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UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Form 10-K

Commission File Number 0-24720

BUSINESS OBJECTS S.A.

157-159 Rue Anatole France, 92300 Levallois-Perret, France

(408) 953-6000

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act:

*	Ordinary shares are not traded in the United States, rather they are deposited with The Bank of New York, as Depositary. Each American depositary share represents one ordinary share.

Securities for which there is a reporting obligation pursuant to Section 15(d)of the Act: None

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

       Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.     þ

       Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Securities Exchange Act of 1934).     þ Yes          o No

       As of June 30, 2003, the last business day of our most recently completed second fiscal quarter, there were 64,254,597 ordinary shares of €0.10 nominal value issued (including 27,989,566 American depositary shares, each corresponding to one ordinary share, and 1,067,675 treasury shares). The aggregate market value of our ordinary shares held by non-affiliates, based upon the closing sale price of our American depositary shares on June 30, 2003 as reported on the Nasdaq National Market, was $1,342,335,226. Ordinary shares and American depositary shares held by each of our officers and directors and by each person owning, to our knowledge, 5% or more of our common stock were excluded from the aggregate market value because such persons may be deemed to be affiliates of Business Objects. This determination of affiliate status is not necessarily a conclusive determination for other purposes.

       As of January 31, 2004, the number of issued ordinary shares was 94,987,528, €0.10 nominal value, (including 42,751,336 American depositary shares, each corresponding to one ordinary share, 1,067,675 treasury shares and 5,574,370 shares held by Business Objects Option LLC). As of January 31, 2004, we had issued and outstanding 89,413,158 ordinary shares of €0.10 nominal value (including 37,176,966 American depositary shares, each corresponding to one ordinary share, and 1,067,675 treasury shares). Of the number of issued shares, as of January 31, 2004, 5,574,370 represented shares issued by us to Business Objects Option LLC, our indirectly wholly

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Documents Incorporated by Reference

       We have incorporated by reference into Part III of this Form 10-K portions of our Proxy Statement for our 2004 Annual Meeting of Shareholders.

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Trademarks

References in this Form 10-K to the “Company,” “Business Objects,” “we,” “our,” and “us” refer to Business Objects S.A. and our consolidated subsidiaries. Business Objects, BusinessObjects, the Business Objects logo, BusinessQuery, BusinessObjects Rapid Marts, BusinessObjects Broadcast Agent, BusinessObjects Set Analyzer, Semantically Dynamic, WebIntelligence, Crystal Decisions, Crystal Enterprise, Crystal Reports, Crystal Analysis, Crystal Applications, and Knowledge Accelerator are trademarks or registered trademarks of Business Objects S.A. in the United States and/or other countries. All other trademarks or trade names referenced in this Form 10-K are the property of their respective owners.

Reporting Currency

All financial information contained in this document is expressed in U.S. dollars, unless otherwise stated.

American Depositary Shares

We sponsor a program that provides for the trading of our ordinary shares in the United States in the form of American depositary shares (“ADSs”). Each ADS represents one ordinary share placed on deposit with The Bank of New York, as depositary (the “Depositary”) and is issued and delivered by the Depositary through its principal office in New York City at 101 Barclay Street, New York, New York, 10286. Under the terms of the Deposit Agreement (the “Deposit Agreement”) dated September 22, 1994, as amended and restated on May 8, 1996, December 30, 1998 and October 15, 2003, ordinary shares may be deposited with the Paris office of BNP Paribas Securities Services, as custodian (the “Custodian”), or any successor or successors to such Custodian. The Depositary provides a variety of services to our investors. The form of the Deposit Agreement is incorporated by reference as an exhibit to this Form 10-K.

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PART I

      This discussion contains forward-looking statements based on our expectations, assumptions, estimates and projections about Business Objects and our industry as of the filing date of this Form 10-K. These statements include, but are not limited to, statements concerning: our business strategy; our intention to capitalize on the opportunity to lead the market in enterprise reporting; our intention to continue to integrate the operations of Crystal Decisions, Inc. (“Crystal Decisions”) with ours; and our belief that the likelihood that certain litigation will not have material and adverse effect on our results of operations and financial condition. These forward-looking statements involve risks and uncertainties. Business Objects’ actual results could differ materially from those indicated in these forward-looking statements as a result of certain factors, as more fully described in Management’s Discussion and Analysis of Financial Condition and Results of Operations in the section captioned “Factors Affecting Future Operating Results” and elsewhere in this Form 10-K. Business Objects undertakes no obligation to update publicly any forward-looking statements for any reason, even if new information becomes available or other events occur in the future.

Item 1.     Description of Business

Our Company

       Business Objects is a leading worldwide provider of Business Intelligence solutions, which we refer to in this document as “Business Intelligence.” We develop, market and distribute software that enables organizations to track, understand and manage enterprise performance within and beyond the enterprise to make better, more informed business decisions. Users can view and interact with key performance indicators in a dashboard, create new queries or reports, access catalogs of reports and do simple or complex analysis of data. Instead of struggling with complex and technical database terminology, users interact with data using business representations of information, or “business objects,” with which they are familiar. This proprietary technology is commonly referred to as the “semantic layer.” Our products are designed to be easy to use and architected to be secure, scalable and extensible. We have sold our products to more than 24,000 customers in over 80 countries.

       In order to implement our vision of offering customers a complete solution and product suite for Business Intelligence, we acquired Crystal Decisions in December 2003. We believe this combination enhanced our leadership position in Business Intelligence, increased our customer base and strengthened our product line. We believe that in terms of product lines, distribution channels, and international presence, the combination of Business Objects and Crystal Decisions is highly complementary. We offer our customers what we believe is the de facto standard in reporting, Crystal Reports, together with leading interactive query and analysis solutions, and world-class enterprise performance management (“EPM”) products for scorecarding and dashboards. Our technology suite is complemented by data integration technologies and specific, customizable analytical applications that we believe provides best practices in business analysis. The product line offers a platform for organizations looking to standardize on a single Business Intelligence solution in order to reduce total cost of ownership.

       We and several of our wholly owned subsidiaries entered into an agreement and plan to acquire Crystal Decisions and its majority stockholder Seagate Software (Cayman) Holdings Corporation (“SSCH”) (collectively the “Crystal Decisions Acquisition”) dated July 18, 2003, and amended August 29, 2003. On December 11, 2003, the Crystal Decisions Acquisition closed for total consideration of $307.6 million in cash and approximately 23.3 million Business Objects ADSs. As of December 11, 2003, Crystal Decisions had delivered 15 million product licenses and had more than 1,800 employees in more than 30 offices worldwide.

       We were incorporated in France in 1990. Our principal executive offices are located at 157-159, rue Anatole France, Levallois-Perret, France and 3030 Orchard Parkway, San Jose, California. Our website is www.businessobjects.com. Information contained on, or accessible

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Industry Background

       Organizations of every size need to analyze and assess their performance quickly and effectively. As a result, every organization has a fundamental and widespread need for useful information. The burden on organizations to make more effective use of information is growing rapidly in today’s environment, which is characterized by increasing data volume, uncertain economic trends, intensified competition and heightened legislative and regulatory requirements for data collection, reporting and disclosure.

