<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the Quarter Ended March 31, 1998
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ____________ to ______________
Commission File number 0-19395
SYBASE, INC.
(Exact Name of Registrant as Specified in Its Charter)
Delaware 94-2951005
(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
6475 Christie Avenue, Emeryville, CA 94608
------------------------------------------
(Address of Principal Executive Offices)
Registrant's Telephone Number, Including Area Code: (510) 922-3500
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 April 30, 1998, 80,862,281 shares of the Registrant's Common Stock, $.001 par
value, were outstanding.
<PAGE> 2
SYBASE, INC.
FORM 10-Q
QUARTER ENDED MARCH 31, 1998
INDEX
<TABLE>
<CAPTION>
Page
----
<S> <C>
Part I: Financial Information (Unaudited)
Item 1: Financial Statements
Condensed Consolidated Balance Sheets at March 31, 1998 3
and December 31, 1997
Condensed Consolidated Statements of Operations for the 4
three months ended March 31, 1998 and March 31, 1997
Condensed Statement of Stockholders' Equity for the three 5
months ended March 31, 1998 and March 31, 1997
Condensed Consolidated Statements of Cash Flows 6
for the three months ended March 31, 1998 and
March 31, 1997
Notes to Condensed Consolidated Financial Statements 7
Item 2: Management's Discussion and Analysis of 9
Financial Condition and Results of Operations
Part II: Other Information
Item 6: Exhibits and Reports on Form 8-K 20
Signatures 21
</TABLE>
-2-
<PAGE> 3
ITEM 1: FINANCIAL STATEMENTS
SYBASE, INC.
---------------------
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, December 31,
(In thousands, except share data) 1998 1997
--------- ---------
(Unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 122,714 $ 188,876
Short-term cash investments 42,711 47,127
--------- ---------
Total cash, cash equivalents and short-term cash investments 165,425 236,003
Accounts receivable, net 195,078 204,411
Deferred income taxes 16,973 16,973
Other current assets 26,192 18,274
--------- ---------
Total currents assets 403,668 475,661
Long-term cash investments 10,116 10,134
Property, equipment and improvements, net 138,950 149,661
Deferred income taxes 24,076 24,077
Capitalized software, net 43,041 44,208
Restricted cash deposits 13,276 --
Other assets 70,345 77,884
--------- ---------
Total assets $ 703,472 $ 781,625
========= =========
Current liabilities:
Accounts payable $ 7,986 $ 19,521
Accrued compensation and related expenses 41,722 43,974
Accrued income taxes 28,084 31,800
Other accrued liabilities 120,236 95,476
Deferred revenue 171,964 170,473
Other current liabilities 36,045 46,907
--------- ---------
Total current liabilities 406,037 408,151
Other liabilities 1,817 1,959
Commitments and contingent liabilities
Stockholders' equity
Preferred stock, $0.001 par value, 8,000,000
shares authorized; none issued or outstanding -- --
Common stock, $0.001 par value, 200,000,000
shares authorized; 80,823,012 shares issued
and outstanding (1997 - 79,998,287) 81 80
Additional paid-in capital 405,136 397,925
Accumulated deficit (90,537) (9,343)
Accumulated translation adjustments (19,062) (17,147)
--------- ---------
Total stockholders' equity 295,618 371,515
--------- ---------
Total liabilities and stockholders' equity $ 703,472 $ 781,625
========= =========
</TABLE>
See accompanying notes.
-3-
<PAGE> 4
SYBASE, INC.
---------------------
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three months ended
-----------------------------
March 31, March 31,
(In thousands, except per share data) 1998 1997
--------- ---------
<S> <C> <C>
Revenues:
License fees $ 96,004 $ 127,392
Services 110,813 104,809
--------- ---------
Total revenues 206,817 232,201
Costs and expenses:
Cost of license fees 10,098 8,058
Cost of services 62,782 61,878
Sales and marketing 108,434 114,597
Product development and engineering 37,133 35,300
General and administrative 16,425 17,363
Cost of restructuring 51,694 --
--------- ---------
Total costs and expenses 286,566 237,196
--------- ---------
Operating loss (79,749) (4,995)
Interest income 2,702 1,913
Interest expense and other, net (627) (907)
--------- ---------
Loss before income taxes (77,674) (3,989)
Provision for income taxes 3,520 2,171
--------- ---------
Net loss $ (81,194) $ (6,160)
========= =========
Basic and diluted net loss per share $ (1.01) $ (0.08)
========= =========
Shares used in computing basic and diluted net loss per share 80,409 77,504
</TABLE>
See accompanying notes.
-4-
<PAGE> 5
SYBASE, INC.
--------------------
CONDENSED STATEMENT OF STOCKHOLDERS' EQUITY
(Unaudited)
<TABLE>
<CAPTION>
(In thousands) Retained Accumulated
Common Additional Earnings Other
------------------- Paid-in (Accumulated Comprehensive
Shares Amount Capital Deficit) Income (loss) Total
-------- ------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Balances at December 31, 1996 76,609 $77 $359,161 $46,081 $(8,511) $396,808
Common stock issued in connection
with business combinations 750 12,000 12,000
Common stock issued under stock
option and stock purchase plans 1,086 1 10,869 10,870
-------- ------- -------- -------- -------- --------
Subtotal 78,445 78 382,030 46,081 (8,511) 419,678
-------- ------- -------- -------- -------- --------
Net loss (6,160) (6,160)
Foreign currency translation adjustment (3,061) (3,061)
-------- ------- -------- -------- -------- --------
Comprehensive loss (6,160) (3,061) (9,221)
-------- ------- -------- -------- -------- --------
Balances at March 31, 1997 78,445 $78 $382,030 $39,921 $(11,572) $410,457
======== ======= ======== ======== ======== ========
Balances at December 31, 1997 79,998 $80 $397,925 $(9,343) $(17,147) $371,515
Common stock issued under stock
option and stock purchase plans 825 1 7,211 7,212
-------- ------- -------- -------- -------- --------
Subtotal 80,823 81 405,136 (9,343) (17,147) 378,727
-------- ------- -------- -------- -------- --------
Net loss (81,194) (81,194)
Foreign currency translation adjustment (1,915) (1,915)
-------- ------- -------- -------- -------- --------
Comprehensive loss (81,194) (1,915) (83,109)
-------- ------- -------- -------- -------- --------
Balances at March 31, 1998 80,823 $81 $405,136 $(90,537) $(19,062) $295,618
======== ======= ======== ======== ======== ========
</TABLE>
See accompanying notes.
