1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-K

FOR ANNUAL AND TRANSITION REPORTS PURSUANT TO SECTIONS 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

(Mark One)

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

For the fiscal year ended December 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number: 0-19395

SYBASE, INC.
(Exact name of registrant as Specified in its Charter)

Delaware 94-2941005
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)

6475 Christie Avenue, Emeryville, California 94608
(Address of principal executive offices and Zip Code)

Registrant's telephone number, including area code: (510) 922-3500

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

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

Common Stock, $.001 par value
Preferred Share Purchase Rights

Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. 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. [X]

The aggregate market value of the voting stock held by non-affiliates
of the Registrant, based upon the closing sale price of the Common Stock on
March 24, 1998 as reported on the NASDAQ National Market System, was
approximately $756,900,000. Shares of Common Stock held by each officer and
director and by each person who owns 10% or more of the outstanding Common Stock
have been excluded in that such persons may be deemed to be affiliates. This
determination of affiliate status is not necessarily a conclusive determination
for other purposes. As of March 24, 1998, Registrant had outstanding 80,818,083
shares of Common Stock.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Registrant's Annual Report to Stockholders for the
fiscal year ended December 31, 1997 are incorporated by reference in Parts II
and IV of this Form 10-K to the extent stated herein. The Registrant's
definitive Proxy Statement for the Annual Meeting of Stockholders to be held on
May 27, 1998 is incorporated by reference in Part III of this Form 10-K to the
extent stated herein.

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PART I

ITEM 1. BUSINESS

THE COMPANY

Sybase, Inc. ("Sybase" or the "Company"), one of the ten largest global
independent software companies in the world, helps businesses gain competitive
advantage by enabling them to integrate and distribute information anywhere it
is needed. The Company's software products and consulting services provide a
comprehensive platform for delivery of integrated solutions that businesses need
to be successful. Sybase's software products consist of leading high-performance
database products, middleware products that provide interoperability,
connectivity and data movement, and application development tools. The Company
offers a broad range of consulting, education and technical support services to
provide customers with complete solutions for building on-line, enterprise-wide
applications. Unless otherwise specified, the terms "Sybase" or the "Company"
include Sybase and all of its direct and indirect consolidated subsidiaries.

ARCHITECTURE AND MARKET OVERVIEW

Sybase's advanced software product architecture allows users to build
and deploy applications that can be distributed across a heterogeneous networked
computing environment, and is based on a multi-tier model which is widely
recognized as the most effective approach to networked applications. The
Company's software is primarily used to address customer needs in the following
areas: online transaction processing (OLTP) systems, such as securities
brokerage systems which need to process and store a high rate of transactions;
data warehouse and datamart applications, which are designed to access and
analyze corporate data (either routinely or on an ad-hoc basis) to enable an
enterprise to rapidly obtain answers to specific queries about its business and
customers; and Internet and intranet applications, which are increasingly being
used to develop dynamic Web sites integrated with an enterprise's relational
database management systems (RDBMS). Sybase offers products that are designed
to address the unique requirements in each of these areas, to operate together
and to provide customers with the flexibility to mix and match software from
different vendors.

The Company's strategy is to leverage its existing strengths in
enterprise data management and enterprise application development to focus on
delivering market-leading computing solutions in three growing markets:
occasionally connected computing, data warehousing and Web computing.

OCCASIONALLY CONNECTED COMPUTING

Occasionally connected computing involves providing remote workgroups,
branch offices, mobile users, and other users occasionally connected to an
enterprise's computer network with the up-to-date strategic information and
computer applications necessary to give them the flexibility to transact
business anywhere, whether it be at a self-serve kiosk, in the field using a
sales force automation system, or using a hand-held device for remote access.
For example, sales and service professionals increasingly use laptops and other
devices to connect with their corporate network on an as-needed basis to obtain
up-to-the-minute information such as pricing, product availability and order
status. The Company believes its high-performance, scalable technology in
products such as Adaptive Server(TM) Anywhere, the industry's leading
small-footprint mobile database, position the Company at the forefront of this
market.

DATA WAREHOUSING

Data warehouses are typically used to enable enterprises to extract
meaningful information from the mountains of customer transaction data residing
in their corporate databases to better identify, predict and fulfill customer
needs. Sybase offers an integrated platform for the data warehousing market. The
Company believes that Adaptive Server(TM), with its Enterprise and IQ data
stores, is the first database development environment with optimized storage and
processing capabilities for both the back-end

warehouse functions of data consolidation and integration, and the interactive
analysis requirements of warehouse users. Sybase's industry-leading middleware
provides organizations with the data movement, connectivity and interoperability
capabilities to effectively leverage and integrate information from diverse data
sources, and to distribute data throughout the enterprise and beyond. To speed
warehouse deployment and to ease management, Sybase delivers a full suite of
warehouse design tools, central meta data management facilities, and leading
development tools for building warehouse applications.

WEB COMPUTING

Businesses are increasingly differentiating themselves and gaining
competitive advantage by using the Internet as a platform for business
computing. Computing over the Internet's World Wide Web has created a tremendous
opportunity for companies to give their customers, vendors and partners better
access to information systems and to strategic data. It also allows companies to
advertise and sell products in a vast, global marketplace. Using the same
technology, organizations can also provide better, more timely information
internally to their employees. Through its combination of high-performance
database servers, middle-tier transaction servers, and powerful rapid
application development tools, Sybase enables companies to design, develop and
deploy enterprise dynamic Internet applications that can integrate their various
legacy and mainframe-based data sources. Sybase believes it is the only company
to provide a platform-neutral, integrated and open approach to Internet and
intranet enterprise application development and deployment.

- ----------------------------
Sybase, the Sybase logo, SQL Server, System 11, SQL Anywhere, Adaptive
Component Architecture, Adaptive Server, SQL Remote, Replication Server,
OmniConnect, DirectConnect, Jaguar CTS, jConnect, Sybase IQ, Power J, Open
Client, Open Server, Powersoft, PowerBuilder, PowerSite, PowerDesigner,
PowerDynamo, ProcessAnalyst, DataArchitect, AppModeler, Warehouse Architect,
MetaWorks, Viewer, Transact SQL, Bitwise, and AnswerBase are trademarks of
Sybase, Inc. This Form 10-K also includes additional trademarks of other
companies.

PRODUCTS AND PLATFORMS

Sybase provides a comprehensive technology platform for enterprise
computing known as the Adaptive Component Architecture(TM) which supports the
use of industry-standard components; rapid application development; delivery of
data in the right form, to the right place, at the right time; and minimized
complexity for end-users and developers. This architecture is based on open
component logic, comprehensive development tools, and optimized data stores. Its
multi-tiered framework is designed to manage and deploy components across the
distributed heterogeneous computing environment.

The Company's software products consist primarily of high-performance
relational database products, such as Adaptive Server(TM) Enterprise and
Adaptive Server(TM) Anywhere, that are used primarily for OLTP and data
warehousing applications; industry-leading middleware products, such as
DirectConnect(TM) and OmniConnect(TM) that provide connectivity,
interoperability and data movement in heterogeneous computing environments; and
leading application development tools, such as PowerBuilder(R), that enable
customers to develop software applications. Sybase's database products generally
are marketed under the Adaptive Server(TM) brand name, and its application
development and design tools generally are marketed under the Powersoft(R) brand
name.

Sybase products are available for a wide variety of hardware platforms
from various hardware manufacturers including, but not limited to, Digital
Equipment Corporation, Hewlett-Packard, IBM, Silicon Graphics, and Sun
Microsystems. The Company also provides connectivity to other hardware platforms
with large installed bases. Sybase products are available for various UNIX
environments, DOS, Netware, OS/2, Windows, Windows NT and other software
operating systems.

ADAPTIVE SERVER(TM) PRODUCT FAMILY

Sybase's database management systems permit multiple users and
applications to access data concurrently while protecting the integrity of the
data against user and program errors and against computer and network failures.
The Adaptive Server database product family is unique in delivering optimized
database performance for different application environments, and in providing
common management, administration, access and other services across the entire
database family. The end result is a product family providing high performance
for today's transaction processing requirements with the flexibility to
accommodate future enterprise computing needs. The Adaptive Server product
family includes: Adaptive Server Enterprise, Adaptive Server Anywhere, Adaptive
Server IQ and Replication Server(R).

Adaptive Server Enterprise is the latest version of the Company's
flagship client/server RDBMS product designed specifically for online mission
critical applications, and is a key element of the Company's Adaptive Component
Architecture. This server defines, stores, retrieves, updates and manages data
by using an extended relational database language based primarily on the
Structured Query Language (SQL), the industry-standard data manipulation
language for RDBMSs. Adaptive Server Enterprise is designed to provide
organizations with predictable high performance in unpredictable mixed workload
online transaction processing and data warehouse environments. Product features
include Logical Memory Manager and Logical Process Manager for application and
user-specific dedicated resources; scalability for very large databases through
parallel operation for maximum utilization of system resources; common services
for management and administration, data access/movement, security and Web
access, and security features for Internet transactions and multi-tier
applications. In September 1997, Adaptive Server Enterprise for Windows NT
became generally available.

