Form 10-Q

Large accelerated filer

Accelerated filer

Non-accelerated filer

¨ (Do not check if a smaller reporting company)

Smaller reporting company

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. Yes x No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x

The number of shares outstanding of the registrant’s common stock, $0.001 par value, as of July 6, 2012 was 162,085,627 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 (“GAAP”) have been condensed or omitted in accordance with such rules and regulations. The condensed consolidated balance sheet data as of November 30, 2011 was derived from audited financial statements, but does not include all disclosures required by GAAP. In the opinion of management, the accompanying unaudited Condensed Consolidated Financial Statements reflect all adjustments, consisting only of normal recurring adjustments, necessary for a fair statement of our financial position and our 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 included in our 2011 Annual Report on Form 10-K for the fiscal year ended November 30, 2011.

Our fiscal year ends on November 30^th of each year. For purposes of presentation, we have indicated the second quarter of fiscal years 2012 and 2011 as ended on May 31, 2012 and May 31, 2011, respectively; whereas in fact, the second quarter of fiscal years 2012 and 2011 actually ended on June 3, 2012 and May 29, 2011, respectively. There were 91 days in the second quarter of both fiscal years 2012 and 2011.

The Condensed Consolidated Financial Statements include the accounts of us and our wholly-owned and majority-owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation. For majority-owned subsidiaries, we reflect the noncontrolling interest of the portion we do not own on our Condensed Consolidated Balance Sheets in Equity and our Condensed Consolidated Statements of Operations.

The results of operations for the three and six months ended May 31, 2012 are not necessarily indicative of the results that may be expected for the fiscal year ending November 30, 2012, or any other future period, and we make no representations related thereto.

Our significant accounting policies and recent accounting pronouncements were described in Note 2 to our Consolidated Financial Statements included in our 2011 Annual Report on Form 10-K for the fiscal year ended November 30, 2011. There have been no significant changes in our accounting policies since November 30, 2011.

License revenue consists principally of revenue earned under software license agreements. License revenue is generally recognized when a signed contract or other persuasive evidence of an arrangement exists, the software has been shipped or electronically delivered, the license fee is fixed or determinable and collection of the resulting receivable is probable. When contracts contain multiple software and software-related elements (for example, software license, maintenance, and professional services) wherein Vendor-Specific Objective Evidence (“VSOE”) exists for all undelivered elements, we account for the delivered elements in accordance with the “Residual Method.” VSOE of fair value for maintenance and support is established by a stated renewal rate, if substantive, included in the license arrangement or rates charged in stand-alone sales of maintenance and support. VSOE of fair value of consulting and training services is based upon stand-alone sales of those services.

Provided all other revenue criteria are met, the upfront, minimum, non-refundable license fees from original equipment manufacturer (“OEM”) customers are generally recognized upon delivery, and on-going royalty fees are generally recognized upon reports of units shipped. Revenue on shipments to resellers is recognized when all revenue criteria are met and is recorded net of related costs to the resellers. Revenue from subscription license agreements, which include software, rights to unspecified future products and maintenance, is recognized ratably over the term of the subscription period.

Maintenance revenue consists of fees for providing software updates on a when-and-if available basis and technical support for software products (“post-contract customer support” or “PCS”). Maintenance revenue is recognized ratably over the term of the agreement. Payments received in advance of services performed are deferred.

Professional services revenue consists primarily of revenue received for assisting with the implementation of our software, on-site support, training and other consulting services. Many customers who license our software also enter into separate professional services arrangements with us. In determining whether professional services revenue should be accounted for separately from license revenue, we evaluate whether the professional services are considered essential to the functionality of the software using factors such as the nature of our software products; whether they are ready for use by the customer upon receipt; the nature of our implementation services, which typically do not involve significant customization to or development of the underlying software code; the availability of services from other vendors; whether the timing of payments for license revenue is coincident with performance of services; and whether milestones or acceptance criteria exist that affect the realizability of the software license fee. Substantially all of our professional services arrangements are billed on a time and materials basis and, accordingly, are recognized as the services are performed. Contracts with fixed or not-to-exceed fees are recognized on a proportional performance model based on actual services performed. If there is significant uncertainty about the project completion or receipt of payment for professional services, revenue is deferred until the uncertainty is sufficiently resolved. Training revenue is recognized as training services are delivered. Payments received in advance of consulting or training services performed are deferred and recognized when the related services are performed. Work performed and expenses incurred in advance of invoicing are recorded as unbilled receivables. These amounts are billed in the subsequent month. Allowances for estimated future returns and discounts are provided for upon recognition of revenue.

For arrangements that do not qualify for separate accounting for the license and professional services revenues, including arrangements that involve significant modification or customization of the software, that include milestones or customer specific acceptance criteria that may affect collection of the software license fees, or where payment for the software license is tied to the performance of professional services, software license revenue is generally recognized together with the professional services revenue using either the percentage-of-completion or completed-contract method. The completed contract method is used for contracts where there is a risk over final acceptance by the customer or for contracts that are short term in nature. Under the percentage-of-completion method, revenue recognized is equal to the ratio of costs expended to date to the anticipated total contract costs, based on current estimates of costs to complete the project. If there are milestones or acceptance provisions associated with the contract, the revenue recognized will not exceed the most recent milestone achieved or acceptance obtained. If the total estimated costs to complete a project exceed the total contract amount, indicating a loss, the entire anticipated loss would be recognized in the current period.

In the first quarter of fiscal year 2011 we adopted the amended accounting guidance for certain multiple deliverable revenue arrangements that:

We occasionally enter into multiple element revenue arrangements in which a customer may purchase a combination of software licenses, hosting services, maintenance, professional services and hardware. If a tangible hardware product includes software, we determine if the tangible hardware and the software work together to deliver the product’s essential functionality. If so, the entire product is accounted for as a non-software deliverable; otherwise the hardware product and the software are accounted for separately. For multiple element arrangements that contain non-software related elements, for example our hosting services, we allocate revenue to each non-software element based upon the relative selling price of each, and if software and software-related elements are also included in the arrangement, to those elements as a group based on our ESP for the group. When applying the relative selling price method, we determine the selling price for each deliverable using VSOE of selling price, if it exists, then TPE of selling price. If neither VSOE nor TPE of selling price exist for a deliverable, we use our ESP for multiple element arrangements that include non-software components. The objective of ESP is to determine the price at which we would transact a sale if the product or service were sold on a stand-alone basis. We determine ESP by considering multiple factors, including, but not limited to, geographies, market conditions, competitive

landscape, internal costs, gross margin objectives, and pricing practices. ESP is generally used for offerings that are not typically sold on a stand-alone basis or for new or highly customized offerings. Revenue allocated to each element is then recognized when the basic revenue recognition criteria are met for each element. The manner in which we account for multiple element arrangements that contain only software and software-related elements remains unchanged.

While we use our best estimates and assumptions as part of the purchase price allocation process to value assets acquired and liabilities assumed at the business combination date, our estimates and assumptions are subject to refinement. As a result, during the preliminary purchase price allocation period, which may be up to one year from the business combination date, we record adjustments to the assets acquired and liabilities assumed, with the corresponding offset to goodwill. We record adjustments to assets acquired or liabilities assumed subsequent to the purchase price allocation period in our operating results in the period in which the adjustments were determined.

The total purchase price allocated to the tangible assets acquired is assigned based on the fair values as of the date of the acquisition. The fair value assigned to identifiable intangible assets acquired is determined using the income approach which discounts expected future cash flows to present value using estimated assumptions determined by management. We believe that these identified intangible assets will have no residual value after their estimated economic useful lives. The identifiable intangible assets are subject to amortization on a straight-line basis as this best approximates the benefit period related to these assets.

The excess of the purchase price over the identified tangible and intangible assets, less liabilities assumed, is recorded as goodwill and primarily reflects the value of the synergies expected to be generated from combining our and the acquired entities’ technology and operations. Generally none of the goodwill recorded in connection with the acquisitions is deductible for income tax purposes.

On April 10, 2012, we acquired LogLogic, Inc. (“LogLogic”), a private company based in San Jose, California and incorporated in Delaware. LogLogic is a provider of scalable log and security management platforms. We paid $131.6 million, net of cash acquired, to acquire all of the outstanding shares of capital stock of LogLogic. We have also incurred $0.7 million of transaction costs associated with the acquisition. As a result of the acquisition, we assumed facility leases, certain liabilities and commitments of LogLogic. Management is currently evaluating the purchase price allocation for this transaction.

The preliminary allocation of the purchase price for the LogLogic acquisition, as of the date of the acquisition, is as follows (in thousands):

On August 30, 2011, TIBCO International Holdings B.V., one of our indirect wholly-owned subsidiaries, acquired Nimbus Partners Limited (“Nimbus”), a private company organized under the laws of England and Wales and a provider of business process discovery and analysis applications that help companies drive adoption of business process initiatives. We paid $42.0 million of cash to acquire the outstanding equity of Nimbus. We have also incurred $1.0 million of acquisition related and other expenses associated with the acquisition. As a result of the acquisition, we assumed facility leases, certain liabilities and commitments of Nimbus. We are evaluating the purchase price allocation following consummation of the transaction.

The preliminary allocation of the purchase price for the Nimbus acquisition, as of the date of the acquisition, is as follows (in thousands):

On December 7, 2010, we acquired LoyaltyLab, Inc. (“Loyalty Lab”), a private company incorporated in Delaware. Loyalty Lab is an independent provider of loyalty management solutions that allow marketers to manage loyalty programs from their desktop. This acquisition provides us international presence in the customer loyalty market. We paid $23.5 million in cash to acquire all of the outstanding shares of capital stock of Loyalty Lab. We have also incurred $0.4 million of acquisition related and other expenses associated with the acquisition. As a result of the acquisition, we assumed facility leases and certain liabilities and commitments of Loyalty Lab.

The allocation of the purchase price for the Loyalty Lab acquisition is as follows (in thousands):

The results of operations of LogLogic, Nimbus and Loyalty Lab have been included in the Consolidated Financial Statements subsequent to the acquisition dates. The following unaudited pro forma adjusted summary for the three and six months ended May 31, 2012 and 2011 assumes LogLogic, Nimbus and Loyalty Lab had been acquired at the beginning of fiscal year 2011 (in thousands, except per share data):

The unaudited pro forma results presented include amortization charges for acquired intangible assets, adjustments for incremental compensation expense related to the post-combination service arrangements entered into with the continuing employees and related tax effects. The unaudited pro forma adjusted summary combines the historical results for TIBCO for those periods with the historical results for LogLogic, Nimbus and Loyalty Lab for the same periods. The summary is presented for informational purposes only and is not intended to be indicative of future results of operations or whether similar results would have been achieved if the acquisition had taken place at the beginning of fiscal year 2011.

Marketable securities, which are classified as available-for-sale and included either in cash and cash equivalents if their maturities were three months or less or in short term investments on the Condensed Consolidated Balance Sheet, are summarized below as of May 31, 2012 and November 30, 2011 (in thousands):

FASB guidance for fair value measurements 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, the guidance 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 equivalents 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 money market securities and 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 and state, municipal and provincial obligations. Such instruments are generally classified within Level 2 of the fair value hierarchy.

We execute our foreign currency contracts primarily in the retail market in an over-the-counter environment with a relatively high level of price transparency. The market participants usually are large multi-national 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.

