EX-99.(C)(2) 3 dex99c2.htm PRESENTATION OF MORGAN STANLEY AND CO. INCORPORATED Presentation of Morgan Stanley and Co. Incorporated
Board Review Materials
November 10, 2005
Project Sword
Exhibit (c)(2)

Table of Contents
Project Sword
Section 1
Executive Summary
Section 2
Sword Financial Overview
Section 3
Sword Valuation
Appendix A
Supplemental Materials

Project Sword
Section 1
Executive Summary

Executive Summary
Project Sword
1
Notes
1.
Reflects the $24.00 transaction price paid for shares not rolling in the transaction.
2.
Based on net cash, cash equivalents, and liquid investments of $181 million.
3.
Based on Wall Street equity research dated 8/19/05.
4.
Unaffected closing price of $20.03 as of 10/28/05.
Summary of Proposed Transaction Terms
Summary of Transaction Terms
Merger Consideration
Public shareholders to receive $24.00 per share of Sword common stock (founder will roll
approximately 7.5 million shares
into NewCo
at a valuation of $20.50, resulting in a blended price
of $23.50
paid by SLP)
100% cash consideration
Transaction Statistics
Equity Value: $1.260 Billion
(1)
Aggregate Value: $1.080 Billion
(2)
Premium
Transaction Multiples
(1)(3)
Stock Price
Unaffected
AV/Rev.
AV/EBITDA
P/E
1-Day
30-Day
60-Day
90-Day
1-Day
(4)
CY05
CY06
CY05
CY06
CY05
CY06
1%
17%
21%
21%
20%
4.4x
4.2x
12.4x
11.5x
18.3x
16.9x
Structure
Transaction taxable to Sword
shareholders (100% cash consideration)
Merger
of
Merger
Co.
with
and
into
Sword
Deal Protection
Customary no-shop provision post-signing
Sword
board
can
change
recommendation
/
terminate
merger
agreement
in
the
event
of
an
unsolicited superior proposal
Sword
to
pay
SLP
a
break-up
fee
in
the
event
of
a
superior
proposal
([$35MM]
/
[2.8%]
of
-
transaction value
and [3.2%] of aggregate value
(1)
)
Founder
contribution
and
voting
agreement
terminates
if
the
merger
agreement
is
terminated
(1)

Executive Summary
(continued)
Project Sword
2
Summary of Proposed Transaction Terms
Summary of Transaction Terms
Treatment of Sword
Employee Options
All
options
accelerated.
In-the-money
options
cashed
out
at
closing.
Out-of-the-money
options
cancelled.
CEO and CFO will roll a portion of options and restricted stock (to be determined)
Designation of other employee options to be rolled will be determined and agreed upon prior to
mailing of proxy
Representations & Warranties
Customary
for
a
transaction
of
this
nature
Conditions to Closing
Sword
shareholder
approval
Regulatory
and
governmental
approvals
and
absence
of
government
litigation
No breach of reps and warranties (MAE standard) and covenants (materiality standard)
No Sword
material adverse effect (with customary carve-outs)
-
Receipt of debt financing (see below)
Financing Contingency
Commitment
letters
executed
at
signing
for
$450
million
of
senior
credit
facilities
($375
million
drawn
at
closing)
and
$225
million
senior
subordinated
notes
offering
or
bridge
facility
(bridging
to
a
senior
subordinated
notes
offering)
Limited
financing
outs
in
commitment
letters
(principally:
negotiation
of
merger
agreement,
accuracy
of
information
provided,
receipt
of
financial
statements
and
offering
memorandum,
equity
funded,
narrow
Sword
MAE
definition,
6.6x
total
debt
/
LTM
EBITDA)

•
Throughout Sword’s Special
Committee process, 16
parties have been contacted
regarding a potential
transaction
–
12 financial buyers
–
4 strategic parties
•
Silver Lake Partners is the
only party that has submitted
a proposal
Executive Summary
Project Sword
3
Summary of Parties Contacted
Contacted
Past
Preliminary
Discussions (1)
Submitted
Proposal /
Negotiated
Definitive
Agreement
Financial Buyers:
Financial Buyer 1
Financial Buyer 2
Silver Lake
Financial Buyer 3
Financial Buyer 4
Silver Lake
Notes
1.
Parties contacted by the Company or on the Company’ s behalf prior to the Special Committee Process.
2.
Parties who originally contacted Sword financial advisors on an unsolicited basis.
3.
Reflects agreements or meetings prior to Special Committee Process.
Met with
Management
Financial Buyer 1(3)
Financial Buyer 8
Financial Buyer 2 (3)
Silver Lake
Financial Buyer 11
Financial Buyer 4 (3)
Company 1
Strategic Buyers:
Company 1
Company 2
Company 3
Company 4
Company 5
Company 6
Special Committee Process
Financial Buyers:
Financial Buyer 5
Financial Buyer 6
Financial Buyer 7 (2)
Financial Buyer 1
Financial Buyer 8
Financial Buyer 2
Financial Buyer 9
Financial Buyer 10 (2)
Financial Buyer 3
Silver Lake
Financial Buyer 11
Financial Buyer 4
Strategic Buyers:
Company 1
Company 2
Company 5
Company 6
Signed
Confidentiality
Agreement
Financial Buyer 5
Financial Buyer 1 (3)
Financial Buyer 8
Silver Lake (3)
Financial Buyer 11
Financial Buyer 4 (3)
Company 1

Executive Summary
Overview of Proposals
Project Sword
•
Silver Lake Partners submitted a series of proposals which were
evaluated by the Special Committee
–
Initial $22.00 indication (August 25) was rejected, but Silver Lake was
allowed to conduct additional diligence to improve their proposal
–
$23.00 proposal (October 5) was rejected
–
$23.25 -
$23.50 proposal (October 7) was rejected
–
Current structure was subsequently proposed on October 13 ($24.00
to public shareholders; Doug Troxel
agrees to roll his shares into
NewCo
at lower stipulated value)
•
No other proposals were received
4

Executive Summary
Transaction / Valuation Considerations
Project Sword
5
•
Uncertain quarter-to-quarter outlook
–
Missed two of last three quarters
–
Notable
recent
"misses"
in
enterprise
software
(Symantec,
Mercury)
–
Q3 results ahead of street consensus
•
Other competitors have substantially more scale (IBM, CA)
•
Recovery in  Dimensions product line
•
Inability to expand valuation multiples
–
"Mainframe" tag
–
Constrained by sector (only CA is meaningfully > 20x forward PE)
•
Limited ability to transform business model
–
Change
of
revenue
model
difficult
with
quarterly
public
reporting
requirements
–
Limited opportunity for acquisitions given public requirement for earnings / margin
accretion

Project Sword
Section 2
Sword Financial Overview

Sword Financial Overview
Sword Summary Financials (Street Model)
FY2003A –
FY2007E (FYE January 31)
Project Sword
6
$220
$206
$189
$90
$83
85%
83%
84%
85%
86%
0
50
100
150
200
250
FY03A
FY04A
FY05A
FY06E
FY07E
0%
25%
50%
75%
100%
125%
Gross Profit
Margin
Gross Profit (1)(2)
Margin
$MM
%
$96
$106
$225
$248
$260
10%
113%
10%
5%
0
50
100
150
200
250
300
FY03A
FY04A
FY05A
FY06E
FY07E
0%
25%
50%
75%
100%
125%
150%
Revenue
Growth
Revenue (1)
Growth
$MM
%
Note:
1.
Sword based on Wall Street equity research dated 8/19/05.
2.
Excludes amortization and one-time items.
3.
Includes contribution from Merant
acquisition, which closed April 2004.
$0.68
$0.74
$1.25
$1.31
$1.42
9%
69%
5%
8%
$0.25
$0.75
$1.25
$1.75
FY03A
FY04A
FY05A
FY06E
FY07E
0%
25%
50%
75%
EPS
Growth
EPS (1)(2)
Growth
$MM
%
$91
$84
$75
$39
$37
35%
34%
33%
37%
39%
0
20
40
60
80
100
FY03A
FY04A
FY05A
FY06E
FY07E
0%
10%
20%
30%
40%
50%
Operating Profit
Margin
Operating Profit (1)(2)
Margin
$MM
%
•
Growth has been supported
by the acquisition of Merant
in 2004
–
Margins have stayed
consistently strong
$215
(3)
$229
(3)
$252
(3)
Pro Forma Impact of
Merant
acquisition

