UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

FORM 10-K

þ	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Fiscal Year Ended June 30, 2004

OR

o	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 0-9993

MICROS SYSTEMS, INC.

(Exact name of registrant as specified in its charter)

Registrant’s telephone number, including area code: 443-285-6000

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 $.025 per share

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 report(s)), and (2) has been subject to such filing requirements for the past 90 days.

YES þ 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 Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o

Indicate by check mark whether the Registrant is an Accelerated Filer (as defined in Rule 12b-2 of the Securities Exchange Act of 1934).

YES þ NO o

     At the close of business on August 31, 2004, there were issued and outstanding 18,378,962 shares of Registrant’s Common Stock at $.025 par value. At such time the aggregate market value of the Registrant’s Common Stock held by nonaffiliates of the Registrant was $855,356,891.

Table of Contents

DOCUMENTS INCORPORATED BY REFERENCE

     Portions of the Proxy Statement for the 2004 Annual Meeting of Shareholders, currently scheduled to be held on November 19, 2004, and to be filed with the Commission pursuant to Regulation 14A of the Securities Exchange Act of 1934, are incorporated by reference in Part III of this Form 10-K.

PART I

ITEM 1. BUSINESS

INTRODUCTION

     MICROS Systems, Inc. was incorporated in the State of Maryland in 1977 as Picos Manufacturing, Inc. and, in 1978, changed its name to MICROS Systems, Inc. (References to “MICROS” or the “Company” herein include the operations of MICROS Systems, Inc. and its subsidiaries on a consolidated basis). MICROS is a leading worldwide designer, manufacturer, marketer, and servicer of enterprise information solutions for the global hospitality and specialty retail industries. The information solutions consist of application-specific software and hardware systems, supplemented by a wide range of services. The hospitality industry includes numerous defined market segments such as lodging (including individual hotel sites, hotel central reservation systems and customer information systems), table service restaurants, quick service restaurants, entertainment venues such as stadiums and arenas, business foodservice operations, casinos, transportation foodservice, government operations, and cruise ships. The specialty retail industry consists of retail operations selling to consumers both general and specific products, such as clothing, shoes, supermarkets, hardware, jewelry, and other specialty items.

     MICROS’s enterprise solutions comprise three major areas: (1) hotel information systems; (2) restaurant information systems; and (3) specialty retail information systems. In addition to its software enterprise solutions and hardware products, MICROS offers an extensive array of support services and products for its hotel, restaurant, and retail information systems. The hotel information systems consist of software encompassing property management systems (“PMS”), sales and catering systems (“S&C”), central reservation systems (“CRS”), and customer information systems (“CIS”). The restaurant information systems consist of hardware and software for point-of-sale (“POS”) and operational applications, a suite of back office applications, including inventory, labor, and financial management, and certain centrally hosted enterprise applications. The specialty retail systems consist of software encompassing POS, loss prevention, business analytics, and enterprise applications.

     The Company’s PMS applications are installed worldwide in leading hotel chains such as Marriott International, InterContinental Hotels Group, Best Western, Fairmont Hotels, Radisson, Hilton International, Hyatt International, Wyndham, Starwood, Four Seasons, Accor, Concorde, Thistle, Federal, Kempinski, Mandarin Oriental, Mövenpick, Peninsula, Ramada Europe, Shangri-La International, Dusit Hotels, Swissôtel and Steigenberger. Worldwide, there are currently approximately 13,300 MICROS PMS installations.

     The MICROS CRS is installed in numerous hotel chains such as Four Seasons, Best Western, Shangri-La, Wyndham, Concorde, Equatorial (Malaysia), West Coast Hotels, MacDonalds (United Kingdom), Oberoi (India), Pan Pacific (Singapore), Rydges (Australia), Sokos (Finland), Starhotels (Italy), Sun International (South Africa), Thistle (UK), Tourast (Australia), and Vagabond Inns.

     The MICROS CIS is installed in numerous hotel chains such as Four Seasons, Wyndham, Concorde, Equatorial, First, Scandic (Sweden), Peninsula, Hilton International, Rydges, Shangri-La, Sokos, Sorat (Germany), Starhotels, Sun International, Tourast, Taj (India), Oberoi, and Pan Pacific.

     MICROS’s restaurant POS systems are installed worldwide. Major table service restaurant chain customers include T.G.I. Friday’s, Cracker Barrel, Metromedia Restaurant Group, Brinker International, International House of Pancakes, Bertucci’s, Perkins, Friendly’s, La Madeleine, El Torito, Eat ‘N Park, HMS Host, Mitchells and Butlers (U.K.), Hooters, Marie Callender’s, Ruby Tuesday’s, Hard Rock Café, Rainforest Cafe, VIPS (Spain), Corporacion Mexicana de Restaurantes (Mexico), and Whitbread PLC (United Kingdom). Major quick service chain restaurant (“QSR”) customers include numerous franchisees of Burger King, Subway, Arby’s, El Pollo Loco, El Pollo Campero (Guatemala), various franchisees of Yum! Brands (Pizza Hut, KFC International, and Taco Bell), Atlanta Bread,

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Baja Fresh, Grandy’s, Red Rooster (Australia), Panera Bread, Popeye’s, Krispy Kreme, Ben & Jerry’s, Starbucks (mainly international sites), and Wendy’s. Most of MICROS’s QSR installations are with franchisees.

     MICROS’s restaurant POS systems are also installed in hotel restaurants in chains such as Marriott International, Hilton International, Starwood, Hyatt, InterContinental Hotels, Hilton, Omni, Wyndham, Radisson, Kempinski, Swissôtel, Mandarin Oriental, Fairmont, and Four Seasons. Additional significant markets for the Company’s POS systems include complex foodservice environments such as casinos, cruise ships, sports arenas, airport concourses, theme parks, recreational centers, institutional food service organizations and specialty retail shops. Users include Aramark, Anton’s, Compass, Delaware North, HMS Host, and various government entities. The Company has installed large POS systems in the Foxwoods Hotel and Casino (Ledyard, CT), Grand Casino (Australia), Atlantis (Bahamas), Mandalay Resorts Group, Sun City (South Africa), Harrah’s Casinos, Luxor Hotel and Casino, MGM Grand Hotel Casino and Theme Park, Mirage Casino, Bellagio and The Venetian (the latter five casinos are located in Las Vegas, Nevada). MICROS supplies and services POS systems for users in the complex foodservice environments identified above both directly and through distribution channels, including through specialty reseller relationships with Blackboard, CBORD Group, and Diebold.

