UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
- --------------------------------------------------------------------------------
Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the Quarter Ended March 31, 1997. Commission File No. 0-13442
- --------------------------------------------------------------------------------
MENTOR GRAPHICS CORPORATION
(Exact name of registrant as specified in its charter)
Oregon 93-0786033
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
8005 S.W. Boeckman Road, Wilsonville, Oregon 97070-7777
(Address including zip code of principal executive offices)
Registrant's telephone number, including area code: (503) 685-7000
- --------------------------------------------------------------------------------
NO CHANGE
Former name, and former
fiscal year, if changed since last report
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
Number of shares of common stock, no par value, outstanding as of April 30,
1997: 65,021,922
<PAGE>
MENTOR GRAPHICS CORPORATION
Index to Form 10Q
PART I FINANCIAL INFORMATION Page Number
- ------------------------------- -----------
Item 1. Financial Statements
Consolidated Statements of Operations for the three 3
months ended March 31, 1997 and 1996
Consolidated Balance Sheets as of March 31, 1997 4
and December 31, 1996
Consolidated Statements of Cash Flows for the 5
three months ended March 31, 1997 and 1996
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of
Results of Operations and Financial Condition 7-13
SIGNATURES 14
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
<TABLE>
<CAPTION>
Mentor Graphics Corporation
Consolidated Statements of Operations
(In thousands, except net income (loss) per share)
(Unaudited)
Three Months Ended March 31,
1997 1996
-------------- --------------
<S> <C> <C>
Revenues:
System and software $ 55,440 $ 61,227
Service and support 46,119 47,826
-------------- --------------
Total revenues 101,559 109,053
-------------- --------------
Cost of revenues:
System and software 19,153 10,743
Service and support 28,674 22,818
-------------- --------------
Total cost of revenues 47,827 33,561
-------------- --------------
Gross margin 53,732 75,492
Expenses:
Research and development 27,277 23,697
Marketing and selling 39,750 34,572
General and administration 10,289 10,007
Special charges 8,560 ---
Merger and acquisition related charges --- 4,410
-------------- --------------
Total expenses 85,876 72,686
-------------- --------------
Operating income (loss) (32,144) 2,806
Other income, net 515 1,805
-------------- --------------
Income (loss) before income taxes (31,629) 4,611
Provision (benefit) for income taxes (3,480) 840
-------------- --------------
Net income (loss) $ (28,149) $ 3,771
============== ==============
Net income (loss) per common and
common equivalent share $ (.43) $ .06
============== ==============
Weighted average number of common and common
equivalent shares outstanding 64,871 65,209
============== ==============
See accompanying notes to unaudited consolidated financial statements.
</TABLE>
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<TABLE>
<CAPTION>
Mentor Graphics Corporation
Consolidated Balance Sheets
(In thousands)
As of As of
March 31, 1997 December 31, 1996
-------------- -----------------
(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 116,364 $ 165,406
Short-term investments 27,604 31,673
Trade accounts receivable, net 100,018 108,957
Other receivables 6,981 6,697
Prepaid expenses and other 18,494 15,937
Deferred income taxes 9,478 9,522
------------- --------------
Total current assets 278,939 338,192
Property, plant and equipment, net 107,665 102,253
Cash and investments, long-term --- 30,000
Other assets 29,344 42,914
------------- --------------
Total $ 415,948 $ 513,359
============= ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term borrowings $ 1,585 $ 9,055
Accounts payable 11,536 15,003
Income taxes payable 14,735 19,598
Accrued and other liabilities 55,888 61,623
Deferred revenue 36,950 32,065
------------- --------------
Total current liabilities 120,694 137,344
Long-term debt --- 52,441
Other long-term deferrals 4,466 3,934
------------- --------------
Total liabilities 125,160 193,719
------------- --------------
Stockholders' equity:
Common stock 297,835 297,756
Retained earnings (accumulated deficit) (18,363) 9,786
Foreign currency translation adjustment 11,316 12,098
------------- --------------
Total stockholders' equity 290,788 319,640
------------- --------------
Total $ 415,948 $ 513,359
============= ==============
See accompanying notes to unaudited consolidated financial statements.
