We believe the actions taken by management improved our operating environment and helped restore customer confidence in our company and its products.

As of December 31, 1997, our accrued liabilities included accruals for certain claims against us. During the first quarter of 1998, our lawyers determined that there was no merit to a specific claim for which we had recorded a liability of $1.9 million. Accordingly, we reversed this $1.9 million accrual during the first quarter of 1998. In addition, we reduced an accrued liability related to another specific claim by $2.0 million and $0.8 million during the second and third quarters of 1998, respectively, based on a legal opinion and a settlement offer.

We recorded restructuring charges of $59.6 million and $49.7 million in the second and third quarters of 1997, respectively. The total restructuring expense decreased by $1.2 million during the fourth quarter of 1997 primarily due to adjusting the original estimate of the loss incurred on the sale of land to the actual loss. We recorded restructuring-related adjustments to decrease restructuring expense by $3.3 million, $1.4 million, $2.6 million and $3.0 million in the first, second, third, and fourth quarters of 1998, respectively, and $0.6 million during the first quarter of 1999 primarily due to adjusting the estimated severance and facility charges to actual costs incurred.

In the first quarter of 1997, we recorded a charge of $30.5 million to write down the carrying values of certain of our Japanese subsidiary’s long-lived assets to their fair values. During the same quarter, we also recorded a charge of $14.7 million to write down the carrying value of capitalized software development costs for certain products to their net realizable values. In connection with our acquisition of Red Brick in December 1998, we recorded a charge to operations in the fourth quarter of 1998 of $2.6 million for in-process research and development which had not yet reached technological feasibility and had no alternative future uses. In connection with our acquisition of Cloudscape in October 1999, we recorded a charge of $2.8 million to operations in the fourth quarter of 1999 for merger costs.

During the second quarter of 1999, we incurred a charge of $97.0 million in connection with our entering into a memorandum of understanding regarding the settlement of the private securities and related litigation against us.

Liquidity and Capital Resources

Operating Cash Flows. We generated positive cash flows from operations totaling $18.6 million for 1999 primarily from improved operating profitability and a reduction in cash outflows for accounts payable and accrued liabilities offset by an increase in the amount of license revenue recognized from customer advances and an increase in the effect of changes in current assets and deferred maintenance revenue on operating cash flows.

Investing Cash Flows. Net cash and cash equivalents used for investing activities increased by approximately $21.1 million for 1999 when compared to 1998. This increase was due primarily to a net increase of approximately $21.2 million in our investment in available-for-sale securities of excess cash generated from operating income during 1999. Other significant changes in investing activities during 1999 when compared to 1998 include a $7.0 million decrease in purchases of strategic investments, an increase in proceeds from the sale of strategic investments of $4.3 million, an increase in capital expenditures of $4.0 million and an increase in the capitalization of software development costs of $4.0 million.