     MICROS also markets both hotel and restaurant POS systems that it acquired as part of the acquisition of certain assets of Hospitality Solutions International, Inc. (“HSI”) in October 2000. The HSI hotel and restaurant systems products are both Windows® based software products that run on personal computers (“PCs”). Additionally, MICROS is marketing and further developing a POS product that it acquired via the stock purchase of Indatec GmbH and Co. KG (“Indatec”) in January 2001. The Indatec product is a proprietary based POS system with embedded software. Currently, the Indatec product is sold exclusively in Europe and is targeted to small restaurants.

     MICROS’s specialty retail solutions are provided through its wholly owned subsidiary, Datavantage Corporation, a privately held software application developer and system integrator specializing in the specialty and apparel retail market, which was acquired on May 1, 2003. Datavantage has over 190 retail company customers. Its customers include Abercrombie & Fitch, Armani, Barney’s New York, Hugo Boss (Germany), Jos. A Banks Clothiers, Books-A-Million, Limited Too, Michael’s Arts and Crafts, Polo Ralph Lauren, Roots Canada Ltd. (Canada), Steve Madden Retail and Shaw’s Markets.

     “MICROS”, “Fidelio”, “DatavatageCorp”, “Go 2 Team”, “In Store Plus”, “Ovation”, “Opera”, “Store 21”, “Tradewind” and “Patient Select”, are trademarks or service marks of MICROS or its subsidiaries. This Annual Report on Form 10-K (this “Annual Report”) also contains trademarks, trade names and services marks of other companies that are the property of their respective owners.

PRODUCTS AND SERVICES

Hotel Information Systems

     For the hotel marketplace, MICROS develops, markets and distributes a complete line of hotel software products and services. The hotel information systems include property management systems, sales and catering systems, central reservation systems, customer information systems, revenue management systems (“RMS”), an Internet/Global Distribution System based hotel reservation service called myfidelio.net, and installation and support services associated with the various product sets. The PMS software provides for check-in and check out, reservations, guest accounting, travel agent accounting, engineering management, and interfaces to central reservation and global distribution systems. The S&C software enables hotel sales staff to evaluate, reserve and invoice meetings, banquets and related events for a property. The CRS software allows hotels to coordinate, process, track, and analyze hotel room reservations at a central facility for electronic distribution to the appropriate lodging site. The CIS software allows hotels to efficiently capture and track relevant information of guests. The RMS software allows hotels to manage room rates, occupancy, and the mix of business between corporate and transient customers. The software systems run on PCs. MICROS also offers an Internet based hotel reservation service via its myfidelio.net service. This service enables corporations, tourist representation services, and consumers to create room reservations directly with designated hotels. This service also allows those hotel properties without internal reservation capabilities to outsource to MICROS the maintenance of their connectivity to the global distribution systems, such as Sabre, Galileo, Amadeus and WorldSpan, and the internet-based alternative distribution system.

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     MICROS’s hotel systems run on industry standard Intel®-based PCs. MICROS markets a range of property management systems geared to hotels of varying sizes and operational needs. For larger hotels, MICROS markets a comprehensive suite of hotel software products under the Opera brand name. Opera includes modules for property management, central reservations, customer information systems, sales and catering, revenue management, data mining, financials, golf reservations, spa management, and quality management. The first modules of Opera were released in June 2001. Several additional modules have since been released to the market, with Opera Reservation System being the most recent application, having been released in March 2003. Development of Opera continues with significant enhancements to all of its modules.

     Opera is designed to run on PCs and large PC based servers. All the products are designed to share a common Oracle® database. Opera operates under these three operating systems: Microsoft Windows® (NT, 2000 and XP), IBM AIX®, and Sun Solaris®.

     The Opera software suite is deemed an important product line for MICROS’s continued growth in the hotel information systems market. Over 30 hotel chains have adopted Opera and are in the midst of multi-year rollouts. As of June 30, 2004, over 1,500 hotel sites have installed Opera PMS. MICROS also has released a version of Opera property management system called Opera Xpress. This product allows smaller properties to deploy the Opera PMS at a lower price with a limited number of product features.

     MICROS also continues to market suites of hotel software products under the Fidelio Version 7.0 brand names. Fidelio Version 7.0 utilizes the Microsoft Windows® graphical user interface and runs on an Oracle® database. There are over 3,900 hotels using Version 7.0.

     For smaller hotels and bed and breakfast establishments, MICROS markets a product called Fidelio Xpress. This product operates on the Windows® 2000 operating system and runs on a Sybase SQL database. It uses an innovative touch screen display user interface. The product incorporates a limited sales and catering capability and has Internet reservations capability. It is installed in over 850 sites in over 20 countries. MICROS also markets a suite of hotel products via its Hospitality Solutions International division in Phoenix, Arizona with over 450 sites installed.

     MICROS has also introduced a PMS product designed specifically for the European resort markets called Fidelio Version 8. This product contains certain Internet based features and utilizes the Windows® operating system with an Oracle® database. The product is designed to meet the needs of independent hotel operators and smaller chains based in Europe. Fidelio Version 8 was released in January 2004 and is installed in over 200 hotels sites as of June 30, 2004.

     MICROS markets a specialized version of its PMS product to the cruise industry via its Fidelio Cruise subsidiary. The Fidelio Cruise PMS enables cruise ships to manage their reservations and on-board operational needs including check-in and check-out, point-of-sale, passenger and crew administration, invoicing, maintenance tracking and passport document management. Fidelio Cruise has installed over 145 cruise ships. Customers include Carnival Cruise Lines, Cunard Line, Radisson Seven Seas, Princess Cruises, P. & O. Cruises, Holland America Line, Royal Caribbean International, Norwegian Cruise Lines and the U.S. Navy.

