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UNITED STATES

FORM 10-K

Commission File Number 000-31859

CRYSTAL DECISIONS, INC.

Telephone: (650) 838-7410

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act: Common stock, par value of $0.001

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 o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment of this Form 10-K.  x

On August 30, 2002, 75,908,555 shares of the registrant’s common stock, $0.001 par value per share, were issued and outstanding.

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CRYSTAL DECISIONS, INC.

ANNUAL REPORT ON FORM 10-K

For the Fiscal Year Ended June 28, 2002

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PART 1

Item 1.     Business

The Company

      Crystal Decisions, Inc. is an information management company that creates software products and provides services for reporting, analysis and information delivery. We develop, market and support an integrated, scalable suite of enterprise software products and solutions that enable businesses to access disparate data sources and distribute secure, interactive reports and analyses across and beyond these organizations. We believe our products provide direct and rapidly achieved benefits including improved decision-making, lower overall information technology costs and better business performance.

      Through our company and its predecessors, we have been providing reporting, analysis and information delivery technologies and services for over 15 years. As of June 28, 2002, we shipped (directly, and bundled with our original equipment manufacturer (“OEM”) partners) over 12 million licenses of our products. We have a diverse customer base, including many Fortune 1000 companies. While our primary market is North America, we have over 25 offices and operations in 10 countries, through which we market and distribute our products. To facilitate international use, we have translated many of our products into other languages such as French, German, Japanese and Spanish.

      We changed our name to Crystal Decisions, Inc. (“Crystal Decisions”) from Seagate Software Information Management Group Holdings, Inc. in March 2001. We were incorporated in Delaware in August 1999 and are headquartered in Palo Alto, California. Our majority shareholder is Seagate Software (Cayman) Holdings, which is a wholly owned subsidiary of New SAC, a Cayman Islands limited corporation (“New SAC”). Silver Lake Partners L.P. and Texas Pacific Group control New SAC.

      We became a majority owned subsidiary of New SAC on November 22, 2000 when Seagate Software (Cayman) Holdings acquired 75,001,000 shares, or 99.7%, of our common stock then outstanding under the terms of a stock purchase agreement. Prior to November 22, 2000, we were a majority owned subsidiary of Seagate Software Holdings, Inc., a Delaware corporation, and a wholly owned subsidiary of Seagate Technology, Inc.

Industry Background

      Over the last decade, many organizations have invested in a wide range of data collection systems to help improve operational efficiencies and more effectively manage their businesses. Businesses, governments and other entities have spent billions of dollars implementing enterprise resource planning, data warehousing and traditional database systems, as well as customer relationship management and supply chain management systems.

      Organizations justify the disruption and expense of the purchase of these data systems because they need to improve their transactional efficiency. They also need to capture, organize, store and protect critical information about specific aspects of corporate performance, such as customer information, financial performance, inventory management and employee information. They would like to utilize that captured information for faster, more effective planning and execution of business strategies. These system investments have been very successful in addressing the first objective. Today, large volumes of corporate data are captured and processed.

      We believe that the ability of the average company to utilize this data to improve the planning and execution of the company’s activities can present a challenge. The data collection systems may not provide robust technologies for analyzing and reporting on the information therein. The increasing amount of data creates an opportunity for businesses to make more informed decisions. Extracting data from different systems, converting it into a standard format, performing calculations or comparisons on it and then delivering the results to the right person is a complex undertaking. We believe large and small companies struggle to efficiently extract information from these diverse systems and present it to decision makers at all levels in a manner that is intuitive, interactive and efficient. The data is there, but the ability to access and present the

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      Recently, organizations have begun to invest in an additional layer of technologies to address the information challenge. These technologies offer a range of functionality and are known by many labels, but tend to be commonly grouped under the umbrella label “enterprise business intelligence”. The most common requirement of enterprise business intelligence projects is reporting — accessing and presenting relevant information in a meaningful way to users.

      Enterprise business intelligence solutions enable business users at many different levels in an organization to access and manipulate data stored in various business applications or systems, extract the required information and present it using easy to understand reports, complete with interactive charts, graphs and tables to aid the user. These reports can then be shared in a secure environment with business users across the organization, providing users with the tools to make better, more informed business decisions.

      Enterprise business intelligence solutions have evolved considerably over the last decade, so that today they typically comprise a common set of technologies for reporting, ad hoc query, multi-dimensional on-line analytical programming reporting and analysis, data mining and statistics.

The Crystal Decisions Solution

      We are a software and services company that is focused on one objective: to help companies bring together their people and information to improve business performance. We believe that every organization and every decision maker can benefit from the ability to access a wide variety of corporate data sources, and to analyze, report and distribute the information and resultant business insights contained therein.

