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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
 
FORM 10-K
 
x Annual Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
 
For the fiscal year ended December 31, 2001.
 
OR
 
¨ 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 0-24720
 
 
BUSINESS OBJECTS S.A.
(Exact name of registrant as specified in its charter)
 
The Republic of France
  
None
(Jurisdiction of incorporation or organization)
  
(I.R.S. Employer Identification No.)
 
157-159 Rue Anatole France, 92309 Levallois-Perret, France
(Address of principal executive offices)
 
(408) 953-6000
(Registrant’s telephone number, including area code)
 
Securities registered pursuant to Section 12(b) of the Act: None
 
Securities registered pursuant to Section 12(g) of the Act:
 
Title of each class:
  
Name of each exchange on which registered:
American depositary shares, each representing one Ordinary Share
  
Nasdaq—National Market
Ordinary Shares
  
Nasdaq—National Market*
Ordinary Shares
  
Premier Marché—Euronext Paris, France
*
 
Ordinary Shares are not traded in the United States, rather, they are deposited with The Bank of New York, as Depositary, and one American depositary share is issuable for every one Ordinary Share deposited with the Depositary.
 
Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act: None
 
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.    x Yes    ¨ No
 
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.    ¨
 
The aggregate market value of our common equity held by non-affiliates, based upon the closing sale price of our American depositary shares on February 28, 2002 as reported on the Nasdaq—National Market, was approximately $2,336,644,000. Ordinary Shares and American depositary shares held by each of our officers and directors and by each person owning 5% or more of our outstanding Ordinary Shares are excluded because such persons may be deemed to be affiliates of Business Objects. This determination of affiliate status is not necessarily a conclusive determination for other purposes.
 

 
As of February 28, 2002, the number of outstanding shares of each class of our common equity was 62,479,000 Ordinary Shares of Euro 0.10 nominal value, including 21,911,000 American depositary shares (as evidenced by American depositary receipts), each corresponding to one Ordinary Share, and 817,675 treasury shares.
 
Documents Incorporated by Reference
 
We have incorporated by reference into Part III of this Form 10-K portions of our Proxy Statement for our Annual Meeting of Shareholders. References in this Form 10-K to the “Company,” “Business Objects,” “we,” “our,” and “us” refer to Business Objects S.A. and our consolidated subsidiaries.
 
Trademarks
 
BUSINESSOBJECTS, the Business Objects logo, BUSINESSQUERY, BUSINESSMINER, SET ANALYZER, BUSINESSOBJECTS BROADCAST AGENT, BUSINESSOBJECTS PERSONAL TRAINER, RAPID DEPLOYMENT TEMPLATES, Set Analyzer, Semantically Dynamic, Smart Space, Universe Repository, Microcube, First in e-Business Intelligence, and WEBINTELLIGENCE are trademarks or registered trademarks of Business Objects S.A. in the U.S. and /or other countries. All other trademarks or trade names referenced in this Form 10-K may be the property of their respective owners.
 
Reporting Currency
 
All financial information contained in this document is expressed in United States dollars, unless otherwise stated.
 
American Depositary Shares
 
We have sponsored a program that provides for the trading of our Ordinary Shares in the United States in the form of American depositary shares (“ADSs”). Each ADS represents one Ordinary Share placed on deposit with The Bank of New York as depositary (the “Depositary”), and is issued and delivered by the Depositary through its principal office in New York City at 101 Barclay Street, New York, New York 10286. Under the terms of the Deposit Agreement (the “Deposit Agreement”) dated September 22, 1994, as amended and restated on May 8, 1996 and December 30, 1998, Ordinary Shares may be deposited with the Paris office of BNP Paribas, as custodian (the “Custodian”), or any successor or successors to such Custodian. The Depositary provides a variety of services to our investors. The form of the Deposit Agreement as amended and restated on December 30, 1998 is incorporated by reference as an exhibit to this Form 10-K.

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TABLE OF CONTENTS
 
         
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This discussion contains forward-looking statements based on our current expectations, assumptions, estimates, and projections about Business Objects and our industry. These forward-looking statements involve risks and uncertainties. Business Objects’ actual results could differ materially from those indicated in these forward-looking statements as a result of certain factors, as more fully described in the “Risk Factors” section and elsewhere in this Form 10-K. Business Objects undertakes no obligation to update publicly any forward-looking statements for any reason, even if new information becomes available or other events occur in the future.
 
Item 1.     Description of Business
 
Our Company
 
Business Objects develops, markets, and supports business intelligence software for client/server environments, intranets, extranets, and the internet. Business intelligence lets organizations access, analyze, and share information internally with employees and externally with customers, suppliers, and partners. Business intelligence helps organizations improve operational efficiency, build customer relationships, and develop differentiated product offerings.
 
The three main markets for business intelligence are enterprise, extranet, and analytic applications. For the enterprise, Business Objects products provide employees with information to make better business decisions. Deployments can range from workgroups of 10 users to enterprise deployments exceeding 50,000 users. For the extranet, our products allow organizations to build stronger relationships by linking customers, partners, and suppliers via the internet. And for analytic applications, our products offer packaged best practice analytics, alerts driven by business rules, and workflow for specific business users, such as sales managers or supply chain managers.
 
Our products enable non-technical end users to access and interact with proprietary information available to enterprises from a wide range of sources, including database systems, such as those developed by Oracle Corporation, IBM Corporation, Sybase, Informix, and Microsoft Corporation, and business applications, such as those developed by SAP AG, Siebel Systems, Inc., PeopleSoft, Inc., Oracle Corporation and i2 Technologies Inc., and data warehouses. Users can view and interact with key performance indicators in a dashboard, create new queries or reports, access catalogs of reports, and do simple or complex analysis of the data. Instead of struggling with complex and technical database terminology, users interact with data using business representations of information, or “business objects,” with which they are familiar. The reports they create or access can be shared with other users through sophisticated distribution and security systems. Our software also enables our customers to share their information with their own customers, suppliers and other business partners through the internet and extranets.
 
