<PAGE>
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
----------------
FORM 10-Q
(Mark One)
[X]QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended October 31, 2000
OR
[_]TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
Commission File Number: 0-22369
----------------
BEA SYSTEMS, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
Delaware 77-0394711
<CAPTION>
(State or other jurisdiction of (I. R. S. Employer
incorporation or organization) Identification No.)
</TABLE>
2315 North First Street
San Jose, California 95131
(Address of principal executive offices)
(408) 570-8000
(Registrant's telephone number, including area code)
----------------
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 [_]
As of November 30, 2000, there were approximately 384,502,000 shares of the
Registrant's Common Stock outstanding.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<PAGE>
BEA SYSTEMS, INC.
INDEX
<TABLE>
<CAPTION>
Page No.
--------
<C> <S> <C>
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements (Unaudited):
Condensed Consolidated Statements of Operations and
Comprehensive Income (Loss) Three and Nine months ended
October 31, 2000 and 1999................................. 3
Condensed Consolidated Balance Sheets October 31, 2000 and
January 31, 2000.......................................... 4
Condensed Consolidated Statements of Cash Flows Nine
months ended October 31, 2000 and 1999.................... 5
Notes to Condensed Consolidated Financial Statements...... 6
ITEM 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations....................... 11
ITEM 3. Quantitative and Qualitative Disclosure about Market
Risks..................................................... 26
PART II. OTHER INFORMATION
ITEM 6. Exhibits and Reports on Form 8-K.......................... 27
Signatures.......................................................... 28
</TABLE>
2
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM I. FINANCIAL STATEMENTS
BEA SYSTEMS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE INCOME (LOSS)
(in thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
Three months
ended Nine months ended
October 31, October 31,
------------------ ------------------
2000 1999 2000 1999
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Revenues:
License fees......................... $128,202 $ 77,912 $317,636 $198,715
Services............................. 95,812 48,542 246,081 116,526
-------- -------- -------- --------
Total revenues..................... 224,014 126,454 563,717 315,241
Cost of revenues:
Cost of license fees................. 4,894 1,310 13,172 3,427
Cost of services..................... 55,702 27,382 144,006 65,764
Amortization of certain acquired
intangible assets................... 10,438 6,925 30,605 21,027
-------- -------- -------- --------
Total cost of revenues............. 71,034 35,617 187,783 90,218
-------- -------- -------- --------
Gross profit........................... 152,980 90,837 375,934 225,023
Operating expenses:
Sales and marketing.................. 88,838 56,356 234,502 146,674
Research and development............. 23,277 16,754 63,730 42,598
General and administrative........... 15,832 10,228 39,315 27,726
Amortization of goodwill............. 15,964 4,008 42,468 6,594
Acquisition-related charges.......... -- -- 2,200 --
-------- -------- -------- --------
Total operating expenses........... 143,911 87,346 382,215 223,592
-------- -------- -------- --------
Income (loss) from operations.......... 9,069 3,491 (6,281) 1,431
Interest income (expense) and other,
net................................... 6,099 454 15,792 (219)
-------- -------- -------- --------
Income before provision for income
taxes................................. 15,168 3,945 9,511 1,212
Provision for income taxes............. 6,925 3,800 11,382 7,100
-------- -------- -------- --------
Net income (loss)...................... 8,243 145 (1,871) (5,888)
Other comprehensive income (loss):
Foreign currency translation
adjustments......................... (2,755) (226) (3,057) (351)
Unrealized gain (loss) on available-
for-sale investments, net of income
taxes............................... 380 (68) (125) (184)
-------- -------- -------- --------
Comprehensive income (loss)............ $ 5,868 $ ( 149) $ (5,053) $ (6,423)
======== ======== ======== ========
Net income (loss) per share:
Basic................................ $ 0.02 $ (0.00) $ (0.01) $ (0.02)
======== ======== ======== ========
Diluted.............................. $ 0.02 $ (0.00) $ (0.01) $ (0.02)
======== ======== ======== ========
Number of shares used in per share
calculations:
Basic................................ 380,950 311,280 374,113 306,920
======== ======== ======== ========
Diluted.............................. 430,590 344,069 374,113 306,920
======== ======== ======== ========
</TABLE>
See accompanying notes.
3
<PAGE>
BEA SYSTEMS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
<TABLE>
<CAPTION>
October 31, January
2000 31, 2000
----------- ----------
(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents............................ $ 782,445 $ 763,294
Restricted cash...................................... 1,988 1,631
Short-term investments............................... 75,659 38,135
Accounts receivable, net............................. 186,616 133,069
Other current assets................................. 42,738 35,248
---------- ----------
Total current assets............................... 1,089,446 971,377
Computer equipment, furniture and leasehold
improvements, net................................... 49,749 27,978
Goodwill, net........................................ 149,718 141,457
Acquired intangible assets, net...................... 54,902 61,600
Investments in equity and debt securities, net....... 93,920 38,060
Other long-term assets............................... 18,616 18,369
---------- ----------
Total assets....................................... $1,456,351 $1,258,841
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable..................................... $ 9,082 $ 14,848
Accrued liabilities.................................. 144,719 92,673
Accrued income taxes................................. 18,181 27,021
Deferred revenues.................................... 179,127 96,537
Current portion of notes payable, other long-term
obligations and capital lease obligations........... 607 4,454
---------- ----------
Total current liabilities.......................... 351,716 235,533
Notes payable and other long-term obligations.......... 18,920 6,005
Convertible subordinated notes......................... 561,771 572,484
Commitments and contingencies
Stockholders' equity:
Common stock......................................... 384 361
Additional paid-in capital........................... 733,695 650,128
Accumulated deficit.................................. (204,826) (202,951)
Notes receivable from shareholders................... (198) (296)
Deferred compensation................................ (650) (1,144)
Accumulated other comprehensive loss................. (4,461) (1,279)
---------- ----------
Total stockholders' equity......................... 523,944 444,819
---------- ----------
Total liabilities and stockholders' equity......... $1,456,351 $1,258,841
========== ==========
</TABLE>
See accompanying notes.
4
<PAGE>
BEA SYSTEMS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(Unaudited)
<TABLE>
<CAPTION>
Nine months ended
October 31,
------------------
2000 1999
-------- --------
<S> <C> <C>
Operating activities:
Net loss................................................. $ (1,871) $ (5,888)
Adjustments to reconcile net loss to net cash provided by
operating activities:
Depreciation and amortization.......................... 8,346 5,273
Amortization of deferred compensation.................. 494 548
Amortization of certain acquired intangible assets and
acquisition-related Charges........................... 76,773 27,621
Amortization of debt issuance costs.................... 1,652 261
Debt conversion premium................................ 236 --
Changes in operating assets and liabilities............ 61,888 28,930
Other.................................................. 2,362 (399)
-------- --------
Net cash provided by operating activities.................. 149,880 56,346
-------- --------
Investing activities:
Purchase of computer equipment, furniture and leasehold
improvements............................................ (29,489) (13,170)
Payments for business combinations, net of cash acquired
and investments in equity securities.................... (101,890) (19,524)
Purchases of available-for-sale short-term investments,
net of sales and maturities............................. (38,006) (42,479)
-------- --------
Net cash used in investing activities...................... (169,385) (75,173)
-------- --------
Financing activities:
Net borrowings under lines of credit..................... 2,529 (679)
Net payments on notes payable, other long-term
obligations and capital lease Obligations............... (11,392) (373)
Debt conversion premium.................................. (236) --
Proceeds from notes receivable........................... 1,191 --
Net proceeds received for employee stock purchases....... 51,913 17,776
-------- --------
Net cash provided by financing activities.................. 44,005 16,724
-------- --------
Net increase (decrease) in cash and cash equivalents....... 24,500 (2,103)
Effect of exchange rate changes on cash.................... (5,349) 858
Cash and cash equivalents at beginning of period........... 763,294 232,556
-------- --------
Cash and cash equivalents at end of period................. $782,445 $231,311
======== ========
</TABLE>
See accompanying notes.
5
<PAGE>
BEA SYSTEMS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 1. Basis of Presentation
The condensed consolidated financial statements included herein are
unaudited and reflect all adjustments (consisting only of normal recurring
adjustments) which are, in the opinion of management, necessary for a fair
presentation of the financial position, results of operations and cash flows
for the interim periods. Certain amounts reported in prior periods have been
reclassified for comparative purposes. These condensed consolidated financial
statements should be read in conjunction with the consolidated financial
statements and notes thereto, together with Management's Discussion and
Analysis of Financial Condition and Results of Operations contained in the BEA
Systems, Inc. ("BEA" or the "Company") Annual Report on Form 10-K for the
fiscal year ended January 31, 2000. The results of operations for the nine
months ended October 31, 2000 are not necessarily indicative of the results for
the entire fiscal year ending January 31, 2001.
The consolidated balance sheet at January 31, 2000 has been derived from the
audited financial statements at that date but does not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements.
Revenue recognition
The Company recognizes revenues in accordance with the American Institute of
Certified Public Accountants Statement of Position 97-2, Software Revenue
Recognition, as amended. Revenue from software license agreements is recognized
when persuasive evidence of an agreement exists, delivery of the product has
occurred, no significant vendor obligations are remaining to be fulfilled, the
fee is fixed or determinable, and collectibility is probable.
