GARTNER INC - 10-K Annual Report

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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-K

[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 2001

OR

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OF 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

COMMISSION FILE NUMBER 0-14443

GARTNER, INC.
(Exact name of Registrant as specified in its charter)

DELAWARE 04-3099750
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)

P.O. BOX 10212 06904-2212
56 TOP GALLANT ROAD (Zip Code)
STAMFORD, CT
(Address of principal executive offices)

REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE:
(203) 316-1111

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

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

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

Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K 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. [ ]

The aggregate market value of the voting stock held by persons other than
those who may be deemed affiliates of the Registrant, as of November 30, 2001,
was approximately $768.0 million. This calculation does not reflect a
determination that persons are affiliates for any other purposes.

The number of shares outstanding of the registrant's capital stock as of
November 30, 2001 was 51,196,453 shares of Common Stock, Class A and 32,547,828
shares of Common Stock, Class B.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Definitive Proxy Statement for the 2002 Annual Meeting of
Stockholders of the Registrant currently scheduled to be held on March 6, 2002
are incorporated by reference into Part III of this Report.

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GARTNER, INC.

2001 ANNUAL REPORT ON FORM 10-K

TABLE OF CONTENTS

PART I

ITEM 1. BUSINESS

GENERAL

Gartner, Inc., founded in 1979, is the world's leading independent provider
of research and analysis on the computer hardware, software, communications and
related information technology ("IT") industries. We currently provide
comprehensive coverage of the IT industry to approximately 10,000 client
organizations. The Company is organized into three business segments: research,
consulting and events.

- Research. Gartner's research products and services highlight industry
developments, review new products and technologies, provide quantitative
market research, and analyze industry trends within a particular
technology or market sector. The Company typically enters into annually
renewable subscription contracts for research products. Gartner
distributes its research products through a number of electronic delivery
formats, CD ROM and print media.

- Consulting consists primarily of consulting, measurement engagements and
strategic advisory services (paid one-day analyst engagements), which
provide comprehensive assessments of cost performance, efficiency and
quality for all areas of IT.

- Events consists of various focused symposia, conferences and exhibitions.
Gartner's primary clients are senior business executives, IT
professionals, purchasers and vendors of IT products and services.

MARKET OVERVIEW

In the dynamic IT marketplace, vendors continually introduce new products
with a wide variety of standards and ever-shorter life cycles. The users of
technology -- almost all organizations -- must not only stay abreast of these
new developments, but also make major financial commitments to new IT systems
and products in a short time. To purchase and plan effectively, they need
independent, third-party research and consultative services.

While the pace of IT investments is expected to slow significantly in 2002,
companies are still spending more on IT than they were two years ago. Those
investments are expected to account for more than half of all capital spending
and 6% of GDP in the United States in 2002. The intense scrutiny on technology
spending ensures that Gartner's products and services remain essential in the
current economy, for while the nature of client decision-making is changing, the
need for value-added, independent and objective research and analysis of the IT
market has not.

PRODUCTS AND SERVICES

The Company's principal products and services are Research, Consulting and
Events.

- Research. Gartner devotes an experienced research team to every
significant IT product category. Our staff researches and prepares
published reports and responds to telephone and e-mail inquiries from
clients. Clients receive our information through a number of electronic
delivery formats -- including gartner.com -- as well as CD-ROM and print
media. Most clients purchase annually renewable subscription contracts
for research products. Among these products: highlights of industry
developments and trends, new product and technology evaluations,
quantitative market research, and comparative analysis of IT operations
of organizations. Gartner Research also provides clients with information
such as IT trends and vendor strategies, statistical analysis, growth
projections, and market share rankings of suppliers and vendors. This
information is useful to IT manufacturers and the financial community; it
also helps business leaders formulate, implement and execute growth
strategies. By using Gartner research, IT buyers, technology users,
vendors and business executives are able to make decisions faster and
with greater confidence. Our research products and services include our
core research business, Dataquest, Gartner Executive Programs and
GartnerG2.

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- Consulting. Consulting consists primarily of consulting and measurement
engagements and strategic advisory services. Gartner's consulting
provides customized project consulting on the delivery, deployment and
management of high-tech products and services. We offer consulting
through seven specialized practices: Enterprise Solutions, IT Strategy &
Management, Architecture & Technology, Human Capital Management,
Strategic Sourcing, Market & Business Strategies, and General Advisory
Services. Our Measurement services provide performance management,
benchmarking, continuous improvement and best practices services.

- Events. Events include symposia, conferences and exhibitions that
provide comprehensive coverage of IT issues and forecasts of key IT
industry segments. The conference season begins each year with Symposia
and ITxpo, Gartner's flagship event held in Orlando, Florida; Cannes,
France; Tokyo, Japan and Sydney, Australia. Throughout the year, the
Company sponsors other conferences, seminars and briefings worldwide.
Attendees at the majority of Gartner events pay in advance of the event.
Events revenues are deferred and recognized upon the completion of the
related symposium, conference or exhibition.

See Note 17 of the Notes to Consolidated Financial Statements for a summary of
the Company's operating segments and geographic information.

COMPETITION

We believe that the principal competitive factors that differentiate
Gartner are:

- high quality, independence and objectivity of our research and analysis;

- multi-faceted expertise in all industries and technologies, both legacy
and emerging;

- our position as the only research company with broad consulting
capabilities, and the only consulting firm with research;

- timely delivery of information;

- the ability to offer products that meet changing market needs and prices;
and

- superior customer service.

We believe we compete favorably with respect to each of these factors.

The Company faces competition from a significant number of independent
providers of information products and services, as well as the internal
marketing and planning organizations of our clients. We also compete indirectly
against consulting firms and other information providers, including electronic
and print media companies. These indirect competitors could choose to compete
directly with Gartner in the future. In addition, limited barriers to entry
exist in the markets in which we compete. As a result, additional new
competitors may emerge and existing competitors may start to provide additional
or complementary services. Increased competition may result in loss of market
share, diminished value in Gartner's products and services, reduced pricing and
increased sales and marketing expenditures. The Company may not be successful if
it cannot continue to compete effectively on any of its principal competitive
factors.

EMPLOYEES

As of September 30, 2001, the Company had 4,281 employees, of which 825
employees are located at the Company's headquarters in Stamford, CT; 1,955 are
located at other domestic facilities; and 1,501 are located outside of the
United States. None of the Company's employees are represented by a collective
bargaining arrangement. The Company has experienced no work stoppages and
considers its relations with employees to be favorable.

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ITEM 2. PROPERTIES

The Company's headquarters are located in approximately 244,000 square feet
of leased office space in five buildings located in Stamford, CT. These
facilities accommodate research and analysis, marketing, sales, client support,
production and corporate administration. The leases on these facilities expire
in 2010. The Company has a significant presence in the United Kingdom with
approximately 89,000 square feet of leased office space in two buildings located
in Egham, UK. The Company also leases office space in 50 domestic and 43
international locations to support its research and analysis, domestic and
international sales efforts and other functions. The Company believes its
existing facilities and expansion options are adequate for its current needs and
that additional facilities, if needed, are available for lease to meet future
needs.

ITEM 3. LEGAL PROCEEDINGS

The Company is involved in legal proceedings and litigation arising in the
ordinary course of business. The Company believes the outcome of all current
proceedings, claims and litigation will not have a material effect on the
Company's financial position or results of operations when resolved in a future
period.

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

No matter was submitted to a vote of the Company's stockholders during the
fourth quarter of the fiscal year covered by this Annual Report.

PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

As of November 30, 2001, there were approximately 220 holders of record of
the Company's Class A Common Stock and approximately 3,964 holders of record of
the Company's Class B Common Stock. Since September 15, 1998, the Company's
Class A Common Stock has been listed for trading on the New York Stock Exchange
under the symbol "IT". Prior to September 15, 1998, the Class A Common Stock was
listed on the NASDAQ National Market. Since July 20, 1999, the Company's Class B
Common Stock has been listed for trading on the New York Stock Exchange under
the symbol "IT/B". The Class B Common Stock is identical in all respects to the
Class A Common Stock, except that the Class B Common Stock is entitled to elect
at least 80% of the members of the Company's Board of Directors. In connection
with the Company's recapitalization in July 1999, the Company declared a
special, non-recurring cash dividend of $1.1945 per share, payable to all
Company stockholders of record as of July 16, 1999. The cash dividend, totaling
approximately $125.0 million, was paid on July 22, 1999 and was funded out of
existing cash. While subject to periodic review, the current policy of the
Company's Board of Directors is to retain all earnings primarily to provide
funds for the continued growth of the Company.

The following table sets forth the high and low sales prices for the Class
A Common Stock and Class B Common Stock as reported on the New York Stock
Exchange for the periods indicated.

CLASS A COMMON STOCK

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CLASS B COMMON STOCK

ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA

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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

FORWARD-LOOKING STATEMENTS

In addition to historical information, this Annual Report contains
forward-looking statements within the meaning of Section 27A of the Securities
Act of 1933, as amended, and Section 21E of the Securities and Exchange Act of
1934, as amended. Forward-looking statements are any statements other than
statements of historical fact, including statements regarding the Company's
expectations, beliefs, hopes, intentions or strategies regarding the future. In
some cases, forward-looking statements can be identified by the use of words
such as "may," "will," "expects," "should," "believes," "plans," "anticipates,"
"estimates," "predicts," "potential," "continue," or other words of similar
meaning. Forward-looking statements are subject to risks and uncertainties that
could cause actual results to differ materially from those discussed in, or
implied by, the forward-looking statements. Factors that might cause such a
difference include, but are not limited to, those discussed in "Factors That May
Affect Future Results" below. Readers should not place undue reliance on these
forward-looking statements, which reflect management's opinion only as of the
date on which they were made. Except as required by law, the Company disclaims
any obligation to review or update these forward-looking statements to reflect
events or circumstances as they occur. Readers should also carefully review any
risk factors described in Company Reports filed with the Securities and Exchange
Commission.

BUSINESS STRATEGY

Gartner is a research and advisory firm that helps business and IT
professionals use technology to build, guide and grow their enterprises. The
Company employs a diversified business model leveraging our unparalleled breadth
and depth of research intellectual capital to maintain and enhance our
market-leading position and brand franchise.

The Company's primary objective is consistent revenue growth with higher,
more predictable profit through moderated investment. We are focused on:

- improving the profitability and free cash flow of our three core business
segments;

- maintaining our position as the market leader among research and advisory
firms; and

- growing our business relationships with our most valuable clients.

Profitability & Cash Flow. The Company has a number of strategies for
improving operating margins and increasing free cash flow, including:

- rigorous analysis and assessment of our client, product and market
portfolio;

- reducing selling, general and administrative expenses as a percentage of
revenue by (1) leveraging the Company's global infrastructure to tightly
control worldwide costs, (2) maximizing our inside sales model (which has
a lower cost of selling), and (3) focusing client growth on our most
valuable clients;

- enhancing analyst productivity and consultant utilization;

- managing capital expenditures and foreign exchange exposure;

- tax planning; and

- selectively investing in new initiatives aligned with core competencies
and capable of driving near-term returns.

Market Leadership. Gartner is by far the leading provider of proprietary
research and analysis of the IT industry and the world's pre-eminent source of
insight about technology purchasing and deployment. The Company's global network
of professionals is an unrivalled "brain trust" of provocative thought
leadership. Gartner employs more analysts with more data points than any
competitor; these analysts advise over 1,000 executives each day across 80
countries. Hundreds of experienced Gartner consultants combine our objective,
independent research with a practical, sought-after business perspective focused
on the IT market. Gartner's

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events are the world's largest of their kind, gathering one of the most highly
qualified audiences of senior business executives, IT professionals, purchasers
and vendors of IT products and services.

Business Relationships. Gartner serves approximately 10,000 client
organizations and roughly half of the Fortune 1000. Our great strength is the
intimate understanding of our clients' industries and the technologies they
employ, and the expertise to redefine and transform their businesses. A key
strategy is to increase business volume with our most valuable clients,
identifying relationships with the greatest sales potential and expanding those
relationships where possible by offering strategically relevant research and
analysis. Our diversified business model provides multiple entry points and
synergies that facilitate increased client spending on Gartner research,
consulting and events. Specific growth opportunities in fiscal 2002 include
GartnerG2, a new research service designed specifically for business executives,
and Gartner Executive Programs ("Gartner EXP"), concierge-quality service and
personalized programs for senior IT executives.

BUSINESS MEASURES

Research encompasses products which, on an ongoing basis, highlight
industry developments, review new products and technologies, provide
quantitative market research, analyze industry trends within a particular
technology or market sector and provide comparative analysis of the IT
operations of organizations. The Company typically enters into annually
renewable subscription contracts for research products. Revenues from research
products are deferred and recognized ratably over the contract term. Consulting
revenues, primarily derived from consulting and measurement engagements and
strategic advisory services are recognized as work is performed on a contract by
contract basis. Events revenues are deferred and recognized upon the completion
of the related symposium, conference or exhibition. Other revenues includes
software licensing fees which are recognized when a signed non-cancellable
software license exists, delivery has occurred, collection is probable, and the
Company's fees are fixed or determinable. Revenue from software maintenance is
deferred and recognized ratably over the term of each maintenance agreement,
typically twelve months.

The Company believes the following business measurements are important
indicators of future revenues for its significant business segments.

Contract value is a significant measure of the Company's volume of
business. The Company's past experience has been that a substantial portion of
client companies renew subscription products for an equal or higher level each
year. In addition, the Company has been able to increase its multi-year
contracts to 48% of total contract value at September 30, 2001 from 40% at
September 30, 2000. Total research contract value decreased 7% to approximately
$556.0 million at September 30, 2001 from $599.2 million at September 30, 2000.
The decrease was due primarily to less favorable economic conditions which have
led to constrained IT spending, the September 11th terrorist attacks, which
occurred three weeks before the Company's fiscal year end and the impact of
foreign currency adjustments. After adjusting for foreign exchange, research
contract value was down 4%.

Total research deferred revenues of $263.5 million and $296.9 million at
September 30, 2001 and 2000, respectively, represent unamortized revenues from
billed products and services. Deferred revenues do not directly correlate to
contract value as of the same date since contract value represents an annualized
value of

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all outstanding contracts without regard to the duration of such contracts, and
deferred revenue represents unamortized revenue remaining on all outstanding and
billed contracts.

All research contracts are billable upon signing, absent special terms
granted on a limited basis from time to time. All research contracts are
non-cancelable and non-refundable, except for government contracts which have a
30-day cancellation clause, but have not produced material cancellations to
date. With the exception of certain government contracts which permit
termination, it is the Company's policy to record at the time of signing of a
contract the entire amount of the contract billable as a fee receivable, which
represents a legally enforceable claim, and a corresponding amount as deferred
revenue. For government contracts which permit termination, the Company bills
the client the full amount billable under the contract but only records a
receivable equal to the earned portion of the contract. In addition, the Company
only records deferred revenue on these contracts when cash is received. Deferred
revenues attributable to government contracts were $24.5 million and $33.8
million at September 30, 2001 and 2000, respectively. In addition, at September
30, 2001, the Company has billed but not yet collected $13.3 million of
government contracts which permit termination. Accordingly, the Company has not
recorded the receivable and associated deferred revenue for these contracts. The
Company records the commission obligation related to research contracts upon the
signing of the contract and amortizes the corresponding deferred commission
expense over the contract period in which the related revenues are earned.

Consulting backlog increased 13% to approximately $119.0 million at
September 30, 2001 from $105.5 million at September 30, 2000. The increase in
backlog reflects primarily the growth in the strategic advisory services
engagements.

Deferred revenue from events decreased 2% to approximately $70.5 million at
September 30, 2001 from $72.2 million at September 30, 2000. The decrease was
due primarily to less favorable economic conditions and the September 11th
attacks, including the related impacts on clients' willingness to travel.

Historically, research revenues typically increase in the first quarter of
the fiscal year over the immediately preceding quarter primarily due to the
increase in contract value at the end of the prior fiscal year. Events revenues
have increased similarly due to annual conferences and exhibition events held in
the first quarter. Additionally, operating income margin (operating income as a
percentage of total revenues) typically improves in the first quarter of the
fiscal year over the immediately preceding quarter due to the increase in
research revenue upon which the Company is able to further leverage its selling,
general and administrative expenses, plus operating income generated from the
first quarter Symposium and ITxpo exhibition events. Although operating income
margins have generally not been as high in the remaining quarters, the full year
impact of acquisitions and strategic initiatives may result in operating margin
trends in the future that are not comparable to historical trends.

RESULTS OF OPERATIONS

FISCAL YEAR ENDED SEPTEMBER 30, 2001 VERSUS FISCAL YEAR ENDED SEPTEMBER 30,
2000

Total revenues increased 11% to $952.0 million in fiscal 2001 compared to
$854.6 million in fiscal 2000.