     Additionally, MICROS has entered into an alliance with Systems Union Group Plc, headquartered in London. This alliance involves the joint product development and marketing of application software based on Systems Union’s back office accounting applications. This alliance enables MICROS to offer a hotel customer a complete suite of integrated software solutions that addresses operational needs and provides back office accounting and reporting. As part of this alliance, MICROS serves as a preferred reseller of Systems Union’s software and business solutions to the hospitality industry.

Restaurant Information Systems

     MICROS’s restaurant systems include a full-featured point of sale application, offering transaction control, restaurant operations, accounting data, interfaces to other systems, communications, and hardware and support services. Most of the products are designed to operate on Intel® based personal computers with the order entry

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terminals being either industry standard PCs or proprietary terminals, including two types of proprietary intelligent terminals developed and designed by MICROS.

     The Company’s restaurant POS systems are the 9700 Hospitality Management System (“HMS”), the 3700 POS system, HSI POS, Indatec, and the e7 Series. These systems provide transaction control for table service, quick service and large entertainment venues.

     MICROS offers POS hardware terminals for entry of restaurant orders. The terminals can either be Intel® chip-based personal computers with additional functionality added for operating within foodservice environments or proprietary intelligent terminals. MICROS’s main PC based terminal workstations are the Eclipse and Workstation 4. The Eclipse was released in June 2001 and continues to be enhanced with faster chips and memory. It is a specialized point-of-sale computer designed to withstand the rigors of a restaurant environment. Sanmina-SCI Corporation (“SSCI”) manufactures the MICROS Eclipse PCWS. It is a color touchscreen based system that offers both passive and active matrix display options. MICROS resells various hardware products such as personal computers, printers, network cards, and other related computer equipment. MICROS signed an agreement with Hewlett Packard Corporation in fiscal year 2000 in which Hewlett Packard was designated as a non-exclusive preferred provider of personal computers, printers, and networking equipment on a global basis. Sales under this relationship began in fiscal year 2001.

     MICROS released a new POS terminal in fiscal year 2003, called Workstation 4. This product is a thin-client point-of-sale terminal, utilizing Microsoft’s Windows® CE operating system, with standalone resiliency. This capability means that even if the system server shuts down, the POS terminal can continue to function and store data until the server is operational. MICROS’s Workstation 4 is manufactured by GES Singapore Pte Ltd. in Singapore. MICROS also markets a PC-based POS terminal called the Elite in its Asia/Pacific region. Partner Tech, Inc., manufactures this product for MICROS in Taiwan. GES is also manufacturing for MICROS a new product named the Keyboard Workstation. This new product allows for orders to be entered into the MICROS 9700 HMS via a low cost but durable workstation with a keyboard interface versus a more costly touchscreen.

     The 9700 HMS, released in fiscal year 2001, and since upgraded to add new features and functionality in subsequent releases, is designed for table service and quick service restaurants in hotels, resorts, casinos, airports, stadiums/arenas, theme parks and larger independent and chain restaurants. The 9700 HMS product has an open systems architecture running on Microsoft’s Windows® 2000 operating system. The 9700 succeeded an earlier product called the MICROS 8700 HMS. The product can be deployed on site in a client-server configuration or on a multi-property configuration where a remote server can run multiple distant restaurants. A new version will be released in fiscal year 2005 that will allow the 9700 HMS to be deployed with an Oracle database in addition to the current proprietary database.

     The 3700 POS, released in fiscal year 1997, is designed for table service restaurants. It has an open systems architecture utilizing Microsoft’s Windows® 2000 operating system, and either Microsoft’s SQL or Sybase’s relational databases, and runs on industry standard Intel®-based PCs. It utilizes a touchscreen, with the Microsoft Windows® based graphical user interface.

     MICROS introduced the Restaurant Enterprise Series (“RES”) software suite, now called “RES 3000”, in fiscal year 1999. RES is a software suite of products that includes point-of-sale transaction control, restaurant operations (labor scheduling, time and attendance and financial management), data analysis, and communications. The POS software comprises the front-end application for the 3700 system. The restaurant operations modules constitute the Enterprise Office suite. The software modules include inventory, product forecasting, labor management, financial management, gift cards and enterprise data management. These modules are designed to operate at a restaurant site. For management of multiple restaurants, the RES includes a suite of software products called Enterprise Management. This suite allows for data to be transmitted to a remote site (including a corporation’s headquarters) for data collection and analysis. Additionally, changes such as pricing and menus can be made at a remote site and downloaded to specified restaurant locations. The Restaurant Enterprise Series is an important component of MICROS’s strategy to fully integrate point-of-sale transaction processing with other restaurant operational and management functions.

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     MICROS has developed and released in July 2004 a new POS system called the e7 Series. This product is designed for small restaurants and runs on the MICROS User Workstation 4 POS platform with a Microsoft Windows® CE Operating system. It is designed as the successor product for the MICROS 2700 HMS. The MICROS 2700 HMS was released in fiscal year 1989 and was marketed through fiscal year 2004. This product was highly successful with approximately 95,000 terminals installed in the product’s fifteen-year life.

     In addition, MICROS developed and introduced an Internet based portal product called “mymicros.net” in fiscal year 2002. Mymicros.net posts store transaction POS detail to a centralized data warehouse in near real time. This product allows the customer to view reports and charts for a single store, a group, or the entire enterprise from any location that has an Internet connection. The mymicros.net software product can either be purchased via a license to use or by an annual or multi-year subscription contract. In fiscal year 2003, MICROS created a data center in its Columbia, Maryland headquarters to host the mymicros.net software for customers.

     MICROS markets the HSI POS product primarily to table service customers in North America via a direct sales force. The product contains a wide array of point of sales features. A portal called “myhsi.net” was introduced in fiscal year 2003. The product’s functionality is similar to the mymicros.net portal and is designed for the HSI POS product. HSI is currently developing a new POS product called iPOS, which is a modified and enhanced version of the Internet-based point of sale product previously developed by MICROS and an outside development entity. The product will be released in fiscal year 2005. It can be deployed either on site in a client-server configuration or via a web-based configuration.

