<PAGE>
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
of
THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended April 3, 1998
Commission File Number 0-23169
SEAGATE SOFTWARE, INC.
(Registrant)
Incorporated in the State of Delaware
I.R.S. Employer Identification Number 77-0397623
915 Disc Drive, Scotts Valley, California 95066
Telephone: (408) 438-6550
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
--- ---
On May 6, 1998, 940,525 shares of the registrant's common stock were issued and
outstanding.
<PAGE>
INDEX
SEAGATE SOFTWARE, INC.
<TABLE>
<CAPTION>
PART I FINANCIAL INFORMATION PAGE NO.
- ------ ----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Item 1. Financial Statements (unaudited)
Condensed Consolidated Balance Sheets--April 3, 1998 (unaudited) and June 27, 1997 3
Condensed Consolidated Statements of Operations--Three and nine months ended
April 3, 1998 and March 28, 1997 (unaudited) 4
Condensed Consolidated Statements of Cash Flows--Nine months ended April 3, 1998 and
March 28, 1997 (unaudited) 5
Notes to Condensed Consolidated Financial Statements (unaudited) 6
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 11
PART II OTHER INFORMATION PAGE NO.
- ------- ----------------------------------------------------------------------------------------------------------------
Item 1. Legal Proceedings 22
Item 6. Exhibits and Reports on Form 8-K 22
SIGNATURES 23
</TABLE>
2
<PAGE>
SEAGATE SOFTWARE, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
April 3, June 27,
-------- --------
1998 1997
-------- --------
<S> <C> <C>
(unaudited) (1)
ASSETS
Cash...................................................... $ 9,469 $ 12,085
Accounts receivable, net.................................. 43,777 28,172
Inventories............................................... 869 3,206
Other current assets...................................... 3,702 4,040
--------- ---------
Total Current Assets................................. 57,817 47,503
Property, equipment and leasehold improvements, net....... 16,197 20,785
Goodwill and other intangibles, net....................... 52,381 75,306
--------- ---------
Total Assets......................................... $ 126,395 $ 143,594
========= =========
LIABILITIES
Loan payable to Seagate Technology, Inc................... $ 114 $ 28,971
Accounts payable.......................................... 10,049 9,116
Accrued employee compensation............................. 14,301 10,267
Accrued expenses.......................................... 22,733 18,734
Deferred revenue.......................................... 12,865 8,354
--------- ---------
Total Current Liabilities............................ 60,062 75,442
Deferred income taxes..................................... 2,342 6,233
Other liabilities......................................... 262 301
--------- ---------
Total Liabilities.................................... 62,666 81,976
STOCKHOLDERS' EQUITY
Convertible preferred stock............................... 55 55
Common stock.............................................. -- --
Additional paid-in capital................................ 343,097 342,091
Accumulated deficit....................................... (279,490) (280,685)
Foreign currency translation adjustment................... 67 157
--------- ---------
Total Stockholders' Equity........................... 63,729 61,618
--------- ---------
Total Liabilities and Stockholders' Equity........... $ 126,395 $ 143,594
========= =========
</TABLE>
(1) The information in this column was derived from the Company's audited
consolidated balance sheet as of June 27, 1997.
See notes to condensed consolidated financial statements
3
<PAGE>
SEAGATE SOFTWARE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
------------------------ ------------------------
APRIL 3, MARCH 28, APRIL 3, MARCH 28,
------------ ---------- ------------ ----------
1998 1997 1998 1997
------------ ---------- ------------ ----------
<S> <C> <C> <C> <C>
Revenues:
License............................................... $ 65,501 $ 45,275 $ 177,481 $136,835
License from Seagate Technology, Inc.................. 1,949 1,036 4,382 4,739
Maintenance, support and other........................ 11,138 7,863 32,091 19,199
----------- -------- ----------- --------
Total revenues..................................... 78,588 54,174 213,954 160,773
Cost of revenues:
License............................................... 4,848 3,709 13,521 14,151
License from Seagate Technology, Inc.................. 127 436 498 1,515
Maintenance, support and other........................ 4,777 1,825 14,052 4,517
Amortization of developed technologies................ 3,522 8,427 10,501 17,648
----------- -------- ----------- --------
Total cost of revenues............................. 13,274 14,397 38,572 37,831
----------- -------- ----------- --------
Gross profit............................................ 65,314 39,777 175,382 122,942
Operating expenses:
Sales and marketing................................... 34,003 27,557 94,461 79,248
Research and development.............................. 12,311 10,456 35,482 31,387
General and administrative............................ 8,741 10,472 28,234 26,601
In-process research and development................... - 2,613 - 2,613
Amortization of goodwill and other intangibles........ 3,244 12,415 12,246 23,624
Unusual items......................................... - 13,446 - 13,446
----------- -------- ----------- --------
Total operating expenses........................... 58,299 76,959 170,423 176,919
----------- -------- ----------- --------
Income (loss) from operations........................... 7,015 (37,182) 4,959 (53,977)
Interest expense........................................ (303) (299) (961) (627)
Other, net.............................................. 318 179 784 27
----------- -------- ----------- --------
Interest expense and other, net.................... 15 (120) (177) (600)
----------- -------- ----------- --------
Income (loss) before income taxes....................... 7,030 (37,302) 4,782 (54,577)
Benefit (provision) for income taxes.................... (5,273) 9,666 (3,587) 10,408
----------- -------- ----------- --------
Net income (loss)....................................... $ 1,757 $(27,636) $ 1,195 $(44,169)
=========== ======== =========== ========
Net income (loss) per share:
Basic.............................................. $ 9.22 $(442.18) $ 8.04 $(706.70)
Diluted............................................ $ .03 $(442.18) $ .02 $(706.70)
Number of shares used in per share computations:
Basic.............................................. 190,666 62,500 148,587 62,500
Diluted............................................ 57,537,858 62,500 56,508,981 62,500
</TABLE>
See notes to condensed consolidated financial statements
4
<PAGE>
SEAGATE SOFTWARE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
-------------------------------
APRIL 3, MARCH 28,
-------- ---------
1998 1997
-------- ---------
<S> <C> <C>
OPERATING ACTIVITIES
Net income (loss).......................................................... $ 1,195 $(44,169)
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization............................................ 30,416 28,870
Deferred income taxes.................................................... (3,891) (5,997)
Write-off of goodwill and intangibles.................................... 1,900 17,192
Write-off of in-process research and development......................... -- 2,613
Unusual items............................................................ -- 13,446
