairment test will be performed in fourth quarter 2005. As of March 31, 2005, goodwill has been allocated to our reporting units as follows: $42.0 million to Retail Enterprise Systems, $9.7 million to In-Store Systems, and $18.2 million to Collaborative Solutions.

9

          The estimated useful lives of our customer list intangibles range from 5 to 13 years. The estimated economic lives of our software technology range from 5 to 15 years. Amortization expense for the three months ended March 31, 2005 and 2004 was $2.1 million and $2.1 million, respectively. These figures are shown as separate line items in the consolidated statements of income within cost of revenues and operating expenses. We expect amortization expense for the next five years to be as follows:

2005	$	8,294
2006	$	8,153
2007	$	7,031
2008	$	5,854
2009	$	4,210

5. Earnings per Share

          Earnings per share for the three months ended March 31, 2005 and 2004 is calculated as follows:

	Three Months
	Ended March 31,
	2005		2004
Net income (loss)	$	703	$	(437	)
Shares – Basic earnings (loss) per share		29,152		29,037
Dilutive common stock equivalents		374		—
Shares – Diluted earnings (loss) per share		29,526		29,037
Basic earnings (loss) per share	$	.02	$	(.02	)
Diluted earnings (loss) per share	$	.02	$	(.02	)

6. Restructuring Charges

          Restructuring Charges Related to Our 2005 Operating Plan

          We recorded a $1.6 million restructuring charge in first quarter 2005 related to the restructuring initiatives contemplated in our 2005 Operating Plan. This charge, which is primarily for one-time termination benefits, is in addition to the $3.1 million restructuring charge recorded in fourth quarter 2004. The fourth quarter 2004 charge included $2.8 million in one-time termination benefits and $341,000 for the negotiated buyout or net rentals remaining under existing operating leases on certain facilities that were vacated by December 31, 2004. The restructuring initiatives include a consolidation of product lines, a net workforce reduction of approximately 12% or 159 FTE worldwide, and a reduction of certain office space in Northern Europe. The net workforce reduction includes certain employees involved in the product development (82 FTE), consulting services and training (54 FTE), sales and marketing (21 FTE), and administrative (16 FTE) functions in the Americas, Europe and Asia Pacific, offset by a net gain of 14 FTE in the customer support function resulting from the transfer of 20 developers and functional experts into the new Customer Directed Development (“CDD”) organization structure within our Customer Support Solutions group. The CDD group is responsible for improving the speed and efficiency of the Company’s issue resolution, support and enhancements for maintenance customers. A total of 110 FTE were terminated or open positions eliminated through December 31, 2004 with an additional 36 FTE terminated during first quarter 2005. We anticipate taking an additional charge of approximately $200,000 to $300,000 in second quarter 2005 to complete these restructuring initiatives and to sublet excess space.

10

          A summary of the restructuring and office closure charges associated with these initiatives are included in accrued expenses and other liabilities as follows:

									Impact of
									Changes									Impact of
	(Q4-04)					Loss on			in				(Q1-05)					Changes in
Description of	Initial		Cash			Disposal			Exchange		Balance		Additional		Cash			Exchange			Balance
charge	Reserve		Charges			of Assets			Rates		Dec. 31, 2004		Reserve		Charges			Rates			Mar. 31, 2005
Severance, benefits, and legal costs	$	2,810	$	(1,485	)	$	—		$	42	$	1,367	$	1,553	$	(2,456	)	$	(12	)	$	452
Office closure costs		341		(228	)		(33	)		3		83		6		(65	)		(4	)		20
Total	$	3,151	$	(1,713	)	$	(33	)	$	45	$	1,450	$	1,559	$	(2,521	)	$	(16	)	$	472

          The remaining balance for severance, benefits and legal costs relates to terminated employees that we expect to be substantially paid out by June 30, 2005, pending labor court confirmation in certain European countries.

          Other 2004 Restructuring Charges

          We recorded a $2.7 million restructuring charge in first quarter 2004 for $1.8 million in one-time termination benefits related to a workforce reduction of 47 full-time employees (“FTE”), primarily in sales (15 FTE) and consulting services (18 FTE) functions in the Americas, Europe and Asia/Pacific, and $899,000 for closure costs of certain offices in the Americas and Europe that were either under-performing or under-utilized and used primarily by consulting services personnel. All workforce reductions and office closures associated with this charge were made on or before March 31, 2004. Subsequent to the initial restructuring charge, we increased our estimate of employee severance and termination benefits by $50,000, primarily as a result of a contested termination in the Americas, and reduced our estimate of office closure reserve requirements by $58,000 primarily as a result of a favorable settlement of outstanding lease obligations on a vacated facility in Germany.

          A summary of the first quarter 2004 restructuring and office closure charges included in accrued expenses and other liabilities is as follows:

												Impact of							Impact of
	(Q1-04)					Loss on						Changes in							Changes in
Description of	Initial		Cash			Disposal			Adj to			Exchange		Balance		Cash			Exchange			Balance
charge	Reserve		Charges			of Assets			Reserves			Rates		Dec. 31, 2004		Charges			Rates			Mar. 31, 2005
Severance, benefits, and legal costs	$	1,789	$	(1,774	)	$	—		$	50		$	—	$	65	$	—		$	(3	)	$	62
Office closure costs		899		(427	)		(62	)		(58	)		33		385		(197	)		(10	)		178
Total	$	2,688	$	(2,201	)	$	(62	)	$	(8	)	$	33	$	450	$	(197	)	$	(13	)	$	240

          The remaining balance for severance, benefits and legal costs relates to terminated employees that we expect to be paid out by June 30, 2005, pending labor court confirmation in certain European countries. The remaining balance for office closure costs is being paid out as the leases and related subleases run through their remaining terms.

          2002 Restructuring Charges

          We recorded a $1.3 million restructuring charge in second quarter 2002 for a workforce reduction of 53 full-time employees, primarily in the consulting services function in the Americas and Europe. All workforce reductions associated with this charge were made on or before June 30, 2002. All employees potentially impacted by this restructuring were notified of the plan of termination and the related benefits on or before June 30, 2002.

11

          We recorded a restructuring charge of $5.0 million in fourth quarter 2002 for the workforce reduction and office closure costs to reorganize the Company in connection with the implementation of the Customer Value Program (“CVP”). CVP was designed to (i) refocus the organization on delivering value to our existing customer base, (ii) strengthen our competitive position, (iii) improve the quality, satisfaction and efficiency of our customers’ experience with JDA, (iv) increase revenue, (v) better align our cost structure, and (vi) improve our operating results. The reorganization resulted in the consolidation of nearly all product development and client support activities at our corporate headquarters, a workforce reduction of approximately 204 full-time employees and certain office closures. Office closure costs pertain to certain US, Latin American, and European offices that were either under-performing or became redundant with the reorganization.

          A summary of the 2002 restructuring and office closure charges included in accrued expenses and other liabilities is as follows:

						Loss on
Description of the	Initial		Cash			disposal			Adjustments			Balance at		Cash			Balance at
charge	Reserve		Charges			of assets			to Reserve			Dec 31, 2004		Charges			Mar 31, 2005
Severance, benefits and legal costs	$	5,204	$	(5,007	)	$	—		$	(197	)	$	—	$	—		$	—
Office closure costs		1,083		(932	)		(138	)		196			209		(98	)		111
Total	$	6,287	$	(5,939	)	$	(138	)	$	(1	)	$	209	$	(98	)	$	111

          During 2003, we reduced our estimate of severance, benefits and legal costs by $197,000, primarily as a result of our decision to offer indefinite full-time employment to certain employees previously subject to temporary retention arrangements, and accrued an additional $196,000 for office closure costs based on our revised estimate of the time required to sublease the vacated office space in the current economic environment. Both adjustments were made through the income statement. The remaining balance for office closure costs is being paid out as the leases and any related subleases run through their remaining terms.

7. E3 Acquisition Reserves

          In conjunction with the acquisition of E3 Corporation (“E3”) in 2001, we recorded acquisition reserves of approximately $14.6 million for restructuring costs to exit the activities of E3 and other direct costs associated with the acquisition. These costs related primarily to facility closures, employee severance, investment banker fees, and legal and accounting costs. We subsequently increased the purchase price and E3 acquisition reserves by $1.3 million during 2002 based on revised estimates of the restructuring costs to exit the activities of E3 and other direct costs of the acquisition. During 2003, we reduced our estimate of employee severance and termination benefits by $172,000, and accrued $190,000 for facility termination and sublease costs based on our revised estimate of the time required to sublease the vacated office space in the current economic environment. During 2004, we accrued an additional $341,000 to fully reserve the remaining lease payments on this vacated office space, including $150,000 in the first quarter of 2004. The real estate market in which this facility is located continues to be depressed, and to date we have received no offers to sublease the available space during the remaining term of the lease which extends through February 2006. All adjustments during 2003 and 2004 were made through the income statement. The 2004 adjustment is included in operating expenses under the caption “Restructuring charges and adjustments to acquisition-related reserves.”

          All employee severance and termination benefits as well as investment banker fees and legal and accounting costs were fully paid by December 31, 2003, and the only remaining reserves at March 31, 2005 are for facility termination and sublease costs which are being paid out over the remaining term of the lease. A summary of the charges and adjustments recorded against the E3 acquisition reserves, which are included in accrued expenses and other liabilities, is as follows:

12

												Balance					Balance
	Initial		Cash			Adj to			Non-Cash			December 31,		Cash			March 31,
Description of charge	Reserve		Charges			Reserves			Charges			2004		Charges			2005
Restructuring charges under EITF 95-3:
Facility termination and sublease costs	$	4,689	$	(5,851	)	$	1,660		$	(25	)	$	473	$	(110	)	$	363
Employee severance and termination benefits		4,351		(4,363	)		12			—			—		—			—
Termination payments to distributors		500		(100	)		(400	)		—			—		—			—
E3 user group and trade show cancellation fees		84		(72	)		(12	)		—			—		—			—
Direct costs under SFAS No. 141
Legal and accounting costs		2,344		(2,751	)		407			—			—		—			—
Investment banker fees		2,119		(2,119	)		—			—			—		—			—
Due diligence fees and expenses		350		(376	)		26			—			—		—			—
Filing fees, appraisal services and transfer taxes		110		(100	)		(10	)		—			—		—			—
Total	$	14,547	$	(15,732	)	$	1,683		$	(25	)	$	473	$	(110	)	$	363

          The facility termination and sublease costs represent the costs of a plan to exit an activity of an acquired company as described in Financial Accounting Standards Board Emerging Issues Task Force Issue No. 95-3 (“EITF No. 95-3”), Recognition of Liabilities in Connection with a Purchase Business Combination, and include the estimated costs of management’s plan to shut down nine offices of E3 shortly after the acquisition date. These costs have no future economic benefit to the Company and are incremental to the other costs incurred by the Company or E3.

          Employee severance and termination benefits were costs resulting from a plan to involuntarily terminate employees from an acquired company as described in EITF No. 95-3. As of the consummation date of the acquisition, executive management approved a plan to involuntarily terminate approximately 31% of the 338 full time employees of E3. In the first three months following the consummation of the E3 acquisition, management completed the assessment of which employees would be involuntarily terminated and communicated the termination arrangements to the affected employees in accordance with statutory requirements of the local jurisdictions in which the employees were located.

8. Treasury Stock Repurchase Program

          On February 15, 2005, our Board of Directors approved a program to repurchase from time to time at management’s discretion up to one million shares of the Company’s common stock on the open market or in private transactions until January 26, 2006 at prevailing market prices. The program was adopted as part of our revised approach to equity compensation, which will emphasize performance-based awards to employees and open market stock repurchases by the Company designed to mitigate or eliminate dilution from future employee and director equity-based incentives. Through March 31, 2005, we have purchased a total of 157,000 shares of our common stock for $2.2 million under this program.

9. Stock-Based Compensation

          We do not record compensation expense for options granted to our employees as all options granted under our stock option plans have an exercise price equal to the market value of the underlying common stock on the date of grant. As permitted under Statement of Financial Accounting Standards No. 123, Accounting for Stock-Based Compensation (“SFAS No. 123”), we have elected to continue to apply the provisions of Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees (“APB No. 25”) and account for stock-based compensation using the intrinsic-value method, and provide pro forma disclosure on an annual basis of net income (loss) and net income (loss) per common share for employee stock option grants made, as if the fair-value method defined in SFAS No. 123 had been applied.

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          Statement of Financial Accounting Standards No. 148, Accounting for Stock-Based Compensation - Transition and Disclosure (“SFAS No. 148), which became effective in 2003, amended SFAS No. 123 to provide alternative methods of transition to the fair value method of accounting for stock-based employee compensation if a company elects to account for its equity awards under this method. SFAS No. 148 also amended the disclosure provisions of SFAS No. 123 and APB Opinion No. 28, Interim Financial Reporting, to require disclosure of the effects of an entity’s accounting policy with respect to stock-based employee compensation on reported net income and earnings per share in both annual and interim financial statements.

          The following table presents pro forma disclosures required by SFAS No. 123 and SFAS No. 148 of net income (loss) and basic and diluted earnings (loss) per share as if stock-based compensation expense had been recognized during the three months ended March 31, 2005 and 2004. The compensation expense for these periods has been determined under the fair value method using the Black-Scholes pricing model, and assumes graded vesting. Stock-based compensation expense for first quarter 2004 has been adjusted to reflect the revised tax benefit available for incentive stock options generated at the time of exercise.

	Three Months
	Ended March 31,
	2005			2004
Net income (loss) — as reported	$	703		$	(437	)
Less: stock-based compensation expense, net of related tax effects		(3,627	)		(923	)
Pro forma net income (loss)	$	(2,924	)	$	(1,360	)
Basic earnings (loss) per share — as reported	$	.02		$	(.02	)
Diluted earnings (loss) per share — as reported	$	.02		$	(.02	)
Basic earnings (loss) per share — pro forma	$	(.10	)	$	(.05	)
Diluted earnings (loss) per share — pro forma	$	(.10	)	$	(.05	)

          On December 16, 2004, the Financial Accounting Standards Board issued Statement of Financial Accounting Standard No. 123(R), Share Based Payment (“SFAS No. 123(R)”) which is a revision of SFAS No. 123, supersedes APB No. 25 and SFAS No. 148, and amends Statement of Financial Accounting Standard No. 95, Statement of Cash Flows (“SFAS No. 95”). Generally, the approach in SFAS No. 123(R) is similar to the approach described in SFAS No. 123; however, SFAS No. 123(R) requires all share-based payments to employees, including grants of stock options, to be recognized in the income statement based on their fair values. Pro forma disclosure is no longer an alternative. SFAS No. 123(R) was initially required to be adopted in the next reporting period beginning after June 15, 2005. On April 14, 2005, the Securities and Exchange Commission (the “SEC”) adopted a rule that amends this compliance date to allow companies to implement SFAS No. 123(R) at the beginning of the first fiscal year beginning after June 15, 2005.

          SFAS No. 123(R) permits public companies to adopt its requirements using one of two methods:

1.	A “modified prospective” method in which compensation cost is recognized beginning with the effective date (a) based on the requirements of SFAS No. 123(R) for all share-based payments granted after the effective date and (b) based on the requirements of SFAS No. 123 for all awards granted to employees prior to the effective date of SFAS No. 123(R) that remain unvested on the effective date.
2.	A “modified retrospective” method which includes the requirements of the modified prospective method described above, but also permits entities to restate based on the amounts previously recognized under SFAS No. 123 for purposes of pro-forma disclosures either (a) all prior periods presented or (b) prior interim periods of the year of adoption.

          On March 29, 2005, the SEC issued Staff Accounting Bulletin Topic 14, “Share-Based Payment” (“SAB 107”). SAB 107, which becomes effective for public companies upon their adoption of SFAS No. 123(R), describes the SEC Staff’s views in determining the assumptions that underlie the fair value estimates and interaction of SFAS No. 123(R) with certain existing SEC guidance. We plan to adopt SFAS No. 123(R) on January 1, 2006 using the modified prospective method.

          As permitted by SFAS No. 123, the company currently accounts for share-based payments to employees using APB No. 25’s intrinsic value method and, as such, recognizes no compensation cost for employee stock options. Accordingly, the adoption of SFAS No. 123(R)’s fair value method could potentially have a significant impact on our results of operations, although it will have no impact

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on our overall financial position. The impact of adoption of SFAS No. 123(R) cannot be predicted at this time because it will depend on levels of share-based payments granted in the future. However, had we adopted SFAS No. 123(R) in prior periods, the impact of that standard would have approximated the impact of SFAS No. 123 as described in the disclosure of pro forma net income (loss) and earnings per share above and in Note 1 to the consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2004. SFAS No. 123(R) also requires the benefits of tax deductions in excess of recognized compensation cost to be reported as a financing cash flow, rather than as an operating cash flow as required under current literature. This requirement will reduce net cash flows from operating activities in periods after adoption. While we cannot estimate what those amounts will be in the future (because this would depend on, among other things, when employees exercise stock options), we have recognized $61,000 in first quarter 2005 and $48,000 in first quarter 2004 in operating cash flows for such excess tax deductions.

          On February 15, 2005, the Compensation Committee of our Board of Directors (the “Committee”) approved the immediate vesting of all unvested stock options previously awarded to employees, officers and directors. The accelerated options were issued under our 1995 Stock Option Plan, 1996 Stock Option Plan, 1996 Outside Director Stock Option Plan and 1998 Non-statutory Stock Option Plan. The Committee made the decision to immediately vest these options based in part on the issuance of SFAS No. 123(R). The Committee also considered the reduced level of cash bonuses paid to employees and officers in 2004, the fact that there are no equity awards planned in 2005, other than for certain new hires, and recognized that the exercise of any accelerated options would bring cash into the Company. Absent the acceleration of these options, upon adoption of SFAS No. 123(R), we would have been required to recognize approximately $3.7 million in pre-tax compensation expense from these options over their remaining vesting terms. By vesting all previously unvested options, the stock-based compensation expense under SFAS No. 123 will only be reflected in our footnote disclosures. Further, we believe the future stock-based compensation expense to be recorded under SFAS No. 123(R) related to these options is significantly reduced and would be immaterial to our financial results. However, there can be no assurance that these actions will avoid the recognition of future compensation expense in connection with these options.

          Employees, officers and directors will benefit from the accelerated vesting of their stock options in the event they terminate their employment with or service to the Company prior to the completion of the original vesting terms as they would have the ability to exercise certain options that would have otherwise been forfeited. No stock-based compensation expense will be recorded with respect to these options unless an employee, officer or director actually benefits from this modification. For those employees, officers and directors who do benefit from the accelerated vesting, we are required to record additional stock-based compensation expense equal to the intrinsic value of the option on the date of modification (i.e., February 15, 2005). The closing market price per share of our common stock on February 15, 2005 was $11.85 and the exercise prices of the approximately 1.4 million in unvested options on that date ranged from $8.50 to $28.20. Based on our historical employee turnover rates during the past three years, we currently estimate the potential additional stock-based compensation expense we may be required to record with respect to these options is approximately $45,000. No additional stock-based compensation expense was recorded in first quarter 2005 with respect to these options.

10. Income Taxes

          We recorded an income tax benefit of $453,000 in first quarter 2005 that includes a tax provision of $92,000 and a net one-time income tax benefit of $545,000 resulting from revisions of certain tax estimates in prior years. The net one-time income benefit includes an $850,000 adjustment to our estimate of the foreign tax credit carry forward for taxes withheld in Mexico and Taiwan from 2000 to 2002. We have reduced our FAS 5 income tax contingency to reflect this change in the foreign tax credit carry forward as we had previously believed that these taxes would not be recoverable. We also recorded a $292,000 adjustment in our German subsidiary for our revised estimate of the net operating loss deferred tax asset and the current income tax liability, and a $241,000 adjustment in our Japanese subsidiary to reflect a revision of the income taxes payable upon the filing of the 2004 tax return in first quarter 2005. These benefits have been reduced by a $654,000 adjustment for additional income tax expense related to our revised estimate of the amount realizable at the beginning of 2005 for the depreciation deferred tax asset and a $184,000 adjustment for additional income tax expense related to our revised estimate of the amounts realizable for certain other deferred tax assets related to our UK and Singapore subsidiaries. The effective income tax rate for first quarter 2005, excluding the effect of the net one-time tax benefit, is 37%.

          We recorded an income tax benefit of $741,000 in first quarter 2004 that includes a $329,000 tax refund from the settlement of an Internal Revenue Service (“IRS”) audit of our 1998 and 1999 federal income tax returns and an agreement with the IRS to allow the Company to take a research and development expense tax credit for most of the qualifying expenses originally reported in these returns. The effective income tax rate for the first quarter of 2004, excluding the effect of the $329,000 one-time tax benefit, is 35%.

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          The income tax benefits recorded in first quarter 2005 and 2004 take into account the source of taxable income, domestically by state and internationally by country, and available income tax credits, and does not include the tax benefits realized from the employee stock options exercised during first quarter 2005 and 2004 of $61,000 and $48,000, respectively. These tax benefits reduce our income tax liabilities and are included as an increase to additional paid-in capital.

11. Business Segments and Geographic Data

          We are a leading provider of sophisticated software solutions designed specifically to address the demand and supply chain management, business process, decision support, e-commerce, inventory optimization and collaborative planning and forecasting and store operations requirements of the retail industry and its suppliers. Our solutions enable customers to manage and optimize their inventory flows throughout the demand chain to the consumer, and provide optimized labor scheduling for retail store operations. Our customers include over 4,700 of the world’s leading retail, consumer package goods (“CPG”) manufacturers and wholesalers. We conduct business in three geographic regions that have separate management teams and reporting structures: the Americas (United States, Canada and Latin America), Europe (Europe, Middle East and Africa), and Asia/Pacific. Similar products and services are offered in each geographic region and local management is evaluated primarily based on total revenues and operating income. Identifiable assets are also managed by geographical region. The geographic distribution of our revenues and identifiable assets is as follows:

	Three Months
	Ended March 31,
	2005			2004
Revenues:
Americas	$	36,660		$	39,213
Europe		12,180			14,203
Asia/Pacific		4,701			5,094
		53,541			58,510
Sales and transfers among regions		(3,290	)		(3,331	)
Total revenues	$	50,251		$	55,179

	March 31,		December 31,
	2005		2004
Identifiable assets:
Americas	$	272,524	$	279,282
Europe		42,350		38,464
Asia/Pacific		15,311		14,821
Total identifiable assets	$	330,185	$	332,567

          Revenues for the Americas include $4.2 million and $3.4 million from Canada and Latin America in the three months ended March 31, 2005 and 2004, respectively. Identifiable assets for the Americas include $12.7 million $10.9 million in Canada and Latin America as of March 31, 2005 and December 31, 2004, respectively.

          We have organized our business segments around the distinct requirements of retail enterprises, retail stores, and suppliers to the retail industry:

•   Retail Enterprise Systems. The modern retail enterprise is required to rapidly collect, organize, distribute and analyze, and optimize information throughout its organization. Retail Enterprise Systems include corporate level merchandise management systems (“Merchandise Operations Systems”) that enable retailers to manage their inventory, product mix, pricing and promotional execution, and enhance the productivity and accuracy of warehouse processes. In addition, Retail Enterprise Systems include a comprehensive set of tools for planning, buying, supplying, promoting and analyzing inventory decisions throughout the demand chain (“Strategic Merchandise Management Solutions”).