Services revenue includes consulting services, post-contract customer
support and training. Software maintenance agreements provide technical support
and the right to unspecified upgrades on an if-and-when-available basis.
Consulting revenue and the related cost of services are primarily recognized on
a time and materials basis. Post-contract customer support revenue is
recognized ratably over the term of the support period (generally one year) and
training and other service revenues are recognized as the related services are
provided. The unrecognized portion of amounts paid in advance for licenses and
services is recorded as deferred revenues.
Recent acquisitions
On October 3, 2000, the Company purchased Bauhaus Technologies, Inc.
("Bauhaus"). The purchase price was approximately $19.8 million in cash. The
acquisition was accounted for using the purchase method with a significant
portion of the purchase price allocated to intangible assets.
On April 19, 2000, the Company completed its acquisition of the services
business of The Object People, Inc. ("TOP"). The purchase price was
approximately $20.5 million in cash. The acquisition was accounted for using
the purchase method with a significant portion of the purchase price allocated
to intangible assets.
On March 21, 2000, the Company purchased The Workflow Automation Corporation
("Workflow") with $4.9 million in cash and the issuance of 470,718 shares of
BEA common stock, valued at $49.41 per share. The acquisition was accounted for
using the purchase method with the majority of the purchase price allocated to
intangible assets.
Due to the immateriality of the acquired entities, pro forma information for
these acquisitions, as if they had been acquired at the start of the periods
presented, is not required.
6
<PAGE>
BEA SYSTEMS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Investments in equity securities
BEA has a non-voting preferred stock and convertible debt interest
(representing approximately 45 percent ownership interest) in WebGain, Inc.
("WebGain"), a private company, that has experienced operating losses since its
inception. Other shareholders of WebGain include venture capital funds managed
by E.M. Warburg, Pincus & Co., Inc., of which certain BEA directors are
Managing Directors. To the extent that WebGain's aggregate losses exceed its
common stockholders' equity, BEA would begin recognizing losses in a manner
similar to the equity method of accounting, with such losses being limited to
the extent of BEA's investment in and loans to WebGain. As of October 31, 2000,
BEA has an investment in and loans to the company aggregating $60 million and
no obligation to provide additional funding. Based on WebGain's historical
financial results and current estimates of WebGain's future operations, BEA
does not expect to recognize WebGain losses in the immediate future, if ever.
However, the amount of any future WebGain losses and the period in which BEA
would begin recognizing such losses, if ever, is subject to several factors
that cannot be predicted with certainty. Factors include: timing and size of
any future acquisitions by WebGain, amount of WebGain's operational profits or
losses, dilution or disposition of BEA's ownership of WebGain below the
threshold for equity accounting, or conversion of BEA's ownership interest into
common stock. If BEA is ever required to recognize WebGain losses, such losses
could be material in relation to BEA's net income or loss at that time.
Other investments in equity securities
During the first three quarters of fiscal 2001, the Company invested in
several other privately held companies for a total of approximately $34.3
million. These investments are accounted for under the cost method, as
ownership is less than 20 percent and the Company does not have the ability to
exercise significant influence over the operations of these investee companies.
The Company has derived revenues from several of these companies, which, in the
aggregate, are less than $5.0 million, representing less than 1 percent of
total revenues.
Stock split
In April 2000, the Company completed a two-for-one common stock split in the
form of a stock dividend. All share information and per share amounts in the
accompanying consolidated financials statements reflect the effect of the stock
split.
Effect of new accounting pronouncements
In December 1999, the Securities and Exchange Commission ("SEC") issued
Staff Accounting Bulletin No. 101, Revenue Recognition in Financial Statements
("SAB 101") and amended it in March 2000. BEA is required to adopt the
provisions of SAB 101 in its fourth fiscal quarter of 2001. The Company does
not expect that the adoption of SAB 101 will have a material impact to the
Company's financial position or results of operations.
In June 1998, the Financial Accounting Standards Board released Statement of
Financial Accounting Standards No. 133, Accounting for Derivative Instruments
and Hedging Activities ("FAS 133"). FAS 133 establishes the accounting and
reporting standards for derivative instruments, including certain derivative
instruments embedded in other contracts (collectively referred to as
derivatives) and for hedging activities. It requires that an entity recognize
all derivatives as either assets or liabilities in the statement of financial
position and measure those instruments at fair value. In July 1999, FAS No.
137, Accounting for Derivative Instruments and Hedging Activities--Deferral of
the Effective Data of FASB Statement 133 ("FAS 137") was issued. FAS 137
deferred the effective date of FAS 133 until the first fiscal quarter of fiscal
years beginning
7
<PAGE>
BEA SYSTEMS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
after June 15, 2000. The Company will adopt FAS 133 effective February 1, 2001.
The Company does not currently expect that the adoption of FAS 133 will have a
material impact to its financial position or results of operations.
In March 2000, the Financial Accounting Standards Board issued FASB
Interpretation No. 44, Accounting for Certain Transactions Involving Stock
Compensation--an Interpretation of APB Opinion No. 25, ("FIN 44"). FIN 44
clarifies the application of APB Opinion No. 25 and, among other issues
clarifies the following: the definition of an employee for purposes of applying
APB Opinion No. 25; the criteria for determining whether a plan qualifies as a
noncompensatory plan; the accounting consequence of various modifications to
the terms of the previously fixed stock options or awards; and the accounting
for an exchange of stock compensation awards in a business combination. FIN 44
is effective July 1, 2000, but certain conclusions in FIN 44 cover specific
events that occurred after either December 15, 1998 or January 12, 2000. The
application of FIN 44 has not had a material impact on the Company's financial
position or results of operations.
Note 2. Supplemental Cash Flow Disclosures
For the nine months ended October 31, 2000, approximately $10.7 million of
the 4% Convertible Subordinated Notes due June 15, 2005 ("2005 Notes") was
converted into common stock. The value of stock issued in business acquisitions
for the nine months ended October 31, 2000 was approximately $23.2 million.
Note 3. Net Income (Loss) Per Share
Basic net income (loss) per share is computed based on the weighted average
number of shares of the Company's common stock outstanding less shares subject
to the Company's right to repurchase, which lapses ratably. Diluted net income
(loss) per share is computed based on the weighted average number of shares of
the Company's outstanding common stock and common equivalent shares (stock
options, warrants and convertible notes), if dilutive. The treasury stock
method is used to calculate the dilution effect of stock options and warrants.
The as-if-converted method is used to calculate the dilution effect of the
convertible subordinated notes.
8
<PAGE>
BEA SYSTEMS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
The following is a reconciliation of the numerators and denominators of the
basic and diluted loss per share computations (in thousands, except per share
data):
<TABLE>
<CAPTION>
Three months Nine months
ended October ended October
31, 31,
---------------- -----------------
2000 1999 2000 1999
------- ------- -------- -------
<S> <C> <C> <C> <C>
Numerator:
Numerator for basic net income (loss)
per share:
Net income (loss)..................... $ 8,243 $ 145 $( 1,871) $(5,888)
======= ======= ======== =======
Numerator for diluted net income (loss)
per share:
Net income (loss)..................... $ 8,243 $ 145 $( 1,871) $(5,888)
Interest and amortization charges for
2005 Notes, net of Taxes............. 80 -- -- --
------- ------- -------- -------
Adjusted net income (loss)............ $ 8,323 $ 145 $( 1,871) $(5,888)
======= ======= ======== =======
Denominator:
Denominator for basic net income per
share--weighted Average shares......... 381,283 314,221 375,339 310,596
Weighted average shares subject to
repurchase............................. (333) (2,941) (1,226) (3,676)
------- ------- -------- -------
Denominator for basic net income per
share, weighted Average shares, net.... 380,950 311,280 374,113 306,920
Weighted average dilutive potential
common shares:
Options, warrants and shares subject
to repurchase........................ 2,120 32,789 -- --
Convertible notes..................... 47,520 -- -- --
------- ------- -------- -------
Denominator for diluted net income per
share.................................. 430,590 344,069 374,113 306,920
======= ======= ======== =======
Basic net income (loss) per share....... $ 0.02 $ (0.00) $ (0.01) $ (0.02)
======= ======= ======== =======
Diluted net income (loss) per share..... $ 0.02 $ (0.00) $ (0.01) $ (0.02)
======= ======= ======== =======
</TABLE>
The computation of diluted net income per share for the three months ended
October, 31, 2000 includes the impact of options to purchase approximately 47.5
million shares of common stock and the conversion of the 2005 Notes which are
convertible into approximately 1.8 million shares of common stock, and
approximately 0.3 million shares of common stock which are subject to
repurchase. The $550 million 4% Convertible Subordinated Notes due December 15,
2006 ("2006 Notes") are excluded from the computation of diluted net income per
share as the impact would be antidilutive.
The computation of basic and diluted net loss per share for the nine months
ended October 31, 2000 excludes approximately 1.2 million shares of common
stock which are subject to repurchase, options to purchase approximately 47.2
million shares of common stock and the conversion of the 2006 Notes and the
remaining 2005 Notes, which are convertible into approximately 15.9 and
approximately 1.9 million shares of common stock, respectively, as such impact
would be antidilutive.
