Forward-Looking Statements

In addition to historical information, this Quarterly Report on Form 10-Q contains forward-looking statements. The forward-looking statements are made in reliance upon the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. The words "believe," "expect," "anticipate," "intend," "estimate," "forecast," "project," "should" and similar expressions are intended to identify "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include, among others, statements about our future performance, the continuation of historical trends, the sufficiency of our sources of capital for future needs, the effects of acquisitions and the expected impact of recently issued accounting pronouncements. The forward-looking statements are subject to certain risks and uncertainties that

could cause actual results to differ materially from those anticipated in the forward-looking statements. Factors that might cause such a difference include, but are not limited to those discussed in Item 1A "Risk Factors" in our Annual Report on Form 10-K filed with the SEC for our fiscal year ended May 31, 2008. Readers are cautioned not to place undue reliance on these forward-looking statements, which reflect management's opinions only as of the date hereof. We undertake no obligation to revise or publicly release the results of any revision to these forward-looking statements. Readers should carefully review the risk factors described in our Annual Report on Form 10-K and in other documents we file with the SEC.

Management Overview

Lawson Software, Inc. is a global provider of enterprise software. We provide business application software, consulting and maintenance to customers primarily in the services sector, trade industries and manufacturing/distribution sectors. In the manufacturing sector we serve both process manufacturing and discrete manufacturing. In the service sector we serve both asset-intensive and labor-intensive services. We operate as one business segment focused on broad sectors. We specialize in specific markets including healthcare, public sector in the U.S., food, fashion, wholesale distribution, equipment services and rental, and manufacturing (our targeted industries). Our software includes enterprise financial management, human capital management, business intelligence, asset management, enterprise performance management, supply chain management, service management, manufacturing operations, business project management and industry-tailored applications. Our applications help automate and integrate critical business processes, which enables our customers to collaborate with their partners, suppliers and employees. We support our customers' use of our applications through consulting services which primarily help our customers implement their Lawson applications, and through our maintenance program that provides on-going support and product updates for our customers' continued use of our applications.

Our enterprise software solutions focus on providing competitive advantages and business flexibility to our customers. Lawson's solutions fall within three main product lines and include related maintenance and consulting services. Our product lines are referred to as "Lawson S3 Enterprise Management System," "Lawson M3 Enterprise Management System," and "Lawson Strategic Human Capital Management" with many of the solutions in each product line having broad, cross-industry application. Our S3 solutions consist of business applications designed for services-centric industries. Our M3 solutions consist of applications that are geared for manufacturing, distribution and trade businesses who face resource constraints and whose processes are often complex and industry-specific, and our Strategic Human Capital Management applications provide solutions for customers to strategically manage their workforce.

Revenues for the first quarter of fiscal 2009 were $190.9 million, up 1.9% compared to $187.4 million in the first quarter of fiscal 2008. Revenues in all geographic regions were up compared to the first quarter of last year. Maintenance revenues were up 13.5% year-over-year partially offset by a 17.0% decline in our License fees revenues primarily relating to a decrease in M3 sales in our EMEA region and a decrease in S3 sales in the Americas primarily outside our targeted industries. In addition, our consulting revenues were down 3.3% in the first quarter of fiscal 2009 compared to the first quarter of fiscal 2008. The Americas continue to represent over half of our total revenues for the fiscal quarter at 54.9%. The EMEA region accounted for 41.1% of total revenues in the quarter and the remaining 4.0% was in the Asia Pacific region including Australia and New Zealand. Total gross margin as a percent of revenues for the first quarter increased slightly at 50.4% compared to 50.0% in the first quarter of last year with improved margins on license fees and maintenance being offset by lower consulting margins. Operating expenses were up $1.7 million, or 1.9%, from the first quarter of last year. As a percent of revenues, operating expenses were relatively flat at 47.2% compared to 47.1% in the first quarter of last year.