From our inception in 1990 through December 31, 2001, we have sold to more than 15,000 customers around the world.
 
Industry Background
 
History
 
In the past, organizations around the world have invested in an array of business software applications in order to better run their operations and better manage their businesses. These applications are commonly referred to as online transaction processing systems, because their primary requirement was the ability to process and record the large number of transactions handled by an organization in the course of its operations.
 
During the 1980s, these applications were typically built in-house using application development tools and relational database management systems. The early 1990s brought a revolution in packaged enterprise business applications as customers began to purchase their software solutions from third parties rather than develop such software internally. As a result, organizations invested heavily in enterprise resource planning systems, customer relationship management applications, supply chain systems and other packaged business applications from vendors such as SAP AG, PeopleSoft, Inc., Oracle Corporation, Baan, Siebel Systems, Inc. and i2.
 
While the ultimate goal of deploying these business applications was to both automate the execution of business processes and make information more readily available to business users, the software industry historically succeeded in delivering the former

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goal and failed in the latter. While the increased use of packaged business applications have resulted in organizations possessing unprecedented amounts of data about their customers, products, revenues, and operations, that data largely remained inaccessible to the business users who needed it. Realizing that the strategic business value of information technology lies not in process automation itself, but in exploiting the information captured by process automation, these enterprises began looking for ways in which to access and utilize that information.
 
The Emergence of Business Intelligence
 
As a result, the 1990s brought a strong focus on the delivery of business intelligence software designed to work in conjunction with an enterprise’s operational packaged business applications, but built with the specific goal of providing information access to users throughout an organization. Business intelligence software was typically built in conjunction with data warehouses and data marts, which are dedicated databases, set up and designed to provide end users with access to business information.
 
Business intelligence software was developed to allow non-technical users to generate queries, structure reports, conduct analysis, and share the answers to common business questions such as the following:
 
Sales.    What were sales by region for the past four quarters? Which regions are exceeding their plan?
 
Finance.    Which departments are more than 10% over budget? What is departmental spending quarter to date?
 
Human resources.    What are the open requisitions by department? What is the employee turnover by department? Which has the highest turnover?
 
Marketing.    What is the repeat purchase rate for customers who have purchased in the last five years? What were the top three sales lead generating programs during the year?
 
The Impact of the Internet
 
The emergence and growth of the internet brought many changes to the business intelligence software market, including the following:
 
Larger enterprise deployments.    Internet technologies made it possible to create business intelligence software that eliminates the need to install and maintain personal computer application database connectivity software on a user’s desktop personal computer. As a result, organizations can now deploy business intelligence software in an environment that requires minimal administration by information technology departments at a greatly reduced cost. Accordingly, it has become cost effective for organizations to deploy business intelligence software more widely within an organization to the increasing number of individuals empowered to make business decisions.
 
More data collected from new sources.    Organizations are now collecting and storing an increasing amount of data through the internet, including customer profiles, clickstream data (data regarding users’ navigation around the internet), customer purchasing patterns, and other e-commerce information. Organizations need to analyze this data in order to perform:
 
 
•
 
Fine-grained customer segmentation, or dividing their customer base into segments and delivering tailored market messages to these segments.
 
 
•
 
One-to-one marketing, which is advanced fine-grained market segmentation where each customer is given personalized marketing messages based on a detailed profile of his or her preferences and past behaviors.
 
 
•
 
Customer loyalty, profitability, retention, and lifetime value analysis.
 
Extranets.    The internet also enables organizations to differentiate their products and services from competitive offerings by supplementing the products and services with online, value-added, internet-based information services. Organizations are realizing that value-added information can also improve customer service and drive both revenue and profit growth. Examples of ways in which these business-to-business extranet applications are used include:

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•
 
A telecommunications company providing online billing information to its customers as a way to differentiate its commodity local voice telephone service.
 
 
•
 
An insurance firm providing its commercial clients with real-time claims information so its clients can spot accident patterns quickly, and take steps to prevent future accidents before they happen.
 
 
•
 
A medical products distributor positioning itself as an information middleman between the hospitals it serves and the suppliers it represents, allowing the hospitals to better analyze their purchasing patterns and supplier fill rates, and suppliers to analyze purchasing patterns across hospitals.
 
In summary, the internet has a positive impact on the business intelligence software market because it increases the business potential in three principal ways, among others:
 
 
•
 
It lowers the cost of deployment and therefore increases the number of users within an organization;
 
 
•
 
It enables companies to get more data about their customers, which in turn results in a more significant need for business intelligence; and
 
 
•
 
It enables extranet applications, which significantly increase the number of users of business intelligence software, from just users within an organization to users outside the organization, including customers, suppliers, and partners.
 
However, in order to take advantage of this increased business opportunity, business intelligence software has had to meet new requirements, including:
 
 
•
 
An internet-based architecture with robust engines resident on the servers and Java-based query applets, small software applications capable of executing queries, on the desktops;
 
 
•
 
Scalability to the increasing numbers of users required by larger internal deployments and extranet usage as well as a larger volume of data;
 
 
•
 
Robust security features; and
 
 
•
 
An easy migration path between client/server-based applications and internet-based applications.
 
Business Objects Solutions
 
We provide our customers with easy-to-use, secure, scalable, and extensible business intelligence solutions designed to optimize decision making and meet the demanding requirements of today’s competitive world. Our products provide a simple interface from which users can track what is happening in their business and use that information to make better business decisions. They also act as an information access front end for end users on top of corporate databases, business applications, and data warehouses. The key advantages of our solutions include:
 
•  Ease of use and learning.    Our software is designed to ensure maximum ease of use and learning. It allows users to develop queries consisting of commonly used business terms and phrases. For example, users can combine objects or terms such as “sales revenue,” “products”, or “customers” to develop their queries. Further, users do not need to understand the technical details of database structures, such as the location of the data, or the relationship between different database tables. Our software also delivers key business indicators, driven by advanced analytic techniques, in easy-to-use dashboards. In addition, we provide sophisticated online documentation and an intranet-based training tool for cost-effective training.
 
