<PAGE> 1
================================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------------
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED DECEMBER 31, 1997
[ ] 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 0-21484
THE SANTA CRUZ OPERATION, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN THIS CHARTER)
CALIFORNIA 94-2549086
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
400 ENCINAL STREET, SANTA CRUZ, CALIFORNIA 95060
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code (408) 425-7222
Indicate by check mark whether the registrant (1) has filed all reports 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 [ ]
The number of shares outstanding of the registrant's common stock as of December
31, 1997 was 36,167,625.
================================================================================
<PAGE> 2
THE SANTA CRUZ OPERATION, INC.
FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED DECEMBER 31, 1997
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
ITEM 1.FINANCIAL STATEMENTS
A) CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED DECEMBER 31, 1997 AND 1996............. 1
B) CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31, 1997 AND SEPTEMBER 30, 1997.................... 2
C) CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED DECEMBER 31, 1997 AND 1996............. 3
D) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ......................... 4
ITEM 2.MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS................................................... 6
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS................................................... 9
ITEM 6. EXHIBITS............................................................ 9
SIGNATURES............................................................................. 10
</TABLE>
<PAGE> 3
Part I. Financial Information
Item I. Financial Statements
THE SANTA CRUZ OPERATION, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except amounts per share)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
DECEMBER 31,
----------------------
1997 1996
-------- --------
(Unaudited)
<S> <C> <C>
NET REVENUES $ 47,497 $ 56,608
COST OF REVENUES 12,346 13,663
-------- --------
GROSS MARGIN 35,151 42,945
-------- --------
OPERATING EXPENSES:
Research and development 10,759 11,966
Sales and marketing 19,619 20,776
General and administrative 4,604 5,235
-------- --------
Total operating expenses 34,982 37,977
-------- --------
Operating income 169 4,968
OTHER INCOME (EXPENSE):
Interest income, net 475 637
Other expense, net 101 (317)
-------- --------
Income before income taxes 745 5,288
-------- --------
Income taxes 321 1,322
-------- --------
NET INCOME $ 424 $ 3,966
-------- --------
NET INCOME PER SHARE:
Basic $ 0.01 $ 0.11
Diluted $ 0.01 $ 0.11
-------- --------
SHARES USED IN INCOME PER SHARE CALCULATION:
Basic 36,345 36,909
Diluted 37,094 37,683
-------- --------
</TABLE>
See accompanying notes to consolidated financial statements.
1
<PAGE> 4
THE SANTA CRUZ OPERATION, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31, September 30,
1997 1997
------------ -------------
(In thousands, except for share data) (Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 25,631 $ 23,225
Short-term investments 27,207 28,486
Receivables, net 33,491 36,546
Deferred tax assets 6,630 6,631
Other current assets 7,009 6,934
---------- ----------
Total current assets 99,968 101,822
---------- ----------
Property and equipment, net 14,080 13,666
Purchased software and technology licenses 14,749 16,523
Other assets 14,197 14,654
---------- ----------
TOTAL ASSETS $ 142,994 $ 146,665
---------- ----------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Royalties payable $ 8,709 $ 11,262
Trade accounts payable 9,133 8,600
Income taxes payable 1,054 1,101
Accrued expenses and other current liabilities 26,821 27,230
Deferred revenues 6,480 7,465
---------- ----------
Total current liabilities 52,197 55,658
---------- ----------
Other long-term liabilities 10,400 9,545
---------- ----------
SHAREHOLDERS' EQUITY
Common stock, net, authorized 100,000,000 shares
Issued and outstanding 36,167,625 and 36,450,115 shares 117,575 119,287
Cumulative translation adjustment 862 639
Accumulated deficit (38,040) (38,464)
---------- ----------
Total shareholders' equity 80,397 81,462
---------- ----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 142,994 $ 146,665
========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
2
<PAGE> 5
THE SANTA CRUZ OPERATION, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
Three Months Ended
December 31,
-------------------------
1997 1996
-------- --------
(Unaudited)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 424 $ 3,966
Adjustments to reconcile net income to net cash
provided by operating activities -
Depreciation and amortization 3,879 5,428
Deferred tax assets (51) --
Exchange gain (315) --
Changes in operating assets and liabilities-
Receivables 3,478 (4,708)
Other current assets 18 1,512
Royalties payable (2,550) (3,216)
Trade accounts payable 403 (3,959)
Income taxes payable (95) (1,634)
Accrued expense and other current liabilities (683) 2,454
Deferred revenue (1,048) (521)
-------- --------
Net cash provided by (used for) operating activities 3,460 (678)
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (1,364) (2,048)
Purchases of software and technology licenses (195) (2,162)
