The following contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Forward-looking statements relate to expectations concerning matters that are not historical facts. Words such as “projects,” “believes,” “anticipates,” “plans,” “expects,” “intends,” and similar words and expressions are intended to identify forward-looking statements. These forward-looking statements include, but are not limited to: the mix of our revenues between license, service and maintenance revenues; the effect of stock-based compensation on our financial results; our financing plans and capital requirements; our revenues and costs of revenues; our expenses; our potential tax benefit or liabilities; the effect of recent accounting pronouncements and related interpretations; our investments, foreign currency risk, concentration of credit risk, debt service and principal repayment obligations; cash flows and our ability to finance operations from cash flows; seasonality in our business; the dependence of our license revenue on the timing and number of license deals; our continued investment and increased spending on research and development; the increase in absolute dollars in sales and marketing expenses, general and administrative spending and operating expenses; our amortization of acquired intangible assets; and other similar matters. Although we believe that the expectations reflected in the forward-looking statements contained herein are reasonable, these expectations or any of the forward-looking statements could prove to be incorrect, and actual results could differ materially from those projected or assumed in the forward-looking statements. Our future financial condition and results of operations, as well as any forward-looking statements, are subject to risks and uncertainties, including, but not limited to, the factors set forth in Part II, Item 1A. “Risk Factors” of this Quarterly Report on Form 10-Q. All forward-looking statements and reasons why results may differ included in this Quarterly Report on Form 10-Q are made as of the date hereof, and we assume no obligation to update any such forward-looking statements or reasons why actual results may differ.

EXECUTIVE OVERVIEW

We are a leading business integration and process management software company that enables real-time business. We provide a broad range of standards-based software solutions that helps organizations achieve the benefits of real-time business. Real-time business is about giving organizations the ability to sense and respond to changes and opportunities as they arise by enabling the use of current information to execute critical business processes and make smarter decisions.

We are the successor to a portion of the business of Teknekron Software Systems, Inc. (“Teknekron”). Teknekron developed software, known as The Information Bus ^® (“TIB”) technology, for the integration and delivery of market data, such as stock quotes, news and other financial information, in trading rooms of large banks and financial services institutions. In 1992, Teknekron expanded its development efforts to include solutions designed to enable complex and disparate manufacturing equipment and software applications, primarily in the semiconductor fabrication market, to communicate within the factory environment. Teknekron was acquired by Reuters Group PLC (“Reuters”), the global information company, in 1994. Following the acquisition, continued development of the TIB ^® technology was undertaken to expand its use in the financial services markets.

In January 1997, TIBCO was established as an entity separate from Teknekron. We were formed to create and market software solutions for use in the integration of business information, processes and applications. In connection with our establishment as a separate entity, Reuters transferred to us certain assets and liabilities related to our business and granted to us a royalty-free license to the intellectual property from which some of our messaging software products originated.

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TIBCO Products and Services

We offer a wide range of software products that can be sold individually to solve specific technical challenges, but the emphasis of our product development and sales efforts is to create products that interoperate and can be sold together as a suite to enable businesses to be more cost-effective, agile and efficient. These products can help organizations achieve success in four areas: service-oriented architecture (“SOA”), business process management (“BPM”), business optimization and master data management (“MDM”).

Our products are currently licensed by companies worldwide in diverse industries such as financial services, telecommunications, retail, healthcare, manufacturing, energy, transportation, logistics, government and insurance. We sell our products through a direct sales force and through alliances with leading software vendors and systems integrators.

Our revenue consists primarily of license and maintenance fees from our customers and distributors. In addition, we receive fees from our customers for providing consulting services. We also receive revenue from our strategic relationships with business partners who embed our products in their hardware and networking systems as well as from systems integrators who resell our products.

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First-year maintenance typically is sold with the related software license and renewed on an annual basis thereafter. Maintenance revenue is determined based on vendor-specific objective evidence of fair value and amortized over the term of the maintenance contract, typically 12 months. Consulting and training revenues are typically recognized as the services are performed, which services are usually performed on a time and materials basis. Such services primarily consist of implementation services related to the installation of our products and generally do not include significant customization to or development of the underlying software code.

Our revenue is generally derived from a diverse customer base. No single customer represented greater than 10% of total revenue for the three months ended February 28, 2007 or 2006. As of February 28, 2007, no single customer had a balance in excess of 10% of our net accounts receivable. We establish allowances for doubtful accounts based on our evaluation of collectibility and an allowance for returns and discounts based on specifically identified credits and historical experience.