      We believe our products meet an extensive range of data centric business and organizational needs commonly referred to under a number of different labels, including information delivery, enterprise reporting, enterprise business intelligence, enterprise information portals, developer reporting, ad hoc query and reporting, business analytics, on-line analytical processing reporting, analytic application development and packaged analytic applications. Our products are designed to help organizations derive higher business value from their range of electronic data sources and their enterprise information sources (including, but not limited to, enterprise resource planning, customer relationship management, supply chain management, e-commerce and business intelligence systems, as well as data warehouses and data marts).

      We believe we are positioned to take advantage of any acceleration in demand for enterprise business intelligence across all industries. We believe our solutions are both easy to use and deploy in smaller projects and powerful enough for the most complex and large-scale applications. We provide a secure, web-based information infrastructure that incorporates reporting, analysis, query and information delivery. We developed our solutions to meet the increasing demands of global organizations and provide an infrastructure enabling business users, both inside and outside the organization, to access interactive content, or reports, through a personalized web-based interface.

Products

      We provide a complete range of products designed to extend the value of our industry acclaimed reporting with robust analytics and the underlying infrastructure required to manage and deliver corporate data. With a common enterprise architecture as its foundation, our product suite provides scalable and secure infrastructure and tools that are built to withstand demanding business environments. Our products provide an integrated, web-enabled platform to provide access, analysis, interpretation and distribution of data designed to improve business performance through ad hoc query and reporting to complex analysis. Customers use our products to create, implement and deploy enterprise information solutions in an application, on a desktop, across an organization or between organizations. Our products extend e-business technology architectures for flexible deployment using the world wide web. Our products support a variety of data sources, including operational or legacy data stores, data marts, data warehouses, e-commerce systems, enterprise resource

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Our products include:

      Crystal Enterprise — Crystal Enterprise provides an information delivery and business intelligence suite which is an integrated, web-based solution for reporting, analysis and delivery. Crystal Enterprise integrates and delivers all of our component products on one extensible suite. The software offers a customizable infrastructure for providing highly secure access to interactive, actionable information to employees, customers and suppliers. It is designed to help companies improve decision making by organizing, categorizing and delivering reports, analytic applications and strategic business information into web or enterprise applications. Crystal Enterprise provides a scalable and reliable infrastructure to securely deliver information to a high volume of users, and a multi-tier architecture for proven fault tolerance designed to ensure maximum up time. The Crystal Enterprise product is the new generation of the Seagate Info family of products.

      Enterprise Partner Kits — We provide a series of software toolkits and packages that enable closer integration with our partners’ products. Most kits include data access drivers, sample reports and data structures and may include special documentation, support and services. We currently offer packages for SAP R/3, SAP BW 3.0, Siebel 7.0 CRM and Baan 2.0 ERP.

      Crystal Reports — Crystal Reports is an integrated software package for query, report design, application development and web report publishing functions. Provided in a range of versions for both developers and users, Crystal Reports allows users to access most types of structured data, format, design and process a variety of reports, integrate these reports into .NET, Java and COM applications and other popular environments and distribute reports to users. The report design capabilities of Crystal Reports produce interactive documents that can be published in a variety of formats including DHTML, RTF, Microsoft Excel, PDF and XML for increased flexibility.

      Crystal Analysis — Based on our experience with both reporting and advanced on-line analytical processing and analytics, Crystal Analysis combines user ad hoc query, analytic reporting and on-line analytical processing as well as Microsoft Excel integration in a single user focused interface. Crystal Analysis is provided in a range of versions for business users, analysts and developers. It is a client design tool that provides powerful and guided analysis that can be used as an extension to any of our other products and integrates seamlessly with Crystal Reports, Crystal Enterprise and Holos.

      Holos — Holos, an advanced analytic application development and deployment environment, represents the high end of our analytics family of products. It is designed to handle large amounts of relational and multidimensional data. Holos enables the modeling of large amounts of data with complex business logic and then provides multiple views of the data to enable analysis, expose trends and accelerate decision making. Holos integrates with our enterprise and user products.

      Analytic Application Templates — We provide a collection of solution templates built for use with our enterprise products. These solutions help accelerate customer adoption and success of our products. Designed to address common enterprise needs and current market demand, the current templates include applications for customer profiling, balanced scorecard, budgeting, e-commerce analysis and telecommunications billing analysis. These packages include reports, on-line analytical processing data structures and a framework of business logic to begin implementations.

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Sales and Marketing

      Our sales and marketing programs are organized by geographical regions, including North America, EMEA and the Asia Pacific region. We adapt certain products for foreign markets, including translation of documentation and local language versions, and localize our marketing and sales support programs accordingly.