The U.S. dollar has weakened relative to certain major international currencies in the three months ended August 31, 2008, when compared with rates in the three months ended August 31, 2007. These currency fluctuations contributed approximately $7.0 million to our revenue growth as reported for the first quarter of fiscal 2009. Excluding the effect of currency fluctuations, our total revenues were down approximately $3.5 million quarter over quarter. The currency fluctuations also had the effect of increasing costs of revenues and expenses, as reported in U.S. dollars, by approximately $10.0 million, which was offset by a decrease in costs and expenses of $7.3 million on a constant currency basis resulting in a reported net increase of $2.7 million in the first quarter of fiscal 2009.

The global economy showed signs of continued weakening over the course of the first quarter of fiscal 2009, especially in the financial services industry.
While we have certain financial services customers, the

financial services industry is not a targeted industry for Lawson. We believe the significant distress experienced by financial institutions may have far reaching impact on other industries. Together, the weakening economy and the fallout from the financial market crisis may challenge our license contracting and demand for our services for the remainder of our fiscal 2009. We continue to monitor the economic situation, the business environment and our outlook for our full fiscal year.

Critical Accounting Policies and Estimates

Our critical accounting policies are described in Part II - Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations of our Annual Report on Form 10-K for the fiscal year ended May 31, 2008. These policies reflect those areas that require more significant judgments, and use of estimates and assumptions in the preparation of our financial statements and include the following:

† Revenue Recognition

† Allowance for Doubtful Accounts

† Sales Returns and Allowances

† Valuation of Long-Lived and Intangible Assets and Goodwill

† Income Taxes

† Contingencies

† Litigation reserves

† Stock-Based Compensation

† Marketable Securities and Other Investments

With the July 7, 2008 sale of our auction rate securities portfolio, we no longer consider our accounting policies related to Marketable Securities and Other Investments as critical. Other than this change, there have been no material changes to our critical accounting policies and estimates as disclosed in our Annual Report on Form 10-K.

Results of Operations

We recorded a net loss of $2.5 million in the first quarter of fiscal 2009 as compared to net income of $5.6 million in the first quarter of fiscal 2008. Net loss per share was $0.01 in the first quarter of fiscal 2009 compared to net income of $0.03 per diluted share in the similar period last year.

The following table sets forth certain line items in our Consolidated Statements of Operations as a percentage of total revenues and the period-over-period percent increase (decrease) for the periods indicated:

                                               Percentage of Total Revenue
                                                   Three Months Ended              Percentage of
                                                       August 31,                  Dollar Change
                                                 2008               2007        Fiscal 2009 vs. 2008
Revenues:
License fees                                         11.1 %             13.6 %                 (17.0 )%
Maintenance                                          46.7               41.9                    13.5
Consulting                                           42.2               44.5                    (3.3 )
Total revenues                                      100.0              100.0                     1.9
Cost of revenues:
Cost of license fees                                  2.8                3.6                   (21.0 )
Cost of maintenance                                   8.8                8.4                     7.8
Cost of consulting                                   38.0               38.0                     1.7
Total cost of revenues                               49.6               50.0                     1.1

Gross profit                                         50.4               50.0                     2.7

Operating expenses:
Research and development                             11.5                9.2                    26.8
Sales and marketing                                  24.3               22.6                     9.9
General and administrative                           10.1               13.7                   (25.0 )
Restructuring                                        (0.1 )             (0.1 )                  59.3
Amortization of acquired intangibles                  1.4                1.7                   (18.3 )
Total operating expenses                             47.2               47.1                     1.9

Operating income                                      3.2                2.9                    14.3
Total other income (expense), net                     0.6                2.4                   (76.4 )
Income before income taxes                            3.8                5.3                   (27.3 )
Provision for income taxes                            5.1                2.3                   122.2
Net income (loss)                                    (1.3 )%             3.0 %                   *NM %

The discussion that follows relating to our results of operations for the comparable fiscal quarters ended August 31, 2008 and August 31, 2007 should be read in conjunction with the accompanying unaudited Consolidated Financials Statements and related notes and with the information presented in the above table.

