Joseph J. Tabacco, Jr. (75484)
Nicole Lavallee (165755)
BERMAN, DeVALERIO, PEASE & TABACCO
425 California Street, Suite 2025
San Francisco, CA 94104
Telephone: (415) 433-3200

Attorneys for Plaintiff
(Additional Counsel Listed on Signature Page)

Plaintiff, by his attorneys, alleges upon personal knowledge as to himself and his own acts and as to all other matters upon information and belief, based upon, inter alia, the investigation made by his attorneys, which included, but was not limited to, a review of the public filings and reports of defendant Sybase, Inc. ("Sybase" or the "Company") and public statements by and concerning the Company, as follows:

1. (a) This Court has jurisdiction over this action pursuant to §27 of the Securities Exchange Act of 1934 (the "Exchange Act"), 15 U.S.C. §78aa, and 28 U.S.C. §§1331 and 1337. The claims asserted herein arise under §§10(b) and 20(a) of the Exchange Act, 15 U.S.C. §§78j(b) and 78t(a), and Rule 10b-5, 17 C.F.R. §240.10b-5, promulgated thereunder by the Securities and Exchange Commission ("SEC").

(b) In connection with the acts and conduct alleged in this Complaint, the defendants directly and indirectly used means and instrumentalities of interstate commerce, including the United States mails and interstate telephone communications.

2. Venue is proper in this District pursuant to §27 of the Exchange Act, 15 U.S.C. §78aa, and 28 U.S.C. §1391(b). Many of the acts giving rise to the violations alleged herein occurred in this District and the Company's principal place of business is located in this District.

3. This is a class action on behalf of a class (the "Class") consisting of all persons other than defendants named herein, who purchased shares of Sybase's common stock (the "Shares") from April 17, 1997 through January 21, 1998, inclusive (the "Class Period").

4. On October 29, 1997, plaintiff Benjamin Feldman purchased 1000 Shares at a price of $16.75 per Share and was damaged thereby.

5. Defendant Sybase develops computer database software and sells it throughout the world. The Company's executive offices are located at 6475 Christie Avenue, Emeryville, California 94608.

6. Defendant Mitchell E. Kertzman ("Kertzman") was President, Chief Executive Officer and a member of the Board of Directors of Sybase throughout the Class Period. He served as the Company's President until August 1, 1997, when he became Chairman of the Board of Directors, a position he held through the remainder of the Class Period. In 1996, defendant Kertzman was issued 150,000 options to purchase Shares at an exercise price of $17.50 per Share, and received compensation of $956,152 from the Company. During the Class Period, Kertzman sold 210,000 Shares, or 54% of the total Shares he owned, for proceeds in excess of $3.1 million.

7. At all times relevant hereto, defendant Jack L. Acosta ("Acosta") was Senior Vice President and Chief Financial Officer of Sybase.

8. At all relevant times hereto, defendant Piet Vander Vorst ("Vander Vorst") was the Principal Accounting Officer of the Company. During the Class Period, Vander Vorst sold 918 Shares, or 61% of his total holdings, for proceeds in excess of $14,000.

9. Defendants Kertzman, Acosta and Vander Vorst (collectively, the "Individual Defendants") made, reviewed and/or were aware of the false and/or misleading SEC filings, press releases and other statements complained of herein at the time they were issued or circulated, knew or recklessly disregarded their false and/or misleading nature, directly or indirectly made representations to investment analysts who issued reports concerning the Company's operating results during the Class Period, which information was materially false and/or misleading, and were in positions to control the contents of or otherwise cause corrective or accurate disclosures to have been made. The Individual Defendants' actions described herein had the purpose and effect of artificially inflating the price of the Shares, thereby causing plaintiff and other members of the Class to purchase such Shares at artificially maintained prices and allowing Kertzman and Vander Vorst to sell their Shares at artificially inflated prices. Accordingly, it is appropriate to treat the Individual Defendants as a group for pleading purposes and to presume that the false and misleading information conveyed in the Company's public filings, press releases and other publications and statements as alleged herein are the collective actions of the narrowly defined group of Individual Defendants identified above.