The fair value hierarchy of our cash equivalents, marketable securities and foreign currency contracts is as follows (in thousands):

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 U.S. dollar is our major transaction currency; we also transact business in approximately 25 foreign currencies worldwide, of which the most significant to our operations is the Euro. We enter into forward contracts with financial institutions to manage our currency exposure related to net assets and liabilities denominated in foreign currencies, and 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 the following forward contracts outstanding as of May 31, 2012 (in thousands):

The change in the carrying value of goodwill for the six months ended May 31, 2012 is as follows (in thousands):

Certain of our intangible 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 May 31, 2012 and November 30, 2011 are as follows (in thousands):

In order to achieve cost efficiencies and realign our resources and operations, our Board of Directors approved restructuring plans initiated by management in fiscal years 2011 and 2010. The following is a summary of activities in accrued restructuring and excess facilities costs for the six months ended May 31, 2012 under these plans (in thousands):

The remaining accrued excess facilities costs represent the estimated loss on abandoned excess facilities, net of estimated sublease income, which is expected to be paid over the next two years. As of May 31, 2012, $1.0 million of the $2.0 million accrued restructuring and excess facilities costs were classified as long-term liabilities.

In connection with the purchase of our corporate headquarters in June 2003, we recorded a $54.0 million mortgage note to a financial institution collateralized by the commercial real property acquired. The balance on the mortgage note was $36.9 million and $38.1 million as of May 31, 2012 and November 30, 2011, respectively.

The mortgage note carries a 20-year amortization and a fixed annual interest rate of 5.50%. The $34.4 million principal balance 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 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. In addition, we are subject to certain non-financial covenants as provided in the agreements. As of May 31, 2012, we were in compliance with all covenants under the mortgage note agreements.

In November 2009, we entered into a three year $150.0 million unsecured revolving credit facility (the “2009 Credit Facility”). In December 2011, we and one of our subsidiaries entered into an Amended and Restated Credit Agreement (the “2011 Credit Facility”). In May 2012, we amended certain covenants and other terms of the 2011 Credit Facility. The 2011 Credit Facility matures on December 19, 2016 and provides for borrowings of up to $250.0 million with a sublimit for swing line loans of up to $10.0 million and standby letters of credit in a face amount of up to $50.0 million. We have an option to request that the lenders increase the available commitments by up to an additional $100.0 million for total borrowings of up to $350.0 million.

Revolving loans accrue interest at a per annum rate based on, at our option, either (i) the base rate plus a margin ranging from 0.25% to 1.25%, depending on TIBCO’s consolidated leverage ratio or (ii) the London Interbank Offered Rate (“LIBOR”) rate plus a margin ranging from 1.25% to 2.25%, depending on TIBCO’s consolidated leverage ratio, for various interest periods. The base rate is defined as the highest of (i) the administrative agent’s prime rate, (ii) the federal funds rate plus a margin equal to 0.50%, and (iii) the LIBOR rate for a one month interest period plus a margin of 1.00%. We are also obligated to pay commitment fees for the unused amount of the 2011 Credit Facility, letter of credit fees and other customary fees. Loan origination fees and issuance costs of approximately $3.4 million were incurred since consummation of the 2011 Credit Facility which will be amortized through interest expense over a period of five years. Under certain circumstances, a default interest rate of 2.00% above the applicable interest rate will apply on all obligations during the existence of an event of default under the 2011 Credit Facility.

We must maintain a minimum consolidated interest coverage ratio of 3.5:1.0 and a maximum consolidated leverage ratio of 3.25:1.00 in addition to other customary affirmative and negative covenants. The maximum consolidated leverage ratio decreases to 3.00:1.00 and then to 2.75:1.00 at the beginning of the second fiscal quarter of our fiscal years 2013 and 2014, respectively. As of May 31, 2012, we were in compliance with all covenants under this facility.

As of May 31, 2012, we had no outstanding borrowings under the 2011 Credit Facility.

We also have a $20.0 million revolving line of credit that matures in June 2013 (the “Line of Credit”). The revolving Line of Credit is available for cash borrowings and for the issuance of letters of credit up to $20.0 million. The Line of Credit contains financial covenants substantially identical to those of the 2011 Credit Facility, as well as other customary affirmative and negative covenants. As of May 31, 2012, we were in compliance with all covenants under the 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 collateralized under the Line of Credit which renews for successive one-year periods until the mortgage note payable has been satisfied in full. In addition, we have $1.4 million of irrevocable letters of credit outstanding in connection with revenue transactions.

As of May 31, 2012, no other borrowings were outstanding under the Line of Credit.

We have a revolving guarantee credit line of approximately $12.4 million available for the issuance of bank guarantees denominated in foreign currency. Issued bank guarantees were approximately $11.9 million and $11.4 million as of May 31, 2012 and November 30, 2011, respectively, and were collateralized by pledging the equivalent amount under restricted cash as required under our guarantee credit line. Other various contractual commitments also require us to pledge cash as security and record this cash under restricted cash. As of May 31, 2012 and November 30, 2011, we had restricted cash of $13.9 million and $13.8 million, respectively, which is included in Other Assets on our Condensed Consolidated Balance Sheets.

In April 2012, we issued convertible senior notes (the “Notes”) in an aggregate principal amount of $600.0 million due May 1, 2032. The Notes bear interest at a rate of 2.25% per annum. The Notes do not contain any financial covenants or any restrictions on the payment of dividends, the incurrence of senior debt or other indebtedness, or the issuance or repurchase of securities by us. Each $1,000 principal amount of Notes is initially convertible, at the option of the holders, at a rate of 19.7750 shares of our common stock, which represents an initial conversion price of approximately $50.57 per share, which is subject to adjustment upon the occurrence of certain events specified in the indenture. On conversion of a Note, we will deliver cash in an amount generally equal to the lesser of the conversion value and the principal amount of each Note and, for any conversion value greater than the principal amount, we will deliver shares of common stock. Holders may convert Notes prior to February 1, 2032, and other than during the period from February 1, 2017 to May 5, 2017, under the following circumstances: (1) if the Notes are called for redemption, at any time prior to the redemption date; (2) during any fiscal quarter commencing after the fiscal quarter ending on September 2, 2012, if our last reported sale price for at least 20 trading days during a period of 30 consecutive trading days ending on the last trading day of the immediately preceding fiscal quarter is greater than or equal to 130% of the conversion price on each applicable trading day; (3) during any five consecutive trading day period when the trading price per $1,000 principal amount of Notes is less than 98% of the product of the last reported sale price of a share of common stock and the conversion rate; and (4) upon the occurrence of certain distributions or corporate events as specified in the indenture governing the Notes. From February 1, 2017 to May 5, 2017, and from February 1, 2032 until the maturity date, holders may convert Notes at any time, regardless of the foregoing circumstances.

After May 5, 2017, we may redeem for cash all or part of the Notes. The redemption price will be equal to the principal amount of the Notes to be redeemed, plus accrued and unpaid interest. Holders may require us to repurchase all or a portion of their Notes on May 5, 2017, May 1, 2022 and May 1, 2027 in cash at a price equal to the principal amount, plus accrued and unpaid interest.

Upon the occurrence of a fundamental change under the indenture for the Notes such as in the event of a change in control, the holders may require us to repurchase all or a portion of their Notes at the principal amount of the Notes plus accrued and unpaid interest. Following certain corporate transactions that constitute a change of control, the conversion rate may increase for a holder who elects to convert the Notes. Upon conversion, we will deliver an amount of cash and a number of shares of common stock, if any, equal to the sum of the daily settlement amounts for each daily volume weighted average price in the 35 day observation period for such Note as determined pursuant to the indenture for the Notes.

We used approximately $121.0 million of the net proceeds from the offering to repurchase 3.6 million shares of our common stock concurrently with the offering of the Notes.

Accounting guidance requires that convertible debt that can be settled for cash, such as the Notes, be separated into the liability and equity component at issuance and each be assigned a value. The value assigned to the liability component is the estimated fair value, as of the issuance date, of a similar debt without the conversion feature. The difference between the cash proceeds and estimated fair value of the liability component, representing the value of the conversion premium assigned to the equity component, is recorded as a debt discount on the issuance date. This debt discount is amortized to interest expense using the effective interest method over the period from the issuance date through the first stated put date on May 5, 2017. We estimated the straight debt borrowing rates at debt origination to be 5.50% for the Notes and determined the debt discount to be $84.6 million. As a result, a conversion premium after tax of $52.6 million was recorded in additional paid-in capital.

As of May 31, 2012, the carrying value of the Notes was $517.0 million, which consisted of $600.0 million outstanding principal amount net of $83.0 million unamortized debt discount.

In connection with the issuance of the Notes, we incurred $15.6 million of issuance costs, which primarily consisted of investment banker fees and legal and other professional service fees. Deferred issuance costs of $13.4 million attributable to the liability component are being amortized to interest expense through May 1, 2017, and $2.2 million ($1.4 million net of tax) of transaction costs attributable to the equity component were netted with the equity component in additional paid-in capital at the issuance date. The deferred debt issuance costs are recorded within other assets in accordance with short- and long-term classification. If the holders require conversion of some or all of the Notes when the conversion requirements are met, we would accelerate amortization of the pro rata share of the unamortized balance of the issuance cost to additional paid-in capital on such date.

For the second quarter ended May 31, 2012, we recognized interest expense of $3.3 million related to the Notes, comprised of $1.4 million for the contractual coupon interest, $1.6 million related to the amortization of debt discount and $0.3 million related to the amortization of deferred debt issuance costs.

The Notes are carried at face value less any unamortized debt discount and also require disclosure of an estimate of fair value. The fair value of the Notes at each balance sheet date is determined based on recent quoted market prices or dealer quotes for the Notes, if available. Otherwise, the fair value is determined using cash-flow models of the scheduled payments discounted at market interest rates for comparable debt without the conversion feature. As of May 31, 2012, the estimated fair value of the Notes approximated their carrying value.

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 market condition. 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 twelve 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 May 2019. Rental expense was $3.4 million and $3.6 million for the three months ended May 31, 2012 and 2011, respectively, and $7.2 million and $6.8 million for the six month periods ended May 31, 2012 and 2011, respectively.

As of May 31, 2012, contractual commitments associated with indebtedness, lease obligations and restructuring were as follows (in thousands):

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

The above commitment table does not include approximately $24.2 million of long-term income tax liabilities due to the fact that we are unable to reasonably estimate the timing of these potential future payments.

Our software license agreements typically provide for indemnification of customers for intellectual property infringement claims. 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.

On January 21, 2010, JuxtaComm-Texas Software, LLC (“JuxtaComm”) filed a complaint for patent infringement against us and other defendants in the United States District Court for the Eastern District of Texas, Case No. 6:10-CV-00011-LED. On April 22, 2010, JuxtaComm filed an amended complaint in which it alleges that certain TIBCO offerings, including TIBCO ActiveMatrix Business Works™, TIBCO iProcess™ Suite, TIBCO Business Studio™ and TIBCO ActiveMatrix^® Service Bus infringe U.S. Patent No. 6,195,662 (“’662 patent”). JuxtaComm seeks injunctive relief and unspecified damages. On May 6, 2010, we filed an answer and counterclaims in which we denied JuxtaComm’s claims and asserted counterclaims for declaratory relief that the asserted patent is invalid and not infringed.

On May 12, 2011, the U.S. Patent & Trademark Office (“PTO”) issued a Final Office Action rejecting all asserted claims of the ’662 patent in a separate re-examination proceeding before the PTO. On September 9, 2011, JuxtaComm filed a Notice of Appeal to the Board of Patent Appeals and Interferences (“BPAI”), challenging the Final Office Action. JuxtaComm’s Appeal before the BPAI is currently pending.

On May 15, 2012, the Court in the Eastern District of Texas granted the defendants’ motion for summary judgment on invalidity of the asserted claims. On May 16, 2012, the Court issued an order staying all deadlines and vacating the trial date in light of the Court’s grant of summary judgment of invalidity. On July 5, 2012, the Court issued an order containing its opinion supporting the Court’s grant of summary judgment.