CRITICAL ACCOUNTING POLICIES, JUDGMENTS AND ESTIMATES

The discussion and analysis of our financial condition and results of operations are based upon our Condensed Consolidated Financial Statements, which have been prepared in accordance with generally accepted accounting principles in the United States of America. The preparation of these financial statements requires us to make estimates, assumptions and judgments that can have significant impact on the reported amounts of assets and liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities at the date of our financial statements. We base our estimates, assumptions and judgments on historical experience and various other factors that we believe to be reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions. On a regular basis we evaluate our estimates, assumptions and judgments and make changes accordingly. We also discuss our critical accounting estimates with the Audit Committee of our Board of Directors.

We believe that the estimates, assumptions and judgments involved in revenue recognition, allowances for doubtful accounts, returns and discounts, stock-based compensation, valuation and impairment of investments, impairment of goodwill, intangible assets and long-lived assets, restructuring and integration costs and accounting for income taxes have the greatest potential impact on our Condensed Consolidated Financial Statements, so we consider these to be our critical accounting policies. Historically, our estimates, assumptions and judgments relative to our critical accounting policies have not differed materially from actual results. The critical accounting estimates associated with these policies are described in Part II, Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operation” of our Annual Report on Form 10-K filed with the SEC on February 9, 2007

RECENT ACCCOUNTING PRONOUNCEMENTS

Recent accounting pronouncements are detailed in Note 2 to our Condensed Consolidated Financial Statements.

RESULTS OF OPERATIONS

For purposes of presentation, we have indicated the first quarter of fiscal years 2007 and 2006 as ended on February 28, 2007 and 2006, respectively; whereas in fact, the first quarter of fiscal years 2007 and 2006 actually ended on March 4, 2007, and March 5, 2006, respectively. All amounts presented in the tables in the following sections on Results of Operations are stated in thousand of dollars, except for percentages and unless otherwise stated.

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Total Revenue

Our total revenue consisted primarily of license, consulting and maintenance fees from our customers and partners.

Total revenue in the first quarter of fiscal year 2007 compared to the same quarter last year increased by $11.0 million or 10%. The increase was comprised of a $7.0 million or 11% increase in service and maintenance revenue and by a $4.0 million or 8% increase in license revenue.

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No single customer accounted for more than 10% of total revenue in the first quarter of fiscal years 2007 and 2006, respectively. Our products are licensed by companies worldwide in diverse industries, and a high percentage of our customers are from the financial service and telecommunication sectors.

We experienced growth in total revenue from all major geographic regions. In particular, we had a significant increase in EMEA in the first quarter of fiscal year 2007. See Note 14 to our Condensed Consolidated Financial Statements for amounts of total revenue by region. The percentages of total revenue from the geographic regions are summarized as follows:

Our total revenue may fluctuate from quarter to quarter, based in part upon seasonality in our business.

License Revenue and Cost

License revenue increased 8% in the first quarter of fiscal year 2007 compared to the same quarter last year. The increase was primarily due to increased revenue in EMEA.

Our license revenue in a particular period is dependent upon the timing and number of license deals and their relative size. Selected data about our license revenue deals recognized for the respective periods is summarized as follows:

Our total license revenue in any particular period is to a certain extent dependent on the size and timing of larger license deals. We currently expect the number of license transactions over $100,000 to increase in the remainder of fiscal year 2007, while the size and timing of any particular multi-million dollar deal cannot be reasonably forecasted.

Cost of license revenue mainly consisted of royalty costs and amortization of developed technology acquired through corporate acquisitions. Cost of license revenue remained approximately 3% of total revenue in the first quarter of fiscal year 2007 and the same quarter last year. The increase in absolute dollars in cost of

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license revenue in the current quarter compared to the same quarter last year resulted primarily from an increase of $0.1 million of royalty costs and consulting expenses as well as an increase of $0.1 million in amortization expenses associated with acquired technologies.

We estimate license revenue to be approximately 40% to 55% of our total revenue for fiscal year 2007, and we estimate the cost of license revenue to be approximately 4% to 7% of license revenue for fiscal year 2007.

Service and maintenance revenue increased $7.0 million or 11% in the first quarter of fiscal year 2007 compared to the same quarter last year. This increase was comprised of a $6.7 million increase in maintenance revenue and a $0.3 million increase in consulting and training services revenue. Maintenance revenue increased primarily due to growth in our installed software base.