</TABLE>
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<TABLE>
<CAPTION>
Mentor Graphics Corporation
Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
Three Months Ended
March 31,
1997 1996
------------- -------------
<S> <C> <C>
Operating Cash Flows:
Net income(loss) $ (28,149) $ 3,771
Adjustments to reconcile net income to
net cash used by operating activities:
Depreciation and amortization of property, plant & equipment 6,710 6,222
Deferred taxes 40 (167)
Amortization of other assets 3,588 2,591
Writedown of assets 7,468 ---
Changes in operating assets and liabilities:
Trade accounts receivable 8,931 (15,154)
Prepaid expenses and other assets 216 266
Accounts payable (3,433) 2,172
Accrued liabilities (5,592) (4,960)
Other liabilities and deferrals 14 3,169
------------- -------------
Net cash used by operating activities (10,207) (2,090)
------------- -------------
Investing Cash Flows:
Maturities of short-term investments 4,067 436
Purchases of property and equipment (11,071) (5,361)
Purchase of businesses (946) (704)
Purchase of technology (600) (500)
Capitalization of software development costs --- (723)
------------- -------------
Net cash used by investing activities (8,550) (6,852)
------------- -------------
Financing Cash Flow
Proceeds from issuance of common stock 1,991 1,787
Repurchase of common stock (1,912) (5,095)
Decrease in short-term borrowings (7,457) (306)
Repayment of long-term debt (51,779) ---
Decrease in cash and investments long-term 30,000 ---
------------- -------------
Net cash used by financing activities (29,157) (3,614)
------------- -------------
Effect of exchange rate changes on cash and cash equivalents (1,129) (883)
------------- -------------
Net change in cash and cash equivalents (49,043) (13,439)
Cash and cash equivalents at beginning of period 165,406 186,676
------------- -------------
Cash and cash equivalents at end of period $ 116,363 $ 173,237
============= =============
See accompanying notes to unaudited consolidated financial statements.
</TABLE>
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MENTOR GRAPHICS CORPORATION
Notes to Consolidated Financial Statements
(In thousands)
(Unaudited)
(1) General - The accompanying financial statements have been prepared in
conformity with generally accepted accounting principles. However,
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 the
rules and regulations of the Securities and Exchange Commission. In the
opinion of management, the statements include all adjustments necessary
for a fair presentation of the results of the interim periods presented.
Certain reclassifications have been made in the accompanying financial
statements for 1996 to conform with the 1997 presentation.
(2) Special Charge - During the first three months of 1997 the Company
recorded a special charge of $8,560. The charge consisted of subsidiary
closures and related employee terminations, early termination of an
interest rate swap agreement, and recognition of the impairment in value
of goodwill and purchased technology. It is expected that all of the
costs associated with the subsidiary closures and related employee
terminations will be disbursed by the end of 1997.
(3) Supplemental Disclosures of Cash Flow Information - The following
provides additional information concerning cash flow activities:
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1997 1996
-----------------------------------
<S> <C> <C>
Interest paid $ 548 $ 484
Income taxes paid, net of refunds $ 1,578 $ 499
</TABLE>
Page 6
<PAGE>
Item 2. Management's Discussion and Analysis of Results of Operations and
Financial Condition
(All numerical references are in thousands, except for percentages)
RESULTS OF OPERATIONS
- ---------------------
REVENUES AND GROSS MARGINS
System and Software
System and software revenues for the quarter ended March 31, 1997, totaled
$55,440 compared to $61,227 for the same period of 1996. As a percentage of
system and software revenues, gross margins were 65% for the quarter ended March
31, 1997, compared to 82% for the first quarter of 1996.
System and software revenues during the first quarter of 1997 declined by 9%
compared to the same period last year. Software product revenue accounted for
the majority of the decrease, while hardware product revenue was also lower for
the 1997 period and the weakening of the Japanese Yen versus the US dollar also
negatively impacted revenues. These reductions were partially offset by sales of
accelerated verification systems made by Meta Systems, which was purchased in
May 1996. System and software revenues were lower in the first quarter of 1997
due in part to weakness of the Company's older product offerings which decreased
at an accelerated rate. The rate of decline of revenues for these older software
product offerings will continue to negatively impact system and software revenue
growth. The rate of expected increases in revenue from newer product offerings
to offset these declines is difficult to predict. In addition, software product
sales at Microtec experienced a year over year decline due principally to
turnover of sales personnel.