Sales of short-term investments 6,630 4,302
Purchases of short-term investments (5,351) (3,734)
Changes in other assets 447 (3,873)
-------- --------
Net cash provided by (used for) investing activities 167 (7,515)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on capital lease (555) (279)
Net proceeds from sale of common stock 72 1,480
Repurchases of common stock (1,784) (5,699)
Changes in other long-term liabilities 836 2,289
-------- --------
Net cash used for financing activities (1,431) (2,209)
-------- --------
Effects of exchange rate changes on cash and cash equivalents 210 833
-------- --------
Change in cash and cash equivalents 2,406 (9,569)
Cash and cash equivalents at beginning of period 23,225 32,065
-------- --------
Cash and cash equivalents at end of period $ 25,631 $ 22,496
-------- --------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid-
Income taxes $ 231 $ 3,351
Interest 233 57
Non-cash financing and investing activities-
Assets recorded under capital leases $ 852 $ 1,080
-------- --------
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE> 6
THE SANTA CRUZ OPERATION,INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
In the opinion of management, the accompanying unaudited, consolidated
statements of operations, balance sheets and statements of cash flows have
been prepared in accordance with generally accepted accounting principles
and include all material adjustments (consisting of only normal recurring
adjustments) necessary for their fair presentation. The financial statements
include the accounts of the Company and its wholly owned subsidiaries after
all material intercompany balances and transactions have been eliminated.
The Notes to Consolidated Financial Statements contained in the fiscal year
1997 report on 10K should be read in conjunction with these Consolidated
Financial Statements. The consolidated interim results presented are not
necessarily indicative of results to be expected for a full year. Certain
reclassifications have been made for consistent presentation. The September
30, 1997 balance sheet was derived from audited financial statements, and is
included for comparative purposes.
2. EARNINGS PER SHARE (EPS) DISCLOSURES
The Company has adopted the provisions of Statement of Financial Accounting
Standards No. 128 (SFAS 128), Earnings Per Share, effective December 31,
1997. SFAS 128 requires the presentation of basic and diluted earnings per
share. Basic EPS is computed by dividing income available to common
stockholders by the weighted average number of common shares outstanding for
the period. Diluted EPS is computed giving effect to all dilutive potential
common shares that were outstanding during the period. Dilutive potential
common shares consist of the incremental common shares issuable upon the
exercise of stock options for all periods. All prior period earnings per
share amounts have been restated to comply with SFAS 128. Basic and diluted
earnings per share were calculated as follows during the three months ended
December 31, 1997 and 1996:
<TABLE>
<CAPTION>
1997 1996
------- -------
(in thousands, except per share data) (unaudited)
<S> <C> <C>
Basic:
Weighted average shares 36,345 36,909
======= =======
Net income $ 424 $ 3,966
======= =======
Net income per share $ 0.01 $ 0.11
======= =======
Diluted:
Weighted average shares 36,345 36,909
Common equivalent shares from stock options
and warrants 749 774
------- -------
Shares used in per share calculation 37,094 37,683
======= =======
Net income $ 424 $ 3,966
======= =======
Net income per share $ 0.01 $ 0.11
======= =======
</TABLE>
Options to purchase 2,587,856 and 3,470,379 shares of common stock at a
range of $5.36 to $12.00 and $6.87 to $13.94 per share were outstanding
during the first quarter of fiscal year 1998 and 1997, respectively, but
were not included in the computation of diluted EPS because the options'
exercise price was greater than the average market price of the common
shares for each respective quarter.
4
<PAGE> 7
3. RECENT ACCOUNTING PRONOUNCEMENTS
In October 1997, the AICPA issued Statement of Position (SOP) 97-2, Software
Revenue Recognition, which supersedes SOP 91-1. The Company will be required
to adopt SOP 97-2 prospectively for software transactions entered into
beginning October 1, 1998. SOP 97-2 generally requires revenue earned on
software arrangements involving multiple elements such as software products,
upgrades, enhancements, postcontract customer support, installation and
training, to be allocated to each element based on the relative fair values
of the elements. The fair value of an element must be based on evidence
which is specific to the vendor. The revenue allocated to software products,
including specified upgrades or enhancements generally is recognized upon
delivery of the products. The revenue allocated to postcontract customer
support generally is recognized ratably over the term of the support and
revenue allocated to service elements generally is recognized as the
services are performed. If a vendor does not have evidence of the fair value
for all elements in a multiple-element arrangement, all revenue from the
arrangement is deferred until such evidence exists or until all elements are
delivered. The Company's management is currently evaluating whether the
adoption of SOP 97-2 will have a material impact on the Company's financial
position or results of operations.