The computation of diluted net income per share for the three months ended
October, 31, 1999 includes the impact of options to purchase approximately 29.9
million shares of common stock and approximately 2.9 million shares of common
stock which are subject to repurchase. The 2005 Notes are excluded from the
computation of diluted net income per share as the impact would be
antidilutive.
The computation of basic and diluted net loss per share for the nine months
ended October 31, 1999 excludes approximately 3.7 million shares of common
stock which are subject to repurchase, options to
9
<PAGE>
BEA SYSTEMS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
purchase approximately 23.9 million shares of common stock as well as the
conversion of the 2005 Notes (See Note 4), which were convertible into
approximately 37.9 million shares of common stock, as such impact would be
antidilutive.
Note 4. Convertible Subordinated Debt Offering
The Company has two Convertible Subordinated Notes (the "2005 Notes" and the
"2006 Notes" or "Notes") which are subordinated to all existing and future
senior indebtedness of the Company. The principal amounts of the Notes are
convertible at the option of the holder at any time into common stock of the
Company at their respective conversion rates. At the end of the third quarter
of fiscal 2001, none of the 2006 Notes have been converted to common stock and
approximately $238.2 million of the 2005 Notes had been converted to common
stock, leaving approximately $550.0 million and $11.8 million as remaining
principal, respectively. The Company incurred no debt conversion premium in the
quarter ended October 31, 2000 and $236,000 of debt conversion premium in the
nine month period ended October 31, 2000, which was charged to interest
expense.
Note 5. Accumulated Other Comprehensive Loss
The components of accumulated other comprehensive loss are as follows (in
thousands):
<TABLE>
<CAPTION>
October 31, January 31,
2000 2000
----------- -----------
<S> <C> <C>
Foreign currency translation adjustment......... $(4,019) $ (962)
Unrealized loss on available-for-sale
investments, net of tax........................ (442) (317)
------- -------
Total accumulated other comprehensive loss...... $(4,461) $(1,279)
======= =======
</TABLE>
Note 6. Commitments and Contingencies
Litigation
The Company is subject to legal proceedings and claims that arise in the
ordinary course of its business. While management currently believes the amount
of ultimate liability, if any, with respect to these actions will not
materially affect the financial position, results of operations, or liquidity
of the Company, the ultimate outcome of any litigation is uncertain, and the
impact of an unfavorable outcome could be material to the Company.
Employer Payroll Taxes
The Company is subject to employer payroll taxes when employees exercise
stock options. The payroll taxes are assessed on the stock option gain, which
is the difference between the common stock price on the date of exercise and
the exercise price. The tax rate varies depending upon the employees' taxing
jurisdiction. The timing and amount of employer payroll taxes is directly
related to the timing and number of options exercised by employees, the gain
thereon and the tax rate in the applicable jurisdiction. For the three and nine
months ended October 31, 2000, the Company recorded employer payroll taxes
related to stock option exercises of approximately $3.1 million and $8.5
million, respectively. For both the three and nine months ended October 31,
1999, the employer payroll taxes related to stock option exercises were not
significant. Because the Company is unable to predict these employer payroll
taxes, the Company is unable to predict what, if any, expense will be recorded
in a future period.
10
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion of the financial condition and results of
operations of BEA Systems, Inc. ("BEA" or the "Company") should be read in
conjunction with the Management's Discussion and Analysis of Financial
Condition and Results of Operations and the Consolidated Financial Statements
and the Notes thereto included in the Company's Annual Report on Form 10-K for
the year ended January 31, 2000. This quarterly report on Form 10-Q contains
forward-looking statements within the meaning of Section 27A of the Securities
Act of 1933, as amended, and Section 21E of the Securities Exchange Act of
1934, as amended, including statements using terminology such as "may," "will,"
"expects," "plans," "anticipates," "estimates," "potential," or "continue," or
the negative thereof or other comparable terminology regarding beliefs, plans,
expectations or intentions regarding the future. Forward-looking statements
include statements regarding future operating results, the extension of
computer systems to the Internet, opportunity for expansion of our business,
additional acquisitions or licensing of technology, seasonality of orders,
continuation of certain products and services accounting for a majority of
revenues, continued investment in product development, product releases, growth
in markets, consolidation among companies, investing in sales channels and
marketing programs, increases in sales and marketing expenses and research and
development expenses, devoting substantial resources to product development,
continued hiring, expected amortization of goodwill, continuing to make
additional acquisitions, satisfaction of cash requirements, the effects of the
adoption of new accounting pronouncements, the recognition of operating losses
from WebGain, the establishment of product distribution arrangements and the
improvement in financial reporting and controls. These forward-looking
statements involve risks and uncertainties and actual results could differ
materially from those discussed in the forward-looking statements. These risks
and uncertainties include, but are not limited to, those described under the
headings "Effect of New Accounting Pronouncements" and "Factors That May Impact
Future Operating Results", as well as risks described immediately prior to or
following some forward-looking statements. All forward-looking statements and
risk factors included in this document are made as of the date hereof, based on
information available to BEA as of the date thereof, and BEA assumes no
obligation to update any forward-looking statement or risk factors.
Overview
BEA Systems, Inc. ("BEA" or the "Company") is a leading provider of e-
business infrastructure software that helps companies of all sizes build e-
business systems that extend investments in existing computer systems and
provide the foundation for running a successful integrated e-business. BEA's
products are marketed and sold worldwide primarily through BEA's direct sales
force, and also through hardware vendors, independent software vendors ("ISVs")
and systems integrators ("SIs") that are BEA partners and distributors. BEA's
products have been adopted in a wide variety of industries, including
commercial and investment banking, securities trading, telecommunications,
airlines, services, retail, manufacturing, package delivery, insurance and
government. The BEA WebLogic E-Business Platform provides infrastructure for
building an integrated e-business, allowing customers to integrate private
client/server networks, the Internet, intranets, extranets, and mainframe and
legacy systems as system components. BEA's products serve as a platform or
integration tool for applications such as billing, provisioning, customer
service, electronic funds transfers, ATM networks, securities trading, Web-
based banking, Internet sales, supply chain management, scheduling and
logistics, and hotel, airline and rental car reservations. Licenses for BEA
products are typically priced on a per-central processing unit basis, but BEA
also offers licenses priced on a per-user basis.
The Company's core business has been providing infrastructure for e-business
systems and high-volume transaction systems, such as Web-based retail sites,
inventory systems, telecommunications billing applications, commercial bank ATM
networks and account management systems, credit card billing systems and
securities trading account management systems. These Web-based and distributed
systems must be highly available, scale to process high transaction volumes and
accommodate large numbers of users. As the Internet and e-commerce continue to
develop and become more richly integrated, systems that historically had been
strictly internal are now being extended to the Internet, such as
telecommunications, bank and credit card account information.
11
<PAGE>
BEA provides an e-business platform that is designed to address this demand
and help companies quickly develop and integrate e-business initiatives and
reliably deliver a wider range of dynamic, personalized services. In addition,
BEA provides a personalization engine and components used to build common
e-commerce functionality, such as online catalog, dynamic pricing, shopping
cart and order processing.
Seasonality. As is common in the software industry, we believe that our
fourth quarter orders are favorably impacted by a variety of factors including
year-end capital purchases by larger corporate customers and the commission
structure for our sales force. This increase typically results in first quarter
customer orders being lower than orders received in the immediately preceding
fourth quarter. BEA anticipates that this seasonal impact is likely to
continue.
Investment in Distribution Channel. BEA is currently investing in building
its direct sales and consulting capacity by aggressively hiring sales,
technical sales support and consulting personnel. In addition, in August 2000,
BEA announced a major planned investment in expansion of its indirect
distribution network through stronger relationships with system platform
companies, packaged application software developers, systems integrators and
independent consultants, independent software vendors, and distributors. These
investments result in an immediate increase in expenses, especially in sales
and marketing, and diversion of revenue-bearing training services to training
of participants in the indirect channel.
Service Revenues as a Percentage of Total Revenues. As of October 31, 2000,
service revenues increased as a percentage of total revenues. BEA believes that
its customer base has been in the process of transitioning to mission-critical
applications based on Java, EJB, and, in some cases, CORBA, programming models,
but that customers typically have not had sufficient numbers of system
architects and application developers experienced in building large, reliable
systems on these programming models. BEA believes that by providing its
customers with additional services, especially in architecting, building and
deploying Java, EJB and CORBA systems, and training system architects and
customers' application developers to develop these systems, BEA can help
facilitate customers' deployment of systems based on our platform products. An
important element of the strategy of investing in an indirect distribution
channel is to supplement BEA's services offerings through relationships with
systems integrators, allowing BEA to focus on architecture services and
increase the number of projects available for licensing BEA's products through
systems integrators' application development efforts. Investment in these
efforts results in an immediate increase in expenses, although the return on
such investment, if any, is not anticipated to occur until future periods.
These expenses adversely affect BEA's operating results in the short-term, and
also in the long-term if the anticipated benefits of such investments do not
materialize.
