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

FORM 10-Q

Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934

For the quarterly period ended September 30, 2006
Commission file number 0-9993

MICROS SYSTEMS, INC.

(Exact name of Registrant as specified in its charter)

MARYLAND	52-1101488
(State of incorporation)	(I.R.S. Employer Identification Number)
7031 Columbia Gateway Drive, Columbia,  Maryland	21046-2289
(Address of principal executive offices)	(Zip code)

Registrant’s telephone number, including area code: 443-285-6000

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 report(s)), and (2) has been subject to such filing requirements for the past 90 days.

Yes x No o

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer.  See definition of ‘accelerated filer and large accelerated filer’ in Rule 12b-2 of the Exchange Act.

Large accelerated filer x Accelerated filer o Non-accelerated filer o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes o No x

As of October 31, 2006, there were issued and outstanding 39,554,516 shares of Registrant’s Common Stock at $0.0125 par value.

MICROS SYSTEMS, INC. AND SUBSIDIARIES

Form 10-Q
For the three months ended September 30, 2006

PART I – FINANCIAL INFORMATION

ITEM 1.          FINANCIAL STATEMENTS

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MICROS SYSTEMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited, in thousands, except per share data)

	Sept. 30, 2006		June 30, 2006
ASSETS
Current Assets:
Cash and cash equivalents	$	262,169	$	237,222
Accounts receivable, net of allowance for doubtful accounts of $21,673 at September 30, 2006 and $20,335 at June 30, 2006		142,111		141,159
Inventory, net		45,979		46,637
Deferred income taxes		20,427		16,649
Prepaid expenses and other current assets		21,535		15,485
Total current assets		492,221		457,152
Property, plant and equipment, net of accumulated depreciation and amortization of $67,631 at September 30, 2006 and $65,582 at June 30, 2006		23,863		23,794
Deferred income taxes, non-current		16,249		16,192
Goodwill		105,774		98,581
Intangible assets, net of accumulated amortization of $2,905 at September 30, 2006 and $2,592 at June 30, 2006		11,677		10,427
Purchased and internally developed software costs, net of accumulated amortization of $44,773 at September 30, 2006 and $43,267 at June 30, 2006		36,984		38,328
Other assets		3,748		3,383
Total assets	$	690,516	$	647,857
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Bank lines of credit	$	3,978	$	2,134
Accounts payable		37,428		36,022
Accrued expenses and other current liabilities		83,597		84,897
Current portion of capital lease obligations		200		89
Income taxes payable		10,163		12,416
Deferred income taxes		—		227
Deferred service revenue		82,448		68,246
Total current liabilities		217,814		204,031
Capital lease obligations, net of current portion		326		424
Deferred income taxes, non-current		15,747		14,998
Other non-current liabilities		8,604		8,146
Minority interests		3,527		3,142
Commitments and contingencies
Shareholders' Equity:
Common stock, $0.0125 par value; authorized 50,000 shares; issued and outstanding 39,371 at September 30, 2006 and 38,980 at June 30, 2006		492		487
Capital in excess of par		114,048		100,723
Retained earnings		317,959		302,848
Accumulated other comprehensive income		11,999		13,058
Total shareholders' equity		444,498		417,116
Total liabilities and shareholders' equity	$	690,516	$	647,857

The accompanying notes are an integral part of the condensed consolidated financial statements.

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MICROS SYSTEMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited, in thousands, except per share data)

	Three Months Ended September 30,
	2006			2005
Revenue:
Hardware	$	54,142		$	44,053
Software		27,757			27,879
Service		91,802			80,072
Total revenue		173,701			152,004
Cost of sales:
Hardware		33,966			29,582
Software		7,360			5,801
Service		43,706			38,460
Total cost of sales		85,032			73,843
Gross margin		88,669			78,161
Selling, general and administrative expenses		58,281			51,234
Research and development expenses		6,916			6,378
Depreciation and amortization		2,823			2,497
Total operating expenses		68,020			60,109
Income from operations		20,649			18,052
Non-operating income (expense):
Interest income		2,197			825
Interest expense		(95	)		(62	)
Other income (expense), net		129			(406	)
Total non-operating income, net		2,231			357
Income before taxes, minority interests and equity in net earnings of affiliates		22,880			18,409
Income tax provision		7,665			5,983
Income before minority interests and equity in net earnings of affiliates		15,215			12,426
Minority interests and equity in net earnings of affiliates		(104	)		(73	)
Net income	$	15,111		$	12,353
Net income per common share:
Basic	$	0.39		$	0.32
Diluted	$	0.37		$	0.30
Weighted-average number of shares outstanding:
Basic		39,015			38,402
Diluted		40,651			40,575

The accompanying notes are an integral part of the condensed consolidated financial statements.

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MICROS SYSTEMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited, in thousands)

	Three Months Ended September 30,
	2006			2005
Net cash flows provided by operating activities	$	21,934		$	12,804
Cash flows from investing activities:
Cash paid for acquisitions, net of cash acquired		(4,674	)		—
Purchases of property, plant and equipment		(2,215	)		(2,090	)
Internally developed software		(422	)		(1,096	)
Disposal of property, plant and equipment		40			—
Net cash flows used in investing activities		(7,271	)		(3,186	)
Cash flows from financing activities:
Proceeds from stock option exercises		8,243			2,038
Realized tax benefits from stock option exercises		4,667			1,221
Repurchases of stock		(2,395	)		(24,277	)
Principal payments on lines of credit		(1,271	)		(628	)
Proceeds from lines of credit		1,002			—
Net (decrease) increase in capital lease obligations		(47	)		22
Net cash flows provided by (used in) financing activities		10,199			(21,624	)
Effect of exchange rate changes on cash and cash equivalents		85			(36	)
Net increase (decrease) in cash and cash equivalents		24,947			(12,042	)
Cash and cash equivalents at beginning of period		237,222			153,521
Cash and cash equivalents at end of period	$	262,169		$	141,479

The accompanying notes are an integral part of the condensed consolidated financial statements.

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MICROS SYSTEMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY AND COMPREHENSIVE INCOME
(Unaudited, in thousands)

							Capital in Excess of Par			Retained Earnings		Accumulated Other Comprehensive Income (Loss)			Total
	Common Stock
	Shares			Amount
Balance, June 30, 2006		38,980		$	487		$	100,723		$	302,848	$	13,058		$	417,116
Comprehensive income:
Net income		—			—			—			15,111		—			15,111
Foreign currency translation adjustments		—			—			—			—		(1,059	)		(1,059	)
Total comprehensive income																14,052
Share-based compensation		—			—			2,815			—		—			2,815
Stock issued upon exercise of options		453			6			8,237			—		—			8,243
Repurchases of stock		(62	)		(1	)		(2,394	)		—		—			(2,395	)
Income tax benefit from options exercised		—			—			4,667			—		—			4,667
Balance, September 30, 2006		39,371		$	492		$	114,048		$	317,959	$	11,999		$	444,498

The accompanying notes are an integral part of the condensed consolidated financial statements.

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MICROS SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
For the three months September 30, 2006

1.       Basis of presentation

          The accompanying condensed consolidated financial statements of MICROS Systems, Inc. and its subsidiaries (collectively, the “Company”) have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”).  This Quarterly Report on Form 10-Q should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended June 30, 2006.

          Certain information and footnote disclosures that are normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted as permitted by SEC rules and regulations.  The condensed consolidated financial statements included in this report reflect all normal and recurring adjustments that, in the opinion of management, are necessary for a fair statement of the financial position of the Company and its results of operations for the interim periods set forth herein.  The results for the three months ended September 30, 2006 are not necessarily indicative of the results to be expected for the full year or any future periods.

2.        Acquisitions

          During the three months ended September 30, 2006, the Company acquired certain assets, and full or controlling interests in various distributors of MICROS products and services and another company with complementary products and services.  The aggregate purchase price for these acquisitions was approximately $7.6 million which includes certain amounts that were held back.  The assets acquired included approximately $1.2 million in cash.  The aggregate goodwill for these acquisitions was approximately $7.3 million.  The pro forma operating results due to these acquisitions was not material to the financial statements presented herein.