•   In-Store Systems. Store-level personnel require systems that enhance and facilitate the retailer’s direct interaction with the customer, and integrate the store-level operations into the overall business processes of the organization. In-Store Systems include point-of-sale, labor scheduling and back office applications that enable retailers to capture, analyze and transmit certain sales, store inventory and other operational information to corporate level merchandise management and payroll systems using hand-held, radio frequency devices, point-of-sale workstations or dedicated workstations. In addition, In-Store Systems include a

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workforce management solution to optimize the scheduling of in-store labor which typically represents the next largest operational cost for a retailer after inventory.

•

Collaborative Solutions. Industry practices developed by retailers such as Wal*Mart, increasingly require CPG manufacturers and distributors to collaborate with other participants in the demand chain. While these companies have historically focused on technology to support their ability to manufacture and supply products, this new era of collaboration with retailers has created a requirement for new technology solutions that are designed to optimize sales of products to end consumers through the retail channel. Collaborative Solutions provide applications that enable business-to-business collaborative activities such as collaborative planning, forecasting and replenishment (“CPFR”), collaborative category management including collaborative space and assortment planning, and collaborative revenue management through trade funds management programs. Our Collaborative Solutions offerings leverage existing solutions deployed to retailers within our Retail Enterprise Systems business segment.

          A summary of the revenues, operating income (loss), and depreciation attributable to each of these business segments for the three months ended March 31, 2005 and 2004 is as follows:

	Three Months
	Ended March 31,
	2005			2004
Revenues:
Retail Enterprise Systems	$	33,764		$	38,727
In-Store Systems		4,406			4,358
Collaborative Solutions		12,081			12,094
	$	50,251		$	55,719
Operating income (loss):
Retail Enterprise Systems	$	5,583		$	5,046
In-Store Systems		(403	)		(41	)
Collaborative Solutions		2,491			2,951
Other (see below)		(7,937	)		(9,882	)
	$	(266	)	$	(1,926	)
Depreciation:
Retail Enterprise systems	$	1,329		$	1,417
In-Store systems		292			233
Collaborative Solutions		435			369
	$	2,056		$	2,019
Other:
Amortization of intangible assets	$	849		$	841
Restructuring charge and adjustments to acquisition-related reserves		1,559			2,824
General and administrative expenses		5,529			6,217
	$	7,937		$	9,882

          Operating income in the Retail Enterprise Systems, In-Store Systems and Collaborative Solutions business segments includes direct expenses for software licenses, maintenance services, service revenues, amortization of acquired software technology, and certain sales, marketing and product development expenses, as well as allocations for other sales, marketing and product development expenses, occupancy costs and depreciation expense. The “Other” caption includes general and administrative expenses and other charges that are not directly identified with a particular business segment and which management does not consider in evaluating the operating income (loss) of the business segment.

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

Overview

          We are a leading provider of sophisticated software solutions designed specifically to address the demand and supply chain management, business process, decision support, e-commerce, inventory optimization, collaborative planning and forecasting and store operations requirements of the retail industry and its suppliers. Our solutions enable customers to manage and optimize their inventory flows throughout the demand chain to the consumer, and provide optimized labor scheduling for retail store operations. Our customers include over 4,700 of the world’s leading retail, consumer package goods (“CPG”) manufacturers and wholesalers. We also offer maintenance services to our software customers, and enhance and support our software business by offering implementation and other services that are designed to enable our clients to rapidly achieve the benefits of our solutions. These services include project management, system planning, system design and implementation, custom configurations, and training services. Demand for our implementation services is driven by, and often trails, sales of our software products. Consulting services revenues are generally somewhat more predictable but generate significantly lower gross margins than software license revenues.

Significant Trends and Developments in Our Business

          Outlook for Second Quarter 2005. Software license sales may continue to vary significantly from quarter-to-quarter for the remainder of 2005. We currently expect a sequential increase in software license sales in second quarter 2005, particularly in the Americas region (United States, Canada and Latin America) and in the Europe region (Europe, Middle East and Africa), due to a substantially larger sales pipeline at the start of second quarter 2005 than we had going into first quarter 2005. The Asia/Pacific region remains weak in terms of overall performance. We believe our competitive position in Asia/Pacific remains good, and we are winning a high percentage of the opportunities we encounter; however, the region has not shown any broad signs of economic recovery or growth in the overall volume of business.

          An important component of our strategic operational plan for 2005 (“2005 Operating Plan”) is to improve the profitability of our services organization, primarily as a result of the actions undertaken in fourth quarter 2004 to increase the utilization of our services personnel through headcount reductions. We currently expect our services revenues to remain flat to down slightly in second quarter 2005 compared to first quarter 2005. In addition, service margins may experience downward pressure in second quarter 2005 depending upon the level of use of our consultants in pre-sales and product development activities and our overall software performance, which impacts incentive compensation.

          Our 2005 Operating Plan is designed to deliver higher profitability through a reduced cost structure, even if global spending levels for information technology or the overall market environment does not improve over 2004. We reduced our operating costs and improved our overall profitability in first quarter 2005 as a result of the restructuring activities and cost reductions taken in fourth quarter 2004 in connection with the implementation of our 2005 Operating Plan. An additional restructuring charge was taken in first quarter 2005 to substantially complete this plan. We expect our total costs and expenses to remain flat in second quarter 2005 compared to first quarter 2005. In addition, we expect a modest sequential decline in product development expenses in second quarter 2005 as we begin to realize the full impact of the staged headcount reductions that we set in motion in November 2004. Quarterly sales and marketing expense will vary during 2005 primarily as a result of incentive compensation, which is directly associated with the volume of software sales and the timing of marketing events. Therefore, even with the anticipated sequential increase in software license sales in second quarter 2005, we believe sales and marketing expense will remain flat with first quarter 2005. General and administrative expenses are expected to increase modestly in second quarter 2005 compared to first quarter 2005 as we “go live” on our new internal financial system, and as a result of the outside costs associated with the startup of Sarbanes-Oxley compliance procedures for 2005.

          Changes in Buying Patterns Continue to Impact our Operating Results. The retail industry and its suppliers continue to exercise significant due diligence prior to making large capital outlays, and the decision-making process for investments in information technology remains highly susceptible to deferral. Delays in the decision-making process have been, and may continue to be, the most significant issue affecting our software license revenue results. Delays in the customer decision-making processes have resulted from a number of factors including uncertain economic conditions, extended due diligence procedures designed to minimize risk, corporate reorganizations, consolidations within the industry, the appointment of new senior management, and the increasing trend by companies to seek board-level approval for all significant investments in information technology. As a result, our sales cycles remain elongated and we continue to experience uncertainty predicting the size and timing of individual contracts, particularly the closure of large software licenses ($1.0 million or greater), which continues to remain uneven from quarter-to-quarter. For example, we signed no large

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software license in first quarter 2005 compared to five in fourth quarter 2004 and two in first quarter 2004. Sales to new customers have historically required between three and nine months from generation of the sales lead to the execution of a software license agreement. Sales cycles are typically longer and more complex for larger dollar projects, large multi-national retail organizations and retailers in certain geographic regions.

          We have historically recognized a substantial portion of our software license revenues under an Initial License Fee model. Under this license model, software license contracts are structured to enable the Company to recognize 100% of the software license revenue upon execution of the contract provided all of the revenue recognition criteria set forth in Statement of Position 97-2, Software Revenue Recognition have been met. However, due to the elongated sales cycles we are experiencing and the absence of a predictable base demand, we have begun to increasingly offer larger customers in the Americas region the option to purchase software licenses under Proof of Concept and Milestone-Based licensing models in order to mitigate their risk aversion. Under the Proof of Concept license model, customers are allowed to try one or more of our solutions before they purchase them, either in a proof of concept, pilot, or prototype environment, or during the performance of business process analyses or benchmarking activities. Under the Milestone-Based license model, payment of the software license fees are aligned with the achievement of defined milestones or deliverable objectives within an agreed timeframe. Although the purchase of software licenses under the Proof of Concept and Milestone-Based licensing models will delay the recognition of revenue, we believe these licensing models may improve our ability to predict the timing of software license revenues and over time, decrease our dependence on Initial License Fee model transactions, which have historically been the least predictable element of our revenue stream. It is still too early to determine the timing and magnitude of the impact these new licensing models will have on our operating results

          Economic conditions have negatively impacted the demand for our Merchandise Operations Systems and In-Store Systems in recent years. Although we believe that significant growth in the transaction systems market will require sustained macroeconomic improvement, we have seen signs that companies are beginning to address long-standing issues in their enterprise systems environments, which could potentially signal a general improvement in demand for our Merchandise Operations Systems. We continue to believe there are a substantial number of retailers worldwide who will ultimately be faced with the need to update their Merchandise Operations Systems.

          Our Competitive Environment is Changing. Our industry has been going through a transition over the past few years that has resulted in fewer competitors in every significant product market we supply. Currently, we believe there are only two primary global competitors left for our Merchandise Operations Systems, Oracle Corporation (which acquired Retek, Inc. on April 12, 2005) and SAP AG. Similarly, we believe the number of significant competitors for our In-Store Systems and Strategic Merchandise Management Systems have declined.

          We do not believe Oracle’s acquisition of Retek, Inc. will have any significant impact on our near-term strategy. We will continue to consolidate our products onto a common technological platform and drive growth not only in the retail marketplace but also with the suppliers to the retail industry in the collaborative solutions marketplace. Although, the acquisition has the potential to create some additional delays around decisions made by larger Tier 1 customers to purchase Merchandise Operations Systems, we believe there are only a small number of these decisions made each year. In addition, we believe our Strategic Merchandise Management Solutions, which bring together forecasting and replenishment, planning and category management solutions, provide a unique offering and a strong competitive advantage as neither Oracle Corporation or SAP AG currently offer comprehensive analytic and optimization solutions. We also believe that potential customers are far more likely to drive their software application decision processes based on the suite of analytic and optimization solutions a vendor is able to provide rather than on the financial or human resource systems that may be offered. The majority of our current software license transactions are for Strategic Merchandise Management Solutions. Product revenues from Strategic Merchandise Management Solutions transactions can be as high as the revenues realized on sales of Merchandise Operations Systems.

          Software license revenues from existing customers represented 83% of software license revenues in first quarter 2005 compared to 74% in first quarter 2004. We believe that sales of add-on products to existing customers will continue to comprise a majority of our software revenues and that this metric is a direct result of our large customer base, principally amassed through our acquisition activities in 2000 and 2001, and the focus we have and will continue to place on back-selling opportunities for both our existing JDA Portfolio synchronized products and our next generation PortfolioEnabled products. Over the past five years, the acquisition of Strategic Merchandise Management Solutions such as Portfolio Space Management by Intactix and Portfolio Replenishment by E3 have provided significant back-selling and growth opportunities in our customer base as approximately 60% of our retail customer base, and substantially all of our CPG manufacturers and wholesale customers, still only own applications from one

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of our product families. We believe that once a customer has purchased multiple products from us, we are more likely to be viewed as a strategic partner in terms of their information systems strategy rather than simply a “point solution provider.”

          Business Opportunities and Growth Strategies. We continue to believe there are three distinct growth opportunities in the current economic environment:

•   Offer value propositions in our products and licensing models that make the purchase of our solutions easier and reduce the customers’ risk of investment. Many of our prospective customers have had poor experiences with other information technology vendors. These customers are often reluctant to incur the “upfront” license fees in our traditional Initial License Fee model because it places much of the risk of a difficult implementation on the customer. To address our customers’ concerns and overcome their caution, we have begun to increasingly offer larger customers in the Americas region the option to purchase software licenses under Proof of Concept and Milestone-Based licensing models in order to mitigate their risk aversion. We do not plan to offer these kinds of contractual terms for smaller transactions, which we believe will continue to close as they have historically. We anticipate these new licensing models will result in extended software license revenue streams that will be advantageous in the longer run; however they may reduce revenues in the near term. We further expect to realize greater average selling prices in larger transactions under the Proof of Concept and Milestone-Based licensing models than have been realized historically under our Initial License Fee model.

•   Generate new business opportunities with existing and prospective customers with next generation JDA Portfolio products. We believe our next generation of JDA Portfolio products, PortfolioEnabled, will create opportunities with prospective customers who seek a single, integrated solution that combines the retail disciplines of planning, assortment, purchasing, allocations and replenishment. We do not currently expect to be able to estimate the rate of acceptance of these new products until late 2005 or early 2006; however, during first quarter 2005, our sales organization did encounter some difficultly in determining whether to propose the existing JDA Portfolio synchronized products or the next generation PortfolioEnabled products to prospective customers. As with all new product adoption curves, we expect progress to be slow initially and then accelerate once early adopters of the PortfolioEnabled applications begin to “go live.” We began delivery of these solutions in early 2005 beginning with Portfolio Replenishment Optimization by E3 (“PRO”) and Portfolio Knowledge Base. In second quarter 2005 we plan to release a PortfolioEnabled solution for enterprise planning that will ultimately replace certain of the Portfolio Planning Solutions by Arthur, including Merchandise Planning by Arthur and Assortment Planning by Arthur. The initial PortfolioEnabled solutions may not offer every capability of their predecessor products but will offer other advantages such as an advanced technology platform, the ability of PRO to install on Unix/Oracle environments utilizing Microsoft .Net componentry with subsequent releases to include Microsoft SQL 2005, or other significant functional advantages such as “planning by attribute” capabilities in the enterprise planning solution. Further, the PortfolioEnabled products do offer some significant capabilities that go beyond the current generation products they are replacing, and as a result, we believe they are in and of themselves competitive in the marketplace. On this basis, the PortfolioEnabled products may initially be more attractive to new customers during competitive bids, as opposed to existing customers for upgrade cycles. Sales cycles to new customers tend to be more elongated than those to existing customers who already have contracts in place with us and prior experience with our products. We also believe there will be opportunities to sell new add-on solutions to those customers that do choose to move to the PortfolioEnabled versions of the JDA Portfolio applications.

•   Expansion of our business into areas that are complementary to our traditional retail base. We have begun to develop and deploy broader and more sophisticated solutions to the non-retail market. Our new Optimize on Demand solution has taken the basic Space Planning by Intactix application and expanded it into a strategic category management offering, including additional JDA applications. In addition, we are developing new solutions around business practices such as sales and operations planning that will add to our growing complement of non-retail solutions. Finally, we continue to grow our collaborative planning, forecasting and replenishment (“CPFR”) business and now have over 260 trading partners worldwide with an estimated annual trading value of over $4.3 billion who are live and fully operational on our Marketplace Replenishment CPFR solution. We will continue to search for acquisition opportunities to further develop our Collaborative Solutions business.

          Long-Term Prospects For The In-Store Systems Business Segment Are Promising, But Recent Results Are Below Expectations. The In-Store Systems business segment provided 9% of our total revenues in first quarter 2005 compared to 8% in first quarter 2004. Total revenues in this business segment were $4.4 million in first quarter 2005 which is flat with fourth quarter 2004 and first quarter 2004. The In-Store Systems business segment has been negatively impacted in recent years by poor economic conditions

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that have caused retailers to delay major capital appropriations and by what we believe is a major platform transition as market demand moves from Window-based to Java-based point-of-sale applications. Portfolio Point of Sale (“PPOS”), our Java-based point-of-sale application, was commercially released in second quarter 2003. We have only sold the PPOS application to a limited number of customers since its initial release. We do not believe the In-Store Systems business segment will experience any significant organic growth until the PPOS application becomes more mature and early adopters complete their implementations and become referenceable. Industry surveys indicate that point-of-sales systems are becoming an increased priority for retailers, and we believe potential customers may look to partner with broad solutions providers such as JDA that can bring all aspects of store operations into one integrated suite, including point-of-sale tilling functions, in-store inventory management functions, customer relationship management, space planning and workforce management solutions, rather than software vendors that only offer in-store systems. Accordingly, we believe the long-term prospects for the PPOS application and the In-Store Systems business segment are promising, in part because we believe we are positioned to take advantage of this anticipated replacement cycle for point-of-sales systems that is being driven by a shift to new technology platforms. However, the timing and full impact of the replacement cycle is unclear.

          We Continue to Invest Heavily in New Product Development. We invested $11.7 million in first quarter 2005 and approximately $433 million from 1996 to 2004 in new product development and the acquisition of complementary products. The acquisitions of Arthur and Timera extended our product offerings in the Retail Enterprise Systems and In-Store Systems segments of our business. The acquisitions of Intactix, NeoVista Decision Series, E3, Vista, and Engage not only have expanded our product offerings, but have also provided us with collaborative applications that address new vertical market opportunities with the manufacturers and wholesalers who supply our traditional retail customers. We believe our strategy of expanding our product portfolio and increasing the scalability of our products has been the key element in attracting larger retail customers, and we believe that it has resulted in new customers licensing multiple products, as well as enhanced back-selling opportunities in our customer base.

          We are developing a series of enhancements and the next generation of JDA Portfolio products, PortfolioEnabled, based primarily upon the .Net Platform that we believe will position us uniquely in the retail and collaborative solutions markets. We will continue to offer PortfolioEnabled applications that operate with other market accepted platforms such as Oracle, the IBM iSeries platform where feasible, and where appropriate, Java-based technology. Our goals are to ensure that our solutions offer: (i) increased ease of use, (ii) increased integration of business processes, (iii) reduced cost of ownership, (iv) faster implementation, and (v) faster return on investment. The initial PortfolioEnabled solutions may not offer every capability of their predecessor products but will offer other advantages such as an advanced technology platform, the ability of PRO to install on Unix/Oracle environments utilizing Microsoft .Net componentry with subsequent releases to include Microsoft SQL 2005, or other significant functional advantages such as “planning by attribute” capabilities in the enterprise planning solution. Further, the PortfolioEnabled products do offer some significant capabilities that go beyond the current generation products they are replacing, and as a result, we believe they are in and of themselves competitive in the marketplace. On this basis, the PortfolioEnabled products may initially be more attractive to new customers during competitive bids, as opposed to existing customers for upgrade cycles. Sales cycles to new customers tend to be more elongated than those to existing customers who already have contracts in place with us and prior experience with our products. We will continue selling the equivalent Portfolio Synchronized versions of these products until the new PortfolioEnabled solutions have achieved critical mass in the marketplace.

          Consistent with our 2005 Operating Plan, we have begun to leverage our past investment in product development by reducing our level of product development expenditures, in absolute dollars and as a percentage of revenues. We have begun the process of transition to our new PortfolioEnabled solutions, and as a result, we are now reducing the “double investment” in products that we have endured over the past two years. JDA Portfolio version 2005.1, the fourth synchronized release of our products, was released in first quarter 2005 and included enhancements to virtually all of our existing products that will enable them to maintain their competitive edge. In first quarter 2005 we released the first versions of the PortfolioEnabled solutions beginning with Portfolio Replenishment Optimization by E3 and Portfolio Knowledge Base. In second quarter 2005 we plan to release a PortfolioEnabled solution for enterprise planning that will ultimately replace certain of the Portfolio Planning Solutions by Arthur, including Merchandise Planning by Arthur and Assortment Planning by Arthur. This has been a significant investment by the Company as we have been building this next generation of products while developing JDA Portfolio version 2005.1. With the realignment of our resources at the end of 2004 we have now increased our focus on the development of the PortfolioEnabled solutions, reduced our investment in existing JDA Portfolio products going forward, and will leverage the most current release of these applications.

          The JDA Portfolio Investment Protection Program provides existing customers with a platform transfer right to the new .Net Platform, if and when available, at no additional license fee under certain conditions. Customers will pay any required third party charges associated with the new platform. We will encourage our customers to move to the .Net Platform; however, at this time we are

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unable to estimate how many of our existing customers will take advantage of this program. A similar investment protection program is available for In-Store Systems customers, which provides a platform transfer right from Win/DSS to PPOS. Approximately one-third of our domestic Win/DSS customers have indicated they intend to participate in the In-Store Systems investment protection program.

          We Intend to Continue to Grow Our Business Through Acquisitions. We believe there are opportunities to grow our business through the acquisition of complementary and synergistic companies, products and technologies. We have historically looked at cash acquisitions in the $5 million to $25 million range that could be readily integrated, accretive to earnings, or that could shorten our time to market with new technologies. We are now focusing our acquisition strategy on larger companies, particularly those that have significant recurring revenues or that will increase the breadth of our JDA Portfolio offerings in the Collaborative Solutions business segment.

          We Recorded an Additional Charge for the Restructuring Initiatives Contemplated in Our 2005 Operating Plan. We recorded a $1.6 million charge in first quarter 2005 related to the restructuring initiatives contemplated in our 2005 Operating Plan. This charge, which is primarily for one-time termination benefits, is in addition to the $3.1 million restructuring charge recorded in fourth quarter 2004. The fourth quarter 2004 charge included $2.8 million in one-time termination benefits and $341,000 for the negotiated buyout or net rentals remaining under existing operating leases on certain facilities that were vacated by December 31, 2004. The restructuring initiatives include a consolidation of product lines, a net workforce reduction of approximately 12% or 159 FTE worldwide, and a reduction of certain office space in Northern Europe. The net workforce reduction includes certain employees involved in the product development (82 FTE), consulting services and training (54 FTE), sales and marketing (21 FTE), and administrative (16 FTE) functions in the Americas, Europe and Asia Pacific, offset by a net gain of 14 FTE in the customer support function resulting from the transfer of 20 developers and functional experts into the new Customer Directed Development (“CDD”) organization structure within our Customer Support Solutions group. The CDD group is responsible for improving the speed and efficiency of the Company’s issue resolution, support and enhancements for maintenance customers. A total of 110 FTE were terminated or open positions eliminated through December 31, 2004 with an additional 36 FTE terminated during first quarter 2005. We anticipate taking an additional charge of approximately $200,000 to $300,000 in second quarter 2005 to complete these restructuring initiatives and to sublet excess space.

          Management believes the restructuring initiatives in the 2005 Operating Plan will allow the Company to generate substantially higher profits if the revenue levels for 2005 are comparable to 2004. Specifically, management believes the restructuring initiatives will enable JDA to (i) streamline operations and reduce duplicate investments in product development by consolidating significant portions of the existing product suite on the .Net and Java platforms used in the PortfolioEnabled products, (ii) maximize the return from the Company’s ongoing investments in advanced technology for the delivery of highly specialized services via the Internet and internal administrative systems, and (iii) better align the Company’s operating strategies to identified growth areas in the market. JDA expects to realize an annualized cost reduction in the range of $15 million to $17 million once the 2005 Operating Plan is fully implemented.

          Our Financial Position is Strong and We Have Positive Operating Cash Flow. Our financial position remains strong and as of March 31, 2005 we had $100.2 million in cash, cash equivalents and marketable securities, as compared to $97.1 million at December 31, 2004. We generated $5.8 million in positive cash flow from operations during first quarter 2005 compared to $6.8 million in first quarter 2004. We believe our cash position is sufficient to meet our operating needs for the foreseeable future.