System and software gross margins were 65% and 82% for the quarters ended March
31, 1997 and 1996, respectively. Gross margins were significantly lower for the
1997 period primarily due to a write-down of certain previously capitalized
software development costs and sales of accelerated verification systems which,
because of their hardware content, yield lower gross margins. Amortization of
previously capitalized software development costs to system and software cost of
revenues was $1,438 and $1,503 for the first quarter of 1997 and 1996,
respectively. In addition, the Company recognized an impairment in value of
certain previously capitalized software development costs in the first quarter
of 1997 primarily as a result of the accelerated decline in sales of older
software product offerings discussed above. These costs, which totaled $5,348,
were determined to be unrecoverable and were charged to system and software cost
of revenues during the quarter. All remaining previously capitalized software
development costs of $4,100 will be amortized over the final three quarters of
1997 to recognize the change in estimated useful lives of these older
technologies.
Purchased technology amortization to system and software cost of goods sold was
$1,741 and $664 for the quarters ended March 31, 1997 and 1996, respectively.
The increase in amortization of purchased technology is principally attributable
to seven business acquisitions since March 31, 1996 accounted for as purchases.
Amortization of purchased technology should be lower in the following quarters
as several older technologies became fully amortized in the quarter.
Page 7
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Service and Support
Service and support revenues for the first quarter of 1997 were $46,119, a
decrease of 4% from the first quarter of 1996. Software support revenue was
approximately flat for the comparable periods while consulting services revenue
accounted for the overall decrease. The decline in consulting services revenue
is principally due to adjusting the Company's revenue recognition policy to
recognize revenue only on completion of contract milestones. Previously, the
Company used either the percent completion method or the contract milestone
method to recognize consulting service revenues. The impact of this restriction
on future consulting services revenues is not expected to be significant. This
decrease was partially offset by increased demand for ASIC and IC design
consulting services.
Service and support gross margins were 38% and 55% for the quarters ended March
31, 1997 and 1996, respectively. Consulting service gross margins continued to
be negative in 1997 and the decrease in overall service and support gross
margins is attributable to lower than anticipated levels of consulting services
revenue without a corresponding decrease in costs, including the revenue
adjustment previously discussed. Consistent with consulting and training
business models, gross margins generated by the Company's consulting service
activities have been and are expected to continue to be lower than software
support. Service and support gross margins are expected to be lower than the
prior year's run rate of 54% as growth in consulting service business is
expected to be higher than growth in software support.
Geographic Revenue Information
Domestic revenue from unaffiliated customers including service and support
revenue decreased by 4% as compared to the first quarter of 1996. International
revenues from unaffiliated customers including service and support revenue
represented 49% and 51% of total revenue for the first quarters of 1997 and 1996
respectively. From the first quarter of 1996 to 1997, European revenue decreased
approximately 6% and Japanese revenue decreased approximately 16%. A stronger US
dollar in 1997 negatively impacted international revenues during the comparable
periods and most significantly in Japan where the Yen weakened against the US
dollar by approximately 15% for the comparable periods. Since the Company
generates approximately half of its revenues outside of the United States and
expects this to continue in the future, revenue results should continue to be
impacted by the effects of future foreign currency fluctuations.
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OPERATING EXPENSES
Research and development expenses totaled $27,277 and $23,697 or 27% and 22% of
revenue for the first quarters of 1997 and 1996, respectively. These increases
are attributable to seven prior year acquisitions accounted for as purchases
discussed above and lower revenue for the 1997 period.
Capitalization of software development costs was zero in the first quarter of
1997 compared to $723 in the same quarter of the prior year. This decrease in
capitalization is due to timing and content of product development activities
which resulted in a lower level of costs eligible for capitalization. Based on
these lower costs, product development activities have been expensed on a
current basis. The Company does not expect any significant capitalization for
the remainder of 1997.