Revenues



                   Three Months Ended        Quarterly Change
                       August 31,          Fiscal 2009 vs. 2008
(in thousands)      2008        2007        Dollars       Percent

Revenues:
License fees     $   21,125   $  25,460   $     (4,335 )    (17.0 )%
Maintenance          89,109      78,514         10,595       13.5
Consulting           80,682      83,434         (2,752 )     (3.3 )
Total revenues   $  190,916   $ 187,408   $      3,508        1.9 %

Total Revenues. We generate revenues from licensing software, providing maintenance on licensed products and providing consulting services. We generally utilize written contracts as the means to establish the terms and conditions by which our products, maintenance and consulting services are sold to our customers. As our maintenance and consulting services are primarily attributable to our licensed products, growth in our maintenance and consulting services is generally tied to the level of our license contracting activity.

We recognize revenues pursuant to specific and detailed guidelines applicable to the software industry. License fees revenues from end-users are generally recognized when the software product has been shipped, provided a non-cancelable license agreement has been signed; there are no uncertainties surrounding product

acceptance; the fees are fixed or determinable and collection of the related receivable is considered probable. If the fee due from the customer is not fixed or determinable, or includes extended payment terms, revenue is deferred and recognized as payments become due and all other conditions for revenue recognition have been satisfied. Revenues from customer maintenance and support contracts are deferred and recognized ratably over the term of the agreements. Revenues from consulting services (including training and implementation services) are recognized as services are provided to customers. See Critical Accounting Policies and Estimate - Revenue Recognition, in our Annual Report on Form 10-K for the year ended May 31, 2008, for a more complete description of our revenue recognition policy.

First quarter fiscal 2009 total revenues increased 1.9% to $190.9 million as compared to $187.4 million in the first quarter of fiscal 2008. The increase was driven by a 13.5% increase in maintenance revenues which more than offset decreases in our license fees and consulting revenues.

License Fees. Our license fees primarily consist of fees resulting from products licensed to customers on a perpetual basis. Product license fees result from a customer's licensing of a given software product for the first time or with a customer's licensing of additional users for previously licensed products.

License fees revenues for the first quarter of fiscal 2009 decreased $4.3 million, or 17.0%, compared to the first quarter of fiscal 2008. The decrease in license fees revenues was experienced in all of our geographies with EMEA down $2.2 million compared to the first quarter of last year primarily related to decreased sales of our M3 solutions in manufacturing related verticals. The Americas and APAC license fees revenues were down $1.9 million and $0.2 million, respectively, compared to the first quarter of last year. Within the Americas we experienced decreases in our S3 license fees revenues primarily in markets outside of our targeted industries. These decreases were somewhat offset by increased revenues in our healthcare sector. Our M3 license fees revenues in the Americas were relatively flat quarter over quarter. The total number of licensing transactions decreased in the first quarter of fiscal 2009 by 78 to 216 as compared to 294 in the first quarter of fiscal 2008. The number of licensing transactions with new customers increased to 31 compared to 27 in the first quarter of fiscal year 2008. In the first quarter of fiscal 2009 we entered into nine license transactions between $0.5 million and $1.0 million compared to four in the similar quarter last year. We entered into one licensing transaction greater than $1.0 million in the current quarter compared to six in the first quarter of fiscal 2008.

Maintenance. Our maintenance revenues represent the ratable recognition of fees to enroll and renew licensed products in our maintenance program. This program entitles our customers to product enhancements, technical support services, and on-going compatibility with third-party operating systems, databases and hardware. These fees are typically charged annually and are based on the license fees initially paid by the customer. Maintenance revenues can fluctuate based on the number and timing of new license contracts, renewal rates and price increases.

Maintenance revenues for the first quarter of fiscal 2009 increased $10.6 million, or 13.5%, compared to fiscal 2008 first quarter. This increase was primarily driven by annual maintenance agreement renewals with associated price increases, the continued migration of our customers, primarily in our EMEA region, to Lawson Total Care agreements as well as maintenance agreements associated with new customers. Lawson Total Care is our comprehensive customer care program which includes among other things software upgrades, updates, corrections, as well as various levels of support.