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 130 (SFAS 130), Reporting Comprehensive
Income. This statement establishes requirements for disclosure of
comprehensive income and becomes effective for the Company for fiscal years
beginning after December 15, 1997, with reclassification of earlier
financial statements for comparative purposes. Comprehensive income
generally represents all changes in stockholders' equity except those
resulting from investments or contributions by stockholders. The Company is
evaluating alternative formats for presenting this information, but does not
expect this pronouncement to materially impact the Company's results of
operations.
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 131, (SFAS 131), Disclosures about
Segments of an Enterprise and Related Information. This statement
establishes standards for disclosure about operating segments in annual
financial statements and selected information in interim financial reports.
It also establishes standards for related disclosures about products and
services, geographic areas and major customers. This statement supersedes
Statement of Financial Accounting Standards No. 14, Financial Reporting for
Segments of a Business Enterprise. The new standard becomes effective for
fiscal years beginning after December 15, 1997, and requires that
comparative information from earlier years be restated to conform to the
requirements of this standard. The Company is evaluating the requirements of
SFAS 131 and the effects, if any, on the Company's current reporting and
disclosures.
4. LEGAL PROCEEDINGS
In August 1993, a securities class action lawsuit was filed against the
Company. In November 1997, the lawsuit was settled for an insignificant
amount. The settlement was fully provided for at September 30, 1997.
5
<PAGE> 8
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
In addition to historical information contained herein, this Discussion and
Analysis may contain forward-looking statements that involve risks and
uncertainties. The Company's actual results could differ materially. Readers are
cautioned not to place undue reliance on these forward-looking statements, which
reflect management's analysis only as of the date hereof. The Company undertakes
no obligation to publicly release the results of any revision to these
forward-looking statements, which may be made to reflect events or circumstances
after the date hereof or to reflect the occurrence of unanticipated events.
RESULTS OF OPERATIONS
NET REVENUES
Net revenues for the three months ended December 31, 1997 decreased 16% to $47.5
million from $56.6 million in the same period in fiscal 1997. This quarter's
decline resulted in part from decreased or delayed sales to Asia due to weakened
local currency and a delay in recording several large transactions which did not
close by December 31,1997. No one customer accounted for more than 10% of net
revenues in the first quarter ended December 31, 1997 or 1996.
International revenues continue to represent a significant portion of total net
revenues comprising 54% of the revenues for the first fiscal quarter of 1998,
and 53% for the same quarter in fiscal 1997.
COSTS AND EXPENSES
Cost of revenues as a percentage of net revenues increased to 26% for the first
quarter of fiscal 1998 from 24% in the same period of 1997, principally due to
the impact of stable fixed costs over lower unit sales volume. It was mitigated,
in part, by a change in the overhead rate allocated to inventory and by the
improvement in the cost base due to outsourcing of the Company's distribution
function in the fourth quarter of fiscal 1997.
Research and development expenses decreased 10% to $10.8 million in the first
quarter of fiscal 1998 from $12.0 million in the comparable quarter of fiscal
1997, or 23% and 21% of net revenues, respectively. The absolute spending
decrease is primarily attributable to reduced staffing levels initiated with the
restructuring of operations in the third quarter of fiscal 1997.
Sales and marketing expenses decreased 6% to $19.6 million in the first quarter
of fiscal 1998 from $20.8 million for the comparable quarter of the prior year.
Sales and marketing expenses represented 41% of net revenues in the first
quarter of fiscal 1998 and 37% in 1997.
General and administrative expenses decreased 12% to $4.6 million for the first
quarter of fiscal 1998 from $5.2 million for the same period of the prior year.
General and administrative expenses represented 10% and 9% of net revenues for
the first quarter of fiscal 1998 and 1997, respectively. Reduced headcount and
lowered discretionary spending resulted in the decline.
Other income consists of net interest income, foreign exchange gain and loss as
well as other miscellaneous income and expense items. For the first quarter of
fiscal 1998, other income was $.6 million compared to $.3 million for the same
quarter of fiscal 1997. The increase in other income was due primarily to
foreign exchange translation gain in 1998 and loss in 1997 on non-sterling
denominated assets in the Company's UK subsidiary.