3.        Share-based compensation

          The Company has incentive and non-qualified stock options outstanding that were granted to directors, officers, and other employees pursuant to authorization by the Board of Directors.  Currently, options are not granted to directors who are not employees of or consultants to the Company.  The exercise price of all options equals the market value on the date of the grant.  Substantially all of the options granted are exercisable pursuant to a three-year vesting schedule whereby one-third of the options vest upon the first anniversary of the grant, the second third of the options vest upon the second anniversary of the grant, and the final third of the options vest upon the third anniversary of the grant.  The Company provides previously unissued shares of common stock upon a participant’s exercise of vested options.  All outstanding options expire ten years from the date of grant.  The Company has authorized approximately 15.8 million shares for awards of options, of which approximately 1.6 million shares are available for future grants as of September 30, 2006.

          The Company accounts for its option awards in accordance with Statement of Financial Accounting Standard (“SFAS”) No. 123(R), “Share-Based Payment.”  The fair value of awards granted under the stock option program are measured and non-cash share-based compensation expenses, adjusted for expected forfeitures, are recognized ratably over the service period of options in the consolidated statements of operations.  In addition, non-cash share-based compensation expense is recognized for the non-vested portion of awards that were granted before the effective date of SFAS No. 123(R) as those options become vested.  The non-cash share-based compensation expense included in the condensed consolidated statements of operations are as follows:

	Three Months Ended September 30,
(in thousands)	2006		2005
Selling, general and administrative	$	2,692	$	1,875
Research and development		123		38
Non-cash share-based compensation expense	$	2,815	$	1,913

          No compensation expense was capitalized for the three months ended September 30, 2006 and 2005 because no stock options had been granted to employees whose labor costs were capitalized as software development costs.

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          The Company values stock options using the Black-Scholes option-pricing model, which was developed for use in estimating the fair value of traded options that are fully transferable and have no vesting restrictions.  In determining the expected term, the Company separates groups of employees that have historically exhibited similar behavior with regard to option exercises and post-vesting cancellations.  The option-pricing model requires the input of highly subjective assumptions, including assumptions about volatility rates, expected term of options, and applicable interest rates. 

          The volatility rates are based on historical stock prices. The expected term of options granted is based on historical data, adjusted for the remaining option life cycle by assuming ratable exercise of any unexercised vested options over the remaining term. The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant.  The total expense to be recorded in future periods will depend on several variables, including the number of share-based awards that vest, pre-vesting cancellations and the fair value of those vested awards.

          The fair values of options granted during the three months ended September 30, 2006 and 2005 were estimated on the date of grant using the following assumptions:

	Three Months Ended September 30,
	2006		2005
Weighted-average expected volatility		37%		34%
Expected volatility		37%		34%
Expected term		4.7 years		4.0 years
Expected dividend yield		0%		0%
Risk-free interest rate		4.7%		3.9% - 4.1%

          The following is a summary of option activity:

(in thousands, except per share data and number of years)	Number of Shares			Weighted-Average Exercise Price		Weighted- Average Remaining Contractual Term (in years)		Aggregate Intrinsic Value
Outstanding at June 30, 2006		4,810		$	25.34
Granted		30		$	47.86
Exercised		(454	)	$	18.16
Forfeited or expired		(4	)	$	43.40
Outstanding at September 30, 2006		4,382		$	26.22		6.3	$	102,356
Exercisable at September 30, 2006		2,622		$	19.22		5.1	$	85,502

          The weighted-average grant-date fair value per share of options granted during the three months ended September 30, 2006 and 2005 was $18.48 and $13.86, respectively.  The total intrinsic value, the difference between the exercise price and the market price on the date of exercise, of options exercised during the three months ended September 30, 2006 and 2005 was approximately $13.4 million and $4.6 million, respectively.

          As of September 30, 2006, there was approximately $19.1 million in non-cash share-based compensation costs related to non-vested awards not yet recognized in the Company’s consolidated statements of operations.  This cost is expected to be recognized over a weighted-average period of 2.5 years.  The total fair value of shares underlying options that vested during the three months ended September 30, 2006 and 2005 was approximately $0.2 million and $0.1 million, respectively.

          Cash received from options exercised during the three months ended September 30, 2006 and 2005 was approximately $8.2 million and $2.0 million, respectively.

8

4.       Inventory

          The components of inventory are as follows:

(in thousands)	September 30, 2006		June 30, 2006
Raw materials	$	8,766	$	8,290
Work-in-process		28		20
Finished goods		37,185		38,327
	$	45,979	$	46,637

          The Company maintains a reserve for obsolescence for inventory of approximately $9.6 million at September 30, 2006 compared to approximately $9.9 million at June 30, 2006.  The Company reserved approximately $0.6 million and $1.3 million during the three months ended September 30, 2006 and 2005, respectively, related to older products.  Inventory balance was decreased by foreign currency translation adjustments of approximately $1.2 million.

5.       Goodwill and intangible assets

          During the three months ended September 30, 2006, the Company completed its annual impairment tests on its goodwill and trademarks as of July 1, 2006.  Based on its annual impairment test results, the Company determined that no impairment of goodwill or trademarks existed as of July 1, 2006.

6.       Accumulated other comprehensive income

          The components of comprehensive income, net of tax, were as follows:

	Three Months Ended September 30,
(in thousands)	2006			2005
Net income	$	15,111		$	12,353
Other comprehensive loss:
Change in cumulative translation adjustment, net of tax		(1,059	)		(926	)
	$	14,052		$	11,427

7.       Line of credit

          Effective July 29, 2005, the Company entered into two credit agreements (the “Credit Agreements”) that in the aggregate provide a four-year $65.0 million multi-currency committed line of credit, expiring on July 31, 2009.  The lenders under the Credit Agreements are Bank of America, N.A., Wachovia Bank, N.A., and US Bank (the “Lenders”).  The international facility is secured by 65% of the capital stock of the Company’s Ireland subsidiary and 100% of all of the foreign subsidiaries.  The U.S. facility is secured by 100% of the capital stock of the Company’s major U.S. subsidiaries as well as all inventory and receivables located in the U.S.

          The interest rate under the Credit Agreements is at the prime rate or federal funds rate plus 125 to 200 basis points for borrowings in U.S. currency, and LIBOR plus 125 to 200 basis points for borrowings in foreign currencies, depending upon the Company’s consolidated earnings before interest, taxes, depreciation and amortization (“EBITDA”) for the immediately preceding four calendar quarters.  The Company is required to pay insignificant commitment fees on the unused portion of the line of credit to the Lenders.  The Credit Agreements also contain certain financial covenants and restrictions on the Company’s ability to assume additional debt, repurchase stock, sell subsidiaries, or acquire companies.  In case of an event of default, as defined in the Credit Agreements, that is not cured within the applicable cure period (with respect to those defaults for which the Credit Agreements provide a cure period), the Lenders’ remedies include their ability to declare all outstanding loans, plus interest and other related amounts owed, to be immediately due and payable in full, and to pursue all rights and remedies available to them under the Credit Agreements or under applicable law.

9

          As of September 30, 2006, the Company had approximately $2.8 million outstanding on the above lines of credit and had approximately $62.2 million available for future borrowings.  The total outstanding balance consisted of the following:

• JPY (Japanese Yen) - 149.0 million (approximately $1.3 million at the September 30, 2006 exchange rate);

• SEK (Swedish Krona) - 5.0 million (approximately $0.7 million at the September 30, 2006 exchange rate), and

• NZD (New Zealand Dollar) - 1.3 million (approximately $0.8 million at the September 30, 2006 exchange rate.)

          The Company also has a credit relationship with a European bank in the amount of EUR 1.0 million (approximately $1.3 million at the September 30, 2006 exchange rate.)  Under the terms of this facility, the Company may borrow in the form of either a line of credit or term debt.  The amount available to borrow is reduced by approximately EUR 0.2 million (approximately $0.3 million at the September 30, 2006 exchange rate) for guarantees.  As of September 30, 2006, there were no balances outstanding on this credit facility.

          As of September 30, 2006, the Company had approximately $63.2 million available to borrow under all of the above credit facilities available at that time; the total amount available to borrow was reduced by approximately $0.3 million for guarantees.  The weighted-average interest rate on the outstanding balances under the lines of credit as of September 30, 2006 was 4.4%.

          As of September 30, 2006, in addition to the above credit facilities, the Company also had approximately EUR 1.0 million (approximately $1.2 million at the September 30, 2006 exchange rate) outstanding on a line of credit related to an international business acquired in August 2006.  The interest rate on the outstanding balance under this line of credit as of September 30, 2006 was 2.7%.  During October 2006, the balance outstanding on this line of credit was paid off and the line of credit was closed.