10. Plaintiff brings this action pursuant to Rule 23(a) and (b)(3) of the Federal Rules of Civil Procedure, on behalf of himself and on behalf of a class (the "Class") of persons who purchased Shares during the Class Period. Excluded from the Class are defendants herein, members of the immediate family of each defendant, any person, firm, trust, corporation, officer, director or other individual or entity in which any defendant has a controlling interest or which is related to or affiliated with any of the defendants, and the legal representatives, agents, affiliates, heirs, successors-in-interest or assigns of any such excluded party.

11. This action is properly maintainable as a class action for the following reasons:

(a) The members of the Class for whose benefit this action is brought are so numerous that joinder of all Class members is impracticable. During the Class Period, millions of Shares were traded on NASDAQ and there were more than 79 million Shares outstanding held by members of the Class who are scattered throughout the United States.

(b) There are questions of law and fact which are common to members of the Class and which predominate over any questions affecting only individual members. The common questions include, inter alia, the following:

(i) Whether the Exchange Act was violated by the defendants as alleged herein;

(ii) Whether statements disseminated by defendants to the investing public during the Class Period omitted and/or misrepresented material facts about the business of the Company;

(iii) Whether the defendants acted willfully, recklessly or with gross negligence in omitting to state and/or misrepresenting material facts;

(iv) Whether the market price of the Shares was artificially inflated due to the non-disclosures and/or misrepresentations complained of herein; and

(v) Whether the members of the Class have sustained damages and, if so, the proper measure of damages.

12. Plaintiff's claims are typical of the claims of other members of the Class and plaintiff has no interests that are adverse or antagonistic to the interests of the Class.

13. Plaintiff is committed to the vigorous prosecution of this action and has retained competent counsel experienced in litigation of this nature. Accordingly, plaintiff is an adequate representative of the Class and will fairly and adequately protect the interests of the Class.

14. Plaintiff anticipates that there will not be any difficulty in the management of this litigation as a class action.

15. For the reasons stated herein, a class action is superior to other available methods for the fair and efficient adjudication of this action and the claims asserted herein. Because of the size of the individual Class members' claims, few, if any, class members could afford to seek legal redress individually for the wrongs complained of herein.

16. At all relevant times, the market for the Shares was an efficient market for the following reasons, among others:

(a) The Shares met the requirements for listing and were listed and actively traded on NASDAQ, a highly efficient and automated market;

(b) As a regulated issuer, Sybase filed periodic public reports with the SEC and the National Association of Securities Dealers; and

(c) Sybase regularly communicated with the investing public through the dissemination of various reports, participation in meetings and conferences with investors and securities analysts and other customary means of communicating with the investing public such as employing major newswire services for the dissemination of press releases and providing information and interviews about the Company to the business media.

17. As a result, the market for the Shares promptly digested current information regarding the Company from all publicly available sources and reflected such information in the Shares' price. Under these circumstances, all purchasers of the Shares during the Class Period suffered similar injury through their purchases of Shares at artificially maintained prices and a presumption of reliance applies.

Background

18. In 1995 and 1996, the technology of Sybase's products fell behind that of its competitors, resulting in reduced revenue and operating losses and contributing to a drop in Sybase's share of the database market. Kertzman was appointed chief executive officer in July 1996, as part of a plan to revamp the Company. On January 23, 1997, Sybase announced a profit of $.07 per Share, marking its return to profitability.

19. However, analysts and investors were concerned by the lack of significant growth in revenue, causing the Shares' price to drop from a high of over $20 per Share in January 1997 to below $13 per Share in April 1997. Consequently, in order to support the Shares' price, defendants reported positive financial results, emphasizing significant revenue growth in its Intercontinental region, which includes Japan, Asia, Australia and Latin America.

The False and Misleading Earnings and Revenue Reports

20. On April 17, 1997, Sybase announced that for the first quarter of 1997, ended March 31, 1997, it had net income of $3.5 million or $.05 per Share, as compared with a $6.9 million loss, or $.09 per share, for the first quarter of 1996. However, its revenue for the quarter declined to $241.9 million from $243.7 million in the 1996 first quarter.