       Organizations have spent billions of dollars implementing relational databases and software systems to efficiently capture, organize, store and protect data that measures their performance, including customer sales, expenses, inventory management and employee data. However, often these systems do not effectively address the needs of business end users to access this information to make business decisions. As a result, there is a basic need to access, analyze, understand and deliver information more effectively within and among organizations, in order to allow them to improve performance.

       A broad category of software known as Business Intelligence has been developed to help organizations address the need to transform the organizations’ growing amount of data into useful information.

       Organizations have typically deployed Business Intelligence products that are custom developed or purchased as stand-alone products in a specific department or for an individual project. This approach has resulted in a proliferation of products and systems that are often not integrated with each other or with existing enterprise systems and, as a result, only provide a fragmented view of the overall business. Many of these products and systems are costly and complex to maintain and support. In addition, many Business Intelligence products are designed primarily for sophisticated analytical users and are difficult for the non-technical user to master. Most non-technical users require intuitive and seamless access to data as part of their regular work tasks, regardless of where the data is stored in an organization.

       To allow broad user access to data within and among organizations and to maximize those organizations’ return on investment, a Business Intelligence product should meet a range of complex needs. A Business Intelligence product should integrate data from disparate systems and applications, scale to support large numbers of users and offer flexible reporting that is easy to use and provides a full range of presentation, interactivity and analysis. We believe there is a significant opportunity to provide organizations with a comprehensive Business Intelligence software approach that meets the needs of all types of enterprises and all types of users. In order to accomplish this objective, we believe Business Intelligence products should serve as an underlying information infrastructure that allows every user to access information in a form appropriate for the user.

Business Strategy

       Our business strategy is focused on three key Business Intelligence opportunities:

       Lead the Market in Enterprise Standardization. Companies are beginning to select a standard Business Intelligence solution for their enterprise and we believe this is a significant business opportunity. As enterprises realize the benefits of deploying Business Intelligence software, they often look to standardize on a single enterprise-wide solution that can maximize their return on investment. To capitalize on this opportunity, we have designed our software to be used throughout the enterprise by the maximum number of users with the intention of

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       Capitalize on the Growing Demand for Enterprise Performance Management. EPM is the combination of Business Intelligence, metrics and methodologies to improve enterprise performance. EPM has become a significant force in the market due to a number of factors. The recent economic downturn highlighted managements’ need to use operational dashboards to help their companies more closely monitor their performance. There is a general increase in demand for financial transparency and control. There is pressure for companies to show a real return on their investments in Enterprise Resource Planning (“ERP”) and Customer Relationship Management (“CRM”) systems. While the concepts of EPM are not new, the ability of companies to implement EPM applications is finally possible. Today, the enabling infrastructure of data warehouses and ERP and CRM systems are in place to make EPM meaningful. We believe that we are well-positioned to take advantage of the market interest in EPM applications.

       Address Demand by Developers for Embedded Business Intelligence Functionality. A significant component of our business, strengthened by our acquisition of Crystal Decisions, is the use of Business Intelligence technology embedded within other enterprise software applications. Customers of numerous independent software vendors (“ISVs”) require that the ISVs offer reporting functionality as an embedded complement to the ISV’s primary software applications. Corporate application developers often need to embed reports into custom applications and require the use of object-oriented reporting technology to efficiently address the need. We believe the third-party and custom application market to be strong and one in which we are well positioned to be successful.

Products

       Business Objects offers a complete suite of Business Intelligence software that enable organizations to track, understand and manage enterprise performance. Our solutions leverage the information that is stored in an array of corporate databases, ERP and other packaged applications. Our products include data integration, query, reporting, online analytical processing, information broadcasting, business alerts, analytical application frameworks and pre-packaged analytic applications. Our products also include administration tools that enable information technology professionals to set up and deploy our products across an enterprise. The software can be deployed in web, Windows or mobile environments to provide greater flexibility.

       In April 2003, we released the newest version of our Business Intelligence product suite, Business Objects Enterprise 6, which enables organizations to track, understand and manage their enterprise performance. Enterprise 6 is an update to the entire Business Objects product line.

       In January 2004, we released the newest version of our enterprise reporting products, Crystal Version 10, which combines Crystal Enterprise, an efficiently scalable and reliable enterprise reporting platform, with the powerful report design capabilities of Crystal Analysis and Crystal Reports, which we believe is the de facto standard in reporting. Together, the Crystal Version 10 products provide organizations with the ability to make better, faster decisions for improved business performance.

       We have three product families: Business Intelligence Platform, Enterprise Analytic Applications and Data Integration.

       We currently maintain and support both Business Objects and Crystal Decisions products. We plan to integrate them into a unified product suite in the future.

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Business Intelligence Platform

   Business Objects Reporting

       Our reporting tools provide richly formatted, interactive information delivery. They enable the process of accessing and formatting data, as well as delivering information inside and outside the organization. Business Objects Reporting serves as the foundation of a broader Business Intelligence strategy by providing the most-requested pieces of information reliably and securely — through the web or embedded in enterprise applications.

       Business Objects Reporting products provide organizations with the following benefits:

	•	Powerful authoring — Provides broad data access from any source with data formatting capabilities that create graphically rich, interactive reports.
	•	Scalable infrastructure — Centralizes management and on-demand processing, which drive the secure and reliable delivery of reports to thousands of users both inside and outside the organization.
	•	Open platform — Enables reporting and infrastructure components to be embedded in a wide variety of applications on all of the platform.
	•	Proven technology — Leverages the 10th generation, industry leading Crystal Reports technology that has been licensed to millions of users.

       Our products in this category include Crystal Reports and Crystal Enterprise.

   Business Objects Query and Analysis

       Business Objects Query and Analysis tools allow end users to interact with business information and answer ad hoc questions themselves with minimal knowledge of the underlying data sources and structures.

       Business Objects Query and Analysis tools provide organizations with the following benefits:

	•	Easy to use interface — Users can author their own reports and queries with minimal knowledge of the underlying data sources and structures required. They can then intuitively interact with the data and perform additional analysis.
	•	Powerful query and analysis — Technology resolves complex multi-data source schemas and enables more reliable results and consistent performance.
	•	Open platform — Broad platform and operating systems support provides query and analysis compatibility with existing organizational infrastructures.
	•	Proven technology — Thousands of customers have deployed query and analysis within their intranet and to customers, partners and suppliers via Business Intelligence extranets.

       Our products in this category include BusinessObjects, BusinessQuery, Crystal Analysis, and WebIntelligence.

   Business Objects Information Infrastructure

       Business Objects Information Infrastructure provides a set of common services to simplify deployment and allow for the management of Business Intelligence tools, reports, performance management and analytic applications. End-user components include portal, scheduling and software developer kits, while administrative components include security, auditing and data access features.

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       Business Objects Information Infrastructure products provide organizations with the following benefits:

	•	Broad deployment capability — Built for broad-scale, mission-critical deployment of data access, reporting and information delivery to the extended enterprise.
	•	Centralized management — Information technology departments can control data access, system performance and user functionality from a central location.
	•	Open platform — Designed to integrate seamlessly with existing data, web, application and technology stack investments without imposing a new set of standards and processes.

       Our products in this category include BusinessObjects Developer Suite, BusinessObjects Enterprise Professional, BusinessObjects InfoView and Crystal Enterprise Professional.