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Results of Operations

          The following table sets forth certain selected financial information expressed as a percentage of total revenues for the periods indicated and certain gross margin data expressed as a percentage of software license revenue, maintenance services revenue, product revenues or services revenues, as appropriate:

	Three months
	Ended March 31,
	2005			2004
REVENUES:
Software licenses		21	%		26	%
Maintenance services		43			35
Product revenues		64			61
Consulting services		33			36
Reimbursed expenses		3			3
Service revenues		36			39
Total revenues		100			100
COST OF REVENUES:
Cost of software licenses		—			1
Amortization of acquired software technology		3			3
Cost of maintenance services		11			9
Cost of product revenues		14			13
Cost of consulting services		26			25
Reimbursed expenses		3			3
Cost of service revenues		29			28
Total cost of revenues		43			41
GROSS PROFIT		57			59
OPERATING EXPENSES:
Product development		23			25
Sales and marketing		19			20
General and administrative		11			11
Amortization of intangibles		2			1
Restructuring charges and adjustments to acquisition-related reserves		3			5
Total operating expenses		58			62
OPERATING LOSS		(1	)		(3	)
Other income, net		1			1
INCOME (LOSS) BEFORE INCOME TAX BENEFIT		—			(2	)
Income tax benefit		1			1
NET INCOME (LOSS)		1	%		(1	)%
Gross margin on software licenses		98	%		95	%
Gross margin on maintenance services		74	%		74	%
Gross margin on product revenues		78	%		80	%
Gross margin on service revenues		22	%		27	%

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          The following table sets forth a comparison of selected financial information, expressed as a percentage change between quarters for the three months ended March 31, 2005 and 2004. In addition, the table sets forth cost of revenues and product development expenses expressed as a percentage of the related revenues:

	% Change
	Three Months ended March 31,
	2005			2004 to 2005			2004
Revenues:
Software licenses	$	10,217			(30	)%	$	14,579
Maintenance		21,706			12	%		19,307
Product revenues		31,923			(6	)%		33,866
Service revenues		18,328			(14	)%		21,293
Total revenues		50,251			(9	)%		55,179
Cost of Revenues:
Software licenses		225			(67	)%		678
Amortization of acquired software technology		1,299			3	%		1,261
Maintenance services		5,613			13	%		4,968
Product revenues		7,137			3	%		6,907
Service revenues		14,365			(8	%)		15,624
Total cost of revenues		21,502			(5	%)		22,531
Gross Profit		28,749			(12	%)		32,648
Operating Expenses:
Product development		11,676			(15	%)		13,770
Sales and marketing		9,402			(14	%)		10,922
General and administrative		5,529			(11	%)		6,217
		26,607			(14	%)		30,909
Amortization of intangibles		849			1	%		841
Operating loss	$	(266	)		86	%	$	(1,926	)
Cost of Revenues as a % of related revenues:
Software licenses		2	%					5	%
Maintenance services		26	%					26	%
Product revenues		22	%					20	%
Service revenues		78	%					73	%
Product Development as a % of product revenues		37	%					41	%

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          The following tables set forth selected comparative financial information on revenues in our business segments and geographical regions, expressed as a percentage change between quarters for the three months ended March 31, 2005 and 2004. In addition, the tables set forth the contribution of each business segment and geographical region to total revenues in the three months ended March 31, 2005 and 2004, expressed as a percentage of total revenues:

	Retail Enterprise Systems				In-Store Systems				Collaborative Solutions
		2005 vs 2004				2005 vs 2004				2005 vs 2004
Software licenses			(43	%)			(23	%)			15	%
Maintenance services			17	%			14	%			3	%
Product revenues			(11	%)			(3	%)			7	%
Service revenues			(15	%)			6	%			(20	%)
Total revenues			(13	%)			1	%			—	%
Product development			(20	%)			(9	%)			(7	%)
Sales and marketing			(29	%)			13	%			37	%
Operating income (loss)			11	%			(883	%)			(16	%)

	Retail Enterprise Systems							In-Store Systems							Collaborative Solutions
		2005			2004				2005			2004				2005			2004
Contribution to total revenues			67	%		70	%			9	%		8	%			24	%		22	%

	The Americas				Europe				Asia/Pacific
		2005 vs 2004				2005 vs 2004				2005 vs 2004
Software licenses			(40	%)			1	%			(9	%)
Maintenance services			13	%			2	%			14	%
Product revenues			(9	%)			2	%			5	%
Service revenues			(2	%)			(43	%)			(18	%)
Total revenues			(7	%)			(14	%)			(8	%)

	The Americas							Europe							Asia/Pacific
		2005			2004				2005			2004				2005			2004
Contribution to total revenues			68	%		67	%			23	%		24	%			9	%		9	%

Three Months Ended March 31, 2005 Compared to Three Months Ended March 31, 2004

Product Revenues

          Product revenues decreased in first quarter 2005 compared to first quarter 2004 primarily due to weaker than expected software license sales in the Americas region due to delays in the closure of certain deals, particularly those involving larger software licenses.

          Software Licenses.

          Retail Enterprise Systems. The decrease in software license revenues in this business segment in first quarter 2005 compared to first quarter 2004 resulted primarily from a delay in large deal closures in the Americas. The Retail Enterprise Systems business segment had no new software license deals of $1.0 million or more in first quarter 2005 compared to one in first quarter 2004 which also included an unusually large license sold as part of a $1.5 million multi-product deal that also included In-Store Systems.

          In-Store Systems. Software license revenues in this business segment decreased in first quarter 2005 compared to first quarter 2004. First quarter 2004 software license revenues included an unusually large license sold as part of a $1.5 million multi-product deal that also included Strategic Merchandise Management Solutions.

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          Collaborative Solutions. Software license revenues in this business segment increased in first quarter 2005 compared to first quarter 2004. Licenses revenues for Marketplace Replenishment, our collaborative specific CPFR solution which is sold on a subscription basis and enables manufacturers, distributors and retailers to work from a single, shared demand forecast, increased 44% in first quarter 2005 compared to first quarter 2004 and represented approximately half of the overall increase.

          Regional Results. Software license revenues in the Americas region decreased in first quarter 2005 compared to first quarter 2004 primarily as a result of weaker than expected software license sales due to delays in the closure of certain deals, particularly those involving larger software licenses. Software license revenues from Retail Enterprise Systems and In-Store Systems applications in the Americas decreased 57% and 23%, respectively, offset in part by a 13% increase in Collaborative Solutions software license revenues. The Americas region had no new software license deals of $1.0 million or more in first quarter 2005 compared to two in first quarter 2004. Software license revenues in the Europe region increased slightly in first quarter 2005 compared to first quarter 2004 as a 13% increase in Collaborative Solutions software license revenues was substantially offset by a 3% decrease in software license revenues from Retail Enterprise Systems. Results in the Europe region were impacted by operational issues and management changes throughout 2004. We appointed a new Regional Vice President of the Europe region in January 2005. Software license revenues in the Asia/Pacific region decreased in first quarter 2005 compared to first quarter 2004 primarily due to a 19% decrease software license revenues from Retail Enterprise Systems, offset in part by a 59% increase in Collaborative Solutions software license revenues. There were no In-Store Systems sales in the Europe or Asia/Pacific regions in first quarter 2005 or 2004.

          Maintenance Services. The increase in maintenance services revenue in first quarter 2005 compared to first quarter 2004 is due primarily to new software license sales in the past twelve months and the correlating increase in our installed customer base.

Service Revenues

          Service revenues include consulting services, hosting services, training revenues, net revenues from our hardware reseller business and reimbursed expenses. The decrease in service revenues in first quarter 2005 compared to first quarter 2004 resulted primarily from decreases in implementation services for Retail Enterprise Systems and Collaborative Solutions. In-Store Systems service revenues increased 6% in first quarter 2005 compared to first quarter 2004. Demand continues to remain depressed for implementation services associated with Merchandise Operations Systems, which typically have higher implementation requirements, as well as the continued softness in our software sales performance, particularly in our international regions. Utilization rates for consulting services decreased to 46% in first quarter 2005 compared to 49% in first quarter 2004; however average billing rates remained flat at $200 per hour between the comparable quarters. Net revenues from our hardware reseller business decreased 34% to $510,000 in first quarter 2005 compared to $768,000 in first quarter 2004 which included an unusually large hardware transaction.

          Fixed bid consulting services work represented 17% of total consulting services revenue in first quarter 2005 compared to 14% in first quarter 2004.

Cost of Product Revenues

Cost of Software Licenses. The decrease in cost of software licenses in first quarter 2005 compared to first quarter 2004 resulted from a lower number of transactions that involved software products that incorporate functionality from third party software providers and require the payment of royalties, or the resale of third party software applications.

Amortization of Acquired Software Technology. The increase in amortization of acquired software technology in first quarter 2005 compared to first quarter 2004 is due to the amortization of software technology acquired in the acquisition of Timera.

Cost of Maintenance Services. The increase in cost of maintenance services in first quarter 2005 compared to first quarter 2004 resulted primarily from a 7% increase in maintenance services headcount due to new software license sales in past twelve months and the correlating increase in our installed customer base, annual salary

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increases and higher training costs related to the Microsoft .Net Platform and our next generation PortfolioEnabled products and our Customer Directed Development organization structure.

Cost of Service Revenues

          The decrease in cost of service revenues in first quarter 2005 compared to first quarter 2004 resulted primarily from a 19% decrease in services headcount and a reduction in outside contractors, offset in part by annual salary increases and higher incentive compensation.

Gross Profit

          The decrease in gross profit dollars and gross profit percentage in first quarter 2005 compared to first quarter 2004 resulted primarily from the decrease in software license revenues and lower service revenue margins, offset in part by the increase in maintenance services revenue.

          The decrease in service revenue margins in first quarter 2005 compared to first quarter 2004 resulted primarily from reduced demand for consulting services, a 3% decrease in utilization rates for consulting services, higher incentive compensation, and a $258,000, or 34% decrease in net revenues from our hardware reseller business. Excluding the net revenues from the hardware reseller business, service margins were 19% in first quarter 2005 compared to 24% in first quarter 2004.

Operating Expenses

          Operating expenses, excluding amortization of intangibles and restructuring charges and adjustments to acquisition-related reserves decreased 14% in first quarter 2005 compared to first quarter 2004, and represented 53% and 56% of total revenues in the comparable quarters, respectively. The decrease in operating expenses includes a decrease in salaries and benefits related to the restructuring initiatives undertaken during fourth quarter 2004 and first quarter 2005, a decrease in the use of outside contractors in our PortfolioEnabled product development activities, lower commissions due to the decrease in software license revenues, higher capitalized costs associated with the development of our internal financial systems, a decrease in the bad debt provision and customer dispute requirements.

          Product Development. The decrease in product development expense in first quarter 2005 compared to first quarter 2004 resulted primarily from a 26% decrease in product development headcount related to the restructuring initiatives undertaken during fourth quarter 2004 and first quarter 2005, a $300,000 decrease in the use of outside contractors in our PortfolioEnabled product development activities, and a $343,000 vendor cost reimbursement for acceleration of certain funded development activities, offset in part by annual salary increases. At of March 31, 2005, we had 308 employees in the product development function compared to 418 at March 31, 2004.

          Sales and Marketing. The decrease in sales and marketing expense in first quarter 2005 compared to first quarter 2004 resulted primarily from a 15% decrease in sales and marketing headcount related to the restructuring initiatives undertaken during fourth quarter 2004 and first quarter 2005 and lower commissions due to the 30% decrease in software license revenues, offset in part by annual salary increases. At March 31, 2005, we had 136 employees in the sales and marketing function compared to 159 at March 31, 2004. These totals include 65 and 75 direct sales representatives, respectively.

          General and Administrative. The decrease in general and administrative expenses in first quarter 2005 compared to first quarter 2004 resulted from a 5% decrease in general and administrative headcount related to the restructuring initiatives undertaken during fourth quarter 2004 and first quarter 2005, a $480,000 reduction in the bad debt and customer dispute requirements, a $234,000 increase in capitalized costs associated with the development of our internal financial systems, offset in part by annual salary increases.

          Amortization of Intangibles. The increase in amortization of intangibles in first quarter 2005 compared to first quarter 2004 resulted from the amortization of customer list intangibles acquired in the acquisition of Timera.

          Restructuring Charge and Adjustments to Acquisition-Related Reserves. We recorded a $1.6 million charge in first quarter 2005 related to the restructuring initiatives contemplated in our 2005 Operating Plan. This

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charge, which is primarily for one-time termination benefits, is in addition to the $3.1 million restructuring charge recorded in fourth quarter 2004. The fourth quarter 2004 charge included $2.8 million in one-time termination benefits and $341,000 for the negotiated buyout or net rentals remaining under existing operating leases on certain facilities that were vacated by December 31, 2004. The restructuring initiatives include a consolidation of product lines, a net workforce reduction of approximately 12% or 159 FTE worldwide, and a reduction of certain office space in Northern Europe. The net workforce reduction includes certain employees involved in the product development (82 FTE), consulting services and training (54 FTE), sales and marketing (21 FTE), and administrative (16 FTE) functions in the Americas, Europe and Asia Pacific, offset by a net gain of 14 FTE in the customer support function resulting from the transfer of 20 developers and functional experts into the new Customer Directed Development (“CDD”) organization structure within our Customer Support Solutions group. The CDD group is responsible for improving the speed and efficiency of the Company’s issue resolution, support and enhancements for maintenance customers. A total of 110 FTE were terminated or open positions eliminated through December 31, 2004 with an additional 36 FTE terminated during first quarter 2005. We anticipate taking an additional charge of approximately $200,000 to $300,000 in second quarter 2005 to complete these restructuring initiatives and sublet excess space.

          We recorded a $2.7 million restructuring charge in first quarter 2004 for $1.8 million in one-time termination benefits related to a workforce reduction of 47 full-time employees (“FTE”), primarily in sales (15 FTE) and consulting services (18 FTE) functions in the Americas, Europe and Asia/Pacific, and $900,000 for closure costs of certain offices in the Americas and Europe that were either under-performing or under-utilized and used primarily by consulting services personnel. All workforce reductions and office closures associated with this charge were made on or before March 31, 2004.

          During first quarter 2004, we also recorded a $125,000 net increase to our acquisition-related reserves primarily due to an increase in the estimated facility closure costs recorded in connection with the acquisition of E3 Corporation.

Operating Income (Loss)

          We incurred an operating loss of $266,000 in first quarter 2005 compared to operating loss of $1.9 million in first quarter 2004. The decrease in the operating loss is due to a $5.5 million reduction in total costs and operating expenses, which resulted primarily from a 13% decrease in average headcount related to the restructuring initiatives undertaken in fourth quarter 2004 and first quarter 2005, a $1.3 million lower restructuring charge and a $1.1 million decrease in incentive compensation, offset in part a 9% decrease in total revenues.

          Operating income in our Retail Enterprise Systems business segment increased to $5.6 million in first quarter 2005 compared to $5.0 million in first quarter 2004. The increase in operating income in this business segment resulted from an 8% decrease in total cost of revenues, a 29% decrease in allocated sales and marketing costs, and a 20% decrease in product development costs, offset in part by $5.0 million decrease in total revenues.

          The operating loss in our In-Store Systems business segment increased to $403,000 in first quarter 2005 compared to $41,000 in first quarter 2004. The increase in the operating loss in this business segment results from a 24% increase in total cost of revenues and a 13% increase in allocated sales and marketing costs based upon the pro rata share of software sales that came from this business segment, offset in part by a 9% decrease in product development costs.

          Operating income in our Collaborative Solutions business segment decreased to $2.5 million in first quarter 2005 compared to $3.0 million in first quarter 2004. The decrease in the operating income in this business segment results from a 37% increase in allocated sales and marketing costs based upon the pro rata share of software sales that came from this business segment, offset in part by a 7% decrease in product development costs.

Income Tax Benefit

          We recorded an income tax benefit of $453,000 in first quarter 2005 that includes a tax provision of $92,000 and a net one-time income tax benefit of $545,000 resulting from revisions of certain tax estimates in prior years. The net one-time income benefit includes an $850,000 adjustment to our estimate of the foreign tax credit

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carry forward for taxes withheld in Mexico and Taiwan from 2000 to 2002. We have reduced our FAS 5 income tax contingency to reflect this change in the foreign tax credit carry forward as we had previously believed that these taxes would not be recoverable. We also recorded a $292,000 adjustment in our German subsidiary for our revised estimate of the net operating loss deferred tax asset and the current income tax liability, and a $241,000 adjustment in our Japanese subsidiary to reflect a revision of the income taxes payable upon the filing of the 2004 tax return in first quarter 2005. These benefits have been reduced by a $654,000 adjustment for additional income tax expense related to our revised estimate of the amount realizable at the beginning of 2005 for the depreciation deferred tax asset and a $184,000 adjustment for additional income tax expense related to our revised estimate of the amounts realizable for certain other deferred tax assets related to our UK and Singapore subsidiaries. The effective income tax rate for first quarter 2005, excluding the effect of the net one-time tax benefit, is 37%.

          We recorded an income tax benefit of $741,000 in first quarter 2004 that includes a $329,000 tax refund from the settlement of an Internal Revenue Service (“IRS”) audit of our 1998 and 1999 federal income tax returns and an agreement with the IRS to allow the Company to take a research and development expense tax credit for most of the qualifying expenses originally reported in these returns. The effective income tax rate for the first quarter of 2004, excluding the effect of the $329,000 one-time tax benefit, is 35%.

          The income tax benefits recorded in first quarter 2005 and 2004 take into account the source of taxable income, domestically by state and internationally by country, and available income tax credits, and do not include the tax benefits realized from the employee stock options exercised during first quarter 2005 and 2004 of $61,000 and $48,000, respectively. These tax benefits reduce our income tax liabilities and are included as an increase to additional paid-in capital.

Liquidity and Capital Resources

          We had working capital of $96.7 million at March 31, 2005 compared to $94.8 million at December 31, 2004. Cash and marketable securities at March 31, 2005 were $100.2 million, an increase of $3.1 million from the $97.1 million reported at December 31, 2004. The increase in working capital, and our cash and marketable securities balances during first quarter 2005 resulted primarily from the net cash provided by operating activities.

          Net accounts receivable were $36.3 million or 65 days sales outstanding (“DSOs”) at March 31, 2005 compared to $39.5 million, or 62 days sales outstanding (“DSOs”) at December 31, 2004. DSOs may fluctuate significantly on a quarterly basis due to a number of factors including seasonality, shifts in customer buying patterns, the timing of annual maintenance renewals, lengthened contractual payment terms in response to competitive pressures, the underlying mix of products and services, and the geographic concentration of revenues. The collection of accounts receivable continues to be an area of focus and we consistently apply our credit authorization procedures.

          Operating activities provided cash of $5.8 million in first quarter 2005 and $6.8 million in first quarter 2004. The principle sources of our cash flow from operations are typically net income adjusted for depreciation and amortization, collections on accounts receivable, and increases in deferred maintenance revenue which result from support services billings to a larger install base. In addition, cash flow from operations was reduced in first quarter 2005 by a $5.0 million decrease in accrued expenses and other current liabilities which resulted primarily from the payment of incentive compensation accrued in fourth quarter 2004 and payment of expenses associated with the restructuring charge taken fourth quarter 2004, a $1.4 million increase in prepaid expenses and other current assets and a $1.2 million decrease in accounts payable. Cash flow from operations in first quarter 2004 were also affected by increases in accrued expenses and accounts payable of $2.8 million and $1.6 million, respectively, and a $7.0 million increase in accounts receivable due primarily to higher total revenues and the timing of customer payments, and a $1.4 million increase in income tax receivable.

          Investing activities utilized cash of $1.1 million in first quarter 2005 and $40.1 million in first quarter 2004. Net cash utilized by investing activities in first quarter 2005 included $1.6 million in capital expenditures and a $1.1 million from payments received on the promissory note receivable from Silvon Software, Inc. Net cash utilized by investing activities in first quarter 2004 included $23.8 million in cash expended to purchase our corporate office facility, $13.6 million in cash expended to acquire Timera Texas, Inc. and $3.7 million in other capital expenditures. All other variances between first quarter 2005 and first quarter 2004 are due to normal maturing and reinvesting of marketable securities.

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          Financing activities utilized cash of $1.5 million in first quarter 2005 and provided cash of $332,000 in first quarter 2004. The activity in both periods includes proceeds from the issuance of common stock under our stock option plans. Financing activities in first quarter 2005 also include the repurchase of 157,000 shares of our common stock for $2.2 million.

          Changes in the currency exchange rates of our foreign operations had the effect of decreasing cash by $581,000 in first quarter 2005 and $67,000 in first quarter 2004. The change in first quarter 2005 is due to a slight improvement of the US Dollar against major foreign currencies including the Euro and the British Pound. We use derivative financial instruments, primarily forward exchange contracts, to manage a majority of the short-term foreign currency exchange exposure associated with foreign currency denominated assets and liabilities which exist as part of our ongoing business operations. The exposures relate primarily to the gain or loss recognized in earnings from the revaluation or settlement of current foreign denominated assets and liabilities. We do not enter into derivative financial instruments for trading or speculative purposes. The forward exchange contracts generally have maturities of less than 90 days, and are not designated as hedging instruments under Financial Accounting Standard No. 133, Accounting for Derivative Instruments and Hedging Activities (“SFAS No. 133”). Forward exchange contracts are marked-to-market at the end of each reporting period, with gains and losses recognized in other income, net, offset by the gains or losses resulting from the settlement of the underlying foreign currency denominated assets and liabilities.

          We Intend to Continue to Grow Our Business Through Acquisitions. We believe there are opportunities to grow our business through the acquisition of complementary and synergistic companies, products and technologies. We have historically looked at cash acquisitions in the $5 million to $25 million range that could be readily integrated, accretive to earnings, or that could shorten our time to market with new technologies. We are now focusing our acquisition strategy on larger companies, particularly those that have significant recurring revenues or that will increase the breadth of our JDA Portfolio offerings in the Collaborative Solutions business segment.

          Any material acquisition could result in a decrease to our working capital depending on the amount, timing and nature of the consideration to be paid. In addition, any material acquisitions of complementary or synergistic companies, products or technologies could require that we obtain additional equity financing. There can be no assurance that such additional financing will be available or that, if available, such financing will be obtained on terms favorable to us and would not result in additional dilution to our stockholders.

          Treasury Stock Repurchase Program. On February 15, 2005, our Board of Directors approved a program to repurchase from time to time at management’s discretion up to one million shares of the Company’s common stock on the open market or in private transactions until January 26, 2006 at prevailing market prices. The program was adopted as part of our revised approach to equity compensation, which will emphasize performance-based awards to employees and open market stock repurchases by the Company designed to mitigate or eliminate dilution from future employee and director equity-based incentives. The repurchase of shares under this program will result in a decrease to our working capital. Through March 31, 2005, we have purchased a total of 157,000 shares of our common stock for $2.2 million under this program.