Consulting. Our consulting revenues consist of services related to software installations, software implementations, customized development and training services for customers who have licensed our products. Consulting revenues have historically, and through the first quarter of fiscal 2009, included revenues associated with our hardware business. As of August 31, 2008, we have exited the hardware business which represented a non-core component of our business to better concentrate our efforts on providing our solutions and related services to our targeted industries.

Consulting revenues for the first quarter of fiscal 2009 decreased $2.8 million, or 3.3%, compared to the first quarter of fiscal 2008. Of this decrease, $1.6 million was due to a decrease in third-party revenues, lower billable headcount, and lower utilization in certain regions in the first quarter of fiscal 2009 compared to the first quarter last year. In addition, hardware revenues decreased $1.2 million as we exited this non-core component of our business during the first quarter of fiscal 2009.

Deferred Revenue. We had total deferred revenues of $275.1 million at August 31, 2008 compared to $312.6 million at May 31, 2008. Deferred revenue represents revenue that is to be recognized in future periods related to certain license agreements, maintenance contracts and certain consulting arrangements as discussed above.

The following table sets forth the components of deferred revenue (in thousands):

                                  August 31,     May 31,
                                     2008         2008
License fees                     $     57,811   $  54,555
Maintenance                           200,578     240,704
Consulting                             16,709      17,347
Total deferred revenue                275,098     312,606
Less current portion                 (256,164 )  (298,509 )
Deferred revenue - non-current   $     18,934   $  14,097

The decrease in total deferred revenue at August 31, 2008 as compared to May 31, 2008, was primarily due to the decrease in deferred maintenance revenue as a result of our renewal dates occurring in the third and fourth quarters of our fiscal year.

Cost of Revenues



                           Three Months Ended        Quarterly Change
                               August 31,          Fiscal 2009 vs. 2008
(in thousands)              2008         2007       Dollars       Percent

Cost of revenues:
Cost of license fees     $     5,332   $  6,753   $     (1,421 )    (21.0 )%
Cost of maintenance           16,874     15,660          1,214        7.8
Cost of consulting            72,447     71,226          1,221        1.7
Total cost of revenues   $    94,653   $ 93,639   $      1,014        1.1 %

Gross profit:
License fees             $    15,793   $ 18,707   $     (2,914 )    (15.6 )%
Maintenance                   72,235     62,854          9,381       14.9
Consulting                     8,235     12,208         (3,973 )    (32.5 )
Total gross profit       $    96,263   $ 93,769   $      2,494        2.7 %

Gross margin %:
License fees                    74.8 %     73.5 %
Maintenance                     81.1 %     80.1 %
Consulting                      10.2 %     14.6 %
Total gross margin %            50.4 %     50.0 %

Cost of License Fees. Cost of license fees includes royalties to third parties, amortization of acquired software and software delivery expenses. Our software solutions may include embedded components of third-party vendors for which a fee is paid to the vendor upon the sale of our products. In addition, we resell third-party products in conjunction with the license of our software solutions, which also results in a fee. The cost of license fees is higher, as a percentage of revenues, when we resell products of third-party vendors. As a result, license fee gross margins will vary depending on the proportion of third-party product sales in our revenue mix.

During the first quarter of fiscal 2009, cost of license fees decreased $1.4 million, or 21.0%, compared to the first quarter of fiscal 2008. The decrease was primarily related to lower volume of license fees revenues, a decrease in third-party costs as well as decreased amortization of acquired intellectual property. Fiscal 2009 first quarter license fees gross margin increased to 74.8% up from 73.5% in the first quarter of fiscal 2008 primarily due to the first quarter fiscal 2009 revenue mix which included a lower percentage of third party revenues as compared to the first quarter last year.

Cost of Maintenance. Cost of maintenance includes salaries, employee benefits, related travel, third-party maintenance costs associated with embedded and non-embedded third-party products, the overhead costs of providing support services to customers and intangible asset amortization on support contracts.