Enterprise Analytic Applications

   Business Objects Performance Management

       Business Objects Performance Management helps users track and analyze key business metrics via management dashboards, scorecards and alerting. Goals can be set around metrics and assigned to owners, thereby aligning people with strategies. These products also support group decision-making and analysis through integrated collaboration and workflow capabilities.

       Business Objects Performance Management products provide organizations with the following benefits:

	•	Goal management — Manage goals to align people with strategy, deploy scorecards to track performance and close the loop back to decisions using collaboration and guided analysis.
	•	Flexible dashboarding — Define key performance indicators, customize dashboard display and extend with advanced segmentation and predictive and statistical analytics.
	•	Integrated platform — Use core Business Intelligence tools and information infrastructure including reports, metadata and security.

       Our products in this category include BusinessObjects Application Foundation, BusinessObjects Dashboard Manager, BusinessObjects Performance Manager and BusinessObjects Set Analysis.

   Business Objects Analytic Applications

       Business Objects Analytic Applications provide pre-packaged metrics, reports and analytics covering customers, products and services, supply chain, human resource and finance functions. These applications contain best practices for business analysis and are supported by a customizable framework that enables them to be adapted to the unique needs of each customer.

       Business Objects Analytic Applications provide organizations with the following benefits:

	•	Comprehensive suite — These analytical applications are focused on customers, products and services, supply chain, human resources and finance. These applications are supported by powerful analytic engines which provide for segmentation, alerting and predictive analysis.
	•	Analytics — Guided analysis provides insight into user driven business questions, then intuitively navigates to the next relevant business question. Each analytic application contains prepackaged metrics and analysis techniques, allowing organizations to better

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		understand trends and business drivers such as customer churn, product profitability and supply chain effectiveness.
	•	Flexibility — Analytic applications are built on the core BI tools and information infrastructure and are designed to be customizable and extensible.

       Our products in this category include BusinessObjects Analytics, BusinessObjects Customer Intelligence, BusinessObjects Product and Service Intelligence and Crystal Applications.

Data Integration

       Business Objects Data Integration drives the process of extracting data from disparate sources, transforming and loading it into data marts and warehouses. Delivering data in batch and real time, enterprise-class data integration helps accelerate Business Intelligence deployments and provides metadata management and impact analysis across the Business Intelligence environment.

       Business Objects Data Integration helps provide organizations with the following benefits:

	•	Productive environment — Easy administration from a single graphical tool enabled with high-productivity workflows that integrate more data in less time.
	•	Powerful extraction, transformation and loading (“ETL”) — High performance parallel architecture that can simplify complex integration and deliver data in batch and real time, with the industry’s leading ERP connectivity support.
	•	Complete integration — Reduces time to value and total cost of ownership by tightly integrating the metadata between data integration products and the Business Intelligence platform to provide an integrated, end-to-end Business Intelligence environment.

       Our products in this category include BusinessObjects Data Integrator and BusinessObjects Rapid Marts.

Services

       We believe that, in addition to our product offerings, our service and support organization is a critical component to our success.

       Post-Sales Customer Support and Software Maintenance. Our worldwide network of customer support centers (Americas — San Jose, Lake Mary and Atlanta, USA and Vancouver, Canada; Europe — Maidenhead and Ealing, United Kingdom; and Asia/ Pacific — Tokyo, Japan and Sydney, Australia) are staffed by highly trained support engineers who answer customer inquiries by telephone and email. In 2003, the San Jose and Atlanta support centers earned the prestigious Support Center Practices Certification that recognizes the high quality and consistency of Business Objects customer support organization. This award is presented by Service and Support Professionals Association and is based on a stringent set of performance standards and best practices for delivering world-class technology support. All customer support centers are equipped with a global case tracking system, and a knowledge base and problem reporting system designed to enable engineers to share their knowledge and experience, improve the quality of responses to customers, and reduce response time for customer inquiries. Business Objects’ value-added resellers, systems integrators, consulting partners and distributors, supported by Business Objects’ regional support centers, also provide technical support.

       We offer three levels of customer support programs, Standard, Elite and Premium Support, to better meet customers’ needs. All registered support customers who are on a current maintenance plan have access 24 hours a day, seven days a week to our online customer

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       Software maintenance releases and post-sales technical support are provided to customers for an annual maintenance fee, which is charged in addition to the initial product license fee.

       Customer Education and Training. We offer a comprehensive education and training program to customers and third-party consultants who support our products. Our education services assist customers in getting the most value out of their Business Intelligence investment. The approach starts with a training program to plan for maximizing business value by training both information technology personnel and end users through the appropriate education services and delivery options, as well as providing the right services for continuous on-demand learning. This comprehensive plan enables each audience to obtain the knowledge and skills needed to minimize training time, maximize solution capabilities and increase overall business value.

       Education services offers training via standard or customized courses delivered through classroom and/or on-site training, as well as virtual classrooms delivered via webcasts. In 2003, we launched Knowledge Accelerator, a web-based learning solution. Knowledge Accelerator can be customized to meet the specific needs of end users of different skill levels within an organization. It allows customers to quickly deploy out-of-the-box training and performance support on a variety of our products via their intranet or server, or on a compact disc.

       As users become proficient with our products, they can benefit from continuous learning on a variety of topics to keep up with the evolution of the products and continue to maximize the value they get from Business Intelligence. These courses are offered as a series of webcasts on specific topics such as technical updates, migration training, optimization best practices and custom sessions.

       Consulting Services. Our consulting services provide expertise in the design, development and deployment of enterprise Business Intelligence systems that meet the technical and business requirements of its customers. Our consulting resources are located in major countries around the world and we supplement our resources with third-party certified consulting partners. With in-depth knowledge of enterprise Business Intelligence systems, reporting, enterprise performance management, analytic applications and data integration, our consultants ensure that customers can quickly benefit from the business value that Business Intelligence systems provide.

       To help customers succeed with their Business Intelligence initiatives, we invested heavily in the development of a comprehensive approach toward Business Intelligence deployments: the Business Intelligence Solution Accelerator. This methodology integrates technical and strategic consulting, life cycle learning and post implementation support to provide customers with a flexible deployment strategy. Our consultants have implemented Business Intelligence systems in multiple vertical markets. Consulting services are generally charged to customers on a per consultant per day basis.

Sales and Marketing

       The Crystal Decisions Acquisition brought us complementary strengths in sales channels, geographic presence and marketing.

       We market and sell our products and services directly through our direct sales organizations and indirectly through other sales channels. Our sales and marketing organization is comprised of sales teams, each consisting of employees engaged in telesales, field sales, field technical

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       Our sales cycle varies from customer to customer, typically requiring several months from the time of initial contact until closing a sale. For large customers or larger deals, the sales cycle can be greater than one year. We believe that the Crystal Decisions Acquisition will present significant opportunities for cross-selling and up-selling through our complementary product lines.

       To support our sales efforts, we conduct marketing programs, including advertising, direct mail, public relations, web-based and face-to-face seminars and demonstrations at customer sites and at our offices, appearances at trade shows and ongoing customer communications programs and events.

