Saba Software 8-K Saba Announces Record Second Quarter Fiscal 2007 Results

Exhibit 99.1

Saba Announces Record Second Quarter Fiscal 2007 Results

Revenues and Earnings Exceed Guidance; GAAP Revenues Grow 61% from the Prior Year

Redwood Shores, Calif., January 4, 2007– Saba (NASDAQ: SABA), the premier provider of human capital management (HCM) solutions, today reported financial results for its second quarter of fiscal year 2007 ended November 30, 2006.

“We delivered strong financial results and significantly improved operating margins,” said Bobby Yazdani, Saba’s Chairman and CEO. “Our product offerings continue to lead the industry; as a result we continued to win deals with new blue-chip customers for global deployments as well as with existing customers for expansion.”

Second Quarter Results

Total GAAP revenues in the second quarter of fiscal 2007 were $26.2 million, representing a 61% increase compared to $16.2 million in the same quarter last year. License revenue in the second quarter of fiscal 2007 was $6.9 million, representing a 36% increase compared to $5.1 million in the same quarter last year and OnDemand revenue in the second quarter of fiscal 2007 was $3.8 million, representing a 371% increase compared to $804,000 in the same quarter last year. Net loss was $1.0 million, or $0.04 per share on a basic and diluted basis, in the second quarter of fiscal 2007 compared to a net profit of $131,000, or $0.01 per share, in the same quarter last year.

On a non-GAAP basis, total revenues increased 67% to $27.8 million from $16.6 million in the second quarter of fiscal 2006. Non-GAAP net income in the quarter was $2.0 million, or $0.07 per share on a basic and diluted basis, compared to non-GAAP net income of $694,000, or $0.04 per share on a basic and diluted basis, in the second quarter of fiscal 2006.

Deferred revenue at November 30, 2006 grew to $27.6 million.

Cash generated from operations was $3.1 million during the quarter. In the quarter, Saba made acquisition related payments of approximately $1.5 million. Excluding these acquisition related payments, Saba generated $4.6 million from operating activities.

Non-GAAP results are computed by adjusting GAAP results to exclude the amortization of acquisition-related intangibles, stock-based compensation expenses and the write-down of acquired deferred revenue to fair value. A reconciliation of GAAP to non-GAAP results is included in the financial statements accompanying this press release.

Key Customer Wins and Significant Developments in the Second Quarter

During the quarter, Saba’s momentum continued as it signed deals for a number of large enterprise and government customers, including: AT&T, Cemex, CVRD, Deloitte, Deutsche Telekom, Ericsson, Novartis, Rhodia, Rockwell Automation, Royal Mail, Schering-Plough and Sentara Healthcare.

Saba’s second quarter results reflect strength across a number of key verticals, including the public sector, healthcare, pharmaceuticals, financial services and the oil and gas industries.

Business Outlook

The following statements are based on current expectations as of the date of this release. These statements are forward-looking, and actual results may differ materially. Saba does not undertake to update these targets in any way or for any reason.

• For its third quarter of fiscal 2007 (February 28, 2007), Saba anticipates total revenues to range from $26.5 million to $27.5 million on a GAAP basis and from $27.0 million to $28.0 million on a non-GAAP basis.

• Saba anticipates net earnings per share for its third quarter of fiscal 2007 (February 28, 2007) to range from breakeven to earnings of $0.03 on a GAAP basis and earnings of $0.07 to $0.10 on a non-GAAP basis.

The non-GAAP outlook excludes the estimated non-cash amortization of purchased intangibles ($929,000), charges related to stock-based compensation expenses ($500,000 to $600,000) and the write-down of acquired deferred revenue to fair value and amortization of acquired backlog ($480,000).

Conference Call

Saba will host a conference call on its second quarter fiscal year 2007 results at 2:00 p.m. Pacific Time on Thursday, January 4, 2007. The call will be available via Web cast athttp://investor.saba.com or by dialing +1-612-288-0337.

A replay of the call will be available athttp://investor.saba.com or by calling +1-320-365-3844 and entering code 850725, after 5:30 p.m. Pacific Time on January 4, 2007 through January 18, 2007, at 11:59 p.m. Pacific Time.

Legal Notice Regarding Forward-Looking Statements

This press release contains forward-looking statements within the meaning of the federal securities laws, including, without limitation: statements regarding Saba’s business outlook, including anticipated GAAP and non-GAAP revenue and per share earnings (loss), non-cash amortization of purchased intangibles, charges related to stock-based compensation expense, the write-down of acquired deferred revenue to fair value, amortization of acquired backlog; and statements regarding Saba’s product leadership. Saba’s actual results could differ materially from those expressed in any forward-looking statements. Risks and uncertainties Saba faces that could cause results to differ materially include risks associated with: Saba’s ability to successfully integrate Centra in a manner that takes advantage of our combined businesses and operations to improve operating results, dependence on growth of the markets for Saba’s products, dependence on acceptance of Saba’s products by customers and channel partners, the success of Saba’s alliances, fluctuation in customer spending, any changes in the length of Saba’s sales cycle, new product offerings or pricing changes introduced by our competitors, technological changes that could make our products less attractive to customers or require a new product development investments, dependence on new product introductions and enhancements in order to meet the changing needs of our customers and markets, and potential software defects. Readers should also refer to the section entitled “Risk Factors” on pages 11 through 21 of Saba’s Annual Report on Form 10-K for the fiscal year ended

May 31, 2006 and similar disclosures in subsequent Saba periodic SEC reports. The forward-looking statements and risks stated in this press release are based on information available to Saba today. Saba assumes no obligation to update them.