Adaptive Server Anywhere is a small footprint, self-tuning,
fully-functional RDBMS engine for applications operating in remote or mobile
computing environments, such as hand-held PCs or embedded solutions. Important
requirements in this market include a database solution that can be
transparently deployed and easily managed with a low cost of ownership. From
mobile computing to large-scale high-performance applications, the compatibility
and interoperability of Adaptive Server Anywhere with Adaptive Server Enterprise
provides an end-to-end data management platform. Key to the product's success is
SQL Remote(TM) which makes two-way synchronization possible for occasionally
connected users.

Telecommuters, remote office locations or traveling professionals can both
download and upload mission critical information ensuring that up-to-date
information is always available both at their fingertips, and at the head
office. Data can be synchronized among multiple hand-held PCs, desktop PCs and
enterprise servers using standard communication and wireless products. This
technology allows users to achieve the benefits of a true mobile computing
solution.

Adaptive Server IQ. Adaptive Server IQ is an optional extension to
Adaptive Server Enterprise designed specifically to provide substantially
enhanced performance for the complex, interactive ad hoc queries that dominate
client/server-based data warehouse applications in a multi-user environment. In
December 1997, Sybase announced general availability of Adaptive Server IQ 11.5,
the latest version of Adaptive Server IQ. Adaptive Server IQ utilizes an
innovative Bitwise(TM) indexing technology to provide rapid responses with a
minimum of tuning. Intelligent data storage, compression and retrieval software
features are designed to reduce storage requirements for data in comparison to
traditional index RDBMSs and to minimize the associated hardware costs of data
warehousing. Adaptive Server IQ works with standard commercial hardware and
imported database information from a wide variety of data sources, and supports
a wide range of standard Sybase tools and online analytical processing
middleware from companies such as Business Objects, Cognos and Prodea.

Replication Server(R) synchronizes replicated copies of data on
heterogeneous platforms through a client/server network, and is designed to
allow data sharing among operational and decision support systems without
affecting data integrity and consistency or business performance. Frequently,
each piece of data in an organization has a primary site that is the actual
source of the data and is the location where the data is updated or revised.
Using Replication Server, organizations can allow remote sites to subscribe to
the primary site for the data they need, and Replication Server will deliver
that data and monitor the primary site for any transactions that change the
primary site data. Replication Server will then deliver such transactions to the
remote sites, thereby ensuring that the remote sites automatically have the
updated data. The Replication Server architecture uses store-and-forward
asynchronous replication. This transaction-based technology monitors and
replicates changes based on the activity at the primary data site and forwards
changes to replicated sites without the need for the system to query the primary
data manager. As a result, Replication Server reduces the impact on the primary
data manager while providing near real-time data replication.

DATA ACCESS AND DATA MOVEMENT PRODUCTS

Within larger enterprises, data is generally stored in RDBMS and
non-RDBMS sources developed by different vendors, operating on different
hardware platforms running under different operating systems and operated or
managed by different departments or groups. Sybase's middleware products are
designed to enable information that is different in format, distributed in
multiple locations and stored in disparate computing systems to be integrated
easily and transparently for use in OLTP and data warehouse applications and to
facilitate mass deployment. Recognizing the importance of access to data in a
multi-platform environment, Sybase offers a market-leading suite of data access
and data movement products to manage the flow of data required in most of the
applications being developed today. These products include: OmniConnect(TM),
DirectConnect(TM), jConnect(TM) for JDBC(TM), Open Client(TM) and Open
Server(TM).

OmniConnect(TM) is a data integration server that enables users and
developers to employ a single language to access multiple disparate data sources
as through they were a single database. In October 1997, OmniConnect 11.5, the
latest version of the product, became generally available. While SQL is the
industry standard language for RDBMS products, manufacturers employ different
dialects of SQL. OmniConnect translates Sybase Transact-SQL into the target
RDBMS SQL dialect and automatically joins data from multiple databases to
respond to a single query. Because it enables users to access multiple data
sources as if data were stored in a single database, users can reduce training
costs because they need to learn only the Sybase access language, rather than
separate access languages for each of the many databases that may be used in the
enterprise. In addition, because the OmniConnect catalogue stores the location
of each table of information for all RDBMSs accessed, users do not need to know
where each type of data resides within each database or which server controls a
database.

DirectConnect(TM) is a single-source data access server which provides
users with complete read/write access to heterogeneous data sources. It
simplifies access to enterprise data wherever it resides and enables greater
flexibility in managing distributed heterogeneous environments. The product is
optimized for both OLTP and decision support and offers enhanced remote systems
management and monitoring; greater client and middleware configuration
flexibility; increased support for multi-tier application development;
integration of specialized services such as e-mail or additional data sources;
and utilization of Open Client(TM) and Open Server(TM) enhancements such as
directory and security services. DirectConnect also works in conjunction with
OmniConnect. Users can use a DirectConnect server on its own to connect directly
to a single data source, or combine DirectConnect with other products in the
Sybase family for enterprise data access, data movement, data transparency,
heterogeneous replication, and data warehousing.

jConnect(TM) for JDBC(TM), which became generally available in March
1997, provides Java developers with high-performance native database access in a
multi-tier environment to the complete family of Sybase database products,
including Adaptive Server Enterprise, Adaptive Server Anywhere, Adaptive Server
IQ and Replication Server. In addition, jConnect utilizes OmniConnect and
DirectConnect to provide high-performance, transparent access to Oracle,
Informix, DB2 and over 25 other enterprise and legacy databases. The product
allows enterprises to easily and cost effectively extend both mainframes and
client/server systems to the Internet. jConnect for JDBC is currently available
on all platforms running Java VM 1.02 or higher, and a variety of Java-enabled
Web servers and browsers.

Open Client(TM) is a client-side application kit for building interfaces
to Sybase data sources, including Adaptive Server, Open Server, Replication
Server and OmniConnect. Open Client offers developers a choice of
standards-based programming interfaces that are consistent across a variety of
hardware platforms.

Open Server(TM) products provide a server-side application programming
interface for developing gateways to other DBMSs, data sources and services.
These products integrate data from diverse sources such as real-time data feeds,
networking services and other relational and non-relational databases.

POWERSOFT(R) APPLICATION DEVELOPMENT AND DESIGN TOOLS

The Company's suite of open development tools enable enterprise
customers to design, develop and deploy component-based business applications
for client/server, distributed and Internet-based environments. The Powersoft(R)
product family includes, among other products, PowerBuilder(R), Jaguar CTS(TM),
PowerSite(TM), PowerJ(TM) and PowerDesigner(TM).

PowerBuilder(R) is the Company's principal application development tool
for building enterprise business applications for client/server, multi-tier and
Internet architectures. PowerBuilder combines an intuitive graphical interface
with a powerful object oriented development language, and enables developers to
rapidly build client/server and Internet applications without requiring
specialized knowledge of the operating system or complicated programming.
PowerBuilder Enterprise 6.0, the latest version of the product which became
generally available in September 1997, features new capabilities for creating
Web applications, key advancements in distributed development capabilities for
creating multi-tier applications, expanded UNIX platform support with HP/UX and
IBM AIX, and the capability for generation of industry-standard open components.

Jaguar CTS(TM), which became generally available in October 1997, is a
high-performance component transaction server designed for delivering scalable
transactional applications for Web OLTP. It combines the features of a TP
monitor and an object request broker to give developers an easy-to-use package
for rapidly deploying transactional applications. Jaguar CTS supports multiple
component models, such as ActiveX, Java, JavaBeans, and C/C++, for rapid
application development. With Jaguar CTS, developers can focus on solving
business problems instead of programming application infrastructure. In a
multi-tier distributed computing environment, Jaguar CTS delivers the foundation
for developing transactional applications.

PowerSite(TM) is a complete, open, rapid application development
environment designed for teams of developers working together to build, manage
and deploy complex Web applications. For example, if a company wishes to run
Netscape LiveWire on UNIX on its external Web server, PowerDynamo(TM) for its
remote sales force, and Active Server pages from Microsoft on its intranet
servers, it can use PowerSite to build an application once and deploy it to all.
PowerSite also allows developers to integrate many different components when
building Web pages including HTML, dynamic HTML, graphics, scripts, ActiveX
components, JavaBeans and plug-ins, and more. PowerSite Enterprise 1.0 was
announced by Sybase in December 1997.

PowerJ(TM) offers simplified development and deployment of Java
applications for the enterprise, enhancing programmer productivity while
leveraging a company's existing investment and IT architecture plans. PowerJ,
which became generally available in late 1997, provides support for JavaBeans on
both the client and middle tiers, robust database access and the ability to
build and deploy multi-tier applications. PowerJ features seamless integration
with Jaguar CTS for building real-world business applications on the Web.

