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Sybase Reports Solid Q1 2006 Results, Driven by 30% Growth in Mobile & Wireless Business

Posted by dcparris on Apr 29, 2006 9:46 PM EDT
PR Newswire; By Press release

Highlights: - Pro Forma EPS increased 14% to $0.25, beating analyst consensus estimates - GAAP EPS increased 36% to $0.19 - Total license revenues increased 7% year-over-year - Mobile & wireless license revenues increased 49%

DUBLIN, Calif., April 27 /PRNewswire-FirstCall/ -- Sybase, Inc. (NYSE: SY), a leading provider of enterprise infrastructure and mobile software, today reported financial results for the first quarter ended March 31, 2006.

For the 2006 first quarter, total license revenue increased 7% to $66.9 million from $62.7 million in the first quarter of 2005. Total revenues for the 2006 first quarter increased 2% to $195.0 million from $191.9 million for the first quarter of 2005.

Operating income calculated in accordance with generally accepted accounting principles (GAAP) for the first quarter of 2006 was $18.9 million, compared with GAAP operating income of $20.3 million for the year-ago quarter. Results for the 2006 first quarter include the impact of $3.5 million associated with implementation of FAS 123R. GAAP net income for the 2006 first quarter increased 30% to $17.3 million, or GAAP EPS of $0.19, compared with GAAP net income of $13.3 million, or GAAP EPS of $0.14 for the 2005 first quarter.

Pro forma operating income was $28.4 million, compared with pro forma operating income of $28.1 million in the first quarter of 2005. Pro forma net income for the first quarter increased 10% to $22.7 million, or earnings per diluted share of $0.25. This compares with pro forma net income of $20.6 million, or earnings per diluted share of $0.22, for the 2005 first quarter.

Pro forma amounts exclude amortization of certain expenses including certain purchased intangibles, stock-based compensation, and restructuring costs. Accompanying this release is a reconciliation of pro forma and GAAP amounts for the 2006 first quarter.

"We're very pleased with the ongoing strength of our mobile and wireless business, with license revenues increasing 49% year over year," said John Chen, chairman, CEO, and president of Sybase. "Performance was driven by accelerating demand for our mobile database, device and security management, AvantGo on-demand services, as well as the recent acquisition of Extended Systems."

Added Mr. Chen, "We expect solid growth in our data management business in the second half of this year. We believe this growth will be principally driven by ASE 15.0 and its options, including encryption and partitioning, combined with strength in those solutions that help customers extract data from various data sources and make that information available to the mobile worker.

"Based on these results and the strength of our fundamentals, we remain confident in our ability to achieve our revenue, margin, cash flow, and profitability targets for the year," concluded Mr. Chen.

Balance Sheet and Other Data

At March 31, 2006, Sybase reported $907.8 million in cash and cash investments, including restricted cash of $5.3 million. The company generated $73.4 million in cash flow from operations in the first quarter.

Sybase repurchased approximately $24.7 million worth of its stock during the 2006 first quarter. As of March 31, 2006, approximately $34.9 million remained authorized in the company's current share repurchase program.

Days sales outstanding for the first quarter was 63 days.

Forward Guidance

For the second quarter ended June 30, 2006, management anticipates revenues will range from $210 to $215 million, with pro forma fully diluted EPS of approximately $0.30. GAAP EPS is estimated to be approximately $0.24, which would include the impact of expensing options under FAS 123R.

For the 12-month period ended December 31, 2006, management estimates total revenue growth of 6%, fully diluted pro forma EPS of approximately $1.29, GAAP EPS of approximately $1.07, and cash flow from operations of approximately $170 million.

Conference Call and Webcast Information

The Sybase 2006 first quarter conference call and simultaneous Webcast is scheduled to begin at 7:30 a.m., Pacific Time/10:30 a.m. Eastern Time, on Thursday, April 27, 2006. To access the live Webcast, please visit http://www.fulldisclosure.com or Sybase's Website at http://www.sybase.com at least 20 minutes prior to the call to download any necessary audio or plug-in software. A telephone replay will be available approximately two hours after the conference call ends and will be available until 10:00 p.m. Pacific Time on May 4, 2006. To access the replay, please dial (888) 203-1112 for domestic access and (719) 457-0820 for international callers; the access code for the telephone replay is #3767734. Additionally, the archived Webcast will be available through July 19, 2006 at http://www.sybase.com/about_sybase/investorrelations.

About Sybase, Inc.