Changes in operating assets and liabilities:
Accounts receivable................................................... (15,605) (4,074)
Inventories........................................................... 2,337 (1,257)
Other current assets.................................................. 338 (615)
Accounts payable...................................................... 933 4,244
Accrued employee compensation......................................... 4,034 1,443
Accrued expenses...................................................... 4,184 1,422
Accrued income taxes.................................................. 307 3,443
Deferred revenue...................................................... 4,511 2,849
Other assets and liabilities.......................................... (39) 110
-------- --------
Net cash provided by operating activities................................ 30,620 19,520
INVESTING ACTIVITIES
Acquisition of property, equipment and leasehold improvements, net......... (4,803) (12,071)
-------- --------
Net cash (used in) investing activities.................................. (4,803) (12,071)
FINANCING ACTIVITIES
Sale of common stock....................................................... 514 --
Borrowings from Seagate Technology, net.................................... (28,857) (7,057)
-------- --------
Net cash (used in) financing activities.................................. (28,343) (7,057)
Effect of exchange rate changes on cash.................................... (90) 94
-------- --------
Increase (decrease) in cash................................................ (2,616) 486
Cash at the beginning of the period........................................ 12,085 7,595
-------- --------
Cash at the end of the period.............................................. $ 9,469 $ 8,081
======== ========
SUPPLEMENTAL DISCLOSURES
Cash paid for interest................................................... $ 36 $ 195
Cash paid for income taxes............................................... 7,041 2,092
</TABLE>
See notes to condensed consolidated financial statements
5
<PAGE>
SEAGATE SOFTWARE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION. The consolidated condensed financial statements have
been prepared by the Company, without audit, pursuant to the rules and
regulations of the Securities and Exchange Commission. Certain information and
footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been condensed or
omitted pursuant to such rules and regulations. The Company believes the
disclosures included in the unaudited condensed consolidated financial
statements, when read in conjunction with the consolidated financial statements
of the Company as of June 27, 1997 and notes thereto, are adequate to make the
information presented not misleading.
The condensed consolidated financial statements reflect, in the opinion of
management, all adjustments necessary to summarize fairly the consolidated
financial position, results of operations and cash flows for such periods.
The results of operations for the three and nine months ended April 3, 1998
are not necessarily indicative of the results that may be expected for the
entire year ending July 3, 1998.
The Company operates and reports financial results on a fiscal year of 52 or
53 weeks ending on the Friday closest to June 30. Accordingly, fiscal 1997 was
52 weeks and ended on June 27, 1997 and fiscal 1998 will be 53 weeks and will
end on July 3, 1998.
NEW ACCOUNTING PRONOUNCEMENTS
The Financial Accounting Standards Board recently approved the new American
Institute of Certified Public Accountants Statement of Position 97-2 ("SOP 97-
2") on software revenue recognition. SOP 97-2 will be effective for the Company
beginning in fiscal year 1999. The Company is currently assessing the impact of
the new SOP on its revenue recognition policies.
The Company intends to adopt SFAS No. 130, "Reporting Comprehensive Income,"
and SFAS No. 131, "Disclosures about Segments of an Enterprise and Related
Information." Both standards will require additional disclosure, but will not
have a material effect on the Company's financial position or results of
operations. SFAS No. 130 establishes standards for the reporting and display of
comprehensive income and is expected to first be reflected in the Company's
first quarter of 1999 interim financial statements. The components of
comprehensive income include net income and items that are currently reported
directly as a component of shareholders' equity such as changes in foreign
currency translation adjustments and changes in the fair value of available for
sale financial instruments. SFAS No. 131 changes the way companies report
segment information and requires segments to be determined based on how
management measures performance and makes decisions about allocating resources.
SFAS No. 131 will first be reflected in the Company's 1999 Annual Report on Form
10-K.
6
<PAGE>
SEAGATE SOFTWARE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NET INCOME (LOSS) PER SHARE. Basic net income (loss) per common share is
computed using the weighted average number of shares of common stock outstanding
during the period. For periods in which the Company had losses, common
equivalent shares from common stock options and convertible preferred stock are
excluded from the computation of dilutive net loss per share as their effect is
antidilutive. Below is a reconciliation of the numerator and denominator used
to calculate basic earnings per share and diluted earnings per share (in
thousands, except share and per share data):
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
--------------------------- ---------------------------
APRIL 3, MARCH 28, APRIL 3, MARCH 28,
-------- --------- -------- ---------
1998 1997 1998 1997
-------- --------- -------- ---------
<S> <C> <C> <C> <C>
Basic net income (loss) per share
computation:
Numerator:
Net income (loss)........................ $ 1,757 $(27,636) $ 1,195 $(44,169)
----------- -------- ----------- --------
Denominator:
Weighted average number of common
shares outstanding during the period.......... 190,666 62,500 148,587 62,500
----------- -------- ----------- --------
Net income (loss) per share -
Basic................................... $ 9.22 $(442.18) $ 8.04 $(706.70)
=========== ======== =========== ========
Diluted net income (loss) per share
computation:
Numerator:
Net income (loss)........................ $ 1,757 $(27,636) $ 1,195 $(44,169)
----------- -------- ----------- --------
Denominator:
Weighted average number of common
shares outstanding during the period.......... 190,666 62,500 148,587 62,500
Convertible preferred stock................... 54,633,333 - 54,633,333 -
Incremental common shares
attributable to exercise of outstanding
options (assuming proceeds would be used
to purchase treasury stock).................. 2,713,859 - 1,727,061 -
----------- -------- ----------- --------
57,537,858 62,500 56,508,981 62,500
Net income (loss) per share -
Diluted................................. $ .03 $(442.18) $ .02 $(706.70)
=========== ======== =========== ========
</TABLE>
7
<PAGE>
SEAGATE SOFTWARE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
ACCOUNTS RECEIVABLE.
Accounts receivable are summarized below, in thousands:
<TABLE>
<CAPTION>
APRIL 3, JUNE 27,
-------- --------
1998 1997
-------- --------
<S> <C> <C>
Accounts receivable........................ $45,399 $29,442
Allowance for non-collection............... (1,622) (1,270)
------- -------
$43,777 $28,172
======= =======
</TABLE>
INVENTORIES.