Product Development. In Fiscal 2001, BEA continues to invest in product
development, particularly BEA WebLogic Collaborate(TM), BEA WebLogic Commerce
Server(TM), BEA WebLogic Personalization Server(TM) and new releases of BEA
WebLogic Server(TM). BEA WebLogic Collaborate(TM) is business-to-business
integration software that provides an open, scalable and dynamic way to rapidly
create and manage multi-party trading exchanges. BEA WebLogic Commerce
Server(TM) and BEA WebLogic Personalization Server(TM) help enable companies to
quickly deliver highly personalized e-commerce applications. BEA WebLogic
Server(TM) accounts for the majority of BEA's license revenues and is a
platform for Java and EJB applications. BEA recently announced a major release
of this product, which adds new transaction, multicasting, Java messaging
services and XML support, as well as other features; the release is scheduled
to become generally available in the fourth quarter of fiscal 2001. BEA's
planned investment in these efforts may affect BEA's anticipated overall
financial results, particularly cost of revenues as a percentage of total
revenues and research and development expense as a percentage of total
revenues, and may create product transition concerns in BEA's customer base. In
addition, investment in these projects results in an immediate increase in
expenses, especially in research and development, although the return on such
investment, if any, is not anticipated to occur until future periods. These
expenses adversely affect BEA's operating results in the short-term, and also
in the long-term if the anticipated benefits of such investments do not
materialize.
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Acquisitions. Since its inception, BEA has acquired several companies and
product lines, as well as distribution rights to product lines. Through these
acquisitions, BEA has added additional product lines, additional functionality
to its existing products, additional direct distribution capacity and
additional service capacity. These acquisitions have resulted in significant
charges to BEA's operating results in the periods in which the acquisitions
were completed and have added intangible assets to BEA's balance sheet, the
values of which are being amortized and charged to BEA's operating results over
periods ranging from two to five years after completion of the acquisitions.
BEA's management views the markets for its products as growing, and that
companies serving those markets are consolidating. This consolidation presents
an opportunity for BEA to further expand its product lines and functionality,
distribution capacity and service offerings and to add new, related lines of
business. BEA anticipates that it will make additional, perhaps material,
acquisitions in the future. The timing of any such acquisition is impossible to
predict and the charges associated with any such acquisition could materially
adversely affect BEA's results of operations, beginning in the periods in which
any such acquisition is completed.
Results of Operations
Three and nine months ended October 31, 2000 and 1999
Revenues
BEA's revenues are derived from fees for software licenses, customer
support, education and consulting services. Total revenues increased 77.2
percent from the quarter ended October 31, 1999 to the quarter ended October
31, 2000. Total revenues also increased 78.8 percent from the nine months ended
October 31, 1999 to the nine months ended October 31, 2000. These increases
reflect the continued adoption of our solutions for e-business systems,
resulting in additional sales to existing customers and new customer accounts,
and increases in demand for consulting services.
License Revenues. License revenues increased 64.5 percent from the third
quarter of fiscal 2000 to the third quarter of fiscal 2001. For the nine months
ended October 31, 2000, license revenues increased 59.8 percent from the nine
months ended October 31, 1999. These increases were mainly due to adoption of
our products for e-commerce systems, expansion of our direct sales force and
introduction of new products and new versions of existing products. License
revenues as a percentage of total revenues represented 57.2 percent and 61.6
percent of revenues in the third quarters of fiscal 2001 and 2000,
respectively, and 56.3 percent and 63.0 percent of total revenues for the nine
months ended October 31, 2000 and 1999, respectively. These percentage
decreases were attributable to the significant increase in service revenues as
a result of increased demand for, and capacity of, our consulting services
offerings.
Service Revenues. Service revenues increased 97.4 percent in the third
quarter of fiscal 2001 compared with the same quarter in fiscal 2000. For the
nine months ended October 31, 2000, service revenues increased 111.2 percent
from the same period of the prior fiscal year. Service revenues as a percentage
of total revenues represented 42.8 percent and 38.4 percent of total revenues
in the third quarters of fiscal 2001 and 2000, respectively, and 43.7 percent
and 37.0 percent of total revenues for the nine months ended October 31, 2000
and 1999, respectively. These increases were primarily due to the increased
revenues from consulting resulting from an increased customer base and
increased number of service personnel and consultants as a result of the
Company's increased focus on service offerings.
International Revenues. International revenues accounted for 40.6 percent of
total revenue in both quarters ended October 31, 2000 and 1999. For the nine
months ended October 31, 2000 and 1999, international revenues were 41.3
percent and 40.6 percent of total revenues, respectively.
Revenues from the European, Middle East and Africa region ("EMEA") and
Asia/Pacific region ("APAC") increased in the third quarter of fiscal 2001 to
$60.4 million and $28.0 million, respectively, from
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$33.1 million and $17.8 million in the same quarter of the prior fiscal year.
Revenues from EMEA represented 27.0 percent of total revenues in the third
quarter of fiscal 2001, compared with 26.2 percent in the same quarter of the
prior fiscal year and 29.0 percent compared with 29.9 percent for the nine
month periods ended October 31, 2000 and 1999, respectively. Revenues from APAC
represented 12.5 percent of total revenues in the third quarter of fiscal 2001,
compared with 14.1 percent in the same quarter of the prior fiscal year and
11.3 percent compared with 10.4 percent for the nine month periods ended
October 31, 2000 and 1999, respectively. Revenues from other non-United States
regions were immaterial.
Cost of Revenues
Total cost of revenues represented 31.7 percent and 28.2 percent of total
revenues in the quarters ended October 31, 2000 and 1999, respectively. For the
nine months ended October 31, 2000 and 1999, cost of revenues represented 33.3
percent and 28.6 percent, respectively. The increases were primarily due to the
increase in service revenues as a percentage of total revenues. Service
revenues carry a substantially higher cost of revenues than software licenses.
Amortization charges included in cost of revenues also contributed to the
increase.
Cost of Licenses. Cost of licenses includes expenses related to the purchase
of compact discs, costs associated with transferring the Company's software to
electronic media, the printing of user manuals, packaging and distribution
costs as well as royalties paid to third parties. Cost of licenses represented
3.8 percent and 1.7 percent of license revenues in the third quarters of fiscal
2001 and 2000, respectively. For the nine months ended October 31, 2000 and
1999, cost of licenses represented 4.1 percent and 1.7 percent of license
revenues, respectively. These increases were due to increased royalties paid to
third parties, which occurred in the fourth quarter of fiscal 2000.
Cost of Services. Cost of services consists primarily of salaries and
benefits for consulting, education and product support personnel. Cost of
services increased 103.4 percent in the third quarter of fiscal 2001 compared
to the same quarter of the prior fiscal year. For the nine months ended October
31, 2000, cost of services increased 119.0 percent from the same period of the
prior fiscal year. These increases were the result of overall increased demand
for the Company's consulting services, increased professional services'
headcount and the expansion of customer support centers in Europe and Asia.
Cost of services represented 58.1 percent and 56.4 percent of service revenues
in the quarters ended October 31, 2000 and 1999, respectively. For the nine
months ended October 31, 2000 and 1999, cost of services represented 58.5
percent and 56.4 percent of service revenues, respectively. These percentage
increases in cost of services overall were a result of increased costs
attributable to increased consulting services, which carry a higher cost than
other services.
Amortization of Certain Acquired Intangible Assets, included in Cost of
Revenues. The amortization of certain acquired intangible assets, consisting of
developed technology, distribution rights, trademarks and tradenames, totaled
$10.4 million and $6.9 million for the third quarters of fiscal 2001 and 2000,
respectively. For the nine months ended October 31, 2000 and 1999, amortization
of certain acquired intangible assets included in cost of revenues totaled
$30.6 million and $21.0 million, respectively. These increases were primarily
due to intangible assets resulting from a number of strategic acquisitions,
particularly the fiscal 2000 acquisition of The Theory Center, Inc. ("TTC"). In
the future, amortization expense associated with these intangible assets
recorded prior to October 31, 2000 is expected to total $8.7 million for the
fourth quarter of fiscal 2001, and approximately $23.0 million, $15.1 million,
and $8.1 million for the fiscal years ending January 31, 2002, 2003 and
thereafter, respectively.
Operating Expenses
Sales and Marketing. Sales and marketing expenses include salaries,
benefits, sales commissions, travel and facility costs for the Company's sales
and marketing personnel. These expenses also include programs aimed at
increasing revenues, such as advertising, public relations, trade shows and
user conferences. Sales and marketing expenses increased 57.6 percent in the
third quarter of fiscal 2001 compared with the same quarter of
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the prior fiscal year. For the nine months ended October 31, 2000, sales and
marketing expenses increased 59.9 percent from the same period of the prior
fiscal year. These increases were due to increased commissions on the Company's
increased revenue base, the expansion of the Company's direct sales force and
an increase in marketing personnel and programs. Sales and marketing expenses
decreased as a percentage of revenues to 39.7 percent from 44.6 percent in the
third quarters ended October 31, 2000 and 1999, respectively, and to
41.6 percent from 46.5 percent for the nine months ended October 31, 2000 and
1999, respectively. These decreases were due to the allocation of the increased
sales and marketing expenses over a larger revenue base. The Company expects to
continue to invest in expansion of the direct and indirect sales channels, as
well as marketing programs to promote the Company's products and brand.
Accordingly, the Company expects sales and marketing expenses to continue to
increase in future periods.