Product Development

       We believe that innovation, timeliness of product releases and high product quality are essential to maintain a competitive position. Consequently, we dedicate considerable resources to development efforts to enhance existing products and to develop new products. To date, Business Objects has relied primarily on internal development of its products, but has from time to time licensed or acquired technology or products from third parties. The product development group is responsible for the design, development and release of product enhancements, upgrades and new products. We have two large development centers in Levallois-Perret, France and Vancouver, Canada. We also have significant development teams in San Jose, California, and smaller groups located in the U.K. and, through an independent third-party in India. Our customers did not fund any material research and development activities.

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Customers

       As of December 31, 2003, we had sold our products to more than 24,000 customers in over 80 countries. Our customers represent a wide, cross-industry spectrum of companies and major government and educational institutions. During each of the last three years, no customer accounted for 10% or more of our consolidated revenues. A selected list of customers, by industry segment, who made purchases of software licenses, exclusive of maintenance and consulting revenues, in excess of $100,000 in 2003 include:

Competition

       The market for our Business Intelligence software is highly competitive, rapidly evolving and subject to rapidly changing technology. We compete principally with providers of Business Intelligence software, analytic applications, query and reporting software, extraction, transformation and loading software and data warehousing software. Our competitors, which are

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       We believe that the principal competitive factors that impact the market we serve include: price, performance, scalability, ease of use, functionality, product architecture, product quality and reliability, scope of distribution, customer support, name recognition and the scope of product offering. We believe that we are successfully addressing each of these competitive factors. Nonetheless, we expect to face increasing competitive pressures from both current and future competitors in the markets we serve.

Patents and Intellectual Property Protection

       We believe that we own or have licensed all proprietary rights necessary for us to offer our products. Our success depends in part on our ability to protect our property rights in our products. To protect our proprietary information, we use a combination of protections provided by patent, copyright and trademark laws, trade secret laws, employee and third-party nondisclosure agreements and licensing arrangements, including confidentiality provisions.

       We currently have five patents issued in the United States, numbers 5,555,403, 6,247,008 and 6,578,027, which relate to a “Relational Database Access System Using Semantically Dynamic Objects” and numbers 6,289,352 and 6,490,593 which relate to an “Apparatus and Method for Compound Online Analytical Processing in Databases.” We acquired the latter two patents in connection with the Crystal Decisions Acquisition. Our patents expire at various dates between 2011 and 2018. In addition, we have 17 patent applications pending in the U.S. and two foreign patent applications pending. We cannot be sure that any patents will be issued as a result of these applications or that any issued patents will provide effective protection of our intellectual property. We also have obtained a registered trademark in the United States, France and other countries for our name, the Crystal Decisions name, together with our logo, the Crystal Decisions logo, as well as for certain other product names. In addition, we have an ongoing trademark registration program. Despite our efforts, we may not successfully protect our proprietary rights from misappropriation. While our competitive position may be affected by our ability to protect our proprietary information, we believe that factors such as the technical expertise and innovation skills of our personnel, our name recognition and ongoing product support and enhancement may be more significant in maintaining our competitive position.

       Litigation may be necessary to protect and defend our proprietary rights. For example, we are currently involved in several litigation matters regarding our proprietary rights. See Item 3 — Legal Proceedings.

       Our software products are generally licensed to end users pursuant to perpetual licenses. We also license a portion of our technology in object code to third parties. We also license certain software programs from third parties and incorporate these programs into our software products, including an object request broker that allows messaging between software components from Borland Software Corporation and Visual Basic Application functionality from Microsoft Corporation. We use this software primarily to add features that we choose not to develop internally.

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Strategic Relationships

       We have developed or acquired relationships with a wide range of technology vendors and service providers including industry leaders and influencers such as IBM, Microsoft and SAP. In many cases, we have integrated our products with those of the other party and our products are delivered with theirs. We believe these relationships generate new sales opportunities, increase our deployment capacity and enhance our products’ features.

   IBM

       Both Business Objects and Crystal Decisions have had relationships with IBM for many years. In particular, we have a Master Relationship Agreement which entails joint selling, marketing and development. We are a certified partner with IBM’s On Demand initiative and, in late 2003, signed an ISV Advantage Agreement. On the product front, IBM integrates Crystal Enterprise into its Tivoli Data Warehouse solution and also resells a limited version of the product to Tivoli customers.

   Microsoft

       Both Business Objects and Crystal Decisions have had relationships with Microsoft for many years. In particular, Microsoft currently integrates Crystal Reports into its developer product suite and its Visual Studio.NET and Business Solutions products. We receive advance notice of planned upgrades and improvements to Microsoft’s products so that we can integrate our products before shipment. We have a full time staff at Microsoft’s Redmond, Washington facilities. We also coordinate sales and marketing efforts with Microsoft where possible. Through its Business Solutions value-added reseller channel, Microsoft resells our products with its CRM and ERP products.

   SAP

       We have an original equipment manufacturer and reseller arrangement with SAP whereby SAP incorporates our Crystal Enterprise and Crystal Reports products into SAP’s BW 3.0 product, its data warehouse product. We receive advance notice of planned upgrades and improvements to SAP’s products so that we can integrate our products before shipment. We have full time staff at a site adjacent to SAP’s Walldorf, Germany facility.

Other Strategic Relationships

       We also have original equipment manufacturer relationships with approximately 600 ISVs. These companies sell and support our products and/or integrate our products into their applications. As a result of these relationships, we believe our customers may derive incremental value from the other applications by using our integrated reporting and analysis products without a separate deployment or integration cycle. We consider our relationships with these companies to be of strategic importance to us because many of these ISVs are industry leaders and influence adoption of products and technologies by customers.

Employees

       At December 31, 2003, we had 3,924 full-time employees, including:

	•	1,918 in sales and marketing;
	•	936 in research and development;
	•	529 in customer service and support; and
	•	541 in finance and administration.

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       Our employees in France have been represented by the CFDT Union (Confédération Francaise Démocratique du Travail) since October 2002 and by the CGT Union (Confédération Générale du Travail) since November 2002. Our employees in France represented 17% of our labor force at December 31, 2003. The collective bargaining agreements we have entered into with the unions have been and are renewed annually. We have never experienced any work stoppage.

       Under French law, our management is required to hold monthly meetings with a delegation of an elected employee representative, called the comité d’entreprise, to discuss employment matters and our economic condition and to provide appropriate information and documents relating to these matters. As required under French law, two employee representatives are entitled to be present at meetings of our board of directors, but do not have any voting rights.

       We offer our newly hired employees an orientation course ranging from one to three weeks in length presented by Business Objects University, our in-house education program. Generally, most employees complete at least a one week orientation course at our local facilities. Our engineers and other technical staff generally complete a two week training course, in addition to the one week orientation. Our extended training program consists of lectures, problem sets and independent and group projects relating to programmability and deployment of our products. We believe this emphasis on training yields highly qualified employees and promotes camaraderie among our staff.

Directors, Executive Officers and Key Personnel

The following are our directors, executive officers and key personnel and certain information about them at December 31, 2003:

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Where You Can Find Additional Information

       The reports and other information we file with the U.S. Securities and Exchange Commission (the “SEC”) can be read and copied at the SEC’s Public Reference Room at 450 Fifth Street, N.W., Washington D.C. 20549. Copies of these materials can be obtained at prescribed rates from the Public Reference Section of the SEC at the principal offices of the SEC, 450 Fifth Street, N.W., Washington D.C. 20549. You may obtain information regarding the operation of the public reference room by calling 1(800) SEC-0330. The SEC also maintains a website at http://www.sec.gov that contains reports, proxy and information statements and other information regarding issuers that file electronically with the SEC.