- Research revenue increased 5% in fiscal 2001 to $535.1 million compared
to $509.8 million in fiscal 2000 and comprised approximately 56% and 60%
of total revenues in fiscal 2001 and 2000, respectively.

- Consulting revenue increased 27% to $265.5 million in fiscal 2001
compared to $208.8 million in fiscal 2000 and comprised approximately 28%
and 24% of total revenues in fiscal 2001 and 2000, respectively.

- Events revenue was $132.7 million in fiscal 2001, an increase of 22% over
the $108.6 million in fiscal 2000 and comprised approximately 14% of
total revenues in fiscal 2001 versus 13% in fiscal 2000.

- Other revenues, consisting principally of software licensing and
maintenance fees, decreased 31% to $18.8 million in fiscal 2001 from
$27.4 million in fiscal 2000.

Although the growth rate in total revenues declined slightly in fiscal
2001, the increase in total revenues reflects the ability of the Company to gain
client acceptance of new products and services, deliver high value

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consultative services, increase sales penetration into new and existing clients
and develop incremental revenues from prior year acquisitions (see discussion of
segment results below).

Revenue has grown in the three defined geographic market areas of the
Company: United States and Canada, Europe, and Other International. Revenues
from sales to United States and Canadian clients increased 12% to $633.7 million
in fiscal 2001 from $563.6 million in fiscal 2000. Revenues from sales to
European clients increased 8% to $248.2 million in fiscal 2001 from $230.3
million in fiscal 2000. Revenues from sales to Other International clients
increased by 16% to $70.2 million in fiscal 2001 from $60.7 million in fiscal
2000.

The Company's sales strategy is to maintain its focus on large customers
and to expand sales of product and service offerings to different user bases
within existing and potential client companies. Key components of this strategy
are the focus on the Company's most valuable accounts to ensure that these
relationships are maintained and expanded, emphasis on GartnerG2, Gartner EXP
and seat retention and penetration amongst Fortune 1000 companies. The Company
continues to invest in direct sales personnel and distributor relationships in
Europe and other international markets and intends to pursue continued expansion
of operations outside of the United States in fiscal 2002.

Costs and expenses, excluding other charges, in fiscal 2001, increased to
$863.0 million from $770.5 million in fiscal 2000. The increase in costs and
expenses reflects the additional support required for the growing client base,
incremental costs associated with conferences, and strategic investments which
included the hiring of additional project executives and sales personnel in the
first half of fiscal 2001, and spending on sales productivity tools and
interactive initiatives. During fiscal 2001, the Company implemented certain
measures, including the workforce reduction in the second half of the year, to
reduce ongoing costs and expenses.

Cost of services and product development expenses were $439.6 million and
$387.7 million for fiscal 2001 and fiscal 2000, respectively. The costs of
services and product development expenses increased as a percentage of total
revenues to 46% from 45%. The increase is attributable to growth in personnel
costs associated with the development and delivery of products and services.

Selling, general and administrative expenses increased to $370.1 million in
fiscal 2001 from $341.9 million in fiscal 2000. The increase was due to
recruiting and facilities costs related to the growth in Company personnel as
well as increases in sales costs associated with revenue growth.

Depreciation expense increased to $40.9 million in fiscal 2001 from $27.8
million in fiscal 2000, primarily due to capital spending and internal use
software development costs required to support business growth, including the
launch of the new gartner.com web site in January 2001. Amortization of
intangibles of $12.4 million in fiscal 2001 was down from $13.0 million in
fiscal 2000.

During 2001, the Company recorded other charges of $46.6 million. Of these
charges, $24.8 million are associated with the Company's workforce reduction
announced in April 2001. This workforce reduction has resulted in the
elimination of 383 positions, or approximately 8% of the Company's workforce.
Approximately $14.3 million of the other charges are associated with the
write-down of goodwill and other long-lived assets to net realizable value as a
result of the Company's decision to discontinue certain unprofitable products,
and $7.5 million of the charge is associated primarily with the write-off of
internally developed systems in connection with the launch of gartner.com and
seat-based pricing. At September 30, 2001, $6.6 million of the termination
benefits relating to the workforce reduction remain to be paid, primarily in the
first quarter of fiscal 2002. The Company is funding these costs out of
operating cash flows.

Operating income decreased 49% to $42.5 million in fiscal 2001 compared to
$84.1 million in fiscal 2000. In fiscal 2001, the United States and Canada, and
Europe markets experienced declines in operating income of 49% and 21%,
respectively. Other International markets experienced an operating loss for the
year. These operating results were all impacted by the other charges recorded
during fiscal 2001. On a consolidated basis, operating income as a percentage of
total revenues was 4% and 10%, respectively, for fiscal 2001 and 2000. Operating
income was impacted, in part, by other charges and costs associated with the
re-architecture of the Company's Web capabilities and its research methodology
and delivery processes, and higher growth in lower margin consultative services.
Excluding the other charges, operating income for fiscal 2001 was 9.4% of total

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revenues. The Company decreased its staff by approximately 8% in the second half
of fiscal 2001 and, in the fourth quarter, decreased the expense to revenue
ratio on selling, general and administrative expense by 2.4 percentage points as
compared to the fourth quarter of last year. As a result of the Company's cost
reduction initiatives, operating margin improved from 7.9% for the first six
months of the fiscal year to 10.8% for the second half, all excluding other
charges.

Net loss on sale of investments in fiscal 2001 of $0.6 million includes the
sale of the Company's remaining 1,922,795 shares of Jupiter Media Metrix
("Jupiter") for net cash proceeds of $7.5 million for a pre-tax loss of $5.6
million, offset in part by the sale of shares received from the Company's
venture capital funds, SI Venture Associates ("SI I") and SI Venture Fund II
("SI II") for net cash proceeds of $6.0 million for a pre-tax gain of $4.9
million. Net gain on sale of investments in fiscal 2000 reflects the sale of
1,995,950 shares of Jupiter for net cash proceeds of $55.5 million for a pre-tax
gain of $42.9 million. This gain was partially offset by the sale of the
Company's 8% investment in NETg, Inc., a subsidiary of Harcourt, Inc., to an
affiliate of Harcourt, Inc. for $36.0 million in cash that resulted in a pre-tax
loss of approximately $6.6 million. The Company acquired this investment as
consideration for its sale of GartnerLearning in September 1998. In addition, in
fiscal 2000 the Company settled a claim arising from the sale of GartnerLearning
to NETg Inc. The claim asserted that the Company had breached its contractual
commitment under a joint venture to co-produce a product when the business was
sold. The claim was settled for approximately $6.7 million and has been recorded
as a loss on sale of investments.

Net loss from minority-owned investments in fiscal 2001 of $26.8 million
was primarily the result of impairment losses related to investments owned by
the Company through SI I, SI II and other directly owned investments for other
than temporary declines in value. These investments are comprised of early to
mid-stage IT-based or Internet-enabled companies. The Company made an assessment
of the carrying value of its investments and determined that certain investments
were in excess of their fair value due to the significance and duration of the
decline in valuation of comparable companies operating in the internet and
technology sectors (see Note 5 -- Investments in the Notes to Consolidated
Financial Statements). The impairment factors evaluated by management may change
in subsequent periods, given that the entities underlying these investments
operate in a volatile business environment. In addition, these entities may
require additional financing to meet their cash and operational needs, however,
there can be no assurance that such funds will be available to the extent
needed, at terms acceptable to the entities, if at all. This could result in
additional material non-cash impairment charges in the future.

Interest expense decreased to $22.4 million in fiscal 2001 from $24.9
million in fiscal 2000. The decrease related primarily to lower interest rates
and lower revolving credit borrowings compared to fiscal 2000. Interest income
of $1.6 million in fiscal 2001 was down from $3.9 million in fiscal 2000 due to
a lower average balance of funds available for investment and due to lower
interest rates. Other expense, net increased to $3.7 million in fiscal 2001 from
$0.7 million in fiscal 2000. The increase relates primarily to foreign currency
exchange losses.

Provision for income taxes on continuing operations was a benefit of $9.2
million in fiscal 2001 compared to a provision of $36.4 million in fiscal 2000.
The effective tax rate in 2001, less the impact of a one-time tax benefit of
$14.5 million due to the utilization of foreign tax credits in the second half
of the year and other charges and losses on investments and related tax impact,
was 37% compared to 40% for fiscal 2000. The decrease in the effective tax rate
from fiscal 2000 is due to on-going tax planning initiatives. A more detailed
analysis of the changes in the provision (benefit) for income taxes is provided
in Note 14 of the Notes to Consolidated Financial Statements.

Diluted income (loss) per common share from continuing operations decreased
to $0.00 per share in fiscal 2001 compared to $0.62 per share in fiscal 2000 and
$0.84 per share in fiscal 1999. Excluding the effect of other charges of $46.6
million, losses on investments of $27.5 million, net of tax benefits of $18.6
million, in the aggregate, on these items, and certain one-time tax benefits of
$14.5 million, diluted income per common share from continuing operations was
$0.47 per share in fiscal 2001. Excluding the effect of the net gain on
investments of $28.9 million, net of taxes of $11.6 million, diluted net income
per common share from continuing operations was $0.42 per share in fiscal 2000.
Excluding the effect of other charges related to the

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Company's recapitalization of $23.4 million, net of tax benefits of $6.0 million
on these items, plus a one-time tax benefit of $2.5 million, diluted income per
common share from continuing operations was $0.98 per common share in fiscal
1999. Basic income (loss) per common share from continuing operations was $0.00
per common share in fiscal 2001 compared to $0.63 per common share in fiscal
2000 and $0.87 per common share in fiscal 1999.

On July 2, 2001, the Company sold its subsidiary, TechRepublic, to CNET
Networks, Inc. ("CNET") for approximately $23.0 million in cash and common stock
of CNET, before reduction for certain termination benefits. The proceeds were
$14.3 million in cash and 755,058 shares of CNET common stock, which had a fair
market value of $12.21 per share on July 2, 2001. From July 2, 2001 through
September 30, 2001, the market value of the CNET shares had declined
substantially, accordingly the Company recorded a $3.9 million impairment charge
in net loss from minority-owned investments representing an other than temporary
decline in market value of the CNET common stock. The Consolidated Financial
Statements of the Company have been restated to reflect the disposition of the
TechRepublic segment as a discontinued operation in accordance with APB Opinion
No. 30. Accordingly, revenues, costs and expenses, assets, liabilities, and cash
flows of TechRepublic have been excluded from the respective captions in the
Consolidated Statements of Operations, Consolidated Balance Sheets and
Consolidated Statements of Cash Flows, and have been reported through the date
of disposition as "Loss from discontinued operation," "Net assets of
discontinued operation," and "Net cash used by discontinued operation," for all
periods presented. During 2001, the Company recorded a pre-tax loss of $66.4
million ($39.9 million after tax) to recognize the loss on the sale of
TechRepublic. This pre-tax loss includes a write-down of $42.4 million of
assets, primarily goodwill, to net realizable value, operating losses through
the date of sale of $6.5 million, severance and related benefits of $8.3
million, and other sale-related costs and expenses, including costs associated
with the closure of facilities, of $9.2 million.

Segment Analysis:

The Company evaluates reportable segment performance and allocates
resources based on gross contribution margin. Gross contribution is defined as
operating income excluding certain selling, general and administrative expenses,
depreciation, amortization of intangibles and other charges.

Research

Research revenues grew 5% to $535.1 million in fiscal 2001 as compared to
$509.8 million in the prior fiscal year. The increase was due primarily to
higher client retention in North America, the continued successful migration of
clients from legacy to seat-based pricing, the increased penetration of new
buying centers within existing clients and continued focus and growth of
GartnerG2 and Gartner EXP. The new pricing structure provides broader access to
research compared to the traditional individual research subscription. During
fiscal 2001, the Company launched GartnerG2, a new research service designed
specifically to help business executives grow their companies. The Company
expects that the gartner.com web site and launch of GartnerG2 will facilitate
continued penetration within the existing client base as well as the ability to
add new clients. Research gross contribution in fiscal 2001 increased to $352.6
million from $341.1 million in fiscal 2000. Gross contribution margin decreased
slightly to 66% in fiscal 2001 from 67% in fiscal 2000, primarily a result of
the investments in gartner.com and the launch of GartnerG2. Gross contribution
margin increased to 67% for the second half of fiscal 2001 from 64% for the
first half, due in large part to cost reduction measures instituted during the
year.

Consulting

Consulting revenues grew 27% to $265.5 million in fiscal 2001 as compared
to $208.8 million in the prior fiscal year. The increase was due primarily to an
increase in the number of projects, increased project size, and increases in
billing rates. Consulting gross contribution increased by 15% to $86.9 million
in fiscal 2001 from $75.7 million in fiscal 2000. Consulting gross contribution
margin of 33% in fiscal 2001 decreased from 36% in fiscal 2000 primarily due to
increases in compensation expense related to the hiring of additional personnel
in the first half of fiscal 2001, coupled by an increase in non-billable
services, such as training, participation in

12

annual symposia events, and increased selling activity. Gross contribution
margin increased to 40% for the second half of fiscal 2001 from 23% for the
first half, due in large part to cost reduction measures instituted during the
year. The Company intends to reduce the rate of investment in consulting and
improve consultant productivity in an effort to improve profitability.

Events

Events revenues grew 22% to $132.7 million in fiscal 2001 as compared to
$108.6 million in the prior fiscal year. The increase was due to greater
attendance at existing and new events and increased sponsorships and exhibit
revenues. Events gross contribution increased by 26% to $63.6 million in fiscal
2001 from $50.6 million in fiscal 2000 with gross contribution margin of 48% in
2001 compared to 47% in fiscal 2000. The increase in gross contribution margin
was due to the ability of the Company to leverage existing events and an overall
increase in sponsorship and exhibitor sales.

FISCAL YEAR ENDED SEPTEMBER 30, 2000 VERSUS FISCAL YEAR ENDED SEPTEMBER 30,
1999

Total revenues increased 16% to $854.6 million in fiscal 2000 as compared
to $734.2 million in fiscal 1999.

- Research revenue increased 6% in fiscal 2000 to $509.8 million compared
to $479.0 million in fiscal 1999 and comprised approximately 60% and 65%
of total revenues in fiscal 2000 and 1999, respectively.

- Consulting revenue increased 39% to $208.8 million in fiscal 2000 as
compared to $149.8 million in fiscal 1999 and comprised approximately 24%
of total revenue in fiscal 2000 versus 20% in fiscal 1999.

- Events revenue was $108.6 million in fiscal 2000, an increase of 44% over
the $75.6 million in fiscal 1999.

- Other revenues, consisting principally of software licensing and
maintenance fees, experienced a slight decrease of $2.4 million to $27.4
million in fiscal 2000 from $29.8 million in fiscal 1999.

Revenue grew in the three defined geographic market areas of the Company:
United States and Canada, Europe, and Other International. Revenues from sales
to United States and Canadian clients increased 19% to $563.6 million in fiscal
2000 from $471.8 million in fiscal 1999. Revenues from sales to European clients
increased 9% to $230.3 million in fiscal 2000 from $212.1 million in fiscal
1999. Although European revenues increased in fiscal 2000, the rate of growth
was less than in fiscal 1999. This decrease in growth rate was attributable, in
part, to research revenues remaining relatively unchanged from fiscal 1999 as a
result of foreign exchange rates. On a constant dollar basis, revenues from
Europe would have increased 16% compared to fiscal 1999. Revenues from sales to
Other International clients increased by 21% to $60.7 million in fiscal 2000
from $50.3 million in fiscal 1999. This increase reflected primarily the general
recovery in the economic climate in the Asian markets in fiscal 2000 as compared
to fiscal 1999.

Costs and expenses, excluding other charges in fiscal 1999, increased to
$770.5 million in fiscal 2000 from $577.4 million in fiscal 1999. The increase
in costs and expenses reflected the additional support required for the growing
client base, incremental costs associated with conferences, costs associated
with acquired businesses and previously planned strategic investments which
included the hiring of additional consultants, analysts, project executives and
sales personnel, and spending on sales productivity tools and gartner.com
initiatives. Cost of services and product development expenses were $387.7
million and $293.6 million for fiscal 2000 and fiscal 1999, respectively. The
increase in costs of services and product development expenses, as a percentage
of total revenues to 45% from 40%, was primarily attributable to continuing
growth in personnel costs associated with the development and delivery of
products and services and the hiring of personnel in association with the
planned strategic investments. Costs and expenses in fiscal 2000 were also
impacted by the amounts earned by employees under the retention bonus program as
well as the performance-related variable compensation expense incurred in fiscal
2000. In contrast, costs and expenses in fiscal 1999 were favorably impacted
through the elimination of variable compensation costs linked to financial
performance.