8.       Recent accounting standards

          SFAS No. 158
          In September 2006, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 158, “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans - an amendment of FASB Statements No. 87, 88, 106 and 132(R)” (“SFAS No. 158”), to require an employer to recognize the overfunded or underfunded status of a defined benefit postretirement plan (other than a multiemployer plan) as an asset or liability on its statement of financial position and to recognize changes in that funded status in the year in which the changes occur through comprehensive income.  The statement also requires an employer to measure the funded status of a plan as of the date of its year-end statement of financial position, with limited exceptions.  SFAS No. 158 is effective for fiscal years ending after December 15, 2006.  SFAS No. 158 will not change the amount of net periodic benefit expense recognized in an entity’s results of operations.  Application of this statement at June 30, 2006 would have required adjustment to the Company’s accrued pension liability relating to its Supplemental Executive Retirement Plan (the “SERP Plan”), resulting in an increase to accrued employee benefit liabilities of approximately $4.8 million and a decrease in stockholders’ equity of approximately $4.8 million, net of a tax rate of 33%.  The effect at June 30, 2007, the adoption date, or any other future date could significantly differ depending on the measurement of pension obligations at such date, but the Company does not believe SFAS No. 158 will have a material impact on the Company’s consolidated financial position, results of operations and cash flows.

          SFAS No. 157
          In September 2006, the FASB issued SFAS No. 157 “Fair Value Measurements” (“SFAS No. 157”) to establish a framework for measuring fair value under generally accepted accounting principles and to expand disclosures on fair value measurements.  The statement applies to previously established valuation pronouncements, but is to be applied prospectively, so that it does not require the changing of any fair value measurements.  SFAS No. 157 may cause some valuation procedures to change after its adoption.  Under SFAS No. 157, fair value is established by the price that would be received to sell the item or the amount to be paid to transfer the liability of the asset (an exit price), as opposed to the price to be paid for the asset or received to assume the liability (an entry price).  SFAS No. 157 is effective for all assets valued in financial statements for fiscal years beginning after November 15, 2007.  The Company is currently reviewing the impact of the adoption of the SFAS 157 on the Company’s consolidated financial position, results of operations and cash flows.

10

          SAB 108
          In September 2006, the SEC issued Staff Accounting Bulletin No. 108 (“SAB 108”), which provides interpretive guidance on the process of quantifying financial statement misstatements.  As permitted by SAB 108, the provisions under SAB 108 will be applied in the first fiscal year ending after November 15, 2006, the Company’s current fiscal year.  The Company does not believe SAB 108 will have a material impact on the Company’s consolidated financial position, results of operations and cash flows.

          FIN 48
          In June 2006, the FASB issued Interpretation No. 48, “Accounting for Uncertainty in Income Taxes,” an interpretation of FAS 109, “Accounting for Income Taxes” (“FIN 48”), to create a single model to address accounting for uncertainty in tax positions.  FIN 48 clarifies the accounting for income taxes, by prescribing a minimum recognition threshold a tax position is required to meet before being recognized in the financial statements.  FIN 48 also provides guidance on derecognition, measurement, classification, interest and penalties, accounting in interim periods, disclosure and transition.  FIN 48 is effective for fiscal years beginning after December 15, 2006.  As required, the Company will adopt FIN 48 in fiscal year 2008.  The cumulative effect of adopting FIN 48 will be recorded in retained earnings and other accounts as applicable.  The Company is currently reviewing the impact of the adoption of the FIN 48 on the Company’s consolidated financial position, results of operations and cash flows.

9.       Net income per share

          Basic net income per common share is computed by dividing net income by the weighted-average number of shares outstanding.  Diluted net income per share includes the dilutive effect of stock options.  A reconciliation of the weighted-average number of common shares outstanding assuming dilution is as follows:

	Three Months Ended September 30,
(in thousands, except per share data)	2006		2005
Net income	$	15,111	$	12,353
Average common shares outstanding		39,015		38,402
Dilutive effect of outstanding stock options		1,636		2,173
Average common shares outstanding assuming dilution		40,651		40,575
Basic net income per share	$	0.39	$	0.32
Diluted net income per share	$	0.37	$	0.30
Anti-dilutive weighted shares excluded from reconciliation		965		109

10.     Segment reporting data

          SFAS No. 131, “Disclosures about Segments of an Enterprise and Related Information,” establishes standards for reporting information about operating segments.  This standard requires segmentation based on the Company’s internal organization and reporting of financial results.  The Company’s financial reporting systems present various data for management to run the business.  The segments are designed to allocate resources internally and provide a framework to determine management responsibility.  Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker, or decision making group, in deciding how to allocate resources and in assessing performance.  The Company’s chief operating decision maker is the Company’s Chief Executive Officer.

          The Company manages its business geographically and is organized and operates in four operating segments:  U.S., Europe, the Pacific Rim and Latin America regions.  For the purposes of applying SFAS No. 131, the Company has identified U.S. as a separate reportable segment and has aggregated its three international operating segments into one reportable segment, International, as the three international operating segments share many similar economic characteristics.  The management views the U.S. and International segments separately in operating the business, although the products and services are similar for each segment.

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          A summary of the Company’s reportable segments is as follows:

	Three Months Ended September 30,
(in thousands)	2006			2005
Revenue(1):
U.S.	$	86,058		$	81,936
International		121,011			105,736
Intersegment eliminations		(33,368	)		(35,668	)
	$	173,701		$	152,004
Income before taxes, minority interests and equity in net earnings of affiliates(1):
U.S.	$	6,818		$	3,255
International		43,195			44,015
Intersegment eliminations		(27,133	)		(28,861	)
	$	22,880		$	18,409

(in thousands)	September 30, 2006		June 30, 2005
Identifiable assets (2):
U.S.	$	375,175	$	383,663
International		315,341		264,194
	$	690,516	$	647,857

(1)	Amounts based on the location of the selling entity, and include export sales.
(2)	Amounts based on the physical location of the asset.

11.     Shareholders’ equity

          In fiscal year 2005, the Board of Directors authorized the purchase of up to two million shares of the Company’s common stock.  Since the inception of the repurchase programs, the Company has incurred approximately $0.1 million in fees related to the programs.  A summary of the cumulative number of shares purchased and retired through September 30, 2006 since the inception of the repurchase programs is as follows:

	Number of Shares		Average Purchase Price Per Share		Total Purchase Value (in thousands)
Total shares purchased as of June 30, 2006		3,417,999	$	27.33	$	93,414
1st Quarter (July 2006-September 2006)		62,100	$	38.56		2,395
		3,480,099	$	27.53	$	95,809

12.     Pension benefits

          Effective as of August 25, 2004, the Company’s Board of Directors authorized the establishment of the SERP Plan to provide designated officers and executives of the Company with benefits upon retirement.  On April 27, 2005, the Company amended the SERP Plan to provide for immediate vesting of benefits upon a participant’s death.  The plan is accounted for in accordance with SFAS No. 87, “Employers Accounting for Pensions.”  Commencing in July 2005, the Company has funded the benefits under the plan with corporate owned life insurance policies.  Effective August 2006, the Company-owned life insurance policies are held by a segregated trust (known as a “Rabbi Trust”), whose assets are subject to the claims of creditors of the Company.

12

          The components of net period pension cost are as follows:

	Three Months Ended September 30,
(in thousands)	2006		2005
Service cost	$	139	$	127
Interest cost		174		124
Amortization of prior service cost		137		124
	$	450	$	375

13.     Contingencies

          The Company is and has been involved in legal proceedings arising in the normal course of business.  The Company is of the opinion, based upon presently available information and the advice of counsel concerning pertinent legal matters, that any resulting liability should not have a material adverse effect on the Company’s results of operations or financial position or cash flows.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Forward-looking statements

          The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the condensed consolidated financial statements and the related notes and other financial information included elsewhere in this Quarterly Report on Form 10-Q.  Statements contained in this Quarterly Report on Form 10-Q that are not historical facts are forward looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act” ), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act” ), that involve risks and uncertainties, and are made in reliance upon safe harbor provisions of the Private Securities Litigation Reform Act of 1995.  Our actual results may differ materially from those anticipated in these forward-looking statements as a result of specified factors, including those set forth below under the heading “Factors that May Affect Future Results.” 