Sybase is the largest global enterprise software company exclusively focused on managing and mobilizing information from the data center to the point of action. Sybase provides open, cross-platform solutions that securely deliver information anytime, anywhere, enabling customers to create an information edge. The world's most critical data in commerce, finance, government, healthcare, and defense runs on Sybase. For more information, visit the Sybase Website at http://www.sybase.com.

Forward-Looking Statements

Certain statements in this release concerning Sybase, Inc. and its prospects and future growth are forward-looking and involve a number of uncertainties and risks. Factors that could cause actual events or results to differ materially from those suggested by these forward-looking statements include, but are not limited to, the performance of the global economy and growth in software industry sales; market acceptance of the company's products and services; customer and industry analyst perception of the company and its technology vision and future prospects; the success of certain business combinations engaged in by the company or by competitors; political unrest or acts of war; possible disruptive effects of organizational or personnel changes; and other factors described in Sybase, Inc.'s reports filed with the U.S. Securities and Exchange Commission, including its annual report on Form 10-K for the year ended December 31, 2005.

Sybase Q1 2006 Announcement Highlights

Sybase announcements during the first quarter of 2006 underscored the company's leadership in the mobile marketplace, including the announcement of RFID Enterprise 2.0 - a comprehensive RFID solution that enables companies to meet the design, deployment and integration challenges presented by enterprise-scale RFID deployments. Sybase was honored with the 2005 LinuxWorld Magazine Readers' Choice Award for "Best Linux Database," with Adaptive Server(R) Enterprise (ASE) triumphing over offerings from MySQL, Oracle, and Ingres/Computer Associates. Also, Sybase announced PowerDesigner(R) 12.0, an all-in-one modeling and design solution for enterprises that need to build or re-engineer business applications quickly, cost-effectively and consistently.

Mobile Enterprise Initiatives

* Debuted RFID Enterprise 2.0, a comprehensive RFID solution that

enables companies to meet the design, deployment and integration

challenges presented by enterprise-scale RFID deployments:

http://www.sybase.com/detail?id=1039486

* Achieved certified integration of RFID Anywhere(TM) 2.0 with SAP's

Auto-ID Infrastructure (AII), allowing end-users easier access and

increased ability to manage collected data from various RFID devices:

http://www.sybase.com/detail?id=1038931

* Introduced new version of Afaria(R) frontline management and security

solution with expanded breadth of functionality available for managing

mobile devices:

http://www.sybase.com/detail?id=1039955

* Debuted RFID Anywhere Appliance Edition which brings intelligence and

manageability to RFID devices, enhancing performance and reducing

operating costs for enterprises deploying RFID solutions:

http://www.sybase.com/detail?id=1039177

* Introduced general availability of the AvantGo(R) Travel Guide,

further demonstrating the company's dedication to offering applications

that will enable business professionals to have 'always available'

access to important information:

http://www.sybase.com/detail?id=1039898

* Announced availability of the AvantGo Windows Mobile Smartphone beta,

enabling Windows Mobile Smartphone with access to over a thousand

websites optimized for reading on their phone, including news, weather,

sports, and more from the world's leading media:

http://www.sybase.com/detail?id=1039968

* Unveiled RFID University, a series of free technical webcasts targeted

to educate developers on various aspects of RFID development to enable

them to jumpstart their RFID projects; RFID University sponsors include

leading industry vendors AWID, Printronix, Symbol Technologies,

ThingMagic and Zebra:

http://www.sybase.com/detail?id=1039498

* Joined UWB Forum and WiMedia Alliance Ultrawideband standards bodies to

offer customers high-bandwidth, short-range wireless communications:

http://www.sybase.com/detail?id=1038817 Database/Developer Initiatives

* Announced general availability of Quest Software's Sybase Database

Expert Option and Sybase SQL Expert Option for Sybase ASE 15.0 to help

deliver optimal database performance and enable rapid migration to

ASE 15:

http://www.sybase.com/detail?id=1039254

* Announced PowerDesigner 12.0, an all-in-one modeling and design

solution for enterprises that need to build or re-engineer business

applications quickly, cost-effectively and consistently:

http://www.sybase.com/detail?id=1038932

* Announced its "Advantage Developer Days 2006" seminar series to provide

developers with in-depth knowledge on how to use and exploit the new

and improved features introduced in Advantage 8.0:

http://www.sybase.com/detail?id=1039897 New Customers and Partners

* Announced that by using Sybase IQ at the core of its new high speed

version of TrueStandings Securities, LoanPerformance, a subsidiary of

First American Real Estate Solutions and a leader in residential

mortgage data and analytics, can run analyses and reports up to one

hundred times faster than previous generations:

