Form 10-Q

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days:

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act.

Large accelerated filer þ Accelerated filer ¨ Non-accelerated filer ¨ Smaller reporting company ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

The number of shares outstanding of the registrant’s Common Stock, $0.001 par value, as of April 4, 2008 was 186,445,764 shares.

The accompanying unaudited Condensed Consolidated Financial Statements have been prepared by TIBCO Software Inc. (“TIBCO,” the “Company,” “we” or “us”) in accordance with the rules and regulations of the Securities and Exchange Commission (“SEC”). Certain information and footnote disclosures normally included in Consolidated Financial Statements prepared in accordance with generally accepted accounting principles in the United States of America have been condensed or omitted in accordance with such rules and regulations. In the opinion of management, the accompanying unaudited Condensed Consolidated Financial Statements reflect all adjustments, consisting only of normal recurring adjustments, necessary to state fairly the financial position of the Company, and its results of operations and cash flows. These Condensed Consolidated Financial Statements should be read in conjunction with the audited Consolidated Financial Statements and notes thereto for the fiscal year ended November 30, 2007, included in the Company’s Annual Report on Form 10-K filed with the SEC on January 25, 2008.

Our fiscal year ends on November 30^th of each year. For purposes of presentation, we have indicated the first quarter of fiscal years 2008 and 2007 as ended on February 29, 2008 and February 28, 2007, respectively; whereas in fact, the first quarter of fiscal years 2008 and 2007 actually ended on March 2, 2008, and March 4, 2007, respectively. There were 93 days and 94 days in the first quarter of fiscal years 2008 and 2007, respectively.

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

The results of operations for the three months ended February 29, 2008, are not necessarily indicative of the results that may be expected for the year ending November 30, 2008, or any other future period, and we make no representations related thereto.

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

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

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

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

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

In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements (“SFAS No. 157”). SFAS No. 157 defines fair value, establishes a framework and gives guidance regarding the methods used for measuring fair value, and expands disclosures about fair value measurements. SFAS No. 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007, and interim periods of those fiscal years. In February 2008, the FASB released a FASB Staff Position (FSP FAS 157-2—Effective Date of FASB Statement No. 157) which delays the effective date of SFAS No. 157 for all nonfinancial assets and nonfinancial liabilities, except those that are recognized or disclosed at fair value in the financial statements on a recurring basis (at least annually) to fiscal years beginning after November 15, 2008. The partial adoption of SFAS No. 157 for financial assets and liabilities did not have a material impact on our condensed consolidated financial position, results of operations or cash flows. See Note 4. Investments and Fair Value Measurements.

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

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

The results of Spotfire’s operations have been included in the Condensed Consolidated Financial Statements since the acquisition date. The following unaudited pro forma adjusted summary reflects the Company’s condensed results of operations for the three months ended February 28, 2007, assuming Spotfire had been acquired at the beginning of the period, and includes the acquired in-process research and development (“IPR&D”) charge of $1.6 million (in thousands, except per share data):

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

Marketable securities, which are classified as available-for-sale, are summarized below as of February 29, 2008, and November 30, 2007 (in thousands):

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

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

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

The following table summarizes the fair value and gross unrealized losses related to available-for-sale securities, aggregated by investment category and the length of time that individual securities have been in a continuous unrealized loss position, as of February 29, 2008 (in thousands):

As of February 29, 2008, the investments that we held are high investment grade. The unrealized losses on our investments were due primarily to changes in interest rates and market and credit conditions of the underlying securities. Because we have the ability to hold these investments until a recovery of fair value, which may be maturity, we do not consider these investments to be other-than-temporarily impaired as of February 29, 2008.

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

We have invested in privately held companies; such investments are classified as equity investments that are generally carried on a cost basis and are included in Other Assets. The carrying value of our equity investments is $0.8 million and $0.9 million as of February 29, 2008 and November 30, 2007, respectively. No impairment losses were incurred in the periods presented.

SFAS No. 157 clarifies that fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. As a basis for considering such assumptions, SFAS No. 157 establishes a three-tier value hierarchy, which prioritizes the inputs used in measuring fair value as follows: (Level 1) observable inputs such as quoted prices in active markets; (Level 2) inputs other than the quoted prices in active markets that are observable either directly or indirectly; and (Level 3) unobservable inputs in which there is little or no market data, which require us to develop our own assumptions. This hierarchy requires us to use observable market data, when available, and to minimize the use of unobservable inputs when determining fair value. On a recurring basis, we measure certain financial assets and liabilities at fair value, including our marketable securities and foreign currency contracts.

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

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

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

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

The change in the carrying amount of goodwill for the three months ended February 29, 2008, was as follows (in thousands):

Certain of our intangibles assets were recorded in foreign currencies, and therefore, the gross carrying amount and accumulated amortization are subject to foreign currency translation adjustments. The carrying values of our amortized acquired intangible assets as of February 29, 2008, and November 30, 2007, are as follows (in thousands):

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

The following is a summary of activities in accrued facilities restructuring costs for the three months ended February 29, 2008 (in thousands):

The remaining accrued facilities restructuring costs represent the estimated loss on abandoned excess facilities, net of estimated sublease income, which is expected to be paid over the next three years. As of February 29, 2008, $9.6 million of the $14.5 million accrued excess facilities costs were classified as long-term liabilities based on our current expectation that we will pay the remaining lease payments over the remaining term of the related leases.

In connection with the purchase of our corporate headquarters in June 2003, we recorded a $54.0 million mortgage note payable to a financial institution collateralized by the commercial real property acquired. The balance on the mortgage note payable was $46.0 million and $46.5 million as of February 29, 2008, and November 30, 2007, respectively.

The mortgage note payable carries a fixed annual interest rate of 5.50% and a 20-year amortization. The $34.4 million principal balance that will be remaining at the end of the ten-year term will be due as a final lump sum payment on July 1, 2013. Under the currently applicable terms of the mortgage note agreements, we are prohibited from acquiring another company without prior consent from the lender unless we maintain at least $50.0 million of cash or cash equivalents, and meet other non-financial terms as defined in the agreements. We were in compliance with all covenants as of February 29, 2008.

We have a $20.0 million revolving line of credit that matures on June 19, 2008. The revolving line of credit is available for cash borrowings and for the issuance of letters of credit up to $20.0 million. As of February 29, 2008, no borrowings were outstanding under the facility and a $13.0 million irrevocable letter of credit was outstanding, leaving $7.0 million of available credit for additional letters of credit or cash borrowings. The $13.0 million irrevocable letter of credit outstanding was issued in connection with the mortgage note payable. The letter of credit automatically renews for successive one-year periods, until the mortgage note payable has been satisfied in full. We are required to maintain a minimum of $40.0 million in unrestricted cash, cash equivalents and short-term investments, net of total current and long-term indebtedness, as well as comply with other non-financial covenants defined in the agreement. As of February 29, 2008, we were in compliance with all covenants under the revolving line of credit.

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

In connection with a facility lease, we have an irrevocable letter of credit in the amount of $4.5 million. The letter of credit automatically renews annually for the duration of the lease term, which expires in December 2010. We are subject to certain financial covenants as defined in the letter of credit agreement. As of February 29, 2008, we were in compliance with all letter of credit covenants.

As of February 29, 2008, in connection with bank guarantees issued by some of our international subsidiaries, we had $3.8 million of restricted cash which is included in Other Assets on our Condensed Consolidated Balance Sheets.

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

At various locations worldwide, we lease office space and equipment under non-cancelable operating leases with various expiration dates through April 2015. Rental expense was approximately $2.5 million and $2.3 million for the three month periods ended February 29, 2008 and February 28, 2007, respectively.

As of February 29, 2008, contractual commitments associated with indebtedness, lease obligations and operational restructuring are as follows (in thousands):

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

The above commitment table does not include approximately $11.8 million of long-term income tax liabilities recorded in accordance with FIN 48 due to the fact that we are unable to reasonably estimate the timing of these potential future payments.

Subsequent to the quarter-end, we entered into a vendor agreement where we are committed to pay approximately $1.7 million within 12 months to the vendor based on specific deliverable milestones and acceptance criteria.

We conduct business in the Americas; Europe, the Middle East and Africa (“EMEA”) and Asia Pacific and Japan (“APJ”). As a result, our financial results could be affected by factors such as changes in foreign currency exchange rates or changes in economic conditions in foreign markets. The majority of our sales are currently made in U.S. dollars. We enter into forward contracts with financial institutions to manage our currency exposure related to net assets and liabilities denominated in foreign currencies. These forward contracts are generally settled monthly. Our forward contracts reduce, but do not eliminate, the impact of currency exchange rate movements. We do not enter into derivative financial instruments for trading purposes. Gains and losses on forward contracts are included in Other Income (Expense) in our Condensed Consolidated Statements of Operations. We had eight outstanding forward contracts with total notional amounts of $59.4 million which resulted in a loss of $18,000 as of February 29, 2008.

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

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

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

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

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

1996 Stock Option Plan. As of February 29, 2008, there were 26.4 million shares reserved for grant, 35.2 million shares underlying stock options, 2.4 million shares of restricted stock and 0.6 million shares underlying restricted stock units outstanding under the 1996 Stock Option Plan. We expect to continue granting a majority of our new equity grants from the reserved shares under this plan until August 1, 2008, if stockholders approve our 2008 Equity Incentive Plan.