          Accelerated Vesting of Options. On February 15, 2005, the Compensation Committee of our Board of Directors (the “Committee”) approved the immediate vesting of all unvested stock options previously awarded to employees, officers and directors. The accelerated options were issued under our 1995 Stock Option Plan, 1996 Stock Option Plan, 1996 Outside Director Stock Option Plan and 1998 Non-statutory Stock Option Plan. The closing market price per share of our common stock on February 15, 2005 was $11.85 and the exercise prices of the approximately 1.4 million in unvested options on that date ranged from $8.50 to $28.20. The exercise of vested stock options would increase our working capital. See Critical Accounting Policies for additional discussion.

          We believe our cash and cash equivalents, investments in marketable securities, and net cash provided from operations will provide adequate liquidity to meet our normal operating requirements for the foreseeable future. A major component of our positive cash flow is the collection of accounts receivable. We invest our excess cash in short-term, interest-bearing instruments that have a low risk of capital loss, such as U.S. government securities, commercial paper and corporate bonds, and money market securities. Commercial paper must be rated “1” by 2 of the 5 nationally recognized statistical rating organizations. Corporate bonds must be rated Aa2 or AA or better by Moody’s and S&P, respectively.

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Critical Accounting Policies

          We have identified the policies below as critical to our business operations and the understanding of our results of operations. There have been no changes in our critical accounting policies during first quarter 2005. The impact and any associated risks related to these policies on our business operations is discussed throughout Management’s Discussion and Analysis of Financial Condition and Results of Operations where such policies affect our reported and expected financial results. The preparation of this Quarterly Report on Form 10-Q requires us to make estimates and assumptions that affect the reported amount of assets and liabilities, disclosure of contingent assets and liabilities at the date of our financial statements, and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.

•	Revenue recognition. Our revenue recognition policy is significant because our revenue is a key component of our results of operations. In addition, our revenue recognition determines the timing of certain expenses such as commissions and royalties. We follow specific and detailed guidelines in measuring revenue; however, certain judgments affect the application of our revenue policy.
	We license software primarily under non-cancelable agreements and provide related services, including consulting, training and customer support. We recognize revenue in accordance with Statement of Position 97-2 (“SOP 97-2”), Software Revenue Recognition, as amended and interpreted by Statement of Position 98-9, Modification of SOP 97-2, Software Revenue Recognition, with respect to certain transactions, as well as Technical Practice Aids issued from time to time by the American Institute of Certified Public Accountants, and Staff Accounting Bulletin No. 104, Revenue Recognition, that provides further interpretive guidance for public companies on the recognition, presentation and disclosure of revenue in financial statements.
	Software license revenue is generally recognized using the residual method when:

Ø	Persuasive evidence of an arrangement exists and a license agreement has been signed;
Ø	Delivery, which is typically FOB shipping point, is complete;
Ø	Fees are fixed and determinable and there are no uncertainties surrounding product acceptance;
Ø	Collection is considered probable; and
Ø	Vendor-specific evidence of fair value (“VSOE”) exists for all undelivered elements.

Our customer arrangements typically contain multiple elements that include software, options for future purchases of software products not previously licensed to the customer, maintenance, consulting and training services. The fees from these arrangements are allocated to the various elements based on VSOE. Under the residual method, if an arrangement contains an undelivered element, the VSOE of the undelivered element is deferred and the revenue recognized once the element is delivered. If we are unable to determine VSOE for any undelivered element included in an arrangement, we will defer revenue recognition until all elements have been delivered. In addition, if a software license contains milestones, customer acceptance criteria or a cancellation right, the software revenue is recognized upon the achievement of the milestone or upon the earlier of customer acceptance or the expiration of the acceptance period or cancellation right.

Maintenance services are separately priced and stated in our arrangements. Maintenance services typically include on-line support, access to our Solution Centers via telephone and web interfaces, comprehensive error diagnosis and correction, and the right to receive unspecified upgrades and enhancements, when and if we make them generally available. Maintenance services are generally billed on a monthly basis and recorded as revenue in the applicable month, or billed on an annual basis with the revenue initially deferred and recognized ratably over the maintenance period. VSOE for maintenance services is the price customers will be required to pay when it is sold separately, typically the renewal rate.

Consulting and training services are separately priced and stated in our arrangements, are generally available from a number of suppliers, and are not essential to the functionality of our software products. Consulting services include project management, system planning, design and implementation, customer configurations, and training. These services are generally billed bi-weekly on an hourly basis or pursuant to

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	the terms of a fixed price contract. Consulting services revenue billed on an hourly basis is recognized as the work is performed. Under fixed price contracts, including milestone-based arrangements, consulting services revenue is recognized using the percentage of completion method of accounting described in Statement of Position 81-1, Accounting for Performance of Construction-Type and Certain Production-Type Contracts, by relating hours incurred to date to total estimated hours at completion. Training revenues are included in consulting revenues in the Company’s consolidated statements of income and are recognized once the training services are provided. VSOE for consulting and training services is based upon the hourly or per class rates charged when those services are sold separately. Revenues from our hardware reseller business are also included in consulting revenues, reported net (i.e., the amount billed to a customer less the amount paid to the supplier) pursuant to EITF 99-19, Reporting Revenue Gross as a Principal versus Net as an Agent, and recognized upon shipment of the hardware.
	Customers are reviewed for creditworthiness before we enter into a new arrangement that provides for software and/or a service element. We do not sell or ship our software, nor recognize any license revenue unless we believe that collection is probable. Payments for our software licenses are typically due in installments within twelve months from the date of delivery. Although infrequent, where software license agreements call for payment terms of twelve months or more from the date of delivery, revenue is recognized as payments become due and all other conditions for revenue recognition have been satisfied.
•	Accounts Receivable. Consistent with industry practice and to be competitive in the retail software marketplace, we typically provide installment payment terms on most software license sales. Software licenses are generally due in installments within twelve months from the date of delivery. Customers are reviewed for creditworthiness before we enter into a new arrangement that provides for software and/or a service element. We do not sell or ship our software, nor recognize any license revenue unless we believe that collection is probable in accordance with the requirements of paragraph 8 in Statement of Position 97-2, Software Revenue Recognition, as amended. For those customers who are not credit worthy, we require prepayment of the software license fee or a letter of credit before we will ship our software. We have a history of collecting software payments when they come due without providing refunds or concessions. Consulting services are generally billed bi-weekly and maintenance services are billed annually or monthly. If a customer becomes significantly delinquent or their credit deteriorates, we put the account on hold and do not recognize any further services revenue (and in most cases we withdraw support and/or our implementation staff) until the situation has been resolved.
	We do not have significant billing or collection problems. We review each past due account and provide specific reserves based upon the information we gather from various sources including our customers, subsequent cash receipts, consulting services project teams, members of each region’s management, and credit rating services such as Dun and Bradstreet. Although infrequent and unpredictable, from time to time certain of our customers have filed bankruptcy, and we have been required to refund the pre-petition amounts collected and settle for less than the face value of their remaining receivable pursuant to a bankruptcy court order. In these situations, as soon as it becomes probable that the net realizable value of the receivable is impaired, we provide reserves on the receivable. In addition, we monitor economic conditions in the various geographic regions in which we operate to determine if general reserves or adjustments to our credit policy in a region are appropriate for deteriorating conditions that may impact the net realizable value of our receivables.
•	Goodwill and Intangible Assets. Our business combinations typically result in goodwill and other intangible assets, which affect the amount of future period amortization expense and possible impairment expense that we will incur. The determination of the value of such intangible assets and the annual impairment tests required by Statement of Financial Accounting Standard No. 142, Goodwill and Other Intangible Assets, requires management to make estimates of future revenues, customer retention rates and other assumptions that affect our consolidated financial statements.
	Goodwill is tested annually for impairment by comparing the fair value of future cash flows under the “Discounted Cash Flow Method of the Income Approach” to the carrying value of goodwill allocated to our reporting units.
	Substantially all of our trademarks were acquired in connection with the acquisition of E3. Beginning

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	January 1, 2002, we assigned indefinite useful lives to our trademarks, and ceased amortization, as we believe there are no legal, regulatory, contractual, competitive, economic, or other factors that would limit their useful lives. In addition, we intend to indefinitely develop next generation products under our trademarks and expect them to contribute to our cash flows indefinitely. Trademarks are tested annually for impairment using the “Relief from Royalty Method of the Income Approach.” The premise of this valuation method is that the value of an asset can be measured by the present worth of the net economic benefit (cash receipts less cash outlays) to be received over the life of the asset and assumes that in lieu of ownership, a firm would be willing to pay a royalty in order to exploit the related benefits of this asset class.
•	Product Development. The costs to develop new software products and enhancements to existing software products are expensed as incurred until technological feasibility has been established. We consider technological feasibility to have occurred when all planning, designing, coding and testing have been completed according to design specifications. Once technological feasibility is established, any additional costs would be capitalized. We believe our current process for developing software is essentially completed concurrent with the establishment of technological feasibility, and accordingly, no costs have been capitalized.
•	Income Taxes. Deferred tax assets and liabilities are recorded for the estimated future tax effects of temporary differences between the tax basis of assets and liabilities and amounts reported in the consolidated balance sheets, as well as operating loss and tax credit carry-forwards. We follow specific and detailed guidelines regarding the recoverability of any tax assets recorded on the balance sheet and provide any necessary allowances as required.
•	Stock-Based Compensation. We do not record compensation expense for options granted to our employees as all options granted under our stock option plans have an exercise price equal to the market value of the underlying common stock on the date of grant. As permitted under Statement of Financial Accounting Standards No. 123, Accounting for Stock-Based Compensation (“SFAS No. 123”), we have elected to continue to apply the provisions of Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees (“APB No. 25”) and account for stock-based compensation using the intrinsic-value method, and provide pro forma disclosure on a quarterly and annual basis of net income (loss) and net income (loss) per common share for employee stock option grants made, as if the fair-value method defined in SFAS No. 123 had been applied.
	Statement of Financial Accounting Standards No. 148, Accounting for Stock-Based Compensation - - Transition and Disclosure (“SFAS No. 148”), which became effective in 2003, amended SFAS No. 123 to provide alternative methods of transition to the fair-value method of accounting for stock-based employee compensation if a company elects to account for its equity awards under this method. SFAS No. 148 also amended the disclosure provisions of SFAS No. 123 and APB Opinion No. 28, Interim Financial Reporting, to require disclosure of the effects of an entity’s accounting policy with respect to stock-based employee compensation on reported net income and earnings per share in both annual and interim financial statements.
	The following table presents pro forma disclosures required by SFAS No. 123 and SFAS No. 148 of net income (loss) and basic and diluted earnings (loss) per share as if stock-based compensation expense had been recognized during the three months ended March 31, 2005 and 2004. The compensation expense for these periods has been determined under the fair value method using the Black-Scholes pricing model, and assumes graded vesting. Stock-based compensation expense for first quarter 2004 has been adjusted to reflect the revised tax benefit available for incentive stock options generated at the time of exercise.

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	Three Months
	Ended March 31,
	2005			2004
Net income (loss) — as reported	$	703		$	(437	)
Less: stock-based compensation expense, net of related tax effects		(3,627	)		(923	)
Pro forma net income (loss)	$	(2,924	)	$	(1,360	)
Basic earnings (loss) per share — as reported	$	.02		$	(.02	)
Diluted earnings (loss) per share — as reported	$	.02		$	(.02	)
Basic earnings (loss) per share — pro forma	$	(.10	)	$	(.05	)
Diluted earnings (loss) per share — pro forma	$	(.10	)	$	(.05	)

On December 16, 2004, the Financial Accounting Standards Board issued Statement of Financial Accounting Standard No. 123(R), Share Based Payment (“SFAS No. 123(R)”) which is a revision of SFAS No. 123, supersedes APB No. 25 and SFAS No. 148, and amends Statement of Financial Accounting Standard No. 95, Statement of Cash Flows (“SFAS No. 95”). Generally, the approach in SFAS No. 123(R) is similar to the approach described in SFAS No. 123; however, SFAS No. 123(R) requires all share-based payments to employees, including grants of stock options, to be recognized in the income statement based on their fair values. Pro forma disclosure is no longer an alternative. SFAS No. 123(R) was initially required to be adopted in the next reporting period beginning after June 15, 2005. On April 14, 2005, the Securities and Exchange Commission (the “SEC”) adopted a rule that amends this compliance date to allow companies to implement SFAS No. 123(R) at the beginning of the first fiscal year beginning after June 15, 2005.

SFAS No. 123(R) permits public companies to adopt its requirements using one of two methods:

1.	A “modified prospective” method in which compensation cost is recognized beginning with the effective date (a) based on the requirements of SFAS No. 123(R) for all share-based payments granted after the effective date and (b) based on the requirements of SFAS No. 123 for all awards granted to employees prior to the effective date of SFAS No. 123(R) that remain unvested on the effective date.
2.	A “modified retrospective” method which includes the requirements of the modified prospective method described above, but also permits entities to restate based on the amounts previously recognized under SFAS No. 123 for purposes of pro-forma disclosures either (a) all prior periods presented or (b) prior interim periods of the year of adoption.

On March 29, 2005, the SEC issued Staff Accounting Bulletin Topic 14 (“SAB 107”). SAB 107, which becomes effective for public companies upon their adoption of SFAS No. 123(R), describes the SEC Staff’s views in determining the assumptions that underlie the fair value estimates and interaction of SFAS No. 123(R) with certain existing SEC guidance. We plan to adopt SFAS No. 123(R) on January 1, 2006 using the modified prospective method.

As permitted by SFAS No. 123, the company currently accounts for share-based payments to employees using APB No. 25’s intrinsic value method and, as such, recognizes no compensation cost for employee stock options. Accordingly, the adoption of SFAS No. 123(R)’s fair value method could potentially have a significant impact on our results of operations, although it will have no impact on our overall financial position. The impact of adoption of SFAS No. 123(R) cannot be predicted at this time because it will depend on levels of share-based payments granted in the future. However, had we adopted SFAS No. 123(R) in prior periods, the impact of that standard would have approximated the impact of SFAS No. 123 as described in the disclosure of pro forma net income (loss) and earnings per share above and in Note 1 to the consolidated financial statements included in our Annual Report on Form 10-K for the year ended

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	December 31, 2004. SFAS No. 123(R) also requires the benefits of tax deductions in excess of recognized compensation cost to be reported as a financing cash flow, rather than as an operating cash flow as required under current authoritative literature. This requirement will reduce net cash flows from operating activities in periods after adoption. While we cannot estimate what those amounts will be in the future (because this would depend on, among other things, when employees exercise stock options), we have recognized $61,000 in first quarter 2005 and $48,000 in first quarter 2004 in operating cash flows for such excess tax deductions.
	On February 15, 2005, the Compensation Committee of our Board of Directors (the “Committee”) approved the immediate vesting of all unvested stock options previously awarded to employees, officers and directors. The accelerated options were issued under our 1995 Stock Option Plan, 1996 Stock Option Plan, 1996 Outside Director Stock Option Plan and 1998 Non-statutory Stock Option Plan. The Committee made the decision to immediately vest these options based in part on the issuance of SFAS No. 123(R). The Committee also considered the reduced level of cash bonuses paid to employees and officers in 2004, the fact that there are no equity awards planned in 2005, other than for certain new hires, and recognized that the exercise of any accelerated options would bring cash into the Company. Absent the acceleration of these options, upon adoption of SFAS No. 123(R), we would have been required to recognize approximately $3.7 million in pre-tax compensation expense from these options over their remaining vesting terms. By vesting all previously unvested options, the stock-based compensation expense under SFAS No. 123 will only be reflected in our footnote disclosures. Further, we believe the future stock-based compensation expense to be recorded under SFAS No. 123(R) related to these options is significantly reduced and would be immaterial to our financial results. However, there can be no assurance that these actions will avoid the recognition of future compensation expense in connection with these options.
	Employees, officers and directors will benefit from the accelerated vesting of their stock options in the event they terminate their employment with or service to the Company prior to the completion of the original vesting terms as they would have the ability to exercise certain options that would have otherwise been forfeited. No stock-based compensation expense will be recorded with respect to these options unless an employee, officer or director actually benefits from this modification. For those employees, officers and directors who do benefit from the accelerated vesting, we are required to record additional stock-based compensation expense equal to the intrinsic value of the option on the date of modification (i.e., February 15, 2005). The closing market price per share of our common stock on February 15, 2005 was $11.85 and the exercise prices of the approximately 1.4 million in unvested options on that date ranged from $8.50 to $28.20. Based on our historical employee turnover rates during the past three years, we currently estimate the potential additional stock-based compensation expense we may be required to record with respect to these options is approximately $45,000. No additional stock-based compensation expense was recorded in first quarter 2005 with respect to these options.
•	Derivative Instruments and Hedging Activities. We use derivative financial instruments, primarily forward exchange contracts, to manage a majority of the foreign currency exchange exposure associated with net short-term foreign denominated assets and liabilities which exist as part of our ongoing business operations. The exposures relate primarily to the gain or loss recognized in earnings from the revaluation or settlement of current foreign denominated assets and liabilities. We do not enter into derivative financial instruments for trading or speculative purposes. The forward exchange contracts generally have maturities of less than 90 days, and are not designated as hedging instruments under SFAS No. 133. Forward exchange contracts are marked-to-market at the end of each reporting period, with gains and losses recognized in other income offset by the gains or losses resulting from the settlement of the underlying foreign denominated assets and liabilities. We recorded foreign currency exchange gains of $5,000 and $213,000 in the three months ended March 31, 2005 and 2004, respectively.

Other Recent Accounting Pronouncements

          In December 2004, the FASB issued Statement of Financial Accounting Standards No. 153, Exchanges of Nonmonetary Assets, an amendment of Accounting Principles Board Opinion No. 29, Accounting for Nonmonetary Transactions (“SFAS No. 153”). SFAS No. 153, which is effective for fiscal periods beginning after June 15, 2005, requires that exchanges of nonmonetary assets are to be measured based on fair value and eliminates the exception

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for exchanges of nonmonetary, similar productive assets, and adds an exemption for nonmonetary exchanges that do not have commercial substance. We do not participate in the exchange of nonmonetary assets.

Factors That May Affect Our Future Results or the Market Price of Our Stock

          We operate in a dynamic and rapidly changing environment that involves numerous risks and uncertainties. The following section describes some, but not all, of these risks and uncertainties that we believe may adversely affect our business, financial condition or results of operations. This section should be read in conjunction with the Unaudited Consolidated Financial Statements and Notes thereto, and Management’s Discussion and Analysis of Financial Condition and Results of Operations as of March 31, 2005 and for the three months then ended contained elsewhere in this Form 10-Q.

Regional And/Or Global Changes in Economic, Political And Market Conditions Could Cause Decreases in Demand For Our Software And Related Services Which Could Negatively Affect Our Revenue And Operating Results And The Market Price of Our Stock.

          Our revenue and profitability depend on the overall demand for our software and related services. A regional and/or global change in the economy and financial markets could result in delay or cancellation of customer purchases. Historically, developments associated with terrorist attacks on United States’ interests, the US war and continued violence in Iraq, natural catastrophes or contagious diseases such as the Severe Acute Respiratory Syndrome (“SARS”) have resulted in economic, political and other uncertainties, and factors such as these could further adversely affect our revenue growth and operating results. If demand for our software and related services decrease, our revenues would decrease and our operating results would be adversely affected which, in turn, may cause our stock price to fall.

Our Quarterly Operating Results May Fluctuate Significantly, Which Could Adversely Affect the Price of Our Stock.

          Our quarterly operating results have varied and are expected to continue to vary in the future. If our quarterly operating results fail to meet management’s or analysts’ expectations, the price of our stock could decline. Many factors may cause these fluctuations, including:

•   Demand for our software products and services, including the size and timing of individual contracts and our ability to recognize revenue with respect to contracts signed in the quarter, particularly with respect to our larger customers;

•   Changes in the length and complexity of our sales cycle;

•   Competitive pricing pressures and the competitive success or failure on significant transactions;

•   Customer order deferrals resulting from the anticipation of new products, economic uncertainty, disappointing operating results by the customer, or otherwise;

•   The timing of new software product and technology introductions and enhancements to our software products or those of our competitors, and market acceptance of our new software products and technology;

•   Changes in the number, size or timing of new and renewal maintenance contracts or cancellations;

•   Changes in our operating expenses;

•   Changes in the mix of domestic and international revenues, or expansion or contraction of international operations;

•   Our ability to complete fixed price consulting contracts within budget;

•   Foreign currency exchange rate fluctuations;

•   Operational issues resulting from corporate reorganizations; and

•   Lower-than-anticipated utilization in our consulting services group as a result of reduced levels of software sales, reduced implementation times for our products, changes in the mix of demand for our software products, or other reasons.

          We made certain decisions in fourth quarter 2004 regarding our cost structure and the rate of investment in new product development for certain purchased software. These decisions caused us to reduce our projected cash flows from certain affected products and required that we record a $1.1 million impairment loss on the trademarks we acquired from E3 Corporation. There can be no assurance that any future decisions we make regarding our cost

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structure and rate of investment in new product development will not result in additional write downs or impairment charges that will adversely affect our quarterly operating results.

Our Stock Price Has Been And May Remain Volatile.

          The trading price of our common stock has in the past and may in the future be subject to wide fluctuations. In general, our stock price has declined when we achieve lower than anticipated operating results. Examples of factors that we believe have led to disappointing results include the following:

•   Cancelled or delayed purchasing decisions

•   External and internal marketing issues;

•   Announcements of reduced visibility and increased uncertainty concerning future demand for our products;

•   Increased competition;

•   Elongated sales cycles;

•   A limited number of reference accounts with implementations in the early years of product release;

•   Certain design and stability issues in early versions of our products; and

•   Lack of desired features and functionality in our products.

          In addition, fluctuations in the price of our common stock may expose us to the risk of securities class action lawsuits. Defending against such lawsuits could result in substantial costs and divert management’s attention and resources. Furthermore, any settlement or adverse determination of these lawsuits could subject us to significant liabilities.

Our Gross Margins May Vary Significantly or Decline.

          Because the gross margins on product revenues (software licenses and maintenance services) are significantly greater than the gross margins on consulting services revenue, our combined gross margin has fluctuated from quarter to quarter and it may continue to fluctuate significantly based on revenue mix. Demand for the implementation of products with longer implementation timeframes, specifically Merchandise Operations Systems and In-Store Systems, remains depressed. We believe that demand continues to be greater for products that have a higher short term ROI and lower total costs ownership with less disruption to the underlying business of our customers. As a result, most of our current implementations are for our Strategic Merchandise Management Solutions that have shorter implementation timeframes. The decline in software sales of Merchandise Operations Systems and In-Store Systems continues to have a corollary negative impact on our service revenues as consulting services revenue typically lags the performance of software revenues by as much as one year. In addition, our gross margins on consulting services revenue vary significantly with the rates at which we utilize our consulting personnel, and as a result, our overall gross margins will be adversely affected when there is not enough work to keep our consultants busy. We may face some constraints on our ability to adjust consulting service headcount and expense to meet demand, due in part to our need to retain consulting personnel with sufficient skill sets to implement and maintain our full set of products.