•  Access to all enterprise data sources.    Our software can access over 100 different relational and non-relational data sources. Due to our powerful query generation technology, our software tools can access data stored not only in relational data warehouses and data marts built for analytical purposes, but also any major existing relational database.

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We also offer specific interfaces for popular packaged business applications such as those provided by SAP AG, Oracle Corporation, Siebel Systems, Inc., PeopleSoft, Inc., and Baan.
 
•  Shared infrastructure for client/server and internet environments.    Because we built our internet products on the architecture of our client/server software, BUSINESSOBJECTS™, our software shares a common infrastructure. This enables our customers to easily expand their existing client/server installations to include internet-based users and to migrate their systems from client/server-based systems to internet applications. Our internet software tools have been developed based on an HTML/Java architecture that works in extranet environments. Extranets are shared networks that use the internet to link businesses with their suppliers, customers, and partners. Our internet software offers a business intelligence solution that allows our customers to share selected information with their suppliers, customers, and partners with the protection of security protocols that have been designed to provide effective security across internet firewalls.
 
•  Information technology control and security.    Our software is designed to provide non-technical business users with the ability to access, analyze, and share information stored in their company databases, while at the same time allowing information technology departments to control and manage that access throughout the enterprise. Business representations of such information are contained in a central repository where the information technology staff can maintain control over data access and security throughout the enterprise, as well as for remote users accessing the database via the internet.
 
•  Scalability.    Because of our powerful administration and security tools, as well as a centralized business intelligence repository, our software is capable of scaling from deployments as small as 10 users to deployments exceeding 50,000 users.
 
Business Strategy
 
Our objective is to be the leading supplier of business intelligence software solutions worldwide. Our business strategy to achieve our objective is focused on four key areas:
 
Maintain enterprise-wide focus.    We believe that enterprise-wide deployments will continue to represent a significant business opportunity for us. To capitalize on this opportunity, we intend to ensure that our software can be used throughout the enterprise by the maximum number of users.
 
Continue to develop and deploy products and services for extranets.    We believe that the internet represents a tremendous opportunity for business intelligence technology. We developed WEBINTELLIGENCE® and BUSINESS OBJECTS INFOVIEW to extend the business intelligence capabilities of BUSINESSOBJECTS from its original client/server environment into intranet and extranet environments. We intend to continue developing and optimizing our products for use on the internet, including integrating new technologies such as web services to offer second-generation extranets.
 
Expand the analytic applications strategy.    We believe that corporations today are focusing more and more on the relationships with their customers and suppliers, and that business intelligence has an important role to play in both the customer relationship management and supply chain management markets. During 2001, we released BUSINESS OBJECTS APPLICATION FOUNDATION, a platform for building integrated applications for the enterprise, and five integrated analytic application modules that provide business managers with a complete view of their organization’s customers, products, supply chain, and operations.
 
Expand our strategic relationships.    We believe that our relationships with key enterprise software vendors, systems integrators, and value-added resellers are important to our success. We currently have marketing relationships with several large relational database management, enterprise resource planning (ERP), customer relationship management (CRM), supply chain management, wireless, portal, and e-business vendors to promote our solution in their respective markets, which we believe will improve our competitive position. In the ERP market, we have continued to work very closely with SAP AG and PeopleSoft, Inc., and have received certifications on their most recent offerings. In the supply chain management space, we significantly expanded our relationship in 2001 with i2 Technologies Inc. and our software is now embedded in their products. We have a strategic relationship with IBM, who is currently the largest reseller of Business Objects products worldwide. We created formal partnership programs to work with many of the leading enterprise information portal vendors and wireless device, service, and platform companies. We also have reseller agreements with indirect sales channel partners to expand our market coverage, as well as to provide a source of

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revenue at attractive margins. Finally, we have relationships with system integrators who not only market our products with larger systems solutions, but have also generated revenues for us by recommending our products to their customer base. We intend to continue to pursue and develop these relationships to expand our market opportunity.
 
Marketing Focus
 
We design our software for medium to large business organizations and governmental institutions, and focus our marketing efforts on the following:
 
•  Users of Data Warehousing/Data Marts.    Data warehousing has emerged as a popular architecture for business intelligence functions. To implement data warehousing, an organization installs one or more servers to supplement existing mainframes or other systems on which mission-critical transactional applications run. The organization then regularly downloads data from its transactional applications to the data warehouses that are used as information servers for end users. Data marts are smaller scale data warehouses that are focused on a particular business unit or specific function. Both data warehousing and data marts enable end users to access data without incurring the risk of corrupting production databases or slowing down mission-critical transactional applications. In addition, transactional applications may only contain six to twelve months of data, in contrast to data warehouses and data marts which, over time, may contain years of information. Because business intelligence is the main objective of data warehousing, we consider our software to be a key component of the data warehousing architecture, as it provides the end user with the business intelligence tools to access warehoused data.
 
•  Users of Enterprise Resource Planning and Customer Relationship Management Software.    Organizations implementing complex packaged business applications from ERP vendors such as SAP AG, Oracle Corporation, PeopleSoft, Inc., and Baan and CRM vendors such as Siebel Systems, Inc., Remedy, and Clarify frequently require comprehensive end user data access and reporting functionality. Our software provides significant value to these organizations by virtue of its ability to handle the complexities of the underlying databases that support these applications. In addition, our RAPID DEPLOYMENT TEMPLATES (RDTs) can be used with certain of these packaged business applications. RDTs provide a set of predefined objects to organizations using such applications to facilitate the implementation of our business intelligence solutions.
 