Talarian Stock Option Plans. As of February 29, 2008, there were no shares reserved for grant and approximately 23,000 shares underlying stock options outstanding under the Talarian Stock Option Plans.

2000 Extensibility Stock Option Plan. As of February 29, 2008, no shares were reserved for grant and approximately 24,000 shares underlying stock options outstanding under the 2000 Extensibility Stock Option Plan.

1998 Director Option Plan. As of February 29, 2008, there were 2.1 million shares reserved for grant and 1.3 million shares underlying stock options outstanding under the 1998 Director Option Plan.

Employee Stock Purchase Program. We issued approximately 0.2 million shares under the Employee Stock Purchase Program (the “ESPP”), representing approximately $1.5 million in employee contributions for the three months ended February 29, 2008. Shares are reserved under the 1996 Stock Option Plan for future purchases under the ESPP.

The summary of stock option activity in the three months ended February 29, 2008, is presented below (in thousands, except per share data):

The intrinsic value of exercised stock options is calculated based on the difference between the exercise price and the quoted closing market price of our common stock as of the exercise date. The total intrinsic value of stock options exercised in the three months ended February 29, 2008 and February 28, 2007 was $3.5 million and $6.0 million, respectively. Upon the exercise of stock options, we issue common stock from our authorized shares. As of February 29, 2008, total unamortized stock-based compensation cost related to unvested stock options was $18.0 million, with the weighted-average recognition period of 2.28 years.

The total realized tax benefit attributable to stock options exercised and vesting of stock awards was $3.9 million and $2.0 million in the three months ended February 29, 2008 and February 28, 2007, respectively.

Our nonvested stock awards are comprised of restricted stock and restricted stock units. A summary of the status for nonvested stock awards as of February 29, 2008, and activities during the three months ended February 29, 2008, is presented as follows (in thousands, except per share data):

We granted approximately 0.5 million shares of nonvested stock awards at no cost to recipients during the three months ended February 29, 2008. As of February 29, 2008, there was $14.1 million of total unrecognized compensation cost related to nonvested stock awards. That cost is expected to be recognized generally on a straight-line basis as the shares vest over three to four years (the weighted-average recognition period of 2.93 years). The total fair value of shares vested pursuant to stock awards during the three months ended February 29, 2008 was $38,000.

Stock-based compensation cost for the three months ended February 29, 2008 and February 28, 2007 was $5.2 million and $3.9 million, respectively, which consisted primarily of stock-based compensation cost related to employee stock options recognized under SFAS No. 123(R), Share-Based Payment (“SFAS No. 123(R)”). The tax benefit on employee stock-based compensation for the three months ended February 29 2008 and February 28, 2007 was $1.2 million and $0.8 million, respectively.

We recognized stock-based compensation cost associated with our ESPP on a straight-line basis over each six-month offering period. Employee stock-based compensation associated with ESPP for the three months ended February 29, 2008 and February 28, 2007, was approximately $0.3 million and $0.1 million, respectively

We started granting restricted stock and restricted stock units to employees during the third quarter of fiscal year 2006. Including in the total stock-based compensation, approximately $1.5 million and 0.6 million of employee stock-based compensation for the three months ended February 29, 2008 and February 28, 2007, respectively, was related to restricted stock and restricted stock units.

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

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

The balances of each component of accumulated other comprehensive income, net of taxes, as of February 29, 2008, and November 30, 2007 consist of the following (in thousands):

In the first quarter of fiscal year 2007, we established a joint venture in South Africa, TS Innovations Limited (“Innovations”), with a local South Africa corporation, to assist with our sales efforts as well as to provide consulting services and training to our customers in the Sub-Saharan Africa region. For the three months ended February 29, 2008, Innovations had total assets of $1.1 million and total revenues of $1.0 million. As of February 29, 2008, we owned a 74.9% interest in the joint venture. Because of this majority interest, our Condensed Consolidated Financial Statements include the balance sheets, results of operations and cash flows of Innovations, net of intercompany charges. We therefore eliminated 25.1% of our financial results that pertain to the minority interest; the eliminated amount was reported as a separate line on our Condensed Consolidated Statements of Operations and Balance Sheets.

The effective tax rate of 33.7% for the three months ended February 29, 2008, differs from the statutory rate of 35% primarily due to the tax benefits resulted from the reorganization of certain foreign entities, lower foreign taxes and research and development credits which was partially offset by the impact of certain stock compensation charges under SFAS No. 123(R) and state income taxes. The effective tax rate of 36.3% for the three months ended February 28, 2007, differs from the statutory rate of 35% primarily due to the tax impact of certain stock compensation charges under SFAS No. 123(R), state income taxes and additional U.S. taxes on repatriated U.K. earnings which was partially offset by research and development credits.

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

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

During the first quarter of fiscal 2008, the amount of gross unrecognized tax benefits was increased by approximately $0.3 million. The total amount of gross unrecognized tax benefits was $34.1 million as of February 29, 2008, of which $11.7 would affect the effective tax rate if realized. We do not expect any significant changes to the amount of unrecognized tax benefit within the next twelve months.

Upon adoption of FIN 48, we have elected to include interest expense and penalties accrued on unrecognized tax benefits as a component of our income tax expense. This is consistent with our policy prior to the adoption of FIN 48. As of the date of adoption of FIN 48, we had accrued $1.0 million for interest and penalties. There was no material change to this amount as of February 29, 2008.

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

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

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

We assess the likelihood that we will be able to recover our deferred tax assets. We consider all available evidence, both positive and negative, including historical levels of income, expectations and risks associated with estimates of future taxable income and ongoing prudent and feasible tax planning strategies in assessing the need for the valuation allowance. If it is not more likely than not that we will recover our deferred tax assets, we will increase our provision for taxes by recording a valuation allowance against the deferred tax assets that we estimate will not ultimately be recoverable. As a result of our analysis of all available evidence, both positive and negative, as of February 29, 2008, it was considered more likely than not that our deferred tax assets would be realized with the exception of certain capital loss and foreign tax credit carryovers as we cannot forecast sufficient future capital gains or foreign source income to realize these deferred tax assets. The remaining valuation allowance of approximately $8.6 million as of February 29, 2008, will result in an income tax benefit if and when we conclude it is more likely than not that the related deferred tax assets will be realized.

As of February 29, 2008, we believed that the amount of deferred tax assets recorded on our balance sheet would ultimately be recovered. However, should there be a change in our ability to recover our deferred tax assets, our tax provision would increase in the period in which we determine that it is more likely than not that we cannot recover our deferred tax assets.

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

While we do not expect any impact to the effective tax rate for U.S. non-qualified stock option, restricted stock or restricted stock units expense due to the adoption of SFAS No. 123(R), the effective tax rate has been and may continue to be negatively impacted by foreign stock option expense that may not be deductible in the foreign jurisdictions. Also, SFAS No. 123(R) requires that the tax benefit of stock option deductions relating to incentive stock options be recorded in the period of disqualifying disposition. This could result in significant fluctuations in our effective tax rate between accounting periods.

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

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

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

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

No customer accounted for more than 10% of total revenue for the three months ended February 29, 2008 and February 28, 2007. No customer had a balance in excess of 10% of our net accounts receivable at February 29, 2008 and November 30, 2007.

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

In December 2006, the Audit Committee on behalf of our Board of Directors approved an eighteen-month stock repurchase program pursuant to which we were authorized to repurchase up to $100.0 million of our outstanding common stock. In April 2007, our Board of Directors approved a new stock repurchase program pursuant to which we may repurchase up to $300.0 million of our outstanding common stock from time-to-time in the open market or through privately negotiated transactions. In connection with approving the April 2007 stock repurchase program, the December 2006 stock repurchase program was terminated and the remaining authorized amount of $58.2 million under the December 2006 stock repurchase program was canceled.

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

In connection with the repurchase activities during the three months ended February 29, 2008, we classified $20.1 million of the excess purchase price over the par value of our common stock to retained earnings and $25.2 million to additional paid-in capital.

The following contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Forward-looking statements relate to expectations concerning matters that are not historical facts. Words such as “projects,” “believes,” “anticipates,” “plans,” “expects,” “intends,” “strategy,” “continue,” “will,” “estimate,” “forecast,” and similar words and expressions are intended to identify forward-looking statements. Although we believe that the expectations reflected in the forward-looking statements contained herein are reasonable, these expectations or any of the forward-looking statements could prove to be incorrect, and actual results could differ materially from those projected or assumed in the forward-looking statements. Our future financial condition and results of operations, as well as any forward-looking statements, are subject to risks and uncertainties, including, but not limited to, the factors set forth in Part II, Item 1A. “Risk Factors.” All forward-looking statements and reasons why results may differ included in this Quarterly Report on Form 10-Q are made as of the date hereof, and we assume no obligation to update any such forward-looking statements or reasons why actual results may differ.

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

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

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

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

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

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

Our products are currently licensed by companies worldwide in diverse industries such as financial services, telecommunications, retail, healthcare, manufacturing, energy, transportation, logistics, government and insurance. We sell our products through a direct sales force and through alliances with leading software vendors and systems integrators.