Research and Development. Research and development expenses consist
primarily of salaries and benefits for software engineers, contract development
fees, costs of computer equipment used in software development and facilities
expenses. Total expenditures for research and development increased 38.9
percent in the third quarter of fiscal 2001 compared with the same quarter in
fiscal 2000. For the nine months ended October 31, 2000, research and
development expenses increased 49.6 percent from the same period of the prior
fiscal year. These increases were attributed to an increase in product
development personnel and related expenses. Research and development expenses
represented 10.4 percent and 13.2 percent of total revenues in the third
quarters of fiscal 2001 and 2000, respectively, and 11.3 percent and 13.5
percent of total revenues in the nine months ended October 31, 2000 and 1999,
respectively. These decreases were primarily due to the allocation of the
increased research and development expenses over a larger revenue base. The
Company expects to continue to commit substantial resources to product
development and engineering in future periods. As a result, the Company expects
research and development expenses to continue to increase in future periods.
Additionally, management intends to continue recruiting and hiring experienced
software development personnel and to consider the licensing and acquisition of
technologies complementary to the Company's business.
General and Administrative. General and administrative expenses include
costs for the Company's human resources, finance, legal, information
technology, facilities and general management functions. General and
administrative expenses increased 54.8 percent in the third quarter of fiscal
2001 compared with the same quarter of fiscal 2000. For the nine months ended
October 31, 2000, general and administrative expenses increased 41.8 percent
from the same period of the prior fiscal year. These increases were attributed
to the expansion of the Company's support infrastructure, including information
systems and associated expenses necessary to manage the Company's growth.
General and administrative expenses represented 7.1 percent and 8.1 percent of
total revenues for the quarters ended October 31, 2000 and 1999, respectively,
and 7.0 percent and 8.8 percent of total revenues for the nine month periods
ended October 31, 2000 and 1999, respectively. These decreases were primarily
due to the allocation of the increased general and administrative expenses over
a larger revenue base.
Amortization of Goodwill. Amortization of goodwill increased in the third
quarter of fiscal 2001, compared to the third quarter of fiscal 2000, due to
goodwill resulting from various acquisitions completed in fiscal 2000 and in
the first nine months of fiscal 2001. In the future, amortization of goodwill
recorded prior to October 31, 2000 is expected to total $15.6 million for the
fourth quarter of fiscal 2001, and approximately $54.2 million, $45.3 million,
and $34.6 million for the fiscal years ending January 31, 2002, 2003 and
thereafter, respectively.
Acquisition related charges. In the third quarters of fiscal 2001 and 2000,
respectively, there were no acquisition-related charges. For the nine months
ended October 31, 2000, acquisition related charges were related to the write-
off associated with the acquired in-process research and development of
approximately $2.2 million relating to The Workflow Automation Corporation
("Workflow") acquisition, which occurred in the first quarter of fiscal 2001.
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Interest Expense; Interest Income and Other, Net. Interest expense was $5.6
million in the third quarter of fiscal 2001, compared with $2.5 million in the
same quarter of the prior fiscal year. For the nine months ended October 31,
2000, interest expense increased to $17.2 million, compared to $7.5 million for
the same period of the prior fiscal year. These increases were due to a higher
average amount of outstanding borrowings, primarily due to the issuance of $550
million 4% Convertible Subordinated Notes due December 15, 2006 ("2006 Notes")
in the last quarter of fiscal 2000. Interest income and other, net in the third
quarter of fiscal 2001 and 2000 was $11.7 million and $3.0 million,
respectively, and for the nine months ended October 31, 2000 and 1999 was $33.0
million and $7.3 million, respectively. These increases were due to the
investment of higher average cash, cash equivalents and short-term investment
balances, generated primarily from the Company's debt and equity offerings.
Provision for Income Taxes. The Company has provided for income taxes of
$6.9 million and $11.4 million for the quarter and nine months ended October
31, 2000, respectively, as compared to $3.8 million and $7.1 million for the
quarter and nine months ended October 31, 1999. The income tax expense provided
in both years consist primarily of US federal minimum tax, US current state
income taxes, foreign withholding taxes and foreign income tax expense incurred
as a result of local country profits. The increases in income taxes provided
for in the quarter ended October 31, 2000 and through the first nine months of
fiscal 2001, relative to the same periods in the prior fiscal year, were
primarily due to an overall increase in US federal minimum tax, US current
state income taxes, and foreign withholding taxes.
Under Statement of Financial Accounting Standards No. 109 Accounting for
Income Taxes ("FAS 109"), deferred tax assets and liabilities are determined
based on the difference between financial reporting and tax bases of assets and
liabilities and are measured using the enacted tax rates and laws that will be
in effect when the differences are expected to reverse. FAS 109 provides for
the recognition of deferred tax assets if realization of such assets is more
likely than not. Based upon the available evidence, which includes BEA's
historical operating performance and the reported cumulative net losses from
prior years, the Company has provided a valuation allowance against its net
deferred tax assets to the extent that they are dependent upon future taxable
income for realization. The Company intends to evaluate the realizability of
the deferred tax assets on a quarterly basis.
Liquidity and Capital Resources
As of October 31, 2000, cash, cash equivalents and short-term investments
totaled $860.1 million, up from $803.1 million at January 31, 2000. The
increase in cash, cash equivalents and short-term investments was primarily due
to cash generated from operations, in the amount of $149.9 million, offset by
cash used in the acquisitions of the services business of Bauhaus Technologies,
Inc. ("Bauhaus") and The Object People, Inc. ("TOP"), and the Company's
strategic equity investments in privately-held companies.
Cash generated from operating activities rose to $149.9 million for the nine
months ended October 31, 2000, compared with $56.3 million generated in the
same period of the prior fiscal year. Cash provided by operating activities for
the nine months ended October 31, 2000 and 1999, respectively, resulted
primarily from net income adjustments made for non-cash items such as
acquisition related charges and depreciation, as well as increases in deferred
revenues and accrued liabilities, offset by increases in accounts receivable.
Investing activities consumed $169.4 million for the nine months ended
October 31, 2000, compared with $75.2 million in the same period of the prior
fiscal year. Cash used for investing activities for the first nine months of
fiscal 2001 was primarily for strategic acquisitions and equity investments in
privately-held companies amounting to an aggregate of $101.9 million, capital
expenditures of $29.5 million and purchases of short-term investments of $38.0
million. In the same period of the prior fiscal year the primary use of cash
for investing activities was due to purchases of short-term investments and
purchases of computer equipment, furniture and leasehold improvements.
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The Company generated $44.0 million from financing activities in the first
nine months of fiscal 2001, compared with $16.7 in the same period of fiscal
2000. The primary source of cash from financing activities in both the first
nine months of fiscal 2001 and 2000 was the proceeds received from employee
stock purchases and the issuance of common stock by BEA pursuant to stock
option exercises.
As of October 31, 2000, the Company's outstanding short and long-term debt
obligations were $581.3 million, up from $582.9 million at January 31, 2000. At
October 31, 2000, the Company's outstanding debt obligations consisted
principally of the $561.8 million of convertible notes and $19.5 million of
other short-term and long-term debt. At January 31, 2000, the Company's
outstanding debt obligations consisted principally of $572.5 million of
convertible notes and $10.4 million of other short-term and long-term debt.
In addition to normal operating expenses, cash requirements are anticipated
for financing anticipated growth, payment of outstanding debt obligations and
the acquisition or licensing of products and technologies complementary to the
Company's business. The Company believes that its existing cash, cash
equivalents, short-term investments and cash generated from operations, if any,
will be sufficient to satisfy its currently anticipated cash requirements
through October 31, 2001. However, the Company expects to make additional
acquisitions and may need to raise additional capital through future debt or
equity financing to the extent necessary to fund any such acquisitions. There
can be no assurance that additional financing will be available, at all, or on
terms favorable to the Company.
Effect of New Accounting Pronouncements
In December 1999, the Securities and Exchange Commission ("SEC") issued
Staff Accounting Bulletin No. 101, Revenue Recognition in Financial Statements
("SAB 101") and amended it in March 2000. BEA is required to adopt the
provisions of SAB 101 in its fourth fiscal quarter of 2001. The Company does
not expect that the adoption of SAB 101 will have a material impact to the
Company's financial position or results of operations.
In June 1998, the Financial Accounting Standards Board released Statement of
Financial Accounting Standards No. 133, Accounting for Derivative Instruments
and Hedging Activities ("FAS 133"). FAS 133 establishes the accounting and
reporting standards for derivative instruments, including certain derivative
instruments embedded in other contracts (collectively referred to as
derivatives) and for hedging activities. It requires that an entity recognize
all derivatives as either assets or liabilities in the statement of financial
position and measure those instruments at fair value. In July 1999, FAS No.
137, Accounting for Derivative Instruments and Hedging Activities--Deferral of
the Effective Data of FASB Statement 133 ("FAS 137") was issued. FAS 137
deferred the effective date of FAS 133 until the first fiscal quarter of fiscal
years beginning after June 15, 2000. The Company will adopt FAS 133 effective
February 1, 2001. The Company does not currently expect that the adoption of
FAS 133 will have a material impact to its financial position or results of
operations.