$65
$65
$34
$59
$62
$69
$63
$59
(6%)
5%
84%
1%
0
10
20
30
40
50
60
70
80
Q105
Q205
Q305
Q405
Q106
Q206
Q306
Q406
(20%)
0%
20%
40%
60%
80%
100%
Revenue
YOY Growth
Revenue (1)
YOY Growth
$MM
%
Sword Financial Overview
Sword Summary Financials (cont’d)
Project Sword
7
$54
$53
$49
$53
$59
$52
$48
$29
83%
82%
83%
84%
84%
84%
82%
86%
20
30
40
50
60
Q105
Q205
Q305
Q405
Q106
Q206
Q306
Q406
80%
82%
84%
86%
88%
90%
Gross Profit
Margin
Gross Profit (1)(2)
Margin
$MM
%
$13.1
$16.4
$20.0
$25.1
$21.7
$19.6
$21.3
$22.7
38%
28%
32%
36%
35%
33%
33%
35%
0.0
5.0
10.0
15.0
20.0
25.0
30.0
Q105
Q205
Q305
Q405
Q106
Q206
Q306
Q406
20%
30%
40%
50%
Operating Profit
Margin
Operating Profit (1)(2)
Margin
$MM
%
$0.35
$0.35
$0.25
$0.28
$0.35
$0.37
$0.32
$0.32
(5%)
(1%)
28%
14%
$0.20
$0.25
$0.30
$0.35
$0.40
Q105
Q205
Q305
Q405
Q106
Q206
Q306
Q406
(10%)
(5%)
0%
5%
10%
15%
20%
25%
30%
EPS
YOY Growth
EPS (1)(2)
YOY Growth
$MM
%
FY2005A –
FY2006E (FYE January 31)
Note:
1.
Sword projections based on Wall Street equity research dated 8/19/05.
2.
Excludes amortization and one-time items.

Sword Financial Overview
Summary Historical and Projected Financial Performance
Management vs. Street Case
Project Sword
8
Calendar Year(1)
$MM
Historical
Street Case (3)
Management Case (4)
CY2003A
CY2004A (2)
LTM
CY2005E
CY2006E
CY2007E
CY2005E
CY2006E
CY2007E
Summary Income Statement:
Revenue
$105.6
$224.5
$256.1
$247.7
$260.1
$275.7
$253.1
$273.7
$296.2
% Growth
10.2%
112.7%
10.3%
5.0%
6.0%
12.7%
8.1%
8.2%
EBITDA
40.8
77.3
90.0
87.1
94.2
102.3
91.2
107.1
120.4
% Margin
38.7%
34.4%
35.2%
35.1%
36.2%
37.1%
36.0%
39.1%
40.6%
Operating Income (5)
39.3
74.5
87.1
84.2
91.2
99.3
88.0
104.1
117.5
% Margin
37.2%
33.2%
34.0%
34.0%
35.1%
36.0%
34.8%
38.1%
39.7%
Cash Net Income (5)
29.9
57.1
67.6
72.4
78.6
70.6
82.4
92.8
% Margin
28.3%
25.4%
27.3%
27.8%
28.5%
27.9%
30.1%
31.3%
Cash EPS (5)
$0.74
$1.25
$1.31
$1.42
$1.48
$1.37
$1.62
$1.75
% Growth
(47.9%)
69.7%
4.3%
8.5%
4.5%
9.0%
18.3%
8.3%
Free Cash Flow:
NOPAT
$27.8
$56.6
$66.0
$70.7
$76.9
$69.1
$80.7
$91.1
Plus: Depreciation
1.6
2.8
2.9
3.0
3.0
3.2
3.0
2.9
Less: Capital Expenditures
1.2
2.0
3.0
3.2
3.2
3.0
3.2
3.2
Less: Increase in NWC/Plus: Decrease in NWC
(0.6)
40.9
0.0
4.0
4.2
0.0
4.0
4.2
Unlevered Free Cash Flow
$27.6
$98.3
$65.9
$74.5
$81.0
$69.3
$84.5
$95.1
Notes:
1.
Fiscal year ending January approximates previous calendar year.
2.
Partial year contribution from Merant acquisition, which closed 4/29/04.
3.
Based on Wall Street equity research for CY2005E- CY2006E and extrapolations to Wall Street equity research for CY2007E.
4.
Based on Management projections. Forecasted interest income, tax rate and shares outstanding based on Wall Street equity research. Adds back public company expenses of $6.4MM.
5.
Excludes amortization and nonrecurring items.

Sword Financial Overview
Q3 Financial Performance
Fiscal Quarter Ended Oct 31; Street vs. Actual
Project Sword
9
$MM
Actual
Non-Disclosed (1)
Street (2)
Revenues
License Revenue
$22.5
$18.1
Maintenance / Service Revenue
42.4
42.4
Total Revenue
$65.0
$60.5
%Y/Y Growth
4.6%
(2.6%)
Gross Profit
53.5
50.0
% Margin
82.3%
82.6%
Operating Profit
21.9
20.2
% Operating Margin
33.7%
33.4%
Earnings Per Share
$0.35
$0.32
Notes:
1.
Preliminary results from management. Scheduled to be announced 11/17.
2.
Serena based on Wall Street equity research dated 8/19/05.

Sword Financial Overview
Comparison of Operating Margins
Last four quarters
Project Sword
•
Sword’s operating margins
are substantially higher than
those of its closest
comparables
•
Both Management and Street
Cases assume further margin
improvement
–
Management Case: 40% by
CY2007
–
Street Case: 36% by
CY2007
10
-5%
0%
5%
10%
15%
20%
25%
30%
35%
40%
Q1
Q2
Q3
Q4
Compuware
CA
Quest Software
Borland
BMC
Mercury
Sword
LTM Operating Margins
%
Source
Wall Street equity research.
Quest 
CA
Mercury
Compuware
Borland
Sword
BMC

