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SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

For the fiscal year ended January 31, 2004

or

Commission File No. 000-25285

SERENA SOFTWARE, INC.

(Exact name of registrant as specified in its charter)

Registrant’s telephone number, including area code: 650-522-6600

SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NONE

SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:

COMMON STOCK, $0.001 PAR VALUE

(Title of Class)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x        No  ¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (Section 229.405 of this chapter) 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.    ¨

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  x        No  ¨

The aggregate market value of the voting stock held by non-affiliates of the Registrant based on the closing sale price of the Common Stock on July 31, 2003, as reported on the Nasdaq National Market, was approximately $440,876,009. Shares of Common Stock held by each executive officer and director and by each person who may be deemed to be an affiliate of the Registrant have been excluded from this computation. This determination of affiliate status is not necessarily a conclusive determination for other purposes. As of March 31, 2004, the Registrant had 38,401,197 shares of Common Stock, $0.001 par value, issued and outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

The Registrant has incorporated by reference into Part III of this Form 10-K portions of its Proxy Statement for the 2004 Annual Meeting of Stockholders, which is currently scheduled to be held on June 25, 2004.

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SERENA SOFTWARE, INC.

ANNUAL REPORT ON FORM 10-K

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PART I

ITEM 1.    BUSINESS

This report contains forward-looking statements under the Private Securities Reform Act of 1995. Certain statements under the captions “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and elsewhere in this report are “forward-looking statements.” These forward-looking statements include, but are not limited to, statements about our plans, objectives, expectations and intentions and other statements contained in this report that are not historical facts. When used in this report, the words “expects,” “anticipates,” “intends,” “plans,” “believes,” “seeks,” “estimates” and similar expressions are generally intended to identify forward-looking statements. Because these forward-looking statements involve risks and uncertainties, there are important factors that could cause actual results to differ materially from those expressed or implied by these forward-looking statements, including our plans, objectives, expectations and intentions and other factors discussed under “Factors That May Affect Future Results” under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and elsewhere in, or incorporated by reference into, this report. Factors that could cause or contribute to such differences include but are not limited to, our ability to successfully integrate our recently announced offer for Merant plc; our reliance on our mainframe products for revenue; the percentage of license revenue typically closed at the end of each quarter making estimation of operating results prior to the end of the quarter extremely uncertain; weak economic conditions worldwide which may continue to affect the overall demand for software and services, which has resulted in and could continue to result in decreased revenues or lower revenue growth rates; changes in revenue mix and seasonality; our ability to deliver our products on the distributed systems platform; dependence on revenues from our installed base; continued demand for additional mainframe MIPS capacity; expansion of our international organizations; and our ability to manage our growth. We assume no obligation to update the forward-looking information contained in this report.

Overview

SERENA is a leading provider of infrastructure software to manage change to enterprise applications. Our products and services are used to manage and control application change for organizations whose business operations are dependent on managing information technology, or IT. In our 23 year history, we have developed highly effective solutions for managing software change that enable our customers to improve their return on IT investments by improving application availability, accelerating time to market, and increasing programmer productivity while reducing application development and IT infrastructure maintenance costs. All large companies have a process for managing change to their internally developed applications, including new version releases, “bug fixes,” upgrades and application introductions. Our products help IT managers manage changes to applications by automating and enforcing the process throughout the application life cycle. Our consulting services help companies improve their process by identifying where their current practices deviate from standard practices and making appropriate recommendations. As of January 31, 2004, our products have been installed in over 3,600 customer sites worldwide and our customers include 46 of the Fortune 50 companies such as American Express, UBS AG, Duke Energy, Capital One, Bank of America, Caterpillar, Safeway, General Electric, IBM, MetLife, Prudential, and SBC Communications.

On March 3, 2004, the Company’s Board of Directors, together with the Board of Directors of Merant plc. (“Merant”), announced that they had reached agreement on the terms of a recommended cash and share offer (the “Offer”) to be made by the Company and by Lehman Brothers on its behalf (outside of the United States) for the entire issue and to be issued share capital of Merant, including Merant Shares represented by Merant ADSs (“American Depository Shares”). At the time of the announcement the Offer valued the then entire issued share capital of Merant at approximately GBP206 million (US$380 million). The Offer was made on March 18, 2004. If completed, the acquisition will create the second largest provider of Enterprise Change Management (“ECM”) software solutions, serving the complex change management needs of at least 46 of the Fortune 50 largest companies worldwide, with a resulting combined install base of over 15,000 customers. See Note 11(b) of Notes to Consolidated Financial Statements for a further discussion on the Merant acquisition.