Cost of service and maintenance revenue consisted primarily of compensation of professional services, customer support personnel and third-party contractors, and associated expenses related to providing consulting services.

The cost of service and maintenance revenue increased by $2.1 million or 7% in the first quarter of fiscal year 2007 compared to the same quarter last year, which was primarily due to the relative proportion of personnel costs. The increase in absolute dollars in the first quarter of fiscal year 2007 compared to the same quarter last year resulted primarily from a $2.4 million increase in employee related costs which was offset by a $0.1 million decrease in third-party contractor compensation and consulting fees and a $0.1 million decrease in stock-based compensation. Increased employee related costs were primarily due to adjustments in net salaries and benefits as well as increased headcount.

We estimate service and maintenance revenue to be approximately 45% to 60% of total revenue for fiscal year 2007. We estimate the cost of service and maintenance revenue to increase in absolute dollars and to be in line with increasing service and maintenance revenue for the remainder of fiscal year 2007.

Research and development expenses decreased by $1.0 million or 4% in the first quarter of fiscal year 2007 compared to the same quarter last year, resulting primarily from a $0.5 million decrease in third-party contractor compensation and consulting fees, a $0.2 million decrease in stock-based compensation and a $0.2 million decrease in travel expenses.

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We believe that continued investment in research and development is critical to attaining our strategic objectives. Accordingly, we estimate that spending on research and development will increase slightly in absolute dollars and will continue to account for approximately 15% to 20% of total revenue for fiscal year 2007.

The $4.3 million or 11% increase in sales and marketing expense in the first quarter of fiscal year 2007 compared to the same quarter last year was primarily due to a $4.2 million increase in employee related costs, a $0.7 million increase in third-party contractor compensation and consulting fees and a $0.2 million increase in recruiting related expenses. These costs were offset by a $0.6 million reduction in our sales incentive expenses on strategic partner programs and a $0.3 million decrease in travel costs. The increase in employee related costs was mainly related to an increase in sales commission as well as increased headcount.

We intend to selectively increase staff in our direct sales and marketing organizations and to increase our marketing efforts during the remainder of fiscal year 2007. Accordingly, we estimate that sales and marketing expenses will increase in absolute dollars and will continue to account for approximately 30% to 35% of total revenue for fiscal year 2007.

General and Administrative Expenses

General and administrative expenses consisted primarily of personnel and related costs for general corporate functions including executive, legal, finance, accounting and human resources, and also includes stock-based compensation cost.

General and administrative expenses increased by $2.4 million or 23% in the first quarter of fiscal year 2007 compared to the same quarter last year, primarily due to a $0.9 million increase in employee related costs, a $0.6 million increase in fees and charges, and a $0.7 million increase in third-party contractor compensation and consulting fees. Increased employee related costs were primarily due to adjustments in net salaries and benefits as well as increased headcount.

We will continue to invest in improving our corporate infrastructure to enhance effective management of internal controls, and we therefore estimate that general and administrative expenses will increase in absolute dollars and will account for approximately 7% to 10% of total revenue for fiscal year 2007.

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Amortization of Acquired Intangible Assets

Intangible assets acquired through corporate acquisitions are comprised of the expected value of developed technologies, patents, trademarks, established customer bases and non-compete agreements, as well as maintenance and OEM customer royalty agreements. Amortization of developed technologies is recorded as a cost of revenue, and amortization of other acquired intangible assets is included in operating expenses.

We expect the amortization of acquired intangible assets to be approximately $3.9 million per quarter for the remainder of fiscal year 2007, excluding any new acquisitions.

Stock-Based Compensation

The stock-based compensation cost was included in the Condensed Consolidated Statements of Operations corresponding to the same functional lines as cash compensation paid to the same employees, as follows:

For the remainder of fiscal year 2007, we estimate our stock-based compensation cost before income taxes to be approximately $14.0 million to $19.0 million.

Interest Income

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The increase in interest income in the first quarter of fiscal year 2007 compared to the same quarter last year was primarily due to interest income received from higher investment yields and higher average investment portfolio balances.

Interest expense was primarily related to a $54.0 million mortgage note issued in connection with the purchase of our corporate headquarters. The mortgage note is payable to a financial institution collateralized by the commercial real property acquired and carries a fixed annual interest rate of 5.09% and a 20-year amortization. The balance of the mortgage note as of February 28, 2007, was $47.7 million. The $33.9 million principal balance that will be remaining at the end of the ten-year term will be due as a final lump sum payment on July 1, 2013. See Note 6 to our Condensed Consolidated Financial Statements for further detail on the mortgage note payable. Interest expenses decreased by $0.3 million in the first quarter of fiscal year 2007 compared to the same quarter last year, which resulted primarily from a release of a transaction tax reserve due to a favorable tax ruling.