13

Selling, general and administrative expenses, increased to $341.9 million
in fiscal 2000 from $252.2 million in fiscal 1999 as a result of the Company's
continued expansion of worldwide distribution channels and additional general
and administrative resources needed to meet the expanding infrastructure
requirements of the growing revenue base and fiscal 2000 and fiscal 1999
acquisitions. These infrastructure requirements involved information systems
support, telecommunication, facilities, and human capital costs.

In fiscal 1999, the Company recorded pre-tax other charges totaling $9.2
million of legal and advisory fees related to the recapitalization (see Note
16 -- Recapitalization in the Notes to Consolidated Financial Statements) and
$14.2 million of costs, primarily severance related, incurred as part of
strategic reduction in workforce initiatives.

Depreciation expense increased to $27.8 million in fiscal 2000 from $21.6
million in fiscal 1999, primarily due to capital spending required to support
business growth. Additionally, amortization of intangibles increased by $3.0
million in fiscal 2000 as compared to fiscal 1999, reflecting primarily goodwill
associated with fiscal 2000 and 1999 acquisitions.

Operating income decreased 37% to $84.1 million in fiscal 2000 compared to
$133.4 million in fiscal 1999. In fiscal 2000, the United States and Canada,
Europe, and Other International markets experienced declines in operating income
of 13%, 64% and 71%, respectively. On a consolidated basis, operating income as
a percentage of total revenues was 10% and 18%, respectively, for fiscal 2000
and 1999. Operating income was impacted, in part, by expenditures related to
planned investments and the rearchitecture of the Company's Web capabilities and
the research methodology and delivery processes, the hiring of analysts and
consultants and higher growth in lower margin consultative services.

Net gain on sale of investments in fiscal 2000 reflects the sale of
1,995,950 shares of Jupiter Communications, Inc. (now known as Jupiter Media
Metrix) for net cash proceeds of $55.5 million for a pre-tax gain of $42.9
million. This gain was partially offset by the sale of the Company's 8%
investment in NETg, Inc., a subsidiary of Harcourt, Inc., to an affiliate of
Harcourt, Inc. for $36.0 million in cash that resulted in a pre-tax loss of
approximately $6.6 million. The Company had acquired this investment as
consideration for its sale of GartnerLearning in September 1998. In addition,
Gartner settled a claim arising from the sale of GartnerLearning to NETg Inc.
The claim asserted that the Company had breached its contractual commitment
under its joint venture arrangement to co-produce a product when the business
was sold. The claim was settled for approximately $6.7 million and has been
recorded as a loss on sale of investments. Interest expense increased to $24.9
million in fiscal 2000 from $1.3 million in fiscal 1999. This increase related
primarily to debt facility borrowings, of which the proceeds were used primarily
to fund the Company's recapitalization in the prior fiscal year. Interest income
and other decreased in fiscal 2000 which was due primarily to a lower average
balance of investable funds as compared to the prior fiscal year.

Provision for income taxes decreased by 29%, or $14.6 million, to $36.4
million in fiscal 2000 from $51.0 million in fiscal 1999. The effective tax rate
was 40% and 37% for fiscal 2000 and fiscal 1999, respectively. The increase in
the effective rate principally reflected the impact of non-deductible goodwill
related to acquisitions. A more detailed analysis of the changes in the
provision for income taxes is provided in Note 14 of the Notes to Consolidated
Financial Statements.

In fiscal 2000, the Company entered into a second amendment to its Credit
Agreement. Under this amendment, the Company agreed to refinance all existing
indebtedness and to repay in full and terminate the term loans drawn under the
existing Credit Agreement. In connection with the extinguishment of the term
loan, the Company wrote-off $2.9 million of deferred debt issuance costs in the
fourth quarter of fiscal 2000. The charge was recorded, net of tax benefit of
$1.2 million, as an extraordinary loss.

Segment Analysis:

The Company evaluates reportable segment performance and allocates
resources based on gross contribution margin. Gross contribution is defined as
operating income excluding certain selling, general and administrative expenses,
depreciation, amortization of intangibles and other charges.

14

Research

Research revenues grew 6% to $509.8 million in fiscal 2000 as compared to
$479.0 million in the prior fiscal year due to increased sales penetration into
new and existing clients. Contributing to the growth in sales was the
introduction of a new pricing architecture launched in the third quarter of
fiscal 2000. This pricing plan provides broad access to Gartner research on
price per seat basis. Research gross contribution in fiscal 2000 increased
slightly to $341.1 million from $336.9 million in fiscal 1999. Gross
contribution margin decreased to 67% in fiscal 2000 from 70% in fiscal 1999 due
primarily to slower revenue growth and increases in compensation expenses
associated with headcount and annual merit increases.

Consulting

Consulting revenues grew 39% to $208.8 million in fiscal 2000 as compared
to $149.8 million in the prior fiscal year due primarily to an increase in
demand for IT consulting. Also contributing to the revenue growth was the full
year impact of prior year and current year acquisitions. Consulting gross
contribution increased by 35% to $75.7 million in fiscal 2000 from $55.9 million
in fiscal 1999. Consulting gross contribution margin of 36% in fiscal 2000
decreased from 37% in fiscal 1999 primarily due to the impact of integration
costs and lower margins associated with new strategic consulting practices and
recent consulting related acquisitions.

Events

Events revenues grew 44% to $108.6 million in fiscal 2000 as compared to
$75.6 million in the prior fiscal year due to a growth in attendance at existing
and new events and increased sponsorships and exhibit revenues. Events gross
contribution increased by 56% to $50.6 million in fiscal 2000 from $32.5 million
in fiscal 1999 with gross contribution margin increasing to 47% in 2000 from 43%
in fiscal 1999. The increase in Events gross contribution margin was due to the
ability of the Company to leverage existing event infrastructure, selected price
adjustments, and an overall increase in sponsorship and exhibitor sales.

LIQUIDITY AND CAPITAL RESOURCES

Cash provided by operating activities during fiscal 2001 was $73.5 million,
compared to $104.3 million in the prior fiscal year. The decrease was primarily
due to lower operating income which was impacted by termination payments
associated with the workforce reduction and to changes in balance sheet
accounts.

Cash used in investing activities totaled $44.6 million for fiscal 2001,
compared to $98.6 million used by investing activities in fiscal 2000. Cash used
in investing activities during fiscal 2001 and 2000 included $57.5 million and
$54.6 million, respectively, for additions to property, equipment and leasehold
improvements. The additions to property, equipment and leasehold improvements
were primarily the result of investments in gartner.com and other infrastructure
systems. This was partially offset by proceeds from the sale of marketable
securities and discontinued operations of $14.4 million and $10.5 million,
respectively. Cash used in investing activities during fiscal 2000 included
$115.2 million in cash used for acquisitions, primarily for the purchase of
TechRepublic, Inc. for $78.5 million, Computer Financial Consultants Limited for
$16.0 million and Rendall and Associates, Inc. for $12.0 million. This was
partially offset by proceeds from the sale of marketable securities and
investments of $55.5 million and $36.0 million, respectively.

Cash used in financing activities totaled $18.9 million in fiscal 2001,
compared to $1.0 million of cash provided by financing activities in fiscal
2000. The cash used in financing activities in fiscal 2001 resulted primarily
from the purchase of treasury stock of $37.9 (see discussion below under Stock
Repurchases). Net proceeds from borrowings under the Company's credit facility
of $15.0 million and $9.1 million in proceeds from the issuance of common stock
for the Employee Stock Purchase Plan and from the exercise of stock options
partially offset the cash used in financing activities. Fiscal 2000 included
$420.0 million in borrowings under a credit facility and issuance of the
convertible notes (see Note 10 -- Debt in the Notes to the Consolidated
Financial Statements) offset by repayments of $370.0 million of borrowings under
the credit facility. Additionally, the Company paid $49.9 million for the
repurchase of shares under the terms of the recapitalization plan, as well as
$8.2 million for the settlement of a forward purchase agreement on the

15

Company's common stock (see discussion below under Stock Repurchases). Cash
provided by financing activities in fiscal 2000 also includes $13.1 million in
proceeds from the issuance of common stock upon the exercise of employee stock
options and from the Employee Stock Purchase Plan.

Total cash used by discontinued operations was $34.2 million in fiscal 2001
and $30.1 million in fiscal 2000.

Stock Repurchases

The Company completed the required open market purchases pursuant to the
recapitalization plan with the $5.4 million purchase, in fiscal 2001, of 662,363
shares of Class A Common Stock and 4,128 shares of Class B Common Stock. Shares
purchased in the open market since July 1999 under the plan totaled 5,166,691
shares.

On July 19, 2001, the Company's Board of Directors approved the repurchase
of up to $75.0 million of Class A and Class B Common Stock. Repurchases will be
made from time to time over the next two years, subject to the availability of
the stock, prevailing market conditions, the market price of the stock, and the
Company's financial performance. Repurchases will be funded from cash flow from
operations and possible borrowings under the Company's existing credit facility.
Repurchases will be made proportionately between shares of the two classes of
common stock. As a part of the repurchase program, on August 29, 2001, the
Company purchased 1,867,149 shares of its Class A Common Stock at $9.88 per
share from IMS Health, Inc. During the fourth quarter of fiscal 2001, the
Company purchased an additional 451,000 shares of Class A Common Stock and 7,960
shares of Class B Common Stock in the open market, at an average price of $9.42
per share. These purchases, taken together, were at a cost of $22.9 million.

In addition, during fiscal 2001, the Company also purchased 1,164,154
shares of its Class A Common Stock through an early termination of its forward
purchase agreement at a cost of $9.7 million.

In fiscal 2000, the Company paid $49.9 million for the repurchase of
2,493,500 shares of Class A Common Stock and 2,006,700 shares of Class B Common
Stock under the terms of the recapitalization plan.

At September 30, 2001, cash and cash equivalents totaled $37.1 million. The
effect of exchange rates reduced cash and cash equivalents by $0.4 million for
the year ended September 30, 2001, and was due to the strengthening of the U.S.
dollar against certain foreign currencies. In fiscal 2000, the effect of
exchange rates reduced cash and cash equivalents by $3.8 million.

The Company has a $200.0 million unsecured senior revolving credit facility
with JPMorgan Chase Bank. At September 30, 2001, there was $15.0 million
outstanding under the facility. The Company is subject to certain customary
affirmative, negative and financial covenants under this credit facility, and
continued compliance with these covenants could preclude the Company from
borrowing the maximum amount of the credit facilities. As a result of these
covenants, the Company's borrowing availability at September 30, 2001 was $123.7
million. The Company also issues letters of credit in the ordinary course of
business. As of September 30, 2001, the Company had letters of credit
outstanding with JPMorgan Chase Bank for $0.8 million and with The Bank of New
York for $2.0 million.

The Company also has outstanding convertible notes in the principal amount
of $326.2 million as of September 30, 2001. These notes are due and payable on
April 17, 2005. On or after April 17, 2003, subject to satisfaction of certain
customary conditions, the Company may redeem all of the convertible notes for
cash provided that (1) the average closing price of the class A Common Stock for
the twenty consecutive trading days immediately preceding the date the
redemption notice is given equals or exceeds 150% of the adjusted conversion
price, and (2) the closing price of the Class A Common Stock on the trading day
immediately preceding the date the redemption notice is given also equals or
exceeds 150% of the adjusted conversion price of $7.45 per share. The redemption
price is the face amount of the notes plus all accrued interest. If the Company
initiates the redemption, Silver Lake has the option of receiving payment in
cash, stock, or a combination of cash and stock. Commencing on April 18, 2003,
Silver Lake may elect to convert all or a portion of the notes to stock. If
Silver Lake initiates the conversion, the Company has the option of redeeming
all such notes for cash at a price based on the number of shares into which the
notes would be converted and

16

the market price on the date the notice of conversion is given. On the maturity
date, April 17, 2005, the Company must satisfy any remaining notes for cash.

Letters of credit are issued by the Company in the ordinary course of
business. At September 30, 2001, the Company had outstanding letters of credit
with The Bank of New York for $2.0 million and with JPMorgan Chase Bank for $0.8
million.

The Company has a total remaining investment commitment to the SI II
venture capital fund of $7.4 million at September 30, 2001. This remaining
commitment is expected to be funded in fiscal 2002.

The Company believes that its current cash balances, together with cash
anticipated to be provided by operating activities, the sale of marketable
equity securities, and borrowings available under the existing credit facility,
will be sufficient for the expected short-term and foreseeable long-term cash
needs of the Company in the ordinary course of business. If the Company were to
require substantial amounts of additional capital to pursue business
opportunities that may arise involving substantial investments of additional
capital, there can be no assurances that such capital will be available to the
Company or will be available on commercially reasonable terms.

FACTORS THAT MAY AFFECT FUTURE RESULTS

The Company operates in a very competitive and rapidly changing environment
that involves numerous risks and uncertainties, some of which are beyond the
Company's control. In addition, the Company and its clients are affected by the
condition of the general economy. The following section discusses many, but not
all, of these risks and uncertainties.

General Economic Conditions. The Company's revenues and results of
operations are influenced by general economic conditions. A general economic
downturn or a recession, anywhere in the world, could negatively effect demand
for the Company's products and services and may substantially reduce existing
and potential client information technology-related budgets. Such economic
downturn may materially and adversely affect the Company's business, financial
condition and results of operations including the ability to achieve continued
customer renewals and achieve new contract value, backlog and deferred events
revenue. The recent less favorable economic conditions and the September 11th
terrorist attacks, which occurred three weeks before fiscal year end, have led
to constrained IT spending and some unwillingness on the part of clients to
travel, thereby impacting the events business.

Competitive Environment. The Company faces competition from a significant
number of independent providers of information products and services, as well as
the internal marketing and planning organizations of the Company's clients. The
Company also competes indirectly against consulting firms and other information
providers, including electronic and print media companies. These indirect
competitors could choose to compete directly with the Company in the future. In
addition, limited barriers to entry exist in the markets in which the Company
competes. As a result, additional new competitors may emerge and existing
competitors may start to provide additional or complementary services. Although
the Company's market share has been increasing, increased competition may result
in loss of market share, diminished value in the Company's products and
services, reduced pricing and increased marketing expenditures. The Company may
not be successful if it cannot compete effectively on quality of research and
analysis, timely delivery of information, customer service, the ability to offer
products to meet changing market needs for information and analysis, and price.

Hiring and Retention of Employees. The Company's success depends heavily
upon the quality of its senior management, sales personnel, analysts,
consultants and other key personnel. The Company faces competition for these
qualified professionals from, among others, technology companies, market
research firms, consulting firms and electronic and print media companies. Some
of the personnel that the Company attempts to hire are subject to
non-competition agreements that could impede the Company's short-term
recruitment efforts. Any failure to retain key personnel or hire additional
qualified personnel, as required to support the evolving needs of clients or
growth in the Company's business, could adversely affect the quality of the
Company's products and services, and, therefore, its future business and
operating results.

17

Maintenance of Existing Products and Services. The Company operates in a
rapidly evolving market, and the Company's success depends upon its ability to
deliver high quality and timely research and analysis to its clients and to
anticipate and understand the changing needs of its clients. Any failure to
continue to provide credible and reliable information that is useful to its
clients could have a material adverse effect on future business and operating
results. Further, if the Company's predictions prove to be wrong or are not
substantiated by appropriate research, the Company's reputation may suffer and
demand for its products and services may decline.

Introduction of New Products and Services. The market for the Company's
products and services are characterized by rapidly changing needs for
information and analysis. To maintain its competitive position, the Company must
successfully continue to enhance and improve its products and services, develop
or acquire new products and services in a timely manner, and appropriately
position and price products and services. Any failure to successfully do so
could have a material adverse effect on the Company's business, results of
operations or financial position. In addition, the Company must continue to
improve its methods for delivering its products and services. Failure to
increase and improve the Company's Internet capabilities could adversely affect
the Company's future business and operating results. Technological advances may
provide increased competition from a variety of sources.

International Operations. A substantial portion of the Company's revenues
are derived from international sales. As a result, the Company's operating
results are subject to the risks inherent in international business activities,
including general political and economic conditions in each country, changes in
market demand as a result of exchange rate fluctuations and tariffs, challenges
in staffing and managing foreign operations, changes in regulatory requirements,
compliance with numerous foreign laws and regulations, different or overlapping
tax structures, higher levels of United States taxation on foreign income, and
the difficulty of enforcing client agreements and protecting intellectual
property rights in international jurisdictions. Additionally, the Company relies
on local distributors or sales agents in some international locations. If any of
these arrangements are terminated, the Company may not be able to replace the
arrangement on beneficial terms or on a timely basis or clients of the local
distributor or sales agent may not want to continue to do business with the
Company or its new agent.