Project Sword
Section 3
Sword Valuation

Sword Valuation
Valuation Summary
Project Sword
11
Notes:.
1.
Closing price as of 10/28/05.
2.
Share price as of 11/10/05.
3.
Serena based on Wall Street equity research dated 8/19/05.
4.
Applied to 30-day average.
$9.86
$8.51
$20.51
$19.87
$16.35
$14.19
$18.63
$21.98
$27.20
$23.03
$22.62
$16.97
$17.82
$18.95
$21.06
$19.77
$17.82
$24.02
$25.54
$35.48
$23.95
$28.26
$28.04
$28.79
$26.78
$23.31
$23.93
$24.65
$22.00
$17.84
$17.84
$18.00
$19.12
$32.71
$33.11
$29.00
$23.76
$23.65
$23.65
$23.65
$5.00
$10.00
$15.00
$20.00
$25.00
$30.00
$35.00
$40.00
Share Price
$
Historical Trading Range 
(2)
Last 30 Days
Last 60 Days
Last 90 Day
LTM
Comparable Companies Analysis
CY2005E Revenue   (1.8x -
3.5x)
CY2006E Revenue  (1.5x –
3.0x)
LTM EBITDA (10.0x –
12.0x)
CY2006E P/E (14.0x –
18.0x)
CY2005E P/E/G (1.0x –
2.0x)
CY2006E P/E/G (0.8x –
2.0x)
Analyst Price Targets
Undiscounted; 12-month
Current
Price =
$23.65
(2)
Discounted Equity Value Analysis  
(3)
(CY2007E EPS, Discount Rate: 11.5%, 14.0x-18.0x)
Street Case
Management Case
Precedent Transaction Analysis
One-Day
Premium
(15%
-
40%)
One-Day Premium to Unaffected (15% -
40%)
(1)
30-Day Average Premium (10% -
40%)
(4)
AV/LTM
Revenue
(3.0x
–
5.0x)
AV/NTM
Revenue
(3.0x
–
4.0x)
LBO Returns Analysis
(5-Year IRR, 9x -11x Exit Multiple, $600MM Debt)
Street Case (15% -25% return)
Management Case (20% -
25% return)
Transaction
Price =
$ 24.00
Unaffected
Price =
$ 20.03
(1)
Median: $23.50

Sword Valuation
Transaction Matrix
Project Sword
12
Blended Price Proposal
Public Shareholder  Price
Current Price
Unaffected Price
$MM, Except Per Share Data
Implied
Implied Price Premium to
FD
FD
FD Aggregate
FD Aggregate
Serena
Unaffected
30 Days
60 Days
Equity
Agg.
Value / Revenue (2)
Value / EBITDA (2)
P/E (2)
Price
Current (1)
10/28/05
Average
Average
Value (3)
Value (3)
CY2005E
CY2006E
CY2005E
CY2006E
CY2006E Mgmt(4)
CY2005E
CY2006E
$23.65
$20.03
$20.56
$19.89
$248
$260
$87
$94
$107      
$1.31
$1.42
$20.03
(15%)
0%
(3%)
1%
$840
$879
3.5
x
3.4
x
10.1
x
9.3
x
8.2     x
15.3
x
14.1
x
21.00
(11%)
5%
2%
6%
883
923
3.7
3.5
10.6
9.8
8.6      
16.1
14.8
22.00
(7%)
10%
7%
11%
929
968
3.9
3.7
11.1
10.3
9.0      
16.8
15.5
23.00
(3%)
15%
12%
16%
1,203
1,023
4.1
3.9
11.7
10.9
9.5      
17.6
16.2
23.50
(1%)
17%
14%
18%
1,232
1,051
4.2
4.0
12.1
11.2
9.8      
18.0
16.6
23.65
0%
18%
15%
19%
1,240
1,060
4.3
4.1
12.2
11.3
9.9      
18.1
16.7
24.00
1%
20%
17%
21%
1,260
1,080
4.4
4.2
12.4
11.5
10.1      
18.3
16.9
24.50
4%
22%
19%
23%
1,289
1,108
4.5
4.3
12.7
11.8
10.3      
18.7
17.3
25.00
6%
25%
22%
26%
1,317
1,137
4.6
4.4
13.1
12.1
10.6      
19.1
17.6
25.50
8%
27%
24%
28%
1,346
1,165
4.7
4.5
13.4
12.4
10.9      
19.5
18.0
Notes:
1.
Current share prices as of 11/10/05.
2.
Serena based on Wall Street equity research dated 8/19/05.
3.
Assumes $220MM convertible debt converts to 9.91MM common shares at prices of $22.19 and higher.
4.
Adds back $6.4MM of public company expenses.

Sword Valuation
Stock Price Performance
Last Twelve Months
13
12
14
16
18
20
22
24
11/10/04
12/10/04
1/10/05
2/10/05
3/10/05
4/10/05
5/10/05
6/10/05
7/10/05
8/10/05
9/10/05
10/10/05
11/10/05
0
1,000
2,000
3,000
4,000
5,000
Volume
Price
Share Price
Volume
$
(000s)
= Beat Street Consensus
= Missed Street Consensus
8/18/05
Serena reports
2Q2006 EPS of
$0.32 and revenue of
$59.4MM vs.
consensus estimates
of $0.32 on revenue
of $59.8MM
5/19/05
Serena reports
1Q2006 EPS of
$0.32 and revenue of 
$62.8MM vs.
consensus estimates
of $0.31 on revenue
of $65.7MM
2/24/05
Serena reports
4Q2005 EPS of
$0.37 and revenue of
$69.4MM vs.
consensus estimates
of $0.33 on revenue
of $66.1MM
= Met Street Consensus
Project Sword
4/5/05
Research analyst Gary
Abbott of Merriman
Curhan
Ford was quoted
as saying Serena looked
like a “viable short-sale
opportunity.”
8/4/05
Serena preannounces
2Q2006 guiding to
$59MM -
$60MM in
revenue and EPS of
$0.31 -
$0.32
= Preannounces
Results
11/18/04
Serena reports
3Q2005 EPS of
$0.35 and revenue of
$62.2MM vs.
consensus estimates
of $0.29 on revenue
of $59.4MM
Notes
1.
Price to public shareholders.
Transaction Price:  $24.00
(1)
10/18/05
WSJ inquiry
Average Prices
11/10/2005
Current
$23.65
20 Day Average
21.05
30 Day Average
20.56
60 Day Average
19.89
90 Day Average
19.83
Last Twelve Months Average
20.49

Sword Valuation
Sword NTM P/E
Last Twelve Months
Project Sword
14
Source
FactSet Research Systems
10.0
12.0
14.0
16.0
18.0
20.0
11/10/04
2/10/05
5/10/05
8/10/05
11/10/05
NTM P/E
(1)
x
Note
1.
Rolling next twelve months P/E based on calendarized
median First Call estimates.
2.
Reflects price to public shareholders.
Transaction
NTM
P/E:
16.9x
(2)

Sword Valuation
Sword vs. Comparables NTM P/E
Since Jan. 2004
Project Sword
15
Source
FactSet Research Systems
10.0
15.0
20.0
25.0
30.0
35.0
40.0
45.0
1/10/04
3/10/04
5/10/04
7/10/04
9/10/04
11/10/04
1/10/05
3/10/05
5/10/05
7/10/05
9/10/05
11/10/05
NTM P/E
(1)
x
Note
1.
Rolling next twelve months P/E based on calendarized
median First Call estimates.
2.
Reflects price to public shareholders.
Transaction
NTM
P/E:
16.9x
(2)
SRNA
Median
Comps
Comparable companies include CA, BMC, QSFT, Mercury, CPWR, and Borland
•
P/E ratios for comparables
companies have declined
over the last 2 years
•
Serena has consistently
traded at a lower P/E than
comparable companies

Share Price (10/3 –
Present)
Volume
$
(000s)
16
17
18
19
20
21
22
23
24
10/6/05
10/13/05
10/20/05
10/27/05
11/3/05
11/10/05
0
500
1,000
1,500
2,000
2,500
3,000
Volume
Price
Sword Valuation
Unaffected Stock Price
Project Sword
•
Recent trading activity
suggests that knowledge of a
potential transaction may be
reflected in Sword’s current
stock price
•
Unaffected closing price of
$20.03 as of 10/28 is a
benchmark that excludes the
recent run-up in price
16
•
On 10/31, Sword’s stock price increased
9.3% to $21.89 per share
–
Dollar volume of approximately $49MM
versus average of $8MM for the 30 trading
days prior
–
No news released during this time period
•
Throughout the special committee
process, Sword, its advisors, and other
parties have received multiple inquiries
that suggest that the market has
knowledge of a potential transaction
–
Unsolicited inquires from potential buyers –
both strategic and financial
–
Wall Street Journal inquiry (10/18/05)
10/28