Cost of maintenance for the first quarter of fiscal 2009 increased $1.2 million, or 7.8%, compared to the first quarter of fiscal 2008. The increase was primarily attributable to a $0.7 million increase in third-party costs, a $0.6 million increase in IT and other infrastructure allocations, as well as a net $0.2 million increase in employee-related costs due to a higher customer support headcount. These increases were somewhat offset by a decrease in intangible asset amortization. Maintenance gross margin for the first quarter of fiscal 2009 was 81.1%, up slightly from 80.1% in the first quarter of fiscal 2008.

Cost of Consulting. Cost of consulting includes salaries, employee benefits, third-party consulting costs, related travel, and the overhead costs of providing implementation, installation, training and education services to customers. Cost of consulting also includes costs associated with our hardware business which we exited in the first quarter of fiscal 2009.

Cost of consulting increased $1.2 million, or 1.7%, in the first quarter of fiscal 2009 compared to the first quarter of fiscal 2008. This increase resulted primarily from a net $1.6 million increase in employee-related costs, a $1.7 million increase in IT and other infrastructure allocations and $0.6 million related to an EMEA pre-merger litigation credit recorded in the first quarter of last year with no corresponding amount in the current quarter. These increases were partially offset by a $2.1 million decrease in third-party costs associated with the lower third-party revenues recorded in the quarter as well as an $0.8 million decrease in hardware costs as we have exited this non-core business. Gross margin on consulting revenues for the first quarter of fiscal 2009 decreased to 10.2% as compared to 14.6% for the similar period last year primarily as a result of the increase in our cost of consulting as well as a decrease in third-party margins in the Americas.

Operating Expenses



                                         Three Months Ended        Quarterly Change
                                             August 31,          Fiscal 2009 vs. 2008
(in thousands)                            2008         2007       Dollars       Percent

Operating Expenses:
Research and development               $    21,918   $ 17,286   $      4,632       26.8 %
Sales and marketing                         46,491     42,291          4,200        9.9
General and administrative                  19,289     25,723         (6,434 )    (25.0 )
Restructuring                                 (231 )     (145 )          (86 )    (59.3 )
Amortization of acquired intangibles         2,627      3,216           (589 )    (18.3 )
Total operating expenses               $    90,094   $ 88,371   $      1,723        1.9 %

Research and Development. Research and development expenses consist primarily of salaries, employee benefits, related overhead costs, and consulting fees associated with product development, enhancements and upgrades provided to existing customers under maintenance plans and to new customers, testing, quality assurance and documentation.

For the first quarter of fiscal 2009, research and development increased $4.6 million, or 26.8%, compared to the first quarter of last year. This increase was primarily the result of an increase in employee-related costs of $3.1 million including increased headcount relating to our global support center and our acquisitions of Visual Advance Systems Technology and the Product Lifecycle Management software division of Freeborders in the fourth quarter of fiscal 2008. In addition, IT and other infrastructure allocations increased $1.3 million in the current quarter as compared to the first quarter of last year.

Sales and Marketing. Sales and marketing expenses consist primarily of salaries and incentive compensation, employee benefits, travel and overhead costs related to our sales and marketing personnel, as well as trade show activities, advertising costs and other costs associated with our Company's marketing activities.

Sales and marketing expenses for the first quarter of fiscal 2009 increased $4.2 million, or 9.9%, compared to the first quarter of fiscal 2008. This increase was primarily due to an increase of $3.0 million in employee-related costs incurred due to an increase in headcount to support our expanded efforts related to our targeted industries. The increase in employee-related costs also includes the affect of a fourth quarter fiscal 2008 under accrual of sales incentive compensation in EMEA. See Note 1, Nature of Business and Basis of Presentation - First Quarter Fiscal 2009 Results of Operations, for more information. In addition, we had a $0.9 million increase in IT and other infrastructure charges and a $0.4 million increase in other expenses to support the growth in our sales and marketing operations. These increases were somewhat offset by a current quarter decrease in certain marketing programs of $0.4 million.

General and Administrative. General and administrative expenses consist primarily of salaries, employee benefits and related overhead costs for administrative employees, as well as legal and accounting expenses, consulting fees and bad debt expense. We deem certain of these items to be shared services . . .