We May Misjudge When Software Sales Will Be Realized.

          Software license revenues in any quarter depend substantially upon contracts signed and the related shipment of software in that quarter. It is therefore difficult for us to accurately predict software license revenues. Because of the timing of our sales, we typically recognize the substantial majority of our software license revenues in the last weeks or days of the quarter, and we may derive a significant portion of our quarterly software license revenues from a small number of relatively large sales. In addition, it is difficult to forecast the timing of large individual software license sales with a high degree of certainty due to the extended length of the sales cycle and the generally more complex contractual terms that may be associated with such licenses that could result in the deferral of some or all of the revenue to future periods. Accordingly, large individual sales have sometimes occurred in quarters subsequent to when we anticipated. Although our increased use of Proof of Concept and Milestone-Based licensing models may improve our ability to predict the timing of certain deals, we expect to experience continued difficulty in accurately forecasting the timing of deals. If we receive any significant cancellation or deferral of customer orders, or we are unable to conclude license negotiations by the end of a fiscal quarter, our operating results may be lower than anticipated. In addition, any weakening or uncertainty in the economy may make it more

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difficult for us to predict quarterly results in the future, and could negatively impact our business, operating results and financial condition for an indefinite period of time.

We May Not Be Able to Reduce Expense Levels If Our Revenues Decline.

          Our expense levels are based on our expectations of future revenues. Since software license sales are typically accompanied by a significant amount of consulting and maintenance services, the size of our services organization must be managed to meet our anticipated software license revenues. We have also made a strategic decision to make a significant investment in new product development. As a result, we hire and train service personnel and incur research and development costs in advance of anticipated software license revenues. If software license revenues fall short of our expectations, or if we are unable to fully utilize our service personnel, our operating results are likely to decline because a significant portion of our expenses cannot be quickly reduced to respond to any unexpected revenue shortfall.

We Are Dependent Upon the Retail Industry.

          Historically, we have derived over 75% of our revenues from the license of software products and the performance of related services to retail customers, and our future growth is critically dependent on increased sales to retail customers. The acquisitions of Arthur and Timera extended our product offerings in the Retail Enterprise Systems and In-Store Systems segments of our business. The acquisitions of Intactix, NeoVista Decision Series, E3, Vista, and Engage not only have expanded our product offerings, but have also provided us with collaborative applications that address new vertical market opportunities with the manufacturers and wholesalers who supply our traditional retail customers. The success of our customers is directly linked to economic conditions in the retail industry, which in turn are subject to intense competitive pressures and are affected by overall economic conditions. In addition, we believe that the licensing of certain of our software products involves a large capital expenditure, which is often accompanied by large-scale hardware purchases or other capital commitments. As a result, demand for our products and services could decline in the event of instability or potential downturns.

          We believe the retail industry remains cautious with their level of investment in information technology during the difficult economic cycle of the last few years, and the uncertainty related to the threat of future terrorist attacks and any continued violence in Iraq. We remain concerned about weak and uncertain economic conditions, consolidations and the disappointing results of retailers in certain of our geographic regions. The retail industry will be negatively impacted if weak economic conditions or fear of additional terrorists’ attacks and wars persist for an extended period of time. Weak and uncertain economic conditions have in the past, and may in the future, negatively impact our revenues, including a potential deterioration of our maintenance revenue base as customers look to reduce their costs, elongate our selling cycles, and delay, suspend or reduce the demand for our products. As a result, it is difficult in the current economic environment to predict exactly when specific software licenses will close within a six to nine month time frame. In addition, weak and uncertain economic conditions could impair our customers’ ability to pay for our products or services. Any of these factors could adversely impact our business, quarterly or annual operating results and financial condition.

          We also believe that the retail industry may be consolidating, and that the industry is currently experiencing increased competition in certain geographical regions that could negatively impact the industry and our customers’ ability to pay for our products and services. Such consolidation has in the past, and may in the future, negatively impact our revenues, reduce the demand for our products and may negatively impact our business, operating results and financial condition.

There May Be An Increase in Customer Bankruptcies Due to Weak Economic Conditions.

          We have in the past and may in the future be impacted by customer bankruptcies that occur in periods subsequent to the software license sale. During weak economic conditions, such as those currently being experienced in our international regions, there is an increased risk that certain of our customers will file bankruptcy. When our customers file bankruptcy, we may be required to forego collection of pre-petition amounts owed and to repay amounts remitted to us during the 90-day preference period preceding the filing. Accounts receivable balances related to pre-petition amounts may in certain of these instances be large due to extended payment terms for software license fees, and significant billings for consulting and implementation services on large projects. The bankruptcy laws, as well as the specific circumstances of each bankruptcy, may severely limit our ability to collect pre-petition

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amounts, and may force us to disgorge payments made during the 90-day preference period. We also face risk from international customers that file for bankruptcy protection in foreign jurisdictions, in that the application of foreign bankruptcy laws may be more difficult to predict. Although we believe that we have sufficient reserves to cover anticipated customer bankruptcies, there can be no assurance that such reserves will be adequate, and if they are not adequate, our business, operating results and financial condition would be adversely affected.

We May Have Difficulty Attracting And Retaining Skilled Personnel.

          Our success is heavily dependent upon our ability to attract, hire, train, retain and motivate skilled personnel, including sales and marketing representatives, qualified software engineers involved in ongoing product development, and consulting personnel who assist in the implementation of our products and services. The market for such individuals is competitive. For example, it may be particularly difficult to attract and retain product development personnel experienced in the Microsoft .Net Platform since the .Net Platform is a new and evolving technology. Given the critical roles of our sales, product development and consulting staffs, our inability to recruit successfully or any significant loss of key personnel would hurt us. A high level of employee mobility and aggressive recruiting of skilled personnel characterize the software industry. We cannot guarantee that we will be able to retain our current personnel, attract and retain other highly qualified technical and managerial personnel in the future, or be able to assimilate the employees from any acquired businesses. We will continue to adjust the size and composition of the workforce in our services organization to match the different product and geographic demand cycles. If we were unable to attract and retain the necessary technical and managerial personnel, or assimilate the employees from any acquired businesses, our business, operating results and financial condition would be adversely affected.

We Have Only Deployed Certain of Our Software Products On a Limited Basis, And Have Not Yet Deployed Some Software Products That Are Important to Our Future Growth.

          Certain of our software products, including Portfolio Point of Sale, Portfolio Workforce Management, Portfolio Registry, Trade Events Management, Portfolio Replenishment Optimization by E3 and certain modules of Portfolio CRM and Intellect, have been commercially released within the last two years. In addition, we have only recently announced our intentions to develop or acquire a series of business-to-business e-commerce solutions, including products in furtherance of our pursuit of the market for Collaborative Solutions. The markets for these products are new and evolving, and we believe that retailers and their suppliers may be cautious in adopting web-based and other new technologies. Consequently, we cannot predict the growth rate, if any, and size of the markets for our e-commerce products or that these markets will continue to develop. Potential and existing customers may find it difficult, or be unable, to successfully implement our e-commerce products, or may not purchase our products for a variety of reasons, including their inability or unwillingness to deploy sufficient internal personnel and computing resources for a successful implementation. In addition, we must overcome significant obstacles to successfully market our newer products, including limited experience of our sales and consulting personnel. If the markets for our newer products fail to develop, develop more slowly or differently than expected or become saturated with competitors, or if our products are not accepted in the marketplace or are technically flawed, our business, operating results and financial condition will decline.

We Have Invested Heavily in Re-Writing Many of Our Products for the Microsoft .Net Platform.

          We are developing a series of enhancements and the next generation of JDA Portfolio products, PortfolioEnabled, based upon the .Net Platform that we believe will position us uniquely in the retail and collaborative solutions markets. We will continue to offer PortfolioEnabled applications that operate with other market accepted platforms such as Oracle and the IBM iSeries and, where appropriate, Java-based technology. Our goals are to ensure that our solutions offer: (i) increased ease of use, (ii) increased integration of business processes, (iii) reduced cost of ownership, (iv) faster implementation, and (v) faster return on investment. The initial PortfolioEnabled solutions may not offer every capability of their predecessor products but will offer other advantages such as an advanced technology platform, the ability of PRO to install on Unix/Oracle environments utilizing Microsoft .Net componentry with subsequent releases to include Microsoft SQL 2005, or other significant functional advantages such as “planning by attribute” capabilities in the enterprise planning solution. Further, the PortfolioEnabled products do offer some significant capabilities that go beyond the current generation products they are replacing, and as a result, we believe they are in and of themselves competitive in the marketplace. On this basis, the PortfolioEnabled products may initially be more attractive to new customers during competitive bids, as

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opposed to existing customers for upgrade cycles. Sales cycles to new customers tend to be more elongated than those to existing customers who already have contracts in place with us and prior experience with our products. We will continue selling the equivalent Portfolio Synchronized versions of these products until the new PortfolioEnabled solutions have achieved critical mass in the marketplace.

          We have begun the process of transition to our new PortfolioEnabled solutions, and as a result, we are now reducing the “double investment” in products that we have endured over the past two years. JDA Portfolio version 2005.1, the fourth synchronized release of our products, was released in first quarter 2005 and included enhancements to virtually all of our existing products that will enable them to maintain their competitive edge. In first quarter 2005 we released the first versions of the PortfolioEnabled solutions beginning with Portfolio Replenishment Optimization by E3 and Portfolio Knowledge Base. In second quarter 2005 we plan to release a PortfolioEnabled solution for enterprise planning that will ultimately replace certain of the Portfolio Planning Solutions by Arthur, including Merchandise Planning by Arthur and Assortment Planning by Arthur. This has been a significant investment by the Company as we have been building this next generation of products while developing JDA Portfolio version 2005.1. We also plan to develop new products as well as shared code            components using the .Net Platform.

          The risks of our commitment to the .Net Platform include, but are not limited to, the following:

•   The possibility that it may be more difficult than we currently anticipate to develop our products for the .Net Platform, and we could incur costs in excess of our projections to complete the planned transition of our product suite;

•   The difficulty our sales organization may encounter in determining whether to propose the existing JDA Portfolio synchronized products or the next generation PortfolioEnabled products based on the .Net Platform to prospective customers;

•   The possibility that our .Net Platform beta customers will not become favorable reference sites;

•   Adequate scalability of the .Net Platform for our largest customers;

•   The possibility we may not complete the transition to the .Net Platform in the time frame we currently expect;

•   The ability of our development staff to learn how to efficiently and effectively develop products using the .Net Platform;

•   Our ability to transition our customer base onto the .Net Platform when it is available;

•   The possibility that it may take several quarters for our consulting and support organizations to be fully trained and proficient on this new technology and as a result, we may encounter difficulties implementing and supporting new products or versions of existing products based on the .Net Platform;

•   We may be required to supplement our consulting and support organizations with .Net proficient resources from our product development teams to support early .Net implementations which could impact our development schedule for the release of additional Net products;

•   Microsoft’s ability to achieve market acceptance of the .Net platform;

•   Delays in Microsoft’s ability to commercially release necessary components for deployment of our applications; and

•   Microsoft’s continued commitment to enhancing and marketing the .Net platform.

          The risk associated with developing products that utilize new technologies remains high. Despite our increasing confidence in this investment and our efforts to mitigate the risks of the         .Net Platform project, there can be no assurances that our efforts to re-write many of our current products and to develop new PortfolioEnabled solutions using the .Net Platform will be successful. If the .Net Platform project is not successful, it likely will have a material adverse effect on our business, operating results and financial condition. Moreover, we cannot assure you that, even if we successfully re-write our PortfolioEnabled solutions products on the .Net Platform, that these re-written products will achieve market acceptance.

We May Introduce New Lines of Business Where We Are Less Experienced.

          We may introduce new lines of business that are outside our traditional focus on software licenses and related maintenance and implementation services. Introducing new lines of business involves a number of uncertainties, including a lack of internal resources and expertise to operate and grow such new lines of business,

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immature internal processes and controls, inexperience predicting revenues and expenses for the new lines of business, and the possibility that such new lines of business will divert management attention and resources from our traditional business. The inability of management to effectively develop and operate these new lines of business could have a material adverse effect on our business, operating results and financial condition. Moreover, we may not be able gain acceptance of any new lines of business in our markets, penetrate new markets successfully, or obtain the anticipated or desired benefits of such new lines of business.

There Are Many Risks Associated with International Operations.

          International revenues represented 42% of our total revenues in first quarter 2005 as compared to 40% and 44% of total revenues in the years ended December 31, 2004 and 2003, respectively. If our international operations grow, we would need to recruit and hire a number of new consulting, sales and marketing and support personnel in the countries in which we have or will establish offices. Entry into new international markets typically requires the establishment of new marketing and distribution channels as well as the development and subsequent support of localized versions of our software. International introductions of our products often require a significant investment in advance of anticipated future revenues. In addition, the opening of a new office typically results in initial recruiting and training expenses and reduced labor efficiencies associated with the introduction of products to a new market. If we are less successful in a new market than we expect, we may not be able to realize an adequate return on our initial investment and our operating results could suffer. If we have to downsize certain international operations, the costs to do so are typically much higher than downsizing costs in the United States, particularly in Europe. We cannot guarantee that the countries in which we operate will have a sufficient pool of qualified personnel from which to hire, that we will be successful at hiring, training or retaining such personnel or that we can expand or contract our international operations in a timely, cost effective manner.

          Our international business operations are subject to risks associated with international activities, including:

•   Currency fluctuations;

•   Higher operating costs due to local laws or regulations;

•   Unexpected changes in employment and other regulatory requirements;

•   Tariffs and other trade barriers;

•   Costs and risks of localizing products for foreign countries;

•   Longer accounts receivable payment cycles in certain countries;

•   Potentially negative tax consequences;

•   Difficulties in staffing and managing geographically disparate operations;

•   Greater difficulty in safeguarding intellectual property, licensing and other trade restrictions;

•   Ability to negotiate and have enforced favorable contract provisions;

•   Repatriation of earnings;

•   The burdens of complying with a wide variety of foreign laws;

•   Anti-American sentiment due to the war with Iraq, and other American policies that may be unpopular in certain regions;

•   The effects of regional and global infectious diseases such as SARS;

•   The challenges of finding qualified management for our international operations; and

•   General economic conditions in international markets.

          Consulting services in support of certain international software licenses typically have lower gross margins than those achieved domestically due to generally lower billing rates and/or higher costs in certain of our international markets. Accordingly, any significant growth in our international operations may result in declines in gross margins on consulting services. We expect that an increasing portion of our international software license, consulting services and maintenance services revenues will be denominated in foreign currencies, subjecting us to fluctuations in foreign currency exchange rates. If we expand our international operations, exposures to gains and losses on foreign currency transactions may increase. We use derivative financial instruments, primarily forward exchange contracts, to manage a majority of the foreign currency exchange exposure associated with net short-term foreign denominated assets and liabilities which exist as part of our ongoing business operations. We cannot guarantee that any currency exchange strategy would be successful in avoiding exchange-related losses. In addition, revenues earned in various countries where we do business may be subject to taxation by more than one jurisdiction, which would reduce our earnings.

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We May Face Difficulties in Our Highly Competitive Markets.

          We encounter competitive products from a different set of vendors in each of our primary product categories. We believe that while our markets are still subject to intense competition, the number of significant competitors in many of our application markets has diminished over the past five years. We believe the principal competitive factors in our markets are feature and functionality, product reputation and quality of reference accounts, vendor viability, retail and demand chain industry expertise, total solution cost, technology platform and quality of customer support.

          Our Retail Enterprise Systems compete primarily with internally developed systems and other third-party developers such as AC Nielsen Corporation, Aldata Solutions, Connect3 Systems, Inc., Evant, Inc., Island Pacific, Inc., Manugistics Group, Inc., Micro Strategies Incorporated, NSB Retail Systems PLC, Oracle Corporation (acquired Retek, Inc. on April 12, 2005), SAP AG and SAS/Marketmax. In addition, new competitors may enter our markets and offer merchandise management systems that target the retail industry.

          The competition for our In-Store Systems is more fragmented than the competition for our Retail Enterprise Systems. We compete primarily with smaller point-of-sale focused companies such as CRS Business Computers, Kronos Incorporated, MICRO Systems, Inc., Radiant Systems, Inc., Retalix, Ltd., 360 Commerce, Tomax Technologies, Triversity, Inc., Workbrain, Inc., and Workplace Systems International. We also compete with other broad solution set providers such as NSB Retail Systems PLC, Oracle Corporation (acquired Retek, Inc. on April 12, 2005), and SAP AG (Campbell Software Division).

          Our current Collaborative Solutions compete primarily with products from AC Nielsen Corporation, Evant Inc., i2 Technologies, Information Resources, Inc., Manugistics Group, Inc. and SAS/Marketmax.

          In the market for consulting services, we have pursued a strategy of forming informal working relationships with leading retail systems integrators such as IBM Global Services, Capgemini, Kurt Salmon Associates and Lakewest Consulting. These integrators, as well as independent consulting firms such as Accenture, AIG Netplex, CFT Consulting, SPL and ID Applications, also represent competition to our consulting services group. Moreover, because many of these consulting firms are involved in advising our prospective customers in the software selection process, they may successfully encourage a prospective customer to select software from a software company with whom they have a relationship. Examples of such relationships between consulting firms and software companies include the relationship between Oracle Corporation (acquired Retek, Inc. on April 12, 2005) and Accenture.

          As we continue to develop or acquire e-commerce products and expand our business in the Collaborative Solutions area, we expect to face potential competition from business-to-business e-commerce application providers, including Ariba, Commercialware, Demantra, Inc., Ecometry Corporation, i2 Technologies, Manugistics Group, Inc., Microsoft, Inc., Oracle Corporation (acquired Retek, Inc. on April 12, 2005) and SAP AG.

          A few of our existing competitors, as well as a number of potential new competitors, have significantly greater financial, technical, marketing and other resources than we do, which could provide them with a significant competitive advantage over us. For example, we have recently encountered competitive situations with SAP AG where, in order to expedite their entrance into our markets and to encourage customers to purchase licenses of its non-retail applications, SAP AG has offered to license at no charge certain of its retail software applications that compete with the JDA Portfolio products. In addition, we could face competition from large, multi-industry technology companies that have historically not offered an enterprise solution set to the retail supply chain market. Further, the enterprise software market is consolidating and this may result in larger, new competitors with greater financial, technical and marketing resources than we possess. Such a consolidation could negatively impact our business. This consolidation trend is evidenced by Oracle Corporation’s acquisition of Retek, Inc. on April 12, 2005. Prior to this acquisition, Oracle Corporation did not compete with our retail specific products. We do not believe Oracle’s acquisition of Retek, Inc. will have any significant impact on our near-term strategy; however, it is difficult to estimate what effect this acquisition will ultimately have on our competitive environment. We cannot guarantee that we will be able to compete successfully against our current or future competitors, or that competition will not have a material adverse effect on our business, operating results and financial condition.

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It May Be Difficult to Identify, Adopt and Develop Product Architecture that is Compatible with Emerging Industry Standards.

          The markets for our software products are characterized by rapid technological change, evolving industry standards, changes in customer requirements and frequent new product introductions and enhancements. We continuously evaluate new technologies and implement into our products advanced technology such as our current .Net Platform effort. However, if we fail in our product development efforts to accurately address in a timely manner, evolving industry standards, new technology advancements or important third-party interfaces or product architectures, sales of our products and services will suffer.

          Our software products can be licensed with a variety of popular industry standard platforms, and are authored in various development environments using different programming languages and underlying databases and architectures. There may be future or existing platforms that achieve popularity in the marketplace that may not be compatible with our software product design. Developing and maintaining consistent software product performance across various technology platforms could place a significant strain on our resources and software product release schedules, which could adversely affect our results of operations.

We May Have Difficulty Implementing Our Products.

          Our software products are complex and perform or directly affect mission-critical functions across many different functional and geographic areas of the enterprise. Consequently, implementation of our software products can be a lengthy process, and commitment of resources by our clients is subject to a number of significant risks over which we have little or no control. Although average implementation times have recently declined, we believe the implementation of the UNIX/Oracle versions of our products can be longer and more complicated than our other applications as they typically (i) appeal to larger retailers who have multiple divisions requiring multiple implementation projects, (ii) require the execution of implementation procedures in multiple layers of software, (iii) offer a retailer more deployment options and other configuration choices, and (iv) may involve third party integrators to change business processes concurrent with the implementation of the software. Delays in the implementations of any of our software products, whether by our business partners or us, may result in client dissatisfaction, disputes with our customers, or damage to our reputation.

          There is also a risk that it may take several quarters for our consulting and support organizations to be fully trained and proficient on the new .Net technology platform and as a result, we may encounter difficulties implementing and supporting new products or versions of existing products based on the .Net Platform. In addition, we may be required to supplement our consulting and support organizations with .Net proficient resources from our product development teams to support early .Net implementations which could impact our development schedule for the release of additional .Net products. Significant problems implementing our software therefore, can cause delays or prevent us from collecting license fees for our software and can damage our ability to get new business. As a result of our aggressive management of the utilization of our consulting and support personnel, including recent headcount reductions undertaken in fourth quarter 2004 and first quarter 2005, we face the risk of constraints in our services offerings in the event of greater than anticipated licensing activity or more complex implementation projects.

We May Not Achieve the Desired Results From Our ePathways Implementation Methodology.

          We have invested in the development of an ePathways methodology with the objective of optimizing the delivery of services related to shorter implementation cycle projects typically associated with our Portfolio Space Management, Portfolio Planning and Portfolio Replenishment applications, and improving our utilization rates. A key facet of this methodology involves the delivery of services through the Internet using industry standard technology. There can be no assurance that the ePathways methodology can be successfully implemented within our service organization, that customers will readily accept this method of delivery of our services, or that our utilization rates will improve. If we are unsuccessful implementing the ePathways methodology or the timeframe for its full roll-out is extended, and our utilization rates do not improve, our business, operating results and financial condition would be adversely affected.

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Our Fixed-Price Service Contracts May Result In Losses.

          We offer a combination of software products, consulting and maintenance services to our customers. Historically, we have entered into service agreements with our customers that provide for consulting services on a “time and expenses” basis. We believe our competitors may be offering customers fixed-price service contracts in order to differentiate their product and service offerings. As a result, we are increasingly required during negotiations with customers to enter into fixed-price service contracts which link services payments, and occasionally software payments, to implementation milestones. Fixed bid consulting services work represented 17% of total consulting services revenue in first quarter 2005 as compared to 16% in 2004 and 15% in 2003. If we are unable to meet our contractual obligations under fixed-price contracts within our estimated cost structure, our operating results could suffer.

Our Success Depends Upon Our Proprietary Technology.

          Our success and competitive position is dependent in part upon our ability to develop and maintain the proprietary aspect of our technology. The reverse engineering, unauthorized copying, or other misappropriation of our technology could enable third parties to benefit from our technology without paying for it.