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The Company was incorporated in California in 1980 and reincorporated in Delaware in 1998. Unless the context otherwise requires, references in this report to “SERENA” and the “Company” refer to SERENA Software, Inc., a Delaware corporation, and its predecessor, SERENA Software International, Inc., a California corporation. The Company’s executive offices are located at 2755 Campus Drive, 3rd Floor, San Mateo, California 94403-2538 and its telephone number is (650) 522-6600.

Industry Background

The evolution of enterprise computing from centralized, mainframe-based computing to distributed, client/server and Web-based computing has added substantial complexity in recent years to the management of IT infrastructures. Today’s IT environment is characterized by distributed information systems, applications and networks, comprising a wide range of hardware platforms, operating systems, databases, software and content development tools, networking protocols and packaged and internally developed software. This distributed computing environment has fueled a proliferation of applications disseminated throughout the enterprise as departments and individual users have been empowered to independently sponsor applications. These applications must be continually maintained and often enhanced to be compatible with emerging technologies and to keep pace with a dynamic business environment. The continued innovation in Internet related technologies such as Web Services and portals has added further complexity by stimulating the development of new applications, extending the reach of applications throughout and beyond the enterprise while placing a higher premium on speed, quality and, more recently, security. In addition, the requirements of government and industry regulations have increased the scrutiny of these application changes by outside entities and placed demands on IT organizations to demonstrate compliance.

The mainframe has continued to be a critical component of IT infrastructures. Many IT organizations maintain applications that are vital to their business on the mainframe because of its unmatched performance, reliability and security. As organizations implement initiatives to increase their agility and responsiveness to customer demands, they are typically creating and integrating applications over a multi-tier, multi-platform architecture. Often these application architectures contain a mainframe application utilizing data in a mainframe database, a middle-tier of UNIX, LINUX or Windows servers, and a Web browser client or Web Services interface.

Software Change Management (“SCM”) products have historically focused on managing change to applications running on a single platform. Early Internet focused business initiatives, and more recent Service Oriented Architectures, have resulted in an increasing demand for multi-platform, multi-application infrastructures to manage change. These new application architectures require coordination and control across a complex set of operating systems, application platforms, databases, and web servers. Managing change to the client interface, often a Web Page, or to the Service interface, often based on XML, is a critical component of the infrastructure.

In addition to software changes, organizations are now faced with ever more complex processes that must be followed to manage these application changes. These processes can be different in each department, geographical unit, or outsourcing vendor. Moreover, organizations following these disparate processes must work together to bring a needed capability to market. Often these processes are required by external entities, such as government regulators, to be formalized and regularly audited. Failure to comply with these processes can result in penalties for the organizations as well as the individuals responsible for the company. Companies are complying with this requirement by defining and automating the processes they do have, and working with industry experts to implement processes.

These processes are often independent of each other with information being passed between individual groups and organizations informally, through e-mail, phone calls, and spreadsheets. This is an error prone system that is vulnerable to failure, which, in turn can lead to business failure. Process automation must be coupled with process integration to allow for information to be shared between organizations and the people in them. In addition, information gathered from tools such as software change management solutions, asset management solutions, and the like, must be made available to those constituents at the right point in the process.

To meet this need, SERENA has extended its mission beyond both Software Change Management (SCM) and Enterprise Change Management (ECM) to Application Life Cycle Management (ALM). In June 2003,

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SERENA announced the acquisition of TeamShare, Inc. This acquisition brought the TeamTrack product into SERENA’s product line. Serena TeamTrack creates and enforces a clear process throughout the life cycle—from initial project request through post-delivery customer support activities.

In September 2003, SERENA introduced SAFE^™, the Serena Application Framework for Enterprise. SAFE is an extendable, collaborative application life cycle business framework for Enterprise Change Management that will enable a single point of control over the enterprise-wide processes and provide role-based views of enterprise change, integrating people, tools and application assets. With SAFE, the enterprise can identify common elements across process islands and link these common processes with tools. SAFE will provide a single point of role-based access to enterprise information—whether it is processes, tools or assets. In this method, people are still making changes to application assets, but now all their activities are governed by the SAFE integrated, automated, and enforced change process framework.

SAFE is SERENA’s strategy of providing change management solutions to tomorrow’s most complex business problems, while maintaining high levels of customer satisfaction and delivering, innovative high quality solutions. SAFE will be built from SERENA’s existing product line, and will use TeamTrack as a base platform. In November 2003, SERENA released Serena TeamTrack Version 6, the first product to deliver on the SAFE vision.

