Compuware Corporation Releases Fourth Quarter and Fiscal Year 2003 Financial Results; Announces $125 Million Stock Repurchase Program

DETROIT--May 7, 2003--Compuware Corporation (NASDAQ: CPWR) today announced financial results for its fourth quarter and fiscal year ended March 31, 2003. The company also announced that its Board of Directors approved a $125 million stock repurchase program.

Fourth Quarter Fiscal 2003 Results

Compuware reports fourth quarter revenues of $337.6 million, compared to revenues of $408.5 million in the fourth quarter last fiscal year. Net income in the quarter was $21.4 million, compared to a loss of $335.9 million in the comparable quarter last fiscal year. Earnings per share (diluted computation) were 6 cents, compared to a loss of 90 cents in the same quarter last year, based upon 379.2 million and 373.8 million shares outstanding, respectively.

During the company’s fourth quarter, software license fees were $77.8 million. Maintenance fees were $103.1 million. Revenue from professional services was $156.7 million.

Fiscal Year 2003 Results

During the fiscal year ended March 31, 2003, revenues were $1.375 billion, compared with $1.741 billion in fiscal 2002. Net income was $103.1 million for fiscal 2003, compared with a loss of $245.3 million in the previous fiscal year. Earnings per share (diluted computation) were 27 cents, compared with a loss of 66 cents in the prior fiscal year, based upon 378.4 and 371.8 million shares outstanding, respectively.

During the year, software license fees were $295.7 million, compared with $417.6 million in fiscal year 2002. Maintenance revenue was $412.2 million versus $433.8 million in the previous fiscal year. Professional services fees for fiscal year 2003 were $667.4 million compared to $889.2 million in fiscal year 2002.

$125 Million Stock Repurchase Plan Announced

The company’s Board of Directors has authorized the repurchase of up to $125 million in the company’s Common Stock. The company will purchase stock on the open market, through negotiated or block transactions, from time-to-time based upon market and business conditions.

"Compuware is looking forward to a new fiscal year," said Compuware Chairman and CEO Peter Karmanos, Jr. "We feel very positive that the market is going to change and that we are as well positioned as at any time in the last decade to take advantage of any upturns." Continuing, Karmanos said: "Recent market conditions have created an opportunity to reiterate our confidence in the company and its future by repurchasing stock while we continue to evaluate other means of investing in the company’s growth and returning value to shareholders."

Fourth Quarter Fiscal Year 2003 Highlights

During the fourth quarter, Compuware:

Released our latest version of OptimalJ. Compuware OptimalJ provides organizations that are adopting Java 2 Enterprise Edition (J2EE) applications a way to accelerate the development, integration and maintenance of these applications. Enhancements included in OptimalJ 2.2 create a competitive advantage for users by simplifying a wide variety of pressing IT challenges

Announced that Sun Microsystems can now use OptimalJ to accelerate enterprise development projects for its customers using J2EE. Compuware will also incorporate Sun’s J2EE Patterns into OptimalJ, giving Sun’s consultants a new, more powerful tool they can use to quickly develop J2EE technology-based applications for their clients.

Unveiled Vantage 8.5, which includes a new, web-based interface that provides the ability to conveniently manage an entire enterprise from a single console. The Vantage 8.5 release offers an integrated suite of tools for sharing critical performance data and eliminating costly downtime.

Made enhancements to NetworkVantage, the Vantage suite’s application traffic analysis tool. NetworkVantage now enables network engineers and managers to monitor and report on ATM traffic, helping organizations minimize their Wide Area Network costs.

Released the latest version of our load-testing solution, QACenter Performance Edition, this quarter. QACenter helps organizations prevent costly application failures, and the latest version includes improved scripting, enhanced test scripts and other features that help improve productivity.

Compuware Corporation

Compuware Corporation, a multi-billion dollar company, provides business value through software and professional services that optimize productivity and reduce costs across the application life cycle. Meeting the rapidly changing needs of businesses of all sizes, Compuware’s market-leading solutions improve the quality, ease the integration and enhance the performance of distributed, e-business and enterprise software. For more information about Compuware, please contact the corporate offices at 800-521-9353. You may also visit Compuware on the World Wide Web at http://www.compuware.com/.