-5-
<PAGE> 6
SYBASE, INC.
--------------------
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
(In thousands) Three Months Ended March 31,
-----------------------------
1998 1997
--------- ---------
<S> <C> <C>
Cash and cash equivalents, beginning of year $ 188,876 $ 156,796
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (81,194) $ (6,160)
Adjustments to reconcile net loss to
net cash (used for)/provided by operating activities:
Depreciation and amortization 30,845 26,282
Write-off of assets in restructuring 23,126 --
Changes in assets and liabilities:
Accounts receivable 8,319 25,388
Other current assets (8,161) (6,973)
Accounts payable (11,535) (14)
Accrued compensation and related expenses (2,252) (8,520)
Accrued income taxes (3,716) (1,825)
Other accrued liabilities 12,183 (10,168)
Deferred revenues 1,491 1,941
Other (191) (60)
--------- ---------
Net cash (used for)/provided by operating activities (31,085) 19,891
CASH FLOWS USED FOR INVESTING ACTIVITIES:
Restricted cash deposits (13,276) --
Purchases of available-for-sale cash investments 14,319 (12,228)
Maturities of available-for-sale cash investments (11,742) 3,978
Sales of available-for-sale cash investments 3,124 8,200
Business combinations, net of cash acquired (5,000) (3,031)
Purchases of property, equipment and improvements (9,262) (11,569)
Capitalized software development costs (4,131) (4,088)
Decrease in other assets 314 1,328
--------- ---------
Net cash used for investing activities (25,654) (17,410)
CASH FLOWS (USED FOR)/PROVIDED BY FINANCING ACTIVITIES:
Increase (decrease) in other current liabilities (10,862) 9,667
Net proceeds from issuance of common stock 7,212 10,870
--------- ---------
Net cash (used for)/provided by financing activities (3,650) 20,537
Effect of exchange rate changes on cash (5,773) (3,554)
--------- ---------
Net (decrease) increase in cash and cash equivalents (66,162) 19,464
Cash and cash equivalents, end of period 122,714 176,260
Cash investments, end of period 52,827 17,798
--------- ---------
Total cash, cash equivalents and cash investments, end of period $ 175,541 $ 194,058
========= =========
Supplemental disclosures:
Interest paid $ 298 $ 140
========= =========
Income taxes paid $ 6,908 $ 4,465
========= =========
</TABLE>
See accompanying notes
-6-
<PAGE> 7
SYBASE, INC.
---------------------
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. The accompanying unaudited consolidated financial statements include the
accounts of Sybase and its subsidiaries, and, in the opinion of management,
reflect all adjustments (consisting only of normal recurring adjustments)
necessary to fairly state the Company's consolidated financial position, results
of operations, cash flows and stockholders' equity as of and for the dates and
periods stated. The condensed consolidated balance sheet as of December 31, 1997
has been prepared from the audited consolidated financial statements of the
Company.
2. This report on Form 10-Q should be read in conjunction with the Company's
audited consolidated financial statements for the year ended December 31, 1997
and notes included therein. The results of operations for the three months ended
March 31, 1998 are not necessarily indicative of results for the entire fiscal
year ending December 31, 1998.
3. On February 2, 1998, Sybase acquired Intellidex Systems, L.L.C., (Intellidex)
a provider of data management technology for deploying and managing data
warehouse environments. Under terms of the acquisition agreement, Sybase paid
$5,000,000 in cash for certain assets and assumed certain liabilities of
Intellidex. Of the amount paid, $3,737,000, was allocated to purchased software
and the balance of $1,263,000 was allocated to goodwill. In addition, pursuant
to the terms of the agreement, Sybase, Inc. is obligated to make contingent
payments based on certain agreed upon performance criteria. The maximum
additional amount payable over an aggregate three-year period is equal to
$10,000,000. The transaction was accounted for as a purchase. The results of
operations of Intellidex are not material in relation to those of the Company
and are included in the consolidated results of operations for periods
subsequent to the acquisition date.
4. In February 1998, the Company announced and began to implement a
restructuring plan aimed at reducing costs, and focusing the Company's products
and personnel around its core businesses. The Company's restructuring actions in
the first quarter of 1998, consisted primarily of terminating certain product
lines, terminating employees and vacating certain facilities, and canceling real
estate leases as a result of these employee terminations. These actions resulted
in a charge to operations in the first quarter of 1998 of approximately
$51,600,000, including approximately $12,000,000 for employee severance and
related items, $15,500,000 for vacating facilities, canceling real estate
leases, and writing off related assets, $8,600,000 for expenses related to
discontinued products including the write-off of capitalized software, and
$15,500,000 for other restructuring related items. Of the $51,600,000
restructuring charge, $10,200,000 was paid in the first quarter of 1998,
$18,300,000 was included in other accrued liabilities at March 31, 1998 and
$23,100,000 consisted of write-offs of property, equipment and improvements,
capitalized software development costs, and other assets. The Company expects
that the majority of the remaining $18,300,000 accrued liability balance at
March 31, 1998 will be expended in 1998. On February 26, 1998, the Company
terminated approximately 600 employees as part of the restructuring. The Company
estimates it will incur an additional $18,400,000 in restructuring charges for
the remainder of 1998, bringing the total amount for 1998 to approximately
$70,000,000.
5. Shares used in computing basic and diluted net loss per share are based on
the weighted average shares outstanding in each period. The effect of
outstanding stock options is excluded from the calculation of diluted net loss
per share as their inclusion would be antidilutive.
6. On February 18, 1998, the Board of Directors authorized the repurchase of up
to $25 million of the Company's outstanding common stock. Subject to price and
market conditions, these purchases will be made from time to time in open market
transactions using available cash balances. No repurchases of common stock under
the program had been made as of March 31, 1998.