PowerDesigner(TM) is an integrated design toolset for building highly
optimized and functional databases, data warehouses and data-aware components,
and is comprised of six modules targeted at business and systems analysts, data
modelers, database administrators and application developers: ProcessAnalyst(TM)
for identifying and capturing data flow within a business; DataArchitect(TM) for
bi-level conceptual and physical database design and construction; Warehouse
Architect(TM) for data warehouse design and construction; AppModeler(TM) for
physical data modeling and data-aware component generation, MetaWorks(TM) for
model management and team design; and Viewer(TM) for read-only access to model
information. In December 1997, Sybase announced PowerDesigner 6.1, the newest
version of the product set.

SERVICES

Technical Support and Maintenance Services. The Sybase worldwide
Customer Service and Support organization provides support for the entire family
of Sybase products. A comprehensive portfolio of support programs let customers
choose the level of support their business requires, from personalized support
for mission critical projects, to minimum assistance designed to get development
underway. Support is provided by a worldwide organization with major support
centers located in North America, Europe, Asia Pacific and Latin America.
Operating as a virtual team, support resources are coordinated to provide
services 24 hours a day, seven days a week in all time zones around the world.
Sybase also offers a wide variety of methods to obtain support, including
electronic support services that allow customers to search vast sources of
problem-solving technical information, connect with other users, log support
cases and download software fixes. Access to the technical information sources
and newsgroups on Sybase's support web site is provided free to all customers.

Sybase Professional Services. The Company provides comprehensive
consulting and integration services for its customers through the Sybase
Professional Services organization, which employs more than 1,300 professionals
worldwide. These service offerings assist customers on an enterprise-wide basis
with migration, design and development, implementation, performance improvement,
knowledge transfer and IT architecture projects, particularly in the areas of
data warehousing, Web computing and occasionally connected computing. Services
include architecture and resource planning, custom application design and
development, performance and migration services, system administration and
extensive SQL and Sybase product training.

Training and Education Services. The Company provides a broad education
curriculum for its customers allowing them to increase their proficiency in
Sybase products. The Company offers basic and advanced classes from
education centers in the United States, Australia, Belgium, Brazil, Canada,
China, France, Germany, Hong Kong, Italy, Japan, Korea, Malaysia, Mexico,
Netherlands, New Zealand, Singapore, Spain, Switzerland, Taiwan and the United
Kingdom. On-site and specially tailored customer classes are also available. A
number of the Company's distributors also provide training. In addition to
classroom training, Sybase also offers a number of videotape training materials
for self-paced training. Training is also available through authorized third
party providers. Sybase believes that customer training is as integral a
component of its products as the software and documentation. The Sybase
SKILS(TM) program also provides interactive multimedia training for users of
Sybase products, and enables individuals and teams to train, answer technical
questions and create their own reference notes.

SALES, MARKETING AND CUSTOMERS

The Company markets its products both through a direct sales
organization and through indirect sales channels comprised of commercial
application partners, systems integrators, original equipment manufacturers,
international distributors and other resellers. In general, enterprise database
products, middleware and services are primarily marketed through the direct
sales organization. Tools products and PC-oriented databases are marketed
primarily through a combination of indirect channels and direct sales. In 1998,
the Company expects to make changes in its sales model and sales compensation
programs, and focus on increasing the number of discrete quota-carrying sales
people. Although such changes are intended to enhance overall revenues, such
changes could, in the short-run, materially and adversely affect the sales
process and revenues. See "Part II, Item 5, Market For The Registrant's Common
Stock And Related Stockholder Matters - Future Operating Results; Stock Price
Volatility".

Approximately 38%, 39% and 37% of the Company's total revenues for the
years ended December 31, 1995, 1996 and 1997, respectively, were from
international operations. As of December 31, 1997, the Company's subsidiaries
licensed and supported the Company's products in Australia, Belgium, Brazil,
Chile, China, Czech Republic, France, Germany, Hong Kong, Indonesia, Italy,
Japan, Peru, South Korea, Malaysia, Mexico, New Zealand, The Netherlands,
Norway, Singapore, Spain, Sweden, Switzerland, Taiwan, Thailand, the United
Kingdom and Venezuela. In 1997, the Company acquired its distributors in
Argentina, Chile, Norway and Peru, and established a subsidiary in Venezuela, as
well as a representative office in Lao PDR. In 1996, the Company established
subsidiaries in the Philippines and Indonesia, and a liaison office in India.
The Company also licenses its products through distributors in Europe, Asia and
Latin America. In the future, the Company could experience fluctuations in
international revenues and such fluctuations, could adversely affect the
Company's financial results. For a discussion of certain risks associated with
international operations, see "Part II, Item 5, Market For The Registrant's
Common Stock And Related Stockholder Matters - Future Operating Results; Stock
Price Volatility".

The Company's customers are primarily Fortune 1000 companies in North
America, or their equivalents in other geographic regions. Among the Company's
primary market segments are financial services, insurance, telecommunications,
defense and government agencies. Emerging segments include healthcare, the
pharmaceutical industry, media and publishing, retail, transportation and
utilities. No customer

accounted for more than 10% of revenues during any of the years ended December
31, 1997, 1996 and 1995.

The Company's products and services are offered in a wide variety of
configurations depending on each customer's requirements and hardware
environment. As is customary in the software industry, in order to protect its
intellectual property rights, the Company does not sell or transfer title to its
software products to customers. Customers generally purchase nonexclusive,
nontransferable perpetual licenses in exchange for a fee that varies depending
on the mix of products and services, the number and type of users, the number of
servers, and the type of operating system. License fees range from several
hundred dollars for single user desktop tools or databases to several million
dollars for enterprise solutions that can support hundreds or thousands of users
throughout an organization. Under the Company's current standard forms of
end-user license agreement, customers license software either for use on a
single machine or by a single user, or for use in a networked environment by a
specified number of users and/or machines. The Company's Adaptive Server
Anywhere and PC-oriented databases, the Company's tool products, and products
licensed through the telemarketing sales organization, are typically licensed
under "break the seal" licenses. These licenses may not be enforceable in a
number of jurisdictions.

As is common in its industry, the Company's backlog is typically small
and not a meaningful indicator of future revenues.

PRODUCT DEVELOPMENT

Since inception, the Company has made substantial investments in
research and product development. The Company believes that timely development
of new products and enhancements to its existing products is essential to
maintain a strong position in its market. During 1997, 1996 and 1995, product
development and engineering expenses were $138.6 million, $164.7 million and
$151.9 million, representing 15%, 16% and 16% of total revenues, respectively.
Sybase currently is developing new products as well as enhancements to existing
products in each of its major product categories of database, middleware and
tools and Internet products. Sybase intends to continue to invest heavily in
research and product development.

The Company has from time-to-time received vendor funding for porting
its products to additional platforms and to extend its product offerings. The
Company generally retains technology ownership and rights to market developed
products to other customers, in some cases subject to the payment of royalties
to the funding party. In addition, the Company has entered into agreements with
certain end-user customers which have resulted in jointly funded product
development.

The Company's future results will depend in part on its ability to
enhance existing products and to introduce new products on a timely and
cost-effective basis that meet dynamic customer requirements. Customer
requirements for products can rapidly change as a result of innovations or
changes within the computer hardware and software industries. For example, the
widespread use of the Internet is rapidly giving rise to new customer
requirements as well as new methods and practices of selling, marketing, and
distributing products and services. Sybase's future results will depend in part
on its success in developing new products, making generally available products
that have been previously announced, enhancing its existing products and
adapting its existing products to changing customer requirements, and ultimately
gaining market acceptance for such new or enhanced products. The Company
recently announced the development and anticipated availability dates of several
products, including Adaptive Server(TM) Anywhere for Windows CE, which is
scheduled to become generally available in the second quarter of 1998.

The Company has experienced delays in introducing some new products in
the past. Unanticipated delays in product availability schedules could result
from various factors including development or testing difficulties, feature
changes, software errors, shortages in appropriately skilled software engineers,
and project management problems. Delays in the scheduled availability of these
or other products, a lack of or decrease in market acceptance of new or enhanced
products, or the Company's failure to accurately anticipate customer demand or
to meet customer performance requirements or to anticipate competitive products
and developments could have a material adverse effect

on the Company's business and financial results. New products or new versions of
existing products may, despite testing, contain undetected errors or bugs that
could delay the introduction, or adversely affect commercial acceptance, of such
products or give rise to warranty or other customer claims, which could, in
turn, adversely affect the Company's financial results.

COMPETITION

The market for the Company's software products and services is extremely
competitive and characterized by dynamic customer demands, rapid technological
and marketplace changes, and frequent product enhancements and new product
introductions. The Company competes with a number of companies, including Oracle
Corporation, Informix Corporation, Microsoft Corporation, IBM Corporation, and
Computer Associates, Inc. Many of the Company's competitors and potential
competitors have significantly greater financial, technical, sales, and
marketing resources, and a larger installed base than the Company. New or
enhanced products, many of which have been announced and many of which are
continually introduced by existing or future competitors in the software
industry, could increase the competition faced by the Company's products from
time to time and result in greater price pressure on certain of the Company's
products, especially to the extent that market acceptance for personal
computer-oriented technologies increases. A failure by the Company to compete
successfully with its existing competitors or with new competitors could have a
material adverse effect on the Company's business and results of operations and
on the market price of the Company's common stock.