       We are subject to the information and periodic reporting requirements of the Securities Exchange Act of 1934 and accordingly we file periodic reports, proxy statements and other information with the SEC. We make our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to such reports available free of charge through our website, www.businessobjects.com, as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC.

       In addition, as a French company quoted on the Premier Marché of Euronext Paris S.A., we are subject to periodic information disclosures about our annual financial statements and our quarterly results which are published in the Bulletin des Annonces Légales Obligatoires, a French legal newspaper. Such publications are available in the French language only on the French Journal Officiel website at http://balo.journal-officiel.gouv.fr/.

       We file further press releases, prospectuses and notes of information relating to our share repurchase programs or any forms relating to transactions impacting our securities with the Autorité des Marchés Financiers (the “AMF,” the new entity resulting from the merger of the Commission des Opérations de Bourse, the Conseil des Marchés Financiers and the Conseil de Discipline de la Gestion Financière, which is in charge of the protection of investors, investors’ information and the proper running of the French securities markets). Such filings are available in the French language only on the AMF website at www.amf-france.org. Our press releases and our French annual reports are available free of charge through our website, www.france.businessobjects.com.

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Item 2.     Description of Property

       Our corporate headquarters are in Levallois-Perret, France, a suburb of Paris, and consists of approximately 163,000 square feet of office space under lease through 2009, with an option to cancel the lease in 2006 without penalty. We are subleasing approximately 42,000 square feet of this facility.

       Our U.S. headquarters are in San Jose, California, and consist of approximately 126,000 square feet of office space under lease through 2011, with a right to extend the lease term for one additional six-year period.

       During the third quarter of fiscal 2003, we terminated the office lease we had for approximately 61,000 square feet in Mountain View, California, which was the previous headquarters of Acta Technology, Inc. (“Acta” or “Acta Technology”), a company we acquired in 2002.

       We also lease approximately 352,000 square feet of office space in Vancouver, Canada, under various leases expiring between 2004 and 2014. We intend to continue to utilize these facilities. As of December 31, 2003, there was 117,000 square feet of excess capacity at one of the Vancouver locations, which we are currently in the process of refurbishing to accommodate our expansion. We lease a facility in Maidenhead, England, measuring approximately 56,000 square feet, under a lease expiring in 2021. We have additional smaller leased field sales and software development offices in the Americas, Europe, Japan and Asia Pacific regions.

       Certain of the leases for previous Crystal Decisions locations will be terminated and the remaining lease payments or termination costs were accrued net of anticipated sublease income at December 31, 2003 as part of the restructuring liability related to Crystal Decisions.

       We believe that our existing facilities are adequate to meet current requirements and that additional space will be available as needed to accommodate any future expansion of our operations.

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Item 3.     Legal Proceedings

       On October 17, 2001, we filed a lawsuit in the United States District Court for the Northern District of California against MicroStrategy Incorporated for alleged patent infringement. The lawsuit alleges that MicroStrategy infringes on our U.S. Patent No. 5,555,403 by making, using, offering to sell and selling its product currently known as MicroStrategy Version 7.0. Our complaint requests that MicroStrategy be enjoined from further infringing the patent and seeks an as-yet undetermined amount of damages. On June 27, 2003, MicroStrategy filed a motion for summary judgment that its products do not infringe our patent. On August 29, 2003, the Court ruled that our patent was not literally infringed and that we were estopped from asserting the doctrine of equivalents and dismissed the case. We have appealed the Court’s judgment to the Court of Appeals for the Federal Circuit and anticipate a ruling on the appeal in early 2005.

       On October 30, 2001, MicroStrategy filed an action for alleged patent infringement in the United States District Court for the Eastern District of Virginia against us and our subsidiary, Business Objects Americas. The complaint alleges that our software products, BusinessObjects Broadcast Agent Publisher, BusinessObjects Broadcast Agent Scheduler and BusinessObjects Infoview, infringe MicroStrategy’s U.S. Patent Nos. 6,279,033 and 6,260,050. In December 2003, the Court dismissed MicroStrategy’s claim of infringement on U.S. Patent No. 6,279,033 without prejudice. Trial on U.S. Patent No. 6,260,050 originally set for April 12, 2004 has been continued by the Court to June 2004. We believe that we have valid defenses to this action and will continue to defend it vigorously.

       In April 2002, MicroStrategy obtained leave to amend its patent claims against us to include claims for misappropriation of trade secrets, violation of the Computer Fraud and Abuse Act, tortuous interference with contractual relations and conspiracy in violation of the Virginia Code seeking injunctive relief and damages. On December 30, 2002 the Court granted our motion for summary judgment and rejected MicroStrategy’s claims for damages as to the causes of action for misappropriation of trade secrets, Computer Fraud and Abuse Act and conspiracy in violation of the Virginia Code. Trial of the trade secret claim for injunctive relief and the sole remaining damages claim for tortious interference with contractual relations started on October 20, 2003. On October 28, 2003, the Court granted judgment as a matter of law in our favor and dismissed the jury trial on MicroStrategy’s allegations that we tortiously interfered with certain employment agreements between MicroStrategy and its former employees. The Court took MicroStrategy’s claim for misappropriation of trade secrets under submission and has yet to rule. The only relief which remains available under the Court’s prior rulings is for an injunction. MicroStrategy also seeks an award of its attorneys’ fees in an undisclosed amount, should they prevail on the injunction claim. We do not believe that any attorneys’ fees awarded will be material.

       On December 10, 2003, MicroStrategy filed an action for patent infringement against Crystal Decisions in the United States District Court for the District of Delaware. We became a party to this action when we acquired Crystal Decisions. The complaint alleges that the Crystal Decisions software products Crystal Enterprise, Crystal Reports, Crystal Analysis and Crystal Applications infringe MicroStrategy’s U.S. Patent Nos. 6,279,033, 6,567,796 and 6,658,432. The complaint seeks relief in the form of an injunction, unspecified damages, an award of treble damages and attorney fees. Our investigation of this matter is at a preliminary stage and no discovery has been obtained. As a result, we are not in a position to opine as to the merits of the suit or the potential exposure to us. We intend vigorously to defend this case.

       In November 1997, Vedatech Corporation commenced an action in the Chancery Division of the High Court of Justice in the United Kingdom against Crystal Decisions (UK) Limited, now a wholly owned subsidiary of Business Objects Americas. The liability phase of the trial was completed in March 2002, and Crystal Decisions prevailed on all claims except for the quantum meruit claim. The court ordered the parties to mediate the amount of that claim and, in August 2002, the parties came to a mediated settlement. The mediated settlement was not material to

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       In October 2003, Vedatech and Mani Subramanian filed an action against Crystal Decisions, Crystal Decisions (UK) Limited and Susan J. Wolfe, Vice President, General Counsel and Secretary of Crystal Decisions, in the United States District Court, Northern District of California, San Jose Division, alleging that the August 2002 mediated settlement was induced by fraud and that the defendants engaged in negligent misrepresentation and unfair competition. In October 2003, Crystal Decisions (UK), Crystal Decisions (Japan) K.K. and Crystal Decisions Inc. filed an application with the High Court of Justice claiming the proceedings in the United States District Court, Northern District of California, San Jose Division were commenced in breach of an exclusive jurisdiction clause in the settlement agreement and requesting injunctive relief to restrain Vedatech from pursuing the United States District Court proceedings. A hearing in the High Court of Justice took place in January 2004 to determine whether the injunction should be granted. The hearing was continued and concluded on March 9, 2004. The Court has not yet rendered its decision.