-7-
<PAGE> 8
SYBASE, INC.
--------------------
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
7. Effective January 1, 1998, the Company adopted Financial Accounting Standards
Board (FASB) Statement of Financial Accounting Standards No. 130, "Reporting
Comprehensive Income," which states that all items that are required to be
recognized under accounting standards as components of comprehensive income
(revenues, expenses, gains and losses) be reported in a financial statement that
is displayed with the same prominence as other financial statements. Prior year
financial statements have been reclassified to confirm to the requirements of
Statement 130. During the first quarters of 1998 and 1997, the Company's
comprehensive losses amounted to $83,109,000 and $9,221,000, respectively.
8. Effective January 1, 1998, the Company adopted the American Institute of
Certified Public Accountants Statement of Position No. 97-2, "Software Revenue
Recognition" (SOP 97-2), which supercedes SOP 91-1. Restatement of prior
financial statements is prohibited. SOP 97-2 addresses software revenue
recognition matters primarily from a conceptual level and detailed
implementation guidelines have not been issued.
In March 1998, the American Institute of Certified Public Accountants issued
Statement of Position No. 98-4, "Deferral of the Effective Date of a Provision
of SOP 97-2, Software Revenue Recognition", which defers for one year the
application of certain provisions of SOP 97-2. These provisions limit what is
considered vendor-specific objective evidence of the fair value of the various
elements in a multiple-element arrangement. All other provisions of SOP 97-2
remain in effect.
9. In 1997, the FASB issued Statement of Financial Accounting Standards No. 131,
"Disclosures about Segments of an Enterprise and Related Information",
(Statement 131) which establishes standards for the way public business
enterprises report information about operating segments in annual financial
statements and requires that those enterprises report selected information about
operating segments in interim financial reports issued to stockholders. In
addition, it establishes standards for related disclosures about products and
services, geographic areas and major customers. The Company will comply with the
requirements of Statement 131 in its annual consolidated financial statements
for the year ending December 31, 1998.
-8-
<PAGE> 9
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
REVENUES
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
Three Months Ended Three Months Ended
3/31/98 3/31/97 Percent Change
--------------------- -------------------- --------------------
<S> <C> <C> <C>
License fees $ 96.0 $127.4 (25)%
Percentage of total revenues 46% 55%
Services 110.8 104.8 6%
Percentage of total revenues 54% 45%
Total revenues $206.8 $232.2 (11)%
</TABLE>
Total revenues for the first quarter of 1998 decreased 11 percent to $206.8
million compared to $232.2 million achieved in the first quarter of 1997.
License fees revenues decreased 25 percent to $96.0 million in the first quarter
of 1998, down from $127.4 million achieved in the first quarter of 1997. The
Company believes the decrease in license fees revenues was primarily due to
slower sales in North America and Asia and the impact of companies continuing to
reallocate technology resources toward "Year 2000" compliance solutions.
Additionally, due to ongoing uncertain economic conditions in the Asia Pacific
region, the Company continues its conservative approach to business and
accounting practices in the region.
Services revenues grew 6 percent to $110.8 million in the first quarter 1997, up
from $104.8 million achieved in the first quarter of 1997. Services revenues
consist primarily of consulting, education and other services related to the
development and deployment of applications using the Company's software products
and product support and maintenance fees. Services revenues as a percentage of
total revenues increased to 54 percent in the first quarter of 1998, up from 45
percent in the first quarter of 1997.
The increase in services revenues in absolute dollars resulted, in part, from
the increase in support and maintenance service fees related to the Company's
growing installed base, both in terms of directly supported sites as well as
additional users and the renewal of maintenance contracts. The increase in
service revenues also resulted from increased demand for the Company's
consulting and other services. The Company expects services revenue to continue
to increase in absolute dollars in 1998, based upon management's commitment to
providing complete technology solutions and world-class support for the
Company's customers. However, as this is a forward-looking statement, future
actual results may differ based on the factors described in "Future Operating
Results."
-9-
<PAGE> 10
GEOGRAPHICAL REVENUES
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
Three Months Ended Three Months Ended
3/31/98 3/31/97 Percent Change
---------------------- -------------------- -----------------
<S> <C> <C> <C>
North American $121.1 $149.5 (19)%
Percentage of total revenues 59% 64%
International:
European $62.9 $55.3 14%
Percentage of total revenues 30% 24%
Intercontinental $22.8 $27.3 (16)%
Percentage of total revenues 11% 12%
Total International: $85.7 $82.7 4%
Percentage of total revenues 41% 36%
Total Revenues $206.8 $232.2 (11)%
</TABLE>
North American revenues (United States, Canada and Mexico) decreased 19 percent
in the first quarter of 1998 to $121.1 million from $149.5 million in the first
quarter of 1997 as a result of decreased license fees revenues. International
revenues increased 4 percent in the first quarter of 1998 to $85.7 million from
$82.7 million in the first quarter of 1997. European revenues were up 14 percent
in the first quarter of 1998 to $62.9 million from $55.3 million in the first
quarter of 1997. The strong performance in Europe reflects increased license
fees revenues. Intercontinental revenues (Japan, Asia Pacific and South America)
decreased 16 percent in the first quarter of 1998 to $22.8 million from $27.3
million in the first quarter of 1997. The decrease in Intercontinental revenues
is primarily due to more conservative business and accounting practices
implemented during 1997 in the Asia Pacific region.
International revenues comprised 41 percent of total revenues in the first
quarter of 1998, up from 36 percent in the first quarter of 1997. Although the
Company takes into account changes in exchange rates over time in its pricing
strategy, the Company's business and results of operations could be materially
and adversely affected by fluctuations in foreign currency exchange rates.
Changes in foreign currency exchange rates, the strength of local economies, and
the general volatility of software markets may result in a higher or lower
proportion of foreign revenues as a percentage of total revenues in the future.
