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

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 three and six months ended November 30, 2008 were $206.4 million and $397.3 million, respectively, down 5.6% and 2.2% compared to $218.6 million and $406.0 million in the similar periods of fiscal 2008. Revenues in the Americas and APAC increased for both the quarter and six month period of fiscal 2009 compared to fiscal 2008 while our EMEA region's revenues were lower for these comparable three and six month periods. Maintenance revenues for the second quarter of fiscal 2009 were up 6.3% over the second quarter of last year and increased 9.8% in the six month period of fiscal 2009 compared to fiscal 2008. These increases were offset by an 8.9% and 12.4% decrease in our second quarter and year-to-date fiscal 2009 license fees revenues primarily relating to a decrease in M3 sales in our EMEA region and in the Americas. In addition, our consulting revenues were also declined 14.6% and 9.5% in the second quarter and first six months of fiscal 2009 compared to the similar periods last year. The Americas continue to represent over half of our total revenues for the second quarter of fiscal 2009 at 55.4%. The EMEA region accounted for 40.2% of total revenues in the second quarter of fiscal 2009 and the remaining 4.4% was in the Asia Pacific region including Australia and New Zealand. Total gross margin as a percent of revenues for the second quarter of fiscal 2009 increased to 52.6% compared to 50.8% in the second quarter of fiscal 2008. Gross margin as a percent of revenues improved to 51.6% in the first six months of fiscal 2009 as compared to 50.4% in the similar period last year. These increases are the result of improved margins on maintenance being offset in part by lower license fees and consulting margins. Operating expenses decreased $1.4 million, or 1.5%, in the second quarter of fiscal 2009 from the second quarter of last year and increased as a percent of revenues to 47.4% compared to 45.4%. For the first six months of fiscal 2009, operating expenses increased $0.3 million, or less than one percent, as compared to the similar period last year. As a percent of revenues, operating expenses were 47.3% and 46.2% in the comparable six month periods of fiscal 2009 and 2008, respectively.

Our results for the second quarter and six months ended November 30, 2008 include restructuring charges of approximately $7.9 million relating to the cost reduction actions we announced on November 18, 2008. In response to the continued uncertainty in the global economic environment, we implemented a restructuring plan that included the elimination of approximately 200 employees, or 5.0% of our global workforce, and the closing of one of our facilities. In addition, we have reduced our discretionary spending while preserving targeted investments that we believe will enable long-term growth and increase efficiencies.

A significant portion of our business is in currencies other than the U.S. dollar, particularly the Swedish Kroner (SEK) and the Euro. Our revenues and operating expenses are affected by fluctuations in applicable foreign currency exchange rates. Since the acquisition of Intentia in April 2006, the U.S. dollar has generally weakened against the SEK and Euro. However, during the second quarter of fiscal 2009, foreign exchange rates were extremely volatile and the U.S dollar strengthened significantly against most major currencies. Exchange rates related to the SEK and Euro increased 26.0% and 15.6% during the second quarter of fiscal 2009, respectively. Year-to-date the SEK and Euro exchange rates have increased 35.3% and 22.6%, respectively.

The strengthening of the U.S. dollar during our second quarter ended November 30, 2008, had a negative impact on our revenues of approximately $10.0 million, or 4.5%, of the decline in revenues, as compared to the second quarter last year. Excluding the effect of currency fluctuations, our total revenues were down approximately $2.2 million, or 1.1%, as compared to the second quarter last year. The currency fluctuations also had the effect of decreasing total expenses, as reported in U.S. dollars, by approximately $10.6 million, this is in addition to a decrease in total expenses of $0.7 million excluding the effect of currency fluctuations resulting in a total reported decrease of $11.3 million in the second quarter of fiscal 2009 as compared to the similar period last year. As a result, foreign currency had a minimal impact on second quarter net income.

Year-to-date fiscal 2009, currency fluctuations had a negative impact of approximately $0.9 million on revenues or 0.2% of the decline in revenues for the six months ended November 30, 2008. Excluding the effect of currency fluctuations, our total revenues decreased approximately $7.8 million, or 1.9%, as compared to the similar period last year. Total expenses decreased by less than $0.2 million as a result of currency fluctuations and on a constant currency basis total expenses decreased $8.4 million for a total decrease of approximately $8.6 million as compared to the similar period last year. The effect of foreign currency on basic and diluted earnings for the six months ended November 30, 2008, was less than $0.01 per share.

For financial results denominated in a currency other than the U.S. Dollar, we calculate constant currency changes by converting the prior period financial results at the exchange rates applicable to current periods. We believe these constant currency changes provide additional insight into our business performance during the applicable reporting periods exclusive of the effects of foreign currency fluctuations, and should be considered in

addition to, and not as a substitute for the actual changes in revenues, expenses, income or other financial measures presented in this Quarterly Report on Form 10-Q.