We will continue to defend the action vigorously. While we believe that we have valid defenses to JuxtaComm’s claims, and the Court granted the motion for summary judgment, litigation is inherently unpredictable and we cannot make any predictions as to the outcome of this litigation. It is possible that our business, financial position, or results of operations could be negatively affected by an unfavorable resolution of this action, however, we are unable to estimate a range of potential loss at this time.

On November 24, 2010, InvestPic, LLC (“InvestPic”) filed a complaint for patent infringement against us and fourteen other defendants in the United States District Court for the District of Delaware, Case No. 1:10cv01028-SLR. The complaint alleges that TIBCO Spotfire^® S+^® “and other similar products” infringe U.S. Patent No. 6,349,291 (the “’291 patent”). On March 29, 2011, defendant SAS Institute Inc. (“SAS”) filed a motion to dismiss the complaint for failure to state a claim for relief on the basis that all the asserted claims of the ’291 patent are invalid as being directed to unpatentable subject matter. On May 13, 2011, TIBCO, along with other defendants, filed a motion to dismiss the complaint on the same grounds as SAS’ motion. On September 30, 2011, the Court denied this motion to dismiss. However, the Court declined to address the merits of defendants’ arguments that the claims of the ’291 patent are directed to unpatentable subject matter, in the absence of discovery or claim construction. On May 3, 2012, defendants SAS, Algorithmics (U.S.), Inc. and International Business Machines Corp. filed a motion to stay the litigation pending the reexamination of the ’291 patent. On July 10, 2012, the Court entered an order to stay the litigation and administratively close the case during the pendency of the reexamination of the ’291 patent.

InvestPic seeks injunctive relief and unspecified damages. We intend to defend the action vigorously. While we believe that we have valid defenses to InvestPic’s claims, litigation is inherently unpredictable and we cannot make any predictions as to the outcome of this litigation. It is possible that our business, financial position, or results of operations could be negatively affected by an unfavorable resolution of this action. As InvestPic has made no specific demand for damages in this matter other than injunctive relief, we cannot currently estimate a reasonably possible range of loss for this action.

On December 23, 2011, Vasudevan Software, Inc. (“Vasudevan”) filed a complaint for patent infringement against us and Spotfire Inc. in the United States District Court for the Northern District of California, Case No. 3:11-cv-06638-RS. The complaint alleges that TIBCO directly, indirectly, and willfully infringes U.S. Patent No. 7,167,864 B1 based on “Spotfire Analytics and other products.” Vasudevan further alleges in its infringement contentions that the accused products “include at least the TIBCO Spotfire Platform (e.g., TIBCO Spotfire Professional, TIBCO Spotfire Server, TIBCO Spotfire Web Player, TIBCO Spotfire Enterprise Player, TIBCO Spotfire for the Apple iPad, TIBCO Spotfire Application Data Services, TIBCO Spotfire Developer, TIBCO Spotfire Metrics, TIBCO Spotfire Network Analytics, TIBCO Spotfire Operations Analytics Bundle, and TIBCO Silver Spotfire) at least versions 4.0 to 2.1, as well as any TIBCO products and services that utilize the TIBCO Spotfire Platform.” Vasudevan amended its complaint on March 6, 2012, but continues to accuse the same products of infringement. Vasudevan seeks injunctive relief and unspecified damages. On May 18, 2012, the Court dismissed Vasudevan’s indirect and willful infringement claims.

The Court issued a case management scheduling order on April 27, 2012, including a September 12, 2012 claim construction hearing, a fact discovery deadline of February 15, 2013, and an expert discovery deadline of May 3, 2013. A trial date for the case has not yet been scheduled. We intend to defend the action vigorously. While we believe that we have valid defenses to Vasudevan’s claims, litigation is inherently unpredictable and we cannot make any predictions as to the outcome of this litigation. It is possible that our business, financial position, or results of operations could be negatively affected by an unfavorable resolution of this action. As Vasudevan has made no specific demand for relief in this matter other than injunctive relief, we cannot currently estimate a reasonably possible range of loss for this action.

On February 10, 2012, YYZ, LLC (“YYZ”) filed a complaint for patent infringement against us in the United States District Court for the District of Delaware, Case No. 1:12-cv-00170-SLR. On April 18, 2012, YYZ filed a first amended complaint for patent infringement. YYZ alleges that certain TIBCO offerings, including at least TIBCO Business Studio, infringe U.S. Patent No. 8,046,747 (the “‘747 patent”). On May 7, 2012, we filed an answer and counterclaims to YYZ’s first amended complaint in which we denied YYZ’s claims and asserted counterclaims for declaratory relief that the ‘747 patent is invalid and not infringed.

YYZ seeks injunctive relief and unspecified damages. We intend to defend the action vigorously. While we believe that we have valid defenses to YYZ’s claims, litigation is inherently unpredictable and we cannot make any predictions as to the outcome of this litigation. It is possible that our business, financial position, or results of operations could be negatively affected by an unfavorable resolution of this action, however, we are unable to estimate a range of potential loss at this time.

Stock-based compensation cost for the three months ended May 31, 2012 and 2011 was $14.4 million and $11.8 million, respectively. Stock-based compensation cost for the six months ended May 31, 2012 and 2011 was $29.7 million and $23.3 million, respectively. The deferred tax benefit from stock-based compensation expenses for the three months ended May 31, 2012 and 2011 was $4.8 million and $3.9 million, respectively. The deferred tax benefit on stock-based compensation expenses for the six months ended May 31, 2012 and 2011 was $9.9 million and $7.9 million, respectively.

The following table summarizes additional information pertaining to our stock-based compensation from stock options and stock awards which are comprised of restricted stock, restricted stock units and performance-based restricted stock units (in thousands, except grant-date fair value and recognition period):

Our comprehensive income (loss) 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 (loss) for the periods indicated is as follows (in thousands):

The comprehensive income (loss) of the noncontrolling interest includes the portion of net income and translation adjustment related of our majority-owned subsidiaries.

The effective tax rate was approximately 21% and 22% for the three months ended May 31, 2012 and 2011, respectively, and approximately 18% and 18% for the six months ended May 31, 2012 and 2011, respectively.

In the three months ended February 28, 2012, we recognized a discrete benefit of $1.8 million primarily related to the lapse of various statutes of limitations and a true-up for prior period withholding taxes. In the three months ended February 28, 2011, we recognized a discrete benefit of $3.2 million tax benefit primarily related to lapses of statutes of limitations and the reinstatement of the federal research and development credit.

In the three months ended May 31, 2012, we recognized a discrete provision of $3.1 million primarily related to estimated withholding taxes in jurisdictions where we do not expect to benefit from a foreign tax credit. We recognize these as discrete items because of the high variability of withholding tax rates by country and the difficulty in forecasting the exact country of future revenue.

The provision for the six month periods ended May 31, 2012 and 2011 reflects a forecasted annual tax rate of 16% and 26%, respectively, offset by discrete items which are booked in the period they occur. The forecasted tax rate reflects the benefits resulting from the reorganization of certain foreign entities, lower foreign taxes, the release of the valuation allowance on certain domestic tax assets (fiscal year 2011), domestic manufacturing incentives, and federal and state research and development credits (federal R&D credit expired on December 31, 2011), partially offset by the impact of certain stock compensation charges and state income taxes.

For California state taxation we elected the single sales factor apportionment; we expect that the election will reduce our future taxable income and thus may affect the extent to which we can benefit from $10.0 million in deferred tax assets from research and development credit carryforwards. If we determine that it is more likely than not that we will not be able to fully utilize these credits, we will be required to book a valuation allowance against theses deferred tax assets.

During the three months ended May 31, 2012, the amount of gross unrecognized tax benefits increased by approximately $2.9 million primarily due to current period exposures. The total amount of gross unrecognized tax benefits was $48.2 million as of May 31, 2012, of which $29.0 million would benefit tax expense if realized. We elected to include interest expense and penalties accrued on unrecognized tax benefits as a component of our income tax expense. We do not expect any significant changes to the amount of unrecognized tax benefit within the next twelve months.

We are subject to periodic corporate income tax audits in both the United States and foreign jurisdictions. As of May 31, 2012 we have several tax audits at various stages of completion. We believe that we have provided adequate reserves to cover any potential audit adjustments. The statute of limitations for our fiscal years 1994 through 2011 remains open for U.S. purposes. Most foreign jurisdictions have statutes of limitations that range from three to six years.

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):

In fiscal year 2010, we granted 4.1 million performance-based restricted stock units (“PRSUs”) that contain performance metrics based on the attainment and maintenance of specified non-GAAP EPS goals. If the performance criteria are achieved, these PRSUs will be considered outstanding for the purpose of computing diluted EPS if the effect is dilutive. The dilutive impact of these awards will be deferred until the performance criteria have been met which at the earliest is as of the first quarter of fiscal year 2013.

Anti-dilutive potential common stock equivalents for the three and six months ended May 31, 2012 include the weighted effect of the 11.9 million shares that could be issued under the Notes if we experience substantial increases in our common stock price. Under the treasury stock method, the Notes will generally have a dilutive impact on net income per share if our average stock price for the period exceeds the conversion price for the Notes. On conversion of a Note, however, we will deliver cash in an amount generally equal to the lesser of the conversion value and the principal amount of each Note and, only for any conversion value greater than the principal amount, we will deliver shares of common stock.

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, organized by the following geographic regions: (i) Americas; (ii) Europe, the Middle East and Africa (“EMEA”); and (iii) Asia Pacific and Japan (“APJ”), based on the location at which each sale originates, is summarized as follows (in thousands):

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

On March 29, 2012, we announced that 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 connection with the approval of this program, our Board of Directors also terminated our previous $300.0 million stock repurchase program from December 2010, and the remaining authorized amount of $38.4 million under the December 2010 stock repurchase program was canceled.

During the six months ended May 31, 2012, we repurchased 6.5 million shares for $188.5 million under the stock repurchase programs, including 3.6 million shares for $121.0 million in connection with our issuance of the Notes during the three months ended May 31, 2012.

In connection with the repurchase activities during the six months ended May 31, 2012, we classified $59.9 million of the excess purchase price over the par value of our common stock to retained earnings.

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 future events or 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 these words are not the only means of identifying these 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.” This discussion should be read in conjunction with our Consolidated Financial Statements and accompanying notes and with our Annual Report on Form 10-K for the year ended November 30, 2011 and with our quarterly Condensed Consolidated Financial Statements and notes thereto which appear elsewhere in this Quarterly Report on Form 10-Q . 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.

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

Our revenue consists primarily of license and maintenance fees from our customers, distributors and partners (including system integrators, resellers, professional service organizations and business partners) who embed our software in their products. In addition, we receive fees from our customers for providing consulting services. Our revenue is generally derived from a diverse customer base. No single customer represented greater than 10% of our total revenue for the first six months of fiscal year 2012. As of May 31, 2012, 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 collectability and an allowance for returns and discounts based on specifically identified credits and historical experience.

For the second quarter of fiscal year 2012, we recorded total revenue of $247.4 million, an increase of 14% from the second quarter of fiscal year 2011. License revenue was $92.6 million, an increase of 13% from the second quarter of fiscal year 2011. In addition, we generated cash flow from operations of $116.9 million in the second quarter of fiscal year 2012. Diluted earnings per share under generally accepted accounting principles in the United States of America (“GAAP”) was $0.16 in the second quarter of fiscal year 2012 as compared to $0.12 for the second quarter of fiscal year 2011. We ended the quarter with $647.3 million in cash, cash equivalents and short-term investments. We issued $600 million of convertible senior notes and spent $121.0 million to repurchase shares of our common stock during the second fiscal quarter.

During the second fiscal quarter, we also acquired LogLogic, Inc. (“LogLogic”), a provider of scalable log and security management platforms for $131.6 million, net of cash acquired.