-10-
<PAGE> 11
COSTS AND EXPENSES
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
Three Months Ended Three Months Ended
3/31/98 3/31/97 Percent Change
--------------------- --------------------- ------------------
<S> <C> <C> <C>
Cost of license fees $10.1 $8.1 25%
Percentage of license fees revenues 11% 6%
Cost of services $62.8 $61.9 1%
Percentage of services revenues 57% 59%
Sales and marketing $108.5 $114.6 (5)%
Percentage of total revenues 52% 49%
Product development & engineering $37.1 $35.3 5%
Percentage of total revenues 18% 15%
General and administrative $16.4 $17.4 (6)%
Percentage of total revenues 8% 7%
Cost of restructuring $51.6 --
Percentage of total revenues 25% --
</TABLE>
Cost of License Fees
Cost of license fees, consisting primarily of product costs (media and
documentation), amortization of capitalized software development costs and
third-party royalty costs, increased in absolute dollars in the first quarter of
1998 to $10.1 million, up from $8.1 million in the first quarter of 1997. These
costs were 11 percent of license fees revenues in the first quarter of 1998 and
6 percent of license fees revenues in the first quarter of 1997. Amortization of
capitalized software costs included in cost of license fees was $5.4 million in
the first quarter of 1998 up from $2.0 million in the first quarter of 1997,
representing the largest factor in the increase in the cost of license fees. The
increase in the amortization of capitalized software related to the release of
Adaptive Server(TM) Enterprise 11.5 and PowerBuilder(R) 6.0 during the second
half of 1997.
Cost of Services
Cost of services, consisting primarily of maintenance, consulting and education
expenses and, to a lesser degree, services-related product costs (media and
documentation), increased 1 percent to $62.8 million in the first quarter of
1998 up from $61.9 million for the same period of 1997. These costs decreased as
a percentage of services revenues to 57 percent in the first quarter of 1998
compared to 59 percent for the same quarter of 1997. The increase in absolute
dollars year over year reflects the continued investment in training personnel
in the customer support and professional services organizations.
Sales and Marketing
Sales and marketing expenses decreased 5 percent in absolute dollars to $108.5
million in the first quarter of 1998 from $114.6 million for the same period of
1997 while increasing slightly as a percentage of total revenues at 52 percent
for the first quarter of 1998 compared to 49 percent for the same period of
1997. This increase in sales and marketing expense as a percentage of revenues
was primarily the result of lower than expected license revenues year over year.
-11-
<PAGE> 12
Product Development and Engineering
Product development and engineering expenses (net of capitalized software
development costs) increased slightly as a percentage of total revenues in the
first quarter of 1998 from 18 percent compared to 15 percent for the same period
in 1997. The increase is in part the result of lower than anticipated license
revenues. In absolute dollars, product development and engineering expenses for
the first quarter of 1998 of $37.1 million increased compared to $35.3 million
for the first quarter of 1997. This increase is due in part to the acquisition
in February 1998 of Intellidex Systems, L.L.C., (Intellidex) a provider of data
management technology for deploying and managing data warehouse environments.
The product development and engineering costs incurred by Intellidex since the
date of acquisition have been included in the results of operations for the
first quarter of 1998. The Company believes that product development and
engineering expenditures are essential to technology and product leadership and
expects product development and engineering expenditures to continue to be
significant, both in absolute dollars and as a percentage of total revenues.
General and Administrative
General and administrative expenses represented 8 percent of total revenue in
the first quarter of 1998 compared to 7 percent for the same period in 1997,
while decreasing in absolute dollars from $16.4 million in the first quarter of
1998 compared to $17.4 million for the same period in 1997. The absolute dollar
decrease year over year resulted primarily from the Company's emphasis on
managing general and administrative costs and improving productivity.
Cost of Restructuring
In February 1998, the Company announced and began to implement a restructuring
plan aimed at reducing costs, and focusing the Company's products and personnel
around its core businesses. The Company's restructuring actions in the first
quarter of 1998, consisted primarily of terminating certain product lines,
terminating employees and vacating certain facilities, and canceling real estate
leases as a result of these employee terminations. These actions resulted in a
charge to operations in the first quarter of 1998 of approximately $51.6
million, including approximately $12.0 million for employee severance and
related items, $15.5 million for vacating facilities, canceling real estate
leases, and writing off related assets, $8.6 million for expenses related to
discontinued products including the write-off of capitalized software, and $15.5
million for other restructuring related items. Of the $51.6 million
restructuring charge, $10.2 million was paid in the first quarter of 1998, $18.3
million was included in other accrued liabilities at March 31, 1998 and $23.1
million consisted of write-offs of property, equipment and improvements,
capitalized software development costs, and other assets. The Company expects
that the majority of the remaining $18.3 million accrued liability balance at
March 31, 1998 will be expended in 1998. On February 26, 1998, the Company
terminated approximately 600 employees as part of the restructuring. The Company
estimates it will incur an additional $18.4 million in restructuring charges for
the remainder of 1998, bringing the total amount for 1998 to approximately $70.0
million.
OPERATING LOSS
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
Three Months Ended Three Months Ended
3/31/98 3/31/97 Percent Change
--------------------- --------------------- ----------------
<S> <C> <C> <C>
Operating loss $79.7 $5.0 *
Percentage of total revenues 39% 2%
Operating loss exclusive of cost of restructuring
$28.1 $5.0 *
Percentage of total revenues 14% 2%
</TABLE>
- ---------------
* Not meaningful
-12-
<PAGE> 13
Operating loss, before cost of restructuring, was $28.1 million for the first
quarter of 1998, as compared to an operating loss of $5.0 million for the same
period of 1997. This increase in operating loss before cost of restructuring is
due primarily to lower license fees revenues and a conservative approach to
business practices in the Asia Pacific region. The operating loss of $79.7
million for the first quarter of 1998 includes restructuring charges of $51.6
million related to the Company's plan to discontinue certain product lines,
terminate employees and vacate certain real estate facilities.
OTHER INCOME AND EXPENSE, NET
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
Three Months Ended Three Months Ended
3/31/98 3/31/97 Percent
Change
----------------------- ------------------------ ----------------
<S> <C> <C> <C>
Interest income $2.7 $1.9 42%
Percentage of total revenues 1% 1%
Interest expense and other, net $(0.6) $(0.9) 33%
Percentage of total revenues * * *
</TABLE>
- --------------
* Not meaningful
Interest income consists primarily of interest earned on investments. Interest
expense and other (net) includes interest expense from bank fees and expenses,
net gains and losses resulting from the Company's foreign currency transactions
and the related hedging activities and the cost of hedging foreign currency
exposures. The increase in interest income in absolute dollars in the first
quarter of 1998 is largely due to larger average invested cash balances compared
to the same period of 1997.