The provision for income taxes was $.3 million for the first quarter of fiscal
1998 compared to $1.3 million for the same period of the prior fiscal year. The
tax provision for the first quarter of the current fiscal year resulted from
foreign taxes paid. The tax provision for the first quarter of the prior fiscal
year reflects taxes provided on operations at an effective tax rate of 25%. The
tax provisions for fiscal 1998 and fiscal 1997 reflect the realization of
certain deferred tax assets for which a valuation allowance was previously
established.
Net income for the first quarter of fiscal 1998 was $.4 million compared to $4.0
million for 1997.
6
<PAGE> 9
FACTORS THAT MAY AFFECT FUTURE RESULTS
The Company's future operating results may be affected by various uncertain
trends and factors which are beyond the Company's control. These include adverse
changes in general economic conditions and rapid or unexpected changes in the
technologies affecting the Company's products. The process of developing new
high technology products is complex and uncertain and requires accurate
anticipation of customer needs and technological trends. The industry has become
increasingly competitive and, accordingly, the Company's results may also be
adversely affected by the actions of existing or future competitors, including
the development of new technologies, the introduction of new products, and the
reduction of prices by such competitors to gain or retain market share. The
Company's results of operations could be adversely affected if it were required
to lower its prices significantly.
The Company participates in a highly dynamic industry and future results could
be subject to significant volatility, particularly on a quarterly basis. The
Company's revenues and operating results may be unpredictable due to the
Company's shipment patterns. The Company operates with little backlog of orders
because its products are generally shipped as orders are received. In general, a
substantial portion of the Company's revenues have been booked and shipped in
the third month of the quarter, with a concentration of these revenues in the
latter half of that third month. In addition, the timing of closing of large
license contracts and the release of new products and product upgrades increase
the risk of quarter to quarter fluctuations and the uncertainty of quarterly
operating results. The Company periodically may adjust the level of inventory
held in its distribution channels which may also cause quarter-to-quarter
fluctuations. The Company's staffing and operating expense levels are based on
an operating plan and are relatively fixed throughout the quarter. As a result,
if revenues are not realized in the quarter as expected, the Company's expected
operating results could be adversely affected, and such effect could be
substantial and could result in an operating loss.
The Company experiences seasonality of revenues for both the European and the
U.S. federal government markets. European revenues during the quarter ending
June 30 are historically lower or relatively flat compared to the prior quarter.
This reflects a reduction of customer purchases in anticipation of reduced
selling activity during the summer months. Sales to the U.S. federal government
generally increase during the quarter ending September 30. This seasonal
increase is primarily attributable to increased purchasing activity by the U.S.
federal government prior to the close of its fiscal year. Additionally, net
revenues for the first quarter of the fiscal year are typically lower or
relatively flat compared to net revenues of the prior quarter.
The overall cost of revenues may be affected by changes in the mix of net
revenue contribution between licenses and services, product families,
geographical regions and channels of distribution, as the costs associated with
these revenues may have substantially different characteristics. The Company may
also experience a change in margin as net revenues increase or decrease since
technology costs, service costs and production costs are fixed within certain
volume ranges.
The Company's results of operations could be adversely affected if it were to
lower its prices significantly. In the event the Company reduced its prices, the
Company's standard terms for selected distributors provide credit for inventory
ordered in the previous 180 days, such credits to be applied against future
purchases. The Company, as a matter of policy, does not allow product returns
for refund. Product returns are generally allowances for stock balancing and are
accompanied by compensating and offsetting orders. Revenue is net of a provision
for estimated future stock balancing and excess quantities above levels the
Company believes are appropriate in its distribution channels. The Company
monitors the quantity and mix of its product sales.
As the Company determines that it is more likely than not able to utilize its
tax carryforwards and other deferred tax assets in the future and as new tax
legislation is enacted, the Company's effective tax rate is subject to change.
A substantial portion of the Company's revenues are derived from outside the
United States. Trade sales to international customers represented 54% and 53% of
total revenues for the first quarter of fiscal 1998 and 1997, respectively. A
substantial portion of these international revenues are denominated in the U.K.
pound sterling and operating results can vary with changes in the U.S. dollar
exchange rate for such currency. The Company's revenues can also be affected by
general economic conditions in the United States, Europe and other international
markets. The Company's operating strategy and pricing take into account changes
in exchange rates over time. However, the
7
<PAGE> 10
Company's results of operations may be significantly affected in the short term
by fluctuations in foreign currency exchange rates.
The Company has adopted a strategy of reviewing and forecasting all material
foreign denominated assets and liabilities to cover any potential transactional
gain or loss which may occur should exchange rates change significantly. The
Company may employ hedging instruments to offset uncovered exposure.
