Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). YES |X| NO |   |

          The number of shares of the registrant's common stock, par value $0.01 per share, outstanding as of July 31, 2004, the most recent practicable date prior to the filing of this report, was 80,421,422.

The accompanying notes are an integral part of the financial statements.

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The accompanying notes are an integral part of the financial statements.

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BORLAND SOFTWARE CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(In thousands, unaudited)

The accompanying notes are an integral part of the financial statements.

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          The accompanying Borland Software Corporation, or Borland, condensed consolidated financial statements at June 30, 2004 and December 31, 2003 and for the three and six months ended June 30, 2004 and 2003, are unaudited and have been prepared in accordance with accounting principles generally accepted in the United States (GAAP) for interim financial information and Rule 10-01 of Regulation S-X. Accordingly, they do not include all financial information and disclosures required by GAAP for complete financial statements and certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted. The unaudited interim condensed consolidated financial statements have been prepared on the same basis as the annual consolidated financial statements and, in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary to present fairly Borland's financial position at June 30, 2004 and December 31, 2003, and its results of operations and cash flows for the three and six months ended June 30, 2004 and 2003. Certain amounts in the three and six months ended June 30, information have been reclassified in order to be consistent with current financial statement presentation. See Note 6 to our Notes to Condensed Consolidated Financial Statements for information regarding our reclassifications of amortization of intangible assets.

          The preparation of condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The results of operations for interim periods are not necessarily indicative of the results to be expected for any subsequent quarter or for the full year. The condensed consolidated financial statements and notes should be read in conjunction with our audited financial statements included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2003 as filed with the Securities and Exchange Commission, or the SEC, on March 15, 2004.

          Due to the nature of our products and the customers we serve, we have very few contracts that are accounted for under Statement of Position 81-1 (SOP 81-1) Accounting Performance of Construction-Type and Certain Production-Type Contracts. The majority of our consulting engagements are accounted for on a time and material basis.

          We account for stock-based compensation using the intrinsic value method prescribed in Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees," or APB 25, and related interpretations. Under APB 25, compensation expense is measured as the excess, if any, of the closing market price of our stock at the date of grant over the exercise price of the option granted. We recognize compensation cost for stock options, if any, ratably over the vesting period. Generally, we grant options with an exercise price equal to the closing market price of our stock on the grant date. Accordingly, we have not recognized any compensation expense for our stock option plans. We have also granted restricted stock awards to certain officers and other executives as an incentive to retain key employees. The awarded shares are made in common stock and vest at the end of the restriction period. Upon issuance of the award, an amount equivalent to the excess of the market price of the shares awarded over the price paid by the recipient at the date of grant is recorded in deferred compensation and is amortized using a straight line method against income over the related vesting period. We provide additional pro forma disclosures as required under Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation," or SFAS No. 123, as amended by SFAS No. 148, "Accounting for Stock-Based Compensation- Transition and Disclosure-an amendment of FASB Statement No. 123," or SFAS No. 148.

          Compensation expense included in pro forma net income (loss) and pro forma net income (loss) per share is recognized for the fair value of the awards granted under our stock option and stock purchase plans using the Black-Scholes pricing model. The fair value of each stock option is estimated on the date of grant using the Black-Scholes pricing model with the following weighted average assumptions:

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          The fair value of each employee stock purchase plan award is estimated using the Black-Scholes pricing model with the following weighted average assumptions:

          The weighted average fair value of the stock options granted under our employee stock option plans and the stock awarded under our employee stock purchase plan during the three months ended June 30, 2004 and 2003, as defined by SFAS No. 123, was $4.27 and $5.94, respectively, and was $4.28 and $7.69 for the six months ended June 30, 2004 and 2003, respectively.

          Had we recorded compensation expenses based on the estimated grant date fair value for awards granted under our stock option and stock purchase plans as defined by SFAS No. 123, our pro forma net loss and net loss per share for the three and six months ended June 30, 2004 and 2003 would have been as follows (in thousands, except per share amounts):

          The pro forma amounts include compensation expenses related to stock option grants and stock purchase rights for the three and six months ended June 30, 2004 and 2003. In future periods, compensation expense may increase as a result of the fair value of stock options and stock purchase rights granted in those future periods.

          We compute net income (loss) per share in accordance with SFAS No. 128, "Earnings per Share," or SFAS No. 128. Under the provisions of SFAS No. 128, basic net income (loss) per share is computed by dividing the net income (loss) by the weighted average number of common shares outstanding during the period. Diluted net income per share is computed by dividing the net income for the period by the weighted average number of common and potentially diluted shares outstanding during the period. Potentially diluted shares, which consist of incremental shares issuable upon exercise of stock options, are included in diluted net income per share to the extent such shares are dilutive. Diluted net loss per share is the same as the basic net loss per share for the three and six months ended June 30, 2003.