Inventories are summarized below, in thousands:
<TABLE>
<CAPTION>
APRIL 3, JUNE 27,
-------- --------
1998 1997
-------- --------
<S> <C> <C>
Raw materials.............................. $ 248 $1,699
Finished goods............................. 621 1,507
----- ------
$ 869 $3,206
===== ======
</TABLE>
PROPERTY, EQUIPMENT AND LEASEHOLD IMPROVEMENTS.
Property, equipment and leasehold improvements consisted of the following, in
thousands:
<TABLE>
<CAPTION>
APRIL 3, JUNE 27,
-------- --------
1998 1997
-------- --------
<S> <C> <C>
Property, equipment and leasehold
improvements.............................. $ 35,034 $ 36,437
Accumulated depreciation and
amortization.............................. (18,837) (15,652)
-------- --------
$ 16,197 $ 20,785
======== ========
</TABLE>
GOODWILL AND OTHER INTANGIBLES.
Goodwill and other intangibles consisted of the following, in thousands:
<TABLE>
<CAPTION>
APRIL 3, JUNE 27,
-------- --------
1998 1997
-------- --------
<S> <C> <C>
Goodwill................................... $ 44,120 $ 46,200
Developed technology....................... 43,279 46,136
Trademarks................................. 9,972 9,972
Assembled workforce........................ 4,256 6,666
Distribution network....................... 2,925 2,925
Other intangibles.......................... 12,313 12,853
-------- --------
116,865 124,752
Accumulated amortization................... (64,484) (49,446)
-------- --------
Goodwill and other intangibles, net........ $ 52,381 $ 75,306
======== ========
</TABLE>
8
<PAGE>
SEAGATE SOFTWARE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
INCOME TAXES
The Company's current estimate of its annual effective tax rate on anticipated
operating income for the 1998 fiscal year is 75%. The projected effective tax
rate exceeds the U.S. statutory rate primarily due to the amortization of
goodwill which is not deductible for tax purposes and foreign taxes on earnings
generated in higher tax rate jurisdictions. This estimated annual effective tax
rate of 75% has been used to record the provision for income taxes for the three
and nine month periods ended April 3, 1998 compared with effective tax rates of
26% and 19%, respectively, used to record the benefit for income taxes for the
comparable year-ago periods. The effective tax rates used to record the benefit
for income taxes for the three month period and the nine month period ended
March 28, 1997 were less than the U.S. statutory rate primarily due to increases
in the valuation allowance for deferred tax assets and the amortization of
nondeductible goodwill. The Company is currently reviewing certain potential
international tax planning alternatives that, if implemented, would result in an
increase in the Company's provision for income taxes in the year of
implementation. Should the Company decide to implement any one of these
international tax planning alternatives in the final quarter of fiscal 1998, the
Company's fiscal 1998 effective tax rate would exceed 75%.
STOCKHOLDERS' EQUITY
Shares authorized and outstanding are as follows:
<TABLE>
<CAPTION>
SHARES OUTSTANDING
----------------------
APRIL 3, JUNE 27,
-------- --------
1998 1997
-------- --------
<S> <C> <C>
Preferred stock, par value $.001 per share,
73,000,000 shares authorized................. 54,633,333 54,633,333
Common stock, par value $.001 per share,
95,600,000 shares authorized................. 201,005 83,355
</TABLE>
RESTRUCTURING COSTS
During 1996, the Company recorded restructuring charges totaling $9,502,000 as
a result of the acquisition of Arcada, a majority-owned subsidiary of Seagate
Technology which was acquired in connection with Seagate Technology's merger
with Conner Peripherals, Inc. During 1997, the Company recorded restructuring
charges of approximately $2,524,000, which consisted of $3,481,000 resulting
from the Network and Storage Management Group's (NSMG's) consolidation efforts,
offset by an adjustment to reduce the 1996 restructuring by $957,000. The
restructuring charges were incurred for the reduction of personnel, write-off or
write down of equipment, intangibles and other assets, closure of duplicate and
excess facilities and other expenses.
The restructuring activities are substantially complete except for remaining
liabilities pertaining to long-tem lease commitments on excess and duplicate
facilities.
9
<PAGE>
SEAGATE SOFTWARE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The following table summarizes the Company's restructuring activity for the
nine months ended April 3, 1998 (in thousands):
<TABLE>
<CAPTION>
EQUIPMENT,
-----------------
SEVERANCE INTANGIBLES
--------- -----------------
AND EXCESS AND
--------- ---------- -----------------
BENEFITS FACILITIES OTHER ASSETS TOTAL
--------- ---------- ----------------- -----
<S> <C> <C> <C> <C>
Reserve balances, June 27, 1997............ $ 480 $1,235 $ 1,414 $ 3,129
Cash charges............................... (373) (381) (8) (762)
Non-cash charges........................... -- -- (1,048) (1,048)
Adjustments and reclassifications.......... (107) 465 (358) -
----- ------ ------- -------
Reserve balances, April 3, 1998............ $ - $1,319 $ - $ 1,319
===== ====== ======= =======
</TABLE>
LITIGATION
See Part II, Item 1 of this Form 10-Q for a description of legal proceedings.
10
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
CERTAIN FORWARD-LOOKING INFORMATION
Certain statements in this Management's Discussion and Analysis of Financial
Condition and Results of Operations ("MD&A") are forward-looking statements
based on current expectations, and entail various risks and uncertainties that
could cause actual results to differ from those projected in such forward-
looking statements. Certain of these risks and uncertainties are set forth below
in the sections entitled "Results of Operations," "Liquidity and Capital
Resources" and "Factors Affecting Future Operating Results." Certain
sections in this Quarterly Report on Form 10-Q have been identified as
containing forward-looking statements. The reader is cautioned that other
sections and other sentences not so identified may also contain forward-looking
information.
OVERVIEW
The Company develops and markets software products and provides related
services through two business units. The Information Management Group ("IMG")
offers business intelligence products with features such as report writing,
automatic report delivery and on line analytical processing ("OLAP") that help
users throughout an enterprise obtain and analyze information. The Network and
Storage Management Group ("NSMG") offers products that help information
technology professionals manage enterprise data and network systems. Tasks
performed by NSMG's products include system backup, replication, migration,
disaster avoidance and disaster recovery. The Company has developed strategic
relationships with a number of application software developers and computer
hardware manufacturers, and markets its products through distributors,
organizational licensing, OEMs and resellers.