Branding. The Company believes that its Gartner brand is critical to the
Company's efforts to attract and retain clients and that the importance of brand
recognition will increase as competition increases. The Company expects to
expand its marketing activities to promote and strengthen the Gartner brand and
may need to increase its marketing budget, hire additional marketing and public
relations personnel, expend additional sums to protect the brand and otherwise
increase expenditures to create and maintain brand loyalty among clients. If the
Company fails to effectively promote and maintain the Gartner brand, or incurs
excessive expenses in attempting to do so, the Company's future business and
operating results could be materially and adversely impacted.

Investment Activities. The Company maintains investments in equity
securities in private and publicly traded companies through direct ownership and
through wholly and partially owned venture capital funds. The companies invested
in are primarily early to mid-stage IT-based and Internet-enabled businesses.
The risks related to such investments, due to their nature and the volatile
public markets, include the possibilities that anticipated returns may not
materialize or could be significantly delayed. In addition, these entities may
require additional financing to meet their cash and operational needs, however,
there can be no assurance that such funds will be available to the extent
needed, at terms acceptable to the entities, if at all. As a result, the
Company's financial results could be materially impacted.

Indebtedness. The Company has incurred significant indebtedness. The
associated debt service could impair future operating results. Further, the
outstanding debt could limit the amount of cash or additional credit available
to the Company, which in turn, could restrain the Company's ability to expand or
enhance products and services, respond to competitive pressures or pursue
business opportunities that may arise in the future and involve substantial
investments of additional capital. Pursuant to the terms of the $300.0 million
convertible notes issued by the Company in April 2000 (see Note 10 -- Debt in
the Notes to Consolidated Financial Statements), the conversion price per share
is $7.45. As a result, the number of shares of Class A

18

Common Stock issuable upon conversion of the notes is 43.9 million shares of
Class A Common Stock at September 30, 2001. Although the Company has the right
to redeem the notes in certain circumstances, there can be no assurance that the
Company will be able to obtain sufficient capital on a commercially reasonable
basis, or at all, in order to fund any such redemption, which in turn, could
impact future business and operating results.

Organizational and Product Integration Related to Acquisitions. The
Company has made and may continue to make acquisitions of, or significant
investments in, businesses that offer complementary products and services. The
risks involved in each acquisition or investment include the possibility of
paying more than the value the Company derives from the acquisition, the
assumption of undisclosed liabilities and unknown and unforeseen risks, the
ability to integrate successfully the operations and personnel of the acquired
business, the ability to retain key personnel of the acquired company, the time
to train the sales force to market and sell the products of the acquired
company, the potential disruption of the Company's ongoing business and the
distraction of management from the Company's business.

Enforcement of the Company's Intellectual Rights. The Company relies on a
combination of copyright, patent, trademark, trade secrets, confidentiality and
contractual procedures to protect its intellectual property rights. Despite the
Company's efforts to protect its intellectual property rights, it may be
possible for unauthorized third parties to obtain and use technology or other
information that the Company regards as proprietary. In addition, the Company's
intellectual property rights may not survive a legal challenge to their validity
or provide significant protection for the Company. Furthermore, the laws of
certain countries do not protect the Company's proprietary rights to the same
extent as do the laws of the United States. Accordingly, the Company may not be
able to protect its intellectual property against unauthorized third-party
copying or use, which could adversely affect the Company's competitive position.

Agreements with IMS Health Incorporated. In connection with its
recapitalization in July 1999, the Company agreed to certain restrictions on
business activity to reduce the risk to IMS Health, Inc. and its stockholders of
substantial tax liabilities associated with the spin-off by IMS Health, Inc. of
its equity interest in the Company. The Company also agreed to assume the risk
of such tax liabilities if the Company were to undertake certain business
activities that give rise to the liabilities. As a result, the Company may be
limited in its ability to undertake acquisitions involving the issuance of a
significant amount of stock unless the Company were to seek and obtain a ruling
from the IRS that the transaction will not give rise to such tax liabilities. In
addition, the Company has certain limits in purchasing its common stock under
the terms of the recapitalization.

Possibility of Infringement Claims. Third parties may assert infringement
claims against the Company. Regardless of the merits, responding to any such
claim could be time consuming, result in costly litigation and require the
Company to enter into royalty and licensing agreements which may not be offered
or available on terms acceptable to the Company. If a successful claim is made
against the Company and the Company fails to develop or license a substitute
technology, the Company's business, results of operations or financial position
could be materially adversely affected.

Potential Fluctuations in Operating Results. The Company's quarterly
operating income may fluctuate in the future as a result of a number of factors,
including the timing of the execution of research contracts, the performance of
consulting engagements, the timing of symposia and other events, the amount of
new business generated by the Company, the mix of domestic and international
business, changes in market demand for the Company's products and services, the
timing of the development, introductions and marketing of new products and
services, and competition in the industry. An inability to generate sufficient
earnings and cash flow, and achieve our forecasts, may impact operating
activities, the share repurchase program and other activities.

EURO CONVERSION

On January 1, 1999, eleven of the fifteen member countries of the European
Union established fixed conversion rates between their sovereign currencies and
a new currency called the "euro" and adopted the euro as their common legal
currency. During 2001, a twelfth country joined and established a fixed
conversion rate between its sovereign currency and the euro. In 2002,
participating countries will adopt the euro as their

19

single currency. The participating countries will issue new euro-denominated
bills and coins for use in cash transactions. Legacy currency will no longer be
legal tender for any transactions beginning July 1, 2002, making conversion to
the euro complete. As of September 30, 2001, the Company does not believe that
the translation of financial transactions into euros has had, or will have, a
significant effect on the Company's results of operations, liquidity, or
financial condition. Additionally, the Company does not anticipate any material
impact from the euro conversion on the Company's financial information systems,
which currently accommodate multiple currencies. Costs associated with the
adoption of the euro have not been and are not expected to be significant and
are being expensed as incurred.

RECENTLY ISSUED ACCOUNTING STANDARDS

In June 2001, Statement of Financial Accounting Standards No. 141,
"Business Combinations" ("FAS 141") and Statement of Financial Accounting
Standards No. 142 "Goodwill and Other Intangible Assets" ("FAS 142") were
issued. FAS 141 requires the purchase method of accounting to be used for all
business combinations initiated or completed after June 30, 2001. FAS 141 also
specifies criteria that intangible assets acquired must meet to be recognized
and reported separately from goodwill. The Company does not anticipate that
adoption of FAS 141 will have any material effect on the Company. FAS 142
requires that goodwill and intangible assets with indefinite lives no longer be
amortized but instead be measured for impairment at least annually, or when
events indicate that there may be an impairment. In connection with the FAS 142
transitional goodwill impairment evaluation, the Company is required to perform
an assessment of whether there is an indication that goodwill is impaired as of
the date of adoption. To accomplish this, the Company must identify its
reporting units and determine the carrying value of each reporting unit by
assigning the assets and liabilities, including the existing goodwill and
intangible assets, to those reporting units as of the date of adoption. The
Company will then have up to six months from the date of adoption to determine
the fair value of each reporting unit and compare it to the carrying amount of
the reporting unit. To the extent the carrying amount of a reporting unit
exceeds the fair value of the reporting unit, an indication exists that the
reporting unit goodwill may be impaired and the Company must perform the second
step of the transitional impairment test. In the second step, the Company must
compare the implied fair value of the reporting unit goodwill with the carrying
amount of the reporting unit goodwill, both of which would be measured as of the
date of adoption. The implied fair value of goodwill is determined by allocating
the fair value of the reporting unit to all of the assets (recognized and
unrecognized) and liabilities of the reporting unit in a manner similar to a
purchase price allocation, in accordance with Statement 141. The residual fair
value after this allocation is the implied fair value of the reporting unit
goodwill. This second step is required to be completed as soon as possible, but
no later than the end of the year of adoption. Any transitional impairment loss
will be recognized as the cumulative effect of a change in accounting principle
in the Company's statement of operations.

FAS 142 is effective for fiscal years beginning after December 15, 2001.
Early adoption is permitted for companies with fiscal years beginning after
March 15, 2001. The Company expects to adopt FAS 142 in the first quarter ended
December 31, 2001. Because of the extensive effort needed to comply with
adopting FAS 142, it is not practicable to reasonably estimate the impact on the
Company's financial statements, specifically whether it will be required to
recognize any transitional impairment losses as the cumulative effect of a
change in accounting principle. As of September 30, 2001, the Company had
unamortized goodwill of $216.8 million and unamortized identifiable intangible
assets of $5.4 million. Amortization expense related to goodwill and other
identifiable intangible assets was $9.1 million and $3.3 million, respectively,
for the fiscal year ended September 30, 2001.

In June 2001, Statement of Financial Accounting Standards No. 143,
"Accounting for Asset Retirement Obligations" ("FAS 143") was issued. FAS 143
addresses financial accounting and reporting for legal obligations associated
with the retirement of tangible long-lived assets and the associated retirement
costs that result from the acquisition, construction, or development and normal
operation of a long-lived asset. Upon initial recognition of a liability for an
asset retirement obligation, FAS 143 requires an increase in the carrying amount
of the related long-lived asset. The asset retirement cost is subsequently
allocated to expense using a systematic and rational method over the assets
useful life. FAS 143 is effective for fiscal years beginning after

20

June 15, 2002. The adoption of this statement is not expected to have a material
impact on the Company's financial position or results of operations.

In August 2001, Statement of Financial Standards No. 144, "Accounting for
the Impairment or Disposal of Long-lived Assets" ("FAS 144") was issued. FAS 144
supersedes Statement of Financial Accounting Standards No. 121, "Accounting for
the Impairment of Long-lived Assets to be Disposed of," and the accounting and
reporting provisions of APB Opinion No. 30, "Reporting the Results of
Operations-Reporting the Effects of Disposal of a Segment of a Business, and
Extraordinary, Unusual and Infrequently occurring Events and Transactions." FAS
144 also amends ARB ("Accounting Research Bulletins") No. 51, Consolidated
Financial Statements, to eliminate the exception to consolidation for a
subsidiary for which control is likely to be temporary. FAS 144 retains the
fundamental provisions of FAS 121 for recognizing and measuring impairment
losses on long-lived assets held for use and long-lived assets to be disposed of
by sale, while resolving significant implementation issues associated with FAS
121. Among other things, FAS 144 provides guidance on how long-lived assets used
as part of a group should be evaluated for impairment, establishes criteria for
when long-lived assets are held for sale, and prescribes the accounting for
long-lived assets that will be disposed of other than by sale. FAS 144 is
effective for fiscal years beginning after December 15, 2001. The Company is
currently evaluating the effect, if any, that adoption of FAS 144 will have on
the Company's financial position and results of operations.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company's exposure to market risk for changes in interest rates relates
primarily to borrowing under long-term debt which consists of a $200.0 million
unsecured senior revolving credit facility with JPMorgan Chase Bank and $326.2
million of 6% convertible subordinated notes (see Note 10 -- Debt in the Notes
to Consolidated Financial Statements). At September 30, 2001, there was $15.0
million outstanding under the revolving credit facility. Under the revolving
credit facility the interest rate on borrowings is based on LIBOR plus an
additional 100 to 200 basis points based on the Company's debt to EBITDA ratio.
The Company believes that an increase or decrease of 10% in the effective
interest rate on available borrowings from its senior revolving credit facility,
if fully utilized, will not have a material effect on future results of
operations. In addition, pursuant to the terms of the convertible subordinated
notes, the conversion price as of September 30, 2001 was $7.45 per share. The
number of shares of Class A Common Stock issuable upon conversion of the notes
as of September 30, 2001 was 43.9 million shares with a total market value of
$397.2 million, using the Company's September 30, 2001 market price. Commencing
on April 17, 2003, the note holder can convert the notes into shares of Class A
Common Stock. Although the Company has the right to redeem the notes in certain
circumstances, including after a conversion election, there can be no assurance
that the Company will be able to obtain sufficient capital on a commercially
reasonable basis, or at all, to fund a redemption.

Beginning in 1997, the Company entered into a series of forward purchase
agreements that extended through May 2003 to offset the dilutive effect of the
Company's stock-based employee compensation plans. These agreements were settled
quarterly on a net basis in either shares of the Company's Class A Common Stock
or cash, at the Company's option. During the year ended September 30, 2001, two
settlements resulted in the Company's issuance of 491,789 shares of Class A
Common Stock and paying approximately $64,000 in cash. During the quarter ended
June 30, 2001, the Company reacquired 1,164,154 shares of Class A Common Stock
for approximately $9.7 million through an early termination of the forward
purchase agreements. As of September 30, 2001, the Company has no remaining
commitments under these forward purchase agreements.

The Company is exposed to market risk as it relates to changes in the
market value of its equity investments. The Company invests in equity securities
of public companies directly and through SI I and SI II. The Company owns 34% of
SI II. SI I and SI II are engaged in making venture capital investments in early
to mid-stage IT-based or Internet-enabled companies (see Note 5 -- Investments
in the Notes to the Consolidated Financial Statements). As of September 30,
2001, the Company had equity investments totaling $18.5 million, including
available for sale marketable securities with a fair market value of $3.2
million and a cost basis of $5.3 million. The gross unrealized losses of $2.0
million have been recorded net of deferred taxes of $0.8 million as a separate
component of accumulated other comprehensive income in the stockholders' equity
section of the Consolidated Balance Sheets. The gross unrealized gains were
insignificant. These

21

investments are inherently risky as the businesses are typically in early
development stages and may never develop. Furthermore, certain of these
investments are in publicly traded companies whose shares are subject to
significant market price volatility. Adverse changes in market conditions and
poor operating results of the underlying investments may result in the Company
incurring additional losses or an inability to recover the original carrying
value of its investments. The Company does not attempt to reduce or eliminate
its market exposure on its investments in equity securities and may incur
additional losses related to these investments. If there were a 100% adverse
change in the value of the Company's equity portfolio as of September 30, 2001,
this would result in a non-cash impairment charge of $18.5 million.

The Company faces two risks related to foreign currency exchange:
translation risk and transaction risk. Amounts invested in the Company's foreign
operations are translated into U.S. dollars at the exchange rates in effect at
the balance sheet date. The resulting translation adjustments are recorded as a
component of accumulated other comprehensive income (loss) in the stockholders'
equity (deficit) section of the Consolidated Balance Sheets. The Company's
foreign subsidiaries generally collect revenues and pay expenses in currencies
other than the United States dollar. Since the functional currency of the
Company's foreign operations is generally the local currency, foreign currency
translation adjustments are reflected as a component of stockholders' equity and
do not impact operating results. Revenues and expenses in foreign currencies
translate into higher or lower revenues and expenses in U.S. dollars as the U.S.
dollar weakens or strengthens against other currencies. Therefore, changes in
exchange rates may negatively affect the Company's consolidated revenues and
expenses (as expressed in U.S. dollars) from foreign operations. Currency
transaction gains or losses arising from transactions in currencies other than
the functional currency are included in results of operations. The Company has
generally not entered into foreign currency forward exchange contracts or other
derivative financial instruments to hedge the effects of adverse fluctuations in
foreign currency exchange rates. At September 30, 2001, the Company had only one
outstanding foreign currency forward contract outstanding. The contract requires
the Company to sell U.S. dollars and purchase Japanese yen. The contract amount
is $1.0 million, and is for a one year term expiring on September 25, 2002, and
contains a forward exchange rate of 114.26 Japanese yen. The foreign currency
forward contract was entered into to offset the foreign exchange effects of the
Company's Japanese yen intercompany payable, which had a value at September 30,
2001 of $1.0 million. The forward contract and the intercompany payable are each
reflected at fair value with gains and losses recorded currently in earnings.

ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The Company's consolidated financial statements as September 30, 2001 and
2000 and for each of the years in the three-year period ended September 30,
2001, together with the reports of KPMG LLP, independent auditors, dated October
29, 2001 are included in this Annual Report beginning on Page F-1.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

None.

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The information required to be furnished pursuant to this item will be set
forth under the captions "Proposal One: Election of Directors," "Executive
Officers" and "Section 16(a) Beneficial Ownership Reporting Compliance" in the
Definitive Proxy Statement to be filed with the Securities and Exchange
Commission in connection with the Company's 2002 Annual Meeting of Stockholders
currently scheduled to be held on March 6, 2002 (the "Proxy Statement") or if
the Proxy Statement is not filed with the Commission by January 25, 2002, such
information will be included in an amendment to this Annual Report filed by
January 25, 2002.