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

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

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

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

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

Our revenue consists primarily of license and maintenance fees from our customers and distributors. In addition, we receive fees from our customers for providing consulting services. We also receive revenue from our strategic relationships with business partners who embed our products in their hardware and networking systems as well as from systems integrators who resell our products.

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

Our revenue is generally derived from a diverse customer base. No single customer represented greater than 10% of total revenue for the three months ended February 29, 2008 or February 28, 2007. As of February 29, 2008, no single customer had a balance in excess of 10% of our net accounts receivable. We establish allowances for doubtful accounts based on our evaluation of collectibility and an allowance for returns and discounts based on specifically identified credits and historical experience.

Our business is subject to variations throughout the year due to seasonal factors in the U.S. and worldwide. These factors include fewer selling days during the summer vacation season (which has a disproportionate effect on sales in Europe), the impact of the December holidays and a slow down in capital expenditures by our customers after calendar year-end (during our first fiscal quarter). These factors typically constrain sales activity in our first and third fiscal quarters compared to the rest of the year, and they make quarter-to-quarter comparisons of our operating results less meaningful.

The discussion and analysis of our financial condition and results of operations are based upon our Condensed Consolidated Financial Statements, which have been prepared in accordance with generally accepted accounting principles in the United States of America. The preparation of these financial statements requires us to make estimates, assumptions and judgments that can have significant impact on the reported amounts of assets and liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities at the date of our financial statements. We base our estimates, assumptions and judgments on historical experience and various other factors that we believe to be reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions. On a regular basis we evaluate our estimates, assumptions and judgments and make changes accordingly. We also discuss our critical accounting estimates with the Audit Committee of our Board of Directors.

We believe that the estimates, assumptions and judgments involved in revenue recognition, allowances for doubtful accounts, returns and discounts, stock-based compensation, valuation and impairment of investments, impairment of goodwill, intangible assets and long-lived assets, restructuring and integration costs and accounting for income taxes have the greatest potential impact on our Condensed Consolidated Financial Statements, so we consider these to be our critical accounting policies. Historically, our estimates, assumptions and judgments relative to our critical accounting policies have not differed materially from actual results. The critical accounting estimates associated with these policies are described in Part II, Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operation” of our Annual Report on Form 10-K filed with the SEC on January 25, 2008.

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

For purposes of presentation, we have indicated the first quarter of fiscal years 2008 and 2007 as ended on February 29, 2008 and February 28, 2007, respectively; whereas in fact, the first quarter of fiscal years 2008 and 2007 actually ended on March 2, 2008, and March 4, 2007, respectively. There were 93 days and 94 days in the first quarter of fiscal years 2008 and 2007, respectively. All amounts presented in the tables in the following sections on Results of Operations are stated in thousand of dollars, except for percentages and unless otherwise stated.

The following table sets forth the components of our Results of Operations as percentages of total revenue for the periods indicated:

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

With the acquisition of Spotfire, TIBCO gained approximately 200 employees, based primarily in the United States and Sweden. In connection with the acquisition, we have incurred additional expenses, including amortization of intangible assets and acquired technology, acquired IPR&D costs, stock-based compensation, personnel and related costs, facility and infrastructure costs and other charges. As a result of these expenses, costs and charges, the acquisition is dilutive to earnings in the first quarter of fiscal year 2008.

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

Total revenue in the first quarter of fiscal year 2008 compared to the same quarter last year increased by $20.9 million or 17%. The increase was comprised of a $15.3 million or 21% increase in service and maintenance revenue and by a $5.6 million or 11% increase in license revenue.

No single customer accounted for more than 10% of total revenue in the first quarter of fiscal years 2008 and 2007, respectively. Our products are licensed by companies worldwide in diverse industries.

We experienced growth in total revenue. In particular, we had a significant increase in Americas in the first quarter of fiscal year 2008. See Note 15 to our Condensed Consolidated Financial Statements for amounts of total revenue by region. The percentages of total revenue from the geographic regions are summarized as follows:

Our total revenue may fluctuate from quarter to quarter, based in part upon seasonality in our business.

License revenue increased 11% in the first quarter of fiscal year 2008 compared to the same quarter last year. The increase was primarily due to increased revenue in North America and APJ as well as revenue attributable to the Spotfire acquisition.

Our license revenue in the first quarter of fiscal years 2008 and 2007 was derived from the following three product family: SOA, Business Optimization and BPM. The approximate percentages of total license revenue for the two periods were: 2008, 61% from SOA, 28% from Business Optimization and 11% from BPM; 2007, 72% from SOA, 8% from Business Optimization and 20% from BPM. The first quarter of fiscal year 2008 increase in the percentage of license revenue derived from Business Optimization was primarily attributable to the Spotfire acquisition.

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

We currently expect the number of license transactions over $100,000 to increase in the remainder of fiscal year 2008, while the size and timing of any particular multi-million dollar deal cannot be reasonably forecasted.

Cost of license revenue mainly consisted of royalty costs and amortization of developed technology acquired through corporate acquisitions. Cost of license revenue increased by $3.2 million or 79% for the first quarter of fiscal year 2008 compared to the same quarter last year. The increase in absolute dollars in cost of license revenue in the current quarter compared to the same quarter last year resulted primarily from an increase of $2.4 million in amortization of acquired technologies, mainly associated with the Spotfire acquisition, as well as an increase of $0.8 million in royalty costs.

Service and maintenance revenue increased $15.4 million or 21% in the first quarter of fiscal year 2008 compared to the same quarter last year. This increase was comprised of a $9.3 million increase in maintenance revenue and a $6.1 million increase in consulting and training services revenue. Maintenance revenue increased primarily due to growth in our installed software base and contribution from Spotfire, and consulting revenue increased due to an increase in both the number and scope of engagements, reflecting our increased focus on providing more services to customers.

Cost of service and maintenance revenue consisted primarily of compensation for professional services, including stock-based compensation expenses, customer support personnel, third-party contractors and associated expenses related to providing consulting services.

The cost of service and maintenance revenue increased by $4.9 million or 16% for the first quarter of fiscal year 2008 compared to the same quarter last year, which was primarily due to the relative proportion of personnel costs. The increase in absolute dollars in the first quarter of fiscal year 2008 compared to the same quarter last year resulted primarily from a $3.0 million increase in employee-related expenses, a $1.3 million increase in subcontractor costs and a $0.3 million increase in facilities expenses. Increased employee-related expenses and subcontractors costs were primarily due to increased headcount.

Research and development expenses consisted primarily of employee-related expenses, including salary, bonus, benefits, stock-based compensation expenses, recruiting expense and office support, third-party contractor fees and related costs associated with the development and enhancement of our products.

Total research and development expenses increased by $4.4 million or 21% for the first quarter of fiscal year 2008 compared to the same quarter last year with a $3.1 million increase in employee-related expenses, a $0.5 million increase in contractor expenses and a $0.4 million increase in facilities expenses. The increase in employee-related expenses was primarily due to added headcount. Our first quarter of fiscal year 2008 research and development expenses included incremental costs attributable to Spotfire operations.

Sales and marketing expenses consisted primarily of employee-related expenses, including sales commissions, salary, bonus, benefits, stock-based compensation expenses, recruiting expense and office support, related costs of our direct sales force and marketing staff, and the costs of marketing programs, including customer conferences, promotional materials, trade shows, advertising and related travel expenses.

Total sales and marketing expenses increased by $11.4 million or 27% for the first quarter of fiscal year 2008 compared to the same quarter last year was primarily due to a $8.7 million increase in employee-related expenses, a $1.8 million increase in marketing programs and a $0.8 million increase in travel expenses. The increase in employee-related expenses was mainly due to an increase in headcount and a $2.6 million increase in sales commissions associated with an increase in revenue. Our first quarter of fiscal year 2008 sales and marketing expenses included incremental costs attributable to Spotfire operations.

General and administrative expenses consisted primarily of employee-related expenses, including salary, bonus, benefits, stock-based compensation expenses, recruiting expense and office support and related costs for general corporate functions including executive, legal, finance, accounting and human resources, and also included accounting, tax and legal fees and charges.

Total general and administrative expenses increased by $1.0 million or 8% for the first quarter of fiscal year 2008 compared to the same quarter last year, primarily due to a $1.4 million increase in employee-related expenses, which was partially offset by a $0.2 million decrease in fees and charges and a $0.2 million decrease in consulting expenses. The increase in employee-related expenses was primarily due to increased headcount. Our first quarter of fiscal year 2008 general and administrative expenses included incremental costs attributable to Spotfire operations.

Intangible assets acquired through corporate acquisitions are comprised of the expected value of developed technologies, patents, trademarks, established customer bases, non-compete agreements, as well as maintenance and OEM customer royalty agreements. Amortization of developed technologies is recorded as a cost of revenue, and amortization of other acquired intangible assets is included in operating expenses.

The increase in amortization expenses for the first quarter of fiscal year 2008 in fiscal year compared to the same quarter last year was primarily due to the additional amortization related to intangible assets acquired in the acquisition of Spotfire in the third quarter of fiscal year 2007.

We expect the amortization of acquired intangible assets to be approximately $8.0 million per quarter for the remainder of fiscal year 2008, excluding any future acquisitions.