Existing and future competition or changes by the Company in its product
offerings or product pricing structure could result in an immediate reduction in
the prices of the Company's products. For example, changes to the Company's
pricing and licensing structure in the first quarter of 1996 increased prices
for certain products, and reduced prices for others. The Company will introduce
price and licensing changes from time to time in the future. If such changes or
changes in the Company's products, or existing or future competition were to
result in significant revenue declines, the Company's business and financial
results could be adversely affected.

INTELLECTUAL PROPERTY AND PROPRIETARY RIGHTS

The Company relies on a combination of trade secret, copyright, patent
and trademark laws and contractual provisions to protect its proprietary rights
in its software products. These protections may not be adequate in certain
circumstances. As of February 1998, the Company had seventeen (17) issued
patents, expiring between 2113 and 2115, covering various aspects of software
technology. Competitors may independently develop technologies that are
substantially equivalent or superior to the Company's technology. In addition,
copyright and trade secret protection for the Company's products may be
unavailable or unreliable in certain foreign countries. As the number of
software products in the industry and the number of software patents increase,
the Company believes that software developers may become increasingly subject to
infringement claims. Third parties have in the past asserted, and may in the
future assert, that their patents or other proprietary rights are violated by
products offered by the Company. Any such claims, with or without merit, can be
time consuming and expensive to defend or settle, and could have an adverse
effect on the Company's business and results of operations. While the Company
believes that its products do not infringe other parties' patents and
proprietary rights, it cannot be certain that its products are not doing so.
Infringement of valid third party patents and proprietary rights could have an
adverse effect on the Company's business and results of operations. With respect
to an increasing number of products, the Company relies on "break the seal"
licenses not signed by the licensee to protect its proprietary rights. "Break
the seal" licenses may be unenforceable under the laws of certain jurisdictions.

EMPLOYEES

As of March 24, 1998, the Company and its subsidiaries had 5,216
employees, excluding temporary personnel and consultants. There were several
changes in 1997 and early 1998 to the Company's executive management team. For
example, in the third quarter of 1997, John Chen became the Company's President
and Chief Operating Officer, and Mitchell Kertzman, Chief Executive Officer,
became Chairman of the Board. In February 1998, the Company created the Office
of the Chief Executive

with shared leadership responsibilities between Messrs. Kertzman and Chen, who
now also holds the title of Chief Executive Officer. Other management changes
and additions were also effected in late 1997 and early 1998, including the
appointment of several new Senior Vice Presidents in charge of several major
business units. Further changes in management, the Company's recent financial
performance, and a reduction in the overall number of Sybase employees made in
February 1998 could cause an increase in the amount of employee turnover. The
failure to effectively recruit, train, and retain qualified personnel or high
rates of employee turnover, particularly among engineering or sales staff, could
adversely affect the Company's product development efforts, product sales, and
other aspects of the Company's operations and results.

ITEM 2. PROPERTIES

The Company is headquartered in Emeryville, California, where it owns or
leases administrative, sales and marketing and product development facilities in
eight locations consisting of an aggregate of approximately 543,210 square feet.
Sybase owns property comprising approximately 63,000 square feet of its
headquarters facilities. The Company's leases with respect to its Emeryville
headquarters facilities expire as follows: approximately 269,831 square feet in
1998, 36,671 square feet in 2000, 129,700 square feet in 2001 and 44,000 square
feet in 2,002. The Company has renewal options, generally at the fair market
value, under each of these headquarters leases. The area of Emeryville in which
the Company's headquarters facilities are located includes significant amounts
of landfill and was historically used for industrial and light industrial uses.
Underground fuel storage tanks and soil contaminated from leaked fuel were
removed, prior to Sybase's occupancy, from the owned property and one leased
property included in Sybase's headquarters facilities. The cost of monitoring
and treating these sites is less than $100,000 per year. As of December 31,
1997, the Company maintained an engineering center in Mountain View, California
where it leased approximately 61,000 square feet of office space. According to
their terms, the leases for the Mountain View facilities expire December 31,
1998, unless renewed by the Company. The Company also maintains engineering
centers in Boulder, Colorado and in Concord, Massachusetts that are focused,
respectively, on the development of the Company's middleware products and tools
products.

As of December 31, 1997, the Company's field operations, professional
service organizations and subsidiaries occupied leased facilities in
approximately 120 locations in the United States, Australia, Belgium, Brazil,
Canada, China, Czech Republic, France, Germany, Hong Kong, Italy, Japan, Korea,
Mexico, The Netherlands, New Zealand, Philippines, Russia, Singapore, Spain,
Sweden, Switzerland, Taiwan, Argentina, Chile, Venezuela, Peru and the United
Kingdom aggregating approximately 1.9 million square feet. In addition, the
Company owns a building in Concord, Massachusetts encompassing approximately
55,500 square feet and a building encompassing 10,500 square feet located in
Maidenhead, England. The Company is in the process of leasing additional
premises in various locations.

ITEM 3. LEGAL PROCEEDINGS

Following the Company's announcements on January 2, 1998 and January 21,
1998 regarding its preliminary results of operations for the quarter and year
ended December 31, 1997, several class action lawsuits were filed against the
Company and certain of its officers and directors in the United States District
Court, Northern District of California. The complaints are similar and allege
violations of federal and state securities laws and request unspecified monetary
damages.

On January 27, 1998, a purported shareholder derivative action was filed
in the Superior Court of the State of California, County of Alameda. The
complaint alleges that certain of the Company's present and former officers
and/or directors breached fiduciary duties owed to the Company in connection
with the underlying circumstances alleged in the securities class action
complaints described above. Sybase is a nominal defendant in the action and no
damages are sought from it.

Following the Company's announcement on April 3, 1995 of its preliminary
results for the first fiscal quarter ended March 31, 1995, several class action
lawsuits were filed against the Company and certain of its officers in the U.S.
District Court, Northern District of California. The complaints are similar to
one another and allege violations of federal and state securities laws and
request unspecified monetary

damages. These actions have been consolidated, and a consolidated amended class
action complaint was served on August 7, 1995. The parties are in pretrial
discovery.

Management believes that the claims alleged against it in all of the
foregoing actions are without merit and intends to defend against the claims
vigorously. In the opinion of management, resolution of such litigation is not
expected to have a material adverse effect on the financial position of the
Company. However, depending on the amount and timing, an unfavorable resolution
of such litigation could materially affect the Company's future results of
operations or cash flows in a particular period.

The Company is also a party to various legal disputes and proceedings
arising from the ordinary course of business activities. In the opinion of
management, resolution of these matters is not expected to have a material
adverse effect on the financial position of the Company. However, depending on
the amount and timing, an unfavorable resolution of some or all of these matters
could materially affect the Company's future results of operations or cash flows
in a particular period.

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

No matters were submitted to a stockholder vote in the quarter ended
December 31, 1997.

EXECUTIVE OFFICERS OF THE REGISTRANT

The executive officers of the Company who are elected by and serve in
such capacities at the discretion of the Board of Directors, and their ages, as
of March 24, 1998, are as follows:

Name Age Position
- ---------------------------------------------- ---- ------------------------------------------------------------------

Mitchell E. Kertzman ......................... 49 Chairman of the Board, Chief Executive Officer
and Director

John S. Chen ................................. 42 President, Chief Executive Officer and Director

Jack L. Acosta ............................... 50 Executive Vice President and Chief Financial Officer

Robert S. Epstein ............................ 45 Executive Vice President, Chief Information Officer and Director

Michael S. Gardner ........................... 52 Senior Vice President, Worldwide Sales

Eric L. Miles ................................ 51 Senior Vice President, Product Operations

Raj Nathan ................................... 44 Senior Vice President, Corporate Program Office

Michael E. Regan ............................. 41 Senior Vice President, Worldwide Professional
Services

L. Mindi Butterfield ......................... 36 Vice President, Marketing

Mitchell L. Gaynor ........................... 38 Vice President, General Counsel and Secretary

Pieter A. Van der Vorst ...................... 43 Vice President and Corporate Controller

Mr. Kertzman has served as a director since February 1995, as Chief
Executive Officer since July 1996 and as Chairman of the Board since July 1997.
Between February 1995 and July 1996 he served as an Executive Vice President and
between July 1996 and July 1997 he served as President. In February 1995, Sybase
merged with Powersoft Corporation ("Powersoft"), a leading provider of
application development tools. Mr. Kertzman had served as Chief Executive
Officer and a director of Powersoft since he founded it in 1974. He also served
as President of Powersoft from 1974 to 1992. Mr. Kertzman is also a director of
C-Net, Inc.