We currently intend to grow our business by pursuing key initiatives to: broaden our product platform through internal development and acquisitions; increase our sales capacity by expanding our direct sales organization and developing our channel partnerships; expand our product offerings to new vertical markets; and employ marketing programs to increase awareness of us and our products among existing and prospective customers. Whether or not we are successful depends on our ability to: appropriately manage our expenses as we grow our organization; identify or acquire companies or assets at attractive valuations; enter into beneficial channel relationships; develop new products; and successfully execute our marketing and sales strategies.

The discussion and analysis of our financial condition and results of operations is based upon our Condensed Consolidated Financial Statements, which have been prepared in accordance with GAAP. 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 on a regular basis 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, business combination, impairment of goodwill, intangible and long-lived assets, 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. In addition in our second quarter, we estimated the discount rate based on market interest rates to determine the discount on the convertible senior notes which will be amortized as interest expense over the term of the notes. 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 Operations” of our 2011 Annual Report on Form 10-K for the fiscal year ended November 30, 2011.

Recent accounting pronouncements are detailed in Note 2 to our Consolidated Financial Statements included in our 2011 Annual Report on Form 10-K for the fiscal year ended November 30, 2011.

For purposes of presentation, we have indicated the second quarter of fiscal years 2012 and 2011 as ended on May 31, 2012 and May 31, 2011, respectively; whereas in fact, the second quarter of fiscal years 2012 and 2011 actually ended on June 3, 2012 and May 29, 2011, respectively. There were 91 days in the second quarter of fiscal years 2012 and 2011. All amounts presented in the tables in the following sections of our Results of Operations are stated in thousands 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:

Our Results of Operations include incremental revenue and costs related to the acquisitions of LogLogic, Nimbus and Loyalty Lab. In connection with these acquisitions, we have incurred additional expenses, including amortization of intangible assets and acquired technology; stock-based compensation; personnel and related costs; facility and infrastructure costs; and other charges.

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

Total revenue in the second quarter of fiscal year 2012 increased by $30.9 million, or 14%, compared to the same quarter last year. The increase was primarily comprised of a $10.6 million, or 13%, increase in license revenue and a $20.3 million, or 15%, increase in service and maintenance revenue. Total revenue for the six months ended May 31, 2012 increased by $71.3 million, or 18%, compared to the same period last year.

For the six months ended May 31, 2012, we experienced an increase in total revenue in all geographic regions compared to the same periods last year. See Note 16 to our Condensed Consolidated Financial Statements for total revenue by region. The percentages of total revenue from the geographic regions are summarized as follows:

Our license revenue for the three months and six months ended May 31, 2012 and 2011 was derived from the following three product lines: service oriented architecture (“SOA”) and core infrastructure; business optimization; and process automation and collaboration. The percentages of license revenue from the three product lines are summarized as follows:

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

Cost of license revenue mainly consisted of amortization of developed technology acquired through acquisitions and royalty costs. Cost of license revenue in the second quarter of fiscal year 2012 decreased by $0.3 million, or 3%, compared to the same quarter last year. Cost of license revenue for the six months ended May 31, 2012 decreased by $0.2 million, or 1%, compared to the same period last year.

Service and maintenance revenue in the second quarter of fiscal year 2012 increased by $20.3 million, or 15%, compared to the same quarter last year. Service and maintenance revenue for the six months ended May 31, 2012 increased by $48.5 million, or 19%, compared to the same period last year. Maintenance revenue was 63% and professional services and training revenue was 37% of total service and maintenance revenue for both the three and six months ended May 31, 2012. The increase for the three months and six months ended May 31, 2012 was primarily due to continued growth in our installed software base and an increase in both the number and size of consulting engagements, reflecting our increased focus on providing more services to our customers.

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

Cost of service and maintenance in the second quarter of fiscal year 2012 increased by $7.5 million, or 14%, compared to the same quarter last year. The increase in absolute dollars was primarily due to a $6.4 million increase in employee-related expenses.

Cost of service and maintenance for the six months ended May 31, 2012 increased by $20.5 million, or 21%, compared to the same period last year. The increase was primarily due to a $15.2 million increase in employee related expenses, a $1.6 million increase in travel costs, a $1.1 million increase in sub-contract costs and a $1.0 million increase in facility expenses.

The increase in employee-related expenses for both periods was primarily due to increased headcount and an increase in professional services and customer support staff related to increased professional services projects and services revenue compared to the same period last year.

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.

Research and development expenses in the second quarter of fiscal year 2012 increased by $2.4 million, or 7%, compared to the same quarter last year. The increase was primarily due to a $1.3 million increase in employee-related expenses.

Research and development expenses for the six months ended May 31, 2012 increased by $7.1 million, or 10%, compared to the same period last year. The increase was primarily due to a $5.6 million increase in employee-related expenses.

The increase in employee-related expenses for both periods compared to last year was primarily due to an increase in headcount, partly due to recent acquisitions.

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.

Sales and marketing expenses in the second quarter of fiscal year 2012 increased by $10.0 million, or 15%, compared to the same quarter last year. The increase was primarily due to a $6.8 million increase in employee-related expenses and a $1.4 million increase in travel expenses.

Sales and marketing expenses for the six months ended May 31, 2012 increased by $23.2 million, or 18%, compared to the same period last year. The increase was primarily due to a $16.4 million increase in employee-related expenses, a $3.5 million increase in travel costs and a $1.4 million increase in marketing costs.

The increase in employee-related expenses for both periods compared to last year was primarily due to an increase in headcount. The increase in travel and marketing expenses was due to an expansion of sales and marketing activities.

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.

General and administrative expenses in the second quarter of fiscal year 2012 increased by $1.8 million, or 12%, compared to the same quarter last year. The increase was primarily due to a $2.7 million increase in employee-related expenses.

General and administrative expenses for the six months ended May 31, 2012 increased by $6.5 million, or 23%, compared to the same period last year. The increase was primarily due to a $4.9 million increase in employee-related costs, a $1.1 million increase in fees and charges and a $1.0 million increase in sub-contract costs.

The increase in employee-related expenses was primarily due to an increase in headcount. The increase in fees and charges and sub-contract costs was due to increased consulting projects, professional services, and other fees and charges.

Intangible assets acquired through corporate acquisitions are comprised of the expected value of developed technologies, patents, trademarks, established customer bases and 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.

Acquisition related and other expenses consisted of costs incurred after the issuance of a definitive term sheet for a particular transaction (whether or not such transaction is ultimately completed, remains in-process or is not completed) and included legal, banker, accounting and other advisory fees of third parties and severance costs for employees of the acquired company that are terminated within 90 days of the acquisition date.

Stock-based compensation cost is included in our Condensed Consolidated Statements of Operations corresponding to the same functional lines as cash compensation paid to the same employees in the respective departments as follows:

Total stock-based compensation costs in the second quarter of fiscal year 2012 increased by $2.6 million, or 22%, compared to the same quarter last year primarily due to a $2.2 million increase in stock-based compensation costs related to performance-based restricted stock units (“PRSUs”).

Total stock-based compensation costs for the six months ended May 31, 2012 increased by $6.5 million, or 28%, compared to the same period last year. The increase was primarily due to a $3.5 million increase in stock-based compensation costs related to PRSUs and a $2.1 million increase in stock-based compensation costs related to grants of service-based stock awards.

Interest expense is primarily related to the outstanding borrowings under our convertible senior notes, mortgage note and credit facility.

Interest expense increased in the second quarter of fiscal year 2012 compared to the same quarter last year by $3.4 million, or 362%, due to the issuance of the convertible senior notes and our borrowing under the credit facility. See Note 8 and Note 9 to our Condensed Consolidated Financial Statements for further detail on the credit facility, mortgage note and the convertible senior notes.

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

Other income (expense) increased in the second quarter of fiscal year 2012 compared to the same quarter last year by $1.7 million primarily due to a $1.7 million difference in foreign exchange gains. Other income (expense) increased by $3.0 million for the six months ended May 31, 2012 compared to the same period last year primarily due to a $2.6 million difference in foreign exchange gains for the first six months of fiscal year 2012.

In the three months ended May 31, 2012 we recognized a discrete provision of $3.1 million primarily related to estimated withholding taxes in jurisdictions where we do not expect to benefit from a foreign tax credit. We recognize these as discrete items because of the high variability of withholding tax rates by country and the difficulty in forecasting the exact country of future revenue.

The tax expense for the six-month periods ended May 31, 2012 and 2011 reflects a forecasted tax rate of 16% and 26%, respectively, offset by discrete items which are recognized in the period they are incurred. The forecasted tax rate reflects the benefits resulting from the reorganization of certain foreign entities, lower foreign taxes, a release of the valuation allowance on certain domestic tax assets (fiscal year 2011), domestic manufacturing incentives, and research and development credits (federal R&D credit expired on December 31, 2011), partially offset by the impact of certain stock compensation charges and state income taxes.

We are required to estimate our income taxes in each of the jurisdictions in which we operate. This process involves estimating our current tax exposure under the most recent tax laws and assessing temporary differences resulting from differences in the timing of the recognition of revenue and expense for tax and financial statement purposes. Our temporary differences primarily relate to stock-based compensation charges, amortization of intangible assets, fixed asset depreciation, deferred revenue and other similar items. For California state taxation we elected the single sales factor apportionment which might reduce our future taxable income and thus affect the extent to which we can benefit from $10.0 million in deferred tax assets from research and development credit carryforwards. If we determine that it is more likely than not that we will not be able to fully utilize these credits, we will be required to book a valuation allowance against the deferred tax assets.

With the exception of our subsidiaries in the United Kingdom and Japan, 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.

During the second quarter of fiscal year 2012, the amount of gross unrecognized tax benefits increased by approximately $2.9 million primarily due to current period exposures. The total amount of gross unrecognized tax benefits was $48.2 million as of May 31, 2012, of which $29.0 million would benefit tax expense if realized. We elected to include interest expense and penalties accrued on unrecognized tax benefits as a component of our income tax expense. The change in accrued interest and penalties during the second quarter of fiscal year 2012 was not material. We do not expect any significant changes to the amount of unrecognized tax benefit within the next twelve months. Recent statements from the Internal Revenue Service have indicated their intent to seek greater disclosure by companies of their reserves for uncertain tax positions.

We are subject to periodic corporate income tax audits in both the United States and foreign jurisdictions and there are several tax audits at various stages of completion as of May 31, 2012. We believe that we have provided adequate reserves to cover any potential audit adjustments. The statute of limitations for our fiscal years 1994 through 2011 remains open for U.S. purposes. Most foreign jurisdictions have statutes of limitations that range from three to six years.

Effective December 1, 2010, we changed our organizational operating structure which resulted in the centralization of the majority of our international operations in the Netherlands. As a result of the change, we anticipate that a portion of our consolidated pre-tax income will be subject to foreign tax at comparatively lower tax rates than the United States federal statutory tax rate. Our future effective income tax rates could be adversely affected if tax authorities challenge our international tax structure or if the relative mix of United States and international income changes for any reason. Accordingly, there can be no assurance that our income tax rate will be less than the United States federal statutory rate in future periods.

As of May 31, 2012, we had cash and cash equivalents totaling $647.1 million, representing an increase of $339.0 million from November 30, 2011. As of May 31, 2012, $236.5 million of our cash and cash equivalents were held by our foreign subsidiaries in our foreign operations. Our current intention is to permanently reinvest the majority of our earnings from foreign operations. Our current plans do not anticipate a need to repatriate cash to fund our domestic operations. In the event cash from foreign operations in our foreign operations is needed to fund operations in the U.S., we would be subject to additional income taxes in the United States reduced by any foreign taxes paid on these earnings.