In January 2002, we entered into an OEM Agreement with IBM Corporation (“IBM”) whereby IBM acquired the rights to resell our StarTool APM technology. IBM provides SERENA a quarterly royalty report the month after each calendar quarter detailing licenses and maintenance sold to end users during the quarter. We recognized our first revenue from this arrangement in the second quarter of fiscal 2003 and total license revenue for fiscal 2003 and fiscal 2004 was $2.5 million and $4.1 million, respectively. Because we have little or no visibility during the quarter on pipelines, sales forecasts, sales volumes or the amount of license revenue that will be reported, we cannot accurately predict the IBM revenue or our operating results for the quarter or any future quarter. Because the IBM OEM license revenue may be significant to our total license revenue in any fiscal quarter, any decline in revenue could materially adversely affect our business and our future quarterly and annual operating results.

Products

SERENA develops, markets and supports an integrated suite of products for managing and controlling change across the enterprise throughout the application life cycle. Under the SAFE vision, the SERENA solution automates the application life cycle and creates an IT environment that improves process consistency, enhances software integrity and protects valuable application assets. Our products significantly improve developer productivity, operational efficiency, application availability, and customers’ return on IT investments, while reducing costs across the entire application lifecycle.

The Serena^™ ChangeMan^® product family includes products that manage change in the mainframe z/OS environments and products that manage change in distributed and other proprietary environments, including Microsoft Windows, UNIX, LINUX, AS/400. Serena ChangeMan ECP is a customizable enterprise change portal giving customers a single point of control for application change reporting and approvals for applications running across virtually all major platforms from the mainframe to the Web. Serena ChangeMan ZDD provides a Windows Explorer user interface to z/OS datasets and PDS members, enabling them to be edited in-place from the desktop. Jobs can be submitted and their output viewed directly from Windows Explorer. Mainframe datasets and members can be transferred from the z/OS server to a Windows folder on the local computer with a simple drag and drop operation. Serena ChangeMan SSM manages change to mainframe system software and is used for disaster recovery and to maintain business continuity.

The Serena TeamTrack product allows customers to build and deploy integrated business processes that extend to all stakeholders, including departmental users, customers, suppliers and business partners. Serena

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TeamTrack uses a robust, multi-level hierarchical workflow engine to link the overall business processes with the processes of the individual departments or functional groups. Entirely web based, it provides all users with a role-based view of their responsibilities, assuring that all navigation and transactions are consistent with job function. It improves developer productivity by organizing information, prioritizing work assignments, and allowing them to use the tools they prefer.

Serena Comparex and the Serena StarTool product family comprise a comprehensive suite of products designed to improve mainframe application availability. This functionality includes file and data management, data comparison, fault analysis, application performance management, input/output optimization, and application test debugging.

Customers typically purchase our distributed systems products under a “per user” based perpetual license. Customers typically purchase our mainframe products under Million Instructions Per Second, or MIPS-based, perpetual licenses. A description of MIPS-based licenses is included in the “Overview” section of “Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following products comprise the Serena ChangeMan product family, Serena TeamTrack, Serena Comparex and the Serena StarTool product family:

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Serena ChangeMan ZMF, Serena ChangeMan DS and Serena TeamTrack are our flagship products. They provide a comprehensive set of SCM and ALM solutions that provide an automated infrastructure to help customers manage and control change throughout the software application life cycle from receipt of the change request, through design of the solution, to the implementation of the resolution, to testing, approvals and finally deployment and, if necessary, backout of the changes in the event of a failure.

Serena ChangeMan ZMF is a flexible, compatible SCM solution that supports multiple mainframe operating systems and database platforms and integrates easily with customers’ existing IT environments by using standard IBM programming languages and working with existing customer security systems, libraries and inventory lists. Serena ChangeMan DS is a comprehensive SCM solution that provides an automated infrastructure to help customers manage and control change throughout the software application life cycle for Windows, UNIX, LINUX, OS/390, USS, and OS/400 environments. Both Serena ChangeMan ZMF and Serena ChangeMan DS manage change by coupling application development, build management, and application deployment. They provide developers and their managers with technological control and integrity throughout the development process enabling them to focus on software quality and reliability. Each product automates the critical components of application change during the software application life cycle including the management of concurrent development efforts by separate programming teams, impact analysis, version control, build and release management, online management of approvals and authorizations, code freezing to prevent further development while testing and auditing, promotion of fixed code into production, and automating the back out of erroneous changes.