Mr. Chen has served as President and a director since August 1997. In
February 1998, the Company formed the Office of the Chief Executive, and Mr.
Chen began to share the position of Chief Executive Officer with Mr. Kertzman.
Between August 1997 and February 1998, Mr. Chen also held the position of Chief
Operating Officer. Before joining Sybase, Mr. Chen served between March 1995 and
July 1997 as the President of the Open Enterprise Computing Division of Siemens
Nixdorf, a computer and electronics company, and as Chief Executive Officer and
Chairman of the Siemens Pyramid subsidiary of Siemens Nixdorf. Before its
acquisition by Siemens Nixdorf in March 1995, Mr. Chen served in various
executive capacities with Pyramid Technology Corporation, a computer company,
where he became Chief Operating Officer in October 1992 and President in June
1993.

Mr. Acosta became Executive Vice President in February 1998, and has
served as Chief Financial Officer since July 1996. From July 1996 through
February 1998, Mr. Acosta also served as Senior Vice President. Prior to that,
beginning in March 1995, he served as Vice President of Products Group
Operations. From December 1994 though February 1995, Mr. Acosta served first as
Vice President of SCG Business Operations, then as Vice President of Products
Business Operations. From March 1993

through December 1994, Mr. Acosta was President and Chief Operating Officer of
Tanon Manufacturing, Inc., an electronics manufacturing company. From October
1984 to February 1993, he was employed by Ungermann-Bass, Inc., a computer
networking company. During that period, he held various titles, including
Executive Vice President, Corporate Operations, and Chief Financial Officer.

Dr. Epstein is a founder of the Company and has served as Executive Vice
President and as a director since November 1984. Since November 1996, Dr.
Epstein has also served as Chief Information Officer of the Company. From
December 1995 to November 1997, Dr. Epstein served as a director of First
Virtual Holding, Inc. He currently is the Chairman of the Board of Colorado
Microdisplay, a privately-held company, where he has been a director since
August 1996.

Mr. Gardner joined Sybase in February 1998 as Senior Vice President,
Worldwide Sales. Immediately prior to joining Sybase, Mr. Gardner served as
Chief Operating Officer of ACT Networks, an integrated multimedia access
company, beginning in December 1996. From June 1995 through November 1996, he
was President of Whittaker Corporation (formerly Hughes Lan Systems), a
networking hardware company. From May 1994 through June 1995, he held the
position of Senior Vice President of Sales and Marketing at Ungermann-Bass, Inc.
Prior to that, Mr. Gardner was Chief Operating Officer of Advanced Computer
Communications from February 1992 through April 1994.

Mr. Miles joined Sybase in December 1997 as Senior Vice President,
Product Operations. From November 1995 until he joined Sybase, Mr. Miles served
as Vice President, Product Development at Informix Corporation, a database
software company. Prior to that, he served as Vice President, Applications
Development at Ross Systems from September 1994 through November 1995. From
January through September 1994, Mr. Miles was President of the Ingres business
unit of Ask Corporation, a software company. Before that, he was corporate vice
president at Amdahl Corporation, and also held various positions with Bank of
America and IBM.

Dr. Nathan joined Sybase in November 1997 as Senior Vice President,
Corporate Program Office. From May through November 1997, he served as President
and CEO of Siemens Pyramid, and held a number of executive positions with
Siemens Pyramid prior to that. From 1985 through 1991, Dr. Nathan was manager of
manufacturing engineering and director of systems engineering at Unisys
Corporation. Before moving into the software industry, he taught engineering at
Kansas State University.

Mr. Regan became Senior Vice President, Worldwide Professional Services
in February 1998. Prior to that, he served as vice president and general manager
of Sybase's Server Product Group. Over the past nine years, Mr. Regan has held a
variety of positions at Sybase, including general manager of the applications
solution division, and a vice president of Sybase Professional Services. Prior
to joining Sybase in February 1988, Mr. Regan worked for Cullinet Software where
he was the director of that company's federal consulting practice.

Ms. Butterfield has served as Vice President, Marketing since February
1997. Prior to that, beginning in January 1996, she served as Vice President of
Workplace Marketing and Vice President of Product Group Marketing
Communications. From September 1992 to January 1996, Ms. Butterfield held
various positions with the Powersoft division (formerly Powersoft Corporation),
including Director of Marketing Communications. From March 1991 until she joined
Powersoft Corporation, Ms. Butterfield was a sales representative for Bachman
Information Systems, Inc., an application development company.

Mr. Gaynor has served as Vice President, General Counsel and Secretary
since January 1997. Prior to that, beginning in May 1996, he served as Vice
President and Associate General Counsel. Between February 1993 and May 1996, Mr.
Gaynor served first as Corporate Counsel, then as Senior Corporate Counsel.
Before joining Sybase, Mr. Gaynor was an attorney with the law firm of Brobeck,
Phleger & Harrison.

Mr. Van der Vorst became Vice President and Corporate Controller in
November 1997. Prior to that, he served as Sybase's Vice President, Tax and
Corporate Accounting beginning in April 1997. From the time he joined Sybase in
December 1991 through April 1997, Mr. Van der Vorst held various other

positions, including Director of Tax and Assistant Controller. Prior to joining
Sybase, Mr. Van der Vorst held positions with Cetus Corporation, a biotechnology
company, Specta Physics, Inc., a laser manufacturing company, Levi Strauss &
Company and Price Waterhouse.

PART II

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

Sybase, Inc. Common Stock, par value $.001, is traded on the NASDAQ
National Market System under the symbol "SYBS." The price per share reflected in
the table below represents the range of low and high closing sale prices for the
Company's Common Stock as reported in the NASDAQ National Market System for the
quarters indicated.

High Low
------ ------

Fiscal 1996:

Quarter ended March 31, 1996 $37.13 $22.25
Quarter ended June 30, 1996 $27.38 $21.50
Quarter ended September 30, 1996 $20.00 $14.38
Quarter ended December 31, 1996 $20.50 $13.88

Fiscal 1997:

Quarter ended March 31, 1997 $20.00 $13.25
Quarter ended June 30, 1997 $16.88 $12.50
Quarter ended September 30, 1997 $20.75 $12.50
Quarter ended December 31, 1997 $23.50 $12.00

The Company has never paid cash dividends on its capital stock. The
Company currently intends to retain any earnings for use in its business and
does not anticipate paying any cash dividends in the foreseeable future.

The closing sale price of the Company's Common Stock as reported in the
NASDAQ National Market System on March 24, 1998 was $9.56. The number of
stockholders of record of the Company's Common Stock as of March 24, 1998 was
2,371.

FUTURE OPERATING RESULTS; STOCK PRICE VOLATILITY

The Company's future operating results may vary substantially from
period to period. The price of the Company's common stock will fluctuate in the
future, and an investment in the Company's common stock is subject to a variety
of risks, including but not limited to the specific risks identified below. The
results of operations for the quarter and year ended December 31, 1997 are not
necessarily indicative of results for the quarter and fiscal year ending
December 31, 1998 or any other future period. Expectations, forecasts, and
projections by the Company or others are by nature forward-looking statements,
and future results cannot be guaranteed. Forward-looking statements that were
true at the time made may ultimately prove to be incorrect or false. Inevitably,
some investors in the Company's securities will experience gains while others
will experience losses depending on the prices at which they purchase and sell
securities. Prospective and existing investors are strongly urged to carefully
consider the various cautionary statements and risks set forth in this report.

The timing and amount of the Company's license fee revenues are subject
to a number of factors that make estimation of revenues and operating results
prior to the end of a quarter extremely uncertain. Sybase has experienced a
seasonal pattern of license fee decline between the fourth quarter and the
succeeding first quarter contributing to lower total revenues and operating
earnings in the first quarter compared to the prior fourth quarter. For example,
the Company currently anticipates that revenues and earnings in the first
quarter of 1998 will be lower than in the fourth quarter of 1997. As a result of
the seasonal impact on revenues, an anticipated restructuring charge of
approximately $70 million which the Company has announced it will incur in 1998,
and forecasted expenses, the Company anticipates it will incur both an operating
loss and a net loss in the first quarter of 1998. The Company has operated

historically with little or no backlog and, as a result, license fees in any
quarter are dependent on orders booked and shipped in that quarter. In addition,
the timing of closing of large license agreements increases the risk of
quarter-to-quarter fluctuations and the uncertainty of estimating quarterly
operating results. The Company has experienced a pattern of recording 50 percent
to 70 percent of its quarterly revenues in the third month of the quarter, with
a concentration of such revenues in the last two weeks of such third month. The
Company's operating expenses are based on projected annual and quarterly revenue
levels and are incurred approximately ratably throughout each quarter. Because
the Company's operating expenses are relatively fixed in the short term, if
projected revenues are not realized in the expected period, the Company's
operating results for that period would be adversely affected and could result
in an operating loss, as occurred in the first and second quarters of 1996.
Failure to achieve revenues, earnings, and other operating and financial results
as forecast or anticipated by brokerage firm and industry analysts could result
in an immediate and adverse effect on the market price of the Company's stock.
The Company may not achieve, in the future, the relatively high rates of growth
experienced by the Company in 1991 through 1994 or the rates of growth projected
for the software markets in which Sybase competes.