Other Income (Expense), Net

Other income (expense) included realized gains and losses on investments, foreign exchange gain (loss) and other miscellaneous income and expense items.

The decrease in other income (expense) in absolute dollars for the first quarter of fiscal year 2007 compared to the same quarter last year was due to unfavorable exchange rate movements on certain foreign currency transactions.

Provision for Income Taxes

The effective tax rate of 36.3% for the three months ended February 28, 2007, differs from the statutory rate of 35% primarily due to the tax impact of certain stock compensation charges under SFAS No. 123(R), state

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income taxes and additional U.S. taxes on repatriated U.K. earnings which was partially offset by research and development credits. The effective tax rate of 54.5% for the three months ended February 28, 2006, differs from the statutory rate of 35% primarily due to the recording of a valuation allowance, the tax impact of certain stock compensation charges under SFAS 123(R), state income taxes and additional taxes related to certain U.K. interest expense deductions.

In December 2006, the Tax Relief and Health Care Act of 2006, which included a retroactive reinstatement of the research and development credit, was signed into law. In the first quarter of fiscal year 2007, we recorded the retroactive fiscal year 2006 research and development credit of $0.6 million on a discrete basis.

We make certain estimates and judgments in determining income tax expense for financial statement purposes. These estimates and judgments occur in the calculation of certain tax assets and liabilities, which arise from differences in the timing of recognition of revenue and expense for tax and financial statement purposes.

As part of the process of preparing our Condensed Consolidated Financial Statements, we are required to estimate our income taxes in each of the jurisdictions in which we operate. This process involves us estimating our current tax exposure under the most recent tax laws and assessing temporary differences resulting from differing treatment of items for tax and accounting purposes. These differences result in deferred tax assets and liabilities, which are included in our Condensed Consolidated Balance Sheets.

We assess the likelihood that we will be able to recover our deferred tax assets. We consider all available evidence, both positive and negative, including historical levels of income, expectations and risks associated with estimates of future taxable income and ongoing prudent and feasible tax planning strategies in assessing the need for a valuation allowance. If it is not more likely than not that we will recover our deferred tax assets, we will increase our provision for taxes by recording a valuation allowance against the deferred tax assets that we estimate will not ultimately be recoverable. As a result of our analysis of all available evidence, both positive and negative, as of February 28, 2007, it was considered more likely than not that our deferred tax assets would be realized with the exception of certain capital loss and foreign tax credit carryovers. The remaining valuation allowance of approximately $10.6 million as of February 28, 2007, will result in an income tax benefit if and when we conclude it is more likely than not that the related deferred tax assets would be realized.

As of February 28, 2007, we believed that the amount of the deferred tax assets recorded on our balance sheet would ultimately be recovered. However, should there be a change in our ability to recover our deferred tax assets, our tax provision would increase in the period in which we determine that it is more likely than not that we cannot recover our deferred tax assets.

Minority Interest, Net of Tax

Minority interest represents the portion of net income belonging to minority stockholders of our consolidated subsidiaries.

Minority Interest is detailed in Note 11 to our Condensed Consolidated Financial Statements.

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LIQUIDITY AND CAPITAL RESOURCES

Current Cash Flows

As of February 28, 2007, we had cash, cash equivalents and short-term investments totaling $547.7 million, representing an increase of $8.1 million from November 30, 2006. Our total cash and cash equivalent balance was $127.2 million as of February 28, 2007. As of February 28, 2007, our short-term available-for-sale investments totaled $421.0 million, primarily in high grade corporate bonds, U.S. government debt, asset-backed and mortgage-backed securities and money market funds.

Net cash provided by operating activities for the three months ended February 28, 2007, was $42.0 million, resulting from net income of $10.4 million, adjusted for $10.7 million in non-cash charges and $20.9 million net change in assets and liabilities. The non-cash charges included depreciation and amortization, stock-based compensation cost, deferred income tax and tax benefits from employee stock options, less excess tax benefits from stock-based compensation recorded on financing activities. Net change in assets and liabilities included a decrease in accounts receivable due to significant cash collections in the first quarter of fiscal year 2007 resulting from a strong revenue quarter in the fourth quarter of fiscal year 2006, a decrease in accrued liabilities due to the fiscal year 2006 corporate annual bonus and commission payments, and decreases in accounts payable and other assets compared to the first quarter of fiscal year 2006.