     The Indatec POS product is marketed in Europe to smaller table service restaurants and small hotels with restaurants that do not require the higher-level functionality of MICROS POS products. These smaller restaurants require a lower cost product in terms of purchase and installation expense, a market niche that the Indatec product is designed to serve.

     The Company’s design architecture allows existing users of many MICROS POS products to access new technologies and applications in conjunction with their existing MICROS POS system. In addition, many MICROS products interface with various back office accounting and property management systems, including the Company’s hotel PMS products.

Retail Information Systems.

     Through its Datavantage subsidiary, MICROS markets store software automation systems and business intelligence applications. The store systems are called Store21 Store Management System (“Store 21”) and Tradewind Store Management System (“Tradewind”). Store21 is designed for smaller retail operations, while Tradewind is targeted at larger heavy transaction oriented retail stores. The Proact Home Office Business Intelligence Suite (“Proact”) includes loss prevention, customer relationship management, gift cards and audit control. The products operate on Microsoft’s Windows® NT and 2000 operating systems and utilize Sybase® as the database.

     Datavantage is developing a next generation POS system for release in fiscal year 2005. This product runs on the Sun Microsystems Java operating system and incorporates the latest available programming features.

     All of Datavantage’s software systems run on industry standard PCs and specially designed PC-based POS terminals manufactured by IBM and NCR. MICROS is working with Datavantage to develop a version of the Eclipse PCWS to offer to customers as an alternative POS terminal option.

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Summary of Product Solutions (Software and Hardware):

Services

     MICROS provides a wide range of service products and support services to its customers. Products include spare parts, media supplies (ribbons, paper, printer cartridges, etc.), network products, printers, active power-line conditioners and uninterruptible power supplies. MICROS offers these supplies through its direct sales offices and through an operation called POS Depot (North America only). Services include installation, operator and manager training, on-site hardware maintenance, customized software development, application software support, credit card software support, help desk, systems configuration, network support and consulting. MICROS offers software hosting capabilities, which allows customers to utilize the software without investing in hardware and a network.

     MICROS provides field hardware and software maintenance via a combination of its direct and indirect (authorized U.S. dealers and international distributors) channels. The field hardware maintenance is provided mainly to customers using MICROS POS hardware and software systems. Depot field maintenance is also provided. MICROS may contract with various PC manufacturers to provide either first or second line support for PC servers for both hotel and restaurant customers. Maintenance contracts are an important and growing part of MICROS’s revenue.

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     MICROS operates a help desk seven days a week, 24 hours per day (7/24) in its Columbia, Maryland headquarters. This central support operation receives support calls from customers and addresses them telephonically, on-line or, where appropriate, dispatches a service call to the appropriate local service provider. Internationally, in-country support is provided by the local sales entity, whether it be a MICROS subsidiary or distributor. MICROS maintains regional support call centers in Neuss, Germany, Galway, Ireland, Buenos Aires, Argentina and Sydney, Australia. MICROS’s corporate customer service provides back-up support for its regional centers. Customer support for myfidelio.net is centered in Hamburg, Germany, the site of the subsidiary’s product development operations. MICROS’s HSI division maintains a 7/24 call center in Scottsdale, Arizona to support its hotel and restaurant products. Datavantage supports its retail customers from its 7/24 help desk in its headquarters facility located in Cleveland, Ohio.

     In fiscal year 2002, MICROS opened a customer support call center in Galway, Ireland. This center became operational in fiscal year 2003 and serves as the software support call center for many MICROS POS and hotel software installations in most European nations. MICROS also plans to provide support from Galway for its European Datavantage sites. MICROS is also in the process of installing a data center in Galway to act as a hosting center for European customers deploying MICROS web based applications, as well as acting as a backup site for MICROS’s data center in its Columbia, Maryland headquarters.

     MICROS believes that its services are an important competitive factor and differentiator in customer purchasing decisions. Service revenue, which comprises programming, installation, training, in-field support and help-desk maintenance, constituted approximately 52.0% ($253.3 million) of MICROS’s total revenues in fiscal year 2004, 49.6% ($201.2 million) in fiscal year 2003 and 48.6% ($181.2 million) in fiscal year 2002.

     An important component of MICROS’s service offerings are maintenance service contracts that include field and depot hardware maintenance and software support. Most service maintenance contracts are annual contracts that automatically renew for a one-year renewal term unless either party tenders timely notice of non-renewal. Revenue for service maintenance contracts were $140.3 million for fiscal year 2004, $113.3 million for fiscal year 2003 and $99.5 million for fiscal year 2002. Service maintenance contract revenue was included in the service revenue for the Company.

SALES, MARKETING AND DISTRIBUTION

     The Company considers its direct and indirect global distribution network to be a major strength and competitive advantage. This network has been built over the past 27 years. The Company (including its various subsidiaries), its U.S. based dealers, and international distributors work closely together in seeking to identify new customers, products, services and markets, as well as to serve the Company’s existing customer base with enhanced products and services.

     The Company’s hotel and restaurant products and services are sold primarily through three channels: (i) the Direct Sales Channel, comprised of the Company’s sales distribution network consisting of approximately 50 wholly or majority owned subsidiaries and sales offices; (ii) the MICROS Major Accounts program directed to designated regional, national, and international customers; and (iii) the Indirect Sales Channel, an independent sales distribution network consisting of approximately 64 domestic dealers and 47 international distributors.

     MICROS’s Datavantage subsidiary markets its product largely through a direct sales force to a North American customer base. In fiscal year 2004, Datavantage launched its international expansion plans by hiring selected sales and support personnel in several countries.

     Foreign sales, including export sales from the United States, accounted for approximately 45.2% ($220.4 million) of the Company’s total revenue in fiscal year 2004, 47.3% ($192.0 million) in fiscal year 2003, and 47.2% ($175.9 million) in fiscal 2002.

RESEARCH AND DEVELOPMENT

     The products sold by the Company are subject to rapid and continual technological change. Accordingly, the Company must continually develop innovative systems incorporating the newest technologies. Products available

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from the Company, as well as those from its competitors, have offered an increasingly wider range of features and capabilities.