The Company is a majority-owned and consolidated subsidiary of Seagate
Technology, Inc. (the "Parent Company"), a data technology company that provides
products for storing, managing and accessing digital information on computer
systems. As of April 3, 1998, the Parent Company and one of its subsidiaries
held 99.7% of the Company's outstanding capital stock. On a diluted basis, the
outstanding minority interests of the Company amounted to approximately 14.1%,
which consisted of Common Stock and options to purchase its Common Stock held
by certain employees and directors of the Company and the Parent Company issued
pursuant to the Company's 1996 Stock Option Plan.
The Company operates and reports financial results on a fiscal year of 52 or
53 weeks ending on the Friday closest to June 30. Accordingly, fiscal 1997 was
52 weeks and ended on June 27, 1997 and fiscal 1998 will be 53 weeks and will
end on July 3, 1998.
11
<PAGE>
RESULTS OF OPERATIONS
REVENUES. Total revenues increased 45% and 33% over the comparable year-ago
three and nine month periods, respectively. The increases in licensing revenues
over both the comparable year-ago three and nine month periods were primarily
due to increases in the number of NSMG and IMG product licenses sold. Such
growth over both comparable year-ago periods was due primarily to increased
sales of NSMG's Backup Exec for Windows NT and IMG's Crystal Reports and Crystal
Info products. Additionally, the Company continued to expand both its indirect
and direct sales channels. Revenues from indirect sales channels increased 60%
and 32% over the comparable year-ago three and nine month periods, respectively.
Revenues from direct sales channels increased 19% and 36% over the comparable
year-ago three and nine month periods, respectively. The increases in
maintenance, support and other revenues over the comparable year-ago three and
nine month periods were primarily due to increases in maintenance, training and
consulting revenues resulting from a larger installed customer base.
COST OF REVENUES. The cost of revenues consists of amortization of acquired
developed technology, royalties, product packaging, documentation, duplication,
production and the cost of maintenance, consulting support and other services.
Acquired developed technology is amortized based on the greater of the straight-
line method over its estimated useful life (30 to 48 months) or the ratio of
current revenues to the total current and anticipated future revenues. The cost
of license revenue as a percent of license revenue declined to 7.4% from 8.2%
and to 7.6% from 10.3% over the comparable year-ago three and nine month
periods, respectively. Decreases over both comparable year-ago periods were
primarily due to reductions in product packaging and documentation costs
resulting from a shift in mix to CD-ROMs from disks and increased sales of
higher margin server products. The increases in the cost of maintenance,
support and other revenues over the comparable year-ago three and nine month
periods were primarily due to expansion of the Company's professional services
work force necessary to support the growth in training and consulting revenues.
The decreases in the amortization of developed technology over the comparable
year-ago three and nine month periods were primarily due to write-downs of
certain developed technologies amounting to approximately $4,830,000 and
$6,918,000 during the comparable year-ago three and nine month periods,
respectively, as a result of asset values that had become impaired based on
reductions in estimated future cash flows.
SALES AND MARKETING. Sales and marketing expenses consist primarily of
personnel related expenses, advertising, sales and marketing promotions and
customer technical support costs. Total sales and marketing expenses increased
23% and 19% over the comparable year-ago three and nine month periods,
respectively. The increases in sales and marketing expenses over both the
comparable year-ago three and nine month periods were primarily due to expansion
of the Company's sales force and increases in advertising, promotion and
technical support costs necessary to support revenue growth. Such increases were
partially offset by 1997 reductions in work force within the NSMG organization
due to facility consolidations.
RESEARCH AND DEVELOPMENT. Research and development expenses consist
primarily of personnel related expenses, depreciation of development equipment
and facilities and occupancy costs. In accordance with Statement of Financial
Accounting Standards No. 86, "Accounting for the Costs of Computer Software to
be Sold, Leased or Otherwise Marketed," software development costs are expensed
as incurred until technological feasibility has been established, at which time
such costs are capitalized until the product is available for general release to
customers. To date, the establishment of technological feasibility of the
Company's products and general release of such software has substantially
coincided. As a result, software development costs qualifying for
capitalization have been insignificant. Total research and development expenses
increased 18% and 13% over the comparable year-ago three and nine month periods,
respectively. The increases in research and development
12
<PAGE>
expenses over both the comparable year-ago three and nine month periods were
primarily due to increases in personnel and related expenses necessary to
support new product development and localization costs. Such increases were
partially offset by 1997 reductions in work force within the NSMG organization
due to facility consolidations.
GENERAL AND ADMINISTRATIVE. General and administrative expenses consist
primarily of personnel related expenses for finance, legal, information
technology, human resources and general management, fixed asset provisions and
outside services. Total general and administrative expenses decreased 17% and
increased 6% over the comparable year-ago three and nine month periods,
respectively. The decrease over the comparable year-ago three month period was
due in part to lower legal and information technology costs, partially offset by
increases in personnel and related expenses necessary to support the Company's
growth. The increase over the comparable year-ago nine month period was due
primarily to increases in personnel and related expenses.
WRITE-OFF OF IN-PROCESS RESEARCH AND DEVELOPMENT. As a result of its
acquisitions, the Company has acquired a number of projects and products that
were considered in-process research and development on the date of acquisition.
The Company determined that purchased in-process technology had not reached
technological feasibility as no working model or detail program design existed
at the time of purchase, and no alternative uses had been identified.
Accordingly, in-process research and development was expensed when acquired.
During the third quarter of fiscal 1997, total write-offs of in-process research
and development were $2,613,000. The Company incurred this charge in connection
with additional amounts paid with respect to the June 1996 acquisition of
Holistic Systems, Ltd.
AMORTIZATION OF GOODWILL AND OTHER INTANGIBLES. Goodwill represents the
excess of the purchase price of acquired companies over the estimated fair
values of the tangible and intangible net assets acquired. Goodwill is amortized
on a straight-line basis over six to seven years. Other intangible assets
consist of acquired trademarks, assembled workforces, distribution networks,
developed technology, customer bases, and covenants not to compete. Amortization
of other intangibles, other than acquired developed technology, which is
included in the cost of revenues, is provided based on the straight-line method
over the respective useful lives of the assets ranging from one to five years.