http://www.sybase.com/detail?id=1038937

* Created a partnership with Applied Wireless Identifications, Inc. to

jointly develop next generation intelligent RFID readers:

http://www.sybase.com/detail?id=1039179 Industry Accolades

* Received the 2005 LinuxWorld Magazine Readers' Choice Award for

"Best Linux Database," ASE triumphed over offerings from MySQL, Oracle

and Ingres/Computer Associates:

http://www.sybase.com/detail?id=1038952

* Honored by CCID Consulting and China Computer Users Magazine at the

China IT Users Annual Conference with four prestigious for Sybase ASE

and Sybase IQ

* Received recognition from leading IT market research advisory firm IDC

as the leader in mobile device management enterprise software with

higher revenues and market share in a top 10 list that makes up more

than three-fourths of the market and is dominated by large systems

management vendors:

http://www.sybase.com/detail?id=1038819

* Awarded MobileTrax's annual 2006 Mobility Awards for the AvantGo mobile

Internet service and Sybase's acquisition of Extended Systems:

http://www.sybase.com/detail?id=1039250

Sybase, Adaptive Server Enterprise, Afaria, AvantGo, PowerDesigner, and RFID Anywhere are trademarks of Sybase, Inc. or its subsidiaries. All other names may be trademarks of the companies with which they are associated.

SYBASE, INC.

RECONCILIATION TO PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF

OPERATIONS (1)

(UNAUDITED) Three Months Ended Three Months Ended

March 31, 2006 March 31, 2005

(In thousands, Pro forma Pro forma

except per Adjustments Adjustments

share data) GAAP (2) Pro forma GAAP (2) Pro forma

Revenues:

License fees $66,888 -- $66,888 $62,708 -- $62,708

Services 128,120 -- 128,120 129,203 -- 129,203

Total revenues 195,008 -- 195,008 191,911 -- 191,911 Costs and expenses:

Cost of license

fees 12,792 (2,447) a 10,345 14,258 (4,710) a 9,548

Cost of services 38,352 (680) b 37,672 40,340 (67) b 40,273

Sales and marketing 61,355 (996) b 60,359 59,578 (93) b 59,485

Product development

and engineering 36,997 (593) b 36,404 33,527 (9) b 33,518

General and

administrative 24,987 (3,156) b 21,831 22,233 (1,288) b 20,945

Amortization of

other purchased

intangibles 1,546 (1,546) a -- 1,677 (1,677) a --

Cost (Reversal)

of restructure 34 (34) c -- (8) 8 c -- Total costs and

expenses 176,063 (9,452) 166,611 171,605 (7,836) 163,769 Operating income 18,945 9,452 28,397 20,306 7,836 28,142 Interest income and

expense and

other, net 6,058 -- 6,058 3,108 -- 3,108 Income before

income taxes 25,003 9,452 34,455 23,414 7,836 31,250 Provision for

income taxes 7,751 3,964 d 11,715 10,068 557 d 10,625 Net income $17,252 $5,488 $22,740 $13,346 $7,279 $20,625 Basic net income

per share $0.19 $0.06 $0.25 $0.14 $0.08 $0.22 Shares used in

computing basic net

income per share 89,637 89,637 89,637 92,669 92,669 92,669 Diluted net income

per share $0.19 $0.06 $0.25 $0.14 $0.08 $0.22 Shares used in

computing diluted

net income per

share 92,041 92,041 92,041 95,134 95,134 95,134 (1) Use of Pro Forma Financial Information

To supplement our consolidated financial statements presented in

accordance with generally accepted accounting principles (GAAP),

Sybase uses pro forma measures of operating results, net income and

earnings per share, which are adjusted from GAAP-based results to

exclude certain costs and expenses. These pro forma adjustments are

provided to enhance an overall understanding of our current financial

performance and our prospects for the future, and are one of the

primary indicators management uses for planning and forecasting future

periods. We have excluded such items, including purchase accounting

adjustments in connection with acquisitions, and the cost of

restructuring because we do not believe they are indicative of our

core business. Even though such items have recurred in the past and

may recur in future periods, they are driven by events (such as

acquisitions and restructurings) that occur sporadically and are not

directly related to our ongoing core business operations. Pro forma

financial information is never intended to be considered in isolation

from, or as a substitute for, financial results prepared in accordance

with GAAP. (2) Proforma adjustments

Proforma adjustments include the following: (a) amortization of

purchased intangibles; (b) stock-based compensation expense; (c) cost

of restructuring charges; (d) income tax effect of proforma

adjustments.