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

We utilize the Black-Scholes option pricing model to value equity instruments. The Black-Scholes model was developed for use in estimating the value of traded options that have no vesting or hedging restrictions and are fully transferable. As our employee stock options have certain characteristics that are significantly different from traded options, and as changes in the subjective assumptions can materially affect the estimated value, in management’s opinion, the existing valuation model may not provide an accurate measure of the fair value of our employee stock options. Although the fair value of employee stock options is determined in accordance with SFAS No. 123(R) and SAB No. 107 using an option-pricing model, that value may not be indicative of the fair value observed in a willing buyer/willing seller market transaction.

The decrease in interest income in the first quarter of fiscal year 2008 compared to the same quarter last year was primarily due to lower average investment portfolio balances primarily as a result of the use of cash for the Spotfire acquisition and our stock repurchase program.

Interest expense was primarily related to a $54.0 million mortgage note issued in connection with the purchase of our corporate headquarters. The mortgage note payable carries a 20-year amortization, and in the second quarter of fiscal year 2007, we amended the mortgage note payable such that it now carries a fixed annual interest rate of 5.50%. The balance of the mortgage note as of February 29, 2008, was $46.0 million. The $34.4 million principal balance that will remain at the end of the ten-year term will be due as a final lump sum payment on July 1, 2013. See Note 7 to our Condensed Consolidated Financial Statements for further detail on the mortgage note payable.

The increase for the first quarter of fiscal year 2008 compared to the same quarter last year is primarily due to a release of a transaction tax reserve in 2007 (which decreased expense) in connection with a favorable tax ruling.

Other income (expense) included realized gains and losses on investments, foreign exchange gain (loss) and other miscellaneous income and expense items.

The increase in other income (expense) in absolute dollars for the first quarter of fiscal year 2008 compared to the same quarter last year was due to unfavorable exchange rate movements on certain foreign currency transactions in the first quarter of fiscal year 2007.

No. FIN 48-1, Definition of Settlement in FASB Interpretation No. 48 (“FSP FIN 48-1”) as part of our initial adoption of FIN 48. FSP FIN 48-1 is an amendment to FIN 48. It clarifies how an enterprise should determine whether a tax position is effectively settled for the purpose of recognizing previously unrecognized tax benefits.

We assess the likelihood that we will be able to recover our deferred tax assets. We consider all available evidence, both positive and negative, including historical levels of income, expectations and risks associated with estimates of future taxable income and ongoing prudent and feasible tax planning strategies in assessing the need for a valuation allowance. If it is not more likely than not that we will recover our deferred tax assets, we will increase our provision for taxes by recording a valuation allowance against the deferred tax assets that we estimate will not ultimately be recoverable. As a result of our analysis of all available evidence, both positive and negative, as of February 29, 2008, it was considered more likely than not that our deferred tax assets would be realized with the exception of certain capital loss and foreign tax credit carryovers. The remaining valuation allowance of approximately $8.6 million as of February 29, 2008, will result in an income tax benefit if and when we conclude it is more likely than not that the related deferred tax assets would be realized.

As of February 29, 2008, we believed that the amount of the deferred tax assets recorded on our balance sheet would ultimately be recovered. However, should there be a change in our ability to recover our deferred tax assets, our tax provision would increase in the period in which we determine that it is more likely than not that we cannot recover our deferred tax assets.

Minority interest represents the portion of net income belonging to minority stockholders of our consolidated subsidiaries.

Minority interest is detailed in Note 12 to our Condensed Consolidated Financial Statements.

As of February 29, 2008, we had cash, cash equivalents and short-term investments totaling $286.5 million, representing an increase of $20.7 million from November 30, 2007. As of February 29, 2008, our short-term available-for-sale investments totaled $83.2 million, primarily in high grade corporate debt, U.S. government debt securities, asset-backed and mortgage-backed securities and money market funds.

Net cash provided by operating activities for the three months ended February 29, 2008, was $60.2 million, resulting from net income of $5.5 million, adjusted for $12.0 million in non-cash charges and a $42.7 million net change in assets and liabilities. The non-cash charges included depreciation and amortization, stock-based compensation, minority interest and tax benefits related to stock benefit plans, less deferred income tax and excess tax benefits from stock-based compensation recorded in financing activities. Net change in assets and liabilities included a decrease in accounts receivable due to significant cash collections in the first quarter of fiscal year 2008 resulting from a strong revenue quarter in the fourth quarter of fiscal year 2007, a decrease in prepaid expenses and other assets, a decrease in accounts payable and a decrease in accrued liabilities and excess facilities costs, which were partially offset by a $7.7 million increase in deferred revenue.

To the extent that non-cash items increase or decrease our future operating results, there will be no corresponding impact on our cash flows. After excluding the effects of these non-cash charges, the primary changes in cash flows relating to operating activities result from changes in working capital. Our primary source of operating cash flows is the collection of accounts receivable from our customers, including maintenance which is typically billed annually in advance. Our operating cash flows are also impacted by the timing of payments to our vendors for accounts payable and other liabilities. We generally pay our vendors and service providers in accordance with the invoice terms and conditions. The timing of cash payments in future periods will be impacted by the terms of accounts payable arrangements.

Net cash provided by investing activities was $11.1 million for the three months ended February 29, 2008, resulting primarily from $13.3 million in net sales of short-term investment which was partially offset by $2.2 million in capital expenditures. In addition, we used part of the net proceeds from sales of short-term investments to finance our stock repurchase program.

Net cash used for financing activities was $38.5 million for the three months ended February 29, 2008, resulting primarily from our $45.3 million repurchase of shares of our common stock in the open market and $0.5 million payment of long-term debt, less $3.5 million cash received from the exercise of stock options and the sale of our common stock under our ESPP, and $3.8 million excess tax benefits from stock-based compensation in accordance with the requirements of SFAS No. 123(R).

In April 2007, our Board of Directors approved a stock repurchase program pursuant to which we may repurchase up to $300.0 million of our outstanding common stock from time to time in the open market or through privately negotiated transactions. In the first quarter of 2008, we repurchased approximately 6.2 million shares of our outstanding common stock at an average price of $7.34 per share pursuant to the program. As of February 29, 2008, the remaining authorized amount under the April 2007 stock repurchase program was $69.6 million.

We currently anticipate that our operating expenses will grow in absolute dollars for the foreseeable future, and we intend to fund our operating expenses primarily through cash flows from operations. Our capital expenditures are currently expected to be approximately $9.0 million to $13.0 million for the remainder of fiscal year 2008. We believe that our current

cash, cash equivalents and short-term investments together with expected cash flows from operations will be sufficient to meet our anticipated cash requirements for working capital, capital expenditures and currently approved stock repurchases for at least the next 12 months. However, we may require or desire additional funds to support our operating expenses and capital requirements or for other purposes, such as acquisitions, and may seek to raise such additional funds through public or private equity or debt financing or from other sources.

We adopted SFAS No. 157, as of the beginning of fiscal year 2008. See Notes 2 and Note 4 to the Condensed Consolidated Financial Statements. Fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. The use of fair value to measure investment instruments, with related unrealized and realized gains or losses on investment is a significant component to our consolidated results of operations.

We value our cash and investment instruments by using quoted market prices, broker or dealer quotations, or alternative pricing sources with reasonable levels of price transparency. The types of instruments valued based on quoted market prices in active markets include most U.S. government and agency securities, sovereign government obligations, and money market securities. We do not adjust the quoted price for such instruments. The types of instruments valued based on quoted prices in markets that are not active, broker or dealer quotations, or alternative pricing sources with reasonable levels of price transparency include investment-grade corporate bonds, mortgage-backed and asset-backed products, state, municipal and provincial obligations. The price for each security at the measurement date is sourced from an independent pricing vendor. Periodically, management assesses the reasonableness of these sourced prices by comparing them to the prices provided by our portfolio managers to derive the fair value of these financial instruments. Historically, we did not experience significant deviation between the prices from the independent pricing vendor and our portfolio managers. Management assesses the inputs of the pricing in order to categorize the financial instruments into the appropriate hierarchy levels.

In June 2003, we purchased our corporate headquarters with a $54.0 million mortgage note to lower our operating costs. The mortgage note payable carries a 20-year amortization and, as amended in the second quarter of fiscal year 2007, a fixed annual interest rate of 5.50%. The principal balance of $34.4 million that will be remaining at the end of the 10-year term will be due as a final lump sum payment on July 1, 2013. Under the applicable terms of the mortgage note agreements, we are prohibited from acquiring another company without prior consent from the lender unless we maintain at least $50.0 million of cash or cash equivalents and meet other non-financial terms as defined in the agreements. We were in compliance with all covenants as of February 29, 2008.

In conjunction with the purchase of our corporate headquarters, we entered into a 51-year lease of the land upon which the property is located. The lease was paid in advance for a total of $28.0 million, but is subject to adjustments every ten years based upon changes in fair market value of the land. Should it become necessary, we have the option to prepay any rent increases due as a result of a change in fair market value.

As of February 29, 2008, we had $3.8 million in restricted cash in connection with bank guarantees issued by some of our international subsidiaries. The cash collateral is presented as restricted cash and included in Other Assets in our Condensed Consolidated Balance Sheets.

As of February 29, 2008, our contractual commitments associated with indebtedness, lease obligations and operational restructuring are as follows (in thousands):

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

Our indemnification obligations are detailed in Note 8 to our Condensed Consolidated Financial Statements.