21. On or about May 14, 1997, the Individual Defendants caused Sybase to file its Report on Form 10-Q for the quarter ended March 31, 1997 with the SEC. It was prepared by the Individual Defendants and was signed by defendants Acosta and Vander Vorst. The first quarter 1997 Form 10-Q contained Sybase's first quarter 1997 financial results as had been reported on April 17, 1997. With revenue declining in Europe and North America, the 10-Q emphasized the Company's reported increased sales in its Asia, Australia and Latin America market. The 10-Q stated that:

North American revenues (United States, Canada and Mexico) declined 1 percent in the first quarter of 1997 to $149.5 million from $150.8 million in the first quarter of 1996. International revenues decreased 1 percent in the first quarter of 1997 to $92.4 million from $92.9 million in the year earlier period, with European revenues decreasing 7 percent partially offset by Intercontinental revenues (principally Asia, Australia, and Latin America) increasing 10 percent. The Company attributes reduced North American and European revenues, and reduced rates of growth in Intercontinental revenues, to the overall decline in license revenues.

International revenues comprised 38 percent of total revenues in eachof the first quarters of 1997 and 1996. The stronger total Intercontinental revenue growth rate in the first quarter compared to North American and European growth rates reflects, in part, the effects of actions taken and investments made in expanding the Company's Intercontinental organization over the past few years.

(Emphasis added.) The 10-Q also assured investors that the financial statements included therein "in the opinion of management reflect all adjustments . . . necessary to fairly state the Company's consolidated financial position, results of operations and cash flows for the periods stated."

22. On July 17, 1997, Sybase issued a press release announcing its financial results for its 1997 second quarter, stating:

Sybase, Inc. today announced profits for the quarter ended June 30, 1997. Second quarter revenues were $237.6 million, compared with $249.9 million recorded in the second quarter of 1996. Net income for the period was $4.4 million, or $0.06 per share, up from a loss of $24.6 million, or $0.33 per share, in the second quarter of 1996.

"We are pleased to report profitable results for the fourth consecutive quarter," said Mitchell Kertzman, Chairman and Chief Executive Officer. "We are on track with our plan...."

23. On or about August 14, 1997, the Individual Defendants caused Sybase to file its Report on Form 10-Q for the second quarter ended June 30, 1997 with the SEC. It was prepared by the Individual Defendants and was signed by defendants Acosta and Vander Vorst. The second quarter 1997 Form 10-Q contained Sybase's second quarter 1997 financial results as had been reported on July 17, 1997. The 10-Q also emphasized the Company's alleged progress in its Asia, Australia and Latin America region:

North American revenues (United States, Canada and Mexico) decreased 9 percent in the second quarter of 1997 to $137.2 million from $151.4 million in the second quarter of 1996. North American revenues were down 5 percent in the first half of 1997 to $286.8 from $302.2 million in the same period in 1996. International revenues increased 2 percent in the second quarter of 1997 to $100.4 million from $98.5 million in the year earlier period, with European revenues declining 3 percent and Intercontinental revenues (principally Asia, Australia, and Latin America) increasing 8 percent. Over the first six months of 1997, International revenues increased 1 percent to $192.7 million from $191.4 million in the year earlier period, with European revenues declining 5 percent and Intercontinental revenues increasing 9 percent from the year earlier period. The Company believes the decline in license revenue is due to lower productivity, and the lack of new product coming to market in the first half of 1997.

International revenues grew to 42 percent of total revenues in the second quarter of 1997 from 39 percent in the second quarter of 1996. International revenues comprised 40 percent of total revenues during the first six months of 1997 compared to 39 percent in the same period of 1996. The stronger Intercontinental growth rate of 9% in the first half of 1997 compared to the North American and European growth rates for the same period reflects the return on our previous investments in the Intercontinental region.