Net cash provided by operating activities in the six months ended May 31, 2012 was $116.9 million, resulting from net income of $47.2 million, $40.5 million in non-cash charges and $29.3 million net change in assets and liabilities. The non-cash charges primarily included depreciation and amortization, stock-based compensation and tax benefits related to stock benefit plans, less deferred income tax and excess tax benefits from stock-based compensation which are recorded in financing activities. Net change in assets and liabilities for the first six months of fiscal year 2012 included a decrease in accounts receivable, a decrease in prepaid expenses and other assets, a decrease in accounts payable, a decrease in accrued liabilities and restructuring costs and an 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 invoiced 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 our accounts payable arrangements.

Net cash used in investing activities was $143.6 million for the six months ended May 31, 2012, resulting primarily from cash used, net of cash acquired, of $131.6 million for the LogLogic acquisition, $11.2 million in capital expenditures and $1.1 million in restricted cash pledged as security.

Net cash provided by financing activities was $380.1 million for the six months ended May 31, 2012, resulting primarily from $584.5 million in net cash received in the issuance of the convertible senior notes, $116.6 million in net cash received from the

2011 Credit Facility, $17.3 million for the exercise of stock options and the sale of our common stock under our ESPP and $16.5 million in excess tax benefits from stock-based compensation, which were partially offset by $188.5 million of repurchases of shares of our common stock, $151.2 million payment of debt and $15.1 million in withholding taxes related to restricted stock net share settlement.

In April 2012, we issued convertible senior notes (the “Notes”) with an aggregate principal amount of $600.0 million due in 2032. We used approximately $121.0 million of the net proceeds from the offering to fund the purchase of approximately 3.6 million shares of our common stock concurrently with the offering of the Notes and approximately $150 million of the net proceeds to repay indebtedness outstanding under the 2011 Credit Facility, which was originally incurred to fund repurchases of our common stock and our acquisition of LogLogic.

On March 29, 2012, we announced that 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. The repurchase of shares of our common stock concurrent with the issuance of the Notes during the second quarter of fiscal year 2012 was made pursuant to this stock repurchase program. In connection with the approval of this program, our Board of Directors also terminated our previous $300.0 million stock repurchase program from December 2010, and the remaining authorized amount of $38.4 million under the December 2010 stock repurchase program available for repurchasing common stock was canceled.

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. We believe that our current cash, cash equivalents and short-term investments and amounts available under our line of credit 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 twelve months. Should demand for our products and services significantly decline over the next twelve months, the available cash provided by operations could be adversely impacted.

In April 2012, we issued convertible senior notes in an aggregate principal amount of $600.0 million due May 1, 2032. The Notes bear interest at a rate of 2.25% per annum. The Notes do not contain any financial covenants or any restrictions on the payment of dividends, the incurrence of senior debt or other indebtedness, or the issuance or repurchase of securities by us. Each $1,000 principal amount of Notes is initially convertible, at the option of the holders, at a rate of 19.7750 shares of our common stock, which represents an initial conversion price of approximately $50.57 per share, which is subject to adjustment upon the occurrence of certain events specified in the indenture. On conversion of a Note, we will deliver cash in an amount generally equal to the lesser of the conversion value and the principal amount of each Note and, for any conversion value greater than the principal amount, we will deliver shares of common stock. Holders may convert Notes prior to February 1, 2032, and other than during the period from February 1, 2017 to May 5, 2017, under the following circumstances: (1) if the Notes are called for redemption, at any time prior to the redemption date; (2) during any fiscal quarter commencing after the fiscal quarter ending on September 2, 2012, if our last reported sale price for at least 20 trading days during a period of 30 consecutive trading days ending on the last trading day of the immediately preceding fiscal quarter is greater than or equal to 130% of the conversion price on each applicable trading day; (3) during any five consecutive trading day period when the trading price per $1,000 principal amount of Notes is less than 98% of the product of the last reported sale price of a share of Common Stock and the conversion rate; and (4) upon the occurrence of certain distributions or corporate events as specified in the indenture governing the Notes. From February 1, 2017 to May 5, 2017, and from February 1, 2032 until the maturity date, holders may convert Notes at any time, regardless of the foregoing circumstances.

Upon the occurrence of a fundamental change under the indenture for the Notes, such as in the event of a change in control, the holders may require us to repurchase all or a portion of their Notes at the principal amount of the Notes plus accrued and unpaid interest. Following certain corporate transactions that constitute a change of control, the conversion rate may increase for a holder who elects to convert the Notes. Upon conversion, we will deliver an amount of cash and a number of shares of common stock, if any, equal to the sum of the daily settlement amounts for each daily volume weighted average price in the 35 day observation period for such Note as determined pursuant to the indenture for the Notes.

In November 2009, we entered into the three year $150.0 million unsecured revolving credit facility. In December 2011, we and one of our subsidiaries entered into an Amended and Restated Credit Agreement. The 2011 Credit Facility matures on December 19, 2016 and provides for borrowings of up to $250.0 million with a sublimit for swing line

loans of up to $10.0 million and standby letters of credit in a face amount of up to $50.0 million. We have an option to request that the lenders increase the available commitments by up to an additional $100.0 million for total borrowings of up to $350 million. In May 2012, we amended certain covenants and other terms of the 2011 Credit Facility.

Revolving loans accrue interest at a per annum rate based on, at our option, either (i) the base rate plus a margin ranging from 0.25% to 1.25%, depending on TIBCO’s consolidated leverage ratio or (ii) the LIBOR rate plus a margin ranging from 1.25% to 2.25%, depending on TIBCO’s consolidated leverage ratio, for various interest periods. The base rate is defined as the highest of (i) the administrative agent’s prime rate, (ii) the federal funds rate plus a margin equal to 0.50%, and (iii) the LIBOR rate for a one month interest period plus a margin of 1.00%. We are also obligated to pay commitment fees for the unused amount of the 2011 Credit Facility, letter of credit fees and other customary fees. Loan origination fees and issuance costs of approximately $3.4 million were incurred since consummation of the 2011 Credit Facility which will be amortized through interest expense over a period of five years. Under certain circumstances, a default interest rate of 2.00% above the applicable interest rate will apply on all obligations during the existence of an event of default under the 2011 Credit Facility.

We also have a $20.0 million revolving line of credit that matures in June 2013. The revolving Line of Credit is available for cash borrowings and for the issuance of letters of credit up to $20.0 million. The Line of Credit, as amended, contains financial covenants substantially identical to those of the 2011 Credit Facility, as well as other customary affirmative and negative covenants. As of May 31, 2012, we were in compliance with all covenants under the 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 collateralized under the Line of Credit which renews for successive one-year periods until the mortgage note payable has been satisfied in full. In addition, we have approximately $1.4 million of irrevocable letters of credit outstanding in connection with revenue transactions.

As of May 31, 2012, no other borrowings were outstanding under the Line of Credit.

We have a revolving guarantee credit line of approximately $12.4 million available for the issuance of bank guarantees denominated in foreign currency. Issued bank guarantees were approximately $11.9 million and $11.4 million as of May 31, 2012 and November 30, 2011, respectively, and were collateralized by pledging the equivalent amount under restricted cash as required under our guarantee credit line. Other various contractual commitments also require us to pledge cash as security and record this cash under restricted cash. As of May 31, 2012 and November 30, 2011, we had restricted cash of $13.9 million and $13.8 million, respectively, which is included in other assets on our Condensed Consolidated Balance Sheets.

In June 2003, we purchased our corporate headquarters with a $54.0 million mortgage note to lower our operating costs. The mortgage note carries a 20-year amortization and 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 comply with other non-financial terms as defined in the agreements. We were in compliance with all covenants under the mortgage note agreements as of May 31, 2012.

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 10 years based upon changes in fair market value of the land. Should it become necessary, we have the option to prepay any rent increases as a result of a change in fair market value.

As of May 31, 2012, our contractual commitments associated with indebtedness, lease obligations and restructuring were as follows (in thousands):

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

Our indemnification obligations are summarized in Note 10 to our Condensed Consolidated Financial Statements.

We are exposed to the impact of foreign currency fluctuations and interest rate changes.

We conduct business in the Americas, EMEA and APJ and transact business in approximately 25 foreign currencies worldwide. 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.

We enter into forward contracts with financial institutions to manage our currency exposure related to net assets and liabilities denominated in foreign currencies, and these forward contracts are generally settled monthly. We do not enter into derivative financial instruments for trading purposes. We use natural hedges, for example, by offsetting exposures in net assets for one entity with net liabilities of the same currency for another entity. Generally, we manage our currency risk so that an increase or decrease in the value of our forward contracts would offset a corresponding decrease or increase in the US dollar value of net assets or liabilities exposed to the shift in that particular currency, thereby minimizing the impact on earnings. As of May 31, 2012, we had two outstanding forward contracts denominated in United States dollars and two outstanding forward contracts denominated in Euros that resulted in a net loss of $0.1 million.

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 investment policy is designed to protect and preserve invested funds by limiting default, market and investment risk. Our exposure to market rate risk for changes in interest rates relates primarily to interest paid on our credit facility and our investments.

Currently, we maintain our cash in current accounts or money market funds. In general, money market funds are not considered to be subject to interest rate risk because the interest paid on such funds fluctuates with the prevailing interest rate. As of May 31, 2012, our cash and cash equivalents totaled $647.1 million, of which $441.4 million was held in money market funds. As of May 31, 2012, a hypothetical 100 basis point increase in interest rates would not have a significant impact on the fair value of our investments.

Interest on borrowings under the 2011 Credit Facility is based at specified margins above either LIBOR or a base rate defined in the 2011 Credit Facility, whereas the interest rate on our Notes is fixed over its term. Our exposure to interest rate risk under the 2011 Credit Facility will depend on the extent to which we utilize such facility. As of May 31, 2012, the 2011 Credit Facility had a borrowing capacity of $250.0 million and with no outstanding borrowings. A hypothetical 100 basis point increase in the LIBOR or Prime Rate-based interest rate on the 2011 Credit Facility would result in an increase in our interest expense by $1.0 million per year for every $100.0 million borrowed. See Note 8 for a discussion of the 2011 Credit Facility.

Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of the design and operation of our “disclosure controls and procedures,” as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of the end of the period covered by this Quarterly Report on Form 10-Q, our disclosure controls and procedures were effective at the reasonable assurance level 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.

Our disclosure controls and procedures are designed to provide reasonable assurance of achieving their objectives as specified above. 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, the design of a control system must reflect that there are resource constraints, thus, 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 probability of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.

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 11 to our Condensed Consolidated Financial Statements.

In addition to the factors discussed elsewhere in this Form 10-Q, 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. These risk factors should be read in conjunction with the other information contained in our other SEC filings, including our Form 10-K for the fiscal year ended November 30, 2011.

Our future revenue is unpredictable, and we expect our quarterly operating results to fluctuate, which may cause our stock price to decline.

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:

A substantial portion of our product license orders are usually received in the last month of each fiscal quarter, with a concentration of such orders in the final two weeks of the quarter. While we typically ship product licenses shortly after the receipt of an order, we may have license orders that have not shipped at the end of any given quarter. Because the amount of such product license orders may vary, the amount, if any, of such orders at the end of a particular quarter is not a reliable predictor of our future performance.

Because it is difficult for us to predict our quarterly operating results, period-to-period comparisons of our operating results may not be a good indication of our future performance. If, as a result of these difficulties, our revenues and operating results do not meet the expectations of our investors or securities analysts or fall below guidance we may provide to the market, the price of our common stock may decline.

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.

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 this software and the related 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 if 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.

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 process automation and collaboration, including companies such as IBM, Oracle, Pegasystems, Progress Software, SAP, and Software AG. We also face competition for certain aspects of our product and service offerings from major systems integrators, and our customers have alternatives to our proprietary software from open source software providers 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. 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. This may allow our present or future competitors 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. For example, some of our competitors offer products outside our segment and routinely bundle these products with their infrastructure software products. Also, some of our competitors are expanding their competitive product offerings and strengthening their market position through increases in capital expenditures for internal research and development. Accordingly, we may not be able to compete effectively in our markets or against existing and future competitors, which could adversely affect our business and operating results.