Marketing and selling expenses totaled $39,750 and $34,572 or 39% and 32% of
revenue for the first quarters of 1997 and 1996, respectively. These increases
are attributable to seven prior year acquisitions previously discussed and lower
revenue for the 1997 period. General and administration expenses totaled $10,289
and $10,007 or 10% and 9% of revenue for the first quarters of 1997 and 1996,
respectively.
MERGER RELATED CHARGES
On January 31, 1996, the Company completed a merger with Microtec Research, Inc.
The transaction was accounted for as a pooling of interests and included a one
time merger related charge of $4,410. The costs associated with this charge
include elimination of duplicate facilities, severance costs related to the
termination of certain employees, the write-off of certain property and
equipment and legal and accounting fees associated with administration of the
merger activities.
SPECIAL CHARGES
During the first three months of 1997 the Company recorded a special charge of
$8,560. The charge consisted of subsidiary closures and related employee
terminations, early termination of an interest rate swap agreement, and
recognition of the impairment in value of goodwill and purchased technology. It
is expected that all of the costs associated with the subsidiary closures and
related employee terminations will be disbursed by the end of 1997.
Page 9
<PAGE>
OTHER INCOME (EXPENSE)
Other income, net totaled $515 for the first quarter of 1997 compared to $1,805
for the same period of 1996. Interest income from investments was $1,795 for the
first quarter of 1997, compared to $2,365 for the first quarter of 1996. The
decrease in interest income is primarily attributable to lower average cash,
cash equivalent and short term investments outstanding during the comparable
quarters due to pay-down of short term lines of credit and the long term
revolving term credit facility. During the first quarter of 1997, interest
expense amounted to $266, down from $348 for the comparable period in 1996.
Also, the Company realized a gain of $500 in the first quarter of 1996 on the
sale of stock of a public company.
PROVISION (BENEFIT) FOR INCOME TAXES
The benefit for income taxes amounted to $3,480 for the quarter ended March 31,
1997, as compared to a provision of $840 for the same period in 1996. The
Company's income tax position for each year combines the effects of available
tax benefits in certain countries where the Company does business, benefits from
available net operating loss carry forwards, and tax expense for subsidiaries
with pre-tax income. Due to the impact of the first quarter results on the
projected mix of pre-tax income and losses among various tax jurisdictions, the
Company expects a tax rate of approximately 11% for the remaining three quarters
of 1997. The Company's tax rate remains sensitive to the shifts in income and
losses among various tax jurisdictions previously discussed.
EFFECTS OF FOREIGN CURRENCY FLUCTUATIONS
The Company experienced a net loss from foreign currency transactions of $367
during the first quarter of 1997 compared to a net loss of $360 during the first
quarter of 1996. These amounts are comprised of realized gains and losses on
cash transactions involving various foreign currencies, and unrealized gains and
losses related to foreign currency receivables and payables resulting from
exchange rate fluctuations between the various currencies in which the Company
operates. Foreign currency gains and losses are included as a component of other
income. The "foreign currency translation adjustment", as reported in the equity
section of the consolidated balance sheet at March 31, 1997, decreased to
$11,316 from $12,098 at the end of 1996. This reflects the decrease in the value
of net assets denominated in foreign currencies against the US dollar since
year-end 1996.
The Company generally realizes approximately half of its revenue outside the
United States and expects this to continue in the future. As such, the Company's
business and operating results may be impacted by the effects of future foreign
currency fluctuations.
NEW ACCOUNTING PRONOUNCEMENTS
In February 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standard (SFAS) No. 128, "Earnings per Share". This
Statement establishes a different method of computing net income per share than
is currently required under the provisions of Accounting Principles Board
Opinion No. 15. Under SFAS No. 128, the Company will be required to present both
basic net income per share and diluted net income per share. Basic net income
per share is expected to be comparable or slightly higher than the currently
presented net income per share as the effect of dilutive stock options will not
be considered in computing basic net income per share. Diluted net income per
share is expected to be comparable or slightly lower than the currently
presented net income per share. As the Company reported a net loss for the
period, stock options are not included in the calculation of loss per share
since they are effectively anti-dilutive.
The Company plans to adopt SFAS No. 128 in the fourth quarter of 1997 and at
that time all historical net income per share data presented will be restated to
conform to the provisions of this Statement.