      We utilize a direct sales force and indirect sales channels, such as OEM relationships and a network of distributors and resellers, to reach our customers. These distributors and OEMs may also sell other products that are complementary to, or compete with, ours. We provide sales and marketing programs to encourage the sale of our products, but there can be no assurance that distributors and OEMs will not place a higher priority on competing products. Our agreements with distributors are generally non-exclusive and may be terminated by either party without cause. Our sales channels are supported by our organization of pre sales and technical specialists. Customers can also purchase some of our products by downloading them over the internet.

      Our marketing efforts are designed to increase brand awareness and acceptance of our products. We have an international marketing strategy that consists of several key components:

	•	targeted print advertising in trade, technical and business publications;
	•	on-line advertising on our website;
	•	cooperative marketing programs with distributors and resellers;
	•	participation in seminars and tradeshows;
	•	direct mailings to both prospective and existing customers; and
	•	extensive public relations activities and programs to build relationships with key analysts, journalists and influential third parties.

      Our international marketing groups produce, or oversee the production of, substantially all of the on-line and print product literature, brochures, advertising and similar marketing and promotional material.

      We derived a substantial portion of our revenues from one distributor customer, Ingram Micro, Inc. (“Ingram”) during the last three fiscal years. As a percent of our total revenues, Ingram accounted for 10%, 16% and 20% for fiscal years ended June 28, 2002 (“fiscal 2002”), June 29, 2001 (“fiscal 2001”) and June 30, 2000 (“fiscal 2000”), respectively. Our relationship with Ingram is subject to a number of agreements, each of which may be terminated upon the expiration of a required notice period. We cannot be certain that our relationship with Ingram will continue at all or the extent to which it will continue. No other customer accounted for 10% of more of our total revenues in fiscal 2002, 2001 or 2000. Our indirect revenues include sales to distributors and OEMs and as a percent of total revenues were 33% in fiscal 2002, 37% in fiscal 2001 and 40% in fiscal 2000. Our revenues from sales outside of the United States as a percent of total revenues were 32% in fiscal 2002, 32% in fiscal 2001 and 34% in fiscal 2000.

Professional Services, Technical Support and Maintenance

      We believe that high quality, real time customer support is important to the successful marketing and sale of our products. We provide a broad range of support services such as consultation, training and technical support to ensure the optimal use of our products. These services (including professional services, technical support and maintenance) are designed to ensure ongoing customer satisfaction and influence customers’ future purchasing decisions.

      Our professional services organization provides consultation and training to plan and execute the deployment of our products and speed end-user adoption. We provide a dedicated, international team to meet this need and help ensure that our customers gain a rapid return on their investments in our technology. We also have organized a network of certified partner organizations to provide extensions to our service offerings in an effort to ensure that customers fully understand the value of our product offering and have a positive experience with our products.

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      Our technical support efforts are designed to ensure that our customers are able to use our products to perform to their potential. We believe effective technical support during product evaluation accrues to the benefit of our customers and that post sale support has been and will continue to be a substantial factor in maintaining customer satisfaction. We provide a range of technical support products to match the needs of different organizations. We operate technical support groups that are located at various sites around the world, including North America and Europe. Certain technical support groups also offer 24-hour, seven-day toll-free telephone services. We offer pre sale services and post sale support to current users and potential customers evaluating our products.

      We also offer maintenance programs for certain of our products, which generally consist of unspecified product enhancements and upgrades. We generally sell maintenance and technical support services in 12-month increments.

Strategic Relationships

      We have a strategic relationship with Microsoft, under which Microsoft bundles our range of access and analysis products with selected Microsoft products. For example, Crystal Reports is bundled with several Microsoft products, including developer tools, such as Microsoft Visual Basic. We supply the integrated reporting tool for Microsoft’s new Visual Studio ..NET product suite.

      We also have strategic partnerships with other technology vendors. We have developed OEM and other strategic relationships with over 300 application independent software vendors, application service providers and computer hardware manufacturers. These strategic partners sell and support our products, as well as integrate our products as components of their applications. As a result of these strategic partnerships, we believe our customers are able to maximize their investments in enterprise applications such as enterprise resource planning, supply chain management and customer relationship management through integrated reporting and analysis solutions.

Research and Development

      We incurred research and development expenses of $30.5 million in fiscal 2002, $29.2 million in fiscal 2001 and $27.4 million in fiscal 2000. Our customers did not fund our research and development expenses in fiscal 2002, fiscal 2001 or fiscal 2000. We are pursuing our product development objectives by developing new software products and product enhancements internally, acquiring products, technologies and businesses complementary to our existing products and forming alliances with other technology companies.

Patents and Intellectual Property Rights

      Due to the rapidly changing nature of applicable technologies, we believe that the improvement of existing products, reliance upon trade secrets and unpatented proprietary know-how and development of new products are generally more important than patent protection. We have one United States issued patent and one United States allowed patent, which we expect to be issued during calendar 2002. We have four patent applications pending in the United States and one foreign patent application pending. We believe that effective protection of intellectual property rights is unavailable or limited in certain foreign countries. In addition, the laws of many countries do not protect our proprietary rights to as great an extent as the laws of the United States.