In 1998, the Company expects to make changes to the sales coverage model
and sales compensation programs, and focus on increasing the number of discrete
quota-carrying sales people. Although such changes are intended to enhance
overall revenues, such changes could, in the short-run, materially and adversely
affect the sales process and revenues. In February 1998, the Company appointed
Michael S. Gardner Senior Vice President of Worldwide Sales. In April 1998, Mr.
Gardner will assume responsibility for overseeing the Company's worldwide sales
force from Mike Forster, Senior Vice President of Worldwide Field Operations,
who will retire at the end of 1998. In the third quarter of 1997, John Chen
became the Company's President and Chief Operating Officer, and Mitchell
Kertzman, Chief Executive Officer, became Chairman of the Board. In February
1998, the Company created the Office of the Chief Executive with shared
leadership responsibilities between Messrs. Kertzman and Chen, who now also
holds the title of Chief Executive Officer. The Company may make other
management and organization changes in the future. Organizational and management
changes are intended to enhance productivity and competitiveness. However, such
changes may not produce the desired results and could materially adversely
affect productivity, expenses and revenues.

The market for the Company's stock is highly volatile. The trading price
of the Company's common stock fluctuated widely in 1995, 1996 and 1997 and may
in the future continue to be subject to wide fluctuations in response to
quarterly variations in operating and financial results, announcements of
technological innovations, new products, or customer contracts won by the
Company or its competitors. Changes in prices of the Company's or its
competitors' products and services, changes in product mix, changes in the
Company's revenues and revenue growth rates for the Company as a whole or for
individual geographic areas, business units, products or product categories, as
well as other events or factors could also affect the Company's stock prices.
Statements or changes in opinions, ratings or earnings estimates made by
brokerage firms and industry analysts relating to the market in which the
Company does business, the Company's competitors, or the Company or its products
specifically, have resulted, and could in the future result, in an immediate and
adverse effect on the market price of the Company's common stock. For example,
due to a variety of factors, the Company's stock price declined significantly
during the first quarter of 1996 and in 1998. In addition, the stock market has
from time to time experienced extreme price and volume fluctuations that have
particularly affected the market price for many high-technology companies and
which often have been unrelated to the operating performance of these companies.

An increased portion of the Company's revenues in recent quarters has
been derived from its international operations. Several of the Company's
international subsidiaries have been only recently acquired or formed. For
example, the Company recently acquired operations in Chile, Argentina, Norway
and Peru. In addition there have been several management and organizational
changes within the international operations. For example, in 1998, the country
managers in Australia, Thailand and Japan resigned or were replaced.
International revenues, in absolute dollars and as a percentage of total
revenues, may fluctuate in part due to the growth and, in some cases, the
relative immaturity of international organizations. The Company's operations and
financial results could be significantly affected by factors associated with
international operations such as changes in foreign currency exchange rates and
uncertainties relative to regional economic circumstances, political instability
in emerging markets, and

difficulties in staffing and managing foreign operations, as well as by other
risks associated with international activities. For example, the economic unrest
and currency devaluations in Asia in late 1997 adversely affected collection of
receivables, particularly dollar denominated receivables, and the recognition of
revenue in the fourth quarter of 1997.

The market for the Company's software products and services is extremely
competitive. For a discussion of risks associated with competition, see "Part I,
Item I, Business - Competition".

The Company's future results will depend in part on its ability to
enhance its existing products and to introduce new products on a timely and
cost-effective basis that meet dynamic customer requirements. See "Part I, Item
I, Business - Product Development".

Sybase's results will also depend increasingly on the ability of its
products to interoperate and perform well with existing and future leading,
industry-standard application software products intended to be used in
connection with relational database management systems ("RDBMSs"). Failure to
meet existing or future interoperability and performance requirements of certain
independent vendors marketing such applications in a timely manner has in the
past and could in the future adversely affect the market for Sybase's products.
Certain leading applications will not be interoperable with Sybase RDBMSs until
certain features are added to the Company's RDBMS, and others may never be
available on Sybase's RDBMSs. In addition, the Company's application development
tools, database design tools, and certain connectivity products are designed for
use with RDBMSs offered by the Company's competitors. Vendors of non-Sybase
RDBMSs and related products may become less willing in the future to provide the
Company with access to products, technical information, and marketing and sales
support. If existing and potential customers of the Company who use non-Sybase
RDBMSs refrain from purchasing such products due to concerns that the
development, quality, and support of products for non-Sybase RDBMSs will
diminish over time, the Company's business, results of operations, and financial
condition could be materially and adversely affected.

Commercial acceptance of the Company's products and services could be
adversely affected by critical or negative statements or reports by brokerage
firms, industry and financial analysts, and industry periodicals concerning the
Company and its products, business, or competitors, or by the advertising or
marketing efforts of competitors that could affect customer perception. In
addition, customer perception of Sybase and its products could be adversely
affected by financial results, particularly revenues and profitability, reported
for the 1997 fiscal year or future periods, by the market share of the Company's
products and by related press reports.

The Company's ability to achieve its future revenues and earnings will
depend in part on the ability of its officers and key personnel to manage
growth, costs, and expenses successfully through the implementation of
appropriate management systems and controls. Failure to effectively implement or
maintain such systems and controls could adversely affect the Company's business
and results of operations. The success of the Company also depends in part on
its ability to attract and retain qualified technical, managerial, sales, and
marketing personnel. The competition for such personnel is intense in the
software industry and, Sybase believes, has increased substantially in recent
years. See "Part I, Item I, Business - Employees".

Sybase currently ships most of its products in North America (other than
its Powersoft(R) products) from its Emeryville, California distribution
facility. Because of the pattern of recording a high percentage of quarterly
revenues within the last week or two weeks of the quarter, the closure or
inoperability of this facility during such weeks due to natural calamity or due
to a systems or power failure could have a material adverse effect on the
Company's ability to record revenues for such quarter.

The Company has acquired a number of companies in the past. Most
recently, in February 1998, the Company acquired Intellidex Systems, a provider
of meta data management technology for deploying and managing data warehouse
environments, The Company will likely acquire other distributors, companies,
products, or technologies in the future. The achievement of the desired benefits
of these and future acquisitions will depend in part upon whether the
integration of the acquired businesses is achieved

in an efficient and effective manner. The successful combination of businesses
will require, among other things, integration of the companies' related product
offerings and coordination of their sales, marketing, and research and
development efforts. The difficulties of such coordination may be increased by
the geographic distance between separate organizations. The Company may be
unable to integrate effectively these or future acquired businesses and may not
obtain the anticipated or desired benefits of such acquisitions. Such
acquisitions may result in costs, liabilities, or additional expenses that could
adversely affect the Company's results of operations and financial condition. In
addition, acquisitions or changes in business or market conditions may cause the
Company to revise its plans, which could result in unplanned expenses or a loss
of anticipated benefits from past investments.

In February 1998, the Company announced that it will incur a
restructuring charge of approximately $70 million in connection with a
Company-wide reorganization which is intended to reduce Sybase's cost structure
by approximately $100 million on an annualized basis. The Company will continue
to evaluate its business, products, and results of operations, and accordingly,
the Company may incur further restructuring charges in the first quarter and in
the future. The actual amount of such charge could exceed the estimated amount
and actual expense savings in the future could be offset by other expense
increases or changes in the Company's business. However, as these are
forward-looking statements, future actual results may differ based on the
factors described above.

In October 1997, the American Institute of Certified Public Accountants
issued Statement of Position No. 97-2, "Software Revenue Recognition ("SOP
97-2"), which supersedes SOP 91-1. The Company will be required to adopt this
standard in the first quarter of 1998. Restatement of prior financial statements
is prohibited. SOP 97-2 addresses software revenue recognition matters primarily
from a conceptual level and detailed implementation guidelines have not been
issued. Accordingly, the Company is not able to currently determine the effect,
if any, that adoption of SOP 97-2 will have on its existing revenue recognition
practices; depending on the implementation guidelines that ultimately emerge,
the amount and timing of revenue recognized could be adversely affected.

Year 2000

The Company is aware of and is addressing the issues associated with the
programming code in existing computer systems as the year 2000 approaches. The
"Year 2000" issue is pervasive and complex, as many computer systems will be
affected in some way by the rollover of the two-digit year value to 00. Systems
that do not properly recognize such information could generate erroneous data or
cause a system to fail. The "Year 2000" issue creates risk for the Company from
unforeseen problems in its own computer systems and from third parties with whom
the Company deals on financial transactions worldwide. Failures of the Company's
and/or third parties' computer systems could have a material impact on the
Company's ability to conduct its business.