We are exposed to the impact of foreign currency fluctuations, interest rate changes and uncertainties in the credit market.

We conduct business in the Americas, EMEA, and APJ. As a result, our financial results could be affected by factors such as changes in foreign currency exchange rates or changes in economic conditions in foreign markets. The majority of sales are currently made in U.S. dollars; a strengthening of the dollar could make our products less competitive. We enter into forward contracts with financial institutions to manage our currency exposure related to net assets and liabilities denominated in foreign currencies. These forward contracts are generally settled monthly. We do not enter into derivative financial instruments for trading purposes. We had eight outstanding forward contracts with total notional amounts of $59.4 million which resulted in a loss of $18,000 as of February 29, 2008.

We are also exposed to foreign exchange rate fluctuations as we convert the financial statements of our foreign subsidiaries into U.S. dollars in consolidation. If there is a change in foreign currency exchange rates, the conversion of the foreign subsidiaries’ financial statements into U.S. dollars will lead to translation gains or losses which are recorded net as a component of other comprehensive income.

Our exposure to market rate risk for changes in interest rates relates primarily to our investment portfolio. We invest excess cash in marketable debt instruments of the U.S. government and its agencies, high-quality corporate debt securities, asset-backed and mortgage-backed debt securities and, by policy, limit the amount of credit exposure to any one issuer. We protect and preserve invested funds by limiting default, market and investment risk.

Investments in both fixed rate and floating rate interest earning instruments carry a degree of interest rate risk. Fixed rate securities 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 in part 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 which have declined in market value due to changes in interest rates or other factors in the current unstable credit environment. As of February 29, 2008, we had an investment portfolio of fixed income securities totaling $83.2 million, excluding those classified as cash and cash equivalents. These securities are classified as available-for-sale and are recorded on the balance sheets at fair market value with unrealized gains or losses reported as a separate component of stockholders’ equity. Unrealized losses are charged against income when a decline in fair market value is determined to be other-than-temporary. The specific identification method is used to determine the cost of securities sold.

A hypothetical 100 basis point increase in interest rates would result in an approximate $0.7 million decrease in the fair value of our available-for-sale debt securities as of February 29, 2008.

As of February 29, 2008, we held high investment grade asset-backed securities and mortgage-backed securities totaling $8.8 and $4.9 million, respectively. These securities’ cash flows are funded by the principal and interest payments of underlying commercial, consumer, or mortgage loans. Payments are typically made monthly over the lifetime of the underlying loans. The recent credit market instability may adversely impact our disposition of these securities at or near their quoted fair market value. We evaluate these investments at each balance sheet date. There is the risk that at future balance sheet dates we may record a charge for a decline in the fair value that is considered other than temporary and a loss would be recognized in the income statement at that time.

Based on our current business plan, our cash and cash equivalents balances and our existing unused credit facilities are sufficient to cover our currently anticipated fiscal 2008 cash flow requirements.

We maintain “disclosure controls and procedures,” as such term is defined in Rule 13a-15(e) under the Exchange Act, that are designed to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating our disclosure controls and procedures, management recognized that disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the disclosure controls and procedures are met. Additionally, in designing disclosure controls and procedures, our management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible disclosure controls and procedures. The design of any disclosure controls and procedures also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.

Based on their evaluation as of the end of the period covered by this Quarterly Report on Form 10-Q, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures were effective.

There was no change in our internal control over financial reporting that occurred during the period covered by this Quarterly Report on Form 10-Q that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Our legal proceedings are detailed in Note 9 to our Condensed Consolidated Financial Statements.

The following risk factors, as well as other factors of which we may be unaware or do not currently view as significant, could materially and adversely affect our future operating results and could cause actual events to differ materially from those predicted in the forward-looking statements we make about our business.

Our future revenue and results of operations are unpredictable, and we expect our quarterly operating results to fluctuate.

As a result of the evolving nature of the markets in which we compete and the size of our customer agreements, we have difficulty accurately forecasting our revenue in any given period. In addition to the factors discussed elsewhere in this section, a number of factors may cause our revenue to fall short of our expectations, or those of stock market analysts and investors, or cause fluctuations in our operating results, including:

Period-to-period comparisons of our operating results may not be a good indication of our future performance. Moreover, our operating results in some quarters have not in the past met, and may not in the future meet, the expectations of stock market analysts and investors.

In addition, while we may in future years record positive net income and/or increases in net income over prior periods, we may not show period-over-period earnings per share growth or earnings per share growth that meets the expectations of stock market analysts or investors as a result of the number of our shares outstanding during such periods. In such case, our stock price may decline.

Political and economic conditions can adversely affect our revenue and results of operations.

Our business can be affected by a number of factors that are beyond our control such as general geopolitical economic and business conditions, conditions in the financial services markets, the overall demand for enterprise software and services and general political and economic developments. A weakening of the global economy could cause delays in and decreases in demand for our products. In addition, hostilities in various parts of the world, potential public health crises and natural disasters continue to contribute to economic uncertainty that could adversely affect our revenue growth and results of operations.

Uneven growth and periods of contraction in the infrastructure software market have caused our revenue to decline in the past and could cause our revenue or results of operations to fall below expectations in the future.

The market for infrastructure software is relatively new and evolving. We earn a substantial portion of our revenue from licenses of our infrastructure software, including application integration software and sales of related services. We expect to earn substantially all of our revenue in the foreseeable future from sales of these products and services. Our future financial performance will depend on continued growth in the number of organizations demanding software and services for application integration and information delivery and companies seeking outside vendors to develop, manage and maintain this software for their critical applications. Lower spending by corporate and governmental customers around the world, which has had a disproportionate impact on information technology spending, has led to a reduction in sales in the past and may continue to do so in the future. Many of our potential customers have made significant investments in internally developed systems and would incur significant costs in switching to third-party products, which may substantially inhibit the growth of the market for infrastructure software. If the market fails to grow, or grows more slowly than we expect, our sales will be adversely affected. Also, even as corporate and governmental spending increases and companies make greater investments in information technology and infrastructure software, our revenue may not grow at the same pace.

Our strategy contemplates future acquisitions which may result in us incurring unanticipated expenses or additional debt, difficulty in integrating our operations and dilution to our stockholders and may harm our operating results.

Our success depends in part on our ability to continually enhance and broaden our product offerings in response to changing technologies, customer demands and competitive pressures. We expect to acquire complementary businesses, products or technologies in the future as part of our corporate strategy. In this regard, we have made strategic acquisitions, including the acquisition of Spotfire in 2007. We do not know if we will be able to complete any subsequent acquisition or that we will be able to successfully integrate any acquired business, operate it profitably or retain its key employees. Integrating any newly acquired business, product or technology could be expensive and time-consuming, could disrupt our ongoing business and financial performance and could distract our management. Therefore, we might not be able, either immediately post-acquisition or ever, to replicate the pre-acquisition revenues achieved by companies that we acquire or achieve the benefits of the acquisition we anticipated in valuing the businesses, products or technologies we acquire. Furthermore, the costs of integrating acquired companies in international transactions can be particularly high, due to local laws and regulations. If we are unable to integrate any newly acquired entity, products or technology effectively, our business, financial condition and operating results would suffer. In addition, any amortization or impairment of acquired intangible assets, stock-based compensation or other charges resulting from the costs of acquisitions could harm our operating results.

In addition, we may face competition for acquisition targets from larger and more established companies with greater financial resources. Also, in order to finance any acquisition, we might need to raise additional funds through public or private financings or use our cash reserves. In that event, we could be forced to obtain equity or debt financing on terms that are not favorable to us or that result in dilution to our stockholders. Use of our cash reserves for acquisitions could limit our financial flexibility in the future. Moreover, the terms of existing loan agreements may place limits on our ability to incur additional debt to finance acquisitions. If we are not able to acquire strategically attractive businesses, products or technologies, we may not be able to remain competitive in our industry or achieve our overall growth plans.

Our success depends on our ability to overcome significant competition and to offer products and enhancements that respond to emerging technological trends and customers’ needs.

The market for our products and services is extremely competitive and subject to rapid change. We compete with a variety of large and small providers of infrastructure software, SOA, Business Optimization and BPM, including companies such as IBM, Oracle, Microsoft, SAP, Pegasystems and Software AG. We believe that of these companies, IBM has the potential to offer the most complete competitive set of products relative to our offerings. In addition, companies such as IBM, Microsoft, Oracle and SAP offer products outside our segment and routinely bundle their broader set of products with their infrastructure software products. Further, some of our competitors are expanding their competitive product offerings and market position through acquisitions and internal research and development. We expect additional competition from other established and emerging companies. We also face competition for certain aspects of our product and service offerings from major systems integrators. Further, we may face increasing competition from open source software providers such as MuleSource that provide software and intellectual property, typically without charging license fees, or from other competitors offering products through alternative business models, such as software as a service. If customers choose such alternatives over our proprietary software, our revenues and earnings could be adversely affected.

Many of our current and potential competitors have longer operating histories; significantly greater financial, technical, product development and marketing resources; greater name recognition; and larger customer bases than we do. Continued consolidation in the software market may further strengthen our larger competitors. Our present or future competitors may be able to develop products comparable or superior to those we offer; adapt more quickly than we do to new technologies, evolving industry trends or customer requirements; or devote greater resources to the development, promotion and sale of their products than we do. Accordingly, we may not be able to compete effectively in our markets or competition may intensify and harm our business and operating results.