PROVISION FOR INCOME TAXES
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
Three Months Ended Three Months Ended
3/31/98 3/31/97 Percent Change
--------------------- --------------------- --------------------
<S> <C> <C> <C>
Provision for income taxes $3.5 $2.2 59%
</TABLE>
The Company recorded a $3.5 million income tax provision for the first quarter
of 1998 compared to a $2.2 million tax provision for the first quarter of 1997.
Both tax provisions are primarily the result of tax on earnings generated from
operations and withholding taxes on revenue in certain international
jurisdictions.
Realization of the Company's deferred tax assets, which totaled $41.0 million at
March 31, 1998 is dependent upon the Company generating sufficient taxable
income in future years in appropriate tax jurisdictions to obtain benefit from
the reversal of temporary differences and from tax credit carryforwards. The
amount of deferred tax assets considered realizable is subject to adjustment in
future periods if estimates of future taxable income are reduced. Any such
adjustments could have an impact on the Company's tax provision in future
periods. See "Future Operating Results."
-13-
<PAGE> 14
NET LOSS AND NET LOSS PER SHARE
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
Three Months Ended Three Months Ended
3/31/98 3/31/97 Percent Change
--------------------- --------------------- ------------------
<S> <C> <C> <C>
Net loss $81.2 $6.2
Percentage of total revenues 39% 3% *
Net loss per share, basic and diluted $1.01 $0.08 *
Shares used in computing basic and
diluted net loss per share 80,409 77,504 4%
</TABLE>
- ---------------
* Not meaningful
The Company incurred a net loss of $81.2 million in the first quarter of 1998
compared to a net loss in the same period of 1997 of $6.2 million. The increase
in net loss is primarily attributed to the restructuring charges and lower
license fees revenues. The basic and diluted net loss per share was $1.01 and
$0.08 for the first quarters of 1998 and 1997, respectively. Shares used in
computing basic and diluted net loss per share increased 4 percent year over
year, primarily due to the exercise of employee stock options and the increase
of shares under the employee stock purchase plan.
FINANCIAL CONDITION
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
Three Months Ended Three Months Ended
3/31/98 3/31/97 Percent Change
------------------------ --------------------- ---------------
<S> <C> <C> <C>
Working capital $(2.4) $102.3 *
Cash, cash equivalents and cash investments $175.5 $194.1 (22)%
Net cash (used for)/provided by operating activities $(31.1) $19.9 (234)%
Net cash used for investing activities $(25.7) $(17.4) 29%
Net cash (used for)/provided by financing activities $(3.7) $20.5 (118)%
</TABLE>
- -------------
* Not meaningful
Net cash used for operating activities was $31.1 million for the first quarter
of 1998 compared to net cash provided by operating activities of $19.9 million
in the first quarter of 1997. Net cash used for operating activities during the
first quarter of 1998 reflects a net loss of $81.2 million compared to a net
loss of $6.2 million in the first quarter of 1997. Depreciation and
amortization, which are included in the net losses, but do not require the use
of cash, amounted to $30.8 million for the first quarter of 1998 compared to
$26.3 million in 1997. The increase in depreciation and amortization for the
first quarter of 1998 compared to the same period in 1997 reflects the increase
in software amortization of previously capitalized software. In addition, in the
first quarter of 1998, there was a write-off of assets for $23.1 million, a part
of the $51.6 million charged to operations to cover the cost of restructuring.
The increase in net cash used for operating activities reflects an increase in
operating losses attributed to lower license fees revenues and $10.2 million
paid for the cost of restructuring.
-14-
<PAGE> 15
Net cash used for investing activities increased to $25.7 million for the first
quarter of 1998 compared to $17.4 million in the same period for 1997. Investing
activities included capital expenditures of $9.3 million for the first quarter
of 1998 compared to $11.6 million in the same period for 1997. This reflects a
decrease in capital expenditures required to support the Company's employee base
around the world as well as related systems and infrastructure needs. The
Company's headcount was reduced to 5,152 at March 31, 1998 from 5,471 at March
31, 1997. Additionally, in the first quarter of 1998 investing activities
included cash use of $5.0 million for business combinations, compared to $3.0
million (net of cash acquired) in the first quarter of 1997. In the first
quarter of 1998, the Company collateralized its obligation to a lessor by
pledging $13.3 million in cash deposits.
Net cash used for financing activities for the first quarter of 1998 was $3.7
million compared to net cash provided by financing activities of $20.5 million
in the same period for 1997. Net cash used for financing activities in the first
quarter of 1998 increased due to the repayment of amounts received from Japanese
financial institutions for financing transactions related to revenues which were
subsequently reversed as a result of certain accounting practices in the
Japanese subsidiary discovered in January 1998 that were not in accordance with
U.S. generally accepted accounting principles. This activity was partially
offset by cash proceeds from the issuance of common stock associated with the
exercise of stock options.
The Company engages in business operations around the world and is therefore
exposed to foreign currency fluctuations. As of March 31, 1998, the Company had
identifiable assets totaling $127.7 million associated with its European
operations and $66.1 million associated with its Intercontinental operations.
The Company experiences foreign exchange transaction exposures from certain
balances denominated in different currencies. The Company hedges certain of
these short-term exposures under a plan approved by the Board of Directors (see
Note 2 of Notes to Consolidated Financial Statements in the 1997 Sybase Annual
Report to Shareholders). The Company also experiences foreign exchange
translation exposure on its net assets denominated in different currencies. As
certain of these net assets are considered by Sybase, Inc., the U.S. parent
company, to be a permanent investment in the respective subsidiaries, the
related foreign currency translation gains and losses are reflected in an
accumulated foreign translation adjustments account in stockholders' equity.
Cash, cash equivalents and cash investments totaled $175.5 million at March 31,
1998, compared to $194.1 million at March 31, 1997.