Serena TeamTrack automates and enforces the process and workflow associated with software issues, enhancements, and problems that move through the application lifecycle. Serena TeamTrack manages the process of tracking increasingly frequent and critical requests for software change and shortens development cycles by managing, tracking and reporting on the people, processes, and tasks involved with resolving a request. It improves developer productivity by organizing and prioritizing work assignments, activities and information

Serena ChangeMan ECP is a customizable enterprise change portal for managing enterprise change from a Web browser. Serena ChangeMan ECP allows customers to approve changes and view reports from Serena ChangeMan ZMF or Serena ChangeMan DS, giving them a single point of control for change related approvals and reports from the mainframe to the Web. For mainframe users, this is faster, less complicated and more visually appealing than the previous method of logging on to a “green screen” via the Time Sharing Option. Managers can also link change packages across platforms and applications and manage them throughout the life cycle and personalize their view of enterprise change with the product’s MyChangeMan feature.

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Serena ChangeMan ZDD, for z/Series desktop development, allows desktop developers working in their chosen graphical IDE to develop mainframe application code under the control of Serena ChangeMan ZMF. The mainframe files are available through Windows Explorer and remain on the mainframe eliminating costly file transfer issues.

Serena ChangeMan M+R facilitates the management of multiple versions of mainframe software by providing a comprehensive comparison tool that can merge up to eight versions of source code into a single version, and produces a report that compares the different versions and clearly identifies differences and conflicts. M+R can reduce application development costs by enabling separate programming teams to work concurrently on the same parts of an application. By merging different versions of a program’s source code to provide a consolidation of each team’s changes, Serena ChangeMan M+R greatly reduces implementation time and improves the quality of new releases. Serena ChangeMan M+R can be closely integrated with Serena ChangeMan ZMF to provide enhanced concurrent development capabilities.

Serena ChangeMan SSM or System Software Manager detects, tracks and synchronizes changes in multiple environments to improve system integrity and recoverability, which is important for disaster recovery of mainframe system software. Serena ChangeMan SSM provides centralized control to software change implementation and distribution after applications are initially deployed. Serena ChangeMan SSM speeds development and problem resolution by detecting, reporting and recovering from changes across local and remote environments. Serena ChangeMan SSM provides configuration security for the production environment by using fingerprinting technology to audit and track changes enabling system programmers to repair unauthorized changes and to facilitate the replication of authorized changes to remote environments.

Serena Comparex is a comparison SCM product used for efficient mainframe application testing and software quality assurance. Serena Comparex performs fast, accurate, single-step comparisons of the contents of libraries, directories, files or databases by performing line-by-line byte-level comparisons. Serena Comparex performs several functions, including supporting a variety of data types, providing sophisticated comparison algorithms for both data and text, minimizing the scope of comparisons by utilizing key words to compare specific portions of a file, providing direct interfaces to most major databases, and producing detailed reports on the comparison differences.

Serena StarTool FDM is used for complex mainframe file and data management tasks and has extensive editing tools. Serena StarTool FDM provides a comprehensive workbench of utilities that may be used for application and system testing or conversion and recovery support. Serena StarTool FDM enables users to perform many data management tasks, including locating and replacing data and data sets, automatically tracking changes to applications or systems, recreating lost source code, and diagnosing and mapping recovery strategies for file-related problems. Serena StarTool FDM supports a multitude of data types including sequential, load libraries, VSAM, DB2, and IMS.

Serena StarTool DA Batch and CICS are dump management, distribution, analysis and diagnostic systems for both mainframe system and application “abends” or abnormal terminations. Serena StarTool DA is able to display the failing instruction down to the source code level for both COBOL and Assembler Language and display the last transaction screen for CICS failures. Serena StarTool DA reduces the time it takes to analyze code information for solving application abends in batch, CICS and DB2 applications.

Serena StarTool APM is a mainframe performance measurement and analysis system that helps to resolve OS/390 and z/OS job performance issues, whether those jobs are applications, subsystems or tasks. Serena StarTool APM provides performance statistics and allows developers to tune specific areas of an application.

Serena StarTool IOO is an integrated optimization system that automatically tunes the major components of OS/390’s and z/OS’s I/O processing functions to achieve throughput improvements both in batch and on-line. By using Serena StarTool IOO, customers have been able to reduce job turnaround time.