(Emphasis added.) The 10-Q also assured investors that the financial statements included therein "in the opinion of management reflect all adjustments . . . necessary to fairly state the Company's consolidated financial position, results of operations and cash flows for the periods stated."

24. On or about October 16, 1997, Sybase issued a press release announcing increased revenue results for its third quarter of fiscal 1997 ended September 30, 1997. Revenue for the third quarter was $244.2 million up from $237.6 reported in the 1997 second quarter but lower than the $250.2 million of revenue reported for the third quarter of 1996. The press release stated that net income for the quarter was $5.2 million or $0.07 per Share, an improvement over 1997 second quarter reported net income of $4.4 million or $0.06 per Share and the loss of $52.6 million (after a $49.2 million restructuring charge) or $0.69 per Share in the third quarter of 1996.

25. On November 13, 1997, the Individual Defendants caused Sybase to file its Report on Form 10-Q for the third quarter ended September 30, 1997 with the SEC. It was prepared by the Individual Defendants and signed by defendants Acosta and Vander Vorst. The third quarter 1997 Form 10-Q contained Sybase's third quarter 1997 financial results as previously reported on October 16, 1997. It also reported that revenue increased over the 1996 third quarter only in the Intercontinental regions, consisting principally of Asia, Australia and Latin America, explaining that the growth in Intercontinental sales reflected "the Company's increased market presence in the Intercontinental regions." The third quarter 10-Q also contained assurances that the financial statements included therein "in the opinion of management reflect all adjustments . . . necessary to fairly state the Company's consolidated financial position, results of operations and cash flows for the periods stated."

26. On January 2, 1998, Sybase announced in a press release that it expected revenue for the ended December 31, 1997 to be in the range of $245 million to $250 million, that earnings per share would range from a loss of $0.07 to a profit of $0.02, and that the Company expected to report an operating profit before taxes. Bloomberg News Service reported that "Sybase told analysts its sales in North America fell below its expectations while orders in other parts of the world, such as Europe were strong" and that:

Sybase changed its revenue recognition policy in Asia to a cash basis to reflect the currency turmoil there. That accounting change will affect Sybase's earnings negatively this quarter, the company said, because it will recognize revenue when the company is paid, rather than when the orders are booked.

Defendants Admit the Falsity of Their 1997 Quarterly Reports

27. On January 21, 1998, Sybase stunned the market by announcing that it would report a loss for the 1997 fourth quarter substantially greater than that projected on January 2, 1998. In addition, the Company announced that it would restate its revenue for the first three quarters of 1997 and reverse certain revenues recorded in the fourth quarter of 1997, in an amount totalling between $60 and $65 million, resulting from "improper revenue recognition relating to a number of transactions by the Company's Japanese subsidiary." The Company had recorded sales although the customers had been promised the right to return the purchased software, without penalty. Following this admission that its prior 1997 earnings reports were false and misleading, the price of the Shares declined from $9 11/16 on January 21, 1998, the closing price prior to the announcement, to a closing price of $7 49/64 on January 22, 1998, the first trading day after the announcement, a 69% decline from the Class Period high of $23.50 reached on October 9, 1997.

28. On January 28, 1998, the Company announced that, for the first quarter of 1997, net income was restated from a $3.5 million profit to a $6.2 million loss, for the second quarter, a $4.4 million profit was restated to a $17.8 million loss, and for the 1997 third quarter, a $5.2 million profit was restated to a $6 million loss. Sybase reported a loss of $25.5 million for the fourth quarter on revenue of $223.2 million. In total, the Company was thus forced to reduce its 1997 revenue by $69 million because of its improper revenue recognition, reporting a loss of $55.4 million on revenue of $903.9 million for the year.

Sybase's Financial Reports During the Class
Period Were False and Misleading

29. In order to inflate the price of the Shares, the Company improperly reported as sales during the first three quarters of 1997 transactions in which shipments made through the Company's Japanese subsidiary were subject to the right of Sybase's customers to return the products. Thereby Sybase materially overstated its revenue, net income and earnings per Share in each of the first three quarters of 1997.