The Company believes that it has the financial resources needed to meet its
presently anticipated business requirements, including capital expenditures and
strategic operating programs, for the foreseeable future.
FUTURE OPERATING RESULTS
The Company's future operating results may vary substantially from period to
period. The price of the Company's common stock will fluctuate in the future,
and an investment in the Company's common stock is subject to a variety of
risks, including but not limited to the specific risks identified below. The
results of operations for the quarter ended March 31, 1998 and year ended
December 31, 1997 are not necessarily indicative of results for fiscal year
ending December 31, 1998 or any other future period. Expectations, forecasts,
and projections by the Company or others are by nature forward-looking
statements, and future results cannot be guaranteed. Forward-looking statements
that were true at the time made may ultimately prove to be incorrect or false.
Inevitably, some investors in the Company's securities will experience gains
while others will experience losses depending on the prices at which they
purchase and sell securities. Prospective and existing investors are strongly
urged to carefully consider the various cautionary statements and risks set
forth in this report.
The timing and amount of the Company's license fees revenues are subject to a
number of factors that make estimation of revenues and operating results prior
to the end of a quarter extremely uncertain. Sybase has experienced a seasonal
pattern of license fees decline between the fourth quarter and the succeeding
first quarter contributing to lower total revenues and operating earnings in the
first quarter compared to the prior fourth quarter. As a result of both the
seasonal impact on revenues and lower license fees revenues, a restructuring
charge of $51.6 million and a more conservative approach to business practices
in the Asia Pacific Region because of the uncertain economic conditions, the
Company incurred both a net operating loss and a net loss in
-15-
<PAGE> 16
the first quarter of 1998. The Company anticipates it will incur further
restructuring charges of approximately $20.0 million for the remaining quarters
of 1998, which may cause the Company to incur operating losses and net losses in
future periods. The Company has operated historically with little or no backlog
and, as a result, license fees in any quarter are dependent on orders booked and
shipped in that quarter. In addition, the timing of closing of large license
agreements increases the risk of quarter-to-quarter fluctuations and the
uncertainty of estimating quarterly operating results. The Company has
experienced a pattern of recording 50 percent to 70 percent of its quarterly
revenues in the third month of the quarter, with a concentration of such
revenues in the last two weeks of such third month. The Company's operating
expenses are based on projected annual and quarterly revenue levels and are
incurred approximately ratably throughout each quarter. Because the Company's
operating expenses are relatively fixed in the short term, if projected revenues
are not realized in the expected period, the Company's operating results for
that period would be adversely affected and could result in an operating loss,
as occurred in the first quarter of 1998. Failure to achieve revenues, earnings,
and other operating and financial results as forecast or anticipated by
brokerage firms and industry analysts could result in an immediate and adverse
effect on the market price of the Company's stock. The Company may not achieve,
in the future, the relatively high rates of growth experienced by the Company in
1991 through 1994 or the rates of growth projected for the software markets in
which Sybase competes.
In 1998, the Company expects to make further changes to its sales coverage model
and sales compensation programs, and focus on increasing the number of discrete
quota-carrying sales people. Although such changes are intended to enhance
overall revenues, such changes could, in the short-run, materially and adversely
affect the sales process and revenues. In February 1998, the Company appointed
Michael S. Gardner as Senior Vice President of Worldwide Sales. In April 1998,
Mr. Gardner assumed responsibility for overseeing the Company's worldwide sales
force from Mike Forster, Senior Vice President of Worldwide Field Operations,
who will retire at the end of 1998. In the third quarter of 1997, John Chen
became the Company's President and Chief Operating Officer, and Mitchell
Kertzman, Chief Executive Officer, became Chairman of the Board. In February
1998, the Company created the Office of the Chief Executive with shared
leadership responsibilities between Messrs. Kertzman and Chen. Mr. Chen now also
holds the title of Chief Executive Officer. The Company may make other
management and organization changes in the future. Organizational and management
changes are intended to enhance productivity and competitiveness. However, such
changes may not produce the desired results and could materially adversely
affect productivity, expenses and revenues.
The market for the Company's stock is highly volatile. The trading price of the
Company's common stock fluctuated widely in 1995, 1996, 1997 and the first
quarter of 1998 and may in the future continue to be subject to wide
fluctuations in response to quarterly variations in operating and financial
results, announcements of technological innovations, new products, or customer
contracts won by the Company or its competitors. Changes in prices of the
Company's or its competitors' products and services, changes in product mix,
changes in the Company's revenues and revenue growth rates for the Company as a
whole or for individual geographic areas, business units, products or product
categories, as well as other events or factors could also affect the Company's
stock prices. Statements or changes in opinions, ratings or earnings estimates
made by brokerage firms and industry analysts relating to the market in which
the Company does business, the Company's competitors, or the Company or its
products specifically, have resulted, and could in the future result, in an
immediate and adverse effect on the market price of the Company's common stock.
For example, due to a variety of factors, the Company's stock price declined
significantly during the first quarter of 1996 and the first quarter of 1998. In
addition, the stock market has from time to time experienced extreme price and
volume fluctuations that have particularly affected the market price for many
high-technology companies and which often have been unrelated to the operating
performance of these companies.
An increased portion of the Company's revenues in recent quarters has been
derived from its international operations. Several of the Company's
international subsidiaries have been only recently acquired or formed. For
example, the Company recently acquired operations in Chile, Argentina, Norway
and Peru and established a new subsidiary in Venezuela. In addition there have
been several management and organizational changes within the international
operations. For example, in 1998, the country managers in Australia, Thailand
and Japan resigned or were replaced. International revenues, in absolute dollars
and as a percentage of total revenues, may fluctuate in part due to the growth
and, in some cases, the relative immaturity of international organizations. The
Company's operations and financial results could be significantly affected by
factors associated with international operations such as changes in foreign
currency exchange rates and uncertainties relative to regional
-16-
<PAGE> 17
economic circumstances, political instability in emerging markets, and
difficulties in staffing and managing foreign operations, as well as by other
risks associated with international activities. For example, the economic unrest
and currency devaluations in Asia in late 1997 adversely affected collection of
receivables, particularly dollar denominated receivables and the recognition of
revenue in the fourth quarter of 1997 and the first quarter of 1998.