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Serena StarTool RB VSAM is a backup utility for Virtual Storage Access Method (VSAM) data. Serena StarTool RB VSAM detects VSAM changes at the record level and has the ability to back up only those records that have changed. If VSAM data needs to be restored, Serena StarTool RB VSAM provides a simple-to-use function to restore those changes to the desired state. Serena StarTool RB VSAM improves efficiency by reducing the time and resources it takes to backup and restore VSAM data.

Products Under Development

SERENA continues to execute on its vision of managing change to enterprise applications from a single point of control by enhancing existing products and releasing new products based on market requirements. SERENA is focused on improving the functionality and usability of our products worldwide, expanding our integration with important solutions offered by third parties, and increasing the integration among our suites and product families so customers can more readily access the quality, speed and cost advantages of our Enterprise Change Management solutions.

The major focus of the company today is the delivery of the SAFE vision. This vision is an extension of the work that has continued to evolve from the product specialists, architects and designers at SERENA and is in response to research conducted with Serena’s strategic advisory board members. The SAFE vision (Serena Application Framework for Enterprises) takes Software Change Management to the next level of Application Change Management. SAFE provides the capability of managing not only the software assets of the application but also any other asset that can be configured and whose configuration is subject to change. Such assets include Servers, Databases, Routers, among others. Each time an application is changed it invariably includes software and hardware changes; SAFE is an approach to manage all of the Application assets. To accomplish this SAFE needs to have a full understanding of Change Management (the process of changing an asset’s configuration), which it obtains from our proven ChangeMan product set but also it needs to understand Configuration Management (the record keeping of an asset’s configuration settings at any point). The Configuration Management capabilities come from our TeamTrack product.

SAFE is designated to be comprised of six solutions that will become available in the future. A solution is a generalized workflow, a list of assets to be managed, the roles of the users who will work in the workflow and who are responsible for the assets and a number of product integrations. The six solutions are called:

A second critical feature of the SAFE vision is the provision of an open API that enables Serena, customer and third party tools to integrate to provide interoperability amongst tools where none exists today and to ensure that events and data that are changing in one workflow that impact another are automatically reflected in other adjacent workflows. This is achieved through the use “integration solutions” that are a common part of the SAFE vision.

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One of the cornerstones of SERENA’s Enterprise Change Management advantage today is its support of the broad range of platforms and applications prevalent in large enterprises. Today’s environments place an increasing importance on packaged applications, such as Enterprise Resource Planning (“ERP”) systems. We introduced support for SAP ERP systems in June 2002, becoming the only SCM company to achieve SAP Certification. Serena TeamTrack has integrations with Mercury TestDirector, Microsoft Project and with a number of third party SCM solutions. These integrations allow customers to integrate their development environments, testing process and project management with the rest of their development and deployment process, further increasing efficiencies and encouraging collaboration between teams.

Mainframe development continues to evolve. Working with our customers, we recognized the trend for increasing complexity in mainframe development and the need for managing multiple simultaneous projects. To assist in this effort, we released the Enterprise Release Option (“ERO”) to our Serena ChangeMan ZMF product in August 2002. This option allows companies to manage changes to an application that spread across not only components, but also across time, allowing them to assure the quality of the application while increasing the efficiencies of the development organization.

Continuing SERENA’s tradition of customer focused innovation, we were the first company to introduce an XML interface to a mainframe SCM product when we announced Serena XML Services in August 2002. XML forms the basic communications technology supporting multiple integration strategies in the industry, including Web Services. The introduction of Serena XML Services represents a significant event by opening up this critical infrastructure to much easier integration with a variety of other applications in the IT environment, such as Help Desk and Project / Portfolio management systems.

SERENA’s strategy is to integrate its Serena ChangeMan and Serena StarTool product families to provide a higher level of automation, quality and productivity improvements for customers who purchase our entire solution. Having access to the change history and the relevant source or load modules contained in our Serena ChangeMan product family is critical to the fault analysis, application performance management, application testing and debugging and file and data management functions performed by our Serena StarTool product family. Serena is enhancing both our Serena ChangeMan and Serena StarTool product families to provide this integration. The releases containing this integration can be expected throughout 2004.

SERENA may be unable, for technological or other reasons, to develop and introduce these products in a timely manner. Any failure by us to successfully develop, market, sell and support our products would have a material adverse effect on our business, operating results and financial condition. See “Factors That May Affect Future Results—We May Experience Delays in Developing Our Products Which Could Adversely Affect Our Business.”

Technology

SERENA has a number of core technologies that provide the ability to enhance and develop products rapidly and reliably. These technologies fall into two broad categories: development tools and technology infrastructure.