In March 2000, the Financial Accounting Standards Board issued FASB
Interpretation No. 44, Accounting for Certain Transactions Involving Stock
Compensation--an Interpretation of APB Opinion No. 25, ("FIN 44"). FIN 44
clarifies the application of APB Opinion No. 25 and, among other issues
clarifies the following: the definition of an employee for purposes of applying
APB Opinion No. 25; the criteria for determining whether a plan qualifies as a
noncompensatory plan; the accounting consequence of various modifications to
the terms of the previously fixed stock options or awards; and the accounting
for an exchange of stock compensation awards in a business combination. FIN 44
is effective July 1, 2000, but certain conclusions in FIN 44 cover specific
events that occurred after either December 15, 1998 or January 12, 2000. The
application of FIN 44 has not had a material impact on the Company's financial
position or results of operations.
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Factors That May Impact Future Operating Results
BEA Systems, Inc. operates in a rapidly changing environment that involves
numerous risks and uncertainties. The following section lists some, but not
all, of these risks and uncertainties which may have a material adverse effect
on the Company's business, financial condition or results of operations.
Significant unanticipated fluctuations in our actual or anticipated quarterly
revenues and operating results may cause us not to meet securities analysts'
or investors' expectations and may result in a decline in our stock price
Although we have had significant revenue growth in recent quarters, our
growth rates may not be sustainable. If our revenues, operating results,
earnings or future projections are below the levels expected by investors or
securities analysts, our stock price is likely to decline. Our stock price is
also subject to the volatility generally associated with Internet, software and
technology stocks and may also be affected by broader market trends unrelated
to our performance, such as the declines in the prices of many such stocks in
March, April and November 2000.
We expect to experience significant fluctuations in our future quarterly
revenues and operating results as a result of many factors, including:
. difficulty predicting the size and timing of customer orders
. the mix of our products and services sold
. mix of distribution channels
. whether our strategy to further establish and expand our relationships
with distributors is successful
. introduction or enhancement of our products or our competitors' products
. general economic conditions, which can affect our customers' capital
investment levels and the length of our sales cycle
. changes in our competitors' product offerings and pricing policies, and
customer order deferrals in anticipation of new products and product
enhancements from BEA or competitors
. whether we are able to develop, introduce and market new products on a
timely basis and whether any new products are accepted in the market
. any slowdown in use of the Internet for commerce
. recent hiring may prove excessive if growth rates are not maintained
. the structure, timing and integration of acquisitions of businesses,
products and technologies
. the terms and timing of financing activities
. potential fluctuations in demand or prices of our products and services
. the lengthy sales cycle for our products
. technological changes in computer systems and environments
. whether we are able to successfully expand our sales and marketing
programs
. whether we are able to meet our customers' service requirements
. costs associated with acquisitions
. loss of key personnel
. fluctuations in foreign currency exchange rates
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As a result of all of these factors, we believe that quarterly revenues and
operating results are difficult to forecast and period-to-period comparisons
of our results of operations are not necessarily meaningful and should not be
relied upon as indications of trends or future performance.
A material portion of our revenues has been derived from large orders, as
customers deployed our products. Increases in the dollar size of some
individual license transactions have also increased the risk of fluctuation in
future quarterly results. The majority of our revenue is derived from a large
number of small development orders with the potential to turn into large
deployments. If we cannot generate large customer orders, turn development
orders into large deployments or customers delay or cancel such orders in a
particular quarter, it may have a material adverse effect on our revenues and,
more significantly on a percentage basis, our net income or loss in that
quarter. Moreover, we typically receive and fulfill most of our orders within
the quarter, with the substantial majority of our orders typically received in
the last month of each fiscal quarter. As a result, we may not learn of
revenue shortfalls until late in a fiscal quarter, after it is too late to
adjust expenses for that quarter. Additionally, our operating expenses are
based in part on our expectations for future revenues and are difficult to
adjust in the short term. Any revenue shortfall below our expectations could
have an immediate and significant adverse effect on our results of operations.
We are subject to employer payroll taxes when our employees exercise their
stock options. The employer payroll taxes are assessed on each employee's
gain, which is the difference between the price of our common stock on the
date of exercise and the exercise price. During a particular period, these
payroll taxes could be material. These employer payroll taxes are recorded as
an expense and are assessed at tax rates that vary depending upon the
employee's taxing jurisdiction in the period such options are exercised based
on actual gains realized by employees. However, because we are unable to
predict how many stock options will be exercised, at what price and in which
country during any particular period, we cannot predict the amount, if any, of
employer payroll expense that will be recorded in a future period or the
impact on our future financial results.
As is common in the software industry, we believe that our fourth quarter
orders are favorably impacted by a variety of factors including year-end
capital purchases by larger corporate customers and the commission structure
for our sales force. This increase typically results in first quarter customer
orders being lower than orders received in the immediately preceding fourth
quarter. BEA anticipates that this seasonal impact is likely to continue.
Although we use standardized license agreements designed to meet current
revenue recognition criteria under generally accepted accounting principles,
we must often negotiate and revise terms and conditions of these standardized
agreements, particularly in larger license transactions. Negotiation of
mutually acceptable terms and conditions can extend the sales cycle and, in
certain situations, may require us to defer recognition of revenue on the
license. While we believe that we are in compliance with Statement of Position
97-2, Software Revenues Recognition, ("SOP 97-2") and SOP 98-4 and SOP 98-9,
which amend certain provisions of SOP 97-2, the American Institute of
Certified Public Accountants continues to issue implementation guidelines for
these standards and the accounting profession continues to discuss a wide
range of potential interpretations. In addition, the Securities and Exchange
Commission ("SEC") issued Staff Accounting Bulletin No. 101, Revenue
Recognition in Financial Statements ("SAB 101"). BEA is required to adopt the
provisions of SAB 101 in its fourth fiscal quarter of 2001. Additional
implementation guidelines and changes in interpretations of such guidelines
could lead to unanticipated changes in our current revenue accounting
practices that could cause us to recognize lower revenue and profits.
It is difficult to predict our future results for a variety of reasons
including our limited operating history and need to continue to integrate our
acquisitions
We were incorporated in January 1995 and therefore have a limited operating
history. We have generated revenues to date primarily from sales of BEA
WebLogic(TM), a software product which we acquired in September 1998, and from
BEA TUXEDO(TM), a software product to which we acquired worldwide distribution
rights in
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February 1996, and fees for software products and services related to WebLogic
and TUXEDO. We have also acquired a number of additional businesses,
technologies and products. Our limited operating history and the need to
integrate a number of separate and independent business operations subject our
business to numerous risks. At October 31, 2000, we had an accumulated deficit
of approximately $204.8 million. In addition, in connection with certain
acquisitions completed prior to October 31, 2000, we recorded approximately
$499.1 million as intangible assets and goodwill. Under Generally Accepted
Accounting Principles, intangible assets and goodwill are required to be
amortized in future periods. Approximately $294.5 million of these assets have
been amortized as of October 31, 2000, and we expect to amortize the remaining
amount of approximately $204.6 million in future periods through our fiscal
year ending January 31, 2005. We expect to amortize $24.3 million of such
intangible assets and goodwill over the remaining quarter of fiscal 2001. If we
acquire additional businesses, products and technologies in the future, we may
report additional, potentially significant expenses. If future events cause the
impairment of any intangible assets acquired in our past or future
acquisitions, we may have to expense such assets sooner than we expect. Because
of our limited operating history and ongoing expenses associated with our prior
acquisitions, there can be no assurance that we will be profitable in any
future period, and recent operating results should not be considered indicative
of future financial performance.
BEA has a non-voting preferred stock and convertible debt interest
(representing approximately 45 percent ownership interest) in WebGain, Inc.
("WebGain"), a private company, that has experienced operating losses since its
inception. Other shareholders of WebGain include venture capital funds managed
by E.M. Warburg, Pincus & Co., Inc., of which certain BEA directors are
Managing Directors. To the extent that WebGain's aggregate losses exceed its
common stockholders' equity, BEA would begin recognizing losses in a manner
similar to the equity method of accounting, with such losses being limited to
the extent of BEA's investment in and loans to WebGain. As of October 31, 2000,
BEA has an investment in and loans to the company aggregating $60 million and
no obligation to provide additional funding. Based on WebGain's historical
financial results and current estimates of WebGain's future operations, BEA
does not expect to recognize WebGain losses in the immediate future, if ever.
However, the amount of any future WebGain losses and the period in which BEA
would begin recognizing such losses, if ever, is subject to several factors
that cannot be predicted with certainty. Factors include: timing and size of
any future acquisitions by WebGain, amount of WebGain's operational profits or
losses, dilution or disposition of BEA's ownership of WebGain below the
threshold for equity accounting, or conversion of BEA's ownership interest into
common stock. If BEA is ever required to recognize WebGain losses, such losses
could be material in relation to BEA's net income or loss at that time.
Our revenues are derived primarily from two main product and services lines,
and a decline in demand or prices for either could substantially adversely
affect our operating results
We currently derive the majority of our license and service revenues from
BEA WebLogic(TM), BEA TUXEDO(TM) and from related products and services. We
expect these products and services to continue to account for the majority of
our revenues in the immediate future. As a result, factors adversely affecting
the pricing of or demand for BEA WebLogic(TM) and BEA TUXEDO(TM), such as
competition, product performance or technological change, could have a material
adverse effect on our business and consolidated results of operations and
financial condition.
