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The following is an excerpt from a 10-K SEC Filing, filed by BINDVIEW DEVELOPMENT CORP on 3/31/2003.
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BINDVIEW DEVELOPMENT CORP - 10-K - 20030331 - PART_I

PART I

ITEM 1. BUSINESS

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Report includes "forward-looking statements" within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. All statements other than statements of historical facts included in this Report, including, without limitation, statements regarding the Company's future financial position, business strategy, planned products, products under development, markets, budgets and plans and objectives of management for future operations, are forward-looking statements. Although we believe that the expectations reflected in these forward-looking statements are reasonable, we cannot assure you those expectations will prove to have been correct. Important factors that could cause actual results to differ materially from the Company's expectations are disclosed in statements set forth under "Cautionary Statements" and elsewhere in this Report, including, without limitation, in conjunction with the forward-looking statements included in this Report. All subsequent written and oral forward-looking statements attributable to us, or persons acting on our behalf, are expressly qualified in their entirety by the Cautionary Statements and such other statements. References to the "Company," "BindView," "we," "us," and "our" refer to BindView Development Corporation and its subsidiaries.

GENERAL

BindView Development Corporation ("BindView" or the "Company") delivers proactive network security-management software and services to help secure, automate and lower the costs of managing information technology infrastructures. Our software helps safeguard our customers' computer networks from the inside out, working to protect those networks from both internal and external threats, while also helping to lower our customers' overall cost of ownership through automation of numerous administrative tasks and security reporting requirements. Since our founding in 1990, more than 20 million licenses of our software have been shipped worldwide to approximately 5,000 companies, including more than 80 of the Fortune 100 and 24 of the largest 25 U.S. banks.

BindView was founded in May 1990 as a Texas corporation. Before 1995 we were known as The LAN Support Group, Inc. Our initial public offering was completed in July 1998 and a follow-on offering in December 1998. On December 18, 1998, we acquired CuraSoft, Inc. ("CuraSoft"), a provider of automated event management software. On March 1, 1999, we acquired Netect, Ltd. ("Netect"), a provider of corporate security software for Internet/Intranet networks. On February 9, 2000, we acquired Entevo Corporation ("Entevo"), a provider of directory management and migration software for Windows NT and Windows 2000 environments.

FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS

Our global business is principally in a single industry segment, as described above under the heading "General". For a discussion of our financial information in this segment, see Note 14 of our Consolidated Financial Statements included elsewhere in this Report.

NARRATIVE DESCRIPTION OF BUSINESS

PRODUCTS AND TECHNOLOGY

BindView currently has three main product lines to help secure, automate and lower the costs of managing IT infrastructures: bv-Control(R), bv-Admin(R) and the BindView Policy Center.

Our bv-Control(R) Software

Many traditional security management solutions (such as firewalls, anti-virus scanners, and intrusion detection systems) typically take action only when an intrusion across the security perimeter is detected. In contrast, BindView's proactive solutions work to find and fix security holes and thus help customers eliminate

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security vulnerabilities before they are exploited. Our software can help protect our customers' networks from internal as well as external threats. This can be important to customers because internal security threats may pose a greater business risk and potential for financial loss than external threats.

Our bv-Control product line provides vulnerability assessment, configuration management, general reporting, and disaster recovery documentation capabilities. Our core bv-Control software products use a centralized management console called the BindView RMS Console and Information Server software, or simply, the "RMS Console" software. The RMS Console software uses an object-oriented architecture that enables a variety of network operating systems and managed objects to be supported through snap-in modules. The RMS Console software supplies a set of common core services to such modules. This architecture provides a development environment that enables our customers to deploy new products more quickly.

Our bv-Control software products provide customers with a flexible querying capability. Our query engine gathers large amounts of data about the network and presents query results to the user. The user can quickly create custom queries, or can select a query from the many sample reports that are provided "out-of-the-box" with our software. The bv-Control software thus helps to detect vulnerabilities within the network and to alert administrators of critical issues so administrators can begin taking corrective action before users experience system downtime or performance problems.

Our various bv-Control software products help to manage daily configuration and operational issues, including password policies, effective-rights analysis, and user accounts. Our products deliver robust reporting and analysis capabilities, and thereby help to reduce downtime from improperly configured servers and access rights and from security holes. Our bv-Control products help improve service levels by identifying and proactively correcting problems quickly and easily; they also help reduce the likelihood of unknown security breaches.

We offer bv-Control software for a variety of operating systems and applications, including but not limited to the following:

- bv-Control for Windows(R) 2000

- bv-Control for NetWare(R)

- bv-Control for NDS(R) eDirectory

- bv-Control for UNIX(R)

- bv-Control for Microsoft(R) Exchange

- bv-Control for Active Directory(R)

- bv-Control for Internet Security

- bv-Control for SAP(R) Systems

- bv-Control for SQL Server

- bv-Control for Desktops

- bv-Control for OS/400

- bv-Control for Web services

Our bv-Admin(R) Software

Our bv-Admin software provides a directory and systems administration solution for security and migration, including roles-based access control for network administrators and help-desk staffs; provisioning of users and machine accounts; and automation of many day-to-day tasks. The bv-Admin software helps network administrators to focus more effectively on the planning and implementation issues that surround technologies such as Windows 2000, Active Directory and Exchange 2000. Our bv-Admin migration software products also

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help organizations to manage proactively the transition from Windows NT, Exchange 5.5, and Novell environments to Windows 2000, Active Directory, and Exchange 2000 environments.