Current and future development plans are based upon a framework known as the SAFE Platform. This platform consists of an XML based, open API for use both within Serena’s own products and those of our customers and partners. This platform enables rapid integration of tools and workflows and is the core element of the SAFE vision. To this end TeamTrack is the foundation of the SAFE Platform and the majority of development activity is either focused on extending this platform or on exploiting it.

We use our own product to manage changes within our application development life cycle. On the mainframe and the distributed platforms the Serena ChangeMan family is used extensively to develop the products and Serena’s TeamTrack product is used to track issues, create project plans, create market requirement documents, to manage the Quality Assurance lifecycle and several other parts of the Serena Development

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Lifecycle. SERENA’s testing and fault analysis tools are used to diagnose errors and provide test coverage. Where third party tools are used, these are integrated with the Serena development tools to ensure optimal productivity.

Our inventory of change management components is extensive and allows for the rapid development of products. Some of these key infrastructure components are:

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Research and Development

SERENA believes that the ability to introduce new and enhanced products to customers will be a key factor for future success. As part of our efforts to generate ideas for enhancing our existing products and for developing new ones, we maintain an ongoing dialogue with our customers who are continually facing new SCM challenges in their evolving IT environments. Serena has devoted and expects to continue to devote significant resources to developing new and enhanced products, particularly distributed systems products and other initiatives aimed at the Web.

Most of our technical personnel have been employed by SERENA for a substantial length of time and their significant knowledge base contributes to SERENA’s ability to understand and address customers’ ALM and

SCM requirements. We believe that attracting and retaining talented software developers who understand the customers’ problems is an important component of product development activities. We encourage our developers to assume responsibility for the design and delivery of our products through our product authorship incentive program that rewards our developers with incentives based on the market success of the applications they design, write, market and support. Competition for developers is intense and any failure by us to continue to attract and retain qualified personnel could have a material adverse effect on our business, operating results and financial condition.

SERENA’s research and development expenses were $13.3 million, $11.8 million and $14.0 million in fiscal 2002, 2003 and 2004, representing 13%, 12% and 13% of total revenues, respectively. We expect research and development expenses will increase in the future as we hire additional research and development personnel to enhance and develop our distributed systems product suite. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

We believe that our ability to develop and introduce enhancements to our products and new products on a timely basis is a key success factor. We expect that we will have to respond quickly to rapid technological change, changing customer needs, frequent new product introductions and evolving industry standards that may render existing products and services obsolete. Serena has in the past devoted and expects in the future to continue to devote a significant amount of resources to developing new and enhanced products. We currently have a number of product development initiatives underway. There can be no assurance that existing or new customers will embrace any enhanced products, new products or product suites. The failure of these products to achieve market acceptance could have a material adverse effect on our business, operating results and financial condition. See “Factors That May Affect Future Results—Our Industry Changes Rapidly Due to Evolving Technology Standards and Our Future Success Will Depend on Our Ability to Continue to Meet the Sophisticated Needs of Our Customers.”

Professional Services and Customer Support

Our services group provides technical consulting, education, customer support and product maintenance to help customers maximize the utilization of SERENA’s products.

Consulting.    SERENA provides a comprehensive range of consulting services to our customers. Our consultants review customers’ existing IT systems and applications and make recommendations for changing those systems and applications and customizing SERENA’s SCM products so that customers can fully realize their benefits. In addition to helping customers customize, install and deploy our software products, our consulting services may also include process reengineering and developing interfaces with customers’ databases, third party proprietary software repositories or programming languages.

We also offer customers more specialized consulting services. These specialized consulting services include our Best Practices Consulting Services, which provide customers with expertise and assistance in defining and developing a best practice change and configuration management architecture and in identifying corresponding products, methods and procedures. Serena’s consulting services are typically billed on a time and materials basis.

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Education.    We offer hands-on training courses for the implementation and administration of our products. Product training is provided on a periodic basis at our headquarters in San Mateo, California, at our offices in London and also at customer sites throughout the United States and Europe. We also offer custom course development for certain of our products. We bill our education services on a per class basis.

Customer Support and Product Maintenance.    We have a staff of customer service personnel who provide technical support to customers. We offer technical support services 24 hours a day, seven days a week via our Internet site, toll free telephone lines, electronic mail, bulletin board service and facsimile lines. Customers are notified about the availability of regular maintenance and enhancement releases via Internet-based electronic mail. Initial mainframe product license fees include one year of product software maintenance and support. Thereafter, customers are entitled to receive software updates, maintenance releases and technical support for an annual maintenance fee equivalent to approximately 17% to 18% of the discounted list price of the licensed product.