22

ITEM 11. EXECUTIVE COMPENSATION

The information required to be furnished pursuant to this item is
incorporated by reference from the information set forth under the caption
"Executive Compensation" in the Proxy Statement or if the Proxy Statement is not
filed with the Commission by January 25, 2002, such information will be included
in an amendment to this Annual Report filed by January 25, 2002.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The information required to be furnished pursuant to this item will be set
forth under the caption "Security Ownership of Certain Beneficial Owners and
Management" in the Proxy Statement or if the Proxy Statement is not filed with
the Commission by January 25, 2002, such information will be included in an
amendment to this Annual Report filed by January 25, 2002.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The information required to be furnished pursuant to this item will be set
forth under the caption "Certain Relationships and Transactions" in the Proxy
Statement or if the Proxy Statement is not filed with the Commission by January
25, 2002, such information will be included in an amendment to this Annual
Report filed by January 25, 2002.

PART IV

ITEM 14. EXHIBITS, CONSOLIDATED FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
FORM 8-K

(a) 1. and 2. Consolidated Financial Statements and Schedules

The independent auditors' report, consolidated financial statements and
financial statement schedule listed in the Index to Consolidated Financial
Statements and Schedule on page F-1 hereof are filed as part of this report,
beginning on page F-2 hereof.

All other financial statement schedules not listed in the Index have been
omitted because the information required is not applicable or is shown in the
financial statements or notes thereto.

3. Exhibits

- ---------------

* Management compensation plan or arrangement.

(1) Incorporated by reference from the Company's Registration Statement on Form
S-1 (File No. 33-67576), as amended, effective October 4, 1993.

(2) Incorporated by reference from the Company's Annual Report on Form 10-K as
filed on December 21, 1995.

(3) Incorporated by reference from the Company's Annual Report on Form 10-K as
filed on December 17, 1996.

24

(4) Incorporated by reference from the Company's Annual Report on Form 10-K
filed on December 22, 1999.

(5) Incorporated by reference from the Company's Form 8-K dated March 1, 2000 as
filed on March 7, 2000.

(6) Incorporated by reference from the Company's Quarterly Report on Form 10-Q
as filed on May 12, 2000.

(7) Incorporated by reference from the Company's Form 8-K dated April 17, 2000
as filed on April 25, 2000.

(8) Incorporated by reference from the Company's Annual Report on Form 10-K as
filed on December 29, 2000.

(b) Reports on Form 8-K

No reports on Form 8-K were filed by the Company during the fiscal quarter
ended September 30, 2001.

25

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULE

GARTNER, INC.

CONSOLIDATED FINANCIAL STATEMENTS

Report by Management........................................ F-2
Independent Auditors' Report................................ F-3
Consolidated Balance Sheets as of September 30, 2001 and
2000...................................................... F-4
Consolidated Statements of Operations for Years Ended
September 30, 2001, 2000 and 1999......................... F-5
Consolidated Statements of Changes in Stockholders' Equity
(Deficit) for Years Ended September 30, 2001, 2000 and
1999...................................................... F-6
Consolidated Statements of Cash Flows for Years Ended
September 30, 2001, 2000 and 1999......................... F-8
Notes to Consolidated Financial Statements.................. F-9
Independent Auditors' Report on Consolidated Financial
Statement Schedule........................................ S-1
Schedule II -- Valuation and Qualifying Accounts, Years
Ended September 30, 2001, 2000 and 1999................... S-2

F-1

REPORT BY MANAGEMENT

Management's Responsibility for Financial Reporting

Management has prepared and is responsible for the integrity and
objectivity of the consolidated financial statements and related information
included in the Annual Report. The consolidated financial statements, which
include amounts based on management's best judgments and estimates, were
prepared in conformity with generally accepted accounting principles. Financial
information elsewhere in this Annual Report is consistent with that in the
consolidated financial statements.

The Company maintains a system of internal controls designed to provide
reasonable assurance at reasonable cost that assets are safeguarded and
transactions are properly executed and recorded for the preparation of reliable
financial information. The internal control system is augmented with written
policies and procedures, an organizational structure providing division of
responsibilities and careful selection and training of qualified financial
people and a program of internal audits.

The Audit Committee of the Board of Directors, composed solely of
non-employee directors, meets regularly with management, internal auditors and
our independent accountants to ensure that each is meeting its responsibilities
and to discuss matters concerning internal controls and financial reporting.
Both the independent and internal auditors have unrestricted access to the Audit
Committee.

The independent auditors for fiscal 2001, 2000 and 1999, KPMG LLP, audit
and render an opinion on the financial statements in accordance with generally
accepted auditing standards. These standards include an assessment of the
systems of internal controls and tests of transactions to the extent considered
necessary by them to support their opinion.

/s/ MICHAEL D. FLEISHER
--------------------------------------
Michael D. Fleisher
Chairman of the Board and Chief
Executive Officer

/s/ REGINA M. PAOLILLO
--------------------------------------
Regina M. Paolillo
Chief Financial Officer

F-2

INDEPENDENT AUDITORS' REPORT

The Board of Directors and Stockholders
Gartner, Inc.:

We have audited the accompanying consolidated balance sheets of Gartner,
Inc. and subsidiaries as of September 30, 2001 and 2000, and the related
consolidated statements of operations, changes in stockholders' equity (deficit)
and cash flows for each of the years in the three-year period ended September
30, 2001. These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Gartner,
Inc. and subsidiaries as of September 30, 2001 and 2000, and the results of
their operations and their cash flows for each of the years in the three-year
period ended September 30, 2001, in conformity with accounting principles
generally accepted in the United States of America.

/s/ KPMG LLP
--------------------------------------

New York, New York
October 29, 2001

F-3

GARTNER, INC.

CONSOLIDATED BALANCE SHEETS

See Notes to Consolidated Financial Statements.
F-4

GARTNER, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

See Notes to Consolidated Financial Statements.
F-5

GARTNER, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)

F-6

GARTNER, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(DEFICIT) -- (CONTINUED)

See Notes to Consolidated Financial Statements.
F-7

GARTNER, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

See Notes to Consolidated Financial Statements.
F-8

GARTNER, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of presentation. The fiscal year of Gartner, Inc. (the "Company")
represents the period from October 1 through September 30. References to 2001,
2000 and 1999, unless otherwise indicated, are to the respective fiscal year.
Certain prior year amounts have been reclassified to conform to the current year
presentation or restated to reflect the disposition of the previously reported
TechRepublic segment as a discontinued operation (see Note 3 -- Discontinued
operation).

Principles of consolidation. The consolidated financial statements include
the accounts of the Company and its majority-owned subsidiaries. All significant
intercompany transactions and balances have been eliminated. The Company's
investments in companies in which it owns less than 50% but has the ability to
exercise significant influence over operating and financial policies are
accounted for using the equity method. All other investments for which the
Company does not have the ability to exercise significant influence or for which
there is not a readily determinable market value are accounted for under the
cost method of accounting. The results of operations for acquisitions of
companies accounted for using the purchase method have been included in the
Consolidated Statements of Operations beginning on the closing date of
acquisition.

Revenue and commission expense recognition. The Company typically enters
into annually renewable subscription contracts for research products. Revenue
from research products is deferred and recognized ratably over the contract
term. Consulting revenues, primarily derived from consulting, measurement and
strategic advisory services (paid one-day analyst engagements), are recognized
as work is performed on a contract by contract basis. Events revenue is deferred
and recognized upon the completion of the related symposium, conference or
exhibition. In addition, the Company defers certain costs directly related to
events and expenses these costs in the period during which the related
symposium, conference or exhibition occurs. The Company's policy is to defer
only those costs, primarily prepaid site and production services costs, that are
incremental and are directly attributable to a specific event. Other costs of
organizing and producing the Company's events, primarily Company personnel and
non-event specific expenses, are expensed in the period incurred. At the end of
each fiscal quarter, management assesses on an event-by-event basis whether
expected direct costs of producing a scheduled event will exceed expected
revenues. If such costs are expected to exceed revenues, the Company records the
expected loss in the period determined. Other revenues includes software
licensing fees which are recognized when a signed non-cancellable software
license exists, delivery has occurred, collection is probable, and the Company's
fees are fixed or determinable. Revenue from software maintenance is deferred
and recognized ratably over the term of each maintenance agreement, typically
twelve months. All research contracts are billable upon signing, absent special
terms granted on a limited basis from time to time. All research contracts are
non-cancelable and non-refundable, except for government contracts which have a
30-day cancellation clause but have not produced material cancellations to date.
With the exception of certain government contracts which permit termination, it
is the Company's policy to record at the time of signing of a contract the
entire amount of the contract billable as a fee receivable, which represents a
legally enforceable claim, and a corresponding amount as deferred revenue. For
government contracts which permit termination, the Company bills the client the
full amount billable under the contract but only records a receivable equal to
the earned portion of the contract. In addition, the Company only records
deferred revenue on these contracts when cash is received. Deferred revenues
attributable to government contracts were $24.5 million and $33.8 million at
September 30, 2001 and 2000, respectively. In addition, at September 30, 2001,
the Company had not recognized receivables or deferred revenues relating to
government contracts which permit termination of $13.3 million which have been
billed but not yet collected. The Company also records the commission obligation
related to research contracts upon the signing of the contract and amortizes the
corresponding deferred commission expense over the contract period in which the
related revenues are earned.

Cash and cash equivalents. All highly liquid investments with original
maturities of three months or less are considered cash equivalents. The carrying
value of these investments approximates fair value based upon

F-9

their short-term maturity Investments with maturities of more than three months
are classified as marketable securities.

Investments in equity securities. The Company accounts for its investments
in publicly traded equity securities under Statement of Financial Accounting
Standards No. 115, "Accounting for Certain Investments in Debt and Equity
Securities" ("FAS 115"). These investments, which meet the criteria for
classification as available for sale, are recorded at fair value and are
included as Marketable Equity Securities on the Consolidated Balance Sheets
given the Company's ability and intent to sell such investments within a one
year period. Unrealized gains and losses on marketable investments are recorded,
net of tax, as a component of Accumulated other comprehensive income (loss), net
in the Stockholders' equity (deficit) section of the Consolidated Balance
Sheets. Realized gains and losses are recorded in Net gain (loss) from sale of
investments within the Consolidated Statements of Operations. The cost of equity
securities sold is based on specific identification. The Company assesses the
need to record impairment losses on investments and records such losses when the
impairment of an investment is determined to be other than temporary in nature.
These impairment losses are reflected in Net loss from minority-owned
investments within the Consolidated Statements of Operations. Investments that
are not publicly traded and for which the Company does not have the ability to
exercise significant influence over operating and financial policies are
accounted for under the cost method. Accordingly, these investments are carried
at the lower of cost or net realizable value and are included in Other assets in
the Consolidated Balance Sheets (See Note 5 - Investments). The equity method is
used to account for investments in entities that are not majority-owned and that
the Company does not control but does have the ability to exercise significant
influence.

Property, equipment and leasehold improvements. Property, equipment and
leasehold improvements are stated at cost less accumulated depreciation and
amortization. Property and equipment are depreciated using the straight-line
method over the estimated useful lives of the assets. Leasehold improvements are
amortized using the straight-line method over the shorter of the estimated
useful lives of the assets or the remaining term of the related leases.

Software development costs. The Company capitalizes certain computer
software development costs and enhancements upon the establishment of
technological feasibility, limited to the net realizable value of the software
product, and ceases when the software product is available for general release
to clients. Until these products reach technological feasibility, all costs
related to development efforts are charged to expense. Once technological
feasibility has been determined, additional costs incurred in development,
including coding, testing, and documentation, are capitalized. Amortization of
software development costs is provided on a product-by-product basis over the
estimated economic life of the software, generally two years, using the
straight-line method. Amortization of capitalized computer software development
costs begins when the products are available for general release to customers.
Additionally, the Company capitalizes certain costs that are incurred to
purchase or to create and implement internal use software. The Company performs
periodic reviews to ensure that unamortized capitalized software development
costs remain recoverable from future revenue.

Intangible assets. Intangible assets include goodwill, non-compete
agreements, tradenames and other intangibles. Goodwill represents the excess of
the purchase price of acquired businesses over the estimated fair value of the
tangible and identifiable intangible net assets acquired. Amortization is
recorded using the straight-line method over periods ranging from three to
thirty years. Non-compete agreements are being amortized on a straight-line
basis over the period of the agreement ranging from two to five years.
Tradenames are being amortized on a straight-line basis over their estimated
useful lives ranging from nine to twelve years.

Impairment of long-lived assets and intangible assets. The Company reviews
long-lived assets and intangible assets for impairment whenever events or
changes in circumstances indicate that the carrying amount of the respective
asset may not be recoverable. Such evaluation may be based on a number of
factors including current and projected operating results and cash flows,
changes in management's strategic direction as well as other economic and market
variables. Management's policy regarding long-lived assets and intangible assets
is to evaluate the recoverability of these assets by determining whether the
amortization of the goodwill balance over its remaining life can be recovered
through undiscounted future operating cash

F-10

flows. Should events or circumstances indicate that the carrying value may not
be recoverable based on undiscounted future operating cash flows, an impairment
loss would be recognized by the Company. The amount of impairment, if any, is
measured based on the difference between projected discounted future operating
cash flows using a discount rate reflecting the Company's average cost of funds
and the carrying value of the asset (see Note 6 -- Other charges).

Foreign currency translation. All assets and liabilities of foreign
subsidiaries are translated into U.S. dollars at fiscal year-end exchange rates.
The resulting translation adjustments are recorded as a component of
stockholders' equity. Income and expense items are translated at average
exchange rates prevailing during the year. Currency transaction gains or losses
arising from transactions of the Company in currencies other that the functional
currency are included in results of operations within Other expense, net.

Income taxes. Deferred tax assets and liabilities are recognized based on
differences between the book and tax basis of assets and liabilities using
presently enacted tax rates. The provision for income taxes is the sum of the
amount of income tax paid or payable for the year as determined by applying the
provisions of enacted tax laws to taxable income for that year and the net
changes during the year in the Company's deferred tax assets and liabilities.
Undistributed earnings of subsidiaries outside of the U.S. amounted to
approximately $0.9 million as of September 30, 2001 and will either be
indefinitely reinvested or remitted substantially free of U.S. tax. Accordingly,
no material provision has been made for taxes that may be payable upon
remittance of such earnings, nor is it practicable to determine the amount of
this liability. The Company credits additional paid-in capital for realized tax
benefits arising from stock transactions with employees. The tax benefit on a
nonqualified stock option is equal to the tax effect of the difference between
the market price of a share of the Company's common stock on the exercise and
grant dates.

Fair value of financial instruments. The Company's financial instruments
include cash and cash equivalents, fees receivable, accounts payable, and
accruals which are short-term in nature. Accordingly, the carrying amounts of
these financial instruments approximate their fair value (see Note
12 -- Stockholders' equity (deficit) regarding forward purchase agreements).
Investments in publicly traded equity securities are valued based on quoted
market prices. Investments in equity securities that are not publicly traded are
valued at the lower of cost or net realizable value, which approximates fair
market value.

Long-term convertible debt consists of 6% convertible subordinated notes
(see Note 10 -- Debt). In addition, at September 30, 2001, $15.0 million was
outstanding under a senior revolving credit facility. The carrying amount of the
senior revolving credit facility approximates fair value as the rates of
interest on the revolving credit facility approximate current market rates of
interest for similar instruments with comparable maturities.

Concentrations of credit risk. Financial instruments that potentially
subject the Company to concentrations of credit risk consist primarily of cash
and cash equivalents, marketable equity securities and fees receivable.
Concentrations of credit risk with respect to fees receivable are limited due to
the large number of clients comprising the Company's client base and their
dispersion across many different industries and geographic regions.

Use of estimates. The preparation of consolidated financial statements in
conformity with generally accepted accounting principles in the United States of
America requires management to make estimates and assumptions that affect the
reported amounts of assets, liabilities and disclosures, if any, of contingent
assets and liabilities at the dates of the financial statements and the reported
amounts of revenues and expenses during the reporting periods. Actual results
could differ from those estimates. Estimates are used when accounting for such
items as allowance for doubtful accounts, investments, depreciation,
amortization, income taxes and certain accrued liabilities.