Sword Valuation
Summary of Analyst Commentary
•
Relatively narrow band of
analyst forecasts for FY2006
and FY2007 reflects stable
prospects and recurring
nature of company’s revenue
stream
•
Analysts generally positive
on near-term prospects for
company and near-term price
appreciation
17
Research Commentary
Outlook
•
Stronger IT spending trends and new
mainframe cycle expected in back half
of this year
•
Company guidance on third quarter
total revenues was in the range of
$60MM to $61MM and non-GAAP
EPS was between $0.32 and $0.33
Investment Considerations
•
Competition from larger vendors such
as IBM and CA
•
Reliance on mainframe-related
revenue results in modest growth
prospects
Investment Positives
•
Strong brand within large IT shops.
Long-standing relationships with large
IT organizations including 98 of the
Fortune 100
•
Revenues tied to mainframe platforms
are highly recurring and very profitable
•
Potential to leverage relationships into
higher growth opportunities in
distributed platforms
Buy
100%
Analyst Recommendations
Project Sword
Serena Research Summary, FYE Januar
$MM, Except Per Share Data
Report
Revenue
Operating Margin
EPS
Company
Date
Rating
Price Target
FY2006E
FY2007E
FY2006E
FY2007E
FY2006E
FY2007E
Stanford Financial Group
11/3/05
Buy
$29.00
$250
$274
34.8%
36.4%
$1.32
$1.43
Lehman Brothers
8/19/05
1-Overweight/Positive
22.00
248
260
34.0%
35.1%
1.31
1.42
Needham & Company
8/19/05
Buy
23.00
250
262
33.8%
35.6%
1.29
1.39
Pacific Crest Securities
8/19/05
Outperform
24.00
250
278
NA
NA
1.31
1.45
Mean:
$24.50
$249
$268
34.2%
35.7%
$1.31
$1.42
Median:
$23.50
$250
$268
34.0%
35.6%
$1.31
$1.43

Sword Valuation
Comparable Company Analysis
Trading Statistics
Project Sword
18
Source
Company Filings and I/B/E/S as of 11/10/05; Wall Street equity research
Source
Company Filings and I/B/E/S as of 11/10/05; Wall Street equity research
Source
Company Filings and I/B/E/S as of 11/10/05
Source
Company Filings and I/B/E/S as of 11/10/05
4.7x
4.3x
2.9x
2.3x
2.2x
1.8x
1.1x
0x
1x
2x
3x
4x
5x
CY2005E Aggregate Value / Revenue
x
4.3x
4.1x
2.6x
2.1x
2.0x
1.8x
1.1x
0x
1x
2x
3x
4x
5x
CY2006E Aggregate Value / Revenue
x
9.2x
7.8x
6.7x
5.2x
3.8x
3.0x
NM
0x
3x
6x
9x
12x
LTM Aggregate Value / Maintenance Revenue
x
12.2x
11.9x
11.9x
11.0x
10.9x
8.9x
8.3x
0x
3x
6x
9x
12x
15x
LTM Aggregate Value / EBITDA
x

Sword Valuation
Comparable Company Analysis
Trading Statistics
Project Sword
19
Source
I/B/E/S as of 11/10/05; Wall Street equity research
Source
I/B/E/S as of 11/10/05; Wall Street equity research
Source
I/B/E/S as of 11/10/05; Wall Street equity research
Source
I/B/E/S as of 11/10/05; Wall Street equity research
Note:
Serena*
represents
P/E
multiple
off
of
unaffected
price
of
$20.03
as
of
10/28.
NM
15.3x
18.1x
19.1x
22.2x
24.0x
24.5x
31.8x
0x
10x
20x
30x
40x
CY2005E P/E
x
NM
14.1x
16.2x
16.7x
18.7x
19.1x
20.5x
26.2x
0x
10x
20x
30x
CY2006E P/E
x
NM
0.9x
1.3x
1.4x
2.0x
2.6x
3.2x
0x
1x
2x
3x
4x
CY2005E P/E/G
x
N.M.
0.8x
1.1x
1.3x
1.6x
2.2x
2.6x
0x
1x
2x
3x
CY2006E P/E/G
x

Sword Valuation
Discounted Equity Value Analysis
Project Sword
20
Current Serena CY2006E P/E = 16.7x
$MM, except per share data
Street Case (1)
Management Case (2)
CY2005
CY2006
CY2007
CY2005
CY2006
CY2007
Revenue
$247.7
$260.1
$275.7
$253.1
$273.7
$296.2
   % Growth
10.3%
5.0%
6.0%
12.7%
8.1%
8.2%
Operating Income
84.2
91.2
99.3
88.0
104.1
117.5
   % Margin
34.0%
35.1%
36.0%
34.8%
38.1%
39.7%
TSO
51.7
51.0
53.0
51.7
51.0
53.0
EPS
$1.31
$1.42
$1.48
$1.37
$1.62
$1.75
   % Growth
4.3%
8.5%
4.5%
9.0%
18.3%
8.3%
Forward
Discount
P/E Multiple
Rate (3)
Value per Share (4)
Value per Share (4)
14 x
11.5%
$18.63
$21.98
15
 
11.5%
19.96
23.55
16
 
11.5%
21.29
25.12
17
 
11.5%
22.62
26.69
18
 
11.5%
23.95
28.26
Notes:
1.
Based on Wall Street equity research for CY2005E- CY2006E and extrapolations to Wall Street equity research for CY2007E.
2.
Based on Management projections. Forecasted interest income, tax rate and shares outstanding based on Wall Street equity research. Adds back public company expenses of $6.4MM.
3.
Assumed range of cost of capital of 10.1% - 13.1% based on predicted beta of 1.52, risk- free rate of 4%, and a market risk premium of 4% - 7%.
4.
Discounted one year for CY2007.

5.1x
4.5x
4.4x
4.0x
3.0x
2.3x
2.3x
2.3x
2.2x
2.2x
1.9x
1.8x
1.6x
6.0x
2.0x
Mean: 2.9x
Median: 2.3x
0.0x
1.0x
2.0x
3.0x
4.0x
5.0x
6.0x
7.0x
Documentum/
EMC
Precise/
Veritas
LEGATO/
EMC
Illustrative
Proj. Sword (1)
Netegrity/
CA
HNC/
Fair, Isaac
Ascential/
IBM
DoubleClick/
Hellman &
Friedman
Square/
Enix
Verity /
Autonomy
Aspect/
Concerto
Overture/
Yahoo!
Systems &
Comp.Tech/  Golden Gate
SunGard
GEAC /
J.D. Edwards/
PSFT
Aggregate Value / LTM Revenue
x
Sword Valuation
Precedent Multiples Analysis
Public Target Software Transactions; $500MM –
$2BN; 2002 –
Present
21
Project Sword
5.4x
4.4x
4.2x
3.9x
3.5x
2.6x
2.1x
2.1x
2.0x
2.0x
2.0x
1.8x
1.7x
1.3x
1.8x
Mean: 2.6x
Median: 2.1x
0.0x
1.0x
2.0x
3.0x
4.0x
5.0x
6.0x
Documentum/
EMC
Precise/
Veritas
Illustrative
Proj. Sword (1)
LEGATO/
EMC
Netegrity/
CA
HNC/
Fair, Isaac
Square/
Enix
Aspect/
Concerto
Verity /
Autonomy
DoubleClick/
Hellman &
Friedman
Ascential/
IBM
GEAC /
Golden Gate
Systems &
Comp.Tech/
SunGard
JD Edwards/
PSFT
Overture/
Yahoo!
Aggregate Value / NTM Revenue
x
Notes
1.
Reflects price to public shareholders of $24.00.