       Although we believe that Vedatech’s basis for seeking to set aside the mediated settlement and its claims in the October 2003 complaint is meritless, the outcome cannot be determined at this time. If the mediated settlement were to be set aside such an, outcome could adversely affect our financial position, liquidity and results of operations.

       On July 15, 2002, Informatica Corporation filed an action for alleged patent infringement in the United States District Court for the Northern District of California against Acta. We became a party to this action when we acquired Acta in August 2002. The complaint alleges that the Acta software products infringe Informatica’s U.S. Patent Nos. 6,014,670, 6,339,775 and 6,208,990. On July 17, 2002, Informatica filed an amended complaint alleging that the Acta software products also infringe U.S. Patent No. 6,044,374. The complaint seeks relief in the form of an injunction, unspecified damages, an award of treble damages and attorneys fees. We have answered the suit, denying infringement and asserting that the patents are invalid and other defenses. We intend to defend ourselves vigorously. The potential costs associated with an adverse outcome of this matter cannot be reasonably estimated at this time. The August 16, 2004 trial date previously set by the Court has been vacated.

       We are also involved in various other legal proceedings in the ordinary course of business none of which we believe to be material to our financial condition and results of operations.

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       An ordinary and extraordinary general meeting of shareholders of Business Objects was held on December 11, 2003 at 5:00 p.m., Paris time, at which meeting our shareholders took the following action.

       Within the authority of the extraordinary general meeting, the following items were voted on:

	1.	Approval of the acquisition of Crystal Decisions and SSCH by Business Objects S.A. and the other transactions contemplated by the Agreement and Plan of Merger, dated as of July 18, 2003, as amended on August 29, 2003.

	2.	Approval of the method for the calculations of consideration, the amount of the capital increase, the amount and recording of the contribution premium and approval of the amendment of the articles of association.

	3.	Authorization to issue warrants to subscribe to a maximum number of shares reserved for issuance to Mr. David J. Roux.

	4.	Authorization to increase the share capital reserved for subscription by Business Objects S.A. Employee Benefits Trust under Business Objects’ 1995 International Employee Stock Purchase Plan.

	5.	Authorization to increase the share capital reserved for subscription by employees under the French Employee Savings Plan.

	6.	Authorization to issue securities giving immediate or deferred access to the share capital with preferential subscription right.

	7.	Authorization to issue securities giving immediate or deferred access to the share capital without preferential subscription right.

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	8.	Authorization of the modification of the method for determination of the maximum annual increase in the number of shares which may be subscribed for or purchased pursuant to our 2001 Option Plan.

       Within the authority of the ordinary general meeting, the following items were voted on:

	9.	Approval of the appointment of Mr. David J. Roux as director.

	10.	Approval of the increase of the aggregate amount of authorized directors’ fees.

	11.	Approval of the full powers of attorney granted to carry out registrations and formalities.

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PART II

Item 5.     Market for Registrant’s Common Equity and Related Shareholder Matters

U.S. Market Information

       We sponsor a program that provides for the trading of our ordinary shares in the United States in the form of ADSs. Each ADS represents one ordinary share placed on deposit with The Bank of New York, as Depositary and is issued and delivered by the Depositary through its principal office in New York City at 101 Barclay Street, New York, New York, 10286. Under the terms of our deposit agreement with the Depositary, ordinary shares may also be deposited with the Paris office of BNP Paribas Securities Services, as Custodian, or any successor or successors to such Custodian. Our ADSs have been quoted on the Nasdaq National Market since September 1994 under the symbol “BOBJ”.

French Market Information

       Our ordinary shares have been listed on the Premier Marché of Euronext Paris S.A. since November 1999 under the ISIN code FR0004026250. The Premier Marché is a regulated market managed and operated by Euronext Paris S.A., the organization that manages and operates the Premier Marché.

       Admission to the Premier Marché is subject to certain capital adequacy and liquidity requirements determined by Euronext Paris S.A. In addition, companies applying for listing on the Premier Marché are required to publish comprehensive information regularly and to keep the public informed of events likely to affect the market price of the securities.

       Official trading of listed securities on Euronext Paris S.A. is transacted through authorized financial institutions that are members of Euronext Paris S.A. Trading on the Premier Marché takes place continuously on each business day from 9:00 a.m. through 5:25 p.m. (Paris, France time), with a pre-opening session from 7:15 a.m. through 9:00 a.m., a pre-closing session from 5:25 p.m. to 5:30 p.m. during which transactions are recorded but not executed, a closing auction at 5:30 p.m., and a trading-at-last phase from 5:30 p.m. to 5:40 p.m. each day after the closing call. Any trade that occurs after the close of a stock exchange session is recorded on the next business day at the previous session’s closing price for that security.

       Euronext Paris S.A. has introduced continuous electronic trading during trading hours for most actively traded securities. Euronext Paris S.A. publishes a daily official price list that includes, among other things, price information on listed securities.

       Euronext Paris S.A. places securities listed on the Premier Marché in one of two categories (Continu or Fixing) depending on their trading volume. Our ordinary shares are placed in the category known as Continu, which includes the most actively traded securities. To be placed in the category Continu, Euronext Paris S.A. requires, among other things, that a company already listed on a regulated market of Euronext Paris S.A. be the object of a minimum of 2,500 trades per year. Our ordinary shares are part of the Euronext 150, IT CAC and IT CAC 50 indexes.

       Since September 25, 2000, all trading on the Premier Marché of Euronext Paris S.A. is performed on a cash settlement basis on the third day following the trade. However, a Deferred Settlement Service (Service à Règlement Différé or “SRD”) allows investors who elect this service to benefit from leverage and other special features of the previous monthly settlement market. The service is only available for trades in securities that have both a total market capitalization of at least €1 billion and represent a minimum daily average trading volume of €1 million on Euronext Paris S.A. and that are cited in a list published by Euronext Paris S.A. Investors in shares eligible for SRD can elect on the determination date (date de liquidation), which is, at the latest, the fifth trading day before the end of the month, either to settle the trade by the last trading day of the month or to pay an additional fee and postpone the settlement

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       Ownership of equity securities traded on a deferred settlement basis is considered to have been transferred only after they have been registered in the purchaser’s account. In accordance with French securities regulations, any sale of securities executed on a deferred settlement basis during the month of a dividend is deemed to occur after payment of the dividend. The account of the purchaser having purchased the securities prior to the date of the dividend payment, but during the month of a dividend payment date, is credited with an amount equal to the dividend paid and the seller’s account is debited by the same amount.