Recently issued accounting standards. In June 2001, Statement of Financial
Accounting Standards No. 141, "Business Combinations" ("FAS 141") and Statement
of Financial Accounting Standards No. 142 "Goodwill and Other Intangible Assets"
("FAS 142") were issued. FAS 141 requires the purchase method of accounting to
be used for all business combinations initiated and/or completed after June 30,
2001. FAS 141 also specifies criteria that intangible assets acquired must meet
to be recognized and reported apart from

F-11

goodwill. The Company does not anticipate that adoption of FAS 141 will have any
material effect on the Company. FAS 142 requires that goodwill and intangible
assets with indefinite lives no longer be amortized but instead be measured for
impairment at least annually, or when events indicate that there may be an
impairment. In connection with the FAS 142 transitional goodwill impairment
evaluation, the Company is required to perform an assessment of whether there is
an indication that goodwill is impaired as of the date of adoption. To
accomplish this, the Company must identify its reporting units and determine the
carrying value of each reporting unit by assigning the assets and liabilities,
including the existing goodwill and intangible assets, to those reporting units
as of the date of adoption. The Company will then have up to six months from the
date of adoption to determine the fair value of each reporting unit and compare
it to the carrying amount of the reporting unit. To the extent the carrying
amount of a reporting unit exceeds the fair value of the reporting unit, an
indication exists that the reporting unit goodwill may be impaired and the
Company must perform the second step of the transitional impairment test. In the
second step, the Company must compare the implied fair value of the reporting
unit goodwill with the carrying amount of the reporting unit goodwill, both of
which would be measured as of the date of adoption. The implied fair value of
goodwill is determined by allocating the fair value of the reporting unit to all
of the assets (recognized and unrecognized) and liabilities of the reporting
unit in a manner similar to a purchase price allocation, in accordance with
Statement 141. The residual fair value after this allocation is the implied fair
value of the reporting unit goodwill. This second step is required to be
completed as soon as possible, but no later than the end of the year of
adoption. Any transitional impairment loss will be recognized as the cumulative
effect of a change in accounting principle in the Company's statement of
operations.

FAS 142 is effective for fiscal years beginning after December 15, 2001.
Early adoption is permitted for companies with fiscal years beginning after
March 15, 2001. Although the Company is not required to adopt this statement
until the first quarter of fiscal 2003, it expects to adopt FAS 142 in the first
quarter ended December 31, 2001. Because of the extensive effort needed to
comply with adopting FAS 142, it is not practicable to reasonably estimate the
impact on the Company's financial statements, specifically whether it will be
required to recognize any transitional impairment losses as the cumulative
effect of a change in accounting principle. As of September 30, 2001, the
Company had unamortized goodwill of $216.8 million and unamortized identifiable
intangible assets of $5.4 million. Amortization expense related to goodwill and
other identifiable intangible assets was $9.1 million and $3.3 million,
respectively, for the fiscal year ended September 30, 2001.

In June 2001, Statement of Financial Accounting Standards No. 143,
"Accounting for Asset Retirement Obligations" ("FAS 143") was issued. FAS 143
addresses financial accounting and reporting for legal obligations associated
with the retirement of tangible long-lived assets and the associated retirement
costs that result from the acquisition, construction, or development and normal
operation of a long-lived asset. Upon initial recognition of a liability for an
asset retirement obligation, FAS 143 requires an increase in the carrying amount
of the related long-lived asset. The asset retirement cost is subsequently
allocated to expense using a systematic and rational method over the assets
useful life. FAS 143 is effective for fiscal years beginning after June 15,
2002. The adoption of this statement is not expected to have a material impact
on the Company's financial position or results of operations.

In August 2001, Statement of Financial Standards No. 144, "Accounting for
the Impairment or Disposal of Long-lived Assets" ("FAS 144") was issued. FAS 144
supersedes Statement of Financial Accounting Standards No. 121, "Accounting for
the Impairment of Long-lived Assets to be Disposed of," and the accounting and
reporting provisions of APB Opinion No. 30, "Reporting the Results of
Operations -- Reporting the Effects of Disposal of a Segment of a Business, and
Extraordinary, Unusual and Infrequently occurring Events and Transactions." FAS
144 also amends ARB ("Accounting Research Bulletins") No. 51, Consolidated
Financial Statements, to eliminate the exception to consolidation for a
subsidiary for which control is likely to be temporary. FAS 144 retains the
fundamental provisions of FAS 121 for recognizing and measuring impairment
losses on long-lived assets held for use and long-lived assets to be disposed of
by sale, while resolving significant implementation issues associated with FAS
121. Among other things, FAS 144 provides guidance on how long-lived assets used
as part of a group should be evaluated for impairment, establishes criteria for
when long-lived assets are held for sale, and prescribes the accounting for
long-lived

F-12

assets that will be disposed of other than by sale. FAS 144 is effective for
fiscal years beginning after December 15, 2001. The Company is currently
evaluating the effect, if any, that adoption of FAS 144 will have on the
Company's financial position and results of operations.

2 -- BUSINESS ACQUISITIONS

On October 2, 2000, the Company acquired all of the assets and assumed the
liabilities of Solista Global LLC ("Solista") for approximately $9.0 million in
cash. Solista is a provider of strategic consulting services that merge
technology and business expertise to help clients build strategies for the
digital world. The acquisition was accounted for by the purchase method and the
purchase price has been allocated to the assets acquired and the liabilities
assumed, based upon estimated fair values at the date of the acquisition. The
excess purchase price over the fair value of amounts assigned to the net
tangible assets acquired was approximately $6.5 million, of which $6.0 million
has been allocated to goodwill and is being amortized over 20 years. In
addition, $0.5 million of the purchase price was allocated to non-compete
agreements which are being amortized over three years. See Note 6 -- Other
Charges.

On December 10, 1999, the Company acquired all of the assets and assumed
the liabilities of Rendall and Associates, Inc. ("Rendall") for $12.0 million in
cash. Rendall provides strategic planning advice, feasibility and competitive
analysis and research on the telecommunications market, technologies, regulation
and public policies. Additionally, Rendall provides technical expertise in
broadband technologies. The acquisition was accounted for by the purchase method
and the purchase price has been allocated to the assets acquired and the
liabilities assumed, based upon estimated fair values at the date of the
acquisition. The excess purchase price over the fair value of amounts assigned
to the net tangible assets acquired was approximately $11.1 million, of which
$9.9 million has been allocated to goodwill and is being amortized over 20
years. In addition, $1.2 million of the purchase price was allocated to a
non-compete agreement, and is being amortized over 5 years.

On November 30, 1999, the Company acquired all the outstanding shares of
Computer Financial Consultants Limited ("CFC") for $16.0 million in cash. CFC
provides senior executives in IT and purchasing with assistance intended to
enhance the procurement of IT related products and services. The acquisition was
accounted for by the purchase method and the purchase price has been allocated
to the assets acquired and the liabilities assumed, based upon estimated fair
values at the date of the acquisition. The excess purchase price over the fair
value of amounts assigned to the net tangible assets acquired was approximately
$11.6 million, of which $11.0 million has been allocated to goodwill and is
being amortized over 30 years. In addition, $0.6 million of the purchase price
was allocated to a non-compete agreement, and is being amortized over 5 years.

During fiscal 2000, the Company completed additional acquisitions for
consideration of $9.7 million in cash and a $1.0 million note payable.

On July 30, 1999, the Company acquired all of the outstanding shares of The
Warner Group ("Warner") for $18.0 million in cash. Warner is a leading
management consulting firm specializing in information technology,
communications technology and performance improvement for government agency
clients. The acquisition was accounted for by the purchase method, and the
purchase price has been allocated to the assets acquired and the liabilities
assumed, based upon estimated fair values at the date of acquisition. The excess
purchase price over the fair value of amounts assigned to the net tangible
assets acquired was approximately $15.2 million, of which $14.3 million has been
recorded as goodwill and is being amortized over 30 years. In addition, $0.9
million of the purchase price was allocated to non-compete agreements and is
being amortized over 2 and 5 years.

On January 1, 1999, the Company acquired all of the assets and assumed the
liabilities of G2R, Inc. ("G2R") for $7.8 million in cash and 358,333 shares of
Class A Common Stock of the Company which had an approximate fair market value
of $7.8 million. G2R is a provider of research and consulting services to IT
product vendors and professional services and outsourcing firms. The acquisition
was accounted for by the purchase method and the purchase price has been
allocated to the assets acquired and the liabilities assumed, based upon
estimated fair values at the date of acquisition. The excess purchase price over
the fair value of
F-13

amounts assigned to the net tangible assets acquired was approximately $13.4
million, of which $12.6 million has been recorded as goodwill, which is being
amortized over 30 years. In addition, $0.8 million of the purchase price was
allocated to a non-compete agreement and is being amortized over 4 years.

On November 13, 1998, the Company acquired all of the outstanding shares of
Wentworth Research, Limited ("Wentworth") for $8.3 million in cash. Wentworth
provides research and advisory services to chief information officers and the
senior information technology management community in the United Kingdom and
Hong Kong. The acquisition was accounted for by the purchase method, and the
purchase price has been allocated to the assets acquired and the liabilities
assumed, based upon estimated fair values at the date of acquisition. The excess
purchase price over the fair value of amounts assigned to the net tangible
assets acquired was approximately $10.5 million, of which $9.7 million has been
recorded as goodwill, which is being amortized over 30 years. In addition, $0.8
million of the purchase price was allocated to a non-compete agreement, and is
being amortized over 2 years.

On October 7, 1998, the Company acquired all the assets and assumed the
liabilities of Griggs-Anderson, Inc., for $10.9 million in cash and 305,808
shares of Class A Common Stock of the Company, which had an approximate fair
market value of $7.3 million. Griggs-Anderson, Inc. provides custom market
research to vendors in the technology marketplace, research and surveys for the
evaluation of Web sites for effectiveness of content, technical performance,
ease of navigation, impact of graphics, and demographic profiles of users. The
acquisition was accounted for by the purchase method and the purchase price has
been allocated to the assets acquired and the liabilities assumed, based upon
estimated fair values at the date of acquisition. The excess purchase price over
the fair value of amounts assigned to the net tangible assets acquired was $16.9
million, of which $15.5 million has been recorded as goodwill, which is being
amortized over 30 years. In addition, $1.4 million of the purchase price was
allocated to a non-compete agreement and is being amortized over 5 years.

During 1999, the Company completed additional acquisitions for
consideration of $16.1 million in cash. These acquisitions have been accounted
for under the purchase method and substantially all of the purchase price has
been assigned to goodwill.

3 -- DISCONTINUED OPERATION

On July 2, 2001, the Company sold its subsidiary, TechRepublic, to CNET
Networks, Inc. ("CNET") for approximately $23.0 million in cash and common stock
of CNET, before reduction for certain termination benefits. The proceeds were
$14.3 million in cash and 755,058 shares of CNET common stock which had a fair
market value of $12.21 per share on July 2, 2001. The Consolidated Financial
Statements of the Company have been restated to reflect the disposition of the
TechRepublic segment as a discontinued operation in accordance with APB Opinion
No. 30. Accordingly, revenues, costs and expenses, assets, liabilities, and cash
flows of TechRepublic have been excluded from the respective captions in the
Consolidated Statements of Operations, Consolidated Balance Sheets and
Consolidated Statements of Cash Flows, and have been reported through the date
of disposition as "Loss from discontinued operation," "Net assets of
discontinued operation," and "Net cash used by discontinued operation," for all
periods presented.

During 2001, the Company recorded a pre-tax loss of $66.4 million ($39.9
million after tax) to recognize the loss on the sale. This pre-tax loss includes
a write-down of $42.4 million of assets, primarily goodwill, to net realizable
value, operating losses through the date of sale of $6.5 million, severance and
related benefits of $8.3 million, and other sale-related costs and expenses,
including costs associated with the closure of facilities, of $9.2 million.

F-14

Summarized financial information for the discontinued operation is as
follows (in thousands):

STATEMENTS OF OPERATIONS DATA

BALANCE SHEET DATA

4 -- NET GAIN (LOSS) ON SALE OF INVESTMENTS

During the year ended September 30, 2001, the Company sold the remaining
1,922,795 shares of Jupiter Media Metrix ("Jupiter") for net cash proceeds of
$7.5 million at an average price of $3.91 per share for a pre-tax loss of $5.6
million. In addition the Company received additional stock distributions from
its investment in SI Venture Associates, LLC ("SI I"), and SI Venture Fund II,
LP ("SI II"). During the year ended September 30, 2001, the Company sold a
portion of the shares received from SI I and SI II for net cash proceeds of $6.0
million for a pre-tax gain of $4.9 million.

On June 30, 2000, the Company sold its 8% investment in NETg, Inc. ("NETg")
for $36.0 million in cash to an affiliate of Harcourt, Inc. resulting in a
pre-tax loss of approximately $6.6 million. The Company received the cash
proceeds on July 7, 2000. In addition, the Company recorded an additional loss
in connection with a negotiated settlement of a joint venture agreement
associated with the sale of GartnerLearning for approximately $6.7 million.

On October 7, 1999, Jupiter Communications, Inc. ("Jupiter") completed its
initial public offering at $21.00 per share of common stock. Upon completion of
Jupiter's initial public offering, the Company owned 4,028,503 shares of
Jupiter's outstanding common stock. The change in the Company's proportionate
share of Jupiter's equity resulted in the Company's write-up of the investment
by approximately $15.4 million and increases in deferred tax liability and
additional paid-in capital of approximately $7.1 million and $8.3 million,
respectively. During the quarter ended June 30, 2000, the Company's investment
decreased below 20% of Jupiter's outstanding common stock. Because the Company
had concluded it no longer exercised significant influence over Jupiter, it has
changed its method of accounting for this investment from the equity method to
the cost method. During the year ended September 30, 2000, the Company sold
1,995,950 shares for net cash proceeds of $55.5 million at an average price of
$27.81 per share for a pre-tax gain of $42.9 million. In September 2000, Jupiter
merged with Media Metrix, Inc., creating Jupiter Media Metrix. Jupiter
shareholders received 0.946 shares of Jupiter for each share of Jupiter that
they owned. At the date of the merger, the

F-15

Company owned 2,032,553 shares of the former Jupiter, which were exchanged for
shares of Jupiter Media Metrix. At September 30, 2000, the Company's investment
of 1,922,795 shares of Jupiter had a fair market value of $30.6 million and is
recorded at fair value and is included in Marketable equity securities in the
Consolidated Balance Sheets at September 30, 2000.

5 -- INVESTMENTS

A summary of the Company's investments in marketable equity securities and
other investments at September 30, 2001 and 2000 is as follows (in thousands):

At September 30, 2001, marketable equity securities were comprised of
755,058 shares of CNET received in connection with the sale of TechRepublic on
July 2, 2001 which had a fair value of $12.21 per share, or $9.2 million on the
closing date. Since July 2, 2001, the market value of the CNET shares has
declined substantially, accordingly the Company has recorded a $3.9 million
impairment charge in net loss from minority-owned investments representing an
other than temporary decline in market value of the CNET common stock. At
September 30, 2001, these shares are reflected in the September 30, 2001
Consolidated Balance Sheet at their fair market value of $3.2 million after
giving effect to an additional $2.0 million of unrealized losses.

In addition to equity securities owned directly by the Company and through
SI I, a wholly owned affiliate, the Company owns 34% of SI II. Both entities are
venture capital funds engaged in making investments in early to mid-stage
IT-based or Internet-enabled companies. Both entities are managed pursuant to a
management contract with SI Services Company, LLC, an entity controlled by the
former Chairman of the Board of the Company, who continues as an employee of the
Company, and certain former officers and employees of the Company. The accounts
of SI I are included in the Company's Consolidated Financial Statements. The
Company had a total original investment commitment to SI I and SI II of $10.0
million and $30.0 million, respectively, of which $7.4 million of the commitment
to SI II remained unfunded at September 30, 2001. This commitment is expected to
be funded in fiscal 2002.

The Company's investment in SI II is recorded on the equity method. Equity
method investments represent the investments held through SI II. The Company's
share of equity losses were $0.3 million and $0.1 million for fiscal 2001 and
2000, respectively. Other investments is comprised of various cost-based and
equity-based investments. During fiscal 2001, the Company wrote-down certain of
its investments and recognized an impairment charge of $22.6 million for other
than temporary declines in the value of certain investments which is reflected
in Net loss from minority-owned investments in the 2001 Consolidated Statement
of Operations. The Company made an assessment of the carrying value of its
investments and determined that certain investments were in excess of their fair
value due to the significance and duration of the decline in valuation of
comparable companies operating in the internet and technology sectors. The

F-16

impairment factors evaluated by management may change in subsequent periods,
given that the entities underlying these investments operate in a volatile
business environment. In addition, these entities may require additional
financing to meet their cash and operational needs, however, there can be no
assurance that such funds will be available to the extent needed, at terms
acceptable to the entities, if at all. This could result in additional material
non-cash impairment charges in the future.

6 -- OTHER CHARGES

During 2001, the Company recorded other charges of $46.6 million. Of these
charges, $24.8 million are associated with the Company's workforce reduction
announced in April 2001. This workforce reduction has resulted in the
elimination of 383 positions, or approximately 8% of the Company's workforce.
Approximately $14.3 million of the other charges are associated with the
write-down of goodwill and other long-lived assets to net realizable value as a
result of the Company's decision to discontinue certain unprofitable products,
and $7.5 million of the charge is associated primarily with the write-off of
internally developed systems in connection with the launch of gartner.com and
seat-based pricing. At September 30, 2001, $6.6 million of the termination
benefits relating to the workforce reduction remain to be paid, primarily in the
first quarter of fiscal 2002. The Company is funding these costs out of
operating cash flows.