The Company has completed an initial assessment of its worldwide
infrastructure systems (e.g., computer and telephone systems) and its business
systems (e.g., revenue, sales and marketing and finance functions) to determine
what actions are required to resolve the Year 2000 issue. As of February 1998,
approximately two-thirds of Company's systems had been tested or certified to be
Year 2000 compatible. Of the remaining one-third, approximately half are
scheduled for upgrades from suppliers which will be installed over the coming
year. The Company anticipates completion of testing on the remaining systems in
the second quarter of 1998. For systems which are not either vendor-certified or
internally certified to be Year 2000 compatible, the Company will endeavor to
upgrade or modify those systems where possible, and otherwise retire systems
where necessary. The Company believes it will have identified solutions
available for all of its systems before the end of 1998, and expects to install
all solutions by April of 1999. The Company has initiated formal communications
with all of its significant suppliers and large customers to determine the
extent to which the Company's interface systems are vulnerable to those third
parties' failure to remediate their own Year 2000 issues. There is no guarantee
that the systems of other companies on which the Company's systems rely will be
timely converted and would not have an adverse effect on the Company's systems.
The Company does not believe that the cost of such actions will have a material
effect on the Company's results of operations or financial condition. There are
no assurances, however, that there will not be a delay in, or increased cost
associated with, the implementation of such changes, and the Company's inability
to implement such changes could have an adverse effect on future results of
operations. Factors that could cause unusual costs and delays include the
availability and cost of

personnel trained in this area, the ability to locate and correct all relevant
computer codes and other uncertainties.

ITEM 6. SELECTED FINANCIAL DATA

The information required by this item is incorporated by reference to
the section entitled "Selected Financial Data" of the Registrant's 1997 Annual
Report to Stockholders.

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

The information required by this item is incorporated by reference to
the section entitled "Management's Discussion and Analysis of Financial
Condition and Results of Operations" of the Registrant's 1997 Annual Report to
Stockholders.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not applicable.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The information required by this item is incorporated by reference to
the Consolidated Financial Statements, related notes thereto and Report of
Independent Auditors which appear in the Registrant's 1997 Annual Report to
Stockholders.

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

Not applicable.

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF REGISTRANT

The information required by this item with respect to identification of
directors is incorporated by reference to the information contained in the
section captioned "Election of Directors" in the Registrant's definitive Proxy
Statement for the Annual Meeting of Stockholders to be held May 27, 1998 (the
"Proxy Statement"), to be filed with the Commission within 120 days after the
end of the Registrant's fiscal year ended December 31, 1997. For information
with respect to the executive officers of the Registrant, see "Executive
Officers of the Registrant" at the end of Part I of this Report on Form 10-K.

The information required by this item with respect to the information
required under Item 405 of Regulation S-K is incorporated by reference to the
information contained in the section captioned "Compliance With Section 16(a) of
the Exchange Act" in the Proxy Statement.

ITEM 11. EXECUTIVE COMPENSATION

The information required by this item is incorporated by reference to
the information contained in the section captioned "Executive Compensation" in
the Proxy Statement.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The information required by this item is incorporated by reference to
the information contained in the section captioned "Share Ownership by Principal
Stockholders and Management" in the Proxy Statement.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The information required by this item is incorporated by reference to
the information contained in the section captioned "Employment Agreements and
Certain Transactions" in the Proxy Statement.

PART IV

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

(a) The following documents are filed as part of this Report on Form
10-K:

1. Financial Statements. The following Consolidated Financial Statements
of Sybase, Inc. and Report of Independent Auditors are incorporated by reference
to the Registrant's 1997 Annual Report to Stockholders:

Pages Located
in 1997 Annual
Report to
Stockholders
--------------

Report of Independent Auditors 15

Consolidated Balance Sheets as of December 31, 1997 and 1996 16

Consolidated Statements of Operations for the Three Years Ended December 31, 1997 17

Consolidated Statements of Stockholders' Equity for the Three Years Ended December 31, 1997 18

Consolidated Statements of Cash Flows for the Three Years Ended December 31, 1997 19

Notes to Consolidated Financial Statements 20 - 33

2. Financial Statement Schedules. The following financial statement
schedules of Sybase, Inc. for the years ended December 31, 1997, 1996 and 1995
are filed as part of this Report on Form 10-K and should be read in conjunction
with the Consolidated Financial Statements, and related notes thereto, of
Sybase, Inc.
Form
10-K
Schedule Page
- -------------------------------------- ----
II Valuation and Qualifying Accounts 25

Schedules not listed above have been omitted because they are not
applicable or are not required, or the information required to be set forth
herein is included in the Consolidated Financial Statements or notes thereto.

3. Exhibits Required by Item 601 of Regulation S-K. The management
contracts and compensatory plans required to be filed as part of, or
incorporated by reference into, this Report are: (i) 1991 Employee Stock
Purchase Plan, as amended, and 1991 Foreign Subsidiary Employee Stock Purchase
Plan, as amended, Exhibit 10.2, (ii) 1993 Sybase Executive Incentive Plan,
Exhibit 10.3, (iii) Sybase, Inc. 401(K) Plan, as amended, Exhibit 10.4, (iv)
1992 Director Stock Option Plan, as amended, Exhibit 10.5, (v) 1988 Stock Option
Plan, as amended, Exhibit 10.1, (vi) Executive Deferred Compensation Plan,
Exhibit 10.6, (vii) 1996 Stock Plan, as amended, and form of Stock Option
Agreement, Exhibit 10.20, (viii) Form of Statement of Employment Terms, Exhibit
10.21, (ix) Loan and Security Agreement dated as of January 7, 1998 between
Sybase, Inc. and Mitchell E. Kertzman, Exhibit 10.13, (x) Agreement of
Employment Terms dated as of August 1, 1996 between Sybase, Inc. and Jack
Acosta, Exhibit 10.14, (xi) Retirement Agreement and General Release between
Sybase, Inc. and Michael Forster dated as of March 11, 1998, Exhibit 10.22,
(xii) Employment Agreement between Sybase, Inc. and John S. Chen dated as of
July 11, 1997, Exhibit 10.23, (xiii) Promissory Note of Eric Miles in favor of
Sybase, Inc. dated as of January 2, 1998, Exhibit 10.26.

The following Exhibits are filed as part of, or incorporated by
reference into, this Report on Form 10-K:

Exhibit No. Description

3.1(4) Restated Certificate of Incorporation of Registrant, as
amended

3.2 Bylaws of Registrant, as amended

4.1 Preferred Share Rights Agreement dated as of March 24, 1992
between Registrant and The First National Bank of Boston, as
amended, (incorporated herein by reference to Exhibit 4.2 of
the Registrant's Registration Statement on Form S-8 (file
no. 33-81692) filed July 18, 1994)

10.1 1988 Stock Option Plan and Forms of Incentive Stock Option
Agreements and Nonstatutory Stock Option Agreements, as
amended

10.2 1991 Employee Stock Purchase Plan and 1991 Foreign
Subsidiary Employee Stock Purchase Plan, as amended

10.3(6) Sybase Executive Incentive Plan

10.4(1) Sybase, Inc. 401(k) Plan, as amended

10.5(7) 1992 Director Stock Option Plan, as amended

10.6(6) Executive Deferred Compensation Plan

10.7(1) Standard Office Lease dated March 10, 1988 between
Registrant and Bay Center Associates

10.8(1) Standard Office Lease dated April 17, 1989 between
Registrant and P.O. Partners

10.9(1) Standard Office Lease dated April 21, 1989 between
Registrant and Christie Avenue Partners

10.10(1) Form of Indemnification Agreement

10.11(3) Second Amendment dated as of November 24, 1992 to Standard
Office Lease dated April 21, 1989 between the Registrant and
Christie Avenue Partners

10.12(3) Lease dated October 1, 1992 between JS - Bay Center
Associates and the Registrant

10.13 Loan and Security Agreement dated as of January 7, 1998
between Sybase, Inc. and Mitchell E. Kertzman

10.14 Agreement of Employment Terms dated as of August 1, 1996
between Sybase, Inc. and Jack Acosta

10.15(5) Powersoft Corporation 1984 Incentive Stock Option Plan, as
amended

10.16(5) Powersoft Corporation Form of Incentive Option Granted under
the 1984 Incentive Stock Option Plan

10.17(5) Powersoft Corporation 1994 Amended and Restated Incentive
and Non-Qualified Stock Option Plan

10.18(5) Powersoft Corporation Forms of Incentive and Non-Qualified
Stock Option Granted under the 1994 Amended and Restated
Incentive and Non-Qualified Stock Option Plan

10.19(5) Powersoft Corporation 1994 Amended and Restated Employee
Stock Purchase Plan

10.20 1996 Stock Plan, as amended, and form of Stock Option
Agreement

10.21(7) Form of Statement of Employment Terms

10.22 Retirement Agreement and General Release between Sybase,
Inc. and Michael Forster dated as of March 11, 1998

10.23(8) Employment Agreement between Sybase, Inc. and John S. Chen
dated as of July 11, 1997

10.24 Office Lease dated March 17, 1998, Building A - Bay Center
between Sybase, Inc. and JS Bay Center Associates

10.25 Office Lease dated March 17, 1998, Building C - Bay Center
between Sybase, Inc. and JS Bay Center Associates

10.26 Promissory Note of Eric Miles in favor of Sybase, Inc. dated
as of January 2, 1998

13.1(2) Proxy for 1998 Annual Meeting of Stockholders

13.2 Pages 4 - 36 of the Registrant's Annual Report to
Stockholders for the fiscal year ended December 31, 1997
(except for the portions of the 1997 Annual Report to the
Stockholders expressly incorporated by reference in the
Report on Form 10-K, the 1997 Annual Report to Stockholders
is furnished for the information of the Securities and
Exchange Commission and is not to be deemed "filed")

21 Subsidiaries of Registrant

23.1 Consent of Independent Auditors

27 Financial Data Schedules

(1) Incorporated by reference to exhibits filed in response to Item 16(a),
"Exhibits," of the Company's Registration Statement on Form S-1 (File No.
33-41549) declared effective on August 13, 1991.