Total amortization of goodwill and other intangibles decreased 74% and 48% over
the comparable year-ago three and nine month periods, respectively. The
decreases in the amortization of goodwill and other intangibles over the
comparable year-ago three and nine month periods were primarily due to
decreases in amortization expense based on lower levels of intangible assets
and write-downs and write-offs of the carrying value of goodwill and other
intangible assets of approximately $7,990,000 during the three months ended
March 28, 1997 versus no such write-downs and write-offs during the three
months ended April 3, 1998, and $10,259,000 during the nine months ended March
28, 1997 versus $1,900,000 during the nine months ended April 3, 1998, based
on asset values that had become impaired resulting from reductions in
estimated future cash flows.
UNUSUAL ITEMS. In connection with the June 1996 acquisition of Holistic
Systems, Ltd. (''Holistic''), $18,000,000 of funds were placed in escrow pending
the outcome of certain purchase price contingencies. Prior to the expiration of
the contingency period, the Company elected to release the funds to the Holistic
shareholders even though certain contingencies had not been met. Of the
$18,000,000 total contingency payment, the Company recorded $13,446,000 as
compensation expenses for amounts paid to former Holistic shareholders who were
employees of the Company and recorded the remaining $4,554,000 paid to non-
employee shareholders as additional purchase price, including $2,613,000
expensed as in-process research and development. The $13,446,000 unusual item
was recognized during the third quarter of fiscal 1997. The Company released
the funds prior to the expiration of the contingency period, because in order to
position the IMG business unit for future growth and product development, the
Company needed to begin an aggressive plan to integrate the
13
<PAGE>
operations of Holistic. These activities resulted in the diversion of the
attention of certain Holistic employees from their responsibilities at Holistic.
As such, Holistic's ability to achieve the purchase price contingencies
necessary to trigger the $18,000,000 contingency payment was impaired. The
Company believed that the Holistic employees should not be penalized, because
they had sacrificed achievement of their individual goals in order to meet the
overall needs of the Company. Accordingly, the Company elected to make the full
payment of $18,000,000.
INTEREST EXPENSE AND OTHER, NET. Interest expense decreased 1% and increased
53% over the comparable year-ago three and nine month periods, respectively.
The increase in interest expense over the comparable year-ago nine month period
was primarily due to higher interest expense on a higher level of outstanding
borrowings. The increases in other income, net over both comparable year-ago
periods were primarily due to foreign exchange gains.
INCOME TAXES. The Company's current estimate of its annual effective tax
rate on anticipated operating income for the 1998 fiscal year is 75%. The
projected effective tax rate exceeds the U.S. statutory rate primarily due to
the amortization of goodwill which is not deductible for tax purposes and
foreign taxes on earnings generated in higher tax rate jurisdictions. This
estimated annual effective tax rate of 75% has been used to record the provision
for income taxes for the three and nine month periods ended April 3, 1998
compared with effective tax rates of 26% and 19%, respectively, used to record
the benefit for income taxes for the comparable year-ago periods. The effective
tax rates used to record the benefit for income taxes for the three month period
and the nine month period ended March 28, 1997 were less than the U.S. statutory
rate primarily due to increases in the valuation allowance for deferred tax
assets and the amortization of nondeductible goodwill. The Company is currently
reviewing certain potential international tax planning alternatives that, if
implemented, would result in an increase in the Company's provision for income
taxes in the year of implementation. Should the Company decide to implement any
one of these international tax planning alternatives in the final quarter of
fiscal 1998, the Company's fiscal 1998 effective tax rate would exceed 75%.*
______
* This statement is a forward-looking statement reflecting current expectations.
There can be no assurance that the Company's actual future performance will meet
the Company's current expectations. Readers are cautioned that other sections
and other sentences not so identified may also contain forward-looking
information.
14
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
The Company's total cash was $9,469,000 and $12,085,000 as of April 3, 1998
and June 27, 1997, respectively. The decrease in cash was primarily due to a
reduction in the Company's loan payable balance to the Parent Company and
acquisitions of property and equipment, partially offset by cash provided by
operating activities. The Company's cash is maintained in highly liquid
operating accounts and primarily consists of bank deposits.
The Company's operations have been financed by cash flows from operating
activities and borrowings from the Parent Company. Such borrowings are available
to the Company under a Revolving Loan Agreement dated as of June 28, 1996,
whereby the Parent Company finances certain of the Company's working capital
requirements. The Loan Agreement, which provides for maximum borrowings of up to
$60,000,000, matures June 28, 1998 and is extendable by mutual consent. Interest
is paid to the Parent Company at the rate of 6% per annum. The loan balance was
$114,000 as of April 3, 1998. The Company anticipates that the Loan Agreement
will be renewed with comparable terms and conditions as of June 28, 1998.*
During the nine months ended April 3, 1998, the Company made investments in
property and equipment totaling approximately $6,265,000 for new office
facilities, leasehold improvements, computers, furniture and office equipment.
The Company presently anticipates it will make investments in fiscal 1998 of
approximately $10,000,000 in property and equipment.* Additionally, product
development activities will include cash used to acquire technology.* Such
investments will be funded from existing cash balances and cash flows from
operations.*
The Company believes its current cash balances, its available borrowings from
the Parent Company and cash flows generated from the Company's operations will
be sufficient to meet its anticipated cash needs for working capital and capital
expenditures for at least the next 12 months.* Furthermore, the Company
anticipates that future operating and investing activities may be financed by
additional borrowings from the Parent Company, equity financing or other
sources.* The Company believes that additional financing will be available from
the Parent Company at a reasonable cost.*
______
* This statement is a forward-looking statement reflecting current expectations.
There can be no assurance that the Company's actual future performance will meet
the Company's current expectations. Readers are cautioned that other sections
and other sentences not so identified may also contain forward-looking
information.
15
<PAGE>
FACTORS AFFECTING FUTURE OPERATING RESULTS
POTENTIAL FLUCTUATIONS IN ANNUAL AND/OR QUARTERLY OPERATING RESULTS. The
Company's future results of operations may be subject to substantial future
fluctuations. The Company operates with no backlog because its software products
are generally shipped shortly after orders are received. Annual and/or quarterly
sales and operating results therefore depend on the volume and timing of and the
ability to fill orders received within a given quarter, and such factors are
difficult to forecast. The Company recognizes a substantial portion of its
revenue in the last month of each quarter and, therefore, may be unable to
adjust spending in a timely manner to compensate for any unexpected revenue
shortfall. If revenue levels in a given year or quarter are below expectations,
the Company's operating results may be materially adversely affected.