      Our license agreements include restrictions intended to protect and defend our intellectual property. We realize that, although we have incorporated these restrictions, there is a possibility for unauthorized use of our software. In addition to relying on these contractual rights, we have an ongoing trademark registration program pursuant to which we register certain of our product names, slogans and logos in the United States and in some foreign countries.

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Competition

      The segment of the software market in which we compete is comprised of numerous competitors, and we expect competition to increase. Many of our current and prospective competitors may have significantly greater financial, technical and marketing resources than we do. In addition, many of our prospective customers may have the internal capability to implement software solutions that assist users to analyze and interpret data to make business decisions.

The competitive factors affecting the market for our products include:

	•	product functionality;
	•	performance and reliability;
	•	demonstrable cost-effective benefits for users;
	•	price;
	•	quality of customer support and user documentation;
	•	ease of use and installation;
	•	vendor reputation;
	•	experience; and
	•	financial stability of the software provider.

      We believe that we currently compete effectively with respect to these factors. Our ability to remain competitive will depend to a great extent upon our ongoing performance in the areas of product development and customer support. To be successful in the future, we believe that we must respond promptly and effectively to the challenges of technological change and our competitors’ innovations by continually enhancing our product offerings. Performance in these areas will in turn depend upon our ability to attract and retain highly qualified technical personnel in a competitive market for experienced and talented software developers.

Employees

      As of June 28, 2002, we had 1,600 employees, including 547 in sales and marketing, 417 in services and support, 447 in research and development and 189 in general and administrative functions. None of our employees are represented by a labor union or are the subject of a collective bargaining agreement. We have never experienced a work stoppage and believe that our employee relations are good.

      We believe our future success will depend in large part upon our ability to attract and retain highly skilled managerial, product development, sales and marketing personnel. The loss of the services of any of our key personnel, the inability to attract or retain qualified personnel in the future or delays in either hiring required personnel or the rate at which new people become productive, particularly sales personnel and product developers, could have a material adverse effect on our business, operating results and financial condition. Competition for qualified employees is intense in the software industry.

Item 2.     Properties

      Our principal executive offices are located in Palo Alto, California. Our other principal facilities are located in Canada and the United Kingdom. The majority of our facilities are occupied under leases that expire at various times through fiscal 2015. At June 28, 2002, our leased space approximated 311,000 square feet with approximately 185,000 square feet located in Canada, 58,000 square feet located in the United States, 49,000 square feet located in Europe and 19,000 square feet located in the Asia Pacific region. These figures exclude approximately 87,000 square feet of unoccupied space in Canada and approximately 3,000 square feet leased to others in the United States.

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      We believe that our facilities are adequate for our current needs and that suitable additional or substitute space will be available as needed to accommodate expansion of our operations.

Item 3.     Legal Proceedings

      The following discussion contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). We are subject to litigation arising in the ordinary course of our business. While we believe that the ultimate outcome of these actions will not have a material adverse effect on us, the outcome of these actions is not determinable and negative outcomes may adversely effect our financial position, liquidity, or results of operations. Accordingly, actual results could differ materially from those projected in the forward-looking statements.

      In November 1997, Vedatech Corporation (“Vedatech”) commenced an action in the Chancery Division of the High Court of Justice in the United Kingdom against Crystal Decisions (UK) Limited, a wholly owned subsidiary of Crystal Decisions. The action alleged a breach of an oral agreement and infringement of Vedatech’s U.K. copyright in one of our products and sought monetary and injunctive relief. In August 2000, Vedatech obtained permission to amend its action to include claims for unjust enrichment, unlawful interference and quantum meruit. In May 2001, Vedatech sought to enjoin Crystal Decisions (UK) Limited from infringing on the U.K. copyright and sought forfeiture to Vedatech of all infringing software copies. Of the relief sought, only a claim for JPY 26,624,181 (approximately U.S. $240,000) for unpaid invoices initially was settled. The liability phase of the trial was completed in March 2002, and we prevailed on all claims except for the quantum meruit. The court ordered the parties to mediate the quantum of that claim and, in August 2002, we came to a mediated settlement with Vedatech. The mediated settlement is not material to our operations and contains no continuing obligations. On September 24, 2002, however, we received documents indicating Vedatech is seeking to set aside the settlement.

      In addition to the foregoing, we are subject to other litigation in the ordinary course of business. While we believe that the ultimate outcome of these matters will not have a material adverse effect on us, the outcome of these matters is not determinable and negative outcomes may adversely effect our financial position, liquidity or results of operations.

Item 4.     Submission of Matters to a Vote of Security Holders

      None.