Our bv-Admin software utilizes a standards-based, non-intrusive architecture (ADSI, LDAP, XML, COM, and HTTP). It supports large, distributed environments through its scalable infrastructure. The bv-Admin software provides role-based administration, reducing the cost and complexity of directory management, while improving service levels at the same time. It consolidates multiple directories and domains into a single management console, and provides a powerful Find-and-Fix query facility to help locate and correct directory information. It offers secure remote administration via a Web browser, and automates a variety of complex and repetitive tasks with a powerful, non-proprietary scripting facility.

We offer bv-Admin software for a variety of operating systems and applications, including but not limited to the following:

- bv-Admin for Windows(R) 2000

- bv-Admin for Windows(R) 2000 Migration

- bv-Admin for Novell NDS(R)

- bv-Admin for Novell(R) Migration

- bv-Admin for Microsoft(R) Exchange

- bv-Admin for Microsoft(R) Exchange Migration

- bv-Admin for .Net Web Services

- bv-Admin for Group Policy Objects

The BindView Policy Center

In July 2002 we announced the launch of a new product line, the BindView Policy Center, and released the first product in that line, the BindView Policy Operations Center. The BindView Policy Operations Center, which is hosted for us by META Security Group, is a Web-based system that helps policy officers and system administrators to develop, implement, and manage security policies. Major features of the BindView Policy Operations Center include:

- Security Policy Creation and Development: Organizations can easily document and distribute proprietary security policies throughout the enterprise, helping to ensure that all employees have access to and are aware of relevant security policies -- an important component of meeting basic requirements for protecting information assets. Additionally, existing policies can be easily imported and integrated with the new best practices information.

- Education and Awareness: Organizations can measure user awareness of internal security policies and then document when each user has read and accepted those policies, providing important information for legal and regulatory audits.

- Disaster Recovery and Business Continuity: The Web-based delivery method provides organizations with 24x7 access to their security policies and documentation, regardless of physical location.

- No Internal Installation or Support Costs: Organizations need only to provide the browser and Web access -- BindView Policy Operations Center does not require lengthy or complex installations, thereby reducing implementation delays and ongoing support concerns.

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BACKLOG

We normally do not operate with a backlog because we ship our products shortly after orders are received.

COMPETITION

Currently, our products compete with products from a variety of organizations including but not necessarily limited to the following:

- providers of security analysis and audit products;

- providers of Windows NT management and migration tools;

- providers of network security scanning technology;

- providers of security-policy products and services;

- providers of shareware/freeware software products that perform some of the same functions as our software;

- providers of enterprise resource planning application add-ons for SAP security administration and vulnerability assessment;

- providers of LAN desktop management suites; and

- providers of stand-alone inventory and asset management products.

Some examples of specific companies with whom we compete in particular markets or submarkets are: Aelita Corporation; ConfigureSoft, Inc.; CSI International; Ecora Corporation; Hewlett-Packard Company; Intel Corporation; Intrusion.Com; ISS Group, Inc.; BearingPoint; Microsoft Corporation; NetIQ Corporation; Network Associates Inc.; PentaSafe, Inc. (recently acquired by NetIQ Corporation); PoliVec, Inc.; Quest Software; Symantec Inc.; and Tally Systems Corporation.

In addition, companies such as Novell and Microsoft also offer native tools with their products that provide a basic set of management tools. While the native tools currently offered by these companies provide assistance in certain administrative tasks for their own respective platforms, we believe that they do not help IT administrators or security professionals cope, to the same extent that our products do, with the day-to-day management tasks with which they are challenged. Our software solutions provide an easy-to-use interface and can be scaled to the largest of the heterogeneous environments. We believe we are in a unique position to help address the growing demand for cross-platform security and administration solutions in these installations.

SALES AND MARKETING

We sell our products through direct sales and telesales forces, and, to a lesser extent, through value-added resellers ("VARs"), distributors, and original equipment manufacturers ("OEMs"). In addition, we have strategic marketing relationships with certain professional service organizations and software vendors that provide us with increased visibility, as well as sales leads. Sales cycles typically range from three months for departmental sales and up to twelve months or more for large, enterprise-wide deployments.

SALES FORCE

Direct Sales Force. Our direct sales force focuses on enterprise and large-market customers, generally Fortune 500 companies. Direct sales representatives are in communication with our largest opportunities, using our staff of software engineers to help customers with the technical aspects of our software. Most of our direct sales force is based at our Houston headquarters. We also have direct sales representatives in Frankfurt, Germany; Mexico City, Mexico; Berkshire, England; and Sao Paolo, Brazil.

Telesales Force. Our telesales organization, which is based in Houston, concentrates on emerging and middle-market customers by utilizing our staff of software engineers, as well as the telephone and Internet

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communications for product demonstrations and product sales. When necessary, members of our telesales force also travel to customer locations.