(2) To be filed with Securities and Exchange Commission not later than 120 days
after the end of the period covered by this Report on Form 10-K.

(3) Incorporated by reference to the Registrant's Annual Report on Form 10-K for
the year ended December 31, 1992, filed on March 29, 1993.

(4) Incorporated by reference to Amendment No. 1 to the Company's Registration
Statement on Form S-4 filed March 8, 1994 (File No. 33-75462).

(5) Incorporated by reference to the Registrant's Registration Statement on Form
S-8 (file no. 33-89334) filed on February 10, 1995.

(6) Incorporated by reference to exhibits filed in response to Item 16(a),
"Exhibits," of the Company's Annual Report on Form 10-K for the year ended
December 31, 1994.

(7) Incorporated by reference to exhibits filed in response to Item 16(a),
"Exhibits," of the Company's Annual Report on Form 10-K for the year ended
December 31, 1995.

(8) Incorporated by reference to exhibits filed in response to Item 6(a),
"Exhibits and Reports on Form 8K" of the Company's Quarterly Report on Form 10-Q
for the quarter ended September 30, 1997.

(b) Reports on Form 8-K. The Company filed no Reports on Form 8-K
during the quarter ended December 31, 1997.

II Valuation and Qualifying Accounts

SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS

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

SYBASE, INC.

- ------------------------------------------------------------------------------------------------------------------------------------
COL. A COL. B COL. C COL. D COL. E
- ------------------------------------------------------------------------------------------------------------------------------------
ADDITIONS
-----------------------------
Balance at Charged to Charged to Balance at
Beginning Costs Other End of
DESCRIPTION of Period and Expenses Accounts Deletions Period
- ------------------------------------------------------------------------------------------------------------------------------------

Year ended December 31, 1997:
Deducted from asset accounts:
Allowance for doubtful accounts $28,242,000 $ 1,484,000 $45,582,000 A $44,635,000 B $30,673,000
Allowance for amortization of intangible assets 28,965,000 14,523,000 43,488,000
----------- ----------- ----------- ----------- -----------
Totals $57,207,000 $16,007,000 $45,582,000 $44,635,000 $74,161,000
=========== =========== =========== =========== ===========

Year ended December 31, 1996:
Deducted from asset accounts:
Allowance for doubtful accounts $19,304,000 $11,713,000 $34,505,000 A $37,280,000 B $28,242,000
Allowance for amortization of intangible assets 21,969,000 6,996,000 28,965,000
----------- ----------- ----------- ----------- -----------
Totals $41,273,000 $18,709,000 $34,505,000 $37,280,000 $57,207,000
=========== =========== =========== =========== ===========

Year ended December 31, 1995:
Deducted from asset accounts:
Allowance for doubtful accounts $15,903,000 $ 867,000 $27,802,000 A $25,268,000 B $19,304,000
Allowance for amortization of intangible assets 12,996,000 8,973,000 21,969,000
----------- ----------- ----------- ----------- -----------
Totals $28,899,000 $ 9,840,000 $27,802,000 $25,268,000 $41,273,000
----------- ----------- ----------- ----------- -----------

A Charged against revenue
B Uncollectible accounts written off and recoveries

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Report on Form 10-K to
be signed on its behalf of the undersigned, thereunto duly authorized.

SYBASE, INC.

By: /s/ MITCHELL E. KERTZMAN
----------------------------------
March 24, 1998 Mitchell E. Kertzman
Chairman of the Board
and Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934,
this Report on 10-K has been signed by the following persons in the capacities
and on the dates indicated:

Signature Title Date
- ----------------------------------------------- --------------------------------------------- --------------

/s/ MITCHELL E. KERTZMAN Chairman of the Board, Chief March 24, 1998
- ----------------------------------------------- Executive Officer (Principal
(Mitchell E. Kertzman) Executive Officer) and Director

/s/ JOHN S. CHEN President, Chief Executive March 24, 1998
- ----------------------------------------------- Officer (Principal Executive Officer)
(John S. Chen) and Director

/s/ JACK L. ACOSTA Executive Vice President and March 24, 1998
- ----------------------------------------------- Chief Financial Officer (Principal
(Jack L. Acosta) Financial Officer)

/s/ ROBERT S. EPSTEIN Executive Vice President March 24, 1998
- ----------------------------------------------- and Director
(Robert S. Epstein)

/s/ PIETER A. VAN DER VORST Vice President and Corporate March 24, 1998
- ----------------------------------------------- Controller (Principal Accounting
(Pieter A. Van der Vorst) Officer)

/s/ RICHARD C. ALBERDING Director March 24, 1998
- -----------------------------------------------
(Richard C. Alberding)

/s/ L. WILLIAM KRAUSE Director March 24, 1998
- -----------------------------------------------
(L. William Krause)

/s/ DAVID E. LIDDLE Director March 24, 1998
- -----------------------------------------------
(David E. Liddle)

/s/ ALAN B. SALISBURY Director March 24, 1998
- -----------------------------------------------
(Alan B. Salisbury)

/s/ ROBERT P. WAYMAN Director March 24, 1998
- -----------------------------------------------
(Robert P. Wayman)

/s/ JEFFREY T. WEBBER Director March 24, 1998
- -----------------------------------------------
(Jeffrey T. Webber)

EXHIBIT INDEX

Exhibit No. Description

3.1(4) Restated Certificate of Incorporation of Registrant, as
amended

3.2 Bylaws of Registrant, as amended

4.2 Preferred Share Rights Agreement dated as of March 24, 1992
between Registrant and The First National Bank of Boston, as
amended, (incorporated herein by reference to Exhibit 4.2 of
the Registrant's Registration Statement on Form S-8 (file
no. 33-81692) filed July 18, 1994)

10.2 1988 Stock Option Plan and Forms of Incentive Stock Option
Agreements and Nonstatutory Stock Option Agreements, as
amended

10.2 1991 Employee Stock Purchase Plan and 1991 Foreign
Subsidiary Employee Stock Purchase Plan, as amended

10.3(6) Sybase Executive Incentive Plan

10.4(1) Sybase, Inc. 401(k) Plan, as amended

10.5(7) 1992 Director Stock Option Plan, as amended

10.6(6) Executive Deferred Compensation Plan

10.7(1) Standard Office Lease dated March 10, 1988 between
Registrant and Bay Center Associates

10.8(1) Standard Office Lease dated April 17, 1989 between
Registrant and P.O. Partners

10.9(1) Standard Office Lease dated April 21, 1989 between
Registrant and Christie Avenue Partners

10.10(1) Form of Indemnification Agreement

10.11(3) Second Amendment dated as of November 24, 1992 to Standard
Office Lease dated April 21, 1989 between the Registrant and
Christie Avenue Partners

10.12(3) Lease dated October 1, 1992 between JS - Bay Center
Associates and the Registrant

10.15 Loan and Security Agreement dated as of January 7, 1998
between Sybase, Inc. and Mitchell E. Kertzman

10.16 Agreement of Employment Terms dated as of August 1, 1996
between Sybase, Inc. and Jack Acosta

10.15(5) Powersoft Corporation 1984 Incentive Stock Option Plan, as
amended

10.16(5) Powersoft Corporation Form of Incentive Option Granted under
the 1984 Incentive Stock Option Plan

10.17(5) Powersoft Corporation 1994 Amended and Restated Incentive
and Non-Qualified Stock Option Plan

10.18(5) Powersoft Corporation Forms of Incentive and Non-Qualified
Stock Option Granted under the 1994 Amended and Restated
Incentive and Non-Qualified Stock Option Plan

10.19(5) Powersoft Corporation 1994 Amended and Restated Employee
Stock Purchase Plan

10.20 1996 Stock Plan, as amended, and form of Stock Option
Agreement

10.21(7) Form of Statement of Employment Terms

10.23 Retirement Agreement and General Release between Sybase,
Inc. and Michael Forster dated as of March 11, 1998

10.23(8) Employment Agreement between Sybase, Inc. and John S. Chen
dated as of July 11, 1997

10.24 Office Lease dated March 17, 1998, Building A - Bay Center
between Sybase, Inc. and JS Bay Center Associates

10.26 Office Lease dated March 17, 1998, Building C - Bay Center
between Sybase, Inc. and JS Bay Center Associates