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PART II

      As of August 30, 2002, 75,908,555 shares of our common stock were outstanding, which were held by 198 stockholders of record. There is no established public trading market for any class of our securities.

      We have never declared nor paid cash dividends on any of our capital stock and do not anticipate that any cash dividends will be declared in the foreseeable future. We currently intend to retain all available funds and any future earnings to use in the operation of our business.

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Item 6.     Selected Financial Data

      The selected financial data set forth below should be read in conjunction with Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” our Audited Consolidated and Combined Financial Statements and the Notes thereto, and the other information contained elsewhere in this Form 10-K. We derived our selected statements of operations data for the fiscal years ended June 28, 2002, June 29, 2001 and June 30, 2000 and the selected balance sheet data as of June 28, 2002 and June 29, 2001 from the Audited Consolidated and Combined Financial Statements that are included under Item 8 in this Form 10-K. The selected statements of operations data for the fiscal years ended July 2, 1999 and July 3, 1998 and the selected balance sheet data as of June 30, 2000 and July 2, 1999 were derived from our Audited Consolidated and Combined Financial Statements that are not included in this Form 10-K. The selected balance sheet data as of July 3, 1998 was derived from our Unaudited Consolidated and Combined Financial Statements that are not included in this Form 10-K. The consolidated and combined statements of operations data reflect certain comparative period figure reclassifications to conform to the basis of presentation adopted in fiscal 2002. Historical results are not necessarily indicative of results of operations to be expected for future periods.

The net loss for fiscal 2001 included unusual items of $8.9 million, comprising $1.9 million of non-cash compensation expense and $7.1 million of in-process research and development write-offs related to the Stock Purchase Agreement and the acquisition of Seagate Technology, Inc. by VERITAS Software Corporation.

The net loss for fiscal 2000 included unusual items of $242.6 million.

The net loss for fiscal 1999 included unusual items of $86.7 million.

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Item 7.     Management’s Discussion and Analysis of Financial Condition and Results of Operations

      The following discussion and analysis should be read in conjunction with our audited consolidated and combined financial statements and the notes thereto and other information included elsewhere in this Form 10-K. Certain statements in this Management’s Discussion and Analysis of Financial Condition and Results of Operations and information contained elsewhere in this Form 10-K are forward-looking statements within the meaning of Section 27A of the Securities Act, Section 21E of the Exchange Act and the Private Securities Litigation Reform Act of 1995. These forward-looking statements involve risks and uncertainties. Our actual results could differ materially from those anticipated in such forward-looking statements as a result of certain factors, as more fully described in the “Factors Affecting Future Operating Results” section of this Item and elsewhere in this Form 10-K. We do not undertake any obligation to publicly update any forward-looking statement to reflect events or circumstances after the date on which any such statement is made or to reflect the occurrence of unanticipated events.

Overview

      Crystal Decisions, Inc. is an information management company that creates software products and provides services for reporting, analysis and information delivery. We develop, market and support an integrated, scalable suite of enterprise software products that enable businesses to access disparate data sources and distribute secure, interactive reports and analyses across and beyond these organizations. We believe that our products provide direct and rapidly achieved benefits including improved decision-making, lower overall information technology costs and better business performance.

      We operate in a broad industry segment that is commonly referred to as “business intelligence.” We believe that our products meet an extensive range of data-centric business and organizational needs commonly referred to under a number of different labels, including information delivery, enterprise reporting, enterprise business intelligence, enterprise information portals, developer reporting, ad hoc query and reporting, business analytics, on-line analytical processing (“OLAP”) reporting, analytic application development and packaged analytic applications. We sell our products through our direct sales force and certain indirect sales channels such as distributors and original equipment manufacturers (“OEMs”).

      Through our company and its predecessors, we have been providing reporting, analysis and information delivery technologies and services for over 15 years. As of June 28, 2002, we shipped (directly, and bundled with our OEM partners) over 12 million licenses of our products, and our current customer base is diverse, including many Fortune 1000 companies. While our primary market is North America, we have over 25 offices and operations in 10 countries, through which we market and distribute our products. To facilitate international use, we have translated many of our products into other languages such as French, German, Japanese and Spanish.

      We were incorporated in Delaware in August 1999. Our headquarters are located at 895 Emerson St., Palo Alto, California 94301. Our telephone number is (650) 838-7410.

      We operate and report financial results on a fiscal year of 52 or 53 weeks ending on the Friday closest to June 30. Accordingly, fiscal 2002 ended on June 28, 2002 (“fiscal 2002”), fiscal 2001 ended on June 29, 2001 (“fiscal 2001”) and fiscal 2000 ended on June 30, 2000 (“fiscal 2000”). Fiscal 2003 will end on June 27, 2003 and will be comprised of 52 weeks. Fiscal 2002, 2001 and 2000 were each comprised of 52 weeks. We have reclassified certain comparative period figures to conform to the basis of presentation adopted in fiscal 2002.