The market for the Company's software products and services is extremely
competitive and characterized by dynamic customer demands, rapid technological
and marketplace changes, and frequent product enhancements and new product
introductions. The Company competes with a number of companies, including Oracle
Corporation, Informix Corporation, Microsoft Corporation, IBM Corporation, and
Computer Associates, Inc. Many of the Company's competitors and potential
competitors have significantly greater financial, technical, sales, and
marketing resources, and a larger installed base than the Company. New or
enhanced products, many of which have been announced and many of which are
continually introduced by existing or future competitors in the software
industry, could increase the competition faced by the Company's products from
time to time and result in greater price pressure on certain of the Company's
products, especially to the extent that market acceptance for personal
computer-oriented technologies increases. A failure by the Company to compete
successfully with its existing competitors or with new competitors could have a
material adverse effect on the Company's business and results of operations and
on the market price of the Company's common stock.
The Company's future results will depend in part on its ability to enhance
existing products and to introduce new products on a timely and cost-effective
basis that meet dynamic customer requirements. Customer requirements for
products can rapidly change as a result of innovations or changes within the
computer hardware and software industries. For example, the widespread use of
the Internet is rapidly giving rise to new customer requirements as well as new
methods and practices of selling, marketing, and distributing products and
services. Sybase's future results will depend in part on its success in
developing new products, making generally available products that have been
previously announced, enhancing its existing products and adapting its existing
products to changing customer requirements, and ultimately gaining market
acceptance for such new or enhanced products. During the first quarter of 1998,
the Company achieved a number of milestones, including the shipment to several
application partners of Adaptive Server(TM) Enterprise with row-level locking
capabilities. The Company also announced the development and anticipated
availability dates of several products, including a beta version of Adaptive
Server(TM) Anywhere for Windows CE, which is scheduled to become available in
the second quarter of 1998.
Sybase's results will also depend increasingly on the ability of its products to
interoperate and perform well with existing and future leading,
industry-standard application software products intended to be used in
connection with relational database management systems ("RDBMSs"). Failure to
meet existing or future interoperability and performance requirements of certain
independent vendors marketing such applications in a timely manner has in the
past and could in the future adversely affect the market for Sybase's products.
Certain leading applications will not be interoperable with Sybase RDBMSs until
certain features are added to the Company's RDBMS, and others may never be
available on Sybase's RDBMSs. In addition, the Company's application development
tools, database design tools, and certain connectivity products are designed for
use with RDBMSs offered by the Company's competitors. Vendors of non-Sybase
RDBMSs and related products may become less willing in the future to provide the
Company with access to products, technical information, and marketing and sales
support. If existing and potential customers of the Company who use non-Sybase
RDBMSs refrain from purchasing such products due to concerns that the
development, quality, and support of products for non-Sybase RDBMSs will
diminish over time, the Company's business, results of operations, and financial
condition could be materially and adversely affected.
Commercial acceptance of the Company's products and services could be adversely
affected by critical or negative statements or reports by brokerage firms,
industry and financial analysts, and industry periodicals concerning the Company
and its products, business, or competitors, or by the advertising or marketing
efforts of competitors that could affect customer perception. In addition,
customer perception of Sybase and its products could be adversely affected by
financial results, particularly revenues and profitability, reported for the
1997 fiscal year or future periods, by the market share of the Company's
products and by related press reports.
-17-
<PAGE> 18
The Company's ability to achieve its future revenues and earnings will depend in
part on the ability of its officers and key personnel to manage growth, costs,
and expenses successfully through the implementation of appropriate management
systems and controls. Failure to effectively implement or maintain such systems
and controls could adversely affect the Company's business and results of
operations. The success of the Company also depends in part on its ability to
attract and retain qualified technical, managerial, sales, and marketing
personnel. The competition for such personnel is intense in the software
industry and, Sybase believes, has increased substantially in recent years.
There were several changes in 1997 and early 1998 to the Company's executive
management team. For example, in the third quarter of 1997, John Chen became the
Company's President and Chief Operating Officer, and Mitchell Kertzman, Chief
Executive Officer, became Chairman of the Board. In February 1998, the Company
created the Office of the Chief Executive with shared leadership
responsibilities between Messrs. Kertzman and Chen. Mr. Chen now also holds the
title of Chief Executive Officer. Other management changes and additions were
also effected in late 1997 and early 1998, including the appointment of several
new Senior Vice Presidents in charge of several major business units. Further
changes in management, the Company's recent financial performance, and a
reduction in the overall number of Sybase employees made in February 1998 could
cause an increase in the amount of employee turnover. The failure to effectively
recruit, train, and retain qualified personnel or high rates of employee
turnover, particularly among engineering or sales staff, could adversely affect
the Company's product development efforts, product sales, and other aspects of
the Company's operations and results.
Sybase currently ships most of its products in North America (other than its
Powersoft(R) products) from its Emeryville, California distribution facility.
Because of the pattern of recording a high percentage of quarterly revenues
within the last week or two weeks of the quarter, the closure or inoperability
of this facility during such weeks due to natural calamity or due to a systems
or power failure could have a material adverse effect on the Company's ability
to record revenues for such quarter.
The Company has acquired a number of companies in the past. Most recently, in
February 1998, the Company acquired Intellidex Systems L.L.C., a provider of
meta data management technology for deploying and managing data warehouse
environments. The Company will likely acquire other distributors, companies,
products, or technologies in the future. The achievement of the desired benefits
of these and future acquisitions will depend in part upon whether the
integration of the acquired businesses is achieved in an efficient and effective
manner. The successful combination of businesses will require, among other
things, integration of the companies' related product offerings and coordination
of their sales, marketing, and research and development efforts. The
difficulties of such coordination may be increased by the geographic distance
between separate organizations. The Company may be unable to integrate
effectively these or future acquired businesses and may not obtain the
anticipated or desired benefits of such acquisitions. Such acquisitions may
result in costs, liabilities, or additional expenses that could adversely affect
the Company's results of operations and financial condition. In addition,
acquisitions or changes in business or market conditions may cause the Company
to revise its plans, which could result in unplanned expenses or a loss of
anticipated benefits from past investments.