The Company expects to experience significant fluctuations in annual and/or
quarterly operating results based upon a number of factors including, but not
limited to, (i) market acceptance of new products and product enhancements, (ii)
the Company's ability to develop, introduce and market new products and product
enhancements in a timely fashion, (iii) the timing of large orders, (iv)
increased competition, (v) changes in pricing policies by the Company and/or its
competitors, (vi) the Company's ability to control costs, (vii) the amount of
one time charges incurred in future acquisitions, (viii) the Company's ability
to integrate future acquisitions into its operations, (ix) technological changes
in the Company's markets, (x) personnel changes and (xi) general economic
factors.* Because of these considerations, the Company believes that a period to
period comparison of its operations is not necessarily meaningful and should not
be relied upon as any indication of future performance.
REVENUE CONCENTRATION. The Company derives a substantial majority of its
revenues from a limited number of software products and anticipates that revenue
from these products will continue to account for a majority of the Company's
revenue in the foreseeable future. Broad market acceptance of such products is
therefore critical to the Company's future success, and failure to achieve broad
market acceptance of these products as a result of competition, technological
change or other factors would have a material adverse effect on the business,
operating results and financial condition of the Company.* The life cycle of
these products is difficult to estimate, and the Company's future financial
performance may depend in part on the successful development, introduction and
market acceptance of new products, applications and product enhancements.* There
can be no assurance that the Company will continue to be successful in marketing
its key products or any new products, applications or product enhancements.
Further, the Company derives a substantial portion of its revenues from sales to
its top 2 customers. Accordingly, there can be no assurance that the Company
will continue to be successful in marketing its products to such customers.
______
* This statement is a forward-looking statement reflecting current expectations.
There can be no assurance that the Company's actual future performance will meet
the Company's current expectations. Readers are cautioned that other sections
and other sentences not so identified may also contain forward-looking
information.
16
<PAGE>
NEW PRODUCT DEVELOPMENT AND TECHNOLOGICAL CHANGE. The markets for the
Company's products are characterized by rapidly changing technology, evolving
industry standards and frequent new product introductions. The Company's future
success will therefore depend on its ability to design, develop, test and
support new software products and enhancements on a timely and cost effective
basis.* There can be no assurance that the Company will be successful in
developing and marketing new products that respond to technological changes or
that the Company's new products will achieve market acceptance. If the Company
is unable for technological or other reasons to develop and introduce new
products in a timely manner in response to changing market conditions or
customer requirements, the Company's business, operating results and financial
condition may be materially adversely affected. If potential new products are
delayed or fail to achieve market acceptance, the Company's business, operating
results and financial condition will be materially adversely affected.
RELIANCE ON SALES STAFF AND CHANNEL PARTNERS. The Company sells and supports
its products through its sales staff and third party distributors and OEMs. The
Company has made significant expenditures in recent years for the expansion of
its sales and marketing force and plans to continue to expand its sales and
marketing force. The Company's future success will depend in part upon the
productivity of its sales and marketing force and the ability of the Company to
continue to attract, integrate, train, motivate and retain new sales and
marketing personnel.* Competition for sales and marketing personnel in the
software industry is intense. There can be no assurance that the Company will be
successful in hiring and retaining such personnel in accordance with its plans.
There can be no assurance that the Company's recent and other planned expenses
in sales and marketing will ultimately prove to be successful or that the
incremental revenue generated will exceed the significant incremental costs
associated with these efforts. In addition, there can be no assurance that the
Company's sales and marketing organization will be able to compete successfully
against the significantly more extensive and better funded sales and marketing
operations of many of the Company's current and potential competitors. If the
Company is unable to develop and manage its sales and marketing force expansion
effectively, the Company's business, operating results and financial condition
would be materially adversely affected.
The Company derives a substantial portion of its revenue from the marketing
and distribution of its products by its distributors and OEMs. The Company's
agreements with distributors and OEMs typically allow such resellers to carry
product lines that are competitive with those of the Company and in many cases
may be terminated by either party without cause. There can be no assurance that
such distributors and OEMs will place high priority on the marketing of the
Company's products or that they will continue to carry the Company's products.
Loss of the Company's current distributors and OEMs or the inability to attract
new distributors and OEMs could materially adversely affect the Company's
business, operating results and financial condition.
______
* This statement is a forward-looking statement reflecting current expectations.
There can be no assurance that the Company's actual future performance will meet
the Company's current expectations. Readers are cautioned that other sections
and other sentences not so identified may also contain forward-looking
information.
17
<PAGE>
COMPETITION. The markets for the Company's products are highly competitive
and characterized by rapidly changing technology and evolving standards.
Increased competition can be expected to cause price reductions, reduced gross
margins and loss of market share, any of which could have a material adverse
effect on the Company's business, operating results and financial condition.
Current and potential competitors may be able to respond more quickly to new or
emerging technologies and changes in customer requirements, or to devote greater
resources for the development, promotion, sale and support of their products
than the Company. It is possible that new competitors or alliances among
competitors may emerge and rapidly acquire significant market share. In
addition, network operating system vendors could introduce new or upgrade
existing operating systems or environments that could render the Company's
products obsolete and unmarketable. There can be no assurance that the Company
will successfully compete against current or future competitors, or that
competitive pressures faced by the Company will not materially adversely affect
its business, operating results and financial condition.
DEPENDENCE ON KEY PERSONNEL. The Company's future performance depends to a
significant degree upon the continued service of its key members of management
as well as marketing, sales and product development personnel. The loss of one
or more of the Company's key personnel would have a material adverse effect on
the Company's business, operating results and financial condition. The Company
believes its future success will also depend in large part upon its ability to
attract and retain highly skilled management, marketing, sales and product
development personnel.* Competition for such personnel is intense, and there can
be no assurance that the Company will be able to retain its key employees or
that it will be successful in attracting, assimilating and retaining them in the
future.