      In view of our significant growth in recent years, we believe that fiscal year-to-year comparisons of our financial results are not necessarily meaningful and you should not rely upon them as an indication of future performance.

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Critical Accounting Policies and Estimates

      Our consolidated and combined financial statements have been prepared in accordance with accounting principles generally accepted in the United States and form the basis for the following discussion and analysis on critical accounting policies and estimates. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On a regular basis we evaluate our estimates and assumptions. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

      We believe the following critical accounting policies reflect our more significant estimates and assumptions used in the preparation of our consolidated and combined financial statements:

      Revenue Recognition. We derive revenues from the sale of licenses for our software products and from services such as maintenance, consulting, training and technical support. We recognize revenue in accordance with Statement of Position (SOP) 972, “Software Revenue Recognition” as amended by SOP 98-9 “Modification of SOP 97-2, Software Revenue Recognition with Respect to Certain Transactions.” We generally recognize licensing revenues, whether sold direct or through distributors or resellers, upon product delivery, provided persuasive evidence of an arrangement exists, fees are fixed or determinable and we deem the resulting receivable to be collectible. In instances where payments are subject to extended terms, we do not recognize revenues until the payments become due.

      SOP 97-2 requires that the total arrangement fee from software arrangements that include rights to multiple software products, post contract customer support and/or other services, be allocated to each element of the arrangement based on their relative fair values. Under SOP 97-2, the determination of fair value is based on vendor specific objective evidence (“VSOE”). We apply the residual method of accounting as specified in SOP 98-9 such that the total fair value of the undelivered elements as indicated by VSOE, is deferred and subsequently recognized in accordance with SOP 97-2 and the difference between the total arrangement fee and the amount deferred for the undelivered elements is accounted for as revenue related to the delivered elements.

      Some OEM arrangements contain end-user maintenance elements for which VSOE has not been established, as sufficient evidence of consistent pricing and renewal rates are not present. In such arrangements, we recognize the arrangement fee ratably over the maintenance period in accordance with the provisions set forth in SOP 97-2.

      Our policy is to recognize no revenues on sales to distributors or resellers if any resale contingencies exist. Some of the factors that we consider in determining the existence of such contingencies include payment terms, collectability and history with the distributor or reseller. We recognize revenues when any contingencies have been resolved and the criteria for revenue recognition under SOP 97-2 are met.

      We recognize revenues for sales to distributors or resellers with rights of returns when the criteria for recognizing revenues, as outlined in Statement of Financial Accounting Standards (“SFAS”) No. 48 “Revenue Recognition When Right of Return Exists” (“SFAS 48”), are met. We make estimates of future returns and reduce our revenues and related receivables accordingly.

      Where rights of return exist and the criteria of SFAS 48 are not met, we do not recognize revenues until such time that all of the criteria are met. We consider factors including historical experience, nature of the product, fixed or determinable fees, arms length contract terms, the level of inventory in the distribution channels and our ability to reasonably estimate returns.

      We recognize revenues from technical support and maintenance, which consist of fees for ongoing support and product updates, ratably over the term of the contract, which is generally one year. We generally recognize revenues from training and consulting as the services are performed.

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      We record out-of-pocket expense reimbursements in maintenance, support and services revenues in accordance with Emerging Issues Task Force (“EITF”) Issue No. 01-14, “Income Statement Characterization of Reimbursements Received for ‘Out-of-Pocket’ Expense Incurred” (“EITF 01-14”).

      Where we provide consulting services for significant production, modification, or customization of our software, or where these services are essential to the functionality of our software, we recognize revenues in accordance with the provisions of SOP 81-1, “Accounting for Performance of Construction-Type and Certain Production-Type Contracts.” In these arrangements, we recognize both the licensing revenues and consulting services revenues using the percentage of completion method based on the cost of labor inputs.

      Allowance for Doubtful Accounts. We record an allowance for doubtful accounts in general and administrative expenses. The allowance, which is netted against our accounts receivable balance on our consolidated balance sheets, totaled $2.1 million and $1.8 million as of June 28, 2002 and June 29, 2001, respectively. The amounts represent estimated losses resulting from the inability of our customers to make required payments. The estimates are based on historical bad debt write-offs, specific identification of probable bad debts based on collection efforts, aging of accounts receivable and other known factors. If the financial condition of our customers were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be required.