To the extent that non-cash items increase or decrease our future operating results, there will be no corresponding impact on our cash flows. After excluding the effects of these non-cash charges, the primary changes in cash flows relating to operating activities resulted from changes in working capital. Our primary source of operating cash flows is the collection of accounts receivable from our customers, including maintenance which is typically billed annually in advance. Our operating cash flows are also impacted by the timing of payments to our vendors for accounts payable and other liabilities. We generally pay our vendors and service providers in accordance with the invoice terms and conditions. The timing of cash payments in future periods will be impacted by the terms of an accounts payable arrangement. In addition, we usually pay our annual bonuses in the first quarter.

Net cash used for investing activities was $22.8 million for the three months ended February 28, 2007, resulting primarily from the net purchases of short-term investments of $19.4 million and $2.6 million in capital expenditures.

Net cash used for financing activities was $30.3 million for the three months ended February 28, 2007, resulting primarily from our $41.8 million repurchase of shares of our common stock in the open market, less $9.4 million cash received from the exercise of stock options and the sale of our common stock under our ESPP, and $2.6 million excess tax benefits from stock-based compensation. Additionally, proceeds of $0.2 million were received from minority investors.

In December 2006, the Audit Committee on behalf of our Board of Directors approved a new eighteen-month stock repurchase program pursuant to which we may repurchase up to $100.0 million of our outstanding common stock. As of February 28, 2007, we had repurchased approximately 4.5 million shares of our outstanding common stock at an average price of $9.34 per share pursuant to this program.

We currently anticipate that our operating expenses will grow in absolute dollars for the foreseeable future, and we intend to fund our operating expenses primarily through cash flows from operations. Our capital expenditures are currently expected to be approximately $12.0 million to $16.0 million for the remainder of fiscal year 2007. We believe that our current cash, cash equivalents and short-term investments together with expected cash flows from operations will be sufficient to meet our anticipated cash requirements for working capital, capital expenditures and currently approved stock repurchases for at least the next 12 months.

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Commitments

In June 2003, we purchased our corporate headquarters with a $54.0 million mortgage note to lower our operating costs. The principal balance of $33.9 million that will be remaining at the end of the ten-year term will be due as a final lump sum payment on July 1, 2013. Under the currently applicable terms of the mortgage note agreements, we are prohibited from acquiring another company without prior consent from the lender unless we maintain at least $300.0 million of cash or cash equivalents, and meet other non-financial terms as defined in the agreements. In addition, we are subject to certain non-financial covenants as defined in the agreements. We were in compliance with all covenants as of February 28, 2007.

In conjunction with the purchase of our corporate headquarters, we entered into a 51-year lease of the land upon which the property is located. The lease was paid in advance for a total of $28.0 million, but is subject to adjustments every ten years based upon changes in fair market value of the land. Should it become necessary, we have the option to prepay any rent increases due as a result of a change in fair market value.

We have a $20.0 million revolving line of credit that matures on June 20, 2007. The revolving line of credit is available for cash borrowings and for the issuance of letters of credit up to $20.0 million. As of February 28, 2007, no borrowings were outstanding under the facility and a $13.0 million irrevocable letter of credit was outstanding, leaving $7.0 million of available credit for additional letters of credit or cash borrowings. The $13.0 million irrevocable letter of credit outstanding was issued in connection with the mortgage note payable. The letter of credit automatically renews for successive one-year periods, until the mortgage note payable has been satisfied in full. We are required to maintain a minimum of $40.0 million in unrestricted cash, cash equivalents and short-term investments, net of total current and long-term indebtedness, as well as comply with other non-financial covenants defined in the agreement. As of February 28, 2007, we were in compliance with all covenants under the revolving line of credit.

As of February 28, 2007, we had $4.0 million in restricted cash in connection with bank guarantees issued by some of our international subsidiaries. The cash collateral is presented as restricted cash and included in Other Assets in our Condensed Consolidated Balance Sheets.

As of February 28, 2007, our contractual commitments associated with indebtedness, lease obligations and operational restructuring are as follows (in thousands):

Future minimum lease payments under restructured non-cancelable operating leases are included in Accrued Excess Facilities Costs in our Condensed Consolidated Balance Sheets.

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Indemnification

Our indemnification obligations are detailed in Note 7 to our Condensed Consolidated Financial Statements.