     The Company conducts its core restaurant POS product software and hardware development at its Columbia, Maryland corporate headquarters. To facilitate rapid responses for various regional application needs, MICROS also conducts POS software development in regional offices located in Scottsdale, Arizona, Sydney, Australia, Hamburg, Neuss and Bernau am Chiemsee, Germany, and Singapore. In addition, the Company continually examines and evaluates software and hardware products and designs created by third parties, and the Company has acquired and may in the future acquire ownership or licensing rights to such products and designs.

     MICROS outsources the manufacturing of its POS terminals mainly to Sanmina-SCI and GES Electronics. Both companies provide hardware design services and manufacturing services to MICROS. These outsourcing relationships allow the Company to utilize each company’s respective design capabilities and efficient manufacturing facilities to produce a series of MICROS branded POS terminals. MICROS uses its internal design capabilities to help each contract manufacturer in designing industry specific POS terminals and peripherals. See also Manufacturing in Part I of this Form 10-K.

     The Company’s hotel PMS, S&C, CRS, and CIS development is primarily conducted in Naples, Florida. Additional development is conducted in Hamburg, Germany on the Fidelio Version 8.0 suite of hotel products and in Columbia, Maryland, for the Yield Management Software products. MICROS maintains close relationships with major software operating and database companies such as Oracle, Novell, Sybase, and Microsoft. These relationships are important to MICROS so it can readily incorporate software changes from these companies into its products. MICROS’s international offices may also conduct specific product enhancement activities to meet specific interface needs, local requirements, and customer requests.

     Product development for MICROS’s myfidelio.net product is conducted in Hamburg, Germany.

     Product development for MICROS’s retail products is conducted in Cleveland, Ohio and Boston, Massachusetts.

     Research and development (“R&D”) expenses consist primarily of labor costs less capitalized software development costs. A summary of R&D activities for the past three fiscal years is as follows (in thousands):

     The fiscal year 2004 increase in total R&D expenses arose primarily in connection with the R&D activities conducted at Datavantage.

COMPETITION

     The Company believes that its competitive strengths include its established global distribution and service network, its ability to offer a broad array of hardware, software and service products to the hospitality and retail industry and its corporate focus on providing specialized information systems solutions.

     The markets in which the Company operates are highly competitive. MICROS competes on various bases, including product functionality, service capabilities, price and geography. There are at least 40 competitors worldwide that offer some form of sophisticated restaurant POS system, over 100 hotel systems competitors and over 50 retail systems competitors. Competitors in the restaurant POS marketplace include full service providers such as Infogenesis, NCR, Par Technology, Panasonic, POSitouch, Progressive, Radiant Systems, Sharp, Squirrel, Vectron AG, and hardware providers such as Dell, IBM, NCR, and Wincor-Nixdorf. There are also numerous companies that license their POS-oriented software with PC-based systems in regional markets around the world.

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     Many of the over 100 competitors in the hotel systems market are companies with software designed to run on industry standard PCs. These companies may have several hotel related software products, or simply one product for a particular niche. These competitors include Agilysys, MAI Systems, Multi-Systems, Newmarket, Optims, Pegasus, Ramesys, Springer-Miller, Visual One, and property management systems developed and marketed by major hotel chains for their corporate-owned operations and franchisees. Internationally, MICROS generally faces smaller, regionally oriented competitors.

     The specialty retail market in which MICROS’s subsidiary Datavantage operates within is highly competitive. Competitors include CRS Retail Systems, JDA Software, NSB, Retek, Trax Software and, Triversity among many others. Internationally, Datavantage generally competes with smaller, regionally oriented competitors.

     The CRS market is highly fragmented, with most central reservation systems being customized systems for each hotel chain or allied reservation group. The competitors in this market consist of in-house development efforts by chains, property management competitors such as Pegasus and Springer-Miller, and specialized central reservation providers such as Optims, Pegasus, VIP International Corp., and WizCom International/Trust International (subsidiaries of Cendant Corporation). The market for central reservation systems is highly competitive.

     MICROS believes that the CIS market has various competitors. Those that offer such a product are generally smaller companies targeting specialized segments of the market. However, most of the systems in place today are customized solutions developed by specific chains for their own use. These customized systems are thus not marketed to other hotel chains.

MANUFACTURING

     The Company’s manufacturing program seeks to maintain flexibility and reduce costs by emphasizing the strategic outsourcing of key products and subassemblies. MICROS maintains relationships with several companies for the manufacturing of POS terminals. Pursuant to a contract with MICROS, SSCI manufactures MICROS’s Eclipse terminals, and certain communication boards. The Company entered into this non-exclusive agreement to lower its manufacturing costs, expand the availability of terminals, and improve product quality. MICROS’s latest POS terminal, the Workstation 4, was developed in conjunction with, and is manufactured by GES Singapore Pte Ltd, located in Singapore. MICROS’s Elite PC based POS terminal is manufactured by Partner Tech, Inc. in Taiwan. This product is offered for sale in Asia by MICROS’s Asia/Pacific regional offices.

     MICROS’s Indatec operation manufactures its POS systems in a facility in Bernau am Chiemsee, Germany, and contracts with a third party manufacturer in Germany for additional production capacity.

     MICROS retains a limited manufacturing and repair capability of certain products in its distribution facility in Hanover, Maryland.

     MICROS maintains a good relationship with SSCI under the manufacturing agreement. In October 2003, MICROS concluded an amicable legal settlement with SSCI in connection with alleged breaches by an SSCI subsidiary under a 1999 development agreement. As part of the settlement, SSCI made a cash payment to MICROS.

     Additionally, MICROS’ maintains a good relationship with GES Singapore Pte Ltd. While not replacing the relationship with SSCI, this arrangement does provide MICROS with certain additional manufacturing capabilities.

     Material sourcing is based on availability, service, cost, delivery and quality of the purchased items from domestic and international suppliers. Some items are custom manufactured to the Company’s design specifications. MICROS believes that the loss of its current sources for components would not have a material adverse effect on the Company’s business since other sources of supply are generally available. Except as provided above, the Company believes it maintains good relationships with its suppliers.