Sword Valuation
Precedent Price Premia
Analysis
Public Target Software Transactions; $500MM –
$2BN; 2002 –
Present
22
Project Sword
64%
42%
36%
33%
33%
30%
29%
22%
20%
18%
18%
14%
11%
9%
17%
Mean: 27%
Median: 25%
0%
20%
40%
60%
80%
Netegrity/
CA
Documentum/
EMC
Precise/
Veritas
Verity /
Autonomy
Overture/
Yahoo!
LEGATO/
EMC
HNC/
Fair, Isaac
GEAC /
Golden Gate
Square/
Enix
Ascential/
IBM
JD Edwards/
PeopleSoft
Illustrative
Proj. Sword
Aspect/
Concerto
DoubleClick/
H&F
Systems &
Comp. Tech/
SunGard
Premium to 30-Day Average Price
%
39%
37%
30%
29%
27%
27%
21%
20%
18%
17%
17%
16%
14%
13%
16%
Mean: 23%
Median: 20%
0%
10%
20%
30%
40%
Netegrity/
CA
Precise/
Veritas
Verity /
Autonomy
Documentum/
EMC
HNC/
Fair, Isaac
GEAC /
Golden Gate
JD Edwards/
PSFT
Illustrative
Proj. Sword (1)
Ascential/
IBM
Aspect/
Concerto
Square/
Enix
LEGATO/
EMC
DoubleClick/
Hellman &
Friedman
Systems &
Comp. Tech/
SunGard
Overture/
Yahoo!
1-Day Premium
%
Notes
1.
Based on unaffected price of $20.03 as of 10/28.

Project Sword
Sword Valuation
Serena Buyout Summary
$23.50 Blended Transaction Price; $600MM Debt; $25MM Minimum Cash Balance; Street Case
23
Sources and Uses of Funds
$MM
Sources of Funds
Existing Cash
$222.9
Bank Debt
375.0
Subordinated Debt
225.0
Rollover Equity
(1)
176.7
Sponsor Equity
283.6
Total Sources
$1,283.2
Uses of Funds
Purchase of Equity
$1,055.1
Rollover Equity
(1)
176.7
Required Cash
25.0
Retired Debt
0.0
Fees and Expenses
26.4
Total Uses
$1,283.2
Notes:
1. Assumes the rollover of 7.5MM shares of common stock.
Financial Summary
$MM
Pro Forma
2005
2006
2007
2008
2009
2010
2011
2012
Net Sales
$247.7
$260.1
$273.1
$286.8
$301.1
$316.2
$332.0
$348.6
% growth
5.0%
5.0%
5.0%
5.0%
5.0%
5.0%
5.0%
Operating Income
84.2
97.5
104.1
109.0
114.2
119.6
125.2
131.2
% margin
34.0%
37.5%
38.1%
38.0%
37.9%
37.8%
37.7%
37.6%
Depreciation
3.1
2.9
2.9
3.2
3.2
3.2
3.2
3.2
EBITDA
87.3
100.4
107.0
112.2
117.3
122.7
128.4
134.3
% margin
35.2%
38.6%
39.2%
39.1%
39.0%
38.8%
38.7%
38.5%
Capital Expenditures
3.0
3.2
3.2
3.2
3.2
3.2
3.2
3.2
Transaction Summary
Offer Structure
Acquisition Share Price
$23.50
Premium to Current Price (%)
(1)
-0.6%
Fully Diluted Shares Outstanding
52.4
Fully Diluted Equity Value
$1,231.8
Plus: Net Debt (as of 1/06)
(222.9)
Fully Diluted Aggregate Value
$1,008.9
Purchase Price Analysis
AV / 2005 Revenues
4.1x
AV / 2006 Revenues
3.9x
AV / 2005 EBITDA
11.6x
AV / 2006 EBITDA
10.0x
Notes:
1. Based on current  price of $23.65 as of 11/10/2005.
Pro Forma Capitalization
$MM
Pro Forma
% of
EBITDA Multiple
2005
Total
2005
2006
Cash and Equivalents
$25.0
Bank Debt
375.0
36%
4.3x
3.7x
Subordinated Debt
225.0
21%
2.6x
2.2x
Total Debt
$600.0
57%
6.9x
6.0x
Shareholders Equity
(1)
447.2
43%
5.1x
4.5x
Total Capitalization
$1,047.2
100%
12.0x
10.4x
Notes:
1. Reflects $284MM sponsor and $177MM rollover investment net of$13MM of non- capitalized transaction expenses

Project Sword
Sword Valuation
Credit Statistics and Sponsor Equity Returns
$23.50 Blended Transaction Price; $600MM Debt; $25MM Minimum Cash Balance; Street Case
24
Credit Statistics
$MM
Pro Forma
2005
2006
2007
2008
2009
2010
2011
2012
EBITDA
$87.3
$100.4
$107.0
$112.2
$117.3
$122.7
$128.4
$134.3
Net Cash Interest Expense
47.6
47.6
44.7
41.6
38.2
34.4
30.1
24.9
Senior Debt
375.0
334.9
290.5
243.3
190.5
131.5
66.0
0.0
Total Debt
600.0
559.9
515.5
468.3
415.5
356.5
291.0
218.0
Shareholders Equity
447.2
452.4
460.5
471.0
487.0
509.0
537.5
573.2
Bank Debt / EBITDA
4.3x
3.3x
2.7x
2.2x
1.6x
1.1x
0.5x
0.0x
Total Debt / EBITDA
6.9x
5.6x
4.8x
4.2x
3.5x
2.9x
2.3x
1.6x
EBITDA / Net Cash Interest Expense
1.8x
2.1x
2.4x
2.7x
3.1x
3.6x
4.3x
5.4x
(EBITDA-CAPEX)/Net Cash Interest Expense
1.8x
2.0x
2.3x
2.6x
3.0x
3.5x
4.2x
5.3x
Total Debt / Total Capitalization
57%
55%
53%
50%
46%
41%
35%
28%
Sponsor IRR
$MM
Pro Forma
2005
2006
2007
2008
2009
2010
2011
2012
EBITDA
$87.3
$100.4
$107.0
$112.2
$117.3
$122.7
$128.4
$134.3
Assumed Exit Multiple (EBITDA)
11.0x
11.0x
11.0x
11.0x
11.0x
11.0x
11.0x
Implied P/E Trailing
14.7x
16.5x
18.0x
18.2x
18.4x
18.5x
18.6x
Aggregate Value
1,104.7
1,177.5
1,234.0
1,290.5
1,349.8
1,412.0
1,477.3
Less: Total Debt
(559.9)
(515.5)
(468.3)
(415.5)
(356.5)
(291.0)
(218.0)
Plus: Cash
25.0
25.0
25.0
25.0
25.0
25.0
25.0
Equity Value
569.8
687.0
790.7
900.0
1,018.2
1,146.0
1,284.4
Gross Management Dilution
8.0%
8.0%
8.0%
8.0%
8.0%
8.0%
8.0%
Management Equity Value
8.8
18.1
26.4
35.2
44.6
54.9
65.9
Rollover Equity Value
(176.7)
215.3
256.7
293.3
331.9
373.7
418.8
467.7
Sponsor Equity Value
(283.6)
345.7
412.2
470.9
532.9
599.9
672.4
750.8
Multiple of Investment
1.2x
1.5x
1.7x
1.9x
2.1x
2.4x
2.6x
Sponsor IRR
21.9%
20.5%
18.4%
17.1%
16.2%
15.5%
14.9%