Additionally, consolidation in the software industry has been a trend in recent years and is continuing at a rapid pace. Our current and potential competitors could make additional strategic acquisitions, consolidate their operations, or establish cooperative relationships among themselves or with other solution providers, allowing them to broaden their offerings of products and solutions and more effectively address the needs of our prospective customers, including acting as sole-source vendors for our customers. If any of this were to occur, it could adversely affect our business and operating results.

Our strategy contemplates future acquisitions that may result in our 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 have acquired and expect to continue to acquire complementary businesses, products or technologies as part of our corporate strategy. In this regard, we have made a number of strategic acquisitions in recent years. We do not know if we will be able to complete any future acquisitions 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, could distract our management, could increase our debt to finance such acquisition, could increase our capital expenditures to support such new business and could require us to manage larger and more complex operations. Therefore, we may 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, among other things, 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 may need to raise additional funds through public or private financings or use our cash reserves. In that event, we may not be able to raise additional funds or 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. The terms of existing or future 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.

We may not be able to achieve our key initiatives and grow our business as anticipated.

While we currently intend to grow our business by pursuing key initiatives to: broaden our product platform through internal development and acquisitions; increase our sales capacity by expanding our direct sales organization and developing our channel partnerships; expand our product offerings to new vertical markets; and employ marketing programs to increase awareness of our company and our products among existing and prospective customers, we cannot assure you that we will be able to achieve these key initiatives. Our success depends on our ability to: appropriately manage our expenses as we grow our organization; identify or acquire companies or assets at attractive valuations; enter into beneficial channel relationships; develop new products; and successfully execute our marketing and sales strategies. If we are not able to execute on these actions, our business may not grow as we anticipated, and our operating results could be adversely affected.

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

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 or challenged, 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.

Claims by others that our products may infringe their intellectual property rights may cause us to incur unexpected costs or prevent us from selling our products.

Third parties may claim that certain of our products infringe their patents or other intellectual property rights. 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, with or without merit, is expensive and time consuming, could cause product shipment delays 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, which could require the payment of royalty or licensing fees, 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 to our customers, and we could be prevented from selling certain of our products.

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 a variety of risks, including:

Any of these factors, either individually or in combination, could materially impact our international operations and adversely affect our business as a whole.

Economic and market conditions have in the past adversely affected, and may in the future adversely affect, our operating results.

We are subject to risks arising from adverse changes and uncertainty in domestic and global economies. For example, past domestic and global economic downturns resulted in reduced demand for information technology, including enterprise software and services. The direction and relative strength of the global economy continues to be uncertain and volatile, and could be adversely affected by, among other things, concerns regarding Europe’s potential sovereign-debt crisis and other potential financial issues, unrest in the Middle East, tightening in the credit markets, downturns in the financial industry, issues related to the United States’ debt and budget, and other geopolitical factors, and makes it difficult for us to forecast operating results and to make decisions about future investments. We cannot predict the duration of these economic conditions or the impact they may have on our customers or business. Information technology spending has historically declined or been postponed as general economic and market conditions have worsened. During challenging and uncertain economic times and in tight credit markets, many customers delay or reduce technology purchases. Contract negotiations may become more protracted or difficult if customers institute additional internal approvals for technology purchases or require more negotiation of contract terms and conditions. These economic conditions, and uncertainty as to the general direction of the macroeconomic environment, are beyond our control and could result in reductions in sales of our products, longer sales cycles, difficulties in collection of accounts receivable or delayed payments, slower adoption of new technologies, increased price competition and reductions in the rate at which our customers renew their maintenance agreements and procure consulting services.

We have historically realized, and may continue in the future to realize, an increasingly high percentage of our revenue from services, which has a lower profit margin than license or maintenance revenue. As a result, if consulting and training services revenue increases as a percentage of total revenue, our overall profit margin may decrease, which could impact our stock price.

Changes in foreign currency exchange rates could negatively affect our operating results.

In addition to receiving revenue and incurring expenses in U.S. dollars, we also receive revenue and incur expenses in approximately twenty-five foreign currencies. As a result of these international sales and operations, our revenue, expenses and net income are impacted by foreign exchange rate fluctuations against the U.S. dollar. For example, any strengthening of the U.S. dollar against foreign currencies would result in lower revenues from our international sales when sales are calculated into U.S. dollars, although these decreases may be partially offset by lower operating expenses. Additionally, customers in foreign

countries that incur higher costs due to the strengthening of the U.S. dollar may elect to delay payments or default on credit extended to them. Any material delay or default in our collection of significant accounts could have a negative result on our results of operations. Additionally, any strengthening of the U.S. dollar could require us to offer discounts, reduce pricing or offer other incentives to mitigate any negative effects on demand from such rise in the U.S. dollar. Further, in the event that the U.S. dollar weakens compared to foreign currencies, we may incur higher operating expenses in those locations and, therefore, our business, financial condition and operating results could suffer. As our international operations continue to grow, or if large fluctuations in foreign exchange rates continue, our revenue, operating expenses and income may be adversely affected.

We enter into foreign currency forward contracts, the majority of which mature within approximately one month, in an effort to manage our exposure from changes in value of certain foreign currency denominated net assets and liabilities. Our foreign currency forward contracts are intended to 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. In addition, our hedging program may not reduce the impact of short-term or long-term volatility in foreign exchange rates. Accordingly, amounts denominated in such foreign currencies may fluctuate in value and produce significant earnings and cash flow volatility.

We may not be able to successfully offer products and enhancements that respond to emerging technological trends and customers’ needs.

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 or acceptance by the marketplace, 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.

Our stock price may be volatile, which could cause investors to incur significant losses.

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. Some of the factors that may affect our common stock price other than our operating results include:

Since December 1, 2010 through the end of our second fiscal quarter of fiscal year 2012, our stock price has fluctuated between a low of $18.43 and a high of $34.67. If market or industry-based fluctuations continue, our stock price could decline in the future regardless of our actual operating performance and investors could incur significant losses.

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 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 justify employee-related expenses, we may be forced to reduce our headcount, which could force us to incur significant expenses and could harm our business and operating results.

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.

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 strive to be cost-effective in our product development activities. 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 solutions.

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.

Any unauthorized, and potentially improper, actions of our personnel could adversely affect our business, operating results and financial condition.

The recognition of our revenue depends on, among other things, the terms negotiated in our contracts with our customers. Our personnel may act outside of their authority and negotiate additional terms without our knowledge. We have implemented policies to help prevent and discourage such conduct, but there can be no assurance that such policies will be followed. For instance, in the event that our sales personnel negotiate terms that do not appear in the contract and of which we are unaware,

whether such additional terms are written or verbal, we could be prevented from recognizing revenue in accordance with our plans. Furthermore, depending on when we learn of unauthorized actions and the size of the transactions involved, we may have to restate revenue for a previously reported period, which would seriously harm our business, operating results and financial condition.

We review our goodwill, intangible and long-lived assets for impairment annually in the fourth quarter or whenever events or changes in circumstances indicate that the carrying amount of these assets may not be recoverable.

Significant negative industry or economic trends, a decline in the market price of our common stock, reduced estimates of future cash flows or disruptions to our business could indicate that goodwill, intangible or long-lived assets might be impaired. If, in any period, our stock price decreases to the point where our market capitalization is less than our book value, this too could indicate a potential impairment and we may be required to record an impairment charge in that period.

Our valuation methodology for assessing impairment requires management to make judgments and assumptions based on historical experience and to rely on projections of future operating performance. We operate in highly competitive environments and projections of future operating results and cash flows may vary significantly from results. Additionally, if our analysis results in an impairment to our goodwill, we would be required to record a non-cash charge to earnings in our financial statements during a period in which such impairment is determined to exist.

Our debt agreements contain certain restrictions that may limit our ability to operate our business.

The agreements governing some of our debt contain, and any other future debt agreement we enter into may contain, restrictive covenants that limit our ability to operate our business, including, in each case subject to certain exceptions, restrictions on our ability to:

In addition, our debt agreements contain financial covenants and additional affirmative and negative covenants. Our ability to comply with these covenants is dependent on our future performance, which will be subject to many factors, some of which are beyond our control, including prevailing economic conditions. If we are not able to comply with all of these covenants for any reason and we have debt outstanding at the time of such failure, some or all of our outstanding debt could become immediately due and payable and the incurrence of additional debt under the credit facilities would not be allowed. If our cash is utilized to repay any outstanding debt, depending on the amount of debt outstanding, we could experience an immediate and significant reduction in working capital available to operate our business. In the event of an acceleration of our debt obligations, we may also not have or be able to obtain sufficient funds to make any accelerated payments, including under our convertible senior notes.

As a result of these covenants, our ability to respond to changes in business and economic conditions and to obtain additional financing, if needed, may be significantly restricted, and we may be prevented from engaging in transactions that might otherwise be beneficial to us, such as strategic acquisitions or joint ventures.

The conversion provisions of our convertible senior notes require us to deliver cash and, in certain circumstances, common stock upon conversion and could dilute the ownership interests of stockholders. In addition, the increase in our debt level from the issuance of the convertible senior notes could adversely affect our liquidity and impede our ability to raise additional capital which may also be affected by the tightening of the capital markets.

In April 2012, we issued $600.0 million aggregate principal amount of convertible senior notes due 2032 (the “Notes”). All of the Notes were outstanding as of May 31, 2012. The Note holders can convert the Notes, under certain circumstances, into cash in an amount generally equal to the lesser of the conversion value and the principal amount of each Note and, for any conversion value greater than the principal amount, into shares of common stock at any time before the Notes mature or we redeem or repurchase them. Upon certain dates (May 5, 2017, May 1, 2022, and May 1, 2027) or the occurrence of certain events including a change in control, the Note holders can require us to repurchase some or all of the Notes.

Upon any conversion of the Notes, we would be required to make cash payments up to the principal amount of any converted Notes. Additionally, our basic earnings per share would be expected to decrease to the extent we are required to issue shares upon conversion because such underlying shares would be included in the basic earnings per share calculation and the conversion would result in dilution to our stockholders. Any new issuance of equity securities, including the issuance of shares upon the conversion of the Notes, could dilute the interests of our then-existing stockholders, including holders who receive shares upon conversion of their Notes, and could decrease the trading price of our common stock and the Notes.

Given that events constituting a “change in control” can trigger repurchase obligations, the existence of such repurchase obligations may delay or discourage a merger, acquisition, or other consolidation.

Our ability to service our debt obligations, make cash payments upon conversion and meet our repurchase or repayment obligations of the Notes will depend upon our future performance, which is subject to economic, competitive, financial, and other factors affecting our industry and operations, some of which are beyond our control. Further, we may not be able to generate sufficient cash flows to enable us to meet our expenses and service our debt, as well as to meet any cash conversion, repurchase or repayment obligations of the Notes. This could limit our flexibility in planning for, or reacting to, changes in our business and the markets in which we operate. If we are unable to meet the obligations out of cash flows from operations or other available funds, we may need to raise additional funds through public or private debt or equity financings. We may not be able to borrow money or sell more of our equity securities to meet our cash needs for various reasons, including the tightening of the capital markets. Even if we are able to do so, it may not be on terms that are favorable or reasonable to us. Any of these events could reduce the availability of cash flow to us to fund working capital, capital expenditures, acquisitions and investments and other general corporate purposes, which could have an adverse effect on our business, operating results and financial condition.

Any losses we incur as a result of our exposure to the credit risk of our customers and partners 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. Any material losses we incur as a result of customer defaults could have an adverse effect on our business, operating results and financial condition.