          We rely on a combination of trademark, trade secret, copyright law and contractual restrictions to protect the proprietary aspects of our technology. We seek to protect the source code to our software, documentation and other written materials under trade secret and copyright laws. To date, we have not protected our technology with issued patents, although we do have several patent applications pending. Effective copyright and trade secret protection may be unavailable or limited in certain foreign countries. We license our software products under signed license agreements that impose restrictions on the licensee’s ability to utilize the software and do not permit the re-sale, sublicense or other transfer of the source code. Finally, we seek to avoid disclosure of our intellectual property by requiring employees and independent consultants to execute confidentiality agreements with us and by restricting access to our source code.

          There has been a substantial amount of litigation in the software and Internet industries regarding intellectual property rights. It is possible that in the future third parties may claim that our current or potential future software solutions or we infringe on their intellectual property. We expect that software product developers and providers of e-commerce products will increasingly be subject to infringement claims as the number of products and competitors in our industry segment grows and the functionality of products in different industry segments overlap. Moreover, as software patents become more common, the likelihood increases that a patent holder will bring an infringement action against us, or against our customers, to whom we have indemnification obligations. In addition, we may find it necessary to initiate claims or litigation against third parties for infringement of our proprietary rights or to protect our trade secrets. Since we resell hardware, we may also become subject to claims from third parties that the hardware, or the combination of hardware and software, infringe their intellectual property. Although we may disclaim certain intellectual property representations to our customers, these disclaimers may not be sufficient to fully protect us against such claims. We may be more vulnerable to patent claims since we do not have any issued patents that we can assert defensively against a patent infringement claim. Any claims, with or without merit, could be time consuming, result in costly litigation, cause product shipment delays or require us to enter into royalty or license agreements. Royalty or licensing agreements, if required, may not be available on terms acceptable to us or at all, which could have a material adverse effect on our business, operating results and financial condition.

If We Lose Access to Critical Third-Party Software or Technology, Our Costs Could Increase And The Introduction of New Products And Product Enhancements Could be Delayed, Potentially Hurting Our Competitive Position.

          We license and integrate technology from third parties in certain of our software products. For example, we license the Uniface client/server application development technology from Compuware, Inc. for use in Portfolio Merchandise Management, certain applications from Silvon Software, Inc. for use in Performance Analysis by IDEAS, IBM’s Net.commerce merchant server software for use in Customer Order Management, and the Syncsort application for use in certain of the Portfolio Planning by Arthur products. Our third party licenses generally require us to pay royalties and fulfill confidentiality obligations. If we are unable to continue to license any of this third party software, or if the third party licensors do not adequately maintain or update their products, we

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would face delays in the releases of our software until equivalent technology can be identified, licensed or developed, and integrated into our software products. These delays, if they occur, could harm our business, operating results and financial condition. It is also possible that intellectual property acquired from third parties through acquisitions, mergers, licenses or otherwise may not have been adequately protected, or infringes another parties intellectual property rights.

We May Face Liability If Our Products Are Defective Or If We Make Errors Implementing Our Products.

          Our software products are highly complex and sophisticated. As a result, they may occasionally contain design defects or software errors that could be difficult to detect and correct. In addition, implementation of our products may involve customer-specific configuration by third parties or us, and may involve integration with systems developed by third parties. In particular, it is common for complex software programs, such as our UNIX/Oracle and e-commerce software products, to contain undetected errors when first released. They are discovered only after the product has been implemented and used over time with different computer systems and in a variety of applications and environments. Despite extensive testing, we have in the past discovered certain defects or errors in our products or custom configurations only after our software products have been used by many clients. For example, we will likely experience undetected errors in our .Net applications as we begin to implement them for the first time at customer sites. In addition, our clients may occasionally experience difficulties integrating our products with other hardware or software in their environment that are unrelated to defects in our products. Such defects, errors or difficulties may cause future delays in product introductions and shipments, result in increased costs and diversion of development resources, require design modifications or impair customer satisfaction with our products.

          We believe that significant investments in research and development are required to remain competitive, and that speed to market is critical to our success. Our future performance will depend in large part on our ability to enhance our existing products through internal development and strategic partnering, internally develop new products which leverage both our existing customers and sales force, and strategically acquire complementary retail point and collaborative solutions that add functionality for specific business processes to an enterprise-wide system. If clients experience significant problems with implementation of our products or are otherwise dissatisfied with their functionality or performance or if they fail to achieve market acceptance for any reason, our market reputation could suffer, and we could be subject to claims for significant damages. Although our customer agreements contain limitation of liability clauses and exclude consequential damages, there can be no assurances that such contract provisions will be enforced. Any such damages claim could impair our market reputation and could have a material adverse affect on our business, operating results and financial condition.

We Are Dependent on Key Personnel.

          Our performance depends in large part on the continued performance of our executive officers and other key employees, particularly the performance and services of James D. Armstrong our Chairman and Hamish N. J. Brewer our Chief Executive Officer. We do not have in place “key person” life insurance policies on any of our employees. The loss of the services of Mr. Armstrong, Mr. Brewer, or other key executive officers or employees without a successor in place, or any difficulties associated with our succession, could negatively affect our financial performance.

We May Have Difficulty Integrating Acquisitions.

          We continually evaluate potential acquisitions of complementary businesses, products and technologies, including those that are significant in size and scope. In pursuit of our strategy to acquire complementary products, we have completed nine acquisitions over the past seven years including the Arthur Retail Business Unit in June 1998, Intactix International, Inc. in April 2000, E3 Corporation in September 2001, and substantially all the assets of Timera Texas, Inc. in January 2004. The E3 acquisition was our largest to date, and involved the integration of E3’s products and operations in 12 countries. The risks we commonly encounter in acquisitions include:

•   We may have difficulty assimilating the operations and personnel of the acquired company;

•   The challenge to integrate new products and technologies into our sales and marketing process, particularly in the case of smaller acquisitions;

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•   We may have difficulty effectively integrating the acquired technologies or products with our current products and technologies;

•   Our ongoing business may be disrupted by transition and integration issues;

•   We may not be able to retain key technical and managerial personnel from the acquired business;

•   We may be unable to achieve the financial and strategic goals for the acquired and combined businesses;

•   We may have difficulty in maintaining controls, procedures and policies during the transition and integration;

•   Our relationships with partner companies or third-party providers of technology or products could be adversely affected;

•   Our relationships with employees and customers could be impaired;

•   Our due diligence process may fail to identify significant issues with product quality, product architecture, legal contingencies, and product development, among other things;

•   We may be subject to as a successor, certain liabilities of our acquisition targets; and

•   We may be required to sustain significant exit or impairment charges if products acquired in business combinations are unsuccessful.

Anti-takeover Provisions in Our Organizational Documents and Stockholders’ Rights Plan and Delaware Law Could Prevent or Delay a Change in Control.

          Our certificate of incorporation, which authorizes the issuance of “blank check preferred” stock, our stockholders’ rights plan which permits our stockholders to counter takeover attempts, and Delaware state corporate laws which restrict business combinations between a corporation and 15% or more owners of outstanding voting stock of the corporation for a three-year period, individually or in combination, may discourage, delay or prevent a merger or acquisition that a JDA stockholder may consider favorable.

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Item 3: Quantitative and Qualitative Disclosures about Market Risk

          We are exposed to certain market risks in the ordinary course of our business. These risks result primarily from changes in foreign currency exchange rates and interest rates. In addition, our international operations are subject to risks related to differing economic conditions, changes in political climate, differing tax structures, and other regulations and restrictions.

          Foreign currency exchange rates. Our international operations expose us to foreign currency exchange rate changes that could impact translations of foreign denominated assets and liabilities into U.S. dollars and future earnings and cash flows from transactions denominated in different currencies. International revenues represented 42% of our total revenues in first quarter 2005 as compared to 40% and 44% of total revenues in the years ended December 31, 2004 and 2003 respectively. In addition, the identifiable net assets of our foreign operations totaled 21% of consolidated net assets at March 31, 2005, as compared to 19% at December 31, 2004. Our exposure to currency exchange rate changes is diversified due to the number of different countries in which we conduct business. We operate outside the United States primarily through wholly owned subsidiaries in Europe, Asia/Pacific, Canada and Latin America. We have determined that the functional currency of each of our foreign subsidiaries is the local currency and as such, foreign currency translation adjustments are recorded as a separate component of stockholders’ equity. Changes in the currency exchange rates of our foreign subsidiaries resulted in an unrealized foreign currency exchange loss of $527,000 in first quarter 2005 and an unrealized foreign currency exchange gain of $1.3 million in first quarter 2004.

          Foreign currency gains and losses will continue to result from fluctuations in the value of the currencies in which we conduct operations as compared to the U.S. Dollar, and future operating results will be affected to some extent by gains and losses from foreign currency exposure. We prepared sensitivity analyses of our exposures from foreign net working capital as of March 31, 2005 to assess the impact of hypothetical changes in foreign currency rates. Based upon the results of these analyses, a 10% adverse change in all foreign currency rates from the March 31, 2005 rates would result in a currency translation loss of $2.1 million before tax. We use derivative financial instruments to manage this risk.

          We use derivative financial instruments, primarily forward exchange contracts, to manage a majority of the foreign currency exchange exposure associated with net short-term foreign denominated assets and liabilities which exist as part of our ongoing business operations. The exposures relate primarily to the gain or loss recognized in earnings from the revaluation or settlement of current foreign denominated assets and liabilities. We do not enter into derivative financial instruments for trading or speculative purposes. The forward exchange contracts generally have maturities of less than 90 days, and are not designated as hedging instruments under SFAS No. 133. Forward exchange contracts are marked-to-market at the end of each reporting period, with gains and losses recognized in other income offset by the gains or losses resulting from the settlement of the underlying foreign denominated assets and liabilities.

          At March 31, 2005, we had forward exchange contracts with a notional value of $7.3 million and an associated net forward contract receivable of $43,500. At December 31, 2004, we had forward exchange contracts with a notional value of $5.8 million and an associated net forward contract liability of $219,000. The net forward contract liabilities are included in accrued expenses and other liabilities. The notional value represents the amount of foreign currencies to be purchased or sold at maturity and does not represent our exposure on these contracts. We prepared sensitivity analyses of the impact of changes in foreign currency exchange rates on our forward exchange contracts at March 31, 2005. Based on the results of these analyses, a 10% adverse change in all foreign currency rates from the March 31, 2005 rates would result in a net forward contract liability of $796,000 that would offset the underlying currency translation loss on our net foreign assets. We recorded foreign currency exchange gains of $5,000 and $213,000 in the three months ended March 31, 2005 and 2004, respectively.

          Interest rates. We invest our cash in a variety of financial instruments, including bank time deposits and variable and fixed rate obligations of the U.S. Government and its agencies, states, municipalities, commercial paper and corporate bonds. These investments are denominated in U.S. dollars. We classify all of our investments as available-for-sale in accordance with Statement of Financial Accounting Standards No. 115, “Accounting for Certain Investments in Debt and Equity Securities.” Cash balances in foreign currencies overseas are operating balances and

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rate risk. Fixed rate securities are invested in short-term deposits of the local operating bank. Interest income earned on our investments is reflected in our financial statements under the caption “Other income, net.” Investments in both fixed rate and floating rate interest earning instruments carry a degree of interest may have their fair market value adversely impacted due to a rise in interest rates, while floating rate securities may produce less income than expected if interest rates fall. Due to these factors, our future investment income may fall short of expectations due to changes in interest rates, or we may suffer losses in principal if forced to sell securities that have suffered a decline in market value due to a change in interest rates. We hold our investment securities for purposes other than trading. The fair value of securities held at March 31, 2005 was $36.2 million, which is approximately the same as amortized cost, with interest rates generally ranging between 1% and 3%.

Item 4: Controls and Procedures

          During and subsequent to the reporting period, and under the supervision and with the participation of our management, including our principal executive officer and principal financial and accounting officer, we conducted an evaluation of our disclosure controls and procedures, as such term is defined under Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), that were in effect at the end of the period covered by this report. Based on their evaluation, our principal executive officer and principal financial and accounting officer have concluded that our disclosure controls and procedures that were in effect on March 31, 2005 were effective to ensure that information required to be disclosed in our reports to be filed under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms. There have been no significant changes in our internal controls over financial reporting, or to our knowledge, in other factors that could significantly affect these controls subsequent to March 31, 2005.

          While we have not identified any material weakness or condition in our disclosure controls and procedures that would cause us to consider them ineffective for their intended purpose, we nevertheless have identified certain deficiencies in our manual accounting procedures related to the computation of our quarterly income tax provision (benefit) and analysis of deferred tax assets. These deficiencies have resulted in the Company recording various adjustments to its tax accounts related to revisions of certain tax estimates in prior years. These deficiencies did not have a material impact on the quality or accuracy of our financial statements. To correct these deficiencies, we have implemented additional internal controls over the computation of the quarterly income tax provision and our analysis of deferred tax assets which include (i) an external review by an independent tax advisor prior to the filing of our quarterly reports, (ii) a formal fixed asset review to ensure additions and disposals have been properly accounted in a timely manner for tax purposes and (iii) the purchase of an income tax provision software package to reduce the amount of manual calculations and the potential for human error.

48

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

          We are involved in legal proceedings and claims arising in the ordinary course of business. Although there can be no assurance, management does not currently believe that the disposition of these matters will have a material adverse effect on our business, financial position, results of operations or cash flows.

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

          Not applicable

Item 3. Defaults Upon Senior Securities

          Not applicable

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

          Note applicable

Item 5. Other Information

          Not applicable

Item 6. Exhibits

          See Exhibit Index

49

JDA SOFTWARE GROUP, INC.

SIGNATURE

          Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized

	JDA SOFTWARE GROUP, INC.
Dated: May 10, 2005	By:	/s/ Kristen L. Magnuson
		Kristen L. Magnuson
		Executive Vice President and Chief Financial Officer (Principal Financial and Accounting Officer)

50

EXHIBIT INDEX

Exhibit #	Description of Document
2.1**	— Asset Purchase Agreement dated as of June 4, 1998, by and among JDA Software Group, Inc., JDA Software, Inc. and Comshare, Incorporated.
2.2##	— Asset Purchase Agreement dated as of February 24, 2000, by and among JDA Software Group, Inc., Pricer AB, and Intactix International, Inc.
2.3###	— Agreement and Plan of Reorganization dated as of September 7, 2001, by and among JDA Software Group, Inc., E3 Acquisition Corp., E3 Corporation and certain shareholders of E3 Corporation.
3.1####	— Third Restated Certificate of Incorporation of the Company together with Certificate of Amendment dated July 23, 2002.
3.2***	— First Amended and Restated Bylaws of JDA Software Group, Inc.
4.1*	— Specimen Common Stock Certificate of JDA Software Group, Inc.
10.1*(1)	— Form of Indemnification Agreement.
10.2*(1)	— 1995 Stock Option Plan, as amended, and form of agreement thereunder.
10.3 sss (1)	— 1996 Stock Option Plan, as amended on March 28, 2003.
10.4*(1)	— 1996 Outside Directors Stock Option Plan and forms of agreement thereunder.
10.5 sss(1)	— Executive Employment Agreement between James D. Armstrong and JDA Software Group, Inc. dated July 23, 2002, together with Amendment No. 1 effective August 1, 2003.
10.6sss (1)	—Executive Employment Agreement between Hamish N. Brewer and JDA Software Group, Inc. dated January 22, 2003, together with Amendment No. 1 effective August 1, 2003.
10.7 (1)####	—Executive Employment Agreement between Kristen L. Magnuson and JDA Software Group, Inc. dated July 23, 2002.
10.8sss (1)	— 1998 Nonstatutory Stock Option Plan, as amended on March 28, 2003.
10.10†	— 1999 Employee Stock Purchase Plan.
10.12**	— Software License Agreement dated as of June 4, 1998 by and between Comshare, Incorporated and JDA Software, Inc.
10.13sss	— Purchase Agreement between Opus Real Estate Arizona II, L.L.C. and JDA Software Group, Inc. dated February 5, 2004.
10.14sss (2)	— Value-Added Reseller License Agreement for Uniface Software between Compuware Corporation and JDA Software Group, Inc. dated April 1, 2000, together with Product Schedule No. One dated June 23, 2000, Product Schedule No. Two dated September 28, 2001, and Amendment to Product Schedule No. Two dated December 23, 2003.
10.15sss (1)	— JDA Software, Inc. 401(k) Profit Sharing Plan, adopted as amended effective January 1, 2004.
10.16ssss (1)	— Non-Plan Stock Option Agreement between JDA Software Group, Inc. and William C. Keiper, dated March 4, 1999.
10.17***(1)	— Form of Amendment of Stock Option Agreement between JDA Software Group, Inc and Kristen L. Magnuson, amending certain stock options granted to Ms. Magnuson pursuant to the JDA Software Group, Inc. 1996 Stock Option Plan on September 11, 1997 and January 27, 1998.
10.18††(1)	— Form of Rights Agreement between the Company and ChaseMellon Shareholder Services, as Rights Agent (including as Exhibit A the Form of Certificate of Designation, Preferences and Rights of the Terms of the Series A Preferred Stock, as Exhibit B the From of Right Certificate, and as Exhibit C the Summary of Terms and Rights Agreement).
10.19†††(1)	— Form of Incentive Stock Option Agreement between JDA Software Group, Inc. and Kristen L. Magnuson to be used in connection with stock option grants to Ms. Magnuson pursuant to the JDA Software Group, Inc. 1996 Stock Option Plan.

51

Exhibit #	Description of Document
10.20s(1)(3)	— Form of Incentive Stock Option Agreement between JDA Software Group, Inc. and certain Senior Executive Officers to be used in connection with stock options granted pursuant to the JDA Software Group, Inc. 1996 Stock Option Plan.
10.21s (1)(3)	— Form of Nonstatutory Stock Option Agreement between JDA Software Group, Inc. and certain Senior Executive Officers to be used in connection with stock options granted pursuant to the JDA Software Group, Inc. 1996 Stock Option Plan.
10.22s (1) (4)	— Form of Amendment of Stock Option Agreement between JDA Software Group, Inc and certain Senior Executive Officers, amending certain stock options granted pursuant to the JDA Software Group, Inc. 1995 Stock Option Plan.
10.23s (1)(5)	— Form of Amendment of Stock Option Agreement between JDA Software Group, Inc and certain Senior Executive Officers, amending certain stock options granted pursuant to the JDA Software Group, Inc. 1996 Stock Option Plan.
10.24s (1)(6)	— Form of Incentive Stock Option Agreement between JDA Software Group, Inc. and certain Senior Executive Officers to be used in connection with stock options granted pursuant to the JDA Software Group, Inc. 1996 Stock Option Plan.
10.25ss	— Secured Loan Agreement between JDA Software Group, Inc. and Silvon Software, Inc. dated May 8, 2001, together with Secured Promissory Note and Security Agreement.
10.26#	— Settlement Agreement and Release between JDA Software Group, Inc. and Silvon Software, Inc. dated November 30, 2004, together with Amended and Restated Secured Promissory Note and Amended and Restated Security Agreement.
10.27	— Second Amendment to Secured Loan Agreement between JDA Software Group, Inc. and Silvon Software, Inc. dated March 30, 2005, together with Second Amended and Restated Secured Promissory Note and Subordination Agreement between Silvon Software, Inc. and Michael J. Hennel, Patricia Hennel, Bridget Hennel and Frank Bunker.
14.1sss	— Code of Business Conduct and Ethics.
21.1#	— Subsidiaries of Registrant.
31.1	— Rule 13a-14(a) Certification of Chief Executive Officer.
31.2	— Rule 13a-14(a) Certification of Chief Financial Officer.
32.1	— Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

*	Incorporated by reference to the Company’s Registration Statement on Form S-1 (File No. 333-748), declared effective on March 14, 1996.
**	Incorporated by reference to the Company’s Current Report on Form 8-K dated June 4, 1998, as filed on June 19, 1998.
***	Incorporated by reference to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 1998, as filed on August 14, 1998.
†	Incorporated by reference to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 1999, as filed on August 19, 1999.
††	Incorporated by reference to the Company’s Current Report on Form 8-K dated October 2, 1998, as filed on October 28, 1998.
†††	Incorporated by reference to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 1998, as filed on November 13, 1998.
#	Incorporated by reference to the Company’s Annual Report on Form 10-K for the year ended December 31, 2004, as filed on March 15, 2005.
##	Incorporated by reference to the Company’s Current Report on Form 8-K dated February 24, 2000, as filed on March 1, 2000.
###	Incorporated by reference to the Company’s Current Report on Form 8-K dated September 7, 2001, as filed on September 21, 2001.
####	Incorporated by reference to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2002, as filed on November 12, 2002.
s	Incorporated by reference to the Company’s Annual Report on Form 10-K for the year ended December 31, 1999, as filed on March 16, 2000.

52

ss	Incorporated by reference to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2001, as filed on August 14, 2001.
sss	Incorporated by reference to the Company’s Annual Report on Form 10-K for the year ended December 31, 2003, as filed on March 12, 2004.
ssss	Incorporated by reference to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2004, as filed on May 10, 2004.
(1)	Management contracts or compensatory plans or arrangements covering executive officers or directors of the Company.
(2)	Confidential treatment has been granted as to part of this exhibit.
(3)	Applies to James D. Armstrong.
(4)	Applies to Hamish N. Brewer and Gregory L. Morrison.
(5)	Applies to Hamish N. Brewer, Peter J. Charness, Gregory L. Morrison and David J. Tidmarsh.
(6)	Applies to Senior Executive Officers with the exception of James D. Armstrong and Kristen L. Magnuson.

53

EX-10.27

                                                                   EXHIBIT 10.27

                   SECOND AMENDMENT TO SECURED LOAN AGREEMENT

            This SECOND AMENDMENT TO SECURED LOAN AGREEMENT ( this "Amendment")
is dated as of March 30, 2005 and is entered into by and between SILVON
SOFTWARE, INC., an Illinois corporation ("Borrower"), and JDA SOFTWARE GROUP,
INC., a Delaware corporation ("Lender").

                                    RECITALS:

            A. Borrower and Lender entered into that certain Secured Loan
Agreement dated as of May 8, 2001, as amended by that certain First Amendment to
Secured Loan Agreement dated as of November 30, 2004 between Borrower and
Lender (as the same may hereafter be amended, restated, supplemented or
otherwise modified from time to time, the "Loan Agreement") pursuant to which,
among other things, Lender agreed, subject to the terms and conditions thereof,
to make a loan to Borrower.

            B. Borrower has requested that Lender (i) extend the maturity date
of the loan under the Loan Agreement and (ii) permit Borrower to incur
$1,000,000 of indebtedness from Michael J. Hennel, Patricia Hennel, Bridget
Hennel and Frank Bunker (collectively, the "Subordinated Lenders" and each,
individually, a "Subordinated Lender").

            C. Lender has agreed to such amendments on the terms and conditions
hereinafter set forth.

            NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and adequacy of which are hereby
acknowledged, the parties hereto agree as follows:

                                   AGREEMENTS:

            SECTION 1. DEFINITIONS. Capitalized terms used in this Amendment,
unless otherwise defined herein, shall have the meaning ascribed to such terms
in the Loan Agreement.

            SECTION 2. RECITALS. The foregoing Recitals are hereby made a part
of this Amendment.