       Prior to any transfer of securities held in registered form on the Premier Marché, the securities must be converted into bearer form and accordingly inscribed in an account maintained by an accredited intermediary with Euroclear France S.A., a registered clearing agency. Transactions in securities are initiated by the owner giving instruction (through an agent, if appropriate) to the relevant accredited intermediary. Trades of securities listed on the Premier Marché are cleared and settled through Euroclear France S.A. and using Clearing 21 (a continuous net settlement system). A fee or commission is payable to the broker-dealer or other agent involved in the transaction.

       Trading in securities listed on the Premier Marché may be suspended by Euronext Paris S.A. if quoted prices exceed certain price limits defined by the regulations of Euronext Paris S.A. In particular, if the quoted price of a security categorized as Continu varies by more than 10% from the previous day’s closing price, Euronext Paris S.A. may suspend trading for up to 4 minutes. Further suspensions for up to four minutes are also possible if the price again varies by more than 10% from the threshold at which the suspension was initiated. During the continuous trading session, Euronext Paris S.A. may also suspend trading for a four minute period if the price varies by more than 2% from the last traded price. Euronext Paris S.A. may also suspend trading of a security listed on the Premier Marché in certain other limited circumstances, including for example, the occurrence of unusual trading activity in the security. In addition, in exceptional cases, the AMF may also suspend trading.

High and Low Price Range

       The following table sets forth the range of quarterly high and low closing sales prices in U.S. dollars for our ADSs on the Nasdaq National Market and in euros for our ordinary shares on the Premier Marché for each full quarterly period within the two most recent fiscal years.

       At December 31, 2003, there were 94,903,697 ordinary shares of €0.10 nominal value issued (including 43,736,285 ADSs, each corresponding to one ordinary share which were held by 64 shareholders of record, 1,067,675 treasury shares and 5,737,437 shares held by Business Objects Option LLC). Of these issued shares there were 89,166,260 ordinary shares outstanding (including 37,998,848 ADSs, each corresponding to one ordinary share and

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       We have not declared or distributed any cash dividends on our ordinary shares. Payment of dividends is fixed by the ordinary general meeting of shareholders at which the annual accounts are approved following recommendations of the board of directors. Net income in each fiscal year after deduction for legal reserves is available for distribution to our shareholders as dividends, subject to the requirements of French law and our bylaws. We currently intend to retain our earnings to finance future growth and, therefore, do not anticipate paying any cash dividends on our ordinary shares in the foreseeable future.

       The following selected financial data should be read in conjunction with the Consolidated Financial Statements and related Notes thereto appearing elsewhere in this Form 10-K. We have derived that statement of income data for the years ended December 31, 2003, 2002 and 2001 and the balance sheet data as of December 31, 2003 and December 31, 2002 from the consolidated audited financial statements included elsewhere in this Annual Report on Form 10-K. The statement of income data for the years ended December 31, 2000 and 1999 and the balance sheet data as of December 31, 2001, 2000 and 1999 were derived from the consolidated audited financial statements that are not included in this Annual Report. The consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) and adjusted to reflect the three-for-two stock split effected March 12, 2001 and the two-for-one stock split effected January 20, 2000. We have not declared or distributed any cash dividends on our ordinary shares. Historical results are not necessarily indicative of results to be expected for future periods, particularly in light of the Crystal Decisions Acquisition.

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(1)	We acquired Crystal Decisions and SSCH on December 11, 2003 for a total purchase price of $1.2 billion as further described in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Item 7 of this Annual Report on Form 10-K. The purchase price consisted of the payment of $307.6 million in cash to former stockholders of Crystal Decisions and SSCH, which was paid out of general cash reserves, and 23.3 million ADSs. We acquired the fair value of the net tangible and intangible assets on purchase, including $978.0 million of goodwill and $142.7 million of amortizable intangible assets. The statement of income for 2003 includes the revenues and expenses of Crystal Decisions for the 20 days ended December 31, 2003. The Crystal Decisions Acquisition had a $38.1 million negative impact on operating income for 2003 due to the $28.0 million write-off of acquired in-process research and development, $2.2 million in amortization of acquired intangible assets and deferred compensation, $7.5 million in integration related costs and $7.8 million in restructuring costs for the combined company in 2003. These costs were partially offset by the $7.4 million of operating income earned by Crystal Decisions during the 20 days in 2003 that we operated as a combined company.
(2)	Effective with our adoption of Statement of Financial Accounting Standard No. 142, “Goodwill and Other Intangible Assets” (“FAS 142”) effective January 1, 2002 we no longer

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	amortize goodwill. See Note 4 in Item 8 of this Form 10-K for a reconciliation of reported net income and net income adjusted for the adoption of FAS 142 for the years ended December 31, 2003, 2002 and 2001.

US-French GAAP Reconciliation

       As we are listed on both the Premier Marché and the Nasdaq National Market in the United States, we are required to separately report consolidated financial statements prepared in accordance with accounting principles generally accepted in France (“French GAAP”) and in accordance with U.S. GAAP. Prior to 2002, there were not significant differences from operating results presented under French GAAP and U.S. GAAP. Effective 2002, there was a significant difference in the results of operations and financial position due to the adoption of FAS 142 under U.S. GAAP, but not French GAAP. As a result of the Crystal Decisions Acquisition, there were additional differences identified in 2003.

       The following table sets forth the reconciliation of net income under U.S. GAAP to French GAAP (in thousands):

(1)	In accordance with FAS 142, we no longer amortize goodwill and other indefinite lived intangible assets, but instead review them annually for impairment or more frequently if impairment indicators arise. As French GAAP does not have a rule similar to FAS 142, we continue to amortize goodwill and other indefinite lived intangible assets on a straight-line basis over their estimated useful lives for French GAAP reporting.
(2)	FAS 133, “Accounting for Derivative Instruments and Hedging Activities” requires the we recognize all derivative instruments either as assets or liabilities in the balance sheet at fair value. Gains or losses resulting from changes in the value of derivatives are accounted for depending on the intended use of the derivative and whether it qualifies for hedge accounting. Under French GAAP, derivative instruments are commitments and are not recorded on the balance sheet.
(3)	Business Objects assumed the as-converted outstanding options of former Crystal Decisions optionees. These options were valued at fair value under French GAAP and an unrealized loss on the options was recorded based on the difference between the fair value of the shares and the exercise price of the underlying options. Any exercises of these options are accounted for as a decrease in the unrealized loss on options. Under U.S. GAAP, any exercise of options is accounted for as an increase in shareholders’ equity. In addition, under French GAAP, the deferred compensation on unvested options and the related amortization over the service period are not recognized.

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       The following discussion and analysis should be read together with our Consolidated Financial Statements and the Notes to those statements included elsewhere in this Form 10-K. This discussion contains forward looking statements based on our current expectations, assumptions, estimates and projections about Business Objects and our industry. These forward-looking statements involve risks and uncertainties. Business Objects’ actual results could differ materially from those indicated in these forward looking statements as a result of certain factors, as more fully described in the “Factors Affecting Future Operating Results” section of this Management’s Discussion and Analysis of Financial Condition and Results of Operations and elsewhere in this Form 10-K. Business Objects undertakes no obligation to update publicly any forward looking statements for any reason, even if new information becomes available or other events occur in the future.