          Examples of such forward-looking statements include:

• our expectation that product and service margins may decline in response to the competitive nature of our market;

• our statements regarding the effects of currency fluctuations (in particular, Euro fluctuations) on our financial performance;

• our expectations that the customers with whom we do the largest amount of business will fluctuate from year to year, and our statements about the effects of large customer orders on our quarterly earnings, revenues, and total revenues;

• our statements concerning the fluctuations in the market price of our common stock, whether as a result of variations in our quarterly operating results or other factors;

• our belief that any existing legal claims or proceedings will not have a material adverse effect on our results of operations or financial position;

• our expectations regarding effective tax rates in future periods;

• our expectations regarding the impact or lack of impact on our financial position and results of operations of the application of recent accounting standards;

• our expectations about the adequacy of our cash flows and our available lines of credit to meet our working capital needs, and our ability to raise additional funds if and when needed;

• our expectations that our exposure to interest rate risk will not materially change in the future;

• our expectation that we will evaluate our need to invest in instruments to protect against interest rate fluctuations and our exposure to such interest rate risk;

• our statements about the effects on our revenue recognition as a result of changes to a customers’ delivery requirements or a products’ completion;

• our statements regarding our ability to increase sales of our higher margin products; and

• our expected costs associated with modifying our products to comply with applicable legal rules, regulations, and guidelines, including the credit card associations’ security and data protection rules.

Factors that may affect future results

          Current market conditions, and world political and economic uncertainty, make it difficult to predict whether we can continue to achieve revenue and profitability growth over the remainder of the current fiscal year.  One reason for this difficulty is that our primary customers – the hospitality, travel, restaurant, and retail industries – are highly sensitive to economic, political, and environmental disturbances, all of which are not only outside of our (and, frequently, their) control, but also are extraordinarily difficult to predict with any accuracy.  Accordingly, there can be no assurance that any particular level of growth is reasonable or can be achieved. 

          We continue to experience gross margin pressure on our hardware and software products, and our service offerings, due to the highly competitive nature of the market for our products and services, and we expect that product and service margins will tend generally to decline.  There can be no assurance that we will be able to increase sufficiently the sales of our higher margin products, including software, to prevent future declines in our overall gross margin.

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          Currency fluctuations directly affect our financial results because we conduct business in many different currencies.  In particular, a weakening or strengthening Euro could significantly affect our financial performance due to the volume of business that we conduct in the European market.

          Our quarterly financial results are dependent upon the timing and size of customer orders.  Large software orders from customers may account for more than an insignificant portion of earnings in any quarter.  Based on past experience, we expect that the list of customers with whom we do the largest amount of business will vary from year to year, in part as a result of the timing of the rollouts of each customer’s systems.  Further, if a customer delays or accelerates its delivery requirements, or if a product’s completion is delayed or accelerated, revenues that we may have expected in one quarter could be deferred or accelerated into a subsequent or earlier quarter.

          The market price of our common stock is volatile.  It may be subject to significant fluctuations in response to variations in our quarterly operating results, and also may vary as a result of other factors, such as announcements of technological developments or new products by us or by our competitors, customer rollouts, the emergence of new competitors and consolidations of our existing competitors, and general market conditions in the hospitality, travel, restaurant, and retail industries.  In addition, conditions in the stock market in general, and shares of technology companies in particular, have experienced significant price and volume fluctuations, which we believe have, at times, been unrelated to the operating performance of the companies.

          Because of the nature of the industries in which our customers operate, we are subject to political risk, including as a result of instability in the Middle East and the worldwide threat of terrorism, and especially in developing countries with uncertain or unstable political structures or regimes.  Additionally, we are subject to the effects of, and changes in, laws and regulations, and other activities of governments, agencies and similar regulatory organizations.  And, to be able to offer commercially viable and competitive products, we must also assure that our products and services comply with applicable rules of the credit card associations, including their security and data protection rules.  These rules have changed over time, and may change again in the future; we anticipate that we will continue to incur costs associated with modifying our products and services to become and remain compliant with these rules.

          Past performance is not necessarily a strong or reliable indicator of future performance.  Actual results could differ materially from past results, estimates, or projections, or forward-looking statements made by, or on behalf of us.

          The foregoing is in addition to those other risks and uncertainties disclosed in our periodic press releases and SEC filings, including in the section titled “Business and Investment Risks; Information Relating to Forward-Looking Statements,” in our Annual Report on Form 10-K for the Fiscal Year ended June 30, 2006.

Overview

          We are a leading worldwide designer, manufacturer, marketer and servicer of enterprise information solutions for the global hospitality and specialty retail industries. The information solutions consist of application-specific software and hardware systems, supplemented by a wide range of services including installation, training, maintenance and support, customer development and software hosting.  Our enterprise solutions comprise three major areas:

	Hotel information systems:
•	consist of software encompassing property management systems, sales and catering systems, central reservation systems, and customer information systems; and have been provided to more than 20,000 hotels worldwide.
	Restaurant information systems:
•	consist of hardware and software for point-of-sale and operational applications, a suite of back office applications, including inventory, labor, and financial management, and certain centrally hosted enterprise applications; and we have installed over 200,000 systems in table and quick service restaurants, hotels, motels, casinos, leisure and entertainment, and retail operations in more than 140 countries and on all seven continents.
	Specialty retail information systems:
•	consist of software encompassing point-of-sale, loss prevention, business analytics, customer gift cards, and enterprise applications; and have been provided to more than 50,000 specialty retail stores worldwide.

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          In addition to our software enterprise solutions and hardware products, we offer a wide range of support services to our customers.  These services include installation, operator and manager training, on-site hardware maintenance, customized software development, application software support, credit card software support, help desk, systems configuration, network support, consulting and software hosting.  We distribute our products and services directly and through our district and subsidiary offices, as well as through a network of independent dealers and distributors.

          The markets in which we operate are highly competitive.  We compete on various bases, including product functionality, service capabilities, price and geography.  There are at least 40 competitors worldwide that offer some form of sophisticated restaurant point-of-sale system, over 100 hotel systems competitors and over 50 retail systems competitors.  We believe that our competitive strengths include our established global distribution and service network, our ability to offer a broad array of hardware, software and service products to the hospitality and retail industry and our corporate focus on providing specialized information systems solutions.

          We manage our business geographically and are organized and operate in two reportable segments:  U.S. and International.  The International reportable segment is primarily in Europe, the Pacific Rim and Latin America.  For purposes of applying Statement of Financial Accounting Standards (“SFAS”) No. 131, “Disclosures about Segments of an Enterprise and Related Information,” management views the U.S. and International reportable segments separately in operating our business, although the products and services are similar for each segment.

Results of Operations

Revenue:

          An analysis of the sales mix by reportable segments is as follows (amounts are net of intersegment eliminations, based on location of the selling entity, and include export sales):

	Three Months Ended September 30,
	U.S.				International				Total
(in thousands)	2006		2005		2006		2005		2006		2005
Hardware	$	28,475	$	26,636	$	25,667	$	17,417	$	54,142	$	44,053
Software		11,070		11,487		16,687		16,392		27,757		27,879
Service		43,029		41,468		48,773		38,604		91,802		80,072
	$	82,574	$	79,591	$	91,127	$	72,413	$	173,701	$	152,004

          An analysis of the total sales mix as a percent of total revenue is as follows:

	Three Months Ended September 30,
	2006			2005
Hardware		31.2	%		29.0	%
Software		16.0	%		18.3	%
Service		52.8	%		52.7	%
		100.0	%		100.0	%

          For the three months ended September 30, 2006, total revenue increased approximately $21.7 million, or 14.3% to approximately $173.7 million compared to the same period last year.  This increase is primarily due to increases in service and hardware revenues.  The increase in our service revenues primarily resulted from expansion of our customer base and increases in the volume of our support services that resulted in increased recurring support revenue from existing customers.  The increase in recurring support revenue contributed 66.1% and the increase in installation revenue contributed 12.3% of the service revenue increase.  The hardware revenue increased due to an overall sales volume increase.

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          The International segment sales for the three months ended September 30, 2006 increased approximately $18.7 million.  The increase was a result of the following (illustrated below by percent of the total change for the period):

• 54% - continued increases in service revenues from expansion of our customer base coupled with recurring support revenue from existing customers;

• 44% - increase in hardware sales due to an overall sales volume increase; and

• 2% - increase in software sales due to an overall sales volume increase.