SYBASE, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands, except share and per March 31, December 31,

share data) 2006 2005

(Unaudited)

Current assets:

Cash and cash equivalents $505,903 $398,741

Short-term investments 312,513 342,247

Total cash, cash equivalents and short-term

cash investments 818,416 740,988 Restricted cash 2,707 2,773

Accounts receivable, net 136,894 167,790

Deferred income taxes 4,691 5,523

Other current assets 23,149 16,876 Total current assets 985,857 933,950 Long-term cash investments 84,049 118,948

Restricted long-term cash investments 2,600 2,600

Property, equipment and improvements, net 58,178 59,178

Deferred income taxes 27,040 24,879

Capitalized software, net 66,211 65,911

Goodwill, net 239,308 238,864

Other purchased intangibles, net 83,589 87,562

Other assets 39,818 38,722 Total assets $1,586,650 $1,570,614 Current liabilities:

Accounts payable $10,357 $10,353

Accrued compensation and related expenses 37,556 51,983

Accrued income taxes 27,510 31,398

Other accrued liabilities 69,452 78,040

Deferred revenue 226,728 188,929 Total current liabilities 371,603 360,703 Other liabilities 40,871 40,339

Long-term deferred revenue 4,947 5,663

Minority interest 5,079 5,079

Convertible subordinated notes 460,000 460,000 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; 105,337,362 shares issued

(2005 - 105,337,362) 105 105

Additional paid-in capital 946,235 953,771

Accumulated earnings 29,952 16,195

Other comprehensive income 20,840 19,231

Less: Cost of treasury stock (15,518,440 shares

and 2005 - 14,806,217) (292,982) (277,510)

Unearned compensation -- (12,962) Total stockholders' equity 704,150 698,830 Total liabilities and stockholders' equity $1,586,650 $1,570,614

SYBASE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

PROFORMA WITHOUT PURCHASE ACCOUNTING, COST OF RESTRUCTURE, AND STOCK

COMPENSATION EXPENSE

(UNAUDITED) Three Months Ended March 31,

(In thousands, except per share data) 2006 2005 Revenues:

License fees $66,888 $62,708

Services 128,120 129,203 Total revenues 195,008 191,911 Costs and expenses:

Cost of license fees 10,345 9,548

Cost of services 37,672 40,273

Sales and marketing 60,359 59,485

Product development and engineering 36,404 33,518

General and administrative 21,831 20,945 Total costs and expenses 166,611 163,769 Operating income 28,397 28,142 Interest income and expense and other, net 6,058 3,108 Income before income taxes 34,455 31,250 Provision for income taxes 11,715 10,625 Net income $22,740 $20,625 Basic net income per share $0.25 $0.22 Shares used in computing basic net income

per share 89,637 92,669 Diluted net income per share $0.25 $0.22 Shares used in computing diluted net income

per share 92,041 95,134 Note: The pro forma statement of operations is intended to present the

Company's operating results excluding purchase accounting

adjustments associated with the acquisitions of Home Financial

Network, Inc., New Era of Networks, Inc., AvantGo Inc., Dejima,

Inc., XcelleNet, Inc., Avaki, Inc., ISDD Ltd., and Extended

Systems, Inc. and other purchased intangibles. Such purchase

accounting adjustments would include amortization of developed

technology, amortization of intangibles, goodwill impairment loss,

in-process research and development costs, and related adjustments

for income tax provision. The pro forma statement of operations

also excludes stock compensation expense, restructuring costs, and

cumulative effect of an accounting change which we do not believe

are indicative of our core business. Even though such items have

recurred in the past and may recur in future periods, they are

driven by events (such as acquisitions and restructurings) that

occur sporadically and are not directly related to our ongoing core

business operations. Pro forma financial information is never

intended to be considered in isolation from, or as a substitute

for, financial results prepared in accordance with GAAP.