•  Users of Custom Developed Business Applications Software.    Many organizations have a number of end users using information systems or applications developed by third parties in a relational database environment and have accumulated a large volume of data in their databases. We believe that the exposure of end users to the benefits of the relational database environment has stimulated demand for more efficient and effective access to the data. By allowing end users to independently access data, generate reports, and perform analyses, our software enables these organizations to take better advantage of their substantial investments in relational database technology.
 
•  Organizations Sharing Data and Doing Business Over the Internet.    Many organizations are providing their customers, partners, and suppliers with access to information over the internet. Our software products enable these organizations to provide controlled access to information to end users outside the organization through internet connectivity.
 
Products
 
Business Objects offers a complete suite of business intelligence software, which includes query, reporting, online analytical processing, information broadcasting, set-based analysis, time series analysis, and business alerts for end users. It also includes administration tools that enable information technology professionals to set up and deploy our products across the enterprise. To provide greater flexibility to our customers, our software can be deployed in web, Windows™, or mobile environments. The Business Objects product line is divided into two families of products, BUSINESSOBJECTS™ 2000 and BUSINESSOBJECTS ANALYTICS.

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BUSINESSOBJECTS 2000
 
BUSINESSOBJECTS 2000 is a strategic business intelligence (BI) platform and integrated BI toolset that enables users to access, analyze, and share information within and beyond the enterprise. It has been carefully designed to be easy to use, and has been architected to be secure, scalable and extensible. BUSINESSOBJECTS 2000 consists of query, reporting and analysis; portal and broadcasting; and administration products.
 
Query, Reporting, and Analysis.    BUSINESSOBJECTS 2000 provides query, reporting, and analysis tools to meet the needs of all users with both Windows and web-based interfaces.
 
 
•
 
BUSINESSOBJECTS.    BUSINESSOBJECTS provides integrated query, reporting, and analysis for the enterprise. It is a web-enabled full-client tool that allows users to easily access, analyze, and share the wealth of information stored in multiple data sources within and beyond the enterprise.
 
 
•
 
WEBINTELLIGENCE.    WEBINTELLIGENCE provides query, reporting, and analysis solution for the web. It is a thin-client solution that enables users to access, analyze, and share corporate data using a simple browser as their interface, while maintaining tight security over data access.
 
 
•
 
BUSINESSQUERY® FOR EXCEL.    BUSINESSQUERY opens up the power and ease of use of BUSINESSOBJECTS data access to users of Microsoft Excel. It offers users a simple tool to retrieve data from corporate databases, then combine and analyze it in their favorite spreadsheet.
 
 
•
 
BUSINESSOBJECTS PERSONAL TRAINER™.    PERSONAL TRAINER is an intranet-based training product for BUSINESSOBJECTS INFOVIEW, BUSINESSOBJECTS, and WEBINTELLIGENCE users. PERSONAL TRAINER delivers fast, cost-effective training to users throughout the organization, while also monitoring their progress.
 
Portal and Broadcasting.    BUSINESSOBJECTS 2000 meets information delivery requirements through the combination of a BI portal and powerful broadcast capabilities.
 
 
•
 
BUSINESSOBJECTS INFOVIEW.    INFOVIEW is a business intelligence portal that collects and consolidates a company’s BI information and presents it in a secure, focused, and personalized view to users inside and outside an organization. INFOVIEW lets users personalize how they view, manage, and distribute BI content. It is both a standalone BI portal and a BI content provider for enterprise information portals.
 
 
•
 
BUSINESSOBJECTS INFOVIEW MOBILE™.    INFOVIEW MOBILE extends the BI portal functionality of INFOVIEW, presenting BI information in a secured, focused, and personalized way to mobile users inside and outside an organization via support for wireless devices such as mobile phones and personal digital assistants, including Palm, PocketPC, and RIM Blackberry.
 
 
•
 
BUSINESSOBJECTS BROADCAST AGENT™.    BROADCAST AGENT delivers timely and personalized information via multiple devices to hundreds of thousands of users, through intelligent and cost effective delivery mechanisms. It provides a scalable solution to drive the quick delivery of business driven alerts and mission critical information that decision makers need, however, whenever, and wherever they need it.
 
Administration.    BUSINESSOBJECTS 2000 provides a full set of administrative tools to set up and manage an enterprise BI deployment.
 
 
•
 
BUSINESSOBJECTS DESIGNER.    DESIGNER is a graphical design tool used to create the rich semantic layer or metadata that makes Business Objects tools intuitive for non-technical users. DESIGNER can also work with existing metadata in an enterprise.
 
 
•
 
BUSINESSOBJECTS SUPERVISOR.    SUPERVISOR provides powerful security and user management in a single graphical panel. With SUPERVISOR, users can be easily arranged into groups and departments, with security enforced at each level.

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•
 
BUSINESSOBJECTS AUDITOR.    AUDITOR is the Business Objects audit product. It helps administrators gain insight into their Business Objects deployment via a web-based tool. AUDITOR offers extensive information on the Business Objects system and its use, as well as advanced analysis capabilities that will help administrators monitor, analyze, and optimize their BI solution.
 
 
•
 
BUSINESSOBJECTS DEVELOPER SUITE.    DEVELOPER SUITE is a development toolkit that allows customers and partners to customize, integrate, and extend the Business Objects BI platform. DEVELOPER SUITE provides a complete toolkit to customize INFOVIEW, WEBINTELLIGENCE, and BUSINESSOBJECTS or to embed them within another application, including object models, documentation, and samples.
 
 
•
 
RAPID DEPLOYMENT TEMPLATES (RDTS).    RDTS are development starter kits to provide direct access from BUSINESSOBJECTS to major packaged applications from vendors such as SAP AG, Oracle Corporation, Baan, and PeopleSoft, Inc.
 
BUSINESSOBJECTS ANALYTICS
 
BUSINESSOBJECTS ANALYTICS is a suite of integrated enterprise analytic applications built on BUSINESSOBJECTS 2000 to provide packaged best practice analytics and a platform for the development of custom analytic applications.
 