Sales and Marketing

In North America, the United Kingdom, Germany, Switzerland, France, and the Benelux and Nordic regions we market our software primarily through our direct sales organization. Our direct sales force works closely with customers to understand and address their ALM and SCM needs. Serena’s North American sales organization includes personnel in the metropolitan areas of Boston, Chicago, Los Angeles, New York, Sacramento, San Francisco, Dallas, Atlanta and Toronto.

In addition to our direct sales and telesales efforts, we have established relationships with distributors, resellers and original equipment manufacturers (“OEM”) located in North America, Spain, Italy, Latin America, Belgium, Hong Kong, Israel, Australia, Japan, Korea and South Africa. These distributors, resellers and OEMs market and sell our software as well as provide technical support, educational and consulting services.

In January 2002, we entered into an OEM Agreement with IBM Corporation (“IBM”) whereby IBM acquired the rights to resell our StarTool APM technology. IBM provides Serena a quarterly royalty report the month after each calendar quarter detailing licenses and maintenance sold to end users during the quarter. We recognized our first revenue from this arrangement in the second quarter of fiscal 2003 and total license revenue for fiscal 2003 and fiscal 2004 was $2.5 million and $4.1 million, respectively.

We market our products through seminars, industry conferences, trade shows, advertising, direct marketing efforts and our Internet site. In addition, we have developed programs that promote an active exchange of information between our existing customers and us. These programs include customer meetings with our senior management at our Executive Briefing Center and focus group meetings with customers to evaluate product positioning. We plan to continue to expand our marketing organization to broaden our market presence.

Competition

The market for our products and services is highly competitive and diverse. The technology for ALM products may change rapidly. New products are frequently introduced and existing products are continually enhanced. Competitors vary in size and in the scope and breadth of the products and services that they offer. Many of our current and potential competitors have greater financial, technical, marketing and other resources than we have. As a result, they may be able to respond more quickly to new or emerging technologies and changes in customer requirements. They may also be able to devote greater resources to the development, promotion and sale of their products than we can. We may not be able to compete successfully against current and future competitors. See “Factors That May Affect Future Results—SERENA Is Subject to Intense Competition in the SCM Industry and We Expect to Face Increased Competition in the Future, Including Competition in the SCM Distributed Systems Market.”

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Competition.    We currently face competition from a number of sources, including:

Competition in the Distributed Systems ALM Market.    We face significant competition as we develop, market and sell our distributed systems products, including Serena ChangeMan DS and Serena TeamTrack. If we are unable to successfully penetrate the distributed systems ALM market, our business and future quarterly and annual operating results will be materially adversely affected. Penetrating the existing distributed systems ALM market will be difficult. Competitors in the distributed systems market include IBM/Rational Software, Computer Associates, MERANT, Microsoft, Telelogic, and other companies.

Future Competition.    We may face competition in the future from established companies who have not previously entered the ALM market or from emerging software companies. Barriers to entry in the software market are relatively low. Increased competition may materially adversely affect our business and future quarterly and annual operating results due to price reductions, reduced gross margins and reduction in market share. Established companies may not only develop their own ALM or SCM solutions, but they may also acquire or establish cooperative relationships with our current competitors, including cooperative relationships between large, established companies and smaller private companies. Because larger companies have significant financial and organizational resources available, they may be able to quickly penetrate the ALM or SCM markets through acquisitions or strategic relationships and may be able to leverage the technology and expertise of smaller companies and develop successful ALM or SCM products. We expect that the software industry, in general, and providers of ALM or SCM solutions, in particular, will continue to consolidate. It is possible that new competitors or alliances among competitors may emerge and rapidly acquire significant market share.

Bundling or Compatibility Risks.    Our ability to sell our products also depends, in part, on the compatibility of our products with other third party products, particularly those provided by IBM. Developers of these third party products may change their products so that they will no longer be compatible with our products. These third party developers may also decide to bundle their products with other ALM or SCM products for promotional purposes. If that were to happen, our business and future quarterly and annual operating results might be materially adversely affected as we may be priced out of the market or no longer be able to offer commercially viable products.