      Income Taxes. In preparing our consolidated and combined financial statements, we are required to estimate our income taxes in each of the jurisdictions in which we operate. This process involves estimating actual current tax liabilities together with assessing temporary differences resulting from differing treatment of items for tax and accounting purposes. These differences result in deferred tax assets and liabilities which are included within the consolidated balance sheet, as applicable. Our deferred tax assets consist primarily of net operating losses carried forward. We then assess the likelihood that deferred tax assets will be recovered from future taxable income, and, to the extent that we believe that recovery is not more likely than not, we establish a valuation allowance. We have provided a valuation allowance against all of our deferred tax assets at June 28, 2002 and June 29, 2001. To the extent we establish a valuation allowance against our deferred tax assets or change this valuation allowance in a period, we reflect the impact in the tax provision for (benefit from) income taxes in the consolidated and combined statements of operations.

Significant Transactions Affecting Our Financial Reporting

      On November 22, 2000, Seagate Technology Inc. (“Seagate Technology”), Seagate Software Holdings, Inc. (“Seagate Software Holdings”), and Suez Acquisition Company (Cayman) Limited (“Suez Acquisition Company”), an entity affiliated with, among others, Silver Lake Partners L.P. and Texas Pacific Group, completed the transactions under the stock purchase agreement, and Seagate Technology and VERITAS Software Corporation (“VERITAS”) completed the transactions under the agreement and plan of merger and reorganization. Suez Acquisition Company was a limited liability company organized under the laws of the Cayman Islands and formed solely for the purpose of entering into the stock purchase agreement and related acquisitions. At the closing of the transactions under the stock purchase agreement, Suez Acquisition Company assigned all of its rights under the stock purchase agreement to New SAC (“New SAC”), a Cayman islands limited corporation. This transaction is referred to hereafter as the New SAC Transaction.

      Upon closing of the transactions under the stock purchase agreement, New SAC, through Suez Acquisition Company, purchased substantially all of the operating assets of Seagate Technology and its consolidated subsidiaries for $1.84 billion cash, including transaction costs of $25 million. This included Seagate Technology’s rigid disc drive, storage area network, removable tape storage solutions businesses and operations, our common stock, and certain cash balances, but excluding the approximately 128 million shares of VERITAS common stock then held by Seagate Software Holdings and certain of Seagate Technology’s equity investments. In addition, the wholly owned subsidiaries of New SAC assumed substantially all of the operating liabilities of Seagate Technology, Seagate Software Holdings and their consolidated subsidiaries. New SAC also acquired Seagate Technology Investments, Inc., a subsidiary of Seagate Technology, which held certain strategic equity investments in various companies.

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      Immediately following the closing of the transactions under the stock purchase agreement and under the terms of the agreement and plan of merger and reorganization, VERITAS acquired the remainder of Seagate Technology and a wholly owned subsidiary of VERITAS merged with and into Seagate Technology, with Seagate Technology becoming a wholly owned subsidiary of VERITAS. VERITAS did not acquire Seagate Technology’s disc drive business or any other Seagate Technology operating business, including ours. In the VERITAS merger, the Seagate Technology stockholders received merger consideration consisting of VERITAS stock and cash.

      In connection with the transactions effected under the stock purchase agreement, New SAC and Seagate Technology agreed to assume and indemnify VERITAS for substantially all liabilities arising in connection with Seagate Technology’s and our operating assets. On March 29, 2000, Seagate Technology, VERITAS and New SAC entered into an indemnification agreement. Pursuant to this agreement these entities and certain other subsidiaries of Seagate Technology, including us, were required to indemnify VERITAS and its affiliates for any liability for taxes of Seagate Technology, and the subsidiaries of Seagate Technology, including us, acquired by New SAC, in excess of an amount deposited into an escrow account by VERITAS. VERITAS deposited $150 million in an escrow account. This amount may be withdrawn by New SAC to satisfy these tax liabilities, including those of Crystal Decisions and its subsidiaries.

      As of November 22, 2000, as a result of the completion of the transactions under a stock purchase agreement, we became a majority owned subsidiary of Seagate Software (Cayman) Holdings (“Suez Software”), which is a wholly owned subsidiary of New SAC, whose predecessor was Seagate Technology. Prior to November 22, 2000, we were a majority owned subsidiary of Seagate Software Holdings, a Delaware corporation, and a wholly owned subsidiary of Seagate Technology.

      Silver Lake Partners L.P. and Texas Pacific Group control New SAC. New SAC acquired 75,001,000 shares, or 99.7%, of our outstanding common stock on November 22, 2000, with our remaining outstanding common stock at that date being held by our current and former employees and non-employee directors. The minority interests in our common stock amounted to approximately 16.1%, 13.0% and 10.5% on a fully converted basis as of June 28, 2002, June 29, 2001 and June 30, 2000, respectively. These minority interests were comprised of our outstanding common stock held by our current and former employees and non-employee directors, as well as the outstanding options to purchase our common stock held by our employees and non-employee directors.

      This transaction resulted in a change in control of our company. Under rules and regulations promulgated by the Securities and Exchange Commission, because more than 95% of our company was acquired and a change of ownership occurred, we restated all our assets and liabilities in the financial statements as of November 22, 2000 on a “push down” accounting basis.