VARS AND DISTRIBUTORS

We have established indirect distribution channels through relationships with VARs and distributors in the United States, Europe, Latin America, and the Pacific Rim, with the highest concentration of such relationships being located in European markets.

Our international VARs and distributors typically perform selected marketing, sales, and technical support functions in their country or region. Each one might distribute directly to the customer, via other resellers, or through a mixture of both channels.

SYSTEMS INTEGRATORS AND SERVICE PROVIDERS

We also market our products through certain service organizations that help customers install, manage, and secure large Windows NT and NetWare networks. Such organizations include certain large systems integrators, outsourcing companies, and certain security auditing groups within accounting firms. Some of these companies sell our products directly to their end-users, while others license the products from us and include these products in their standard toolkits used at their clients' sites.

CHANNEL ALLIANCES AND PROGRAMS

To support our sales organization and channel partners, we have devoted significant resources to building a series of channel alliances and marketing programs. Currently, we have developed relationships with certain companies including Microsoft Corporation; Novell, Inc.; Hewlett-Packard Company; and IBM Corporation. We are a Microsoft Solution Provider and hold Windows 2000 Certified and Microsoft Gold Partner status for several of our products. We also collaborate with certain accounting firms to increase awareness of network security issues.

In addition, our marketing efforts have resulted in our participation in a number of programs such as seminars, industry trade shows, vendor executive briefings, analyst and press tours, advertising and public relations efforts.

CUSTOMER SUPPORT AND PROFESSIONAL SERVICES

We believe high-quality customer support and professional services are requirements for continued growth and increased sales of our products. We have made a significant investment in increasing the size of our support and services organization in the past and plan to continue to do so in the future. Customer support personnel provide technical support by telephone, e-mail and fax, and maintain our Web site and bulletin boards to complement these services. Product upgrades and enhancements are provided at no extra charge to our maintenance customers as part of their maintenance subscriptions.

Our professional services group provides fee-based product training, consulting, and implementation services to help customers maximize the benefits of our products. In addition, we periodically offer training to our channel partners and employees.

COMPANY-SPONSORED RESEARCH & DEVELOPMENT ACTIVITIES

We have been and continue to be an innovator and leader in the development of IT administration and security management solutions. We believe a technically skilled, quality oriented and highly productive software development organization is key to the continued success of new product offerings. Our software development staff is also responsible for enhancing our existing products and expanding our product line. We expect we will continue to invest substantial resources in product development expenditures. Tables showing financial data, including our expenditures on research and development activities are set forth in Item 6, "Selected Financial Data," and in Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations -- Results of Operations -- Operating Costs and Expenses."

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EMPLOYEES

As of December 31, 2002, we employed approximately 525 full-time employees worldwide. We are not subject to any collective bargaining agreement.

PATENTS, TRADEMARKS, AND COPYRIGHTS

We protect our software and other intellectual-property assets under copyright law, trademark law, trade-secret law, and patent law, as applicable. We have obtained U.S. federal trademark registrations for certain trademarks and U.S. copyright registrations for certain works of authorship. For additional details, see the discussion of Proprietary Rights in Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations -- Cautionary Statements," contained elsewhere in this Report.

SEASONALITY

See the discussion of Seasonality in Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations -- Seasonal Fluctuations," contained elsewhere in this Report.

FUTURE INTENTIONS

We intend to continue focusing on proactive security management software and services to help customers secure, automate, and lower costs of managing their IT infrastructures. We anticipate that our future product directions will focus on the "security-policy life cycle," i.e., on improving our customers' ability to develop, implement, and manage security policy. This likely will include expanding the number of platforms supported by our bv-Control and bv-Admin products; selectively expanding the features and functionality of those products; increasing the scope and capabilities of our new BindView Policy Center offering; and possibly developing or acquiring other products relating to security management. We will focus especially on developing and/or acquiring products we believe we can sell to our existing markets, and/or that we believe will leverage our existing technologies and core competencies.

AVAILABLE INFORMATION

BindView's internet address is http://www.bindview.com. BindView's filings with the Securities and Exchange Commission ("SEC"), including its 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, are accessible free of charge at http://www.bindview.com as soon as reasonably practicable after the company electronically files such material with, or furnishes it to the SEC.

ITEM 2. PROPERTIES

All offices we occupy are leased. Our corporate headquarters, which house our principal administrative, sales and marketing, support, and research and development operations, are located in Houston, Texas. Our international subsidiaries currently have office space for sales personnel in Frankfurt, Germany; Berkshire, England; Sao Paolo, Brazil; and Mexico City, Mexico. We also have additional research and development offices in Pune, India. We believe suitable additional or alternative space will be available on commercially reasonable terms, if needed.

ITEM 3. LEGAL PROCEEDINGS

From time to time we are a plaintiff or defendant in various lawsuits and claims arising in the normal course of business. There are no pending (or, to our knowledge, threatened) lawsuits or claims whose outcomes, individually or in the aggregate, are likely to have a material adverse effect on our operations or results.

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

None.

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