OVERVIEW

Our Business

       Business Objects is a leading worldwide provider of Business Intelligence solutions. We develop, market and distribute software that enables organizations to track, understand and manage enterprise performance within and beyond the enterprise to make better, more informed business decisions. Users can view and interact with key performance indicators in a dashboard, create queries and reports, access catalogs of reports and do simple or complex analysis of data. Users generally interact with data using business representations of information, or “business objects,” with which they are familiar. We have one reportable segment — Business Intelligence software products.

Sources of Revenues and Expenses

       We generate net license fees from the sale of licenses to use our software products. Historically, we have recognized a substantial portion of our revenues in the last month of a quarter.

       We derive our software license updates and support (maintenance) revenues from selling technical support services and rights to receive product updates, when and if we make them available, to customers who have bought software licenses from us. Our maintenance agreements generally have a term of one year and are typically renewed on an annual basis.

       Our professional services organization earns revenues for consulting and training to plan and execute the deployment of our products when requested by the customer. In addition, we provide training to our customers’ employees to enhance their ability to fully utilize the features and functionality of the products purchased.

       Our cost of net license fees consists primarily of materials, product packaging, distribution costs, related fulfillment personnel and third-party royalties. Our cost of license updates and support revenues (cost of maintenance revenues) consists primarily of personnel and related overhead costs for technical support, training, consulting and the cost of materials delivered with product upgrades and enhancements.

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       Sales and marketing expenses include salaries, benefits, commissions and bonuses earned by sales and marketing personnel, advertising, product promotional campaigns, promotional materials, travel, facilities and other overhead and related costs. Research and development expenses are expensed as incurred and consist primarily of personnel and related costs associated with the development of new products, the enhancement of existing products, quality assurance and testing, and facilities and other related costs. General and administrative expenses consist primarily of personnel costs for finance, legal, human resources and other administrative costs. Acquired in-process research and development expense represents the fair value of projects of acquired companies that had not reached technological feasibility and had no future alternative use. Restructuring expenses include costs to involuntarily terminate employees and exit facilities in accordance with an approved restructuring plan.

Key Performance Indicators

       Operating income and net income per ordinary share and ADS decreased in 2003 and 2002, in spite of growth in revenues, largely due to purchase accounting, integration and restructuring charges related to business acquisitions in 2003 and 2002.

Key Events

       On December 11, 2003, we acquired Crystal Decisions, for its complementary geographical strengths, products, services and solutions that allow us to provide a more complete suite of Business Intelligence products to a broader range of business users. The Crystal Decisions Acquisition did not result in any new reportable segments.

       The Crystal Decisions Acquisition had a $38.1 million negative impact on operating income for 2003 due to the $28.0 million write-off of acquired in-process research and development, $2.2 million in amortization of acquired intangible assets and deferred compensation, $7.5 million in integration related costs and $7.8 million in restructuring costs for the combined company in 2003. These costs were partially offset by the $7.4 million of operating income earned by Crystal Decisions during the 20 days in 2003 that we operated as a combined company.

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       As our 2003 results of operations included only 20 days of Crystal Decisions’ revenues and expenses, our historical results are not expected to be indicative of our future results. In addition, we will incur certain acquisition related charges in the future at levels that we have not experienced in the past. The following table shows 2003 actual and estimated 2004 to 2008 acquisition related amortization, restructuring and in-process technology expenses resulting from the Crystal Decisions Acquisition.

   New Products

       We acquired a suite of leading enterprise reporting products through the Crystal Decisions Acquisition that we believe will strengthen the enterprise reporting capability of our Business Intelligence product offerings. We recognized $26.5 million in net license and service revenues from these products during the 20 days in 2003 following the acquisition.

       We released Enterprise 6, a new version of our core Business Intelligence products, in the second quarter of 2003. This was a key business driver in the second half of 2003 as it replaced our maturing product lines. Enterprise 6 represented 17% of total net license fees in 2003 and reached 34% of total net license fees in the fourth quarter of 2003.

       In August 2002, we acquired our data integration product family through the purchase of Acta. Data integration products added $14.0 million in net license fees in 2003, and $3.9 million in 2002 during the four months following the acquisition.

       In recent years, we have developed a suite of analytic applications products that have accounted for $25.7 million, $20.9 million and $8.0 million in net license fees in 2003, 2002 and 2001, respectively.

Impact of Foreign Currency Exchange Rate Fluctuations on Results of Operations

       The translated U.S. dollar value of our revenues and expenses are impacted by changes in foreign currency exchange rates because we conduct a significant portion of our business in currencies other than the U.S. dollar, the currency in which we report our financial statements. Historically, we have generated a significant portion of our revenues and incurred a significant portion of our expenses in euros, British pounds sterling and Japanese yen. In the future, we will incur a significant portion of our expenses in Canadian dollars because of the Crystal Decisions Acquisition.

       The impact of fluctuations in foreign currency exchange rates on our net operating income has been mitigated by the fact that the level of our foreign denominated expenses have tended to be largely offset by the level of our foreign denominated revenues.

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       The following table summarizes the impact of fluctuations in foreign currency exchange rates, assuming for 2003 results that foreign exchange rates in 2003 had remained constant with 2002 rates, for 2002 results that foreign exchange rates in 2002 had remained constant with 2001 rates and for 2001 rates that foreign exchange rates in 2001 had remained constant with 2000 rates.

       Our operating results may be adversely impacted by foreign currency exchange rate fluctuations in the future. As of December 31, 2003, we held forward exchange contracts to mitigate some of our exposure to the risk of changes in foreign currency exchange rates. We cannot predict the effect of exchange rate fluctuations upon our future results. Although we may hedge our foreign exchange risk in the future, we cannot be sure that any hedging techniques we may implement will be successful or that our business, results of operations, financial condition or cash flows will not be adversely affected by exchange rate fluctuations.

RESULTS OF OPERATIONS

Revenues

       The following table shows the change in revenues (in millions of dollars, except percent changes):

   Net License Fees

       Net license fees grew 13% in 2003 compared to 2002 primarily due to 20 days of revenues from Crystal Decisions (included in the Business Intelligence Platform product family), which was acquired on December 11, 2003, our first full year of data integration sales compared to only four months of sales in 2002 and favorable fluctuations in foreign exchange rates.

       The 2% decrease in net license fees in 2002 compared to 2001 was primarily attributable to the weak information technology spending environment in 2002 offset partially by net license fees from our newer product families, Enterprise Analytic Applications and Data Integration.

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   Service Revenues

       Revenues from services increased as a percentage of total revenues during both 2003 and 2002 to 51% and 46%, respectively, from 40% in 2001, primarily due to growth in software license updates and support (maintenance) revenues resulting from the continued expansion of our installed customer base and a greater percentage of customers renewing maintenance contracts. Maintenance revenues also increased in 2003 and 2002 due to favorable fluctuations in foreign exchange rates.

       Professional services and other revenues grew 24% in 2003 compared to 2002 primarily due to a $14.8 million increase in consulting revenues as a result of our increased focus on our consulting business by expanding the breadth and depth of solutions we offer our clients. The decline in professional services and other revenues in 2002 compared to 2001 was primarily due to a decrease in training revenues attributable to reduced customer spending and travel in response to the general economic slowdown in 2002.

   Geographic Revenues Mix

       The following shows the geographic mix of total revenues.