If we are not successful in developing enhancements to existing products and new products in a timely manner, achieving customer acceptance for our existing and new product offerings or generating higher average selling prices, our gross margins may decline, and our business and operating results may suffer. Furthermore, any of our new product offerings or significant enhancements to current product offerings could cause some customers to delay making new or additional purchases while they fully evaluate any new offerings we might have introduced to the market, which in turn may slow sales and adversely affect operating results for an indeterminate period of time. Also, we may not execute successfully on our product plans because of errors in product planning or timing, technical hurdles that we fail to overcome in a timely fashion or a lack of appropriate resources. This could result in competitors providing those solutions before we do and loss of market share, net sales and earnings.

We may in the future realize a higher percentage of our revenue from services, which has a lower profit margin than license or maintenance revenue. As a result, if services revenue increase as a percentage of total revenue, our overall profit margin may decrease, which could impact our stock price.

Any losses we incur as a result of our exposure to the credit risk of our customers could harm our results of operations.

We monitor individual customer payment capability in granting credit arrangements, seek to limit credit to amounts we believe the customers can pay, and maintain reserves we believe are adequate to cover exposure for doubtful accounts. As we have grown our revenue and customer base, our exposure to credit risk has increased. Although we have not had material losses to date as a result of customer defaults, future defaults, if incurred, could harm our business and have an adverse effect on our business, operating results and financial condition.

If we cannot successfully recruit, retain and integrate highly skilled employees, we may not be able to execute our business strategy effectively.

If we fail to retain and recruit key management, sales employees and other skilled employees, our business and our ability to obtain new customers, develop new products and provide acceptable levels of customer service could suffer. As we grow, we must invest significantly in building our sales, marketing and engineering groups. Competition for these people in the software industry is intense, and we may not be able to successfully recruit, train or retain qualified personnel. We are competing against companies with greater financial resources and name recognition for these employees, and as such, there is no assurance that we will be able to meet our hiring needs or hire the most qualified candidates. The success of our business is also heavily dependent on the leadership of our key management personnel, including Vivek Ranadivé, our Chairman and Chief Executive Officer. The loss of one or more key employees could adversely affect our continued operations.

In addition, we must successfully integrate new employees into our operations and generate sufficient revenues to justify the costs associated with these employees. If we fail to successfully integrate employees or to generate the revenue necessary to offset employee-related expenses, we may be forced to reduce our headcount, which would force us to incur significant expenses and would harm our business and operating results.

Because the value of our equity incentive programs has diminished as a retention and recruiting tool, we may need to change our compensation packages in order to remain competitive which in turn could negatively affect our profit margins.

We have historically used equity incentive programs, such as employee stock options and stock purchase plans, as a part of overall employee compensation arrangements. As a result of changes in the financial accounting standards, we have changed our stock purchase plan, reduced the size and number of stock option grants we give to our employees, changed the form of equity compensation we give to some of our employees and may make further changes to our equity compensation programs, all of which may decrease the effectiveness of our plans as employee retention and recruiting tools. In addition, the volatility of our stock price may negatively impact the value of such equity incentives, thereby diminishing the value of such incentive programs to employees and decreasing the effectiveness of such programs as retention and recruiting tools. Given this, we may need to change our compensation packages to employees to remain competitive which could negatively affect our profit margins.

The inability to upsell to our current customers or the loss of any significant customer could harm our business and cause our stock price to decline.

We do not have long-term sales contracts with any of our customers. Our customers may choose not to purchase our products or not to use our services in the future. As a result, a customer that generates substantial revenue for us in one period may not be a source of revenue in subsequent periods. Any inability on our part to upsell to and generate revenues from our existing customers or the loss of a significant customer could adversely affect our business and operating results.

Our products may infringe the intellectual property rights of others, which may cause us to incur unexpected costs or prevent us from selling our products.

We cannot be certain that our products do not infringe issued patents or other intellectual property rights of others. In addition, our use of open source software components in our products may make us vulnerable to claims that our products infringe third-party intellectual property rights, in particular because many of the open source software components we may incorporate with our products may be developed by numerous independent parties over whom we exercise no supervision or control. “Open source software” is software that is covered by a license agreement which permits the user to liberally copy, modify and distribute the software, typically free of charge. Further, because patent applications in the United States and many other countries are not publicly disclosed at the time of filing, applications covering technology used in our software products may have been filed without our knowledge. We may be subject to legal proceedings and claims from time to time, including claims of alleged infringement of the patents, trademarks and other intellectual property rights of third parties by us or our licensees in connection with their use of our products. Our software license agreements typically provide for indemnification of our customers for intellectual property infringement claims. Intellectual property litigation is expensive and time consuming and could divert our management’s attention away from running our business and seriously harm our business. If we were to discover that our products violated the intellectual property rights of others, we would have to obtain licenses from these parties in order to continue marketing our products without substantial reengineering. We might not be able to obtain the necessary licenses on acceptable terms or at all, and if we could not obtain such licenses, we might not be able to reengineer our products successfully or in a timely fashion. If we fail to address any infringement issues successfully, we would be forced to incur significant costs, including damages and potentially satisfying indemnification obligations that we have with our customers, and we could be prevented from selling certain of our products.

Our intellectual property or proprietary rights could be misappropriated, which could force us to become involved in expensive and time-consuming litigation.

We regard our intellectual property as critical to our success. Accordingly, we rely upon a combination of copyrights, service marks, trademarks, trade secret rights, patents, confidentiality agreements and licensing agreements to protect our intellectual property. Despite these protections, a third party could misappropriate our intellectual property. Any misappropriation of our proprietary information by third parties could harm our business, financial condition and operating results. In addition, the laws of some countries do not provide the same level of protection of our proprietary information as do the laws of the United States. If our proprietary information or material were misappropriated, we might have to engage in litigation to protect it. We might not succeed in protecting our proprietary information if we initiate intellectual property litigation, and, in any event, such litigation would be expensive and time-consuming, could divert our management’s attention away from running our business and could seriously harm our business.

The use of open source software in our products may expose us to additional risks.

Certain open source software is licensed pursuant to license agreements that require a user who distributes the open source software as a component of the user’s software to disclose publicly part or all of the source code to the user’s software. This effectively renders what was previously proprietary software open source software. As competition in our markets increases, we must reduce our product development costs. Many features we may wish to add to our products in the future may be available as open source software and our development team may wish to make use of this software to reduce development costs and speed up the development process. While we carefully monitor the use of all open source software and try to ensure that no open source software is used in such a way as to require us to disclose the source code to the related product, such use could inadvertently occur. Additionally, if a third party has incorporated certain types of open source software into its software but has failed to disclose the presence of such open source software and we embed that third party software into one or more of our products, we could, under certain circumstances, be required to disclose the source code to our product. This could have a material adverse effect on our business.

Market acceptance of new platforms, standards and technologies may require us to undergo the expense of developing and maintaining compatible product lines.

Our software products can be licensed for use with a variety of platforms, standards and technologies, and we are constantly evaluating the feasibility of adding new platforms, standards and technologies. There may be future or existing platforms, standards and technologies that achieve popularity in the marketplace which may not be architecturally compatible with our software products. In addition, the effort and expense of developing, testing and maintaining software products will increase as more platforms, standards and technologies achieve market acceptance within our target markets. If we are unable to achieve market acceptance of our software products or adapt to new platforms, standards and technologies, our sales and revenues will be adversely affected.

Developing and maintaining different software products could place a significant strain on our resources and software product release schedules, which could harm our revenue and financial condition. If we are not able to develop software for accepted platforms, standards and technologies, our license and service revenues and our gross margins could be adversely affected. In addition, if the platforms, standards and technologies we have developed software for are not accepted, our license and service revenues and our gross margins could be adversely affected.

If we fail to manage our exposure to global financial and securities market risk successfully, our operating results and financial statements could be materially impacted.

We are exposed to financial market risks, including changes in interest rates, foreign currency exchange rates, credit markets and prices of marketable equity and fixed-income securities. We do not use derivative financial instruments for speculative or trading purposes.

The primary objective of most of our investment activities is to preserve principal while at the same time maximizing yields without significantly increasing risk. To achieve this objective, a majority of our marketable investments are investment grade, liquid, fixed-income securities and money market instruments denominated in U.S. dollars. If the carrying value of our investments exceeds the fair value, and the decline in fair value is deemed to be other-than-temporary, we will be required to further write down the value of our investments, which could materially harm our results of operations and financial condition. Moreover, the performance of certain securities in our investment portfolio correlates with the credit condition of the U.S. financial sector. With the current unstable credit environment, we might incur significant realized, unrealized or impairment losses associated with these investments.

A significant portion of our net revenue and expenses are transacted in U.S. dollars. However, some of these activities are conducted in other currencies, primarily currencies in EMEA and APJ. As a response to the risks of changes in value of foreign currency denominated transactions, we may enter into foreign currency forward contracts or other instruments, the majority of which mature within approximately one month. Our foreign currency forward contracts reduce, but do not eliminate, the impact of currency exchange rate movements. For example, we do not execute forward contracts in all currencies in which we conduct business. Accordingly, such amounts denominated in foreign currencies may fluctuate in value and produce significant earnings and cash flow volatility.