Legal Notice Regarding Non-GAAP Financial Information

Saba has provided its non-GAAP revenue, net income and net income per share data in this press release as additional information for investors. This measure is not in accordance with, or an alternative to, generally accepted accounting principles (“GAAP”), is intended to supplement GAAP financial information, and may be different from non-GAAP measures used by other companies. Saba believes that the presentation of non-GAAP financial measures provides useful information to investors regarding its results of operations. Saba believes it also provides an alternative method of assessing Saba’s operating results that Saba believes is focused on its core on-going operations and may allow investors to perform additional meaningful period-to-period comparisons of its operating results. In addition, Saba’s management team uses these measures for reviewing its financial results, and for budget and planning purposes.

About Saba

Saba (NASDAQ: SABA) is the premier Human Capital Management (HCM) software and services provider, using a people-centric approach to increase productivity and performance. As a trusted partner, Saba enables the Aligned Enterprise™ for over 1,100 customers in 150 countries by providing an integrated people management system to continuously align goals, develop people, improve collaboration and increase visibility into organizational performance.

Saba customers include ABN AMRO, Alcatel, Bank of Tokyo-Mitsubishi UFJ, BMW, CEMEX, Cisco Systems, DaimlerChrysler, Dell, Deloitte Touche Tohmatsu, EDS, EMC Corporation, FedEx Kinko’s, Insurance Australia Group, Lockheed Martin, Medtronic, National Australia Bank, Novartis, Petrobras, Procter & Gamble, Scotiabank, Sprint, Standard Chartered Bank, Stanford University, Swedbank, Wyndham International, Weyerhaeuser, Underwriters Laboratories, and the U.S. Army and U.S. Navy.

Headquartered in Redwood Shores, California, Saba has offices on five continents. For more information, please visitwww.saba.comor call +1-877-SABA-101 or +1-650-779-2791.

SABA, the Saba logo, Centra and the marks relating to Saba products and services referenced herein are either trademarks or registered trademarks of Saba Software, Inc. or its affiliates. All other trademarks are the property of their respective owners.

Contact:

Greg Klaben, Investor Relations, +1-650-581-2521, gklaben@saba.com

###

Saba Software, Inc.

Condensed Consolidated Statements of Operations

(in thousands, except per share data)

(unaudited)

	Three months ended November 30,						Six months ended November 30,
	2006			2005 (A)			2006				2005 (A)
Revenues:
License	$	6,916		$	5,080		$	13,104			$	8,430
License updates and product support		7,699			4,644			14,706				9,007
OnDemand		3,784			804			7,333		��		1,642
Professional services		7,798			5,704			14,213				10,781
Total revenues		26,197			16,232			49,356				29,860
Cost of revenues:
Cost of license		562			34			777				293
Cost of license updates and product support		2,016			981			3,900				1,887
Cost of OnDemand		1,090			490			2,232				817
Cost of professional services		5,074			4,034			10,048				7,843
Amortization of acquired developed technology		295			—			589				—
Total cost of revenues		9,037			5,539			17,546				10,840
Gross profit		17,160			10,693			31,810				19,020
Operating expenses:
Research and development		4,253			2,787			8,270				5,514
Sales and marketing		9,883			5,926			19,247				11,223
General and administrative		3,144			1,542			6,136				3,178
Amortization of purchased intangible assets		634			170			1,269				340
Total operating expenses		17,914			10,425			34,922				20,255
Income (loss) from operations		(754	)		268			(3,112	)			(1,235	)
Interest expense and other, net		(117	)		(111	)		(186	)			(222	)
Income (loss) before provision for income taxes		(871	)		157			(3,298	)			(1,457	)
Provision for income taxes		135			26			300				34
Net income (loss)	$	(1,006	)	$	131		$	(3,598	)		$	(1,491	)
Basic net income (loss) per share	$	(0.04	)	$	0.01		$	(0.13	)		$	(0.09	)
Diluted net income (loss) per share	$	(0.04	)	$	0.01		$	(0.13	)		$	(0.09	)
Shares used in computing basic net income (loss) per share		28,517			17,523			28,363				17,407
Shares used in computing diluted net income (loss) per share		28,517			18,082			28,363				17,407

(A) Certain reclassifications have been made to prior year amounts in order to conform to the current year presentation.

Saba Software, Inc.