MANAGEMENT OF GROWTH. The Company is in the process of expanding the
geographic scope of its customer base and operations. This expansion has
resulted and will continue to result in substantial demands on the Company's
management resources.* The Company's future operating results will depend on the
ability of its officers and other key employees to continue to implement and
improve its operations and customer support and financial control systems and to
effectively expand, train and manage its employee base.
RISK OF ACQUISITIONS. The Company has acquired numerous businesses and
intends to enter into future business combinations and acquisitions of
complementary companies, products and technologies, although there can be no
assurance that suitable companies, divisions or products will be available for
acquisition.* Such acquisitions are inherently subject to certain risks,
including the difficulty of assimilating the operations and personnel of the
combined companies, the potential disruption of the Company's ongoing business,
the potential inability to retain key technical and managerial personnel,
additional expenses associated with the amortization of acquired intangible
assets, and the potential impairment of relationships with employees and
customers as a result of any integration of new personnel. There can be no
assurance that the Company will be successful in overcoming these risks or that
such transactions will not have a material adverse effect upon the Company's
business, financial condition or results of operations.
______
* This statement is a forward-looking statement reflecting current expectations.
There can be no assurance that the Company's actual future performance will meet
the Company's current expectations. Readers are cautioned that other sections
and other sentences not so identified may also contain forward-looking
information.
18
<PAGE>
RISKS OF INFRINGEMENT. The Company's success depends on its proprietary
technology. The Company relies on a combination of patent, copyright, trademark
and trade secret rights, confidentiality procedures, employee and third party
nondisclosure agreements and licensing arrangements to protect its proprietary
rights. As part of its confidentiality procedures, the Company enters into
license agreements with respect to its software, documentation and other
proprietary information. In licensing its products, the Company relies in part
on shrink wrap licenses that are not signed by the end user and, therefore, may
be unenforceable under the laws of certain jurisdictions. Despite the
precautions undertaken by the Company, it may be possible for a third party to
copy or otherwise obtain and use the Company's products and technology without
authorization. Policing unauthorized use of the Company's products is difficult
and, although the Company is unable to determine the extent to which piracy of
its software products exists, software piracy can be expected to be a persistent
problem.
PROTECTION OF INTELLECTUAL PROPERTY. No assurance can be given that
competitors will not successfully challenge the validity or scope of the
Company's patents, copyrights and trademarks and that such patents, copyrights
and trademarks will provide a competitive advantage to the Company. As part of
its confidentiality procedures, the Company generally enters into non-disclosure
agreements with its employees, distributors and corporate partners, and license
agreements with respect to its software documentation and other proprietary
information. Despite these precautions, it may be possible for a third party to
copy or otherwise obtain and use the Company's products or technology without
authorization or to develop similar technology independently. Effective
protection of intellectual property rights is unavailable or limited in certain
foreign countries. There can be no assurance that the Company's protection of
its proprietary rights will be adequate or that the Company's competitors will
not independently develop similar technology, duplicate the Company's products
or design around any patents issued to the Company or other intellectual
property rights of the Company.
The Company is not aware that any of its products infringe the proprietary
rights of third parties. There can be no assurance, however, that third parties
will not claim such infringement by the Company with respect to current or
future products. The Company believes that software product developers
increasingly will be subject to claims of infringement as the number of products
and competitors in the Company's industry segment grows and the functionality of
products in the industry segment overlaps. Any such claims, with or without
merit, could result in costly litigation that could absorb significant
management time, which could have a material adverse effect on the Company's
business, operating results and financial condition.* Such claims might require
the Company to enter into royalty or license agreements. Such royalty or license
agreements, if required, may not be available on terms acceptable to the Company
or at all, and the Company's inability to enter such agreements could have a
material adverse effect on the Company's business, operating results and
financial condition.
______
* This statement is a forward-looking statement reflecting current expectations.
There can be no assurance that the Company's actual future performance will meet
the Company's current expectations. Readers are cautioned that other sections
and other sentences not so identified may also contain forward-looking
information.
19
<PAGE>
PRODUCT LIABILITY. The Company markets its products to customers for
information technology system management and resource optimization and to
access, analyze, report and deliver enterprise data. The Company's license
agreements with its customers typically contain provisions designed to limit the
Company's exposure to potential product liability claims. It is possible,
however, that the limitation of liability provisions contained in the Company's
license agreements may not be effective as a result of existing or future
federal, state or local laws or ordinances or unfavorable judicial decisions.
The sale and support of its products by the Company may entail the risk of such
claims, which could be substantial in light of the use of such products in
system management, resource optimization and business intelligence applications.
A successful product liability claim brought against the Company could have a
material adverse effect upon the Company's business, operating results and
financial condition.
POTENTIAL LITIGATION/LIABILITY RELATED TO YEAR 2000 READINESS. The Company's
products are used in numerous operating environments. It is likely that,
commencing in the Year 2000, the functionality of certain operating environments
will be adversely affected when one or more component products of the
environment is unable to process four-digit characters representing years. The
Company considers a product Year 2000 ready if the product's performance and
functionality are unaffected by processing dates prior to, during, and after the
Year 2000, but only if all products (for example hardware, firmware, and
software) used with the product properly exchange accurate date data with it.
The Company has determined that certain of its software products are not and
will not be Year 2000 ready and is taking measures to inform its customers of
that fact. The inability of one or more of the Company's products to properly
manage and manipulate data related to the Year 2000 could result in a material
adverse effect on the Company's business, financial condition and results of
operations, including increased warranty costs, customer satisfaction issues and
potential lawsuits.*
Even if the Company successfully brings certain of its products into Year 2000
readiness and publicizes the non-readiness of its other products, the Company
anticipates that substantial litigation may be brought against vendors of all
component products of noncompliant operating environments, including the
Company.* The Company's agreements with its customers typically contain
provisions designed to limit the Company's liability for such claims. It is
possible, however, that these measures will not provide protection from
liability claims, as a result of existing or future federal, state or local laws
or ordinances or unfavorable judicial decisions. The Company believes that any
such claims, with or without merit, could result in costly litigation (and
possible adverse judgment) that could absorb significant management and product
development time and potentially result in significant liability to the Company,
which could have a material adverse effect on the Company's business, operating
results and financial condition.*
The Company is identifying Year 2000 dependencies in the Company's systems in
order to determine whether it has Year 2000 issues and implementing changes to
its internal information systems to make them Year 2000 compliant. While the
Company currently expects that the Year 2000 will not pose significant
operational problems, delays in the implementation of new information systems,
or a failure fully to identify all Year 2000 dependencies in the Company's
systems could result in material adverse consequences, including delays in the
delivery or sale of products.*
______
* This statement is a forward-looking statement reflecting current expectations.