As a multinational corporation, we are subject to income taxes as well as non-income based taxes, in both the United States and various foreign jurisdictions. Significant judgment is required in determining our global provision for income taxes and other tax liabilities. In the ordinary course of a global business, there are many intercompany transactions and calculations where the ultimate tax determination is uncertain. We are regularly under audit by tax authorities.

Although we believe that our tax estimates are reasonable, we cannot assure that the final determination of tax audits or tax disputes will not be different from what is reflected in our historical income tax provisions and accruals.

We are also subject to non-income taxes, such as payroll, sales, use, value-added, net worth, property and goods and services taxes, in both the United States and various foreign jurisdictions. We are regularly under audit by tax authorities with respect to these non-income taxes and may have exposure to additional non-income tax liabilities.

We earn a significant portion of our total revenues from international sales generated through our foreign direct and indirect operations. As a result of these sales operations, we face risks arising from local political, legal and economic factors such as the general economic conditions in each country or region, varying regulatory requirements and compliance with international and local trade, labor and other laws. We may also face difficulties in managing our international operations, collecting receivables in a timely fashion and repatriating earnings. Any of these factors, either individually or in combination, could materially impact our international operations and adversely affect our business as a whole.

Our software may have defects and errors that could lead to a loss of revenues or product liability claims.

Our products and platforms use complex technologies and, despite extensive testing and quality control procedures, may contain defects or errors, especially when first introduced or when new versions or enhancements are released. If defects or errors are discovered after commercial release of either new versions or enhancements of our products and platforms:

If any or all of the foregoing occur, we may lose revenues, incur higher operating expenses and lose market share, any of which could severely harm our financial condition and operating results.

The outcome of litigation pending against us could require us to expend significant resources and could harm our business and financial resources.

Note 9 to our Condensed Consolidated Financial Statements describes the litigation pending against us and our directors and officers. The uncertainty associated with substantial unresolved lawsuits could harm our business, financial condition and reputation. The defense of the lawsuits could result in the diversion of our management’s time and attention away from business operations, which could harm our business. Negative developments with respect to the lawsuits could cause our stock price to decline. In addition, although we are unable to determine the amount, if any, that we may be required to pay in connection with the resolution of the lawsuits by settlement or otherwise, any such payment could seriously harm our financial condition and liquidity.

Natural or other disasters could disrupt our business and result in loss of revenue or in higher expenses.

Natural disasters, terrorist activities and other business disruptions could seriously harm our revenue and financial condition and increase our costs and expenses. Our corporate headquarters and many of our operations are located in California, a seismically active region. In addition, many of our current and potential customers are concentrated in a few geographic areas. A natural disaster in one of these regions could have a material adverse impact on our U.S. and foreign operations, operating results and financial condition. Further, any unanticipated business disruption caused by Internet security threats, damage to global communication networks or otherwise could have a material adverse impact on our operating results.

Our stock price may be volatile, which could cause investors to lose all or part of their investments in our stock.

The stock market in general and the stock prices of technology companies in particular, have experienced volatility which has often been unrelated to the operating performance of any particular company or companies. During fiscal year 2007, our stock price fluctuated between a high of $10.45 and a low of $6.72. If market or industry-based fluctuations continue, our stock price could decline in the future regardless of our actual operating performance and investors could lose all or part of their investments.

Any failure by us to meet the requirements of current or newly-targeted customers may have a detrimental impact on our business or operating results.

We may wish to expand our customer base into markets in which we have limited experience. In some cases, customers in different markets, such as financial services or government, have specific regulatory or other requirements which we must meet. For example, in order to maintain contracts with the U.S. government, we must comply with specific rules and regulations relating to and that govern such contracts. Government contracts are generally subject to audits and investigations which could result in various civil and criminal penalties and administrative sanctions, including termination of contracts, refund of a portion of fees received, forfeiture of profits, suspension of payments, fines and suspensions or debarment from future government business. If we fail to meet such requirements in the future, we could be subject to civil or criminal liability or a reduction of revenue which could harm our business, operating results and financial condition.

We license from Reuters the intellectual property that was incorporated into early versions of some of our software products. We do not own this licensed technology. Because Reuters has access to intellectual property used in our products, it could use this intellectual property to compete with us. Reuters is not restricted from using the licensed technology it has licensed to us to produce products that compete with our products, and it can grant limited licenses to the licensed technology to others who may compete with us. In addition, we must license to Reuters all of the products we own and the source code for one of our messaging products, through December 2012. This may place Reuters in a position to more easily develop products that compete with ours.

Some provisions in our certificate of incorporation and bylaws, as well as a stockholder rights plan, may have anti-takeover effects.

We have a stockholder rights plan providing for one right for each outstanding share of our common stock. Each right, when exercisable, entitles the registered holder to purchase certain securities at a specified purchase price. The rights plan may have the anti-takeover effect of causing substantial dilution to a person or group that attempts to acquire TIBCO on terms not approved by our Board of Directors. The existence of the rights plan could limit the price that certain investors might be willing to pay in the future for shares of our common stock and could discourage, delay or prevent a merger or acquisition that stockholders may consider favorable. In addition, provisions of our current certificate of incorporation and bylaws, as well as Delaware corporate law, could make it more difficult for a third party to acquire us without the support of our Board of Directors, even if doing so would be beneficial to our stockholders.

In April 2007, our Board of Directors approved a stock repurchase program pursuant to which we may repurchase up to $300.0 million of our outstanding common stock. The remaining authorized amount for stock repurchases under this program was approximately $69.6 million as of the end of the first quarter of fiscal year 2008.

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.


TIBCO SOFTWARE INC.

By:		/S/ MURRAY D. RODE
		Murray D. Rode Chief Financial Officer and Executive Vice President, Strategic Operations

By:		/S/ SYDNEY L. CAREY
		Sydney L. Carey Senior Vice President, Corporate Controller


Delaware		77-0449727
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)


		Page No.
PART I.	FINANCIAL INFORMATION

Item 1.	Condensed Consolidated Financial Statements:

	Condensed Consolidated Balance Sheets as of February 29, 2008 and November 30, 2007	3

	Condensed Consolidated Statements of Operations for the Three Months Ended February 29, 2008 and February 28, 2007	4

	Condensed Consolidated Statements of Cash Flows for the Three Months Ended February 29, 2008 and February 28, 2007	5

	Notes to Condensed Consolidated Financial Statements	6

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	20

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	32

Item 4.	Controls and Procedures	33

PART II.	OTHER INFORMATION

Item 1.	Legal Proceedings	35

Item 1A.	Risk Factors	35

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

Item 6.	Exhibits	41

	Signatures	43


	February 29, 2008		November 30, 2007
ASSETS
Current assets:
Cash and cash equivalents	$	203,242	$	170,237
Short-term investments		83,222		95,534
Accounts receivable, net of allowances of $3,866 and $ 4,259		113,580		161,730
Prepaid expenses and other current assets		49,039		53,540

Total current assets		449,083		481,041
Property and equipment, net		109,629		111,390
Goodwill		409,635		412,256
Acquired intangible assets, net		104,151		110,930
Long-term deferred income tax assets		40,805		35,307
Other assets		46,023		47,535

Total assets	$	1,159,326	$	1,198,459

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	8,299	$	12,076
Accrued liabilities		75,662		95,526
Accrued excess facilities costs		4,927		5,421
Deferred revenue		138,018		127,200
Current portion of long-term debt		1,951		1,924

Total current liabilities		228,857		242,147
Accrued excess facilities costs, less current portion		9,557		10,811
Long-term deferred revenue		11,374		14,319
Long-term deferred income tax liabilities		18,107		25,821
Long-term income tax liabilities		11,843		—
Long-term debt, less current portion		44,060		44,558
Other long-term liabilities		4,756		5,006

Total liabilities		328,554		342,662

Commitments and contingencies (Note 8)
Minority interest		407		401
Stockholders’ equity:
Common stock, $0.001 par value; 1,200,000 shares authorized; 186,375 shares and 191,150 shares issued and outstanding, respectively		186		191
Additional paid-in capital		781,872		794,568
Accumulated other comprehensive income		34,612		32,993
Retained earnings		13,695		27,644

Total stockholders’ equity		830,365		855,396

Total liabilities and stockholders’ equity	$	1,159,326	$	1,198,459


	Three Months Ended
	February 29, 2008			February 28, 2007
Revenue:
License revenue	$	57,753		$	52,185
Service and maintenance revenue:
Service and maintenance		86,858			71,939
Reimbursable expenses		1,967			1,530

Total service and maintenance revenue		88,825			73,469

Total revenue		146,578			125,654

Cost of revenue:
License		7,280			4,071
Service and maintenance		35,770			30,828

Total cost of revenue		43,050			34,899

Gross profit		103,528			90,755
Operating expenses:
Research and development		25,454			21,015
Sales and marketing		54,388			42,949
General and administrative		13,798			12,752
Amortization of acquired intangible assets		4,140			2,470

Total operating expenses		97,780			79,186

Income from operations		5,748			11,569
Interest income		3,258			6,390
Interest expense		(842	)		(368	)
Other income (expense), net		238			(1,265	)

Income before provision for income taxes and minority interest		8,402			16,326
Provision for income taxes		2,833			5,923
Minority interest, net of tax		55			12