 COMPUWARE CORPORATION AND SUBSIDIARIES
                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                      (In Thousands, Except Per Share Data)

                                     QUARTER ENDED       TWELVE MONTHS ENDED
                                       MARCH 31,              MARCH 31,
                                   2003        2002        2003        2002
    REVENUES:
      Software license fees       $77,787 $109,477 $295,720 $417,631
      Maintenance fees            103,086     106,401     412,176     433,751
      Professional services fees  156,735     192,650     667,444     889,162
           Total revenues         337,608     408,528   1,375,340   1,740,544
    OPERATING EXPENSES:
      Cost of software license
       fees                         7,660       8,621      30,740      34,102
      Cost of professional
       services                   146,743     203,750     611,644     840,149
      Technology development and
       support                     35,383      42,315     143,289     164,280
      Sales and marketing          69,461      76,462     264,012     294,496
      Administrative and general   52,126      45,699     191,131     207,166
      Goodwill amortization and
       impairment                             387,710                 426,344
      Restructuring costs                      46,930                  46,930
           Total operating
            expenses              311,373     811,487   1,240,816   2,013,467
    INCOME (LOSS) FROM
     OPERATIONS                    26,235    (402,959)    134,524    (272,923)
    OTHER INCOME (EXPENSE):
      Interest and investment
       income                       6,894       8,172      27,791      29,504
      Interest and other expense     (738)     (2,270)     (6,100)     (7,428)
           Total other income       6,156       5,902      21,691      22,076
    INCOME (LOSS) BEFORE INCOME
     TAXES                         32,391    (397,057)    156,215    (250,847)
    INCOME TAX PROVISION
     (BENEFIT)                     11,013     (61,152)     53,113      (5,592)
    NET INCOME (LOSS)             $21,378   $(335,905)   $103,102   $(245,255)
    DILUTED EPS COMPUTATION
    Numerator:  Net income
     (loss)                       $21,378   $(335,905)   $103,102   $(245,255)
    Denominator:
      Weighted-average common
       shares outstanding         378,371     373,814     377,028     371,786
      Dilutive effect of stock
       options                        816                   1,412
      Total shares                379,187     373,814     378,440     371,786
    Diluted EPS                     $0.06      $(0.90)      $0.27      $(0.66)
    Note:  Certain amounts in the prior period have been reclassified to
           conform to the March 31, 2003 presentation.
    Note:  Effective April 1, 2002, in accordance with FASB 142, the goodwill
           balance will no longer be amortized on a monthly basis.  Instead,
           it will be tested at least annually for impairment.  Exclusive of
           amortization and impairment of goodwill in fiscal 2002, the net
           loss in the fourth quarter of last year would have been $3,796, or
           negative 1 cent per share (diluted computation).  Net income for
           fiscal 2002 would have been $120,468, or 31 cents per share
           (diluted computation).

                     COMPUWARE CORPORATION AND SUBSIDIARIES
                      CONDENSED CONSOLIDATED BALANCE SHEETS
                                 (In Thousands)
                                                        AS OF MARCH 31,
                   ASSETS
                                                    2003              2002
     CURRENT ASSETS:
       Cash and cash equivalents                  $319,466 $233,305
       Investments                                 156,737           133,503
       Accounts receivable                         515,819           609,579
       Deferred tax asset, net                      30,605            41,811
       Income taxes refundable, net                 10,853            27,687
       Prepaid expenses and other current
        assets                                      16,951            16,954
               Total current assets              1,050,431         1,062,839
     INVESTMENTS                                    95,095            55,566
     PROPERTY AND EQUIPMENT, LESS
      ACCUMULATED
       DEPRECIATION AND AMORTIZATION               386,678           199,365
     CAPITALIZED SOFTWARE, LESS
      ACCUMULATED
       AMORTIZATION                                 54,514            68,998
     OTHER:
       Accounts receivable                         260,735           306,751
       Deferred tax asset, net                      20,174            44,884
       Goodwill, net                               212,288           211,792
       Other                                        42,770            43,743
               Total other assets                  535,967           607,170
     TOTAL ASSETS                               $2,122,685 $1,993,938
    LIABILITIES AND SHAREHOLDERS' EQUITY
     CURRENT LIABILITIES:
       Accounts payable                            $37,588 $28,646
       Accrued expenses                            134,579           186,477
       Deferred revenue                            296,998           341,024
               Total current liabilities           469,165           556,147
     DEFERRED REVENUE                              299,079           218,624
     ACCRUED EXPENSES                               22,750            29,316
               Total liabilities                   790,994           804,087
     SHAREHOLDERS' EQUITY:
       Common stock                                  3,824             3,758
       Additional paid-in capital                  704,190           676,617
       Retained earnings                           631,906           528,804
       Accumulated other comprehensive
        loss                                        (8,229)          (19,328)
               Total shareholders' equity        1,331,691         1,189,851
     TOTAL LIABILITIES AND SHAREHOLDERS'
      EQUITY                                    $2,122,685 $1,993,938 