30. SEC Regulation S-X (17 C.F.R. §210.4-01(a)(1)) states that financial statements filed with the SEC which are not prepared in compliance with generally accepted principles ("GAAP") are presumed to be misleading and inaccurate. Also, Regulation S-X requires that interim financial statements must also comply with GAAP, with the exception that interim financial statements need not include disclosures which would be duplicative of disclosures accompanying annual financial statements. 17 C.F.R. §210.10-01(a).

31. In the presentation of Sybase's financial statements during the Class Period, defendants violated the following GAAP provisions:

(a) The principle that revenue may be recognized only when earned. Revenue may be recognized when both of the following conditions are met: (i) the earnings process is complete or virtually complete, and (ii) an exchange has taken place. (APB Statement No. 4; FASB Statement of Concepts No. 5; FASB No. 48);

(b) The principle that profit is deemed to be realized when a sale in the ordinary course of business is effected (Chapter 1A of Accounting Research Bulletin No. 43);

(c) The principle that revenue should ordinarily be accounted for at the time a transaction is complete, with appropriate provisions for uncollectible accounts (APB Opinion No. 10);

(d) The principle that revenue and gains generally are not recognized until received or realizable, and revenue are considered to have been earned when the entity has substantially accomplished what it must do to be entitled to the benefits represented by the revenue (Statement of Financial Accounting Concepts No. 5); and

(e) The principle that if, after delivery of computer "software, there is significant uncertainty about customer acceptance of the software, license revenue should not be recognized until the uncertainty becomes insignificant." (AICPA Statement of Position 91-1.36)

Defendants' Scienter

32. During the Class Period, defendants were aware of or were recklessly indifferent to the overstatements of the Company's net income and assets and the Company's improper financial controls, the failure to comply with GAAP and the failure to disclose such information to the plaintiff and the Class.

33. The Individual Defendants were motivated to encourage improper revenue recognition in order to continue to portray Sybase as a company that had suffered a period of poor financial performance, but was now reporting successive profitable quarters. In addition, during the Class Period, Kertzman sold approximately 192,500 Shares in the open market, or 54% of the total Shares he owned, at prices ranging between $14.13 and $18.88 per share, reaping over 3.1 million, and Vander Vorst sold 918 Shares, or 61% of his total holdings, for proceeds in excess of $14,000.

34. Plaintiff repeats and realleges the allegations set forth above as though fully set forth herein.

35. During the Class Period, the defendants carried out a plan, scheme and course of conduct which was intended to directly benefit the defendants financially at the expense of the Company. The defendants' scheme had the effect of artificially maintaining the price of the Shares. In furtherance of this unlawful scheme, plan and course of conduct, defendants, and each of them, took the actions set forth herein.

36. The defendants (a) employed devices, schemes, and artifices to defraud; (b) made untrue statements of material fact and/or omitted to state material facts necessary to make the statements not misleading; and (c) engaged in acts, practices, and a course of business which operated as a fraud and deceit upon the purchasers of Shares in an effort to maintain artificially high market prices for the Shares in violation of §10(b) of the Exchange Act and Rule 10b-5.

37. Sybase and the Individual Defendants, individually and in concert, directly and indirectly, by the use of means or instrumentalities of interstate commerce and/or of the mails, engaged and participated in a continuous course of conduct to conceal adverse material information about the business and operations of Sybase as specified herein. The defendants employed devices, schemes and artifices to defraud, while in possession of material adverse non-public information and engaged in acts, practices, and a course of conduct as alleged herein in an effort to assure investors of Sybase's value and performance and continued substantial growth, which included the making of, or the participation in the making of, untrue statements of material facts and omitting to state material facts necessary in order to make the statements made about Sybase, its revenue, earnings and business operations, in light of the circumstances under which they were made, not misleading, as set forth more particularly herein, and engaged in transactions, practices and a course of business which operated as a fraud and deceit upon the purchasers of Shares during the Class Period.