EMPLOYEES

     As of July 31, 2004, the Company had approximately 2,892 full-time employees. Approximately 1,639, or 57%, of these employees are based in North America (United States and Canada), with approximately 725, or 44%, of the

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US-based employees located in the Company’s Columbia, Maryland headquarter building and Hanover, Maryland distribution center. The balance of this group is employed principally at the Company’s regional district offices, divisional office located in Scottsdale, Arizona, its Datavantage subsidiary in Cleveland and Boston, and its hotel product development group in Naples, Florida. Approximately 821, or 28%, of the Company’s employees are employed in the Europe/Africa/Middle East region, 339 employees, or 12%, are employed in the Asia/Pacific region, and 93 employees, or 3%, are employed in the Latin America region. On an aggregate basis, the Company had approximately 1,773 employees in sales/marketing, 533 employees in customer support services, 157 employees in administration and finance, 322 employees in product development, and 107 employees in operations. The Company is not a party to any collective bargaining agreements. None of the Company’s employees are represented by a labor union, except in France, Germany, Mexico and Spain, as mandated by law. MICROS uses certain suppliers whose employees may be represented by labor unions. MICROS believes it maintains good relations with its employees.

FOREIGN SALES AND FOREIGN MARKET RISK

     The Company recorded foreign sales, including exports from the United States, of approximately $220.4 million during fiscal year 2004 to customers located primarily in Europe, Africa, the Middle East, Australia, Asia, Latin America and Canada. Comparable sales in fiscal years 2003 and 2002 were $192.0 million and $175.9 million , respectively. See Note 15 of Notes to Consolidated Financial Statements for additional geographic data.

     MICROS’s significant international business and presence expose the Company to certain market risks, such as currency, interest rate and political risks. With respect to currency risk, the Company transacts business in 23 different currencies through its foreign subsidiaries. The fluctuation of currencies impacts sales and profitability. Frequently, sales and the costs associated with such sales are not denominated in the same currency. Given the fact that the Company transacts business in many different currencies, adverse declines in certain currencies can be offset by favorable advances in other currencies.

     Additionally, the Company is subject to interest rate fluctuations in foreign countries to the extent that the Company elects to borrow in the local foreign currency. In the past, this has not been an issue of concern as the Company has the capacity to elect to borrow in other currencies with more favorable interest rates. While the Company has not to date invested in financial instruments designed to protect against interest rate fluctuations, the Company will continue to evaluate the need to do so in the future.

     Further, the Company is subject to political risk, due in part to the Middle East instability and worldwide threat of terrorism, especially in developing countries with uncertain or unstable political structures or regimes. Contributing to this risk factor is the adverse impact that political instability has on the travel and tourism industries. The Company is also subject to the effects of, and changes in, laws and regulations, other activities of governments, agencies and similar organizations.

     Finally, the Company’s committed line of credit bears interest at a floating rate of interest. The Company does not invest in financial instruments designed to protect against interest rate fluctuations, although it will continue to evaluate the need to do so in the future.

PATENTS

     The Company holds no patents and believes that its competitive position is not materially dependent upon patent protection. The technology used in the design and manufacture of most of the Company’s hardware products is largely licensed or purchased from third parties. With respect to the Company’s software products, it relies on nondisclosure agreements, and an array of U.S. and foreign copyright and trademark laws for protection. In the U.S. and in most other countries, it is believed that both statutory and common law provides the Company with a certain level of protection. Notwithstanding the above, there is a risk that third party entities, including competitors, could attempt to misappropriate the Company’s intellectual property. Given this potential risk, the Company has implemented certain procedures to monitor misappropriation of its intellectual property. Once a misappropriation has been detected, the Company will pursue appropriate legal action.

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FLUCTUATIONS AND CUSTOMERS

     The Company’s quarterly operating results have varied in the past and may vary in the future depending upon such factors as the timing of new product introductions, changes in the pricing and promotion policies of the Company and its competitors, market acceptance of new products and enhanced versions of existing products and the capital expenditure budgets of its customers. Political uncertainty and world turmoil, created by unpredictable factors such as terrorist attacks and the volatile and unpredictable political climate in the Middle East, will continue to adversely impact travel and tourism and therefore the Company’s quarterly operating results. Moreover, the Company has experienced increased seasonality of its business, given the significant volume of international sales. In particular, with the European summer holidays, the Company generally experiences lower sales volume in the first fiscal quarter relative to other quarters. The Company also experiences a stronger than average sales volume in the second fiscal quarter due to the holiday season for the retail products and services. Additionally, with the relative slowdown in corporate buying at the beginning of the calendar year, which is MICROS’s third fiscal quarter, seasonal weakness for the third quarter ending March 31 has been experienced. Nonetheless, the Company believes that quarter-to-quarter historic comparisons of its results are not necessarily meaningful or indicative of future performance.

     No single customer accounts for 10% or more of the Company’s consolidated revenues, nor is any material portion of the Company’s business subject to renegotiation of profits at the election of the U.S. Federal Government. In fiscal years 2004, and 2003, the Company was party, directly and indirectly, to certain contracts with the U.S. Federal Government, which such contracts contained standard termination for convenience clauses. The Company does not anticipate any material adverse financial impact if the U.S. Government elected to exercise its rights under termination for convenience clause.

ENVIRONMENTAL MATTERS

     The Company believes that it is in compliance in all material respects with all applicable environmental laws and does not anticipate that such compliance will have a material effect on its future capital expenditures, earnings or competitive position with respect to any of its operations.

BACKLOG

     The Company generally has a backlog of approximately two months’ revenue, substantially all of which is cancelable at any time before shipment. As of June 30, 2004, 2003, and 2002, the backlog totaled approximately $78.1 million, $65.5 million and $67.2 million, respectively.

OFF-BALANCE SHEET ARRANGEMENTS

     The Company does not have any material off-balance sheet arrangements (as defined in the applicable regulations) that have or are reasonably likely to have a current or future effect on the Company’s financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures, or capital resources.

BUSINESS AND INVESTMENT RISKS; INFORMATION RELATING TO FORWARD-LOOKING STATEMENTS

     In light of current market conditions, there remains uncertainty as to whether the Company can enjoy revenue or profitability growth in the next year. Accordingly, there can be no assurance that any particular level of growth is reasonable or can be achieved. In addition, due to the competitive nature of the market, the Company continues to experience gross margin pressure on its products and service offerings, and the Company does not expect any material product and service margin improvement. There can be no assurance that the Company will be able to increase sufficiently sales of its higher margin products, including software, to prevent future declines in the Company’s overall gross margin.