Intellectual Property

Our success will be heavily dependent upon proprietary technology. We rely primarily on a combination of patent, copyright and trademark laws, trade secrets, confidentiality procedures and contractual provisions to protect our proprietary rights. Such laws, procedures and contracts provide only limited protection. We submitted four patent applications for our technology in calendar 1998, four more in calendar 1999, one in calendar 2001 and one in calendar 2002. Of these patents, one was issued in calendar 2001, two were issued in calendar 2002, one was issued in January 2003 and one was issued in February 2004. Other applications are still pending and may never be issued. Even if these patents are issued, they may not provide sufficiently broad protection or they may not prove enforceable in actions against alleged infringers. Despite the precautions that we take, it may be possible for unauthorized third parties to copy aspects of our current or future products or to obtain and use information that we regard as proprietary. In particular, we may provide our licensees with access to our data model and other proprietary information underlying our licensed applications. Such means of protecting our

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proprietary rights may not be adequate. Additionally, our competitors may independently develop similar or superior technology. Policing unauthorized use of software is difficult and some foreign laws do not protect Serena’s proprietary rights to the same extent as United States laws. Litigation may be necessary in the future to enforce our intellectual property rights, to protect our trade secrets or to determine the validity and scope of the proprietary rights of others. Litigation could result in substantial costs and diversion of Serena’s resources and could materially adversely affect our business, operating results, and financial condition.

Third parties may claim that our current or future products infringe their proprietary rights. See “Factors That May Affect Future Results—Third Parties in the Future Could Assert That Our Products Infringe Their Intellectual Property Rights, Which Could Adversely Affect Our Business.” We may receive claims in the future and any such claims could affect our relationships with existing customers and may prevent future customers from licensing our products. Because we are dependent upon a limited number of products, any such claims, with or without merit, could be time consuming, result in costly litigation, cause product shipment delays or require us to enter into royalty or licensing agreements. Royalty or license agreements may not be available on acceptable terms or at all. We expect that software product developers will increasingly be subject to infringement claims as the number of products and competitors in the software industry segment grows and the functionality of products in different industry segments overlaps. As a result of these factors, infringement claims could materially adversely affect our business, operating results and financial condition.

Employees

As of January 31, 2004, SERENA had 341 full-time employees, 93 of whom were engaged in research and development, 119 in sales and marketing, 78 in consulting, education and customer and document support, and 51 in finance, administration and operations. Our future performance depends in significant part upon the continued service of our key technical, sales and senior management personnel. The loss of the services of one or more of our key employees could materially adversely affect our business, operating results and financial condition. Our future success also depends on our continuing ability to attract, train and retain highly qualified technical, sales and managerial personnel. Competition for such personnel is intense, and we may not be able to retain our key personnel in the future. None of our employees are represented by a labor union. We have not experienced any work stoppages and consider our relations with our employees to be good.

Investor Information

We are subject to the informational requirements of the Securities Exchange Act of 1934 (the Exchange Act). Therefore, we file periodic reports, proxy statements and other information with the Securities and Exchange Commission (the SEC). Such reports, proxy statements and other information may be obtained by visiting the Public Reference Room of the SEC at 450 Fifth Street, NW, Washington, DC 20549 or by calling the SEC at 1-800-SEC-0330. In addition, 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.

You can access financial and other information at our Investor Relations web site. The address is www.serena.com. We make available, free of charge, copies of our annual report 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 Exchange Act as soon as reasonably practicable after filing such material electronically or otherwise furnishing it to the SEC, and have made all such reports and amendments to reports available on our web site (see “Investor—SEC Filings”). The contents of our website are not incorporated by reference in this Annual Report on Form 10-K.

Item 2.    Properties

Our principal administrative, sales, marketing, consulting, education, customer support and research and development facilities are located at our headquarters in San Mateo, California. SERENA currently occupies an aggregate of approximately 27,000 square feet of office space in the San Mateo facility and 12,000 square feet of

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office space in the Woodland Hills facility under leases with terms running through March 2008 and April 2006, respectively. Management believes its current facilities will be adequate to meet SERENA’s needs for at least the next twelve months. We believe that suitable additional facilities will be available in the future as needed on commercially reasonable terms.

SERENA also leases office space for sales and marketing in Colorado Springs, Colorado; Roseville, Irvine and Somis, California; Plano and McKinney, Texas; Salt Lake City and Orem, Utah; Chesterfield, Missouri; and New York City, New York and has subsidiaries in Canada, the United Kingdom, Germany, France, Belgium and Sweden.

Item 3.    Legal Proceedings

Not applicable.

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

Not applicable.

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Executive Officers and Directors of the Registrant

The following table sets forth certain information with respect to the executive officers and directors of the Company as of March 31, 2004.