Project Sword
Sword Valuation
Serena Buyout Summary
$23.50 Blended Transaction Price; $600MM Debt; $25MM Min. Cash Balance; Management Case
25
Sources and Uses of Funds
$MM
Sources of Funds
Existing Cash
$222.9
Bank Debt
375.0
Subordinated Debt
225.0
Rollover Equity
(1)
176.7
Sponsor Equity
283.6
Total Sources
$1,283.2
Uses of Funds
Purchase of Equity
$1,055.1
Rollover Equity
(1)
176.7
Required Cash
25.0
Retired Debt
0.0
Fees and Expenses
26.4
Total Uses
$1,283.2
Notes:
1. Assumes the rollover of 7.5MM shares of common stock.
Financial Summary
$MM
Pro Forma
2005
2006
2007
2008
2009
2010
2011
2012
Net Sales
$253.1
$273.7
$296.2
$311.1
$326.6
$342.9
$360.1
$378.1
% growth
8.1%
8.2%
5.0%
5.0%
5.0%
5.0%
5.0%
Operating Income
87.9
110.5
123.9
131.0
137.5
144.4
151.6
159.2
% margin
34.7%
40.4%
41.8%
42.1%
42.1%
42.1%
42.1%
42.1%
Depreciation
3.1
2.9
2.9
3.2
3.2
3.2
3.2
3.2
EBITDA
91.0
113.4
126.8
134.1
140.7
147.6
154.8
162.4
% margin
36.0%
41.4%
42.8%
43.1%
43.1%
43.0%
43.0%
42.9%
Capital Expenditures
3.0
3.2
3.2
3.2
3.2
3.2
3.2
3.2
Transaction Summary
Offer Structure
Acquisition Share Price
$23.50
Premium to Current Price (%)
(1)
-0.6%
Fully Diluted Shares Outstanding
52.4
Fully Diluted Equity Value
$1,231.8
Plus: Net Debt (as of 1/06)
(222.9)
Fully Diluted Aggregate Value
$1,008.9
Purchase Price Analysis
AV / 2005 Revenues
4.0x
AV / 2006 Revenues
3.7x
AV / 2005 EBITDA
11.1x
AV / 2006 EBITDA
8.9x
Notes:
1. Based on current  price of $23.65 as of 11/10/2005.
Pro Forma Capitalization
$MM
Pro Forma
% of
EBITDA Multiple
2005
Total
2005
2006
Cash and Equivalents
$25.0
Bank Debt
375.0
36%
4.1x
3.3x
Subordinated Debt
225.0
21%
2.5x
2.0x
Total Debt
$600.0
57%
6.6x
5.3x
Shareholders Equity
(1)
447.2
43%
4.9x
3.9x
Total Capitalization
$1,047.2
100%
11.5x
9.2x
Notes:
1. Reflects $284MM sponsor and $177MM rollover investment net of$13MM of non- capitalized transaction expenses

Project Sword
Sword Valuation
Credit Statistics and Sponsor Equity Returns
$23.50 Blended Transaction Price; $600MM Debt; $25MM Min. Cash Balance; Management Case
26
Credit Statistics
$MM
Pro Forma
2005
2006
2007
2008
2009
2010
2011
2012
EBITDA
$91.0
$113.4
$126.8
$134.1
$140.7
$147.6
$154.8
$162.4
Net Cash Interest Expense
47.1
47.1
43.2
38.9
34.4
29.2
20.5
8.1
Senior Debt
375.0
321.0
259.6
196.1
125.3
46.5
0.0
0.0
Total Debt
600.0
546.0
484.6
421.1
350.3
271.5
182.2
79.7
Shareholders Equity
447.2
462.8
485.9
512.4
546.1
587.6
639.5
704.3
Bank Debt / EBITDA
4.1x
2.8x
2.0x
1.5x
0.9x
0.3x
0.0x
0.0x
Total Debt / EBITDA
6.6x
4.8x
3.8x
3.1x
2.5x
1.8x
1.2x
0.5x
EBITDA / Net Cash Interest Expense
1.9x
2.4x
2.9x
3.4x
4.1x
5.0x
7.6x
20.0x
(EBITDA-CAPEX)/Net Cash Interest Expense
1.9x
2.3x
2.9x
3.4x
4.0x
4.9x
7.4x
19.6x
Total Debt / Total Capitalization
57%
54%
50%
45%
39%
32%
22%
10%
Sponsor IRR
$MM
Pro Forma
2005
2006
2007
2008
2009
2010
2011
2012
EBITDA
$91.0
$113.4
$126.8
$134.1
$140.7
$147.6
$154.8
$162.4
Assumed Exit Multiple (EBITDA)
11.0x
11.0x
11.0x
11.0x
11.0x
11.0x
11.0x
Implied P/E Trailing
14.8x
16.6x
18.0x
18.2x
18.4x
18.1x
17.6x
Aggregate Value
1,247.9
1,395.0
1,475.5
1,547.6
1,623.2
1,702.7
1,786.1
Less: Total Debt
(546.0)
(484.6)
(421.1)
(350.3)
(271.5)
(182.2)
(79.7)
Plus: Cash
25.0
25.0
25.0
25.0
25.0
25.0
25.0
Equity Value
727.0
935.4
1,079.4
1,222.3
1,376.7
1,545.5
1,731.4
Gross Management Dilution
8.0%
8.0%
8.0%
8.0%
8.0%
8.0%
8.0%
Management Equity Value
21.3
38.0
49.5
61.0
73.3
86.8
101.7
Rollover Equity Value
(176.7)
270.8
344.4
395.3
445.7
500.3
559.9
625.5
Sponsor Equity Value
(283.6)
434.8
553.0
634.6
715.6
803.1
898.8
1,004.2
Multiple of Investment
1.5x
1.9x
2.2x
2.5x
2.8x
3.2x
3.5x
Sponsor IRR
53.3%
39.6%
30.8%
26.0%
23.1%
21.2%
19.8%

Project Sword
Sword Valuation
Valuation at Targeted Sponsor Returns
Required Transaction Price vs. Required Return / Assumed Exit Multiple
27
Management Case
Price Per Share / Premium to Current Share Price
Management Case, $600MM Leverage
Required
Assumed Exit Multiple
Return
9.0x
10.0x
11.0x
15%
$24.46
/
7.9%
$25.70
/
13.3%
$26.93
/
18.7%
20%
22.67
/
(0.0%)
23.66
/
4.3%
24.65
/
8.7%
25%
21.07
/
(7.1%)
22.06
/
(2.7%)
22.90
/
1.0%
5-Year IRR
Management Case, $600MM Leverage
Transaction
Assumed Exit Multiple
Price
9.0x
10.0x
11.0x
$22.00
22.1%
25.2%
28.0%
23.50
17.5%
20.5%
23.1%
24.00
16.2%
19.1%
21.7%
26.00
11.6%
14.4%
16.9%
Street Case
Price Per Share / Premium to Current Share Price
Street Case, $600MM Leverage
Required
Assumed Exit Multiple
Return
9.0x
10.0x
11.0x
15%
$21.79
/
(7.9%)
$22.91
/
(3.1%)
$23.93
/
1.2%
20%
20.19
/
(14.6%)
21.22
/
(10.3%)
22.24
/
(6.0%)
25%
18.95
/
(19.9%)
19.79
/
(16.3%)
20.63
/
(12.8%)
5-Year IRR
Street Case, $600MM Leverage
Transaction
Assumed Exit Multiple
Price
9.0x
10.0x
11.0x
$22.00
14.4%
17.7%
20.7%
23.50
10.2%
13.3%
16.2%
24.00
8.9%
12.0%
14.8%
26.00
4.7%
7.7%
10.3%