     Moreover, MICROS’s financial results in any single quarter are dependent upon the timing and size of customer orders and the shipment of products for large orders. Large software orders from customers may account for more

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than an insignificant portion of earnings in any quarter. The customers with whom MICROS does the largest amount of business are expected to vary from year to year as a result of the timing for the roll-out of each customer’s system. Furthermore, if a customer delays or accelerates its delivery requirements or a product’s completion is delayed or accelerated, revenues expected in a given quarter may be deferred or accelerated into subsequent or earlier quarters.

     The market price of MICROS Common Stock is volatile, and may be subject to significant fluctuations in response to variations in MICROS’s quarterly operating results and other factors such as announcements of technological developments or new products by MICROS, customer roll-outs, technological advances by existing and new competitors, and general market conditions in the hospitality and retail industries. In addition, conditions in the stock market in general and shares of technology companies in particular have experienced significant price and volume fluctuations which have at times been unrelated to the operating performance of companies.

     Certain statements contained herein not based on historic facts are forward-looking statements, within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, that involve risks and uncertainties. Examples of such forward-looking statements include the statements in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” under the heading “Liquidity and Capital Resources” that the Company’s sources of cash are sufficient to provide the working capital needs of the Company for the next 12 months and that fiscal 2005 property, plant and equipment expenditures will be approximately $2.0 million higher than in fiscal 2004.

     Past performance is not necessarily a strong or reliable indicator of future performance. Actual results could differ materially from past results, estimates, projections, or forward-looking statements made by, or on behalf of, MICROS. Primary risks are disclosed in the Company’s press releases and periodic SEC filings. Some of the additional risks and uncertainties include the following:

— Weakness in the hospitality and tourism industries as a result of the ever-present threat of terrorist attacks and the uncertain political situation in the Middle East and parts of Asia;

— Unexpected health and environmental disasters, such as the SARS (Severe Acute Respiratory Syndrome) crisis in Asia and Eastern Canada. This type of crisis has a material and adverse impact on the Company’s business, as not only is there a material reduction in tourism for the pendency of the crises, but there is a mid-term adverse impact on the buying patterns of the customers located in the affected areas.

— Potentially unfavorable adverse economic conditions arising from the US involvement in Iraq and President Bush’s “war on terrorism” (this is especially true in the hospitality and tourism industry, where geo-political instability has a material adverse impact);

— Given the adverse impact on the travel and hospitality industry as a result of the Iraqi situation, MICROS has experienced delays in certain purchases. There can be no guarantee that this slow down will be only short-term;

— MICROS’s actions in connection with the continued and increasing price and product competition in many product areas, including but not limited to Eclipse PC Workstations, and the pressure on profit margins for those items. Additionally, MICROS’s introduction of the new Workstation 4 in the fourth quarter of fiscal year 2003 could adversely impact sales insofar as it will supplant in part sales of the higher-priced Eclipse workstation;

— Potential declines in service margins, triggered in part by unauthorized and unlicensed service agents who offer limited support services to price-conscious customers at reduced rates. This influence also adversely impacts MICROS support, insofar as those customers request MICROS intervention to correct problems created by unauthorized third-party agents.

— Difficulties or delays in the development, production, testing and marketing of products, including a failure to deliver new products and technologies when scheduled, announced or generally anticipated; the failure of customers to accept these products or technologies when planned; any defects in products; MICROS’s inability to differentiate its products; and a failure of manufacturing efforts, whether internal or through MICROS’s third party manufacturing entities;

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— The inherent difficulties in accurately forecasting buying patterns (especially since more than an insignificant portion of the business is “street” business that cannot be easily predicted), and appropriately staffing and preparing for fluctuations in buying demand;

— Implementation and operation of a cost-effective service structure capable of servicing increasingly complex software systems in increasingly more remote locations; additional costs and expenses associated with servicing and supporting open systems, which generally incorporate third party software products (the support and service of which may be more difficult and costly);

— Unanticipated manufacturing, supply, service or labor difficulties experienced by certain large MICROS vendors, including Sanmina-SCI Systems, Inc. and GES Singapore Pte Ltd, resulting in a disruption or discontinuation of the services or products provided to MICROS, or difficulties in the manufacturing relationship (certain of the facilities where MICROS products are manufactured have union workers who may participate in work slow-downs or stoppages);

— The technological risks of large customer rollouts, especially where the contracts involve newer technology such as Opera, or third party software; and installation of which the customer contracts with MICROS to provide;

— The ability to respond quickly and cost-effectively to the introduction of new technologies, including Internet-based technologies;

— Because almost half of MICROS’s sales are outside the U.S., MICROS’s results could be significantly affected by weak economic conditions in countries in which it does business, and emerging markets in which there tend to be significant growth, and by changes in foreign currency exchange rates affecting those countries;

— Adverse fluctuations in the Euro and Pound, both of which constitute currencies in which material amounts of business are transacted;

— Ongoing economic and political turmoil and instability in countries where MICROS maintains a direct sales and service presence, such as Argentina and Brazil;

— The ability of MICROS to recruit and retain engineers and other highly skilled personnel;

— Although MICROS attempts to protect its proprietary technology through a combination of trade secrets, copyright, trademark law, nondisclosure agreements and technical measures, such protection may not preclude competitors from developing products with features similar to MICROS’s products;

— The costs and other effects of legal and administrative cases and proceedings, settlements and investigations, claims, and changes in those items, and developments or assertions by or against MICROS relating to intellectual property rights and intellectual property licenses;

— The effects of, and changes in, laws and regulations, other activities of governments, agencies and similar organizations, insofar as legislative change can affect local operations and the features that may have to be incorporated into the Company’s software sets;

— Unanticipated impact of issues relating to the adoption and implementation of a common currency, the Euro, by the European Economic and Monetary Union (“EMU”); unanticipated litigation expenses relating to the adoption and implementation of the Euro, including suits where MICROS is named as a result of MICROS products interfacing to third party non-compliant products;

— Unanticipated taxation issues, including the imposition of tariffs by the WTO and other governing bodies in an effort to deter or penalize US imports.