As a multinational corporation, we are subject to income taxes in 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. Additionally, we may be subject to additional tax expenses to the extent we repatriate cash from our foreign jurisdictions into the United States, and the cost of such repatriation may have the effect of restricting our ability to use our cash as we would like. Our income tax returns are routinely subject to audits by tax authorities. Although we regularly assess the likelihood of adverse outcomes resulting from these examinations to determine our tax estimates, a final determination of tax audits or tax disputes could have an adverse effect on our results of operations and financial condition.

We are also subject to non-income taxes, such as payroll, sales, use, value-added, net worth, property and goods and services taxes in 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 which could have an adverse effect on our results of operations and financial condition.

In addition, our future effective tax rates could be favorably or unfavorably affected by changes in tax rates, changes in the valuation of our deferred tax assets or liabilities, changes in the geographical allocation of our business, or changes in tax laws or their interpretation. Such changes could have a material adverse effect on our financial results.

Changes in existing financial accounting standards or practices, or taxation rules or practices may adversely affect our results of operations.

Changes in existing accounting or taxation rules or practices, new accounting pronouncements or taxation rules, or varying interpretations of current accounting pronouncements or taxation practice could have a significant adverse effect on our results of operations or the manner in which we conduct our business. Further, such changes could potentially affect our reporting of transactions completed before such changes are effective. A change in existing financial accounting standards or practices may even retroactively adversely affect previously reported transactions.

In addition, the Financial Accounting Standards Board is currently working with the International Accounting Standards Board (“IASB”) to converge certain accounting principles and to facilitate more comparable financial reporting between companies that are required to follow GAAP and those that are required to follow International Financial Reporting Standards (“IFRS”). These projects may result in different accounting principles under GAAP, which may have a material impact on the way in which we report financial results in areas including, but not limited to, principles for recognizing revenue, lease accounting, and financial statement presentation. A change in accounting principles from GAAP to IFRS may have a material impact on our financial statements should IFRS be incorporated into the financial reporting system for U.S. companies.

Compliance with changing regulations of corporate governance and public disclosure may result in additional expenses.

Because we are a publicly-traded company, we are subject to certain federal, state and other rules and regulations, including those required by the Sarbanes-Oxley Act of 2002, the Dodd-Frank Wall Street Reform and Consumer Protection Act, new regulations promulgated by the SEC and the rules of the Nasdaq Marketplace. These and other laws relating to corporate governance and public disclosure have increased our general and administrative expenses. These new or changed laws, regulations and standards are subject to varying interpretations in many cases, and as a result, their application in practice may evolve over time as new guidance is provided by regulatory and governing bodies, which could result in higher costs necessitated by ongoing revisions to disclosure and governance practices. We are committed to maintaining high standards of corporate governance and public disclosure. As a result, we intend to invest resources to comply with evolving laws, regulations and standards, and this investment may result in increased general and administrative expenses and a diversion of management time and attention from revenue-generating activities to compliance activities. If our efforts to comply with new or changed laws, regulations and standards result in different outcomes from those intended by regulatory or governing bodies, our business may be harmed.

If we fail to maintain an effective system of internal controls, we may not be able to accurately report our financial results or prevent fraud.

Section 404 of the Sarbanes-Oxley Act requires that management report annually on the effectiveness of our internal control over financial reporting and identify any material weaknesses in our internal control and financial reporting environment. If management identifies any material weaknesses, their correction could require remedial measures which could be costly and time-consuming. In addition, the presence of material weaknesses could result in financial statement errors which in turn could require us to restate our operating results. Any identification by us or our independent registered public accounting firm of material weaknesses, even if quickly remedied, could damage investor confidence in the accuracy and completeness of our financial reports, which could affect our stock price and potentially subject us to litigation.

The continuous process of maintaining and adapting our internal controls and complying with Section 404 is expensive and time-consuming, and requires significant management attention. We cannot be sure that our internal control measures will continue to provide adequate control over our financial processes and reporting and ensure compliance with Section 404. Any failure by us to comply with Section 404 could subject us to a variety of administrative sanctions and harm our reputation, which could reduce our stock price.

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

Note 11 to our Consolidated Financial Statements included in this Quarterly Report on Form 10-Q describes the litigation pending against us and our directors and officers. The uncertainty associated with substantial unresolved lawsuits or future

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 current lawsuits or any future lawsuit by settlement or otherwise, any such payment could seriously harm our financial condition and liquidity.

Our software may have defects or 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.

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 United States 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.

Aspects of our business are subject to privacy concerns and a variety of U.S. and international laws regarding data protection.

Aspects of our business are subject to federal, state and international laws regarding privacy and protection of user data. For example, in the United States regulations such as the Gramm-Leach-Bliley Act of 1999 (as amended or supplemented), which protects and restricts the use of consumer credit and financial information, and the Health Insurance Portability and Accountability Act of 1996 (as amended or supplemented), which regulates the use and disclosure of personal health information, impose significant requirements and obligations on businesses that may affect the use and adoption of our service. The European Union has also adopted a data privacy directive that requires member states to impose restrictions on the collection and use of personal data that, in some respects, are far more stringent, and impose more significant burdens on subject businesses, than current privacy standards in the United States. We post, on our website, our privacy policies and practices concerning the use and disclosure of user data. Any failure by us to comply with our posted privacy policies or other federal, state or international privacy-related or data protection laws and regulations could result in proceedings against us by governmental entities or others which could harm our business, operating results and financial condition.

It is possible that these laws may be interpreted and applied in a manner that is inconsistent with our data practices. If so, in addition to the possibility of fines and penalties, a governmental order requiring that we change our data practices could result, which in turn could harm our business, operating results and financial condition. Compliance with these regulations may involve significant costs or require changes in business practices that result in reduced revenue. Noncompliance could result in penalties being imposed on us or orders that we cease conducting the noncompliant activity.

We face a variety of risks in doing business with the U.S. and foreign governments, various state and local governments, and agencies, including risks related to the procurement process, budget constraints and cycles, termination of contracts and audits.

Our customers include the U.S. government and a number of state and local governments or agencies. There are a variety of risks in doing business with government entities, including:

Procurement. Contracting with public sector customers is highly competitive and can be time-consuming and expensive, requiring that we incur significant up-front time and expense without any assurance that we will win a contract.

Budgetary Constraints and Cycles. Demand and payment for our products and services are impacted by public sector budgetary cycles and funding availability, with funding reductions or delays adversely impacting public sector demand for our products and services.

Termination of Contracts. Public sector customers often have contractual or other legal rights to terminate current contracts for convenience or due to a default. If a contract is terminated for convenience, which can occur if the customer’s needs change, we may only be able to collect payment for products or services delivered prior to termination and settlement expenses. If a contract is terminated because of default, we may not recover even those amounts, and we may be liable for excess costs incurred by the customer for procuring alternative products or services.

Audits. The U.S. government and state and local governments and agencies routinely investigate and audit government contractors for compliance with a variety of complex laws, regulations, and contract provisions relating to the formation, administration or performance of government contracts, including provisions governing reports of and remittances of fees based on sales under government contracts, price protection, compliance with socio-economic policies, and other terms that are particular to government contracts. If, as a result of an audit or review, it is determined that we have failed to comply with such laws, regulations or contract provisions, we may be subject to civil and criminal penalties and administrative sanctions, including termination of contracts, forfeiture of profits, refunds of a portion of fees received, suspension of payments, cost associated with the triggering of price reduction clauses, fines and suspensions or debarment from future government business, and we may suffer harm to our reputation if we are found to have violated terms of our government contracts.

Our customers also include a number of foreign governments and agencies. Similar procurement, budgetary, contract and audit risks also apply to our doing business with these foreign entities. In addition, compliance with complex regulations and contracting provisions in a variety of jurisdictions can be expensive and consume significant management resources. In certain jurisdictions our ability to win business may be constrained by political and other factors unrelated to our competitive position in the market. Each of these difficulties could adversely affect our business and results of operations.

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.

Some provisions in our certificate of incorporation and bylaws, as well as our 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.

On December 21, 2010, we announced that 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.

On March 29, 2012, we announced that 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 the approval of this program, our Board of Directors also terminated our previous $300.0 million stock repurchase program from December 2010, and the remaining authorized amount of approximately $38.4 million under the December 2010 stock repurchase program was canceled.

The following table provides information about the repurchase of our common stock during the second quarter of fiscal year 2012 (in thousands, except per share amounts):

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/ Sydney L. Carey
		Sydney L. Carey Executive Vice President, Chief Financial Officer (Principal Financial Officer and duly authorized officer)

By:		/s/ Brent P. Hogenson
		Brent P. Hogenson Vice President, Corporate Controller (Principal Accounting Officer and duly authorized officer)


		Page No.
PART I.	FINANCIAL INFORMATION

Item 1.	Condensed Consolidated Financial Statements (Unaudited):

	Condensed Consolidated Balance Sheets as of May 31, 2012 and November 30, 2011		3

	Condensed Consolidated Statements of Operations for the Three Months and Six Months Ended May 31, 2012 and 2011		4

	Condensed Consolidated Statements of Cash Flows for the Six Months Ended May 31, 2012 and 2011		5

	Notes to Condensed Consolidated Financial Statements (Unaudited)		6

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		23

Item 3.	Quantitative and Qualitative Disclosures About Market Risk		35

Item 4.	Controls and Procedures		36

PART II.	OTHER INFORMATION

Item 1.	Legal Proceedings		37

Item 1A.	Risk Factors		37

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		48

Item 4.	Mine Safety Disclosures		48

Item 6.	Exhibits		49

	Signatures		50


	May 31, 2012			November 30, 2011
Assets
Current assets:
Cash and cash equivalents	$	647,104		$	308,148
Short-term investments		205			225
Accounts receivable, net of allowances of $5,508 and $5,868		175,436			196,419
Prepaid expenses and other current assets		64,862			61,864

Total current assets		887,607			566,656
Property and equipment, net		93,526			89,871
Goodwill		516,687			451,821
Acquired intangible assets, net		140,156			97,258
Long-term deferred income tax assets		114,267			78,656
Other assets		64,069			48,676

Total assets	$	1,816,312		$	1,332,938

Liabilities and Equity
Current liabilities:
Accounts payable	$	24,921		$	25,802
Accrued liabilities		118,281			129,168
Accrued restructuring costs		997			6,792
Deferred revenue		231,634			210,234
Current portion of long-term debt		2,463			2,397

Total current liabilities		378,296			374,393
Accrued restructuring costs, less current portion		966			1,050
Long-term deferred revenue		21,904			14,876
Long-term deferred income tax liabilities		58,173			4,540
Long-term income tax liabilities		24,174			20,772
Other long-term liabilities		2,542			2,445
Long-term debt, less current portion		34,463			65,711
Convertible senior notes, net		516,998			—

Total liabilities		1,037,516			483,787

Commitments and contingencies (Note 10)
Equity:
Common stock, $0.001 par value; 1,200,000 shares authorized; 161,885 and 166,287 shares issued and outstanding		162			166
Additional paid-in capital		820,071			856,190
Accumulated other comprehensive income (loss)		(42,504	)		(21,032	)
Retained earnings		—			12,742

Total TIBCO Software Inc. stockholders’ equity		777,729			848,066
Noncontrolling interest		1,067			1,085

Total equity		778,796			849,151

Total liabilities and equity	$	1,816,312		$	1,332,938


	Three Months Ended May 31,						Six Months Ended May 31,
	2012			2011			2012			2011
Revenue:
License	$	92,581		$	81,974		$	174,896		$	152,059
Service and maintenance		154,782			134,447			298,169			249,703

Total revenue		247,363			216,421			473,065			401,762

Cost of revenue:
License		9,401			9,710			18,441			18,637
Service and maintenance		59,486			52,017			116,536			96,037