            SECTION 3. AMENDMENTS TO THE LOAN AGREEMENT. Subject to
satisfaction of the conditions set forth in Section 4 hereto, effective as of
the date hereof, the Loan Agreement is amended as follows:

            3.1   The Recital to the Loan Agreement is hereby amended and
restated as follows:

                  "The Borrower wishes to borrow from the Lender and the Lender
                  wishes to loan to the Borrower the principal amount of One
                  Million Seven Hundred Sixty-Five Thousand Six Hundred
                  Ninety-Five and 07/100 Dollars ($1,765,695.07)

CHICAGO_1228379_7


                  pursuant to the terms hereof and to be evidenced by a Second
                  Amended and Restated Secured Promissory Note in the form of
                  Exhibit A hereto (as amended, the "Note")."

            3.2   Section 1 of the Loan Agreement is hereby amended by deleting
the amount "$2,861,196.78" where it appears therein and by inserting in its
place the amount "$1,765,695.07."

            3.3   Section 3(d) of the Loan Agreement is hereby amended by
deleting the phrase "and this Agreement, the Note, the Security Agreement, the
Escrow Agreement (as defined in Section 5) (collectively, the "Loan Documents")
and in substitution therefor inserting the phrase "and this Agreement, the Note,
the Security Agreement, the Subordination Agreement, the Escrow Agreement (as
defined in Section 5), and all other agreements, documents and instruments
executed and delivered in connection with the foregoing (collectively, the "Loan
Documents")".

            3.4   Section 4(a)(i) of the Loan Agreement is hereby amended and
restated as follows:

                  "(i) As soon as available, but in any event within 30 days
                  after the end of each monthly accounting period, the Borrower
                  shall deliver to the Lender unaudited consolidated statements
                  of income and cash flows for the monthly period then ended and
                  a balance sheet as of the last day of that monthly period, in
                  each case prepared in accordance with GAAP consistent with
                  past practices."

            3.5   Section 4(b) of the Loan Agreement is hereby amended and
restated as follows:

                  "(b) So long as the Note is outstanding, the Borrower will
                  promptly (and in no event later than 5 days after the Borrower
                  becomes aware of such an event or change) inform the Lender of
                  (i) any material adverse events and of any material change in
                  the nature of the Collateral (as defined in the Security
                  Agreement) and (ii) with respect to any fiscal year of the
                  Borrower, any material change in the financial position of the
                  Borrower as (or to be) set forth in the annual audited
                  financial statements of the Borrower for such period from the
                  financial position of the Borrower as set forth in the
                  unaudited monthly financial statements previously delivered to
                  the Lender pursuant to Section 4(a)(i) for such period and a
                  summary of any such change."

            3.6   Section 4(d)(i) of the Loan Agreement is hereby amended and
restated as follows:

                                        2


                  "(i) authorize, issue or enter into any agreement providing
                  for the issuance (contingent or otherwise) of any indebtedness
                  for borrowed money, other than the incurrence of loans from
                  (A) Michael J. Hennel in a principal amount not to exceed
                  $550,000 at any time outstanding, (B) Patricia Hennel in a
                  principal amount not to exceed $115,000 at any time
                  outstanding, (C) Bridget Hennel in a principal amount not to
                  exceed $75,000 at any time outstanding and (D) Frank Bunker in
                  a principal amount not to exceed $260,000 at any time
                  outstanding (collectively, the "Subordinated Loans");"

            3.7   Section 4(d)(iii) of the Loan Agreement is hereby amended and
restated as follows:

                  "(iii) directly or indirectly redeem, purchase or otherwise
                  acquire any of its equity securities (including the Warrants
                  (as such term is defined below), any other warrants, options
                  and other rights to acquire equity securities) except as
                  contemplated by existing stock option plans or repurchases of
                  employee options or restricted stock in the ordinary course of
                  business; provided, that in no event shall any redemption,
                  purchase or other acquisition of the Warrants or any common
                  stock issued pursuant to the Warrants shall be permitted;"

            3.8   Section 4(d) of the Loan Agreement is hereby amended to (a)
delete the period at the end of clause (ix) and insert a semicolon therefor and
(b) add new clauses (x), (xi), (xii), (xiii) and (xiv) to the end of such
section as follows:

                  "(x) amend or otherwise modify (A) that certain Note dated as
                  of March 30, 2005 by the Borrower in favor of Michael J.
                  Hennel in the original principal amount of $550,000, (B) that
                  certain Note dated as of March 30, 2005 by the Borrower in
                  favor of Patricia Hennel in the original principal amount of
                  $115,000, (C) that certain Note dated as of March 30, 2005 by
                  the Borrower in favor of Bridget Hennel in the original
                  principal amount of $75,000, (D) that certain Note dated as of
                  March 30, 2005 by the Borrower in favor of Frank Bunker in the
                  original principal amount of $260,000 and (E) all other
                  agreements, documents and instruments evidencing the foregoing
                  (the "Subordinated Loan Documents"), except as otherwise
                  provided in that certain Subordination Agreement, dated as of
                  March 30, 2005 between Lender and the Subordinated Lenders, in
                  the form of Exhibit D attached hereto (as

                                        3


                  amended, restated, supplemented or otherwise modified from
                  time to time, the "Subordination Agreement");

                  (xi) except as otherwise permitted pursuant to the
                  Subordination Agreement, make any payments with respect to the
                  Subordinated Loans;

                  (xii) issue any warrants to any Subordinated Lender other than
                  warrants (A) which are exercisable for shares of common stock
                  of the Borrower, (B) which are exercisable for not more than
                  2,800,000 shares of common stock of the Borrower in the
                  aggregate for all Subordinated Lenders and (C) for which the
                  issuance thereof and the exercise into shares of common stock
                  of the Borrower is cashless (the "Warrants");

                  (xiii) permit Michael J. Hennel to cease to own and/or
                  control, directly or indirectly, less than the same percentage
                  of all of the economic and voting rights associated with
                  ownership of the outstanding capital stock of the Borrower, on
                  a fully diluted basis, which were owned and/or controlled by
                  Michael J. Hennel on March 30, 2005; or

                  (xiv) permit someone other than Michael J. Hennel to (A) be
                  President of the Borrower or (B) manage the day-to-day
                  operations of the Borrower."

            3.9   All references in the Loan Agreement to the Note in the form
of Exhibit A to the Loan Agreement shall be deemed to be references to the
Second Amended and Restated Secured Promissory Note in the form of Exhibit A
attached hereto and made a part hereof (the "Second Amended and Restated
Note").

            3.10  The Loan Agreement is hereby amended to add the form of
Subordination Agreement as Exhibit D thereto, in the form of Exhibit B attached
hereto.

            SECTION 4. CONDITIONS. The effectiveness of this Amendment is
subject to the satisfaction of the following conditions precedent (unless
specifically waived in writing by Lender):

            4.1   Lender shall have received fully executed copies of this
Amendment executed by Lender and Borrower.

            4.2   Borrower shall have delivered to Lender a Second Amended and
Restated Note executed by Borrower and payable to the order of Lender, in the
form of Exhibit A attached hereto.

            4.3   Borrower shall have delivered to Lender a Subordination
Agreement, executed by the Subordinated Lenders, in the form of Exhibit B
attached hereto.

                                        4


            4.4   Lender shall have received $1,000,000 in immediately available
United States Dollars for application to the outstanding principal balance of
the Note.

            4.5   Borrower shall have delivered to Lender fully-executed copies
of the Subordinated Loan Documents (together with all annexes, exhibits and
schedules thereto), certified by the secretary of Borrower to be the true,
correct and complete copies of the Subordinated Loan Documents.

            4.6   No Event of Default under the Loan Agreement or the Security
Agreement or other event or circumstance which with the giving of notice or
passage of time, or both, would constitute or become an Event of Default under
the Loan Agreement or the Security Agreement shall have occurred and be
continuing and all representations and warranties of Borrower in the Loan
Agreement and the Security Agreement shall be true and correct in all material
respects.

            4.7   All proceedings taken in connection with the transactions
contemplated by this Amendment and all documents, instruments and other legal
matters incident thereto shall be reasonably satisfactory to Lender.

            SECTION 5. REPRESENTATIONS AND WARRANTIES. Borrower represents and
warrants to Lender that:

            5.1   Representations and Warranties. Borrower is a corporation duly
organized, existing and in good standing under the laws of the State of
Illinois, with full and adequate corporate power to carry on and conduct its
business as presently conducted. Borrower is duly licensed or qualified in all
foreign jurisdictions wherein the nature of its activities require such
qualification or licensing. The Articles of Incorporation and Bylaws of Borrower
have not been changed or amended since the most recent date that certified
copies thereof were delivered to Lender. The Borrower's state issued
organizational identification number is 54821824. The exact legal name of
Borrower is as set forth in the preamble to this Amendment, and Borrower
currently does not conduct, nor has it during the last five (5) years conducted,
business under any other name or trade name.

            5.2   Authorization. Borrower is duly authorized to execute and
deliver this Amendment, the Second Amended and Restated Note and the
Subordination Agreement and is and will continue to be duly authorized to
perform its obligations under the Loan Agreement, as amended hereby, and the
other Loan Documents.

            5.3   No Conflicting Agreements. The execution and delivery of this
Amendment, the Note and the Security Agreement and the performance by Borrower
of its obligations under the Loan Agreement, as amended hereby, and the other
Loan Documents do not and will not conflict with any provision of law or of the
Articles of Incorporation or Bylaws of Borrower or any agreement binding upon
Borrower.

            5.4   Validity and Binding Effect. The Loan Agreement, as amended
hereby, the Note and the Security Agreement are each legal, valid and binding
obligations of Borrower, enforceable against Borrower in accordance with their
respective terms, except as enforceability may be limited by bankruptcy,
insolvency or other similar laws of general application affecting

                                       5


the enforcement of creditors' rights or by general principles of equity
limiting the availability of equitable remedies.

            5.5   Compliance with Loan Agreement. Except as set forth on a
Schedule of Exceptions attached hereto as Exhibit C (the "Schedule of
Exceptions") delivered herewith, the representations and warranties set forth in
clauses (a) through (k) and clauses (n) through (t) of Section 3 of the Loan
Agreement, are true and correct with the same effect as if such representations
and warranties had been made on the date hereof. In addition, Borrower has
complied with and is in compliance with all of the covenants set forth in the
Loan Agreement.

            5.6   Financial Statements. The Borrower has provided or made
available to the Lenders unaudited financial statements (including balance
sheet, income statement and statement of cash flows) for the years ended
December 31, 2002, December 31, 2003 and December 31, 2004, in each case, as
attached hereto as Exhibit D (collectively, the "Financial Statements"). The
Financial Statements have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis throughout the periods
indicated, except that the unaudited Financial Statements may not contain all
footnotes required by generally accepted accounting principles and the absence
of such notes do not make those financial statements misleading. The Financial
Statements fairly present the financial condition and operating results of the
Borrower as of the dates, and for the periods indicated therein. Except as set
forth in the Financial Statements, the Borrower has no liabilities in excess of
$75,000, contingent or otherwise, other than (1) liabilities incurred in the
ordinary course of business subsequent to December 31, 2004, (2) obligations
under contracts and commitments incurred in the ordinary course of business and
not required under generally accepted accounting principles to be reflected in
the Financial Statements and (3) the Subordinated Loan, which, in the case if
clauses (i) and (ii) above, individually or in the aggregate, are not material
to the financial condition or operating results of the Borrower. Except as
disclosed in the Financial Statements, the Borrower is not a guarantor or
indemnitor of any indebtedness of any other person, firm or corporation. The
Borrower maintains and will continue to maintain a standard system of accounting
established and administered in accordance with generally accepted accounting
principles.

            5.7   Changes. Since December 31, 2004, there has not been:

                  i.    any damage, destruction or loss, whether or not covered
                        by insurance;

                  ii.   any waiver, cancellation, release or compromise by the
                        Borrower of a valuable right or claim (or series of
                        related rights or claims) or of a material debt owed to
                        it;

                  iii.  any adverse change to a material contract;

                  iv.   any change in any compensation arrangement or agreement
                        with any Borrower senior officer, director or
                        stockholder outside the ordinary course of business;

                                       6


                  v.    any sale, assignment, transfer or license by the
                        Borrower (except in the ordinary course of business) of
                        any patents, trademarks, copyrights, trade secrets or
                        other intangible assets;

                  vi.   any resignation or termination of employment of any
                        officer or key employee of the Borrower, and the
                        Borrower does not know of any impending resignation or
                        termination of employment of any such officer or key
                        employee;

                  vii.  receipt of notice that there has been a loss of, or
                        material order cancellation by, any major customer of
                        the Borrower;

                  viii. any mortgage, pledge, transfer of a security interest
                        in, or lien, created by the Borrower, with respect to
                        any of its material properties or assets, except liens
                        for taxes not yet due or payable;

                  ix.   any loans or guarantees made by the Borrower to or for
                        the benefit of its employees, officers or directors, or
                        any members of their immediate families, other than
                        travel advances and other advances made in the ordinary
                        course of its business;

                  x.    any declaration, setting aside or payment or other
                        distribution in respect to any of the Borrower's capital
                        stock, or any direct or indirect redemption, purchase or
                        other acquisition of any of such stock by the Borrower;
                        or

                  xi.   any arrangement or commitment to do any of the things
                        described in this Section 5.7.

            SECTION 6. REAFFIRMATION AND OTHER AGREEMENTS.

            6.1   Borrower expressly reaffirms and assumes all of its
obligations and liabilities to Lender as set forth in the Loan Agreement and the
other Loan Documents and agrees to be bound by and abide by and operate and
perform under and pursuant to and comply fully with all of the terms,
conditions, provisions, agreements, representations, undertakings, warranties,
indemnities, grants of security interests and covenants contained in the Loan
Agreement and the other Loan Documents, in so far as such obligations and
liabilities may be modified by this Amendment, as though such Loan Agreement and
other Loan Documents were being re-executed on the date hereof, except to the
extent that such terms expressly relate to an earlier date. Borrower ratifies,
confirms and affirms without condition, all liens and security interests granted
to Lender pursuant to the Loan Agreement, the Security Agreement and the other
Loan Documents and such liens and security interests shall continue to secure
the Indebtedness, including but not limited to, the Loans made by Lender to
Borrower under the Loan Agreement as amended by this Amendment, and all
extensions renewals, refinancings, amendments or modifications of any of the
foregoing.

            6.2   Borrower hereby acknowledges that: (i) it has no defenses,
claims or set-offs to the enforcement by Lender of such liabilities,
obligations and agreements (except

                                        7


pursuant to Section 6 of the Note); (ii) Lender has fully performed all
undertakings owed to Borrower as of the date hereof; and (iii) Lender does not
waive, diminish or limit any term or condition contained in the Loan Agreement
or in any of the other Loan Documents.

            SECTION 7. NO WAIVER. This Amendment shall not be deemed to
constitute a waiver or release of any existing default or Event of Default by
Borrower under any of the Loan Documents or any remedies or rights of Lender
with respect thereto, all of which are hereby reserved by Lender.

            SECTION 8. GENERAL PROVISIONS.

            8.1   No Changes. Except as expressly provided in this Amendment,
the terms and provisions of the Loan Agreement shall remain in full force and
effect and are hereby affirmed, confirmed and ratified in all respects.

            8.2   Compliance. Borrower hereby acknowledges that its failure to
comply with the terms of this Amendment will constitute an Event of Default
under the Security Agreement.

            8.3   Governing Law. This Amendment shall be construed in accordance
with and governed by the internal laws (as distinguished from the conflicts of
law provisions) of the State of New York.

            8.4   Counterparts. This Amendment may be executed in one or more
counterparts, each of which shall constitute an original, but all of which taken
together shall be one and the same instrument. This Amendment may also be
executed by facsimile and each facsimile signature hereto shall be deemed for
all purposes to be an original signatory page.

            8.5   References. On or after the effective date hereof, each
reference in the Loan Agreement or any of the Loan Documents to this "Agreement"
or words of like import, shall unless the context otherwise requires, be deemed
to refer to the Loan Agreement as amended hereby.

            8.6   Severability. Any provision of this Amendment held by a court
of competent jurisdiction to be invalid or unenforceable shall not impair or
invalidate the remainder of this Amendment and the effect thereof shall be
confined to the provision so held to be invalid or unenforceable.

            8.7   Successors and Assigns. This Amendment shall inure to the
benefit of Lender, its successors and assigns and be binding upon Borrower, its
successors and assigns.

            8.8   Licensing Agreement. Notwithstanding anything to the contrary
contained herein, or in the Security Agreement or the Subordination Agreement,
nothing contained herein shall preclude Borrower from enforcing the terms of
that certain Distribution License Agreement dated as of September 30, 1996
between Borrower and Lender, as amended.

                  [Remainder of Page Intentionally Left Blank]

                                       8


            IN WITNESS WHEREOF, the parties hereto have causes this Amendment to
be executed by their respective officers thereunto duly authorized and delivered
at Chicago, Illinois as of the date first written above.

BORROWER:                                   SILVON SOFTWARE, INC.

                                            By: /s/ Michael J. Hennel
                                                ---------------------
                                            Name: Michael J. Hennel
                                            Title: President

LENDER:                                     JDA SOFTWARE GROUP, INC.

                                            By: /s/ Kris Magnuson
                                                -----------------
                                            Name: Kris Magnuson
                                            Title: Chief Financial Officer

         [Signature page to Second Amendment to Secured Loan Agreement.]



                                    EXHIBIT A

                        Second Amended and Restated Note



THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
AND HAS BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION
WITH, THE SALE OR DISTRIBUTION THEREOF. NO SUCH SALE OR DISTRIBUTION MAY BE
EFFECTED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN
EXEMPTION FROM REGISTRATION AVAILABLE SO THAT SUCH REGISTRATION IS NOT REQUIRED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED.

$1,765,695.07                                                     March 30, 2005

                              SILVON SOFTWARE, INC.

                           SECOND AMENDED AND RESTATED
                             SECURED PROMISSORY NOTE

      FOR VALUE RECEIVED, Silvon Software, Inc., an Illinois corporation (the
"Company"), promises to pay to the order of JDA Software Group, Inc., a Delaware
corporation (and any permitted successor(s) and assign(s) under Section 8
hereof, the "Holder"), the principal amount of ONE MILLION SEVEN HUNDRED
SIXTY-FIVE THOUSAND SIX HUNDRED NINETY-FIVE and 07/100 Dollars ($1,765,695.07)
together with interest thereon calculated from the date hereof in accordance
with the provisions of this Second Amended and Restated Secured Promissory Note.
Terms not defined herein shall have the meaning given them in the Secured Loan
Agreement dated as of May 8, 2001 between the Company and the Holder, as amended
by that certain First Amendment to Secured Loan Agreement dated as of November
30, 2004 between the Company and the Holder (as the same may hereafter be
amended, restated, supplemented or otherwise modified from time to time, the
"Loan Agreement"). Neither the foregoing reference to the Loan Agreement nor any
provisions thereof shall affect or impair the absolute and unconditional
obligation of the Company to pay the principal and interest on this Note as
provided herein.

      1.    Loan Agreement. This Second Amended and Restated Secured Promissory
Note (as amended or otherwise modified from time to time, the "Note") is the
Note called for by the Loan Agreement. The Holder is entitled to the benefits
of, and subject to the terms and conditions set forth in the Loan Agreement. The
benefits and rights of the Holder are also subject to certain conditions and
restrictions also set forth in the Loan Agreement, which conditions and
restrictions may be enforced against the Holder.

      2.    Maturity. The outstanding principal under this Note shall be due and
payable on March 30, 2006 (the "Maturity Date"). Notwithstanding the foregoing,
the entire unpaid principal sum of this Note, together with accrued and unpaid
interest thereon, shall become immediately due and payable upon any Event of
Default (as defined in the Security Agreement referred to in Section 3 hereof).

      3.    Security Interest and Collateral. This Note is secured by a first
priority security interest in all of the Company's assets pursuant to the terms
of the Amended and Restated Security Agreement dated November 30, 2004 by and
between the Company and the Holder (as

CHICAGO1228348


amended, restated, supplemented or otherwise modified from time to time, the
"Security Agreement").

      4.    Interest.

            (a) The principal of this Note from time to time outstanding shall
bear interest on the unpaid principal amount of this Note outstanding from time
to time on a monthly basis from the date hereof (compounded monthly) at the rate
of eighteen percent (18%) per annum or the highest rate of interest then allowed
by law; provided, however, that upon an Event of Default and while that Event of
Default is continuing, the interest shall be the lesser of (i) twenty-one
percent (21%) or (ii) the highest rate of interest then allowed by law. All
interest on this Note shall be due and payable monthly on the first day of each
month, with the first interest payment due April 1, 2005.

            (b) Following an Event of Default, the Company shall pay to the
Holder on demand all reasonable expenses and expenditures (including, but not
limited to, reasonable fees and expenses of legal counsel) incurred or paid by
the Holder in exercising or protecting its interests, rights and remedies under
this Note, plus interest thereon at the lesser of (i) twenty-one percent (21%)
per annum or (ii) the highest rate of interest then allowed by law from the date
of such demand by the Holder until paid.

            (c) All agreements between Company and Holder, whether now existing
or hereafter arising and whether written or oral, are expressly limited so that
in no contingency or event whatsoever, whether by conversion, acceleration of
the maturity of this Note or otherwise, shall the amount paid, or agreed to be
paid, to the holder hereof for the use, forbearance or detention of the money to
be loaned hereunder or otherwise, exceed the maximum amount permissible under
applicable law. If from any circumstances whatsoever fulfillment of any
provision of this Note or of any other document evidencing, securing or
pertaining to the indebtedness evidenced hereby, at the time performance of such
provision shall be due, shall involve transcending the limit of validity
prescribed by law, then ipso facto, the obligation to be fulfilled shall be
reduced to the limit of such validity, and if from any such circumstances the
holder of this Note shall ever receive anything of value as interest or deemed
interest by applicable law under this Note or any other document evidencing,
securing or pertaining to the indebtedness evidenced hereby or otherwise an
amount that would exceed the highest lawful rate, such amount that would be
excessive interest shall be applied to the reduction of the principal amount
owing under this Note or on account of any other indebtedness of Company to
Holder relating to this Note, and not to the payment of interest, or if such
excessive interest exceeds the unpaid balance of principal of this Note and such
other indebtedness, such excess shall be refunded to Borrower. In determining
whether or not the interest paid or payable with respect to any indebtedness of
Company to Holder, under any specific contingency, exceeds the highest lawful
rate. Company and Holder shall, to the maximum extent permitted by applicable
law, (i) characterize any nonprincipal payment as an expense, fee or premium
rather than as interest, (ii) amortize, prorate, allocate and spread the total
amount of interest throughout the full term of such indebtedness so that the
actual rate of interest on account of such indebtedness is uniform throughout
the term thereof and/or (iii) allocate interest between portions of such
indebtedness, to the end that no such portion shall bear interest at a rate
greater than that

                                       2


permitted by law. The terms and provisions of this paragraph shall control and
supersede every other conflicting provision of all agreements between Company
and Holder.