The financial market crisis has continued to disrupt credit and equity markets worldwide and has lead to continued weakening in the global economic environment during the second quarter of fiscal 2009. The affect of the continued weakening of the global economy and the fallout from the financial market crisis will be to challenge our license contracting and demand for our services for the remainder of our fiscal 2009. During our fiscal quarter ended November 30, 2008, some prospective and existing customers began canceling, delaying or downsizing software purchases and implementation projects because of the adverse economy and their internal budget constraints. The adverse economic environment has also intensified the difficulty of forecasting software license revenue. A decrease in licensing activity will typically lead to a decrease in services revenue in the same or subsequent quarters. Lower licensing activity will also lower new maintenance revenue since maintenance fees for new product licenses are based on the amount of associated license fees. In response to this challenging economic environment, we have taken actions in November 2008 to reduce our headcount and lower expenses and may need to take additional cost reduction measures if our revenues are lower than forecasted. We continue to monitor the economic situation, the business environment and our outlook for our full fiscal year.

During the second quarter of fiscal 2009 the price of our common stock was significantly impacted by the volatility in the U.S. equity markets and the continued weakening of the global economy. The price of Lawson's common stock reached a low of $2.71 during the second quarter of fiscal 2009; a condition that was not sustained for an extended period of time as Lawson's common stock closed below $3.00 per share for only two consecutive days in mid-November. Since that time, Lawson's common stock has traded at well above $3.00 per share and closed the fiscal quarter at $3.92 per share on November 28, 2008. Our market capitalization as of November 30, 2008, the end of our second quarter of fiscal 2009, was $639.1 million and exceeded the carrying value of our consolidated net assets of $556.9 million by $82.2 million. Since November 30, 2008, the price of our common stock has increased and our market capitalization continues to be at a level such that we believe there is no indication of potential goodwill impairment requiring interim testing under SFAS 142. See Note 6, Goodwill and Intangible Assets, in Notes to Consolidated Financial Statements of this Form 10-Q, for more information. However, due to the ongoing uncertainty in market conditions, which may continue to negatively impact our market capitalization, we will continue to monitor and evaluate the carrying value of our goodwill.

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 generated net income of $4.2 million in the second quarter of fiscal 2009 as compared to net income of $3.7 million in the second quarter of fiscal 2008. Net income per diluted share was $0.03 in the second quarter of fiscal 2009 compared to $0.02 per diluted share in the second quarter last year. For the first six months of

fiscal 2009 we reported net income of $1.7 million or $0.01 per diluted share, as compared to $9.3 million, or $0.05 per 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 for the periods indicated, the period-over-period percent actual increase (decrease) and the period-over-period percent increase (decrease) on a constant currency basis:

                            Percentage of                                      Percentage of
                            Total Revenue           Quarterly Change           Total Revenue        Year-to-Date Change
                         Three Months Ended       Fiscal 2009 vs. 2008       Six Months Ended       Fiscal 2009 vs. 2008
                            November 30,             Percent Change            November 30,            Percent Change
                                                               Constant                                          Constant
                          2008         2007       Actual       Currency       2008        2007      Actual       Currency
Revenues:
License fees                 14.6 %      15.1 %      (8.9 )%        (3.8 )%     12.9 %     14.4 %      (12.4 )%     (11.4 )%
Maintenance                  43.6        38.7         6.3            9.9        45.1       40.2          9.8          9.5
Consulting                   41.8        46.2       (14.6 )         (9.6 )      42.0       45.4         (9.5 )       (9.1 )
Total revenues              100.0       100.0        (5.6 )         (1.1 )     100.0      100.0         (2.2 )       (1.9 )
Cost of revenues:
Cost of license fees          3.2         3.0         0.5            3.3         3.0        3.3        (10.4 )      (12.8 )
Cost of maintenance           8.4         7.7         3.2            8.0         8.6        8.0          5.4          5.0
Cost of consulting           35.8        38.5       (12.4 )         (6.8 )      36.8       38.3         (5.9 )       (5.6 )
Total cost of
revenues                     47.4        49.2        (9.2 )         (3.8 )      48.4       49.6         (4.4 )       (4.4 )
Gross profit                 52.6        50.8        (2.1 )          1.6        51.6       50.4          0.1          0.5
Operating expenses:
Research and
development                  10.9         9.9         3.7            9.9        11.2        9.6         13.9         15.2
Sales and marketing          20.8        22.1       (10.8 )         (6.4 )      22.5       22.3         (1.1 )       (0.7 )
General and
administrative               10.8        11.8       (14.2 )        (11.2 )      10.4       12.7        (19.6 )      (20.7 )
Restructuring                 3.8           -         *NM            *NM         1.9          -          *NM          *NM
Amortization of
acquired intangibles          1.1         1.6       (29.7 )        (24.5 )       1.3        1.6        (24.1 )      (25.1 )
Total operating
expenses                     47.4        45.4        (1.5 )          3.3        47.3       46.2          0.1          0.2
Operating income              5.2         5.4        (7.9 )        (12.0 )       4.3        4.2         (0.9 )        3.6
Total other income
(expense), net                0.1        (0.3 )       *NM            *NM         0.3        1.0        (68.3 )      (65.2 )
Income before income
taxes                         5.3         5.1        (1.1 )         (3.1 )       4.6        5.2        (13.5 )       (8.8 )
Provision for income
taxes                         3.3         3.4        (8.2 )         (6.9 )       4.2        2.9         40.3         41.0
Net income                    2.0 %       1.7 %      13.0 %          4.0 %       0.4 %      2.3 %      (81.9 )%     (79.6 )%

The discussion that follows relates to our results of operations for the comparable three and six months periods ended November 30, 2008 and November 30, 2007 and should be read in conjunction with the accompanying unaudited Consolidated Financials Statements and related notes and with the information presented in the above table. This analysis addresses the actual changes in the current quarter and year-to-date periods' results compared to the similar periods last year. For changes excluding the impact of foreign currency fluctuations, see the constant currency percentages in the above table.