Net income	$	5,514		$	10,391

Net income per share:
Basic	$	0.03		$	0.05

Diluted	$	0.03		$	0.05

Shares used in computing net income per share:
Basic		186,315			208,398

Diluted		190,064			216,306


	Three Months Ended
	February 29, 2008			February 28, 2007
Operating activities:
Net income	$	5,514		$	10,391
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation of property and equipment		4,015			4,080
Amortization of acquired intangible assets		7,957			3,872
Stock-based compensation		5,150			3,936
Deferred income tax		(5,368	)		(588	)
Tax benefits related to stock benefit plans		3,887			1,991
Excess tax benefits from stock-based compensation		(3,801	)		(2,561	)
Minority interest, net of tax		55			12
Other non-cash adjustments, net		67			(76	)
Changes in operating assets and liabilities:
Accounts receivable		47,491			46,844
Prepaid expenses and other assets		1,096			558
Accounts payable		(3,778	)		(1,700	)
Accrued liabilities and excess facilities costs		(9,776	)		(24,759	)
Deferred revenue		7,666			(48	)

Net cash provided by operating activities		60,175			41,952

Investing activities:
Purchases of short-term investments		(34,999	)		(70,900	)
Maturities and sales of short-term investments		48,264			51,477
Purchases of private equity investments		(9	)		(20	)
Proceeds from private equity investments		222			—
Purchases of property and equipment		(2,256	)		(2,607	)
Restricted cash pledged as security		(124	)		(725	)

Net cash provided by (used in) investing activities		11,098			(22,775	)

Financing activities:
Proceeds from exercise of stock options		1,936			8,530
Proceeds from employee stock purchase program		1,528			898
Repurchases of the Company’s common stock		(45,271	)		(41,814	)
Excess tax benefits from stock-based compensation		3,801			2,561
Principal payments on long-term debt		(471	)		(620	)
Proceeds from minority investors		—			189

Net cash used in financing activities		(38,477	)		(30,256	)

Effect of foreign exchange rate changes on cash and cash equivalents		209			(682	)

Net increase (decrease) in cash and cash equivalents		33,005			(11,761	)
Cash and cash equivalents at beginning of the period		170,237			138,912

Cash and cash equivalents at end of the period	$	203,242		$	127,151

Supplemental disclosures:
Income taxes paid	$	1,993		$	2,837

Interest paid	$	637		$	816

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


Pro forma adjusted total revenue	$	136,856

Pro forma adjusted net income	$	4,901

Pro forma adjusted net income per share:
Basic	$	0.02

Diluted	$	0.02


										Classified on Balance Sheet
	Purchased/ Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Aggregate Fair Value		Cash and Cash Equivalents		Short-term Investments
As of February 29, 2008:
U.S. government debt securities	$	33,246	$	657	$	(3	)	$	33,900	$	1,398	$	32,502
Corporate debt securities		36,663		347		(16	)		36,994		—		36,994
Asset-backed securities		8,728		71		—			8,799		—		8,799
Mortgage-backed securities		4,876		59		(8	)		4,927		—		4,927
Money market funds		59,540		—		—			59,540		59,540		—

	$	143,053	$	1,134	$	(27	)	$	144,160	$	60,938	$	83,222

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

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


	February 29, 2008		November 30, 2007
Contractual maturities:
Less than one year	$	38,661	$	12,682
One to three years		44,561		82,852

	$	83,222	$	95,534


	Less than 12 months					More than 12 months				Total
	Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses
Corporate debt securities	$	4,441	$	(3	)	$	—	$	—	$	4,441	$	(3	)
Asset-backed securities		5,619		(16	)		—		—		5,619		(16	)
Mortgage-backed securities		461		(8	)		—		—		461		(8	)

	$	10,521	$	(27	)	$	—	$	—	$	10,521	$	(27	)


			Fair Value Measurements at Reporting Date using
Description	February 29, 2008		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant other Observable Inputs (Level 2)
Assets:
Money market fund	$	59,540	$	59,540	$	—
U.S. government debt securities		33,900		33,900		—
Corporate debt securities		36,994		—		36,994
Asset-backed securities		8,799		—		8,799
Mortgage-backed securities		4,927		—		4,927
Foreign currency forward contracts		229		—		229
Liabilities:
Foreign currency forward contracts	$	247	$	—	$	247


Balance as of November 30, 2007	$	412,256
Foreign currency translation		(2,621	)

Balance as of February 29, 2008	$	409,635


	As of February 29, 2008							As of November 30, 2007
	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount
Developed technologies	$	88,598	$	(48,946	)	$	39,652	$	88,171	$	(45,460	)	$	42,711
Customer base		43,422		(20,767	)		22,655		43,112		(19,228	)		23,884
Patents/core technologies		22,794		(9,131	)		13,663		23,143		(8,412	)		14,731
Trademarks		7,081		(4,718	)		2,363		7,170		(4,530	)		2,640
Non-compete agreements		1,480		(980	)		500		1,480		(863	)		617
OEM customer royalty agreements		1,000		(1,000	)		—		1,000		(1,000	)		—
Maintenance agreements		38,012		(12,694	)		25,318		37,892		(11,545	)		26,347

	$	202,387	$	(98,236	)	$	104,151	$	201,968	$	(91,038	)	$	110,930


	Accrued Excess Facilities
	Headquarter Facilities			Staffware Integration			Total
	Headquarter Facilities			Staffware Integration			Total
As of November 30, 2007	$	15,596		$	634		$	16,230
Cash utilized		(1,278	)		(467	)		(1,745	)

As of February 29, 2008	$	14,318		$	167		$	14,485


	Total			Remainder of 2008			2009			2010			2011			2012		Thereafter
Operating commitments:
Debt principal	$	46,011		$	1,453		$	2,033		$	2,148		$	2,269		$	2,397	$	35,711
Debt interest		12,040			1,872			2,400			2,285			2,164			2,036		1,283
Operating leases		35,040			8,061			8,050			6,407			4,678			3,228		4,616

Total operating commitments		93,091			11,386			12,483			10,840			9,111			7,661		41,610

Restructuring-related commitments:
Gross lease obligations		20,941			5,027			7,551			7,720			643			—		—
Estimated sublease income		(6,203	)		(1,493	)		(2,236	)		(2,282	)		(192	)		—		—

Net restructuring-related commitment		14,738			3,534			5,315			5,438			451			—		—

Total commitments	$	107,829		$	14,920		$	17,798		$	16,278		$	9,562		$	7,661	$	41,610


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

Granted	252			7.54
Exercised	(756	)		2.62
Forfeited or expired	(644	)		8.19

Outstanding at February 29, 2008	36,490		$	8.39	4.98	$	17,696

Vested and expected to vest at February 29, 2008	34,249		$	8.43	4.89	$	17,118

Exercisable at February 29, 2008	28,735		$	8.56	4.59	$	15,366


Nonvested Stock Awards	Restricted Stock		Restricted Stock Units		Total Number of Shares Underlying Stock Awards		Weighted- Average Grant-Date Fair Value
Nonvested at November 30, 2007	2,042		578		2,620		$	8.28
Granted	485		12		497			7.42
Vested	(3	)	(2	)	(5	)		8.20
Forfeited	(79	)	(6	)	(85	)		8.16

Nonvested at February 29, 2008	2,445		582		3,027			8.14


	Unrealized Gain (Loss) in Available-for-Sale Securities		Foreign Currency Translation		Accumulated Other Comprehensive Income
Balance as of November 30, 2007	$	357	$	32,636	$	32,993
Net change during three month period		750		869		1,619

Balance as of February 29, 2008	$	1,107	$	33,505	$	34,612


	February 29, 2008		November 30, 2007
Property and equipment, net:
United States	$	100,899	$	102,044
United Kingdom		3,096		3,435
Other		5,634		5,911

	$	109,629	$	111,390


(In thousands, except per share amounts)	Total Number of Shares Purchased	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs
December 1, 2007 – January 2, 2008	—		—	—	$	114,881
January 3, 2008 – February 1, 2008	4,889	$	7.24	4,889	$	79,496
February 2, 2008 – March 2, 2008	1,277	$	7.74	1,277	$	69,610

	6,166	$	7.34	6,166	$	69,610



3.1(1)		Certificate of Incorporation of Registrant.

3.2(2)		Bylaws of Registrant.

10.1(3)#		1996 Stock Option Plan, as amended and restated.

31.1		Rule 13a-14(a) / 15d-14(a) Certification by Chief Executive Officer.

31.2		Rule 13a-14(a) / 15d-14(a) Certification by Chief Financial Officer.

32.1		Section 1350 Certification by Chief Executive Officer.

32.2		Section 1350 Certification by Chief Financial Officer.


Exhibit No.		Description

3.1(1)		Certificate of Incorporation of Registrant.

3.2(2)		Bylaws of Registrant.

10.1(3)#		1996 Stock Option Plan, as amended and restated.

31.1		Rule 13a-14(a) / 15d-14(a) Certification by Chief Executive Officer.

31.2		Rule 13a-14(a) / 15d-14(a) Certification by Chief Financial Officer.

32.1		Section 1350 Certification by Chief Executive Officer.

32.2		Section 1350 Certification by Chief Financial Officer.