 
•
 
BUSINESSOBJECTS APPLICATION FOUNDATION.    APPLICATION FOUNDATION is a complete environment for the rapid development and deployment of powerful analytic applications and management dashboards. It offers an easy-to-use wizard-driven builder and a catalog of predefined analytic templates. Set-based analysis, time-series analysis, and business rules enable applications that are designed to monitor, interpret, and act on changing business data.
 
 
•
 
BUSINESSOBJECTS CUSTOMER INTELLIGENCE.    CUSTOMER INTELLIGENCE is designed to allow sales and marketing managers improve the performance of their business by providing analytics that help optimize sales force productivity, customer profitability, and marketing efficiency.
 
 
•
 
BUSINESSOBJECTS PRODUCT & SERVICE INTELLIGENCE.    PRODUCT & SERVICE INTELLIGENCE is designed to allow managers of products, services, and contact centers improve performance by facilitating analysis of key business topics, thus enabling optimum efficiency and enhanced customer service.
 
 
•
 
BUSINESSOBJECTS SUPPLY CHAIN INTELLIGENCE.    SUPPLY CHAIN INTELLIGENCE provides analytics to help in the process of balancing supply and demand within an enterprise by ensuring that products are available at the correct time, in the correct quantity, and at the correct location in the most cost effective and efficient manner.
 
 
•
 
BUSINESSOBJECTS OPERATIONS INTELLIGENCE.    OPERATIONS INTELLIGENCE provides analytics to help finance and human resources users understand cash cycles and analyze employee behavior.
 
Services
 
We provide the following services in connection with our product offerings:
 
Post-Sales Customer Support and Software Maintenance.    Our five regional customer support centers (Americas—San Jose and Atlanta, USA; Europe—Maidenhead, United Kingdom; and Asia/Pacific—Tokyo, Japan and Sydney, Australia) are staffed by highly-trained support engineers who answer customer inquiries by telephone. All customer support centers use a common global case tracking, knowledge base, and problem reporting system designed to enable engineers to share their knowledge and experience, improve the quality of our responses to customers and reduce our response time for customer inquiries. Technical support is also provided by our value-added resellers, systems integrators, consulting partners and distributors, whom we support with our regional support centers.

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We deliver tiered customer support services to better meet customers’ needs. Customers can purchase premium level services which provide assigned customer advocates and extended service hours. In addition, we offer an online customer support internet site, designed to help customers become more self-sufficient. The website is available 24 hours a day, 7 days a week to customers on our maintenance plan. The website allows customers to use a high-powered search engine to query the multiple technical repositories we have available to find a solution to their inquiries, or the customer may log a case directly from our internet site to their local support center. Our online customer support internet site provides our customers with access to up-to-date technical information, the ability to download service packs and patches for our software, tips on using our software, product documentation, technical papers and our support newsletter. This internet site provides customers with access to up-to-date technical information and helps customers independently resolve inquiries.
 
Software maintenance releases and post-sales technical support are provided to customers for an annual maintenance fee, which is charged in addition to the initial product license fee.
 
Customer Education and Training.    We offer a comprehensive education and training program to our customers, and to third-party consultants who support our products. Courses range from entry-level sessions for users to more advanced courses for information technology professionals. Every student is provided a complete hands-on experience to help reinforce learning with practical exercises.
 
We offer training classes through in-house facilities at our offices in the United States, the United Kingdom, France, and other locations in Europe. These facilities are complemented by a network of independent certified training centers in our principal markets throughout the world. In addition, we also provide onsite training services upon customer request. Training service fees are charged to a customer on a per participant per day basis. BUSINESSOBJECTS PERSONAL TRAINER is also available for customers who prefer intranet-based training.
 
Consulting Services.    We provide consulting services to our customers through our own staff and through third party certified consulting partners. Our consultants have wide-ranging industry, operational, and technical knowledge of numerous database systems, and all have in-depth knowledge of our product line which allows us to assist our customers in all stages of their development life cycle. Our consulting services are generally charged to a customer on a per consultant per day basis.
 
Sales and Marketing
 
We market and sell our products and services directly through our direct sales organizations and indirectly through sales channels, such as value-added resellers, system integrators, consulting partners, and distributors. Our sales and marketing organization is comprised of sales teams, each consisting of employees engaged in field sales, field technical support, and telemarketing activities. Each sales and marketing organization is responsible for the coordination of both direct and indirect sales in its assigned territory. We believe that focusing our direct sales efforts on identified customers while supporting our indirect sales channels to service our channel partners’ customers maximizes the utilization of our direct sales personnel.
 
Our sales cycle varies from customer to customer, typically requiring several months from the time of initial contact until closing a sale. For large customers or larger deals, the sales cycle can be over a year.
 
To support our sales efforts, we conduct marketing programs, including advertising, direct mail, public relations, web-based and face-to-face seminars and demonstrations at customer sites and at our offices, appearances at trade shows, and ongoing customer communications programs.
 
Product Development
 
We believe that innovation, timeliness of product releases, and high product quality are essential to maintain our competitive position. Consequently, we dedicate considerable resources to development efforts to enhance our existing products and to develop new products. To date, we have relied primarily on internal development of our products, but have in the past and may in the future continue to license or acquire technology or products from third parties. The product development group is responsible

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for the design, development and release of product enhancements, upgrades, and new products, and is based primarily in Levallois-Perret, France, with smaller groups located in Canada, the U.K., and the U.S.
 
The product development cycle consists of five phases:
 
•  The planning phase, in which a vision statement of the product is developed, the initial design and prototype of the product is completed, specifications of the product are written, a testing strategy is developed, and the basic documentation of the product is started.
 
•  The development phase, during which the product code is written and tested, and bugs are identified and fixed.
 
•  The stabilization phase, during which the product undergoes further testing, including beta testing, final release testing and bug fixing, results of the testing and bug fixes are reviewed, and final sign-off prior to commercial shipments are commenced. In addition, the product group runs a field readiness program during this phase to ensure that all departments in our organization are ready to sell and support the new release or product.
 