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          The following table sets forth the computation of basic and diluted net income (loss) per share for the three and six months ended June 30, 2004 and 2003 (in thousands, except per share amounts):

          The diluted earnings (loss) per share calculation for the three months ended June 30, 2004 and 2003 excludes options to purchase approximately 7.9 million and 14.7 million shares, respectively, because their effect would have been antidilutive. The diluted earnings (loss) per share calculation for the six months ended June 30, 2004 and 2003 excludes options to purchase approximately 7.4 million and 5.3 million shares, respectively, because their effect would have been antidilutive.

NOTE 4--BUSINESS RISK

Transition of Sales Cycle

          We are in the process of transforming the company from one focused on selling individual development tools alone to one focused on selling multi-product enterprise solutions that span the entire software application development lifecycle. As part of this transformation, we are focused on increasing sales force productivity by generating more sales of our multi-product solutions, developing stronger alliances with systems integrators and technology partners that have established relationships with enterprise-level customers, and selling our individual products through our network of channel partners. As we make the transition to selling enterprise solutions, we expect to compete more directly with larger companies and, as a result, we may face additional pricing pressures, longer sales cycles, and more complex revenue agreements.

          As a result of our transformation efforts we have expected sales of our multi-product enterprise solutions to become a larger percentage of total revenues and one enterprise-level, multi-product solutions customer, British Telecommunications plc, located in the United Kingdom, represented 11% of our revenues in the three months ended June 30, 2004. No single customer represented 10% or more of our total revenues in the six months ended June 30, 2004 or in the three or six months ended June 30, 2003.

          On January 14, 2003, we completed the acquisition of TogetherSoft Corporation, or TogetherSoft, a privately-held corporation. The consideration consisted of approximately $82.5 million in cash, 9,050,000 shares of Borland common stock and the assumption of certain liabilities and obligations of TogetherSoft, including those arising under its stock option plans. The consideration paid was reduced for certain legal expenses paid by TogetherSoft. Approximately $22.8 million of the total consideration is being held in escrow to indemnify us against, and reimburse us for, certain events and cover certain liabilities and transaction costs. Unused funds will be released from escrow at certain times between 2004 and 2007.

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          During the three and six months ended June 30, 2004, we recorded approximately $2.8 million and $5.8 million, respectively, in acquisition-related expenses associated with the amortization of the purchased intangibles from the acquisition of TogetherSoft.

          Of the total purchase price, approximately $150.9 million was allocated to goodwill. Goodwill represents the excess of the purchase price over the fair value of the net tangible and intangible assets acquired. In accordance with SFAS No. 142, "Goodwill and Other Intangible Assets," or SFAS No. 142, goodwill is not being amortized and is tested for impairment annually during the three months ending September 30, as well as when circumstances indicate a possible impairment.

          Supplemental pro forma information reflecting the acquisition of TogetherSoft as if it occurred on January 1, 2003 is as follows (in thousands, except per share amounts, unaudited):

Such information is not necessarily representative of the actual results that would have occurred for those periods.

          The following table summarizes the short-term portion of our restructuring activity related to the TogetherSoft acquisition accounted for according to The Emerging Issues Task Force Issue No. 95-3, or EITF 95-3, for the six months ended June 30, 2004 (in thousands):

          We expect the amount held in our severance and benefits accrual at June 30, 2004 to be fully paid by the end of 2004, and we are currently seeking to sublet or terminate the leases on our vacant facilities.

          On October 8, 2002, we signed a merger agreement to purchase all of the outstanding shares of Starbase Corporation, or Starbase, for an aggregate consideration of approximately $24.0 million and $2.0 million in bridge financing that was forgiven upon the consummation of the transaction. Starbase was a provider of enterprise software lifecycle solutions covering requirements definition and management, code and content development, and change and configuration management.

          During the three and six months ended June 30, 2004, we recorded approximately $0.7 million and $1.4 million, respectively, in acquisition-related expenses associated with the amortization of the purchased intangibles from the acquisition of Starbase.

          The changes in the carrying amount of goodwill for the six months ended June 30, 2004 are as follows (in thousands):

          The adjustments to goodwill during the six months ended June 30, 2004 are related to reversals of accrued expenses and other reserves originally recorded as part of the purchase accounting for our Togethersoft and Starbase acquisitions and includes adjustments due to fluctuations in foreign currency exchange rates during the six months ended June 30, 2004.

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          The following tables summarize our intangible assets, net (in thousands):

          Estimated future amortization expense related to our intangible assets at June 30, 2004 is as follows (in thousands):