Condensed Consolidated Balance Sheets

(in thousands)

	November 30, 2006			May 31, 2006 (A)
ASSETS
Current assets:
Cash and cash equivalents	$	18,749		$	23,029
Restricted cash		500			500
Accounts receivable, net		22,497			18,737
Prepaid expenses and other current assets		2,025			2,709
Total current assets		43,771			44,975
Property and equipment, net		2,513			2,172
Goodwill (B)		38,337			38,164
Purchased intangible assets, net		18,432			20,449
Other assets		939			1,018
Total assets	$	103,992		$	106,778
LIABILITIES & STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	5,872		$	8,782
Accrued compensation and related expenses		6,287			6,259
Accrued expenses		5,463			6,265
Deferred revenue		25,544			23,974
Current portion of debt and lease obligations		2,551			2,330
Total current liabilities		45,717			47,610
Deferred revenue		2,099			526
Accrued rent		2,791			2,833
Debt and lease obligations, less current portion		3,362			3,962
Total liabilities		53,969			54,931
Stockholders’ equity:
Common stock		29			29
Additional paid-in capital		249,301			247,716
Treasury stock		(232	)		(232	)
Accumulated deficit		(198,957	)		(195,359	)
Accumulated other comprehensive loss		(118	)		(307	)
Total stockholders’ equity		50,023			51,847
Total liabilities and stockholders’ equity	$	103,992		$	106,778

(A) Certain reclassifications have been made to prior year amounts in order to conform to the current year presentation.

(B) Goodwill includes a preliminary allocation of the purchase price for Centra Software, Inc. to acquired assets and assumed liabilities, and is subject to change.

Saba Software, Inc.

Reconciliation of Non-GAAP Financial Measures

(in thousands, except per share data)

(unaudited)

The following table reflects Saba’s non-GAAP results reconciled to GAAP results as included in this release.

	Three months ended November 30,					Six months ended November 30,
	2006			2005		2006			2005
GAAP net income (loss)	$	(1,006	)	$	131	$	(3,598	)	$	(1,491	)
Plus:
Fair value adjustment to deferred revenue		1,504			368		3,694			970
Stock-based compensation expense		499			—		1,007			—
Amortization of acquired developed technology and purchased intangible assets		1,009			195		2,018			389
Non-GAAP net income (loss)	$	2,006		$	694	$	3,121		$	(132	)
Net income (loss) per share
GAAP net loss per share	$	(0.04	)	$	0.01	$	(0.13	)	$	(0.09	)
Plus:
Fair value adjustment to deferred revenue		0.05			0.02		0.13			0.06
Stock-based compensation expense		0.02			—		0.04			—
Amortization of acquired developed technology and purchased intangible assets		0.04			0.01		0.07			0.02
Non-GAAP net income (loss) per share	$	0.07		$	0.04	$	0.11		$	(0.01	)
Weighted average shares used to compute net income (loss) per share:
Basic		28,517			17,523		28,363			17,407
Diluted		29,272			18,082		29,356			17,407

Non-GAAP Financial Information:

To supplement the company’s condensed consolidated financial statements presented on a GAAP basis, Saba uses non-GAAP financial measures. These measures are the result of adjustments made to exclude certain charges and expenses for which the company believes that the disclosure of such non-GAAP financial measures is appropriate to enhance an overall understanding of its historical financial performance. The company believes that the inclusion of these non-GAAP financial measures provides consistency and comparability with its historical financial results. In addition, the presentation allows investors to see how management views the operating performance of the company. This non-GAAP information is subject to material limitations and is not intended to be used in isolation or as a substitute for results prepared in accordance with U.S. generally accepted accounting principles.

The adjustments and the basis for their exclusion are as follows:

Fair Value Adjustment to Deferred Revenue

The company includes revenue associated with the Centra Software, Inc. and THINQ Learning Solutions, Inc. deferred revenue that was excluded as a result of purchase accounting adjustments to fair value, as required by GAAP, as management believes that it is reflective of ongoing operating results. However, license revenue related to THINQ Learning Solutions, Inc. was excluded from the Non-GAAP measures as the deferred license revenue at the time of acquisition was not indicative of the Company’s ongoing operating results.

Stock-based Compensation Expense

The company’s non-GAAP financial measures exclude share-based compensation expenses, which consist of expenses for the issuance of stock options and purchases of common stock under its Employee Stock Purchase Plan, which Saba began recording under SFAS 123(R) in the first quarter of fiscal 2007. The Company excludes share-based compensation expenses from our non-GAAP financial measures because the company believes that the information is not a meaningful indicator of the Company’s operating performance. Weighted average dilutive shares is computed using the method required by SFAS 123(R) for both GAAP and non-GAAP diluted net income per share.

Amortization of Acquired Developed Technology and Purchased Intangible Assets

As a result of various acquisitions of companies and technologies, the company has incurred charges for amortization of acquired developed technology and purchased intangible assets and amortization of acquired backlog that resulted in a reduction of revenue. Management excludes these items from our non-GAAP financial measures when evaluating its operating performance because it believes that it provides for better comparability between periods and provides results that are more reflective of the operating performance of the business. Additionally, management believes that excluding these items facilitates comparisons to the results of other companies in our industry, which have their own unique acquisition histories.