•  The release phase, which culminates in the general availability of a given product. A product is deemed to be ready to manufacture (RTM) when all involved groups indicate they are satisfied with the stabilization stage and are ready to start shipping the product.
 
•  The maintenance phase, during which service packs are developed and released for products released RTM.
 
Customers
 
Our customers represent a wide, cross-industry spectrum of large global corporations, major governmental institutions, and educational institutions. A partial list of customers who have purchased at least $100,000 of our software licenses in 2001 includes:
 
Financial Services/Insurance
 
Barclays Bank
Citibank
Compaq Financial Services
Credit Suisse First Boston
Dresdner Bank AG
GE Financial Services
J.P. Morgan Chase & Co.
Morgan Stanley
Prudential Insurance Company
Zurich Financial Services Group
 
Healthcare/Pharmaceuticals
 
Allergan Pharmaceuticals
Children’s Hospital of Philadelphia
Eli Lilly & Co.
GE Medical Systems
GlaxoSmithKline
Kaiser Permanente
Medtronic
Pfizer, Inc.
Philips Medical Systems

12

 
Energy
 
Caroline Power and Light
Duke Energy
GE Power Systems
 
Government/Educational
 
American Red Cross
French Ministry of Culture and Communication
French Ministry of Defense
The City of Calgary
U.K. Police Service
U.S. Department of Commerce
U.S. Department of Justice
U.S. Department of Transportation
U.S. Federal Aviation Administration (FAA)
The University of Michigan
Vanderbilt University
 
Telecommunications
 
AT&T
Belgacom
BellSouth
British Telecom
Ericsson
France Telecom
MCI WorldCom
Motorola
NTT Japan
Southwestern Bell Corporation (SBC)
Telecom Italia
Verizon
Vodafone
 
Consumer/Retail
 
Amazon.com
Belgian Post Group
Crate & Barrel
Heineken
Nordstrom
PepsiCo, Inc.
Ralston Purina Company
Sara Lee Hanes Printables
WW Grainger
Walt Disney Attractions
 
Transportation/Automotive
 
Air France
Boeing
Ford Motor Company
Honda of America
Peugeot
Volkswagen AG

13

 
Competition
 
The market for our software is highly competitive, rapidly evolving, and subject to rapidly changing technology. We compete principally with providers of business intelligence software, data warehousing, and query and reporting software. Our direct competitors for our core business include Actuate Corporation, Brio Software, Inc., Cognos Incorporated, Crystal Decisions, Hummingbird Communications, Ltd., MicroStrategy, Inc., and Oracle Corporation. We also indirectly compete with suppliers of enterprise application software encompassing both enterprise resource planning and customer relationship management including Microsoft Corporation, Siebel Systems, Inc., Peoplesoft, Inc., SAP AG, and Oracle Corporation. Competitors for our analytic applications include: Cognos Incorporated, Informatica Corporation, E.piphany, Inc., Hyperion Solutions Corporation, MicroStrategy, Inc., Oracle Corporation, SAS Institute Inc., and SAP AG. A number of our competitors and potential competitors have significantly greater financial and other resources than us, which may enable them to address more effectively new competitive opportunities. In addition, some of our competitors, particularly companies that offer relational database management software systems and enterprise resource planning software systems, have well-established relations with some of our existing and targeted customers.
 
We believe that the principal competitive factors that impact the market we serve include: price, performance, and scalability, ease of use, functionality, product architecture, product quality and reliability, scope of distribution, customer support, and name recognition. We believe that we are successfully addressing each of these competitive factors. Nonetheless, we expect to face increasing competitive pressures from both current and future competitors in the markets we serve.
 
Manufacturing
 
We rely upon third-party suppliers to perform our CD duplication, print our user manuals, package our products, and manufacture related materials incorporated into our products and to deliver our product via electronic software download. To date, we have not experienced any material difficulties or delays in manufacturing or electronic delivery by our third-party suppliers in France and the U.S.
 
Patents and Intellectual Property Protection
 
We believe that we own or have licensed all proprietary rights relating to our software products. Our success depends in part on our ability to protect our property rights in our intellectual property. To protect our proprietary information, we use a combination of protections provided by patent, copyright, and trademark laws, trade secret laws, employee and third-party nondisclosure agreements, and licensing arrangements, including confidentiality provisions.
 
We currently have two patents issued in the United States, numbers 5,555,403, and 6,247,008, both relating to a “Relational Database Access System Using Semantically Dynamic Objects.” We also have obtained a registered trademark in the United States, France and other countries for our name, together with our logo as well as for certain other product names. Despite our efforts, we may not successfully protect our proprietary rights from misappropriation. While our competitive position may be affected by our ability to protect our proprietary information, we believe that factors such as the technical expertise and innovation skills of our personnel, our name recognition, and ongoing product support and enhancement may be more significant in maintaining our competitive position.
 
Litigation may be necessary to protect our proprietary rights. For example, in 1999 we settled litigation in our favor asserting that one of our competitors, Brio Software, Inc., was infringing upon our rights under our patent. We also filed lawsuits against competitors Cognos Inc. and Cognos Corporation in May 2000 and MicroStrategy Incorporated in October 2001, alleging patent infringement under U.S. patent number 5,555,403 and 6,247,008. (See Item 3. Legal Proceedings). Litigating claims relating to our intellectual property can be very expensive in terms of management time and resources.

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Our software products are generally licensed to end users pursuant to a perpetual license. Occasionally, we license a portion of our technology in object code to third parties. In addition, we license software programs from third parties and incorporate these programs into our software products or sub-license them directly to our customers. For example, we license our object request broker, which allows messaging between software components, from Borland Software Corporation (formerly Inprise Corporation) and our Visual Basic Application functionality from Microsoft Corporation. This licensed software is embedded in our products. In addition, we license our BUSINESSOBJECTS PERSONAL TRAINER product from a third party, which is sold directly to end users as a stand-alone add-on product.
 