38. Throughout the Class Period, at the direction of and with the consent and knowledge or reckless disregard for the truth of defendants, Sybase disseminated releases, statements, and reports referred to above that contained untrue statements of material fact and omitted to state material facts necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading as set forth above.

39. By making these statements, defendants knowingly and recklessly created a false and misleading impression that Sybase's revenue and income levels were materially greater than had in fact been achieved. The true financial and operating condition of Sybase was known to or recklessly disregarded by defendants, who were under a duty to disclose these facts, including Sybase's repeated violations of GAAP provisions relating to revenue recognition, but instead misrepresented or concealed them throughout the Class Period.

40. Defendants acted with scienter throughout the Class Period, in that they either had actual knowledge of the misrepresentations and omissions of material fact set forth herein, or acted with reckless disregard for the truth in that they failed to ascertain and to disclose the true facts, even though such facts were available to them. Defendants' scienter is demonstrated by their motive and opportunity to commit the fraud. Motive is demonstrated by Kertzman's and Vander Vorst's sales of a substantial portion of their Shares during the Class Period. Opportunity is demonstrated by the Individual Defendants' control of the Company's public statements and defendants' own public statements. Defendants controlled Sybase, and were therefore directly responsible for the false and misleading statements and/or omissions disseminated to the public through Sybase's press releases, news reports, and filings with the SEC.

41. As a result of the dissemination of the materially false and misleading information and failure to disclose material facts by the defendants, as set forth above, the market prices of the Shares were artificially inflated and maintained during the Class Period. Plaintiff and the other members of the Class purchased Shares during the Class Period at artificially high prices, and were damaged thereby, in ignorance of the fact that market prices of the Shares were artificially inflated and maintained, and relying directly or indirectly on (i) the statements made by defendants, (ii) the representations made in SEC filings, (iii) the absence of material adverse information that was known to or recklessly disregarded by defendants but not disclosed in public statements by defendants during the Class Period, and/or upon the integrity of the market in which the Shares trade.

42. At the time of said misrepresentations and omissions, plaintiff and other members of the Class were ignorant of their falsity, and believed them to be true. Had plaintiff and the other members of the Class and the marketplace known of the material adverse information regarding Sybase not disclosed by defendants, plaintiff and the other members of the Class would not have purchased or otherwise acquired their Shares during the Class Period, or, if they had acquired Shares during the Class Period, they would not have done so at the artificially inflated prices which they paid.

43. As a direct and proximate result of the wrongful conduct of the defendants named in this count, plaintiff and the other members of the Class suffered damages in connection with their purchases of Shares during the Class Period.

44. By virtue of the foregoing, Sybase and the Individual Defendants have violated §10(b) of the Exchange Act and Rule 10b-5 promulgated thereunder.

45. Plaintiff repeats and realleges the allegations set forth above as if set forth fully herein.

46. The Individual Defendants, by virtue of their positions with the Company, had the power and influence, and exercised the same, to cause the Company to engage in the illegal conduct and practices complained of herein. As a result, defendants were controlling persons of Sybase within the meaning of §20(a) of the Exchange Act when the wrongs alleged herein occurred.

47. As set forth above, the defendants each violated §10(b) and Rule 10b-5 by their acts and omissions as alleged in this Complaint. As a direct and proximate result of the wrongful conduct of the Individual Defendants, plaintiff and other members of the Class suffered damages in connection with their purchases of the Shares during the Class Period. By virtue of their positions as controlling persons of the Company, the Individual Defendants are liable pursuant to §20(a) of the Exchange.

WHEREFORE, plaintiff, on behalf of himself and the Class, prays for judgment as follows:

A. declaring this action to be a class action properly maintained pursuant to Rule 23 of the Federal Rules of Civil Procedure;

B. awarding plaintiff and the other members of the Class damages with interest thereon;

C. awarding plaintiff and the other members of the Class their costs and expenses of this litigation, including reasonable attorneys' fees, accountants' and experts' fees and other costs and disbursements; and

D. awarding plaintiff and other members of the Class such other and further relief as may be just and proper under the circumstances.

Plaintiff hereby demands a trial by jury.