The Company's policy is to amortize purchased software and technology licenses
using the straight-line method over the remaining estimated economic life of the
product, or on the ratio of current revenues to total projected product
revenues, whichever is greater. Due to competitive pressures, it is reasonably
possible that those estimates of anticipated future gross revenues, the
remaining estimated economic life of the product, or both will be reduced
significantly in the near future. As a result, the carrying amount of the
Company's purchased software and technology licenses may be reduced materially
in the near future and, therefore, could create an adverse impact on the
Company's future reported earnings.
The Company continually evaluates potential acquisition candidates. Such
candidates are selected based on products or markets which are complementary to
those of the Company's. Acquisitions involve a number of special risks,
including the successful combination of the companies in an efficient and timely
manner, the coordination of research and development and sales efforts, the
retention of key personnel, the integration of the acquired products, the
diversion of management's attention to assimilation of the operations and
personnel of the acquired companies, and the difficulty of presenting a unified
corporate image. The Company's operations and financial results could be
significantly affected by such an acquisition.
The Company's continued success depends to a significant extent on senior
management and other key employees. None of these individuals is subject to a
long-term employment contract or a non-competition agreement. Competition for
qualified people in the software industry is intense. The loss of one or more
key employees or the Company's inability to attract and retain other key
employees could have a material adverse effect on the Company.
The stock market in general, and the market for shares of technology companies
in particular, have experienced extreme price fluctuations, which have often
been unrelated to the operating performance of the affected companies. In
addition, factors such as new product introductions by the Company or its
competitors may have a significant impact on the market price of the Company's
Common Stock. Furthermore, quarter-to-quarter fluctuations in the Company's
results of operations caused by changes in customer demand may have a
significant impact on the market price of the Company's stock. These conditions,
as well as factors which generally affect the market for stocks of high
technology companies, could cause the price of the Company's stock to fluctuate
substantially over short periods.
LIQUIDITY AND CAPITAL RESOURCES
The Company's cash and short-term investments totaled $52.8 million at December
31, 1997, representing 37% of the Company's total assets. The three month
increase in cash and short-term investments of $1.1 million was primarily
attributable to improved collection of the Company's accounts receivable. At
December 31, 1997, the Company had available lines of credit of approximately
$17.0 million under which the Company had $0.8 million in outstanding
borrowings. The Company believes that its existing cash and short-term
investments, funds generated from operations and available borrowing
capabilities will be sufficient to meet its operating requirements through at
least calendar 1998.
The Company's first quarter ended December 31, 1997 Days Sales Outstanding (DSO)
was 63.5 days, unchanged from the fourth quarter of fiscal 1997.
The Company is engaged in a systematic repurchase of the Company's Common Stock
for the funding of its employee programs. Additionally, the Company is
authorized to buy back up to 4,000,000 additional shares. As of December 31,
1997, 773,000 shares had been repurchased and retired under this non-systematic
program.
8
<PAGE> 11
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
In August 1993, a securities class action lawsuit was filed against the Company.
In November 1997, the lawsuit was settled for an insignificant amount. The
settlement was fully provided for at September 30, 1997.
ITEM 6. EXHIBITS
(a) Exhibits
27. Financial Data Schedule.
ITEMS 2, 3, 4 AND 5 ARE NOT APPLICABLE AND HAVE BEEN OMITTED.
<PAGE> 12
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.
The Santa Cruz Operation, Inc.
Date: February 13, 1998 By: /s/ Alok Mohan
-------------------------------------
Alok Mohan
President
and Chief Executive Officer
10
<PAGE> 13
EXHIBIT INDEX
27. Financial Data Schedule.
11
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-START> OCT-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 25,631
<SECURITIES> 27,207
<RECEIVABLES> 44,201
<ALLOWANCES> (10,710)
<INVENTORY> 2,094
<CURRENT-ASSETS> 99,968
<PP&E> 56,853
<DEPRECIATION> (42,773)
<TOTAL-ASSETS> 142,994
<CURRENT-LIABILITIES> 52,197
<BONDS> 0
0
0
<COMMON> 117,575
<OTHER-SE> (37,178)
<TOTAL-LIABILITY-AND-EQUITY> 80,397
<SALES> 43,861
<TOTAL-REVENUES> 47,497
<CGS> 8,386
<TOTAL-COSTS> 12,346
<OTHER-EXPENSES> 34,982
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 233
<INCOME-PRETAX> 745
<INCOME-TAX> 321
<INCOME-CONTINUING> 424
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 424
<EPS-PRIMARY> 0.01
<EPS-DILUTED> 0.01
</TABLE>