Employees
 
As of December 31, 2001 we had 2,226 full-time employees, including:
 
 
•
 
517 in research and development;
 
 
•
 
1,268 in sales and marketing;
 
 
•
 
197 in customer service and support; and
 
 
•
 
244 in finance and administration.
 
Our employees were not represented by any collective bargaining organization, and we have never experienced a work stoppage.
 
Under French law, management is required to hold monthly meetings with a delegation of elected employee representatives, called the comité d’entreprise, to discuss employment matters and our economic condition and to provide appropriate information and documents relating to these matters. As required under French law, one employee representative is entitled to be present at meetings of our Board of Directors, but does not have any voting rights.
 
Our newly hired employees may complete an orientation course ranging from one to three weeks in length presented by Business Objects University, our in-house education program. Generally, most employees complete at least a one week orientation course at our local facilities. Our engineers and other technical staff generally complete a two week training course, in addition to the one week orientation. Our extended training program consists of lectures, problem sets and independent and group projects relating to programmability and deployment of our products. We believe this emphasis on training yields highly qualified employees and promotes camaraderie among all of the Business Objects staff.
 
Foreign and Domestic Operations and Export Sales
 
See Note 10. Segment and Geographic Information in Notes to Consolidated Financial Statements. No customer accounted for 10% or more of our consolidated revenues for any period presented.
 
Item 2.     Description of Property
 
Since July 2000 our corporate headquarters have been located in a leased facility in Levallois-Perret, France, a suburb of Paris, under a lease expiring in 2009, with an option to cancel in 2006 without penalty. The facility is approximately 140,000 square feet, of which we are subleasing approximately 18,000 square feet.
 
We relocated our U.S. headquarters to a new location in San Jose, California in April 2001 under a ten-year lease which includes the right to extend the term for one additional six-year period. The new facility is approximately 126,000 square feet, of which we are subleasing approximately 51,000 square feet. In March 2001, we relocated our U.K. operations to a new facility in Maidenhead, England, measuring approximately 56,000 square feet, under a lease expiring in 2021. We have additional leased field sales and software development offices in the Americas, Europe, Japan and Asia Pacific regions. We believe that our existing facilities are adequate to meet current requirements, and that additional space will be available as needed to accommodate any future expansion of the corporate locations and for any sales and software development offices.

15

 
Item 3.     Legal
 
Proceedings
 
On October 17, 2001, we filed a lawsuit in the United States District Court for the Northern District of California against MicroStrategy Incorporated (Microstrategy) for alleged patent infringement. The lawsuit alleges that MicroStrategy infringes on our United States Patent No. 5,555,403 and 6,247,008 by making, using, offering to sell and selling its product currently known as MicroStrategy Version 7.0. Our complaint requests that the defendant be enjoined from further infringing the patent and seeks an as yet undetermined amount of damages.
 
On October 30, 2001, an action for alleged patent infringement was filed in the United States District Court for the Eastern District of Virginia against us and our subsidiary, Business Objects Americas by MicroStrategy. The complaint alleges that our software products, BROADCAST AGENT, INFOVIEW and BROADCAST AGENT PUBLISHER, infringe MicroStrategy’s United States Patent No. 6,279,033 entitled “System and Method for Asynchronous Control of Report Generation Using a Network Interface” and United States Patent No. 6,260,050 entitled “System and Method of Adapting Automatic Output of Service Related OLAP Reports to Disparate Output Devices”. The complaint seeks relief in the form of an injunction against us and unspecified damages. Our current assessment is that our products do not infringe. If successful, a claim of infringement against us and our inability to license the infringed or similar technology on commercially reasonable terms could have a material adverse effect on our business, operating results, and financial condition. On January 25th, 2002 we filed requests for reexamination of MicroStrategy’s United States Patent No. 6,279,033 and United States Patent No. 6,260,050 with the United States Patent and Trademark Office. On February 21, 2002, MicroStrategy filed a Motion for Leave to File First Amended Complaint by which it seeks to add claims against us and our subsidiary, Business Objects Americas, for (i) violations of the Computer Fraud and Abuse Act, (ii) misappropriation of trade secrets, and (iii) tortious interference with contractual relations with employees. We intend to oppose the Motion at a hearing set by the Court for April 2, 2002. This case is set to proceed to trial on July 16, 2002 provided that this date is subject to change according to the Court’s rulings on April 2, 2002.
 
On May 5, 2000, we filed a lawsuit in the United States District Court for the Northern District of California against Cognos Incorporated and Cognos Corporation (collectively Cognos) for alleged patent infringement. The lawsuit alleges that Cognos infringes on our United States Patent No. 5,555,403 by making, using, offering to sell and selling its product known as Impromptu. Our complaint requests that the defendants be enjoined from further infringing the patent and seeks damages. On September 7, 2001, the United States District Court denied Cognos’ motion for a partial summary judgment where Cognos was seeking to invalidate our United States Patent No. 5,555,403. The Court determined that the case should proceed to trial and set a date of May 20, 2002.
 
Item 4.     Submission
 
of Matters to a Vote of Security Holders
 
None.
 
Item 5.     Market
 
For Registrant’s Common Equity and Related Stockholder Matters
 
U.S. Market Information
 
We sponsor a program that provides for the trading of our ordinary shares in the United States in the form of American depositary shares (ADSs). Each American depositary share represents one ordinary share placed on deposit with the Bank of New York, as depositary, and is issued and delivered by the depositary through its principal office in New York City at 101 Barclay Street, New York, New York, 10286. Under the terms of our deposit agreement with the depositary, ordinary shares may also be deposited with the Paris office of BNP Paribas, as custodian. Our American depositary shares have been quoted on the Nasdaq National Market since September 1994 under the symbol BOBJ.
 
French Market Information
 
Our ordinary shares have been listed on the Premier Marché of the Euronext Paris S.A. (“Euronext Paris”) since November 1999 under the Euroclear code 12074.
 