      5.    Payment. All payments shall be made in lawful money of the United
States of America without setoff, counterclaim, or other defense (other than as
provided in Section 6 hereof) at such place as the Holder hereof may from time
to time designate in writing to the Company; provided that all payments
hereunder shall be made notwithstanding the Company's audit right under Section
14 of the Distribution Agreement (as defined below). Payment shall be credited
first to attorney fees then due and payable, second to accrued interest then due
and payable, and the remainder applied to principal, except in the case of a new
investment under Section 7 hereof, which shall first be credited to principal
and only when the principal is completely paid shall any such amount be applied
to accrued interest. Prepayment of this Note may be made at any time, and from
time to time, without penalty or premium.

      6.    Royalties. 100% of the Royalties (as defined in the Distribution
Agreement dated as of May 8, 2001 between the Company and the Holder (as
amended, restated, supplemented or otherwise modified from time to time, the
"Distribution Agreement")) due to the Company under the Distribution Agreement
shall be retained by the Holder and applied first against accrued interest then
due and then to outstanding principal hereunder.

      7.    New Money. If the Company shall either receive an investment by a
third party investor or borrow money from a bank or other third party lender,
50% of such investment or loan must be paid by the Company to the Holder to
reduce the outstanding principal and interest hereunder.

      8.    Transfer; Successors and Assigns. The terms and conditions of this
Note shall inure to the benefit of and be binding upon the respective successors
and assigns of the parties. The obligations of the Company or the Holder under
this Note may not be assigned without the prior written consent of the other
party hereto which may be given or denied in their sole and absolute discretion.

      9.    Governing Law. This Note and all acts and transactions pursuant
hereto and the rights and obligations of the parties hereto shall be governed,
construed and interpreted in accordance with the laws of the State of New York,
without giving effect to principles of conflicts of law thereof.

      10.   Notices. Any notice required or permitted by this Note shall be in
writing and shall be deemed effectively given: (i) upon personal delivery to the
party to be notified; (ii) when sent by confirmed facsimile or electronic
transmission if received during normal business hours of the recipient on a
business day, or if not, then on the next business day; or (iii) one (1)
business day after deposit with a nationally recognized overnight courier,
specifying next business day delivery, with written verification of receipt. All
communications shall be sent to the Company and the Holder at the address as set
forth on the signature page hereof or at such other address as the Company or
the Holder may designate by ten (10) days advance written notice to the other
parties hereto.

                                       3


      11.   Lost Documents. Upon receipt by the Company of evidence reasonably
satisfactory to it of the loss, theft, destruction or mutilation of this Note or
any Note exchanged for it, and an indemnity agreement reasonably satisfactory to
the Company (in case of loss, theft or destruction) or surrender and
cancellation of such Note (in the case of mutilation), the Company, at its own
expense, will make and deliver in lieu of such Note a new Note of like tenor and
unpaid principal amount and dated as of the date to which interest has been paid
on the unpaid principal amount of the Note in lieu of which such new Note is
made and delivered.

      12.   Amendments and Waivers.  Any term of this Note may be amended or
waived only with the written consent of the Company and the Holder. Any waiver
by the Company or the Holder of a breach of any provision of this Note shall not
operate as or be construed to be a waiver of any other breach of such provision
or of any breach of any other provision of this Note. The failure of the Company
or the Holder to insist upon strict adherence to any term of this Note on one or
more occasions shall not be considered a waiver or deprive that party of the
right thereafter to insist upon strict adherence to that term or any other term
of this Note.

      13.   Waiver. The Company waives presentment and demand for payment,
notice of dishonor, protest and notice of protest, notice of nonpayment and
notice of acceleration of intent of acceleration of this Note. The right to
plead any and all statutes of limitations as a defense to any demands hereunder
or under the Security Agreement is hereby waived to the fullest extent permitted
by law, regardless of and without any notice, diligence, act or omission as or
with respect to the collection of any amount called for hereunder.

      14.   Invalidity. If any provision of this Note is invalid, illegal or
unenforceable, the balance of this Note shall remain in effect, and if any
provision is inapplicable to any person or circumstance, it shall nevertheless
remain applicable to all other persons and circumstances. In such an event, the
parties will in good faith attempt to effect the business agreement represented
by such invalidated term to the fullest extent permitted by law.

      15.   Attorneys' Fees. If an Event of Default occurs, the Holder shall be
entitled to receive and the Company (or its assignee) agrees to pay all costs of
collection incurred by the Holder, including, without limitation, reasonable
attorneys' fees for consultation, suit and/or settlement.

      16.   Remedies. The remedies of the Holder hereunder are governed by the
terms hereof and the Security Agreement.

      17.   Second Amended and Restated Secured Promissory Note. This Second
Amended and Restated Secured Promissory Note shall be in replacement of and in
substitution for that certain Amended and Restated Secured Promissory Note dated
November 30, 2004 in the original principal amount of $2,861,196.78, made by the
Company and payable to the order of JDA Software Group, Inc., as such note was
replaced and substituted by that certain Secured Promissory Note dated May 8,
2001 in the original principal amount of $3,500,000.00, made by the Company and
payable to the order of JDA Software Group, Inc. (the "Original Note"). The
indebtedness outstanding as of the date hereof evidenced by the Original Note is
continuing indebtedness, and nothing herein shall be deemed to constitute a
payment, settlement or novation of the Original Note, or to release or otherwise
adversely affect any lien, mortgage or security

                                       4


interest securing such indebtedness or any rights of the Holder against any
guarantor, surety or other party primarily or secondarily liable for such
indebtedness.

                  [Remainder of Page Intentionally Left Blank]

                                        5


            IN WITNESS WHEREOF, the parties hereto have causes this Second
Amended and Restated Secured Promissory Note to be executed by their respective
officers thereunto duly authorized and delivered at Chicago, Illinois as of the
date first written above.

                                     COMPANY:

                                     SILVON SOFTWARE, INC.

                                     By:________________________________________
                                        Name: __________________________________
                                        Title:__________________________________

                                     Address: 900 Oakmont Lane
                                              Westmont, Illinois 60559

AGREED TO AND ACCEPTED:

HOLDER:

JDA SOFTWARE GROUP. INC.

By:________________________________________
   Name:___________________________________
   Title:__________________________________

Address: 14400 87th Street Scottsdale
         Scottsdale, Arizona 85260

     [Signature Page to Second Amended and Restated Secured Promissory Note]



                                    EXHIBIT B

                            Subordination Agreement



                             SUBORDINATION AGREEMENT

      WHEREAS, SILVON SOFTWARE, INC., an Illinois corporation (the "Borrower"),
is indebted to MICHAEL J. HENNEL, PATRICIA HENNEL, BRIDGET HENNEL and FRANK
BUNKER (collectively, the "Subordinated Lenders"), as evidenced by (a) that
certain Note dated as of March 30, 2005 by the Borrower in favor of Michael J.
Hennel in the original principal amount of $550,000, (b) that certain Note dated
as of March 30, 2005 by the Borrower in favor of Patricia Hennel in the original
principal amount of $115,000, (c) that certain Note dated as of March 30, 2005
by the Borrower in favor of Bridget Hennel in the original principal amount of
$75,000, (d) that certain Note dated as of March 30, 2005 by the Borrower in
favor of Frank Bunker in the original principal amount of $260,000 and (e) all
other agreements, documents and instruments evidencing the Junior Debt (as
defined below) (collectively, the "Junior Debt Instruments");

      WHEREAS, the Subordinated Lenders are desirous of having JDA SOFTWARE
GROUP, INC., a Delaware corporation (the "Senior Lender") continue to extend
credit to the Borrower (as it may, in its sole discretion, determine), and the
Senior Lender has refused to consider the continued extension of such credit
until the Junior Debt is subordinated to the "Senior Debt" (as defined below) in
the manner hereinafter set forth; and

      WHEREAS, the continued extension of credit, as aforesaid, by the Senior
Lender is necessary or desirable to the conduct and operation of the business of
the Borrower, and will inure to the personal and financial benefit of the
Subordinated Lenders.

      NOW, THEREFORE, in consideration of the continued extension of credit by
the Senior Lender to the Borrower, as Senior Lender may, in its sole discretion,
determine, and for other good and valuable consideration to the Subordinated
Lenders, the receipt and sufficiency of which is hereby acknowledged, the
Subordinated Lenders hereby:

            (A) subordinate the indebtedness evidenced by the Junior Debt
      Instruments, as well as any and all other indebtedness now or at any time
      or times hereafter owing by the Borrower, or any successor or assign of
      the Borrower, including without limitation, a receiver, trustee or
      debtor-in-possession (the term "Borrower" as used hereinafter shall
      include any such successor or assign) to any of the Subordinated Lenders,
      whether such indebtedness is absolute or contingent, direct or indirect
      and howsoever evidenced, including without limitation all interest
      thereon, (collectively, the "Junior Debt") to any and all indebtedness now
      or at any time or times hereafter owing by the Borrower to the Lender
      (whether absolute or contingent, direct or indirect and howsoever
      evidenced, including without limitation all interest thereon and fees,
      whether or not such interest or fees are allowed in a bankruptcy or
      similar proceeding) and all other demands, claims, liabilities or causes
      of action for which the Borrower may now or at any time or times hereafter
      in any way be liable to the Lender, whether under any agreement,
      instrument or document executed and delivered or made by the Borrower to
      the Lender or otherwise (collectively, the "Senior Debt");



            (B) agrees not to ask for or receive from, the Borrower or any other
      person or entity any security for the Junior Debt;

            (C) agrees to instruct the Borrower not to pay, and agrees not to
      accept payment of, or assert, demand, sue for or seek to enforce against
      the Borrower or any other person or entity, by setoff or otherwise, all or
      any portion of the Junior Debt unless and until Lender has, in writing,
      notified the Subordinated Lenders that the Senior Debt has been paid in
      full in cash and all obligations arising in connection therewith have been
      discharged; provided, that the Borrower may make regularly scheduled
      payments of interest with respect to the Junior Debt so long as (i) no
      default exists or would occur as a result of such payment (x) under the
      Secured Loan Agreement dated as of May 8, 2001 between the Borrower and
      the Senior Lender, as amended, or (y) the Amended and Restated Security
      Agreement dated as of November 30, 2004 by the Borrower in favor of the
      Senior Lenders, (ii) all such regularly scheduled payments of interest are
      based upon an interest rate not to exceed four percent (4%) per annum;
      provided, that during any twelve month period, the aggregate amount of
      such interest payments shall not exceed $40,000, and (iii) all such
      regularly scheduled interest payments are calculated exclusive of interest
      and any other amounts capitalized, if any, into the outstanding principal
      balance of the Junior Debt;

            (D) subrogates the Senior Lender to the Junior Debt; irrevocably
      authorizes the Senior Lender (i) to collect, receive, enforce and accept
      any and all sums or distributions of any kind that may become due, payable
      or distributable on or in respect of the Junior Debt (other than with
      respect to payments to the extent, and only to the extent, such payment is
      permitted pursuant to clause (C) above), whether paid directly by the
      Borrower or paid or distributed in any liquidation, bankruptcy,
      arrangement, receivership, assignment, reorganization or dissolution
      proceedings or otherwise, and (ii) in the Senior Lender's sole discretion,
      to make and present claims therefor in, and take such other actions as the
      Senior Lender deems necessary or advisable in connection with, any such
      proceedings, either in the Senior Lender's name or in the name of the
      Subordinated Lenders; and agrees that upon the written request of the
      Senior Lender, it will promptly assign, endorse and deliver to and deposit
      with the Senior Lender all agreements, instruments and documents
      evidencing the Junior Debt, including without limitation the Junior Debt
      Instruments;

            (E) agrees to receive and hold in trust for and promptly turn over
      to the Senior Lender, in the form received (except for the endorsement or
      assignment by the Subordinated Lenders where necessary), any sums at any
      time paid to, or received by, the Subordinated Lenders in violation of the
      terms of this Subordination Agreement and to reimburse the Senior Lender
      for all costs, including reasonable attorney's fees, incurred by the
      Senior Lender in the course of collecting said sums should the
      Subordinated Lenders fail to voluntarily turn the same over to the Senior
      Lender as herein required. If the Subordinated Lenders fail

                                       2


      to endorse or assign to the Senior Lender any items of payment received by
      any Subordinated Lender on account of the Junior Debt, each Subordinated
      Lender hereby irrevocably makes, constitutes and appoints the Senior
      Lender (and all persons designated by the Senior Lender for that purpose)
      as such Subordinated Lender's true and lawful attorney and agent-in-fact,
      to make such endorsement or assignment in such Subordinated Lender's name;
      and

            (F) until payment in full in cash of the Senior Debt, agrees that it
      shall not modify or amend any agreement, instrument or document evidencing
      the Junior Debt, including without limitation the Junior Debt Instruments,
      without the prior written consent of the Senior Lender.

      The Subordinated Lenders represent and warrant to the Senior Lender that
no Subordinated Lender has assigned or otherwise transferred the Junior Debt, or
any interest therein to any person or entity, that no Subordinated Lender will
make any such assignment or other transfer thereof, and that all agreements,
instruments and documents evidencing the Junior Debt will be endorsed with
proper notice of this Subordination Agreement. The Subordinated Lenders will
promptly deliver to the Senior Lender a certified copy of the Junior Debt
Instruments, as well as certified copies of all other agreements, instruments
and documents hereafter evidencing any Junior Debt, in each case showing such
endorsement. The Subordinated Lenders represent and warrant to the Senior Lender
that the outstanding amount of Junior Debt evidenced by the Junior Debt
Instruments as of the date of this Subordination Agreement is $1,000,000.

      The Subordinated Lenders expressly waive all notice of the acceptance by
the Senior Lender of the subordination and other provisions of this
Subordination Agreement and all notices not specifically required pursuant to
the terms of this Subordination Agreement, and the Subordinated Lenders
expressly waive reliance by the Senior Lender upon the subordination and other
provisions of this Subordination Agreement as herein provided. The Subordinated
Lenders consent and agree that all Senior Debt shall be deemed to have been
made, incurred and/or continued at the request of the Subordinated Lenders and
in reliance upon this Subordination Agreement. The Subordinated Lenders agree
that the Senior Lender has made no warranties or representations with respect to
the due execution, legality, validity, completeness or enforceability of the
documents, instruments and agreements evidencing the Senior Debt, that the
Senior Lender shall be entitled to manage and supervise its financial
arrangements with the Borrower in accordance with its usual practices, without
impairing or affecting this Subordination Agreement, and that the Senior Lender
shall have no liability to the Subordinated Lenders, and the Subordinated
Lenders hereby waive any claim which they may now or hereafter have against the
Senior Lender arising out of (i) any and all actions which the Senior Lender
takes or omits to take (including without limitation actions with respect to the
occurrence of an event of default under any documents, instruments or agreements
evidencing the Senior Debt, and actions with respect to the collection of any
claim for all or any part of the Senior Debt from any account debtor, guarantor
or other person or entity) with respect to the documents, instruments and
agreements evidencing the Senior Debt or to the collection of the Senior Debt
(ii) the Senior Lender's election in any proceeding instituted under Chapter 11
of Title 11 of United States Code (11 U.S.C. Section 101 et. seq.) (the
"Bankruptcy Code"), of the application of

                                        3


Section 1111(b)(2) of the Bankruptcy Code, and/or (iii) any borrowing or grant
of a security interest under Section 364 of the Bankruptcy Code by the Borrower,
as debtor-in-possession.

      The Subordinated Lenders agrees that the Senior Lender, at any time and
from time to time hereafter, may enter into such agreements with the Borrower as
the Senior Lender may deem proper extending the time of payment of or renewing
or otherwise altering the terms of all or any of the Senior Debt, and may
release any balance of funds of the Borrower with the Senior Lender, without
notice to the Subordinated Lenders and without in any way impairing or affecting
this Subordination Agreement.

      This Subordination Agreement shall be irrevocable and shall constitute a
continuing agreement of subordination and shall be binding on the Subordinated
Lenders and its heirs, personal representatives, successors and assigns, and
shall inure to the benefit of the Senior Lender, its successors and assigns
until the Senior Lender has, in writing, notified the Subordinated Lenders that
all of the Senior Debt has been paid in full in cash and all obligations arising
in connection therewith have been discharged. The Senior Lender may continue,
without notice to the Subordinated Lenders, to lend monies, extend credit and
make other accommodations to or for the account of the Borrower on the faith
hereof. The Subordinated Lenders hereby agree that all payments received by the
Senior Lender may be applied, reversed, and reapplied, in whole or in part, to
any of the Senior Debt, without impairing or affecting this Subordination
Agreement.

      The Subordinated Lenders hereby assume responsibility for keeping
themselves informed of the financial condition of the Borrower, any and all
endorsers and any and all guarantors of the Senior Debt and the Junior Debt and
of all other circumstances bearing upon the risk of nonpayment of the Senior
Debt and the Junior Debt that diligent inquiry would reveal, and the
Subordinated Lenders hereby agrees that the Senior Lender shall have no duty to
advise the Subordinated Lenders of information known to the Senior Lender
regarding such condition or any such circumstances or to undertake any
investigation not a part of its regular business routine. If the Senior Lender,
in its sole discretion, undertakes, at any time or from time to time, to provide
any information of the type described herein to the Subordinated Lenders, the
Senior Lender shall be under no obligation to subsequently update any such
information or to provide any such information to the Subordinated Lenders on
any subsequent occasion.

      No waiver shall be deemed to be made by the Senior Lender of any of its
rights hereunder unless the same shall be in writing signed on behalf of the
Senior Lender and each such waiver, if any, shall be a waiver only with respect
to the specific matter or matters to which the waiver relates and shall in no
way impair the rights of the Senior Lender or the obligations of the
Subordinated Lenders to the Senior Lender in any other respect at any other
time.

      THIS AGREEMENT SHALL BE GOVERNED AND CONTROLLED BY THE INTERNAL LAWS (AS
DISTINGUISHED FROM THE CONFLICTS OF LAW PROVISIONS) OF THE STATE OF NEW YORK.

      To induce the Senior Lender to accept this Subordination Agreement, each
Subordinated Lender irrevocably agrees that, subject to the Senior Lender's sole
and absolute election, ALL

                                       4


ACTIONS OR PROCEEDINGS IN ANY WAY, MANNER OR RESPECT, ARISING OUT OF OR FROM OR
RELATED TO THIS AGREEMENT SHALL BE LITIGATED IN COURTS HAVING SITUS WITHIN THE
CITY OF NEW YORK, STATE OF NEW YORK. THE SUBORDINATED LENDERS HEREBY CONSENT AND
SUBMIT TO THE JURISDICTION OF ANY LOCAL, STATE OR FEDERAL COURTS LOCATED WITHIN
SAID CITY AND STATE. Each Subordinated Lender hereby irrevocably appoints and
designates Alexander Lourie, whose address is c/o Barack Ferrazzano Kirschbaum
Perlman & Nagelberg LLP, 333 W. Wacker Drive, Suite 2700, Chicago, Illinois
60606 (or any other person having and maintaining a place of business in
Illinois whom the Subordinated Lenders may from time to time hereafter designate
upon ten (10) days written notice to the Senior Lender and who the Senior Lender
has agreed in its sole discretion in writing is satisfactory and who has
executed an agreement in form and substance satisfactory to the Senior Lender
agreeing to act as such attorney and agent), as such Subordinated Lenders' true
and lawful attorney and duly authorized agent for acceptance of service of legal
process. Each Subordinated Lender agrees that service of such process upon such
person shall constitute personal service of such process upon such Subordinated
Lender. EACH OF THE SUBORDINATED LENDERS HEREBY WAIVES ANY RIGHT IT MAY HAVE TO
TRANSFER OR CHANGE THE VENUE OF ANY LITIGATION BROUGHT AGAINST SUCH SUBORDINATED
LENDER BY THE SENIOR LENDER IN ACCORDANCE WITH THIS PARAGRAPH.

      EACH OF THE SUBORDINATED LENDERS HEREBY WAIVES ALL RIGHTS TO TRIAL BY JURY
IN ANY ACTION OR PROCEEDING WHICH PERTAINS DIRECTLY OR INDIRECTLY TO THIS
AGREEMENT.

                                        5


      IN WITNESS WHEREOF, this Subordination Agreement has been executed as of
the first day written above.

                                     SUBORDINATED LENDERS:

                                     MICHAEL J. HENNEL

                                     __________________________

                                     Address:
                                     290 Cottage Hill Avenue
                                     Elmhurst, IL 60126

                                     PATRICIA HENNEL

                                     __________________________

                                     Address:
                                     450 Oriole Avenue
                                     Elmhurst, Illinois 60126

                                     BRIDGET HENNEL

                                     __________________________

                                     Address:
                                     7041 170th Street
                                     Tinley Park, Illinois 60477

                                     FRANK BUNKER

                                     __________________________

                                     Address:
                                     2588 Oakton Lane
                                     Lisle, Illinois 60532

EX-31.1

EXHIBIT 31.1

Certifications

I, Hamish N. J. Brewer, President and Chief Executive Officer of JDA Software Group, Inc. certify that:

1.	I have reviewed this quarterly report on Form 10-Q of JDA Software Group, Inc.;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a.	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b.	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c.	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d.	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.   The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal controls over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):

a.	All significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b.	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls over financial reporting.

Date: May 10, 2005	By:	/s/ Hamish N. J. Brewer
		Hamish N. J. Brewer
		President and Chief Executive Officer

EX-31.2

EXHIBIT 31.2

Certifications

I, Kristen L. Magnuson, Executive Vice President and Chief Financial Officer of JDA Software Group, Inc. certify that:

1.	I have reviewed this quarterly report on Form 10-Q of JDA Software Group, Inc.;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a.	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b.	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c.	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d.	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.   The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal controls over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):

a.	All significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b.	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls over financial reporting.

Date: May 10, 2005	By:	/s/ Kristen L. Magnuson
		Kristen L. Magnuson
		Executive Vice President and Chief Financial Officer (Principal Financial and Accounting Officer)

EX-32.1

EXHIBIT 32.1

Certification of Chief Executive Officer And Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

We, Hamish N. J. Brewer, President and Chief Executive Officer and Kristen L. Magnuson, Executive Vice President and Chief Financial Officer of JDA Software Group, Inc. (the “Registrant”), do hereby certify in accordance with 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, based upon each of our respective knowledge:

(1) the Quarterly Report on Form 10-Q of the Registrant, to which this certification is attached as an exhibit (the “Report”), fully complies with the requirements of section 13(a) of the Securities Exchange Act of 1934; and

(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant.

Dated: May 10, 2005	/s/ Hamish N. J. Brewer
	Hamish N. J. Brewer
	President and Chief Executive Officer

/s/ Kristen L. Magnuson  

Kristen L. Magnuson 

Executive Vice President and Chief Financial Officer 

This certificate accompanies this annual report on Form 10-K pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and will not be deemed “filed” by the Registrant for purposes of Section 18 of the Securities Exchange Act of 1934, as amended. This certificate will not be deemed to be incorporated by reference into any filing, except to the extent that the Registrant specifically incorporates it by reference.