Any failure to maintain ongoing sales through distribution channels could
result in lower revenues
To date, we have sold our products principally through our direct sales
force, as well as through indirect sales channels, such as computer hardware
companies, packaged application software developers (ISVs), systems integrators
and independent consultants (SIs), independent software tool vendors and
distributors. Our ability to achieve revenue growth in the future will depend
in large part on our success in expanding our direct sales force and in further
establishing and expanding relationships with distributors, ISVs, OEMs and
systems integrators. In particular, in August 2000, we announced a significant
initiative to further establish and expand
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relationships with our distributors through these sales channels, especially
ISVs and SIs. A significant part of this initiative is to recruit and train a
large number of consultants employed by SIs and induce these SIs to more
broadly use our products in their consulting practices, as well as to embed our
technology in products our ISV customers offer. We intend to seek distribution
arrangements with additional ISVs to embed our Web application servers in their
products. It is possible that we will not be able to successfully expand our
direct sales force or other distribution channels, secure agreements with
additional SIs and ISVs on commercially reasonable terms or at all, and
otherwise adequately develop our relationships with indirect sales channels.
Moreover, even if we succeed in these endeavors, it still may not increase our
revenues. If we invest resources in these types of expansion and our revenues
do not correspondingly increase, our business, results of operations and
financial condition will be materially and adversely affected.
In addition, we already rely on informal relationships with a number of
consulting and systems integration firms to enhance our sales, support, service
and marketing efforts, particularly with respect to implementation and support
of our products as well as lead generation and assistance in the sales process.
We will need to expand our relationships with third parties in order to support
license revenue growth. Many such firms have similar, and often more
established, relationships with our principal competitors. It is possible that
these and other third parties will not provide the level and quality of service
required to meet the needs of our customers, that we will not be able to
maintain an effective, long term relationship with these third parties, and
that these third parties will not successfully meet the needs of our customers.
If we do not develop and enhance new and existing products to keep pace with
technological, market and industry changes, our revenues may decline
The market for our products is highly fragmented, competitive with
alternative computing architectures, and characterized by continuing
technological developments, evolving industry standards and changing customer
requirements. The introduction of products embodying new technologies, the
emergence of new industry standards or changes in customer requirements could
render our existing products obsolete and unmarketable. As a result, our
success depends upon our ability to timely and effectively enhance existing
products (such as our WebLogic Server product), respond to changing customer
requirements and develop and introduce in a timely manner new products (such as
our WebLogic Collaborate product) that keep pace with technological and market
developments and emerging industry standards. It is possible that our products
will not adequately address the changing needs of the marketplace and that we
will not be successful in developing and marketing enhancements to our existing
products or products incorporating new technology on a timely basis. Failure to
develop and introduce new products, or enhancements to existing products, in a
timely manner in response to changing market conditions or customer
requirements, will materially and adversely affect our business, results of
operations and financial condition.
The price of our common stock may fluctuate significantly
The market price for our common stock may be affected by a number of
factors, including developments in the Internet, software or technology
industry, general market conditions and other factors, including factors
unrelated to our operating performance or our competitors' operating
performance. In addition, stock prices for BEA and many other companies in the
Internet, technology and emerging growth sectors have experienced wide
fluctuations including recent rapid rises and declines in their stock prices
that often have not been directly related to the operating performance of such
companies, such as the declines in the stock prices of BEA and many such
companies in March, April and November 2000. Such factors and fluctuations, as
well as general economic, political and market conditions, such as recessions,
may materially adversely affect the market price of our common stock.
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If we cannot successfully integrate our past and future acquisitions, our
revenues may decline and expenses may increase
From our inception in January 1995, we have made a number of strategic
acquisitions. Integration of acquired companies, divisions and products
involves the assimilation of potentially conflicting operations and products,
which divert the attention of our management team and may have a material
adverse effect on our operating results in future quarters. It is possible we
may not achieve any of the intended financial or strategic benefits of these
transactions. While we intend to make additional acquisitions in the future,
there may not be suitable companies, divisions or products available for
acquisition. Our acquisitions entail numerous risks, including the risk we
will not successfully assimilate the acquired operations and products, or
retain key employees of the acquired operations. There are also risks relating
to the diversion of our management's attention, and difficulties and
uncertainties in our ability to maintain the key business relationships the
acquired entities have established. In addition, if we undertake future
acquisitions, we may issue dilutive securities, assume or incur additional
debt obligations, incur large one-time expenses, and acquire intangible assets
that would result in significant future amortization expense. Any of these
events could have a material adverse effect on our business, operating results
and financial condition.
Recently, the Financial Accounting Standards Board ("FASB") proposed to
eliminate pooling of interests accounting for acquisitions and the ability to
write-off in-process research and development has been limited by recent
pronouncements. The effect of these changes would be to increase the portion
of the purchase price for any future acquisitions that must be charged to
BEA's cost of revenues and operating expenses in the periods following any
such acquisitions. As a consequence, our results of operations in periods
following any such acquisitions could be materially adversely affected.
Although these changes would not directly affect the purchase price for any of
these acquisitions, they would have the effect of increasing the reported
expenses associated with any of these acquisitions. To that extent, these
changes may make it more difficult for us to acquire other companies, product
lines or technologies.
The lengthy sales cycle for our products makes our revenues susceptible to
substantial fluctuations
Our customers typically use our products to implement large, sophisticated
applications that are critical to their business, and their purchases are
often part of their implementation of a distributed or Web-based computing
environment. Customers evaluating our software products face complex decisions
regarding alternative approaches to the integration of enterprise
applications, competitive product offerings, rapidly changing software
technologies and limited internal resources due to other information systems
requirements. For these and other reasons, the sales cycle for our products is
lengthy and is subject to delays or cancellation over which we have little or
no control. We have experienced an increase in the number of million and
multi-million dollar license transactions. In some cases, this has resulted in
more extended customer evaluation and procurement processes, which in turn
have lengthened the overall sales cycle for our products.
If we do not effectively compete with new and existing competitors, our
revenues and operating margins will decline
The market for application server and integration software, and related
software components and services, is highly competitive. Our competitors are
diverse and offer a variety of solutions directed at various segments of this
marketplace. These competitors include operating system and hardware vendors,
such as IBM and Sun Microsystems, and database vendors, such as Oracle. In
addition, another of our competitors, Microsoft, has released products that
include certain application server functionality and has announced that it
intends to include application server and integration functionality in future
versions of its operating systems, including future versions of Windows 2000.
IBM and Oracle recently announced plans to invest significant amounts of
money, engineering resources and marketing efforts in pursuing products that
compete with ours. In addition, there are companies offering and developing
application server and integration software products and related services that
directly compete with products we offer. Further, software development tool
vendors typically emphasize the broad versatility of their tool sets and, in
some cases, offer complementary software that
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supports these tools and performs basic application server and integration
functions. Last, internal development groups within prospective customers'
organizations may develop software and hardware systems that may substitute for
those we offer. A number of our competitors and potential competitors have
longer operating histories, significantly greater financial, technical,
marketing and other resources, greater name recognition and a larger installed
base of customers than us.
Our principal competitors currently include hardware vendors who bundle
their own application server and integration software products, or similar
products, with their computer systems and database vendors that advocate
client/server networks driven by the database server. IBM and Sun Microsystems
are the primary hardware vendors who offer a line of application server and
integration solutions for its customers. IBM's sale of application server and
integration functionality along with its IBM proprietary hardware systems
requires us to compete with IBM in its installed base, where IBM has certain
inherent advantages due to its significantly greater financial, technical,
marketing and other resources, greater name recognition and the integration of
its enterprise application server and integration functionality with its
proprietary hardware and database systems. These inherent advantages allow IBM
to bundle, at a discounted price, application functionality with computer
hardware and software sales. Due to these factors, if we do not differentiate
our products based on functionality, interoperability with non-IBM systems,
performance and reliability, and establish our products as more effective
solutions to customers' needs, our revenues and operating results will suffer.
Microsoft has announced that it intends to include certain application
server and integration functionality in future versions of its Windows 2000
operating system. Microsoft has also introduced a product that includes certain
basic application server functionality. The bundling of competing functionality
in versions of Windows requires us to compete with Microsoft in the Windows
marketplace, where Microsoft has certain inherent advantages due to its
significantly greater financial, technical, marketing and other resources, its
greater name recognition, its substantial installed base and the integration of
its application server and integration functionality with Windows. We need to
differentiate our products from Microsoft's based on a number of criteria
including scalability, functionality, interoperability with non-Microsoft
platforms, performance and reliability, and need to establish our products as
more effective solutions to customers' needs. We may not be able to
successfully differentiate our products from those offered by Microsoft, and
Microsoft's entry into the application server and integration market could
materially adversely affect our business, operating results and financial
condition.
In addition, current and potential competitors may make strategic
acquisitions or establish cooperative relationships among themselves or with
third parties, thereby increasing the ability of their products to address the
needs of our current and prospective customers. Accordingly, it is possible
that new competitors or alliances among current and new competitors may emerge
and rapidly gain significant market share. Such competition could materially
adversely affect our ability to sell additional software licenses and
maintenance, consulting and support services on terms favorable to us. Further,
competitive pressures could require us to reduce the price of our products and
related services, which could materially adversely affect our business,
operating results and financial condition. We may not be able to compete
successfully against current and future competitors and any failure to do so
would have a material adverse effect upon our business, operating results and
financial condition.