SYBASE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(UNAUDITED) Three Months Ended March 31,

(In thousands, except per share data) 2006 2005 Revenues:

License fees $66,888 $62,708

Services 128,120 129,203 Total revenues 195,008 191,911 Costs and expenses:

Cost of license fees 12,792 14,258

Cost of services 38,352 40,340

Sales and marketing 61,355 59,578

Product development and engineering 36,997 33,527

General and administrative 24,987 22,233

Amortization of other purchased intangibles 1,546 1,677

Cost (Reversal) of restructure 34 (8) Total costs and expenses 176,063 171,605 Operating income 18,945 20,306 Interest income and expense and other, net 6,058 3,108 Income before income taxes 25,003 23,414 Provision for income taxes 7,751 10,068 Net income $17,252 $13,346 Basic net income per share $0.19 $0.14 Shares used in computing basic net income

per share 89,637 92,669 Diluted net income per share $0.19 $0.14 Shares used in computing diluted net income

per share 92,041 95,134

SYBASE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited) Three Months Ended

March 31,

(Dollars in thousands) 2006 2005

Cash and cash equivalents, beginning of year $398,741 $321,417

Cash flows from operating activities:

Net income 17,252 13,346

Adjustments to reconcile net income to net cash

provided by operating activities:

Depreciation and amortization 18,012 20,539

(Gain) Loss on disposal of assets (381) 327

Deferred income taxes (1,329) (2,083)

Stock-based compensation - restricted stock 1,956 1,457

Stock-based compensation - all other 3,469 --

Amortization of note issuance costs 492 202

Changes in assets and liabilities:

Accounts receivable 31,048 29,853

Other current assets (6,273) (6,527)

Other assets - operating (1,589) 877

Accounts payable 4 595

Accrued compensation and related expenses (14,427) (11,486)

Accrued income taxes (3,678) 9,472

Other accrued liabilities (8,851) (7,747)

Deferred revenues 37,083 19,058

Other liabilities 582 2,082

Net cash provided by operating activities 73,370 69,965

Cash flows from investing activities:

(Increase) Decrease in restricted cash 66 (82)

Purchases of available-for-sale cash

investments (171,467) (404,594)

Maturities of available-for-sale cash

investments 101,297 99,297

Sales of available-for-sale cash investments 134,618 451

Business combinations, net of cash acquired (23) --

Purchases of property, equipment and improvements (4,622) (3,757)

Proceeds from sale of fixed assets 2 10

Capitalized software development costs (8,542) (9,588)

Decrease in other assets - investing 1 1

Net cash provided by (used for) investing activities 51,330 (318,262)

Cash flows from financing activities:

Proceeds from the issuance of convertible

subordinated notes, net of issuance costs -- 450,529

Repayments of long-term obligations (14) --

Payments on capital lease (77) (79)

Net proceeds from the issuance of common stock

and reissuance of treasury stock 5,699 10,085

Purchases of treasury stock (24,665) (129,942)

Net cash provided by (used for) financing activities (19,057) 330,593

Effect of exchange rate changes on cash 1,519 (8,827)

Net increase in cash and cash equivalents 107,162 73,469

Cash and cash equivalents, end of period 505,903 394,886

Cash investments, end of period 396,562 496,409

Total cash, cash equivalents and cash investments,

end of period $902,465 $891,295

SYBASE, INC.

CONSOLIDATED STATEMENT OF OPERATIONS BY SEGMENT

PROFORMA WITHOUT PURCHASE ACCOUNTING, COST OF RESTRUCTURE, AND STOCK

COMPENSATION EXPENSE

FOR THE THREE MONTHS ENDED MARCH 31, 2006

(UNAUDITED) (In thousands, except

per share data)

Infrastructure Consoli-

Platform iAnywhere dated

Revenues: Group Solutions Eliminations Total

License fees

Infrastructure $44,175 $39 $-- $44,214

Mobile and Embedded 5,253 17,421 -- 22,674

Subtotal license fees 49,428 17,460 -- 66,888

Intersegment license

revenues 22 4,348 (4,370) --

Total license fees 49,450 21,808 (4,370) 66,888 Services

Direct service revenue 116,837 11,283 -- 128,120

Intersegment service

revenues 49 6,137 (6,186) --

Total services 116,886 17,420 (6,186) 128,120 Total revenues 166,336 39,228 (10,556) 195,008 Total allocated costs and

expenses 143,712 34,135 (10,556) 167,291 Operating income before

unallocated costs $22,624 $5,093 $-- $27,717 Other unallocated cost savings (680) Operating income after unallocated

expenses 28,397 Interest income and expense and

other, net 6,058 Income before income taxes 34,455 Provision for income taxes 11,715 Net income $22,740 Basic net income per share $0.25 Shares used in computing basic net

income per share 89,637 Diluted net income per share $0.25 Shares used in computing diluted

net income per share 92,041 Note: The pro forma statement of operations is intended to present the