Sword Valuation
Summary Returns Analysis
Street Case
Project Sword
28
$MM, Except Per Share Data
Implied
Sponsor Equity
Serena
Premium to
FD Equity
FD Agg.
($600MM debt,
5-Year IRR
(2)
Assuming Exit EBITDA Multiple
Price
Current
(1)
Agg. Value
Value
Value
(3)
$25MM cash)
9.0x
9.5x
10.0x
10.5x
11.0x
11.5x
12.0x
$23.65
0.0%
0.0%
$1,240
$1,017
$291
9.8%
11.4%
12.9%
14.4%
15.8%
17.1%
18.3%
20.00
(15.4%)
(17.9%)
838
835
136
20.7%
22.5%
24.2%
25.8%
27.3%
28.8%
30.2%
20.50
(13.3%)
(15.7%)
861
858
155
18.9%
20.7%
22.4%
24.0%
25.5%
26.9%
28.3%
21.00
(11.2%)
(13.5%)
883
880
174
17.3%
19.1%
20.7%
22.3%
23.8%
25.2%
26.5%
21.50
(9.1%)
(11.2%)
906
903
193
15.8%
17.5%
19.2%
20.7%
22.2%
23.6%
24.9%
22.00
(7.0%)
(9.0%)
929
926
212
14.4%
16.1%
17.7%
19.2%
20.7%
22.1%
23.4%
22.50
(4.9%)
(6.4%)
1,175
952
234
13.0%
14.7%
16.2%
17.7%
19.1%
20.5%
21.8%
23.00
(2.7%)
(3.6%)
1,203
980
259
11.5%
13.2%
14.7%
16.2%
17.6%
18.9%
20.2%
23.50
(0.6%)
(0.8%)
1,232
1,009
284
10.2%
11.8%
13.3%
14.8%
16.2%
17.5%
18.7%
24.00
1.5%
2.0%
1,260
1,037
308
8.9%
10.5%
12.0%
13.5%
14.8%
16.1%
17.4%
24.50
3.6%
4.8%
1,289
1,066
333
7.8%
9.3%
10.8%
12.2%
13.6%
14.9%
16.1%
25.00
5.7%
7.6%
1,317
1,094
358
6.7%
8.2%
9.7%
11.1%
12.4%
13.7%
14.9%
25.50
7.8%
10.4%
1,346
1,123
383
5.7%
7.2%
8.7%
10.0%
11.3%
12.6%
13.8%
26.00
9.9%
13.2%
1,374
1,152
407
4.7%
6.2%
7.7%
9.0%
10.3%
11.5%
12.7%
27.00
14.2%
18.8%
1,432
1,209
457
3.0%
4.4%
5.8%
7.2%
8.4%
9.6%
10.8%
28.00
18.4%
24.4%
1,489
1,266
507
1.4%
2.8%
4.2%
5.5%
6.8%
7.9%
9.1%
Notes:
1.
Current share price as of 11/10/05.
2.
Assumes 8.0% of equity allocated to management and Street Case.
3.
Assumes net debt based on management projections for CY2005E.

Sword Valuation
Summary Returns Analysis
Management Case
Project Sword
29
$MM, Except Per Share Data
Implied
Sponsor Equity
Serena
Premium to
FD Equity
FD Agg.
($600MM debt,
5-Year IRR
(2)
Assuming Exit EBITDA Multiple
Price
Current
(1)
Agg. Value
Value
Value
(3)
$25MM cash)
9.0x
9.5x
10.0x
10.5x
11.0x
11.5x
12.0x
$23.65
0.0%
0.0%
$1,240
$1,017
$291
17.1%
18.6%
20.0%
21.4%
22.7%
24.0%
25.2%
20.00
(15.4%)
(17.9%)
838
835
136
28.8%
30.5%
32.1%
33.6%
35.1%
36.5%
37.8%
20.50
(13.3%)
(15.7%)
861
858
155
26.9%
28.6%
30.2%
31.7%
33.1%
34.5%
35.8%
21.00
(11.2%)
(13.5%)
883
880
174
25.2%
26.8%
28.4%
29.9%
31.3%
32.6%
33.9%
21.50
(9.1%)
(11.2%)
906
903
193
23.6%
25.2%
26.7%
28.2%
29.6%
30.9%
32.2%
22.00
(7.0%)
(9.0%)
929
926
212
22.1%
23.7%
25.2%
26.6%
28.0%
29.3%
30.6%
22.50
(4.9%)
(6.4%)
1,175
952
234
20.5%
22.1%
23.6%
25.0%
26.3%
27.6%
28.9%
23.00
(2.7%)
(3.6%)
1,203
980
259
19.0%
20.5%
22.0%
23.3%
24.7%
26.0%
27.2%
23.50
(0.6%)
(0.8%)
1,232
1,009
284
17.5%
19.0%
20.5%
21.8%
23.1%
24.4%
25.6%
24.00
1.5%
2.0%
1,260
1,037
308
16.2%
17.7%
19.1%
20.4%
21.7%
23.0%
24.1%
24.50
3.6%
4.8%
1,289
1,066
333
14.9%
16.4%
17.8%
19.1%
20.4%
21.6%
22.8%
25.00
5.7%
7.6%
1,317
1,094
358
13.7%
15.2%
16.6%
17.9%
19.1%
20.3%
21.5%
25.50
7.8%
10.4%
1,346
1,123
383
12.6%
14.1%
15.4%
16.7%
18.0%
19.2%
20.3%
26.00
9.9%
13.2%
1,374
1,152
407
11.6%
13.0%
14.4%
15.6%
16.9%
18.1%
19.2%
27.00
14.2%
18.8%
1,432
1,209
457
9.7%
11.1%
12.4%
13.7%
14.9%
16.0%
17.1%
28.00
18.4%
24.4%
1,489
1,266
507
8.0%
9.3%
10.6%
11.9%
13.0%
14.2%
15.3%
Notes:
1.
Current share price as of 11/10/05.
2.
Assumes 8.0% of equity allocated to management and Management Case.
3.
Assumes net debt based on management projections for CY2005E.

Project Sword
Appendix A
Supplemental Materials

Supplemental Materials
Detailed Research Forecasts
Published Research Models
30
Project Sword
$MM
CY2005E
CY2006E
Lehman Brothers (1)
Needham (1)
Pacific Growth (1)
Mean
Lehman Brothers (1)
Needham (1)
Pacific Growth (1)
Mean
Revenue
$247.7
$249.7
$262.1
$253.1
$260.1
$262.0
$284.8
$269.0
% Growth
10.3%
11.2%
16.7%
12.8%
5.0%
4.9%
8.7%
6.2%
Gross Profit
205.8
208.5
218.8
211.0
220.0
218.8
238.5
225.8
% Gross Margin
83.1%
83.5%
83.5%
83.4%
84.6%
83.5%
83.7%
83.9%
R&D
34.6
35.0
34.9
34.9
36.4
35.0
37.0
36.1
S&M
69.6
70.8
74.0
71.5
73.6
72.5
79.8
75.3
G&A
17.5
18.2
22.9
19.5
18.9
18.1
25.6
20.9
Total Operating Expenses
121.7
124.0
131.8
125.8
128.9
125.6
142.3
132.2
Operating Income (2)
84.2
84.4
79.8
82.8
91.2
93.2
96.2
93.5
% Operating Margin
34.0%
33.8%
30.4%
32.7%
35.1%
35.6%
33.8%
34.8%
Interest Income/(Expense)
1.9
3.8
4.4
3.4
2.2
5.6
4.4
4.1
Pre-Tax Income
86.1
88.2
84.2
86.2
93.4
98.8
100.6
97.6
Income Taxes
18.5
20.7
15.4
18.2
21.0
24.7
25.1
23.6
% Tax Rate
21.5%
23.5%
18.3%
21.1%
22.5%
25.0%
25.0%
24.2%
Net Income
67.6
67.5
68.8
68.0
72.4
74.1
75.4
74.0
% Net Income Margin
27.3%
27.0%
26.3%
26.9%
27.8%
28.3%
26.5%
27.5%
EPS
$1.31
$1.29
$1.33
$1.31
$1.42
$1.40
$1.46
$1.42
Avg. FD Shares Outstanding
51.7
52.2
51.6
51.8
51.0
53.1
51.7
51.9
Notes:
1.
Street Research from Lehman Brothers 8/19/05, Needham 8/19/05, and Pacific Growth Equities 8/05/05.
2.
Excludes one time charges.