During 1999, the Company recorded other charges related to reorganization
and recapitalization of approximately $23.4 million on a pre-tax basis.
Approximately $14.2 million of the charge related to certain job eliminations
associated with certain strategic reduction in force initiatives. Approximately
$9.2 million of the other charge pertained to legal and advisory fees associated
with the Company's recapitalization (see Note 16 -- Recapitalization).

7 -- PROPERTY, EQUIPMENT AND LEASEHOLD IMPROVEMENTS, NET

Property, equipment and leasehold improvements, less accumulated
depreciation and amortization consist of the following (in thousands):

At September 30, 2001 and 2000, capitalized development costs for internal
use software were $27.3 million and $26.3 million, respectively, net of
accumulated amortization of $24.7 million and $10.3 million, respectively.
Amortization of capitalized internal software development costs totaled $14.3
million, $7.2 million and $2.3 million in fiscal 2001, 2000 and 1999,
respectively.

F-17

8 -- INTANGIBLE ASSETS, NET

Intangible assets, less accumulated amortization consist of the following
(in thousands):

9 -- ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

Accounts payable and accrued liabilities consist of the following (in
thousands):

10 -- DEBT

On July 16, 1999, the Company entered into an unsecured Credit Agreement
with JPMorgan Chase Bank, as administrative agent for the participating
financial institutions thereunder, providing for a maximum of $500.0 million of
credit facilities, consisting of a $350.0 million term loan and a $150.0 million
senior revolving credit facility. On February 25, 2000, the Company modified
certain financial and other covenants to permit the issuance of convertible
debt. Loans under the revolving facility were to be available for five years,
subject to certain customary conditions on the date of any such loan. On July
17, 2000, the Company entered into a second amendment to the Credit Agreement.
Under this amendment, the Company agreed to refinance all existing indebtedness
and to repay in full and terminate the term loans drawn under the existing
Credit Agreement. At September 30, 2001, the Company has a senior revolving
credit facility, as amended, totaling a maximum aggregate principal amount of up
to $200.0 million. In connection with the extinguishment of the $350.0 million
term loan, the Company wrote off $1.7 million, net of the related tax benefit of
$1.2 million, of deferred debt issuance costs in the fourth quarter of fiscal
2000. The charge was recorded as an extraordinary loss on debt extinguishment.

At September 30, 2001, $15.0 million was outstanding under the revolving
credit facility. A commitment fee of 0.30% to 0.50% is paid on the unused
revolving credit amount. Pursuant to certain financial covenants of the
revolving credit facility, the Company had $123.7 million of available
borrowings at September 30, 2001. The weighted average interest rate on
borrowings was 6.8% for the year ended September 30, 2001.

On April 17, 2000, the Company issued in a private placement transaction,
$300.0 million of 6% convertible subordinated notes (the "convertible notes") to
Silver Lake Partners, L.P. ("Silver Lake") and certain of Silver Lake's
affiliates. The convertible notes mature in April 2005 and accrue interest at 6%
per annum. Interest accrues semi-annually by a corresponding increase in the
face amount of the convertible notes

F-18

commencing September 15, 2000. Accordingly, $26.2 million has been added to the
face amount of the convertible notes' balance outstanding at September 30, 2001.

As part of the transaction, two Silver Lake representatives were elected to
the Company's ten-member Board of Directors. The Company also granted to Silver
Lake the right to acquire 5% of any Company subsidiary that is spun off or spun
out at 80% of the initial public offering price. The Company valued the option
at $1.0 million, which was recorded as a discount to the convertible notes, and
is being amortized to interest expense over the five-year term.

On April 18, 2000, $200.0 million of the proceeds were used to pay down
term loan borrowings under the Credit Agreement with JPMorgan Chase Bank. The
Company incurred $7.9 million of transaction and advisory fees related to the
transaction. These fees were accounted for as debt issuance costs and are being
amortized over the five-year term of the debt using the effective interest
method.

The convertible notes were originally convertible into shares of the
Company's Class A Common Stock, commencing April 17, 2003, at an initial price
of $15.87 per share. In accordance with the original terms of the note, on the
first anniversary date of issuance of the convertible notes, April 17, 2001, the
conversion price was adjusted, or reset, to be equal to the lower of the initial
conversion price of $15.87 per share, or the average closing price over the
thirty trading day period ending April 17, 2001 if less than $14.43, a price
equal to a 10% premium to the average closing price over that same period. On
April 17, 2001, the conversion price was reduced to $7.45 per share. The number
of shares of Class A Common Stock issuable upon conversion of the notes as of
September 30, 2001 was 43.9 million shares with a total market value of $397.2
million, using the Company's September 30, 2001 market price of $9.05 per share.

On or after April 17, 2003, subject to satisfaction of certain customary
conditions, the Company may redeem all of the convertible notes for cash
provided that (1) the average closing price of the class A Common Stock for the
twenty consecutive trading days immediately preceding the date the redemption
notice is given equals or exceeds 150% of the adjusted conversion price of $7.45
per share, and (2) the closing price of the Class A Common Stock on the trading
day immediately preceding the date the redemption notice is given also equals or
exceeds 150% of the adjusted conversion price. The redemption price is the face
amount of the notes plus all accrued interest. If the Company initiates the
redemption, Silver Lake has the option of receiving payment in cash, stock, or a
combination of cash and stock.

Commencing on April 18, 2003, Silver Lake may elect to convert all or a
portion of the notes to stock. If Silver Lake initiates the conversion, the
Company has the option of redeeming all such notes for cash at a price based on
the number of shares into which the notes would be converted and the market
price on the date the notice of conversion is given.

On the maturity date, April 17, 2005, the Company must satisfy any
remaining notes for cash.

Letters of credit are issued by the Company in the ordinary course of
business. At September 30, 2001, the Company had outstanding letters of credit
with The Bank of New York for $2.0 million and with JPMorgan Chase Bank for $0.8
million.

F-19

11 -- COMMITMENTS AND CONTINGENCIES

The Company leases various facilities, furniture and computer equipment
under operating lease arrangements expiring between 2001 and 2026. Future
minimum annual payments under non-cancelable operating lease agreements at
September 30, 2001 are as follows (in thousands):

Rental expense for operating leases, net of sublease income, was $26.9
million, $22.4 million, and $18.4 million for the years ended September 30,
2001, 2000 and 1999, respectively. The Company has commitments with two
facilities management companies for printing, copying, mailroom and other
related services. The minimum annual obligations under these service agreements
are $4.9 million for 2002 and $1.6 million for 2003.

The Company is involved in legal proceedings and litigation arising in the
ordinary course of business. The Company believes the outcome of all current
proceedings, claims and litigation will not have a material effect on the
Company's financial position or results of operations when resolved in a future
period.

12 -- STOCKHOLDERS' EQUITY (DEFICIT)

Capital stock. Class A Common Stock and Class B Common Stock stockholders
are entitled to one vote per share on all matters to be voted by stockholders
and vote together as a single class, other than with respect to the election of
directors. Class A Common Stock stockholders are entitled to one vote per share
on the election of Class A directors, which constitute no more than 20% of the
directors, and Class B Common Stock stockholders are entitled to one vote per
share on the election of Class B directors, which constitute at least 80% of the
directors.

Stock option plans. The Company's 1991 Stock Option Plan expired on April
25, 2001. As a result, as of September 30, 2001, no options were available for
future grant under this plan. At September 30, 2000, 1,354,876 options were
available for grant.

In January 1993, the Company adopted the 1993 Director Option Plan, a stock
option plan for directors, and reserved an aggregate of 1,200,000 shares of
Class A Common Stock for issuance under this plan. The plan currently provides
for the automatic grant of 15,000 options to purchase shares of Class A Common
Stock to each non-employee director upon first becoming an outside director and
the automatic grant of an option to purchase an additional 7,000 shares of Class
A Common Stock annually based on continuous service as an outside director. The
exercise price of each option granted under the plan is equal to the fair market
value of the Class A Common Stock at the date of grant. Options granted are
subject to yearly vesting over a three-year period after the date of grant.
Directors are also compensated in common stock equivalents payable under this
plan. At September 30, 2001 and 2000, 420,738 and 464,635 options were available
for grant, respectively.

In October 1994, the Board of Directors and stockholders of the Company
approved the adoption of a Long-Term Stock Option Plan and the reservation of an
aggregate of 6,560,000 shares of Class A Common Stock for issuance thereunder.
The purpose of the plan is to provide to senior personnel long-term equity
participation in the Company as an incentive to promote the long-term success of
the Company. The exercise price of each option granted under the plan is equal
to the fair market value of the Class A Common Stock at the date of grant.
Options granted under the plan vest and become fully exercisable five years
following the

F-20

date of grant, based on continued employment, and have a term of ten years from
the date of grant assuming continued employment. Vesting and exercisability
accelerates upon achievement of certain financial performance targets determined
by the Board of Directors. If the financial performance targets are met for the
year of grant in accordance with parameters as set by the Board at its sole
discretion, 25% of the shares granted become exercisable on the first
anniversary date following the date of grant and, if cumulative financial
performance targets are met for both the first and second years following the
date of grant, a second 25% become exercisable three years following the date of
grant. If cumulative financial performance targets are met for all three years
following the date of grant, a third 25% become exercisable on the fourth
anniversary date following the date of grant and the final 25% become
exercisable on the fifth anniversary following the date of grant. Based on
cumulative performance through 2001, 1,652,770 shares were exercisable on
September 30, 2001. At September 30, 2001 and 2000, 419,250 and 600,250 options
were available for grant, respectively.

In October 1996, the Company adopted the 1996 Long Term Stock Option Plan.
Under the terms of the plan, the Board of Directors may grant non-qualified and
incentive options, entitling employees to purchase shares of the Company's
common stock at the fair market value at the date of option grant. A total of
1,800,000 shares of Class A Common Stock was reserved for issuance under this
plan. All options granted under the plan vest and become fully exercisable six
years following the date of grant, based on continued employment, and have a
term of ten years from the date of grant assuming continued employment. Vesting
and exercisability accelerates upon achievement of certain financial performance
targets determined by the Board of Directors. If financial performance targets
are met in the year of grant in accordance with parameters as set by the Board
in its sole discretion, 25% of the shares granted become exercisable on the
third anniversary date following the date of grant. If cumulative financial
performance targets are met for both the first and second years following the
date of grant, a second 25% become exercisable three years following the date of
grant. If financial performance targets are met cumulatively for all three years
following the date of grant, a third 25% become exercisable on the fourth
anniversary date following the date of grant and the final 25% become
exercisable on the fifth anniversary following the date of grant. Based on 1997
and 1998 performance, 638,000 options were exercisable on September 30, 2001.
Based on 1999 performance, an additional 172,375 will vest in 2002. Based on
2000 and 2001 performance, there was no additional acceleration of vesting. At
September 30, 2001 and 2000, 952,125 and 812,000 options to purchase common
stock were available for grant, respectively.

In October 1998, the Company adopted the 1998 Long Term Stock Option Plan.
Under the terms of the plan, the Board of Directors may grant non-qualified and
incentive options, entitling employees to purchase shares of the Company's
common stock at the fair market value at the date of option or restricted stock
grant. A total of 2,500,000 shares of Class A Common Stock was reserved for
issuance under this plan. Options currently granted under the plan generally
vest and become fully exercisable six years following the date of grant, based
on continued employment, and have a term of ten years from the date of grant
assuming continued employment. Vesting and exercisability accelerates upon
achievement of certain financial performance targets determined by the Board of
Directors. If financial performance targets are met in the year of grant in
accordance with parameters as set by the Board in its sole discretion, 25% of
the shares granted become exercisable in the third anniversary date following
the date of grant. If cumulative financial performance targets are met for both
the first and second years following the date of grant, a second 25% become
exercisable three years following the date of grant. If financial performance
targets are met cumulatively for all three years following the date of grant, a
third 25% become exercisable on the fourth anniversary date following the date
of grant and the final 25% become exercisable on the fifth anniversary following
the date of grant. Based on cumulative 2001 performance, no vesting has
accelerated. At September 30, 2001 and 2000, 838,509 and 662,001 options to
purchase common stock were available for grant, respectively.

On December 15, 1998, the Company adopted an option exchange program that
allowed the exchange of certain stock options granted from April 1998 through
July 1998 for options with an exercise price of $20.46. In total, options to
purchase 4,737,400 shares of common stock were exchanged under this program. The
original vesting schedules and expiration dates associated with these stock
options were also amended to

F-21

commence with the stock option exchange program date. These amounts have been
included as granted and canceled options during 1999 in the summary activity
table shown below.

In connection with the recapitalization (see Note 16 -- Recapitalization),
substantially all options with an exercise price below the fair market value of
the stock on the effective date were reduced to maintain the ratio of the
exercise price to the fair market value of the stock prior to the special,
nonrecurring cash dividend, which was $1.1945 per share. The exercise prices of
options with an exercise price equal to or greater than the fair market value of
the stock on the effective date were reduced by an amount equal to the dividend
per share paid by the Company. No changes were made in either the number of
shares of common stock covered or in the vesting schedule of the options.

In November 1999, the Company adopted the 1999 Stock Option Plan. Under the
terms of the plan, the Board of Directors may grant non-qualified and incentive
stock options and other awards to eligible employees and consultants. The
Company's directors and most highly compensated executive officers are not
eligible for awards under the plan. A total of 20,000,000 shares of Class A
Common Stock was reserved for issuance under this plan. Substantially all of the
options currently granted under the plan vest and become fully exercisable each
year for three years in equal installments following the date of grant, based on
continued employment, and have a term of ten years from the date of grant
assuming continued employment. At September 30, 2001 and 2000, 2,767,349 and
9,776,090 options to purchase common stock were available for grant,
respectively.

A summary of stock option activity under the plans and agreement through
September 30, 2001 follows:

Options for the purchase of 12,935,484 and 6,754,574 shares of Class A
Common Stock were exercisable at September 30, 2001 and 2000, respectively.

F-22

The following table summarizes information about stock options outstanding
at September 30, 2001:

Employee stock purchase plans. In January 1993, the Company adopted
employee stock purchase plans, and reserved an aggregate of 4,000,000 shares of
Class A Common Stock for issuance under this plan. Eligible employees are
permitted to purchase Class A Common Stock through payroll deductions, which may
not exceed 10% of an employee's compensation (or $21,250 in any calendar year),
at a price equal to 85% of the Class A Common Stock price as reported by NYSE at
the beginning or end of each offering period, whichever is lower. Eligible
international employees can purchase shares at a price that is calculated
monthly with no corresponding discount. During the years ended September 30,
2001 and 2000, 769,085 and 394,279 shares were issued from treasury stock at an
average purchase price of $7.01 and $12.72 per share, respectively, in
conjunction with this plan. At September 30, 2001 and 2000, 676,994 and
1,429,406 shares were available for purchase under the plan, respectively.

Restricted stock awards. Beginning in 1998, the Company granted restricted
stock awards under the 1991 Stock Option Plan and the 1998 Long Term Stock
Option Plan. The restricted stock awards vest in six equal installments with the
first installment vesting two years after the grant and then annually
thereafter. Recipients are not required to provide consideration to the Company
other than rendering service and have the right to vote the shares and to
receive dividends. The restricted stock may not be sold by the employee during
the vesting period. In 1999, the Company also granted 40,500 stock options under
the 1998 Long Term Stock Option Plan with an exercise price of $1.00 per share
that vest on the same basis as the restricted stock awards to certain
international employees. Such stock options had a weighted average fair market
value of $22.81 per stock option on the date of grant. At September 30, 2001, a
total of 271,616 restricted shares of Class A Common Stock were outstanding at a
weighted average market value, as of the original grant date, of $23.14 per
share. At September 30, 2000, a total of 417,499 restricted shares of Class A
Common Stock were outstanding at a weighted average market value, as of the
original grant date, of $22.26 per share. In 2000, the Company granted a
restricted stock award of 50,000 shares with a fair market value of $13.00 per
share. During 2001, there were forfeitures and acceleration of grants of 64,593
shares and 9,581 shares, respectively. At September 30, 2001, the aggregate
unamortized compensation expense for restricted stock awards and the $1 stock
option grants was $5.1 million. During 2000, there were forfeitures and
acceleration of grants of 77,501 shares and 7,833 shares, respectively. Total
compensation expense recognized for the restricted stock awards and option
grants was $1.1 million, $1.1 million and $1.7 million for 2001, 2000 and 1999,
respectively.