          U.S. segment sales increased approximately $3.0 million for the three months ended September 30, 2006 compared to the same period last year.  The increase was primarily the result of an increase in hardware sales due to an overall sales volume increase.

Cost of Sales:

          An analysis of the cost of sales is as follows:

	Three Months Ended September 30,
	2006					2005
(in thousands)	Cost of Sales		% of Related Revenue			Costs of Sales		% of Related Revenue
Hardware	$	33,966		62.7	%	$	29,582		67.2	%
Software		7,360		26.5	%		5,801		20.8	%
Service		43,706		47.6	%		38,460		48.0	%
	$	85,032		49.0	%	$	73,843		48.6	%

          For the three months ended September 30, 2006, cost of sales as a percent of revenue increased 40 basis points to 49.0% compared to the same period last year.  Hardware cost of sales as a percent of related revenue decreased approximately 450 basis points compared to the same period last year.  The decrease is primarily as a result of decrease in Workstation 4 cost of sales as a percent of revenue, which generate higher margin than other hardware products, coupled with the increase in Workstation 4 revenue.

          Software cost of sales as a percent of related revenue increased approximately 570 basis points compared to the same period last year primarily as a result of higher third party software sales for the three months ended September 30, 2006, which generate much lower margin than internally developed software sales.  Additionally, the Opera suite software sales for the three months ended September 30, 2005 were approximately 47% higher than the sales during the same period this year due mainly to two large Opera installations during the prior year period.  Opera suite product sales generate much higher margin than third party software sales.  Service costs as a percent of related revenue decreased approximately 40 basis points compared to the same period last year.

Selling, General and Administrative (“SG&A”) Expenses:

          SG&A expenses, as a percent of revenue, decreased 10 basis points to 33.6% compared to the same period last year.  This decrease reflects the following:

• Overall decrease in SG&A expenses as a percent of total revenue was primarily due to our ability to leverage our costs with the increase in total revenue;

• The above decrease in SG&A expenses as a percent of total revenue was partially offset by approximately $0.8 million increase in non-cash share-based compensation expenses recorded as a component of SG&A expenses for the three months ended September 30, 2006 compared to the same period last year.  See “Share-Based Compensation Expense” below for further discussion.

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Research and Development (“R&D”):

          R&D expenses consist primarily of labor costs less capitalized software development costs.  Non-cash share-based compensation expenses allocated to R&D were not capitalized as software development costs during the three months ended September 30, 2006 and 2005 because stock options were not granted to employees whose labor costs were capitalized as software development costs.  An analysis of R&D activities is as follows:

	Three Months Ended September 30,
(in thousands)	2006			2005
Total R&D incurred	$	7,338		$	7,474
Capitalized software development costs		(422	)		(1,096	)
Total R&D expenses	$	6,916		$	6,378
% of Revenue		4.0	%		4.2	%

          The decrease in total R&D capitalized software development costs is primarily due to the release of Datavantage’s capitalized software product in December of 2005.  Total R&D incurred includes approximately $0.1 million and less than $0.1 million for the non-cash share-based compensation expense allocated to R&D for the three months ended September 30, 2006 and 2005, respectively.

Depreciation and Amortization Expenses:

          Depreciation and amortization expenses for the three months ended September 30, 2006 increased approximately $0.3 million to approximately $2.8 million compared to the same period last year.

Share-Based Compensation Expenses:

          We account for our option awards in accordance with SFAS No. 123(R), “Share-Based Payment.”  The fair value of awards granted under the stock option program are measured and non-cash share-based compensation expenses, adjusted for expected forfeitures, are recognized ratably over the vesting period of options in the consolidated statements of operations.  In addition, non-cash share-based compensation expense is recognized for the non-vested portion of awards that were granted before the effective date of SFAS No. 123(R) as those options become vested.  The cost of sales, SG&A expenses and R&D expenses discussed above include the following allocations of non-cash share-based compensation expense:

	Three Months Ended September 30,
(in thousands)	2006		2005
SG&A	$	2,692	$	1,875
R&D		123		38
	$	2,815	$	1,913

Income from Operations:

          Income from operations for the three months ended September 30, 2006 increased approximately $2.6 million or 14.4%, to approximately $20.6 million, compared to the same period last year.  The increase is mainly due to an overall increase in sales volume partially offset by increase in cost of sales as a percent of revenue.

          Net non-operating income for the three months ended September 30, 2006 increased approximately $1.9 million to approximately $2.2 million compared to the same period last year.  The increase is primarily due to an increase in interest income of approximately $1.4 million resulting from overall higher cash and cash equivalents balances and overall higher interest rates earned on these balances.

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          The effective tax rates for the three months ended September 30, 2006 and 2005 were 33.5% and 32.5%, respectively.  The increase in tax rate was primarily attributable to the negative impact of the changes in legislation related to Extra-territorial Income Exclusions as well as the non-deductible nature of certain non-cash share-based compensation items and other non-deductible compensation items.  These negative impacts were partially offset by the benefit recognized from certain activities where the mix of earnings were subject to a lower statutory tax rate than that recognized in the U.S. and the phase-in of the Deduction for Domestic Production Activities.

          We believe that due to the mix of jurisdictional earnings, the seasonality of earnings and the impact of the interim reporting requirements of FIN 18, “Accounting for Income Taxes in Interim Periods” (“FIN 18”), there may be some level of adjustment to the effective tax rate on a quarterly basis.  We estimate that the 2007 fiscal year tax rate will be approximately 32.0% compared to 2006 fiscal year tax rate of 32.9%.  The tax rate recognized during the three months ended September 30, 2006 was greater than the estimated fiscal year 2007 tax rate due to the impact of certain discreet items recognized during the period and the application of FIN 18.

Non-GAAP Disclosure (Excluding Share-based Compensation Expense):

          The following non-GAAP presentation of selected financial information, excluding the non-cash share-based compensation expenses recorded in accordance with SFAS No. 123(R), is provided to enhance the understanding of our historical financial performance and the comparability of our financial results against those of our competitors as majority of them are still in their first year of adoption.  As discussed above under “Share-Based Compensation Expense,” SFAS No. 123(R) requires us to expense the fair value of grants made under our stock option program over the vesting period of the plan.

	Three Months Ended September 30,
	2006									2005
(in thousands, except per share data)	GAAP, as reported			Effect of SFAS No. 123(R)			Non-GAAP (1)			GAAP, as reported			Effect of SFAS No. 123(R)			Non-GAAP (1)			% Increase in Non- GAAP (1)
Revenue	$	173,701		$	—		$	173,701		$	152,004		$	—		$	152,004
Cost of sales		85,032			—			85,032			73,843			—			73,843
Gross margin		88,669			—			88,669			78,161			—			78,161
SG&A		58,281			(2,692	)		55,589			51,234			(1,875	)		49,359
R&D		6,916			(123	)		6,793			6,378			(38	)		6,340
Depreciation and amortization		2,823			—			2,823			2,497			—			2,497
Total operating expenses		68,020			(2,815	)		65,205			60,109			(1,913	)		58,196
Income from operations		20,649			2,815			23,464			18,052			1,913			19,965			17.5	%
Non-operating income, net		2,231			—			2,231			357			—			357
Income before taxes, minority interests and equity in net earnings of affiliates		22,880			2,815			25,695			18,409			1,913			20,322			26.4	%
Income tax provision		7,665			571			8,236			5,983			622			6,605
Income before minority interests and equity in net earnings of affiliates		15,215			2,244			17,459			12,426			1,291			13,717			27.3	%
Minority interests and equity in net earnings of affiliates		(104	)		—			(104	)		(73	)		—			(73	)
Net income	$	15,111		$	2,244		$	17,355		$	12,353		$	1,291		$	13,644			27.2	%
Net income per share- diluted (2)	$	0.37		$	0.06		$	0.43		$	0.30		$	0.03		$	0.34			26.5	%

(1)	Non-GAAP, excluding the impact of SFAS No. 123(R).
(2)	For the three months ended September 30, 2005, net income per diluted share, excluding SFAS No. 123(R), does not equal the sum of net income per diluted shares as reported plus the effect of SFAS 123(R) due to a rounding difference.