Total cost of revenue		68,887			61,727			134,977			114,674

Gross profit		178,476			154,694			338,088			287,088
Operating expenses:
Research and development		38,605			36,175			75,926			68,861
Sales and marketing		78,923			68,909			154,641			131,432
General and administrative		17,407			15,573			35,002			28,490
Amortization of acquired intangible assets		5,653			5,030			10,201			9,921
Acquisition related and other		929			278			1,325			823
Restructuring adjustments		(400	)		—			(519	)		(33	)

Total operating expenses		141,117			125,965			276,576			239,494

Income from operations		37,359			28,729			61,512			47,594
Interest income		221			448			476			930
Interest expense		(4,395	)		(951	)		(5,860	)		(1,997	)
Other income (expense), net		572			(1,136	)		1,548			(1,426	)

Income before provision for income taxes and noncontrolling interest		33,757			27,090			57,676			45,101
Provision for income taxes		7,200			6,000			10,500			7,996

Net income		26,557			21,090			47,176			37,105
Less: Net income attributable to noncontrolling interest		65			44			43			106

Net income attributable to TIBCO Software Inc.	$	26,492		$	21,046		$	47,133		$	36,999

Net income per share attributable to TIBCO Software Inc.:
Basic	$	0.17		$	0.13		$	0.29		$	0.23

Diluted	$	0.16		$	0.12		$	0.28		$	0.21

Shares used to compute net income per share attributable to TIBCO Software Inc.:
Basic		160,437			161,911			160,949			161,207

Diluted		169,477			174,666			170,173			174,076


	Six Months Ended May 31,
	2012			2011
Operating activities:
Net income	$	47,176		$	37,105
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation of property and equipment		7,050			6,310
Amortization of acquired intangible assets		17,365			19,664
Amortization of debt discount and transaction costs		2,210			386
Stock-based compensation		29,718			23,268
Deferred income tax		(9,281	)		(9,342	)
Tax benefits related to stock benefit plans		9,406			10,739
Excess tax benefits from stock-based compensation		(16,484	)		(26,737	)
Other non-cash adjustments, net		531			(146	)
Changes in assets and liabilities, net of acquisitions:
Accounts receivable		16,751			17,516
Prepaid expenses and other assets		4,290			3,237
Accounts payable		(981	)		(1,222	)
Accrued liabilities and restructuring costs		(20,373	)		(21,504	)
Deferred revenue		29,563			24,064

Net cash provided by operating activities		116,941			83,338

Investing activities:
Acquisitions, net of cash acquired		(131,611	)		(22,579	)
Purchases of property and equipment		(11,224	)		(3,837	)
Restricted cash pledged as security		(1,149	)		(1,852	)
Other investing activities, net		414			1,348

Net cash used in investing activities		(143,570	)		(26,920	)

Financing activities:
Proceeds from issuance of convertible debt, net		584,450			—
Proceeds from revolving credit facility, net		116,648			—
Principal payments on debt		(151,182	)		(1,119	)
Proceeds from issuance of common stock		17,298			33,324
Repurchases of the Company’s common stock		(188,508	)		(72,329	)
Withholding taxes related to restricted stock net share settlement		(15,116	)		(15,024	)
Excess tax benefits from stock-based compensation		16,484			26,737

Net cash provided by (used in) financing activities		380,074			(28,411	)

Effect of foreign exchange rate changes on cash and cash equivalents		(14,489	)		6,491

Net increase in cash and cash equivalents		338,956			34,498
Cash and cash equivalents at beginning of period		308,148			243,989

Cash and cash equivalents at end of period	$	647,104		$	278,487

Supplemental disclosures:
Interest paid	$	2,027		$	1,473

Income taxes paid	$	1,268		$	7,466


Cash	$	5,018
Accounts receivable (approximate contractual value)		5,359
Other assets		1,524
Identifiable intangible assets		61,200
Goodwill		73,189
Liabilities		(7,006	)
Deferred Revenue		(7,297	)
Deferred income tax asset, net		4,642

Total preliminary purchase price	$	136,629


	Gross Amount at Acquisition Date		Weighted Average Amortization Period
Existing technology	$	32,800		6.0 years
Customer contracts		3,200		7.0 years
Maintenance agreements		22,300		6.0 years
Trademarks		2,900		7.0 years

	$	61,200		6.5 years


Cash	$	971
Accounts receivable (approximate contractual value)		3,634
Other assets		763
Identifiable intangible assets		19,800
Goodwill		28,194
Liabilities		(6,693	)
Deferred income tax liabilities, net		(4,669	)

Total preliminary purchase price	$	42,000


Cash	$	905
Accounts receivable (approximate contractual value)		5,118
Deferred income tax assets, net		3,758
Other assets		729
Identifiable intangible assets		6,600
Goodwill		11,966
Liabilities		(5,590	)

Total purchase price	$	23,486


	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Aggregate Fair Value
As of May 31, 2012:
Money market funds	$	441,427	$	—	$	—		$	441,427
Term deposits		542		—		—			542
Mortgage-backed securities		187		55		(37	)		205

	$	442,156	$	55	$	(37	)	$	442,174

As of November 30, 2011:
Money market funds	$	16,664	$	—	$	—		$	16,664
Term deposits		560		—		—			560
Mortgage-backed securities		200		51		(26	)		225

	$	17,424	$	51	$	(26	)	$	17,449


			Fair Value Measurements at Reporting Date using
Description	Total Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant other Observable Inputs (Level 2)
As of May 31, 2012:
Assets:
Money market funds	$	441,427	$	441,427	$	—
Term deposits		542		—		542
Mortgage-backed securities		205		—		205
Liabilities:
Foreign currency forward contracts	$	152	$	—	$	152

As of November 30, 2011:
Assets:
Money market funds	$	16,664	$	16,664	$	—
Term deposits		560		—		560
Mortgage-backed securities		225		—		225
Foreign currency forward contracts		142		—		142
Liabilities:
Foreign currency forward contracts	$	142	$	—	$	142


	Notional Value Local Currency			Notional Value USD			Fair Value Gain (Loss) USD
Forward contracts denominated in United States dollars sold:
Brazilian real		(1,700	)	$	(833	)	$	4
British Pound		12,400			19,063			(141	)

							$	(137	)


	Notional Value Local Currency			Notional Value EURO			Fair Value Gain (Loss) USD
Forward contracts denominated in Euros sold:
Australian dollar		(2,100	)	€	(1,642	)	$	4
British pound		1,800			2,237			(19	)

							$	(15	)


	Derivatives not Designated as Hedging Instruments
	May 31, 2012		November 30, 2011
Foreign currency forward contracts, fair value included in:
Other Current Assets	$	—	$	142
Accrued Liabilities		152		142


		Amount of Gain or (Loss) Recognized In Income on Derivative
		Three Months Ended May 31,						Six Months Ended May 31,
Derivatives not Designated as Hedging Instruments	Location	2012			2011			2012			2011
Foreign Currency Contracts	Other income/(exp.)	$	(438	)	$	(3,135	)	$	(1,795	)	$	(7,569	)


	May 31, 2012							November 30, 2011
	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount
Developed technologies	$	176,044	$	(106,439	)	$	69,605	$	146,289	$	(102,034	)	$	44,255
Customer base		57,806		(39,026	)		18,780		56,165		(37,376	)		18,789
Patents/core technologies		27,315		(22,455	)		4,860		27,922		(21,542	)		6,380
Trademarks		12,514		(7,498	)		5,016		9,771		(7,077	)		2,694
Non-compete agreements		580		(580	)		—		580		(580	)		—
Maintenance agreements		82,360		(42,108	)		40,252		61,677		(38,237	)		23,440
In-process research and development		1,700		(57	)		1,643		1,700		—			1,700

Total intangible assets	$	358,319	$	(218,163	)	$	140,156	$	304,104	$	(206,846	)	$	97,258


	Total		Remainder of 2012		2013		2014		2015		2016		Thereafter
Commitments:
Debt principal	$	637,513	$	1,802	$	35,711	$	—	$	—	$	—	$	600,000
Debt interest		70,602		8,569		14,783		13,500		13,500		13,500		6,750
Operating leases ⁽¹⁾		34,455		5,421		9,807		6,946		4,735		3,553		3,993

Total commitments	$	742,570	$	15,792	$	60,301	$	20,446	$	18,235	$	17,053	$	610,743


Balance as of November 30, 2011	$	451,821
Goodwill recorded for the LogLogic acquisition		73,189
Post-acquisition goodwill adjustment for the Nimbus acquisition ⁽¹⁾		1,077
Foreign currency translation		(9,400	)

Balance as of May 31, 2012	$	516,687


	Excess Acquisition Integration			Accrued Facilities Restructuring			Accrued Severance and Other			Total
As of November 30, 2011	$	41		$	2,782		$	5,019		$	7,842
Restructuring adjustment		—			(32	)		(487	)		(519	)
Adjustment to acquisition integration costs		(3	)		(420	)		170			(253	)
Cash Utilized		—			(806	)		(4,301	)		(5,107	)

As of May 31, 2012	$	38		$	1,524		$	401		$	1,963


	May 31, 2012		November 30, 2011
Property and equipment, net:
United States	$	83,283	$	83,500
United Kingdom		1,173		1,386
Other		9,070		4,985

	$	93,526	$	89,871


	Three Months Ended									Six Months Ended
	May 31,									May 31,
	2012			2011			Change			2012			2011			Change
Restructuring charges (adjustment)	$	(400	)	$	—			*	%	$	(519	)	$	(33	)		*	%
As percent of total revenue		—	%		—	%					—	%		—	%


			Remainder of 2012										Thereafter
	Total		Remainder of 2012		2013		2014		2015		2016		Thereafter
Commitments:
Debt principal	$	637,513	$	1,802	$	35,711	$	—	$	—	$	—	$	600,000
Debt interest		70,602		8,569		14,783		13,500		13,500		13,500		6,750
Operating leases ⁽¹⁾		34,455		5,421		9,807		6,946		4,735		3,553		3,993

Total commitments	$	742,570	$	15,792	$	60,301	$	20,446	$	18,235	$	17,053	$	610,743


Period	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
March 1, 2012 – March 31, 2012		—	$	—		—	$	300,000
April 1, 2012 – April 30, 2012		3,648	$	33.16		3,648	$	179,016
May 1, 2012 – May 31, 2012		—	$	—		—	$	179,016

Total		3,648	$	33.16		3,648



3.1(1)		Amended and Restated Certificate of Incorporation of Registrant.

3.2(2)		Amended and Restated Bylaws of Registrant.

4.1(3)		Indenture between TIBCO Software Inc. and U.S. Bank National Association, dated as of April 23, 2012.

4.2(3)		Form of 2.25% Convertible Senior Note due May 1, 2032 (included in Exhibit 4.1 hereto).

10.1(4)		Purchase Agreement, dated as of April 17, 2012, by and between TIBCO Software, Inc. and Morgan Stanley & Co. LLC and J.P. Morgan Securities LLC, as representatives of the initial purchasers.

10.2(4)		Waiver, dated as of April 16, 2012, by and between TIBCO Software, Inc. and Bank of America, N.A., as administrative agent, and the lenders party thereto.

10.3(5)		First Amendment to Credit Agreement, dated as of May 31, 2012, by and among TIBCO Software Inc., TIBCO International Holdings B.V., as Designated Borrower, each of the lenders party thereto, and Bank of America, N.A., as Administrative Agent.

10.4#		TIBCO Software Inc. 2008 Equity Incentive Plan (March 7, 2012 Restatement).

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.

101		Interactive data files (XBRL) pursuant to Rule 405 of Regulation S-T: (i) the Condensed Consolidated Balance Sheets as of May 31, 2012 and November 30, 2011, (ii) the Condensed Consolidated Statement of Operations for the three months and six months ended May 31, 2012 and 2011, (iii) the Condensed Consolidated Statements of Cash Flows for the six months ended May 31, 2012 and 2011 and (iv) the Notes to Condensed Consolidated Financial Statements.*