If the market for application servers, application integration and application
component software does not grow as quickly as we expect, our revenues will be
harmed
We sell our products and services in the application server, application
integration and application component markets. These markets are emerging and
are characterized by continuing technological developments, evolving industry
standards and changing customer requirements. Our success is dependent in large
part on acceptance of our products by large customers with substantial legacy
mainframe systems, customers establishing a presence on the Web for commerce,
and developers of web-based commerce applications. Our future financial
performance will depend in large part on continued growth in the number of
companies extending their mainframe-based, mission-critical applications to an
enterprise-wide distributed
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computing environment and to the Internet through the use of application
server and integration technology. There can be no assurance that the markets
for application server and integration technology and related services will
continue to grow. If these markets fail to grow or grow more slowly than we
currently anticipate, or if we experience increased competition in these
markets, our business, results of operations and financial condition will be
adversely affected.
If we fail to adequately protect our intellectual property rights,
competitors may use our technology and trademarks, which could weaken our
competitive position, reduce our revenues and increase our costs
Our success depends upon our proprietary technology. We rely on a
combination of patent, copyright, trademark and trade secret rights,
confidentiality procedures and licensing arrangements to establish and protect
our proprietary rights. It is possible that other companies could successfully
challenge the validity or scope of our patents and that our patents may not
provide a competitive advantage to us.
As part of our confidentiality procedures, we generally enter into non-
disclosure agreements with our employees, distributors and corporate partners
and into license agreements with respect to our software, documentation and
other proprietary information. Despite these precautions, third parties could
copy or otherwise obtain and use our products or technology without
authorization, or develop similar technology independently. In particular, we
have, in the past, provided certain hardware OEMs with access to our source
code, and any unauthorized publication or proliferation of this source code
could materially adversely affect our business, operating results and
financial condition. It is difficult for us to police unauthorized use of our
products, and although we are unable to determine the extent to which piracy
of our software products exists, software piracy is a persistent problem.
Effective protection of intellectual property rights is unavailable or limited
in certain foreign countries. The protection of our proprietary rights may not
be adequate and our competitors could independently develop similar
technology, duplicate our products, or design around patents and other
intellectual property rights we hold.
Third parties could assert that our software products and services infringe
their intellectual property rights, which could expose us to increased costs
and litigation
It is possible that third parties could claim our current or future
products infringe their rights including their patent rights. Any such claims,
with or without merit, could cause costly litigation that could absorb
significant management time, which could materially adversely affect our
business, operating results and financial condition. These types of claims
could cause us to pay substantial damages on settlement amounts, cease
offering any subject technology and require us to enter into royalty or
license agreements. If required, we may not be able to obtain such royalty or
license agreements, or obtain them on terms acceptable to us, which could have
a material adverse effect upon our business, operating results and financial
condition.
Our international operations expose us to greater management, collections,
currency, intellectual property, regulatory and other risks
International revenues accounted for 40.6 percent of our consolidated
revenues for both the nine months ended October 31, 2000 and 1999,
respectively. We sell our products and services through a network of branches
and subsidiaries located in 30 countries worldwide. In addition, we also
market through distributors. We believe that our success depends upon
continued expansion of our international operations. Our international
business is subject to a number of risks, including unexpected changes in
regulatory practices and tariffs, greater difficulties in staffing and
managing foreign operations, longer collection cycles, seasonality, potential
changes in tax laws, greater difficulty in protecting intellectual property
and the impact of fluctuating exchange rates between the US dollar and foreign
currencies in markets where we do business.
General economic and political conditions in these foreign markets may also
impact our international revenues. There can be no assurances that these
factors and other factors will not have a material adverse effect
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on our future international revenues and consequently on our business and
consolidated financial condition and results of operations.
If we are unable to manage our growth, our business will suffer
We have continued to experience a period of rapid and substantial growth
that has placed, and if such growth continues would continue to place, a strain
on the Company's administrative and operational infrastructure. We have
increased the number of our employees from 120 employees in three offices in
the United States at January 31, 1996 to over 2,600 employees in over 89
offices in 30 countries at October 31, 2000. Our ability to manage our staff
and growth effectively requires us to continue to improve our operational,
financial and management controls, reporting systems and procedures. In this
regard, we are currently updating our management information systems to
integrate financial and other reporting among our multiple domestic and foreign
offices. In addition, we intend to continue to increase our staff worldwide and
to continue to improve the financial reporting and controls for our global
operations. It is possible we will not be able to successfully implement
improvements to our management information and control systems in an efficient
or timely manner and that, during the course of this implementation, we could
discover deficiencies in existing systems and controls. If we are unable to
manage growth effectively, our business, results of operations and financial
condition will be materially adversely affected.
If we lose key personnel or cannot hire enough qualified personnel, it will
adversely affect our ability to manage our business, develop new products and
increase revenue
We believe our future success will depend upon our ability to attract and
retain highly skilled personnel including our founders, Messrs. William T.
Coleman III and Alfred S. Chuang, and other key members of management.
Competition for these types of employees is intense, and it is possible that we
will not be able to retain our key employees and that we will not be successful
in attracting, assimilating and retaining qualified candidates in the future.
As we seek to expand our global organization, the hiring of qualified sales,
technical and support personnel will be difficult due to the limited number of
qualified professionals. Failure to attract, assimilate and retain key
personnel would have a material adverse effect on our business, results of
operations and financial condition.
If our products contain software defects, it could harm our revenues and
expose us to litigation
The software products we offer are internally complex and, despite extensive
testing and quality control, may contain errors or defects, especially when we
first introduce them. We may need to issue corrective releases of our software
products to fix any defects or errors. Any defects or errors could also cause
damage to our reputation, loss of revenues, product returns or order
cancellations, or lack of market acceptance of our products. Accordingly, any
defects or errors could have a material and adverse effect on our business,
results of operations and financial condition.
Our license agreements with our customers typically contain provisions
designed to limit our exposure to potential product liability claims. It is
possible, however, that the limitation of liability provisions contained in our
license agreements may not be effective as a result of existing or future
federal, state or local laws or ordinances or unfavorable judicial decisions.
Although we have not experienced any product liability claims to date, sale and
support of our products entails the risk of such claims, which could be
substantial in light of customers' use of such products in mission-critical
applications. If a claimant brings a product liability claim against us, it
could have a material adverse effect on our business, results of operations and
financial condition.
Our products interoperate with many parts of complicated computer systems,
such as mainframes, servers, personal computers, application software,
databases, operating systems and data transformation software. Failure of
anyone of these parts could cause all or large parts of computer systems to
fail. In such circumstances, it may be difficult to determine which part
failed, and it is likely that customers will bring a
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lawsuit against several suppliers. Even if our software is not at fault, we
could suffer material expense and material diversion of management time in
defending any such lawsuits.
We have a high debt balance and large interest obligations
At October 31, 2000, we had approximately $561.8 million of long-term
indebtedness in the form of convertible notes. As a result of this
indebtedness, we have substantial principal and interest payment obligations.
The degree to which we are leveraged could significantly harm our ability to
obtain financing for working capital, acquisitions or other purposes and could
make us more vulnerable to industry downturns and competitive pressures. Our
ability to meet our debt service obligations will be dependent upon our future
performance, which will be subject to financial, business and other factors
affecting our operations, many of which are beyond our control. In addition,
our earnings are insufficient to cover our fixed charges.
We will require substantial amounts of cash to fund scheduled payments of
interest on the notes, payment of the principal amount of the notes, payment of
principal and interest on our other indebtedness, future capital expenditures
and any increased working capital requirements. If we are unable to meet our
cash requirements out of cash flow from operations, there can be no assurance
that we will be able to obtain alternative financing. In the absence of such
financing, our ability to respond to changing business and economic conditions,
to make future acquisitions, to absorb adverse operating results or to fund
capital expenditures or increased working capital requirements would be
significantly reduced. If we do not generate sufficient cash flow from
operations to repay the notes at maturity, we could attempt to refinance the
notes; however, no assurance can be given that such a refinancing would be
available on terms acceptable to us, if at all. Any failure by us to satisfy
our obligations with respect to the notes at maturity (with respect to payments
of principal) or prior thereto (with respect to payments of interest or
required repurchases) would constitute a default under the indenture and could
cause a default under agreements governing our other indebtedness.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISKS
For financial market risks related to changes in interest rates and foreign
currency exchange rates, refer to Part II: Item 7a, "Quantitative and
Qualitative Disclosure About Market Risks," in the Company's Annual Report on
Form 10-K for the year ended January 31, 2000.
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PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
27 Financial Data Schedule
(b) Reports on Form 8-K:
None
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SIGNATURES
Pursuant to the requirement of the Security Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
BEA SYSTEMS, INC.
(Registrant)
/s/ William M. Klein
_____________________________________
William M. Klein
Chief Financial Officer and
Executive Vice President--
Administration
(Duly Authorized Officer and
Principal Financial Officer)
Dated: December 15, 2000
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