Securities listed on the Euronext Paris are traded on one of three markets: Premier Marché, Second Marché and Nouveau Marché. The securities of most large public companies are listed on the Premier Marché. Official trading of listed securities on

16

the Euronext Paris is transacted through authorized financial institutions that are members of the Euronext Paris. Trading on the Premier Marché takes place continuously on each business day from 9:00 a.m. through 5:25 p.m. (Paris, France time), with a pre-opening session from 7:15 a.m. through 9:00 a.m. (Paris, France time), with a pre-closing session from 5:25 a.m. to 5:30 p.m. during which transactions are recorded but not executed and a closing auction at 5:30 p.m. Any trade that occurs after the close of a stock exchange session is recorded on the next business day at the previous session’s closing price for that security.
 
Euronext Paris has introduced continuous electronic trading during trading hours for most listed securities. Euronext Paris is managed and operated by Euronext Paris market enterprise. Euronext Paris publishes a daily official price list that includes price information on listed securities.
 
Euronext Paris places securities listed on the Premier Marché in one of three categories depending on their trading volume. Our shares are placed in the category known as Continu, which includes the most actively traded securities. Since October 29, 2001, Euronext Paris applied new regulations under which the yearly trading required for a security to be listed in Continu for a company already listed on a regulated market of Euronext Paris is 2,500 trades.
 
Since September 25, 2000, all trading on the Premier Marché is performed on a cash settlement basis. However, a Deferred Settlement Service (Service à Règlement Différé or SRD) allows investors who elect this service to benefit from leverage and other special features of the monthly settlement market. The service is only available for trades in securities which either are SBF 120 components or have both a total market capitalization of at least Euro 1 billion and represent a minumum average daily trading volume of Euro 1 million. Our shares are eligible for the SRD. Investors who opt for SRD get billed by the financial intermediary holding these shares. Only bearer shares can be traded using SRD. Investors can elect on the determination date (date de liquidation), which is the fifth trading day before the end of the month, either to settle the trade by the last trading day of the month or to pay an additional fee and postpone the settlement decision to the determination date of the following month.
 
Equity securities traded on a deferred settlement basis are considered to have been transferred only after they have been registered in the purchaser’s account. In accordance with French securities regulation, any sale of securities executed on a deferred settlement basis during the month of a dividend is deemed to occur after payment of the dividend. The account of the purchaser having purchased the securities prior to the date of the dividend payment, but during the month of a dividend payment date, is credited with an amount equal to the dividend paid, and the seller’s account is debited by the same amount.
 
Trading in securities listed on the Premier Marché may be suspended by the Euronext Paris if quoted prices exceed certain price limits defined by the regulations of the Euronext Paris S.A. In particular, if the quoted price of a Continu security varies by more than 10% from the previous day’s closing price, Euronext Paris may be suspend trading for up to 4 minutes. Further suspensions for up to 4 minutes are also possible if the price again varies by more than 10% from the threshold at which the suspension was initiated. During the continuous trading session, Euronext Paris may also suspend trading for a 4 minute period if the price varies by more than 2% from the last traded price. Euronext Paris may also suspend trading of a security listed on the Premier Marché in certain other limited circumstances, including for example, the occurrence of unusual trading activity in the security. In addition, in exceptional cases, the Conseil des Marchés Financiers may also suspend trading.

17

 
High and Low Price Range
 
The following table sets forth the range of quarterly high and low closing prices in U.S. dollars for our ADSs on the Nasdaq National Market exchange and in Euros for our ordinary shares on the Premier Marché for the two most recent fiscal years. All prices have been adjusted retroactively to reflect the three for two stock split effected on March 12, 2001 and the two for one stock split effected on January 20, 2000.
 
    
Price per ADS
   
Price per Ordinary Share
    
High
   
Low
   
High
   
Low
2001:
                        
Fourth Quarter
   
$
36.89
   
$
19.11
   
Euro   41.01
   
Euro 20.95
Third Quarter
   
$
29.19
   
$
18.35
   
Euro   33.20
   
Euro 19.00
Second Quarter
   
$
41.75
   
$
22.07
   
Euro   43.50
   
Euro 24.71
First Quarter
   
$
54.75
   
$
28.56
   
Euro   58.86
   
Euro 31.15
2000:
                        
Fourth Quarter
   
$
75.83
   
$
37.21
   
Euro   87.33
   
Euro 41.87
Third Quarter
   
$
76.33
   
$
52.92
   
Euro   85.00
   
Euro 56.67
Second Quarter
   
$
68.00
   
$
45.33
   
Euro   74.47
   
Euro 50.67
First Quarter
   
$
98.67
   
$
37.58
   
Euro 103.30
   
Euro 40.00
 
As of December 31, 2001, there were 61,928,474 ordinary shares outstanding (including 18,883,511 ordinary shares underlying the outstanding American depositary shares held by 49 stockholders of record and 817,675 treasury shares). All American depositary shares and ordinary share data has been adjusted retroactively to reflect the three for two stock split effected in the form of a dividend on March 12, 2001 and the two for one stock split effected on January 20, 2000. The Company has never declared or paid any cash dividends on its ordinary shares. We currently intend to retain our earnings to finance future growth and, therefore, do not anticipate paying any cash dividends on our ordinary shares in the foreseeable future.
 
Item 6.     Selected
 
Financial Data
 
The following selected financial data should be read in conjunction with the Consolidated Financial Statements and related Notes thereto appearing elsewhere in this Form 10-K. The selected statement of operations data for each of the five years in the period ended December 31, 2001 and the balance sheet data at December 31, 2001, 2000, 1999, 1998, and 1997 respectively have been derived from the Consolidated Financial Statements of the Company, which have been prepared in accordance with accounting principles generally accepted in the United States, and adjusted to reflect the three for two stock split effected March 12, 2001, and the two for one stock split effected January 20, 2000.
 
    
Year