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          Income from operations for the three months ended September 30, 2006, excluding non-cash share-based compensation expense recorded in accordance with SFAS No. 123(R), increased approximately $3.5 million or 17.5%, to approximately $23.5 million compared to the three months ended September 30, 2005.  The increase is mainly due to an overall increase in sales volume partially offset by increase in cost of sales as a percent of revenue, all of which are discussed above.

          Net income for the three months ended September 30, 2006, excluding non-cash share-based compensation expense recorded in accordance with SFAS No. 123(R), increased approximately $3.7 million, or 27.2%, to approximately $17.4 million.  Diluted net income per share, excluding non-cash share-based compensation expense recorded in accordance with SFAS No. 123(R), increased $0.09 per share, or 26.5%, to $0.43 per share.

Critical accounting policies

          Our discussion and analysis of our financial condition and results of operations are based upon our condensed consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the U.S.  The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue and expenses and related disclosure of contingent assets and liabilities.  We base our estimates and judgments on historical experience and on various assumptions that we believe to be reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions.

          We believe the following critical accounting policies affect our more significant judgments and estimates used in the preparation of the condensed financial statements:

• Revenue recognition and deferred revenue;

• Allowance for doubtful accounts;

• Inventory

• Non-cash share-based compensation;

• Capitalized software development costs;

• Valuation of long-lived assets, including intangible assets and impairment review of goodwill;

• Contingencies and litigation;

• Income taxes; and

• Foreign currency translation.

          We have reviewed our critical accounting policies, critical accounting estimates and the related disclosures with our Audit Committee.  These policies and procedures are described further in our Annual Report on Form 10-K for the year ended June 30, 2006 in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” under the heading “Critical Accounting Policies and Estimates.”

Liquidity and capital resources

          Effective July 29, 2005, we entered into two credit agreements (the “Credit Agreements”) that in the aggregate provide a four-year $65.0 million multi-currency committed line of credit, expiring on July 31, 2009.  The lenders under the Credit Agreements are Bank of America, N.A., Wachovia Bank, N.A., and US Bank (the “Lenders”).  The international facility is secured by 65% of the capital stock of our Ireland subsidiary and 100% of all of the foreign subsidiaries.  The U.S. facility is secured by 100% of the capital stock of our major U.S. subsidiaries as well as all inventory and receivables located in the U.S.

          The interest rate under the Credit Agreements is at the prime rate or federal funds rate plus 125 to 200 basis points for borrowings in U.S. currency, and LIBOR plus 125 to 200 basis points for borrowings in foreign currencies, depending upon our consolidated earnings before interest, taxes, depreciation and amortization (“EBITDA”) for the immediately preceding four calendar quarters.  Under the terms of the Credit Agreements, we are required to pay insignificant commitment fees on the unused portion of the line of credit to the Lenders.  The Credit Agreements also contain certain financial covenants and restrictions on our ability to assume additional debt, repurchase stock, sell subsidiaries, or acquire companies.  In case of an event of default, as defined in the Credit Agreements, that is not cured within the applicable cure period (with respect to those defaults for which the Credit Agreements provide a cure period), the Lenders’ remedies include their ability to declare all outstanding loans, plus interest and other related amounts owed, to be immediately due and payable in full, and to pursue all rights and remedies available to them under the Credit Agreements or under applicable law.

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          As of September 30, 2006, we had approximately $2.8 million outstanding on the lines of credit and had approximately $62.2 million available for future borrowings.  The total outstanding balance consisted of the following:

• JPY (Japanese Yen) – 149.0 million (approximately $1.3 million at the September 30, 2006 exchange rate);

• SEK (Swedish Krona) – 5.0 million (approximately $0.7 million at the September 30, 2006 exchange rate), and

• NZD (New Zealand Dollar) – 1.3 million (approximately $0.8 million at the September 30, 2006 exchange rate.)

          We also have a credit relationship with a European bank of EUR 1.0 million (approximately $1.3 million at the September 30, 2006 exchange rate).  Under the terms of this facility, we may borrow in the form of either a line of credit or term debt.  The amount available to borrow is reduced by approximately EUR 0.2 million (approximately $0.3 million at the September 30, 2006 exchange rate) for guarantees.  As we have significant international operations, we do not believe that our Euro-denominated borrowings represent a significant foreign exchange risk.  On an overall basis, we monitor our cash and debt positions in each currency in an effort to reduce our foreign exchange risk.  As of September 30, 2006, there were no balances outstanding on this credit facility.

          As of September 30, 2006, we had approximately $63.2 million borrowing capacity under all of the above credit facilities available at that time.  The total amount available to borrow was reduced by approximately $0.3 million for guarantees.  The weighted-average interest rate on the outstanding balances under the lines of credit as of September 30, 2006 was 4.4%.

          As of September 30, 2006, in addition to the above credit facilities, we also had approximately EUR 1.0 million (approximately $1.2 million at the September 30, 2006 exchange rate) outstanding on a line of credit related to an international business acquired in August 2006.  The interest rate on the outstanding balance under this line of credit as of September 30, 2006 was 2.7%.  During October 2006, the balance outstanding on this line of credit was paid off and the line of credit was closed.

          Net cash provided by operating activities for the three months ended September 30, 2006 was approximately $21.9 million versus approximately $12.8 million for the three months ended September 30, 2005.  We used approximately $7.3 million in investing activities, including approximately $4.7 million for two international acquisitions in July and August of 2006, approximately $2.2 million to purchase property, plant, and equipment, and approximately $0.4 million used to internally develop software.  Net cash provided by financing activities was approximately $10.2 million, consisting primarily of proceeds from the issuance of stock under the employee option plan of approximately $8.2 million and tax benefits realized from stock option exercises of approximately $4.7 million, partially offset by repurchases of our stock of approximately $2.4 million.  All cash is being retained for the operation and expansion of the business and the repurchase of our common stock.

          We believe that our cash and cash equivalents, cash generated from operations, and our available lines of credit will be sufficient to provide our working capital needs for the foreseeable future.  However, if we need to raise additional funds, we believe we will be able to raise the necessary amounts either by entering into additional financing agreements or through the issuance of our common stock.  We currently anticipate that our property, plant, and equipment expenditures for fiscal year 2007 will be approximately $11 million.

Recent accounting standards

          SFAS No. 158
          In September 2006, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 158, “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans - an amendment of FASB Statements No. 87, 88, 106 and 132(R)” (“SFAS No. 158”), to require an employer to recognize the overfunded or underfunded status of a defined benefit postretirement plan (other than a multiemployer plan) as an asset or liability on its statement of financial position and to recognize changes in that funded status in the year in which the changes occur through comprehensive income.  The statement also requires an employer to measure the funded status of a plan as of the date of its year-end statement of financial position, with limited exceptions.  SFAS No. 158 is effective for fiscal years ending after December 15, 2006.  SFAS No. 158 will not change the amount of net periodic benefit expense recognized in an entity’s results of operations. 

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Application of this statement at June 30, 2006 would have required adjustment to our accrued pension liability relating to our Supplemental Executive Retirement Plan (“SERP Plan”), resulting in an increase to accrued employee benefit liabilities of approximately $4.8 million and a decrease in stockholders’ equity of approximately $4.8 million, net of a tax rate of 33%.  The effect at June 30, 2007, the adoption date, or any other future date could significantly differ depending on the measurement of pension obligations at such date, but we do not believe SFAS No. 158 will have a material impact on our consolidated financial position, results of operations and cash flows.

          SFAS No. 157
          In September 2006, the FASB issued SFAS No. 157 “Fair Value Measurements” (“SFAS No. 157”) to establish a framework for measuring fair value under generally accepted accounting principles and to expand disclosures on fair value measurements.  The statement applies to previously established valuation pronouncements, but is to be applied prospectively, so that it does not require the changing of any fair value measurements.  SFAS No. 157 may cause some valuation procedures to change after its adoption.  Under SFAS No. 157, fair value is established by the price that would be received to sell the item or the amount to be paid to transfer the liability of the asset (an exit price), as opposed to the price to be paid for the asset or received to assume the liability (an entry price).  SFAS No. 157 is effective for all assets valued in financial statements for fiscal years beginning after November 15, 2007.  We are currently reviewing the impact of the adoption of the SFAS 157 on our consolidated financial position, results of operations and cash flows.