Page 10
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LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
CASH AND INVESTMENTS
Total cash and short-term investments at March 31, 1997 were $143,968 compared
to $197,079 at the end of 1996. Cash used by operations was $10,207 for the
first three months of 1997 compared to cash used by operations of $2,090 during
the same period of 1996. During the first quarter of 1997, cash used by
operations was negatively impacted by the net loss from operations and increased
days sales outstanding in trade accounts receivable. Cash also decreased as
expenditures for property, plant and equipment exceeded depreciation by $4,361.
Cash used by financing activities was negatively impacted by the pay-down of
short term lines of credit and the long term revolving credit facility totaling
$59,236 offset by the release of cash held as collateral previously classified
as long term on the consolidated balance sheets.
TRADE ACCOUNTS RECEIVABLE
Trade accounts receivable decreased to $100,018 at March 31, 1997 from $108,957
at year-end 1996. Trade receivables are only down about 47% of the total
decrease in revenues from the fourth quarter of 1996 to the first quarter of
1997. Average days sales outstanding in accounts receivable increased from 81
days at the end of 1996 to 88 days at the end of the first quarter of 1997. This
increase in average trade receivables days sales outstanding is principally
attributable to a few large contract sales where the Company provided its
customers extended payment terms. The Company is currently reviewing all
policies related to accounts receivable and customer payment terms in an attempt
to improve these ratios.
OTHER ASSETS
Other assets decreased to $29,344 at March 31, 1997 from $42,914 at year-end
1996. Previously capitalized software development costs decreased by $6,796 as a
result the of current quarters amortization and a write-down in recognition of
impaired value previously discussed. In addition, regular amortization of
goodwill and purchased technology further reduced the balance in the quarter.
CAPITAL RESOURCES
Total capital expenditures increased to $11,071 through March 31, 1997, compared
to $5,361 for the same period of 1996. The increase in capital expenditures is a
result of costs associated with leasehold improvements related to moving the
Microtec facility closer to the Company's other development site in the San Jose
area where costs are expected to be more favorable. In addition, the Company
further invested in its global information and sales force automation systems.
The Company anticipates that current cash balances, anticipated cash flows from
operating activities, and existing credit facilities will be sufficient to meet
its working capital needs for at least the next twelve months.
Page 11
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FACTORS THAT MAY AFFECT FUTURE RESULTS AND FINANCIAL CONDITION
The statements contained in this report that are not statements of historical
fact are forward looking statements that involve a number of risks and
uncertainties. Moreover, from time to time the Company may issue other forward
looking statements. The following discussion highlights factors that could cause
actual results to differ materially from the forward looking statements. The
forward looking statements should be considered in light of these factors.
The Company competes in the highly competitive and dynamic EDA (electronic
design automation) and integrated systems design industries. The Company's
success is dependent upon its ability to develop and market products that are
innovative, cost-competitive and that meet customers' expectations, and to
deliver those products to its customers in a timely manner. Competition in the
EDA industry is intense, which can create adverse effects including, but not
limited to, price reductions, lower product margins, loss of market share and
additional working capital requirements.
A material amount of the Company's software product revenue is usually the
result of current quarter order performance of which the majority is usually
booked in the last month of each quarter. In addition, the Company's revenue
often includes multi-million dollar contracts. The timing of the completion of
these contracts and the terms of delivery of software, hardware and other
services can have a material impact on revenue recognition for a given quarter.
The combination of these factors impairs and delays the Company's ability to
identify shortfalls or overages from quarterly revenue targets.
The Company generally realizes approximately half of its revenues outside the
United States and expects this to continue in the future. As such, the Company's
business and operating results can be impacted by the effects of foreign
currency fluctuations. In order to hedge the impact of foreign currency
fluctuations, the Company enters into foreign currency forward contracts.
However, significant changes in exchange rates may have a material adverse
impact on the Company's results of operations. International operations subject
the Company to other risks including, but not limited to, changes in regional or
worldwide economic or political conditions, government trade restrictions,
limitations on repatriation of earnings, licensing and intellectual property
rights protection.