                    COMPUWARE CORPORATION AND SUBSIDIARIES
                       CONSOLIDATED STATEMENT OF CASH FLOWS
                                  (In Thousands)
                                                      TWELVE MONTHS ENDED
                                                            MARCH 31,
                                                    2003               2002
    CASH FLOWS PROVIDED BY OPERATING
     ACTIVITIES:
      Net income (loss)                           $103,102          $(245,255)
      Adjustments to reconcile net income
       (loss) to cash provided
          by operations:
          Goodwill amortization and
           impairment                                                 426,344
          Depreciation and amortization             53,808             63,619
          Tax benefit from exercise of
           stock options                               152              8,384
          Issuance of common stock to
           ESOP                                      9,425             10,657
          Acquisition tax benefits                   7,056              6,854
          Deferred income taxes                     35,916            (75,485)
          Other                                     14,780              3,589
          Net change in assets and
           liabilities, net of effects
           from acquisitions:
            Accounts receivable                    139,776            145,647
            Prepaid expenses and other
             current assets                         (2,106)               681
            Other assets                               (32)             2,595
            Accounts payable and accrued
             expenses                              (37,819)            20,578
            Deferred revenue                        36,429             36,240
            Income taxes                            16,834            (17,659)
                 Net cash provided by
                  operating activities             377,321            386,789
    CASH FLOWS USED IN INVESTING
     ACTIVITIES:
      Purchase of:
          Property and equipment:
               Headquarters facility              (219,071)           (81,644)
               Other                                (6,222)            (8,784)
          Capitalized software                     (11,369)           (13,300)
      Investments:
          Proceeds from maturity                   201,938            221,716
          Purchases                               (267,502)          (210,784)
                 Net cash used in
                  investing activities            (302,226)           (92,796)
    CASH FLOWS PROVIDED BY (USED IN)
     FINANCING ACTIVITIES:
      Net proceeds from exercise of stock
       options                                       1,503             16,148
      Contribution to stock purchase
       plans                                         9,563              6,999
      Proceeds from sale of warrant                                     2,825
      Payments on long term debt                                     (140,000)
                 Net cash provided by (used in)
                  financing activities              11,066           (114,028)
    NET INCREASE IN CASH AND CASH
     EQUIVALENTS                                    86,161            179,965
    CASH AND CASH EQUIVALENTS AT
     BEGINNING OF PERIOD                           233,305             53,340
    CASH AND CASH EQUIVALENTS AT END OF
     PERIOD                                       $319,466 $233,305
    Note:  Certain amounts in prior periods have been reclassified to conform
           to the current presentation.

                      COMPUWARE CORPORATION AND SUBSIDIARIES
                              OPERATIONAL HIGHLIGHTS
                          (dollar amounts in thousands)
                                                  QUARTER ENDED
                                              MARCH 31,  DECEMBER 31,
                                                2003         2002     % Change
    License Fees:
      Distributed Product License Fees
    DevPartner                                 $5,878 $5,900      (0.4%)
    File-AID Client/Server                        610          381      60.1%
    QACenter                                    5,907        4,997      18.2%
    UNIFACE and Optimal                         6,575        3,472      89.4%
    Vantage                                     7,643       11,090     (31.1%)
      Total Distributed Product License
       Fees                                    26,613       25,840       3.0%
      Mainframe Product License Fees           51,174       47,921       6.8%
    Total License Fees                         77,787       73,761       5.5%
    Maintenance Fees                          103,086      100,359       2.7%
    Total Products Revenue                   $180,873 $174,120       3.9%

    Total Mainframe Products Revenue         $138,242 $133,097       3.9%
    Total Distributed Products Revenue        $42,631 $41,023       3.9%
    Total Products Revenue by Geography
    North America $98,926 $99,603      (0.7%)
    International                             $81,947 $74,517      10.0%
    Product Releases
    Mainframe                                      26           13     100.0%
    Distributed                                    19           18       5.6%
    Total Costs of Software Products         $112,504 $108,623       3.6%
    Professional Services
    Professional Services Revenue            $156,735 $159,019      (1.4%)
    Operating Margin                              6.4%         8.7%
    Billable Headcount                          5,164        5,293      (2.4%)
    Total Company Headcount                     9,356        9,430      (0.8%)

SOURCE  Compuware Corporation
CONTACT:  Lisa Elkin, Vice President, Investor Relations and Corporate
Communications of Compuware Corporation, +1-248-737-7345

Certain statements in this release that are not historical facts, including those regarding the Company’s future plans, objectives and expected performance, are "forward-looking statements" within the meaning of the federal securities laws. These forward-looking statements represent our outlook only as of the date of this release. While we believe any forward-looking statements we have made are reasonable, actual results could differ materially since the statements are based on our current expectations and are subject to risks and uncertainties. These risks and uncertainties are discussed in the Company’s reports filed with the Securities and Exchange Commission. Readers are cautioned to consider these factors when relying on such forward-looking information. The Company does not undertake, and expressly disclaims any obligation, to update or alter its forward-looking statements whether as a result of new information, future events or otherwise, except as required by applicable law.