          SAB 108
          In September 2006, the SEC issued Staff Accounting Bulletin No. 108 (“SAB 108”), which provides interpretive guidance on the process of quantifying financial statement misstatements.  As permitted by SAB 108, the provisions under SAB 108 will be applied in the first fiscal years ending after November 15, 2006, our current fiscal year.  We do not believe SAB 108 will have a material impact on our consolidated financial position, results of operations and cash flows.

          FIN 48
          In June 2006, the FASB issued Interpretation No. 48, “Accounting for Uncertainty in Income Taxes,” an interpretation of FAS 109, “Accounting for Income Taxes” (“FIN 48”), to create a single model to address accounting for uncertainty in tax positions.  FIN 48 clarifies the accounting for income taxes, by prescribing a minimum recognition threshold a tax position is required to meet before being recognized in the financial statements.  FIN 48 also provides guidance on derecognition, measurement, classification, interest and penalties, accounting in interim periods, disclosure and transition.  FIN 48 is effective for fiscal years beginning after December 15, 2006.   As required, the Company will adopt FIN 48 in fiscal year 2008.  The cumulative effect of adopting FIN 48 will be recorded in retained earnings and other accounts as applicable.  We are currently reviewing the impact of the adoption of the FIN 48 on our consolidated financial position, results of operations and cash flows.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

          The Company recorded foreign sales, including exports from the United States, of approximately $91.1 million and approximately $72.4 million during the three months ended September 30, 2006 and 2005, respectively, to customers located primarily in Europe, Africa, the Middle East, Australia, Asia, Latin America and Canada. 

          The Company’s significant international business and presence expose the Company to certain market risks, such as currency fluctuation, interest rate changes, and political risks.  With respect to currency risk, the Company transacts business in different currencies through its foreign subsidiaries.  The fluctuation of currencies affects sales and profitability.  Frequently, sales and the costs associated with those sales are not denominated in the same currency.

          In the three months ended September 30, 2006 and 2005, the Company transacted business in 31 currencies and 27 currencies, respectively.

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          The relative currency mix for the three months ended September 30, 2006 and 2005 were as follows:

	% of Reported Revenue
	Three Months Ended September 30,						Exchange Rates As of September 30,
	2006			2005			2006		2005
Revenues by currency (1):
United States Dollar		53	%		60	%		1.0000		1.0000
European Euro		22	%		20	%		1.2681		1.2012
British Pound Sterling		8	%		5	%		1.8724		1.7638
Australian Dollar		2	%		2	%		0.7453		0.7627
Mexican Peso		2	%		1	%		0.0910		0.0930
All Other Currencies (2), (3)		13	%		12	%		0.0248		0.0282
Total		100	%		100	%

(1) Calculated using weighted average exchange rates for the period.

(2) The “% of Reported Revenue” for “All Other Currencies” is calculated based on the weighted average three month exchange rates for all other currencies.

(3) The “Exchange Rates as of September 30” for “All Other Currencies” represents the weighted average September 30 exchange rates for all other currencies based on the three month revenue.

          The Company has evaluated the effect of a 10% change, both upward and downward, of the Euro in relation to the U.S. dollar.  A 10% increase or decrease in the value of the Euro in relation to the U.S. dollar in the three months ended September 30, 2006, would have affected total revenues by approximately $3.8 million, or 2.2%.  The sensitivity analysis assumes a weighted average 10% change in the exchange rate during the respective periods with all other variables being held constant.  This sensitivity analysis does not consider the effect of exchange rate changes on either cost of sales, operating expenses, or income taxes, and accordingly, is not necessarily an indicator of the effect of potential exchange rate changes on the Company’s net income.

          The Company is also subject to interest rate fluctuations in foreign countries to the extent that the Company elects to borrow in the local foreign currency.  In the past, this has not been an issue of concern as the Company has the capacity to elect to borrow in other currencies with more favorable interest rates.  While the Company has not invested in financial instruments designed to protect against interest rate fluctuations, the Company will continue to evaluate the need to do so in the future.

          The Company’s committed lines of credit bear interest at a floating rate, which exposes the Company to interest rate risks.  The Company manages its exposure to this risk by minimizing, to the extent feasible, overall borrowing and monitoring available financing alternatives. The Company’s interest rate risk has not changed materially from June 30, 2006, and the Company does not foresee any significant changes in exposure or in how it manages this exposure in the near future.  The Company’s lines of credit bear interest at the prime rate or federal funds rate plus 125 to 200 basis points for borrowings in U.S. currency, and LIBOR rate plus 125 to 200 basis points for borrowings in foreign currencies, depending on the Company’s EBITDA for the immediately preceding four calendar quarters.  At September 30, 2006, the Company had total borrowings of approximately $4.0 million, and had not entered into any instruments to hedge the resulting exposure to interest-rate risk.   Management believes that the fair value of the debt equals its carrying value at September 30, 2006. The Company’s exposure to fluctuations in interest rates will increase or decrease in the future with increases or decreases in the outstanding amount under the line of credit.

          To minimize the Company’s exposure to credit risk associated with financial instruments, the Company places its temporary cash investments with high-credit-quality institutions.

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ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

          Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report.  Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures as of the end of the period covered by this report are functioning effectively to provide reasonable assurance that the information required to be disclosed by us in reports filed under the Securities Exchange Act of 1934 is (i) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and (ii) accumulated and communicated to our management, including the Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding disclosure.  A controls system cannot provide absolute assurance, however, that the objectives of the controls system are met, and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected. 

Change in Internal Control over Financial Reporting

No change in our internal control over financial reporting occurred during the Company’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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PART II – OTHER INFORMATION

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Issuer Purchases of Equity Securities

	Total Number of Shares Purchased		Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plan or Program		Maximum Number of Shares that May Yet be Purchased Under the Plan or Program
Period(1)
07/1/06 – 07/31/06		42,100	$	39.29		42,100		539,901
08/01/06 – 08/31/06		20,000	$	37.02		20,000		519,901
09/01/06 – 09/30/06		—		N/A		—		519,901
		62,100	$	38.56		62,100		519,901

(1) In fiscal year 2005, the Board of Directors authorized the purchase of up to two million shares of the Company’s common stock.  All purchases during the periods presented in the table above were made under this authorized plan.  As of September 30, 2006, the Company has purchased an aggregate of approximately 1.5 million shares in the open market under this authorized plan.

ITEM 5. OTHER INFORMATION

          During the three months ended September 30, 2006, we acquired certain assets, and full or controlling interests in various distributors of MICROS products and services and another company with complementary products and services.  The aggregate purchase price for these acquisitions was approximately $7.6 million which includes certain amounts that were held back.  The assets acquired included approximately $1.2 million in cash.  The aggregate goodwill for these acquisitions was approximately $7.3 million.  The acquisitions, whether considered individually or collectively, are not material to our results of operations, financial position, or cash flows.

ITEM 6. EXHIBITS

3(i)	Articles of Incorporation of the Company are incorporated herein by reference to Exhibit 3 to the Annual Report on Form 10-K of the Company for the Fiscal Year ended June 30, 1990.
3(i)(a)	Articles of Amendment to Articles of Incorporation are incorporated herein by reference to Exhibit 3(i) to the Quarterly Report on Form 10-Q of the Company for the period ended December 31, 1997.
3(i)(b)	Articles of Amendment to Articles of Incorporation are incorporated herein by reference to Exhibit 3(i) to the Quarterly Report on Form 10-Q of the Company for the period ended December 31, 1998.
3(ii)(a)	By-laws of the Company are incorporated herein by reference to Exhibit 3 to the Annual Report on Form 10-K of the Company for the Fiscal Year ended June 30, 1990.
3(ii)(b)	By-laws of the Company, as amended, are incorporated herein by reference to Exhibit 3(ii) to the Form 8-K filed on August 30, 2004.
10(a)(1)*	Amendment and Restatement of MICROS Systems, Inc. Stock Option Plan is incorporated herein by reference to Exhibit 4.1 to the Registration Statement on Form S-8 of the Company filed on February 16, 1990.
10(a)(2)*	First Amendment to the Amendment and Restatement of MICROS Systems, Inc. Stock Option Plan is incorporated herein by reference to Exhibit 4.2 to the Registration Statement on Form S-8 of the Company filed on February 16, 1990.
10(a)(3)*	MICROS Systems, Inc. 1991 Stock Option Plan as amended, is incorporated herein by reference to Exhibit A to the Proxy Statement of the Company for the 2005 Annual Meeting of Shareholders