Deferred compensation employee stock trust. The Company has supplemental
deferred compensation arrangements for the benefit of certain officers, managers
and other key employees. These arrangements are funded by life insurance
contracts, which have been purchased by the Company. The plan permits the
participants to diversify in marketable equity securities. The value of the
assets held, managed and invested, pursuant to the agreement was $7.8 million
and $7.2 million at September 30, 2001 and 2000, respectively, and are included
in other assets. The corresponding deferred compensation liability of $8.8
million and $8.2 million at September 30, 2001 and 2000, respectively, is
recorded at the fair market value of the shares held in a rabbi trust and
adjusted, with a corresponding charge or credit to compensation cost, to reflect
the fair value of the amount owned by the employee. Due to declines in the fair
value of the shares held by the

F-23

rabbi trust, the Company recorded no compensation expense for fiscal 2001. Total
compensation expense recognized for the plan in fiscal 2000 was $1.0 million.

Forward purchase agreements. Beginning in 1997, the Company entered into a
series of forward purchase agreements to effect the repurchase of 1,800,000 of
its Class A Common Stock. These agreements were settled quarterly at the
Company's option on a net basis in either shares of its own Class A Common Stock
or cash. To the extent that the market price of the Company's Class A Common
Stock on a settlement date is higher (lower) than the forward purchase price,
the net differential is received (paid) by the Company. During the year ended
September 30, 1999, four settlements resulted in the Company receiving 155,962
shares of Class A Common Stock and paying approximately $10.9 million in cash.
During the year ended September 30, 2000, four settlements resulted in the
Company receiving 155,792 shares of Class A Common Stock and paying
approximately $8.2 million in cash. During the year ended September 30, 2001,
two settlements resulted in the Company delivering 491,789 shares of Class A
Common Stock and paying approximately $64,000 in cash. During June 2001, the
Company terminated the forward purchase agreement by reacquiring 1,164,154
shares of Class A Common Stock for approximately $9.7 million.

Stock repurchases. On July 19, 2001, the Company's Board of Directors
approved the repurchase of up to $75.0 million of Class A and Class B Common
Stock. Repurchases will be made from time to time over the next two years
through open market purchases, subject to the availability of the stock,
prevailing market conditions, the market price of the stock, and the Company's
financial performance. Repurchases will be funded from cash flow from operations
and possible borrowings under the Company's existing credit facility.
Repurchases will be made proportionately between shares of the two classes of
common stock. On August 29, 2001, the Company purchased 1,867,149 shares of its
Class A Common Stock at $9.88 per share from IMS Health, Inc. During the fourth
quarter of fiscal 2001, the Company purchased an additional 451,000 shares of
Class A Common Stock and 7,960 shares of Class B Common Stock in the open
market, at an average price of $9.42 per share.

Stock based compensation. The Company applies the provisions of APB
Opinion No. 25, "Accounting for Stock Issued to Employees" and related
interpretations in accounting for stock-based compensation plans. Accordingly,
no compensation cost has been recognized for the fixed stock option plans.
Pursuant to the requirements of Statement of Financial Accounting Standards No.
123, "Accounting for Stock-Based Compensation", the following are the pro forma
net income (loss) and net income (loss) per share for the years ended September
30, 2001, 2000, and 1999 had compensation cost for the Company's stock-based
compensation plans been determined based on the fair value at the grant date for
grants under those plans (in thousands, except per share data):

The pro forma disclosures shown above reflect options granted after the year
ended September 30, 1995 and are not likely to be representative of the effects
on net income (loss) and net income (loss) per common share in future years.

F-24

The fair value of the Company's stock plans used to compute pro forma net
income and diluted earnings per share disclosures is the estimated fair value at
grant date using the Black-Scholes option pricing model. The following
weighted-average assumptions were utilized for stock options granted or
modified:

The weighted average fair values of the Company's stock options granted in
the years ended September 30, 2001, 2000 and 1999 are $3.77, $6.63 and $10.19,
respectively.

13 -- COMPUTATION OF EARNINGS PER SHARE OF COMMON STOCK FROM CONTINUING
OPERATIONS

Basic earnings per share ("EPS") is computed by dividing earnings available
to common stockholders by the weighted average number of common shares
outstanding for the period. Diluted EPS reflects the potential dilution of
securities that could share in earnings. When the exercise of stock options is
antidilutive they are excluded from the calculation.

The following table sets forth the reconciliation of the basic and diluted
net earnings per share computations (in thousands, except per share).

For the year ended September 30, 2001, options to purchase 35.0 million
shares of Class A Common Stock of the Company were not included in the
computation of diluted loss per share because the effect would have been
antidilutive. For the year ended September 30, 2000, options to purchase 14.3
million shares of Class A Common Stock of the Company with exercise prices
greater than the average fair market value of $13.78 were not included in the
computation of diluted net income per share because the effect would have been
antidilutive. For the years ended September 30, 2001 and 2000, unvested
restricted stock awards were not included in the computation of diluted earnings
(loss) per share because the effect would have been antidilutive. Additionally,
convertible notes outstanding for the year ended September 30, 2001 and 2000,
representing 30.5 million and 8.8 million common shares, if converted, and the
related interest expense of $18.8 million and $8.2 million, respectively, were
not included in the computation of diluted net income (loss) per share because
the effect would have been antidilutive.

F-25

14 -- INCOME TAXES

Following is a summary of the components of income before provision for
income taxes, loss from discontinued operations and extraordinary loss (in
thousands):

The provision for income tax on the above income consists of the following
components (in thousands):

F-26

Current and long-term deferred tax assets and liabilities are comprised of
the following (in thousands):

Current and long-term net deferred tax assets were $9.9 million and $29.4
million as of September 30, 2001 and were $0.2 million and $2.2 million as of
September 30, 2000, respectively, and are included in Prepaid expenses and other
current assets and Other assets in the Consolidated Balance Sheets. Current and
long-term net deferred tax liabilities were $9.5 million and $0.3 million as of
September 30, 2000, and were included in Accounts payable and accrued
liabilities and Other liabilities in the Consolidated Balance Sheet. In 2001,
the Company recorded a $27.5 million current tax receivable as a result of its
ability to recover federal income taxes for capital loss and foreign tax credit
carrybacks. This amount is included in Prepaid expenses and other current assets
in the Consolidated Balance Sheet.

The valuation allowance relates to domestic and foreign tax net operating
loss and capital loss carryforwards that more likely than not will expire
unutilized. The net increase in the valuation allowance of approximately $16.0
million in the current year results primarily from the increase in federal and
state and local tax capital loss carryforwards of $14.8 million and $7.2
million, respectively, the net decrease in federal and state and local net
operating losses of $4.6 million and $1.9 million, respectively, and the net
increase in foreign tax loss carryforwards of approximately $0.5 million.
Approximately $2.4 million of the valuation allowance will reduce additional
paid-in-capital upon subsequent recognition of any related tax benefits.

F-27

The differences between the U.S. federal statutory income tax rate and the
Company's effective tax rate on income from continuing operations are:

As of September 30, 2001 the Company had U.S. federal tax net operating
loss carryforwards of $0.2 million which will expire in fifteen to twenty years,
federal capital loss carryforwards of $18.5 million which will expire in five
years, foreign tax credit carryforwards of $8.6 million which will expire in
five years and other federal tax credit carryforwards of $1.7 million which can
be carried forward indefinitely. The Company had state and local tax net
operating loss carryforwards of $83.8 million, of which $20.9 million will
expire within one to five years, $7.3 million will expire within six to fifteen
years, and $55.6 million will expire within sixteen to twenty years. The Company
also had $68.9 million in state and local capital loss carryforwards which will
expire in five years. Lastly, the Company had foreign tax loss carryforwards of
$5.4 million of which $2.4 million will expire in two years and $3.0 million
which can be carried forward indefinitely.

In 2001, the Company generated a one-time tax benefit of $14.5 million due
to the utilization of foreign tax credits. In 2001, the Company also recorded a
valuation reserve of $8.3 million on deferred tax assets generated from losses
from minority-owned investments.

15 -- EMPLOYEE BENEFITS

The Company has a savings and investment plan covering substantially all
domestic employees. The Company contributes amounts to this plan based upon the
level of the employee contributions. In addition, the Company also contributes
fixed and discretionary amounts based on employee participation and attainment
of operating margins set by the Board of Directors. Amounts expensed in
connection with the plan totaled $10.5 million, $8.5 million, and $6.6 million
for the years ended September 30, 2001, 2000, and 1999, respectively.

16 -- RECAPITALIZATION

The Dun and Bradstreet Corporation ("D&B"), an investor in Information
Partners Capital Fund, L.P. ("Fund"), provided a portion of the financing in
connection with the acquisition of the Company in October 1990. In April 1993,
D&B acquired a majority of the outstanding voting securities of the Company in
transactions among the Company, D&B and persons and entities associated with the
Fund. On November 1, 1996, D&B transferred ownership of its common stock of the
Company to Cognizant Corporation ("Cogni-

F-28

zant"), a spin-off of D&B and an independent public company. At the date of
transfer, these shares represented 51% of the Company's outstanding common
stock. During the year ended September 30, 1997, Cognizant's ownership of the
Company's outstanding common stock fell below 50%. On June 30, 1998, Cognizant
transferred its ownership in the Company to IMS Health Incorporated ("IMS
Health"), a spin-off of Cognizant and an independent public company.

On July 16, 1999, the Company's stockholders approved a series of
transactions that resulted in the separation of the Company and IMS Health. This
was accomplished, in part, through the recapitalization of the Company's
outstanding Common Stock into two classes of Common Stock, consisting of Class A
Common Stock and Class B Common Stock, and the issuance of an aggregate of
40,689,648 shares of Class B Common Stock to IMS Health in exchange for a like
number of shares of Class A Common Stock held by IMS Health. The separation was
effected, in part, through the July 26, 1999 tax-free distribution by IMS Health
to its stockholders of the newly issued Class B Common Stock of the Company
owned by IMS Health. The Class B Common Stock is identical in all respects to
the Class A Common Stock, except that the Class B Common Stock is entitled to
elect at least 80% of the members of the Company's Board of Directors. The
Company's stockholders also approved an amendment to the Company's Certificate
of Incorporation to create a classified Board of Directors of three classes
having staggered three-year terms.

The Company also declared a special, nonrecurring cash dividend of $1.1945
per share, payable to all Company stockholders of record as of July 16, 1999.
The cash dividend, totaling approximately $125.0 million, was paid on July 22,
1999 and was funded out of existing cash.

On August 29, 2001, the Company purchased 1,867,149 shares of its Class A
Common Stock at $9.88 per share from IMS Health. The Company also confirmed on
that date that IMS Health sold its remaining shares of the Company's Class A
Common Stock at $9.88 per share through a direct placement to several
institutional investors. These transactions divest IMS Health of any remaining
ownership in the Company.

Under the terms of the recapitalization agreement, the Company is required
to indemnify IMS Health for additional taxes, under certain circumstances, if
actions by the Company cause the distribution to become taxable to IMS Health
and its stockholders. These actions include the use of stock for substantial
acquisitions and the issuance, without regulatory approval, of stock options
over set limitations during a two-year period following the recapitalization. In
addition, the Company has indemnified IMS Health for any tax liabilities
associated with the spin-off that may result from the acquisition of the
Company. The Company monitors compliance in this regard and believes that it is
unlikely, within matters under the Company's control, that it will incur any
significant costs as a result of its indemnity.

17 -- SEGMENT INFORMATION

The Company previously managed its business in four reportable segments
organized on the basis of differences in its related products and services. With
the discontinuance and sale of TechRepublic (see Note 3 -- Discontinued
Operation), three reportable segments remain: research, consulting and events.
Research consists primarily of subscription-based research products. Consulting
consists primarily of consulting and measurement engagements and strategic
advisory services. Events consists of various symposia, conferences and
exhibitions.

The Company evaluates reportable segment performance and allocates
resources based on gross contribution margin. Gross contribution, as presented
below, is defined as operating income excluding certain selling, general and
administrative expenses, depreciation, amortization of intangibles and other
charges. The accounting policies used by the reportable segments are the same as
those used by the Company.

The Company earns revenue from clients in many countries. Other than the
United States, the Company's country of domicile, there is no individual country
in which revenues from external clients represent 10% or more of the Company's
consolidated revenues. Additionally, no single client accounted for 10% or more
of total revenue and the loss of a single client, in management's opinion, would
not have a material adverse effect on revenues.

F-29

The Company does not identify or allocate assets, including capital
expenditures, by operating segment. Accordingly, assets are not being reported
by segment because the information is not available by segment and is not
reviewed in the evaluation of performance or making decisions in the allocation
of resources.

The following tables present information about reportable segments (in
thousands). The "Other" column includes certain revenues and corporate and other
expenses (primarily selling, general and administrative) unallocated to
reportable segments, expenses allocated to operations that do not meet the
segment reporting quantitative threshold, and other charges. There are no
intersegment revenues:

The Company's consolidated revenues are generated primarily through direct
sales to clients by domestic and international sales forces and a network of
independent international distributors. The Company defines "Europe Revenues" as
revenues attributable to clients located in England and the European region and

F-30

"Other International Revenues" as revenues attributable to all areas located
outside of the United States, Canada and Europe. Most products and services of
the Company are provided on an integrated worldwide basis. Because of the
integration of products and services delivery, it is not practical to separate
precisely the revenues and operating income of the Company by geographic
location. Accordingly, the separation set forth in the table below is based upon
internal allocations, which involve certain management estimates and judgments.

European identifiable tangible assets consist primarily of the assets of
the European subsidiaries and include the accounts receivable balances carried
directly by the subsidiaries located in England, France and Germany. All other
European customer receivables are maintained by, and therefore are included as
identifiable assets of, the United States operations.

Summarized information by geographic location is as follows (in thousands):

18 -- QUARTERLY FINANCIAL DATA -- (UNAUDITED)

F-31

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(1) Includes other charges of $31.1 million and $15.5 million in the quarters
ended March 31, 2001 and September 30, 2001, respectively.

(2) Includes net losses from minority owned investments of $1.7 million, $3.4
million, $6.6 million and $15.1 million for each of the four quarters in the
fiscal year ended September 30, 2001. Also includes benefits for income
taxes from the utilization of foreign tax credits of $2.9 million in the
quarter ended June 30, 2001 and $11.6 million in the quarter ended September
30, 2001.

(3) The aggregate of the four quarters' diluted earnings per common share does
not total the reported full fiscal year amount due to rounding.

F-32

INDEPENDENT AUDITORS' REPORT ON
CONSOLIDATED FINANCIAL STATEMENT SCHEDULE

The Board of Directors and Stockholders
Gartner, Inc.:

Under date of October 29, 2001, we reported on the consolidated balance
sheets of Gartner, Inc. and subsidiaries as of September 30, 2001 and 2000, and
the related consolidated statements of operations, changes in stockholders'
equity (deficit) and cash flows for each of the years in the three-year period
ended September 30, 2001, which are included in the September 30, 2001 Annual
Report on Form 10-K. In connection with our audits of the aforementioned
consolidated financial statements, we also audited the related consolidated
financial statement schedule of Valuation and Qualifying Accounts in the Form
10-K. This financial statement schedule is the responsibility of the Company's
management. Our responsibility is to express an opinion on this financial
statement schedule based on our audits.

In our opinion, such financial statement schedule, when considered in
relation to the basic consolidated financial statements taken as a whole,
present fairly, in all material respects, the information set forth therein.

/s/ KPMG LLP
--------------------------------------

New York, New York
October 29, 2001

S-1

GARTNER, INC.

SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS

- ---------------

(1) Allowance of $46,000 and $274,000 assumed upon acquisitions of entities in
fiscal 2000 and 1999, respectively.

S-2

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has caused this Report on Form 10-K to be signed on its behalf by the
undersigned, duly authorized, in Stamford, Connecticut, on December 28, 2001.

GARTNER, INC.

By: /s/ MICHAEL D. FLEISHER
------------------------------------
Michael D. Fleisher
Chairman of the Board, Chief
Executive Officer and President

Date: December 28, 2001

POWER OF ATTORNEY

Each person whose signature appears below appoints Michael D. Fleisher and
Regina M. Paolillo and each of them, acting individually, as his or her
attorney-in-fact, each with full power of substitution, for him or her in all
capacities, to sign all amendments to this Report on Form 10-K, and to file the
same, with appropriate exhibits and other related documents, with the Securities
and Exchange Commission. Each of the undersigned, ratifies and confirms his or
her signatures as they may be signed by his or her attorney-in-fact to any
amendments to this Report.

Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed by the following persons on behalf of the registrant and
in the capacities and on the dates indicated:

II-1

II-2