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AVAILABLE INFORMATION.

The Company files with the U.S. Securities and Exchange Commission (“SEC”) annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, amendments thereto, and other documents as required by applicable law and regulations. The public may read and copy any materials that the Company files with the SEC at the SEC’s Public Reference Room at 450 Fifth Street, NW, Washington, DC 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330 (1-800-732-0330). The SEC maintains an Internet site (http://www.sec.gov) that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC. The Company maintains an Internet site (http://www.micros.com). The Company makes available free of charge on or through its Internet website its annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 as soon as reasonably practicable after electronically filing such material with or furnishing it to the SEC. The information on the Company’s website is not incorporated into and is not a part of this Annual Report.

ITEM 2. PROPERTIES

     The Company’s worldwide corporate headquarters are located in Columbia, Maryland. Pursuant to the terms of a 10-year lease agreement (the “Lease Agreement”) expiring on March 1, 2010, MICROS leases the entire five-story structure, consisting of 247,624 square feet, from Columbia Gateway Office Corporation. The Company’s executive offices are located at the Columbia facility. The Company also conducts sales, marketing, customer support, and product development activities at this location. On November 1, 2003, MICROS subleased one of the 5 floors, consisting of approximately 49,524 square feet, to Motorola, Inc. pursuant to a 77-month sublease (which Motorola may terminate after 60 months).

     MICROS also leases a facility in Hanover, Maryland, of approximately 75,600 square feet. MICROS conducts light assembly, manufacturing, repair and configuration in this facility. MICROS leases the Hanover facility pursuant to a lease expiring July 31, 2009 with a termination right first available in July 2006.

     The Company’s Datavantage subsidiary recently relocated to new leased space in the Cleveland, Ohio, area, where it leases approximately 69,199 square feet of office and warehouse space in which it conducts the majority of its sales, marketing, customer support, and product development activities. The Datavantage subsidiary also leases approximately 11,457 square feet of office space in the Boston, Massachusetts, area primarily for customer support and research and development activities. The current Cleveland lease expires February 28, 2014, (with a termination right in 2010) and the current Boston lease expires September 30, 2006.

     The Company’s European headquarters facility, in which the Company conducts certain sales, marketing, development and customer support activities for Europe, is located in Neuss, Germany. Currently, the Company leases approximately 42,000 square feet in a Neuss office building pursuant to a lease agreement expiring in May 31, 2007.

     Further, the Company leases approximately 18,180 square feet of office space in Naples, Florida, where the Company develops software, including the Opera suite of products, for the hotel industry. The lease expires December 31, 2006.

     To satisfy other sales, service and support, and product development needs, the Company leases space in 26 cities domestically, including Boston, Chicago, Los Angeles and other major metropolitan areas, and in over 43 cities internationally, including London, Paris, Stockholm, Sydney, Singapore, Tokyo, and Hong Kong.

     In general, the Company believes that additional space will be available as needed.

ITEM 3. LEGAL PROCEEDINGS

     MICROS is and has been involved in legal proceedings arising in the normal course of business. The Company is of the opinion, based upon presently available information and the advice of litigation counsel concerning

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pertinent legal matters, that any resulting liability should not have a material adverse effect on the Company’s results of operations or financial position.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

     During the fourth quarter of fiscal year 2004, no matters were submitted to a vote of security holders.

PART II

ITEM 5. MARKET FOR THE REGISTRANT’S COMMON STOCK AND RELATED STOCKHOLDER MATTERS

Price Range of Common Stock

     As of August 31, 2004, there were approximately 8,260 record holders of the Company’s Common Stock, $.025 par value.

     The Company’s Common Stock (symbol “MCRS”) is traded on the National Association of Securities Dealers Automated Quotation (“NASDAQ”) system. The following table shows the range of trading prices (closing prices) for the periods indicated, as reported by NASDAQ.

     On August 31, 2004, the closing price for the stock was $46.54.

     The Company has never paid a cash dividend and has no current intention to pay any cash dividends. Its current policy is to retain earnings and use funds for the operation and expansion of its business and the repurchase of the Company’s stock. The Company is a party to two credit agreements expiring July 31, 2005, which restrict the payment of dividends other than stock dividends (see Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital Resources” and Note 5 of Notes to Consolidated Financial Statements).

     In fiscal year 2002, the Board of Directors authorized the purchase of up to one million shares of the Company’s common stock. As of August 31, 2004, the Company has purchased a total of 913,424 shares of its common stock.

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A summary of the cumulative number of whole shares purchased is as follows (total purchase value $ in thousands):

Issuer Purchases of Equity Securities ⁽¹⁾

(1)

In fiscal year 2002, the Board of Directors of the Company authorized the purchase of up to one million shares of the Company’s common stock. As of August 31, 2004, the Company has purchased 913,424 shares in the open market.

EQUITY COMPENSATION PLAN INFORMATION
As of June 30, 2004

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Recent Sales of Unregistered Securities

     On May 1, 2003, the Company entered into a stock purchase agreement by and among the stockholders of Datavantage Corporation and a parent holding company of Datavantage, pursuant to which MICROS acquired all of the issued and outstanding shares of Datavantage and its parent holding company on the terms and conditions stated in the Stock Purchase Agreement. The consideration paid by MICROS in the acquisition was approximately $52.3 million, subject to adjustments, modifications, and other conditions as stated in the Stock Purchase Agreement. The consideration consisted of $28.6 million cash paid at closing, $5.2 million cash to be paid 18 months after closing, approximately $0.3 million in transaction costs, and 719,360 shares of MICROS common stock. The shareholders of Datavantage Corporation and its parent holding company were not granted any registration rights in connection with the transaction, and they received unregistered Common Stock in the transaction. The offering of MICROS Common Stock to the shareholders of Datavantage Corporation and its parent holding company was exempt from the registration requirements of the U.S. Securities Act of 1933, as amended, (the “Securities Act”) pursuant to Section 4(2) of the Securities Act.

ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA (in thousands, except per share data)