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10(b)*	Employment Agreement dated June 1, 1995 between MICROS Systems, Inc. and A. L. Giannopoulos is incorporated herein by reference to Exhibit 10e to the Annual Report on Form 10-K of the Company for the Fiscal Year ended June 30, 1995.
10(b)(1)*	First Amendment to Employment Agreement dated February 6, 1997 between MICROS Systems, Inc. and A. L. Giannopoulos is incorporated herein by reference to Exhibit 10 to the Quarterly Report on Form 10-Q of the Company for the period ended December 31, 1996.
10(b)(2)*	Second Amendment to Employment Agreement dated February 1, 1998 between MICROS Systems, Inc. and A. L. Giannopoulos is incorporated herein by reference to Exhibit 10 to the Quarterly Report on Form 10-Q of the Company for the period ended December 31, 1997.
10(b)(3)*	Third Amendment to Employment Agreement dated September 8, 1999 between MICROS Systems, Inc. and A. L. Giannopoulos is incorporated herein by reference to Exhibit 10g to the Annual Report on Form 10-K of the Company for the Fiscal Year ended June 30, 1999.
10(b)(4)*	Fourth Amendment to Employment Agreement dated November 19, 2001 between MICROS Systems, Inc. and A. L. Giannopoulos is incorporated herein by reference to Exhibit 10 to the Quarterly Report on Form 10-Q of the Company for the period ended December 31, 2001.
10(b)(5)*	Fifth Amendment to Employment Agreement dated November 15, 2002 between MICROS Systems, Inc. and A. L. Giannopoulos is incorporated herein by reference to Exhibit 10 to the Quarterly Report on Form 10-Q of the Company for the period ended December 31, 2002.
10(b)(6)*	Sixth Amendment to Employment Agreement dated January 28, 2004 between MICROS Systems, Inc. and A. L. Giannopoulos is incorporated herein by reference to Exhibit 10 to the Quarterly Report on Form 10-Q of the Company for the period ended December 31, 2003.
10(b)(7)*	Seventh Amendment to Employment Agreement dated August 9, 2005 between MICROS Systems, Inc. and A. L. Giannopoulos is incorporated herein by reference to Exhibit 10 to the Current Report on Form 8-K filed on August 11, 2005.
10(b)(8)*	Eighth Amendment to Employment Agreement dated June 6, 2006, between MICROS Systems, Inc. and A.L. Giannopoulos is incorporated herein by reference to Exhibit 10 to the Current Report on Form 8-K filed on June 8, 2006.
10(c)*	Consulting Agreement dated June 30, 1995 between MICROS Systems, Inc. and Louis M. Brown, Jr. is incorporated herein by reference to Exhibit 10 to the Annual Report on Form 10-K of the Company for the Fiscal Year ended June 30, 1995.
10(c)(1)*	First Amendment to Consulting Agreement dated February 1, 1999 between MICROS Systems, Inc. and Louis M. Brown, Jr. is incorporated herein by reference to Exhibit 10 to the Quarterly Report on Form 10-Q of the Company for the period ended December 31, 1998.
10(c)(2)*	Second Amendment to Consulting Agreement dated April 26, 2001 between MICROS Systems, Inc. and Louis M. Brown, Jr. is incorporated herein by reference to Exhibit 10 to the Quarterly Report on Form 10-Q of the Company for the period ended March 31, 2001.
10(c)(3).*	Third Amendment to Consulting Agreement dated September 4, 2003 between MICROS Systems, Inc. and Louis M. Brown, Jr. is incorporated herein by reference to Exhibit 10 to the Annual Report on Form 10-K of the Company for the Fiscal Year ended June 30, 2003.
10(d).*	Employment Agreement dated May 28, 1997 between MICROS Systems, Inc. and Gary C. Kaufman is incorporated herein by reference to Exhibit 10 to the Annual Report on Form 10-K of the Company for the Fiscal Year ended June 30, 1997.
10(d)(1).*	First Amendment to Employment Agreement dated October 1, 1998 between MICROS Systems, Inc. and Gary C. Kaufman is incorporated herein by reference to Exhibit 10 to the Quarterly Report on Form 10-Q of the Company for the period ended December 31, 1998.
10(e).*	Employment Agreement dated May 28, 1997 between MICROS Systems, Inc. and Thomas L. Patz is incorporated herein by reference to Exhibit 10 to the Annual Report on Form 10-K of the Company for the Fiscal Year ended June 30, 1997 (see 10d above, as Mr. Patz’ agreement is an agreement identical (except for the identity of the executive and the economic terms) to that entered into by the Company with Mr. Kaufman).
10(e)(1).*	First Amendment to Employment Agreement dated October 1, 1998 between MICROS Systems, Inc. and Thomas L. Patz is incorporated herein by reference to Exhibit 10 to the Quarterly Report on Form 10-Q of the Company for the period ended December 31, 1998 (see 10(d)(1) above, as Mr. Patz’ amendment is an amendment identical (except for the identity of the executive and the economic terms) to that entered into by the Company with Mr. Kaufman).
10(f).*	Supplemental Executive Retirement Plan effective August 25, 2005, the final form, of which was approved by the Board of Directors on November 19, 2004, is incorporated herein by reference to Exhibit 10.1 to the Current Report on Form 8-K filed on November 23, 2004.

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10(f)(1).*		Restated Supplemental Executive Retirement Plan, as approved by the Board of Directors on April, 27, 2005, filed with the Company’s Annual Report on Form 10-K for the period ended June 30, 2006.
10(g)		Amended and restated Credit Agreement, effective as of July 29, 2005, among MICROS Systems, Inc., DV Technology Holdings Corporation, Datavantage Corporation, Micros Fidelio Nevada, LLC, MSI Delaware, LLC, Micros-Fidelio Worldwide, Inc., and JTECH Communications, Inc. as Borrower, Bank of America, N.A., as administrative agent, swing line lender and L/C issuer, and Wachovia Bank, N.A., and US Bank, N.A., and Banc of America Securities LLC, as sole lead arranger and book manager, is incorporated herein by reference to Exhibit 10 to the Annual Report on Form 10-K for the period ended June 30, 2005.
10(g)(1).		Amended and restated Credit Agreement, effective as of July 29, 2005, among Micros-Fidelio (Ireland) Ltd., Micros-Fidelio Systems (UK) Ltd., Micros-Fidelio España S.L., Micros Fidelio (Canada), Ltd., Micros-Fidelio Brazil, Ltda., Micros-Fidelio France S.A.S., Hospitality Technologies, S.A., Micros-Fidelio Mexico S.A. de C.V., Micros Systems Holding GmbH, Micros-Fidelio GmbH, Micros-Fidelio Software Portugal Unipessoal Lda, Micros-Fidelio (Thailand) Co., Ltd., Micros-Fidelio Singapore Pte Ltd., Micros-Fidelio Software (Philippines), Inc., Micros-Fidelio Japan Ltd., Micros-Fidelio Australia Pty. Ltd., Micros-Fidelio Hong Kong, Ltd., Fidelio Nordic Norway A/S, Fidelio Nordic Oy, Fidelio Nordic Sverige, A.B., Hotelbk, A.B., as Borrower, Bank Of America, N.A., as Administrative Agent, swing line lender, and L/C issuer, and Wachovia Bank N.A. and US Bank N.A., and Banc of America Securities LLC, as sole lead arranger and book manager is incorporated herein by reference to Exhibit 10 to the Annual Report on Form 10-K for the period ended June 30, 2005.
31(i).1		Certification by CEO pursuant to Rule 13A-14 or 15D of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.**
31(i).2		Certification by CFO pursuant to Rule 13A-14 or 15D of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.**
32.1		Certification by CEO pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.***
32.2		Certification by CFO pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.***
*	Management contract or compensatory plan or arrangement.
**	Filed herewith.
***	These certifications are being furnished solely to accompany the quarterly report on Form 10-Q pursuant to 18 U.S.C. Section 1350, and are not being filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and are not to be incorporated by reference into any filing of the Company, whether made before or after the date hereof, regardless of any general incorporation language in such filing.

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          Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	MICROS SYSTEMS, INC.
	(Registrant)
Date:  November 9, 2006	/s/ Gary C. Kaufman
	Gary C. Kaufman
	Executive Vice President,
	Finance and Administration/
	Chief Financial Officer
Date:  November 9, 2006	/s/ Cynthia A. Russo
	Cynthia A. Russo
	Vice President and Corporate Controller

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