Supplemental Materials
Sword Street Forecast
FY2003A –
FY2006E
Project Sword
31
$MM, Except Per Share Data
Fiscal Year Ended Jan 31
2005
2006
Fiscal Year
4/04A
7/04A
10/04A
1/05A
4/05A
7/05A
10/05E
1/06E
2004A
2005A
2006E
2007E
Total Revenue
$34.1
$58.8
$62.1
$69.5
$62.8
$59.4
$60.5
$65.0
$105.6
$224.5
$247.7
$260.1
% Growth
72.3%
5.7%
11.8%
(9.6%)
(5.4%)
1.8%
7.4%
112.7%
10.3%
5.0%
Total COGS
4.7
10.4
10.1
10.9
9.9
10.3
10.5
11.2
15.8
36.0
41.9
40.1
% of Sales
13.7%
17.7%
16.2%
15.6%
15.7%
17.3%
17.4%
17.2%
14.9%
16.1%
16.9%
15.4%
Gross Profit
$29.5
$48.4
$52.1
$58.6
$52.9
$49.1
$50.0
$53.8
$89.8
$188.5
$205.8
$220.0
% Gross Margin
86.3%
82.3%
83.8%
84.4%
84.3%
82.7%
82.6%
82.8%
85.1%
83.9%
83.1%
84.6%
R&D
5.0
8.9
8.4
8.8
8.9
8.6
8.6
8.6
14.0
31.1
34.6
36.4
% of Sales
14.5%
15.1%
13.5%
12.7%
14.1%
14.4%
14.1%
13.2%
13.3%
13.8%
14.0%
14.0%
Sales & Marketing
9.4
18.1
17.9
18.9
17.8
16.7
16.9
18.2
29.2
64.3
69.6
73.6
% of Sales
27.4%
30.8%
28.8%
27.3%
28.3%
28.1%
28.0%
28.0%
27.6%
28.7%
28.1%
28.3%
General & Administrative
2.1
5.0
5.8
5.8
4.6
4.2
4.3
4.4
7.3
18.6
17.5
18.9
% of Sales
6.0%
8.4%
9.3%
8.3%
7.4%
7.1%
7.1%
6.7%
7.0%
8.3%
7.1%
7.3%
Operating Expenses
16.4
32.0
32.1
33.6
31.3
29.5
29.8
31.1
50.5
114.0
121.7
128.9
Operating Income (2)
$13.1
$16.4
$20.0
$25.1
$21.7
$19.6
$20.2
$22.7
$39.3
$74.5
$84.2
$91.2
% Operating Margin
38.4%
27.9%
32.1%
36.1%
34.5%
33.0%
33.4%
34.9%
37.2%
33.2%
34.0%
35.1%
Other Income/(Expense)
0.5
(0.1)
(0.1)
0.3
0.3
0.6
0.6
0.6
2.9
0.6
1.9
2.2
Pre-tax Income (2)
$13.6
$16.3
$19.8
$25.4
$22.0
$20.2
$20.7
$23.2
$42.2
$75.1
$86.1
$93.4
Income Taxes
3.9
3.7
4.5
5.9
5.0
3.7
4.7
5.2
12.3
18.0
18.5
21.0
% tax rate
28.9%
22.6%
22.8%
23.1%
22.6%
18.2%
22.5%
22.5%
29.2%
24.0%
21.5%
22.5%
Net Income (2)
$9.7
$12.6
$15.3
$19.5
$17.0
$16.5
$16.1
$18.0
$29.9
$57.1
$67.6
$72.4
% Net Income Margin
28.3%
21.4%
24.6%
28.1%
27.0%
27.8%
26.6%
27.7%
28.3%
25.4%
27.3%
27.8%
EPS (2)
$0.25
$0.28
$0.35
$0.37
$0.32
$0.32
$0.32
$0.35
$0.74
$1.25
$1.31
$1.42
Avg. FD Shares Outstanding
38.9
44.6
43.5
53.3
52.8
51.8
51.0
51.0
40.4
45.5
51.7
51.0
Notes:
1.
Serena based on Wall Street equity research dated 8/19/05.
2.
Excludes one-time charges.

Supplemental Materials
Comparable Company Analysis
Selected Trading Statistics
Project Sword
32
Trading Statistics of Selected Comparable Companies
(USD MM, except share price, percents and ratios)
Current
Discount
Premium
Est. 5 Yr
Price
to LTM
to LTM
Market
Aggregate
Growth
Company (fiscal year end)
11/10/2005
High
Low
Value
(1)
Value
(2)(3)
CY2005E
CY2006E
CY2005E
CY2006E
Rate
(4)
CY2005E
CY2006E
Serena Software (01/05)
$23.65
(3.2%)
37.3%
$1,240
$1,060
4.3
x
4.1
x
18.1
x
16.7
x
12.5%
1.45
x
1.33
x
Comparable Companies
Computer Associates (03/05) (6)
$29.20
(7.9%)
12.1%
$17,773
$17,484
4.7
x
4.3
x
31.8
x
26.2
x
10.0%
3.18
x
2.62
x
BMC Software (03/05)
$20.17
(7.0%)
39.7%
4,485
3,266
2.2
2.1
22.2
18.7
8.7%
2.56
2.17
Mercury (12/04)
$27.33
(44.9%)
20.8%
2,425
1,913
2.3
2.0
19.1
16.2
20.5%
0.93
0.79
Compuware (03/05)
$8.04
(19.4%)
49.7%
3,132
2,276
1.8
1.8
24.5
19.1
12.0%
2.05
1.59
Quest Software (12/04)
$14.83
(10.6%)
29.6%
1,556
1,342
2.9
2.6
24.0
20.5
18.0%
1.33
1.14
Borland Software (12/04)
$6.40
(47.8%)
28.3%
490
301
1.1
1.1
N.M.
N.M.
13.0%
N.M.
N.M.
Mean:
(22.9%)
30.0%
2.5
x
2.3
x
24.3
x
20.1
x
13.7%
2.01
x
1.66
x
Median:
(15.0%)
28.9%
2.2
2.1
24.0
19.1
12.5%
2.05
1.59
Notes:
(1)
Market Value includes all options and warrants outstanding using treasury method.
(2)
Financial data based on latest available public information.
(3)
Aggregate value defined as market value plus total debt plus preferred stock plus minority interest less unrestricted cash and liquid securities.
(4)
Estimates by I/B/E/S and Street research and calendarized to December year end.
(5)
Earnings per share before extraordinary items and other one-time charges.
(6)
Treats $460MM in-the-money convertible as equity
Sales
(2) (3) (4)
Aggregate Value/
Price/Earnings
(2) (4) (5)
P/E/G
(2) (4) (5)