The Company has experienced declines in revenues from its older software product
offerings. There can be no assurances that expected increases in revenue from
newer software products will be sufficient to offset these declines.
The Company is currently addressing staffing needs and operations issues of its
consulting services business in an attempt to better focus on ASIC and IC design
methodologies and improve profitability. Business reorganizations can increase
personnel management complexities including retention and hiring of key
technical and management positions. While the Company will look to improve the
utilization of its consultants and pricing of its services, there can be no
assurance that the challenges will be effectively met.
The Company's operating expenses are generally committed in advance of revenue
and are based to a large degree on future revenue expectations. Operating
expenses are incurred in order to generate and sustain higher future revenue
levels. If the revenue does not materialize as expected, the Company's results
of operations can be adversely impacted.
Page 12
<PAGE>
Acquisitions of complementary businesses are a part of the Company's overall
business strategy. There are several risks associated with this strategy
including integration of sales channels, training and education of the sales
force for new product offerings, integration of product development efforts,
retention of key employees, integration of systems of internal controls, and
integration of information systems. All of these factors can impair the
Company's ability to forecast, to meet quarterly revenue and earnings targets,
and to effectively manage the business for long-term growth. While the Company
is aware of and is addressing such issues, there can be no assurance that these
challenges will be effectively met.
As a result of the acquisition of Meta Systems, the Company has entered the
hardware development and assembly business. Some additional issues must be
managed by the Company, such as: procuring hardware components on a timely
basis, assembling and shipping systems on a timely basis with appropriate
quality control, developing new distribution and shipment processes, managing
inventory and placing new demands on the sales force.
The Company has recently added new re-usable intellectual property products and
consulting services to its portfolio of offerings to address this emerging
market. As with all markets, there is inherent uncertainty regarding the overall
rate of growth. Specifically, growth in the re-usable intellectual property
market is subject to significant uncertainties and risks as market participants,
including the Company, seek to gain customer acceptance for the overall concept
of incorporating these re-usable intellectual property designs into their
products, identify and develop the correct products to meet evolving customer
demands, and identify and implement effective distribution models for this new
class of products.
The Company is currently involved in the replacement of its financial
information systems, based primarily on software from SAP. The implementation
phase of new information systems can cause significant disruptions to the
Company's work efficiency. There can be no assurance that the project will be
completed within budgeted time or dollar parameters.
The Company believes it has been successful at recruiting and retaining
necessary personnel to research and develop products that satisfy customers
needs. There can be no assurance that the Company can continue to recruit and
retain such personnel.
Generally accepted accounting principles require management to make estimates
and assumptions that affect the reported amounts of assets, liabilities and
contingencies at the date of the financial statements and the reported amounts
of revenue and expenses during the reporting periods. Actual results could
differ from those estimates.
Due to the factors above, as well as other market factors outside the Company's
control, the Company's future earnings and stock price may be subject to
significant volatility. Past financial performance should not be considered a
reliable indication of future performance. The investment community should use
caution in using historical trends to estimate future results or trends. In
addition, if future results vary significantly from expectations of analysts,
the Company's stock price could be adversely impacted.
Page 13
<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.
MENTOR GRAPHICS CORPORATION
(Registrant)
GREGORY K. HINCKLEY
-----------------------------------------
Gregory K. Hinckley
Executive Vice President and
Chief Operating Officer/Chief Financial
Officer
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 116,364
<SECURITIES> 27,604
<RECEIVABLES> 100,018
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 278,939
<PP&E> 107,665
<DEPRECIATION> 0
<TOTAL-ASSETS> 415,948
<CURRENT-LIABILITIES> 120,694
<BONDS> 0
0
0
<COMMON> 297,835
<OTHER-SE> (7,047)
<TOTAL-LIABILITY-AND-EQUITY> 415,948
<SALES> 101,559
<TOTAL-REVENUES> 101,559
<CGS> 47,827
<TOTAL-COSTS> 47,827
<OTHER-EXPENSES> 85,876
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 266
<INCOME-PRETAX> (31,629)
<INCOME-TAX> (3,480)
<INCOME-CONTINUING> (28,149)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (28,149)
<EPS-PRIMARY> (.43)
<EPS-DILUTED> (.43)
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