There can be no assurance that the Company's actual future performance will meet
the Company's current expectations. Readers are cautioned that other sections
and other sentences not so identified may also contain forward-looking
information.
20
<PAGE>
SOFTWARE PRODUCT ERRORS OR DEFECTS. Software products as complex as those
offered by the Company frequently contain errors or defects, especially when
first introduced or when new versions or enhancements are released. Despite
product testing, the Company's recently introduced products or any products may
contain defects or software errors and, as a result, the Company may experience
delayed or lost revenues during the period required to correct any defects or
errors.* Any such defects or errors could result in adverse customer reactions,
negative publicity regarding the Company and its products, harm to the Company's
reputation or loss of or delay in market acceptance, or could require extensive
product changes, any of which could have a material adverse effect upon the
Company's business, operating results or financial condition.
RISK OF INTERNATIONAL SALES. The Company's international business involves a
number of risks, including lack of acceptance of localized products, cultural
differences in the conduct of business, longer accounts receivable payment
cycles, greater difficulty in accounts receivable collection, seasonality due to
the slow down in European business activity during the summer months, unexpected
changes in regulatory requirements, royalties and withholding taxes that
restrict repatriation of earnings, tariffs and other trade barriers, difficulty
in hiring qualified personnel, economic and political conditions in each
country, management of an enterprise spread over various countries and the
burden of complying with a wide variety of foreign laws. A majority of the
Company's international sales are currently denominated in U.S. dollars, and an
increase in the value of the U.S. dollar relative to foreign currencies could
make the Company's products more expensive and potentially less competitive in
foreign markets. There can be no assurance that such factors will not have a
material adverse effect on the Company's future international sales and
therefore the overall operating results and financial condition of the Company.
The Company anticipates that the recent deterioration of the underlying
economic conditions in certain Asian countries may have an impact on its sales
to customers or OEMs located in those countries due to the impact of currency
fluctuations on the relative price of the Company's products and/or restrictions
on government spending imposed by the International Monetary Fund (the "IMF") on
those countries receiving the IMF's assistance.* In addition, customers in
those countries may face reduced access to working capital to fund component
purchases, such as the Company's products, due to higher interest rates, reduced
bank lending due to contractions in the money supply or the deterioration in the
customer's or its bank's financial condition or the inability to access local
equity financing. During fiscal 1997 and the nine months ended April 3, 1998,
sales to OEMs or end-user customers located in or to OEMs whose end customers
were located in the countries of Japan, Korea, Malaysia, Thailand, Taiwan and
Hong Kong were not material to the Company's business, operating results or
financial condition.
______
* This statement is a forward-looking statement reflecting current expectations.
There can be no assurance that the Company's actual future performance will meet
the Company's current expectations. Readers are cautioned that other sections
and other sentences not so identified may also contain forward-looking
information.
21
<PAGE>
PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On November 10, 1997, Vedatech Corporation ("Vedatech") commenced an action
against the Company's United Kingdom subsidiary, Seagate Software Information
Management Group, Ltd. ("SSIMG LTD") in the High Court of Justice in the
United Kingdom. The Writ alleges that SSIMG LTD breached an existing oral
agreement and also alleges joint ownership of the United Kingdom copyright for
the Japanese translation of a Company software product (the "Complaint"). The
Company filed a response to Vedatech's writ on January 13, 1998. The Company has
collected documentation and conducted various interviews and believes the
Complaint has no merit and intends vigorously to defend the action. However, if
an unfavorable outcome were to arise, there can be no assurance that such
outcome would not have a material adverse effect on the Company's liquidity,
financial position, or results of operations.
In addition to the foregoing, the Company is engaged in legal actions arising
in the ordinary course of its business and believes that the ultimate outcome of
these actions will not have a material adverse effect on the Company's financial
position, liquidity, or results of operations.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
The following exhibits are included herein:
27.1 Financial Data Schedule
(a) Reports on Form 8-K
No reports on Form 8-K have been filed with the Securities and Exchange
Commission during the three months ended April 3, 1998.
22
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SEAGATE SOFTWARE, INC.
----------------------
(Registrant)
DATE: May 6, 1998 BY: /s/ Terence R. Cunningham
_______________________
TERENCE R. CUNNINGHAM
President and Chief
Operating Officer
DATE: May 6, 1998 BY: /s/ Ellen E. Chamberlain
_______________________
ELLEN E. CHAMBERLAIN
Senior Vice President,
Treasurer and
Chief Financial Officer
23
<PAGE>
SEAGATE SOFTWARE, INC.
INDEX TO EXHIBITS
EXHIBIT
NUMBER
_______
27.1 Financial Data Schedule
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 9-MOS 9-MOS
<FISCAL-YEAR-END> JUL-03-1998 JUN-27-1997
<PERIOD-START> JUN-28-1997 JUN-29-1996
<PERIOD-END> APR-03-1998 MAR-28-1997
<CASH> 9,469 8,081
<SECURITIES> 0 0
<RECEIVABLES> 45,399 38,225
<ALLOWANCES> 1,622 1,396
<INVENTORY> 869 2,882
<CURRENT-ASSETS> 57,817 51,240
<PP&E> 35,034 33,188
<DEPRECIATION> 18,837 12,596
<TOTAL-ASSETS> 126,395 174,039
<CURRENT-LIABILITIES> 60,062 91,788
<BONDS> 0 0
0 0
55 55
<COMMON> 0 0
<OTHER-SE> 63,674 74,088
<TOTAL-LIABILITY-AND-EQUITY> 126,395 174,039
<SALES> 213,954 160,773
<TOTAL-REVENUES> 213,954 160,773
<CGS> 38,572 37,831
<TOTAL-COSTS> 38,572 37,831
<OTHER-EXPENSES> 75,962 97,671
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 961 627
<INCOME-PRETAX> 4,782 (54,577)
<INCOME-TAX> 3,587 (10,408)
<INCOME-CONTINUING> 1,195 (44,169)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 1,195 (44,169)
<EPS-PRIMARY> 8.04 (706.70)
<EPS-DILUTED> 0.02 (706.70)
</TABLE>