During the first quarter of 1998, the Company incurred a restructuring charge of
$51.6 million and announced that it anticipates incurring an additional charge
of approximately $20.0 million in the remaining quarters of 1998 in connection
with a Company-wide reorganization which is intended to reduce Sybase's cost
structure by approximately $100 million on an annualized basis. The actual
amount of such charge could exceed the estimated amount and actual expense
savings in the future could be offset by other expense increases or changes in
the Company's business. However, as these are forward-looking statements, future
actual results may differ based on the factors described above.
Effective January 1, 1998, the Company adopted the American Institute of
Certified Public Accountants Statement of Position No. 97-2, "Software Revenue
Recognition" (SOP 97-2), which supercedes SOP 91-1. Restatement of prior
financial statements is prohibited. SOP 97-2 addresses software revenue
recognition matters primarily from a conceptual level and detailed
implementation guidelines have not been issued. In March 1998, the American
Institute of Certified Public Accountants issued Statement of Position No. 98-4,
"Deferral of the Effective Date of a Provision of SOP 97-2, Software Revenue
Recognition", which defers for one year the application of certain provisions of
SOP 97-2. These provisions limit what is considered vendor-specific objective
evidence of the fair value of the various elements in a multiple-element
arrangement. All
-18-
<PAGE> 19
other provisions of SOP 97-2 remain in effect. These and future changes to, and
interpretations of, accounting standards and rules could adversely affect the
amount and timing of recognition of revenue.
YEAR 2000
The Company is aware of and is addressing the issues associated with the
programming code in existing computer systems as the year 2000 approaches. The
"Year 2000" issue is pervasive and complex, as many computer systems will be
affected in some way by the rollover of the two-digit year value to 00. Systems
that do not properly recognize such information could generate erroneous data or
cause a system to fail. The "Year 2000" issue creates potential risk for the
Company from unforeseen problems in its own computer systems, from third parties
with whom the Company deals on financial transactions worldwide and in its own
software products licensed to customers. Failures of the Company's and/or third
parties' computer systems could have a material impact on the Company's ability
to conduct its business. Complex software products, such as the type licensed by
the Company and its competitors, generally are not completely free from "bugs"
and other defects. The existence of such "bugs" may give rise to legal claims
against the Company, notwithstanding standard provisions in the Company's
license agreements with its customers disclaiming all express and implied
warranties against such defects. Such legal claims could have a materially
adverse impact on the Company's business and results of operations.
The Company has completed an initial assessment of its worldwide infrastructure
systems (e.g., computer and telephone systems) and its business systems (e.g.,
revenue, sales and marketing and finance functions) to determine what actions
are required to resolve the Year 2000 issue. As of February 1998, approximately
two-thirds of the Company's systems had been tested or certified to be Year 2000
compatible. Of the remaining one-third, approximately half are scheduled for
upgrades from suppliers, which will be installed over the coming year. The
Company anticipates completion of testing on the remaining systems in the second
quarter of 1998. For systems which are not either vendor-certified or internally
certified to be Year 2000 compatible, the Company will endeavor to upgrade or
modify those systems where possible, and otherwise retire systems where
necessary. The Company believes it will have identified solutions available for
all of its systems before the end of 1998, and expects to install all solutions
by April of 1999. The Company has initiated formal communications with all of
its significant suppliers and large customers to determine the extent to which
the Company's interface systems are vulnerable to those third parties' failure
to remediate their own Year 2000 issues. There is no guarantee that the systems
of other companies on which the Company's systems rely will be timely converted
and that they would not have an adverse effect on the Company's systems. The
Company does not believe that the cost of such actions will have a material
effect on the Company's results of operations or financial condition. There are
no assurances, however, that there will not be a delay in, or increased cost
associated with, the implementation of such changes, and the Company's inability
to implement such changes could have an adverse effect on future results of
operations. Factors that could cause unusual costs and delays include the
availability and cost of personnel trained in this area, the ability to locate
and correct all relevant computer codes and other uncertainties.
-19-
<PAGE> 20
PART II: OTHER INFORMATION
ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
27 Financial Data Schedule
(b) Reports on Form 8-K:
None.
-20-
<PAGE> 21
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.
May 12, 1998 SYBASE, INC.
By /s/ JACK L. ACOSTA
-------------------------------
Jack L. Acosta
Executive Vice President
and Chief Financial Officer
(Principal Financial Officer)
By /s/ PIETER VAN DER VORST
-------------------------------
Pieter Van der Vorst
Vice President and Corporate Controller
(Principal Accounting Officer)
-21-
<PAGE> 22
EXHIBIT INDEX TO SYBASE, INC.
QUARTERLY REPORT ON FORM 10-Q
<TABLE>
<CAPTION>
Exhibit Number Description
- -------------- -----------
<S> <C>
27 Financial Data Schedule
</TABLE>
-22-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS OF SYBASE INC. AS OF MARCH 31, 1998 AND FOR
THE YEARS THEN ENDED.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 122,714
<SECURITIES> 52,827
<RECEIVABLES> 233,121
<ALLOWANCES> (38,043)
<INVENTORY> 0
<CURRENT-ASSETS> 403,668
<PP&E> 423,062
<DEPRECIATION> (284,112)
<TOTAL-ASSETS> 703,472
<CURRENT-LIABILITIES> 406,037
<BONDS> 0
0
0
<COMMON> 81
<OTHER-SE> 405,136
<TOTAL-LIABILITY-AND-EQUITY> 703,472
<SALES> 96,004
<TOTAL-REVENUES> 206,817
<CGS> 10,098
<TOTAL-COSTS> 181,314
<OTHER-EXPENSES> 105,252
<LOSS-PROVISION> 802
<INTEREST-EXPENSE> 298
<INCOME-PRETAX> (77,674)
<INCOME-TAX> 3,520
<INCOME-CONTINUING> (81,194)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (81,194)
<EPS-PRIMARY> (1.01)
<EPS-DILUTED> (1.01)
</TABLE>