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      The table below lists the net purchase price allocation to our company of the tangible and intangible assets acquired by New SAC. The purchase price allocated to us as a result of the November 22, 2000 sale of Seagate Technology is not necessarily indicative of what the purchase price would have been for us on a stand alone basis.

      The net purchase price was allocated to the assets and liabilities of Seagate Technology and its subsidiaries, including our company, based on their fair values at the date of the transaction. The fair values of the identifiable tangible and intangible assets and liabilities of Seagate Technology and its subsidiaries at the date of the transaction exceeded the net purchase price by approximately $909 million. Accordingly, the resultant negative goodwill was allocated to the long-lived tangible and intangible assets, including our assets, on the basis of relative fair values. This allocation reduced the recorded amounts by approximately 46%. The fair values of tangible and intangible assets, including in-process research and development, were determined based upon independent appraisals provided by New SAC.

     Application of SFAS No. 109, “Accounting for Income Taxes” (“SFAS 109”) to Deferred Tax Assets as part of Purchase Price Allocation

      The purchase price under the stock purchase agreement was fixed and no contingencies were identified that would have resulted in a change in the overall purchase price. However, in allocating the purchase price New SAC recorded a valuation allowance against deferred tax assets in accordance with SFAS 109. The deferred tax assets subject to the valuation allowance were based on the excess of tax bases over the fair values of acquired property, plant and equipment and liabilities assumed, for which New SAC expected to receive tax deductions in U.S. federal and state returns in future periods based on its ability to generate taxable income in the U.S.

      During the fourth quarter of fiscal 2002, New SAC evaluated and updated forecasts of projected U.S. taxable income to determine if there was any amount of the deferred tax assets related to the New SAC Transaction that New SAC’s management believed would be more likely realizable than not. In accordance with SFAS 109, this evaluation resulted in the elimination of the valuation allowances that had been recorded against a portion of the deferred tax assets associated with the New SAC Transaction. In order to reflect tax benefits recognized by New SAC, that were attributable to acquired deferred tax assets, the net carrying values of the intangible assets that were pushed down to our consolidated and combined financial statements were reduced to zero on June 28, 2002 as follows (in thousands):

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      As a result of the push down of intangible assets to our consolidated and combined financial statements on November 22, 2000, we recorded a deferred tax liability related to these intangible assets. We calculated this deferred tax liability as the tax-effected temporary differences related to the excess of book over tax bases related to the intangible assets. Pursuant to SFAS 109, the elimination of the remaining book bases of intangible assets requires that the associated deferred tax liability be reduced to zero. We eliminated the net carrying values of our intangible assets at June 28, 2002 and recorded this amount as a charge against additional paid-in capital on our statement of stockholders’ equity for fiscal 2002 as follows (in thousands):

     Allocation of Purchase Price to our Company Pursuant to the Application of Push Down Accounting

      As a result of revaluation of our assets and liabilities from the historical figures at November 22, 2000 in connection with the New SAC Transaction, our results of operations after November 22, 2000, particularly the depreciation and amortization charges, are not necessarily comparable to the results of operations prior to that date.

      The following summarizes the impact of push down accounting on our results:

	•	Revenues. We revalued deferred revenues at November 22, 2000. These were reduced by $1.3 million on a declining basis during the twelve months following the New SAC Transaction. Consequently, revenues were lower by $128,000 and $1.2 million for fiscal 2002 and for fiscal 2001, respectively, than they would have been had the push down adjustments not occurred.
	•	Depreciation and amortization. As a result of the allocation of negative goodwill to our long-lived tangible assets, our capital assets were reduced by $4.3 million. Consequently, we recorded approximately $1.5 million less depreciation expense for each of fiscal 2002 and fiscal 2001 than we would have recorded had the push down adjustments not been made. In addition, we recorded additional amortization expense of approximately $5.6 million and $3.3 million for fiscal 2002 and for fiscal 2001, respectively, resulting from the recording of the incremental fair value of intangible assets in the push down adjustments.
	•	In-process research and development. We wrote off in-process research and development of $7.1 million as an expense in fiscal 2001. We did not have any similar expenses in fiscal 2002.

      As described previously under the heading, Application of SFAS No. 109, the net carrying values of the intangible assets pushed down to our consolidated and combined financial statements were reduced to zero. Therefore, commencing in the first quarter of fiscal 2003, we will no longer provide for amortization related to these intangible assets. Furthermore, while we will adopt SFAS No. 142, “Goodwill and Other Intangible Assets” (“SFAS 142”), at the beginning of fiscal 2003, the non-amortization provisions and the impairment tests will not be applicable until such time as we have recorded goodwill and other intangible assets on our balance sheet.