Revenues



                   Three Months Ended        Quarterly Change
                      November 30          Fiscal 2009 vs. 2008
(in thousands)      2008        2007        Dollars       Percent

Revenues:
License fees     $   30,061   $  32,990   $     (2,929 )     (8.9 )%
Maintenance          90,083      84,705          5,378        6.3
Consulting           86,213     100,907        (14,694 )    (14.6 )
Total revenues   $  206,357   $ 218,602   $    (12,245 )     (5.6 )%




                   Six Months Ended        Year-to-Date Change
                      November 30         Fiscal 2009 vs. 2008
(in thousands)     2008        2007        Dollars       Percent

Revenues:
License fees     $  51,186   $  58,450   $     (7,264 )    (12.4 )%
Maintenance        179,192     163,219         15,973        9.8
Consulting         166,895     184,341        (17,446 )     (9.5 )
Total revenues   $ 397,273   $ 406,010   $     (8,737 )     (2.2 )%

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.

Second quarter fiscal 2009 total revenues decreased 5.6% to $206.4 million as compared to $218.6 million in the second quarter of fiscal 2008. The decrease was driven by a 14.6% decrease in consulting revenues and an 8.9% decrease in license fees. These decreases were partially offset by a 6.3% increase in our maintenance revenues. For the year-to-date period ended November 30, 2008 total revenues decreased 2.2% to $397.2 million as compared to $406.0 million in the similar period last year. The decrease was driven by a 9.5% decrease in consulting revenues and a 12.4% decrease in license fees. These decreases were partially offset by a 9.8% increase in our maintenance 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 second quarter of fiscal 2009 decreased $2.9 million, or 8.9%, compared to the second quarter of fiscal 2008. The decrease in license fees revenues was experienced primarily in our EMEA region which was down approximately $2.4 million compared to the second quarter of last year primarily related to decreased sales of our M3 solutions in manufacturing related verticals. License fees revenues in the Americas region was also down $1.0 million compared to the second quarter of last year primarily as a result of decreased M3 license fees revenues in our manufacturing vertical. The decrease in the Americas' M3 license fees was partially due to a large transaction recorded in the comparable period last year and was somewhat offset by increased license fees related to our equipment services management and rental vertical. Our APAC region's

license fees revenues were up $0.5 million in the second quarter of fiscal 2009 as compared to the second quarter of fiscal 2008. The total number of licensing transactions decreased in the second quarter of fiscal 2009 by 75 to 256 as compared to 331 in the second quarter of fiscal 2008. The number of licensing transactions with new customers in the current quarter was 16 compared to 37 in last year's second quarter. In the second quarter of fiscal 2009 we entered into nine license transactions between $0.5 million and $1.0 million compared to eight in the similar period last year. We entered into two licensing transaction greater than $1.0 million in the current quarter compared to two in the second quarter of fiscal 2008.

For the first six months of fiscal 2009, license fees revenues decreased $7.3 million, or 12.4%, compared to the first six months of fiscal 2008. The decrease in license fees revenues was experienced in our EMEA and Americas geographies which were down approximately $4.6 million and $2.9 million, respectively, while our APAC regions' license fee revenues were up $0.2 million. The EMEA decrease was due to lower sales of our M3 solutions in manufacturing related verticals in certain areas of the region. The America's decrease was primarily related to lower M3 license fees in our manufacturing vertical partially due to a large transaction recorded in the comparable period last year. The total number of licensing transactions decreased in the year-to-date period by 153 to 472 as compared to 625 in the first six months of fiscal 2008. The number of licensing transactions with new customers was 48 compared to 64 last year. In the first six months of fiscal 2009 we entered into 18 license transactions between $0.5 million and $1.0 million compared to 12 in the similar period last year. We entered into three licensing transaction greater than $1.0 million in the current six month period compared to eight in the similar period last year.

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 second quarter of fiscal 2009 increased $5.4 million, or 6.3%, compared to fiscal 2008 second quarter. For the first six months of fiscal 2009, Maintenance revenues increased $16.0 million, or 9.8%, compared to the first six months of fiscal 2008. These increases were 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.

For the second quarter of fiscal 2009 consulting revenues decreased $14.7 million, or 14.6%, compared to the second quarter of fiscal 2008. Of this decrease, $11.8 million was due primarily to fewer billable hours resulting from a reduced number of consultants particularly in EMEA. Third-party revenues decreased $1.7 million primarily in the Americas as we shifted certain third . . .